Rep: OEB Doc: 12J48 Rev: 0 ONTARIO ENERGY BOARD Volume: 1 18 OCTOBER 2002 BEFORE: R. BETTS PRESIDING MEMBER K. MCCANN MEMBER B. SMITH MEMBER 1 RP-2002-0112/EB-2002-0255 TRANSCRIPT VOLUME #1 2 IN THE MATTER OF the Ontario Energy Board Act, 1998, S.O. 1998, c.15 (Sched. B); AND IN THE MATTER OF an Application by Hydro One Remote Communities Inc. for an order or orders approving rates for the distribution of electricity, and the sale of electrical power; 3 RP-2002-0112/EB-2002-0255 TRANSCRIPT VOLUME #1 4 18 OCTOBER 2002 5 HEARING HELD AT THUNDER BAY, ONTARIO 6 APPEARANCES 7 PAT MORAN Board Counsel HIMA DESAI Board Staff MARY ANNE ALDRED Hydro One UNA O'REILLY Hydro One JACK COULIS Hydro One SUSAN ROB Hydro One JIM MALENFANT Hydro One PETER MITTON I.F.N.A. JAMES SIDLOFSKY I.N.A.C. LINDA CHURCHLEY I.N.A.C. BERT LINDSTROM I.N.A.C. MIKE MORRIS Kasabonika Lake FRANCIS THATCHER Fort Severn MEL ORECKLIN Fort Severn CAROL GODBY Shibogama Technical IAN MCKENZIE Shibogama Technical PAUL CAPON Matawa First Nations 8 TABLE OF CONTENTS 9 PRELIMINARY MATTERS: [15] APPEARANCES: [23] PROCEDURAL MATTERS: [44] ISSUE 2.4 [103] SUBMISSIONS BY MR. SIDLOFSKY: [104] SUBMISSIONS BY MS. GODBY: [130] SUBMISSIONS BY MR. MITTON: [137] SUBMISSIONS BY MR. THATCHER: [139] SUBMISSIONS BY MS. ALDRED: [146] REPLY SUBMISSIONS BY MR. SIDLOFSKY: [163] ISSUE 4.1 [172] SUBMISSIONS BY MR. SIDLOFSKY: [173] SUBMISSIONS BY MS. GODBY: [191] SUBMISSIONS BY MR. MITTON: [194] SUBMISSIONS BY MR. CAPON: [197] SUBMISSIONS BY MR. THATCHER: [200] SUBMISSIONS BY MS. ALDRED: [207] REPLY SUBMISSIONS BY MR. SIDLOFSKY: [221] ISSUES 4.2 AND 4.3 [236] SUBMISSIONS BY MR. SIDLOFSKY: [237] SUBMISSIONS BY MS. GODBY: [254] SUBMISSIONS BY MR. MCKENZIE: [257] SUBMISSIONS BY MR. THATCHER: [265] SUBMISSIONS BY MR. MITTON: [268] SUBMISSIONS BY MR. CAPON: [271] SUBMISSIONS BY MS. ALDRED: [277] SUBMISSIONS BY MR. MORAN: [290] REPLY SUBMISSIONS BY MR. SIDLOFSKY: [298] ISSUE 4.5 [312] SUBMISSIONS BY MR. SIDLOFSKY: [313] SUBMISSIONS BY MS. GODBY: [330] SUBMISSIONS BY MR. THATCHER: [333] SUBMISSIONS BY MR. CAPON: [336] SUBMISSIONS BY MS. ALDRED: [342] ISSUE 5.2 [352] SUBMISSIONS BY MS. ALDRED: [353] SUBMISSIONS BY MR. SIDLOFSKY: [357] FURTHER SUBMISSIONS BY MS. ALDRED: [375] REPLY SUBMISSIONS BY MR. SIDLOFSKY: [386] ISSUE 5.5 [394] SUBMISSIONS BY MS. GODBY: [395] SUBMISSIONS BY MR. THATCHER: [409] SUBMISSIONS BY MR. CAPON: [420] SUBMISSIONS BY MS. ALDRED: [424] REPLY SUBMISSIONS BY MS. GODBY: [434] PROCEDURAL MATTERS: DECISION: [508] 10 EXHIBITS 11 12 UNDERTAKINGS 13 14 --- Upon commencing at 11:11 a.m. 15 PRELIMINARY MATTERS: 16 MR. BETTS: Thank you. Can everyone hear okay from here? I see nods so I'm communicating with some people anyway. 17 Good morning. I understand you've been here for a while and I think had a productive period so far. My name is Bob Betts. I am the board member presiding over this hearing. And I'm joined here today by two fellow board members, Brock Smith on my left and Ken McCann on my right. 18 The Board panel is sitting today on the matter of application RP-2002-0112 committed by Hydro One Remote Communities Inc. on March 11, 2002 requesting approval of rates for the distribution of electricity and the sale of power. Today's proceeding is referred to as issues day. It is following the discussion that you have had both yesterday and today, which is your issues conference, and hopefully we will be able to conclude today what the issues will be in the upcoming hearing of this application. 19 It's our hope that we will receive your submissions and arguments regarding the issues prior to our lunchtime break so that we can deliberate through the lunch hour and hopefully return an oral decision after lunch. That's at least our objective. Largely, that's in your hands, and in terms of how quickly we can deal with the submissions on the issues. 20 We will attempt as much as possible to work within the procedures of the Ontario Energy Board in terms of handling these hearings as well as the statutory powers and procedure Act, but I appreciate this is a bit of a new business to many of you there, and we will try to be as flexible as possible in dealing with that so we can ensure that everybody has an opportunity to input their thoughts. 21 First of all, may we have introductions of those that will be appearing before us. 22 Perhaps, Mr. Moran, you could start it off for us. 23 APPEARANCES: 24 MR. BETTS: Thank you. I think everybody who wants to speak will have to switch their microphone on as their turn arises. 25 MR.. MORAN: Thank you, Mr. Chairman. Pat Moran, Board counsel. 26 MR. BETTS: Thank you. And representing the applicant? 27 MS. ALDRED: Thank you, I'm Mary Anne Aldred. I'm representing the applicant. 28 MR. BETTS: Perhaps we can to go around the table and hear the representatives for the intervenors. 29 MR. SIDLOFSKY: Good morning, sir, James Sidlofsky, counsel for Indian Affairs Canada. 30 MR. BETTS: Thank you, Mr. Sidlofsky. 31 MS. GODBY: Carol Godby. I'm representing Shibogama tribal counsel and very likely a number of other First Nation intervenors, but we can address that when the time comes. 32 MR. BETTS: Thank you, and then we'll move around the table this way. 33 Is there a Mr. Morris that be -- Mr. Morris? And you may or may not be speaking on behalf of one of the intervenors, okay. 34 Anyone else that intends to speak -- appear today for us? 35 MR. THATCHER: Francis Thatcher, I'm counsel for two of the intervenors, Mr. Morris and Fort Severn First Nation, and as Ms. Godby mentioned earlier, there are some discussions about creating a coalition of various First Nations intervenors. 36 MR. BETTS: Thank you. 37 MR. MITTON: Peter Mitton, Independent First Nations counsel, and we most likely will be a part of that coalition as well. 38 MR. BETTS: Great. Thank you very much, and I just comment that the Board appreciates that approach to this hearing. If groups of similar interest can get together, it certainly is more expeditious in doing so. 39 MR. CAPON: -- I'm Paul -- 40 MR. BETTS: Could you just use the microphone for us, please? 41 MR. CAPON: I am here and am representing Bentley Cheechoo who was unable be here today and we are with Matawa First Nations tribal council which is representing two First Nations served under Hydro One Remote, Neskantaga and Webequie First Nations. 42 MR. BETTS: I didn't get your name, sir. 43 MR. CAPON: My name is Paul Capon. 44 PROCEDURAL MATTERS: 45 MR. BETTS: Thank you. Anyone else? 46 Mr. Moran, I'll ask you the first question if, in your opinion, this is a properly constituted hearing. 47 MR.. MORAN: Yes, it is, Mr. Chair. The affidavits of service and notice of application are all on the public record. 48 MR. BETTS: Also, while you have your mic turned on, are there any preliminary matters you wish to bring to the attention of the panel. 49 MR.. MORAN: No, Mr. Chair, I think the issues for discussion today are the draft issues list and the timetable and the delivery of documents. 50 MR. BETTS: Are there any other preliminary matters either from the applicant or intervenors that they wish to bring forward at this point? 51 Thank you. 52 Perhaps Mr. Moran, what were your thoughts in terms of the presentation of the issues. 53 MR.. MORAN: Mr. Chair, I guess we're proposing to deal with the draft issues list first. If I could just confirm that you have that. 54 MR. BETTS: Yes, we have -- all three of us have the list. 55 MR.. MORAN: Perhaps I can just simply introduce what we have, and identify the issues that are contested. I think the proposal is that the parties who want to put an issue that's marked as contested on the issues list want to speak to why they want it on the issues list, and the applicant who is contesting those issues can then perhaps respond with its submission as to why they ought not to be on the issues list. 56 MR. BETTS: Fine. 57 MR.. MORAN: I can give you a quick overview of what we have if that's helpful. 58 MR. BETTS: Please do. That would be very helpful. 59 MR.. MORAN: The draft issues list that you have before you is divided into five sections. The first section deals with the PBR proposal itself. None of the issues in section 1 are contested. The issues there are essentially are getting at the rationale for the proposal itself. The consistency and the deviation from the rate handbook and the justification for departing from the rate handbook procedure is the second issue, and then the mechanics of how the proposal itself would work, and then there's a list of several items that relate to the mechanics. 60 The second issue deals with the revenue requirement. The first issue is the revenue forecast itself. The second issue deals with the rate base determination, including the termination of working capital allowance, and the third issue has to do with the year 2000 costs and how they are dealt with, including the two items that you see listed there. 61 The fourth item is a contested item. It's one that's put forward by INAC and has to do with the assumptions made by the applicant with respect to whether INAC will continue to provide capital contradictions. 62 The third section on the draft issues list deals with deferral accounts. Nothing is contested here in terms of issues being on the issues list. It deals with the three deferral accounts that are proposed by the applicant. 63 MR. BETTS: That's probably a good reminder for anybody that has cell phones. I just turned mine off, but if you haven't it's probably a good reminder to turn off your cell phones at this point, please. 64 Please continue. 65 MR.. MORAN: The fourth area is proposed rates, and this is where the bulk of the contested issues are. The first issue has to do with the administration of the customer classes and eligibility for membership in classes, and as I understand this issue, it's one that's put forward by INAC and has to do with who is or is not properly within the customer classes as those classes are defined in the regulation and who is or is not eligible to be a member of those classes. 66 4.2 and 4.3 are similar issues. 4.2 deals with non-standard day rates. 4.3 deals with standard day rates and essentially the same issues are raised with respect to each of them. 67 The issue is identified as a contested one, but only a very small fraction of the actual issue is contested in 4.2, and that is the inclusion of rate design. That's the only contested part of 4.2. 68 Again, this is an issue raised by INAC. 69 In 4.3, only the stuff in the square brackets, relationship to costs, is contested and rate design, the rest is not. 70 4.4 deals with miscellaneous charges. 4.5 is an INAC issue that is contested and has to do with whether rates ought to be uniform for all Remotes' customers or whether they shouldn't reflect INAC contributions in particular communities who receive INAC funding. 71 That brings us to the last part, other issues. Here there are only two things that are contested. 5.2 deals with connection policies and charges. The contested part of 5.2 is the connection policies part only, and 5.5 the imposition of PILs is contested. This is an issue that has to do with whether it's appropriate for Hydro One to be required to pay PILs. The recoverability of PILs is dealt with elsewhere and is not contested. It's dealt with in 1.3. 72 And I think that's all I would say to introduce it. 73 MR. BETTS: I'd ask either the applicant or intervenors, if there's anything that they would like to add about any of those comments made by Mr. Moran or whether that sufficiently covers the agreement. 74 You okay with that. 75 MS. GODBY: Mr. Chair, it's Carol Godby speaking. I would just like to clarify the last contested issue, which is the imposition of PILs, and we understand that the recovery is actually whether or not Remotes is even entitled to recover PILs from First Nations customers, given their tax-exempt status. So it's more of a recovery issue as opposed to the, you know, the imposition of it. We know that we can't very well change that, but that is, perhaps, more the argument. 76 MR. BETTS: And are you the only proponent for this issue, or are there others? And if there are others, does everybody agree that -- the wording here is the imposition of PILs, and in fact, there is a certain aspect of the imposition of PILs that is legislated and, therefore, beyond our jurisdiction. I believe the question of whether or not it could be recovered by Remotes is within our jurisdiction, and that is what Ms. Godby is referring to. Is that what other proponents are referring to or expect to be discussed? 77 MR. THATCHER: We will be speaking to that matter as well, and the position we will be advancing if this issue is accepted by the Board as one to be argued is essentially the requirement to pay PILs or to -- and for Hydro One recovery is ultra vires to the jurisdiction of the Province to even legislate on that point, because it contravenes the tax-exempt status of First Nations and First Nation peoples. 78 MR. BETTS: I believe that's a little bit different. I think you're -- you are looking at the issue as being whether or not it can be imposed by the Province upon Remotes; is that correct? 79 MR. THATCHER: That's right. 80 MR. BETTS: And your position is that the issue should be whether or not Remotes can recover; is that correct? 81 MS. GODBY: I think it's a little more technical, but I think both of the arguments would probably get us to the same end. But that is the context of our argument as I've stated it in this hearing. 82 MR. BETTS: Someone else wanted to provide a comment. 83 MS. ALDRED: I just wanted to comment I misunderstood Ms. Godby's characterization of the issue this morning. I didn't realize she wanted to talk about whether Remotes could recover that much. I thought she wanted to talk about whether it should be recovered in the first place. However, if she wants to treat the issue that way, I'll address that. 84 MR. BETTS: The panel may find it necessary to separate those two issues in order to draw a conclusion on whether or not one or the other is acceptable. I'm not sure if you choose to put them together whether it will satisfy everybody. 85 Mr. Moran, can you help here? 86 MR.. MORAN: Just if I can be of assistance, I think that the way you've heard the issue characterized by Mr. Thatcher and by Ms. Godby captures the total issue that I think people intended to argue under 5.5, the imposition of PILs. So at one level, there is whether the government should even have passed regulation requiring Hydro One to pay PILs, and then the second level of the issue is whether it's recoverable in rates at all by Hydro One. 87 That's -- those two issues I think are caught by 5.5 and they will be argued that they are contested. 88 Then in 1.3, when you see treatment of PILs, that's a slightly different issue. It talks about in the event that PILs are recoverable, are they properly recoverable at a subsidy versus the rates. I think that's what that issue is getting at, and that's not contested. 89 MR. BETTS: Thank you. I think that clarifies it for us and we'll look forward to hearing your submissions on that. 90 Are there any other comments about the overview that Mr. Moran gave? 91 Yes, sir? 92 MR. CAPON: Within the overview and I know one of the issues for our communities isn't so much the rate increase -- that is an issue. But the guess the overall future of Hydro One Remotes and its relationship to First Nation communities, a much more broader political issue, probably beyond the scope of this hearing and even the Energy Board, because it relates to broader, I guess somebody treaty and aboriginal issues, but also long-term economic accountability and connection to community issues. That's the big picture that some of our communities are really looking towards. 93 Thank you. 94 MR. BETTS: Thank you. Anything else? 95 Yes, Mr. Sidlofsky. 96 MR. SIDLOFSKY: Sir, it's not a problem with the issues list, however, we had -- INAC had proposed one revision in an earlier draft of the issues list. It's issue 1.2, and that's the issue of consistency with exceptions to the rate handbook. We are satisfied with the wording of the issue as it stands now, however, the item that we had originally proposed be added to that was treatment of capital contributions for generation. 97 Now, Hydro One Remotes has indicated that none of the capital that has been contributed over the years by INAC is being made the subject of -- of a market base rate of return. There's no return being claimed on the INAC contributed capital. However Remotes indicated that they would be making a statement on the record this morning to that effect, so we'd simply like to make sure that that doesn't slip between the cracks. 98 MR. BETTS: Thank you. 99 MS. ALDRED: I can confirm that the capital contributed by INAC does not appear on Remotes' books. It's not in our rate base. 100 MR. BETTS: Thank you, Ms. Aldred. 101 Then I would say that the -- I believe at this point let us proceed then with the contested items and we'll follow the process Mr. Moran suggested, which is we will hear first a presentation from the proponent or the party that feels that the issue should be on the issues list, and then we will invite submissions from those who are arguing against that. 102 The first one I see here is number 2.4, assumptions regarding on-going capital contributions by INAC, and I believe Mr. Moran indicated that INAC was the proponent. So Mr. Sidlofsky. 103 ISSUE 2.4 104 SUBMISSIONS BY MR. SIDLOFSKY: 105 MR.. SIDLOFSKY: Thank you, sir. 106 As I just mentioned, capital contributions are a concern by INAC and there are two aspects to the capital contribution issue. One of those is the one you've just heard the statement from Remotes on, and that is whether or not a return was being claimed on capital contributed by INAC. 107 The other aspect of that concern has to do with assumptions that are in this application that INAC will continue to fund capital upgrades and, in some respects, initial capital outlays for equipment in remote communities. Typically, those are First Nations communities that INAC is involved with. 108 There is an assumption, and I can refer the Board to page 1 of section 2 of the Remotes application. I'm not sure it's really necessary to go into that, and I don't propose to really go into the details of Remotes' application at this point, but what Remotes says at that section is that in First Nations communities, the Federal Government continues to fund incremental capital costs associated with expansion and load growth. 109 Now there's an assumption being made there, and there's an assumption throughout the application that that state of affairs will continue. 110 Now, historically, there has been an arrangement between -- there was an arrangement between Ontario Hydro and the Federal Government whereby the Federal Government, through the Department of Indian and Northern Affairs, would fund the capital portion of the -- of service -- of the infrastructure for these remote communities. There's a series of agreements in place, roughly 14 that I'm aware of, that number may not be completely accurate, but what those agreements provide for is the initial funding of the capital by INAC. And the funding of the upgrades to that equipment, so that if due to load growth a larger generator unit is needed, INAC will fund the difference between -- once the initial generator was installed, INAC will fund the difference between the cost of replacing that original generator and the larger capacity generator that's required. 111 So there are two on-going aspects to INAC's commitment to funding electricity infrastructure in First Nation communities. One is initial funding, if necessary, the other is funding of upgrades. 112 Now these agreements typically provided for 20-year periods following the in-service -- 20-year terms following the in-service dates under these various agreements, and the agreements relate to the various First Nations communities. 113 INAC is in a position even now to terminate some of these agreements, and that would throw into question the -- the assumptions that are made as to INAC's continued funding of that capital. If there's no longer funding for that capital through INAC, then that will clearly have an impact on Remotes' revenue requirement -- or Remotes' ability to meet its revenue requirement. Clearly there will be costs incurred by Remotes that weren't anticipated in this application. 114 I am not saying this morning that -- that INAC is intending to terminate those agreements, but I can tell you that there are approximately six of them right now with a 20-year period has more than passed. The agreements then provide for termination on a certain notice period. 115 The point here, I think, though, is that INAC is continually reviewing its policies on funding. INAC needs to be clear what the impacts of losing those capital contributions in the future would be on Remotes' proposal. 116 Additionally, INAC isn't in a position to make reasonable policy decisions as to whether it, in fact, should terminate that capital funding or should continue it or deal with the Province -- bring the Province to the table on modifying that funding arrangement, unless it understands what the impacts will be on rates and on the customers in the First Nation communities of removing that funding. 117 And and there is a limited number of forums in which that could be addressed. This is Remotes' first application under the new distribution rate handling. It's a new regime now. This is the opportunity to do that. This is an order that would take place through 2004. As I've indicated, -- and into 2005. And as I've indicated, some of these agreements are in a position where my understanding is they could be terminated now. 118 In order to make rational decisions and determine how to approach these issues with the Province, INAC has to understand what the impacts on Remotes' application would be if the funding -- if the funding isn't there. 119 MR. BETTS: Thank you. 120 Just a pause for just a moment. 121 Okay, we were just discussing how we would deal with each one of these, whether we allow the submissions opposing that position at this point, so do them one at a time or allow each proponent to go through the full list. I think for clarity it would be better for us to hear now the position or submissions that oppose this proposition by Mr. Sidlofsky. 122 So, could I have the first submission from anyone who would choose to oppose this issue. 123 MR. SIDLOFSKY: Sorry, sir, I'm not sure but there may be parties or intervenors that are supporting this submission. Perhaps it might be appropriate to hear from them as well. That would give Remotes one opportunity to respond to those. 124 MR. BETTS: Fine. 125 MR. SIDLOFSKY: Thank you, sir. 126 MR. BETTS: Could you clarify that for me again. What were your -- you're suggesting that Remotes speak to this now? 127 MR. SIDLOFSKY: No, I'm suggesting that if there's anyone in support of our inclusion of this issue on the issues list they have an opportunity to speak to it now. That way Remotes gets one shot at responding to it. 128 MR. BETTS: Very good. I agree with that. 129 Is there anyone in support of this position who would like to speak at this point? 130 SUBMISSIONS BY MS. GODBY: 131 MS. GODBY: I think I can safely say, Mr. Chair, that on behalf of the First Nations that we would be supporting this as an issue, and I don't want to reiterate what Mr. Sidlofsky has stated to the Board and I'll be very brief. 132 Firstly, we agree that INAC is not able to make policy decisions regarding these matters in a vacuum. For that reason, we feel that it's important to be addressed. Secondly, it will have, in the event that the funding is removed -- capital contributions are removed in accordance with these agreements, it will have a significant impact on rates to, you know, primarily First Nation customers who Remotes serve. 133 And thirdly, the applicant has indeed referred to these agreements in the application and has indicated the assumption of obligations pursuant to these agreements, and I think that it is properly an issue before the Board. 134 MR. BETTS: Thank you, Ms. Godby. 135 Again, is there anyone else that wishes to support this, and I -- hopefully you won't need to reiterate what has been said, but are there any other parties supporting this? 136 Yes, sir. 137 SUBMISSIONS BY MR. MITTON: 138 MR. MITTON: Just to say that IFNA does support as well. 139 SUBMISSIONS BY MR. THATCHER: 140 MR. THATCHER: Kasabonika Lake and Fort Severn concur. 141 MR. BETTS: Thank you. And it is Mr. Thatcher; is it? 142 MR. THATCHER: That's correct. 143 MR. BETTS: Any other submissions from parties supporting this position? 144 Then parties opposing this position. 145 MS. ALDRED: I think that would be me. 146 SUBMISSIONS BY MS. ALDRED: 147 MS. ALDRED: Yes, we do oppose inclusion of this issue. We have concerns about the appropriateness of this particular issue for the Board. First of all, yesterday was the first indication that we had that INAC had any indication of rethinking their policy of contributing to capital contributions to First Nations communities. But more importantly, in order to determine this, the Board could be asked to examine the contracts between the Federal Government and Ontario Hydro. 148 There's a long and complex history of these electrification contracts. Initially when the Federal Government wanted Ontario Hydro to electrify these off-grid communities INAC and Ontario Hydro entered into a series of contracts which provided, as Mr. Sidlofsky has said, that INAC would contribute the cost of assets, the cost of upgrades, and that Remotes would cover operation, maintenance and replacement costs. Some of these agreements, as Mr. Sidlofsky says, have expired, but others are still in place and the extend for at least another five years. 149 I'd further like to point out that we have not yet received notice that any of these are not going to be renewed and there's a one-year notice service period. 150 So the contracts are very much in place still in terms of the kind of capital funding that the Remotes communities receive from INAC. 151 In order for you to determine the reasonableness of the assumptions that Remotes made about the continuation of this funding, it would be my submission that you would have to involve yourself to some extent in interpreting these contracts and understanding what they say, their effect, and you might have to start on an exercise of interpreting contracts, which I believe that the Board has traditionally been loathe to do. 152 Also, this is a matter of provincial and Federal Government policy, as I think everyone has acknowledged, and an examination of the reasonableness of the assumption regarding capital -- our assumptions regarding capital, would, in my submission, involve the Board in an examination of public policy issues and political issues which may exist between government bodies. 153 In my submission, that would be difficult for the Board, it would be complex and somewhat unwieldy to deal with and I'm not sure what type of evidence would be adduced by parties as to the government's intentions in this matter, which according to Mr. Sidlofsky don't seem to have crystallized at any rate, such that any evidence that we've heard would seem to me to be highly speculative. I don't know what the Board would do with it. 154 In any event, if INAC is interested in the effect on Remotes of their pulling capital funding, I do not believe this has to be an issue on this particular hearing for them to understand that effect. There's -- they had many opportunities to examine and understand that effect without making it an issue at this hearing. 155 So in summary, in our submission, the issue is not appropriate. It's speculative, it's complex, it's unwieldy, and it's a matter of government policy, and in our view it's hard to understand how the Board can make a finding as to the government's intentions on this issue. So for those reasons we don't believe that this issue should be dealt with by the Board. 156 MR. BETTS: Thank you. 157 Are there any other parties that are opposing the INAC position? 158 Mr. Moran, are there any comments that you wanted to make on behalf of Board staff? 159 MR.. MORAN: No, sir. 160 MR. BETTS: Thank you. 161 Are there any questions from fellow panel members? 162 MR. BETTS: If you, then we'll proceed -- sorry, I should be asking if there's a reply that you would like to make Mr. Sidlofsky. 163 REPLY SUBMISSIONS BY MR. SIDLOFSKY: 164 MR. SIDLOFSKY: Yes, sir, just briefly. 165 This matter is before the Board now. These proposed rates are before the Board. It -- in order to deal for the Federal Government to deal with this policy issue it has to have some understanding what the impacts would be of pulling funding. As I indicated before, this is the forum to do that, this is the place where the rates are. And whatever is done here may have an impact on rates even into second generation PBR. 166 Ms. Aldred indicated that some of -- confirmed that some of those agreements have terminated, even with the 365 day termination clause, which my understanding is what the notice period is, and certainly for some, if not for all of these agreements, that still keeps us within the period of first generation PBR, in the period for which this application is being put forward. 167 So this is the opportunity to deal with that possibility in order that INAC can make its policy decisions, and if need be approach the provincial government to discuss what to do about the -- INAC's on-going commitment to funding capital in First Nations communities. This is the time to do that, sir. 168 Thank you. 169 MR. BETTS: Thank you. Thank you all for your submissions on that item. 170 We'll move on now down to 4.1, another contested issue, administration of customer classes and eligibility for membership in classes, and I believe the proponent in this case again is INAC. 171 Mr. Sidlofsky. 172 ISSUE 4.1 173 SUBMISSIONS BY MR. SIDLOFSKY: 174 MR. SIDLOFSKY: Sir, I'm sorry to jump back. If I could just mention one other item on 2.4. 175 The reason that this is the time to deal with it, among other things, is because this is the chance that INAC will have to challenge the assumptions in the revenue forecast and other assumptions that are being made in the application. It's only the forum where the application is that that can be done in my submission. 176 Sorry about that, but moving onto 4.1. 177 The concern here on the part of INAC is that there are two rates that we are dealing with here, and you'll see those shown in sections -- under issues, 4.2 and 4.3. Those are the standard day rates and non-standard day rates. 178 Now, non-standard day rates are those that are the beneficiaries of -- or where customers who have paid non-standard day rates are the beneficiaries of the subsidy money through rural normal rate protection. Standard day rates will apply to directly or indirectly funded -- what are defined as government premises in regulation 442.01. 179 Now, the regulation indicates what constitute government premises, and I'll just read that briefly. It's not a very long section here. 180 "Government premises means premises occupied by the Crown in right of Canada or Ontario or a facility that is funded in whole or in part by the Crown in right of Canada or Ontario but does not include premises occupied by Canada Post Corporation, the services corporation --" that's now Hydro One -- "or a subsidiary of the services corporation or social housing, a library, a recreational or sports facility, or a radio television or cable television facility." 181 Those are the government premises referred to in the regulation. 182 The concern here really is one of classification. INAC is concerned that the -- well, the correct customers be in the correct categories. Clearly any customer who is eligible for assistance through the subsidy should get that. INAC has an interest in this clearly because, well, INAC provides subsidies to First Nations. It's in INAC's interest to ensure that any customer who should be receiving the benefit of a subsidy through rate protection is getting that benefit and there's clearly a practical concern here. 183 It's an issue because historically there has been some difficulty for quite some years now as between previously Hydro One and now -- my understanding is that it continues with Remotes as to how customers are being classified, whether they have standard day or non-standard day customers. 184 INAC is concerned that that be clarified, and in large part the concern -- the concern amounts to a desire to ensure that the understanding of Remotes as to what constitutes a standard day customer or, of course, the flip side of that is the non-standard day customer, but concern, as I was saying, that -- the understanding of what constitutes a standard day customer is consistent as between INAC and Remotes. 185 It's not clear historically that that has been the case. There have also, I understand, been difficulties in that customers whose premises may originally have been constructed by band council, which might put them into the standard day rate category, once the customers actually operate -- excuse me, actually occupy those premises they should more appropriately be moved to the non-standard day rate category. My understanding is that historically that hasn't always happened or it hasn't happened in a timely manner, so that there is Remotes, and indirectly INAC, has to play catch up in terms of understanding who fits into what category. The practical issue for INAC is to ensure that those customers who ought to be receiving the benefit of the subsidy do receive that, and that those customers who are not properly characterized as standard day customers should be moved out of that class and into -- and into non-standard day. 186 Indirectly, that could have an impact on revenue requirements as well. If there has been an assumption made as to how many customers are in the standard day class, for example, and it turns out that customers have been improperly classified, that leads to problems with the assumptions that have been made as to the revenue that's going to be recovered by Remotes for that class. 187 Thank you. 188 MR. BETTS: Thank you. 189 Can I hear from any parties that are in support of the INAC position on this issue? 190 Ms. Godby. 191 SUBMISSIONS BY MS. GODBY: 192 MS. GODBY: Yes, we would support that the proper people are getting the proper subsidies and an examination of that I think would be fruitful in this case. Thank you. 193 MR. BETTS: Thank you, any other parties. 194 SUBMISSIONS BY MR. MITTON: 195 MR. MITTON: IFNA supports INAC's position on this issue. 196 MR. BETTS: Thank you. 197 SUBMISSIONS BY MR. CAPON: 198 MR. CAPON: We also would concur, Matawa. 199 MR. BETTS: Thank you. 200 SUBMISSIONS BY MR. THATCHER: 201 MR. THATCHER: Fort Severn and Kasabonika Lake concur. 202 MR. BETTS: Thank you, Mr. Thatcher. 203 Any other supporters? 204 Can we then hear from any parties opposing this position. 205 Ms. Aldred? 206 MS. ALDRED: Yes, thank you. 207 SUBMISSIONS BY MS. ALDRED: 208 MS. ALDRED: As Mr. Sidlofsky has quite rightly pointed out, in order to calculate the Remotes' rate of subsidy, there is a definition of a standard day customer, government customer, in the regulation. 209 The regulation that you're speaking about, of course, is the regulation which assists the Board in determining the rural rate assistance. That regulation also directs that the customer classes from the last rate order are to be used on a going-forward basis now to calculate the subsidy. 210 INAC apparently accepts that the rate classes will not change by the auspices of this hearing, and I gather what they're disputing is the administration by Remotes. In other words, what they want to examine is who is a standard day customer. 211 It would seem to us that they could dispute that in one of two ways. First of all, they can go customer by customer or community by community or perhaps building by building and take the Board through that exercise, which I would submit would be a long and perhaps unhelpful exercise for the Board, and that if they have specific issues with specific sights, they should bring them forward to Remotes and see if we can resolve them in another forum. 212 Another way of approaching this would be to have a global recalibration of who is a standard day customer. First of all, as I said before, that's already defined for us by the regulation. I'm presuming the goal would be to move some standard day customers from standard day rates to non-standard day rates. And in our submission, this is really doing through the back door what you can't do through the front door, because if you take a bunch of standard day customers and move them to non-standard, what you're really doing is adjusting the rate classes, which the regulation tells you not to do at this point. 213 And in our view, it -- doing that could have a pretty profound effect on either of the two rate classes, and therefore, in our view, is, in fact, and in essence a change to the rate classes without saying that that's what you're going to be doing. Those are the grounds for our opposition to this particular issue. 214 I'd also comment I'm not aware of any examples of cases where this supposed misallocation has occurred, so right now, the issue for me is quite speculative. 215 Those are my submissions. 216 MR. BETTS: Are there any other parties that oppose the INAC position? 217 Mr. Moran, any comments from Board staff? 218 MR.. MORAN: No, we don't have any comments, Mr. Chair. 219 MR. BETTS: Thank you. 220 Mr. Sidlofsky, any reply? 221 REPLY SUBMISSIONS BY MR. SIDLOFSKY: 222 MR. SIDLOFSKY: First of all, I think INAC would be happy to present evidence when Ms. Aldred confirms that it's going to be issue. But aside from that, INAC understands the wording of the regulation to the effect that the classes that were in the Board's decision in RP-1998-0001 will continue in 2003 and 2004. That's what brings us -- I expect that's what brings us to where we are today in terms of Remotes' application and in fact the two classes exist. 223 INAC would suggest, though, that the levels of rates for those classes are not mandated by the regulation, but aside from that, the question of who properly fits into each of those classes is a legitimate concern, even though the classes themselves will continue, INAC isn't suggesting -- although there's -- fundamentally INAC has some concerns with the fact of standard day rates to begin with. 224 But that aside, the fact is the regulation say what it says in terms of the classes that were referred to in RP-1999-0001, but that shouldn't stand in the way of ensuring that the customers out there on the ground who have to pay Remotes rates are in the classes that they are supposed -- that they are properly supposed to be in. 225 If someone is paying standard day rates now, and paying a significantly higher rate than the non-standard day customer and the non-standard day customer of course is paying the lower rate because it's getting a subsidy first of all and secondly because non-standard day rates are being set at a level similar to rural classes in Hydro One's rural distribution territory, that's a significant concern, sir. 226 If a customer is paying more than it should be, the fact that the regulation says that a standard day class has to continue to exist really isn't -- that's not the issue, the issue is get them out of the standard day class. And if historically there have been problems with this, and I suspect INAC will be in a position to present evidence on that, if there have historically been problems with the way customers are being classified, and the way in which Remotes has been interpreting the wording of the regulation, that is what constitutes a government premise and to follow on that, when does a customer -- or when does a consumer no longer occupy a government premise, that is a matter that needs to be resolved. If that has an impact on the assumptions that Remotes has made in terms of its revenues for each of these classes so be it, but these customers shouldn't be paying higher rates than they ought to be on the grounds that the regulations says you have to have the same classes. That's not the issue here. 227 Thank you. 228 MR. BETTS: Thank you. 229 Any questions from the panel? 230 Thank you, we'll move on to the next contested item, which I believe is 4.2, and I'll read it: "Non-standard day rates (such as appropriate rate setting principles, relationship of Network's rates and rate design, bill impacts, and implementation schedule)". Again this has been put forward by INAC and Mr. Sidlofsky. 231 MR. SIDLOFSKY: Sir, just -- 232 MR.. MORAN: Mr. Chair, given that 4.2 and 4.3 are essentially the same kind of issue in relation to two different kinds of rates, it might make sense for both of those to be dealt with together. Just a suggestion. 233 MR. BETTS: Does anyone object to that approach? 234 MR. SIDLOFSKY: No, that's fine, sir. 235 MR. BETTS: Go ahead on that basis. 236 ISSUES 4.2 AND 4.3 237 SUBMISSIONS BY MR. SIDLOFSKY: 238 MR. SIDLOFSKY: Perhaps I could deal with the words rate design first. That contested item is common to the two -- to the two issues. 239 INAC is largely satisfied with the wording of both of these issues. It may be that a rate design, as a term being included, is not critical to INAC's ability to explore its concerns here. 240 However, the problem that was identified is -- in respect of non-standard rates is that Hydro One is proposing to create a bundled rate here, whereas, typically, in the distribution rate handbook, the PBR scheme now requires the unbundling of rate, clearly, so that the typical distributor will have to unbundle its rates. 241 This isn't be proposed here. The result is that Remotes is using a networks rate, and that remains an issue, that is the relationship to networks' rates. But the intention, or our understanding of the intention is that Remotes is proposing a rate for non-standard day customers that is similar to a rural networks rating. 242 The fact is, though, times have changed. The networks rates now are unbundled as a result of the creation of a competitive market, the restructuring, and the implementation of PBR framework. So to look at the non-standard day rates now, it's hard to -- it's difficult to understand how those rates correspond to an unbundled Hydro One Networks rate. 243 And notwithstanding that the suggestion that there's a similarity that -- if anything, what Remotes is using is an older version of Network's rates, that is a bundled version rate. We would simply like to explore how those -- how the non-standard day rates, which are unbundled, correspond as Networks is suggesting -- excuse me, as Remotes is suggesting to the Networks rate. 244 That would be my entire comment on non-standard day. As you appreciate, INAC's larger concern tends to be with the standard day rates, because those rates deal with the -- what are termed government premises. 245 Now, there are two issues on -- there are two points here that are in dispute. One is the relationship to costs and the other is rate design. And the wording there is -- it's worded as two separate items. The issue is really similar, so perhaps I'll deal with them both at the same time. 246 Historically, and you would find this in Remotes' application, historically, Remotes has set its rate from -- for standard day customers, that is, customers who are subsidized directly or indirectly by government, at some amount above cost. Now, we don't know at this point what those costs are, but as you will see -- as you will have seen in the Remotes application, initially those rates were set -- the standard day rates were set in the later 1980s at cost plus 30 percent. 247 Now, I don't know that anyone knows at this point how the standard day rates relate to Network -- to Remotes' costs, but what does appear clear is that those customers, the standard day customers, are paying a significantly higher rate than their non-standard day neighbors. 248 And INAC is concerned about the level of those bills that are being paid by standard day customers, and if the representation of Remotes is that those rates, the standard day rates were originally designed to bear a relationship to Remotes' costs, and that is initial cost plus 30 percent, now, the 30 percent, I expect is somewhat notional because costs have changed, presumably, since the later 1980s. 249 But INAC needs to know what bearing those rates have on Remotes' costs. Remotes is suggesting that standard day customers are -- are compensating for -- effectively compensating for the fact that there are government subsidies here. The non-standard day customers are getting the benefit of the -- of rate protection. 250 And the -- put simply, I hope the concern is that in analyzing the standard day rates and attempting to take a position on the proposed standard day rates, INAC requires some sense of how these rates relate to Remotes' costs. We appreciate that the cost allocation study is a matter for the time leading up to second generation PBR, however, the standard day rates have been designed from their initiation in the late 1980s as bearing a relationship to costs. The new version of the standard day rates should be of some relationship to that as well, that's the basis on which they were created. Again, this is the opportunity to address that. 251 Thank you. 252 MR. BETTS: Thank you. Could I hear from parties supporting that position. 253 Ms. Godby. 254 SUBMISSIONS BY MS. GODBY: 255 MS. GODBY: Thank you, Mr. Chair. If it pleases the Board, I would like to have our expert Mr. Ian McKenzie address this particular issue and formulate ?Our position, I think, much better than I could. 256 MR. BETTS: Thank you. 257 SUBMISSIONS BY MR. MCKENZIE: 258 MR. McKENZIE: Good morning. Ian McKenzie from RDII Utility Consulting representing Shibogama. 259 The issue we have is in both 4.2 and 4.3, the wording rate design has been contested specifically by Hydro One Remotes. Our thought is that in the transmentional grid part of Ontario, which is how I've been referring to the last couple of days, which is the remainder of Ontario where most of my background has been, we got away from the declining block structure of the old bundled cost of power regime. We would like the opportunity to be able to explore the impacts of the declining block structure that is still in effect or proposed to be in effect for the non-standard and standard day commercial rates in the application -- from the applicant, and as well as exploring the impacts from the increasing block structure, which is kind of a new term, but as you can see from the standard day residential rates, the cost of power increases as consumption goes up from 250 block to the remaining balance. 260 So we would like to have -- or opinion is this should be an issue on the issues list, as we have the right to investigate and ask for some further details on the issue of these block structures. 261 Thank you. 262 MR. BETTS: Thank you Mr. McKenzie. 263 Any other submissions in support of these two issues? 264 Mr. Thatcher. 265 SUBMISSIONS BY MR. THATCHER: 266 MR. THATCHER: On behalf of Fort Severn and Kasabonika Lake I have nothing to add to the comments already made, but just wish to indicate that we are in support of this being an issue before the Board. 267 MR. BETTS: Thank you. 268 SUBMISSIONS BY MR. MITTON: 269 MR. MITTON: IFNA is in support of these issues. 270 MR. BETTS: Thank you. 271 SUBMISSIONS BY MR. CAPON: 272 MR. CAPON: Concurrence from Matawa. 273 MR. BETTS: Thank you. Any other parties? 274 Then may we hear from parties opposing this position. 275 Ms. Aldred. 276 MS. ALDRED: Yes, thank you. 277 SUBMISSIONS BY MS. ALDRED: 278 MS. ALDRED: Just harkening back to, I think, the first submissions that I think Mr. Sidlofsky made which were about comparing non-standard day rates to Network's rate, I believe we had accepted that issue, so I'm not sure why he's raised that. 279 In terms of now speaking to the rate design issue generically as it applies to both the standard day rates and the non-standard day rates, my first point will be one that I've made before and hopefully won't have to make again this morning but regulation 442.01 does require us to use existing rate clauses. 280 The second point, though, is that this is a first generation PBR application. We are a small utility like many of the other small utilities that the Board has already dealt with. We have, in coming up with this application, followed the rate handbook like everyone else did, and as the Board is no doubt aware, rate design issues are not a first generation PBR issue. They're a second generation issue, and furthermore, in order to properly address rate design issues, one would need to conduct a cost allocation study. And it's not a useful exercise to try to rate design without having done that. 281 So for those reasons, we -- the term rate design is something that we oppose on the issues list. 282 As you're aware, options for rate design have been pushed over to second generation PBR, and the Board, I think, will be coming out with directions, I understand, on cost allocation studies. 283 So the submission on that is that this is premature. Other LDCs haven't had to do this prematurely, neither should Remotes. 284 The other issue that Mr. Sidlofsky has raised is the issue of the fact that standard day rates are set above cost, and I'm opposing that issue for this reason: We believe that that reason -- sorry that issue is very much a government policy issue. It's an issue about how much -- because -- how much subsidy is going to be paid, a different kind of subsidy, but none the less. It is a policy issue that needs to be discussed among various levels of government, and we feel it would be better off discussed outside the context of this hearing. 285 I guess one final issue is that if we do address rate design issues in this hearing, we start redesigning the standard day rates and the non-standard day rates, that will have an effect on rural rate assistance and that has an effect on other people as well, beyond Remotes' customer base. 286 So for all those reasons we oppose rate design which would seem to be premature in this particular hearing. 287 MR. BETTS: Thank you. 288 Are there any parties that would like to speak further in opposition to the INAC position? 289 And Mr. Moran any comment from Board Staff? 290 SUBMISSIONS BY MR. MORAN: 291 MR.. MORAN: Thank you, Mr. Chair. 292 I just wanted to note for the record specifically what's in the regulation and so that Mr. Sidlofsky would have an opportunity to comment on that. 293 Section 4 of the regulation creates a global amount of -- global amount for protection, and then in section 4(4) -- sorry, in section 4(3) it says: "For the purposes of subsection 2, Hydro One Remote Communities Inc.'s forecasted consumer revenues for a year shall be based on the rate classes set out in the transitional rate order RP-1998 0001 by the Board." 294 And this is the part that I wanted to draw your attention to: "And upon the rates set out for those classes in the most recent rate order made by the Board." 295 And it seems that the issue that INAC wants to pursue here would constitute perhaps revisiting the actual rates by way of rate design. 296 MR. BETTS: Thank you. 297 Mr. Sidlofsky, have you any reply? 298 REPLY SUBMISSIONS BY MR. SIDLOFSKY: 299 MR. SIDLOFSKY: Sir, I think a number of INAC's concerns and probably the concerns of First Nations groups as well can be addressed in the categories of bill impacts, and that issue isn't -- that portion of issues 4.2 and 4.3 isn't in dispute. That's accepted by Remotes. 300 As I said earlier, INAC isn't suggesting that the regulation says anything other than that this day-to-day rate -- because it was referred to the Board's 1998 decision, and continues forward. The question is what gets put into that rate. It is, in INAC's view, still an issue. 301 If it is the Board's determination on this issue related to wording that this is a federal/provincial government policy matter, and this is a matter that should be taken up at that level, then INAC will certainly have to consider dealing with it at that level if that's the Board's direction on this, or if that's the Board's disposition of this matter. 302 But certainly on the wording of relationship to costs, there's no question about the rate setting principles that are being applied here. That -- that has been accepted as part of both issues to -- 4.2 and 4.3. 303 And earlier drafts of this -- of both of these issues had shown the letters EG before in relationship to Network's rates and relationship to costs, and the fact that I've refer today words relationship to Network's rates doesn't mean I'm questioning Remotes' acceptance of that wording as an issue. I'm not sure where Ms. Aldred has taken that from, but I realize that isn't in dispute. The point is relationship to costs is simply an example of the rate setting principles that should be examined by this Board. 304 INAC still has questions about how these rates relate to costs, and clearly Ms. Aldred has confirmed that the standard day rates are designed above costs. 305 Whether that's a billing impact issue or whether it's a matter of rate setting principles, my submission is it should be addressed by the Board. If there's a larger issue that the Board wishes to direct INAC or suggest that INAC take up with the Province, I'm sure INAC will take that suggestion at heart as well from the Board. 306 MR. BETTS: Thank you. 307 Are there any questions from panel members? 308 There appear to be none. 309 We'll move, then, to item number 4.5, the next contested item, should rates be uniform for all Remotes customers, or should rates reflect INAC contributions in particular communities. 310 Again, I believe it was INAC as the proponent, so Mr. Sidlofsky. 311 By the way, if we have trouble hearing you, there is a wind blowing behind us and it is getting cool so, I would encourage anybody to move along. A cold wind on our backs back here, but anyway, Mr. Sidlofsky. 312 ISSUE 4.5 313 SUBMISSIONS BY MR. SIDLOFSKY: 314 MR. SIDLOFSKY: Thank you, sir. If I could just beg the Board's indulgence for a moment. 315 MS. BRUNTON: Sir, I believe that window might be open behind you. I think it is. 316 MR. BETTS: We're looking at it. Excuse me. I think you're right but I don't know that it can be closed. We'll go back to plan A and it will encourage us to move along here. But please, it's important that we hear all the input, so I'm not trying to rush anybody. 317 MR. SIDLOFSKY: Sir, let me try and explain what the concern is here. As you've heard already this morning, INAC or the Federal Government makes capital contributions to the -- perhaps I'll wait for the microphone. 318 MR. BETTS: I think we're back under control. 319 MR. SIDLOFSKY: The Federal Government through INAC makes contributions to -- capital contributions to the electricity infrastructure in First Nations communities. Now, Remotes has rates that apply to all of Remotes' customers, distinguished between standard day and non-standard day customers. 320 However, all of Remotes' communities are subject to similar rates. Now, not all of those communities have received capital injections or capital contributions from INAC. The concern that INAC has is that the money that it is putting forward toward capital contributions to install generators and other necessary infrastructure in First Nations communities is effectively reducing the costs of Remotes. 321 The effect of what INAC is doing is making it more economical for Remotes to supply electricity and to operate these distribution systems. However, that benefit is actually spread among First Nations and non-First Nations communities. That benefit spreads beyond the communities in which INAC has contributed to capital. INAC's concern is that the benefits of those contributions should be flowing to the communities that INAC is making those contributions to. That, in turn, presumably could have an impact on -- or have an effect on the rate impacts experienced by customers in the communities that INAC is involved in. 322 INAC's concern, put simply, is that it doesn't want to be in a position of subsidizing all of Remotes' customers by virtue of having made contributions to First Nations communities, and the rates as proposed by Remotes don't reflect that difference in contribution. 323 Now, I understand that the provincial government also makes capital contributions. They have a different -- my understanding is that there's a different approach to capital contributions as between the Federal Government and the provincial government. It has to do with funding of upgrades to equipment. The Federal Government does fund upgrades in it's agreements, and my understanding is that the provincial government does not. It may be that, then, the benefits that communities that INAC is not involved in amount to the same benefits that INAC is making in its community, so that effectively, there's a wash. 324 And it would make sense that -- that the benefits from INAC's capital contributions are spread among the entire customer base of Remotes, because effectively the INAC funded communities are getting the benefit from the province's capital contributions as well. 325 The difficulty is that there is no way to determine that at this point from the application that's before the Board, and INAC would like an opportunity to pursue that as an issue through interrogatories and possibly lead evidence on that if it continues to be an issue. 326 Thank you, sir. 327 MR. BETTS: Thank you. 328 Can I hear from parties supporting that submission? 329 Ms. Godby. 330 SUBMISSIONS BY MS. GODBY: 331 MS. GODBY: Yes, sir, we would support that submission for the reasons stated by mine friend. 332 MR. BETTS: Thank you. 333 SUBMISSIONS BY MR. THATCHER: 334 MR. THATCHER: We support it, and I have nothing to add. 335 MR. BETTS: Thank you. 336 SUBMISSIONS BY MR. CAPON: 337 MR. CAPON: Concurrence from Matawa. 338 MR. BETTS: Thank you. 339 Then we will hear now from parties opposing that. 340 Ms. Aldred. 341 MS. ALDRED: Thank you. 342 SUBMISSIONS BY MS. ALDRED: 343 MS. ALDRED: This issue, in my mind, is quite closely linked to the rate design issue that I've just discussed with you so I will try to keep my comments brief. But this issue is absolutely, squarely, a cost allocation issue. It needs a cost allocation study. It is not a first generation PBR issue, it may be a second generation PBR issue, but it is not a first generation PBR issue and it needs a study. It cannot be done without one. 344 Furthermore, as Mr. Sidlofsky I think probably painted for you, there's interplay here between provincial and federal jurisdiction. There are funding issues and there are policy issues, all of which I would suggest are better solved in another forum. So for those reasons we oppose this particular issue. 345 MR. BETTS: That concludes your comments, Ms. Aldred? 346 MS. ALDRED: I'm sorry, it does, yes. 347 MR. BETTS: Thank you. 348 Mr. Moran, anything to add? 349 MR.. MORAN: No comments, sir. 350 MR. BETTS: Any questions from panel? 351 There are none. We will move on, then, to item number 5.2, connection policies and charges, and can those that are proposing this issue please speak to it now. 352 ISSUE 5.2 353 SUBMISSIONS BY MS. ALDRED: 354 MS. ALDRED: I'm opposing just the one part of that issue, the connection policy -- the charges I'm fine with. The reason I'm opposing connection policy as an issue is that it is something that is covered by a distribution system code which Hydro One Remotes follows. And so I think it's not properly an issue for a rates hearing. In fact, that's why I'm opposing that issue. 355 MR. BETTS: Thank you, and was it -- I believe INAC was a proponent of this, and somebody else. Can those parties volunteer their position? 356 MR.. SIDLOFSKY: It seems like it's me again. It was like this yesterday, too. 357 SUBMISSIONS BY MR. SIDLOFSKY: 358 MR. SIDLOFSKY: I'm pleased to see that connection charges are acceptable to apparently all the parties as an issue. Let me try and explain, if I might, what the problem is here. 359 Unlike in more populous areas of the province, -- sorry, if I could step back. 360 The distribution system code contains a process for expanding electricity infrastructure distribution systems. There are also provisions in the code for connection charges, that is, what can a customer be required to pay to connect to a distribution system. 361 The difficulty in the remote areas is that the -- in part, that the expansion provisions of the distribution system code don't quite work. Doing work in the remote areas is a very expensive process, whoever is doing the work. The code contemplates a scheme whereby when customer requests an expansion of the system to service -- in order to connect to that customer, there is certain work that the distributor will undertake, but there is also certain work that can be undertaken on a competitive basis, so that the distributor -- excuse me, the customer can look for alternative bids for performing that work. 362 That's fine when it's not incredibly costly for the contractors who are performing that work to come in. The way the system works right now in the remote communities is, as with other distributors, there's certain work that Remotes insists on doing. The best characterization of that would be the connection to the Remotes line, the actual connection work would be reserved to Remotes, the way the system works right now. 363 Yes, there would be an opportunity for the customer to obtain alternative bids for the work on the customer's side of the connection. Basically, the construction of the lines or any other infrastructure leading up to the connection point that Remotes would be working on. It's difficult to find competitive bids, though, when Remotes is already in the area. Remotes has already incurred the expense to come in and make that connection work. They reserve that work for themselves and nobody else can do it. I think mentally, it may not be a huge cost to do the additional work that's necessary to connect the customer for the system, but for a third party to come in and do that work, it would likely be as expensive as it was for Remotes to come in and do its connection work. 364 The effect of this is that it stifles the opportunity for competition when there is an insistence that Remotes do the connection -- actually do the connection to the live line. There are probably a couple of solutions to this, and this does keep us on the policy side as opposed to the charge side. One solution would be to include the connection in the rates and make the line work itself contestable. In that sense, customers -- there may be some impact on the subsidy as well, but the customer base will effectively be covering the cost of the actual connection work to the line. 365 What that does is it makes for realistic competition for the customer's work on the customer's side of that line. If that solution is taken, that will have -- if the connection -- if the connection work is included in the rates, then that will have an impact on customer rates. If the revenue requirement is needed to cover that connection work, then that may have an impact on customer rates. 366 The other alternative would be to make all of that work contestable, possibly through -- subject to Remotes' approval of the customer's contractors. 367 But the concern on INAC's part is simply that there has to be a way to pursue the objectives, not only of the distribution system, but of restructuring in general, that is fostering the competitive environment. And if that means including the connection work or including more of the connection work in the connection charge, then so be it, but that is -- in these remote communities, that's the realistic way, the only realistic way to foster competition. 368 So those are my comments. 369 MR. BETTS: Thank you. 370 Anyone would like to speak in support of that position? 371 Anyone would like to make a submission opposing that position? 372 Perhaps Ms. Aldred -- 373 MS. ALDRED: I guess I started off improperly. I apologize. 374 MR. BETTS: That's okay. 375 FURTHER SUBMISSIONS BY MS. ALDRED: 376 MS. ALDRED: I just had a little rebuttal or at least a little add on. 377 The distribution system code has been carefully developed as you're all aware, and it's available, and there are processes under the code if one wishes to amend it or make submissions that it needs to be amended to include the types of issues that Mr. Sidlofsky wants to address. But, you know, the Board has another process which should be followed, and in my mind this is a distribution code matter, which I suggest you should leave for that process. 378 And I guess, I heard some argument I guess in there, and I just wanted to make the point that from our viewpoint there are safety issues involved to people, other people working on our lines. This is an important issue for us, and we do believe it should be addressed in another Board process. 379 Thank you. 380 MR. BETTS: Thank you. 381 Are there any other parties that would like to speak in opposition to this issue? 382 Mr. Moran, any comments? 383 MR.. MORAN: No, Mr. Chairman. 384 MR. BETTS: Any question from panel? 385 And Mr. Sidlofsky, any reply to Ms. Aldred's comments? 386 REPLY SUBMISSIONS BY MR. SIDLOFSKY: 387 MR. SIDLOFSKY: I don't think so, sir. I think the only point that I'd like to make is one of confirmation that connection charges clearly are an issue, so what goes into the connection charge or what's reasonable for the connection charge is a matter for this Board. 388 Thank you. 389 MR. BETTS: Thank you. 390 I think we're prepared to move on to the final contested issue, and that's 5.5, which reads at this point "Imposition of PILS." And I'm not certain from the introduction who the proponent was of having this issue on -- 391 MR. SIDLOFSKY: I'm happy to say it was not me. 392 MS. GODBY: But I expect my friend to support. 393 MR. BETTS: Ms. Godby? 394 ISSUE 5.5 395 SUBMISSIONS BY MS. GODBY: 396 MS. GODBY: Thank you very much, Mr. Chair. 397 Let me start out by saying first of all that we understand Remotes' proposal to recover PILs through the subsidy, and if they are recoverable at all that that's the best way, in our view, for it to be done. 398 However, the issue in this case that we have is whether or not PILs can, in fact, be recoverable at all from First Nations. That is the issue. 399 And we submit, Mr. Chair and members of the Board, that it is an issue, it is a rates issue, and it is properly before you in this proceeding. 400 I essentially have three, sort of, prongs to this argument, and the first one is this: 401 The PILs, like the debt retirement charge, is a revenue stream which is specifically dedicated to recover the stranded debt associated with the transmission system. And the PILs, therefore, are analogous to the debt retirement charge. 402 Now, as we know, First Nations are legislatively exempt from payment of the debt retirement charge, and so therefore, we would submit by analogy they should be exempt from any payment of PILs in that regard or of the recovery, whether they be built into the rate or subsidy. 403 Secondly, as I mentioned, PILs are dedicated to pay down the debt associated with the stranded assets of the transmission system, and as we all know, the First Nations and the Remotes have never been hooked up to the grid, have never, you know, been part of the incurring of that debt, and furthermore, have never received the benefit of being hooked up to that system for which the PILs are now dedicated, you know, to pay off. 404 Thirdly, we would submit that Hydro One Remotes has the option, and it is available to it, of conducting their separate NBRR determination. And just like in the rest of the province, for instance in the south, new classes have been created in order to ensure proper recovery of proper costs from the proper people. And that is, in fact, an option that is open to Remotes in this case. 405 But you know, rather than to debate the options of how it can be done, we would submit that this certainly is a rate issue, and it is properly before you. 406 MR. BETTS: Thank you. 407 Can I hear from parties that would support that position? 408 Mr. Thatcher? 409 SUBMISSIONS BY MR. THATCHER: 410 MR. THATCHER: As I'd indicated earlier, we both support that position and have a further argument to make on that, which is that regardless of what the regulations state that this is, in effect -- PILs both in future and what the applicant is trying to recover through prior period losses -- is a form of indirect taxation that is a contravention of the treaty rights and the rights under Section 87 of the Indian Act of the First Nations and Indian members. 411 As such, it is ultra vires of the Province to even attempt to do it. And therefore, we would be looking, I guess, as an issue before the Board to seek a declaration from the Board to that effect. 412 The key point is that although the applicant is legally a separate corporation, a share capital corporation, for all intents and purposes its goal is to provide service to these very specific Remotes communities. 90 to 95 percent of their customers are located on reserves. 413 And that by consequence of all of this, there is no competition against them. There is no other alternative to these First Nations, and that, in effect, by requiring the corporation to pay the tax, they are in effect taxing the First Nations people. 414 I would put this to the Board for consideration: If it's held that this is not the appropriate forum for this, it's not an issue that's going to go away. 415 As you may or may not be aware, the efforts of taxed aboriginal peoples have been very aggressively opposed in the past and will continue to be. 416 So in support of that, we figure this is an issue that needs to be before the Board in terms of the rate application itself. 417 MR. BETTS: Thank you. 418 MS. GODBY: And Mr. Chair, just to clarify, I would support my friend's position with respect to that, with respect to his comments made on the constitutionality of the taxation. 419 MR. BETTS: Are there any other parties that would add their support to that position? 420 SUBMISSIONS BY MR. CAPON: 421 MR. CAPON: Concurrence from Matawa. 422 MR. BETTS: And those opposing that position? 423 Ms. Aldred? 424 SUBMISSIONS BY MS. ALDRED: 425 MS. ALDRED: Thank you. 426 We do oppose the inclusion of this issue. PILs are, as you know, payment in lieu of taxes. They're a matter of government regulation over which we have no control. We have to pay them, other utilities pay them, and my understanding is they're a pass-through item for those utilities, and we would submit that that would be appropriate for us. 427 But given the fact that this is a government regulation, we don't see how the Board can deal with it. The regulation is the regulation. And while these issues are interesting, we don't think that you will be able to treat those issues, because the regulation has to be dealt with in another forum. 428 And I'm also not aware that First Nations have an exemption from paying taxes on pass-through rates. So because the Board won't have the ability to change the application of the regulation to Remotes, we don't feel that this issue is properly before you. 429 MR. BETTS: Thank you. 430 Mr. Moran, anything you would like to add from the Board staff perspective? 431 MR.. MORAN: No, Mr. Chairman. 432 MR. BETTS: Thank you. 433 And Ms. Godby, any reply? 434 REPLY SUBMISSIONS BY MS. GODBY: 435 MS. GODBY: Just very briefly. 436 We're not suggesting that Remotes be able to get out of its legislative requirement to pay. What we are suggesting simply is that it's not recoverable from the First Nations in any form, whether that be through subsidy or rates. 437 MR. BETTS: Thank you. 438 Any questions or comments from Board panel at this point? 439 I believe at this point we can safely say we've heard the submissions of all the parties on the issues that are agreed to as well as those that are contested. And I would say at this point, and I'll probably reiterate this later, that we appreciate your comments. They've been put to us very, very well, and I think you've given us enough information that we're in a position now to make the decision that has to be made. 440 We will break now for lunch. Our lunch will conclude, I think, when hopefully we've finalized our decision. 441 Mr. Moran, did you have a comment there? 442 PROCEDURAL MATTERS: 443 MR.. MORAN: Mr. Chair, I know you were targeting finishing by one, and it's about a quarter to one. I would suggest we can squeeze in one more item so that it won't have to be dealt with later on. That's the question of the timetable. 444 MR. BETTS: Please. Yes. Thank you. I'm glad you brought that up, and by all means. And if there is anything else that needs to be squeezed in, let's do it, but that is an important one. 445 MR.. MORAN: And there is a second item, and that's just the delivery of documents. But again, I think it's a very quick item as well. 446 There has been discussion amongst the parties with respect to a proposed timetable, and I think there is substantial agreement on every part of the timetable, except for the setting of the hearing date. 447 And for the purposes of the record, first of all, there was a request by Shibogama to Remotes to consider pushing back the November 1 date a couple of weeks to allow for some coalition building, and Remotes has agreed to that request. 448 Currently the procedural order that the Board has issued has November 1 as the date, but the proposal is to change the date for the delivery by intervenors of interrogatories to Remotes to November 15. 449 Then there is agreement that Remotes' response to intervenor interrogatories would be delivered by November 29. Intervenors who are pre-filing evidence have to do so by December 6. Remotes will deliver its interrogatories on intervenor evidence by December 13, Remotes' interrogatories to be answered by intervenors by January 13. There's a big space there, but that is to reflect the holiday period that falls in the middle there. 450 And then there's no agreement on the hearing date itself, and I think parties want to make some brief submissions on when they would like you to set a hearing. There's some difference of opinion on how early or how late that should be. 451 MR. BETTS: Then it looks as though we do have a pretty solid schedule there apart from the one date, which is a hearing date. 452 And may I have submissions on that at this point, and perhaps we can deal with that in our decision. 453 What are the various positions? Who would like to take the lead? 454 Ms. Godby? 455 MS. GODBY: Thank you, Mr. Chair. 456 It was our suggestion that the hearing date be postponed for two weeks as opposed to one week, so we would be looking for a hearing date by beginning the end of January as opposed to January 20th. 457 And the reason for that is the -- is because in the event that we are able, and we sincerely hope that we are able, to build a coalition among the various First Nation intervenors, we have a number of logistical difficulties to overcome, and that is witness preparation primarily and meeting with the various parties whose interests we may represent. 458 There are great distances to travel. A lot of the members are not in the community, given, you know, their hunting and trapping schedules and things like that. And it would be, we believe, more culturally sensitive and appropriate if we were to have a week's grace there -- a further week's grace and hold the hearing at the end of January. 459 And I appreciate that the Board needs to balance the interests of the parties, but these people come from Remotes places, and it's very often difficult to access -- gain easy access to them. 460 MR. BETTS: Thank you. 461 Are there any parties that would like to speak in favor of that, and I'm looking at a date of approximately the 27th, appreciating that the Board will have to pick the appropriate days within that range, one way or the other. But I think you would be talking the week of the 27th. 462 Yes, Mr. Thatcher? 463 MR. THATCHER: That Kasabonika and Fort Severn are in support of that date. 464 The only other -- putting it back to the 27th or the last week of January, the only other comment that I'd like to add is that although the dates are agreed by the parties, a number of the First Nation peoples themselves have expressed considerable dismay for what's happened here, and they wanted to put that on the record, which is specifically to the effect that this is the worst possible time to be doing this in terms of them, because of the weather, because of the hunting and their trapping schedules. And they're unhappy with that. 465 The other problem is we're not dealing just with cultural differences. We're also dealing with fundamental language barriers that need to be overcome. We need translators involved, and even delaying this to the 15th of November puts a considerable, perhaps insurmountable barrier, in ensuring the full participation of all the First Nation members. 466 Now, they're aware of the fact that this is not the creation of the Board itself, but they do want this noted for a fact that this schedule is, perhaps, unachievable from a realistic point of view, but we would try and move within it. 467 MR. BETTS: Thank you. 468 Any other submissions in favor of the 27th? 469 MR. CAPON: Concurrence. Thank you. 470 MR. BETTS: Thank you. 471 MR. SIDLOFSKY: Sir, INAC supports Ms. Godby's request as well. 472 MR. BETTS: Thank you. 473 Are there any parties that would like to speak or offer an alternate date? 474 MS. ALDRED: Well, I would, not surprisingly, I guess, now to you. 475 We would prefer to have the hearing heard the 20th. I recognize it's a week's difference, and probably you will have your own schedule, and perhaps it will even be later than that. But we did file the application in March. We have tried to move it along while trying to provide information to intervenors and to accommodate their schedule as well as we can. 476 We would just like to see the hearing move forward. And the problem with the end of January, as sometimes as we all know, there's slippage in these dates, and it's -- it can't be the end of January anymore, and suddenly it's into April or March or another later date. So we just wanted to see if we could schedule it, (a), for the 20th and get as close to that as we could. 477 Thank you. 478 MR. BETTS: Thank you. 479 And are there any other parties that would like to speak to that date, being the 20th? 480 I don't think there's any need to hear reply on that. I think we've heard everyone's position, and we will consider that. 481 Mr. Moran, what was the other item? 482 MR.. MORAN: One last item. That has to do with the exchange of documents amongst parties. I think the experience has been that it takes a while for documents to get there by mail, and parties are in agreement that exchange can be by way of e-mail and fax and mail. 483 So I just wanted to note that for the record. And certainly that works internally within the Board. The Board can accommodate receipt of documents in all three ways. 484 MR. BETTS: The Board takes it that all the parties are prepared to receive correspondence by e-mail, fax, or by normal methods. In other words, the quickest and most effective method for all of you. 485 And anyone in opposition to any of those methods? 486 Would anyone like to speak to that particular item? 487 MS. GODBY: Mr. Chair, if I might raise one point. Ms. Baxter has advised that NAN, the Nishnawbe-Aski Nation has withdrawn from the intervention. However, they are still playing some role in terms of coordinating this umbrella group. 488 And in that regard, we would ask that information continue to be sent to NAN to the attention of Ms. Baxter in her role as coordinator for the intervenors. 489 MR. BETTS: Thank you. We can do that. That's fine. 490 Does the clerk or the Board have all of those various addresses that you can refer to? Is there anybody that hasn't given that information to either Mr. Moran, Ms. Desai, or the clerk? 491 MR.. MORAN: I think we've collected a complete list of it this morning and everybody's e-mail addresses and fax numbers. 492 MR. BETTS: Excellent. 493 MR.. MORAN: And we'll count that one as well. 494 MR. BETTS: Yes, Ms. Aldred? 495 MS. ALDRED: Sorry. I have one other just small matter. 496 As you're aware, the Board has to calculate the RRP subsidy for the year 2003, and in order to do so, they need certain data from Remotes. I just wanted to alert everyone to the fact that we would be filing that probably early next week with the Board. I just thought I would raise that at this point so that you're aware that that's coming. 497 MR. BETTS: Thank you. And I am aware of that time pressure as well from different points of view. 498 Are there any other items we should consider before our break? 499 MR.. MORAN: I believe that's everything, Mr. Chair. 500 MR. BETTS: Great. Well, you did very well, everybody, in providing that to us in the time that we had allocated here. 501 Let me just confer with my fellow members for a moment. 502 Since everybody has been working with us for the time, we're going to try and do the same thing. We will be aiming to conclude both our lunch and our decision by 1:15 -- no, sorry, 2:15. Everybody looked and said, Boy, are you guys fast. 2:15. So we can reconvene here at 2:15. 503 If for some reason we haven't concluded, either Mr. Moran or Ms. Desai will be here to give you an anticipated conclusion time. 504 So at this point, if there's nothing further, then we will stand adjourned. 505 --- Luncheon recess taken at 1:01 p.m. 506 --- On resuming at 2:28 p.m. 507 MR. BETTS: Thank you all, and please be seated. 508 DECISION: 509 MR. BETTS: I hope everybody had a bite to eat. First of all, we have managed to reach a decision, and we'll be able to read that shortly. 510 I just ask as we sit, are there any preliminary matters that we should consider before rendering this decision, any further items that popped up over lunch? 511 Thank you. Then the Board has deliberated and reached decision, and the decision is as follows: 512 The Board accepts the uncontested issues as appropriate ones for the Board to deal with. Regarding the contested issues, the Board's decision is as follows: 513 On Issue Number 2.4, assumptions regarding ongoing capital contributions by INAC, the Board is of the view that this issue is premature. While there is a possibility that funding levels might change, the Board expects that Remotes would have to apply to the Board for a new rate under those circumstances. However, the Board recognizes that funding could change up or down during the PBR period proposed for Remotes. Therefore, the Board is removing issue 2.4 but adding the following wording "changes in funding" to issue 1.3, which will allow it to be considered as an item of adjustment. 514 For Issue Number 4.1, administration of customer classes and eligibility for membership in classes, the Board is of the view that this a relevant issue. INAC does not seek to change any rate classes, its concern is limited to whether the right people are in the right rate classes. This is an issue that affects and promotes revenue requirement. This Board will allow this issue and will move it to section 2 of the issue list. 515 Issues 4.2 and 4.3, the Board is of the view that this issue is premature. The Board expects all local distribution companies to carry out a cost allocation study in preparation for a second generation PBR. At that time, the Board will address rate design issues. 516 Issue 5.2, connection policies and changes. The Board is of the view that connection policies are a licensing matter and should not be dealt with in this proceeding. However, connection charges are a part of this proceeding and will be specifically included as part of issue 4.4. 517 Issue 5.5, imposition of PILs. This issue has two components: The first component is whether the Province has the authority to require Remotes to pay PILs. This question is beyond the scope of the Board's jurisdiction. The second component is whether PILs are recoverable from customers who are members of First Nations. The recoverability of any item is written in the Board's jurisdiction. The Board will amend issue 5.5 to read "recoverability of PILs." 518 It is the Board's view that this is primarily a legal issue that can be dealt with in argument and will not require evidence. 519 With respect to the schedule, the Board accepts submissions from those parties requesting an extension of time. The Board is interested in full participation and also solidly supports the efforts of the parties to work together and coordinate their positions. Therefore, the Board accepts the proposed schedule with a tentative hearing date in the week of January 27th and will issue a procedural order stating the new schedule of dates. 520 The Board understands that the parties participating in this process have been pleased that it was held here in Thunder Bay and would generally hope that the hearing could also be held in Thunder Bay. The Board accepts this position and will do its very best to accommodate that request. 521 And we have just recognized that we have omitted stating our position on 4.5. And 4.5 would be considered similarly to 4.2 and 4.3, again, I believe as being premature in this proceeding. 522 The issue 4.5 is removed for the same reason as the contested parts of 4.2 and 4.3. 523 That concludes our decision at this time. I can speak on behalf of my fellow panel members and thank you all for your participation. It's a good start to a thorough investigation and analysis of this application, and we look forward to hearing further evidence from all of you and input, and I believe it will lead to a just and reasonable decision on the application before us. 524 So thank you to the applicant's representatives, all of those parties that are here as intervenors or as observers. 525 Thank you to the Board staff, the court reporter, and I look forward to our future meetings on this matter and hopefully to a good conclusion for all. 526 At this point, we will stand adjourned. 527 --- Whereupon the hearing concluded at 2:34 p.m.