Rep: OEB Doc: 129LX Rev: 0 ONTARIO ENERGY BOARD Volume: 3 7 JUNE 2002 BEFORE: S. HALLADAY PRESIDING MEMBER R. BETTS MEMBER A. SPOEL MEMBER 1 RP-2001-0032 TRANSCRIPT VOLUME #3 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 #3 4 7 JUNE 2002 5 HEARING HELD AT TORONTO, ONTARIO 6 APPEARANCES 7 PAT MORAN Board Counsel COLIN SCHUCH Board Staff JOHN FARRELL Enbridge Consumers Gas DOUG HAMILTON CME TONY MOUTSATSOS CME PAT MCMAHON Union Gas GLEN MACDONALD Hydro One Networks RANDY AIKEN NRG DAVID POCH GEC MICHAEL JANIGAN VECC JOYCE POON VECC JAMES HAMILTON OESC THOMAS BRETT OASBO IAN MONDROW HVAC Coalition TIBOR HAYNAL TransCanada PipeLines ROBERT WARREN CAC DAVID BROWN Direct Energy Marketing VALERIE YOUNG OAPPA DUANE CRAMER Sithe Energies GEORGE VEGH CEED MURRAY KLIPPENSTEIN Pollution Probe PETER THOMPSON IGUA JASON STACEY Natural Gas Specialist 8 TABLE OF CONTENTS 9 ENBRIDGE CONSUMERS GAS - PANEL 3 [18] CONTINUED CROSS-EXAMINATION BY WARREN: [22] CROSS-EXAMINATION BY MR. JANIGAN: [178] SUBMISSIONS BY MS. NEWLAND: [318] SUBMISSIONS BY MR. WARREN: [344] SUBMISSIONS BY MR. JANIGAN: [367] SUBMISSIONS BY MR. THOMPSON: [376] REPLY SUBMISSIONS BY MS. NEWLAND: [395] PROCEDURAL MATTERS: [496] CONTINUED CROSS-EXAMINATION BY MR. JANIGAN: [554] DECISION: [777] FURTHER CROSS-EXAMINATION BY MR. THOMPSON: [803] CROSS-EXAMINATION BY MR. MORAN: [814] QUESTIONS BY THE BOARD: [1156] RE-EXAMINATION BY MR. FARRELL: [1336] 10 EXHIBITS 11 EXHIBIT NO. F.3.1: LETTER FROM TRANSCANADA PIPELINES DATED OCTOBER 4, 1996 [164] EXHIBIT NO. F.3.2: LETTER FROM TRANSCANADA PIPELINES DATED FEBRUARY 21, 1997 [166] EXHIBIT NO. F.3.3: LETTER FROM TRANSCANADA PIPELINES DATED JUNE 15, 1999 [172] EXHIBIT G.2.2 DOCUMENT ENTITLED 2002 "NOTIONAL DEFERRAL ACCOUNT" [508] EXHIBIT NO. F.3.4: OUTSIDE FORECAST OF EXCHANGE RATES FOR THE PERIOD OF NOVEMBER 1996 [546] EXHIBIT NO. F.3.5: EXCERPT FROM EI'S 2001 ANNUAL REPORT [576] EXHIBIT NO. F.3.6: LETTER FROM IGUA ADDRESSED TO MR. BRENNAN, DATED JANUARY 21, 1998 [1261] 12 UNDERTAKINGS 13 UNDERTAKING NO. G.3.1: TO PROVIDE A LISTING OF PIPELINES PLANNED TO MOVE GAS AWAY FROM THE CHICAGO MARKET IN 1996 [213] UNDERTAKING NO. G.3.2: ADVISE IF ECG HAS A FIRM COMMITMENT FROM ALLIANCE THAT ALLIANCE WILL NOT DISCONTINUE AOS OVER THE 15-YEAR TERM OF THE CONTRACT [261] UNDERTAKING NO. G.3.3: TO PROVIDE AN OVERVIEW OF THE MITIGATING EFFECTS OF HEDGING THE U.S. EXCHANGE RATE [306] UNDERTAKING NO. G.3.4: TO PROVIDE THE DATE OF THE Nexus PROJECT ANNOUNCEMENT [827] UNDERTAKING NO. G.3.5: TO PROVIDE THE DATE THAT TRANSCANADA PIPELINES FILED ITS APPLICATION FOR EXPANSION WITH THE NATIONAL ENERGY BOARD [868] UNDERTAKING NO. G.3.6: PROVIDE THE DATE THAT NEB DECISION REGARDING TRANSCANADA PIPELINE EXPANSION WAS RELEASED [877] UNDERTAKING NO. G.3.7: TO PROVIDE WITHDRAWAL DATE OF THE TRISTATE APPLICATION FROM THE NATIONAL ENERGY BOARD [920] UNDERTAKING G.3.8 TO PROVIDE A LISTING OF ALL Board FILE NUMBERS RELATING TO ENBRIDGE CONSUMERS GAS [944] UNDERTAKING NO. G.3.9: TO PROVIDE AN UPDATED VERSION OF EXHIBIT I, TAB 11, SCHEDULE 27, PAGE 2 [1124] UNDERTAKING NO. G.3.10: TO PROVIDE THE INDIVIDUAL COST CONSEQUENCES FOR EACH OF THE FOUR ENBRIDGE CONSUMERS GAS DECISIONS [1151] UNDERTAKING NO. G.3.11: ADVISE AT WHAT POINT ECG BEGAN DISCUSSIONS WITH PARTIES THAT COULD MOVE GAS OUT OF CHICAGO [1171] UNDERTAKING NO. G.3.12: TO PROVIDE ENBRIDGE CONSUMERS GAS'S CONTRACT DOLLAR LIMIT FOR WHICH NO Board APPROVAL IS REQUIRED [1213] UNDERTAKING NO. G.3.13: TO PROVIDE VARIOUS EXCERPTS FROM EVIDENCE, TRANSCRIPT, AND DECISIONS OF NEB HEARING GH 3/97 UNDERTAKING NO. G.3.14: TO PROVIDE ANY INTERNAL DOCUMENTS, MEMOS, OR OTHER MATERIALS AS WELL AS MINUTE ACTION ITEMS FROM Board OF DIRECTORS' MEETINGS WHICH WOULD ASSIST IN CONFIRMING THAT ENBRIDGE CONSUMERS GAS ACTED PRUDENTLY WHEN ENTERING INTO THESE VARIOUS CONTRACTS [1280] 14 --- Upon commencing at 9:37 a.m. 15 MS. HALLADAY: Please be seated. 16 Good morning. Before we begin, are there any preliminary matters? 17 All right. Mr. Warren, you were in the middle of your cross-examination of this panel. 18 ENBRIDGE CONSUMERS GAS - PANEL 3 19 J.HOLDER; Previously sworn. 20 F.BRENNAN; Previously sworn. 21 A.PLECKAITIS; Previously sworn. 22 CONTINUED CROSS-EXAMINATION BY WARREN: 23 MR. WARREN: Thank you, Madam Chair. 24 Mr. Small, I had asked you yesterday if you could calculate for me the estimated cost of the Alliance and Vector contracts over the life of the contracts. Were you able to do that overnight? 25 MR. SMALL: Well, what -- I just wanted to clarify the -- as I read your question was that cost consequences that we were asking for -- the forecast for gas costs that were asking for recovery for the test year, and I just wanted to clarify that what you'll see in impact statement number 2 is the gas costs in that impact statement are going to be based upon our forecasted volumes priced at the four different reference prices that we've calculated for the year. And those reference prices would have been based upon different 21-day average of changes in various indices over a 12-month period. 26 So, for example, the January 1 reference price was based upon a 21-day average of prices from October 18th to November 15th but over the 12-month period, January 2002 to December 2002. So there's varying commodity costs for each of those 21-day periods or underpinning those various reference prices. 27 So my difficulty is breaking out the commodity cost components as we go through, but what I do know is the Alliance and Vector transportation costs remain relatively unchanged. There's minor changes because of exchange rates. 28 But included in the 2002 test year, the Alliance transportation costs came up to 41.6 million, and the Vector transportation costs amount to 25.1 million. And that's for both the first and second tranche. And the first tranche on Vector would be 13.8; the second tranche would be 11.3. 29 We are also -- should have available today what would be a 2002 notional deferral account, so the comparison between the traditional path and the new path. We talked yesterday about that amount being $5.4 million up to and including the month of April. 30 And what we'll also show on that table, again, is there will be three adjustments or qualifiers; the impact on the difference in the TCPL tolls, the impact of differences in exchange rates, and also the effect of different TCPL fuel ratios, again, to try to identify what difference -- major differences there were from the time that we evaluating the Alliance-Vector path to changes that have occurred to date. 31 MR. WARREN: And that's -- 32 MR. FARRELL: Sorry. May I just make a comment. 33 That, I think, is a response to Undertaking G.2.2, as it appears at paragraph 1023. 34 The part about the notional deferral account that will come later wasn't referred to in the text of the undertaking, but if you look at the exchange between Mr. Warren and Mr. Small, Mr. Warren did ask for that, and it starts at about paragraph 998. 35 That was a two-pronged undertaking, even though the text -- the undertaking itself didn't say that. 36 MR. WARREN: And the calculation of that notional deferral account, moving it forward into the test year, that will be coming later today, you indicated? 37 MR. SMALL: It should be available today, yes. And that would reflect what our actual costs are for the October to April period. 38 MR.WARREN: Mr. Small, I apologize. I didn't get the numbers you gave me. Moving back to the earlier issue of Alliance and Vector. Let me tell you what, so there's no uncertainty about what I'm trying to get at. 39 What I'd like to do is I'd like to understand, when you decided to enter into the Alliance contract and then the Vector contracts, there was, I presume, an assumption about the transportation costs of those. 40 MR. SMALL: Yes. 41 MR. WARREN: And for 2002, my note is that Alliance was $41 million. 42 MR. SMALL: Yeah, the annual cost would be $41.6 million. 43 MR. WARREN: 41.6 and Vector is 25? 44 MR. SMALL: 25.1, yes. 45 MR. WARREN: Which is 67 million, roughly; is that fair? 46 MR. SMALL: Yes. 47 MR. WARREN: Now, if the Board were to multiply that 67 million by 15, would we get, or would the Board get a rough grasp of what the Alliance and Vector contracts would cost over the life of the contracts? 48 MR. SMALL: Yeah, that would be fair. 49 MR. WARREN: Okay. 50 MR. FARRELL: Assuming the tolls today don't change. 51 MR. SMALL: And the exchange rates stay relatively the same. 52 MR. WARREN: So just doing it in my head, which is a dangerous place for anybody to be, it looks like about a billion dollars for those contracts over the life of the contracts; is that -- 53 MR. SMALL: That's close. 54 MR. WARREN: Okay, thanks. 55 MR. SMALL: But the only thing is, though, that may be the cost of those contracts but we would still have to replace that with something else. We still need transportation capacity. 56 MR. WARREN: I wasn't getting to the argument phase about offsets quite yet, Mr. Small. I understand that you have an argument about them. I just want to calculate what they are worth, though. Thanks for that. 57 Now, when we closed yesterday, I was asking a question about -- 58 MR. BRENNAN: Excuse me, Mr. Warren, one other point. Just a reminder on the Vector 2 contract. There is a put-call option where the utility can put the capacity back to Enbridge Inc. after the fifth year. So the assumption that you made as far as the billion dollars assumes that we hold on to that capacity for the life of the contract. 59 MR. WARREN: Okay, thanks. 60 When we finished yesterday, we were talking about exchange rates and I asked you, panel, if -- and unfortunately, I didn't get the transcript last night so I'm going just on my memory what it is I asked you about. Directionally, what I was trying to get at was the -- a comparison of the significance of the exchange rates in the Alliance and Vector contracts as opposed to TCPL because Mr. Farrell pointed out that there is an exchange rate component in the TCPL. Have you been able to do that calculation or make that assessment overnight? 61 MR. FARRELL: I have some notes that were prepared by Mr. Roe as opposed to Mr. Small, and I am looking at them now and then will show them to Mr. Small so we should be able to answer that question perhaps at the break. 62 MR. WARREN: Okay, terrific, thanks. 63 MR. FARRELL: And then there was the other outstanding undertaking, Mr. Warren, was the value of the Alliance contract in 1996, and I think that was G.2.1, I believe. We haven't had a chance to do that, but I think we can also do that at the break. 64 Let me -- just to confirm, since there were no tolls in place for Alliance in 1996, we'd have to use our calculation of the toll for that purpose. Number 1 and number 2, we would be using 50 million cubic feet a day instead of 75 million cubic feet a day, because in 1996, the capacity level was 50 instead of 75, as it is today. I think we can probably do that by the break as well. 65 MR. SMALL: I just want to -- just to reiterate what I had said yesterday, what we were trying to do in identifying that exchange rate amount was the difference between an exchange rate of $1.50 and what the current exchange rates are, just to give a sense of the impact of the change. 66 MR. WARREN: Can I just stay with the exchange rate question for a moment, and I want to deal with the way in which exchange rates were or were not factored into the decision-making process in 1996. 67 Returning to our sort of Talmudic text which is Mr. Otsason's memo, which is Exhibit I, tab 2, schedule 63, now, first of all, panel, I'm going to make a distinction in my question between the text of Mr. Otsason's memo and the attached schedule. I want to deal first with the text of Mr. Otsason's memo. 68 Now, as I read it, panel, I do not see in Mr. Otsason's memo any reference to exchange rate risk as a variable in the Alliance contract; am I missing it? 69 MS. HOLDER: No, you're not, but I think we need to understand that this is a memo that was written to Mr. Riedl and myself as a bit of a summary of some of the things we should consider in deciding upon signing a contract with Alliance. It was never intended to capture everything that was already known by Mr. Riedl and myself at the time. Exchange rates, especially in 1996, were very significant to us from a perspective of gas purchases. Not only do they come into play in TransCanada's tolls, at that time the majority of our gas was U.S. indexed natural gas, so toll -- I don't think it was the responsibility of Mr. Otsason to explain to us, by the way the exchange rate could go up or down. We knew that. 70 Just like the same with the volatility. That was something that was very well known to Mr. Riedl and myself as a part of the business that we had been in and some of the issues we had been dealing with through time. So I don't think Mr. Otsason was trying to capture every single thing we should consider in making the decision. 71 MR. WARREN: Now, we don't have Mr. Otsason here; correct? 72 MS. HOLDER: Correct. 73 MR. WARREN: And I presume that in the last 12 or 18 hours since you and I last chatted about this in a public forum, you have not chatted with Mr. Otsason about this memo, have you? 74 MS. HOLDER: No, I have not. 75 MR. WARREN: So am I now to understand that what this memo is -- that the Board should notionally understand this memo as having a sort of asterisk at the bottom saying, oh, by the way, I didn't mention the big obvious risks. Is that the way we're to understand it now? 76 MS. HOLDER: No. I think what I'm trying to say is that there were -- what was asked of us and the reason why we filed these letters is you wanted everything written that we had in our files that would help you understand what the thought process was and what the analysis was, and that's what we did. I don't want anybody to believe that we could just take this information that's been filed in these three memos that we've been talking about and say that that's everything that we used in coming to our conclusion. We were very knowledgeable people or individuals in this business at the time; that was Mr. Riedl's life and my life as well as Mr. Otsason's. So there were many discussions that went along with these memos. 77 I, nor Mr. Riedl took Juri's letter, Mr. Otsason's letter here and said, oh, great idea, let's just go do it. We did discuss it, we did talk about it, and we understood the risks. 78 MR. WARREN: But you agree with me that -- you and I can agree that for the Alliance contract, exchange rates are a significant risk. 79 MS. HOLDER: Yes, as they were a significant risk for all gas we were buying at that time. 80 MR. WARREN: And we can certainly agree, certainly at a base level, that the risk is not identified in this memo. 81 MS. HOLDER: That's correct. 82 MR. BRENNAN: Again, I don't think you can detach the letter from the table. If you look at the table, there is an expectation that exchange rates would improve going from, I believe the number is, .73 to .8, so obviously the analysis that was done from Mr. Otsason indicated that there was going to be an improvement in exchange rates, I mean, if it's an improvement in exchange rates then I can understand why he wouldn't necessarily list that as a con or, his views, see that as a risk to the -- 83 MR. WARREN: He didn't list it at all, whether a pro or a con; right? 84 MS. HOLDER: I think as Mr. Brennan has appropriately pointed out, he at least considered it in his analysis, though in the memo itself he does not mention the words. 85 MR. WARREN: Then let's turn up the table. As Mr. Brennan has pointed out, what we see in terms of the factoring in of exchange rates is the -- Mr. Otsason's assumption that it's going to improve from 73 to 80; correct? 86 MR. BRENNAN: That's the assumption, correct. 87 MR. WARREN: Now, do we have any underlying reports or analysis or documents that would give rise -- that would support what Mr. Otsason assumed? 88 MR. BRENNAN: The only thing I think that we could look at, and I haven't really converted it, but I believe there was an interrogatory, I can't remember whether it was VECC or not, that asked about exchange rates. 89 MR. FARRELL: It was VECC. 90 MR. BRENNAN: And I haven't gone back to take a look at that, but those were -- it did look, and just briefly looking at those forecasts, that whether they improved to .8, but they certainly looked like they were improving. 91 MR. FARRELL: I think it is VECC 69, Exhibit I, tab 11, schedule 69. 92 MR. BRENNAN: I'll just pick the one that was in September 1996 on page 4-4 of that exhibit. And if I look at the exchange rate in the bottom, it's going from -- in the third quarter of 1996 to -- well, I guess I will use .73, and then going out to fourth quarter of 1998, .755. So there's an indication at that point in time, from the company's perspective, that the exchange rate was improving over time. 93 MR. WARREN: I've read VECC's interrogatory, but the question I had for you was not what was produced in response to an interrogatory in 2002, my question was, in 1996, when this memo arrived on your desk, Ms. Holder and you looked at this calculation, did you say to Mr. Otsason, what's your underlying analysis? Provide me with some information that would support this, what turned out to be, wildly generous assumption about increases in -- was there anything there? 94 MR. BRENNAN: If you go back and look at this interrogatory response, this was a forecast produced in September of 1996. It wasn't a forecast that was produced in 2002, it was a forecast -- 95 MR. WARREN: Ms. Holder, did you ask for this in support of Mr. Otsason's memo? 96 MS. HOLDER: I would not remember asking specifically for this. I do remember discussing all the assumptions around Mr. Otsason's memo, including the analysis. I have no reason to believe that -- I didn't say, show me the chart, prove to me. This was my colleague. This was somebody who worked for Mr. Riedl and was doing the analysis. So we discussed interest rates as the table indicates -- 97 MR. FARRELL: You mean exchange rates. 98 MS. HOLDER: Exchange rates, sorry. Exchange rates, which the table indicates. But whether he actually ever showed me a document that said this is what it looks like, I would take it at face value he was right in putting his numbers and that he got them from appropriate sources. 99 MR. WARREN: I then turn to the last of the four factors which are listed in your pre-filed evidence as -- what I described as offsets against -- actually, Mr. Brennan, you corrected me. The exchange rate and the fuel ratio are not offsets against the notional deferral account. What they are are factors that the Board should take into consideration as it looks forward in comparing TCPL and Alliance-Vector; is that fair? Have I understood your response? I didn't read the transcript on it but -- 100 MR. BRENNAN: Generally -- yes, generally, that was the essence of what I was trying to say; that the Board should be looking at what other factors that could happen in the future that could reverse it, getting back to where we thought things would have eventually turned out back in 1996. 101 MR. WARREN: Now, panel, with apologies, you know you have forgotten more about fuel ratios than I will ever know so I have to take baby-steps through this issue. Please correct me where I am wrong. 102 My understanding of the fuel ratio issue is that there's a certain amount of fuel going through the pipe that is required to run the compressors; is that fair? 103 MR. SMALL: That's fair. 104 MR. WARREN: And that whether it's TransCanada or Alliance, they, in effect, take away a percentage of the fuel to run the compressors, and that's a cost to whoever's gas is going through the pipe; is that fair? 105 MR. BRENNAN: Well, typically you provide the fuel at the inlet of the pipe, but essentially it's there to be able to move your contract capacity on the pipeline. 106 MR. WARREN: Then if I understand, based on those two first baby-steps, if I look at Exhibit A, tab 14, schedule 4, at page 15, have I understood it correctly that TCPL's fuel ratio is now low. 107 But if it were at what you say, if it were 8.12 percent as it was in 1996, then it would be costing more to ship gas on TCPL than it is now. 108 MR. BRENNAN: Correct. 109 MR. WARREN: Now, I'm advised that if it cost more, that is, if you were shipping -- and that the reason that it's low at the moment on TCPL is that there's less gas flowing on TCPL than there was in 1996; is that right? 110 MR. BRENNAN: I'm sorry. I didn't hear your question. 111 MR. WARREN: The reason that it is not at 8.12 percent but rather at something like 5 percent is that there is less gas moving on TCPL now than there was in 1996. 112 MR. BRENNAN: That's correct. 113 MR. WARREN: So in order for it to get back up to 8.12 or something like that, there would have to be more gas flowing through TCPL's system; is that right? 114 MR. BRENNAN: Yes, that's correct. 115 MR. WARREN: And I'm advised that if there were more gas flowing through the TCPL system, that one of the results in addition to an increase in the fuel ratio, there might be a decrease in the tolls; is that fair? 116 MR. BRENNAN: That's correct. It's a question of whether or not those two offset each other. 117 MR. WARREN: But we should -- when we look at your calculation on pages 15 to 16, we should offset the increase due to the increased fuel ratio by some amount to the decreased tolls; is that right? 118 MR. BRENNAN: That's fair. 119 MR. WARREN: All right. 120 Now, the last series of questions, I guess, would be to you, Ms. Holder, and maybe it would be helpful if you would turn up the timeline exhibit that was filed yesterday. It's Exhibit F.2.5., Panel. Do you have it, Ms. Holder? 121 MS. HOLDER: Yes, I do. 122 MR. WARREN: Now, it indicates on the right-hand side of the dividing line that on November 6, 1996, ECG executives Rudy Riedl and John Aiken executed the Alliance agreement; correct? 123 MS. HOLDER: Correct. 124 MR. WARREN: Now, could you describe for me, Ms. Holder, at the time what the decision-making line was, if you could. 125 We have Mr. Otsason's memo that went to you and Mr. Riedl, and we've had a number of exchanges about whether there were other documents or reports. 126 Would Mr. Riedl have had to take that to anyone further up the chain in the ECG system before getting approval to sign it? 127 MS. HOLDER: What would have occurred at that time was that I was responsible for gas supply planning, and I would have made the recommendation to Mr. Riedl that I felt we should be signing the Alliance contract. 128 At that time, I was not an officer of the organization, and all gas supply contracts by the order of the Enbridge Consumers Gas Board must be signed by two officers when it's at an amount of the level of this contract. 129 So I would have initialled that contract, handed it to Mr. Riedl. Mr. Riedl would have signed it and then taken it to another officer in the company at that time, which was our senior vice-president of finance and regulatory, Mr. John Aiken. 130 MR. WARREN: Did the protocol -- I'll call it the "protocol," was there a requirement that it go to the Board before it be signed? 131 MS. HOLDER: No. At that time, as today, this contract fell within the boundaries that were pre-authorized by our Board of directors for the two officers to sign. 132 MR. WARREN: Would the requirement have been that it would have gone to anyone at Enbridge Inc.? 133 MS. HOLDER: No. 134 MR. WARREN: Would Enbridge Inc. have seen this contract before it was signed? 135 MS. HOLDER: They wouldn't have seen our contract. They would have seen their own contract, which I assume was similar. But, no, there was no reason for them to see this contract. 136 MR. WARREN: Now, the reason I just wanted finally to put this question to you, in fairness to you, Ms. Holder. 137 MS. HOLDER: Why thank you. 138 MR. WARREN: I guess, I would preface it by saying that it seems to me -- and I'd ask for your comment on it -- it seems to me to be astonishing that a company, a publicly traded company, would enter into an agreement that had a value allowing for certain offsets, as Mr. Brennan has said, in the neighbourhood of a billion dollars and that it would have been signed. And that the only piece of paper analyzing the pros and cons, which you've said is not complete because it didn't mention exchange rates, among other things, was Mr. Otsason's memo; should I be surprised at that? 139 MR. FARRELL: Just before you answer, the dollar amount is Alliance and Vector combined, the billion dollars, so in November 1996, it was not a billion dollars. 140 MS. HOLDER: We will be getting you the number for the 50 million cubic feet -- 141 MR. WARREN: A company of your size would have been signing a contract for half a billion dollars and would have done it on the strength of one incomplete memo; should I be surprised at that, Ms. Holder? 142 MS. HOLDER: Not if you truly understand what occurs within our own organization and the knowledge of the individuals making these sort of decisions. Recognizing what we're looking at here was a 15-year contract for only 50 million cubic feet a day at the tolls that we were expecting in 1996, which we have committed to providing you with that answer. That was within the boundaries of our signing authority at the time and still within -- that signing authority has not changed, so it's still the signing authority we have today. 143 We do go through lengthy discussions. It would have been discussed at the executive level between Mr. Riedl, Mr. Aiken, most likely Mr. Munkley, and other executive members at that time. I was not an executive at that time so I don't know what those discussions were. I would expect that somebody like a Mr. Aiken, who is the, lack of better terminology, chief financial officer for the organization, would have asked many of these questions to assure himself that yes, he should be signing that contract. 144 But this is -- I know it's a big number and I don't want to dispute that, but we buy maybe 1.4 or 1.5 cubic feet -- or billion dollars, sorry, $1.5 billion worth of gas a year. So you're talking about a very small component of our total portfolio. At that time, we were moving on TransCanada a billion cubic feet. This was .05 billion cubic feet so it was a very small percentage of our overall cost in managing our business. So in absolute terms it's big, but as a component of what we do to run our business and the numbers that we work with to run our business, it's very, very small. 145 MR. WARREN: And would it be unfair of me, Ms. Holder, to suggest that the reason there wasn't a more rigorous and thorough paper trail in support of this was that you were confident in the assumption - good, bad, or indifferent - that ratepayers would have to pay for the half a billion dollar contract; is that unfair of me? 146 MS. HOLDER: That's definitely unfair. Believe me, just about everything we do, we recognize we're going to be back before this Board and explaining, in particular, a gas supply on a retroactive basis. So we're always every year here, trying to explain why we've done what we've done. 147 We clearly knew we would be here some day explaining what we did and why we did it. We would have known that at that time. 148 MR. WARREN: Thank you, panel. 149 Madam Chair, subject to any questions that may arise from the undertaking response that may come in, those are my questions for this panel. 150 MS. HALLADAY: Thank you, Mr. Warren. 151 MR. FARRELL: Before Mr. Janigan commences, yesterday there was a discussion between Mr. Warren and these witnesses and there were -- Mr. Brennan made reference to two letters that ECG had received from TransCanada PipeLines, and Ms. Holder made reference to a memo on -- that she had received from Mr. Dan. I was going to ask those witnesses to produce those documents in my re-examination, but since they occurred in the course of Mr. Warren's cross-examination, perhaps I could do that now. And if he wants to come back and ask any questions on this paper -- these pieces of paper, he would have an opportunity to do so. 152 MS. HALLADAY: Certainly. 153 MR. WARREN: That's fine with me, Madam Chair. 154 MS. HALLADAY: Mr. Farrell. 155 MR. FARRELL: I'm handing Mr. Brennan two copies of the letters, both on TransCanada's letterhead; one dated October 4, 1996, the other dated February 21, 1997. 156 Mr. Brennan, were these the two -- these letters the ones to which you were referring yesterday? 157 MR. BRENNAN: Yes, they are. 158 MR. FARRELL: The October 4, 1996 would be -- Mr. Moran. 159 MR. MORAN: I was just wondering if you wanted to mark these letters individually or collectively. 160 MR. FARRELL: Why don't we do it -- 161 MS. HALLADAY: Individually. 162 MR. FARRELL: That was what I was going to suggest as well, Madam Chair. 163 MR. MORAN: So the October 4, 1996 TCPL letter would be F.3.1. 164 EXHIBIT NO. F.3.1: LETTER FROM TRANSCANADA PIPELINES DATED OCTOBER 4, 1996 165 MR. MORAN: The February 21, 1997 TCPL letter would be F.3.2. 166 EXHIBIT NO. F.3.2: LETTER FROM TRANSCANADA PIPELINES DATED FEBRUARY 21, 1997 167 MR. FARRELL: I'll bring copies to the panel when we do the third. 168 Ms. Holder, what I've handed to you is a memo addressed to L. Beattie, W. Akkermans, F. Brennan, S. Campbell, B. Craig, and B. Rahn, from G. Dan, dated November -- excuse me, June 15, 1999. Is this the document you were referring to yesterday? 169 MS. HOLDER: Yes, it is. 170 MR. FARRELL: So that would be F.3.3? 171 MR. MORAN: That's correct. 172 EXHIBIT NO. F.3.3: LETTER FROM TRANSCANADA PIPELINES DATED JUNE 15, 1999 173 MR. FARRELL: I will put copies in the back, Madam Chair. 174 MS. HALLADAY: Thank you. 175 MR. FARRELL: Thank you, Madam Chair. 176 MS. HALLADAY: Thank you, Mr. Farrell. 177 Mr. Janigan. 178 CROSS-EXAMINATION BY MR. JANIGAN: 179 MR. JANIGAN: Thank you, Madam Chair. 180 Panel, I would like to start with going over some matters that were raised with Mr. Warren and, in particular, looking at yesterday's transcript in an effort to make these points somewhat clearer. 181 I'd like to have you turn up, if possible, the line 12 or paragraph 1211, probably starting at 1209 of yesterday's transcript and with the question from Mr. Warren: "Can you turn up, please, Exhibit 1, tab 2, schedule 35, which is CAC's interrogatory number 35." 182 MS. HOLDER: Okay. 183 MR. JANIGAN: And Mr. Warren refers to, on line 1211 -- the question that was posed was: "Was it a condition of EI's entering into the Alliance project as an equity participant that EI or one of its affiliates assume a shipper position on the Alliance system?" 184 Then Mr. Warren then reads the response: "'the answer is the ECG does not have the information necessary to provide on its own a response to this interrogatory,' but goes on to indicate, 'There was no formal requirement that EI or an affiliate of EI, such as ECG, become a shipper on the Alliance pipeline as a prerequisite of EI acquiring directly or indirectly an ownership interest in the limited partnership.'" 185 Then Mr. Warren goes on to ask: "Was there an informal requirement that EI or an affiliate of EI such as ECG become a shipper?" And, Ms. Holder, you indicate that: "I don't believe so, but it was never a directive for EI to ECG to become a shipper." 186 Now, I'd like to ask you to turn up on Exhibit F.2.1, which is the VECC book of materials, page 32, which is an extract from the Oil Daily, favoured around my house, of September 25th, 1996, which is entitled, the headline, "Doubts Voiced over Canada's Alliance Gas Pipeline Plans. Alliance Pipeline Ltd. Proposed Pipeline from British Columbia, Canada, to Chicago, Illinois." 187 Now, I'd like to direct your attention to the bottom part of the page, the comments of John Olsen, an analyst at Merrill Lynch: "'A lot of people are betting on this project not happening,' said John Olsen, an analyst at Merrill Lynch. 'The economics don't look promising.' Olsen said, 'The planned expansion of TransCanada PipeLines Limited and the Northern Border systems would leave the new project out of the market.' He said that the scheme needs to secure long-term shipping contracts to get necessary financing, and he doesn't believe shippers will be rushing to sign, unless they think there will be a market for their gas in the Chicago area. 'It will be up to the partners in the project to step up to the plate and ship all or most of the gas and take care of the financing. That would be a big risk,' Olsen said." 188 Now, isn't, in effect, ECG's commitment to the Alliance pipeline the partners stepping up to the plate and shipping most of their gas and taking care of the financing? 189 MS. HOLDER: I would say Enbridge Consumers Gas signing the contract is stepping up to the plate, definitely true. But I think as I, at least, tried to get on the record yesterday, this represented 6 percent of the whole capacity or something maybe even less than that. So us signing that contract did not build Alliance. 190 And I think the other fact that we need to make clear is TransCanada didn't happen. So it wasn't us who made the -- we were not the driving force, Enbridge Consumers Gas and their 6 percent in making the decision which pipelines were going to be built in the end. The right pipelines were built and driven by the industry, not just driven by ECG. 191 MR. JANIGAN: But at the time you signed the contract, the TCPL expansion was very much a viable proposal. In fact, this analyst here believes that it was going to be going ahead rather than Alliance; would you not agree? 192 MR. BRENNAN: I would disagree. I think there is a lot of uncertainty around TransCanada, how it was going to respond to the Alliance. 193 It was proposing a high pressure line, something that they haven't had in their system. Whether or not that was going to work, at the end of the day, it didn't. They did not propose that. They went back to their traditional. 194 MS. HOLDER: Sorry. Just one other comment with what you have read here is there were concerns about there not being a market in Chicago. We didn't come into play in that. We were clearly trying to get the gas to our market in Ontario. So I don't think this necessarily references the utilities in Ontario or the customers in Ontario who truly wanted this pipeline built. 195 MR. JANIGAN: But to return to Mr. Brennan's point, clearly this analyst believed that the TCPL project would likely go ahead rather than Alliance. 196 MS. HOLDER: And that -- this analyst? 197 MR. JANIGAN: Yes. 198 MS. HOLDER: I would agree that that is what this analyst says, but I also know that there were analysts who were believing in the Alliance pipeline. 199 MR. JANIGAN: Now, on page 34 of the same article, it's noted about halfway down the page that Alliance said its owners are expected to fill between one-third and one-half of the capacity during the open season. 200 MS. HOLDER: Yes. 201 MR. JANIGAN: Now, was that an expectation that was made clear to all the ownership? 202 MS. HOLDER: I would believe so, but Enbridge Consumers Gas was not an owner and Enbridge Inc. did take capacity on the pipeline. 203 MR. JANIGAN: Now, I want to turn up another portion of Mr. Warren's examination yesterday, and in particular the section that commences with line 1260. It's Mr. Warren that indicates: "But Alliance was being built. There was -- 2.7 billion was the capacity that was about to come flooding into Chicago. There was a lot of capacity from Alliance and Northern." Mr. Brennan indicates: "Right, and I believe, I can't remember whether it was Mr. Foster or Mr. DeWolf that mentioned this morning that there were other pipelines being considered to move some of that gas away from the Chicago market." 204 I wonder, in 1996, can you tell me what pipelines were planned to move gas away from the Chicago market, and when were they scheduled to come onstream? 205 MR. FARRELL: You mean for ECG, or just generally? 206 MR. JANIGAN: Generally. 207 MS. HOLDER: No, I can tell you the list of pipelines that were planned. Let's see what I do have. 208 Our problem is trying to remember what was '96 versus '97 and '98. 209 MR. JANIGAN: Would it be preferable to do an undertaking on that? 210 MS. HOLDER: Yes. 211 MR. MORAN: That would be G.3.1. 212 MS. HALLADAY: Thank you, Mr. Moran. 213 UNDERTAKING NO. G.3.1: TO PROVIDE A LISTING OF PIPELINES PLANNED TO MOVE GAS AWAY FROM THE CHICAGO MARKET IN 1996 214 MR. JANIGAN: Then start with Exhibit A, tab 14, schedule 4, and in paragraphs 8 and 9 -- 215 MR. BRENNAN: I'm sorry, paragraph -- 216 MR. JANIGAN: Paragraphs 8 and 9. It's noted the reasons why Alliance was thought to be preferable to TCPL, and very briefly, the first point was ECG's comparative analysis of Alliance and TCPL, after considering Nexus and other TCPL-related projects, favoured Alliance on the basis of the information that was available in mid-1996. 217 Secondly, Alliance would comprise the major segment of an alternate transportation path for gas sourced in western Canada. And thirdly, Alliance's capacity could be expanded by compression rather than pipe such that the initial expansion capacity would be cheaper to install on a unit basis than the original capacity. An expansion would have the effect of lowering Alliance's tolls, and this would not be likely the case for an expansion on TCPL's systems. 218 Have I summarized that correctly? 219 MS. HOLDER: I think that's fair. 220 MR. JANIGAN: Now, in the comparison of route alternatives that was provided in Exhibit 1, tab 11, schedule 27, which was in effect CEED interrogatory 2 from the last proceeding, you set out on page 4 a comparison of route alternatives. 221 MS. HOLDER: Sorry, you're on page 4 of that -- 222 MR. FARRELL: Of the attachment. 223 MR. BRENNAN: Yes, I have it. 224 MR. JANIGAN: And in the updated evidence that you filed on May 27th, 2002, the famous Otsason memo has a slightly different analysis which is contained in CAC 63; is that correct? Slightly different numerical analysis. 225 MR. BRENNAN: Yes, they are slightly different, but they do come from the same -- both analyses come from the same sheet that was provided in Mr. Otsason's memo. 226 MR. JANIGAN: Okay. And let me go first to the CEED interrogatory which is referenced in our interrogatory number 27. 227 Now, if you look at the base case for TCPL versus the Alliance route, TCPL is cheaper by about 26 cents before you start with your adjustments. 228 MR. BRENNAN: That's about right. 229 MR. JANIGAN: Now, in this base case analysis, under the Alliance route, there is a figure given for the A&R-Link toll. Does that cost include the cost of fuel on the A&R-Link lines? 230 MR. BRENNAN: Yes, I believe it does. 231 MR. JANIGAN: And the adjustments that you will make on either side of the TCPL and the Alliance has the effect of essentially bringing the two base cases, as it were, up to a difference of approximately 6 or -- 232 MR. BRENNAN: 7. 233 MR. JANIGAN: 7.2 cents. 234 MR. BRENNAN: That's correct. 235 MR. JANIGAN: 7 cents, that's right. 236 Now, for Alliance to even beat the cost of TCPL expansion, there would have to be a number of other assumptions on the Alliance side to bring down the cost of Alliance to below the TCPL option. I take it that that is what is set out in the adjustments? 237 MR. BRENNAN: Some of them weren't necessarily assumptions with the example, the effect of a higher heating value was a reality. The effect of the AOS at 10 percent was a reality. 238 MR. JANIGAN: And if we look at the impact of those two items, the effect of the heat -- higher heat content, the effect of the 10 percent AOS, there would be a reduction to the Alliance route costs of 1.645 a gigajoule or 6 1/2 cents for heat content and 6 1/2 cents for AOS. 239 MR. BRENNAN: So a reduction of about 13 cents. 240 MR. JANIGAN: But the Alliance toll, even after these two certainties, the Alliance toll option would be still more expensive than the TCPL expansion item -- expansion option. 241 MR. BRENNAN: You are talking again from the base case. But I mean, even if Alliance didn't get built, there would be an expansion on TransCanada. You could argue whether or not that was a reality as well. In our view, that was going to be a reality as well. 242 MR. JANIGAN: Just dealing with the first two certainties that are still -- even after you make two certain assumptions, it is still more expensive than the TCPL expansion option; correct? 243 MR. BRENNAN: Correct. 244 MR. JANIGAN: Now, I beg the Panel's indulgence. The size of the mouse on my laptop is infinitely smaller than the size of my finger so that ... 245 Now, in developing the credit for the AOS service, did you offset the savings with the additional fuel cost ECG will be required to pay when using the AOS in this analysis? 246 MR. BRENNAN: Yes, that was considered. 247 MR. JANIGAN: Okay. And could the AOS percentage decline or be impacted if more firm capacity is contracted on Alliance by way of new or existing firm customers? 248 MR. BRENNAN: It could. 249 In fact, what happened is -- you can see here in this table, it shows 10 percent on an annual average basis for AOS. In fact, it turned out to be 16 percent. In all likelihood, it could increase beyond that, because my understanding is that the Vector -- or the Alliance capacity, they've gone back, I believe, to the regulators to see if they can increase. And I believe it's up to 1.8 Bcf a day from, I believe, 1.6 capacity that it is today. So that AOS so could increase even further. 250 MR. JANIGAN: Now, according to an IR response from Mr. DeWolf, CAC interrogatory 85 -- I don't know if you have to turn it up or not. But he comments that the AOS concept is similar to TCPL's previous authorized overrun interruptible or AOI that was discontinued in the mid-1980s; do you recall that response? 251 MR. BRENNAN: No, I don't. 252 MR. JANIGAN: Would you agree with his analogy? 253 MR. BRENNAN: I don't know that I would, because the AOS on Alliance was guaranteed. I'm not sure -- and it was only being charged the fuel. I don't know whether -- without having going back to look at what TransCanada offered some years ago, I don't think that was the same. 254 MS. HOLDER: My recollection is that the AOI, you actually had to pay for that service over and above your contract. 255 MR. JANIGAN: Now, does ECG have a firm commitment from Alliance that Alliance will not discontinue AOS over the 15-year term of the contract? 256 MR. BRENNAN: I'd have to check that, sir. My initial reaction would be yes, it's probably there. 257 MR. JANIGAN: If we can have an undertaking on that. 258 MR. FARRELL: We'll undertake to check that, and I guess that would be G.3.2. 259 MS. HALLADAY: Thank you, Mr. Farrell. Undertaking G.3.2. 260 MR. MORAN: 3.2, that's right. 261 UNDERTAKING NO. G.3.2: ADVISE IF ECG HAS A FIRM COMMITMENT FROM ALLIANCE THAT ALLIANCE WILL NOT DISCONTINUE AOS OVER THE 15-YEAR TERM OF THE CONTRACT 262 MR. JANIGAN: Now, you also made the assumption that capacity on Alliance would expand from 1,250 million cubic feet per day to 1,600 million cubic feet per day, an increase in capacity of some 28 percent; is that correct? 263 MR. BRENNAN: Yes. Over the life of the contract, the 15-year contract, we would expect that Alliance probably would expand, and what we've shown there is the -- again, going back to the comment in our evidence that it would be a -- compressor additions more likely, which would be more effective than, say, adding pipe, which could be the case in TransCanada. 264 MR. JANIGAN: Now, about the same time as these assumptions were made, presumably Northern Border was out attempting to sign up customers as well? 265 MR. BRENNAN: I believe they had already gone -- had already completed their open season at that point. 266 MR. JANIGAN: Wasn't this a rather bullish assumption for -- considering an increase in capacity of 28 percent? 267 MR. BRENNAN: Not over the 15-year term of the contract, no, I don't think so. 268 MR. JANIGAN: Now, Mr. Warren has already covered with you certain aspects of the assumptions that you made with respect to exchange rates, but am I correct, and when we look at the VECC interrogatory 69, that at no time did you get a forecast from your economists of exchange rates that showed the Canadian dollar going from 73 cents to 80 cents. 269 MR. BRENNAN: The ones that were filed do not show that. They show a trending upwards from .73 up to .55. That is over a period of roughly two years, and I -- the assumption was that over the 15-year term, that it would reach the .80. 270 MR. JANIGAN: Now, did your in-house people advise you that you would be -- you could rely upon that trend and predict that the exchange rate would eventually become 80 cents? 271 MS. HOLDER: There's no way we would ask or expect any of our internal analysts or external analysts to have the crystal ball and say, we're darn sure it's going to hit this exchange rate. But the information we had at the time clearly was indicating that there was every reason to expect the trending up and that was the assumption we used. 272 MR. JANIGAN: Well, who, in particular, made the decision, looked at this and said, I think that the exchange rate is going to be 80 cents, it's going to go up to 80 cents? I mean who was the one that made the decision on that from an economic standpoint? 273 MS. HOLDER: The analysis was done by Mr. Otsason based upon information he would have received from our economic analysis group. It was then reviewed by Mr. Riedl and myself, probably others at the time. We then went to the executive group, which included Mr. John Aiken who did sign the contract, and Mr. John Aiken at that time had responsibility for our economic analysis group. 274 MR. JANIGAN: But the people that had initially generated the forecasts, your economic analysis group, they didn't give a recommendation that -- or an analysis that the exchange rate was going up to 80 cents. 275 MS. HOLDER: I think -- we don't have all the documentation that was produced at the time or possibly produced at the time. We know that the forecast that we filed in the IR, I should say, has a trending up. I would expect and have every reason to believe that Mr. Otsason would have talked to somebody and said, what do you honestly believe we could use in our analysis? Whether that came from external analysts or internal economics group or Mr. John Aiken himself, I don't have that answer, but I have every reason to believe that Mr. Otsason did ask that question. 276 MR. JANIGAN: Okay. And if you look at Exhibit F.2.1, the VECC book of materials again, and turn up pages 16 and 17, in particular looking at page 17. 277 MS. HOLDER: Yes. 278 MR. JANIGAN: This is a plot of historical exchange rates in Canadian and U.S., and if we can look at 1996 when you made this decision, .733, and by the year 2000, it was .673. It's obvious that at no point in time this forecast came to pass. 279 MR. BRENNAN: Excuse me, could you repeat that again? 280 MR. JANIGAN: Sure. If you look at 1996, at the figure, if you are looking at page 17. 281 MR. BRENNAN: We're looking at the previous table. Okay, we have the table. 282 MR. JANIGAN: It's obvious, then, looking at 1996 up to the year 2000, that the trending upward never came to pass. 283 MR. BRENNAN: In hindsight, it hasn't, that's correct. But if you look at -- I argue that if you look at over the period 1994 through to 1996, in particular 1995 to 1996, it was starting to trend up. 284 MS. HOLDER: I think you also need -- this shows that it was only a few years prior to that that we were above the 80 cent exchange rate. 285 MR. JANIGAN: Well, there's a period of five years of precipitous decline, a very short period of trending upward, I suppose, and from then on it seems to be another period of decline. 286 MS. HOLDER: But unfortunately in 1996, it was trending up. We had no reason to believe at that time it was going to trend down. It was very unfortunate for all of us it has, and in hindsight, this is actual results not what we were looking at as far as information to make our decision at the time on. 287 MR. JANIGAN: Was there any other independent analysis or independent report or consensus forecast in the market that was coming up with similar kinds of views of the exchange rate in 1996? 288 MS. HOLDER: Other than what we filed? 289 MR. JANIGAN: Yes. 290 MS. HOLDER: We could go back and look. I -- if you want us to go find -- 291 MR. JANIGAN: No, that's fine. 292 When this base assumption of the exchange rate appeared to deteriorate, did you take any steps to hedge the exchange rate risk with the Alliance-Vector capacity? 293 MS. HOLDER: Our treasury group does manage exchange rate and does do -- there's a hedging activity recognizing we have exchange rate exposure not just on this contract but on a lot of gas supply purchases. 294 MR. JANIGAN: And was there any efforts taken on this, to hedge this? 295 MS. HOLDER: I don't believe we hedge particularly any one contract, we hedge our money exposure in its entirety. So they would have been managing our exchange rate exposure for all exchange rate exposure that the utility has. 296 MR. JANIGAN: Well, is there some mitigation that has arisen as a result of that hedging activity that is not reflected in the numbers here? 297 MS. HOLDER: These numbers were on -- if you're referring to the analysis, the analysis is assuming that we predict the -- it's on a prediction of exchange rates. 298 MR. JANIGAN: Yes. 299 MS. HOLDER: So you don't do an analysis on mitigation activity. 300 MR. JANIGAN: Sure. But in terms of the impact of the Alliance-Vector contracting, have you taken into consideration the mitigation -- mitigating effects of your treasury group in hedging or -- 301 MR. FARRELL: Just a minute, they are not listening. 302 MS. HOLDER: Sorry, we were trying to figure out how the accounting of all this works and you're not looking at an accountant here. So we will undertake to explain or give you an overview of how the -- what happens with the mitigation of the exchange rate. 303 MR. JANIGAN: Okay. And how it may or may not have been translated into the amounts paid by ratepayers for the Alliance-Vector tolls. 304 MR. FARRELL: Well, I think that she said previously that we hedge on a universal basis, for lack of a better term, so I think that's what the explanation is going to be because it's not assigned to a particular contract. 305 MR. MORAN: That would be G.3.3. 306 UNDERTAKING NO. G.3.3: TO PROVIDE AN OVERVIEW OF THE MITIGATING EFFECTS OF HEDGING THE U.S. EXCHANGE RATE 307 MR. JANIGAN: This may be an appropriate time in my cross-examination to break, Madam Chair, if you are thinking of holding the morning break. 308 MS. HALLADAY: Certainly, Mr. Janigan. We'll have a morning break now and reconvene at 11:00. 309 --- Recess taken at 10:43 a.m. 310 --- On resuming at 11:02 a.m. 311 MS. HALLADAY: Please be seated. 312 Mr. Janigan. 313 MR. FARRELL: Madam Chair, I think now is the appointed time for comments or submissions on the DPWAMS issue. 314 MS. HALLADAY: Is that okay with you, Mr. Janigan? 315 MR. JANIGAN: Oh, yes. 316 MS. HALLADAY: I assume it is, all right. Fine. 317 MS. HALLADAY: Who is going to lead off the DPWAMS? Ms. Newland. 318 SUBMISSIONS BY MS. NEWLAND: 319 MS. NEWLAND: Good morning, Madam Chair. I think the honour falls on me, and I will be brief. 320 Let me begin just by referring you, Madam Chair, to one of the exhibits we filed yesterday by way of an update and that is Exhibit A, tab 11, schedule 2. I'm going to be referring in particular in my submissions this morning to page 3 and page 4, and I think it might be helpful if you just had those in front of you. 321 MS. HALLADAY: Yes, we have it, thank you. 322 MS. NEWLAND: If I could just take you to the first paragraph under section 9, on page 3, that paragraph amends the company's original application and evidence to reflect the fact that we are no longer -- that our project schedule for the DPWAMS project has been revised and is no -- we're no longer seeking to close any portion of the project cost to rate base in this test year, in the 2002 test year, although we do expect to spend some dollars in the test year on the project. 323 The balance of paragraph 9, bottom of page 3 and going over to page 4, sets out in some detail the relief that we are now seeking from the Board in this proceeding in respect to the DPWAMS project. I think it might be useful, Madam Chair, to actually go to page 4 of 5 where we set out what we are seeking, the decisions that we are seeking by way of this application in this proceeding from this panel. 324 We are asking the Board to approve, in principle, the DPWAMS project, and in paragraph 10 you will see we've set out what we believe is an approval in principle, and there are three components to that. The key requests that the company is making of the Board, and I think the focus of my submissions is in B, which is an indication that the reasonable costs of the project will be recovered from ratepayers under whatever rate methodology is used for rate-setting purposes in the period in question, provided of course that the project is demonstrated to be complete and fully functional. 325 Now, as you pointed out on Tuesday, Ms. Halladay, none of these requests that we are making of this Board have any rate-making impact or implication for the fiscal year, and you stated that the prudence of the DPWAMS expenditure may be more appropriately dealt with in a future rate case such as next year's rate case. You also expressed concern about finding future panels. 326 Your comments on Tuesday led us to have certain concerns that you might as a panel at the end of the day tell us that we were in the wrong proceeding and that this issue would be deferred for a consideration in a future proceeding. 327 So my purpose this morning is to request the Board to give us an indication in advance of the scheduled appearance of the DPWAM witnesses next week -- I believe it's scheduled for Wednesday and Thursday -- as to whether you are prepared to hear our evidence on its merits here and decide the evidence on its merits. 328 It would be very helpful to all of us. I think I speak for intervenors as well as for the company to know your intentions in this regard before we invest more time and, I guess, money in preparing for the hearing and then wasting valuable hearing time. 329 We stated in our evidence that DPWAMS is required by the company to maintain -- not enhance but maintain existing levels of productivity, and we've said that without this project, service levels will deteriorate and costs will increase. And that's what our evidence says if we get a chance to present it to you. 330 In other words, DPWAMS is not discretionary, in our view. It's not about installing the latest IT bells and whistles. So our position is we need it. 331 However, and it's a big "however," the company is not prepared to embark on spending $21.5 million without some level of confidence that it will be able to recover these dollars. We need assurance that these dollars are going to be recovered. No prudent business person would make a decision like that. 332 I think it's fair to say, also, that we have some sensitivity in light of our experience with prior IT projects and the ability to recover costs. 333 Now, in our view, the whole issue, really, comes down to a timing problem. If we wait until the 2003 rates case for the assurances that we need before we are willing to spend even one dollar on this project, and if we assume for the purpose of my submission an August 2002 filing date for the 2003 case, and if there's no settlement of the DPWAMS issue, under the most optimistic scenario, the way we do our numbers, we wouldn't expect to see a decision from the Board before December 2002 or January 2003. 334 Under a more realistic scenario, we might not have a decision before the second quarter of 2003 calendar year, which puts us into the third quarter of the fiscal year. 335 So it's entirely conceivable that if DPWAMS is deferred, we end up exactly where we are today, too late in the fiscal year to really realistically expect to be able to complete enough of the project to put anything into rate base -- to close anything to rate base in 2003, the company unable to commit dollars to the project without a certain level of assurance that the dollars will be recovered, and a system -- having to continue to rely on an outmoded and increasingly insufficient IT support system. 336 So I said I will be brief, and I will. At the end of the day, the Board -- if the Board is unwilling to hear the merits of requests for relief in this case, then tell us now, please. 337 And I would -- I would emphasize that the key request that we are making from our perspective, of course, is that the cost of DPWAMS, the reasonable cost of DPWAMS will be recovered from ratepayers. I think that we need to know that. 338 There's no point in, as I said earlier, proceeding with this issue if this is something the Board just cannot deal with in this case. 339 That really is all I have to say, unless you have any questions. 340 MS. HALLADAY: Thank you, Ms. Newland. 341 Do the intervenors have something to say? 342 Mr. Warren. 343 MR. WARREN: Thank you, Madam Chair. 344 SUBMISSIONS BY MR. WARREN: 345 MR. WARREN: The position of the Consumers' Association of Canada is that the Board should not hear the DPWAMS case, DPWAMS issues in this case for reasons which I will set out briefly in a moment. 346 I apologize in advance for saying what I'm about to say, but the Board will surely appreciate the irony of what they've just heard from Ms. Newland, that they will not spend one dollar of a $20-million project when the echo in the room of the witness panel is saying, sure, we spend half a billion dollars all the time without Board approval. I mean, I apologize for the colloquial, but give us a break. 347 For this company now to express nervousness, some timorousness about spending $20 million on an IT project, in light of what we've heard about Alliance and Vector, seems to me to be close to bizarre. 348 Now, if the Panel would turn up the fresh evidence that was delivered yesterday, the interrogatory responses, just briefly. If you look at a response to a CAC interrogatory, it's Exhibit I, tab 2, schedule 99. It's CAC interrogatory 99. 349 The question which was posed by the CAC was: "Has ECG senior management approved the implementation of the DPWAMS project? If so, please provide all documentation provided to senior management to justify the project." And the answer is: "No, senior management has not approved the implementation of the DPWAMS project." 350 So the Board finds itself in a position of being asked to approve a project which the senior management of ECG hasn't even approved, and the Board, in my respectful submission, should not be asked to do that, let alone do it. 351 If the senior management of ECG is committed to this project, it should approve it and bring it to the Board to say, this is something that we have confidence in. 352 Now, I appreciate, and I mean this genuinely, that ECG has worked hard to answer the interrogatories in a brief period of time. But in all of this material, there is no detailed business case which is presented to the Board in support of this, the result of which is that you are being asked or would be asked hypothetically to approve this project without seeing a detailed business rationale in support of these expenditures. 353 In my respectful submission, no panel of a regulatory agency should be asked to give approval without seeing that detailed business case, and as a matter of fairness, the intervenors should see the detailed business case and have an opportunity, A, to cross-examine on the detailed business case; and, B, to respond by leading their own evidence. 354 And in the space of the five or six days we have remaining in this hearing, we can't do that, so that you can't get a fair joining of the issues between the parties given what we've got in our hands now. 355 The overriding risk, in our respectful submission, is that next year a panel of the Board will have to approve this project, because there will be rate-making consequences with the risk that the panel next year will be circumscribed or feel itself circumscribed by what has been decided this year. 356 So the question is: What regulatory benefit accrues from setting up the possibility of that conflict, that constraint? In our respectful submission, there is none. 357 At some point, ECG has to say, we are confident in this project. It is necessary if we're going to expend the dollars, and we can make our case. And we will ask only one Board to approve that case at the appropriate time. 358 It would be premature, in our respectful submission, for the Board to do that. There is no reason, as I say, to take the risk that you make a decision this year, that some other panel next year says, well, with great respect to the panel last year, we now have all of the evidence, and we're a little bit worried about the implications of this. 359 This Board in prior years has been faced with this very issue on the CIS case. And in my recollection of it, which I'm confident Ms. Newland or Mr. Farrell would correct me on in a nanosecond, is that the Board refused to do exactly that in the CIS context, to say we're going to give you prior approval. 360 And they're asking, if you look at the relief requested, it's basically open approval for this project, where it hasn't done that in the past, and it shouldn't do that. 361 The analogy which appears in the pre-filed evidence is to a leave-to-constrict application. The difference is that in a leave-to-construct application, you get very detailed evidence, a very detailed business case, and we don't have it in this case. So the analogy, in my respectful submission, doesn't apply. 362 Now, the CAC has in the past said that there is benefit in the Board getting prior approval, giving prior approval for significant expenditures. Indeed, frankly, in light of the testimony we've heard in the last two days, we would have longed for the opportunity to have taken a look at the business case in support of Alliance and Vector, such as it was. But we don't have that opportunity and we don't have it in this case. And the distinction is that the evidence is, I say this with respect to my friends opposite, it's just insufficient, it's too limited. There isn't a business case, there isn't sufficient detail, and there are no rate-making implications and in those circumstances. 363 The Board should, with respect, defer this to next year, or whenever it is that ECG decides, senior management approves it and wants to bring it forward. 364 Thank you. 365 MS. HALLADAY: Thank you, Mr. Warren. 366 Mr. Janigan, do you have any comments? 367 SUBMISSIONS BY MR. JANIGAN: 368 MR. JANIGAN: Yes, Madam Chair. 369 I fully support the comments of my friend, Mr. Warren, with respect to his suggestion that this matter not be before this proceeding. There is, of course, the matter of the outstanding principle that if there are no rate consequences, that it is felt to be inappropriate for sitting panels to make judgements or orders that may have the effect of, to some extent, constraining future panels. 370 I think it's important to look at what, in effect -- what is, in effect, being requested in this case and that is approval in principle. And what precisely does that mean, "approval in principle"? The way that we look at it, what the company is doing, in my respectful submission, is asking the ratepayers to assume all of the risks of the project taking on the aspects of their former CIS project or appearing to be without substantial foundation or being executed in an improper fashion, in which case they will have the reliance upon the Board's previous order that it was approved in principle and the Board, the succeeding Board and the intervenors are not entitled to lay open the stone of whether or not this project should have been embarked upon in the first place, given the results. 371 I would respectfully suggest that an entire case should be before whatever panel is to deal with this in terms of adjudicating the prudence of whether or not Enbridge should proceed. And to proceed at this time and to give an approval in principle without cost consequences is, in effect, to grant an insurance policy to the company which is not deserved and to place all of the risks of that policy upon the ratepayers. 372 Finally, there are practical concerns associated with proceeding with the discussion of this issue in this proceeding. The business case for the DPWAMS was delivered shortly before the ADR in this proceeding. The company has worked hard to respond to our interrogatories and we appreciate that, but we're left in the situation today that -- in particular, my client, who has retained an expert to look at this and to potentially give evidence is that we have to assess all of the answers to the interrogatory. The business case as we see it, and decide in almost record time whether or not expert evidence should be -- we should propose that expert evidence be called to rebut some of these submissions contained within the assertions of the interrogatories. 373 So it is a very difficult time frame, even if the Board was to accept the principle that it should be heard. And in fact there will likely be requests to make the time lines much more elastic in that circumstance. So in our respectful submission, both the principles of regulation and the practicalities militate for a result that would have this heard in another proceeding. 374 MS. HALLADAY: Thank you, Mr. Janigan. 375 Mr. Thompson. 376 SUBMISSIONS BY MR. THOMPSON: 377 MR. THOMPSON: Yes, thank you. 378 What we have here, with this particular project, as we see it, is a multi-year capital expenditure project which does not fall within the parameters of the Board's leave-to-construct jurisdiction. We have the company seeking what they call a degree of confidence that the project costs will be recoverable to ratepayers where the principles that guide the Board are that its costs that are used and useful that will be recoverable. So we don't know until sometime later whether the costs that the company wishes to incur will, in fact, produce something that is useful and to be used. 379 And the question that we see that the Board is faced with, and it's not an easy one to answer, is whether the Board should or should not scrutinize these types of projects in advance of a test year when some of the costs will be closed to rate base. And we face that type of problem with the CIS project where they came forward with the -- the company came forward, as I recall it, with a five-year project and the Board gave some sort of qualified endorsement of the project but did not make any allowance for the cost being closed to rate base. That was held open for future panels. So the reality in these kinds of cases is that the company is at risk if the project turns out to be useless or if there are massive cost overruns or that kind of thing. 380 The question, I guess, that troubles my client is where we have a situation where we can look at a case with foresight as opposed to hindsight, what would IGUA prefer. I think on balance, they probably prefer to have some scrutiny of these kinds of projects at the front end rather than with hindsight only. So as a general rule, I think that's where we would land on the -- on the point of principle. Foresight is a little bit better than hindsight. 381 But that really begs the question in this particular project which is, should the Board, in this case, embark on a scrutiny of this project before the company's management has even committed to the project. And on this point, I have concerns like Mr. Warren, where the company itself has not demonstrated confidence in the project by committing to it. I have some difficulty with the Board being asked to do what I think the company's management is obliged to do first. 382 So it's not an easy question. As far as we're concerned, we don't want as a general rule to foreclose scrutiny of projects that are multi-year and that have rate implications maybe one or two or three years down the road. But I think the Board will have to look at each project on a case-by-case basis, and when looking at this particular project, the fact that the company's management has not committed to it is a matter of concern. 383 A number of -- just in closing, in this kind of a problem, a number of efforts have been made to do -- and I'm thinking of the Union Petrosar deal, for example, where they conditioned a contract to acquire gas from Petrosar on the Board's approval of a meter station, and then came in in a facilities application and applied for approval of the meter station and made it -- the company tried to make it clear that if you approve this meter station, then it's going to kick in this contract which will have cost implications for the utility longer term. 384 And there again, the Board did approve the construction of the meter station but made it perfectly clear that that approval was not tying its hands for rate-making purposes in future. 385 So I don't know if that's helpful or unhelpful, but it's not an easy question. 386 Those are my submissions. 387 MS. HALLADAY: Thank you, Mr. Thompson. 388 Any other intervenors? 389 Just one moment, please. 390 [The Board confers] 391 MS. NEWLAND: Madam Chair, I apologize for the interruption. I wondered if I would get a chance to -- 392 MS. HALLADAY: Ms. Newland, I do apologize. 393 Board staff can say whatever they want to say, but they've never known to sit back before if they've got something that they want to add. 394 So I do apologize. I'm terribly sorry. Go right ahead. 395 REPLY SUBMISSIONS BY MS. NEWLAND: 396 MS. NEWLAND: No, no. Fine. Thank you very much. 397 A couple of points I would like to address specifically. 398 Mr. Warren talked about the irony of what we were seeking in light of our position in this case on upstream transportation costs. 399 I think it's important to understand that there's a real difference, in our opinion, between IT capital costs, or information technology capital costs, and the cost of upstream transportation. They are just two different beasts. 400 And I say that, really, for two reasons. One I had alluded to earlier, and that was that IT projects have a long and, I had written, somewhat ugly history or, I guess, checkered history. And certainly, that's been our experience, and that has prompted us to take the position on the DPWAMS project that we are taking in this case. 401 And the other thing is just the magnitude of the costs, and I thought Ms. Holder really put that into perspective. The cost of upstream transportation in terms of the Alliance is a small amount relative to a larger -- the total costs of the company in gas supply costs, whereas an IT project of $21 million is a significant IT expenditure for the company, and it causes us to stop and say to ourselves, can we commit a dollar before we have some sense of whether this is going to be acceptable to intervenors and ultimately to the Board. 402 So there really is a distinction between the two with respect to -- all due respect to Mr. Warren's position. 403 I'd like next to address, I believe it was also Mr. Warren who took issue with the quality of the evidence that we have put before the Board, and in particular the -- I think he said there was no detailed business case. 404 Well, you know, that's his opinion and certainly not our opinion. We've strived very hard to put, I think, a vast amount of information and detailed information in front of the Board. 405 But I don't actually think that's an argument for today. I think that's an argument for tomorrow if you decide to hear our case on its merits. I think the sufficiency or lack thereof of the evidence has got nothing to do with the issue that we're asking you to decide today. 406 I'd like to make a brief comment regarding an issue I believe Mr. Janigan raised, and that was about binding future panels. And you raised that concern yourself, Ms. Halladay, on Tuesday. 407 My submission would be that if you decide the DPWAMS issues in this case as we've asked you to decide them, then these issues, in fact, will not come before a future panel for decision. 408 Put another way, once these issues are decided by this panel, if that would be your decision, then they don't have to be re-litigated in a future proceeding. The decision would stand, and it would endure. 409 And I actually don't think that's all that much different than what happens with other issues that you've dealt with in the past, and a couple of them come to mind, such as the company's O&M PBR -- excuse me, the company's O&M PBR plan. And that's a three-year plan. 410 And it's in place, and every year rates get set by a panel that did not necessarily sit on the PBR case, and the rates are set in accordance with a methodology that was approved by a previous panel. 411 Now, it's not on all fours with the fact situation here. We are talking about a methodology out of which rates fall, and here we're talking about an absolute amount of forecast costs that we're asking the Board to give us a level of comfort in respect of. So I do recognize it's not a perfect analogy, but I think it's a useful analogy. 412 And there are other examples, such as the Board's acceptance of the transactional service deferral account sharing mechanism. If the sharing mechanism itself is not in front of the Board in any particular hearing, then the Board just applies whatever sharing mechanism was approved by a previous panel. 413 I'd like to say something about, I believe it was, Mr. Janigan's comment that we're asking the Board to give us an insurance policy and place all the risk on ratepayers. We take issue with that. We're asking the Board to comment and to approve our forecast costs. We're not asking for a blank cheque. 414 Mr. Janigan also mentioned that we're asking intervenors to proceed in record time. My response is we did file our evidence in September. I recognize our business case was not filed until April, but it was filed on April 10th -- 12th, rather. We're in June now. 415 We've dealt with far more difficult issues far more quickly. I don't think this is particularly unusual. 416 I'd like to address the issue that was brought up by Mr. Warren and I believe Mr. -- I think everybody brought it up, actually. This is the fact that the -- there's some, I think, misunderstanding or miscomprehension of the position of the company's management on this project. The company's management has complete confidence in this project and that was demonstrated when it proved the business case and gave us the green light to continue seeking the approvals that we require in this proceeding. 417 The company's management has not given approval of the implementation of the project, so the distinction is a distinction between approval of the project and approval of the implementation. They're saying, this is a good project, we want to proceed with it; however, we will not proceed with it until we have the approvals that we're seeking in this case. 418 Thank you, Madam Chair. 419 MS. HALLADAY: Thank you, Ms. Newland. 420 MS. HALLADAY: Mr. Moran, do Board staff have any comments? 421 MR. MORAN: No, we don't, Madam Chair. 422 MS. HALLADAY: Mr. Betts has a question. 423 MR. BETTS: This would be to Ms. Newland. You stated that you're not looking for a blank cheque in this case, that you're only ask for approval on the forecast amount. Are you saying to me that, under no circumstances, then, you would expect to get dollars over and above what has been applied for in this application? 424 MS. NEWLAND: I'd answer that in two ways. 425 First of all, I would refer you, not necessarily now, but there was a interrogatory asked about whether we would be prepared to accept a price cap and there was a response that that was something that we would probably -- we would be prepared to consider. But I think the real response to your question, Mr. Betts, is that if the Board were to agree to do what we are asking the Board to do, you would be approving forecast costs. Additional costs, depending on the kind of approval we got from the panel, additional costs may or may not be brought forward in a future hearing for consideration of a future panel. So it would only be the forecast costs that would be subject to an "approval" of this panel. 426 MR. BETTS: Thank you. 427 MS. HALLADAY: Ms. Newland, if you can help me with the relief that you are requesting of the Board, and I'm going backwards now. You want acceptance of $6 million of capital costs for the test year. Are you saying that, realistically speaking, we're now in June; I understand you've worked out an arrangement for reply to come sometime in July, for us to have the final case settled for this particular case. Being realistic, even with the speed of light that this Board is not known to proceed at, to have a decision out by August, your test year ends in September, the end of September. Are you saying that you're going to -- you want the assurances of the Board that -- some sort of approval in principle that you're going to spend $6 million in September on the DPWAMS in this test year? Because that's what you're asking. 428 MS. NEWLAND: We struggled with this. At some point when we were revising and updating our evidence, we put the question to the people involved in this project and said, you know -- and obviously the later we are into the test year, the less likely that it will be $6 million. But as soon as we have a green light, there is much -- I mean, the project team is up and running, it's been working all along on this project, so as soon as we get a green light from this panel, they will just continue the work that they've been doing all along, so it's not as if we have to start from a standing stop. 429 Whether we can spend $6 million if we get a decision from you in August, I can't answer that. I agree with you that there is some question whether that is achievable. I can't really respond. 430 MS. HALLADAY: Now, originally you wanted to put 5 million in rate base, thereabouts. 431 MS. NEWLAND: That's correct 432 MS. HALLADAY: And now you are asking for approval of expenditures for 6 million even though it's not going to be put in rate base for this year. 433 MS. NEWLAND: It was originally -- the expenditure for 2002 was originally 13 of which 5 was going to -- we anticipated closing 5 to rate base. We now no longer expect to close anything to rate base in this fiscal year but we do expect, as the evidence says, to be able to spend -- to be able to spend -- to spend $6 million on the project. 434 MS. HALLADAY: Okay. Assuming that that's the case, my next question is, you want approval of the DPWAMS project in principle. Without talking to my fellow panel members but trying to explore this, I personally have nothing against the DPWAMS project in principle so therefore to say it's in principle, I think that -- and I don't think that any of the intervenors say that if in fact this program will do what it's supposed to do and is so critical to it, then in fact we are against it in principle. In fact, we encourage the company to seek solutions to the problems that they've got. So I don't see how that principle is going to help you. 435 MS. NEWLAND: And -- 436 MS. HALLADAY: That approval in principle. 437 MS. NEWLAND: And it won't. Alone it will not, and that is why -- 438 MS. HALLADAY: Then we get to the next point. 439 MS. NEWLAND: Yes. 440 MS. HALLADAY: "An indication that the reasonable costs of the project will be recovered from ratepayers." Well, I think we can all agree that if the costs have been reasonably incurred and that you've satisfied the Board that they have, we're allowed for them to be recovered from the ratepayers. We always have, that's our principle, that's what we do. So I think that without going further, I can give you that assurance right now. 441 Okay. Then you get into the methodology, and the problem that I have with that, giving you those assurances now, is that we don't know what the rate methodology is going to be in the future years. We have a cost of service, I understand, for 2003. There may or may not be a comprehensive PBR. We have a targeted O&M PBR, which, as I read the evidence, some of the benefits of this DPWAMS is covered by your targeted O&M PBR, in which case we are going to have to sort out that relationship between why should it be included in rate base -- closed rate base when in fact the company is going to be able to -- the shareholder is going to get the benefits of the targeted O&M. 442 So it seems to me as though there is a whole issue in future years that will have to be dealt with in future years, how this project goes; right? 443 So to my mind, then we get to this approval of the $6 million in capital expenditures, and normally we will approve the capital expenditures if they are used and useful. That's our test for closing it into rate base. We don't usually approve expenditures in principle in the future as far as I understand, so I guess I'm concerned that if there is a green light for you to spend $6 million on whatever expenditures there are without testing, in fact, whether they are reasonable costs that have been incurred and whether, in fact, they are used and useful before they flow into rate base, I don't know what kind of comfort I can give you and I don't know if I -- I apologize, I haven't spoken to my fellow panel members. But if you've got anything to add, can you help me with this? 444 MS. NEWLAND: I'm not sure that I can because we have struggled with some of the issues that you've raised that -- ourselves internally, because part of the reason we're here is because of the unique confluence, if I can put it that way, of timing and circumstances which were caused by having a multi-year capital project, that's one issue, spread over a period of time where we're also considering changing the methodology under which rates are determined. So that does cause uncertainties as to how those costs will be treated. 445 In terms of your question about the $6 million, I think we could happily remove that bullet from our evidence. It's -- it really, in my submission, falls out of what we're asking for in bullet B, at the top of page 4-5 of our updated evidence. 446 So if we had an indication that the forecast costs of the DPWAMS project were reasonable and would be recovered from ratepayers under whatever methodology is in place in the future for setting rates, then I think that would be enough for us to proceed with the project. 447 What we're setting out in C, really, just falls out of that approval, in my submission. 448 MS. HALLADAY: So if we tell you what is, in my mind, a basic regulatory principle, that if the costs have been reasonable, project -- and the costs have been reasonably incurred, that they will be collected from ratepayers, then that's satisfactory for you? 449 MS. NEWLAND: No, Madam Chair. What we would ask you to do is look at the project as we have described it in our evidence and say, this project is required, your solution to the problem is -- we agree with your approach to solving the problem and the forecast costs of those -- of that project will be recovered from ratepayers. 450 MS. HALLADAY: Okay. And that's the relief that the company is requesting, that level of relief? 451 MS. NEWLAND: Yes, it is. 452 MS. HALLADAY: Thank you. 453 Mr. Betts has one more question. 454 MR. BETTS: I just wanted to get clarification on one point that you made. You certainly indicated early in your presentation that this was not a discretionary expenditure. If this panel were not -- did not find in favour of proceeding at this time, what would the company do? 455 MS. NEWLAND: May have a moment? 456 I think that's a question that Ms. Holder can answer, and I would ask you to accept her answer. 457 MS. HOLDER: Sorry, I'm not part of the planned panel but this project does fall under my direction. 458 Everything that you've been expressing is a concern for us as we are trying to figure out how do we move forward in incentive regulation and how do we ensure that, at the end of the day, the shareholder isn't left holding the bag and all the benefits are going to the ratepayers. We think there's plenty of benefits here to justify the project and therefore the ratepayers should be paying for it. 459 So what would we do if you said no? We haven't come to a firm answer on that. Clearly, we'll have to look at some other alternatives. I think we recognize internally that it is important for us to move forward on dealing with the issues that the DPWAMS system would deal with. If you say no, I suspect we will not spend the money on the project. But I don't know what the other solution is at this point in time. 460 MR. BETTS: If I can follow up, if we simply say no that we will not deal with it at this time, what would the company position be? 461 MS. HOLDER: It will -- I think it would probably be very similar. I think we'd still have to go back and see what are the other -- what other possible solutions there may be to dealing with the issues which will have a cost to them, no question, but potentially a cost that maybe has less shareholder risk. 462 MR. BETTS: And that analysis hasn't been done yet? 463 MS. HOLDER: No. It's just something we've started to put our minds to, as a matter of fact, I think last week or the week before last. It's just something we've been really -- as time has progressed, we realize we're getting ourselves deeper and deeper into the situation and we haven't come up with an answer yet. 464 MR. BETTS: So you haven't investigated other alternatives yet? 465 MS. HOLDER: No. That's what we are just starting to look at now. We're starting to investigate. 466 MS. HALLADAY: But you are asking us to approve the one solution that you've suggested in this rates case without considering the other alternatives for that particular problem? 467 MS. HOLDER: No, I'm not sure that's quite the right way to characterize it. 468 MS. HALLADAY: That's fair enough. 469 MS. HOLDER: We believe the DPWAMS is the right solution. The system is the ideal solution and the most economic solution to dealing with these issues. There are other ways to deal with them; we just don't know which one of those other ways we would deal with. They will have a cost to them. There may be a difference in the short-term cost versus the long-term. We may have to do the bridging until we can get a decision from the Board in our 2003 case, if that's what happens. So we don't know what we are going to do in this grey period. 470 MS. HALLADAY: Ms. Spoel, you had a question. 471 MS. SPOEL: Ms. Newland, you analogized to a leave-to-construct -- at least you made a comment that because there's no leave-to-construct process -- I thought at the beginning you made some comment about the fact that there's no leave to construct for this sort of thing, it was a unique type of project and therefore the company is seeking these kinds of approvals in this case, I guess, in part, because there isn't really any other way to do it in advance; is that fair? 472 MS. NEWLAND: I agree with that. I believe it was Mr. Thompson, actually, who made the point. But I do agree with the point. 473 MS. SPOEL: In any event, I just wanted to explore with you one thing. If this was a project that fell within the Board's jurisdiction for a leave to construct, I think you would get your approval, the approval in principle that it's required -- that it's an appropriate solution to whatever the problem is and that the costs are reasonable. But I don't think you get a guarantee in those cases that the costs will be recovered from ratepayers. 474 So I think you are actually asking us to do something more here than you would get in a regular capital project that required a leave to construct. 475 MS. NEWLAND: I think that's a fair conclusion. 476 MS. SPOEL: If you built, say, a pipeline that turned out not to be useful or used, you wouldn't be able to recover the costs from the ratepayers, regardless of the fact that it had received -- you had received leave to construct in advance; is that right? 477 MS. NEWLAND: What you said is right, and I think I would reply this way: We are seeking a higher level of confidence than we would get from a leave to construct, but we wouldn't feel, I believe, it necessary to get the same level of confidence with respect to a pipeline project, for example, than with respect to an IT project. 478 And I think the reason we are seeking a higher level of confidence with respect to an IT project is simply because of the history of those types of projects. 479 MS. SPOEL: The difficulty in managing the costs? 480 MS. NEWLAND: I'm sorry. I didn't catch that. 481 MS. SPOEL: The difficulty the company has had in managing the costs of those projects in the past? 482 MS. NEWLAND: No, I don't believe that's what's driving our request, and I do recognize there have been difficulties in that respect. 483 But I don't believe that's driving our request. I believe what's simply driving our request is the magnitude of the dollars that we would be required to commit up front and the need to have some sense that these dollars will be recovered. 484 And given the history of IT projects, we don't have that confidence right now. 485 MS. SPOEL: Thank you. 486 MS. HALLADAY: One moment, please. 487 [The Board confers] 488 MS. HALLADAY: Thank you very much for your submissions. 489 What the Panel has decided to do is we'll consider this over the lunch break, so we'll have Mr. Janigan proceed on with his cross-examination of this panel, if that's satisfactory, so we can keep on with that. 490 MS. NEWLAND: If you could just give us a moment to trade places. Thank you. 491 MS. HALLADAY: Certainly. No problem. 492 MR. FARRELL: I think before Mr. Janigan recommences, we can answer some of the outstanding undertakings, Madam Chair. 493 MS. HALLADAY: Thank you, Mr. Farrell. 494 MR. FARRELL: Is that okay with you, Mr. Janigan? 495 MR. JANIGAN: That's fine. 496 PROCEDURAL MATTERS: 497 MR. FARRELL: As I mentioned earlier this morning, Undertaking G.2.2 included the calculation of a notional deferral account for the October through April period of the current test year. 498 And I'll just hand Mr. Small a document and ask him to confirm that that's the case, and then it can become an exhibit. 499 Mr. Small, I've handed you a document entitled 2002 "Notional Deferral Account." Was that prepared by you? 500 MR. SMALL: Yes, it was. 501 MR. FARRELL: And does it cover the period from October 2001 through April 2002 using the same methodology as the notional deferral account for the previous year? 502 MR. SMALL: That's correct. 503 MR. FARRELL: Can we have a number for that. I've lost track, sorry. 504 MR. MORAN: Madam Chair, I would just assume we'd continue with the undertaking numbers. 505 MS. HALLADAY: That's fine. 506 MR. MORAN: G.2.2. 507 MR. FARRELL: I have copies for the Panel and Board staff and the public record and copies with me. 508 EXHIBIT G.2.2 DOCUMENT ENTITLED 2002 "NOTIONAL DEFERRAL ACCOUNT" 509 MR. FARRELL: There was -- excuse me for a moment. The Undertaking No. G.2.1 yesterday was to provide the value of the first Alliance contract, and in 1996, that was the precedent agreement for 50 million cubic feet a day. 510 And I believe Mr. Brennan can provide the answer to Mr. Warren now. 511 MR. BRENNAN: Yes, if you go back and look at the Exhibit I, tab 11, schedule 27, which I believe is the VECC interrogatory, in the attachment that we've been looking at earlier at page 4 of 7. This is the comparison of route alternatives that was filed in RP-2000-0040. 512 Just to explain how I arrived at the number, I took the toll, the base toll of $1.01 in the Alliance -- well, in fact, it was an assumed toll, because there were no tolls at that particular time. It was what, I guess, was estimated to be the toll at the time. And I deducted the adjustments of -- amounted to 7.2 cents. 513 I then took the 50 million cubic feet a day that was part of the PA at November 1996 and multiplied that by 365, and the number I came up with under that scenario is $18.3 million. That would be the value of the Alliance capacity as we saw it in 1996 for the 50 million a day. 514 MR. FARRELL: Then, Mr. Brennan, would you take that number and multiply it by 15 if you wanted the value over 15 years on the same basis? 515 MR. BRENNAN: Yes. If you like, I can give you that number. That number would be $274,500,000. 516 MR. FARRELL: Thank you. 517 We also had an undertaking -- I'll just turn up the number, Madam Chair, G.2.3, which was the exchange rate effect on TransCanada's costs, and I think Mr. Brennan can answer that and respond orally in providing a response to that undertaking. 518 MR. BRENNAN: Yes. 519 There's two components of the exchange rate with TransCanada. 520 The first component is the one I mentioned yesterday, which is the service that TransCanada contracts from Great Lakes, and it's called Transportation by Others, or TBO. That amounts to approximately $170 million U.S. per year, and if you look at what the cost of the exchange rate or the exchange costs in that, based on the exchange rate, TransCanada's 2001 exchange rate of 1.54665, the exchange rate on that is -- amounts to a total of $93 million. So the total, if you like, in Canadian dollars would be approximately $260-some-odd million. 521 The other component is the long-term debt that TransCanada has in U.S. dollars. That's roughly about $1.4 billion, and the interest on that is approximately $125.7 million. 522 And so the exchange rate on that is a further $68.7 million. So the total of those two numbers, the $93 million and the $68 million amounts to about $161.8 million. 523 MR. FARRELL: Thank you, Mr. Brennan. 524 Just to make sure the record is clear, when you called it TBO, that's what TransCanada calls it in their cost of service. 525 MR. BRENNAN: That's correct. 526 MR. FARRELL: And the Great Lakes rate is actually a T-4 rate. 527 MR. BRENNAN: I believe that's correct, yes. 528 MR. FARRELL: I'll ask Mr. Janigan if he will take a response to the contractual question about IOS from me. 529 MR. JANIGAN: That will be fine. 530 MR. FARRELL: I should say that the provisions for IOS are included in Alliance's tariff in the FT toll schedule but they are provided for in the -- both the precedent agreement that was signed in 1996 and in the transportation service agreement that was signed in -- that is dated, rather, March 4, 1999. 531 So the first reference is in the response, in this case, at Exhibit I, tab 2, schedule 26, which is the response to CAC interrogatory number 26. There is a copy of the precedent agreement between Alliance Pipeline Limited Partnership, which is the Alberta limited partnership, and ECG, and attached as schedule D to that precedent agreement is a document entitled, "Toll Principles." And in paragraph 12, it says, and I quote: 532 "In the toll for authorized overrun service will be the commodity charge plus fuel for the primary term and any extension of the primary term of the transportation service agreement." And the commodity toll is zero. 533 Then a similar provision is included in the precedent agreement, same exhibit, for Alliance Pipeline Limited Partnership. Again, in this case, it is schedule C, it's entitled, "Rate Principles," and paragraph 12 reads: 534 "The rate for authorized overrun service will be the negotiated commodity charge plus fuel for the primary term and any extension of the primary term of the transportation agreement." And then, "The commodity" -- I'm tripping over my own tongue. "The negotiated commodity charge is zero." So it's as Mr. Brennan said, AOS is fuel only. 535 Then those same schedules are attached to the transportation service agreements which are not physically an exhibit in this case but are cross-referenced in the response to CAC interrogatory 27. They were filed in the RP-2000-0040 case as a response to CEED interrogatory number 1, and in that case it was Exhibit I, tab 4, schedule 1. The text is identical except that in some cases, there is a capital letter on the word "primary" and a capital letter on the word "term," but otherwise they are identical. So those provisions provide for AOS for the life of the contract and any extension of it. Thank you. 536 MS. HALLADAY: Thank you, Mr. Farrell. 537 MR. FARRELL: I'm not sure whether -- Mr. Brennan, did you have a chance to check on the question you were asked about the pipeline projects that would take gas away from Chicago, during the break? 538 MR. BRENNAN: No, I haven't, but I understand that we will be -- take a look at that. I know there are some. Crossroads was one; there are other ones. We can provide a complete list. 539 MR. FARRELL: Okay, we'll come back to that. 540 Then there was some discussion just prior to the break about exchange rate forecasts and so on, and I believe Mr. Janigan was asking about whether there was any outside forecasts or whatever. So over the break we -- Mr. Ladanyi checked the exhibits from EBRO 495 and we have and would like to file a copy of -- from that record of Exhibit C.2, tab 2, schedule 1, page 2 of 14. It's entitled, "Summary Table - Canada and U.S. December 1996," and it shows the actual values for a number of things, including the exchange rate for 1995 with a forecast. And I believe it was a consensus forecast for the years 1996 to 2000, plus 2003 and 2007. 541 MS. HALLADAY: Mr. Farrell, that's in response to what undertaking? 542 MR. FARRELL: It wasn't in response to an undertaking, Madam Chair, it was a discussion. I think Mr. Janigan's question was, and I am paraphrasing here, did you have any outside forecasts of exchange rates what was -- around the November period of 1996, and this is what we found from that previous case. 543 MS. HALLADAY: Great, thank you. 544 So, Mr. Moran, this gets an exhibit number. 545 MR. MORAN: F.3.4. 546 EXHIBIT NO. F.3.4: OUTSIDE FORECAST OF EXCHANGE RATES FOR THE PERIOD OF NOVEMBER 1996 547 MR. FARRELL: I'm sorry, I didn't hear the exhibit number. 548 MR. MORAN: F.3.4. 549 MR. FARRELL: Thank you. 550 MR. FARRELL: So I think for this panel, I think that leaves the one undertaking which is the pipeline projects taking gas away from Chicago, Madam Chair. 551 MS. HALLADAY: Thank you, Mr. Farrell. 552 MR. JANIGAN: And just with respect to that undertaking, I want to emphasize that '96 is the operative time. 553 MR. BRENNAN: Yes, thank you. 554 CONTINUED CROSS-EXAMINATION BY MR. JANIGAN: 555 MR. JANIGAN: Thank you. 556 Panel, I wonder if you could turn up once again the Otsason memo which is part of CAC interrogatory 63. I want to revisit briefly the comments under the pros on page 2 of his memo dealing with the utilization of the Link pipeline, that, in fact, the Alliance will allow us to fully utilize our capacity on the Link pipeline. 557 Now, I believe you indicated yesterday that ratepayers benefit from third parties contracting on the Link since tolls will be lower? 558 MS. HOLDER: If there is excess capacity on that pipeline, and when I talk about excess capacity, I talk about the excess capacity that Niagara Gas Transmission may have on that pipeline. 559 If there is increased utilization, i.e., another party comes along and signs for transportation on that contract, then the benefit of that contract will be shared among all current shippers so that it will drive the toll down. 560 MR. JANIGAN: Now, similarly, if the system is under-utilized, the shippers are on the hook for higher tolls. 561 MS. HOLDER: The -- that would only occur -- 562 MR. FARRELL: I just asked him whether he meant higher unit tolls. 563 MR. JANIGAN: Yes. 564 MS. HOLDER: That would only occur at the termination of any of the long-term contracts that have been signed with Niagara Gas Transmission, so that would not occur until at least, I believe, another eight years. 565 MR. JANIGAN: And -- 566 MS. HOLDER: It couldn't possibly occur until that time. 567 MR. JANIGAN: Now, is the Vector pipeline fully utilized? 568 MS. HOLDER: I don't know that. 569 MR. BRENNAN: Certainly the first tranche. 570 MR. FARRELL: I think he means the pipeline, per se, not your capacity. 571 MR. BRENNAN: No, I don't know. 572 MR. JANIGAN: I wonder if you could undertake to particularly consult EI's annual report, which indicates that Vector is expected to continue to operate below capacity for several years. I wonder if you could consult that and confirm that that -- 573 MR. FARRELL: We have that. That was a letter that we got advanced notice from Mr. Schuch that -- 574 MS. HOLDER: I have no reason to dispute this. 575 MR. MORAN: Madam Chair, just for the purposes of the record, should we mark this document now as an exhibit? F.3.5, excerpt from EI's 2001 annual report. 576 EXHIBIT NO. F.3.5: EXCERPT FROM EI'S 2001 ANNUAL REPORT 577 MR. JANIGAN: Now, does that under-utilization of available capacity on Vector impact Vector's tolls such that the tolls will be higher as a result of the under-utilization of the Vector pipeline? 578 MR. BRENNAN: No, it does not. We have a negotiated toll, and it's capped at 25 cents. 579 MR. JANIGAN: That presumably is for the entire -- is that for the five-year period or for the entire period? 580 MR. BRENNAN: It's for -- in fact it's a toll that normally you would have to pay for the 15-year contract, but, in fact, it's a benefit to our ratepayers to the extent that we have the put-call option that allows us to put that capacity back to EI. 581 So effectively, we are getting a much lower toll than otherwise you would have been able to get if you just went to Vector an contracted for a five-year term, assuming you could. 582 But to answer your question, that 25-cent cap is for the life of the contract, say, the 15 years, if you like. 583 MR. JANIGAN: I wonder if I could deal with point 4 of Mr. Otsason's memo, where he indicates: "Alliance passes through areas such as Chicago and Michigan with active gas markets that will enhance our ability to provide transactional service and to take advantage of arbitrage opportunities." 584 I believe Mr. Warren yesterday canvassed with you the fact that ECG's shareholders get a portion of the revenue from transactional services once a particular forecast is met; do you agree with that? 585 MS. HOLDER: Actually, we get -- the current methodology is 10 percent of the forecast that's approved by the Board and 25 percent of any amount over that forecast has been a historic -- sorry. We just changed that in ADR. 586 So I believe for this fiscal year -- so that would have been in the rules in place, by the way, at the time that this was -- letter was written. Today -- 587 MR. FARRELL: The settlement is 90/10. 588 MS. HOLDER: 90/10 for all. 589 MR. JANIGAN: Now, with respect to the second part of Mr. Otsason's comment in terms of taking advantage of arbitrage opportunities, I would assume that you could only take advantage of those arbitrage opportunities by doing trades in markets if they were liquid. 590 MS. HOLDER: I don't -- I think arbitrage for the sense of transactional services in a utility is somewhat different than arbitrage for a marketer. 591 We do have arbitrage opportunities within Dawn, for instance, though it's not even liquid, because of the business that we're in. 592 MR. SMALL: And we've talked about in the past that in -- the possibility may exist that we would purposely leave TransCanada capacity empty, pay the -- you'd pay the demand charge, but there could be an opportunity to buy gas at Dawn, for example, that would be cost effective. 593 That's, in the sense, an arbitrage situation with respect to our purchase supplies. 594 MS. HOLDER: But you don't have to have a liquid market in order to have that transaction. You can do that transaction if there was gas there on any given day. If the gas isn't available, you wouldn't do that transaction. 595 MR. JANIGAN: Presumably with the case of the Alliance pipeline, with the gas coming into Chicago, it would have to be a liquid market there, would it not, in order to have the arbitrage opportunity? 596 MS. HOLDER: I would say there is a liquid market in Chicago once all these pipelines were built, so I would agree that that statement is true. I'm not sure that we need to have liquidity in order to have an arbitrage opportunity. 597 MR. FARRELL: And also just to -- the paragraph that Mr. Janigan referred to is not limited to Chicago. Mr. Otsason also wrote, "and Michigan," or, in other words, along that path. 598 MR. JANIGAN: Okay. I'd like to deal with point 2 of Mr. Otsason's letter that Alliance would comprise the major segment of the alternate transportation path. And I assume that Link is also similar to the Alliance pipeline in that it offers the company an alternative to TCPL; correct? 599 MR. BRENNAN: I'm sorry, could you repeat that again. 600 MR. JANIGAN: I would assume that Link is also similar to the Alliance pipeline in that it offers an alternative to TCPL. 601 MR. BRENNAN: I would disagree in and of itself. The Link pipeline only gets you to the middle of the St. Claire River. You need additional pipelines to get you back to a supply basin which is what you have with TransCanada. It gets you back to the western Canadian symmetry basin. So Link, in and of itself, no, I don't think you can say that. 602 MR. JANIGAN: It needs other components to make it that alternative. 603 MR. BRENNAN: To have an alternative to TransCanada, correct. And assuming -- if you want to compare TransCanada, assuming you're going back to the same basin, for example. 604 MR. JANIGAN: I wonder if you could turn up VECC interrogatory response number 26 which is at Exhibit I, tab 11, schedule 26. 605 MS. HOLDER: Yes. 606 MR. JANIGAN: I have to get it. 607 MR. FARRELL: The reason we don't -- just a moment, Madam Chair, the reason we don't have that particular exhibit is it's not an exhibit listed under this issue, this deals with the Link pipeline. 608 MS. HOLDER: I do have a copy with me. 609 MR. FARRELL: Okay, they have a copy. 610 MR. JANIGAN: And a note here that you indicated that the company still believes that the Link pipeline provides a valuable alternative gas supply and further, that the company is continually evaluating its need to buy gas to meet the demands of the marketplace and calculating the least alternative. The company has purposely not contracted for any supply arrangements to fill the Link pipeline. Every month, the company determines whether or not gas must be acquired to satisfy demand or storage targets. Evaluation of a price is made between buying gas and moving it through the Link or buying gas and moving it through Vector or whether or not the gas is available at Dawn. The company always attempts to buy the least cost alternative. 611 I take it that because of this desire to meet demands with the least cost alternative, we have the utilization rates that are listed on the next pages. And I believe you have a total contract capacity of 75 million cubic feet a day. The utilization in fiscal '97 was 22.21 percent, in 1998 was 13.86 percent, in 1999 was 2.8 percent, in 2000 was 22.6 percent, and 2001 was 10.06 percent. Am I correct in that assumption? 612 MR. SMALL: That's correct. 613 MR. JANIGAN: Now, will ECG be using the same principle of using Alliance-Vector pipelines if they are only generating the least-cost option to supply demand needs when we look at the utilization for Alliance-Vector -- Alliance-Vector 75 million cubic feet per day capacity and the second tranche of Vector capacity? 614 MR. SMALL: The response here when we were talking about the Link and whether or not moving gas for Vector, we were thinking of the second tranche of Vector. So the extent would be that the first tranche of -- the Alliance pipeline in the first tranche of Vector would be full, and then dependent upon the demands, whether or not we would be filling the second tranche and looking at the price, various alternatives in the second tranche. 615 MR. JANIGAN: And you would be looking at the least-cost options similar to the same way you have been looking with the Link pipeline? 616 MR. BRENNAN: Yes, best cost. 617 MR. JANIGAN: Now, according to the IR response, VECC IR response number 27, you provided a monthly breakdown of the utilization of the Alliance and Vector capacity in response to part D of the question. 618 MR. BRENNAN: Yes, we have that. 619 MR. JANIGAN: And according to that information, Vector capacity of tranche 2 is utilized at an average of a 62.6 percent load factor. And as late as August 2001, the utilization was at 25 percent. 620 Now, is this due to the fact that alternatives are available to ECG that are less expensive than using this capacity? 621 MR. BRENNAN: The utilization in August of 2001 of 25 percent was due to -- and Mr. Small might correct me here if I'm wrong, but my understanding is that it was probably cheaper for us to buy gas at Dawn as opposed to buying gas in Chicago and moving it on to Vector. 622 MR. SMALL: Sorry, just -- and what we would do is we -- looking at that price for those supplies at Dawn, we would take into consideration the Vector transportation costs. So the delivered costs at Dawn plus the sunk Vector costs, if you will. 623 MR. JANIGAN: I wonder if I could proceed to the third reason that you've cited for electing the Alliance option over TCPL, and that is that it was cited that expansion of capacity would be cheaper to install since it would be carried out by compression. 624 MR. BRENNAN: Sorry, are you back at the evidence again? 625 MR. JANIGAN: That's right. Sorry. 626 MS. HOLDER: That's where I went, to Mr. Otsason's letter. 627 MR. JANIGAN: That's okay. Actually, I misread my notes on that point. 628 MR. FARRELL: This is Exhibit A, tab 14, schedule 4, paragraph 8 at the bottom of the page 3. And actually, Mr. Janigan's reference is at the top of page 4. 629 MR. JANIGAN: I just want to explore that concept a bit. 630 In the IR response to VECC in this proceeding number 27, which is the interrogatory that you just left, you attached the CEED response number 2 that was provided in the previous proceeding. And in that response, it states some information pertaining to the TCPL Nexus project. 631 I just want to read from that: "During the summer of 1996, TransCanada was developing a project to deliver gas from western Canada to eastern markets through a new high-pressure pipeline. The project was known as Nexus. The project was developed as an alternative to the Alliance pipeline project, which was proposing to move gas from northeastern BC and northeastern Alberta to markets near Chicago through a high-pressure pipeline." 632 Now, I take it that that's an accurate description of Nexus as it existed in '96? 633 MR. BRENNAN: Yes, I believe it does. 634 MR. JANIGAN: Okay. And it was a new high-pressure pipeline, and I presume expansions on that pipeline were to take place by compression? 635 MR. BRENNAN: I'm sorry, no. It was a new pipeline, high pressure. The TransCanada system, a good portion of their system from Empress, I believe, over to around Emerson operates at something around 800-and-some-odd pounds; whereas, the northern Ontario system operates at something over a thousand pounds. 636 With this line on the western section, what I call the "western section" between Empress and Emerson, they wanted to increase the pressure well above the 800 pounds, is my understanding. 637 I can't remember unless -- I have the brochure here for the Nexus pipeline. I don't know whether it tells me what the pressure is, but it was... No, unfortunately it doesn't tell me what pressure. But the idea was it was a high -- something considerably higher than was existing at the time. 638 MR. JANIGAN: So in effect, it would be the initial construction of the line as a high-pressure line, but it wouldn't be expanded by further compression; is that -- have I got that right? 639 MR. BRENNAN: After you complete the 2.3 Bcf a day of Nexus? 640 MR. JANIGAN: Yes. 641 MR. BRENNAN: It could be compression. Once you build a line, then the next -- typically the next piece of expansion would be compression. 642 But it would depend on how they were integrating it with their existing system as to whether or not it included more loop as opposed to just compression. 643 MR. JANIGAN: So if we were looking in '96 at the comparison between the Nexus and the Alliance lines, if Nexus went ahead, you would have been able to carry out expansion of Nexus in the same fashion that you would have been able to carry out expansion on Alliance with compression? 644 MR. BRENNAN: Potentially, again. I don't know how they would integrate the two, whether it would require some additional pipe as well. 645 MR. FARRELL: I think the point that Mr. Brennan is making is the word "integration." 646 Nexus wasn't a stand-alone, single pipeline running parallel to TransCanada. 647 Just describe the route of it, Mr. Brennan, from that brochure. 648 MR. BRENNAN: I will try to. 649 It was a pipeline that paralleled the -- I was incorrect. It starts off in Empress, and it goes to Emerson, which is near Winnipeg. And then in this brochure, it shows it, and I was incorrect. It doesn't go through northern Ontario. It goes through -- parallels the Great Lakes system and then comes back into Canada near Dawn, which is parallels their TransCanada's St. Claire to Dawn route. 650 And then extends all the way up --parallels the Union Gas system and continues on over to Montreal. 651 MR. JANIGAN: When you say "parallels it," I take it that means it's a new line. 652 MR. BRENNAN: I'm sorry? 653 MR. JANIGAN: When you say "parallels it," that means it's a new line, is it? 654 MR. BRENNAN: It's a new line but it would be probably close to the right-of-way of the existing pipeline. 655 MR. JANIGAN: Okay. Thank you. 656 MR. BRENNAN: Now, I have to say that that -- this is one of the earlier proposals of Nexus, I think, but there is another version that changes later on which only went to Emerson or Winnipeg and then I think it went down through Chicago, and that was called the -- or tied into something called the Viking Voyageur. 657 MR. JANIGAN: The description I think is probably -- we will be confused by a diagram. 658 MS. HALLADAY: Excuse me, Mr. Janigan, would you mind speaking up a little bit. The panel didn't hear you. 659 MR. JANIGAN: I'm sorry. 660 I wonder if I could move on to another area dealing with Exhibit A, tab 14, schedule 9. 661 MS. HALLADAY: I'm sorry, Mr. Janigan, what was that reference? 662 MR. JANIGAN: Exhibit A, tab 14, schedule 9. 663 MS. HOLDER: Yes. 664 MR. JANIGAN: And in point number 2 on schedule 9, you note that in 1999, you established a put-call arrangement for the Vector capacity that was signed on to in 1999; is that correct? 665 MR. BRENNAN: You're on page 2 of 17 at the top of the page; is that where you are? 666 MR. JANIGAN: I'm at point number 2 on schedule 9. Unfortunately you've reproduced it in my -- 667 MR. FARRELL: Paragraph 2, I think. 668 MR. BRENNAN: Paragraph 2 and the -- 669 MR. FARRELL: Bullet point at the top of page 2, the one that's garbled in the unamended version. 670 MR. BRENNAN: Sorry, what was your question again? 671 MR. JANIGAN: You established a put-call arrangement for the second tranche of Vector capacity in 1999? 672 MR. BRENNAN: Yes, that's correct. 673 MR. JANIGAN: Okay. And just so I understand the put-call option, in five years time, ECG has the right to put the Vector capacity to Enbridge Inc. and it would be likely that you would do that if ECG could get a better deal than Vector. Have I got those two points correct? 674 MS. HOLDER: Sorry, the five-year term was there partly to reflect our concerns about the merchant function and not understanding exactly where we would be going at that time. 675 MR. JANIGAN: But -- 676 MS. HOLDER: Recognizing the time frame for this was much later than the signing of the Alliance contract. 677 MR. JANIGAN: But in five years' time, you -- you are able to put that Vector capacity to EI and I assume that you would do that if -- let's assume that the Vector deal does not turn out to look so good in five years' time. You are able to put that capacity to EI and have them take it on. 678 MS. HOLDER: Yes, if it doesn't make economic sense for the utility to keep that capacity, we can put it back to EI. 679 MR. JANIGAN: Okay. 680 MR. BRENNAN: And the analysis would be done probably prior to that. Obviously we have to give notice to EI of our intention, so there would be a further analysis that would have to be done at that time, say two years. So I would think sometime in 1993 -- or 2003. 681 MR. FARRELL: Just to clarify the timing, the put-call is not part of this record but it was part of the Exhibit I, tab 4, schedule 1, in RP-2000-0040 which is referred to in response to CAC number 27, and the notice is at least 30 days prior to the third anniversary of the in-service date of the Vector system. So it would be three years from December 1, 2000 was the notice period. If put or if called, the agreement says that the transfer would be made on the fifth anniversary. 682 MR. JANIGAN: Now, if the Vector capacity was, in fact, the best thing going to the marketplace, would there not be a strong likelihood that EI would call upon this Vector contract within the appropriate time frame? 683 MS. HOLDER: They have that right, yes. 684 MR. JANIGAN: Okay. So -- 685 MS. HOLDER: They would also have to utilize their current capacity first but -- 686 MR. JANIGAN: In either of these two scenarios, then, it is likely that the contract would terminate in five years; either the Vector capacity is better than the market or the Vector capacity is worse than the market. 687 MS. HOLDER: I'm not sure I could say that positively. I think it would depend on the whole scenario. I mean, I think obviously that reality is there that we can put it or they can call it, and if the circumstances are right for either party, that may happen. But it's also going to be based upon a lot of factors at that time. So I'm not willing to say at this point that it would definitely go one way or the other. It could stay exactly as it is. 688 MR. JANIGAN: But presumably when the -- if the choice is one which ECG has to make by making a put upon EI, that would be done on the basis of the best interest of the ratepayers and on the basis of the fact that that capacity would be cheaper elsewhere. 689 MR. BRENNAN: Absolutely. 690 MR. JANIGAN: Now, when ECG entered into the second tranche on Vector, the system wasn't operating at that point, I assume, to be operating at full capacity. 691 MR. BRENNAN: I'm sorry, which system are you referring to? 692 MR. JANIGAN: Vector. 693 MR. BRENNAN: When we entered into the second tranche? 694 MR. JANIGAN: Yes. 695 MR. BRENNAN: Vector wasn't even operating at that time. 696 MR. JANIGAN: And you would have known that not all of the available FT capacity was formally committed at that time. 697 MR. BRENNAN: I'm sorry, was your question that all the capacity of Vector was not fully contracted at that point in time? 698 MR. JANIGAN: That's correct. 699 MR. BRENNAN: Yes, I believe that's correct. 700 MR. JANIGAN: Now, is the post toll of Vector at the current time valued in the market at a premium or at a discount? 701 MR. BRENNAN: It depends -- changes probably day to day. I can't tell you what it is today. 702 MR. JANIGAN: And can you tell me anything about the prevailing trend about -- for that posted toll. 703 MR. BRENNAN: I would say I've seen it where it has been less than the posted toll. I think there may be a few times where it's above the posted toll or at the posted toll. 704 MR. JANIGAN: And overall, can you say anything in general terms about the trend? 705 MR. BRENNAN: I would say, in general, it's probably less than the posted toll. And one of the reasons for that, I think, would be -- at least my view would be that when Vector was proposed, there was the intent to have a new pipeline to take capacity away from Dawn, the Millennium project, and that to date has not materialized. 706 MS. HOLDER: I think in addition it's also fair to say that we've had unusual weather once again and the warm weather has caused the decrease in demand for natural gas within the Ontario market. And at Dawn storage levels are once again at all-time highs and therefore the demand to get gas to Dawn is not what it would be if we were having normal weather. 707 MR. JANIGAN: Could it also be due to the fact that, as the NEB would say, when capacity floats into the market, there's always some lumpiness of the onset of delivery? 708 MS. HOLDER: I think that's fair. 709 MR. JANIGAN: Now, in Exhibit A, tab 14, schedule 9, paragraphs 19 and 20. 710 MS. HOLDER: Yes. 711 MR. JANIGAN: You note that A&R subsequently withdrew the A&R-MichCon-Link route and that the A&R-MichCon-Link path was not a certainty in 1996 to be sure. 712 Now, based on these comments, obviously ECG did not get a firm commitment from this route from Chicago to ECG at a reasonable price prior to signing the Alliance deal; is that correct? 713 MR. BRENNAN: I think if you go to interrogatory CAC 63, appendix number 2. 714 MS. HOLDER: Exhibit I, tab 2, schedule 63, appendix 2. 715 MR. JANIGAN: Yes, we have it. 716 MR. BRENNAN: This is a letter from A&R at the time to another company outlining what it was prepared to do in terms of providing the service on A&R. And you can see at the first page, at the bottom last paragraph: "As I have indicated to you, A&R would be willing to provide two levels of proposed service at a rate of 11 cents," plus some other surcharges. So I guess that is what we received from A&R as a commitment on their part in terms of being able to provide service to move gas away from Alliance through to Dawn. 717 MR. JANIGAN: And that was what you relied upon in making the commitment to Alliance? 718 MR. BRENNAN: Well, we needed -- in order to commit to Alliance, we obviously had to have a way of getting the gas from Chicago over to Dawn, and this portion, when I say "this," the A&R-MichCon-Link, was the method by which we were going to do that. 719 MR. JANIGAN: And why did you walk away from this particular arrangement? 720 MR. BRENNAN: We did not walk away from it, A&R withdrew the offer. They withdrew it on February 13th, 1997, I believe. 721 MR. JANIGAN: And you didn't formally accept the offer then before that? 722 MR. BRENNAN: There was still some negotiations going on in terms of -- if you want to flip to the second page of that, of course, there is the whole issue of A&R having to build -- potentially building some facilities. But no, our intention was not to -- well, we did not walk away from it. Our intention was to proceed with that. 723 MR. JANIGAN: I'm just concerned with how firm the commitment was from A&R. On November 4th, 1996, presumably, was the letter that gave you comfort enough to sign the Alliance deal when it was capable of dissolving so quickly in February of the following year. 724 MR. BRENNAN: My understanding as to why A&R may have withdrawn this was that when they saw that that -- and Vector, Vector was certainly being thought about, if you like, in early 1997, whether it was actually called Vector at that point in time. And I think -- there was another question, but I think that A&R saw that what would appear to be a great deal for offering that service to Enbridge Consumers Gas, that they thought that maybe they could do better. 725 And I think that they had their own idea. They, I believe a little later on, had their own alternative which was the A&R supply Link. 726 So I think it wasn't so much that it was firm, that they thought that something was going to happen. Alliance was going to go, and so they thought that, maybe there's a better deal we can do out here without having to commit to Enbridge Consumers Gas. 727 MR. JANIGAN: Well, I can see their viewpoint, but from your standpoint, I don't understand why you would not wish to nail this down prior to making your Alliance pipeline commitment insofar as you needed a Link to get the gas from Chicago? 728 MS. HOLDER: I think we were in the process of nailing that down when we signed the precedent agreements for Alliance. So in our mind, this was a done deal. 729 MR. JANIGAN: But in fact, it wasn't a done deal. There was no contractual responsibilities that were assumed by A&R as a result of the ongoing transactions between you and A&R prior to signing the Alliance agreement. 730 MS. HOLDER: You were right. We did not have a signed contract, but we had no reason to believe that a signed contract was not going to happen. 731 MR. JANIGAN: Is there some reason why you did not proceed to get a contract signed with the MichCon-Link prior to signing the Alliance? 732 MS. HOLDER: Unfortunately, I would be only speculating on that. I assume, as we typically have done in all practices with agreements with our colleagues in the industry, we tend to take letters at much more face value than maybe other industries do. 733 MR. JANIGAN: I wonder if I could move on to paragraph 21 in your evidence. 734 MR. BRENNAN: Is this the reply evidence? 735 MR. JANIGAN: Yes, sorry, the reply evidence. 736 MS. HOLDER: Paragraph 21? 737 MR. JANIGAN: It indicates here that: "Mr. Stauft seems to think that in 1996, ECG's view of the natural gas industry was or should have been congruent with the view of the market as he sees it. He is wrong again. ECG's view in 1996 was that a gas distributor with a public utilities duty to serve, including in the context of gas supply, planning for, and procuring not only reliable supplies of system gas and gas for load-balancing purposes for all customers as well, but also reliable means of delivering direct purchase gas as well as system and load-balancing gas to ECG's franchise areas. ECG's view in 1996 as well as now is also a long-term view." 738 Now, if ECG's view is for the long term, as you state, for gas-supply procurement, why is it, according to your gas supply purchase evidence that you have at Exhibit A, tab 14, schedule 1, that you indicate that: "ECG's forecasted gas supply acquisition during the test year relies upon 69 percent of short-term sources"? 739 MS. HOLDER: I think -- I want to come back to this paragraph number 21 and -- because it is a very important one in my mind. And that is our view, that we are here to protect the ratepayer primarily from a reliability issue. 740 I think this really does point to the issue that we have, is we seem to be the only ones in town that do really care about the reliability. 741 And so when we talk about long term, we're talking about a long-term market that exists in our franchise area that we need to ensure is going to have adequate supply in very reliable terms for the long term. 742 We are investing capital in this business that's depreciated over 40 years in some cases. We need to be assured that -- we want to be assured that the market is going to be here and that there's a reliable supply getting it here. So from a long-term perspective, that's why we are here for the long term. 743 From a gas-supply perspective, typically all contracts we have signed for transportation, at least from supply basins to our franchise area, have been long term, 10 to 15 years. 744 Where we get into short term is on the gas purchases, the commodity, which you can buy in AECO, on NYMEX on a day basis, a month basis, a year or five years, whatever you wish, as well as some component of discretionary supply. So that when we have these bleeps in demand due to weather changes, that if we are ever so lucky again to see colder-than-normal weather, we can go out on a market and actually buy some discretionary supplies. Those tend to be short term as well. 745 So we buy some delivered supply short term, we buy some gas commodity short term, but there is no question we have a long-term view of this industry. 746 MR. JANIGAN: I wonder if I could ask you to turn up Exhibit I, tab 2, schedule 63. That's the famous Otsason memo. 747 It's indicated as one of the shortcomings of the Alliance option that acquisition of the gas supply for Alliance will be more complex than purchasing gas at Empress or NIT. Now, I had assumed that in 1996, and perhaps today, that it implies that there are greater gas supply problems relative to Empress or NIT associated with the Alliance pipeline. 748 MS. HOLDER: I think this reference was not to the lack of gas supplies, it was the complexity that was required to obtain that gas supply. So it was a knowledge issue, not a security supply issue. 749 MR. BRENNAN: Yes, the two services that I -- or the two components of the Alliance make it different from, say, the TransCanada system is the offering of AOS and being able to manage that AOS on a daily basis, as well as the heat content as well, which makes it somewhat more complex but certainly not unmanageable. 750 MR. JANIGAN: If I could proceed with some questions associated with who pays for the higher Alliance-Vector costs. And in your Exhibit A, tab 14, schedule 9, which is the reply evidence on page 3, you discuss the recovery of the Alliance-Vector costs. 751 In the evidence, you indicate that Alliance and Vector capacity costs and TCPL are recovered from all distribution customers; is that correct? 752 MR. BRENNAN: Yes, it's correct. 753 MR. JANIGAN: Okay. Therefore, all customers, in their bundled rates, recover the cost of upstream transportation; is that correct? 754 MR. BRENNAN: Yes. 755 MR. JANIGAN: Okay. Now, in paragraph 7, you note that Ontario bundled T-service customers get a transportation credit. Can you first tell me who an Ontario bundled T-service customer is? 756 MR. SMALL: That's any customer that's currently operating -- any direct purchase customer who is has a Ontario T-service arrangement. 757 MR. JANIGAN: These are predominantly customers in the industrial customer rate classes? 758 MR. SMALL: That's true, but also some brokers have taken on assignments of capacity, they've taken on assignments of TCPL capacity. So to the extent they would be what we call an Ontario ABC customer, still an Ontario T-service customer, so they would still get the credit. 759 MR. JANIGAN: And why are you providing these Ontario bundled T-service customers a credit and why is this credit equal to 100 percent of that load factored TCPL unit toll? 760 MR. SMALL: It's a problem we -- basically a problem we have with the cost allocation methodology in the sense that all of transportation costs, including TCPL transportation costs, get captured through the load balancing part of the rate. So what happens then is that the T-service customer, because in the majority of cases we have assigned him our TCPL capacity, or he may have TCPL capacity of his own, he's going to be responsible for making payments directly to TransCanada for that transportation capacity. So he would be making a payment to them on the delivery of the gas, and once the gas is then consumed at the end-use location, through the design of our rates, they would be charged the transportation costs as well, so they get charged twice. 761 So to solve that problem, we pay them a T-service credit so the net cost to them is the -- they only get charged the once and we have no costs that we're bearing. So it offsets the costs that we would be collecting through our distribution rate -- or load balancing rate, sorry. 762 MR. JANIGAN: Now, will the credit value in rider A ever change given the fact that Alliance and Vector tolling alternative in the upstream transportation portfolio is higher priced than the TCPL 100 percent load factor unit toll? 763 MR. SMALL: To the extent that direct purchase volumes are flowing through TransCanada capacity, then the transportation credit or rider A would reflect the TCPL toll. I guess we could get to a point where, with continued growth in the direct purchase market, the possibility would be that we would be assigning capacity on Alliance and Vector to facilitate that direct purchase, which means that we would have to come up with another transportation credit. 764 MR. JANIGAN: So it's unlikely that any of the industrials are being hit by any of the upstream transportation costs? 765 MR. BRENNAN: For Alliance and Vector? 766 MR. JANIGAN: Yes. 767 MR. BRENNAN: No, I disagree. All customers are picking up the cost of Alliance and Vector. 768 MR. JANIGAN: If you change the credit. 769 MR. BRENNAN: I'm sorry? 770 MR. JANIGAN: And the assignment. 771 MR. BRENNAN: Are you saying that if the direct purchase customer wants to take an assignment of Alliance and Vector capacity, then they would -- as Mr. Small mentioned, we would have to restructure such that there be an offsetting credit as well. The point being that they should only pay for the transportation that -- only pay for the transportation once. 772 MR. SMALL: So the credit is really to compensate them for what we're collecting as part of the load balance here. 773 MR. JANIGAN: Thank you, Madam Chair. That concludes my questions for the panel. I appreciate being able to go a little bit further than the lunch break to do so. 774 MS. HALLADAY: Thank you, Mr. Janigan. I think now we'll break for lunch. We will reconvene at 2:15. Thank you. 775 --- Luncheon adjournment at 12:55 p.m. 776 --- On resuming at 2:18 p.m. 777 DECISION: 778 MS. HALLADAY: Please be seated. 779 The Board has carefully considered the submissions of the company and the intervenors with respect to the issue of DPWAMS. We consider the matter to be premature, and we are not prepared to grant the relief requested by the applicant at this time. 780 MS. NEWLAND: Thank you, Madam Chair. 781 MS. HALLADAY: Thank you, Ms. Newland. 782 Are there any preliminary matters before we begin this afternoon? 783 MS. NEWLAND: I'm just consulting with Mr. Farrell. I wondered if you required us to formally withdraw our evidence, or if this ends the matter? 784 MS. HALLADAY: Whatever. I think -- sorry? 785 MR. FARRELL: I was just going to say, last year when the Board declined to hear the deferred tax issue, I don't think we went through the formality of actually withdrawing it. They just didn't consider it. 786 MS. HALLADAY: Or we can amend the issues list to take it off the issues list -- 787 MR. FARRELL: Your ruling is good enough. 788 MS. NEWLAND: Thanks very much. It gives me a much better weekend. 789 MS. HALLADAY: Yes, I was going to say, have a nice weekend. 790 MS. NEWLAND: Thank you. 791 MR. FARRELL: The only preliminary matter I have, Madam Chair, just to advise the Board that we have now filed the "M" and "N" series of exhibits on -- that's the second impact statement and then the effect of that on the settlement statement, if I can call it that. 792 With the exceptions of schedules 8 and 9, I'm told they are on the way, and hopefully they will be filed before the end of the day. 793 MS. HALLADAY: Thank you. 794 MR. FARRELL: We have some copies at the back of the room for intervenors who may not be getting to their office before Monday. We have a limited number here. 795 MS. HALLADAY: Thank you, Mr. Farrell. 796 You have provided those to Board staff, have you, or the Board secretary? 797 MR. FARRELL: The Board secretary got the usual 11 copies, I understand, so copies are awaiting you when you -- when we finish the day, and hopefully by even -- well, I don't know how long we are going to be before we finish the day, but by the end of the day, you should have schedules 8 and 9 to both "M" and "N." 798 MS. HALLADAY: We anxiously look forward to receiving those. Thank you. 799 Mr. Farrell. 800 MR. FARRELL: I have nothing more. Thank you. 801 MS. HALLADAY: Mr. Thompson, do you have any questions of these witnesses? 802 MR. THOMPSON: Yes, I just have one question that I wanted to ask that arose out of Mr. Janigan's examination of this panel, and it was towards the end of his examination. 803 FURTHER CROSS-EXAMINATION BY MR. THOMPSON: 804 MR. THOMPSON: Panel, you were discussing with Mr. Janigan industrial direct purchase arrangements and the fact that industrials currently hold assignments of TCPL capacity on the Enbridge system; do you recall that, Mr. Brennan? 805 MR. BRENNAN: Yes, I do. 806 MR. THOMPSON: Am I correct that that situation will remain for the time being? That is, you don't -- the company doesn't have any plans to change that before your unbundling proposals are brought forward. 807 MR. BRENNAN: No, we do not. 808 MR. THOMPSON: And in terms of the implications of Alliance-Vector capacity in the context of unbundling, am I correct that that's not a matter in issue in these proceedings? It may become a matter in the unbundling proceedings if and when they surface? 809 MR. BRENNAN: Yes, that's correct. 810 MR. THOMPSON: Thank you very much. Those are my questions. 811 MS. HALLADAY: Thank you, Mr. Thompson. 812 Any other intervenors? 813 All right. Mr. Moran? 814 CROSS-EXAMINATION BY MR. MORAN: 815 MR. MORAN: Thank you, Madam Chair. 816 Panel, I'd like to start with Exhibit F.2.5, which is the timeline exhibit. 817 In an effort to make this a bit more useful, perhaps, and to get everything on the timeline that ought to be considered as factors in this, I have a number of questions: 818 The first one relates to the Nexus project, and the first place that we see a mention of the Nexus application is on the timeline at May 13, 1997. 819 When was Nexus first announced? Was it before or after the Alliance pipeline project announcement, which is where your timeline starts? 820 MR. BRENNAN: I believe Nexus was announced after the Alliance project was announced. 821 My reason for saying that is because I think Nexus was a response to Alliance. 822 MR. MORAN: But you don't know what the date was? 823 MR. BRENNAN: No, I don't, not offhand. 824 MR. MORAN: I'm wondering if you might undertake to do that for me. 825 MR. FARRELL: We'll do that. 826 MR. MORAN: Madam Chair, that will be undertaking G.3.4, the date of the Nexus project announcement. 827 UNDERTAKING NO. G.3.4: TO PROVIDE THE DATE OF THE Nexus PROJECT ANNOUNCEMENT 828 MR. MORAN: There's been a discussion of the A&R option through the course of the day, and as I understand it from the evidence, the letter from A&R is dated November 4, 1996; is that correct? 829 MR. BRENNAN: This is the one that's found in exhibit -- 830 MR. MORAN: 63. Sorry, Exhibit I, tab 2, schedule 63. 831 MR. BRENNAN: Yes, it is November 4, 1996. 832 MR. MORAN: So that would be -- if we would want to put that on the timeline, it would appear just ahead of the November 6, 1996 ECG executes Alliance PA; right? 833 MR. BRENNAN: Yes, that's correct. 834 MR. MORAN: Then I guess just after November 6, 1996, but before the February 21, 1997, point on the timeline, you would put in February 13, 1997, for the A&R withdrawal; is that correct? 835 MR. BRENNAN: Yes, that's correct. 836 MR. MORAN: Okay. Now, we have the -- I know that on -- in Exhibit F.2.3, you put all of the different units that apply, but it looks like you left out the metric volumetric units. Unfortunately all my questions use the metric volumetric units, but perhaps we can worry about that later. 837 ECG contracted with or signed precedence agreements with Alliance for 1,416 ten cubed, m cubed per day of capacity, as I understand it, in November of 1996. That's what that reference is there? 838 MR. BRENNAN: I'm sorry, whereabouts are you? 839 MR. MORAN: I am at the November 6, 1996, point on the timeline. 840 MR. BRENNAN: Oh, on the timeline? No, that wouldn't be the -- in November 6, 1996, we contracted for 50 million cubic feet a day of Alliance capacity. 841 MR. MORAN: Right, which, as I understand it, is 1,416 ten cubed, m cubed, per day. 842 MR. BRENNAN: Okay, I'm sorry. 843 MR. MORAN: So when we look at that point on the timeline, that's what we're talking about is that first cut on Alliance. 844 MR. BRENNAN: Yes, that's correct. 845 MR. MORAN: All right. And also in November 1996, the TCPL NEB decision came out with respect to capacity that it had 8,118 ten cubed, m cubed, per day; right? Subject to check. 846 MR. BRENNAN: This was an expansion on TransCanada, you mean? 847 MR. MORAN: Yes. 848 MR. BRENNAN: Do you know what the docket number was at all, offhand? 849 MR. MORAN: I wasn't there. 850 MR. FARRELL: Do you mind just giving me a minute and then repeat the dates. Just a second, please. 851 MR. BRENNAN: I believe we identified that in our evidence somewhere. 852 MR. FARRELL: Would you give me the date again, please. 853 MR. MORAN: November of 1996. I don't have the exact date. 854 MR. FARRELL: That's fine, but did you have a volume you were using? 855 MR. MORAN: 8,118 ten cubed, m cubed, per day. 856 MR. FARRELL: This is in our -- in Exhibit A, tab 14, schedule 4, page 5. And it was -- do you mind if I just read this: "TCPL's 1997-1998 expansion program which the NEB approved in November 1996," GH 3/96 was the docket, "was designed to provide domestic shippers including ECG and Union and export shippers 8,118 ten cubed, m cubed, per day which translates into 286.7 million cubic feet per day." Correct. 857 MR. MORAN: So that's a decision that came in November of 1996 around the same time as the November 6, 1996 Alliance agreement; right? 858 MR. BRENNAN: Yes, that was our capacity starting November 1, 1997. 859 MR. MORAN: Right. Do you know when that application by TCPL was filed? 860 MR. BRENNAN: No, I do not. Typically -- 861 MR. FARRELL: We can find out. 862 MR. BRENNAN: It's typically two years in advance of the in-service date, so I would expect it's probably '95 or '96. 863 MR. MORAN: All right. So it would have been before you -- you figure before the announcement of the Alliance pipeline project? You may want to check. 864 MR. BRENNAN: We'll check then. 865 MR. MORAN: Shall we give that a number, Madam Chair. 866 MS. HALLADAY: Certainly. 867 MR. MORAN: That would be G.3.5. 868 UNDERTAKING NO. G.3.5: TO PROVIDE THE DATE THAT TRANSCANADA PIPELINES FILED ITS APPLICATION FOR EXPANSION WITH THE NATIONAL ENERGY BOARD 869 MR. FARRELL: That's the date of the application? 870 MR. MORAN: That's right. 871 Do you know if the NEB decision came out before or after November 6, 1996? 872 MR. BRENNAN: Well, according to the evidence that we have here, the NEB approved the application, this is the '97, '98 or GH 3/96, in November of 1996. So what day in November, no, I don't know offhand. 873 MR. MORAN: All right. Can you find that out for me, please? 874 MR. FARRELL: We'll try. I just would mention my memory is that typically, the NEB's Reasons for Decision are dated a month and a year, but they don't usually include the date. So we'll check our records to see if we can find the date that the decision was released. 875 It could have actually been in November, or it could have been in December but we'll try to check. 876 MR. MORAN: All right. That would be G.3.6. 877 UNDERTAKING NO. G.3.6: PROVIDE THE DATE THAT NEB DECISION REGARDING TRANSCANADA PIPELINE EXPANSION WAS RELEASED 878 MS. HALLADAY: Sorry. The date of the application is 3.5, and the date of the decision is 3.6? 879 MR. MORAN: That's right. The date of the decision is 3.6. 880 MS. HALLADAY: Thank you. 881 MR. MORAN: Okay. Then we come to the -- we have May 13, 1997, TCPL's Nexus application was filed, and then we have June 1997, Vector was announced. June 27th, 1997, TCPL revises Nexus application. 882 And then as I understand it, the second amount of capacity on Alliance happened in November of 1997. 883 MR. BRENNAN: Yes, November 13th, 1997. 884 MR. MORAN: November 13th. 885 And that was for 708 ten cubed, m cubed per day, which, as I understand it, is 25 million cubic feet. 886 MR. BRENNAN: Yes, that's correct. 887 MR. MORAN: And then also in November of 1997, there was another TCPL NEB decision, and that related to capacity in the amount of 18,160 ten cubed, m cubed, per day; is that correct? 888 MR. BRENNAN: Yes, that's identified in our prefiled evidence. 889 MR. MORAN: That was a decision, in fact, on the revised Nexus application, was it? 890 MR. BRENNAN: Yes, I believe it was. It was more -- it wasn't the Nexus. It was the -- going back to the more traditional expansion on TransCanada. 891 MR. MORAN: Right. TransCanada PipeLine had filed an application for a project that they called "Nexus," but then they revised that project. And the decision on the revised application was the November '97 decision. 892 MR. BRENNAN: Yeah, I believe they withdrew the Nexus and then filed. 893 MR. MORAN: All right. And -- 894 MS. HALLADAY: Sorry, excuse me, Mr. Moran. Could we have the date that they refiled that application, unless you were going to ask for that already -- 895 MR. MORAN: Madam Chair, on the timeline, it says: "June 27, 1997, TCPL revises Nexus application." 896 MS. HALLADAY: That's right. Thank you. 897 MR. MORAN: And I think Mr. Brennan is suggesting that what that means is they replaced Nexus with a conventional expansion, and I think that -- 898 MR. BRENNAN: Sorry. You may have the date -- what date did you have there? 899 MR. MORAN: On your timeline, there's: "June 27, 1997, TCPL revises Nexus application." 900 MR. BRENNAN: Correct. That was the revised, but that may not -- I don't believe that was the one where they went to the traditional expansion. I think that may be where they -- as I mentioned this morning, the initial concept was to have a high-pressure line right across Canada, from Empress all the way to Montreal. And I believe the revised one went from Empress to Emerson or Winnipeg, and then tying into the Viking Voyageur. I think that was the revised Nexus that I'm referring to here. 901 And then they gave up on that one, and they went back to the traditional one. As to when that was filed, I'm not sure. 902 MR. MORAN: All right. 903 MR. BRENNAN: Because that one -- the docket number would have been, I believe, GH 2/97. And the decision was approved in November of 1997. 904 MR. MORAN: That was for the conventional expansion in the amount of 18,160 ten cubed, m cubed, per day; right? 905 MR. BRENNAN: That's correct. 906 MR. MORAN: All right. Do you need to check on the details of that? 907 MR. FARRELL: I was just going to say, why don't we undertake to check, because my memory isn't better at this point than Mr. Brennan. 908 At one point TransCanada announced that it was going to pull Nexus and file what they called a conventional application. I think the conventional application was filed in July. 909 But why don't we undertake to check the application dates around or involving what is the first bullet on page 6 of Exhibit A, tab 14, schedule 4, which would be when filed, when revised, when replaced, et cetera. 910 MS. HALLADAY: I think we're heading towards all of the TCPL expansions throughout this project, actually, for that information. 911 MR. FARRELL: All right. Well, why don't we just have one big undertaking. Why don't we include in G.3.5 and G.3.6, the similar information for the project that Mr. Moran is -- Mr. Moran just gave you, and then the one, I guess, was the GH 3/98, which is the pre-788 ten three, m three; is that where you were going next? 912 MR. MORAN: That's right. That's fine with me, Madam Chair. 913 MS. HALLADAY: Thank you. 914 MR. MORAN: Okay. The next thing that we see in the timeline, then, is October -- sorry, July 1998, the Vector application to the NEB. And then we have October 1998, ECG executes Alliance transportation agreements for deposit in escrow. And then we have November 1998, TriState application to the NEB, and I don't see anything further on the timeline with respect to the TriState application. What happened to the TriState application, and when did it happen? 915 MR. BRENNAN: It was eventually withdrawn. 916 MR. MORAN: All right. And perhaps you could indicate again, or find out for me when it was withdrawn so that we can include it on the timeline. 917 MR. BRENNAN: Yes. 918 MR. FARRELL: That may be -- the date of withdrawal may be difficult to determine, but what we can do is also include on the timeline the corresponding filing date and, in quotes, "withdrawal date" with the Federal Energy Regulatory Commission, because I do remember looking those up for another reason about two weeks ago. We'll see if we can find the withdrawal date. But I know I have the dates for the U.S. side if that would help. 919 MR. MORAN: That would be G.3.7, Madam Chair. 920 UNDERTAKING NO. G.3.7: TO PROVIDE WITHDRAWAL DATE OF THE TRISTATE APPLICATION FROM THE NATIONAL ENERGY BOARD 921 MR. MORAN: The only other question I have on this timeline, it's just a clarification, and that's the third last point, "December 22nd, 1999, ECG executes Vector 2 precedent agreements," and there is a reference to a collateral agreement. I'm assuming that's the reference to the put-call agreement that has been discussed? 922 MR. BRENNAN: Yes, it is. 923 MR. MORAN: Thank you. All right. 924 MS. HALLADAY: Excuse me, Mr. Moran, before we finish on the timeline, are you just about finished? It would be helpful to the panel if we did the entire timeline. 925 MR. MORAN: I was just about to ask them to -- 926 MS. HALLADAY: Great minds think alike. 927 MR. MORAN: Once you've got all the undertakings pulled together, perhaps if you could just revise the timeline, that would be great. Thank you. 928 MS. HALLADAY: It was actually Mr. Betts' idea. 929 MR. FARRELL: Do you want to give the revised timeline an undertaking number, or do you just want us to refile it as Exhibit F.2.5 revised? 930 MR. MORAN: That would be fine, revised. 931 All right. I take it that you'll agree that, for the purposes of doing a prudency review, the Board does have to understand all of the relevant facts that pertain to each of the four decision points that took place in the -- on the Alliance side and the Vector side; do you agree? 932 MS. HOLDER: Yes. 933 MR. MORAN: All right. And part of that is understanding, of course, what exactly was happening, and that's why I want to get a more detailed timeline. We'll see what that shows us when we get it. 934 How many times has ECG come before the Board for a prudency review; do you know? A few or a lot? 935 MS. HOLDER: I believe a few. I'm trying to think if there was ever a true prudency review that I'm aware of. 936 MR. FARRELL: I'm sorry, I don't mean to be the evidence giver, but I did some research. 937 MR. MORAN: You're doing so well. Don't stop now. 938 MR. FARRELL: I don't know whether ECG has ever come before the Board for a prudence review of the type we're in engaged in here. I do know that when the Ontario utilities - at the time there were three, Union, Centra, as it then was, and Consumers Gas - moved to index contracts, the Board, in its decisions, talked about the prudence of the risk management programs and so on. But I think those -- that wasn't the type of review that we're engaged in here. I think it was the Board just saying to the utilities individually, I guess, and collectively, that due to the concern about having contracts that didn't have a number that was known in advance as the gas costs for a test year, that they should conduct themselves prudently. 939 If it would be helpful -- if I gave the references, at least for this company, in terms of the Board's file numbers, I can do that if you think that would be useful. 940 MR. MORAN: I'm in your hands, Madam Chair. If you want -- 941 MS. HALLADAY: That sounds like it might be helpful for us. Thank you, Mr. Farrell. 942 MR. FARRELL: It's actually going to be an easy task because I think some of the Board's decisions were referred to in -- one of Dr. Foster's responses to a CAC information request included those, so we can -- we'll do that. 943 MR. MORAN: I guess to track it we'll give it an undertaking number, G.3.8, Undertaking G.3.8. 944 UNDERTAKING G.3.8 TO PROVIDE A LISTING OF ALL Board FILE NUMBERS RELATING TO ENBRIDGE CONSUMERS GAS 945 MS. HALLADAY: Thank you. 946 MR. MORAN: All right. 947 So we're talking about a decision that was made in November of 1996, another one in November of 1997, and then the two subsequent decisions with respect to the two tranches of Vector, and we're now in the year 2002, many years after the fact. Would you agree that it's important to have a contemporaneous record available in order to assess the prudency of the decisions that were taken at that time? 948 MS. HOLDER: Can you explain exactly what you mean by that? I don't want to guess. 949 MR. MORAN: A record of the decision-making process that was made at the time that the decision-making process took place. 950 MS. HOLDER: Yes. 951 MR. MORAN: And if we look at the contemporaneous record that we have to look at for these decisions, it looks to me, and correct me if I am wrong, but we have a memo from Mr. Otsason, and that appears to be the only contemporaneous record that exists for the November 1996 decision; right? 952 MS. HOLDER: That's the only memo that contains the analysis or the numbers that we were using at that time. 953 This decision wasn't made just based upon that memo. I think as I said earlier, it was based upon discussions among those who understood the industry and needed to make a decision. 954 So that was the only place we, sort of, summarized as much of the information as possible, but clearly there were other pieces of information that we were well aware of that we would use in our decision-making, or we did use in our decision-making. 955 MR. MORAN: Right. But we don't appear to have any records of any of those discussions available to the Board at this point. 956 MS. HOLDER: That's correct. There was no written record of those discussions. 957 MR. MORAN: And with respect to the second decision on Alliance in November 1997, we don't appear to have any documentary evidence at all; right? 958 MS. HOLDER: Yeah, other than what's in the -- embedded in the evidence, there was no documentation from -- 959 MR. MORAN: Made from the time. 960 MS. HOLDER: That's right. 961 MR. MORAN: And with respect to Vector, the first tranche, what do we have there? 962 MS. HOLDER: You have the memo that's -- 963 MR. MORAN: Appendix 3 and appendix 4; right? 964 MS. HOLDER: Yes. 965 MR. MORAN: And that's in Exhibit I, tab 2, schedule 63. 966 And for the second tranche of Vector, I believe there's just appendix 5; right? 967 MS. HOLDER: Yes. 968 I'd like to make a comment. I think if you were to ask us similar questions around the last transportation we signed with TransCanada, you would find, probably, similar amounts of information, as far as detailed documents that say, Here's the whole chronology of the events that are taking place and the information that we used, all the information that we used for one decision. 969 And those decisions that we've made on TransCanada in the past are of the magnitude, if not larger, than these decisions. 970 MR. MORAN: All right. 971 Now, Mr. Pleckaitis, I think you indicated that you reviewed the record before the Board, which I gather is those documents that we just referred to; right? 972 MR. PLECKAITIS: Well, yes. 973 MR. MORAN: Clearly, you couldn't have reviewed the discussions that took place, because -- 974 MR. PLECKAITIS: I wasn't there. 975 MR. MORAN: You weren't there. 976 So to the extent that you've done that, and that's what's available to the Board, you're not really in any better position than the Board is to assess those documents. You don't have any better view of those documents than the Board itself would have; right? 977 MR. PLECKAITIS: No, I don't believe I -- I think the combination of the evidence that's been provided through this examination, plus the evidence that's filed really forms a comprehensive summary of why Enbridge Consumers Gas made the decisions that it made. 978 And I guess the only thing I would qualify is that you seem to be suggesting that the memo, the memos establish the foundation on why and how the rationale behind Enbridge Consumers Gas's decision. 979 But I -- the way I see it, it's the entire documentation file. The memo is just one piece, and as I think the witnesses have said, that memo really summarizes a lot of information at a high level that is then presented to senior management to say, Here's the conclusion of the analysis that we've done to make this recommendation. 980 So I just think -- I would put the context differently. It isn't just the one, two, or three memos. It's the entire documentation file that you're, first of all, seeing before you, plus the evidence of the witnesses that actually participated in that decision-making. 981 MS. HOLDER: It may also be helpful, I know I've referred to the record in GH 3/97, which was the Alliance application, which at least took place earlier than today and much closer to the time at which we were making those decisions. 982 That is also a record, I think, that supports the process and some of the decisions that we came to -- or some of the aspects that were influencing our decision that we came to today or -- back in November, I should say, of '96. 983 So there is other -- another record that we can provide that does support, I think, everything we've been saying. 984 I would like to think that the Board would also recognize that I was very intimately involved with all of these decisions to some extent, short of the one Vector contract, and that I'm trying to fill in the gaps as best I can. 985 But you're right. We're doing this today, not in 1996. 986 MR. MORAN: All right. 987 Mr. Pleckaitis, I just want to follow up a little bit on what you just said. It's not just these memos, but it's the entire documentary file, plus the evidence of the witnesses. I'm not sure I understand what you mean by "the entire documentary file." 988 MR. PLECKAITIS: Well, for example, the company's prefiled evidence, to me, represents -- puts together the rationale of the company's decision-making with respect to this. And it refers, then, to -- I believe to Mr. Otsason's memo. 989 So I think it's -- again, it's a summation of the decision-making process that the company made. And that isn't just capsulated in, as you said, the two or three memos that are part of the company's evidence. 990 MR. MORAN: All right. So when you talk about the entire documentary file, you're talking about these memos, plus some evidence that was prepared later on? The evidence you are referring to was prepared long after the fact, wasn't it? 991 MR. PLECKAITIS: Yes, I'm trying to anticipate where you're going with this. 992 MR. FARRELL: Don't. Just answer the questions. 993 MR. PLECKAITIS: Okay. I'm just trying to be helpful. 994 MR. MORAN: Feel free to anticipate. Thank you, Mr. Pleckaitis. 995 We do have a statement in the evidence that -- and it's in an interrogatory response that -- the parent company had some involvement in this. I take it, just before I get to that question, you'll agree that the relationship between ECG and EI, its parent, is a fact for the Board to consider as part of this prudency review? 996 MS. HOLDER: Yes. I don't think it was an issue, but okay. 997 MR. MORAN: Okay. The interrogatory response seems to suggest that EI made suggestions to ECG with respect to signing up for capacity on Alliance -- 998 MR. BRENNAN: Excuse me, could you give me the reference for that, please? 999 MR. FARRELL: 41, Exhibit I, tab 2, schedule 41. 1000 MR. MORAN: It's Exhibit I, tab 2, schedule 41, page 1 of 3. It's the first paragraph of the response. 1001 MR. BRENNAN: I have it, thank you. 1002 MR. MORAN: There's a statement there: "There were suggestions, though, in favour of both Alliance and Vector." 1003 MS. HOLDER: Yes. 1004 MR. MORAN: And of course there doesn't appear to be any documentary evidence of those suggestions, and so the question is how did those suggestions get made? And there's not even a napkin that would help us here. 1005 MS. HOLDER: I think the suggestions came in a couple of ways, and the suggestions -- again, I think it makes a difference of which one of the contracts you're referring to. I don't believe this refers to the -- or references the first 50 million that we signed on the Alliance. And the discussions would have come from, most likely, Mr. Otsason, at least that's my recollection, realizing that Mr. Otsason, after the November 6 signing -- or, yes, signing of the PA for 50 million cubic feet, left the employment of Enbridge Consumers Gas to work for another Enbridge Inc. affiliate. So discussion -- so some of those suggestions were discussions that we were having with Mr. Otsason. 1006 MR. FARRELL: Do you mean in relation to Vector? 1007 MS. HOLDER: Yes. 1008 MR. FARRELL: Sorry for the interruption. 1009 MS. HOLDER: Yes, and even the second 25 million cubic feet on Alliance. That statement does not refer to the first 50 million in Alliance. 1010 MR. BRENNAN: Just to maybe add as far as suggestions. When you mean -- as it relates to the second 25 million on Alliance, as indicated in one of the interrogatories responses, it was a question of EI or Enbridge Inc., I guess, coming to the utility, asking if we saw a need for an additional 25 million a day. And we looked at our forecast at that time and said yes, we can support up to 99 million a day, so another 25 would be reasonable. 1011 MS. HOLDER: The important note here, though -- by the way, the suggestions were not coming from the executive at Enbridge Inc., these were what we would classify as our callings. 1012 MR. MORAN: Do you know that for sure? 1013 MS. HOLDER: I know that the discussions I always had were with Juri Otsason who was not an executive in Enbridge Inc.. 1014 MR. MORAN: Which doesn't mean to say that there weren't such discussions, you simply wouldn't know about them. 1015 MS. HOLDER: That's correct. 1016 MR. MORAN: I guess when one of my parents suggested to me when I was young that it was bed time, I usually understood what that meant. And I guess the question comes down to EI is clearly the parent company, the sole shareholder of ECG. How is the Board to assess these suggestions, in whatever form they were, in the absence of any evidence to help us to understand just exactly what the suggestions were, what the nature of the discussions were, and how they got organized? 1017 MS. HOLDER: I only can tell you what I know, unfortunately. I can tell you that I do know for a fact that I was never given a direction from Enbridge Inc. or from my boss at the time, whether that be the president or any vice-president within Enbridge Consumers Gas, that I should be signing a contract. We looked at the 50 million cubic feet a day in Alliance; again we were looking at that prior to Enbridge Inc. being part of the Alliance. By the time we signed, yes, Enbridge Inc. was part of the Alliance project. 1018 On the second 25 million and the two Vector contracts, again, I was never asked to sign the contracts. I put my recommendations forward to the executive of Enbridge Consumers Gas and they signed the contracts. In the one case, I was one of those executives, but never did I ever hear a directive, you must do this. And never was I told, do -- you know, I was never even asked to sort of take a really good strong look at this, even indicating that I should play with numbers. We did all the analysis based upon the merit of the information we had at the time. 1019 MR. PLECKAITIS: Can I just add to that, because I think the issue -- I think the way you're asking the question is without full knowledge of all of the discussions that may have gone on between all Enbridge Consumers Gas people and Enbridge Inc.. 1020 How is the Board supposed to make a completely informed decision? My view would be, I don't think anyone could ever give the Board full assurance that you'd have access to all information, all discussions. I don't know if any one person would ever have that. Our evidence is fundamentally based on, was this a prudent decision or not? Did the company make a sound decision, a good business decision, with the information it had at the time? And I believe that the information that you've heard from this panel and that's been presented clearly illustrates that in the scheme of things, this was a good business decision that does provide benefits to the customers. And I believe that ultimately that is the question that the Board needs to ask itself. 1021 If there was a question where, at the end of the day, that there was a bad decision, it appears to be the bad decision, was why was that decision made? 1022 Those became somewhat hypothetical questions, and I don't know whether a complete record, again, of all of the discussions that went on between Enbridge Inc. and ECG would really be a bearing ultimately with the decision the Board needs to make. 1023 MR. MORAN: Within the company, people have to be accountable for the decisions that they make; do they not? 1024 MR. PLECKAITIS: Yes. 1025 MR. MORAN: And five years down the road when somebody is saying, Wait a minute; who the hell made this decision? Presumably, it would be extremely useful at that point if you had a documented record of how that decision was made so that you can say back to that person, It was you, for example. 1026 And that's all I'm asking. If you are making a good business decision, isn't part of making a good business decision documenting the way you made it and what you did and why you made it at the time that it's being made so that you have that record for internal accountability and, in the case of a regulated company, external accountability in front of the Board. 1027 MR. PLECKAITIS: I think, yes. But I think it's a matter of degree. 1028 I believe that we've demonstrated who made the executive decisions, the officers that signed off on the contract and the senior people that were involved in making the decision at that -- did the decision-making tree, then -- do we have a complete record of all of the analysts that provided information? No, we didn't document that. We don't have that on record. 1029 MR. MORAN: We have a memo from Mr. Otsason for the first decision. That's all we have; right? 1030 MR. PLECKAITIS: But then you have a series of contracts that document -- and who signed those contracts, the other decisions that were made. 1031 MR. MORAN: Right. 1032 MR. PLECKAITIS: And provide all of the facts in terms of what the elements are of those contracts. 1033 MR. MORAN: But none of those people have been called to tell the Board about any of the details of their involvement in all of this so that the Board can understand it; right? 1034 MR. PLECKAITIS: But they are no longer employees of the company. Mr. Otsason is no longer a employee of ECG. Mr. Riedl is retired. Mr. Dan is no longer with the company. Mr. Serpanchy is no longer with the company. 1035 MR. MORAN: Right, but these people haven't completely disappeared, have they? 1036 MR. FARRELL: This is beginning to be argumentative, I think, at this point. 1037 MR. MORAN: We know where Mr. Otsason is. He's at another -- an affiliate; right, for example? 1038 MS. HOLDER: But I've been a common thread through this, and I think I can speak on behalf of the company or I don't think I would be here. 1039 MR. MORAN: All right. 1040 As I understand what you said earlier today, Ms. Holder, the ECG contract didn't seem to be a critical element for the Alliance approval process; is that fair? 1041 MS. HOLDER: Yes. 1042 MR. MORAN: It was a small amount, 6 percent, I think. 1043 MS. HOLDER: Yes. 1044 MR. MORAN: I'm reminded C. D. Howe who says: "A million dollars here and a million dollars there, soon we're talking about real money." 1045 That 6 percent is still something in that context, isn't it? 1046 MS. HOLDER: Yes. 1047 MR. MORAN: All right. And we know that around the same time as you were signing in November of 1996, that there was the Nexus project in the air. And then there was also the 1996 NEB decision that had capacity associated with it; right? 1048 MS. HOLDER: Yes, but that capacity was the -- when you refer to the two expansion projects on TransCanada, that was the capacity that had already been signed for and contracted for so -- and they were for a time frame prior to this. 1049 MR. BRENNAN: Yes, the Alliance capacity was meant to be there for 1999. The two expansions you're talking about were capacity that was going into service for November 1, 1997 and November of 1998. 1050 MR. MORAN: But Nexus was also on the table? 1051 MR. BRENNAN: Nexus was still on; that's right. 1052 MR. MORAN: And it was still -- I'm just trying to remember the timeline here. It was still on the table while you were considering the second part of Alliance, was it not? 1053 I know we have to get some clarification on some of the dates, but -- 1054 MS. HOLDER: We'll have to clarify that for you. 1055 MR. MORAN: That's right. But at least in the timeline, as we see it at the moment, up until June 27th of 1997, Nexus still seemed to be in existence? 1056 MR. BRENNAN: My suspicion would be that Nexus would have been withdrawn or cancelled prior to November 13th, but when the dates, we'll -- 1057 MS. HOLDER: I think the other thing to remember is there were other reasons why we wanted to sign the contract with Alliance compared to Nexus. And again, it comes back to the point about reliability and security of supply. 1058 Nexus was following the same pipeline rout as TransCanada, which would not give us the same comfort of security of supply as an Alliance route would. 1059 I know it's not necessarily memorable events in most people's minds, but I can tell you every single -- where I've been every single time there's been a disruption of service on TransCanada's system. 1060 And July 29th, about '97, when they had the huge pipeline rupture in Winnipeg, thankfully, that happened in July and not in January. Both Union Gas and ourselves at that time were actually busy working at trying to get our storage operations turned around in the event that they couldn't open up any of those three lines that they had shut off. 1061 If those sort of catastrophes happen, which we hope they never do in even a shoulder month, let alone a cold winter day, a Nexus route may not have given us the same type of comfort and security that the Alliance-Vector route. 1062 MR. MORAN: That goes to one of the principles that you've relied on, which is diversification of supply, security of supply; right? 1063 MS. HOLDER: that's right. 1064 MR. MORAN: And the other one that you've relied on has to do with competition. If you have two pipelines, you can pitch one against the other and get a better deal; right? 1065 MS. HOLDER: Or they will pitch themselves against another. We wouldn't do the pitching. 1066 MR. MORAN: Right. Both of those things can happen. All right. 1067 So the question, I guess, comes down to this: Knowing that -- well, first Nexus and then the conventional expansion taking over from Nexus, subject to the clarification that you have to get for yourselves, why wouldn't you wait a little bit longer before signing up for Alliance to see if you would be able to take advantage of this impending competition between two major pipelines, Alliance and the TCPL expansion? 1068 MS. HOLDER: I think it comes back to the comment I made earlier, is that I don't think we were the deciding factor between Alliance or Nexus. I think we all believed there was a good chance that neither one of those pipelines would go. 1069 If we would have signed with Nexus and not Alliance, would that have meant Nexus would have went instead of Alliance? I doubt that. I think our volume was not enough to swing the decision between Alliance an Nexus. So at the end of the day, it was Alliance that was built and therefore it was -- that was the best alternative for us. Had Nexus been built, we probably would have contracted on Nexus. But it was not built. 1070 MR. MORAN: And in the meantime, there was 18,000 ten cubed, m cubed, of capacity that came along in 1997 as well in TCPL. 1071 MS. HOLDER: That had already been contracted for by other shippers. 1072 MR. FARRELL: Including ECG and Union, I might add, as the evidence shows. 1073 MR. MORAN: All right. 1074 Now, in signing up for FT capacity, historically, what was the typical term of contract that you would sign up for? As I understand it, it was ten years. 1075 MR. BRENNAN: On TransCanada it would be ten years, that's correct. 1076 MR. MORAN: So I guess the question is, why would you lock in for 15 years in Alliance if -- 1077 MS. HOLDER: On TransCanada, by the way, the term has been ten years over the last while. Storage contracts, for instance, with Union Gas were 20 years, so we had signed contracts for upstream services that were longer than ten years. 1078 MR. MORAN: Why did you sign up for 15 years on Alliance if you had normally signed up for ten years for that kind of capacity? 1079 MS. HOLDER: That was the term that was offered. A shorter term was not offered to us, or any other shipper that I'm aware of. 1080 I think the other point is, given our market and the discussion I had earlier about the long-term nature of our market, ten years, 15 years, is not a lot of difference when you are talking hopefully a 150-year market. 1081 MR. PLECKAITIS: My experience in a green field pipeline, transportation pipeline in the Maritimes is similar -- and Maritimes and North-East's, when we negotiated transportation service with them, there were no options. It was a 15-year term. Not a choice. 1082 MR. MORAN: But it's five years longer where you can't take advantage of the competition between Alliance and TCPL; right? 1083 MS. HOLDER: Sorry. 1084 MR. MORAN: That five years, the 15 years is five years longer that you'd have to wait before you can take advantage of the competition between the competing pipelines. 1085 MS. HOLDER: No, I don't think that's correct. We have got currently, or at least at the time we signed this contract, we had close to a Bcf of capacity on TransCanada. We're talking here of 75 million cubic feet a day on Alliance. That in itself, that competition, should be driving down, we would hope, the tolls, providing better services on TransCanada such that the current capacity we have on TransCanada is better for our ratepayers. 1086 MR. BRENNAN: Also, in addition, too, you have to look at, I guess, Alliance's 15-year contract. But our demand forecast is going to increase over the next ten years as well. So, I mean, it's those additional capacities that would be subject to competition as well, not just that particular contract. 1087 MR. MORAN: All right. 1088 Could you turn up Exhibit F.3.5. That's the excerpt from the annual report for Enbridge Inc.. 1089 MS. HOLDER: Yes. 1090 MR. MORAN: At the bottom of the page, on the left-hand column, there is a paragraph entitled "Gas Pipelines," and then underneath, "Alliance and Vector." It starts by saying: "The company's investments in Vector and Alliance are regulated by the NEB and the Federal Energy Regulatory Commission (FERC) and are subject to regulatory risk." And then it goes on to say: "Regulatory risk has been mitigated through the execution of long-term contracts with customers." 1091 The regulatory risk that we are talking about clearly is the risk faced by Enbridge Inc. as an owner of Alliance and Vector; right? It's their report. 1092 MS. HOLDER: Yes. 1093 MR. MORAN: They're talking about their risk. 1094 MS. HOLDER: Yes. 1095 MR. MORAN: And they're talking about how they've managed to mitigate their risk because of the execution of long-term contracts which, of course, includes your contract; right? 1096 MS. HOLDER: That's correct, which I would expect would be similar language you would see in a TransCanada type report where they mitigate their risks through the signing of long-term contracts with their customers. 1097 This is the way the upstream business operates. If you go to build pipeline capacity, whether you are expanding or whether you are building green field, you mitigate that risk by signing contracts with customers. 1098 MR. MORAN: Right. And that's a benefit to your parent that you, in part, have contributed to; right? 1099 MS. HOLDER: Yes. However, I'm not sure who in their right mind would ever build capacity without having customers sign for contracts. And I think that's one of the reasons why this switched from a producer-supported pipeline when we initially became interested in it to the investment -- the investors being typically in the business of owning and operating regulated assets. 1100 MR. PLECKAITIS: Mr. Moran, I also stated in -- yesterday, during Mr. Warren's examination, that Enbridge -- we've made it clear during this panel's discussion that Enbridge Consumers Gas had, in fact, been an earlier proponent of an alternate from the western Canadian sedimentary base. I stated yesterday, also, that based on the evidence that I reviewed and what I've heard, that if it wouldn't have been Enbridge, we would have supported and alternate even if Enbridge was not part of that, because we were looking for additional supply. We were looking to diversify that supply from someone other than TransCanada for all of the reasons that anyone else would want to have competition in the marketplace. And under similar financial terms is what we received from the Alliance pipeline group. We would have contracted with someone else had Enbridge been part of that or not. 1101 MR. MORAN: All right. Your conclusion is based upon your review of everything that has happened prior to your involvement. 1102 MR. PLECKAITIS: That's correct. 1103 MS. HOLDER: I think there is also the concern that we have always had about whose responsibility is it to look after the market in Ontario. We have assumed that responsibility and we -- and take great pride in how successful we have been in ensuring that there is a secure supply here. If we were not in a position to sign these types of contracts, or if the Board was to say we weren't prudent, I'm not sure who is going to step into our shoes. Who is it that's going to be willing to come forward and sign a contract for upstream capacity to ensure that we have safe, reliable gas at a reasonable price in the province of Ontario, or in our franchise area? We haven't seen the marketers in Ontario willing to do that for us, and I'm not sure if there is ever a disallowance on a prudence issue around an upstream contract; what our Board of directors would say around our role in ensuring that there is adequate upstream capacity, both storage and transportation, to meet the needs of our markets. 1104 MR. PLECKAITIS: The other thing -- I think the other thing I want to add is that a question in people's minds is, is there something wrong with the parent gaining an advantage as a result of a decision made by an affiliate? I personally believe that that shouldn't be the case. Because if it is the case, it suggests that the concept of an integrated energy company, a company that might be in all aspects of the energy business, is a bad thing; that a regulated utility, distribution utility, shouldn't have any transactions with an affiliate that would result in somehow a profit or a benefit to the parent, because if you do that, you're conferring a benefit to that parent and that is wrong. 1105 If that's being suggested, that that's wrong, I think we fundamentally better look at how we operate the energy business in -- not only in Canada but North America, because if anything, there is a greater and greater consolidation. 1106 What is, however, absolutely correct is for the Board to say, okay, you've made that decision with a parent or an affiliate like you do with any other affiliate transactions; demonstrate to us that it's a fair transaction from the ratepayers' perspective. And then the bulk of our evidence I think shows that this is a fair, balanced transaction and it was made rationally and for the right reason. 1107 MR. MORAN: I don't think you've heard me suggest that something is wrong. It's merely more a question, isn't it, of who should pay for that benefit? Isn't that what it comes down to? If there is a benefit to the parent company who is in many different businesses, do the ratepayers of ECG subsidize, in effect, things for the parent company? That's the question. 1108 MR. PLECKAITIS: But this would be a -- 1109 MR. FARRELL: Go ahead. I'll deal with it in re-examination. 1110 MR. PLECKAITIS: But under that -- under that suggestion that, again, an affiliate should not financially benefit from a relationship with another company such as ECG, it would suggest that any time there's any kind of shared service, that the Board should go right back down and try to figure out the profit that is being made with the parent as a result of that transaction. And if that's the case, then the current rules that exist for shared services and what's determined to be a fair transaction or transfer price don't apply, because what we've determined -- I think the Board's rules are market price; and the absence of market price, a cost-based formula. 1111 MS. HALLADAY: I think we're getting into argument here now and perhaps we could just move on. 1112 MR. MORAN: In Exhibit I, tab 11, schedule 27, page 2, there's a table that shows the monthly breakdown of the utilization of Alliance and Vector. 1113 MR. BRENNAN: I'm sorry. Did you say Exhibit I, tab 2? 1114 MR. MORAN: Tab 11, schedule 27, page 2. 1115 MS. HOLDER: Yes, I have that. 1116 MR. MORAN: I'm wondering if you could just undertake to update that table. It stops at September 2001. 1117 MR. BRENNAN: I'm sorry, you want us to update -- 1118 MR. FARRELL: Page 2 of the response, not the attachment. 1119 MR. BRENNAN: What do you mean by update it? Extend it? 1120 MR. MORAN: Yes. 1121 MR. BRENNAN: Okay. 1122 MR. MORAN: Bring it up to date. It stops at September 2001. 1123 That would be undertaking G.3.9. 1124 UNDERTAKING NO. G.3.9: TO PROVIDE AN UPDATED VERSION OF EXHIBIT I, TAB 11, SCHEDULE 27, PAGE 2 1125 Just one last area to cover. We have four decisions on the table up for prudency review, and in theory, I think it's been accepted by the expert witnesses ahead of you, unless you disagree, and let me know if you do, but in theory, one of those or two of those might be deemed to be prudent and one or two of them might be deemed to be imprudent, at the end of the Board's review. So the question is this: If that kind of outcome is possible, how does the Board go about breaking out the cost consequences that would be associated with each of those decisions? 1126 MS. HOLDER: We definitely have not looked at that. We'd have to undertake to provide that answer. 1127 MR. MORAN: All right. Perhaps that's the best way to leave it, then. 1128 MR. FARRELL: For what period are you speaking, the test year or -- 1129 MR. MORAN: Yes, fiscal 2001. 1130 MR. BRENNAN: I'm sorry, fiscal 2001? 1131 MR. FARRELL: You are talking about the notional deferral account? 1132 MR. MORAN: Yes, that's right. Right now we have -- all of the costs are lumped in together and there's no real sorting out amongst the -- well, the four different decision points. 1133 MR. FARRELL: As you'll be hearing from me in argument, our position is that last year's settlement that established the notional deferral account is Alliance and the first tranche Vector only, so that means that the second tranche of Vector wasn't -- it's not reflected in the notional deferral account. 1134 MR. MORAN: All right. So in order to understand the cost consequences associated with all four decision points, I guess I'll ask the witnesses what needs to be done. 1135 MS. HOLDER: It won't be easy, I don't think, but we'll undertake to provide some sort of answer. 1136 MR. BRENNAN: Can you just give us a better idea what exactly you are looking for? Because I'm not really sure it's clear in my mind anyway. 1137 MR. MORAN: Theoretically, the Board could decide that decision one of the four is not prudent and therefore it's not going to allow the cost consequences to be recovered. So the question is how does the Board understand what the cost consequences are for decision one so that it can properly disallow just that amount. 1138 MR. BRENNAN: So are you saying, then, what's the value of each of those contracts, in essence? Is that what you're looking for? 1139 MR. FARRELL: I think what's being asked, if I might take the liberty of rephrasing it, just to make sure we understand what you are asking, the notional deferral account was used, the actual delivered cost of gas; therefore, the cost of the commodity, cost of transportation on Alliance, the cost of transportation on the first tranche of Vector capacity compared to the hypothetical cost of moving the same volume of gas through TransCanada. So if I understand, Mr. Moran's question, it's that if the Board were to disallow or find that the first 50 million cubic feet a day of Alliance was imprudent, that the second 25 million a day was prudent -- 1140 MR. MORAN: As an example -- 1141 MR. FARRELL: -- as an example, then I guess we could do some exercise of carving it out. The difficulty is that if Alliance is imprudent, in part, what do we assume about the second tranche of Vector? So I actually don't understand how we can possibly do that, but we're prepared to go away and think about it. 1142 Just an example, the commodity that flows through that pipeline is bought in Alberta, subject to what Mr. Brennan explained about too much or too little in Chicago. So I don't know whether we can say that these molecules through the first 50 million cost this, and -- but it's different than the molecules through the other 25 million a day. That's the practical difficulty we're facing. 1143 MR. SMALL: And also the AOS as well would have to be factored, as well. 1144 MR. PLECKAITIS: Mr. Moran, since you've asked a hypothetical question, I guess I would be struck by the non-symmetrical nature of that type of decision, because it suggests that if the Board was to rule that because, in a particular situation, costs are higher for a particular contract of the four contracts, you're -- in the term that's being examined, that it would, 1, suggest that in the event that the costs were lower, whether it's in that year or in future years, that somehow those benefits would also then be available to the shareholder to keep, which would not be the nature of the compact that we have on passing through gas costs and transportation costs based on the way you've phrased it, that we should somehow chunk up the individual contracts on this tracking account. 1145 MR. MORAN: Well, I guess your counsel has said you're prepared to think about it -- 1146 MR. FARRELL: I mean, I'm just giving you my impression as I sit here today, but it's like -- forgive the hackney expression -- it's like unscrambling an egg. 1147 MR. MORAN: I'll make this suggestion: Why don't we just give it an undertaking number. And then as you think about it, you may want to discuss it further with Mr. Schuch. 1148 That would be undertaking G.3.10. 1149 MS. HALLADAY: Three point -- sorry? 1150 MR. MORAN: Ten. 1151 UNDERTAKING NO. G.3.10: TO PROVIDE THE INDIVIDUAL COST CONSEQUENCES FOR EACH OF THE FOUR ENBRIDGE CONSUMERS GAS DECISIONS 1152 MR. MORAN: Thank you, Madam Chair. Those are all my questions. 1153 MS. HALLADAY: Thank you, Mr. Moran. 1154 Mr. Betts? 1155 MR. BETTS: Thank you. 1156 QUESTIONS BY THE BOARD: 1157 MR. BETTS: I guess timing is an important factor in this whole review, and there's a couple of dates or periods that I would like to get established in my mind, if possible, that would clarify things. And I'm not sure if it's in evidence now. If it is, you could point it out for me. 1158 But at what point did ECG begin considering the Alliance option? 1159 MS. HOLDER: It was -- actually, it predated the term "Alliance." It actually was a -- I'll never guess. 1160 Do you remember the name of the pipeline that was -- 1161 MR. FARRELL: It was the Northern Area Transportation Study, or NATS. 1162 MS. HOLDER: Yes, NATS. 1163 MR. FARRELL: That' in the evidence, by the way. I didn't make it up. 1164 MS. HOLDER: Yeah, it is in the evidence. And it's early 1996. It predates the May/June 1996 Alliance pipeline project announcement. 1165 MR. BETTS: And at what point did ECG begin discussions with parties that could move the gas out of Chicago? 1166 MS. HOLDER: I think we'll have to undertake to get back to you on that one. 1167 MR. BETTS: Okay. 1168 MS. HOLDER: There is some in evidence, but I think we just want to go back and check. Yeah. 1169 MR. BETTS: Okay. 1170 MR. MORAN: That would be G.3.11. 1171 UNDERTAKING NO. G.3.11: ADVISE AT WHAT POINT ECG BEGAN DISCUSSIONS WITH PARTIES THAT COULD MOVE GAS OUT OF CHICAGO 1172 MR. BETTS: Okay. Thank you. 1173 And I guess I'll ask the question that I'm pursuing with that piece of evidence, and you can either, perhaps, answer it now or wait until that undertaking is completed. But I need clarification to help me understand the prudence of a decision to enter into a long-term contract to supply consumers in Ontario for part of a transportation system when not all of it had been established as a firm arrangement. 1174 In reading the letter from A&R, I see words like "confirming negotiations were underway," and things like that. I'm just wondering how management would look at that portion with respect to the imminent signing of a 15-year contract term and not having that secured. Perhaps you could tell me what your feelings were at the time. 1175 MS. HOLDER: At the time, I think we had a lot of confidence in the discussions with A&R that something could proceed. Though we -- at the time, we also realized there were other alternatives, such as the swap that could replace that. 1176 So it wasn't the only alternative on the table at the time. It was the one that we had, sort of, we thought in the bag at the time. 1177 MR. BETTS: So there were -- you have reminded me, as a matter of fact, that there were other alternatives, so that wasn't necessarily going to kill the project or kill the concept or the economics at that point? 1178 MS. HOLDER: That's correct. 1179 MR. BETTS: Thank you. 1180 MS. HALLADAY: I just have a few questions, and it could be because I'm thinking that I'm one of the people that has to try to put this all together at the end of the day. 1181 And I have to say that it's very difficult. It's a complicated issue, and the evidence is spread throughout a variety of volumes in various interrogatories and replies. So if I ask questions that have already been answered or are in the evidence, bear with me, because I'm just trying to do this one step at a time. 1182 It seems to me as though in a prudence review and the position that's been taken that our role is not to second-guess what decisions have been made by the utility. And therefore, I would tell you, Mr. Pleckaitis, that it's not to look at the end of the day and say, Is it a good deal or a bad deal? 1183 Our review is to determine on what facts decisions were made at the time that they were made and to take into -- and to be sure that the utility has taken into account all the relevant factors at that time. 1184 And I will make a personal comment right now, whether it's right or wrong. There is a paucity of evidence to that fact on the record in this proceeding. 1185 Ms. Holder, you have said that we should basically trust you, and I'm not saying we don't trust you, but we're trying to put together all the bits and pieces at each time. And I guess my first concern is with each decision that was made, on what basis were those decisions made? 1186 In other words, even if you're telling me that these decisions were made based on the -- the first decision based on one memo was -- no. There is other evidence or other decisions, but based on one memo, but the only thing that's left behind is the one memo; is that what you're saying? 1187 MS. HOLDER: No. What I'm saying is that is -- when we were responding to the -- the information request with interrogatory, I've lost my terminology here. We were asked to provide any written materials we had that would provide, I guess, the analysis of information around our decision-making. So when we went back through our files to find memos that supported our decision-making, that was a memo we found. There was never a memo that said, here are all -- here's what Mr. Otsason did at this time; here is what Ms. Holder did at this time; and here is the decision that we made. Those memos didn't exist. But that's the best piece of information we have from our files that supports the numbers that we were using at the time in 1996 to support our decision. 1188 So there were discussions that went around that information among Mr. Otsason, myself, and Mr. Riedl, prior to actually making the decision. But if you want a piece of documentation from our files that says, here's the data, here's the assumptions that we are using with respect to exchange rates, with respect to the toll, that was the document that we found in our files. 1189 MS. HALLADAY: Okay. Perhaps, then, you can help me with what I would call more a corporate governance issue or decision-making process. How would these decisions come up? I'm not being very articulate, and I apologize. It's a Friday afternoon. But -- so what -- that's right. Procedural-wise, not the specific details but procedural-wise, how would you -- what were the steps that would be taken to make the decision to sign the first tranche of the Alliance contract, for example? 1190 MS. HOLDER: There would have been discussions about this -- there were discussions about this prior to the letter that was written by Mr. Otsason. That was then put together for us to finally say, it's time, you are going to have to sign or not sign. So with that information, it would have been reviewed by myself and Mr. Riedl for completeness. We would have asked questions around some of the other issues. We would have talked about things that we knew were happening in the industry at the time. Then I would have made up a formal recommendation to Mr. Riedl by saying -- taking the contract in and saying, Mr. Riedl, Rudy, I think I agree that this is the best thing for us and we should sign this. 1191 Prior to that, like I say, there were many discussions. We meet on gas supply issues, or we used to meet on gas supply issues monthly, and these sorts of issues were always raised and discussed at that time. 1192 When Mr. Riedl then got the contract, he would have taken it to the executive group so that -- and reviewed that with the executive group which would have included the president at the time, Mr. Munkley. I would suspect he was there and that is when he would have got the second signature from Mr. Aiken, who was the financial officer at the time. There were discussions about these contracts at the Board, I believe, however it did not require -- sorry, our Board of directors, but did not require board-of-director approval. So we never did receive board-of-director approval to sign these contracts. It was not a requirement. 1193 MS. HALLADAY: So the Board of directors would have been briefed on this contract, then, and would have known that that was your intention. 1194 MS. HOLDER: Yes. 1195 MS. HALLADAY: And your Board of directors includes representatives from Enbridge Inc.? 1196 MS. HOLDER: Yes, as well as external Board members. 1197 MS. HALLADAY: Okay. And were these arrangements with the director -- at the Board of directors, even the discussions, did the members who are representative of Enbridge Inc., knowing that they had an interest in these contracts, did they exclude themselves from those discussions? 1198 MS. HOLDER: I can't answer that. I don't know. I wasn't -- 1199 MS. HALLADAY: From a matter of corporate governance of having an interest in contracts, or were they were they reviewed by any committee of the Board that were totally independent of the Enbridge group of families, for a better word? 1200 MS. HOLDER: I don't know. I asked the question to confirm prior to coming here whether they were reviewed by the Board and the answer I got back was, yes. I did not ask if that was the complete Board or just a subset of the Board. 1201 MS. HALLADAY: Now, you've said that they did not require Board approval. Presumably what are the terms of reference that would require Board approval? 1202 MS. HOLDER: With respect to gas supply contracts, which include transportation, storage and the commodity, there is a written resolution of the Board that gives appropriate signing authority to officers and management. And depending on the magnitude of the contract, it depends on whether it needs to be management and an officer, or two officers. There's always two contracts on all gas supply contracts -- two signatures. 1203 MS. HALLADAY: Sorry, and there is a dollar amount up to so much you are allowed? 1204 MS. HOLDER: Yes. 1205 MS. HALLADAY: Okay. And do you know what that dollar amount is? 1206 MS. HOLDER: I can't recall offhand. We can provide that, I would think. It's not confidential. 1207 MS. HALLADAY: Because depending on how you value these contracts or these series of contracts, Mr. Warren would tell us is a billion dollars worth of contracts, that's quite a large signing authority, Ms. Holder. I'm quite impressed that you -- 1208 MS. HOLDER: That was my budget. It was $1.2 billion a year so -- 1209 MS. HALLADAY: I appreciate that, but just for the transportation portion of it. 1210 MS. HOLDER: Without getting any advice, I assume that that would not be considered confidential information, but we will endeavour to try to find the answer or provide that information to you. 1211 MS. HALLADAY: I'd appreciate that. 1212 MR. MORAN: That would be G.3.12. 1213 UNDERTAKING NO. G.3.12: TO PROVIDE ENBRIDGE CONSUMERS GAS'S CONTRACT DOLLAR LIMIT FOR WHICH NO Board APPROVAL IS REQUIRED 1214 MS. HALLADAY: And would it be the same process for each of these contracts? 1215 MS. HOLDER: Yes. 1216 MS. HALLADAY: Even though the dollar amounts were different, it would still be the same? 1217 MS. HOLDER: Yes. 1218 MS. HALLADAY: You would make a recommendation to the executive group, which then may or may not bring it up with the Board, whether it required director Board approval, the Board would, in fact, be briefed on -- 1219 MS. HOLDER: Right, it would be briefed. 1220 For all four of these contracts or decision points, none of them are large enough to require the Board of directors' approval. 1221 And as a matter of fact, it showed the process does work. The collateral agreement, the reason why it is only signed by myself is the value of that contract did not require another officer's signature. 1222 MS. HALLADAY: No, I understand. I understand. But often Board of directors will approve contracts in principle and authorize officers or directors, whoever, to sign the contracts with whatever amendments that they deem to be necessary, even though the Board will, in fact, approve them. 1223 MS. HOLDER: Right. So if there was -- for instance, if we had signed a contract with TransCanada for an amount that was greater than the signing authority, then that would be approved by the Board. 1224 MS. HALLADAY: Right. Often if they've agreed to enter into arrangements, but this is a different situation. 1225 This is a situation not of increasing capacity or decreasing capacity or accepting the tolls or whatever on TransCanada. This is entering into a brand new relationship with a new transmission company. 1226 And my question is that whether that would, in fact, entering into a brand new relationship, require board-of-director approval, regardless of the volume amount, or you are free to go back and forth to whoever you want? 1227 MS. HOLDER: Our -- my knowledge is it did not require, and I think that was the opinion of the lawyers at the time, it didn't require Board of directors -- 1228 MS. HALLADAY: My next question deals with legal approval. 1229 I happen to have a particular interest in that. Presumably, this contract, did it just come to you in -- from Alliance and say, here it is; sign it? 1230 MS. HOLDER: No. 1231 MS. HALLADAY: No, okay. 1232 So therefore we've got another level of, at least, due diligence or prudence here. 1233 MS. HOLDER: Yes. 1234 MS. HALLADAY: That, in fact, someone else looked at it. 1235 MS. HOLDER: Yes, and I think that's -- 1236 MS. HALLADAY: And these contracts were looked at by internal lawyers, Mr. Farrell ... 1237 MS. HOLDER: I think Mr. Farrell probably is more intimately involved with the language in that contract than any of us at this table. 1238 MR. FARRELL: Yes, I did. 1239 MS. HALLADAY: Why am I not surprised? 1240 And presumably Mr. Farrell is not giving evidence in this case because, of course, he's not sworn, but keeping that in mind -- 1241 MR. FARRELL: Cross my heart and hope to --- 1242 MS. HALLADAY: Cross your heart. Mr. Farrell, next time, I think we are going to actually swear you in as a witness, as in some cases you give more evidence than some of the people who have been sworn. 1243 But that having been said, presumably Mr. Farrell will then give another level of due diligence as far as the prudence of it is concerned; that is correct? 1244 MS. HOLDER: Yes, and I also want to comment he was employed only by Enbridge Consumers Gas. 1245 MS. HALLADAY: So therefore, in discussing the pros and cons of issues such as terms and mitigation against loss, et cetera, you would be relying on Mr. Farrell as an outside person to be able to give you that advice as far as a risk review? 1246 MS. HOLDER: Yes. 1247 MS. HALLADAY: Thank you. 1248 Were there any other outside advisers who -- or people who were only representing Enbridge Consumers Gas and not Enbridge Inc. that were a part of what I recall overall your due diligence process in entering into any of these agreements? 1249 MS. HOLDER: I'm not sure it falls into due diligence. 1250 We did approach our large-volume customers through the association of IGUA, The Industrial Gas Users Association, who also at the same time were expressing similar concerns about TransCanada, the lack of competition, the lack of diversity and route. 1251 And they did provide us a written letter saying that they were in support of us signing the contract. I believe at this time it would have been for the 75 million cubic feet a day on Alliance. 1252 MS. HALLADAY: Is that a document that could be put in evidence in this proceeding? 1253 MS. HOLDER: Yes. 1254 MS. HALLADAY: Is it in evidence, Mr. Farrell? 1255 MR. FARRELL: No, it's not. It's in my hand. 1256 MS. HALLADAY: Are there any other documents Mr. Farrell might have up his sleeve that would support -- 1257 MR. FARRELL: No, we were advised that Mr. Thompson was going to be asking some questions. I didn't know whether they were going to be nasty or not so I decided to bring this with me. 1258 Ms. Holder, I've handed you a letter dated January 21st, 1998, addressed to Mr. Brennan from IGUA and then the French acronym. Is this the letter you're referring to? 1259 MS. HOLDER: Yes, it is. 1260 MR. MORAN: Exhibit F.3.6. 1261 EXHIBIT NO. F.3.6: LETTER FROM IGUA ADDRESSED TO MR. BRENNAN, DATED JANUARY 21, 1998 1262 MS. HALLADAY: I note that this is dated after the first tranche -- after the second tranche was -- 1263 MS. HOLDER: Yes, this was after signing the contracts, and the reason why -- my recollection why the letter was sent at the time was in support of our evidence in the GH 3/97 application. So it was -- though we had discussions with IGUA, this was written at the time that we were filing our evidence. 1264 MS. HALLADAY: We've been sort of dancing around the GH 3/97 case throughout our discussions, and I guess Mr. Farrell's looking in anticipation, there. 1265 MR. FARRELL: Complete. 1266 MS. HALLADAY: I'm just wondering if you could assist the Board. You've mentioned it on a number of occasions and, in fact, it supports your position and it supports the fact that Enbridge Consumers Gas independently wanted an alternative source of supply from the TransCanada PipeLine. I'm wondering if you could undertake or could provide us with excerpts from that decision, or evidence that was given in that case, or any other documentary evidence to support what you've told us. 1267 MS. HOLDER: I do believe it will be helpful. Number 1, Mr. Dan who you've seen memos from in here was one of the witnesses along with Mr. Brennan and myself. Also, it's much closer to the time at which the contracts were signed so that we were relying on much clearer memories at the time than we may be today. 1268 MR. FARRELL: Yes, we can provide that. Just to indicate what we had in preparation for this, there was, Consumers Gas, as it was at the time, filed written evidence; we could file that. There were two sets of information requests, as the NEB uses the term, instead of interrogatories; we have those. There was a joint opening statement by Union Gas and Consumers Gas; there was a joint witness panel, as a matter of fact. And then we have the transcript excerpt from the day on which Ms. Holder, Mr. Brennan, Mr. Dan, on behalf of Consumers Gas, and Mr. Bracken and Mr. Stedman, on behalf of Union Gas, testified. To give you an idea of the length of NEB hearings, this was from transcript volume 60. 1269 MS. HALLADAY: That's undertaking number? 1270 MR. MORAN: G.3.13. 1271 UNDERTAKING NO. G.3.13: TO PROVIDE VARIOUS EXCERPTS FROM EVIDENCE, TRANSCRIPT, AND DECISIONS OF NEB HEARING GH 3/97 1272 MS. HALLADAY: The famous CAC interrogatory number 63, we seem to refer to a lot, is very limited in terms of its requests, and I assume that likewise you have been very limited in the information that you have provided to the Board in this case. 1273 Is there any other information that might be in your files in terms of a briefing memos, briefing memos to the Board of directors, briefing memos to outside consultants - I don't mean it to be limited, I mean it to be inclusive - to assist this particular panel in evaluating the degree to which outside -- to which the prudence was exercised? 1274 MS. HOLDER: I did just go through these files only a couple of days ago so -- and I didn't come across anything. But I am more than willing to take another look next week just to make sure there isn't something that we're missing that would provide some more comfort and some more information that may be of value. 1275 MS. HALLADAY: I'd appreciate that, because to be honest, I have a certain level of discomfort that there's a lack of this kind of -- contemporaneous record-making, as Mr. Moran would say, to support decisions even if approvals weren't actually being required. Presumably there would be some -- you know that this is a contentious issue. You are a regulated utility, as you pointed out. You knew that this would be -- might be an issue that would come before the Board, and it would be of greater comfort to us to know that in fact that prudence and due diligence was done, if it was. 1276 MS. HOLDER: It's a very interesting point, though. I do remember having a discussion with Mr. Otsason with respect to some day we'd have to testify to this. But our honest belief at the time is we didn't believe this would be an issue because we thought the toll would be less than TransCanada. 1277 MS. HALLADAY: I appreciate that, too. 1278 So is that another undertaking or is that -- 1279 MR. MORAN: We are now at G.3.14. 1280 UNDERTAKING NO. G.3.14: TO PROVIDE ANY INTERNAL DOCUMENTS, MEMOS, OR OTHER MATERIALS AS WELL AS MINUTE ACTION ITEMS FROM Board OF DIRECTORS' MEETINGS WHICH WOULD ASSIST IN CONFIRMING THAT ENBRIDGE CONSUMERS GAS ACTED PRUDENTLY WHEN ENTERING INTO THESE VARIOUS CONTRACTS 1281 MS. SPOEL: Ms. Holder, just to follow up on Ms. Halladay's last question, I'm just wondering whether you referred to monthly meetings where you discussed gas supply issues, regular meetings. Were notes kept of those meetings? 1282 MS. HOLDER: Actually, what's kept is action items, so if -- I don't have my copy. I will try to see if we can find some of those around the organization if anybody has kept them from that far back that may have some action items in them. 1283 But it was not a summary of discussions. It was only the action items that would fall out of those discussions. 1284 MS. SPOEL: But presumably on meetings where you had discussions about the Alliance pipeline, some people like you might have had some action items coming out of those meetings. 1285 MS. HOLDER: Yes. 1286 MS. SPOEL: That would, at least, give an indication that the matter was discussed or the action might have been to send the contract to Mr. Farrell for review. 1287 MS. HOLDER: Right. 1288 MS. SPOEL: And that would, presumably, be the kind of action item that would come out of those meetings. 1289 MS. HOLDER: Yes. 1290 MS. SPOEL: Similarly, does the executive committee when it is briefed on these things, does it not keep some sort of notes or minutes? 1291 MS. HOLDER: Not since I've been executive. Again, we keep only action items, so -- 1292 MS. SPOEL: And you don't have access or can't find any of those from the time period in question either? 1293 MS. HOLDER: I can check. 1294 MS. SPOEL: And I guess similarly, when the -- even though Board of director approval was not required, do these sorts of things go to the Board without a covering memo or some kind of briefing note? 1295 MS. HOLDER: There would have been something presented to the Board of directors. Now, I'm not sure whether that's classified as confidential or not, so I'd have to take the advice of my lawyer whether we can release that information. 1296 But I will undertake to do that. 1297 MS. SPOEL: Thank you. 1298 MR. FARRELL: Can we include that just in G.3.14 -- 1299 MS. SPOEL: I just wanted to clarify it listed those kinds of things as well. Thank you. 1300 MS. HALLADAY: Mr. Betts, you had a question? 1301 MR. BETTS: Thank you. 1302 And this stems from a question of yours, too, Ms. Halladay, but it relates to the point that was raised that this was, in fact, taken to the Board, and if I understood correctly, this is not a decision that would normally be reviewed by the Board; am I right in saying that? 1303 MS. HOLDER: It's not a decision that required Board approval, so there was not -- would not be a resolution of the Board approving the signing of these contracts. 1304 But pretty much all major initiatives that we undertake, including something like DPWAMS, would have a discussion at the Board. 1305 MR. BETTS: So you described this earlier as a relatively minor contract in your full menu of contracts, but it is still something of this size that you would responsible to take to the Board for their review? 1306 MS. HOLDER: Yes. 1307 MR. BETTS: And that happens in every case with something of this magnitude? 1308 MS. HOLDER: I don't know for sure on that, and I think it probably depends on the executive group at the time. 1309 And again, when I say we didn't take it for their review, I think it was -- for their -- I'm not sure if it was review -- or it was discussed before it was presented before the Board. 1310 MR. BETTS: So there's nothing particular about this contract that would have caused the senior management to want to take it to the Board. It was no peculiar -- 1311 MS. HOLDER: Not for approval, anyway. All I know is there was discussions before the Board. When I asked the question, our corporate secretary went back into the files and said there were discussions of these contracts before the Board. 1312 MR. BETTS: Thank you. 1313 MS. HALLADAY: I'd just like to follow up briefly on the notion of the notional deferral account, and which I'm now confused. 1314 I know that the Panel accepted it in the last rates case as part of a settlement agreement, and there was discussion about the note why it was a notional deferral account. And the issue is that it was a notional deferral account, because it was really a tracking account, tracking an actual number against a hypothetical number. 1315 Somehow this notional deferral account is going to be closed, or something is going to happen with this, that I'm really not quite sure of what is being proposed. 1316 Could you help me there, Mr. Farrell. 1317 MR. FARRELL: Yes, Ms. Halladay. 1318 The notional deferral account tracking -- let's call it a tracking account, despite what -- as I said -- I think I mentioned last year in response to either or Mr. Laughren that if we'd have had the word "tracking account" in our minds when we were writing it, that's what it would have said. 1319 If you could turn to Exhibit A, tab 14, schedule 9. After if you turn to page -- the first page past page 17 is appendix A, and appendix A is an excerpt from last year's settlement proposal that deals with this issue as it then was, same number, 2.1. 1320 So what I'd like to do is just sort of walk you through some of the bullet points. And at the bottom of the first page of this appendix, it talks about -- well, it says, "ECG and the other parties concur that examination of this issue would be facilitated by quantifying, during the test year, the cost differential between the two transportation paths by means of a notional deferral account. The result in entries in this account together with the other information ECG will provide as a condition of this settlement," and then the conditions are listed later, "... would provide an evidentiary basis for a thorough examination of this issue in ECG's next rates case." 1321 So that was the purpose of the tracking account. Then the next bullet on the second page of the appendix just gives the formula whereby one calculates the cost differential and, in essence, it's the actuals that are delivered through what we call there the new path, Alliance in the first tranche of Vector, compared to the hypothetical or notional cost of transporting the same volume of gas through TransCanada and therefore paying not only for the commodity but paying for the tolls that would apply to it. 1322 And so the balance of page 2 of the appendix just gives a hypothetical example where the commodity is priced at a certain level and, as you can see, just on that page, there's a difference in commodity costs even though there's -- it's the same volume of gas hypothetically because Alliance is upstream of Empress and therefore the Empress -- the commodity number at the bottom, 759 versus 730, reflects the cost differential two those two supply points. 1323 But then in terms of what happens, if you turn to the next page, and then in the first bullet that appears under the figures, it says, "The cost differential recorded in the notional deferral account for the test year," meaning fiscal 2001, "... will be examined in the context of ECG's next rates case as a means, among others, of ascertaining whether the entire cost differential should be allowed for rate-making purposes and, if not, the amount that should be disallowed. Any such disallowance would not be retroactive, however, but rather any amount disallowed would be applied prospectively as a credit to ECG's revenue requirement for fiscal 2002 or the current test year." 1324 So the deferral, if you will, of the issue was -- and if there was to be any disallowance, it was meant to be prospective rather than reaching back in time and having the retroactivity feature. So that it puts -- that is what we say is on the table, so to speak, brought forward from the last case, Quite apart from the cost consequences for the test year which is the same thing as any other cost for the test year. So that's why when I was -- interjected, perhaps rudely, and if Mr. Moran thought I was rude, I apologize, by saying it wasn't the second tranche of Vector isn't involved here, in our view. The settlement, in our view, clearly relates to tracking the new path against the traditional path as a means of providing some comparator that would be examined in this case. 1325 MS. HALLADAY: Right. But this is only one tool; Is that correct? 1326 MR. FARRELL: That's correct. 1327 MS. HALLADAY: So it's not like a traditional deferral account where the parameters are decided in advance. This is merely a tracking account, so to speak, that's one tool in determining if amounts are going to be disallowed. 1328 MR. FARRELL: Yes, it doesn't have anything to do with the test year. 1329 MS. HALLADAY: Right. 1330 MR. FARRELL: And it was a means -- if you were to decide, at least this is my interpretation of what led to this, if you were to decide -- 1331 MS. HALLADAY: To disallow the entire allowance. 1332 MR. FARRELL: That there should be -- that you made a decision that somehow the costs either weren't reasonable or there was some degree -- I guess there's no degree of prudence or imprudence -- that this was a means of applying your decision in this case to what happened last year as well as on a going-forward basis, that was the basis on which the parties were able to reach the settlement. 1333 MS. HALLADAY: Right. That's how I understood it. Thank you. 1334 Is there anything you'd like to bring up in reply, Mr. Farrell? 1335 MR. FARRELL: Yes, I do have a few questions, and I'll start with a couple of questions that arose from Mr. Moran's examination. 1336 RE-EXAMINATION BY MR. FARRELL: 1337 MR. FARRELL: Can you tell me, panel, whether the benefit to Enbridge Inc. as an owner of Vector or Alliance is any different than the benefit to the other owners? 1338 MS. HOLDER: There is no difference. 1339 MR. FARRELL: Thank you. And in terms of the length of contracts, you mentioned TransCanada was ten years and Alliance and Vector was 15. I think you, Mr. Pleckaitis, mentioned Maritimes and Northeast as being 15 as well. I take it that both Maritimes and Northeast and Alliance could be considered to be greenfield pipelines, like brand new pipelines. 1340 MS. HOLDER: Yes. 1341 MR. PLECKAITIS: Yes. 1342 MR. FARRELL: Whereas a TransCanada expansion is an expansion, by definition, of an existing system. 1343 MS. HOLDER: Yes. 1344 MR. FARRELL: I think you've made the correction, although it was very subtle, Ms. Holder, to a word that you used and Mr. Brennan used the other day which was you talked about your "application" to the NEB. I think today you said your evidence to the NEB. 1345 MS. HOLDER: That's correct. We never did make an application to the NEB. 1346 MR. FARRELL: I had a note here that -- I'll finish my re-examination and then ask Mr. Small to respond to one outstanding undertaking which I believe we had from Mr. Warren. 1347 Mr. Brennan, sorry, I don't have a transcript reference for you, but during your examination by Mr. Warren, not this morning but rather yesterday, you commented that it was ECG's policy or practice, I can't remember which words you used, to contract back to a supply basin and -- but you didn't as I recall it, explain why it was ECG's practice; would you do so now? 1348 MR. BRENNAN: Yes. It's to get the security that we feel that a supply basin has. Traditionally, I guess, going back to a -- it was difficult, I guess, to come back to a market hub that was actually liquid. Certainly in the time frame of 1996, we didn't feel that Chicago was the particularly liquid point, and certainly Dawn was not a liquid point. So going all the way back to the supply basin was, in our view, something that we should be looking at in order to get reliable service. 1349 MR. FARRELL: Thank you. Now, if you could turn to Exhibit I, tab 2, schedule 63, you will be happy to know I am not going to take you to Mr. Otsason's memo, but rather to appendix 2 which follows Mr. Otsason's memo on the attachments, and this is the letter dated November 4, 1996 to ECG from A&R pipeline. Do you have that? 1350 MR. BRENNAN: Yes, we have it. 1351 MR. FARRELL: There was some discussion with Mr. Warren -- excuse me, some discussion with Mr. Janigan earlier today as well as this afternoon about nailing down the A&R route and I'd just like you to take a look at the second page of that letter. I won't read this to you, but just to summarize it and get you to agree with me that the proposal by A&R at the time involved an expansion of one of A&R's pipelines; do you see that reference? 1352 MR. BRENNAN: Yes, and it talks about A&R's expansion to MichCon leg south. 1353 MR. FARRELL: Yes, and read on to the next sentence. 1354 MR. BRENNAN: "Therefore, service will be predicated on filing an approval of an application before the Federal Energy Regulatory Commission for such expansion." 1355 MR. FARRELL: So would it be unfair of me to categorize this letter as something in the nature of a precedent agreement in the sense that -- 1356 MR. BRENNAN: There are conditions applied to it? Yes. 1357 MR. FARRELL: Thank you. And that's normal in the industry when expansion space is needed? 1358 MR. BRENNAN: Yes, you'll even find that in TransCanada's present agreement sale. As well, there will be conditions applied to it as well. 1359 MR. FARRELL: Thank you. Sorry for flipping around, I made my notes in the margin. 1360 That's all I have by way of re-examination. 1361 Earlier, I said that I think -- I thought I said that we had responded to all of the undertakings before this afternoon with the exception of the pipes out of Chicago for Mr. Janigan. What I'd overlooked was that Mr. Janigan and Mr. Small and Mr. Brennan had an exchange in which they were -- Mr. Janigan, as I recall his question, was asking about did ECG try to hedge the exchange risk on the Alliance and Vector contracts, and Mr. Small or Mr. Brennan perhaps both of them said that it was done more -- I put down it was done on a universal basis within ECG, and I now ask Mr. Small to explain that because one of our undertakings was to go away and explain what he was talking about this morning when he answered the question. 1362 MR. SMALL: Yes. When we are establishing our reference price or our quarterly reference price, we will be looking at a 21-day average not only of various commodity prices, but we'll take into consideration the 21-day average of exchange rates over the future 12-month period. So in the establishment of our reference price, there is an underpinning exchange rate. 1363 Now, on a go-forward basis, when -- we will be sending a forecast to the treasury department to given them an indication of what our expected invoice cost would be and how much, then, we would be spending in a particular month in U.S. dollars so that they'll be aware of what those payments would be. So to the extent that they can do some things to secure a better exchange rate or whatever, they will do so. 1364 Then what I would record as part of my actual costs is whatever the actual payment would be. So to the extent that there's a difference in our reference price in the sense that the underlying exchange rate versus what we actually paid for a particular invoice, those benefits would flow through to the -- through the PGVA to customers. 1365 MR. FARRELL: Thank you, Mr. Small. 1366 Just for the record, that was Undertaking G.3.3. So that's all I have but just to confirm that we owe Mr. Janigan an undertaking response G.3.1 and then either staff or the Board from G.3.4 to G.3.14. 1367 MS. HALLADAY: Thank you. 1368 Mr. Moran. Mr. Schuch gave me a little note and, in fact, it was the next thing I was going to mention -- well, not quite the next thing, but one thing we talked about was oral presentations on the QRAM and, according to the schedule, the intervenors are required to reply in writing by the 11th. We had discussed the possibilities of giving the intervenors an option of asking questions orally. Based on our anticipated schedule, we're proposing that the QRAM issue be dealt with at a time certain, and that time can be 2:00 on Tuesday afternoon. 1369 MR. FARRELL: Did you say "ask questions"? 1370 MS. HALLADAY: I assume that we will be dealing with any concerns the intervenors do have. It might be helpful for the company to have witnesses available if there are any questions about the QRAM. 1371 MR. FARRELL: I'm happy you alerted me to that because when we discussed it the first time, Madam Chair, I interpreted your remarks as meaning that rather than going away and writing a letter of comment, the intervenors could make their comments on the record, but certainly with this alert, if that is the Board's wish, we would have the people here. 1372 MS. HALLADAY: Is that a problem to have them here? 1373 MR. FARRELL: What Ms. Hare is reminding me of is that the normal QRAM process is comments followed by reply. So if -- it may be that if there are questions, I don't know whether the witnesses will be able to answer whatever may come up as they sit at the witness table or not, but with that alert, let us take it away and take away your comment and -- 1374 MS. HALLADAY: No, I understand, that's fine. We're trying to expedite this as much as possible. 1375 MR. FARRELL: Yes. That's fine, Madam Chair. 1376 MS. HALLADAY: My concern is that I understand the impact statement will take into effect the QRAM, and we haven't approved the QRAM yet. So we have a bit of a chicken and egg situation of concerns about approving a settlement agreement that includes an impact of a QRAM that is not yet been approved by the Board. 1377 So in order to expedite it in -- I understand also that the intervenors have the right to make comments, that will be the normal procedure, and the company would also have another week to provide its response to whatever comments the intervenors made. That's not to take away from the company's right to have that additional week to make responses. It's just trying to expedite the whole thing. 1378 MR. FARRELL: We'll -- 2:00 on Tuesday is fine, subject to making sure that the witnesses we want to have here we can have here. 1379 MS. HALLADAY: I appreciate that. Our only concern -- our thought process was if we can deal with it all on Tuesday, then we won't have to come back on Wednesday morning if, in fact, it isn't a controversial issue so -- 1380 MR. FARRELL: We'll do our best to have them 2:00 Tuesday. 1381 MS. HALLADAY: Okay. That having been said, we will reconvene to deal with issue 5.3 on Monday morning at 9:30. 1382 Are there any other matters before we adjourn? 1383 MR. FARRELL: Just to confirm the sitting times next week. It's 9:30 to 5:00 on Monday, Tuesday, but mornings only on Wednesday and Thursday. That was our understanding of the -- that the Board had other commitments. I just wanted to confirm that. 1384 MS. HALLADAY: Well, it was technically only Thursday. The -- there is a Board meeting on Wednesday afternoon that this panel are willing to forgo if it's going to expedite the process. But that having been said -- 1385 MR. FARRELL: It may be an academic issue at that point because we have a full day on Monday -- we really only have two issues for company witnesses left, 5.3 followed by 2.3/2.4. So I would hope that even with the fixed time for the QRAM, that we may be finished the company's evidence by mid-day on Wednesday. 1386 MS. HALLADAY: That was our anticipation. We will proceed on full days until we finish, although there is a set time on Friday to hear Mr. Stauft, as I understand it. 1387 MR. FARRELL: Yes, and that's fine by us. 1388 MS. HALLADAY: So we will reconvene on Monday morning at 9:30. Have a nice weekend. 1389 --- Whereupon the hearing adjourned at 4:05 p.m.