1

 1                                         RP-2000-0068
 2                        THE ONTARIO ENERGY BOARD
 3        
 4        IN THE MATTER OF the Ontario Energy Board Act, S.O.
 5        1998, c. 15, Schedule B;
 6        
 7        AND IN THE MATTER OF an Application by Hydro One
 8        Networks Inc. for an order or orders granting leave to
 9        construct an electricity transmission line from the
10        Hawthorne Transmission Station to Gamble Junction and to
11        the Ontario-Qu‚bec provincial border at the Ottawa
12        River, all in the regional Municipality of
13        Ottawa-Carleton.
14        
15        
16        B E F O R E :
17        S.K. HALLADAY       Presiding Member
18        K. McCANN           Member
19        A. BIRCHENOUGH      Member
20        
21        Hearing held at:
22        2300 Yonge Street, 25th Floor, Hearing Room No. 1
23        Toronto, Ontario on Wednesday, November 22, 2000,
24        commencing at 0940
25        
26                                 HEARING
27        
28                                VOLUME 1

                                2

 1                               APPEARANCES
 2        PATRICK MORAN            Counsel to Board Staff
 3        KATHI LITT/
 4        NABIH MIKHAIL/
 5        ZORA CRNOJACKI
 6        
 7        MARY ANNE ALDRED         Hydro One Networks Inc.
 8        PETER THOMPSON           City of Cumberland
 9        MURRAY KLIPPENSTEIN/     Pollution Probe
10        JACK GIBBONS
11        ERNEST McARTHUR          Regional Municipality of
12                                 Ottawa-Carleton
13        PETER BUDD/              TransEnergie, a Division of
14        KRISTIE SEBALJ/          Hydro Quebec
15        DENIS GAGNON
16        LLOYD GREENSPOON         Northwatch
17        DAVID BROWN              Independent Electricity Market
18                                 Operator (IMO)
19        
20        
21        
22        
23        
24        
25        
26        
27        
28        

                                3

 1                                                Toronto, Ontario
 2        --- Upon commencing on Tuesday, November 22, 2000
 3            at 0940
 4                  THE PRESIDING MEMBER:  Please be seated.  Good
 5        morning.
 6                  The Board is sitting to hear an application by
 7        Hydro One Networks Inc. for an order or orders granting
 8        leave to construct an electricity transmission line from
 9        the Hawthorne Transmission Station to Gamble Junction
10        and to the Ontario-Quebec provincial border at the
11        Ottawa River, all in the Regional Municipality of
12        Ottawa-Carleton.
13                  My name is Sheila Halladay.  With me today are
14        Art Birchenough and Ken McCann.
15                  May I have appearances, please?
16                  MS ALDRED:  Good morning.  My name is Mary
17        Anne Aldred, spelled A-L-D-R-E-D.
18                  THE PRESIDING MEMBER:  Ms Aldred.
19                  MR. THOMPSON:  Yes.  My name is Peter Thompson
20        and I am here as counsel for Vice & Hunter, who are the
21        solicitors for the City of Cumberland.
22                  THE PRESIDING MEMBER:  Mr. Thompson.
23                  MR. KLIPPENSTEIN:  Good morning, Madam Chair
24        and members of the panel.  My name is Murray
25        Klippenstein, counsel to Pollution Probe.
26                  THE PRESIDING MEMBER:  Mr. Klippenstein.
27                  MR. McARTHUR:  Good morning, Madam Chair.  My
28        name is McArthur, M-c-A-R-T-H-U-R, first name Ernest.  I

                                4

 1        appear on behalf of the Regional Municipality of
 2        Ottawa-Carleton.
 3                  THE PRESIDING MEMBER:  Good morning,
 4        Mr. McArthur.
 5                  MR. BUDD:  Good morning, Madam Chair, members
 6        of the Board.  My name is Peter Budd.  With me is
 7        Kristie Sebalj, S-E-B-A-L-J.  We represent TransEnergie,
 8        a Division of Hydro Quebec.  Also with me is Denis
 9        Gagnon.
10                  MR. GREENSPOON:  My name is Lloyd Greenspoon
11        and I am here for Northwatch.
12                  THE PRESIDING MEMBER:  Mr. Greenspoon.
13                  MR. BROWN:  Madam Chair, David Brown for the
14        Independent Electricity Market Operator.
15                  THE PRESIDING MEMBER:  Mr. Brown.
16                  MR. MORAN:  Madam Chair, Pat Moran, counsel to
17        the Board.
18                  I have been asked to put in a couple of
19        appearances for some other people.
20                  Richard Stephenson for the Power Workers Union
21        and Michael Janigan for the Vulnerable Energy Consumers
22        Coalition.
23                  THE PRESIDING MEMBER:  Good morning,
24        Mr. Moran.
25                  Any other appearances?
26                  Before we begin I would like to make a few
27        preliminary remarks.
28                  This is only the second case the Board has

                                5

 1        heard under section 92 of the Ontario Energy Board Act
 2        and it is the first application brought by Hydro One
 3        Networks.
 4                  On November 6, 2000, the City of Cumberland
 5        wrote to the Board advising that it intended to
 6        challenge the legality of Ontario Regulation 365/00
 7        insofar as it limits the Board's jurisdiction to decide
 8        matters in the public interest.
 9                  On November 9, 2000, Pollution Probe wrote to
10        the Board indicating its intention to bring a motion to
11        dismiss Hydro One Networks application.
12                  The jurisdiction of the Board to deal with the
13        issues raised by Pollution Probe is also tied to the
14        validity of Ontario Regulation 365/00.
15                  On November 10, the Board wrote to the parties
16        indicating that it was considering three options for
17        dealing with the issue, and the parties were given the
18        opportunity to make submissions.  Needless to say, you
19        are disparate group and no two parties made the same
20        submissions.
21                  On November 20, last Monday, a meeting of the
22        full Board was held.  At that meeting, the Board decided
23        to state a case on the validity of Regulation 365/00 to
24        the Divisional Court pursuant to section 32 of the
25        Ontario Energy Board Act.
26                  As a result of that Board decision, the panel
27        in this case will not be hearing arguments on the
28        validity of the regulation, either by way of preliminary

                                6

 1        motion or in final argument.
 2                  However, in order to expedite this
 3        application, I understand that the parties have agreed
 4        that the Board will proceed to hear the evidence in this
 5        case on the basis that the regulation would not apply. 
 6        This will enable the Board to have a full record in this
 7        proceeding.
 8                  The court will deal with the validity of the
 9        regulation and the Board will deal with the merits of
10        the application.
11                  I would like to stress that this approach in
12        no way prejudices the positions of the parties with
13        respect to the stated case and the validity of the
14        regulation.
15                  The Board feels that this approach is a
16        pragmatic one that addresses Hydro One Networks concern
17        on the timing of the application, as well as the
18        intervenors concern with respect to the validity of the
19        regulation.
20                  Are there any questions?
21                  Before we proceed, are there any preliminary
22        matters?
23        PRELIMINARY MATTERS
24                  MR. MORAN:  Madam Chair, I have just noted
25        that the on-air light isn't switched on.
26                  Thank you.
27                  THE PRESIDING MEMBER:  Thank you.
28                  There are no preliminary matters?

                                7
                                              Preliminary Matters
 1                  MR. THOMPSON:  Madam Chair, I don't know if it
 2        is appropriate to raise it now, but I had raised with
 3        Mr. Moran the possibility of scheduling the Cumberland
 4        witnesses for time fixed and the time that was suggested
 5        to me was Friday at 9:30.  I just wanted to put that on
 6        the record and if the Board has any concerns with that
 7        perhaps they could let me know, otherwise my client is
 8        to have my witnesses here at that time.
 9                  THE PRESIDING MEMBER:  The Board doesn't have
10        any concerns with that.
11                  Ms Aldred, do you have any concerns with that?
12                  MS ALDRED:  My only concern would be that I
13        would like to be, obviously, through our case by then. 
14        We have anticipated three panels and I'm not sure that
15        that third panel would be through by that time.  But,
16        other than that, fine.
17                  THE PRESIDING MEMBER:  We have planned three
18        days for this hearing.  Hopefully, I'm sure we will get
19        to the intervenor evidence on the third day, at least
20        some time, Mr. Thompson.  So that would be fine as far
21        as scheduling them for Friday.
22                  Mr. Klippenstein, do you have a preliminary
23        motion or have you decided to drop that one?
24        MOTION
25                  MR. KLIPPENSTEIN:  I was going to say that
26        there was that request outstanding and I'm not sure if
27        the Board had plans on that.  I would hope that we would
28        be able to hear it this morning prior to the rest of the

                                8
                                            MOTION (Klippenstein)
 1        hearing.
 2                  THE PRESIDING MEMBER:  Mr. Klippenstein, you
 3        have three minutes to convince me why we should dismiss
 4        this application.
 5                  MR. KLIPPENSTEIN:  The motion brought by
 6        Pollution Probe, Madam Chair, has two basic ideas
 7        involved with it.  One is that the Board can look at the
 8        evidence now, which is in its fullest and most complete
 9        form right now from Hydro One, and can say, even in a
10        best case scenario, "This isn't adequate for a
11        decision."  In my submission, the obvious question
12        arises, obviously:  Well, why shouldn't the Board just
13        hear the evidence?
14                  I have given four reasons in the motion
15        materials and they are centering on the fact that if
16        Hydro proposes to add any significant evidence during
17        the hearing now, that would be very problematic.
18                  First of all, it would be last-minute surprise
19        evidence.  So from the Board Member perspective, it
20        wouldn't have the benefit of being tested by the
21        parties.  So it would be inferior evidence arising from
22        the fact that it comes at the last minute.  That is
23        problematic because some of the evidence is very, very
24        complicated.
25                  So in terms of the quality of the Board's
26        information, last minute evidence, in my submission,
27        would be a major problem.
28                  There are also questions of fairness to the

                                9
                                            MOTION (Klippenstein)
 1        parties, the fact that it would contradict the Board's
 2        detailed prehearing procedure.  So there are real
 3        problems if the Board is assuming that it is okay to add
 4        significant evidence at the last minute.
 5                  I have stated that in my motion and I will
 6        move to my next point.
 7                  The next point is one of substance.  That is
 8        that there appears to be what may well be an extremely
 9        problematic problem or gap or contradiction in the
10        evidence right now.
11                  As my motion materials say, the question of
12        whether some of the power that is going to go through
13        this new transmission line is going to end up in Quebec
14        and then in the eastern States is a fundamental one.
15                  The Board has hints of it in the evidence at
16        this stage.  In fact, if one looks at the statements of
17        Hydro Quebec that we filed, Hydro Quebec is saying that
18        they intend to make money through arbitrage -- and they
19        use the term "very profitable" -- by selling power to
20        the eastern States, such as New York, where there is a
21        large price difference.
22                  So, in my submission, what we have here is a
23        potentially huge problem for the consumers of Ontario
24        which, to put it bluntly, involves the sale of cheap
25        Ontario power to the eastern New York States at a large
26        profit by Hydro Quebec using the storage facilities of
27        their reservoir.
28                  So this is something that is not contemplated

                                10
                                            MOTION (Klippenstein)
 1        by the evidence.  If Pollution Probe's understanding of
 2        the evidence is correct, it is going to have to be dealt
 3        with somehow.
 4                  This gets back to my first point.  If we are
 5        going to be, in the middle of a hearing, dealing with
 6        some major, major criticisms on some of the economic
 7        evidence, how is a Pollution Probe and, more
 8        importantly, how is the Board supposed to deal with that
 9        at the last minute?  This may be, if Pollution Probe is
10        correct, the Churchill Falls of Ontario, in which this
11        facility ends up benefiting Hydro Quebec hugely for many
12        years to come -- and I have nothing against Hydro
13        Quebec -- but at the expense of Ontario consumers.
14                  Finally, I would notice that although
15        Pollution Probe has been raising this specific issue
16        repeatedly in the interrogatory period for some weeks
17        now, and that is in some of the letters we received,
18        finally, a partially updated interrogatory response
19        yesterday which says that the assumption in the evidence
20        is that Hydro Quebec will import exactly as much power
21        from Ontario through this transmission line as it will
22        export to Ontario.  The numbers are exactly the same. 
23        There is no net difference.
24                  The implications, in my submission, are
25        momentous for the evidence, because that means that the
26        whole case seems to be assuming that there will be no
27        net export of Ontario power to the northeastern States
28        which are willing to pay a lot for it through Quebec. 

                                11
                                            MOTION (Klippenstein)
 1        It is important that this is a two-stage scenario we are
 2        concerned about, Ontario to Quebec, Quebec to U.S.
 3        jurisdictions.  We are not talking about direct Ontario
 4        to U.S.
 5                  But the numbers we received yesterday
 6        suggest -- they don't suggest, they state that this
 7        whole evidence assumes that all Ontario power that goes
 8        to Hydro Quebec comes back.  In my submission, that
 9        flies against ordinary economic logic.  It flies against
10        the evidence, because the evidence itself says Hydro
11        Quebec will try to maximize this transmission line in
12        its own benefit.
13                  Furthermore, it flies in the face of the
14        public statement of Hydro Quebec that says:  We are
15        going to make a lot of money selling -- storing power
16        and then selling it to New York and others.
17                  So we have, in my submission -- I will wrap-up
18        now -- this enormous contradiction between the
19        assumption that there will be no net outflow of power
20        and the reality that is staring at us from several
21        different angles.  In my submission, the potential there
22        for of huge amounts of cheap Ontario power to go to
23        Quebec, then to be sold at a large mark-up to
24        northeastern States by Quebec, and the net result will
25        be an increase in Ontario prices.
26                  That possibility simply does not appear in the
27        evidence at all.  So my concern is, if this is raised in
28        the middle of a hearing the Board will simply not be

                                12
                                            MOTION (Klippenstein)
 1        able to get enough evidence at the last minute to deal
 2        with what may be Ontario's Churchill Falls.
 3                  Thank you.  Those are my compressed
 4        submissions.
 5                  THE PRESIDING MEMBER:  Thank you,
 6        Mr. Klippenstein.
 7        --- Off record discussion
 8        DECISION
 9                  THE PRESIDING MEMBER:  Thank you,
10        Mr. Klippenstein.
11                  We have considered your motion.
12                  The panel would like to point out that this is
13        Hydro One's application and Hydro One has the onus of
14        proving to the Board and providing the Board with
15        sufficient evidence to consider the application.  The
16        hearing and the testing of Hydro One's evidence is the
17        subject of this oral hearing.
18                  But you are free to argue in final argument
19        that Hydro One has not met this onus, either by not
20        providing the Board with sufficient evidence or by
21        questioning the credibility of that evidence in your
22        final arguments and submissions.
23                  Therefore, the motion to dismiss this
24        application at this time is dismissed.
25                  Are there any other preliminary matters?
26                  Ms Aldred.
27        PRELIMINARY MATTERS
28                  MS ALDRED:  Thank you very much.

                                13
                                              Preliminary Matters
 1                  Just before we start I do have some
 2        housekeeping matters and some filings that I would like
 3        to take care of, several matters that I would just like
 4        to file with the Board.
 5                  The first is the supplementary responses to
 6        questions asked by Pollution Probe.  These were faxed to
 7        all of the parties, but I think they do need to be filed
 8        with the Board.
 9                  Mr. Marritt will be bringing those up.  There
10        are also copies on the side.  Excuse me, I should have
11        mentioned that.
12                  MR. MORAN:  Madam Chairman, that can be
13        Exhibit 14.1, Supplementary Interrogatories filed by
14        Hydro One.
15                  THE PRESIDING MEMBER:  Thank you.
16                       EXHIBIT NO. 14.1:  Supplementary
17                       Interrogatories filed by Hydro One
18                  MS ALDRED:  The second item would be the
19        supplementary response to Pollution Probe Interrogatory
20        No. 4, which was the evidence that Mr. Klippenstein
21        referred to in his motion.  I would like to file that
22        with the Board.
23                  THE PRESIDING MEMBER:  Thank you.
24                  MR. MORAN:  Exhibit No. 14.2.
25                  THE PRESIDING MEMBER:  Mr. Moran, that can
26        probably be just a revised answer to the interrogatory,
27        rather than a specific exhibit.
28                  MS ALDRED:  The next item is a matter that was

                                14
                                              Preliminary Matters
 1        sent by Hydro One Networks in response to complement
 2        evidence.  It was sent to all intervenors.
 3                  MR. MORAN:  Exhibit No. 14.2, Madam Chair.
 4                  MS ALDRED:  Excuse me, I'm very sorry, it has
 5        already been marked as an exhibit.  Mr. Marritt just
 6        pointed that out to me.
 7                  The next item are the CVs.
 8                  THE PRESIDING MEMBER:  I'm sorry, Ms Aldred
 9        which exhibit is it?
10                  MS ALDRED:  It is --
11                  MR. MORAN:  It is 13.21.  It is already
12        marked.
13                  MS ALDRED:  It's 13.21, yes.
14                  The next item is a group of curriculum vitae
15        of the various witnesses which Hydro will be producing.
16                  MR. MORAN:  I think we can finally use that
17        Exhibit 14.2, Madam Chair.
18                       EXHIBIT NO. 14.2:  Curriculum vitae of
19                       Hydro One's witnesses
20                  MS ALDRED:  The next item is a witness
21        responsibility summary which has been served on all the
22        parties, an extra copy is at the side, and which
23        Mr. Thompson shows me is currently Exhibit 13.22.
24                  THE PRESIDING MEMBER:  Thank you.
25                  MS ALDRED:  You are ahead of me.
26                  The next item for filing is a response to OEB
27        Staff Question 40.  It should have been filed before and
28        we are filing it now.

                                15
                                              Preliminary Matters
 1                  THE PRESIDING MEMBER:  That is the response to
 2        the Board Staff Interrogatory.
 3                  MR. MORAN:  Yes.
 4                  MS ALDRED:  Fine.
 5                  Finally, there is an update to Exhibit B,
 6        Tab 4, Schedule 2.  Page 104 has been altered, and
 7        page 304.
 8                  That will be dealt with in Panel 2, but I
 9        thought I would file it now.
10                  THE PRESIDING MEMBER:  Thank you.
11        OPENING STATEMENT
12                  MS ALDRED:  Those are all of the preliminary
13        filings that I wanted to make.
14                  I did have a very brief opening statement, and
15        then I will proceed to call my first panel of witnesses.
16                  Madam Chair and Members of the Board, as you
17        are aware, this is an application pursuant to section 92
18        of the OEB Act for leave to construct a new 1250
19        megawatt interconnection with Hydro Quebec.
20                  The proposal for this interconnection has been
21        developed in concert with Hydro Quebec and will provide
22        substantial benefits to Ontario consumers.
23                  As you will hear in the evidence, and as you
24        have read in the prefiled evidence, the proposed
25        interconnection will introduce 1250 megawatts of new,
26        lower-cost generation into the Ontario market and, if
27        approved, will contribute toward the requirement in
28        Hydro One Networks transitional transmission licence to

                                16
                                       Opening Statement (Aldred)
 1        increase interconnection capacity by 2000 megawatts
 2        within three years of the opening of the Ontario market.
 3                  Networks, as we will refer to ourselves during
 4        the course of the hearing, is a transmission company. 
 5        Therefore, in order to assess the benefit to Ontario
 6        consumers of the new interconnection, PHB Hagler and
 7        Bailly was retained to model the market and render an
 8        opinion on the possible benefits to Ontario consumers of
 9        the interconnection.
10                  PHB Hagler and Bailly, or PA Consulting, as
11        they are now known, will tell you that the
12        interconnection will have a very positive effect on
13        energy prices in Ontario and that the project is
14        decisively economic.
15                  As we know, the Board is guided by legislation
16        to approve this project if it finds it to be in the
17        public interest.
18                  In preparing its evidence, Networks relied on
19        the legislated definition of "public interest", which
20        examines it in light of benefit to consumers in the
21        areas of pricing, availability, reliability, and quality
22        of electricity service.
23                  Several intervenors have sought to address
24        issues which expand beyond these criteria.  While
25        Networks maintains its position regarding the current
26        legislated definition, we have agreed to answer
27        questions during the hearing put to us by intervenors on
28        a without prejudice basis.  We have, in fact, provided

                                17
                                       Opening Statement (Aldred)
 1        supplementary responses on these issues on that basis.
 2                  We have divided our evidence in this matter
 3        into three panels.  The first panel, which we will start
 4        with this morning, will be the Quality Panel.  They will
 5        deal with the issues relating to need, proposed
 6        facilities and alternatives to consider.
 7                  The second panel will deal with issues
 8        relating to project economics and other public interest
 9        considerations, and that is the panel where PHB Hagler
10        and Bailly will testify.
11                  Finally, the third panel will handle matters
12        relating to project costs, construction and
13        administrative matters, and there will be a
14        representative from Hydro Quebec included on this
15        final panel.
16                  In addition, on the final panel we have added
17        a witness to assist in answering questions arising out
18        of the EA process which was already undertaken in this
19        matter.
20                  I have stated the project has been developed
21        with our partners at Hydro Quebec, and both Hydro Quebec
22        and Networks are ready to proceed with this project,
23        subject to approval.
24                  Because of the engineering complexity of the
25        project, it has to be staged over a period of two years. 
26        In order for Ontario consumers to realize benefits in
27        2003, the project must commence shortly.  Therefore, at
28        the conclusion of this hearing, we may make some

                                18
                                       Opening Statement (Aldred)
 1        submissions as to the timing and nature of the decision
 2        to be reflected.
 3                  I would like now to call my first panel of
 4        witnesses.
 5                  THE PRESIDING MEMBER:  Thank you, Ms Aldred.
 6        --- Pause
 7        SWORN:  FRANK MACEDO
 8        SWORN:  CARMINE MARCELLO
 9        EXAMINATION
10                  MS ALDRED:  Dr. Macedo, could you give us your
11        full name and indicate to us what your professional
12        affiliation is?
13                  DR. MACEDO:  I am Frank Macedo.  I am Director
14        of Investment Planning at Hydro One Networks.  I am
15        responsible for expenditures on our capital and OM&A
16        programs on all our assets.
17                  MS ALDRED:  Can you state your qualifications
18        and your experience, please?
19                  DR. MACEDO:  I have over 20 years experience
20        in planning and operations of transmission systems here
21        in Canada and in England.
22                  Prior to my current position, I was Director
23        of Transmission Operations, also in Hydro One Networks,
24        responsible for real-time operations management of our
25        transmission assets.
26                  Previous to that I held various positions in
27        planning and operations, again, in the CEGB in England
28        and here in Ontario Hydro.  This included about three

                                19
                                   HYDRO ONE PANEL 1, ex (Aldred)
 1        years at the Clarkson System Control Centre, which is
 2        now the IMO, where I was Manager of Integrated
 3        Transmission Planning and Operations.
 4                  MS ALDRED:  Could you tell us what your
 5        academic background is, please?
 6                  DR. MACEDO:  I have a degree in electrical bar
 7        systems from London, England, and a Ph.D. in electrical
 8        engineering from Bristol, England.
 9                  MS ALDRED:  What memberships or professional
10        associations do you belong to?
11                  DR. MACEDO:  I am a licensed professional
12        engineer in the Province of Ontario.  For the past two
13        years I have been the Vice-Chair of the North American
14        Electrical Reliability Council's Planning Standards
15        Subcommittee, responsible for developing reliability
16        standards across North America.
17                  I have also been Chair of the Northeast Power
18        Coordinating Council's, NPCC's Working Group on review
19        of reliability standards.
20                  For several years I have also been a member of
21        various NPCC task forces on planning and operations.
22                  Finally, in relation to this project,  I have
23        been Co-chair of various planning committees with our
24        interconnected utilities.
25                  MS ALDRED:  Have you given testimony before at
26        a Board hearing?
27                  DR. MACEDO:  Yes.  In 1992 I was a senior
28        transmission planning witness in the Environmental

                                20
                                   HYDRO ONE PANEL 1, ex (Aldred)
 1        Assessment Board hearing on Ontario Hydro's Demand
 2        Supply Plan.
 3                  MS ALDRED:  Your more detailed CV has been
 4        filed as part of the evidence.
 5                  DR. MACEDO:  Yes, it has.
 6                  MS ALDRED:  Could you please state for us the
 7        area your evidence will cover this morning.
 8                  DR. MACEDO:  My evidence will cover Exhibit B,
 9        Tabs 1, 2 and 3, and I will be dealing with the need for
10        the project, the proposed facilities and policy matters
11        related to the project.
12                  MS ALDRED:  Can you confirm for us that that
13        evidence was prepared under your supervision and
14        direction and that the evidence is true to the best of
15        your present knowledge and belief?
16                  DR. MACEDO:  Yes.
17                  MS ALDRED:  Are there any changes to your
18        evidence?
19                  DR. MACEDO:  Yes, there are two changes.
20                  The first one refers to the project cost
21        estimate.  The Network Board has approved the project at
22        an estimated cost of $97.7 million subject to section 92
23        approval.  Our current estimate is $96 million.  Our
24        Panel 3 will provide further details.
25                  The second correction is in response to OEB
26        Staff IR No. 7.  We indicated that a 48-fibre optical
27        ground wire was to be used for telecommunication
28        purposes.  This has now been revised to 24 fibres.

                                21
                                   HYDRO ONE PANEL 1, ex (Aldred)
 1                  MS ALDRED:  Other than those changes, do you
 2        accept that material referenced as your evidence in this
 3        case?
 4                  DR. MACEDO:  Yes, I do.
 5                  MS ALDRED:  Turning to you, then,
 6        Mr. Marcello, could you please state your name for
 7        the record and tell us what your professional
 8        affiliation is?
 9                  MR. MARCELLO:  My name is Carmine Marcello.  I
10        am currently the Manager of Transmission and
11        Distribution Development in the Investment Planning
12        Division of Hydro One Networks.  I have the geographic
13        responsibility for planning in the northern and eastern
14        part of the province.
15                  MS ALDRED:  Could you tell us what your
16        qualifications are, please?
17                  MR. MARCELLO:  I have worked in the electric
18        utility industry for 13 years.  During that period I
19        have held numerous professional engineering positions in
20        the field of power system planning and operations.  I
21        have a Bachelor of Applied Science Degree in Electrical
22        Engineering from the University of Toronto and a Masters
23        in Business Administration from York University.
24                  MS ALDRED:  Do you have other relevant
25        industry experience?
26                  MR. MARCELLO:  I am currently the Hydro One
27        Networks representative on the Northeast Power
28        Coordinating Council task force for the coordination of

                                22
                                   HYDRO ONE PANEL 1, ex (Aldred)
 1        planning.  I have represented Hydro One Networks on the
 2        OEB's industry task group that developed a transmission
 3        system code.  As part of that development effort, I
 4        chaired the subcommittee dealing with system expansion.
 5                  MS ALDRED:  And what areas will your evidence
 6        cover today?
 7                  MR. MARCELLO:  I will be covering Exhibits B,
 8        Tabs 1, 2 and 3.  The purpose of my direct evidence is
 9        to describe the key elements of the project design and
10        the alternatives considered.
11                  I will also be appearing on the third panel
12        where I will be dealing with the overall project
13        administration including the details of approvals.
14                  MS ALDRED:  Was this evidence prepared under
15        your supervision and is it true and correct to the best
16        of your knowledge today?
17                  MR. MARCELLO:  Yes, it is.
18                  MS ALDRED:  And are there any changes that you
19        want to make to that evidence?
20                  MR. MARCELLO:  None, other than the ones
21        Dr. Macedo has already referred to.
22                  MS ALDRED:  You therefore accept that evidence
23        as your evidence in this matter?
24                  MR. MARCELLO:  Yes, I do.
25                  MS ALDRED:  Dr. Macedo, will you please
26        provide the Board with an overview of the application?
27                  DR. MACEDO:  Hydro One is seeking approval for
28        leave to construct the proposed facilities under

                                23
                                   HYDRO ONE PANEL 1, ex (Aldred)
 1        section 92 of the OEB Act and the proposed facilities
 2        are for a 1250 megawatt interconnection between Hydro
 3        One's Hawthorne Transformer Station in Ottawa with Hydro
 4        Quebec's substation at the Outaouais in Quebec.
 5                  The project has been developed and designed in
 6        cooperation with Hydro Quebec.  The project is required
 7        to meet Networks transitional transmission licence and
 8        it will provide benefits to Ontario consumers in three
 9        specific areas:  reduce energy prices, enhance
10        reliability and availability of supply.
11                  MS ALDRED:  Could you please elaborate on the
12        licence requirement you just referred to?
13                  DR. MACEDO:  The Ontario government, in its
14        November 1997 White Paper direction for change:
15                       "Recognize the favourable impact of
16                       energy prices if generators, both within
17                       the province and outside, could
18                       participate in a competitive market."
19                       (As read)
20                  Subsequently, in January 1999, the Market
21        Design Committee in its final report to the Minister
22        recommended that Networks, and I quote:
23                       "Be expected to use best efforts to
24                       expand intertie capacity with
25                       neighbouring jurisdictions by
26                       approximately 2,000 megawatts within
27                       three years of market opening." (As read)
28                  Now, in making this recommendation, the MDC

                                24
                                   HYDRO ONE PANEL 1, ex (Aldred)
 1        considered market power mitigation as an important
 2        factor and that the interconnections would be a vehicle
 3        to mitigate market par.  The MDC recommendations
 4        eventually became a requirement in Networks transitional
 5        transmission licence approved by the Minister in April
 6        1999.
 7                  MS ALDRED:  Could you explain to the Board how
 8        Networks approached the matter of energy cost savings?
 9                  DR. MACEDO:  I should first start by saying
10        that the Networks is a transmission and distribution
11        company.  It is not in a position to forecast how the
12        markets would operate and what benefits would arise from
13        competition in the marketplace.
14                  Therefore for this project, Networks retained
15        a knowledgeable and recognized expert, PHB Hagler and
16        Bailly, who now calls himself PA Consulting, to carry
17        out this independent analysis.
18                  PHB worked very closely with Networks to
19        ensure that they model the transmission systems in
20        detail and the systems surrounding the Ontario system
21        and this included interconnections right across eastern
22        Canada and the northeast seaboard.  PHB performed
23        simulations based on a number of expectations for market
24        conditions in Ontario.
25                  Now, PHB has estimated on a conservative basis
26        that Ontario electricity consumers are likely to save
27        around $240 million annually from lower electricity
28        prices related directly to this increase in transmission

                                25
                                   HYDRO ONE PANEL 1, ex (Aldred)
 1        capacity with Hydro Quebec.  PHB estimates that,
 2        dependent upon the market conditions, the savings could
 3        range anywhere from $185 million to $295 million
 4        annually.
 5                  Based on these expected savings, there will be
 6        a short payback period for the $96 million capital
 7        outlay to build the Ontario portion of the
 8        interconnection.  Therefore we believe that the project
 9        is clearly economic for the Ontario consumers and PHB
10        will be here to discuss the study results in Panel 2.
11                  MS ALDRED:  Could you please explain the
12        nature of the reliability enhancement?
13                  DR. MACEDO:  The interconnection will, for the
14        first time, provide a permanent connection with Quebec
15        allowing us to import and export on a continuous basis. 
16        This is not the case now.  Today energy imports and
17        exports are achieved by disconnecting generation from
18        the Quebec system and connecting it to the Ontario
19        system and vice versa.
20                  In doing so, the operating plant essentially
21        becomes part of the system to which it is connected. 
22        Continuous access to new supply through a permanent
23        interconnection such as the one being proposed will
24        improve the overall adequacy, enhance reliability supply
25        to Ontario consumers.  In addition, another
26        interconnection will improve the overall performance of
27        the electric power system in Ontario.
28                  MS ALDRED:  Could you tell the Board what you

                                26
                                   HYDRO ONE PANEL 1, ex (Aldred)
 1        mean when you say that there will be availability of new
 2        supply?
 3                  DR. MACEDO:  The interconnection makes
 4        generation from the entire Quebec system and beyond
 5        available to the Ontario market.  And this is, as I said
 6        earlier, this is in contrast to the current situation
 7        where individual plants only in Quebec are connected to
 8        the Ontario system.
 9                  The addition of this new interconnection will
10        therefore increase the level of access Ontario customers
11        will have to alternate sources of supply.
12                  MS ALDRED:  Can you describe for the Board the
13        current nature of existing interconnections with
14        neighbouring jurisdictions?
15                  DR. MACEDO:  We have been permanently
16        interconnected with our neighbours since the early
17        1950s.  These interconnections have been used for three
18        main reasons.  One is to enhance reliability of the
19        system.  Second to provide emergency support, and the
20        third to permit economic energy transfers through
21        imports and exports.
22                  The Ontario transmission system and the
23        interconnections are shown in the picture beside which I
24        am going to get my colleague to demonstrate.
25                  You need to turn that a bit towards the Board,
26        Carmine.  Thank you.
27                  Now, the figure beside me you see is an
28        enlargement of Figure 1 of our prefiled evidence,

                                27
                                   HYDRO ONE PANEL 1, ex (Aldred)
 1        Exhibit B, Tab 3, Schedule 2.
 2                  The Ontario system is an integrated system
 3        composed of 115 kilovolt, 230 kilovolt and 500 kilovolt
 4        lines and the stations.  The 500 kV system is a backbone
 5        of the transmission system and it extends from Timmins
 6        to Toronto, and from London to Ottawa.  The rest of the
 7        system, the 230 and 115 system, extends through most of
 8        the province and, by and large, no one area is dependent
 9        on the output of any one generating unit.  That is
10        essentially what an integrated system is.
11                  Now, Ontario is connected to New York at
12        Cornwall and Niagara areas; with Michigan in the Sarnia
13        and Windsor areas; with Manitoba in the Kenora area. 
14        That is on the inset shown here in yellow, the Manitoba
15        and the Kenora area; and with Minnesota and the Fort
16        Frances area.
17                  With Quebec there are several points of
18        connection along the Ottawa River.  The first connection
19        was placed in service in the late 1920s but, as I stated
20        earlier, these are not permanent interconnections.
21                  Utilization of these interconnections have
22        varied, depending on system conditions, market
23        conditions and transmission constraints, both within
24        Ontario and outside Ontario.  Over the years, these
25        interconnections have played a very important role in
26        maintaining an economic and reliable supply -- I'm
27        sorry, economic and reliable electric boxes for Ontario.
28                  MS ALDRED:  Would you please describe what

                                28
                                   HYDRO ONE PANEL 1, ex (Aldred)
 1        work is currently under way to increase interconnection
 2        capacity?
 3                  DR. MACEDO:  There are two interconnection
 4        projects currently under way which together will
 5        increase our interconnection capacity by 650 megawatts. 
 6        These are the Maclaren and Michigan projects and I would
 7        just like to describe the two of them.
 8                  The Maclaren project will upgrade an existing
 9        115 kilovolt line with Maclaren Industries in Masson,
10        Quebec, with a new 230 kV interconnection.  This will
11        provide 150 megawatt increase in capacity and is
12        scheduled to be in service in a few days.
13                  Now, the Michigan project involves installing
14        base-angled regulating transformers, also known as phase
15        shifters, to control the path flow through the Ontario
16        system.  These phase shifters will be installed or are
17        being installed on the Ontario-Michigan
18        interconnections.
19                  The Michigan project will provide
20        500 megawatts capacity increase and this project is
21        expected to be in service in the second quarter of 2001.
22                  With these projects, there would be a
23        remaining gap of 1,350 megawatts to meet Networks
24        license requirement.
25                  MS ALDRED:  What other option did you consider
26        for additional interconnection capacity?
27                  DR. MACEDO:  As part of our ongoing
28        relationships with our interconnected utilities, we

                                29
                                   HYDRO ONE PANEL 1, ex (Aldred)
 1        regularly review the performance of our
 2        interconnections, the utilization of our
 3        interconnections and, through that, jointly explore
 4        opportunities to increase our interconnections.
 5                  We have been doing this for many years.  In
 6        fact, I personally have been doing this for the last
 7        10 years.  Because of this involvement, we are well
 8        aware of the options that are available and the
 9        characteristics of these options.  So we assembled most
10        technically feasible options, particularly those that
11        have the significant increase in capacity, and rank them
12        according to unit cost in Ontario.  These are summarized
13        in Exhibit B, Tab 3, Schedule 3.
14                  They include capacity increases with Quebec
15        through this new high capacity interconnection with New
16        York by upgrading the Niagara area transmission.  Now,
17        this is an internal constraint that has to be upgraded
18        in order to fully utilize the interconnections at New
19        York; with Michigan, by upgrading transmission west of
20        London and a new interconnection with Michigan; with
21        Pennsylvania through a new high capacity
22        interconnection; and with Manitoba through a new high
23        capacity interconnection.
24                  Now, although we have ranked these options
25        according to unit cost in Ontario, unit cost itself is
26        not the soul criterion for selecting an option.  Other
27        relevant considerations are a willing partner with
28        interconnections.  A willing partner is extremely

                                30
                                   HYDRO ONE PANEL 1, ex (Aldred)
 1        important:  favourable lead times, size of the capacity
 2        increase, and the nature of the upgrade required.
 3                  Based on the comparison of options that I have
 4        outlined, the Hydro Quebec alternative is by far the
 5        best alternative.
 6                  Networks will continue to explore other
 7        opportunities and other cost-effective options to
 8        further increase our interconnections capacity.
 9                  MS ALDRED:  Now, Mr. Marcello, can you tell us
10        what is required in order to build the interconnection
11        with Hydro Quebec?
12                  MR. MARCELLO:  New transmission lines are
13        needed to tie either new or existing transformer
14        stations in Ontario with those in Quebec.
15                  It is at those transformer stations that the
16        power will be delivered and then transmitted to the rest
17        of the province via the transmission system that
18        Dr. Macedo described.  It is also at the stations that
19        the voltages are converted or transformed to a lower
20        level to allow the power to be distributed locally.
21                  In particular, tying Hydro Quebec and Hydro
22        One Networks together directly would cause some
23        problems.  There are frequency and voltage problems that
24        could lead to outages and damaged equipment.
25                  Dr. Macedo referred to this project as being
26        the first permanent interconnection.  The way this is
27        going to be accomplished is through the use of high
28        voltage direct current converter equipment and it is

                                31
                                   HYDRO ONE PANEL 1, ex (Aldred)
 1        referred to as "HVDC" for short.
 2                  What this equipment does is take alternating
 3        current, converts it into direct current and back into
 4        alternating current.  In doing so, the two systems can
 5        now be tied together to allow continuous flow of power
 6        in both directions.
 7                  MS ALDRED:  What sorts of technical
 8        considerations did you have to take into account in
 9        developing this post-interconnection?
10                  MR. MARCELLO:  The development of the
11        transmission system as a whole, and this
12        interconnection, in particular, has been going on for
13        many years.  When you look back at the types of factors
14        that are considered, they are numerous.  A lot of these
15        factors are also the same sorts of items that the IMO is
16        looking at in their System Impact Assessment and that
17        NPCC looks at in their studies.
18                  Specifically, we arranged a physical
19        connection in a manner that allows the facilities to be
20        operated in a safe and reliable manner.  In adding any
21        new element to the system, and in this case the
22        interconnection, we have to look at what impacts there
23        are on the remaining system, specifically the electrical
24        capability of the remaining equipment, the short circuit
25        capability of that equipment and any changes that need
26        to be made have to be included and incorporated in the
27        design.
28                  Reactive power requirements need to be

                                32
                                   HYDRO ONE PANEL 1, ex (Aldred)
 1        reviewed to ensure that the voltages on the systems are
 2        maintained and, once again, any requirements have to be
 3        factored into the design.
 4                  We also carry out transient and steady state
 5        analyses.  These are carried out to ensure that the
 6        system will operate in a reliable manner.
 7                  A lot of these studies are used in the IMO
 8        process and the NPCC and we ensure that we meet their
 9        requirements in carrying out those studies.
10                  MS ALDRED:  Could you please describe your
11        detailed project design for which approval is being
12        sought?
13                  MR. MARCELLO:  This chart here behind
14        Dr. Macedo is a blow-up of Exhibit B, Tab 2, Schedule 3. 
15        It is a subset of it, just so that we will be able to
16        view it a little better in this room, but I think we
17        have failed in that for the people in the back.
18                  MS ALDRED:  Could you put it on the other
19        easel there?
20                  MR. MARCELLO:  That is essentially what the
21        after would look like.
22                  There is an existing right-of-way that runs
23        about 20 kilometres from Ottawa's Hawthorne TS,
24        transformer station, to the Ottawa River.  On that
25        right-of-way today there are two sets of towers and each
26        tower carries a single circuit.  What we are going to be
27        doing on this right-of-way is replacing each set of
28        towers with a new set and each set will now be capable

                                33
                                   HYDRO ONE PANEL 1, ex (Aldred)
 1        of carrying two circuits.  So in total, once the project
 2        is completed, there will be four circuits on two sets of
 3        towers.  The current two circuits that are there now
 4        will be placed on one tower line and the other tower
 5        line will carry the two new 230 kV circuits that will go
 6        to Quebec to form the basis of this interconnection.
 7                  In replacing the towers, the new towers are
 8        going to be located essentially in the same spot as the
 9        existing tower thereby minimizing the environmental
10        impact.
11                  That basically sums up the line portion of the
12        project.
13                  The station work is largely at Hawthorne TS. 
14        It is as this point where the lines will be tied to the
15        rest of the Ontario transmission system.  The basic
16        facilities we will be providing there are additional
17        circuit breakers to accommodate the two new
18        interconnection circuits and to reconnect an existing
19        transformer.  This connection arrangement will allow for
20        the safe and reliable operation and maintenance of the
21        facilities and the system.
22                  Additional capacitor banks and their
23        associated circuit breakers will also be provided at
24        Hawthorne TS.  These are necessary to maintain
25        acceptable voltage levels.
26                  Within Hawthorne TS there are some breakers
27        that currently would not be capable of handling the
28        increased currents that will be going through the

                                34
                                   HYDRO ONE PANEL 1, ex (Aldred)
 1        station and those will be replaced with new higher rated
 2        units.
 3                  Also protection and control facilities and
 4        their associated telecommunications facilities will be
 5        provided to ensure that the proper system operation
 6        occurs under normal and abnormal conditions.
 7                  As a result of our short circuit analysis we
 8        saw no need for any additional facilities with respect
 9        to short circuit.
10                  So overall, both facilities in Ontario will
11        provide the Ontario portion of the interconnection and
12        it will be good for 1250 megawatts of power flow.
13                  MS ALDRED:  Now could you briefly describe the
14        Hydro Quebec facility?
15                  DR. MACEDO:  Hydro Quebec's facilities will
16        run from that river crossing along 15 kilometres of
17        right-of-way to the Outaouais substation in Quebec.  So
18        that is a total of 15 kilometres, two circuits, 230 kV
19        tower line.
20                  At Outaouais the high voltage DC converter
21        equipment will be installed and these lines will be
22        terminated into that equipment and tied to the rest of
23        the Hydro Quebec system at that point.
24                  MS ALDRED:  Taking a step back then,
25        Dr. Macedo indicated that the preferred alternative was
26        an interconnection with Hydro Quebec.  How was this
27        specific proposal developed?
28                  MR. MARCELLO:  We had to look at several

                                35
                                   HYDRO ONE PANEL 1, ex (Aldred)
 1        considerations to come up with this specific project
 2        that is before the board today.  In working with Hydro
 3        Quebec we had to determine what the interconnection
 4        location was going to be.  Ottawa is where we are
 5        proposing.  There was a possibility of tying along
 6        Cornwall into Quebec.  We had to determine the
 7        appropriate voltage level; 230 is what we selected. 
 8        There were 500 kV options as well.
 9                  Also, the location of the converter equipment
10        had to be determined.  It is currently residing in
11        Outaouais.  It could as easily have resided in
12        Hawthorne.  Or half the equipment could have been
13        located on each, Hawthorne and Outaouais TS.  Those
14        factors were all looked at.
15                  In reviewing the overall costs and reliability
16        considerations it was decided that the preferred
17        alternative was an interconnection with two 230 kV
18        circuits between Hawthorne and Outaouais and the HVDC
19        equipment located at Outaouais TS.
20                  That being established, the efforts now turned
21        to specifics of building two lines.  How are we going to
22        physically route those lines and make those facilities
23        take place?
24                  This was accomplished through a class
25        environmental process in accordance with the
26        requirements of the Minister of the Environment and the
27        Ontario Environmental Assessment Act.
28                  Nine transmission line options were considered

                                36
                                   HYDRO ONE PANEL 1, ex (Aldred)
 1        under this process and after extensive public input an
 2        alternative which balanced the environmental
 3        considerations and costs was selected.  The selection,
 4        along with all the details of the assessment, were
 5        documented in an environmental study report and the
 6        Ministry of the Environment has accepted that study
 7        report and no further environmental studies are
 8        required.
 9                  MS ALDRED:  Can you please summarize the key
10        aspects of your current facilities extension agreement
11        with Hydro Quebec?
12                  MR. MARCELLO:  Mr. Gagnon from TransEnergie
13        will be joining me on the third panel where we can
14        discuss this more fully.
15                  The highlights are basically each party has
16        agreed to pay the cost of the facilities on their own
17        respective systems.  Each party is obliged to obtain the
18        necessary approvals to get the project built.
19                  The technical and construction details were
20        documented in the agreement and both parties are
21        committed to looking at options for improving on the
22        in-service date, which currently sits at December 2002
23        for the construction of the Ontario portion and an
24        overall project in-service of May 2003.
25                  MS ALDRED:  What is the current overall cost
26        of the project, including the Quebec portion?
27                  MR. MARCELLO:  As Dr. Macedo pointed out, our
28        portion is $96 million in Ontario.  Hydro Quebec's

                                37
                                   HYDRO ONE PANEL 1, ex (Aldred)
 1        portion, it is my understanding that is $208 million;
 2        $185 million is for station work at Outaouais TS and a
 3        large component of that is the high voltage DC converter
 4        equipment and an additional $.3 million for their line.
 5                  Once again, each party is responsible for
 6        paying the full cost of the facilities on their
 7        respective systems.
 8                  MS ALDRED:  Can you tell us what the status is
 9        of remaining technical approvals that are associated
10        with this project?
11                  MR. MARCELLO:  Once again, I will be
12        discussing this more fully on the third panel.
13                  With respect to NPCC, the Northeast Power
14        Coordinating Council, we are expecting their approvals
15        in December.
16                  A bit of background to NPCC's mandate: their
17        purpose is to promote the reliability and efficiency of
18        the electric service on the power system of its members
19        and NPCC's membership is made up of transmission
20        utilities, market operators and transmission customers
21        in eastern Canada, the northeast U.S., Quebec and
22        Ontario.  Within Ontario, Hydro One, along with Ontario
23        Power Generation and the IMO, are members.
24                  By implementing some basic criteria for the
25        design and operation of the interconnected power system,
26        NPCC strives to meet its goal of reliability and
27        efficiency.
28                  Hydro One and Hydro Quebec have submitted

                                38
                                   HYDRO ONE PANEL 1, ex (Aldred)
 1        joint studies to NPCC's task force on system studies and
 2        no major concerns have been raised.  We expect final
 3        approval early in December.
 4                  In terms of the IMO System Impact Assessment,
 5        at the time of preparing for interrogatories I was
 6        informed by the IMO that the studies would be completed
 7        by the end of November.  It is my understanding that
 8        there are some possible delays but the assessment will
 9        be delivered as soon as possible.
10                  We at Hydro One have been working
11        cooperatively with the IMO in accordance with the market
12        rules and the connection assessment and approval process
13        in completing their System Impact Assessment.  The scope
14        of their study will cover connection arrangement,
15        loadings, reactive power and short circuit assessments
16        and transient and steady state studies.
17                  As I mentioned earlier, Hydro One has already
18        undertaken many of these analyses and incorporated the
19        outcomes in the current design that is before the Board.
20                  Therefore, we do not anticipate any material
21        impact from the System Impact Assessment.
22                  Once that assessment is completed, we plan to
23        respond with the study back to this Board.
24                  MS ALDRED:  Finally, then, Dr. Macedo, is
25        Networks committed to this project and ready to proceed?
26                  DR. MACEDO:  Yes, we are committed to the
27        project.  We have obtained our Board of Directors
28        approval to proceed with the project, subject to a

                                39
                                   HYDRO ONE PANEL 1, ex (Aldred)
 1        favourable decision granted leave to construct.
 2                  We have an expectation that reasonable
 3        expenditures will be eligible for recovery through
 4        approved rates.  Networks is ready and must move quickly
 5        to achieve the benefits to Ontario electricity consumers
 6        in 2003.
 7                  We have, either in hand or anticipate
 8        receiving shortly, all approvals necessary to proceed
 9        with the project.
10                  Networks and Hydro Quebec are also committed
11        to reasonable efforts to achieve the earliest possible
12        in-service date so that Ontario consumers can achieve
13        their energy savings from the project and Hydro Quebec
14        the reliability benefits that the project provides.
15                  MS ALDRED:  That is the end of our direct
16        evidence.
17                  THE PRESIDING MEMBER:  Thank you, Ms Aldred.
18                  Mr. Moran, please.
19        EXAMINATION
20                  MR. MORAN:  Thank you, Madam Chair.
21                  Dr. Macedo, you have already referred to the
22        licence requirement that was imposed on Hydro One to
23        increase interconnection capacity.
24                  This particular project is the one that you
25        have chosen to go with first.  My question is this:  Do
26        you anticipate proceeding with this project as acting as
27        a constraint on any other projects that you will have to
28        pursue to finish achieving the licence requirement?

                                40
                           HYDRO ONE NETWORKS PANEL 1, ex (Moran)
 1                  DR. MACEDO:  This project is clearly the best
 2        alternative, having completed the first two that I
 3        talked about, Maclaren and the Michigan project.
 4                  I cannot see why this would be a constraint to
 5        proceeding with other projects.  We would review the
 6        other projects and make a decision based on the benefits
 7        to Ontario consumers.
 8                  MR. MORAN:  Do you anticipate any budgeting
 9        constraints, given the commitment that this project
10        represents?
11                  DR. MACEDO:  It is our expectation that these
12        projects, if we bring them forward, we would bring them
13        forward because they have definite benefits to Ontario
14        consumers and therefore it is our expectation that we
15        will be able to recover the costs through future rates.
16                  MR. MORAN:  With respect to the use to which
17        this line can be put, I assume that you will agree that
18        power can go both ways and can be wheeled through
19        Ontario from Quebec to other jurisdictions.  Right?
20                  DR. MACEDO:  That is correct.
21                  MR. MORAN:  You indicated that one of the
22        objectives was to enhance the commodity market, but you
23        were also careful to point out that your company is a
24        transmitter and is not directly involved in the
25        commodity market.
26                  How does that fit in with Hydro One's
27        corporate objectives, this interest in enhancing the
28        commodity market?

                                41
                           HYDRO ONE NETWORKS PANEL 1, ex (Moran)
 1                  DR. MACEDO:  Networks supports the competitive
 2        market and we will do whatever we can do to facilitate
 3        the competitive market.  That is all we can do.
 4                  The interconnections is one vehicle to
 5        facilitate the competitive market.
 6                  MR. MORAN:  How does that benefit your
 7        shareholders?
 8                  DR. MACEDO:  We would get a rate of return on
 9        the investment that we make.
10                  MR. MORAN:  Now, the existing interconnection
11        capacity, you have indicated, is a total of 4,000
12        megawatts for all of the interconnections from Ontario
13        to other jurisdictions.  Of that 4,000 megawatts, 1,265
14        megawatts is the current existing capacity between
15        Ontario and Quebec.  Am I correct on that?
16                  DR. MACEDO:  Yes, that is correct.
17                  MR. MORAN:  Thank you.
18                  I think you alluded briefly to the difference
19        between the existing connection and the proposed
20        connection.
21                  As I understand it, and correct me if I am
22        wrong, the existing connection is not instantaneous and
23        you have to essentially disconnect certain things from
24        the circuit so that the power can be transmitted to
25        avoid stability problems that are experienced on the
26        Quebec side.  Right?
27                  DR. MACEDO:  That is correct.
28                  MR. MORAN:  All right.  What this project does

                                42
                           HYDRO ONE NETWORKS PANEL 1, ex (Moran)
 1        is it allows for a permanent connection.  In other
 2        words, instantaneous transmission is now possible for
 3        the first time.  Right?
 4                  DR. MACEDO:  That's correct.
 5                  MR. MORAN:  Okay.  Now, as I understand it,
 6        this will improve access to the market because you do
 7        not have to go through the disconnects, it is
 8        instantaneous, right, but you are converting an existing
 9        connection.  Is that right?
10                  DR. MACEDO:  There is an existing connection. 
11        The comparison is -- I don't want you to compare the
12        two, because the one we have today is very -- it is
13        really for emergency support and the one we are talking
14        about is a permanent, high-capacity interconnection. 
15        The two are not in the same league.
16                  MR. MORAN:  I understand.  It is because of
17        this difference between being instantaneous and
18        non-instantaneous, right, primarily?
19                  DR. MACEDO:  Yes.
20                  MR. MORAN:  What is the existing capacity of
21        the existing interconnection which you have qualified as
22        being for emergency purposes?
23                  MR. MARCELLO:  Four hundred megawatts.
24                  MR. MORAN:  All right.  So in effect, then, as
25        a result of this conversion, you are converting
26        400 existing megawatts to replace it with 1,250
27        megawatts of capacity.  Is that fair?
28                  MR. MARCELLO:  You can characterize it in that

                                43
                           HYDRO ONE NETWORKS PANEL 1, ex (Moran)
 1        fashion, yes.
 2                  MR. MORAN:  All right.
 3                  So for the purposes of the licence
 4        requirement, are you going to count this as 1,250 or
 5        1,250 minus 400?
 6                  DR. MACEDO:  I will answer that.  It is 1,250.
 7                  As I said, the existing interconnection is
 8        really an emergency interconnection and it cannot be
 9        used continuously to import and export.
10                  The new interconnection allows us to do that,
11        and so we would regard the 1,250 as the contribution to
12        the licence requirement.
13                  MR. MORAN:  All right.  In effect, you have
14        determined that the existing 400 really isn't enough
15        capacity and all of what you are doing is new capacity
16        regardless of the existing 400?
17                  DR. MACEDO:  That is correct.
18                  MR. MORAN:  Is that right?  Okay.
19                  One moment, please.
20        --- Pause
21                  MR. MORAN:  This proposed project is capable
22        of exporting power, as we have already indicated, from
23        or through Ontario to Quebec and importing power from
24        Quebec.  What are you able to tell the Board about
25        identifiable or specific uses for the proposed project
26        for Ontario generators?
27                  DR. MACEDO:  Like any interconnection, this
28        one would allow generators in Ontario to access markets

                                44
                           HYDRO ONE NETWORKS PANEL 1, ex (Moran)
 1        outside of Ontario.
 2                  MR. MORAN:  All right.  Have you identified
 3        who those might be at this point?
 4                  DR. MACEDO:  We have not.  Panel 2 may be able
 5        to address that.
 6                  MR. MORAN:  I have a similar question with
 7        respect to Ontario loads.  Would you leave that to
 8        Panel 2?
 9                  DR. MACEDO:  It depends on what your
10        question is.
11                  MR. MORAN:  Have you identified specific
12        Ontario loads that would take advantage of this proposed
13        project?
14                  DR. MACEDO:  Again, I would defer that to
15        Panel 2, yes.
16                  MR. MORAN:  Are you able to say anything about
17        the specific uses identified on the Quebec side for
18        Quebec generators or Quebec loads?
19                  DR. MACEDO:  Again, I can't answer that
20        question.  Panel 2 will be best able to answer that.
21                  MR. MORAN:  All right.
22                  Now, this project has a capacity of 1,250
23        megawatts.  If it is under utilized, how are you going
24        to deal with that?
25                  DR. MACEDO:  The utilization is a function of
26        how the market is going to operate.  As I said, we in
27        Networks would provide a facility and assets that would
28        facilitate the competitive market.  How the

                                45
                           HYDRO ONE NETWORKS PANEL 1, ex (Moran)
 1        interconnection is used is really up to customers
 2        supplies and not Hydro One Networks.
 3                  Panel 2 will discuss the economics of the
 4        utilization, how that is going to impact prices and that
 5        sort of thing.  But what actually happens in reality, of
 6        course, is a function of the marketplace.
 7                  MR. MORAN:  The starting point, as I
 8        understand it, for going with this project was primarily
 9        to meet the licence requirement and in that context you
10        had to look at a number of options.  I take it that you
11        didn't have to look at the do nothing alternative
12        because you can't meet your licence requirement with the
13        do nothing alternative.
14                  Given that the do nothing alternative is a
15        tool to assess how good a proposal you have, one of the
16        tools that is used, what did you do to cover off the
17        fact that you didn't have to do that analysis this time?
18                  DR. MACEDO:  I believe the analysis has been
19        done.  In arriving at the $240 million energy cost
20        savings to consumers in Ontario, that analysis was
21        carried out.  In fact, the $240 million savings is the
22        difference between the cost to consumers without the
23        interconnection versus the cost with the
24        interconnection.
25                  MR. MORAN:  And it will be discussed by a
26        different panel?
27                  DR. MACEDO:  That's right.  You will have the
28        experts on Panel 2 to discuss that.

                                46
                           HYDRO ONE NETWORKS PANEL 1, ex (Moran)
 1                  MR. MORAN:  Okay.
 2                  Could you describe the capital budgeting
 3        process that you followed for this project?
 4                  DR. MACEDO:  As I said earlier, the
 5        expectation, based on the benefits to Ontario consumers,
 6        it is our expectation that we will be able to recover
 7        the capital expenditure through future aids.  On that
 8        basis we have allocated funds to proceed with this
 9        project.
10                  MR. MORAN:  In that process perhaps you could
11        tell us how you actually addressed the four issues of
12        price and availability, reliability and quality of
13        service?  How was that factored into that process?
14                  DR. MACEDO:  We are here before the panel to
15        seek approval for the project based on those very
16        factors:  price, concerned investment of $240 million,
17        reduction in electricity prices to consumers,
18        reliability, interconnection links available, more
19        generation and therefore increases the overall adequacy
20        of generation to supply customer load in Ontario.  So it
21        enhances reliability and, as I said, it also enhances
22        the performance of the system during emergency
23        conditions.
24                  Availability of supply, it increases the level
25        of access to generators outside.  And quality of supply,
26        there should be no change in quality of supply.
27                  MR. MORAN:  In the decision-making process,
28        what role did the price of transmission services play?

                                47
                           HYDRO ONE NETWORKS PANEL 1, ex (Moran)
 1                  DR. MACEDO:  We feel that, you know, the
 2        $96 million expenditure in Ontario is more than
 3        justified by the savings that I have talked about.
 4                  MR. MORAN:  I am not sure that is an answer to
 5        my question and I am just asking, the price of
 6        transmission services, how did that play a role in the
 7        decision-making process to go with this project?
 8                  DR. MACEDO:  I think Panel 2 will talk about
 9        the impact of this $97 or $96 million will have on the
10        tariffs that consumers will have to pay, and they could
11        tell you how they arrived at that.
12                  In our analysis we looked at whether a
13        $96 million expenditure is an economically justifiable
14        expenditure and the answer to that is yes.
15                  MR. MORAN:  The last area I want to cover with
16        you involves you, Mr. Marcello.
17                  You indicated or you referred to the IMO
18        System Impact Assessment that hasn't been delivered yet. 
19        What is the current status of that?  Have you entered
20        into an agreement with the IMO to prepare a System
21        Impact Assessment yet?
22                  MR. MARCELLO:  We have applied for a System
23        Impact and throughout the summer we have scoped out the
24        particulars of that and the final details have been sent
25        to the IMO.  I have signed off on that agreement.  I
26        have yet to received the signed back version.
27                  MR. MORAN:  Okay.  So at this point there
28        isn't actually a completed agreement for the System

                                48
                           HYDRO ONE NETWORKS PANEL 1, ex (Moran)
 1        Impact Assessment.  Is that correct?
 2                  MR. MARCELLO:  That is correct.
 3                  MR. MORAN:  All right.  Do you have any
 4        indication from the IMO when they may execute their end
 5        of it?
 6                  MR. MARCELLO:  No, I don't.
 7                  MR. MORAN:  In the course of your discussions
 8        in establishing the scope for the SIA with IMO, have you
 9        any indication of how long it will actually take to
10        carry out the System Impact Assessment?
11                  MR. MARCELLO:  I can't speak for the IMO's
12        plans.  I can say that at the time of filing the
13        interrogatories I did check with the IMO in terms of the
14        November date which we supplied, and at the time it was
15        felt that that was appropriate.  I understand that there
16        has been some slippage in that date and they are working
17        to have that study completed as soon as  possible.
18                  MR. MORAN:  I note that the IMO is here today
19        so perhaps it is better for them to speak to this point
20        then.
21                  Those will be all my questions, Madam Chair.
22                  THE PRESIDING MEMBER:  Thank you very much,
23        Mr. Moran.
24                  The intervenor, Mr. Thompson, do you have any
25        questions?
26                  MR. THOMPSON:  Yes.
27                  Thank you, Madam Chair.
28        EXAMINATION

                                49
                        HYDRO ONE NETWORKS PANEL 1, ex (Thompson)
 1                  MR. THOMPSON:  Panel, I represent the City of
 2        Cumberland in these proceedings and I have a few
 3        questions.
 4                  First of all, Dr. Macedo, you have been with
 5        Networks or its predecessor for 20 years I note.
 6                  DR. MACEDO:  Since 1982.
 7                  MR. THOMPSON:  Mr. Marcello, you have had
 8        13 years experience?
 9                  MR. MARCELLO:  That is correct.
10                  MR. THOMPSON:  So you would be familiar with
11        the approval processes that applied before the
12        section 92 came into force?
13                  DR. MACEDO:  That is correct.
14                  MR. THOMPSON:  When section 92 of the OEB Act
15        1998 came into force, the approval process for
16        constructing transmission facilities in Ontario changed. 
17        Is that fair?
18                  DR. MACEDO:  If you are referring to
19        section 92 approval, yes.
20                  MR. THOMPSON:  Yes.  And at that time the
21        Ontario Energy Board became what I call a final
22        approving authority?
23                  DR. MACEDO:  That is correct.
24                  MR. THOMPSON:  And is this the first case that
25        Networks has brought to the Board for such approval?
26                  DR. MACEDO:  That is correct.
27                  MR. THOMPSON:  Can you help me with the nature
28        of the approval process before section 92 came into

                                50
                        HYDRO ONE NETWORKS PANEL 1, ex (Thompson)
 1        force?  Could you briefly describe that, please?
 2                  DR. MACEDO:  Depending upon the nature of the
 3        project and whether it requires Environmental Assessment
 4        Board approval or not, we would -- if it did require an
 5        Environmental Assessment Board approval, we would go
 6        through, do an environmental assessment and that
 7        assessment, dependant upon the nature of the project, if
 8        it was a small project, it would be done through the
 9        Class EA, and for a bigger project a full environmental
10        assessment.
11                  MR. THOMPSON:  Okay.  Well, assume I am
12        talking about a project that involves putting up new
13        towers and new lines on an existing right-of-way.  Can
14        you just help me generally with the type of process for
15        getting approval of all aspects of that project?  What
16        type of process applied before section 92 came into
17        force?
18                  DR. MACEDO:  There is the Class EA for minor
19        facilities, and of course, there is the full EA.  I
20        think as a counsel has stated earlier, we will have a
21        witness on Panel 3 who actually carries out these
22        environmental assessments who would be able to describe
23        for you, in whatever detail you would like, the process
24        followed.  I can answer it at a certain level but if you
25        are getting down --
26                  MR. THOMPSON:  Yes.  I am up to 40,000 --
27                  DR. MACEDO:  Okay.
28                  MR. THOMPSON: -- feet with you, doctor.

                                51
                        HYDRO ONE NETWORKS PANEL 1, ex (Thompson)
 1                  DR. MACEDO:  Okay.
 2                  MR. THOMPSON:  Excuse my voice.  I have a
 3        terrible cold.
 4                  But I take it from what you are telling me
 5        that the only, if you will, public interest approval
 6        process external to Hydro that applied was this
 7        environmental-type process.  Do I have that right?
 8                  DR. MACEDO:  Yes, I would say so.
 9                  MR. THOMPSON:  Okay.  And then was it, in
10        effect, Hydro that determined whether all aspects of the
11        public interest were being served or not being served by
12        a particular project?
13                  DR. MACEDO:  No, it went through the
14        environmental assessment process or the Environmental
15        Assessment Board --
16                  MR. THOMPSON:  Right.
17                  DR. MACEDO:  -- then the bigger public
18        interest would have been fully evaluated through that
19        process.
20                  MR. THOMPSON:  Well, the mandate of the
21        Environmental Board is limited to environment.  Is that
22        correct?
23                  DR. MACEDO:  My understanding is that the
24        Environmental Assessment Board, through its process,
25        would examine the need for the project -- I am not
26        talking about the graph here, I am talking about the
27        full year -- the need for the project and the actual
28        facilities that would be used to satisfy the need,

                                52
                        HYDRO ONE NETWORKS PANEL 1, ex (Thompson)
 1        including all the alternatives and make a determination
 2        on whether that project should be approved or not.
 3                  MR. THOMPSON:  Well, let me try it this way: 
 4        Had this application gone to the Environmental
 5        Assessment Board, would you be here today?
 6                  DR. MACEDO:  I expect so, yes.
 7                  MR. THOMPSON:  For what, just to get a rubber
 8        stamp of what the Environmental Assessment Board did or
 9        for a broader assessment of the public interest?
10                  DR. MACEDO:  My understanding is that this
11        Board looks at the public interest as defined in the
12        legislation under section 92.
13                  MR. THOMPSON:  All right.  Let me try it
14        this way:  To the extent that factors other than the
15        environment were germane to a consideration of an
16        approval of a project before June of 2000, who made
17        those considerations?  Would it be the Hydro Board of
18        Directors?
19                  DR. MACEDO:  I don't know where you are headed
20        with this, but could you repeat the question?
21                  MR. THOMPSON:  Well, I'm just trying to find
22        out who was the, if you will, custodian of the public
23        interest under the old process.  Was it essentially
24        Hydro, Ontario Hydro?  That is my understanding and
25        maybe I'm wrong.
26                  DR. MACEDO:  Well, certainly Hydro would take
27        into account all the factors associated with the
28        project, including cost to consumers, reliability and

                                53
                        HYDRO ONE NETWORKS PANEL 1, ex (Thompson)
 1        where environmental issues were involved and required
 2        Environmental Assessment Board approval we take it to
 3        the Environmental Assessment Board.
 4                  So I don't know how else I can answer your
 5        question.
 6                  MR. THOMPSON:  No, I think you have
 7        answered it.
 8                  The final approving authority, if you will, in
 9        the old days, was Ontario Hydro.
10                  DR. MACEDO:  Subject to EAB approval.
11                  MR. THOMPSON:  And that has now changed with
12        the OEB Act?
13                  DR. MACEDO:  No, it is -- that is right.
14                  MR. THOMPSON:  Thanks.
15                  Now, I don't know if you need to turn this up
16        but in -- this is a very high policy level question, but
17        in Exhibit No. 10.1, which is the City of Cumberland's
18        prefiled evidence, at Tab 3, we have there what I
19        understand to be information provided as handouts by
20        Ontario Hydro at open house meetings in Cumberland in
21        March of 1999.  Would you take that subject to check?
22                  DR. MACEDO:  My colleague will answer these
23        questions.
24                  MR. THOMPSON:  Okay.
25                  MR. MARCELLO:  Tab 3, the series of panels,
26        the photocopies of --
27                  MR. THOMPSON:  Yes.  It is "Welcome!
28        Bienvenue! PUBLIC OPEN HOUSE".

                                54
                        HYDRO ONE NETWORKS PANEL 1, ex (Thompson)
 1                  MR. MARCELLO:  Right.
 2                  MR. THOMPSON:  And then it has the
 3        information.
 4                  MR. MARCELLO:  Okay, yes.
 5                  MR. THOMPSON:  And if you go to the fourth
 6        page in, you will see a page entitled "OHSC - Hydro
 7        Quebec Interconnection Existing and Proposed Tower
 8        Options".  Do you see that?
 9                  MR. MARCELLO:  That is correct.
10                  MR. THOMPSON:  One of the options shown there,
11        down on the bottom, second from the right-hand side is a
12        steel pole option.  Is that correct?
13                  MR. MARCELLO:  Yes.
14                  MR. THOMPSON:  The notes say that:
15                       "All options can be used alone, twinned
16                       and/or in combination with existing
17                       structures".
18                  Is that correct?  That is what the notes say?
19                  MR. MARCELLO:  "All options can be used alone,
20        twinned and/or:
21                       "...in combination...  Actual heights may
22                       vary... *spans will be shorter than
23                       existing."
24                  Yes.
25                  MR. THOMPSON:  Yes.  So you could have steel
26        towers -- again --
27                  MR. MARCELLO:  High.
28                  MR. THOMPSON:  You have a span of steel towers

                                55
                        HYDRO ONE NETWORKS PANEL 1, ex (Thompson)
 1        then you could have a span of lattice towers.
 2                  MR. MARCELLO:  Yes, that's possible.
 3                  MR. THOMPSON:  So part of the -- part, if you
 4        will, of the available options for a particular project
 5        design.
 6                  MR. MARCELLO:  Yes.
 7                  MR. THOMPSON:  And how long has the steel
 8        tower component of the array of options been available?
 9                  MR. MARCELLO:  I couldn't give you an exact
10        date but many years.
11                  MR. THOMPSON:  Well, these towers that are
12        being replaced, the evidence, as I understand, indicates
13        that one line was built in 1932 and the second in 1949. 
14        Has the steel tower option been available that long or
15        is it more recent?
16                  MR. MARCELLO:  The pole?
17                  MR. THOMPSON:  The pole, yes.
18                  MR. MARCELLO:  No.  I wouldn't say it has been
19        available that long, no.  More recent.
20                  MR. THOMPSON:  Okay.  So big picture, what,
21        25-30 years?  Is that the sort of -- help me with how
22        long they have been available.
23                  MR. MARCELLO:  Sure.  I will --
24                  MR. THOMPSON:  Is that sort of ballpark?
25                  MR. MARCELLO:  Ballpark.  Close enough, yes.
26                  MR. THOMPSON:  Okay, great.  Thanks.
27                  Could you tell me, again at the very high
28        level, how frequently these steel towers are used in

                                56
                        HYDRO ONE NETWORKS PANEL 1, ex (Thompson)
 1        Ontario -- poles, yes -- steel poles, right.
 2                  MR. MARCELLO:  Generally we are proposing a
 3        tower.  It would be a lattice tower as a proposal and
 4        steel poles would be looked on at a case-by-case basis.
 5                  MR. THOMPSON:  All right, okay.
 6                  MR. MARCELLO:  I wouldn't say that they are
 7        located everywhere.
 8                  MR. THOMPSON:  No, that is obvious, but they
 9        are certainly located in many areas other than Kanata,
10        for example.
11                  MR. MARCELLO:  Yes.
12                  MR. THOMPSON:  And what I would like to have
13        you describe to us, if you could, is the considerations
14        at a policy level that go into a determination as to
15        when Hydro will install steel poles.  Can you help us
16        with that?
17                  MR. MARCELLO:  Sure.
18                  I think the thing to keep in mind is we have
19        to look at it on a case-by-case basis.  Particular
20        circumstances you are dealing with, you would make a
21        determination whether the pole option was in fact a
22        viable one.  We have put them in place on rights-of-way
23        where, because of limited width and the need to increase
24        the number of circuits or towers on the right-of-way in
25        a cross section, we required something more narrow. 
26        That would be one scenario where it has been used.
27                  In the case of Kanata, which you referred to
28        earlier, that was by order of the -- through the EA

                                57
                        HYDRO ONE NETWORKS PANEL 1, ex (Thompson)
 1        process or the joint hearings.  As a result of that, it
 2        was determined that steel poles should be put in that
 3        stretch through the Bridlewood community which was a
 4        residential community, but at the same time the
 5        remainder of that line which cuts through residential
 6        areas in Nepean and Ottawa has lattice towers.
 7                  So I would say you really look at it
 8        case-by-case.  In this specific circumstance, on this
 9        particular right-of-way we have here, we wanted to
10        minimize the environmental impact by staying with the
11        existing tower locations.  So everywhere there was an
12        existing tower that we were taking down, we would
13        replace with a new one and the steel poles, because they
14        would require shorter span, didn't allow that to occur.
15                  MR. THOMPSON:  Okay.  I plan to get into that
16        in more detail.
17                  I think you are on the third panel, aren't
18        you, Mr. Marcello?
19                  MR. MARCELLO:  Yes, I am.
20                  MR. THOMPSON:  Okay.  But I was more
21        interested in the high-level policy as to when these
22        poles have been used in the past, and you have given me
23        the limited width scenario which is the case where Hydro
24        One Network's predecessor put in steel poles.
25                  MR. MARCELLO:  And I have also given you a
26        scenario where we were --
27                  MR. THOMPSON:  Yes, ordered to do so.
28                  MR. MARCELLO:  -- told to do so.

                                58
                        HYDRO ONE NETWORKS PANEL 1, ex (Thompson)
 1                  MR. THOMPSON:  But is that all that motivates,
 2        from a policy level, your decision?  Let me come at it
 3        this way.
 4                  Throughout Ontario, could you give me some
 5        idea of the number of areas where these poles are used? 
 6        Is that something that can be done by undertaking and
 7        brought forward for the third panel?
 8                  DR. MACEDO:  We could do it, yes.
 9                  MR. THOMPSON:  Could I have an undertaking
10        then, please?
11                  MR. MORAN:  That is Undertaking No. 15.1.  How
12        would you like to describe that?
13                  MR. THOMPSON:  As I understand it, when
14        someone reappears at the third panel they are going to
15        describe generally the frequency and areas of steel pole
16        use in Ontario.  Is that your understanding, doctor?
17                  DR. MACEDO:  Yes, that is correct.
18                  MR. MORAN:  So an undertaking to provide
19        information on steel pole use for Panel 3.
20                       UNDERTAKING NO. 15.1:  Dr. Macedo
21                       undertakes to provide information on
22                       steel pole use for Panel 3
23                  MR. THOMPSON:  Is, at a policy level, the fact
24        that a line is to run through an urban area one of the
25        considerations that is taken into account on
26        case-by-case analysis?
27                  MR. MARCELLO:  That would be a factor.
28                  MR. THOMPSON:  Is there a policy statement on

                                59
                        HYDRO ONE NETWORKS PANEL 1, ex (Thompson)
 1        the use of steel poles within either Ontario Hydro or in
 2        Hydro One?
 3                  DR. MACEDO:  I am not aware of any.
 4                  MR. THOMPSON:  Well would you check and when
 5        you come back on the third panel, just confirm that
 6        there isn't one and if there is one, produce it.  Would
 7        that be fair?
 8                  DR. MACEDO:  Yes, that would be fair.
 9                  MR. THOMPSON:  All right.  So any other
10        factors that are considered at a policy level in
11        connection with the analysis of the steel pole option on
12        a case-by-case basis?  We have got width of
13        right-of-way.  We have got orders of tribunals.  Passage
14        through urban areas is a factor.  Are there any other
15        factors?
16                  MR. MARCELLO:  Cost is a factor.
17                  MR. THOMPSON:  Costs.  Okay.
18                  MR. MARCELLO:  I think implicit in some of
19        that was environmental -- overall environmental
20        considerations.  I think you are referring to it in
21        terms of urban but I would expand it to say
22        environmental as a whole.
23                  MR. THOMPSON:  All right.  Anything else?
24                  MR. MARCELLO:  Offhand, no.
25                  MR. THOMPSON:  Turning then just briefly to
26        cost at a policy level, you were describing economic
27        feasibility, from the perspective of this Panel, as
28        being a situation that benefits of a project exceed its

                                60
                        HYDRO ONE NETWORKS PANEL 1, ex (Thompson)
 1        cost.  Did I understand that as your definition of
 2        economic feasibility?
 3                  DR. MACEDO:  That is right.
 4                  MR. THOMPSON:  Hydro One says the benefits of
 5        this project are what?
 6                  DR. MACEDO:  I have said on a conservative
 7        basis, it is $240 million a year.
 8                  MR. THOMPSON:  That is, low side, 240?
 9                  DR. MACEDO:  No, not low side.  Low side was
10        $185 million.
11                  MR. THOMPSON:  All right.  So low, 185.  High
12        is what?
13                  DR. MACEDO:  It's 295.
14                  MR. THOMPSON:  So 295.  And you say, on a
15        conservative basis, 240.  And your estimated costs of
16        the project are $96 million.
17                  DR. MACEDO:  That is correct.
18                  MR. THOMPSON:  And somewhere in the evidence
19        with respect to the City of Cumberland there is an
20        estimate given that the steel pole option would add
21        $3 million to project costs and I think there was a high
22        of $10 million.  Do those numbers ring a bell with you?
23                  MR. MARCELLO:  Yes, they do.
24                  MR. THOMPSON:  Okay.  I can get into the
25        detail of how those were calculated, I assume, on
26        Panel 3.  Is that right?
27                  MR. MARCELLO:  Just generally, at a high
28        level, in discussions with Cumberland various scenarios

                                61
                        HYDRO ONE NETWORKS PANEL 1, ex (Thompson)
 1        were put forward and those estimates are basically a
 2        unit cost which I think we can talk about in Panel 3,
 3        and a length of area to cover and those lengths were
 4        different scenarios we were talking about, short being
 5        $3 million and relatively long being $10 million.
 6                  MR. THOMPSON:  But even in the worst case
 7        scenario, if it was 10 that would increase project costs
 8        to 106 and a conservative estimate of benefits is
 9        $240 million.  So which steel poles -- based on your
10        definition of economic feasibility, the use of steel
11        poles would be economically feasible?
12                  DR. MACEDO:  Purely on economics, yes.  But
13        the environmental assessment study that was carried out
14        tried to balance the two, environment and cost.  As my
15        colleague has stated, a full environmental assessment --
16        the process has been gone through and steel poles were
17        evaluated as part of that assessment.  So you can focus
18        on economics, yes.  It would be economic, but there
19        would be environmental impacts that my colleague has
20        referred to because you would not be able to replace
21        structure for structure.
22                  MR. THOMPSON:  I will get into that in more
23        detail on Panel 3.  Because you mentioned economic
24        feasibility of benefits, I just wanted to nail down that
25        with this level of benefits, even if the costs were
26        10 per cent more, we would still have economic
27        feasibility being met based on your approach.
28                  DR. MACEDO:  Yes, that is correct.

                                62
                        HYDRO ONE NETWORKS PANEL 1, ex (Thompson)
 1                  MR. THOMPSON:  Okay. I appreciate there are a
 2        whole lot of other items that need to be considered in
 3        the overall assessment.
 4                  The last question I wanted to ask you in
 5        connection with this design issue is the economic life
 6        of these poles.  How long do they last?  Are they
 7        depreciated, over how many years?
 8                  MR. MARCELLO:  I think Panel 2 can give you
 9        the exact answer but my understanding is it is between
10        50 and 70.
11                  MR. THOMPSON:  $3 million amortized over 50 to
12        70 years is not a big number.  Would you agree? 
13        $10 million amortized over 50 to 70 years is not a big
14        number. In terms of again, rate impact, it is peanuts.
15                  MR. MARCELLO:  In terms of rate impact it is
16        small.  In terms of environmental impact we will talk
17        about it in Panel 3 I guess.
18                  MR. THOMPSON:  Thanks.  I notice on the
19        witness summary this Panel is claiming responsibility
20        for Ottawa-Carleton Interrogatories 1 and 2 which raised
21        this question of rights-of-way and compensation.  Should
22        that be dealt with here or on Panel 3?
23                  MS ALDRED:  I think it would be more
24        appropriate for Panel 3.
25                  MR. THOMPSON:  Fine, I will leave it for
26        Panel 3.
27                  Thanks very much, those are my questions.
28                  THE PRESIDING MEMBER:  Thank you,

                                63
                        HYDRO ONE NETWORKS PANEL 1, ex (Thompson)
 1        Mr. Thompson.
 2                  Could I have a quick survey of the intervenors
 3        and if they want to cross-examine this panel and how
 4        long they think they will be?  Mr. Klippenstein.
 5                  MR. KLIPPENSTEIN:  Yes, Madam Chair, I would
 6        like to and I would expect between 15 and 20 minutes of
 7        questioning.
 8                  THE PRESIDING MEMBER:  Mr. McArthur.
 9                  MR. McARTHUR:  Madam Chair, yes, I would like
10        to ask some questions in probably five or ten minutes
11        although I am a little bit uncertain now in view of the
12        last question or the last response with reference to
13        Panel 3.
14                  THE PRESIDING MEMBER:  Okay, thank you. 
15        Mr. Budd.
16                  MR. BUDD:  I have no questions, thank you.
17                  THE PRESIDING MEMBER:  Mr. Brown?
18                  MR. BROWN:  No questions, Madam Chair.
19                  MR. GREENSPOON:  Madam Chair --
20                  THE PRESIDING MEMBER:  I'm sorry.
21                  MR. GREENSPOON:  -- Greenspoon.
22                  THE PRESIDING MEMBER:  Mr. Greenspoon.  I
23        apologize.
24                  MR. GREENSPOON:  That is fine.  No problem.  I
25        would have some questions, about 10 or 15 minutes.
26                  THE PRESIDING MEMBER:  All right, I think then
27        that now might be a convenient time to break.  We will
28        have a 15 minute break and return at about, according to

                                64
                        HYDRO ONE NETWORKS PANEL 1, ex (Thompson)
 1        my watch, about 1140 a.m.
 2        --- Upon recessing at 1123
 3        --- Upon resuming at 1153
 4                  THE PRESIDING MEMBER:  Please be seated.
 5                  Mr. Klippenstein, would you like to go next?
 6                  MR. KLIPPENSTEIN:  Thank you.
 7                  I have thought a bit more about my questions
 8        on the break and I may go a little bit longer than I
 9        mentioned before.
10                  THE PRESIDING MEMBER:  The sooner you start,
11        the sooner you will finish!
12        --- Laughter
13                  MR. KLIPPENSTEIN:  My time projections come
14        with the usual limited warranty that accompanies lawyers
15        throughout the examination predictions.
16                  THE PRESIDING MEMBER:  Fair enough.
17        EXAMINATION
18                  MR. KLIPPENSTEIN:  I would like to ask a few
19        questions, I think specifically of Mr. Marcello in your
20        capacity as connected with the Northeast Power
21        Coordinating Council.
22                  I understand from your testimony and from the
23        prefiled evidence that you sit on the Northeast Power
24        Coordinating Council as a representative of Hydro One.
25                  MR. MARCELLO:  On the Task Force for the
26        Coordination of Planning.  That's that is correct.
27                  MR. KLIPPENSTEIN:  Okay.  So the NPCC Task
28        Force on the Coordination and Planning is a subcommittee

                                65
                    HYDRO ONE NETWORKS PANEL 1, ex (Klippenstein)
 1        or a body of the NPCC, and you represent Hydro One in
 2        that committee.
 3                  MR. MARCELLO:  Yes, that's correct.
 4                  MR. KLIPPENSTEIN:  Okay.  And the NPCC, as I
 5        understand it, would include within its membership or
 6        area, Ontario, Quebec, the northeastern United States. 
 7        Perhaps you could mention which northeast United States
 8        are included the NPCC.
 9                  MR. MARCELLO:  Largely, New York and New
10        England.  I won't go through all the New England States.
11                  MR. KLIPPENSTEIN:  But it would be Maine,
12        Vermont, New Hampshire, those, plus others?
13                  MR. MARCELLO:  Basically, yes.
14                  MR. KLIPPENSTEIN:  Yes, okay.
15                  And can I take it that as part of your general
16        work with Hydro One and your representation to the NPCC
17        Committee you would gain some general working knowledge
18        of the transmission lines in existence in northeastern
19        North America and of the flows through those
20        transmission lines in that region?  Is that fair?
21                  MR. MARCELLO:  I have some knowledge in
22        that area.
23                  MR. KLIPPENSTEIN:  I would like to ask you
24        about how the proposed transmission line works, what the
25        theory is behind it, just to make sure I understand it.
26                  As I understand it, Hydro Quebec's water
27        reservoir system essentially acts as a battery for
28        electricity power, if I can use an analogy, in the sense

                                66
                    HYDRO ONE NETWORKS PANEL 1, ex (Klippenstein)
 1        that they can store water and thus store generating
 2        capacity, and that battery analogy allows them to
 3        time-shift power.
 4                  Is that a fair commonsense expression of what
 5        Hydro Quebec can do?
 6                  MR. MARCELLO:  I think, for the purposes of
 7        what you are trying to explain, it probably makes sense,
 8        yes.
 9                  MR. KLIPPENSTEIN:  Those kinds of analogies
10        help us non-technicians to grapple with it, and if it is
11        misleading at any particular time feel free to tell me.
12                  As I understand it, Hydro Quebec is by far the
13        largest operator of water reservoir systems in
14        hydroelectric systems in northeast North America.  So it
15        would be the party with the largest time-shifting
16        capacity using reservoirs in northeast North America. 
17        Is that fair?
18                  MR. MARCELLO:  I believe that that is a fair
19        comment, yes.
20                  MR. KLIPPENSTEIN:  And as I understand the
21        economics of the proposed transmission line -- I don't
22        want to get into it now, that is for the next panel I
23        understand -- but what makes this transmission line
24        economic is that it makes use of that time-shift
25        capacity, so that off-peak power in Ontario can be
26        purchased by Hydro Quebec, and then power to replace
27        that if you will, or time-shifted power can be sold back
28        to Ontario at peak hours.  And it is that time-shifting

                                67
                    HYDRO ONE NETWORKS PANEL 1, ex (Klippenstein)
 1        of power which is the driver behind the economics for
 2        the transmission line.  Is that fair?
 3                  MR. MARCELLO:  I think that is the underlying
 4        assumption of the PHB study.
 5                  Basically, Hydro Quebec sells into the Ontario
 6        market, allows the price to be dampened in Ontario, in
 7        which case $240 million of savings flow to the
 8        electricity consumers, and in order to allow that to
 9        occur they purchase off peak via this transmission line.
10                  So I think that that is a fair assessment.
11                  MR. KLIPPENSTEIN:  Okay, thank you.
12                  Just to link that to some Hydro Quebec
13        documents, the motion materials filed by Pollution Probe
14        include two documents from Hydro Quebec, one of its
15        divisions, and I would like to ask some questions about
16        those from your general knowledge, just to make sure I
17        understand them.
18                  I have taken them out of the Motion Record,
19        for convenience, and I have mentioned this to your
20        counsel.  I wonder, do you have the pages from the Hydro
21        Quebec Strategic Plan 2000-2004, called "Serving Our
22        Customers Better"?  And, as well, the two pages from the
23        division of Hydro Quebec body, from the newsletter or
24        publication called "The Loop", of May 2000?
25                  Do you have those two extracts?
26                  MR. MARCELLO:  Yes, I do.  It looks like
27        pages 10, 11, 12, 13, and 14.
28                  MR. KLIPPENSTEIN:  Yes.

                                68
                    HYDRO ONE NETWORKS PANEL 1, ex (Klippenstein)
 1                  MR. MARCELLO:  Okay.
 2                  MR. BUDD:  Madam Chair, just before my friend
 3        continues on this, I am just going to alert him, through
 4        you, that if he is going to get into discussing what
 5        Hydro Quebec's strategic plans are, I'm not sure how
 6        helpful that is going to be to the Board in any event.
 7                  We have a witness on our third panel, and to
 8        the extent that witness, who is from TransEnergie, a
 9        Division of Hydro Quebec, could answer those questions,
10        then my proposal would be that we ought to have those
11        kinds of questions addressed to him rather than asking
12        Ontario witnesses to answer specific Quebec-type
13        questions.
14                  THE PRESIDING MEMBER:  Mr. Klippenstein.
15                  MR. KLIPPENSTEIN:  I'm not asking this witness
16        to speak for Hydro Quebec, obviously not.  But the role
17        of Hydro Quebec and the possibilities of what Hydro
18        Quebec might do and its intentions are relevant to what
19        is going to happen with this transmission line.  And
20        what I am referring to are these public, carefully
21        prepared presumably, statements by Hydro Quebec and
22        TransEnergie, and I propose to put them to the witness
23        to see whether he has any understanding of what they are
24        saying and to see whether he has any disagreements with
25        what they are saying.
26                  And I will ask these again in the third panel,
27        but it would also make the order of the information
28        unworkable if this information was strictly limited to

                                69
                    HYDRO ONE NETWORKS PANEL 1, ex (Klippenstein)
 1        words from the mouth of that witness who comes at
 2        the end.
 3                  MR. BUDD:  If I may, Madam Chair, the only
 4        reply I have to that is that if he is asking these
 5        witnesses for their understanding at least one of these
 6        witnesses is going to be apparently appearing on the 
 7        third panel with Monsieur Gagnon, so I think those
 8        questions could be put just as easily then.
 9                  THE PRESIDING MEMBER:  Mr. Klippenstein and
10        Mr. Budd, to the extent that Hydro One Networks have
11        indicated that it is a joint project and that there was
12        a lot of joint planning, I think that Mr. Klippenstein
13        has the right to ask these panel members their
14        understanding of the nature of the public documents put
15        out by Hydro Quebec with the caveat that of course their
16        statements are not binding on Hydro Quebec and Hydro
17        Quebec will have the opportunity to respond in the third
18        panel.
19                  Witnesses, if you don't know the answers and
20        would want to defer the answer to the third panel when
21        there is a Hydro Quebec witness available, then you are
22        welcome to do that.
23                  Okay?
24                  MR. KLIPPENSTEIN:  Thank you, Madam Chair.
25                  MR. MORAN:  Madam Chair, should these
26        documents be marked as an exhibit?
27                  MR. KLIPPENSTEIN:  I was going to suggest
28        maybe two exhibit numbers, just for convenience of

                                70
                    HYDRO ONE NETWORKS PANEL 1, ex (Klippenstein)
 1        reference.
 2                  MR. MORAN:  Exhibit 14.3, excerpt from a Hydro
 3        Quebec document, Strategic Plan 2000-2004.
 4                  Exhibit 14.3 an excerpt from a TransEnergie
 5        newsletter, "The Loop".
 6                  THE PRESIDING MEMBER:  Excuse me,
 7        Mr. Klippenstein, as I understand it, that is Schedule A
 8        to your motion, rather than Schedule B to your --
 9                  MR. KLIPPENSTEIN:  Schedule A and Schedule B. 
10        I may have -- I was wondering if they were given
11        separate exhibit numbers or whether they together are
12        Exhibit No. 14.3, just for clarification.
13                  MR. MORAN:  You asked for separate, I gave
14        separate ones, 14.3 and 14.4.
15                  MR. KLIPPENSTEIN:  Thank you.
16                  THE PRESIDING MEMBER:  Excuse me, we decided
17        on two different exhibit numbers?
18                  MR. MORAN:  Mr. Klippenstein asked for two
19        separate numbers for the two excerpts.
20                  THE PRESIDING MEMBER:  So 14.3 and 14.4.
21                  MR. MORAN:  Yes.
22                  THE PRESIDING MEMBER:  Thank you.
23                       EXHIBIT NO. 14.3:  Document entitled
24                       "Serving Our Customers Better" Strategic
25                       Plan 2000-2004
26                       EXHIBIT NO. 14.4:  Document entitled
27                       "The Loop"
28                  MR. KLIPPENSTEIN:  If I could ask you,

                                71
                    HYDRO ONE NETWORKS PANEL 1, ex (Klippenstein)
 1        Mr. Marcello, to first turn to Exhibit 14.4, which is
 2        excerpt from the publication called "The Loop", and turn
 3        to the second page of that exhibit.  And there is a
 4        highlighted or marked sentence or two on the left-hand
 5        column approximately in the middle.  And I would like to
 6        just ask you this:  Do these statements accord with your
 7        general understanding of the transmission line and power
 8        usage on a regional basis?  The publication says that,
 9        beginning with, I believe it is the third sentence in
10        the third paragraph:
11                       "Hydro-Qu‚bec has adjusted to these new
12                       rules, which allow it to take advantage
13                       of price fluctuations.  When prices drop,
14                       Hydro-Qu‚bec imports electricity to
15                       distribute to its Quebec customers and
16                       thus keep water in its reservoir.  When
17                       prices rise to about 30 times the average
18                       price, as they did in July 1999 on the
19                       New York and New England markets,
20                       Hydro-Qu‚bec uses the stored water to
21                       generate very profitable sales."
22                  Now, first of all, does that generally accord
23        with your understanding of how the system works?
24                  DR. MACEDO:  May I take these questions?
25                  MR. KLIPPENSTEIN:  Sure.
26                  DR. MACEDO:  The principle outlined earlier on
27        in your cross-examination in fact is correct and that is
28        that the reservoirs are used for banking energy.  From

                                72
                    HYDRO ONE NETWORKS PANEL 1, ex (Klippenstein)
 1        the Ontario perspective, the important thing is to use
 2        imports into Ontario to dampen the prices in Ontario. 
 3        Okay.  And this is a mechanism that Hydro Quebec may use
 4        to import into Ontario.  The net effect on Ontario
 5        customers is that the -- is that when the cost of
 6        electricity is high, and that is at peak periods, that
 7        is the time you want to import energy to dampen the
 8        prices.
 9                  So the principles identified here are the
10        basis of the analysis.  I don't want to comment on the
11        profitable sales and 30 times average price and that
12        sort of thing, but the principle, underlying principle,
13        is in fact valid.
14                  MR. KLIPPENSTEIN:  Okay.  I wasn't
15        specifically focusing on the 30 times or the dates or
16        anything like that.
17                  But just so I understand because this power
18        line has two ends to it, that first sentence, I just
19        want to make sure I understand that and if that is a
20        correct statement.
21                  The first sentence or the second sentence that
22        I read says:
23                       "When prices drop, Hydro-Qu‚bec imports
24                       electricity to distribute to its Quebec
25                       customers and thus keep water in its
26                       reservoirs."
27                  So Hydro Quebec can import power to save water
28        in its reservoirs and it is by that importing of outside

                                73
                    HYDRO ONE NETWORKS PANEL 1, ex (Klippenstein)
 1        power that it is banking electricity.  Is that right?
 2                  DR. MACEDO:  That is correct.
 3                  MR. KLIPPENSTEIN:  And that is part of the
 4        picture at issue in here, because from Quebec's point of
 5        view that is what it is going to do with this
 6        transmission line.  It is going to import power at
 7        favourable prices, relatively favourable prices and bank
 8        it.  That is step one.  Is that right?
 9                  DR. MACEDO:  That is the basic principle,
10        right.  And that is the principle that PHB used in their
11        analysis.
12                  MR. KLIPPENSTEIN:  Right.  Okay.
13                  Then continuing with the next sentence:
14                       "When prices rise to about 30 times the
15                       average price, as they did in July 1999
16                       on the New York and New England markets,
17                       Hydro-Qu‚bec uses the stored water to
18                       generate very profitable sales."
19                  So just looking at that as the other half of
20        the principle, at a level of principle, is that correct
21        in terms of the picture from Hydro Quebec's point of
22        view when a favourable price opportunity comes by, in
23        other words, they can sell power at a high price.  They
24        can use that stored water to sell that power and make
25        money on the difference.  Is that right?
26                  DR. MACEDO:  I cannot speak on behalf of Hydro
27        Quebec.  What Hydro Quebec does and the motivation for
28        doing it you have to talk to the Hydro Quebec witness.

                                74
                    HYDRO ONE NETWORKS PANEL 1, ex (Klippenstein)
 1                  All I can tell you is from an Ontario
 2        perspective that importing when the price is high in
 3        Ontario will dampen prices of electricity in Ontario. 
 4        And that the mechanism for doing it through energy
 5        banking sure, but the net effect is a reduction in
 6        prices to consumers in Ontario.
 7                  What Hydro Quebec does or doesn't do and how
 8        much profit they make or don't make is something you
 9        should ask Hydro Quebec.
10                  MR. KLIPPENSTEIN:  Well, I'm not asking how
11        much profits Hydro Quebec makes.  But let's be frank, I
12        mean this is not difficult economics and I would imagine
13        that Mr. Marcello has a pretty good idea of how these
14        power flows work and maybe I should ask Mr. Marcello. 
15        But the principle in this statement seems to be buy low,
16        sell high, and Hydro Quebec can do that because it can
17        store electricity in the form of water.  Is that right?
18                  DR. MACEDO:  That is right.  I have said that
19        before.
20                  MR. KLIPPENSTEIN:  Okay.  So in terms of the
21        second sentence, what Hydro Quebec is saying is absolute
22        common sense in that when it sees a favourable price
23        opportunity in another jurisdiction it can sell power,
24        which it didn't -- which it could buy at a previous time
25        at a cheaper price.  Is that fair?
26                  DR. MACEDO:  That is fair.
27                  MR. KLIPPENSTEIN:  And in this particular
28        statement the example it uses is that it sells that

                                75
                    HYDRO ONE NETWORKS PANEL 1, ex (Klippenstein)
 1        power to New York and to other New England States.  Is
 2        that right?
 3                  And this isn't a fanciful example, presumably
 4        Hydro Quebec does do that.  Right?
 5                  DR. MACEDO:  Yes, they do it.
 6                  MR. KLIPPENSTEIN:  All right.  So what Hydro
 7        Quebec then does sometimes is to import power from other
 8        jurisdictions at a favourable price, use its water
 9        reservoirs to store that power and then resell that
10        power to sometimes a northern United States jurisdiction
11        at a higher price to make a profit.  Is that fair?
12                  DR. MACEDO:  Again, I --
13                  MR. KLIPPENSTEIN:  This is not complicated.  I
14        think it is quite simple.  Am I not right?
15                  DR. MACEDO:  That is fine.  I don't want to
16        speak on what Hydro Quebec does with regard to New
17        England and New York.  I would like to talk about what
18        this interconnection will do for the customers of
19        Ontario and how Hydro Quebec is going to be able to
20        import and export into Ontario.
21                  MR. KLIPPENSTEIN:  Will you go this far with
22        me, that Hydro Quebec sometimes sells the imported
23        stored power to northeastern United States States?
24                  DR. MACEDO:  I cannot speak to that.
25                  MR. KLIPPENSTEIN:  Wait a minute.  You mean
26        you don't know whether or not Hydro Quebec sometimes
27        sells imported stored power to northeastern United
28        States.  Don't you know?

                                76
                    HYDRO ONE NETWORKS PANEL 1, ex (Klippenstein)
 1                  DR. MACEDO:  No.  I am saying that what Hydro
 2        Quebec does with the energy it stores is something you
 3        should ask Hydro Quebec.
 4                  MR. KLIPPENSTEIN:  Well, I will but perhaps I
 5        should ask Mr. Marcello.
 6                  Is it Hydro One's position that you don't know
 7        whether or not Hydro Quebec sometimes sells cheap
 8        imported power to the northeastern United States.  Is
 9        that something you don't know?  You think it is -- I
10        mean it is -- I would think it very important for the
11        operations of Hydro One to know that and I am wondering
12        if you do know that?
13                  DR. MACEDO:  Hydro One is --
14                  MS ALDRED:  I'm sorry.  We are going to have
15        two witnesses, one on the second panel, Mr. Kline, who
16        can speak specifically to this issue.
17                  And, secondly, I think Mr. Marcello --
18                  THE COURT REPORTER:  Ms Aldred, you are not at
19        the microphone.
20                  MS ALDRED:  Oh, sorry.
21                  I think Dr. Macedo and Mr. Marcello have both
22        answered that they would defer that type of questioning
23        about Hydro Quebec's behaviour to Hydro Quebec, and they
24        will be here on the third panel.
25                  MR. KLIPPENSTEIN:  Madam Chair, the reason I
26        ask these questions, as I said at the beginning, was
27        because Mr. Marcello is Hydro One's representative on
28        the NPCC, which is the regional coordinating planning

                                77
                    HYDRO ONE NETWORKS PANEL 1, ex (Klippenstein)
 1        body for transmission and other related issues.  That is
 2        why I am asking Mr. Marcello and this panel that.
 3                  I just find it hard to believe that as part of
 4        that overall planning function, in addition to their
 5        ordinary business operations, they are -- I don't
 6        understand why they are so reluctant to simply say what
 7        I think is the obvious, what Hydro Quebec has said
 8        publicly.  If they don't know, they can say they don't
 9        know.  But it just seems to me we have a problem if they
10        are not willing to address that question.
11                  It seems to me to be a legitimate question and
12        a very basic one.
13                  THE PRESIDING MEMBER:  Gentlemen, I think you
14        can speak to your general knowledge.
15                  If it is your understanding that Hydro Quebec
16        sells to the northeastern United States, then perhaps
17        you can just simply state that and Mr. Klippenstein can
18        go on with his questions.
19                  DR. MACEDO:  Yes, thank you, Madam Chair.
20                  I did say that Hydro Quebec does sell to New
21        York.  There is no question about it, New York and New
22        England.
23                  I just wanted to mention that Hydro One is a
24        transmission and distribution network.  I cannot sort of
25        emphasize that more.  We facilitate imports and exports. 
26        You are asking us as Hydro One witnesses here to talk
27        about how the markets are going to operate and for that,
28        we have retained PHB, and PHB on Panel 2 will be able to

                                78
                    HYDRO ONE NETWORKS PANEL 1, ex (Klippenstein)
 1        address how the markets, not only in Ontario and Quebec,
 2        but also in the surrounding jurisdictions, would impact
 3        this interconnection.  So all of these questions really
 4        should be addressed to Panel 2.
 5                  But I am stating that yes, I do know that
 6        Hydro Quebec sells energy to New England and New York.
 7                  MR. KLIPPENSTEIN:  Let me just ask you again
 8        the approximate question I was trying to get answered
 9        before.  I thought it was obvious.
10                  It is accurate and true, isn't it, that as
11        part of its operations, and it is common knowledge I
12        would have thought, particularly to the planning
13        council, that Hydro Quebec sometimes imports cheaper
14        power, stores it, and sells some of that cheaper
15        imported power to the northeastern United States.  Can
16        you agree with that?
17                  DR. MACEDO:  Not from Ontario.
18                  MR. KLIPPENSTEIN:  That wasn't my question. 
19        That wasn't my question.
20                  DR. MACEDO:  No, no, but that is the
21        implication of the question.
22                  MR. KLIPPENSTEIN:  Well, answer my question
23        first.
24                  DR. MACEDO:  Okay.  My thing is that I know
25        that energy is exchanged between Ontario and Quebec at
26        off-peak times and returned at peak times.  That is done
27        today.
28                  What transpires between New York, New England

                                79
                    HYDRO ONE NETWORKS PANEL 1, ex (Klippenstein)
 1        and Hydro Quebec, I am not aware of, other than that
 2        Hydro Quebec sells energy to New York and New England.
 3                  MR. KLIPPENSTEIN:  Just so I understand, my
 4        question was:  does Hydro Quebec sell cheap imported
 5        power that it stores by means of its reservoir at a
 6        higher price to the northeastern United States?  Are
 7        you --
 8                  THE PRESIDING MEMBER:  Excuse me,
 9        Mr. Klippenstein.
10                  I think that the witnesses have said that that
11        will be dealt with in Panel 2 and I think that that was
12        their answer to your question.
13                  As I understand it, this Panel are answering
14        high-level policy questions with respect to the project
15        issues such as the economics are going to be dealt with
16        with another panel.
17                  MR. KLIPPENSTEIN:  All right.
18                  Mr. Marcello, as the Hydro One representative
19        to the Regional Planning Committee, can you advise me,
20        with the completion of the proposed transmission line,
21        will it be possible for Hydro Quebec to purchase power
22        from Ontario and resell that power to the northeastern
23        United States?
24                  MR. MARCELLO:  In terms of purchasing from
25        Ontario, yes, they can.  And can they physically resell
26        to the U.S.?  Yes, they can.
27                  MR. KLIPPENSTEIN:  Okay.  So just so I
28        understand that, it is anticipated that when a

                                80
                    HYDRO ONE NETWORKS PANEL 1, ex (Klippenstein)
 1        transmission line is completed, it will be  physically
 2        possible for Hydro Quebec to purchase power from
 3        Ontario, store it through the reservoir mechanism and
 4        resell that power to the northeastern United States.  It
 5        will be physically possible.  It will be doable.  Is
 6        that fair?
 7                  MR. MARCELLO:  You said "anticipate" so I
 8        would say I don't have any anticipation.
 9                  MR. KLIPPENSTEIN:  My question was whether it
10        was physically doable.
11                  MR. MARCELLO:  Physically the facilities can
12        be used to buy and sell 1,250 megawatts.  So Hydro
13        Quebec can buy 1,250 and can sell 1,250 on our
14        interconnection.  They also have other interconnections,
15        as you have pointed out, and I don't have the specific
16        capability of those.
17                  MR. KLIPPENSTEIN:  I am not asking for
18        specific capabilities.  I am asking as you are the Hydro
19        One representative to the regional planning body, just
20        for clarification, Hydro Quebec could use the new
21        transmission line to buy Ontario power and then Hydro
22        Quebec can sell that power to the northeastern United
23        States.  That is physically possible.  Is that correct? 
24        I think that --
25                  MR. MARCELLO:  I believe I have already
26        answered that.  Yes, I think that is physically
27        possible.  I think it is physically possible for Hydro
28        Quebec to buy from New York and sell into Ontario.  I

                                81
                    HYDRO ONE NETWORKS PANEL 1, ex (Klippenstein)
 1        think it is physically possible once the facilities are
 2        there that they can be used in numerous circumstances
 3        that will only be limited, I think, by the market and it
 4        goes back to the point we are providing a facility that
 5        will help facilitate the market.
 6                  DR. MACEDO:  Mr. Klippenstein, may I just
 7        clarify a point, and that is that NPCC is a reliability
 8        organization.  Their prime purpose is to promote the
 9        reliability of transmission systems in northeastern
10        North America.  The NPCC does not deal with commercial
11        matters.  Buy/sell is not an item discussed within NPCC. 
12        Those are left to individual utilities, parties to
13        negotiate outside of NPCC.  What NPCC is concerned with
14        is that having made those arrangements that the system
15        is operated in a reliable and secure manner.
16                  MR. KLIPPENSTEIN:  Again, Mr. Marcello, as
17        part of your role in the NPCC planning committee or task
18        force, could I refer you to Exhibit No. 14.4 -- I'm
19        sorry, I believe it is 14.3, page 36, bottom left of
20        page 36.
21                  MR. MARCELLO:  Okay.
22                  MR. KLIPPENSTEIN:  And that part of Hydro
23        Quebec's strategic plan talks about the expiry of
24        long-term export contracts by 2002.  Presumably as part
25        of your overall planning knowledge of the northeastern
26        North American region, you would be aware of whether or
27        not Hydro Quebec does have some long-term export
28        contracts that are expiring around 2002.  Can you

                                82
                    HYDRO ONE NETWORKS PANEL 1, ex (Klippenstein)
 1        confirm that Hydro Quebec has such contracts?
 2                  MR. MARCELLO:  Actually, I cannot confirm
 3        that, no.
 4                  MR. KLIPPENSTEIN:  Are you aware of whether or
 5        not Hydro Quebec has some long-term export contracts
 6        that are expiring in the near future?
 7                  MR. MARCELLO:  Other than the fact that you
 8        have provided me this paper, I have no personal
 9        knowledge of that, no.
10                  MR. KLIPPENSTEIN:  So you wouldn't know either
11        that this is true of your own knowledge or that it is in
12        some way not accurate.  You wouldn't know either way
13        then?
14                  MR. MARCELLO:  No, I couldn't comment on that.
15                  MR. KLIPPENSTEIN:  Okay.  Can you tell me as
16        someone who is charged with coordinating planning for
17        the northeastern representative, in part -- of the
18        northeastern region, in part, assume for the moment that
19        Hydro Quebec's strategic planning document is true and
20        that Hydro Quebec does have some export contracts
21        expiring around 2002.
22                  Would it be fair to say that one implication
23        of that is that some transmission capacity that had been
24        previously tied up by long term contracts would be
25        freed up?
26                  MS ALDRED:  I would just like to clarify.  I
27        don't think Mr. Marcello ever told anyone he was charged
28        with planning with the NPCC and I think it might be

                                83
                    HYDRO ONE NETWORKS PANEL 1, ex (Klippenstein)
 1        helpful if he were to explain to us what his role is
 2        there just so that Mr. Klippenstein can focus his
 3        questions.
 4                  MR. KLIPPENSTEIN:  That would be helpful,
 5        thank you.
 6                  THE PRESIDING MEMBER:  Mr. Marcello.
 7                  MR. MARCELLO:  The task force on the
 8        coordination of planning has the primary responsibility
 9        for overseeing a document which is referred to as A2,
10        basic criteria for the planning and operation of the
11        interconnected system.  Basically what this document
12        lays out are the rules by which the system should be
13        designed and operated and I think Dr. Macedo pointed out
14        the real focus of NPCC is keep the lights on.
15                  After 1965 there was a big blackout.  The need
16        for a coordinating council was established.  NPCC was
17        formed.  There are other coordinating councils and they,
18        under an umbrella which is referred to as the North
19        American Electric Reliability Council, has a mandate to
20        make sure that, in simple terms, the lights stay on.
21                  So in doing that, from a transmission
22        perspective, which is where I am coming from and my role
23        on NPCC, and I think you have to separate my role on
24        NPCC from that of maybe a former Ontario Hydro
25        representative who would have looked at generation,
26        transmission and system security all perhaps in one or
27        two people.  I am there from a transmission perspective.
28                  I can comment that the lines we are putting in

                                84
                    HYDRO ONE NETWORKS PANEL 1, ex (Klippenstein)
 1        here meet their basic criteria.  I can say with
 2        certainty that we looked at all the recognized criteria
 3        and contingencies that are specified in that document. 
 4        We have done analysis and in doing that, the facilities
 5        we are putting forward will meet those basic criteria;
 6        the lights will stay on.  That is the role I have in
 7        NPCC -- sorry -- as Hydro One's representative on that
 8        committee.
 9                  The committee does discuss proposals from
10        Hydro One, from TransEnergie or any other jurisdiction
11        and we review those proposals again, against these
12        criteria.  There is a task force of system studies which
13        physically carry out these studies and applies them
14        against the criteria for which we are basically mandated
15        to ensure that it is kept current and reflects the
16        reality of ensuring the reliability is maintained.
17                  THE PRESIDING MEMBER:  Thank you,
18        Mr. Marcello.  Does that help you focus your questions, 
19        Mr. Klippenstein?
20                  MR. KLIPPENSTEIN:  Yes, I think it does. 
21        Thank you, Madam Chair.
22                  Now, Mr. Marcello, or Dr. Macedo, you have
23        agreed that it will be physically possible for Hydro
24        Quebec to use the proposed transmission line to purchase
25        Ontario power and resell it to the northeastern United
26        States.
27                  Now, let me ask about the assumption about
28        power coming back to Ontario.  I think you mentioned,

                                85
                    HYDRO ONE NETWORKS PANEL 1, ex (Klippenstein)
 1        Dr. Macedo, that one of the prime benefits economically
 2        of the proposed transmission line is that the incoming
 3        power from Hydro Quebec will dampen prices in Ontario at
 4        peak periods.  Is that right?
 5                  DR. MACEDO:  That is correct.
 6                  MR. KLIPPENSTEIN:   All right.  Do you make
 7        any assumption -- I guess it is inherent -- you do make
 8        an assumption that Hydro Quebec will sell power back to
 9        Ontario, or power to Ontario, using a new transmission
10        line during peak periods?  Is that fair?
11                  DR. MACEDO:  Again, you are getting into the
12        area that Panel 2 will discuss.  They have made various
13        assumptions in the analysis and they will be able to
14        defend those assumptions and so, if I may, I would like
15        to defer questions like that to Panel 2.
16        --- Pause
17                  MR. KLIPPENSTEIN:  I think, Madam Chair, those
18        are all my questions for this panel and I will direct
19        the others to the next panel.
20                  THE PRESIDING MEMBER:  Thank you,
21        Mr. Klippenstein.
22                  Mr. McArthur.
23        EXAMINATION
24                  MR. McARTHUR:  Thank you, Madam Chair.
25                  Yes, I do have some questions based on the
26        fact first that the witness summary, Panel 1, this
27        panel, refers to Ottawa-Carleton's Interrogatories so I
28        would like to put some questions to this particular

                                86
                        HYDRO ONE NETWORKS PANEL 1, ex (McArthur)
 1        panel, if I may.  Of course, if they wish to defer to a
 2        later panel I am sure they will.
 3                  The second reason I would like to ask some
 4        questions now, Madam Chair, is that I had committed to
 5        two days of hearings starting yesterday and I am
 6        unavailable tomorrow, unfortunately, because of another
 7        commitment.  So with your leave, Madam Chair, I have a
 8        few questions for just a few minutes.
 9                  To the panel, Mr. Marcello I think, it is
10        pretty obvious from what we have heard this morning that
11        pricing is an issue squarely before the Board.  Is that
12        correct?
13                  MR. MARCELLO:  Yes, that is correct.
14                  MR. McARTHUR:  Whatever the definition of
15        public interest, pricing is certainly one of them.
16                  MR. MARCELLO:  Yes.
17                  MR. McARTHUR:  Is it fair to say,
18        Mr. Marcello, that additional costs translate to higher
19        transmission rates which must be borne by all consumers? 
20        Is that a fair statement?
21                  MR. MARCELLO:  I think that is a fair
22        statement, yes.
23                  MR. McARTHUR:  It is one, in fact, that comes
24        from Hydro One's evidence.
25                  Mr. Marcello, following on from that, might
26        additional costs include land costs?
27                  MR. MARCELLO:  Yes, they would.
28                  MR. McARTHUR:  Hydro One has filed evidence

                                87
                        HYDRO ONE NETWORKS PANEL 1, ex (McArthur)
 1        and in its answer to interrogatories it has taken the
 2        position that existing easements are adequate.  Is that
 3        correct?
 4                  MR. MARCELLO:  Yes, that is correct.
 5                  MR. McARTHUR:  And we are talking about
 6        Ottawa-Carleton's easements and easements belonging to
 7        other land owners?  Is that correct?
 8                  MR. MARCELLO:  Yes, sir.
 9                  MR. McARTHUR:  Hydro One has filed a sample
10        easement with its interrogatories.  Is that correct?
11                  MR. MARCELLO:  Yes, we have.
12                  MR. McARTHUR:  Is it also correct that that is
13        a 1990 document?
14                  MR. MARCELLO:  I would have to check it but if
15        you say it is, then it is.  Can you just refer --
16                  MR. McARTHUR:  Yes, I can refer you to it if
17        you wish.  It is OEB Staff Interrogatory No. 65, Tab 1
18        in Hydro's evidence, Hydro One's evidence on
19        interrogatories, at least Hydro's answer to
20        interrogatories.
21                  MR. MARCELLO:  Sorry, I was looking under your
22        interrogatories.  That is why I couldn't --
23                  MR. McARTHUR:  Okay.  No, this is an answer to
24        staff's interrogatories.
25                  MR. MARCELLO:  Okay.
26                  MR. McARTHUR:  Would you say that that
27        particular easement is typical of the easements with
28        respect to this particular line, proposed line?

                                88
                        HYDRO ONE NETWORKS PANEL 1, ex (McArthur)
 1                  MS ALDRED:  I'm sorry, I do not seem to have
 2        an easement attached to 65.
 3                  MR. MARCELLO:  To 64?
 4                  MR. McARTHUR:  Do you have it?
 5                  MR. MARCELLO:  Page 64?  Because I don't have
 6        one under page 65.
 7                  MR. McARTHUR:  Okay.  I will find it.
 8        --- Pause
 9                  MR. McARTHUR:  It's 61, Madam Chair.  OEB
10        Staff Interrogator No. 61.
11                  THE PRESIDING MEMBER:  Yes, thank you.  It
12        is 61.
13                  MR. MARCELLO:  Thank you.
14                  MR. McARTHUR:  The attachment to the response
15        is a sample easement.
16                  MR. MARCELLO:  I'm sorry.  The question again?
17                  MR. McARTHUR:  Would you say that is a typical
18        Hydro One easement for these lands?
19                  MR. MARCELLO:  Yes.
20                  MR. McARTHUR:  Have you looked at them all?
21                  MR. MARCELLO:  No, I haven't.
22                  MR. McARTHUR:  Do you know how many there are?
23                  MR. MARCELLO:  No, I don't.
24                  MR. McARTHUR:  Do you know how old some of
25        these easements are?  Is it fair to say that some of
26        them are 50 or 60 years old?
27                  MR. MARCELLO:  Given that the right-of-way was
28        built or established in the thirties I wouldn't be

                                89
                        HYDRO ONE NETWORKS PANEL 1, ex (McArthur)
 1        surprised to hear that some are that old.  But I have
 2        no -- real estate isn't my area.  I have no way to
 3        confirm or deny that.
 4                  MR. McARTHUR:  All right.  From what you have
 5        just said then some of them could be 70 years old?
 6                  MR. MARCELLO:  Perhaps.
 7                  MR. McARTHUR:  Has Hydro One discussed with
 8        Ottawa-Carleton or any of the affected land owners these
 9        particular easements and the uses described therein?
10                  MR. MARCELLO:  Not to my knowledge.
11                  MR. McARTHUR:  Based on the evidence
12        submitted, prefiled by Hydro One that the easements are
13        sufficient, I take it then that Hydro One has made a
14        unilateral determination that these easements are
15        adequate.
16                  MS ALDRED:  I am wondering if you are getting
17        into legal questions which I would be prepared to deal
18        with in argument.  I don't want to stop my friend, but
19        Mr. Marcello isn't a lawyer and to a large extent, the
20        adequacy or sufficiency of easements, it seems to me, is
21        a legal question.
22                  MR. McARTHUR:  Well, I am not sure, Madam
23        Chair, whether that is a legal question.  All I am
24        asking is has there been consultation with the
25        landowners in question.  The answer has been no.  It
26        follows therefore, that there has been a unilateral
27        determination, I believe, and I am just asking for
28        confirmation of that.  There doesn't seem to be too much

                                90
                        HYDRO ONE NETWORKS PANEL 1, ex (McArthur)
 1        legal about that.
 2                  MR. MARCELLO:  Basically, Hydro One had the
 3        documents reviewed by legal counsel, and they gave us
 4        the opinion that these were sufficient for what we were
 5        planning to do on this right-of-way.
 6                  MR. McARTHUR:  All right, thank you.
 7                  If, however, that position is incorrect, or
 8        the legal advice was incorrect, which I am not saying it
 9        was, but if it was, then there may be an extra cost
10        involved.  Isn't that correct?  For land cost.
11                  MR. MARCELLO:  We are speculating now, but,
12        obviously, if there are additional costs, then the costs
13        of the project will go up.
14                  MR. McARTHUR:  All right.  To speculate a
15        little bit more then, or perhaps not, on the evidence
16        you have already given, that will be borne by the
17        consumer, if there is an extra cost?
18                  MR. MARCELLO:  Once the project is complete,
19        all costs will be brought back to the OEB for inclusion
20        into the rate base and we would expect to give a full
21        accounting of what happened to increase any cost.
22                  MR. McARTHUR:  Okay, thank you.
23                  I would just like to ask you a couple of
24        questions, or perhaps you can clarify for me the exact
25        nature of the construction changes, or the changes in
26        construction.
27                  You said in your evidence that all towers will
28        be replaced with new.  Can you clarify that just a

                                91
                        HYDRO ONE NETWORKS PANEL 1, ex (McArthur)
 1        little for me.  What do you mean exactly?  They will be
 2        built in the same spot, will they?
 3                  MR. MARCELLO:  The towers, where they are
 4        situated on the right-of-way today --
 5                  MR. McARTHUR:  Yes.
 6                  MR. MARCELLO:  -- will be removed and new
 7        towers will be put in place on the same spot.
 8                  MR. McARTHUR:  Why exactly do you need new
 9        towers?
10                  MR. MARCELLO:  In order to -- we have the
11        existing right-of-way --
12                  MR. McARTHUR:  Yes.
13                  MR. MARCELLO:  -- and currently there are two
14        circuits on that right-of-way and these circuits largely
15        supply area load.  The township -- or the City of
16        Cumberland and various other areas are supplied from
17        those existing circuits.  So it is not a matter of we
18        will just get rid of them and build two new circuits to
19        Hydro Quebec.  We still need those circuits.
20                  So when you look at the right-of-way and the
21        real estate that is there, we have two circuits on them. 
22        When you look at what is required when we are done, we
23        are going to need four circuits:  two for Hydro Quebec
24        interconnection and two to continue the existing supply.
25                  There are currently two rows of towers with
26        one circuit on each.  So what we are proposing is
27        replace the existing tower with one that is capable of
28        holding two circuits so at the end we will have four

                                92
                        HYDRO ONE NETWORKS PANEL 1, ex (McArthur)
 1        circuits on the right-of-way.  Two to ensure that the
 2        continuing supply of power is maintained, and two new
 3        ones to tie to Hydro Quebec.
 4                  MR. McARTHUR:  As a non-engineer, you will
 5        have to explain that to me a little more.
 6                  MR. MARCELLO:  Okay.
 7                  MR. McARTHUR:  Is this because the circuits
 8        are heavier?  I mean are they bulkier or heavier or what
 9        is the reason?
10                  MR. MARCELLO:  What is the reason for newer
11        circuits?
12                  MR. McARTHUR:  Well, you are going to replace
13        two circuits with four --
14                  MR. MARCELLO:  Okay.
15                  MR. McARTHUR:  -- and you are going to require
16        new towers.
17                  MR. MARCELLO:  Okay.
18                  MR. McARTHUR:  Is this because the circuits
19        take up more space, or because they are heavier or --
20        why can you not put four circuits on two towers?
21                  MR. MARCELLO:  Okay.  Why can't they put four
22        circuits on two towers?
23                  MR. McARTHUR:  The two towers that are there
24        now.
25                  MR. MARCELLO:  Oh, the existing towers are not
26        designed to accommodate four.  They don't have the
27        clearances necessary.  They don't have the physical,
28        mechanical strength associated with carrying additional

                                93
                        HYDRO ONE NETWORKS PANEL 1, ex (McArthur)
 1        loads.
 2                  The physical foundations that are supporting
 3        it aren't sufficient to carry those additional
 4        mechanical -- and all those physical stresses aren't
 5        sufficient with what is there now.
 6                  MR. McARTHUR:  How then do the new towers
 7        correct those things that you just explained to me, such
 8        as clearances, foundations -- not the physical strength? 
 9        How do the new towers correct that situation?
10                  MR. MARCELLO:  The new towers are basically
11        designed to be able to support the new circuits and the
12        new forces.  So -- I am not a mechanical engineer, but
13        the thickness of the metal is greater; greater
14        clearances are accommodated by having taller towers. 
15        Those sorts of aspects are brought to bear.
16                  MR. McARTHUR:  Okay.  Is it fair to say there
17        is quite a change then in the nature of these towers?
18                  MR. MARCELLO:  The towers are different.  In
19        terms of the real estate, though, they are staying on
20        the same footprint, the same location --
21                  MR. McARTHUR:  Yes, I understand that.
22                  MR. MARCELLO:  -- along the right-of-way.
23                  MR. McARTHUR:  Mr. Marcello, if we might just
24        go into a little different area for a moment.
25                  Hydro One obviously has a policy with respect
26        to reconstructions on existing easements, does it not?
27                  MR. MARCELLO:  I personally don't know; that
28        is not my area of expertise.

                                94
                        HYDRO ONE NETWORKS PANEL 1, ex (McArthur)
 1                  MR. McARTHUR:  All right.  Can you say whether
 2        in the past it has had a policy?
 3                  MR. MARCELLO:  I'm sorry.  Maybe I am not
 4        understanding the question.  Could you repeat it?
 5                  MR. McARTHUR:  If Hydro One is required to
 6        rebuild its towers on an existing easement, does it have
 7        a policy -- or I am actually asking -- did it have a
 8        policy with respect to the landowners?
 9                  MR. MARCELLO:  I would think in reviewing our
10        easement documents if they were not sufficient we would
11        be coming back to the landowner to negotiate a new
12        easement.
13                  One of the things to keep in mind, and it goes
14        back to a discussion we will probably be getting into on
15        the third panel, is why not steel poles?  Steel poles
16        would require -- we would not be able to stay on the
17        existing footprint.  We would require more poles.  And
18        in those circumstances, if that was in fact a necessary
19        outcome, if that was the outcome at the end of the
20        environmental assessment, we would be coming back to
21        Ottawa-Carleton saying, "We need additional easement
22        requirements, because our easements are not sufficient,"
23        in that case.  But that isn't the case in the situation.
24                  MR. McARTHUR:  Well, I won't explore that with
25        you if you feel uncomfortable with my questions and
26        answering them.  I was just trying to find out whether
27        there had been any change in the policy in recent times
28        with respect to existing easements.

                                95
                        HYDRO ONE NETWORKS PANEL 1, ex (McArthur)
 1                  MR. MARCELLO:  I think my answer was I am not
 2        aware of formal policy.  But the practice would have
 3        been -- or my understanding of the practice is that if
 4        we require additional easements definitely we will be
 5        talking to the landowners to negotiate those; and if we
 6        do not, then we would be informing landowners of what we
 7        are doing, just as we have done through this
 8        environmental assessment process.
 9                  MR. McARTHUR:  Yes, I understand about
10        additional easements.  Obviously, if you needed
11        additional easements and additional lands you would
12        certainly be going to landowners.  But I am just -- what
13        I am trying to find out is whether there was a policy
14        with respect to construction changes within an existing
15        easement.
16                  MR. MARCELLO:  I personally don't know, but --
17                  THE PRESIDING MEMBER:  I think he has answered
18        your question:  He doesn't know.
19                  MR. McARTHUR:  Those are all the questions I
20        have, Madam Chair.
21                  THE PRESIDING MEMBER:  Thank you,
22        Mr. McArthur.
23                  Mr. Budd, I understand you have no questions.
24                  MR. BUDD:  None.  Thank you.
25                  THE PRESIDING MEMBER:  Mr. Greenspoon -- now
26        that I can see you!
27                  MR. GREENSPOON:  Thank you.
28                  MR. THOMPSON:  Madam Chair, just if I might

                                96
                        HYDRO ONE NETWORKS PANEL 1, ex (McArthur)
 1        precede my friend.  When he finishes, it might make
 2        sense for me to ask my questions on these easements,
 3        because they do follow right along with Mr. McArthur,
 4        and so that we would have it all at one place in the
 5        record, rather than deferring it to Panel 3, but I am in
 6        your hands.
 7                  THE PRESIDING MEMBER:  How long do you think
 8        your questions will last, Mr. Thompson?
 9                  MR. THOMPSON:  Ten minutes.
10                  THE PRESIDING MEMBER:  Okay.  Thank you.
11                  Mr. Greenspoon.
12                  MR. GREENSPOON:  Yes, thank you.
13        EXAMINATION
14                  MR. GREENSPOON:  I just have a few questions. 
15        My interest, just for your edification, Panel, is -- I
16        represent Northwatch.  Northwatch is a coalition of
17        environmental groups from Northern Ontario.  So we are
18        interested in the impact of this application on Northern
19        Ontario.
20                  I had a couple of clearing-up questions, for
21        my knowledge.
22                  Exhibit B, Tab 3, Schedule 2 -- that is the
23        map of -- that is the map that is the big map up there
24        behind us.  Yes.  It doesn't show any 115 kV lines.
25                  Is that correct?
26                  DR. MACEDO:  That is correct.  What is shown
27        there are the 230 and 500 kV lines.
28                  MR. GREENSPOON:  Does Hydro One consider

                                97
                      HYDRO ONE NETWORKS PANEL 1, ex (Greenspoon)
 1        115 kV as part of the transmission system?
 2                  DR. MACEDO:  Yes, it does.
 3                  MR. GREENSPOON:  The 500 kilovolt construction
 4        from Hamner to Mississauga, is that built?
 5                  DR. MACEDO:  There is no 500 kV between Hamner
 6        and Mississauga.  There is a line that is built to
 7        500 kV standards, but it is not energized at 500 kV.
 8                  MR. GREENSPOON:  I see.  So there is a 500 kV
 9        line but it was built and it hasn't been used.
10                  DR. MACEDO:  Well, it is being operated at
11        230 kilovolts.
12                  MR. GREENSPOON:  At 230.  Okay.
13                  I see on that same map that there are four
14        other connections to Quebec, four other interconnects: 
15        one at Dymond, one at Ottoholden, one at Chenaux, and
16        one at Chats Falls.
17                  DR. MACEDO:  Yes, that is correct.
18                  MR. GREENSPOON:  Those are the interconnects
19        that you describe as not being permanent.  Is that the
20        word you used?
21                  DR. MACEDO:  That is correct.
22                  MR. GREENSPOON:  Did you look at any of those
23        interconnects as possible interconnects for this
24        project?
25                  MR. MARCELLO:  I'm sorry.  Could you just
26        repeat the question.
27                  MR. GREENSPOON:  There are four northeasterly
28        interconnects to Quebec, four other ones.

                                98
                      HYDRO ONE NETWORKS PANEL 1, ex (Greenspoon)
 1                  MR. MARCELLO:  That is correct.
 2                  MR. GREENSPOON:  Were those looked at as an
 3        alternative to this interconnect?
 4                  MR. MARCELLO:  No, they were not.
 5                  MR. GREENSPOON:  Will this interconnect have
 6        any impact on those interconnects?
 7                  MR. MARCELLO:  Once again I think the
 8        interconnections are there and the facilities will be
 9        used in any manner that the market dictates.  If it is
10        economic to do so, they will continue to be used in that
11        manner.  I don't know how the world is going to play out
12        in terms of the market, but the interconnections are
13        there.  Generators can be isolated from one system to
14        the other and back.  It is my expectation that that
15        would continue into the future.
16                  MR. GREENSPOON:  Would it be your expectation
17        that some of these, one or more of these four
18        interconnects, could perhaps be the subject of an
19        application at a later date for a permanent
20        interconnect?
21                  DR. MACEDO:  I doubt it.  The Quebec system on
22        the other side is fairly weak and it is very unlikely,
23        in my view, that those interconnects, those connection
24        points would be converted into a permanent
25        interconnection.
26                  MR. GREENSPOON:  If we could turn to the other
27        map then, Tab 2, Schedule 3, page 1, that is the
28        specific site map of the interconnect.  Do you have

                                99
                      HYDRO ONE NETWORKS PANEL 1, ex (Greenspoon)
 1        that?
 2                  MR. MARCELLO:  Yes.
 3                  MR. GREENSPOON:  Now, I wondered what those
 4        little red lines, those two red lines coming -- going to
 5        the south and east out of the Hawthorne Station were?
 6                  I think your big map is on the floor if you
 7        are looking for it.  They don't appear to be on it.
 8                  MR. MARCELLO:  Basically coming out of
 9        Ottawa-Hawthorne there are two 500 kV lines that are
10        working into Ottawa.
11                  MR. GREENSPOON:  So then the key on the
12        schedule is wrong.  Where it says "Red is Quebec
13        interconnection circuits," the two red lines going south
14        and east from Hawthorne are not Quebec interconnect.  Is
15        that right?
16                  MR. MARCELLO:  I would say that -- that is
17        correct.  Yes, that is an error.
18                  MR. GREENSPOON:  So those two red lines are
19        500 kV lines.  Is that what your guess is?
20                  MR. MARCELLO:  Without looking at the whole --
21        a bigger system map, I would say that there are -- that
22        is possible, yes.  But they are definitely not the Hydro
23        Quebec interconnection.  That would end at Hawthorne.
24                  MR. GREENSPOON:  At Hawthorne.  Thank you.
25                  And those blue lines on that same map, those
26        are the 115 kV's that we are talking about not being on
27        the system map.  The other map we looked at earlier, the
28        bigger province map.

                                100
                      HYDRO ONE NETWORKS PANEL 1, ex (Greenspoon)
 1                  MR. MARCELLO:  That is correct.  Yes.
 2                  MR. GREENSPOON:  And do those feed off the --
 3        say for example, at Gamble Junction, do those feed off
 4        the Quebec interconnect circuit?
 5                  MR. MARCELLO:  No, they do not.
 6                  MR. GREENSPOON:  No.
 7                  MR. MARCELLO:  The Quebec -- the proposed
 8        interconnection is going to run from Outaouais straight
 9        to Hawthorne without any stations or loads tapped off.
10                  MR. GREENSPOON:  Right.
11                  MR. MARCELLO:  It is, for all intents and
12        purposes, an express connection.
13                  MR. GREENSPOON:  Except for Masson and
14        Maclaren.
15                  MR. MARCELLO:  Even there -- even there there
16        is not a connection to the Hydro Quebec interconnected
17        circuits.
18                  MR. GREENSPOON:  Where is the HVAC situated? 
19        That is the -- the HVAC is the inverter or the
20        converter.
21                  MR. MARCELLO:  The converter equipment will be
22        located at the Hydro Quebec Outaouais substation which
23        is shown on that drawing you are referring to basically
24        at the top of the page.
25                  MR. GREENSPOON:  I see.  So it is going over
26        from Ontario as AC?
27                  MR. MARCELLO:  That is correct.  At Outaouais
28        the DC, the high voltage DC equipment will take the AC

                                101
                      HYDRO ONE NETWORKS PANEL 1, ex (Greenspoon)
 1        from the Hydro Quebec system, convert it to DC and back
 2        to AC all within the Outaouais station.
 3                  MR. GREENSPOON:  And what is the line loss at
 4        that HVAC, do you know?
 5                  MR. MARCELLO:  I'm sorry?
 6                  MR. GREENSPOON:  What is the line loss, the
 7        voltage loss that is lost to equipment at the HVAC?  In
 8        other words, for every volt of AC that we send from
 9        Ontario how many volts do they get after the HVAC
10        conversion and inversion at Quebec?
11                  DR. MACEDO:  I may try to answer this.
12                  If the voltage received at the converter
13        station is 230 kV and if it is converted back into
14        230 kV AC, there is no volt drop -- there is no volt
15        drop at -- yes.  I'm sorry, my colleague is telling me
16        that the Outaouais is 315 kV.
17                  There is no volt drop in the converter
18        station.  The converter station requires certain
19        reactive support in order to make it work.  And both
20        Hydro Quebec and ourselves, we would be putting in
21        reactive support to make sure that the converter is fed
22        with the right support so that it can operate in an
23        efficient manner.
24                  MR. GREENSPOON:  Yes.  But I understand you
25        are converting from 230 to 315 and in the middle you are
26        converting to DC.  When you convert to DC you lose some
27        power.  There is some inefficiency in conversion and
28        then inversion.  Is that not correct?

                                102
                      HYDRO ONE NETWORKS PANEL 1, ex (Greenspoon)
 1                  DR. MACEDO:  The equipment is back-to-back. 
 2        There is a conversion that takes place.  The losses in
 3        the converter station is very, very small.
 4                  MR. GREENSPOON:  Do you know what it is?
 5                  DR. MACEDO:  I don't know what it is but the
 6        person who is going to be on Hydro Quebec will tell you
 7        what that loss is.  They are very small.
 8                  MR. GREENSPOON:  All right.  Fine.  Thank you.
 9                  With respect to the markets in Quebec and who
10        may be bidding on those markets once we have open
11        access, are those questions for Panel 2 or are those
12        questions that I should be asking?
13                  DR. MACEDO:  Yes, they are for Panel 2.
14                  MR. GREENSPOON:  With respect to -- if you
15        look again at the big map, Tab 3, Schedule 2, page 1, in
16        that -- in that insert we have what is called the West
17        System.  In that map there is an insert called the West
18        System.
19                  DR. MACEDO:  That is correct.
20                  MR. GREENSPOON:  Now, there are two -- there
21        are two generators in that area, are there not?  Two
22        stations.  Are you aware of -- you have been at Hydro
23        for a long time, you are aware of the system?
24                  DR. MACEDO:  Yes, I am.
25                  MR. GREENSPOON:  All right.  And up in there
26        we have Atikokan and Thunder Bay.
27                  DR. MACEDO:  Yes, they are the fossil plants.
28                  MR. GREENSPOON:  Those are two fossil plants

                                103
                      HYDRO ONE NETWORKS PANEL 1, ex (Greenspoon)
 1        and those are -- those remain unscrubbed to your
 2        knowledge?
 3                  DR. MACEDO:  I really should restrict my
 4        comments to Hydro One assets.  The question you are
 5        asking me really are more relevant for the generating
 6        company to respond to.
 7                  MR. GREENSPOON:  Yes, but you know as a fact
 8        when you were at Hydro that these are the only two
 9        unscrubbed fossil generating stations in Ontario?
10                  DR. MACEDO:  Really I don't want to speak on
11        behalf of OPG.
12                  MR. GREENSPOON:  Okay.  All right.
13                  Can you -- then hypothetically would you
14        accept that they are unscrubbed, just for the purpose of
15        my next question?
16                  Assuming that they are unscrubbed, subject to
17        your finding out that they have scrubbed -- they are
18        scrubbed, and I think it is on the record at other
19        hearings, Madam Chair, that these are two unscrubbed
20        fossil stations -- was it a consideration of the
21        transmission company that an interconnection to
22        Minnesota might have taken some of the pressure off of
23        those two stations and that perhaps that area of Ontario
24        wouldn't be ready -- wouldn't be subject to unscrubbed
25        fossil burning if the interconnect had been with
26        Minnesota?
27                  DR. MACEDO:  We do have an interconnection
28        with Minnesota.

                                104
                      HYDRO ONE NETWORKS PANEL 1, ex (Greenspoon)
 1                  MR. GREENSPOON:  A permanent interconnection?
 2                  DR. MACEDO:  A permanent interconnection.
 3                  MR. GREENSPOON:  All right.  And how many
 4        megawatts is that?
 5                  DR. MACEDO:  That I believe is 100 megawatts,
 6        150 megawatts.  I can't remember the details.
 7                  MR. GREENSPOON:  All right.  And this
 8        application is how many megawatts?
 9                  DR. MACEDO:  It's 1250.
10                  MR. GREENSPOON:  So 1200.  So it's one-tenth?
11                  DR. MACEDO:  Yes.
12                  MR. GREENSPOON:  So presumably if more
13        interconnect was established at Minnesota, less
14        interconnect would be needed to meet the OEB's suggested
15        target?
16                  DR. MACEDO:  We did look at all the
17        interconnections, all the opportunities across the
18        province and we did look at the Minnesota
19        interconnection.
20                  MR. GREENSPOON:  Yes.
21                  DR. MACEDO:  The cost to upgrade the Minnesota
22        interconnection is new unit cost, in other words, the
23        dollars per megawatt for the upgrade is far greater than
24        the cost for the Hydro Quebec upgrade.  And the other
25        very important thing to bear in mind is that in order to
26        make full use of any capacity that you provided
27        interconnection, you have to look at the transmission
28        system beyond the interconnection itself and in

                                105
                      HYDRO ONE NETWORKS PANEL 1, ex (Greenspoon)
 1        Minnesota we would have to upgrade a major interface
 2        which we call the east/west interface which goes between
 3        Wawa and Marathon and the cost of upgrading that has to
 4        be taken into account.
 5                  So when you take both the upgrade of the
 6        interconnection itself plus the upgrade of the interface
 7        required to make use of that interconnection, the unit
 8        cost does not compare with the Hydro Quebec option.
 9                  MR. GREENSPOON:  But that again was not taking
10        into account any environmental impacts of unscrubbed
11        fossil generation.  That was not part of your
12        consideration?
13                  DR. MACEDO:  That was not part of the
14        consideration, no.
15                  MR. MARCELLO:  I think there is an important
16        point to add here.
17                  For an interconnection to work you need two
18        parties and in this case we have Hydro Quebec.  With
19        Minnesota, we have been discussing and studying
20        possibilities for expanding that interconnection for
21        many years and although there is lots of good will in
22        terms of looking at options and studies, when it really
23        comes down to it, the drivers are not there for either
24        party.
25                  I think Dr. Macedo alluded to the high cost on
26        our end and from the Minnesota perspective, they also
27        had concerns.
28                  MR. GREENSPOON:  Just one last area and that

                                106
                      HYDRO ONE NETWORKS PANEL 1, ex (Greenspoon)
 1        is the actual transfer of power from the west system to
 2        the east system.
 3                  What is your understanding of that?  Is there
 4        a net flow one way or the other?
 5                  DR. MACEDO:  No, there isn't.  Power flows in
 6        both directions.
 7                  MR. GREENSPOON:  And what about at Hamner?  Is
 8        there a flow north and south or --
 9                  DR. MACEDO:  Again, same thing.  Power flows
10        both north and south, depending upon the time of day.
11                  MR. GREENSPOON:  And would you say it nets out
12        at zero at those two systems?
13                  DR. MACEDO:  I haven't looked at them recently
14        but I would say yes, close.
15                  MR. GREENSPOON:  That seems to be what it --
16        that is what it was at the DSP -- at the time of the
17        Demand Supply Plan, wasn't it?
18                  DR. MACEDO:  That's right.
19                  MR. GREENSPOON:  Yes.  And will this
20        interconnect impact on those flows, this interconnect
21        that is the subject of this application?  It could.
22                  DR. MACEDO:  It could.
23                  MR. GREENSPOON:  Yes.
24                  Thank you.  Those are all the questions I
25        have.
26                  THE PRESIDING MEMBER:  Thank you very much,
27        Mr. Greenspoon.
28                  Mr. Brown, you have no questions, as I

                                107
                      HYDRO ONE NETWORKS PANEL 1, ex (Greenspoon)
 1        remember.
 2                  Mr. Thompson, you have 10 minutes.
 3                  MS ALDRED:  I just wanted to point out one
 4        more time and I will leave it in your hands, of course,
 5        that Mr. McCormick -- well, he has got more detailed
 6        knowledge.
 7                  MR. THOMPSON:  Yes, I understand that, but I
 8        understand that your second panel cannot start up today
 9        so I thought it might be helpful to use a little time
10        here and it fits in with what Mr. McArthur was
11        questioning.  So if I --
12                  THE PRESIDING MEMBER:  You have ten minutes,
13        Mr. Thompson.  And for the witnesses, if you cannot
14        answer Mr. Thompson's  questions -- you can always defer
15        it to the others.
16        EXAMINATION
17                  MR. THOMPSON:  Panel, would you go back to
18        Cumberland's evidence at Tab 3, that page we were
19        looking at before with the tower designs, about four in.
20                  THE PRESIDING MEMBER:  I'm sorry,
21        Mr. Thompson.  Which tab was this?
22                  MR. THOMPSON:  It is Tab 3, fourth page in,
23        and it is the page entitled "Hydro Quebec
24        Interconnection Existing and Proposed Tower Options".
25                  THE PRESIDING MEMBER:  Thank you.
26                  MR. THOMPSON:  Come on guys, you are eating
27        into my time.
28        --- Laughter

                                108
                        HYDRO ONE NETWORKS PANEL 1, ex (Thompson)
 1                  MR. THOMPSON:  Can you find the page?
 2                  MR. MARCELLO:  Okay, yes.
 3                  MR. THOMPSON:  You got it?
 4                  MR. MARCELLO:  Yes.
 5                  MR. THOMPSON:  All right.
 6                  My understanding is that what is there now are
 7        the two pictures shown on the top line on the right-hand
 8        side.
 9                  MR. MARCELLO:  Yes.
10                  MR. THOMPSON:  And they are 75 and 73 feet
11        high?
12                  MR. MARCELLO:  Yes.  That is pretty typical. 
13        I wouldn't want to leave the impression that every tower
14        is exactly that height.
15                  MR. THOMPSON:  Well, big picture.
16                  MR. MARCELLO:  Yes, big picture, that is it.
17                  MR. THOMPSON:  That is what we have running
18        through this easement.
19                  What you are proposing to put there is down on
20        the bottom line, left corner.
21                  MR. MARCELLO:  Yes.
22                  MR. THOMPSON:  Right.  And that is 152 -- what
23        is the height and what --
24                  MR. MARCELLO:  I think it shows 162.
25                  MR. THOMPSON:  Right.
26                  MR. MARCELLO:  I believe that the actual
27        towers that will end up being built will range from
28        130 to 150 but Panel 3 can confirm that.

                                109
                        HYDRO ONE NETWORKS PANEL 1, ex (Thompson)
 1                  MR. THOMPSON:  Okay.  And the base is larger?
 2                  MR. MARCELLO:  The base is --
 3                  MR. THOMPSON:  It's 28.5, I think.
 4                  MR. MARCELLO:  Well, big picture, they are the
 5        same.  You know, 8.73 versus 8.07.  But yes, I guess it
 6        is bigger.
 7                  MR. THOMPSON:  Precisely.  They are not the
 8        same and obviously they are different towers.
 9                  MR. MARCELLO:  Yes, they are different towers.
10                  MR. THOMPSON:  So what you are doing really is
11        taking down existing towers.  Right?
12                  MR. MARCELLO:  Yes.
13                  MR. THOMPSON:  And putting up new towers?
14                  MR. MARCELLO:  Yes.
15                  MR. THOMPSON:  Okay.  And that is no
16        different -- whether they are your lattice design or
17        pole design, it is no different.  You are taking down
18        existing and putting up new.
19                  MR. MARCELLO:  The difference in that scenario
20        is you have a lot more poles.
21                  MR. THOMPSON:  There are more steel poles, I
22        accept that.
23                  MR. MARCELLO:  Okay.
24                  MR. THOMPSON:  But you say you have a legal
25        opinion that you can do the first, take down existing
26        and put up new, larger towers carrying more lines
27        without additional easement rights.  Did I understand
28        that correctly?

                                110
                        HYDRO ONE NETWORKS PANEL 1, ex (Thompson)
 1                  MR. MARCELLO:  That is correct, yes.
 2                  MR. THOMPSON:  Is that an internal legal
 3        opinion or is that external?
 4                  MS ALDRED:  Well, I don't know that
 5        confidential legal opinions are really --
 6                  MR. THOMPSON:  Fine.  I won't debate that at
 7        this point.
 8                  Now, you then say, as I understand it, and you
 9        say this in this Exhibit 13.21, second last page, that
10        you will need additional easement rights to do the steel
11        pole option.
12                  MR. MARCELLO:  I don't have the exhibit in
13        front of me, but yes --
14                  MR. THOMPSON:  Okay.
15                  MR. MARCELLO:  -- we do say that.
16                  MR. THOMPSON:  All right.  Is that based on
17        some legal opinion?
18                  MR. MARCELLO:  It is my understanding, yes.
19                  MR. THOMPSON:  All right.
20                  Your easements that Mr. McArthur referred you
21        to are not footprint specific.  They cover the whole
22        hundred and whatever width it is.
23                  MR. MARCELLO:  I haven't read them so --
24                  MR. THOMPSON:  Well, would you take that
25        subject to check that you have -- whatever rights you
26        have, you have over that entire width of property?
27                  MR. MARCELLO:  Are you asking me to clarify
28        what the easements give us rights to?

                                111
                        HYDRO ONE NETWORKS PANEL 1, ex (Thompson)
 1                  MR. THOMPSON:  I am trying to have you explain
 2        why you say your easements are in effect footprint
 3        specific when they are not.
 4                  MR. MARCELLO:  I didn't think I said the
 5        easements were footprint specific.  Maybe --
 6                  MR. THOMPSON:  Well, it must be saying that if
 7        you are saying to do what you are proposing to do with
 8        steel towers which involves putting up more, you need
 9        more easement rights.  Either you have the right to do
10        what you propose to do, take down old and put up new
11        through the entire width of the easement, or you don't.
12                  If you have it, you can do what you are
13        proposing to do or the steel pole alternative without
14        further rights and if you don't, you can't do either
15        alternative without further rights.
16                  MS ALDRED:  This is still a legal conclusion,
17        I think.
18                  MR. THOMPSON:  All right, I will accept that. 
19        It is a legal question and my question of the Hydro
20        Panel is:  who should answer the question?  Are you
21        expecting the Board to answer this question?
22                  MR. MARCELLO:  Again, this is not my area but
23        I think the OMB has jurisdiction on these sorts of
24        matters but that is just my understanding.
25                  MR. THOMPSON:  Well, can you help me with
26        process and maybe your lawyer can.
27                  Where do we go if this Board agrees that this
28        is a legal question that needs to be resolved?  It

                                112
                        HYDRO ONE NETWORKS PANEL 1, ex (Thompson)
 1        affects your project costs and it obviously affects
 2        timing.
 3                  MS ALDRED:  Our position is that these
 4        individual matters are not properly before the Board in
 5        this matter.  The OMB has jurisdiction over compensation
 6        issues --
 7                  THE COURT REPORTER:  Ms Aldred.
 8                  MS ALDRED:  I'm so sorry.  I keep forgetting
 9        the microphone.
10                  Our position is that the OMB has jurisdiction
11        over these matters and that these concerns are not
12        properly before you.  They either belong before the OMB
13        or if someone wants to allege that the easement rights
14        are not sufficient then that may be a matter for a court
15        application but it is not a matter for you to determine.
16                  MR. THOMPSON:  Okay.  One last question, then.
17                  In the Act, section 97, it reads:
18                       "In an application under sections 90, 91
19                       or 92, leave to construct shall not be
20                       granted until the applicant satisfies the
21                       Board that it has offered or will offer
22                       to each owner of land affected by the
23                       approved route or location, an agreement
24                       in a form approved by the Board." 
25                       (As read)
26                  Does that have anything to do with easement
27        rights?
28                  MR. MARCELLO:  I'm not familiar with that.

                                113
                        HYDRO ONE NETWORKS PANEL 1, ex (Thompson)
 1                  MR. THOMPSON:  I will let your counsel take
 2        that under advisement and perhaps put it on the record
 3        once she has had a chance to consider it.
 4                  Thank you very much.
 5                  THE PRESIDING MEMBER:  Thank you,
 6        Mr. Thompson.
 7        EXAMINATION
 8                  THE PRESIDING MEMBER:  I just have one quick
 9        question for clarification.
10                  I know that there is now 400 megawatts of what
11        you call the emergency connection.  Is this project
12        going to affect the ability for this 400 megawatts of
13        what you call emergency connection?
14                  MR. MARCELLO:  While we are constructing the
15        tie, that 400 megawatt connection is still there, but
16        there will come a point when we are cutting over, so to
17        speak, and putting this whole project in-service and
18        that 400 megawatt tie basically disappears.
19                  We are reusing the facilities, the line
20        facilities from Outaouais to the river crossing that
21        currently provide that 400 megawatt tie.  They will be
22        integrated into Hydro Quebec's portion of this 1,250
23        tie.  So once the project is in service, that
24        400 essentially disappears.
25                  MS HALLADAY:  So will the capacity of the
26        other interconnects to Quebec provide this, what you
27        call emergency interconnection, or will that not be
28        necessary with the new interconnect?

                                114
                        HYDRO ONE NETWORKS PANEL 1, ex (Halladay)
 1                  MR. MARCELLO:  It will be made redundant by
 2        this 1,250 megawatt tie.
 3                  Basically what happened, after the ice storm 
 4        this area was one of the areas that was hit particularly
 5        hard in Quebec.  This interconnection, this tie was
 6        proposed.  It was put in very quickly and it is there to
 7        provide just that kind of emergency support.
 8                  Once these facilities are fully in place, the
 9        1,250 megawatt tie, Hydro Quebec's Outaouais area will
10        have been reinforced.  So again, their primary driver
11        for the project has been "improve the reliability" and I
12        think the ice storm was a catalyst in pushing the
13        project on their end.
14                  On our end, the whole evolving market and
15        market conditions was the driver.  So the two things
16        came together at the right time and two willing partners
17        got together and this is the proposal we have now.
18                  MS HALLADAY:  One other question.
19                  The conversion equipment is going to be at
20        Outaouais.  Is there any concern about a system
21        reliability with it being outside the jurisdiction of
22        Networks?
23                  MR. MARCELLO:  Not at all.  The equipment
24        in -- well, first off, I think Hydro Quebec can comment
25        a lot more on the third panel about their experience
26        with the equipment.  They have a lot of connections with
27        New England and New York and a lot of experience in
28        using that equipment.

                                115
                        HYDRO ONE NETWORKS PANEL 1, ex (Halladay)
 1                  In effect, what has happened is any event on
 2        either side is, in effect, buffered by that equipment. 
 3        So when we are doing our studies for NPCC -- and the IMO
 4        is basically repeating a lot of these studies -- what
 5        happens is you have to take into account what if this
 6        interconnection were to disappear and what would that do
 7        to the system?  And the system has to stay together in
 8        the event of a contingency.
 9                  So from an overall reliability point of view,
10        you have a buffer.  If something happens in Quebec, it
11        doesn't transfer in Ontario.  If something happens in
12        Ontario, it doesn't transfer into Quebec.
13                  If there is a problem with the buffer itself,
14        the system is designed to withstand that.  And I think
15        it is one of the basic criteria NPCC looks at and it is
16        one of the reasons we do a lot of analysis in that area,
17        and we have been working with the IMO as well to make
18        sure that the system is robust and it stays together and
19        this thing works the way it should.
20                  DR. MACEDO:  I know that he has explained it,
21        but if I can just sort of summarize.
22                  The system, both the Quebec system and our
23        system, is designed and operated to be able to withstand
24        the loss of that convertor and in order to be able to do
25        that you have to put in facilities to allow you to be
26        able to withstand that.  And that is one of the main
27        contingencies that the IMO will be looking at as part of
28        the system impact study, among others.

                                116
                        HYDRO ONE NETWORKS PANEL 1, ex (Halladay)
 1                  If I may just add one more point, and that is
 2        that we have done a tremendous amount of studies on this
 3        interconnection.  We have prepared umpteen reports.  We
 4        have submitted this to the NPCC.  In fact, it was
 5        discussed only last Thursday at the Task Force on
 6        Systems Studies where the group, which includes the IMO,
 7        Hydro Quebec, New England, all the other players,
 8        examined this and they found no major concerns as to
 9        what we were proposing.
10                  Based on all these sorts of studies, we have
11        come up with a very -- we have determined what
12        facilities we needed, and we are fairly confident, in
13        fact very confident that what we proposed in fact will
14        meet the test that the IMO will be carrying out.
15                  THE PRESIDING MEMBER:  Thank you, Dr. Macedo.
16                  Are there any other questions from the
17        intervenors?
18                  Anything on redirect?
19                  MS ALDRED:  I did have one question and it
20        just follows on the last point that Dr. Macedo was
21        making.
22        EXAMINATION
23                  MS ALDRED:  I think it is Mr. Marcello, in
24        your testimony you mentioned that the actual contract
25        for the System Impact Assessment had not perhaps yet
26        been executed by the IMO.  I'm just wondering, does that
27        mean that there has been no work done with the IMO on
28        this issue or has there been some carried out?

                                117
                          HYDRO ONE NETWORKS PANEL 1, ex (Aldred)
 1                  MR. MARCELLO:  Not at all.  We have been
 2        working with the IMO since July/June specifically on the
 3        project.  We have been doing joint studies.  Part of
 4        their scope, in fact, is the accountability and the
 5        responsibility of Hydro One Networks to undertake.  The
 6        interesting thing here is, we are a proponent.  I think
 7        when the process was designed it was anticipated that a
 8        third party would come into their assessment and then
 9        Hydro One could comment and do studies in that regard. 
10        In this case we are the proponent, so those studies have
11        been done.
12                  I think just to characterize it, we have been
13        working together, we have been working along, but
14        because it is a new process and there have been some
15        administrative hiccups, a contract hasn't been signed. 
16        The cheque is in the mail, so to speak -- and it is, by
17        the way.
18                  MS ALDRED:  That was all my re-direct.
19                  Thank you.
20                  THE PRESIDING MEMBER:  Thank you.
21                  Dr. Macedo, Mr. Marcello, you are excused,
22        with our thanks.  Thank you very much.
23                  Mr. Brown, I understand you have a statement
24        you would like to make?  Is now an appropriate time for
25        you to state your statement?
26                  MR. BROWN:  Perhaps after lunch would be more
27        appropriate, Madam Chair.
28                  THE PRESIDING MEMBER:  Now, I understand that

                                118

 1        we are not going to have the next panel after lunch.  Is
 2        that correct?
 3                  MS ALDRED:  Yes, that is correct.  I'm sorry,
 4        I have a scheduling difficulty with one of our witnesses
 5        from out of town actually, and so I appreciate your
 6        indulgence until tomorrow morning for the second panel.
 7                  THE PRESIDING MEMBER:  Mr. Brown, how long
 8        will your statement be for us to reconvene after lunch
 9        just to hear your statement?
10                  MR. BROWN:  Well, no.  Under that
11        circumstance, I suggest we defer until tomorrow morning. 
12        I just have to consult with a few people so I would
13        just --
14                  THE PRESIDING MEMBER:  I appreciate that.  I
15        didn't want to pressure you to make a statement.  I am
16        just trying to fit it all in.
17                  That being said, I think that we are now
18        adjourned until tomorrow morning at 9:30, at which time
19        we will hear Panel No. 2.
20                  Thank you very much.
21        --- Whereupon the hearing adjourned at 1318,
22            to resume on Thursday, November 23, 2000 at 0930
23        
24        
25        
26        
27        
28        

                                119

 1                           INDEX OF PROCEEDING
 2                                                            PAGE
 3        Upon commencing at 0940                                3
 4        Preliminary Matters                                    6
 5        Motion by Mr. Klippenstein                             7
 6        Decision                                              12
 7        Preliminary Matters                                   12
 8        Opening statement by Ms Aldred                        15
 9        HYDRO ONE NETWORKS PANEL 1
10        SWORN:  DR. FRANK MACEDO                              18
11        SWORN:  MR. CARMINE MARCELLO                          18
12        Examination by Ms Aldred                              18
13        Examination by Mr. Moran                              39
14        Examination by Mr. Thompson                           48
15        Upon recessing at 1123                                64
16        Upon resuming at 1153                                 64
17        Examination by Mr. Klippenstein                       64
18        Examination by Mr. McArthur                           85
19        Examination by Mr. Greenspoon                         96
20        Examination by Mr. Thompson                          107
21        Examination by The Board                             113
22        Examination by Ms Aldred                             116
23        Upon adjourning at 1318                              118
24        
25        
26        
27        
28        

                                120

 1                                EXHIBITS
 2        NO.                    DESCRIPTION                  PAGE
 3        14.1           Supplementary Interrogatories          13
 4                       filed by Hydro One
 5        
 6        14.2           Curriculum vitae of Hydro              14
 7                       One's witnesses
 8        
 9        14.3           Document entitled "Serving Our         70
10                       Customers Better" Strategic Plan
11                       2000-2004
12        
13        14.4           Document entitled "The Loop"           70
14        
15        
16        
17        
18        
19        
20        
21        
22        
23        
24        
25        
26        
27        
28        

                                121

 1                              UNDERTAKINGS
 2        
 3        NO.                    DESCRIPTION                  PAGE
 4        
 5        15.1           Dr. Macedo undertakes to provide       58
 6                       information on steel pole use for
 7                       Panel 3
 8        
 9        
10        
11        
12        
13        
14        
15        
16        
17        
18        
19        
20        
21        
22        
23        
24        
25        
26        
27        
28