Rep: OEB Doc: 129LV Rev: 0 ONTARIO ENERGY BOARD Volume: 1 4 JUNE 2002 BEFORE: S. HALLADAY PRESIDING MEMBER R. BETTS MEMBER A. SPOEL MEMBER 1 RP-2001-0032 TRANSCRIPT VOLUME #1 2 IN THE MATTER OF the Ontario Energy Board Act, 1998; AND IN THE MATTER OF an application by The Consumers Gas Company Ltd., carrying on business as Enbridge Consumers Gas, for an order or orders approving or fixing rates for the sale, distribution, transmission and storage of gas for its 2002 fiscal year. 3 RP-2001-0032 TRANSCRIPT VOLUME #1 4 4 JUNE 2002 5 HEARING HELD AT TORONTO, ONTARIO 6 APPEARANCES 7 PAT MORAN Board Counsel COLIN SCHUCH Board Staff JERRY FARRELL Enbridge Consumers Gas MARIKA HARE Enbridge Consumers Gas RICHARD LANNI Enbridge Consumers Gas HELEN NEWLAND Enbridge Consumers Gas TONY MOUTSATSOS CME MALCOLM ROWAN CME PAT MCMAHON Union Gas DAVID POCH GEC THOMAS BRETT OASBO IAN MONDROW HVAC Coalition TIBOR HAYNAL TransCanada PipeLines ROBERT WARREN CAC MICHAEL JANIGAN VECC GEORGE VEGH CEED MURRAY KLIPPENSTEIN Pollution Probe JACK GIBBONS Pollution Probe PETER THOMPSON IGUA 8 TABLE OF CONTENTS 9 APPEARANCES: [19] PRELIMINARY MATTERS: [42] ENBRIDGE CONSUMERS GAS - PANEL 1 [51] EXAMINATION BY MR. FARRELL AND MS. NEWLAND: [61] 10 EXHIBITS 11 12 UNDERTAKINGS 13 14 --- Upon commencing at 9:40 a.m. 15 MS. HALLADAY: Please be seated. Good morning. 16 The Board is sitting today to hear the application of the Consumer's Gas Company Limited, carrying on the business of Enbridge Consumers Gas, for an order or orders approving or fixing rates for the sale, distribution, transmission and storage of gas in fiscal 2002. 17 My name is Sheila Halladay. With me are Cathy Spoel and Bob Betts. 18 May I have appearances, please. 19 APPEARANCES: 20 MS. NEWLAND: Good morning, Madam Chair. Helen Newland for the company. 21 MR. FARRELL: Good morning, Madam Chair. Jerry Farrell for Enbridge Consumers Gas. 22 MR. LANNI: Good morning, Madam Chair. Richard Lanni for Enbridge Consumers Gas. 23 MS. HALLADAY: Mr. Lanni. 24 MR. WARREN: Robert Warren for the Consumer's Association of Canada. And I pronounce to enter an appearance for Michael Janigan on behalf of the Vulnerable Energy Consumers Coalition. 25 MS. HALLADAY: Goods morning, Mr. Warren. 26 MR. BRETT: Good morning, Madam Chair and panel. My name is Tom Brett. I'm acting for the Ontario Association of School Business Officials. 27 MS. HALLADAY: Good morning, Mr. Brett. 28 MR. THOMPSON: Peter Thompson for the The Industrial Gas Users Association. 29 MS. HALLADAY: Mr. Thompson. 30 MR. VEGH: Good morning, Madam Chair. George Vegh for The Coalition for Efficient Energy Distribution. 31 MR. MONDROW: Ian Mondrow for the HVAC Coalition. 32 MR. KLIPPENSTEIN: Good morning, Madam Chair and members of the Panel. Murray Klippenstein for Pollution Probe. 33 MS. HALLADAY: Mr. Klippenstein. 34 MR. HAYNAL: Good morning. I'm Tibor Haynal for TransCanada Pipelines. 35 MR. POCH: Good morning, Madam Chair. David Poch for the Green Energy Coalition. 36 MR. MCMAHON: Good morning, Madam Chair. Pat McMahon for Union Gas. 37 MR. ROWAN: Good, morning, Madam Chair, Malcolm Rowan for The Canadian Manufacturers & Exporters. 38 MS. HALLADAY: Any other appearances? 39 MR. MORAN: Good morning, Madam Chair. Pat Moran for the Board. 40 MS. HALLADAY: I think that does it. 41 Before we begin, are there any preliminary matters? All right. 42 PRELIMINARY MATTERS: 43 Mr. Farrell, I understand you have a settlement proposal. 44 MR. FARRELL: Yes, Madam Chair. 45 I thought before we started through it I'd like to have these witnesses empanelled and sworn. They will provide technical assistance in terms of questions the Board may have, and I thought if we had them ready to go, then we wouldn't have to call them one at a time if counsel run into a problem trying to find something to do. 46 MS. HALLADAY: Certainly, Mr. Farrell. 47 MR. FARRELL: Let me just introduce them to you before they're sworn. 48 Sitting closest to the Board is Robert Bourke. He is manager, regulatory accounting. Sitting to his right is Ms. Pascale Duguay. She is manager, rate research and design. Sitting to her right is Don Small. He is manager, gas costs and budget. Sitting to his right is Rocco Riccio. He is manager, capital knowledge centre. And finally on Mr. Riccio's right is Tom Ladanyi, who is manager, regulatory proceedings. 49 MS. HALLADAY: Thank you, Mr. Farrell. 50 The panel can be sworn in. 51 ENBRIDGE CONSUMERS GAS - PANEL 1 52 R.BOURKE; Sworn. 53 P.DUGUAY; Sworn. 54 D.SMALL; Sworn. 55 R.RICCIO; Sworn. 56 T.LADANYI; Sworn. 57 MR. BETTS: The witnesses are sworn. 58 MS. HALLADAY: Thank you, Mr. Betts. 59 MR. FARRELL: Madam Chair, what you should have and what the witnesses have is a copy of the settlement proposal, which is Exhibit N.1, tab 1, schedule 1. And then the supporting schedule is at Exhibit N.1, tab 2, schedule 1, and they are schedules 1 through 9. 60 We didn't get the tab 2 out with the package, so we can distribute the tabs later to put in your books. So I'd just like to briefly take the witnesses through this material. 61 EXAMINATION BY MR. FARRELL AND MS. NEWLAND: 62 MR. FARRELL: So, Ms. Duguay, and gentlemen, you have each reviewed the settlement proposal with a view to assisting the Board in understanding the settled issues? 63 MR. LADANYI: Yes. 64 MR. RICCIO: Yes. 65 MS. DUGUAY: Yes. 66 MR. FARRELL: Mr. Bourke, were schedules 1 through 7 of Exhibit N.1, tab 2, prepared by you or under your direction or control? 67 MR. BOURKE: Yes, they were. 68 MR. FARRELL: And are these schedules accurate to the best of your knowledge or belief? 69 MR. BOURKE: Yes, they are. 70 MR. FARRELL: Ms. Duguay, were schedules 8 and 9 of Exhibit N.1, tab 2, prepared by you or under your direction or control? 71 MS. DUGUAY: Yes, they were. 72 MR. FARRELL: And are those schedules accurate, to the best of your knowledge or belief? 73 MS. DUGUAY: Yes. 74 MR. FARRELL: Mr. Bourke, I understand you have an update. 75 MR. BOURKE: Yes. Sometime later this week, we anticipate filing Exhibit N.2, which would be the company's second impact statement. It is to update the evidence for two elements. The first and principal reason is the adjustment for the July 1st quarterly rate adjustment mechanism, the QRAM, the impact of the 2002 year, based on the July 1st change in rates. 76 And the second would be to remove the $5 million element of rate base related to a proposed close-out for the distribution plant work asset management solution. 77 When the company originally filed its evidence, it anticipated closing $5 million to rate base on September 30th of the 2002 year. On this impact statement, we propose to remove the impact of that closing. 78 MR. FARRELL: Mr. Bourke's full description will, undoubtedly, as the hearing goes on, be referred to by the acronym DPWAMS. 79 Mr. Small, I understand you have an update as well. Oh, I'm sorry, it's Mr. Bourke. 80 MR. BOURKE: Yes, my impact statement, number 2, will show the impact of those financial considerations in the 2002 year from M-1 to M-2, impact 1 to M-2. I will then also file a corresponding exhibit to show the impact of the settlement proposal on that second impact statement. So I would be filing an ADR second impact statement. Thank you. 81 MR. FARRELL: I will move to you now, Mr. Small. 82 MR. SMALL: Yes. I could draw your attention to page 59 of 60 of the settlement agreement; it's appendix G. And in the column "2001 PGVA reconciliation for the 2001 forecast," the amount related to the month of December was omitted from the schedule, and that number is 33,758,869. And there would be brackets around that, so it's a credit. The dollar amount at the bottom there, the 9,898,447 remains unchanged. 83 The other thing I'd just like to mention is under the 2001 actual column, you'll see down at the bottom, note 4. We brought to the intervenors' attention and Board staff's attention that the amount we had for the month of March related to -- the amounts collected under the rider C excluded any of the volumes related to March consumption that would be billed during the month of April. I have that number now and that number would be 14,272,000, which would draw the balance of 43,297,871 and would reduce that balance to 29,025,871. 84 MS. HALLADAY: Thank you, Mr. Small. 85 MR. FARRELL: Now, Madam Chair, the omission of the December credit was just an inadvertent oversight, and there are a few other typographical errors and the like that we'll identify as we go through. And then in due course, we'll file corrected pages so that when -- along with an electronic version so that when the Board needs to have a copy attached to its decision and reasons in this proceeding, it will reflect these directions. 86 MS. HALLADAY: Mr. Bourke, when do you expect to file the updated materials? I mean, you mentioned later this week. 87 MR. BOURKE: We'll try for Thursday. If not Thursday, it will be Friday at the latest. 88 MS. HALLADAY: Excuse me one moment. 89 [The Board confers] 90 MS. HALLADAY: Thank you. 91 We'd appreciate if you could file the updated information as soon as possible. The Panel is concerned about accepting this settlement proposal without this information, and we'd also like the intervenors to have an opportunity to review the updated information to make sure that it's acceptable to them. 92 MR. FARRELL: Certainly, Madam Chair. 93 MS. HALLADAY: Thank you. 94 MR. FARRELL: Perhaps, Mr. Bourke, could you just provide a little more detail now about the DPWAMS adjustment and then I'd ask Ms. Duguay to indicate, in general terms, the effect on gas costs of the QRAM filing that I believe would be made today. So first you, Mr. Bourke. 95 MR. BOURKE: The company's original evidence anticipated closing an amount of $5 million on September 30th of 2002. Subsequent to events that have transpired since that time, it will be required to remove that amount from rate base on my impact statement number 2. Because of the timing of that close-out, there would have been very little in the way of a rate-base impact or a carrying cost impact. There was, however, a significant CCA impact. So its removal, we anticipate, will impact the deficiency as filed by approximately half a million dollars increase. Thank you. 96 MR. FARRELL: And now, Ms. Duguay, could you just give us a preview of the QRAM application and the effect on gas costs. 97 MS. DUGUAY: Sorry, ECG intends to file its application as it relates to the July 1st QRAM sometime this morning. We have seen, or we forecast for the upcoming 12-month period in the test year, an increase in gas costs that is approximately 31 percent. As a result of the QRAM application, there will be an increase in the gas supply charge essentially going from the existing 16 cents per cubic metre to 21 cents per cubic metre. 98 We have also indicated to the Board that the threshold as it relates to the adjusted purchased gas variance account has been pierced, that is, exceeding half a cent per cubic metre. So as a result, the company is proposing to refund the -- so the forecast QRAM PGVA balance net of the gas and inventory adjustments amounts to a credit of approximately $35 million. So as a result of that, the company is proposing to establish a rate rider that would be in effect starting from July 1st through to the December 31st period. 99 The pre-filed testimony will address the issue around using, as prescribed by the QRAM methodology, a period of three months, a period of six months, I'm sorry, rather than the period of three months. So the average rate rider, given that it would vary by rate class, would be applicable through system, and buy/sell customers will amount to a credit of roughly three cents per cubic metre. 100 MR. FARRELL: Thank you, Ms. Duguay. 101 MS. HALLADAY: Thank you. 102 MR. FARRELL: Mr. Small, I think, wants to add something, Madam Chair. 103 MR. SMALL: Just going back to the update to that schedule on page 59, I just wanted to also bring your attention to page 41 of the settlement agreement where we talk about the balance that we were anticipating to clear. About two-thirds of the way down on page 41, we talk about the balance of all the deferral accounts being 41.8 million in principal plus interest that would have to be cleared as part of the 2001 deferral accounts. Those numbers were based upon the March 31 balances. So to the extent that there has been additional credits going in to offset that 14 million that I talked about, the amount that we would have to collect from customers through the clearance of the deferral accounts would be lowered by that amount. 104 MS. NEWLAND: And, Mr. Small, I imagine that as a result of the update, appendix C to the settlement proposal will also have to have a corresponding change made to it; is that correct? 105 MR. SMALL: The only question I guess I have in my mind is that appendix C was specific to March 31 balances. This adjustment doesn't change the March 31 balances. Those were amounts that were collected and recorded in the books after March 31. 106 MS. NEWLAND: Thank you. 107 MS. HALLADAY: Thank you. 108 Mr. Farrell. 109 MR. FARRELL: Madam Chair, the -- I thought I'd start by just indicating that, unlike last year's settlement proposal, I'm not saying it's not a complete settlement because obviously it isn't, but this settlement proposal was presented as a package, and those provisions are set out on page 8, and notwithstanding that it's a package, I just emphasize the final paragraph on page 8 where, in effect, we would -- "we" being the company and the parties to -- the other parties to the settlement proposal. If the Board has difficulty with some element of it, we would like the opportunity to try to resolve your difficulty rather than having you reject the package as a whole. 110 MS. HALLADAY: Thank you, Mr. Farrell. 111 MR. FARRELL: The first issue is issue 1.1, gas supply and budget, and Ms. Newland will take you and your colleagues through that. 112 MS. HALLADAY: Before I start, Ms. Newland -- Mr. Farrell and Ms. Newland, you are going to be doing the lion's share of the work this morning, so if you require a break or suggest a break, then please feel free to suggest the appropriate time for a break. 113 MR. FARRELL: Thank you. 114 MS. NEWLAND: Turning to issue 1, Madam Chair, this issue has to do with the forecast of throughput used for rate-making purposes in the test year. The throughput is underpinned by a forecast of degree days for the test year, and the degree day forecast was developed using a model that incorporates, among other things, a five-year weighted average of Environment Canada degree days. 115 In its pre-filed evidence, the company filed a five-year weighted average which included data up to and including fiscal 2000, and we subsequently updated our forecast to include actual degree data for fiscal 2001, and much of the discussion during settlement with intervenors had to do with this update. The effect of the update on the degree day forecast is set out in the third bullet on page 9 of the settlement, and if I could just ask you to turn to that for a moment. I'd like to make one correction to a typo in the second line. There's some unfortunate typo. It has no impact on what was agreed upon, but the figure of 11,714, ten six m cubed, should actually be 11723.5, ten six m cubed. 116 Again, over on page 10, the same number, 11,716 appears in the last bullet on the second line and, again, the same correction should be made there as well which is 11. So the number on the second line should read 11,723.5, ten six m cubed. Nothing turns on this change because, as you will see, the intervenors did not accept the updated forecast of degree days and, in fact, we agreed on a throughput forecast as originally filed which is the 11,776.3, ten six m cubed. 117 The intervenors did agree, however, that this forecast would not be adjusted to reflect the increase or the decrease, rather, in the DMS gas volume budget that was agreed to by all parties. It was also agreed that there be no adjustment to reflect the higher than forecast actual customer growth through March 2002, and no adjustment for average uses for rate 6 customers. So this number of 11,776.3, ten six m six will not be adjusted for any of those factors. 118 There was discussion among all the parties about the methodology that was introduced in last year's rate case to develop the forecast for average uses for residential and general service customers, and the company filed evidence that allowed intervenors to test this methodology and that was pursuant to an undertaking that we had made in last year's settlement proposal. The intervenors agreed that the new methodology appears to be working well, but it's really too soon to conclude on the issue after only one year of data. 119 Unless you have any questions, that would be my summary, Madam Chair. 120 MS. HALLADAY: Thank you. 121 It was pointed out to me, Ms. Newland and Mr. Farrell, that, in fact, in this issue there's no statement in the settlement proposal that the parties have accepted the 11,776.31 ten six m three, and if you are amending the settlement proposal, an explicit statement stating that this is what the parties have agreed to would be appreciated. I think we can infer that from what it says but there's no actual statement saying it. 122 MS. NEWLAND: Madam Chair, we were just having a discussion, we were just looking at the last bullet on page 10. It may not be as explicitly stated as you would prefer, and we can certainly change that, but I think that's where we thought that that's where the agreement was captured. 123 MS. HALLADAY: It doesn't say the ECG accepts the other party's position, which I assume you have. It's a minor issue if you could just add it in the statement. 124 MS. NEWLAND: Thank you. We'll make that change. 125 MS. HALLADAY: Is it anticipated that the company will continue to file evidence with respect to the revised methodology in future rates hearings? 126 MS. NEWLAND: Yes, Madam Chair, that would be our intention. 127 MS. HALLADAY: Thank you. 128 MR. FARRELL: The next issue is -- issue 2.1 is the first issue on the series of issues on gas costs and transportation. Issue 2.1 involves ECG's transportation service arrangements with Alliance and Vector, this is the first unsettled issue. The settlement proposal provides a brief statement of the scope of the issue as the company and the other parties to the settlement proposal sought. 129 The scope as described there is not meant to be binding on the Board, but rather to be a guide to the Board as to where the various parties are coming from when we get into the examination and cross-examination of witnesses on this particular issue. 130 Issue 2.2 is the under-utilization of the Link pipeline. Just by way of background, the under-utilization costs are captured or were before the settlement captured in the mechanics of the purchased gas variance account and there was a mechanism whereby the company and customers shared the under-utilization costs on a 50:50 basis. 131 As the settlement proposal indicates, the other parties opposed the continuation of the 50:50 sharing ratio because they believe that ECG's service entitlement for the Link pipeline is now redundant by virtue of the low actual utilization of the Link pipeline. 132 The company, in the course of settlement discussions, reconsidered its proposal to continue the 50:50 sharing ratio and decided, in the light of the entire package that we are presenting to you today, that we would withdraw the 50:50 sharing proposal such that the shareholder, in effect, would now bear the total of the utilization cost to the Link pipeline and that the mechanics would be clarified when the PGVA is cleared. 133 The company also agreed to eliminate or to continue, rather, the elimination of the under-utilization entries in the PGVA for fiscal 2003. 134 The next two issues, Madam Chair, are combined, and they involve cost allegation of gas supply management costs, that's issue 2.3 and issue 2.4 is the cost of managing system gas on a stand-alone basis. These issues arise from the agreement to settle issue 2.2 in last year's settlement proposal. These are unsettled issues so there will be witnesses from ECG appearing to support the company's position. Again, there is a statement of the scope of the issue as the company and the other parties to the settlement proposal sought and, again, it's not binding on the Board, of course, in terms of its consideration but rather indicated as a guide to you and your colleagues in terms of the evidence you would be hearing. 135 MS. HALLADAY: We can continue now, Mr. Farrell. Thank you. 136 MR. FARRELL: Madam Chair, just in that short break, Mr. Bourke indicated to me that he gave you the DPWAMS value of the $5,000, but he didn't continue with the impact of the QRAM application. So although this is slightly disjointed, I'd ask him to do that now so you and your colleagues and the other parties have an indication of the size, if you will, of the two combined. 137 MR. BOURKE: My impact statement number 2 will increase by approximately $4.4 million; the company's deficiency request, half a million dollars being the impact of the removal of the DPWAMS as was originally filed, and approximately 3.9 being the impact of the July 1st QRAM, so that my impact statement, number 1, the impact on M-2 would be approximately 4.4 million and a corresponding similar amount on the second ADR impact statement. 138 MS. HALLADAY: Thank you, Mr. Bourke. 139 MR. FARRELL: So we had arrived at issue 2.5 which is the implications of the quarterly rate adjustment mechanism or QRAM and the out-sourcing, the arrangements -- and are part of the arrangements for the risk management program. And as the text of the settlement indicates, on page 15, in last year's settlement, ECG agreed to form a work group to examine the principles that underpin the risk management program. The work group was formed. The members of the working group decided that no change was required other than to combine the objectives and revise them slightly into a single objective. ECG had nevertheless retained a consultant with the concurrence of the working group's other members to review the risk management policies and procedures manual in the light of two events. One was Enbridge Inc.'s role as a service provider in terms of risk management and ECG's implementation of the new QRAM methodology. 140 The work has been complete. It was -- no need seen to sort of bring the -- to work quickly to revise the manual and bring it forward here; we'll update it in due course and bring it forward in the next rate case for examination by the Board. 141 MS. HALLADAY: Mr. Farrell, has the consultant's report been filed with the Board? 142 MR. FARRELL: Yes, it has, but I don't have an exhibit reference off the top of my head. 143 MS. HALLADAY: My next question was were Board staff involved in the working group? 144 MR. FARRELL: Yes, Board staff attended the meeting, I'm advised by Ms. Hare. 145 MS. HALLADAY: Thank you. 146 MR. FARRELL: I believe the report is part of Exhibit A, tab 14, schedule 5. 147 MS. HALLADAY: Thank you. 148 MR. FARRELL: The next issue is 2.6 and it is the last issue under gas costs and transportation. This was -- involved changes to the QRAM mechanism to include a modification that the company introduced in the application under file number EB-2001-0790, and on page 16 of the settlement proposal you'll see in the third bullet the explanation of why the changes were introduced. They had a salutary effect on gas costs and therefore on rates. 149 So in effect, what we're saying is that in this issue, what the company and the other parties are saying is this change was made without the Board's concurrence and so now we're asking the Board to approve the modification on a -- one of the few times I ever get to use this phrase -- nunc pro tunc basis, or now for then. We chose to use this rather than retroactive because of the implication of the word retroactive. 150 MS. HALLADAY: Thank you, Mr. Farrell. 151 MR. FARRELL: Ms. Newland has the next series of issues, Madam Chair. 152 MS. NEWLAND: Thank you. Issue 3 is cost of capital. Issue 3.1 is the establishment of the return on equity for fiscal 2002 using the Board's existing guidelines, and issue 3.2 is that ECG's proposal for a review of guidelines and, of course, this issue has been deferred to a separate phase of the proceeding. The parties have agreed that the ROE which resulted from applying the Board ROE guidelines using the September 2001 interest spread for 10- and 30-year Canada bonds would apply on an interim basis pending the Board's decision in the later phase of this proceeding to consider the ROE guideline issue. 153 That, Madam Chair, unless you have any questions, gets us to issue 3.3. 154 MS. HALLADAY: Continue. 155 MS. NEWLAND: Thank you. Which is the cost of short- and long-term debt. And the focus this year among parties on this issue was on two aspects of ECG's financing plan for the test year. 156 The first was the inclusion of the $150-million medium term note that, at the time of our original filing in September of 2001, was forecast to be issued in February of 2001 -- rather 2002. It now appears that this note may not be issued in the test year. 157 The second aspect that was discussed was the inclusion of the fees associated with increasing ECG's bank facility from $290 million to $650 million and the discussion focused on including those fees as a component of short-term debt. In the result, the company agreed to remove the $150-million medium term note issue as a component of long-term debt and instead increase its short-term debt by a corresponding amount. ECG also agreed to treat the one-time fee and the commitment fee both associated with the increase in ECG's credit facility as a cost-of-service item instead of a component of debt. 158 If you have no questions, I can move to capital budget, Madam Chair. 159 MS. HALLADAY: Certainly. Please continue. 160 MS. NEWLAND: ECG's proposed capital budget for the test year was $271.4 million. That's the figure that appeared in our original filing. Of this amount, 27.8 million was for information technology expenditures, and of this amount, $13 million was forecast to be spent in fiscal 2002 for the development of a distribution plant work and asset management solution, which I will refer to as DPWAMS. We'll be filing an update to our evidence on Thursday to reflect a new estimate of $6 million of DPWAMS spending for fiscal 2002. And, Madam Chair, we'll also be filing on Thursday responses to the DPWAMS interrogatories that we've received from intervenors. We've received quite a number of these and it will certainly expedite the responses in this hearing to get those interrogatories, and we will be filing those on Thursday. 161 Discussions on the non-DPWAMS portion of the capital budget focused on the year-over-year variances between approved capital budgets and actual capital spending, and these discussions led to an agreement by all parties to reduce the non-DPWAMS portion of the capital budget by $13.4 million, from $258.4 million to $245 million. 162 The last bullet on page 21 of the agreement sets out the effect of the reduction in the capital budget on ECG's rate base and revenue requirement for the test year. I think it's self-explanatory, unless you have any questions. I can move to issue 5. 163 MS. HALLADAY: Thank you. 164 MS. NEWLAND: I suppose I should say before moving to issue 5 that 4.2 deals with the issue of DPWAMS, and of course there was no settlement on this issue and you will be hearing the testimony of ECG's witnesses later on next week on this issue. 165 MS. HALLADAY: Will the issue of DPWAMS, and perhaps Mr. Bourke can help me, as I understand it, it was -- there was going to be removal of $5 million -- 166 MR. BOURKE: In the 2002 test year. 167 MS. HALLADAY: In the 2002 test year. So as a result of the applicant's revised proposal, will there be any issue as far as the rate impact of DPWAMS for the 2002 year? 168 MR. LADANYI: There will be no rate impact of DPWAMS for the 2002 test year deficiency. 169 MS. HALLADAY: Right. Then the next step is why are we going to be hearing evidence on DPWAMS in the 2002 rates case when there will be no rate impact of DPWAMS in the 2002 fiscal year? 170 MR. LADANYI: The company is seeking approval similar to the type of approval that one would obtain for a leave-to-construct project in major capital expenditure. We would like to have some certainty that this project is seen as a reasonable and prudent project for the company before we would incur any significant expenditures. That's why we are bringing this forward at this time. Typically in a capital budget request, the company would present a capital budget, and not all of these items in the capital budget would be closing to rate base in the test year that the capital budget is represented. 171 MS. HALLADAY: Are there any comments from any of the intervenors? 172 MR. THOMPSON: Well, Madam Chair, I don't know if it's appropriate to comment now as to whether this is legit or not legit, but whenever we ask for prior approval of certain transactions such as transportation contracts, or that kind of thing, we're told that's not a rate case issue. So that argument, it seems to me, may be available to intervenors now that they've removed the $5 million from the rate base. But whether we make it now or later, I guess I'd prefer to think about it and consider making it later at the appropriate time. 173 MS. HALLADAY: Any other comments? Just one moment, please. 174 [Board confers] 175 MS. HALLADAY: The Panel has concerns with respect to the DPWAMS being included in this rates case. This is not a case of leave to construct where a specific order of the Board is required. The Board does not approve the specific items in the applicant's capital budget but merely approves the capital budget for rate-making purposes. 176 That having been said, we realize that it is the applicant's case. We just wanted to express our concerns about this being in the rates case for this fiscal year where there is no rate impact prior to proceeding. 177 MR. FARRELL: There are -- thank you, Madam Chair. There are, of course, from the company's perspective, other issues on the issues list that are unsettled that likewise have no rate-making impact, such as issue 5.3, affiliate out-sourcing, and issues 2.3 and 2.4, which is the cost allocation issues. 178 MS. HALLADAY: We appreciate that too, Mr. Farrell. 179 MS. NEWLAND: I guess the only thing I would add to this discussion, Madam Chair, is we have struggled with this issue ourselves internally. We do understand that there are no rate impacts for fiscal 2002. The problem, of course, is that there is just no vehicle available to us to get some level of confidence that we would require in order to proceed with a project of this magnitude in fiscal 2002, because of course that is still our intention, to spend dollars for this project in 2002. So -- 180 MS. HALLADAY: I appreciate that. We appreciate the fact that we are -- we are basically behind as far as rate applications are concerned, and normally it would be an application to expend during the test year, and we're already almost through the test year. So I understand that normally there would be that level of comfort of approval of a specific capital project in the test year. 181 The Panel is concerned, however, about binding future panels. We are not sitting in the 2003 test year, there's no rate applications for 2002 and therefore the prudency of this particular expenditure may be more appropriately dealt with by any panel dealing with the 2003 test year which is the first impact of the DPWAMS. 182 MS. NEWLAND: We understand your concern, and perhaps between now and the time we present argument on this issue, we can think about how that concern might be addressed. 183 MS. HALLADAY: We'd appreciate that. Thank you. 184 MS. NEWLAND: Thank you. 185 Turning to issue number 5, asset sharing arrangements and affiliate services. At 5.1 was ECG's disposition of previously shared assets since October 1st, 2000. This is no longer an issue for the reasons set out in the first bullet; namely, that there were no dispositions of assets that were previously shared with affiliates since October 1st, 2000. 186 Issue 5.2 is ECG's sharing of utility-owned assets with affiliates. With respect to these assets shared with affiliates in the test year, ECG proposes to continue with the rate base elimination approach that we first used last year. Under this approach, the value of shared assets are eliminated from rate base and forecast base -- lease revenues are eliminated as revenue items. 187 Our proposed rate-base elimination, we proposed a rate-base elimination in our original filing of -- or updated filing, rather, of $40.2 million and the breakdown of that figure is shown under the second bullet on page 24. 188 And while I have taken you to page 24, I should also point out another typo on the very first line of page 24. Where you see the figure $2.6 million, referring to the rate base non-utility elimination that fell out of the -- that was the result of the company's acceptance of the recommendations of the CB Richard Ellis report, that $2.6 million should actually be $2.0 million. 189 I should point out that in all of the drafts of the settlement proposal that the intervenors saw, it was always the correct number, 2.0, and somehow there was a gremlin at the very end and that 2.0 turned into a 2.6. And we apologize and would ask people to make that change. 190 There was concern, Madam Chair, among intervenors about ECG's proposal to add to rate base the value of the 28 and a half thousand square feet, rather, of building space that was relinquished by an affiliate in March of 2002, and in the result, ECG agreed to eliminate $2.6 million associated with this space from rate base. So the total rate-base elimination attributed to non-utility activities in the test year is now $42.8 million. 191 And Ms. Hare has just pointed out to me, on the bottom of the page 24, I did made the correction on the first line, so the 2.6 million is now 2.0 million. That number also appears in the last bullet on page 24, first line. So you should make the same correction there as well. Sorry, you're right -- so sorry, I misunderstood Ms. Hare's secret message to me and she was not, in fact, pointing that out at all. That 2.6 million in the last bullet refers to the elimination of the rate-base value of the 28 and a half thousand square feet of building space. Sorry for the confusion. 192 Are there any questions, Madam Chair, members of the panel? 193 MS. HALLADAY: No. Please continue. 194 MS. NEWLAND: I shall turn issue 6 and 7 over to Mr. Farrell. 195 MR. FARRELL: 5.3 is actually the next issue which is the affiliate out-sourcing, and that is an unsettled issue. As you can see, Madam Chair, from the lengthy text on the scope of the issue, this is -- involves policy aspects as well as jurisdictional aspects and not -- certain of the other parties have interests that are not necessarily the same amongst the intervenor group; they were all concerned about this issue. 196 MS. HALLADAY: Thank you. 197 MR. FARRELL: Then we move to the PBRO and M issues, 6.1, 6.2 and 6.3. 198 The first one, 6.1, was a review of the results of the service quality indicators, or SQIs. There was very little discussion of this; people accepted the results and found that there was no need to change the targets for the SQIs during the test year. 199 Issue 6.2, this involves the inputs to the formula that is used to derive O& expense for the test year. Basically the customer growth forecast and the proposed inflation factor were discussed, updates were considered, and in the end, the updates of each of those tended to offset one another; and in the light of the use of prior information, for the purposes of issue 3.1 and 3.2 which Ms. Newland took you through a little while ago, the company and intervenors agreed that the company's proposed factors would be accepted for the purposes of deriving the O& expense for the test year. 200 Issue 6.3 talks of symmetry in ECG's budgeting for Z-factors. This arose from last year's settlement proposal and there's actually two aspects to this issue. One was the symmetry issue that involved the company using its budget letter as a directive to management to look for savings as well as costs, and that effort for the test year was accepted by the other parties on the condition that ECG would continue to give management similar directives whenever a budget would include Z-factors. 201 The other aspect of this issue that doesn't really appear from its title was again something that arose from last year's settlement proposal and that was ECG's undertaking to develop a mechanism as part of the Z-factor for rate hearing expenses that would reflect the principle that's articulated on page 30 in the second complete bullet from the top of the page, and that is that no party should benefit at the expense of the others on the amount of the Board's costs allocated and billed to ECG by the Ministry, as it then was, of Energy Science and Technology. So the company developed the mechanism and the other parties accepted it and it will be continued when there is a Z-factor for rate hearing expenses on an ongoing basis. 202 The next issue is transactional services, issue 7.1. 203 MS. HALLADAY: Just one question, Mr. Farrell. Why is this a complete conditional settlement? 204 MR. FARRELL: The condition was expressed in the first complete bullet on the top of page 30, that one never -- the company's budget included a Z-factor that management would be given the directive to look for savings as well as costs and that gave rise to the conditional settlement, just basically undertaking that, in the PBR context, whenever there are Z-factors that we would -- the company would continue to -- would instruct to ask management to look for savings as well as costs and therefore have symmetry in the approach. 205 So the transactional services, the difference of opinion at least at the outset of the settlement conference was the usual one, and that was what -- how well or poorly, depending on your perspective, would the company perform in terms of transactional services revenue during the test year. 206 The text of the agreement to settle this issue gives some historical data, for example, those at the top of page 31. And the differences of opinion in terms of what the net revenue would be, which is used for rate-making purposes in the sense that it's shared 90 percent, 10 percent by customers and shareholder, was resolved by the company's proposal and the acceptance by the other parties of it to use the 90:10 sharing ratio, not only for net revenue, but also for any credit balances in the transactional services deferral account for the test year. 207 So for the test year, the 90:10 sharing ratio would apply not only to net revenue but also in the event to any credit balance in the transactional services deferral account. The forecast that would be used for rate-making purposes are those shown in the second last major bullet on page 31. And the last bullet on the page then just reiterates what I've been telling you about the use of the 90:10 sharing ratio for all purposes, except when there's a debit balance, in which case the shareholder bears the entire debit balance. 208 MS. HALLADAY: Thank you. 209 MR. FARRELL: The next issue, series of issues of demand-side management, I wrote myself a little note. I recalled a quote by Winston Churchill, and I described the settlement as a riddle, wrapped in a mystery inside an enigma. 210 And with that, I'll turn it over to Ms. Newland. 211 MS. NEWLAND: I would have described it somewhat less elegantly, Madam Chair. 212 I think it's fair to say that this was the most difficult issue to settle, and I think it's a testament to all the patience and persistence of all parties that we have a settlement on this issue. 213 8.1 is the O& DSM budget, the savings target and the level of the shared savings mechanism incentive rate. There was a great deal of discussion around these issues. Essentially, the parties were polarized between those who were concerned about the level of the budget and the manner in which it was established and those who thought that the savings target was not high enough. 214 And a compromise was reached. All parties agreed on an O& budget of 10.85 million, comprising 4 million in fixed costs and 6.85 million in variable costs and a savings target of 94 million cubic metres. 215 The parties were also able to reach agreement on the contents of Enbridge Consumers Gas's overall DSM plan for the test year, and that agreement is out in the last bullet on page 33, continuing over on page 34. 216 And finally, all parties agreed with ECG's proposal to reduce the marginal shared savings incentive rate for the test year only from 35 percent to 20 percent of net benefits calculated in accordance with the TRC test. 217 8.2 is the scope of the demand-side management variance account for the test year. In order to address concerns expressed about cost overruns, ECG proposed to limit the use of the 2002 DSMVA to recording the differences between forecast and actual variable costs only up to 20 percent of the forecast of variable cost, after which time we would have to come back to the Board for approval to exceed that 20 percent cap. 218 The intervenors agreed with this proposal, so we had a settlement on this aspect of the DSMVA. In addition, all parties agreed to a further restriction on the recovery of variable costs overages recorded in the DSMVA, and this restriction is set out in the two bullets on page 35 of the settlement proposal. 219 And I don't intend to try to describe them. I think they speak for themselves, the words speak for themselves. 220 And finally, Madam Chair, issue 8.3 is the 2000 SSMBA, the share saving mechanism variance account, and the 2000 LRAM, and these accounts are -- the clearance of these accounts are synchronized in accordance with the settlement we reached with parties last year. 221 ECG was not in the position to be able to file an audited SSM claim for fiscal 2000 in time to meet the schedule of this proceeding. However, all parties were ultimately able to agree on a procedure that would permit the work of the independent auditor to be completed and the company to finalize its 2000 SSMVA and LRAM claims. These steps are to be completed by July 31st of this year, 2002. 222 After ECG has finalized these claims, the parties will deliver position papers on the company's claim and will convene a settlement conference to consider ECG's proposals. Resolved and unresolved issues will be presented to the Board in ECG's rate application for fiscal 2003 or earlier if there is an opportunity or if that can be managed. 223 There is a work plan and a schedule that was agreed on by all parties and which describes all of the steps leading up to the finalization of the company's proposals in respect of the 2000 SSMBA and LRAM. And that schedule and work plan is attached to the settlement proposal at page 53. 224 And finally, there was an agreement to consider the necessity, feasibility, and advisability of the independent auditor's mandate in terms of reference -- rather to expand that mandate and terms of reference to include a value for money audit, and this agreement is described in the last bullet on page 37 under issue 8.3. 225 And I should also mention that a description of what a value for audit -- a value for money audit might entail, and it was prepared by one of the parties at the request of some of the other parties, has also been included in the settlement proposal at pages 54 through 56 of the proposal. 226 MS. HALLADAY: Thank you. 227 MS. NEWLAND: Thank you. I will turn it over to Mr. Farrell for issue 9. 228 MR. FARRELL: Two issues, Madam Chair. 229 Under customer information system, or CIS, are 9.1, which is the appropriateness of CIS as a Z-factor for the test year, and 9.2, which was the company's proposed CIS Z-factor for the test year. 230 This settlement looks remarkably like a settlement of these issues last year, and in effect, what the settlement does is defer until the fiscal 2003 rate case a consideration of the customer care costs including the supporting customer information systems. The conditional aspect of this settlement is that ECG is free to bring forward these issues for examination in fiscal 2003 rates case. And I think that's really all I have to say. 231 MS. HALLADAY: Thank you. 232 MR. FARRELL: The next three issues all relate to deferred taxes. There was -- the 10.1 is a proposal to establish a deferred income tax deferral account; issue 10.2 was a proposal to record in that deferral account $10 million after tax, and $10 million represented 5 million each for the preceding years. 233 And then the third issue, 10.3, was the proposed preconditions for clearing the deferral account. This issue was not settled, but the parties do not propose to litigate these issues in the context of this phase of the hearing. 234 As the settlement proposal indicates, the parties, for the reasons described on pages 39, 40 and the top of page 41 of the settlement proposal, are requesting that the issues be deferred to either a separate phase of this proceeding or to a new proceeding that would be convened for the purpose of describing these issues rather than trying to deal with them in this phase of RP-2001-0032 case. Mr. Thompson, on behalf of IGUA, CAC, and VECC, has filed with the Board a motion record on behalf of those companies. His transmittal letter indicated, as I recall it, that his intent is not to deal with this motion record in the context of this phase of the proceeding. And I would advise that the company intends to file a motion record in response but not until this phase is complete. So there's no settlement but a request for some procedural relief, if I can put it that way, from you and your colleagues. 235 MS. HALLADAY: Thank you. 236 MR. FARRELL: Ms. Newland will now take you through the deferral and various account issues. 237 MS. NEWLAND: Yes. 11.1 deals with amounts and dispositions of balances in the fiscal 2001 deferral and variance accounts, and 11.2 deals with the company's request to continue certain accounts in 2002 and add some new accounts. These issues are relatively straightforward. I would point out that on page 41 of the settlement, as a result of the update that Mr. Small made earlier this morning, some of the numbers that are set out in the first bullet on page 41 of the settlement will be changing to reflect that update. The only issue I'd like to highlight in my summary to you is the company's request to establish the unaccounted-for gas variance account for the test year. This account will record the gas costs associated with variances between forecast, i.e., Board-approved and actual unaccounted-for gas. 238 The company filed evidence that explained the reasons why it believes that deferral-account treatment is appropriate for these variances under the circumstances. The bottom line, if I might put it that way, is that despite the best and persistent efforts of the company to improve its forecast, forecast error does remain high. The company believes that the problem is not with its forecasting methodology per se but rather with the high -- the evidence refers to it as a high volatility inherent in UAF based on historical distribution. UAF will range between 31,968, ten cubed, m cubed, and 144,976, ten cubed, m cubed, 95 percent of the time. So that is really a large confidence level, interval, rather. 239 Although the intervenors remain concerned about our forecasting methodology, they have agreed to support the establishment of a UAF deferral account on a trial basis only. The only other new deferral or variance account that the company had proposed was the deferred income tax deferral account and Mr. Farrell has already dealt with that proposal. 240 MS. HALLADAY: Please continue. 241 MS. NEWLAND: Thank you. Mr. Farrell? 242 MR. FARRELL: Thank you. I have the remaining issues, Madam Chair. There are three under rate design. 12.1 and 12.2 were very uncontroversial matters. 12.1 is ECG's proposal to change the allocation and recovery of carrying costs relayed to gas and inventory, and this proposal, as the first bullet indicates, was intended to achieve a better matching between costs and revenues and to therefore promote fairness among rate classes, and it describes the two technical changes. You'd need to have some information on implications of those changes and I ask Ms. Duguay to provide it to you. 243 The second bullet basically is -- the so-called bottom line is that the impact of the proposal is diminimus on the rate classes that are most affected by it, or that are affected adversely by it, and in that light, the other parties agreed with the company's proposal. 244 The proposed changes to rider A in rate 125 were basically to put those two on an even footing with the other unbundled rates or put rate 125 on an even footing with the other unbundled distribution rates. The text of the two bullets at the top of page 47 indicate the mechanics of doing that. It's fairly straightforward, and again this is almost to be an administrative change to achieve similar treatment for similar types of service. 245 MS. HALLADAY: Continue. 246 MR. FARRELL: Issue 12.3 is the rate retroactivity issue. The text of the settlement is meant to just provide a chronology, including the Board's caution in last year's Reasons for Decision, and to indicate, the first complete bullet at the top of page 48, a description as the company and the other parties saw it of the Board's concerns. And then the last bullet was the agreement that if we had a -- effecting a staged decision-making process by you and your colleagues, Madam Chair, that that may go in some way to assisting ECG in getting back on track. 247 MS. HALLADAY: Is that now required? 248 MR. FARRELL: The two issues that we wanted the decision on first from Alliance and Vector and DPWAMS, so by virtue of what we've heard about DPWAMS, I guess that comes out to the need to know dollar-wise issue which leaves Alliance and Vector, but I'm looking towards the witness panel. 249 MR. LEDANYI: Maybe I can help you, Mr. Farrell. Any financial impact, should there be one from the Alliance and Vector decision by the Board, would be reflected in the PGVA balance. It would not go into the deficiency. 250 MS. HALLADAY: Right. So that decision would be made prior to clearing the year-end balance in the PGVA account? 251 MR. LEDANYI: Correct, yes. 252 MS. HALLADAY: Which would be cleared sometime after the end of the fiscal year -- 253 MR. LEDANYI: Excuse me for a moment. Mr. Small informs me that we can put it into the 2002 PGVA balance rather than the 2001 PGVA balance, which would be appropriate because we are asking for the clearing of the 2001 PGVA balances. 254 MS. HALLADAY: Right. 255 MR. FARRELL: You will recall that last year's settlement proposal said that the cost consequences of the ten-month period in which Alliance and Vector which were in service in fiscal 2001 would be considered in this case, but the allowance or disallowance of costs related to 2001 would have an impact in fiscal 2002 not reaching back. So I think if it's in the 2002 PGVA, that would be consistent with last year's settlement proposal in terms of whether the cost consequences are recognized. 256 MS. HALLADAY: It's getting confusing as to what years we are clearing accounts for. 257 MR. FARRELL: Yes. 258 MS. HALLADAY: Thank you. 259 MR. FARRELL: The next issue is a late payment penalty. Events have overtaken this issue, I think it's fair to say, and the text of the settlement that starts at the top of page 49, just as a chronology of the events that led to the Board's - how should I put it - independent consideration, or perhaps parallel consideration of the late-payment penalty proposal, and the Board's decision which approved a one-time penalty of 2 percent on an interim basis and disallowed the company's proposal for a variance account, the proposal started as one for a deferral account and was converted into a proposal for a variance account but in any event was disallowed by the Board as the second last bullet on page 49 says. 260 So basically the only outstanding items, because the company has included the one-time penalty of 2 percent in the rate handbook, is simply to say that the Board should confirm that in its final order in this case. So the issue has resolved itself. They are just an administrative clean-up. 261 The last issue is issue 14.1 which the settlement indicates was a place-holder at the time issues day was held, and the response to VECC interrogatory number 1 has, in effect, resolved this issue so the place-holder has been removed. 262 I should just mention in passing, Madam Chair, that in the second bullet of the settlement on page 50, the reference to the interrogatory number is correct. The reference in parentheses in the second line of the second bullet is incorrect. It should be I.11.1, and we'll correct that typographical error along the way. 263 MS. HALLADAY: Thank you, Mr. Farrell. 264 I believe Mr. Betts had a question. 265 MR. BETTS: Thank you, Madam Chair. Sorry to get you bouncing around a bit here, but if I could just go back to 3.3. And certainly you moved through the settlement quickly enough that I didn't catch this when we were at that point. But if -- and we're referring now to the cost of short-term and long-term debt. 266 If you could refer to page 19, and I'm looking at the third sub-bullet point and it's paragraph -- beginning with increasing ECG's bank facility by $360 million which goes from 290 million to $650 million. Can you explain perhaps the cause and the reasonableness of these fees that are arising out of this credit requirement and perhaps give me some background on what caused the change in that credit arrangement? 267 MS. NEWLAND: I can give you a high level explanation. The change in the credit requirement was a result, fell out of the change in the company's credit rating -- a downgrade in the company's credit rating which occurred last January, January 2001. As a result of that change, the rating agencies require, I believe, that the company maintain a full -- committed to a facility that's equal to the size of their commercial paper program, and our commercial paper program is $650 million. So as a result of that requirement, we are now required to cover that by way of a credit facility. So that answers part of your question, Mr. Betts, regarding the reason for the increase, the requirement to increase the credit facility. 268 With respect to the fees, there is a commitment -- there is a one-time fee and I believe that was a negotiated fee. In fact, I understand that it was a fee that was negotiated with the bank and is considered -- this was discussed, I don't think I'm breaching any confidentiality. The reasonableness of this fee was discussed with intervenors and we do understand that this was considered to be a very good deal, if I can put it that way. 269 There was also an annual commitment fee that would be payable in quarterly installments, and I really don't have much information about that other than it is the fee that was associated on an annual basis with the increase in the credit facility. I'm not sure if any of the witnesses on this panel have any more information on this issue. Just Mr. Ledanyi, do you have any? 270 MR. LEDANYI: No, I don't. 271 MS. NEWLAND: I've probably taken you to the edge of my understanding on this issue, Mr. Betts. Do you have further questions? 272 MR. BETTS: I guess if I could, could someone clarify, I guess, the root cause of this change, and that root cause is what caused the credit rating to change. 273 MS. NEWLAND: There is an interrogatory response on that. If you give me a moment, I might try to see if I have it with me. 274 MR. BETTS: Thank you. 275 MS. NEWLAND: The interrogatory that I'm referring to, Mr. Betts, is from CME, Canadian Manufacturer Association interrogatory number 11. The CME asked us to explain why the company's short-term credit rating was downgraded, and as I'm reading here, the response -- we've attached to the response a note, a copy of the rating report and the rationale which is set out in that rating report for the downgrade was primarily the low allowed return on equities from the fallout of the ROE formula linked to interest rates and the magnitude of earnings volatility associated with weather and economic conditions. I haven't reviewed this rating report recently so I'm not able to give you a more cogent explanation. But I would just refer you to the rating report if you have any further questions. 276 MR. BETTS: Thank you. 277 MS. HALLADAY: Thank you. 278 Any comments by any of the intervenors? 279 For clarity, Mr. Thompson, if the Board were to accept the settlement proposal and separate out the deferred taxes as a separate phase or separate proceeding, would your motion then be one of the first matters of business in that separate phase or separate proceeding? 280 MR. THOMPSON: Yes, that's the purpose of delivering it now so that it could be given advance status, and depending on how it's resolved, other steps may or may not be necessary. 281 MS. HALLADAY: Okay. Thank you, Mr. Thompson. 282 One moment. 283 [The Board confers] 284 MS. HALLADAY: Apparently I didn't make myself clear. The issue was if the intervenors have any comments on the entire package, not on that particular issue. 285 MR. THOMPSON: Well, just for the record, IGUA supports the package if that's what you're looking for. 286 MS. HALLADAY: Thank you. We just want to give everyone a chance to have their say. 287 That having been said, thank you, Mr. Farrell. Thank you, Ms. Newland, for carefully going through the settlement proposal with us. 288 As I previously indicated, the Panel is concerned about accepting the settlement proposal until we get the updated information regarding the impact of the settlement proposal, which we understand we'll get shortly. 289 As we know, we are not sitting tomorrow, so we will reconvene Thursday morning at 9:30. Thank you. 290 MR. POCH: Madam Chair, I'm sorry, just before you rise, I would just indicate on the optimistic assumption that the Panel won't have need to hear further from the intervenors, at least in the next few days, on the one issue I am involved in, DSM, which I will absent myself. 291 And, of course, my friends will advise me if there is some further exchange necessary on that, and I will reappear then. 292 I also understand that there will be some discussion amongst the parties about the form of argument at the end of the day, and one proposal is for an oral argument. Again, on the assumption that the Board accepts the settlement on the DSM, my argument would be limited to a request for costs, so in any event, I would simply provide that by way of letter. 293 And so I will hopefully will be taking my leave with your permission. 294 MS. HALLADAY: Thank you, Mr. Poch. 295 MR. FARRELL: Just on that point, Madam Chair, I might ask counsel to stay after we've concluded today's session to discuss the argument process, and we hopefully will reach a consensus and be able to report back to you, at least what the company and the other parties would propose by way of an argument process. 296 There has been in circulation a hearing schedule. I don't know whether you and your colleagues have seen that, but it sets out the sequence in which evidence would be presented by the company and then by Mr. Warren on behalf of CAC. 297 And in that regard, our approach to the witness panels 2 through 6, which are the company's panels, would be to have an examination-in-chief that goes beyond merely adopting their written evidence. And in the course of that examination-in-chief, we propose to have some material that the witnesses will take the Board through. This is not the case for the first witness panel, which is Mr. DeWolf and Dr. Foster. I will just simply be asking them to adopt their evidence and qualifying them as experts. 298 But the company's panel on Alliance and Vector, there will be three pieces of paper that we would ask the witnesses to adopt and then lead the Board through. We have copies of these handouts, and Ms. Hare just reminded me that the witnesses won't be providing new evidence in the examination-in-chief, but rather providing a summary and their involvement in the issue. 299 And then with these three pieces of paper in the case of witness panel number 3, we'll be trying to assist the Board in understanding the issues. So copies of this material is available. Witness panel 3 is scheduled for Friday; although, depending on how Thursday goes, they could be reached before then. That's why I would like to hand it out today, so people have ample time to have it, to look at it, and then be familiar with it when the witnesses take the Board through an explanation of what those documents mean. 300 MS. HALLADAY: Certainly. 301 MR. FARRELL: So I would propose to hand them out, and then after the witnesses have explained them, to have them marked then as an exhibit, subject to what -- 302 MS. HALLADAY: That's fine. 303 MR. FARRELL: Thank you, ma'am. 304 Copies are available of the three documents at the back, and through Mr. Moran, we'll make sure that the Panel has copies after today's sitting. 305 MS. HALLADAY: Thank you. 306 Are there any other matters? I assume that Board staff will be involved in the discussions as far as the form of argument is -- 307 MR. FARRELL: I would trust that to be the case, yes. 308 MS. HALLADAY: Thank you. 309 There being no other matters, then we stand adjourned until Thursday morning. Thank you. 310 --- Whereupon the hearing adjourned at 11:10 a.m.