###CaseId: RP-2000-0040 ###Title: OEB Transcript of RP-2000-0040; Vol. T1:00 ###Section: Transcript Header ###Author: Schuch, Desai (OEB) ###PubDate: 08/30/00 ###LFileId: VOLT100 ###[ 1 EB-2000-0234 (RP-2000-0040) THE ONTARIO ENERGY BOARD IN THE MATTER OF the Ontario Board Act, 1998; AND IN THE MATTER OF an Application by The Consumers' Gas Company Ltd., carrying on business as Enbridge Consumers Gas, for an order or orders approving or fixing rates for the sale, distribution, transmission and storage of gas for its 2001 fiscal year. Hearing held at: 2300 Yonge Street, 25th Floor, Hearing Room No. 1 Toronto, Ontario on Wednesday, August 30, 2000, commencing at 0843 TECHNICAL CONFERENCE Les Services StenoTran Services Inc. 613-521-0703 2 APPEARANCES COLIN SCHUCH/ Board Staff HIMA DESAI/ Board Staff JERRY FARRELL/ Enbridge Consumers Gas THOMAS LADANYI THOMAS BRETT Ontario Association of School Business Officials JULIE GIRVAN Consumers' Association of Canada (CAC) MICHAEL JANIGAN Vulnerable Energy Consumers Coalition (VECC) VALERIE YOUNG/ Ontario Association of PAUL DuMARESQ Physical Plant Administrators ADRIAN PYE Toronto Hydro Energy Services ZIYAAD MIA CEED, Coalition for Energy Efficient Distribution, PanCanadian Petroleum, Dynergy Canada, Sunoco Incorporated, TransCanada Gas Services DAVID CHEREPACHA Associated Toronto Taxi Cab Co-Operators Ltd. (Co-Op Cabs) JAMES HAMILTON Ontario Energy Savings Corporation TIBOR HAYNAL TransCanada PipeLines Les Services StenoTran Services Inc. 613-521-0703 3 Toronto, Ontario --- Upon commencing on Wednesday, August 30, 2000 at 0843 MR. SCHUCH: Good morning and welcome to the Enbridge Consumers Gas Technical Conference for the EB-2000-0234 proceeding, otherwise known as the gas cost increase issue. My name is Colin Schuch and I am with Board Staff. For the record, Enbridge Consumers Gas has applied to the Board for an order or orders approving or fixing rates for the sale, distribution, transmission and storage of natural gas to be effective for the fiscal year commencing October 1st, 2000. The Board has assigned file No. RP-2000-0040 to this case. Paragraph 8 of the application requests interim rates to be approved by the Board to reflect the current forecast of gas costs for fiscal 2001. It is this part of the application that we are addressing today and it has been named the gas cost increase issue. The purpose of today's conference is for intervenors and Board Staff to seek clarification of the prefiled evidence of ECG on the issue of gas costs and to increase intervenor and Board Staff understanding of the evidence. This conference has been scheduled only for this morning and, as such, I would ask that all participants use this session to focus only on the Les Services StenoTran Services Inc. 613-521-0703 4 issues around gas costs. There will be a transcript prepared for the proceeding today and it will be available on the Board's Web site tomorrow. A copy will be also forwarded to all intervenors in the coming week. The transcript will form part of the record of the proceeding. In terms of the order of questioning, my suggestion is that intervenors lead off in order of appearance and Board Staff will conclude the questioning. Barring any objections, we will be providing a live feed of this morning's Technical Conference to the 24th, 25th and 26th floors of this building to allow Board Staff and Members of the Board an opportunity to monitor this proceeding. However, I should note that that this afternoon's Settlement Conference will not be broadcast, nor will it be transcribed. I suggest that we commence in a few moments and continue until a 20 minute break, which I intend to call around 10:00 a.m. We can reconvene after the lunch break, at the conclusion of the questioning, which should take place around 12:30 p.m. After the lunch break, those wishing to participate will reconvene in this hearing room for the Settlement Conference, which we hope to conclude this afternoon. The live audio feed, as I have said, will be cut off for the Settlement Conference. As noted in Procedural Order No. 1, which you Les Services StenoTran Services Inc. 613-521-0703 5 should all have, the Board will hear submissions on the gas cost increase issue, if necessary, on September 6th, 2000 commencing at 10:00 a.m. Those are my introductory remarks. I think at this point we could have appearances. Please introduce yourselves and state your name clearly for the court reporter and also state your affiliation. Should we begin with Board Staff. MS DESAI: I am Hima Desai with Board Staff. MR. FARRELL: Jerry Farrell, for the Applicant, Enbridge Consumers Gas. MR. LADANYI: Tom Ladanyi with Enbridge Consumers Gas. MR. BRETT: Tom Brett with the Ontario Association of School Business Officials -- B-R-E-T-T. MS GIRVAN: Julie Girvan with the Consumers Association of Canada. MR. JANIGAN: Michael Janigan for the Vulnerable Energy Consumers Coalition. MR. DUMARESQ: Paul DuMaresq for A.E. Sharpe Limited. MS YOUNG: Valerie Young, A.E. Sharpe Limited on behalf of the Ontario Association of Physical Plant Administrators. MR. PYE: Adrian Pye, Toronto Hydro Energy Services. MR. MIA: Ziyaad Mia, Donahue Ernst & Young, Les Services StenoTran Services Inc. 613-521-0703 6 representing SEED, which is the Coalition for Energy Efficient Distribution which includes PanCanadian Petroleum, Dynergy Canada, Sunoco Incorporated and TransCanada Gas Services. THE COURT REPORTER: I'm sorry, sir. Could you spell your name, your last name? MR. CHEREPACHA: C-H-E-R-E-P-A-C-H-A. THE COURT REPORTER: I'm sorry, sir, could you come to the microphone? MR. HAMILTON: Ontario Energy Savings Corporation. MR. HAYNAL: Tibor Haynal for TransCanada PipeLines. MR. SCHUCH: Thank you. Are those all the appearances? Before I turn the proceeding over to Enbridge, is everybody clear on today's proceeding? Does anyone have any questions before we start? MS GIRVAN: I have one question. It would be helpful for me to just at some point, before you start, to run through sort of all the evidence related to the application on gas costs that you are seeking today. That would be helpful. MR. SCHUCH: It's my understanding that there will be a presentation soon. MR. LADANYI: Yes. We intend to go through the evidence in a summary way. We are not going to read every bit of evidence, but we are going to go through Les Services StenoTran Services Inc. 613-521-0703 7 it. That is our intention. MS GIRVAN: I just want to be clear that everybody has a good understanding of all the evidence related to gas costs. MR. LADANYI: We are going to outline it. MS GIRVAN: Okay. That's helpful. Thank you. MR. SCHUCH: Okay. I will now turn matters over to ECG and I believe they have some introductory remarks. Then the witness panel will be available for questioning. PRELIMINARY MATTERS MR. FARRELL: I just have a preliminary comment, and I will say it's on status but I don't mean it to be pejorative. But as I interpret Procedural Order No. 1, the intervenors are the intervenors from last year's proceeding and there are some here who are not intervenors from last year's proceeding and who have not intervened, namely Toronto Hydro and Co-Op Cabs. I'm not objecting to their presence, but we will have to deal with that when we come to the Settlement Conference, the discussion of who can be a party to the Settlement Proposal, assuming we have one. --- Pause MR. SCHUCH: Board Staff has no objections to allowing these late intervenors a chance to question. MR. FARRELL: We don't either. I'm just Les Services StenoTran Services Inc. 613-521-0703 8 PRELIMINARY MATTERS raising a technically in terms of who actually has status. The Board itself has to grant intervenor status. When we come to the Settlement Conference and the Settlement Proposal we will have to sort out some of these things. I'm not objecting, I'm just pointing out an anomaly, if you will. MS DESAI: I think you are more concerned about the Settlement Conference and the confidential discussions there. If they want to be a party to the agreement they would have to seek intervenor status prior to that. I think we will address it, if you want, or if you want to speak. MR. PYE: Toronto Hydro Energy Services is applying for late intervenor status. Where this is in the process I couldn't speak to at this point in time. MS DESAI: I think we can discuss it this afternoon. MR. FARRELL: Yes. MR. SCHUCH: Are those all the issues? Shall we proceed? MR. FARRELL: We have three witnesses who are here to elaborate on their evidence. The sequence in which they will speak is: Frank Brennan will speak first, followed by Don Small and then Malini Giridhar. Our preference would be to have each of them conclude their presentation and then respond to Les Services StenoTran Services Inc. 613-521-0703 9 PRELIMINARY MATTERS questions as opposed to interjections with questions. So why don't we proceed on that basis and I will ask Frank to begin. MR. BRENNAN: Thank you. Enbridge Consumers Gas is here to try to recover an increase in gas costs. This increase in gas costs is made up of commodity costs as well as transportation and storage costs. The commodity costs represent about $298 million of $318 million which we are seeking to recover. Since the bulk of the increase in costs is related to the commodity costs, I thought I would spend just a few minutes going through some of the reasons why gas costs have increased over the last few months. I have several points here which I would like to just go through. The first is the increase in demand in natural gas in both Canada and the United States. Both economies in these two countries continue to grow. Also, natural gas is becoming the preferred fuel of choice. Also, from the supply side of things, the U.S. gas production has been flat or in fact declining, resulting in a tighter market and also increasing the price of natural gas. In Canada there has been a similar pattern, however growth has been higher than the U.S. You may have read in the papers and other Les Services StenoTran Services Inc. 613-521-0703 10 PRESENTATION articles, I guess, about the emphasis put on U.S. storage balances and what role they play. It is expected that they will be short 100 to 200 bcf below the normal range for this winter coming up. A lot of this load, I guess, or lack of injections into storage is to the strong growth in electric generation, particularly air conditioning load. The rate is also a link to higher crude oil prices in recent months, which is also driving up the price of natural gas. With the three warm winters behind us, weather forecasters are now predicting a normal weather pattern, and this could also again put price pressure on natural gas for this winter. In summary, I guess, those are just some of the things that we have seen as to why gas prices in terms of commodity prices, I guess, have increased over the last few months. There is, I think over the longer term, forecasts that indicate that gas prices will again come back into the line where they have been in the past. I would now like to maybe just go through the evidence very briefly, I guess, just to hit some of the highlights of the evidence and then pass it over to Don. Going through the evidence in order, I just will again hit the high points. I guess the first thing I would like to mention is that -- I'm sorry, yes -- I'm referring to Les Services StenoTran Services Inc. 613-521-0703 11 PRESENTATION Exhibit A, Tab 14, Schedule I, entitled "Gas Costs and Transportation". To begin with, we have increased our M12 transportation entitlement on Union Gas for this winter by about 53 million cubic feet a day. As far as gas supply commodity is concerned, in terms of volumes, we are anticipating purchasing approximately 200.5 bcf from various suppliers. That is made up of several different components which I will go through. Of this 205, 74.2 bcf will be acquired under our longer term contracts from western Canadian supply. We also have a small amount of Ontario production, .7 bcf. We continue to rely on our peaking service contracts with both TEMCO and CXY. We will be looking to acquire about 29.4 bcf under various buy/sell arrangements. In addition to that, we will be looking for 72.6 bcf of western Canadian discretionary volumes. Some of that will be purchased at NOVA Inventory Transfer, or NIT, at Empress and also to the inlet to the Alliance Pipeline. Currently this volume of gas has not been contracted, or parts of it I guess have not been contracted. We are also looking to acquire 1.7 bcf of delivered supply. This is just a carryover from the supply that we acquired for the period November 1, 1999, through to October 2000. So it was just one month, the total month in there of delivered supply. Les Services StenoTran Services Inc. 613-521-0703 12 PRESENTATION In addition to that, we are looking to acquire an additional 28.7 bcf of U.S. and Ontario delivered supply. This supply will be purchased either at Dawn or from U.S. supply basins and, in some cases, from the Chicago hub. In terms of pricing, the company used the 12 month Canadian Gas Price Reporter strip forecast based on the 21 day average of prices for the period October 2000 to September 2001 and quoted each of the business days between May 31, 2000 and June 28th. That exhibit can be found at D3, Tab 2, Schedule IV. The annual western Canadian fiscal 2000 price at Empress is estimated to be at $5.07 per GJ. As far as the long term contracts, while one contract is still in place beyond this October, the remaining five contracts will terminate. We will be renegotiating some of those supplies, but for the purposes of gas costs we are assuming the continuation of the current pricing of those contracts. The price for Ontario production is based on a combination of NYMEX and the monthly Empress price as quoted by the Canadian Gas Price Reporter. In terms of the buy/sell reference price, we used the same methodology as approved in E.B.R.O. 487. Our forecast is $243 and approximately 71 cents or $6.45 per GJ. Then we have listed in the evidence the various combinations of western buy/sells, net buy/sells and with and without fuel. Les Services StenoTran Services Inc. 613-521-0703 13 PRESENTATION The prices used for western Canadian discretionary supply again will be used. It will be based on the 12 month Canadian Gas Price Reporter strip identified earlier. As far as the delivered supply contracts, the prices used will be those that are in the individual contracts. The prices for the discretionary volumes delivered via the link will be priced using NYMEX. For those delivered by the Vector Pipeline -- this is gas being purchased in Chicago -- we would forecast using a Chicago price. Those deliveries at Dawn, we assume a price equivalent to the monthly FT WACOG. Again, just to point out that if there are significant price movements we will update gas costs for the test year prior to the commencement of the Settlement Conference and also prior to the completion of the hearing process. Now, just looking a bit towards peak day coverage, our peak day demand for fiscal 2001 is estimated to be at 91,084 10(3)m(3) a day or 3.2 bcf. At Exhibit D3, Tab 2, Schedule III, we show the demand supply debt balance for fiscal 2001, and currently we are showing as a supply imbalance of 1,752 10(3)m(3) a day. We are currently in the process of acquiring additional supplies. In terms of transportation, we will have approximately 354.7 bcf a year of FT capacity directly related to the TransCanada system. This forecast Les Services StenoTran Services Inc. 613-521-0703 14 PRESENTATION represents a net reduction of 58,600 GJs a day of capacity into the CDA. Then we go on to explain some of the -- decontracted or not renewed on TransCanada, 117,613 into the CDA, but then we have offset some of that non-renewals, if you like, with capacity acquired form TransCanada into the EDA and some capacity acquired from St. Lawrence Gas as well into the EDA and an assignment of independent third party supply for the winter only into the CDA. One other note on transportation. We have not resigned, or basically we have not renewed our contract for 2001 for capacity on the Union System C-1, Jubilee Dawn, of 15 million cubic feet a day. Then going on to our two new transportation contracts that we have acquired, the first is from the Alliance Pipeline where we have contracted for 75 million cubic feet a day of FT from Alberta into Chicago. Then to move it away from Chicago, we have also contracted additional capacity on the Vector Pipeline. It is broken up into two pieces, the first being 93 million cubic feet a day. This lines up with our Alliance capacity. Then we have also contracted for a second charge of 79.7 million cubic feet a day for gas that we plan on purchasing in the Chicago market. Basically that is just a quick summary, I guess, of the evidence that we have filed. I will let Mr. Small carry on. Les Services StenoTran Services Inc. 613-521-0703 15 PRESENTATION MR. FARRELL: Is it the preference of those here that any questions you want to ask of Frank you ask now, or do you want to hear the whole thing and then come back? MR. JANIGAN: Let's hear the whole thing now. MR. SMALL: I guess the only thing I can really add to what Frank has mentioned, if you continue further in our evidence at Exhibit A, Tab 14, we just give a little bit of information on it with respect to risk management. We are continuing our existing risk management programs. We haven't made any changes to that. I guess the only other thing I was going to add was that all the exhibits with respect to our forecast for 2001 are at Exhibit D3, Tab 2. There is a summary of our purchase costs and you can see at the bottom of that page, at Item No. 8, the PGVA reference price of $245.412 per 10(3)m(3). That is about all I wanted to add. MS GIRIDHAR: I would like to talk about the company proposal to clear the year end PGVA deferral account in the month of November to its customers. The PGVA forecast balance for 2000 at this point in time is approximately $65 million. This will result in a one-time charge of approximately $39 for system and buy/sell customers. The company has a proposal to mitigate the significant one-time impact on customers which stems Les Services StenoTran Services Inc. 613-521-0703 16 PRESENTATION mainly from higher than forecast commodity prices through 2000. What the company proposes to do is to offset the commodity-related proportion of the PGVA balance with amounts from the gas inventory adjustment rider, which is also known as Rider C. These are amounts that would otherwise have been credited to the same group of customers over an overlapping time period, that is system and buy/sell customers. I would just like to explain the mechanics by pointing you to Exhibit A, Tab 14, Schedule III, pages 1 and 2. Basically, if you look at Item No. 1, you see under the total there a forecast year end PGVA balance of approximately $65 million, $64,951,000. You can also see on the first line that commodity is a very large portion of it. You have 78.5 million approximately that is commodity related. If you go five lines down, you see a line that says "Rider C, Revaluation of Commodity June 1, 2000". There are significant dollars there as well, a credit of approximately $42 million. That arises from the revaluation of gas in storage at the time we had the upstream, that is as of June 1, 2000. Basically, our net commodity-related amount in the PGVA balance is approximately $36 million. I should like to move on now to explaining the inventory adjustment rider. Les Services StenoTran Services Inc. 613-521-0703 17 PRESENTATION If you go down to Item No. 3, you see the heading "Calculation of the Inventory Credit". Basically, what this process does is it revalues the opening inventory for the test year at the new PGVA reference price, but because that gas was acquired in the course of the previous year we take the difference between the new PGVA reference price and the old PGVA reference price. You will see those two numbers there. The new reference price as related to by Don Small is $245.412 per 10(3)m(3). The number underpinning the upstream in June was $189.864 per 10(3)m(3), resulting in a net difference of $55.548 per 10(3)m(3). Basically, you take the opening physical balance, multiply it by that difference and you come up with the gas and inventory credit of approximately $123 million. That is a sum of money that would flow back to our system and buy/sell customers over the first few months of fiscal 2001, through what we call Rider C, which is -- basically, the way that operates is it delays the implementation of the new gas supply charge until the inventory is deemed to have run out. As a result of that process, the typical system and buy/sell customer would receive approximately $76 over those four months. As I described above, the PGVA balance would result in a $39 impact in the month Les Services StenoTran Services Inc. 613-521-0703 18 PRESENTATION of November. Basically, what the company is proposing is to net out the commodity-related portion of the PGVA using amounts from the gas inventory adjustment rider. That would result in a net impact to system and buy/sell customers of $13 in the form of a one-time charge. You see that under 4 -- where we have the impact on customers -- typical residential customers, you see the $39. If we use our normal methodology and if you use our proposal now we would have an impact of $13. That is depicted on the next page, Tab 14, Schedule III, page 2. If you look at Item No. 11, Rider C, you can see that the $123 million inventory credit would result in approximately -- well, $77 for the system and buy/sell customer. The line below that shows a PGVA one-time charge of $39 in the month of November. What we have below that is our proposal. If you look at line 24 -- Item No. 24, Rider C, we see that our proposal would now diminish the credits to $51.34. It would also diminish the one-time adjustment to $12.79, approximately $13. We believe it appropriate to do one because it smooths out the cash flow for system and buy/sell customers from significant commodity-related clearing. It also sends better price signals sooner in 2001, Les Services StenoTran Services Inc. 613-521-0703 19 PRESENTATION because when we diminish the inventory adjustment rider we also run out the inventory sooner, or we deem it to have run out sooner, so the full gas supply charge would be in effect sooner than it otherwise would have been. That is basically it. MR. FARRELL: So we are now at the question stage. MR. SCHUCH: We should start in order of appearance. Board Staff will be questioning last. MR. BRETT: Thanks very much. Just on that last point, I'm looking at your table on Exhibit A, Tab 14, Schedule III, page 2, I am just curious about how your arithmetic works here. Why do you not, for example, comparing your top table, your first table there with your inventory rider, including Rider C of 123 and your bottom one including Rider C at 85 million, I see what you have done with Rider C, but you still have in your proposal, in the table, the bottom of the two tables, you still have a PGVA one-time charge. Why don't you just remove it entirely and lower the amounts of the -- remove that much more of the credit. I guess my related question is: Why do you do it over -- is there a reason why you do it over three months or four months, or is that just a convention you use? MS GIRIDHAR: Okay. I will address the second Les Services StenoTran Services Inc. 613-521-0703 20 Questions by Mr. Brett question first. The reason why it is three or four months is basically we start off with a certain inventory balance, and we deem each rate class to have a certain responsibility towards that inventory balance. It is based on what we call our space allocators. Out of the 123 million which we would normally have had, we would say approximately 50 per cent of that is being used up by Rate 1. Given the send out of volumes for Rate 1 customers during the first few months of the fiscal year, it actually runs out on say January 23rd. So that would mean that you would apply that credit from the start of the fiscal year until January the 23rd. We have a formula by which that is derived. The number would change every year depending on what the physical amount is. It does not vary too much actually. MR. SMALL: On a rate class basis. MS GIRIDHAR: On a rate class basis. MR. BRETT: Okay. MS GIRIDHAR: The other question as to why we still have $13, that is because not everything in the PGVA deferral account is commodity related. If you turn to the first page, you will see that we have other categories of costs in there. You have TCPL toll change, and we have seasonal load balancing which is basically supplies required to balance over the winter period. Les Services StenoTran Services Inc. 613-521-0703 21 Questions by Mr. Brett Those amounts apply -- the transportation amounts apply to western T-Service customers as well, not just our system and buy/sell. The seasonal load balancing in fact applies to all of our bundled customers. So we could not really take a gas inventory adjustment rider that applies to system and buy/sell customers and set that off against the entire PGVA balance. That is why you see that amount of $13. MR. BRETT: Thank you very much. Your gas supply load balancing deficiency, those are dollars that are actually spent on the commodity; but under your cost allocation system they are costed somewhat differently. They are in your gas supply load balancing -- MS GIRIDHAR: That is correct. We have a deemed commodity component, but we also recognize that that is used for load balancing over the course of the year. MR. BRETT: My second question is this: You have a western buy/sell equivalent price here of, I think, $5.07. In your change in June, in your re-evaluation in June, in your June gas cost proceeding, what was it prior to the June one? In other words, do you recall what June did? MR. SMALL: Prior to our Board-approved 2000 budget had a buy/sell, an annual average for the western buy/sell price of $2.97 per GJ, roughly. The June 1 upstream went up to $3.69. MR. BRETT: I understand how you got to this Les Services StenoTran Services Inc. 613-521-0703 22 Questions by Mr. Brett price, I think. Does this roughly compare with current market prices, or is this somewhat lower than current market prices. Do you have a view on that? I realize current market prices is a broad formulation. But if we looked at current spot prices, for example, as reported in the Canadian Natural Gas Reporter, how would this compare? MR. SMALL: The ones that are in the 2001 that you have in front of you? MR. BRETT: Yes. MR. SMALL: Actually, I took a look at what would have happened if we were to take a new 21-day average for the period July 28th to August 25th. As you can see at Exhibit D3, Tab 2, Schedule IV, the 21-day average that we use for the separation of the 2001 showed a 12-month average of $5.07 per GJ. In actual fact, the most recent 21-day average, the July 28th to August 25th, comes in very close. It is very close. So there would not be -- MR. BRETT: Do you know at all, if we were to look in the last week or so at actual Empress prices, one-month prices or daily prices, what they would be on a gigajoule basis? Are they roughly in that area as well? I would have thought they would be around there or perhaps a bit higher. MR. SMALL: It depends on whether or not you are looking at one-year prices, winter prices. Les Services StenoTran Services Inc. 613-521-0703 23 Questions by Mr. Brett MR. BRETT: Right. What the period is. MR. SMALL: Yes. MR. BRETT: All right. I gather you have then decided that you are not going to -- you mentioned that you are not going to renew any of your existing long-term contracts after the ones that expire this year. MR. SMALL: We currently have six contracts, five of which have expiry dates as of October 31st. So at this time we have not renewed them. MR. BRETT: Your intent is to just what, effectively purchase that gas on a short-term basis or a discretionary basis? MR. BRENNAN: No. I think some of them will be replaced with one-year supply; some will be monthly; and some may be seasonal. MR. BRETT: You will not be going back to any five-year or ten-year contracts. MR. BRENNAN: That is not our intention, no. MR. BRETT: I take it that the contracts for the Alliance, as you mentioned in your oral comments, that the Vector and Alliance contracts were sort of back-to-back contracts, if you like. You mentioned in your written evidence that one was a stand-alone contract. I take it what you are saying is that the contract on Vector, the first of the two contracts on Vector, is there to move the gas forward from Chicago that you brought into Chicago on Les Services StenoTran Services Inc. 613-521-0703 24 Questions by Mr. Brett the Alliance contract. Is that right? MR. BRENNAN: That is correct. MR. SMALL: That is right. MR. BRETT: I noticed in your Exhibit B, Tab 2, Schedule III -- that is your peak day supply mix that you commented on -- you show a deficiency and you mention that you are addressing that. You show a curtailment, under line 2.1, of 5,666,000 -- 5.66 million -- THE PRESIDING MEMBER: I am sorry, Mr. Brett, you are not on line. MR. BRETT: Sorry, you lost me. Did you get the reference to the evidence? Just a question. You show a curtailment of 5,666,000 cubic metres. I looked back at your actuals for 1999, and there was no curtailment in 1999. That was, of course, a mild year; and as you mentioned, you are going back to forecasting a regular year for the coming fall. Is that customary to show about that magnitude of curtailment? MR. SMALL: Yes. Under our design conditions we have always shown a curtailment level. This works out to be roughly 200 million cubic feet a day. That is what we would normally plan for under design conditions. MR. BRETT: In this proceeding we are not really looking at any changes or any other aspects of the PGVA. That is for the main hearing. This is just Les Services StenoTran Services Inc. 613-521-0703 25 Questions by Mr. Brett the clearance of this in the PGVA and what you propose to clear it. MR. SMALL: No. What we are also suggesting is that we want to get approval for the gas costs, the way they are, so that we can implement our new rates with respect to the gas costs and have a PGVA reference price of the $2.45. MR. BRETT: You have references in your PGVA of things like the link pipeline and the Vector pipeline and how they are going to be treated for purposes of the PGVA. That is not an issue here, is it? Or is it? MR. SMALL: The items with respect to the 2001 PGVA? MR. BRETT: Yes. MR. SMALL: I think we would like to resolve that as well. MR. FARRELL: We are asking that the 2001 PGVA be approved so we can start on October 1st. MR. BRETT: I just apologize. I can't quite find the reference here. I did look at it yesterday and I, now -- maybe you can help me with this. There's a comment in your evidence -- I believe it's PGVA evidence -- that says that your unabsorbed demand charge, with respect to TCPL, is not a PGVA item. Is that right, first of all? MR. SMALL: Yes. Les Services StenoTran Services Inc. 613-521-0703 26 Questions by Mr. Brett MR. BRETT: You make reference to the fact that the Board, in the past, didn't -- preferred not to have that included in the PGVA? MR. SMALL: To the extent that we have unforecasted unabsorbed demand charges related to TransCanada that does not flow into the PGVA. MR. BRETT: Right. MR. SMALL: Now, if we were to forecast unabsorbed demand charges onto TCPL, even though they are included as part of our gas costs, they wouldn't be included as part of the derivation of the PGVA. MR. BRETT: Okay. MR. SMALL: Now, for 2001, we are not forecasting any unabsorbed demand charges on TransCanada. MR. BRETT: Okay. Now, if you had a unforecasted unabsorbed demand charge, where does that go, in the scheme of things? Does that go to the shareholder, essentially, or -- MR. SMALL: If we were to have...? MR. BRETT: Unforecasted unabsorbed demand charge. MR. SMALL: Unforecasted unabsorbed demand charges in TransCanada, our shareholder, as they have been in the past. If we forecast them, the Board has allowed us to recover those costs. MR. BRETT: All right. Thanks. Les Services StenoTran Services Inc. 613-521-0703 27 Questions by Mr. Brett Those are my questions. MR. SCHUCH: Can we have the next -- MS GIRVAN: I have a few questions. If you turn to paragraph 16 of Exhibit A, Tab 14, Schedule I -- and I think I heard that of the six -- you were saying of the six long-term contracts, there's only going to be one in place beyond October 31st, 2000? MR. SMALL: That's correct. MS GIRVAN: And for the purposes of this forecast, you are using current pricing provisions that are in the contracts? MR. SMALL: Yes. For the five that expire. I still have to worry about applying a price to them as of October. So, under the current contract, the pricing provisions have been included as part of -- MS GIRVAN: Just for the month of October -- MR. SMALL: For the month of October. MS GIRVAN: -- for those five contracts? And then, going forward, with the one long-term contracts in place, you are still assuming the current price, although that has to be renegotiated? MR. SMALL: Typically, with those contracts, the pricing of those contracts will be based upon some sort of indices -- MS GIRVAN: Index. Okay. MR. SMALL: -- and, then, with those contracts Les Services StenoTran Services Inc. 613-521-0703 28 Questions by Ms Girvan will be some sort of term factor. MS GIRVAN: Yes? MR. SMALL: Or, possibly, some sort of basis identified. To the extent that there's an indices or a basis or a term factor included that's -- that's how we would price those contracts, going forward into the test year. And it's possible that you could renegotiate something like the term factor, but you wouldn't be renegotiating the indices, for example, which indices you were using. MS GIRVAN: And in terms of that one remaining contract, what percentage of that is your portfolio? Do you know? Is large or small or -- MR. SMALL: I'm trying to think. MS GIRVAN: -- quite small? MR. SMALL: Well, actually, if you look at D3, Tab 2, Schedule I, Item No. 1.1, we identify the volume that we are expecting to buy from what we call "Alberta production", and on that exhibit, we are saying that we are going to be buying approximately 2.1 million 10(3)m(3). That would be representative of all six contracts, for the month of October, and the remaining one for the remainder of the year. So the bulk of the 2.1 would be that one contract. MS GIRVAN: June was your last gas cost change. What was the gas cost change before that? Was Les Services StenoTran Services Inc. 613-521-0703 29 Questions by Ms Girvan it October 1st, 1999? MS GIRIDHAR: Yes, it was. MR. SMALL: That's right. MS GIRVAN: And was that the 297 -- MR. SMALL: It would have been, yes. MS GIRVAN: Okay. In the same exhibit, Exhibit A, Tab 14, Schedule I, there's reference that the company intends to purchase all on contract discretionary volumes pursuant to its natural gas procurement policies and procedure guidelines, and I just wondered if there had been any changes to those guidelines since last October. MR. BRENNAN: Not to my knowledge, no. MS GIRVAN: Okay. Same exhibit, Exhibit A, Tab 14, Schedule I. And there's reference to capacity on two new transportation paths, one from western Canada to Dawn, the Alliance and the Vector. What's the likelihood that you are going to be able to secure those contracts? Do you have anything to add to that? MR. BRENNAN: We, in fact, have entered into transportation contracts on both those pipelines. MS GIRVAN: Oh, you have. Okay. MR. BRENNAN: Yes. MS GIRVAN: Okay. And in light of this sort of rising gas cost, has the company, at all, considered rethinking its risk management policy? MR. BRENNAN: At this point, no, I don't think Les Services StenoTran Services Inc. 613-521-0703 30 Questions by Ms Girvan so. I think we -- we have worked with what we have had in place so far; we feel that it's worked well. At this point in time, I don't think there's any plans to revisit the risk management policy. MS GIRVAN: So you haven't considered that, at all? MR. BRENNAN: There has been some discussion, I should say, around whether or not the trigger number should be adjusted, but just brief discussions on that aspect, and whether or not we want to change that. MS GIRVAN: Okay. So, just in terms of what you are seeking, with respect to the PGVA, just to be clear, I think this was mentioned earlier: (a) you are seeking approval of the establishment of a new account October 1st. Is that right? MR. SMALL: Correct. MS GIRVAN: And (b) your approval of the reference price? And this is for the 2001 PGVA. MR. SMALL: That's right. MS GIRVAN: Okay. With respect to the link pipeline, is that still under-utilized? MR. SMALL: We are forecasting, for 2001, that we would be utilizing 25 million a day of our contracted 75 million a day capacity. MS GIRVAN: And that's consistent with what you have used in the past -- is that right? -- 25 million out of the 75. MR. SMALL: As part of our forecast, this past Les Services StenoTran Services Inc. 613-521-0703 31 Questions by Ms Girvan winter, we did utilize 35 million a day. MS GIRVAN: Okay. What's the cost impact of that under-utilization? And where is that captured? MR. SMALL: Currently, 100 per cent of the link pipeline costs, the demand charges are included in the derivation of the PGVA reference price. And we have continued to do that for 2001. MS GIRVAN: So you are assuming 100 per cent utilization? MR. SMALL: Well, 100 per cent recovery of the demand costs. MS GIRVAN: Yes. MR. SMALL: And what's happened, in the past, is that, as part of the disposal of the PGVA, then the question has come around whether or not the company should calculate using the formula of the unutilized cost consequences. So, essentially, I guess what we are saying is that, for 2001, we are continuing to show 100 per cent of the demand charges associated with the link and the derivation of our PGVA reference price and, to the extent that sometime next year, when we were coming for a review or an analysis of the 2001 PGVA, people could argue whether or not all those costs should be included as part of the recovery for the PGVA -- MS GIRVAN: But what about -- MR. SMALL: -- done in the past. MS GIRVAN: What about in the -- sorry. I'm a little bit confused. What about in the two -- the Les Services StenoTran Services Inc. 613-521-0703 32 Questions by Ms Girvan recovery of the 2000 PGVA and the impact of link? MR. SMALL: Well, right now, we have not taken into consideration whether or not the company should be exposed to any of the unutilized cost consequences for 2000. But just so you know, it's not necessarily going to hinder our proposal because, if there were dollars to be taken out of the PGVA, those costs -- Malini can correct me if I'm wrong -- but it goes through the load-balancing part, it's not part of the commodity costs, so it wouldn't hinder our proposal of offsetting the clearing of the commodity costs of the PGVA component. MS GIRVAN: But are we not here to discuss the load-balancing aspect of the PGVA, as well? Okay, anyway, I have to think about that, but it's not entirely clear to me that -- what the impact is. Thanks. Those are my questions. MR. SCHUCH: Can we have the next -- MR. JANIGAN: I just have one question. In terms of the price change that's attributable to commodity, I guess it wouldn't be possible to differentiate the reason for the price change between the differing composition of the gas supply for 2001 from the changes in the price of the commodity itself? MS GIRIDHAR: So, are you asking for what proportion of our requested -- Les Services StenoTran Services Inc. 613-521-0703 33 Questions by Mr. Janigan MR. JANIGAN: Well, if you had to break down the price increase into two components -- one, the change in the price of the commodity and the change in the composition of your gas supply -- could you do that? MR. SMALL: Just so I'm clear, are you talking about trying to do an analysis of the change from the June 1 upstream reference price of one eighty-nine to the new reference price of two forty-five, that increase? Is that -- MR. JANIGAN: I would think so, yes. MR. SMALL: Maybe just to help, if you were to take the change in the Empress prices from the 21 day average that we would have used for the June 1 upstream and compared it to those Empress prices for the new 21 day average, that's roughly an increase of approximately $1.30 to $1.35 a GJ, which translates to over $51 a 10(3)m(3). So if the increase in the TGA reference price is approximately $55, you can see that $51-$52, of it is strictly commodity. MR. JANIGAN: Those are all my questions. MS GIRVAN: I'm sorry, I just have another question if that's okay. If you turn to -- I don't know if you have got this exhibit with you. It's an H exhibit and it's annual bill comparison for residential customers. It's H3, Tab 7, Schedule I. I'm just trying to understand these numbers a bit. Les Services StenoTran Services Inc. 613-521-0703 34 Questions by Mr. Janigan In the sense of the overall impact, bill impact, for an average residential consumer, the commodity portion is 36.6 per cent. What's the overall bill change -- I'm just not sure I'm reading this properly -- related to sort of everything in the application? MS GIRIDHAR: The overall bill change rate for everything in the RP 2040 application is the 18.1 per cent. Do you see that? MS GIRVAN: Okay. MS GIRIDHAR: It's on line 1.10. MS GIRVAN: Okay. MS GIRIDHAR: At this point, the start of the interim order, we would only be changing the gas supply charge and the gas supply load balancing charge, not the distribution charge. If you go back up to 1.3 you see the change in the distribution charge in column 3 as being $1.83, so there you would exclude that amount, but everything else is what we are requesting at this point. MS GIRVAN: Okay. So the bill impact related to the commodity portion is a 36.6 per cent increase. MS GIRIDHAR: Yes. That's correct. MS GIRVAN: Is it now approximately half the bill? MR. BRENNAN: I think the commodity portion of the bill is -- this increase in commodity cost would be over 50 per cent of the bill. MS GIRVAN: Over 50 per cent. Okay. Les Services StenoTran Services Inc. 613-521-0703 35 Questions by Mr. Janigan I guess just one more question. What's the company doing in light of this significant increase? What's the company doing with respect to informing consumers, your customers, about potential increases? Has there been sort of a phase in terms of, I guess, kind of warning consumers that prices are going up or that their bills are going to go up significantly over the course of the winter? I realize out of each of application there are typically notices to customers, but I guess I would say in light of this significant increase, is the company doing anything over and above what they typically do in terms of informing customers about the potential increases? MR. BRENNAN: Yes, we are. In the billings that are going out in September, there will be a notice or there will be a bill message referring to an insert into the bill that will identify or notify the customers of the increase that's coming forward that they will see once they get their bills, I guess in October. MS GIRVAN: Their message, you mean a line on the bill typically, for instance, it says, you know, "delivery charge". MR. BRENNAN: Well, no. Actually it will "Please see attached" and the description of some of the things that you just talked about, how much of the increase is related to, say, the commodity or the reasons why the commodity prices are going up, those Les Services StenoTran Services Inc. 613-521-0703 36 Questions by Mr. Janigan kinds of things. MS GIRVAN: Okay. MR. BRENNAN: And what you are likely to see as the impact on your bill. MS GIRVAN: All right. Thank you. MR. BRENNAN: Now, in addition to that, we have also spoken to government officials to let them know as to what's going on with gas prices. There's a whole communication package, I guess, that we are trying to get out to not just the customers, but to the public in general. MR. SMALL: Maybe just before we move on, I just quickly calculated -- I mean I will have to check it obviously -- but for the fiscal 2000, if we were to follow the formula that has been established for calculating the NUS cost consequences for the link, taking into consideration our increased utilization this year, the cost consequences after netting off any revenue associated with selling off that capacity unused would be approximately $700,000 in total. In the past it has been shared 50-50, so that would translate to $350,000 against the 2000 PGA, approximately. MR. JANIGAN: I have a follow-up question from Julie. Have you thought of doing any advance briefings in the media about this particular issue? MR. BRENNAN: Yes. There have been -- we have met with interviews with seven newspapers already. Again, articles on the reason why gas costs are coming Les Services StenoTran Services Inc. 613-521-0703 37 Questions by Mr. Janigan up or going up. I guess what we are trying to say is it's not necessarily a utility problem per se in that we didn't generate the problem. It's an industry, gas prices -- gas is a commodity. It's subject to the variability of the market. Just maybe going back to your other point on the bill insert. We are indicating on this sheet as well some efficiency tips that customers can look to towards keeping their gas prices down as well, the gas cost down. MR. JANIGAN: Yes. I recognize it's not a good news story. It would be helpful if something like press clips were available for the media. Essentially what happens from our end is that we get calls from the media whenever this occurs. We never like to be in a position of being a defender of the utility or the consumer advocate, so it would be helpful if you got out the material in advance. MS YOUNG: We have questions that pertain strictly to Exhibit A, Tab 14, Schedule III, the one that was sent out on the 28th of August. The estimated 2000 PGVA balance of approximately 65 million, are we correct that that replaces the 70.2 million that was referenced in Exhibit A, Tab 14, Schedule II, so that's an updated estimate? --- Off Record Discussion MR. SMALL: This really is an update, yes. This is the current number that we would be forecasting, Les Services StenoTran Services Inc. 613-521-0703 38 Questions by Ms Young the 64 -- well, 65 million. MS YOUNG: So it's a post July 24, 2000 estimate then. MR. SMALL: Yes. MS YOUNG: And further on down on page 1 of that same schedule, can you just help us? What's the significance or the purpose of the upper and lower boundaries that are shown? MR. SMALL: I guess that was because we were -- when we were putting together this and because it was a forecast, we kind of were thinking back to an exhibit in prior years that we would have filed where we had updated the Board and intervenors of our -- not just our PGVA balance but all the deferral accounts. We would show what our projected balance was and then an upper and lower boundary to give people a sense of where it could go. Then we would update that as we were going through the hearing process. Our attempt here was to say "Okay, here's what we think our forecast is and we intend to update this in a few weeks time, closer to September". We were really just trying to attempt to give everyone an idea as to the potential we were seeing at the time of the movement in the PGVA, the possible movement in the PGVA. MS YOUNG: So, in other words, when you do the updated estimate on in September, or the update, you would expect that to fall within this boundary, this range? Les Services StenoTran Services Inc. 613-521-0703 39 Questions by Ms Young MR. SMALL: We would hope so. I mean, when this was prepared we looked at what the volatility was expected in the prices at that time. MS YOUNG: Then on page 2 of that same Schedule III, I just want to make sure we understand the two examples that are shown here. So, on the first example, the number that is shown on line 12 for the disposition of the 2000 PGVA, that's if the entire 65 million, or whatever it ends up being, is disposed of in a one-time charge? MS GIRIDHAR: That's right. MS YOUNG: And then the line before that is a Rider C attributable to the 123 million? MS GIRIDHAR: That's correct. MS YOUNG: And I guess it follows in the second example, the line 25 is the non-commodity portion of the PGVA? MS GIRIDHAR: That's right. MS YOUNG: And the line before that is the 85 or 86 million? MS GIRIDHAR: Yes. MS YOUNG: The 85 million in that second example -- Malini, I think you mentioned this earlier, but I probably didn't write it down fast enough. That's the difference between 123 million inventory revaluation and then the sum of the 78 million, the commodity portion net of the 41 million for the inventory revaluation at June 1? Les Services StenoTran Services Inc. 613-521-0703 40 Questions by Ms Young MS GIRIDHAR: That's right. MS YOUNG: And that's considered the commodity portion of the PGVA? MS GIRIDHAR: That's correct. It might not add up entirely or arithmetically because this is intended for illustration purposes. We did not include the interest associated with it, but when we do clear it it would exactly add up. If you look now you would find a small difference. MS YOUNG: Just to follow up on I think a question Mr. Brett had, the reason in the first example that the Rider C extends for a four-month period versus the second example, where it is only three, that's strictly driven by a formula around how the Rider C is determined? MS GIRIDHAR: Yes. It's the formula around how the inventory is deemed to have run out for the different rate classes. So once you take approximately $36 million out Rider C, then the deemed physical balance ends up being lower. When you set that off against the send outs for each of the rate classes you end up with a quicker run-out date for the inventory. That's how that works. MS YOUNG: I am having trouble with that one. Then, I think this my last question or second-last question, again looking at page 2 of that example and going to customer communications, how would this information be displayed on a customer's bill? I Les Services StenoTran Services Inc. 613-521-0703 41 Questions by Ms Young know this is a residential customer example, but just generally how would this be displayed? MS GIRIDHAR: Which information? MS YOUNG: Well, the Rider C in the PGVA in particular? MS GIRIDHAR: The PGVA would be shown as a line item in the November bill, the amount of it. Rider C is not shown per se on the bill. The way it is implemented is through -- it's basically set off against the gas supply charge, so it is not explicitly shown. You wouldn't actually see the amount of $23 as a credit on the bill for the month of January. MS YOUNG: Okay. So it would be an offset to what the gas supply charge proposed is 20.8 -- MS GIRIDHAR: That's right. So, if you have 20.8 and then the unit adjustment would be 5.5 cents. Basically, you can see that on page 3, so it was approximately 15 cents being charged until the inventory comes out, fairly close to the existing upstream gas supply charge. MS YOUNG: Then, just again because -- going to customer communications, how would the impact of the Rider C adjustment in this PGVA, how would it be explained to customers? MS GIRIDHAR: I think the intent is to seek approval in this proceeding for that methodology and clear the lower of $13 to customers. Beyond that I would need to talk to people to find out. I really Les Services StenoTran Services Inc. 613-521-0703 42 Questions by Ms Young don't know. MS YOUNG: Those are all our questions. MR. PYE: One follow-up question to Valerie's question. That customer response when you do put the PGVA on the customer's bill -- MS GIRIDHAR: I'm sorry, could I just clarify? I just wanted to clarify that when I say we are rolling out a smaller amount, it's the unit rate is the same in both scenarios, it's 5.5 cents, which is the difference between the old PGVA reference price and the new PGVA reference price. All that happens is that the inventory is deemed to have run out quicker, that's all the difference is. MS YOUNG: Thanks. MR. PYE: When you do include the PGVA clear out on the customer's bill, I am just trying to understand the customer impact, even though you had the communications prior, what is the impact on your call centre or customer confusion? Do you get, basically, a huge surplus in customer concerns at the beginning of October, essentially resulting from it? MS GIRIDHAR: As a result of the PGVA? MR. PYE: Yes. When customers see it on their bills. MS GIRIDHAR: Well, we do have calls every year. I can't really speak for the call centre, but some calls get escalated to our group. We do have some Les Services StenoTran Services Inc. 613-521-0703 43 Questions by Mr. Pye customers calling and, obviously, it's related to the amount on the bill. MR. PYE: That's all. Thank you. MR. MIA: Colin, do you want to take a break? MR. SCHUCH: Yes. If everyone is ready for a break now -- how many more do we have? MR. MIA: I have questions. MR. SCHUCH: Do you have quite a number of questions? MR. MIA: I have a few. It depends I guess on the panel and how long it will go. MR. SCHUCH: We were late starting. Why don't we continue questioning and take a 20-minute break, say around 10:30. MR. MIA: Okay. My questions are just more of a walk through to understand what the price change is going to be, the PGA reference price. Maybe you can clarify my understanding or correct me if I am wrong. Good morning, by the way. I will turn right to the back of Exhibit A, Tab 14, Schedule II and walk backwards. This is part of your request for the interim order on gas costs. Since we are lawyers we are not very good at math, so you will probably catch me on a couple of mishaps. The difference between the price that you are asking for now for commodity, $5.07 per gigajoule and $3.80 per gigajoule which is the current price is $1.27, Les Services StenoTran Services Inc. 613-521-0703 44 Questions by Mr. Mia this is going to flow through to the new PGA reference price that you are requesting. Correct? MR. SMALL: Off microphone. MR. MIA: That $1.27 is going to be part of what you are requesting as an increase in the PGA reference price, the $1.27? MR. SMALL: Oh, in Item No. 8 you are talking about -- yes, that $1.27. That's the approximate increase. MR. MIA: That's the commodity differential. MR. SMALL: For the price at Empress, that's correct. Those two times, yes. MR. MIA: And I take it that at paragraph 7 of that same schedule, Exhibit A, Tab 14, Schedule II, you indicate that the PGA reference price of $245.412 10(3)m(3) represents an increase of 55.55, just to round it off, 10(3)m(3), from the current price which I take it is 189.86 10(3)m(3)? MR. SMALL: That's right. MR. MIA: And I am just trying to convert those to gigajoules, starting with the first number I mentioned, 245.41 per 10(3)m(3). Is it correct that that translates to $6.49 per gigajoule? MR. SMALL: That's correct. MR. MIA: And jumping to $189.86 per 10(3)m(3) that's the equivalent of $5.02 per gigajoule? MR. SMALL: That's correct. MR. MIA: So that represents a difference of, Les Services StenoTran Services Inc. 613-521-0703 45 Questions by Mr. Mia just to pull my math sheet out, of $1.42. MR. SMALL: Approximately, yes, $1.42, a dollar forty something. MR. MIA: So the difference between the commodity increase and $1.42 is about 20 cents, and that should be equal to the commodity. MR. SMALL: If you are going from the $3.80 to the $5.07 being $1.27, yes. --- Pause MR. SMALL: Just one thing to caution you about. You have to be careful if you are just going from the average for the Empress prices. For example, while we are saying we are going to be using a 12-month average Empress price of $5.07 a GJ, if you were to look at the average price for what we call our Alberta production, that average price is $5.23. Just to caution you that some of our long-term contracts, for example, have term factors associated with them. So it is not strictly the Empress price. MR. MIA: Right. MR. SMALL: So the increase in the commodity for some of those supplies could be greater than the $1.27 that you are seeing here. MR. MIA: Can you then clarify -- MR. FARRELL: Do you want to give the exhibit reference for your $5.23? MR. SMALL: Sorry. It is Exhibit D3, Tab 2, Schedule I, and it is Item No. 1.1. Les Services StenoTran Services Inc. 613-521-0703 46 Questions by Mr. Mia MR. MIA: Sorry, that was Exhibit D, Tab 3...? MR. SMALL: Exhibit D3, Tab 2, Schedule I. Page 1 is a summary of our forecasts of purchases. MR. MIA: Going back to the $6.49 a gigajoule, the difference in price from $5.02 to $6.49, can you tell me what the constituents of that price are? I suppose the largest chunk of it would be commodity. Is that correct? MR. SMALL: That's right. MR. MIA: Can you give me a ballpark figure or point me to somewhere in your evidence where you can tell me what -- let's just say a percentage of that $1.47. What percentage of that $1.47 or what amount of that $1.47 is attributable to commodity? --- Pause MR. SMALL: We were just trying to find a quick way to come up with the number for you. Possibly what you could do is you could look at Exhibit A, Tab 14, Schedule III, where the components of the gas pipeline and load balancing increase have been identified as 318 million on that page 1 of 2. The gas pipe commodity efficiency has been identified as 298, and then the load balancing deficiency is 20.2. MR. MIA: Thank you. MR. SMALL: So that would be representative of the amount of commodity increase. MR. MIA: So the 20 million of 320 as a Les Services StenoTran Services Inc. 613-521-0703 47 Questions by Mr. Mia ballpark is the non-commodity component. Let's just use these numbers. Of that $20.2 million, what portion of that is attributable to transportation? --- Pause MS GIRIDHAR: Just one more minute. MR. MIA: Take your time. --- Pause MS GIRIDHAR: Actually, the load balancing charge recovers transportation costs, but it also recovers something called the carrying cost of gas in inventory. About 60 per cent of that deficiency of the $20 million represents the higher carrying cost for gas in inventory resulting from the increase in commodity prices. Approximately three or $4 million of that is net transportation costs. MR. MIA: Three or $4 million of $20.2 million is transportation. And of that three or $4 million of transportation costs, can you tell me what portion of that is attributable to the Alliance and Vector pipeline? MS GIRIDHAR: I would not be able to say that, because the way we do cost allocation and rate design is we basically put together all the transportation costs. This exercise looks at a revenue of existing rates vis-…-vis the new transportation costs. So I would not Les Services StenoTran Services Inc. 613-521-0703 48 Questions by Mr. Mia be able to isolate that. MR. MIA: I take it from your answer, then, that you are implying that the Alliance and Vector transportation costs are included within that three to $4 million? MS GIRIDHAR: Yes, they are. MR. BRETT: Excuse me. This is a 2000 PGVA clearance. I don't think there are any Alliance and Vector costs yet, are there? MS GIRIDHAR: You are referring to Item No. 2 on that page? MR. BRETT: Yes. MS GIRIDHAR: That is the breakdown of the requested increase for 2001. Look at the 318. MR. FARRELL: 2001 deficiency. MR. BRETT: I am sorry, I apologize. MR. MIA: Just to confirm that Alliance and Vector is included in the three to $4 million that you are asking for in your request to the Board for an increase. With respect to Alliance and Vector, can you point somewhere in your evidence to details, other than the details that I have seen on the length of the pipeline and that sort of thing, details on the costs associated with Alliance and Vector and your contracts there? MR. BRENNAN: The costs that are included can be found in Exhibit B3, Tab 2, Schedule I. You can see Les Services StenoTran Services Inc. 613-521-0703 49 Questions by Mr. Mia at lines 6.10 and 6.11 that we have the costs of the Alliance pipeline of $40 million and of the Vector pipeline of $23 million, approximately. MR. MIA: If you would just bear with me, I will turn that up for a second. --- Pause MR. MIA: Looking at this schedule where you have transportation costs as Item No. 6 of the total transportation costs, would it be accurate to say that if I combined those two amounts to say approximately $63 million, take that as a portion of the 222 -- would that be a fair proportion of what may be in your three to $4 million? MS GIRIDHAR: I really could not say that. MR. MIA: This is all the detail you can give me on Alliance and Vector, this schedule here? MR. BRENNAN: That's all -- MR. MIA: That is all that is in the evidence? MR. BRENNAN: That's correct. MR. MIA: Thank you. Those are my questions. MR. BRETT: If there is no one else, I just have one more question. Looking at these gas prices that you were mentioning earlier, October 1st, 1999, of $2.97 a GJ and these reference prices then increasing to $3.69 in June and $5.07 for next year, it looks to me like you must have done some hedging over the course of 2000 to keep these prices down. Les Services StenoTran Services Inc. 613-521-0703 50 Questions by Mr. Brett MR. SMALL: Yes, we did. MR. BRETT: What percentage would you have hedged, roughly, of your supply, your system supply, in 2000? MR. SMALL: I'm not entirely sure. I could possibly try to find out when we -- but there's approximately -- the PGVA for -- 2000 PGVA, had we not entered into risk management activities, would have been some $40 million higher. MR. BRETT: That's what I... Okay. You haven't hedged, I take it, with respect to 2001? MR. SMALL: No risk management's been taken into yet. MR. BRETT: Was this -- I mean I don't know the -- all right, that's fair enough. Just in broad strokes, I guess, why not? Has it become -- was the run-off too quick, effectively, to be able to deal with that in a -- MR. SMALL: Why we haven't done anything for 2001 yet? MR. BRETT: Yes. You have no contracts for 2001. I guess that's part of it? MR. SMALL: Well, that's part of the problem. I mean, certainly, we are not about to place a hedge, for example, on a supply that we don't have a contract for. And what we have seen -- while prices have moved up and down since we put this together, if you were to Les Services StenoTran Services Inc. 613-521-0703 51 Questions by Mr. Brett look at the 21-day average -- I was talking about that a little before -- it's very close. So there hasn't been a need to enter into anything, up until early this week. MR. BRENNAN: We have met, and we probably will be go out with some risk management sometime this week, or early next. MR. BRETT: And you wouldn't have been able to do it earlier, I guess, in the year, because your contracts basically expired, for the most part, on the 1st of October. Is that -- MR. SMALL: No; the 1st of November. MR. BRETT: The 1st of November. --- Pause MR. BRETT: You didn't do it earlier in the year because -- MR. SMALL: Well, when you -- I guess when you are saying "earlier in the year", the difficulty we have is that our practice is to begin our risk management activity once our budget has been filed and we have a PGVA reference price to work with. MR. BRETT: Right. MR. SMALL: So until we actually go ahead and file a 2001, we are somewhat precluded from entering into anything for fiscal 2001. So -- MR. BRETT: All right. So you have got to do it against a -- once you have determined what your forecast is, essentially, for -- MR. SMALL: That's correct. Les Services StenoTran Services Inc. 613-521-0703 52 Questions by Mr. Brett MR. BRETT: Okay. Thank you. Those are my questions. MR. SCHUCH: Are there any other questions? Speak now. Okay. I have a couple of questions. I would like you to refer to Exhibit A, Tab 14, Schedule II, paragraph 1, where you talk about the 318 million deficiency due to gas costs. And in connection with that, I would like you to refer to a spreadsheet, Exhibit A, Tab 7, Schedule II, pages 4 and 5. It's entitled "2001 Test Year Drivers of the Deficiency". Do you have that? MS GIRIDHAR: Yes. MR. SCHUCH: That spreadsheet, basically, breaks out the total deficiency of 326 million, of which the 318 is due to gas costs. In a fair bit of detail. Now, I was wondering where on that sheet, which column, I might be able to find the 318. I know it doesn't pop out exactly, but would it be Column 5? Would that be most of it? MS GIRIDHAR: Yes -- well, there's a difference in the way this analysis was done, vis-…-vis the 318. The drivers of the deficiency is, basically, an incremental analysis where you layer on each change to the previous level. The 318 is arrived at as a result of our cost allocation and rate design process. Les Services StenoTran Services Inc. 613-521-0703 53 Questions by Mr. Schuch So it's basically more an averaging cost allocating exercise. The other thing I should mention is that while Column 5 shows the 312.5 as being the gas cost related impact, the 318 is the deficiency associated with the gas supply charge and the load balancing charge, which are two components of our rates. They are mostly gas cost related, but they are functionalized in a slightly different way, so they also include non-gas cost items. For example, there is working cash associated with the purchase of commodity. That's an expense for the company; it's not part of our upstream gas costs. That would be added on to the commodity. And there are certain elements that go into load balance charge, as well, that are not strictly derived from the gas costs to operations perspective. For example, we have DSM, which is a function associated with load balance. Those are company costs. So the 318 has that number, but this does not. It's fairly close, indicating that gas cost is the bulk of it, but there are certain other items derived from Board-approved and existing methodology that we have had over a number of years, where certain other company costs get functionalized into the gas supply charge and load balancing charge. So, all this to say that I don't think I could pick up a set of numbers and say all of these add up to 318 on this schedule. Les Services StenoTran Services Inc. 613-521-0703 54 Questions by Mr. Schuch I could, however, show you where the 318 derives from our rate making or rate design exhibits, which is the H exhibits. MR. SCHUCH: Why don't we do that. Can you give me the reference? MS GIRIDHAR: Yes. If you go to H3, Tab 1, Schedule I. So, if you look at Item Nos. 6 and 7 and Item No. 16 -- MR. SCHUCH: Yes, I have it. MS GIRIDHAR: -- you will see those numbers. MR. SCHUCH: Okay. Thank you. Now, on this same spreadsheet, the "Drivers of the Deficiency", Column 2 shows the impact of the prior gas cost increase approved June 1st. It adds up to 220.9. I see that there's a rate base impact of 53 million, on that column. I was wondering if you could explain to us why there is a rate base impact due to gas cost changes. MS GIRIDHAR: Well, this is not my schedule, but I will talk based on what I know of it. There's two main items that impact rate base in any upstream. One is the carrying costs for gas in storage. Given that your commodity price of -- your gas costs go up, obviously, that impacts the carrying costs associated with gas in storage. Les Services StenoTran Services Inc. 613-521-0703 55 Questions by Mr. Schuch Also, there's working cash implications with the change in gas cost. So, typically, those are two items that would cause an increase in rate base in an upstream proceeding. MR. SCHUCH: Of those two items, and in reference to the 53, which would be the largest? MS GIRIDHAR: It would be the carrying cost of gas in storage. MR. SCHUCH: Thank you. I have another question. In Exhibit A, Tab 14, Schedule I, paragraph 48, it's regarding the trigger mechanism of $35 per customer. That's the PGVA figure. I was wondering if you could explain for us the mechanics of the trigger and outline the process of how rate changes are made if the trigger is exceeded. MR. SMALL: The process is that through our risk management program the intent is to protect the customer against upward volatility or price increases during the current year, making sure or trying to limit those increases to less than $35. If during the year our projected PGVA balance is such that it's going to exceed the $35 trigger, then at that time we would be coming forward and having an upstream, just like we did for June 1, so if there is a mechanism whereby prices are increased, we can come forward to increase our gas costs and, therefore, Les Services StenoTran Services Inc. 613-521-0703 56 Questions by Mr. Schuch increase our sales rates. MR. SCHUCH: How often do you monitor the PGVA balance? MR. BRENNAN: I guess the $35 trigger is both on the upside and the downside as well. What we are trying to do is minimize the volatility in prices to our customers, so when we hit the $35 trigger, I guess our obligation is to notify the Board that we have exceeded that or hit that trigger and then, depending on the circumstances, whether or not we see that this may be just a temporary blip, we may not do anything, but if after a period of time it appears that it's going to persist, as Mr. Small mentioned that, we will be filing an upstream. MR. SMALL: In an actual fact, I believe the notification actually comes at $20, just to inform your returns officer that that projected balance is a $20 trigger. There's no need for action at that time. It's just a notification. If you do hit the $35, then you have to apprise the Board of what your intentions are, whether or not you plan to come in for an upstream change or if -- we have had it before where it has been very early in the year that we have hit that target or that trigger and have chosen not to come forward because we believed prices will fall back and stabilize. MR. SCHUCH: I would like you to refer to Exhibit D3, Tab 2, Schedule I, pages 1 and 2. That is the summary of gas costs to operations, year ended Les Services StenoTran Services Inc. 613-521-0703 57 Questions by Mr. Schuch September 30, 2001. There is another pretty much identical schedule, except it's for the year ended 2000. MR. SMALL: That's correct. MR. SCHUCH: If you could refer to both of those, I have questions related to those two schedules taken together. I'm just looking at the two schedules, the transportation cost component. I see that moving from September 2000 to September 2001, transportation costs are going up in total by 29 per cent, but for a 5 per cent lower volume in total, if I'm interpreting the figures correctly. I wondered if you can explain to us the apparent anomaly, lower volumes, higher transportation costs. MR. SMALL: Are you talking -- when you are talking about the lower volumes, are you talking about the lower purchase volume altogether? MR. SCHUCH: Yes. MR. SMALL: The volume identified as Item No. 8? MR. SCHUCH: Yes. MR. SMALL: One thing I would like to draw your attention to is Item No. 4.4. This is on D4, Tab 2. MR. SCHUCH: Yes, I have it. MR. SMALL: You will notice there that those are Ontario delivered supplies. If you were to compare that volume with what we are identifying as under the Les Services StenoTran Services Inc. 613-521-0703 58 Questions by Mr. Schuch same item in the D3 exhibit, there's a great reduction in that volume from the fiscal 2000-2001. That's primarily because in fiscal 2000 we were buying a large amount of supply on a delivered basis. The transportation costs associated with those supplies is included in column 2, the purchase cost of those supplies. You can see by the unit rate that that unit rate is a lot higher than what the PGVA or the average purchase cost would be. When you are going from fiscal 2000 to fiscal 2001, there is less reliance on delivered supplies, but the expectation is that you will be buying supplies in western Canada and moving it through the Alliance at Vector, for example. The category for transportation costs would go up. MR. SCHUCH: Just so I understand. The transportation costs total is that amount identified, 6.1 through -- the sum of 6.1 through 6.11. MR. SMALL: That's right. MR. BRENNAN: What's not included there, of course, is the transportation costs included under 4.4 under Ontario delivered supply. That comes as a bundled. MR. SCHUCH: I see. MR. BRENNAN: You find the commodity as well as the transportation. MR. SMALL: It's one delivered price, so you can't -- it wouldn't be right to back out and assume Les Services StenoTran Services Inc. 613-521-0703 59 Questions by Mr. Schuch transportation costs. MR. SCHUCH: Are you saying that the Ontario delivered, the large difference that they are accounting for is the bulk of the change? MR. SMALL: Yes. In 2000 I think it's fair to say that we relied more on the Ontario delivered supply and in 2001 we are relying more on the Vector and Alliance transportation. MR. SCHUCH: And associated higher costs due -- MR. SMALL: Well, I mean there would be higher transportation costs. Just looking at Item No. 6, that number is going to go up because now we have -- the specific transportation costs with Alliance and Vector are now included in that total. MR. SCHUCH: There is some shifting going on due to bundling. I think that's what you are -- MR. BRENNAN: No. I wouldn't say bundling, no. I would say it's just how we acquire the -- how the gas is being delivered. In 2000 we were purchasing delivered supply which is one price, which includes both the commodity and the transportation. Now in 2001 we will be buying the commodity separately and contract for the transportation separately. Those numbers will be split out and then you will get a reduction in the supply side, but an increase on the transportation side. MS GIRIDHAR: If I could just add, from a rate design perspective we do recognize that we used Les Services StenoTran Services Inc. 613-521-0703 60 Questions by Mr. Schuch delivered supplies as well as specific transportation in order to get the gas into our franchise area. For example, we would have a deemed transportation element to Ontario delivered supplies that would have been reflected in 2000. So, as far as the ratemaking perspective is concerned, you may not really see that kind of impact because we do recognize transportation elements of delivered supplies as well. MR. SCHUCH: Thank you. That's helpful. MR. BRETT: Could I ask one last question on that point? Would you just remind me, am I correct also that you don't have bundled-T commodity in a bundled-T range? MR. SMALL: No. MR. BRETT: Transportation. Do you have the transportation costs in here associated with western bundled-T? MR. SMALL: If you turn the page to page 2. MR. BRETT: Yes. MR. SMALL: Item Nos. 14 and 15 represent the costs associated with the transportation. MR. BRETT: I'm sorry, I see it now. MR. SMALL: It would be included as part of our gas costs. We don't include it on page 1 because this is strictly for the volumes that we are purchasing. MR. BRETT: But it is included in your total number, your reference (off microphone). Les Services StenoTran Services Inc. 613-521-0703 61 Questions by Mr. Schuch MR. SMALL: No. It's included as part of our gas costs. Our gas costs charged to operations is the transportation costs for western and Ontario T-service. MR. BRETT: Is included? MR. SMALL: It's included on page 2 when you are coming up with the total forecasted gas costs, but in the determination of the reference price on page 1, those transportation costs are not included because there is no volume associated with them. We are not buying their volume. MR. BRETT: Okay. Fine. Thank you. That's helpful. MR. SCHUCH: I think we have somebody. MR. HAYNAL: Mr. Brennan, you suggested -- MR. SCHUCH: Would you identify yourself, please? MR. HAYNAL: Yes. Tibor Haynal for TransCanada PipeLines. Mr. Brennan, you suggested that the reason for the 29 per cent increase is due to two items; one of them is the delivered supply from Ontario producers and the other is -- MR. FARRELL: He didn't say from Ontario producers. He said delivered supply in Ontario. MR. HAYNAL: I'm sorry, I misunderstood. So it's delivered supply in Ontario and the other is the new contracts with Alliance and Vector. Could you tell me approximately what percentage of the 29 per cent is Les Services StenoTran Services Inc. 613-521-0703 62 Questions by Mr. Haynal due to the new contracts -- the 29 per cent increase in the transportation costs due to the Alliance and Vector contracts? MR. BRENNAN: And you get to your 29 per cent, you are taking the difference between line 6 in Exhibit D4, Tab 2, Schedule I of 172 million, and line 6 in D3, Tab 2, Schedule I of 222 million. Well, I think if you look at what -- we have the costs in there for both Alliance and Vector totalling $63 million. I would have to go out and look at, and I am not sure whether we can do it or not because we would have to break out what that Ontario delivered supply was between commodity and transportation. MR. SMALL: We would have to make an assumption as to what the transportation costs, the effective transportation costs would be as part of the delivered price. I mean -- just one second. --- Pause MR. SMALL: I guess maybe an order of magnitude, if we took the approximate TCPL toll and applied it to that full volume, you would be coming up with an imputed transportation cost of some $40 million. MR. HAYNAL: Do I understand right, Ontario delivered -- lack of the Ontario delivered supply is the larger component in this 29 per cent increase? MR. SMALL: We are going from a line item of transportation costs in fiscal 2000 to 2001. That line Les Services StenoTran Services Inc. 613-521-0703 63 Questions by Mr. Haynal item is increasing by 29 per cent, yes. However, in Item No. 4.4 in fiscal 2000 we have got an amount for Ontario delivered supplies. That's an all-encompassing dollar amount, the delivered cost of those supplies. In 2001 those delivered supplies -- we are not relying on those delivered supplies in 2001. We will be relying on moving those supplies through Alliance and Vector. Since that's the case, then we will be including the transportation costs as part of line 6 for the Alliance and Vector. That's why the increase is going up, to I guess try to give an imputed transportation cost for those delivered supplies. I mean, I would want to check because the transportation could be instead of a ball park number would be approximately $40 million. MR. BRENNAN: We are just guessing because we have no idea what that transportation component of that delivered supply is. MR. HAYNAL: You assume for the purpose of answering the question what it would be if that volume were moved on the TransCanada system. Is that correct? MR. SMALL: Rough, yes. MR. HAYNAL: Thank you very much. MR. SCHUCH: Is that your question? I think we should take a break. Is there someone else? Les Services StenoTran Services Inc. 613-521-0703 64 Questions by Mr. Haynal MR. DuMARESQ: Yes. Could I ask a quick question. Exhibit 8, Tab 14, Schedule I, under section 29. It says that you are reducing your FT capacity, or not renewing your FT capacity by some 117,000 gigajoules a day. MR. BRENNAN: On TransCanada? MR. DuMARESQ: On TransCanada. MR. BRENNAN: That's correct. MR. DuMARESQ: Is that volume then being picked up through Alliance and Vector? MR. BRENNAN: No. If you go on to look at the rest of that paragraph you will see that we will be increasing our capacity into the EDA of approximately 114,000. MR. DuMARESQ: Right. MR. BRENNAN: In addition to that we are also taking an assignment of a third party capacity of 45,000. MR. DuMARESQ: Right. MR. BRENNAN: And the difference is the 58,600 and my understanding is that is the turnback of direct purchase customers who will be bringing their own supply in. MR. DuMARESQ: Okay. So it's not your own portion of it. Thanks. MR. SCHUCH: Another question? MR. MIA: Just one more question to clarify on questions I had earlier. On the components of the PGVA Les Services StenoTran Services Inc. 613-521-0703 65 Questions by Mr. Mia reference price increase, you referred me to the gas supply load balancing deficiency of 20.2 million. In rooting around through some of these binders I found at Exhibit H3, Tab 1, Schedule I, which is a proposed revenue recovery by rate class. MS GIRIDHAR: Yes. MR. MIA: And that outlines, I believe, the gas supply load balancing. Is that correct? MS GIRIDHAR: Yes. I'm sorry, could you give me that reference again? MR. MIA: I'm sorry, it's Exhibit H3, Tab 1, Schedule I, page 1. MS GIRIDHAR: Yes. MR. MIA: And at column 6 I believe you outline the gas supply load balancing charge and break that down. Is that correct? MS GIRIDHAR: Yes. MR. MIA: I notice on the list of items, I don't know what those are, is there some way I can find out what these items are? I notice on the far left column, just so I can put the numbers to -- MS GIRIDHAR: That's the rate class. MR. MIA: Thank you. MR. SCHUCH: Shall we break now? I would say we reconvene at eleven o'clock, in about 22 minutes. MR. JANIGAN: What happens then? MR. SCHUCH: Board Staff has a few more questions. Then I think we can break for lunch and that Les Services StenoTran Services Inc. 613-521-0703 ###Next: 1 ###] <<<>>> ###CaseId: RP-2000-0040 ###Title: OEB Transcript of RP-2000-0040; Vol. T1:01 ###Section: Preliminary Activities ###Author: Schuch, Desai (OEB) ###PubDate: 08/30/00 ###LFileId: VOLT101 ###[ ###Prev: 1 [Questions by Mr. Mia Page: 66] 66 Questions by Mr. Mia would conclude the technical -- MR. JANIGAN: Would it be possible that we could accelerate the -- MR. SCHUCH: To commence before lunch? MR. JANIGAN: Yes. MR. SCHUCH: I don't see why we couldn't do that, but I think we need a lunch break at some point. --- Upon recessing at 1040 --- Upon resuming at 1112 MR. SCHUCH: I guess we can get started. I just have a couple more questions. I want you to please refer to Exhibit C2, Tab 1, Schedule I, page 4 of 13. It is a document entitled "Economic Outlook: June 2000". MR. SMALL: What was the reference again? MR. SCHUCH: Schedule C2, Tab 1, Schedule I, page 4 of 13. If you look at the bottom of this page, the document shows the Toronto city gate price at $4.16 per GJ in 2001. MR. SMALL: Yes. MR. SCHUCH: I notice that your evidence indicates a reference price of $6.492 per GJ. MR. SMALL: That's right. MR. SCHUCH: First of all, is this an apples to apples comparison? MR. SMALL: I don't think it is. I am not exactly sure when this forecast would have been put Les Services StenoTran Services Inc. 613-521-0703 [Questions by Mr. Schuch Page: 67] 67 Questions by Mr. Schuch together. I know it says June 2000, but the other thing I am uncertain about is what their information source was for coming up with that. In putting together our gas cost forecast we would just take the 21-day average of reported prices. MR. SCHUCH: It is quite a remarkable percentage difference, assuming it is apples to apples. MR. SMALL: And I can't really speak to that outlook, because I am not sure what they used in coming up with their forecast. I can't really speak to that. MR. SCHUCH: So it is a case of another department in your company with different information sources, publishing a document that may or may not be actually up-to-date as of June. MR. SMALL: Yes. MR. SCHUCH: It may be older information or other assumptions. MR. LADANYI: Colin, we don't have a witness for this exhibit. This was from the Economic Studies department, so I am not quite sure on what basis those numbers were presented. MR. SCHUCH: Okay; thank you. MR. LADANYI: If you like, we can investigate it and we will get back to you on that. MR. SCHUCH: That's fine. I was just curious to know about it because it was such a large differential MR. SMALL: Just one second. Les Services StenoTran Services Inc. 613-521-0703 [Questions by Mr. Schuch Page: 68] 68 Questions by Mr. Schuch --- Pause MR. SMALL: I am not entirely sure, but one explanation could be, as you mentioned, the time that they did it. Also, their source of the pricing forecast could be different. It is possible that they could have talked to industry analysts on their perception of where prices were going to be. That is possible. MR. SCHUCH: Okay, that's fine. Another question I have is in reference to Exhibit H3, Tab 6, Schedule I, which is the Rate Handbook. I just wanted to confirm something. Do the rates in this handbook reflect the full revenue requirement of 2.467 billion, or was it adjusted for just gas costs? MS GIRIDHAR: No. That is the full requirement. MR. SCHUCH: Will there be another handbook published that will isolate the gas cost increase only? MS GIRIDHAR: Yes, as part of the draft rate audit process we would submit all of the documentation, including the rate handbook associated with the 318 million increase that we are requesting at this point. MR. SCHUCH: Okay. Thank you very much. MS GIRIDHAR: I should add that the approaches to increase the gas by charge and load balancing elements only but keep the distribution charge the same as it is right now at the approved level under 2084, is Les Services StenoTran Services Inc. 613-521-0703 [Questions by Mr. Schuch Page: 69] 69 Questions by Mr. Schuch it -- the upstream? MR. SCHUCH: I am sorry, could you repeat that last part. MS GIRIDHAR: The handbook that we would provide as part of the draft rate audit process would incorporate the new gas supply charge and the new load balancing charges underpinning the 318 million and would show the same distribution charges as are currently in effect. Those would be the ones from the upstream 2000 -- June 1, 2000 increase. MR. SCHUCH: Okay. I am clear on that; thank you. One final question. I wonder if anybody on the panel would like to comment on this question: Do you believe that the sustained high gas prices, assuming they are sustained, will increase the risk of customers switching to alternative fuel? And to what extent, if this is so, has this been reflected in your volume forecast? MR. BRENNAN: To date, we have been asked -- looking at this question as well; obviously it is a concern of ours -- whether or not some of our customers will switch to alternative fuels. I have spoken to our people in that area. To date, there has been no indication that customers are prepared to switch to alternative fuels; i.e., oil, for example. Some have asked questions, but no one has indicated that's what they want to do. Les Services StenoTran Services Inc. 613-521-0703 [Questions by Mr. Schuch Page: 70] 70 Questions by Mr. Schuch One of the concerns, I guess, that -- or at least what they would have to factor in, in making that decision, for example, if they were holding transportation, having to pay demand charges, they would still have to pay those demand charges even if they went to alternative fuel. So that would be one thing that they would have to factor into that decision. But, as I say, to date, there has been no indication that customers are prepared to switch the fuel -- to fuel oil. MR. SCHUCH: I suppose that also depends on to what extent customers have the ability to switch? MR. BRENNAN: Absolutely, yes. MR. SCHUCH: Okay. Thank you. Those are all my questions. I wonder, now, if there are any additional questions from any intervenors; and if not, I think we can probably conclude this portion. MS GIRIDHAR: Sorry. If I could just clarify something for Ms Young. MR. SCHUCH: For who? Sorry. MS GIRIDHAR: For Ms Young. You asked whether there would be any communication, regarding a rider's fee to customers. I recalled after, and I talked about it, that we do have a line that goes into the rate notice for customers that says that the new gas supply charge would be in effect after -- I can't remember the exact Les Services StenoTran Services Inc. 613-521-0703 [ Page: 71] 71 wording, but something to the effect that: We have lower-priced gas in inventory which will be used up first and that your new gas supply charge will be in effect after that. So that indicates to them the impact of rider's fee on their... MS YOUNG: It indicates that there is an impact of some sort, but it wouldn't necessarily specify -- MS GIRIDHAR: Rider's fee. MS YOUNG: -- the magnitude of the impact. Is that right? MS GIRIDHAR: I do not believe we specified that to the customers but -- I'm talking about residential Rate 1 customers and Rate 6. No; I think it's just a statement to the effect that: We have lower-priced gas in inventory that will be used up first. MS YOUNG: What about other customers? MS GIRIDHAR: The large-volume? MS YOUNG: Yes. MS GIRIDHAR: I would have to get back to you on that; I can't recall offhand. MS YOUNG: Thank you very much for following up on that. MR. SCHUCH: Are there any additional comments that the panel would -- clarification? --- Pause MR. SCHUCH: Shall we conclude this portion? Les Services StenoTran Services Inc. 613-521-0703 [ Page: 72] 72 I see no reason why we can't. So this represents the end of the Technical Conference for EB-2000-0234. The next phase will be the Settlement Conference. It will not be transcribed or broadcast to the rest of the building. Thank you. --- Whereupon the Technical Conference adjourned at 1124 Les Services StenoTran Services Inc. 613-521-0703 [ Page: 73] 73 INDEX OF PROCEEDING PAGE Upon commencing at 0843 3 Preliminary Matters 7 Presentation by Mr. Frank Brennan 9 Presentation by Mr. Don Small 15 Presentation by Ms Malini Giridhar 15 Questions by Mr. Brett 19 Questions by Ms Girvan 27 Questions by Mr. Janigan 32 Questions by Ms Young 37 Questions by Mr. Pye 42 Questions by Mr. Mia 43 Questions by Mr. Brett 49 Questions by Mr. Schuch 52 Questions by Mr. Haynal 61 Questions by Mr. Mia 64 Upon recessing at 1040 66 Upon resuming at 1112 66 Questions by Mr. Schuch 66 Upon adjourning at 1124 72 Les Services StenoTran Services Inc. ###] ###Pages: 66-73