Rep: OEB Doc: 12RX7 Rev: 0 ONTARIO ENERGY BOARD Volume: 2 25 JUNE 2003 BEFORE: R. BETTS PRESIDING MEMBER B. SMITH MEMBER F. PETERS MEMBER 1 RP-2002-0118 EB-2002-0332 2 IN THE MATTER OF the Ontario Energy Board Act, 1998, S.O. 1998, c.15 (Sched. B); AND IN THE MATTER OF a Notice of Intention to Make a Compliance Order under section 75 of the Ontario Energy Board Act, 1998. 3 RP-2002-0118 EB-2002-0332 4 25 JUNE 2003 5 HEARING HELD AT TORONTO, ONTARIO 6 APPEARANCES 7 PAT MORAN Board Counsel J. SIDLOFSKY Abitibi-Consolidated Inc. ANDREW LOKAN Power Workers Union MARY ANNE ALDRED Hydro One Networks RICHARD KING TransAlta Energy corp. 8 TABLE OF CONTENTS 9 HYDRO ONE - PANEL 1; PATTERSON, PATTANI, PORAY, TONEGUZZO [29] EXAMINATION BY MS. ALDRED: [35] CROSS-EXAMINATION BY MR. MORAN: [252] CROSS-EXAMINATION BY MR. KING: [917] CROSS-EXAMINATION BY MR. SIDLOFSKY: [991] RE-EXAMINATION BY MS. ALDRED: [1401] PROCEDURAL MATTERS: [1454] 10 EXHIBITS 11 EXHIBIT NO. 2.1: DIAGRAM ENTITLED "METERING POINTS OF ACI AND WCP" [94] EXHIBIT NO. 2.2: DIAGRAM ENTITLED "OWNERSHIP AND DELIVERY POINTS (DP) OF ACI AND WCP" [96] EXHIBIT NO. 2.3: EXCERPTS FROM MATERIAL FILED IN THE 0044 DECISION [589] EXHIBIT NO. 2.4: EXCERPT FROM THE EVIDENCE FILED IN THE RP-1999-0044 PLEADING [1404] EXHIBIT NO. 2.5: CURRICULA VITAE OF DR. PORAY, MR. PATTERSON AND MR. TONEGUZZO [1485] 12 UNDERTAKINGS 13 14 --- Upon commencing at 9:30 a.m. 15 MR. BETTS: Good morning, everybody, and welcome back. The Board again is sitting for hearing day 2 in the matter of application RP-2002-0118. Before we begin with the introduction of a new witness panel and evidence from them, are there any preliminary matters that the Board should consider? 16 MS. ALDRED: Not from me. 17 MR. SIDLOFSKY: No sir, thank you. 18 MR. BETTS: Am I coming through the speaker system? It looks like we're dead here for a bit. Okay. We're alive now. Thank you. 19 I just will repeat for the record that we are resuming day 2 of the hearing of application RP-2002-0118. The Board is requesting preliminary matters, if there are any, and there appear to be none. 20 That being said, the next item on the agenda is for Ms. Aldred to introduce her witness panel and for them to be sworn in. Ms. Aldred, over to you. 21 MS. ALDRED: Thank you very much. Would you like to swear them in first or should I go through their qualifications? 22 MR. BETTS: Any submissions from parties in terms of the qualifications of the witnesses? 23 MR. SIDLOFSKY: Mr. Chair, I have no issue with their qualifications. Although I'm not completely sure who the designates are. I don't expect to be opposing. 24 MS. ALDRED: I do intend to run briefly through their qualifications. I wondered if they needed to be sworn first. But I'll start -- 25 MR. BETTS: Sorry, if you wanted them sworn first? 26 MS. ALDRED: Sworn first or after, that's all. 27 MR. BETTS: We will swear them first, get that out of the way and then we can go through their qualifications. 28 MS. ALDRED: Thank you very much. 29 HYDRO ONE - PANEL 1; PATTERSON, PATTANI, PORAY, TONEGUZZO 30 J.PATTERSON; Sworn. 31 N.PATTANI; Sworn. 32 A.PORAY; Sworn. 33 J.TONEGUZZO; Sworn. 34 MR. BETTS: Thank you, Mr. Peters. The witnesses have been sworn in. Ms. Aldred? 35 EXAMINATION BY MS. ALDRED: 36 MS. ALDRED: Mr. Patterson, if you could please briefly explain your qualifications and experience with Hydro One and then if you can please explain which areas of the testimony you're responsible for. 37 MR. PATTERSON: I am the manager of the customer contracts and business relations for Hydro One. I have worked for Hydro One for about 27 years, in a number of different capacities. I'm an engineer from Carleton University and I am responsible for the customer-agreement area of the testimony. 38 MS. ALDRED: Thank you. Mr. Pattani, if you can do the same thing, please. 39 MR. PATTANI: I'm Naren Pattani. I graduated from the University of Nairobi as an electrical engineer. I'm registered as a professional engineer in the provinces of Ontario and Quebec. I work with Ontario Hydro and Hydro One for the last 20 years, before which I was with a consulting company in Montreal. I am responsible for the areas around transmission-rate calculations and interpretation of the transmission-rate schedules. 40 MS. ALDRED: Thank you. Mr. Toneguzzo, can you please explain your qualifications and the area of your testimony. 41 MR. TONEGUZZO: Yes. I graduated from the University of Waterloo in electrical engineering. I'm now a professional engineer in the province of Ontario. I've worked for Ontario Hydro since 1979 in various operations and planning roles in the company. 42 MS. ALDRED: Thank you very much. Now Dr. Poray, I understand you've been with Hydro One and Ontario Hydro for about 25 years. 43 DR. PORAY: That's correct. 44 MS. ALDRED: And like Mr. Snelson, you were involved in the design of Ontario's electricity market. 45 DR. PORAY: I was. 46 MS. ALDRED: I understand you participated on the transmission and distribution subcommittee to the Market Design Committee. 47 DR. PORAY: That is correct. And Mr. Snelson was also a member of that sub-committee. 48 MS. ALDRED: I also understand that you are a member of the IMO's technical panel. 49 MR. PORAY: I am, and I have been there since 1999. 50 MS. ALDRED: And you have appeared before this Board on several occasions to provide rate and cost-allocation evidence. 51 MR. PORAY: That is correct. 52 MS. ALDRED: In fact, you provided such evidence in RP-1999-0044, which was the hearing to establish transitional transmission rates including the evidence respecting the net versus gross load billing issue. 53 MR. PORAY: That is correct. 54 MS. ALDRED: Mr. Chairman, I would seek to qualify Dr. Poray as an expert for the purposes of giving opinion evidence. 55 MR. BETTS: Are there any submissions with respect to that proposal? 56 MR. SIDLOFSKY: Not from Abitibi. 57 MR. BETTS: The Board finds that very acceptable. 58 MS. ALDRED: Thank you, Mr. Chairman. 59 Dr. Poray, as you know, we are here because Abitibi and Hydro One Networks disagree as to how the transmission charges for Abitibi should be calculated. Can you please explain how the parties disagree. 60 MR. PORAY: Certainly. The disagreement is in the interpretation of Abitibi's electrical demand for the purpose of paying transmission charges. Hydro One's position is that Abitibi should be charged on the basis of their full demand, net of the output of the hydraulic generation which they own. Abitibi claims that its demand should also be adjusted for the net of the output from Westcoast generation. 61 MS. ALDRED: So why are they wrong? 62 MR. PORAY: They are wrong for three reasons. First, Abitibi is a separate transmission customer, that is connected to the provincial transmission system and is therefore required to pay the applicable transmission charges. 63 Secondly, the transmission charges applicable to Abitibi take into account Abitibi-owned hydro-electric generation which is connected to Abitibi's distribution system on their property and which has been netted out of Abitibi's applicable demand for calculating the applicable transmission charges. 64 There is no other generation located on Abitibi's property that can be considered as embedded generation and which would qualify for net-load treatment in respect of Abitibi's transmission charges. 65 Finally, Westcoast is a separate transmission customer that is contractually obligated to deliver all of its output to the Ontario Electricity Financial Corporation, which in turn sells it to the IMO-administered markets. Abitibi purchases all of its electricity requirements from the IMO-administered markets. 66 MS. ALDRED: Thank you, Dr. Poray. 67 Mr. Toneguzzo, I would like you to please explain for the Board the transmission arrangements that existed and now exist at the Abitibi site as they impact on the matter before the Board. Firstly, can you please describe for the Board the transmission facilities that supply Abitibi prior to the connection of Westcoast. 68 MR. TONEGUZZO: Abitibi's predecessor was first connected to the transmission system formerly owned by Ontario Hydro in 1958 through transmission circuit F2B. This went from Fort Frances TS to the boundary of the customer property. This connection required the installation by Ontario Hydro of dedicated switching facilities and protections. 69 Later on in 1970, a power agreement was entered into between the former Ontario Hydro and Abitibi's predecessor for Ontario Hydro to construct new transmission facilities to accommodate customer expansions at both the Abitibi plant in Ontario and its affiliate in Minnesota. Part of this agreement required the purchase of additional power from Ontario Hydro by Abitibi's predecessor, for resale to its affiliate in Minnesota. 70 To supply these increased power requirements, Ontario Hydro replaced, at its own cost, the existing 110 kV wood-pole line, F2B, with a new section of double circuit, steel-tower 120 kV transmission line and related switching facilities at Fort Francis TS. One circuit designated, F3M, was used by Ontario Hydro to deliver power to the affiliate in the United States. The other circuit, F2B, was used to deliver power to Abitibi's predecessor in Ontario. 71 As part of this arrangement, it was necessary for Ontario Hydro to procure the necessary right of ways, extending from Fort Frances TS to the Abitibi property. These arrangements are referenced in the power agreement between Ontario Hydro and Ontario -- Minnesota dated April 29th, 1970. 72 MS. ALDRED: Were there any other major changes to the transmission system related to these expansions by Abitibi? 73 MR. TONEGUZZO: Yes. In the early seventies, the transmission system in the region was reinforced with 230 kV supply for the purpose of establishing a 230 kV interconnection with Manitoba and to reliably supply the growing loads in the northwest. This included the expanding loads at the Abitibi complex. 74 MS. ALDRED: Are they -- 75 MR. TONEGUZZO: In the Fort Frances area, this required the installation of expensive high voltage transformers and other facilities at Fort Frances TS, which were primarily required to reliably supply the increased load at the Abitibi complex. 76 MS. ALDRED: Are the assets that were placed in service to supply the Abitibi load still in place and are they utilized by Abitibi since the installation of Westcoast? 77 MR. TONEGUZZO: The facilities that were installed to serve Abitibi are still in place and continue to provide the same transmission services to the Abitibi load. Abitibi can only participate in the Ontario electricity market by purchasing power from the IMO administered market. By virtue of its connection through circuit F2B to the IMO-controlled grid. 78 Similarly, Westcoast can only participate in the Ontario electricity market by selling power to the market by virtue of its connection through circuit F2B to the IMO- controlled grid. 79 The facilities that Hydro One invested in for the purpose of supplying Abitibi result in ongoing costs such as interest, depreciation, operations and maintenance for which Hydro One continues to be accountable. This is in spite of the Westcoast Power generation. 80 Further to this, the facilities cannot be decommissioned or reduced in scale due to the addition of the Westcoast generation on the Abitibi site. 81 MS. ALDRED: Mr. Toneguzzo, Abitibi claims in their evidence that they do not make use of the transmission system owned by Hydro One and should, therefore, not be required to pay transmission rates when the Westcoast generation is operating. 82 Do you agree that Abitibi does not use the system? 83 MR. TONEGUZZO: No, I do not agree. Abitibi sells all of its electricity supply -- Abitibi buys, sorry, all of its electricity supply from the IMO-administered market exclusively through the use of the transmission system. This is regardless of the Westcoast Power generation. Without the use of line F2B, and the transmission system that Hydro One owns and operates, Abitibi would simply not be able to purchase its electricity requirements from the market. 84 In this regard, Abitibi's situation is no different than any other similar transmission customer who purchases electricity supply from the market. 85 In addition, Abitibi constantly derives other benefits from being connected to the transmission system. They are connected to circuit F2B, which in turn is supplied from other dedicated facilities at Fort Frances TS and the supporting network. Through this connection, the transmission facilities in the area provide Abitibi with critical transmission services which, in addition to providing access to the market, include protection from power system faults, voltage control, system stability, operating control and metering. These are the same services provided to other transmission customers in the Province of Ontario who pay transmission rates. 86 MS. ALDRED: In their evidence, Abitibi indicate that they have fully contributed to the cost of line F2B. Is this the case? 87 MR. TONEGUZZO: Abitibi has not fully contributed to the cost of line F2B for the following three reasons. First, Hydro One's predecessor purchased the original wood-pole line F2B from Abitibi's predecessor in 1958. Thus, fully contributing to the cost of the line. 88 Second, Hydro One has paid for all subsequent upgrades and other work to line F2B. 89 Thirdly, Hydro One maintains and operates line F2B and the associated rights of ways and the dedicated facilities at Fort Frances TS at its own cost. 90 MS. ALDRED: Mr. Toneguzzo, now I'd like to turn to the topic of metering of Abitibi's demand. Abitibi claimed that the Westcoast generation is located behind their meter. Using the diagram which is located to the left of the panel, and has been handed out, can you please describe how the Abitibi demand is metered? 91 MR. MORAN: Mr. Chair, perhaps we could mark this as an exhibit at this point? 92 MR. BETTS: Thank you. 93 MR. MORAN: You will have in front of you two diagrams, and perhaps we can mark both of them while we're at it. The first one is the one that was just referred to and it's entitled, "Metering Points of ACI and WCP," and that would become Exhibit 2.1. 94 EXHIBIT NO. 2.1: DIAGRAM ENTITLED "METERING POINTS OF ACI AND WCP" 95 MR. MORAN: The other diagram is similar, but it has a different title, it's entitled, "Ownership and Delivery Points (DP) of ACI and WCP." That will become Exhibit 2.2. 96 EXHIBIT NO. 2.2: DIAGRAM ENTITLED "OWNERSHIP AND DELIVERY POINTS (DP) OF ACI AND WCP" 97 MR. BETTS: Thank you. 98 MS. ALDRED: Mr. Toneguzzo, do you want to walk closer to the diagram? 99 MR. TONEGUZZO: I'll try to use a light pen here, if that's okay? 100 MS. ALDRED: Fine. 101 MR. TONEGUZZO: First, I would like to give you some orientation on the diagram. The facilities owned by Hydro One - let's see if I can get this to work - are shown in black here. They include 230 to 115, 230 kV to 115 kV autotransformers or transformers at the station. The simplified diagram also shows circuit F2B, which supplies the Abitibi complex and provides access to the Westcoast Power generator. And you will note that there is one meter on circuit F2B at Fort Frances TS, and that is shown right there. That meter registers the flow of power on circuit F2B. 102 Shown in red are the transmission facilities owned by Abitibi and also step-down transformation facilities owned by Abitibi in red. They transform the voltage from about 50 kV to below 50 kV, and please note that there is no meter on those particular facilities. 103 Shown in green are the facilities owned by Westcoast Power. They include two generators, two step-up transformers, and you will note that there is a meter to register the output of the Abitibi -- or of the Westcoast generators. 104 The effective metering point for Abitibi is at the point where they withdraw electricity from the transmission system. This is the point where voltage is transformed from about 50 kV to below 50 kV here. This is the delivery point where the voltage changes and is consistent with the metering point for all other transmission customers in the province. 105 The magnitude of the withdrawal is measured by simply deducting the meter reading of the Westcoast generator, this one here, from the meter reading on circuit F2B, here. When you deduct that meter reading from that one, what you get is the power that's transformed from above 50 kV to below 50 kV to Abitibi. So that is the load that is consumed by the customer. 106 This arrangement whereby one meter reading is deducted from another to establish the demand of a delivery point is a common metering practice in the utility industry to keep metering costs down for all customers. 107 The other option here was to put meters on every one of those delivery points, which would have been very expensive. Those particular delivery points can be aggregated at the site, so that, essentially, is one delivery point. 108 The reason that there is no specific meter at the delivery point of Abitibi is that prior to the incorporation of the Westcoast generation, Abitibi's consumption was established from a single meter located on circuit F2B. In other words, prior to the Westcoast generator being connected, only that meter on F2B was needed to economically meter all the load at the site. 109 MS. ALDRED: Can you please -- 110 MR. TONEGUZZO: When Westcoast generator was connected to the system in 1992, it was determined that the least cost technical alternative for accurately measuring the combination of Westcoast generator and the Abitibi load connected to line F2B was to install only one new generator output meter at the Westcoast facility. So that was the economical arrangement for supplying the total load and generation at that complex. 111 MS. ALDRED: Can you please explain what the term "behind the meter" means as it relates to embedded generation? 112 MR. TONEGUZZO: The term "behind the meter" means behind the interface at which the customer withdraws power from the transmission system. That's this point here on this diagram. This means that the only way a generator can be connected behind the meter is for the connection to be at the distribution side of the step-down transformer delivering power to the customer load. An example of this is Abitibi's hydro-electric generation. That generation is shown here, their hydro-electric generation, and that generation is truly behind the metering point, which is here. 113 MS. ALDRED: Why is this such an important criteria in this matter before the Board? 114 MR. TONEGUZZO: It's important because transmission charges are determined by delivery point, as provided in RP-1999-0044. 115 MS. ALDRED: Can you please explain the term "delivery point". 116 MR. TONEGUZZO: The delivery point is the point where the power is withdrawn from the transmission system and transformed from a voltage above 50 kV to below 50 kV, for use by the customer. Again, it's that point right there (indicating). Typically, at the delivery point, there will be a meter which measures the power withdrawn by the customer from the transmission system. The customer's loads are located behind that meter on the distribution system. 117 If there is also a generator located on that distribution system, then that generator is also behind that meter and the meter now registers the net demand withdrawn by the customer from the transmission system. 118 This is called net load billing. 119 MS. ALDRED: Now, can you please explain why net load billing does not apply to the Abitibi load and the Westcoast generator? 120 MR. TONEGUZZO: Net load billing does not apply because the Westcoast generator is connected to the transmission system, there (indicating), and has its own delivery point and a meter which is different from the effective meter used to measure the power withdrawn from the transmission system at the Abitibi delivery point. 121 The Abitibi delivery point does not have a specific meter which we can observe on a drawing because the amount of power withdrawn from the transmission system at this point is established by simply using the difference between the meter which registers the power flow on circuit F2B and the meter which registers the amount of generation which Westcoast is delivering. 122 MS. ALDRED: So can you just summarize the reasons why the Westcoast generator is not behind the meter? 123 MR. TONEGUZZO: The Westcoast generator is not behind the meter because Abitibi -- 124 MR. SIDLOFSKY: I'm sorry, for those of us trying to take notes, could I ask Mr. Toneguzzo to slow down a little bit, please. 125 MR. BETTS: Please take your time. 126 MS. ALDRED: Why is the Westcoast Power generator not behind the Abitibi meter? 127 MR. TONEGUZZO: The Westcoast generator is not behind the meter because Abitibi's consumption is at the delivery point where they withdraw power from the transmission system, which is at the facilities which step-down power from above 50 kV to below 50 kV on the Abitibi site. That's right there (indicating). Again, the hydraulic generation that Abitibi owns is behind the meter. 128 The Westcoast generator is not connected at the Abitibi delivery point, but is instead connected to the transmission system at its own delivery point, here (indicating). This is the delivery point for the generator. It's connected through its own step-up transformation facilities and has its own meter -- behind, essentially, its own meter. 129 Westcoast is, therefore, clearly not behind Abitibi's meter. 130 MS. ALDRED: Thank you, Mr. Toneguzzo. 131 Mr. Patterson, I would now like to turn to matters pertaining to the contractual arrangements that are applicable to the Abitibi site. 132 Can you describe for the Board what you understand to be the current contractual arrangements with respect to Westcoast and OEFC. 133 MR. PATTERSON: The agreements were originally established when the facilities were owned by Ontario Hydro, ICG and Boise Canada. For simplicity, I'll refer to the successor parties, OEFC, Westcoast Power and Abitibi. 134 In 1989, the power-purchase agreement was developed between OEFC and Westcoast. Abitibi was not a party to this agreement. This agreement was put in place for Westcoast to sell the generators' capacity exclusively to Ontario Hydro, now OEFC. 135 Under the power-purchase agreement, OEFC buys the power from Westcoast and sells the power to the IMO-administered markets. According to Mr. Gartshore's evidence, there is also an arrangement in place whereby Westcoast have authorized Abitibi to operate the Westcoast facilities on their behalf. However, this arrangement does not give Abitibi ownership of the generation output. 136 MS. ALDRED: What is the purpose of the power-purchase agreement? 137 MR. PATTERSON: The power-purchase agreements were developed by Ontario Hydro to help meet Ontario's growing power needs through non-utility generation. The power-purchase agreement with Westcoast was not intended to supply power to Abitibi, as sufficient transmission capacity was already available in this area to meet Abitibi's needs. 138 In this agreement, power was purchased by Ontario Hydro at a premium to meet the needs of the provincial power pool. Westcoast also provides steam capacity to the Abitibi mill, thereby improving the overall economics of the project. 139 MS. ALDRED: So how does that impact on how Abitibi procures its electricity supply? 140 MR. PATTERSON: Abitibi has always purchased its supply from the power pool. The Westcoast generation has not had any impact on that arrangement. The combination of Abitibi load and Westcoast generation has not been historically treated on a net-load basis, and as was the case for Abitibi's hydro-electric generation. When the Westcoast facilities was built, Abitibi wanted to be assured that they would continue to be supplied by Ontario Hydro. Abitibi did not want to be subject to any supply interruptions that may result from an interruption in supply of the Westcoast facility. 141 MS. ALDRED: So, how does Abitibi purchase its energy requirements? 142 MR. PATTERSON: Abitibi purchases its power from the IMO-administered markets. It does not purchase its power from Westcoast. All the power produced by Westcoast is purchased by OEFC, according to the terms and conditions of the power-purchase agreement. OEFC are registered with the IMO and sell the energy produced by Westcoast to the IMO market. 143 MS. ALDRED: Yesterday Abitibi witnesses indicated that under the bundled regime they had no option, there was no option for Abitibi to negotiate with Ontario Hydro a net load-billing arrangement for the NUG. Is this true? 144 MR. PATTERSON: No, it's not. There could have been other options as well, for example, Abitibi could have negotiated to build a load-displacement non-utility generator on their own facilities. 145 MS. ALDRED: Does Abitibi purchase power directly from Westcoast? 146 MR. PATTERSON: No, Westcoast has a legal agreement to sell all its power to OEFC. 147 MS. ALDRED: How is the physical delivery of power to Abitibi reconciled with the contractual arrangements? 148 MR. PATTERSON: The delivery of power to Abitibi is reconciled through the subtraction of two metering quantities. The Westcoast generation is separately metered; the combined Westcoast generation and Abitibi demand are metered at Fort Frances TS. The Abitibi load is determined by subtracting the Westcoast generation from the metered quantity at Fort Frances TS. It is done in this manner to reduce the cost of metering. 149 Alternatively, each of the Abitibi high-voltage transformers could be individually metered and then aggregated to determine the Abitibi total load. 150 MS. ALDRED: How does the IMO bill and settle with Abitibi and with Westcoast? 151 MR. PATTERSON: The IMO applies the transmission service charges, commodity charges and other IMO charges to the Abitibi account. This account is separate from the settlement account of OEFC for the Westcoast generation quantities. 152 MS. ALDRED: Thank you, Mr. Patterson. Turning to you, Dr. Poray, can we look at the matter of transmission customers. Can you please provide a definition of the term transmission customer as it's used in the context of the Ontario transmission-rate schedules. 153 MR. PORAY: Any entity that is connected to the transmission system comprising structures, equipment or other things that are rated more than 50 kiloVolts as defined by the OEB Act and that withdraws electricity from these structures is a transmission customer. 154 MS. ALDRED: And on what basis do you make that assertion? 155 MR. PORAY: I make this assertion on the basis of the definition of transmission customer contained in the Board decision under proceeding RP-1999-0044, and the Ontario transmission-rate schedules dated April 30th, 2002. 156 MS. ALDRED: And does the ownership of the -- in any way? 157 MR. PORAY: No. Neither the OEB Act, nor the Ontario transmission rate schedule make any distinction based on ownership of transmission facilities. 158 MS. ALDRED: Therefore, in your opinion, is Abitibi a transmission customer, and thus, obligated to pay transmission charges? 159 MR. PORAY: Yes, Abitibi is a transmission customer since it is connected to the transmission facilities that are rated more than 50 kiloVolts and it withdraws electricity from these facilities. 160 MS. ALDRED: And is Westcoast a separate transmission customer? 161 MR. PORAY: Yes, Westcoast is a separate transmission customer since it is a different entity that is also connected to the transmission facilities that are rated more than 50 kiloVolts, and it injects and sometimes withdraws electricity from these facilities. 162 MS. ALDRED: Why is Westcoast a separate transmission customer and not one in the same as Abitibi? 163 MR. PORAY: Westcoast is a separate entity. In fact, it is registered separately from Abitibi under the Ontario Business Corporation Act and it is also connected to the transmission system separately, as is Abitibi. 164 Therefore, Westcoast is treated as a separate transmission customer in accordance with the Ontario transmission rate schedules. 165 In addition, Abitibi and Westcoast are connected to the transmission system through two different transmission delivery points, where a transmission delivery point is defined in section C of the Ontario transmission rate schedules as the transformation station that steps down voltage from above 50 kV to below 50 kV. 166 MS. ALDRED: Now, how is embedded generation defined? 167 MR. PORAY: At section 3.2.1 of the Board decision under RP-1999-0044, it is stated that generation that is not directly connected to the transmission system and is located behind the meter that registers the electricity supplied from the regulated transmission facilities is referred to as embedded generation. 168 MS. ALDRED: Why do you say that Westcoast is not an embedded generator of Abitibi, Dr. Poray? 169 MR. PORAY: Westcoast is not an embedded generator for two reasons. First, Westcoast is connected to the transmission system and is a distinctly separate entity that is a transmission customer in its own right. 170 Secondly, Westcoast is not connected behind the meter that registers electricity withdrawn by Abitibi from the transmission system owned by Abitibi, which itself is regulated, as I will explain later. 171 MS. ALDRED: Dr. Poray, I want to touch briefly on the issue of licensed and non-licensed transmission that is raised in Mr. Snelson's testimony. Can you please briefly describe for the board the term licensed transmission or licensed transmission owners? 172 MR. PORAY: The licence requirement for transmission owners arises out of section 57 of the OEB Act. Essentially, the Act states that all transmission facility owners of facilities and equipment that is rated 50 kV or above have to obtain a transmitter's licence for owning and operating the transmission facilities. Transmission licence holders are under the economic regulation administered by the Board and are required to submit their cost allocation and revenue requirement to the Board for approval. 173 Subject to the Board approval, they may then use this revenue requirement and the forecast of customers' demand to calculate uniform transmission rates that apply across the province. 174 MS. ALDRED: Can you please summarize how some transmission owners could own non-licensed transmission as noted by Mr. Snelson? 175 MR. PORAY: Some parties own transmission facilities that are incidental to the main business of the owning company and as such, these facilities are not intended to be used to provide transmission service to others. 176 Under Ontario regulation 20/02, some transmission owners are exempt from certain provisions of the OEB Act, and in particular, the need to obtain a transmitter's licence. 177 In essence, this exemption provides that an entity which provides transmission connections for its own use should not have to go through the administrative burden of seeking and maintaining a transmitter's licence. 178 The regulation also enables such transmission owners to connect third parties to the non-licensed transmission so as to allow them in turn to connect to the licensed transmitters -- sorry, licensed transmission facilities owned by transmission companies that are in the business of providing transmission service. 179 MS. ALDRED: Dr. Poray, what does the issue of licensed versus non-licensed transmission have to do with the current proceeding to address the Abitibi application to net out the Abitibi load and Westcoast generation? 180 MR. PORAY: It has nothing to do with the matter before the Board. It is a red herring. 181 MS. ALDRED: Dr. Poray, how would you categorize transmission facilities that are owned by unlicensed transmitters? 182 MR. PORAY: I would categorize them to perform exactly the same function as transmission facilities owned by licensed transmitters. In other words, ownership of transmission facilities and the existence, or not, of a transmitter's licence do not change the functionality of those facilities. 183 MS. ALDRED: Are unlicensed transmission facilities part of the provincial transmission system? 184 MR. PORAY: Yes, they are. These facilities, like those owned by licensed transmitters, are not differentiated in either the Electricity Act or the OEB Act. 185 MS. ALDRED: Is it appropriate that entities connected to the unlicensed transmission facilities should be charged the rates of licensed transmitters? 186 MR. PORAY: Yes, it is appropriate to do so. The connection of entities through non-licensed facilities does not absolve these entities from the responsibility for payment of applicable transmission charges per the Ontario transmission rate schedules. 187 MS. ALDRED: Why is that, Dr. Poray? 188 MR. PORAY: These entities continue to derive benefits from being connected to the transmission system. If one were to permit differential treatment of licensed and unlicensed transmission, then this could lead to undesirable gaming opportunities. 189 An example of such gaming opportunities could foresee entities installing unlicensed transmission to their benefit to aggregate different loads and generators to escape paying transmission charges. 190 Such differential treatment would result in higher transmission charges to the remaining transmission customers and potentially lead to an economic investment. 191 MS. ALDRED: How is unlicensed transmission treated in the Ontario rate schedules? 192 MR. PORAY: The rate schedules make no distinction between licensed and unlicensed assets. The schedules inform that rates are applicable to all those who withdraw electricity from the transmission system. 193 MS. ALDRED: In yesterday's testimony, there was discussion about unlicensed transmitters and I believe the impression might have been left with the Board that such unlicensed transmitters are in fact unregulated. Is that true? 194 MR. PORAY: No, that is not true. Unlicensed transmitters are only exempted from certain portions of the Electricity and the OEB Acts. This means that they continue to be regulated and subject to the remaining portion of the Acts as are licensed transmitters. 195 Furthermore, the obligations expected of unlicensed transmitters are the same as those expected of licensed transmitters. In this respect, I refer to Mr. Snelson's statement on page 7 of 12 of his written submission, where he makes reference to the written submission made by the independent electricity market operator in relation to the manner of unlicensed transmitters, and I quote: 196 "The IMO also recognizes that these two classes of transmitters have been created. I would refer you to the IMO's notice of intervention into the transmission system code, proceeding RP-2202-0120. In particular, operating requirements and obligations of non-licensed Ontario transmitters. 197 "Ontario regulation 20/02, which was in force in February 9, 2002, among other things, exempted particular transmitters from certain provisions of the Ontario Energy Board Act (1998), including the need to obtain a transmitter's licence. 198 "In essence, the regulation has created a new form of transmitter, one that may be exempted from the requirements of a licensed transmitter. Notwithstanding the passage of regulation 20/02, all transmitters (licensed or otherwise) must be required to abide by the operating requirements and meet the obligations of a transmitter, including the minimum conditions that a transmitter must meet in designing, constructing, managing and operating its transmission system." 199 MS. ALDRED: Can we now turn to the matter of uniform transmission tariffs. What are the main characteristics of a uniform transmission-charging approach? 200 MR. PORAY: First, all customers pay transmission charges on the basis of a uniform transmission rate, irrespective of where the customer is located, how electricity is transmitted to that customer, and how customers make use of the electricity that is delivered to them. 201 Secondly, the uniform transmission rate is derived or pre-calculated on the basis of the forecast of demand for each customer and not on the basis of actual power flows. 202 Third, it is important that transmission rates in Ontario should be consistent with comparable transmission rates applicable in surrounding jurisdictions with which the Ontario transmission system is interconnected. 203 Finally, there is a potential of compromising fairness among transmission customers if, under a uniform pricing methodology, some customers escape paying their allocated share of transmission service charges. 204 MS. ALDRED: You mentioned fairness, Dr. Poray. Can you please explain what you mean by that and how fairness can be compromised. 205 MR. PORAY: In a uniform pricing methodology or postage-stamp pricing environment, transmission costs are allocated amongst all customers on the basis of their individual demands as measured at their respective delivery points. 206 If one or a few customers were to avoid paying appropriate charges because particular circumstances allow them to do so, then they cease to pay their fair share of costs and other customers have to shoulder a larger burden of the costs. 207 Transmission costs are incurred on behalf of all transmission customers based on their declared or forecast peak demand. The transmission facilities continue to be available to customers up to their peak demand, irrespective of how they may acquire energy delivery throughout any period of time. 208 Fairness can be compromised if the rules around the application of transmission tariffs are altered for the benefit of one or a few customers when the majority of remaining customers would be disadvantaged by having to bear an unfairly larger cost burden. 209 MS. ALDRED: Thank you, Dr. Poray. 210 Now turning to you, Mr. Pattani, I would like to discuss the matter of the application of transmission tariffs in Ontario. First, in order to explain the methodology of deriving the rates to the Board, can you please summarize how uniform transmission rates were established in Ontario. 211 MR. PATTANI: Yes, I can. The Board-approved revenue requirement for each of the cost pools, that is, network, line connection and transformation connection, for the four licensed transmitters in Ontario, are first summed up. 212 Similarly, the load forecast for all four transmitters for each cost pool is also added together. 213 The uniform transmission rates applicable in the Province of Ontario are calculated by dividing the total revenue requirement for each cost pool by the total charge determinance for the same pool. 214 MS. ALDRED: So does the calculation of uniform transmission rates take into account power flows on the transmission system? 215 MR. PATTANI: No, they do not. The fundamental characteristic of uniform transmission pricing is that it makes available, at the same rate of charging, the transmission service for all customers irrespective of how the power flows on the transmission system. 216 The flows on the transmission system change frequently in response to the balance between load and generation, which varies all the time. 217 Further, the transmission infrastructure benefits all transmission customers because it provides them with reliable access to electricity supply no matter where the generator is located. As a result, it is industry practice in most jurisdictions to use transmission pricing that does not take into account power-flow conditions on the transmission system. 218 MS. ALDRED: In developing the currently OEB-approved transmission rates, what assumptions did you make about Abitibi's demand? 219 MR. PATTANI: The load demand for Abitibi was included in calculating the rates for the network pool and the line-connection pool. That is, the total load demand for Abitibi, less the output of the embedded hydraulic regeneration that is owned by Abitibi, was included in calculating the transmission rates. The Abitibi demand was forecast using the historical data for electricity supplied by Ontario Hydro to Abitibi. The output of the Westcoast generation was not considered in deriving the net charge determinant for Abitibi. 220 MS. ALDRED: Why did you take this approach with Abitibi? 221 MR. PATTANI: We took this approach for three reasons which are somewhat interrelated. 222 First, based on the Board decision on the application of the rate structure and the transmission rate schedule, Abitibi is a separate and distinct transmission customer. 223 Second, based on the discussions and decision under proceeding RP-1999-0044, Westcoast is not considered an embedded generator. 224 And third, under the wholesale tariff of the former Ontario Hydro, Abitibi was treated as a separate customer, distinct from the Westcoast generator at the Abitibi complex. 225 Thus, historical data used to develop rates for transmission was based on Abitibi being a transmission customer and Westcoast selling its output to the power pool much the same as it does now by selling its output to the markets through OEFC. 226 MS. ALDRED: Mr. Pattani, could you explain what would be the impact of removing the Abitibi demand from the calculation of uniform transmission rates. 227 MR. PATTANI: Yes, I can. The immediate impact of removing Abitibi's demand from the transmission charge table is the reduction in revenue for transmitters in the province up to about $3 million per year. Over the longer term, the impact of removing Abitibi's demand from the calculation of uniform transmission rates would be to increase the transmission rates for all other customers in the province. 228 If the demand for other customers having similar circumstances were also to be removed from the calculation of the rates, there would be a larger impact on rates. 229 In addition, there may be some other customers that may enter into similar arrangements, for example, by reconnecting existing or new generation so that they can also remove their demand from the transmission charge table, similar to Abitibi. 230 In this case, there would be an even larger impact on rates applicable to the remaining customers. 231 MS. ALDRED: How should Abitibi be charged for transmission, to be consistent with legislation, Board decisions and the Ontario transmission rate schedule? 232 MR. PATTANI: The correct approach is for Abitibi and Westcoast generation to be treated as separate entities. Since Abitibi is a transmission customer in its own right, its transmission charges should be collected on the basis of province-wide uniform transmission rates applied at its own transmission delivery point. That approach will be consistent with the Board decision and Ontario rate schedules, and it will also ensure fairness for all customers. 233 In addition, it will avoid complexities that include unintended and varied interpretations of the rules for applying transmission tariff and it will mitigate the potential for gaming, inefficient investments and rate increases. 234 MS. ALDRED: Now, I wish to ask you about the payment of line-connection charges. Are customers exempt from paying line-connection service charges in the event that the customer has made a partial contribution? 235 MR. PATTANI: No, they are not. The rate schedules do not exempt the customer in such a situation from paying line-connection service charges. The rate schedule states that if a customer fully owns or has fully contributed towards the cost of the line connection assets connecting its delivery point to a network station, then, and only then, that customer does not have to pay line connection service charges. 236 MS. ALDRED: Based on this, is Abitibi exempt from paying line-connection charges? 237 MR. PATTANI: No. Abitibi is not exempt from paying line-connection service charges as it has not fully contributed to the cost of line F2B that connects it to the IMO control group. 238 MS. ALDRED: Thank you, Mr. Pattani. Now I have a final few questions for Dr. Poray. 239 Dr. Poray, I return to you to ask whether Hydro One is in compliance with the current transmission rate order with respect to the treatment of Abitibi and Westcoast? 240 MR. PORAY: Yes, it is. 241 MS. ALDRED: Can you please elaborate on the rationale for your answer? 242 MR. PORAY: Certainly. In doing so, I will refer to the April 30th, 2002, transmission rate schedule which is the current applicable rate schedule. There are four areas that I believe illustrate Hydro One's compliance with the existing rate schedule. 243 First, Abitibi and Westcoast are separate transmission customers in accordance with the definition contained in section A of the said rate schedule. 244 Secondly, Westcoast and Abitibi are connected to the transmission system by separate delivery points as defined in section C of the rate schedule, and as such, the demand and supply of these separate delivery points cannot be aggregated. 245 Thirdly, Westcoast and Abitibi are separate entities under the Ontario Business Corporation Act and as such, their demands cannot be aggregated as defined in section C of the rate schedule. 246 Finally, the Westcoast generator is not an embedded generator since it is connected to the transmission system, and further, it is not located behind the meter that registers Abitibi's consumption for the purpose of IMO's billing and settlement. 247 MS. ALDRED: Thank you, Dr. Poray. 248 That concludes the direct evidence, Mr. Chairman. 249 MR. BETTS: Thank you, Ms. Aldred. 250 I think at this point we will proceed with cross-examination and we'll allow Mr. Moran to begin that. 251 MR. MORAN: Thank you, Mr. Betts. 252 CROSS-EXAMINATION BY MR. MORAN: 253 MR. MORAN: Perhaps I will start with you, Dr. Poray, because you were the one that referring to the definition of transmission system as it's set out in the Ontario Energy Board Act. 254 Obviously, Hydro One owns and operates the transmission system; right? 255 MR. PORAY: That is correct. 256 MR. MORAN: And, obviously, there are others who do as well, Great Lakes Powers, for example? 257 MR. PORAY: Yes. 258 MR. MORAN: Abitibi also owns and operates a transmission system; right? 259 MR. PORAY: That is correct. 260 MR. MORAN: They're exempt, unlike Hydro One and Great Lakes Power, from the regulatory sections of the Ontario Energy Board Act, so they don't need to have a licence and they don't have to have a rate order and they can do other things as well that people like Hydro One would have to get permission from the Board to do; right? 261 MR. PORAY: Correct. 262 MR. MORAN: And if we look at the physical setup of the -- perhaps we can use your Exhibit 2.1 for purposes of this question. 263 If we look at the physical setup, Abitibi's transmission system is between Hydro One's transmission system and the co-gen; right? 264 MR. PORAY: That's correct. 265 MR. MORAN: And it's also between Hydro One's system and the Abitibi loads? 266 MR. PORAY: Correct. 267 MR. MORAN: Right. So on the physical side, it's pretty clear that the Abitibi transmission system provides transmission service to the co-gen; right? 268 MR. PORAY: That's correct. 269 MR. MORAN: And it also provides transmission service to the Abitibi loads, obviously. 270 MR. PORAY: That's so. 271 MR. MORAN: All right. And so, by the same token, therefore, Westcoast Power is not connected to Hydro One's transmission system. 272 MR. PORAY: That is correct. 273 MR. MORAN: And if I understand the theory that you've put before the Board, what you say is that the ownership of the transmission systems isn't particularly important. Westcoast Power is connected to a global transmission system that's composed of, amongst other things, the Abitibi transmission system and the Hydro One transmission system; right? 274 MR. PORAY: Correct. 275 MR. MORAN: I'd like to take you now to the objectives of the Act so that we can perhaps establish what the overall context might be for this process. 276 For convenience, Mr. Chair, I've reproduced the sections. I believe you've got copies in front of you. I put them up there this morning. 277 MR. BETTS: Yes, we do, thank you. 278 MR. MORAN: All right. So what you have in front of you is a copy of the objectives as they apply to electricity set out in section 1 of the Ontario Energy Board Act, and the preamble to the section indicates that: 279 "The Board in carrying out its responsibilities under this or any other Act in relation to electricity shall be guided by the following objectives." 280 And then there's a list of objectives. I take it you wouldn't disagree with the proposition that the objectives have to be considered by the Board in this proceeding; right? 281 MR. PORAY: I agree. 282 MR. MORAN: Okay. And if we look at the first objective, it is: 283 "To facilitate competition in the generation and sale of electricity and to facilitate a smooth transition to competition." 284 Right? 285 MR. PORAY: Correct. 286 MR. MORAN: And would you agree that that's an objective that's applicable to what's before the Board in this proceeding in the context of a ruling out of this proceeding may have an impact on decisions that are made by people who might be preparing to introduce new capacity into Ontario? 287 MR. PORAY: No, I don't agree because, in essence, the matter before the Board applies to existing generation and load at the Abitibi site. 288 MR. MORAN: Right. 289 MR. PORAY: And, furthermore, I don't agree because generation does not pay for transmission other than for its connection to the transmission system. 290 MR. MORAN: Right. But in making rules about how generation will be treated in the context of transmission, for example the question of whether WCP is embedded or not, it's fair to say the Board has to take into account whether its ruling will create disincentives, or incentives for that matter, for other generators for new generation, whether it's embedded or otherwise? 291 MR. PORAY: Certainly the Board has to take those things into account. However, I may add to that that transmission is only one of the items that would be considered by a generator in locating any particular part of the system in Ontario. 292 MR. MORAN: That's right. These are complex decisions and many things impinge upon them. 293 MR. PORAY: That's correct. 294 MR. MORAN: If we look at objective No. 4: "To promote economic efficiency in the generation, transmission and distribution of electricity," that objective has to be taken into account in the context of how generation wants to connect in the first place; isn't that fair? 295 MR. PORAY: Correct. 296 MR. MORAN: And so, if it's economically efficient to connect at high voltage, rather than low voltage, that might be something to take into account; right? 297 MR. PORAY: That is so. 298 MR. MORAN: And in the context of the matter before the Board, historically the transmission system that belongs to Abitibi predates the co-generation plant; right? 299 MR. PORAY: That's correct. 300 MR. MORAN: And finally, if we look at objective No. 6: 301 "To promote energy conservation and energy efficiency, load management and the use of cleaner energy sources, including alternative and renewable energy sources." 302 Again because the issue before this panel deals with co-gen ration and the possibility of signals sent to future co-generation projects, that's a factor that has to be taken into account; right? 303 MR. PORAY: Yes. 304 MR. MORAN: Thank you. 305 MR. PORAY: Can I just add one other thing which the Board would take into consideration? 306 MR. MORAN: By all means. 307 MR. PORAY: In its decision, and that would be item number 3, which is to protect the interests of consumers with respect to prices and the reliability and quality of electricity service. 308 MR. MORAN: Right. And that issue is raised in the context of who should bear the costs if, for example, the Board were to rule that this was embedded generation, there's still some transmission assets that have to be paid for. 309 MR. PORAY: That is correct. 310 MR. MORAN: All right. If I could get you now to turn up the Board's decision in the 0044 proceeding, we'll find that in the Exhibit 1.3, tab 5. The decision comes after -- is a few pages in from the first document there entitled "Application of the Board's Decision." 311 MR. PORAY: I have it. 312 MR. MORAN: Now, at paragraph or section 3.1, which is found at page 22, there is a heading "Definition of Transmission Customer." 313 MR. PORAY: Yes, I have it. 314 MR. MORAN: Just before I ask the next question that I was going to ask, can I confirm that you were involved in the 0044 proceeding? 315 MR. PORAY: I was. 316 MR. MORAN: In fact, you testified in that proceeding; right? 317 MR. PORAY: That's correct. 318 MR. MORAN: As we see as set out in 3.1, Ontario Hydro had a particular approach to defining transmission customers that was based on the power district construct; right? 319 MR. PORAY: That was the case, yes. 320 MR. MORAN: Right. And Hydro One was -- had its own view on how the definition should be approached, and we see that set out in 3.1.4; right? 321 MR. PORAY: Correct. 322 MR. MORAN: Having assessed a number of options, OHNC indicated a preference for customers to be defined as those customers who are directly connected to the transmission system. And it went on, "However, it is indicated that it is reluctant to adopt this definition at this time as there has been inadequate discussion with the various customer groups to assess the implications of that definition, and in the interim OHNC proposed to continue with the existing definition." 323 MR. PORAY: That's what it says. 324 MR. MORAN: Perhaps you could indicate what was meant by the fact that there was inadequate discussion with various customer groups, what was the underlying rationale. 325 MR. PORAY: At that time we felt we hadn't stakeholdered the issue of transmission customers broadly enough to indicate the changes that would take place as a result of moving from the old power district to the new definition. 326 MR. MORAN: Right. And presumably this had to do with the fact there are many different ways in which people are connected to one another and to the transmission system; right? 327 MR. PORAY: That is correct, but the biggest issue was the change, the impact on customers' bills that that would have. 328 MR. MORAN: Right. And would that include, looking at specific situations like the Abitibi set-up, there was insufficient time to look at that in the context of transmission-connection customers? 329 MR. PORAY: No, we did not look at that at that time, no. 330 MR. MORAN: So that would fall within the idea that there was inadequate discussion with stakeholders. 331 MR. PORAY: That's correct. 332 MR. MORAN: And then if we turn to the Board's decision, paragraph 3.1.17, which is the last paragraph in the Board's findings: 333 "The Board agrees that the direct connection criterion for defining a transmission customer is a clear, practical and unambiguous method of defining transmission customers. It is also widely used in other jurisdictions. The direct connection definition ensures objectivity and stability in setting transmission rates and revenue collection for OHNC, the LDCs and the IMO. The Board therefore directs OHNC to adopt its preferred long-term definition upon market opening. The transmission customer will be defined directly to the transmission system. 334 MR. PORAY: That's what it says. 335 MR. MORAN: So despite Hydro One's concern about having an opportunity to explore this further with stakeholders, the Board was of the view you should just go ahead with your preferred approach. 336 MR. PORAY: That's correct. 337 MR. MORAN: Now, in that context, was there any discussion of the relationship between the transmission system that's owned by Hydro One and the transmission system that's owned by other people such as Abitibi? 338 MR. PORAY: No, there was no distinction. 339 MR. MORAN: Was there any discussion of that at the hearing? 340 MR. PORAY: No, there was not. 341 MR. MORAN: All right. So it actually wasn't even an issue at that point, nobody had raised it and nobody considered it in other words? 342 MR. PORAY: That's correct. 343 MR. MORAN: All right. If we were to look at this purely from a physical point of view, is it fair to say that the co-generation facility is an embedded facility vis-a-vis Hydro One's transmission system, on a physical level? 344 MR. PORAY: Which co-generation facility are you referring to? 345 MR. MORAN: The WCP co-gen. 346 MR. PORAY: No, it is not an embedded facility. 347 MR. MORAN: Perhaps you didn't understand my question. In relation to Hydro One's transmission system, just on a pure physical arrangement, is it fair to say that the co-gen is embedded in relation to Hydro One's transmission system? 348 MR. PORAY: No, it is not. It is connected, as any other generator, to the transmission system. 349 MR. MORAN: All right. If you take into account the fact, which you have agreed to already, that Abitibi's transmission system stands between the co-generation plant and Hydro One's system, at that level, is it fair to say that the co-generation station is embedded in relation to Hydro One's transmission system, even though it's connected to Abitibi's transmission system? 350 MR. PORAY: No, I would disagree with that. 351 MR. MORAN: And the reason you would disagree with that is because, as I understand it, they are a separate entity; right? 352 MR. PORAY: That's correct. 353 MR. MORAN: And they have a separate financial arrangement in the IMO-administered markets. 354 MR. PORAY: It's not so much that, it's the fact they are connected by a separate delivery point on the transmission system. 355 MR. MORAN: If the co-gen was owned by Abitibi, I take it you'd have a different view; you would say it is embedded; right? 356 MR. PORAY: No, it is still connected to the transmission system. 357 MR. MORAN: It's connected to Abitibi's transmission system and if it was owned by Abitibi and served Abitibi, wouldn't you agree that that would -- it would be embedded generation at that point, just like the hydraulic generator is embedded? 358 MR. PORAY: No, I would not agree and the reason why I would not agree is that embedded generation is defined as being generation behind the meter, connected at the distribution level or distribution voltage. Westcoast is not connected at the distribution voltage, irrespective of who owns them. 359 MR. MORAN: Can you show me the definition that says that? 360 MR. PORAY: Okay. On page 25 of the Board decision under where we were essentially just following on from section 3.1.17, section 3.2, "Net Versus Gross Load Billing", section 3.2.1 says: 361 "Generation that is not directly connected to the transmission system is located behind the meter that registers the electricity supplied from the regulated transmission facilities is referred to as embedded generation." 362 MR. MORAN: But it doesn't say anything there about low voltage, does it? 363 MR. PORAY: It doesn't specifically say about low voltage, but what it says is that it's not directly connected to the transmission system. 364 MR. MORAN: All right. And so you're assuming that what that means is low voltage, connected at low voltage? 365 MR. PORAY: That is correct. 366 MR. MORAN: Was that issue debated in the 0044 proceeding? 367 MR. PORAY: The issue that was debated in terms of net versus gross load billing pertained to generation that was connected behind the meter of a customer so it would be at the low voltage, and it was connected within local distribution companies' distribution system. 368 MR. MORAN: All right. So if we take a scenario where you have a load and you decide that you want to displace some of that load with your own generation, do I understand you correctly to say that the only way that that generation that you're going to build to serve your load would be treated as embedded generation is if it's connected only at low voltage? 369 MR. PORAY: It would be connected at the same delivery point as the load, at the low voltage, yes. 370 MR. MORAN: All right. So if, for economic efficiency purposes, it made more sense to connect at high voltage and then step it down, you would say, too bad, you lose, you're out of luck on the embedded generation? 371 MR. PORAY: That is correct, that's not the definition of an embedded generator. 372 MR. MORAN: That's not your definition of an embedded generator; right? 373 MR. PORAY: It's how I define embedded generation leading from the decision that was made by the Board in RP-1999 -- 374 MR. MORAN: That's your interpretation of what the Board said? 375 MR. PORAY: Correct. 376 MR. MORAN: Thank you. 377 Now, if we were to look at the actual co-generation plant itself, it has to be located near Abitibi because it's a co-generation plant and there is a steam load relationship; right? 378 MR. PORAY: I believe that was one of the considerations, yes. 379 MR. MORAN: And, in fact, that's the case with every co-generation plant currently in Ontario; right? They're located close to the load that they serve both for steam and for power, if they have a power sale arrangement as well? 380 MR. PORAY: I would think that is correct, yes. 381 MR. MORAN: And, of course, Abitibi's transmission system was already there; right? 382 MR. PORAY: Yes. 383 MR. MORAN: And that made it easy to hook-up the co-generation station without having to build new facilities? 384 MR. PORAY: There were technical requirements to connect it at the transmission level, yes. But there was an alternative, of course, that they could have been connected by a separate line to the transmission system, to Hydro One's transmission system. 385 MR. MORAN: And what would that do? What benefit would flow from that? You'd be duplicating facilities, wouldn't you? 386 MR. PORAY: Potentially, yes. 387 MR. MORAN: So it wouldn't be economically efficient, would it? 388 MR. PORAY: Possibly not, no. 389 MR. MORAN: All right. Now again, looking at this just from a physical perspective, the Abitibi load is, in fact, physically met by the co-generation plant; right? 390 MR. PORAY: If you're talking in terms of how the electrons flow, then I would say yes, that is correct. 391 MR. MORAN: That's what I meant by physical. All right. So on the physical level, Hydro One, in effect, is providing standby power in the event that the co-gen isn't available; right? On the physical level? 392 MR. PORAY: Correct. 393 MR. MORAN: Okay. Now, as I understand it in the 0044 proceeding, Hydro One, going into that hearing, wanted to do gross-load billing for embedded generation; right? That was the Hydro One proposal? 394 MR. PORAY: Correct. 395 MR. MORAN: And with a 50 percent reduction of that if it was something that fell within the definition of efficient embedded generation; right? 396 MR. PORAY: Yes. 397 MR. MORAN: And if you could turn now to the Board decision at paragraph 3.2.26, page 31. 398 MR. PORAY: Yes, I have it. If you just allow me to read it to make myself familiar with it. 399 MR. BETTS: Mr. Moran, that was 3.2? 400 MR. MORAN: Point 26. 401 MR. BETTS: Thank you. 402 MR. PORAY: Okay. 403 MR. MORAN: Now, this is in the section that sets out the Board's findings; right? We can see that if you look at page 28, which is the starting part of this passage; correct? 404 MR. PORAY: Okay. 405 MR. MORAN: So at 3.2.26, the Board indicates in the third sentence, which is three lines from the bottom: 406 "The net level of load on the transmission system can be reduced because of plant closures, reduced operations, increased energy efficiency or substitution of other fuels." 407 So in effect, what the Board is saying is that there's a number of reasons for why a particular demand for a particular load might be decreased and only one of which is embedded generation; right? 408 MR. PORAY: Correct. 409 MR. MORAN: And the Board wasn't prepared to distinguish embedded generation from those other types of load reductions? 410 MR. PORAY: That's what that said, yes. 411 MR. MORAN: And in fact, it goes on at the bottom of that page and over: 412 "These other sources of load reduction are not subject to the penalty of network gross-load billing as is proposed for embedded generation." 413 Right? 414 MR. PORAY: That's what it says, yes. 415 MR. MORAN: All right. And at 3.2.27, the Board expresses concern about how gross-load billing would necessitate highly complex rules and regulations that wouldn't have anything to do with the level of transmission services taken; right? 416 MR. PORAY: That's correct. 417 MR. MORAN: And at 3.2.28, the Board expresses a concern about Hydro One's proposed definition of efficient embedded generation as a new layer of the decision-making, in effect, that the Board didn't think was acceptable? 418 MR. PORAY: Correct. 419 MR. MORAN: And finally, 3.2.29: 420 "The Board observes that the above cited problems of gross-load billing would be avoided by the immediate adoption of net load billing for network services." 421 Right? 422 MR. PORAY: That's correct. 423 MR. MORAN: So with respect to embedded generation, it's very clear the Board has set the rules in its decision and I take it that it's not Hydro One's intention in this proceeding to revisit any of that argument; right? 424 MR. PORAY: That's correct. 425 MR. MORAN: And when we come to paragraph 3.2.30, the Board has one more comment at the end of that paragraph: 426 "In the Board's view this is not a welcoming prospect as large power users and providers must begin now to make important decisions on embedded generation." 427 Right? 428 MR. PORAY: Correct. 429 MR. MORAN: And that's in the context of the new market and the potential for new embedded generation to be developed as part of the new market; right? 430 MR. PORAY: I think what it was referring to specifically was contractual arrangements that Ontario Hydro Networks Corporation was proposing as a solution to the problem, yes. 431 MR. MORAN: The Board was concerned that customer specific contractual arrangements would add -- 432 MR. PORAY: Complexity. 433 MR. MORAN: -- complexity to it and might be a barrier to new generation, particularly embedded generation? 434 MR. PORAY: Correct. 435 MR. MORAN: All right. So is it fair to say, then, that's what's really at stake in this proceeding is the appropriate interpretation to be given to 0044 and the related rate order that came out of that proceeding? That's really what we're talking about here, since you're not here to reopen 0044? 436 MR. PORAY: It's the matter of how one defines embedded generation. 437 MR. MORAN: All right. So we have the Board's findings and we have the rate order and we have this issue of whether the co-generation is, in fact, embedded generation, and that's what it comes down to, how do you interpret 0044 and the rate order with respect to this dispute? 438 MR. PORAY: That's correct. 439 MR. MORAN: Now, clearly there's a relationship between the Board's findings and the rate order; right? The Board makes its findings and then out of that the rate order follows; right? 440 MR. PORAY: Correct. 441 MR. MORAN: And I take it you'd agree that it wouldn't be appropriate to interpret the rate order in isolation from the Board's decision; right? 442 MR. PORAY: That's correct. 443 MR. MORAN: And, specifically, it wouldn't be appropriate to interpret the rate order in such a way as to defeat the Board's findings; right? 444 MR. PORAY: That's correct. 445 MR. MORAN: In fact, the interpretation of the rate order should be informed by the findings of the Board; right? 446 MR. PORAY: Yes. 447 MR. MORAN: All right. And that would be based on the assumption that the Board wouldn't make a finding and then reverse the finding of the rate order; right? 448 MR. PORAY: That's my understanding. 449 MR. MORAN: Okay. So I think as you have agreed, then, the real issue here is whether the co-gens is an existing embedded generation; right? 450 MR. PORAY: That is correct. 451 MR. MORAN: That takes us, then, to the oft-quoted section 2.3.1 of the Board's decision. And the first sentence says: 452 "Generation that is not connected directly to the transmission system and is located 'behind the meter' that registers the electricity supplied from the regulated transmission facilities is referred to as 'embedded generation'." 453 All right. I think we've already covered your interpretation of what that means; you say that "not connected directly" means connected at low voltage; right? 454 MR. PORAY: That is correct. 455 MR. MORAN: Now, the meter, when we say "behind the meter", in this particular case the meter that registers the electricity that is supplied from the regulated transmission facilities is Meter 1 as is shown on Exhibit 2.1; right? 456 MR. PORAY: No, Meter 1 essentially measures the flow on line F2B. The meter that would measure the withdrawal of electricity that Abitibi uses would essentially be located at the delivery points on Abitibi's transmission system, but because there is no metering there, in order to be able to determine the amount of electricity withdrawn from the transmission system, you need to combine the reading on Meter 1 with the reading on Meter 2. 457 MR. MORAN: All right. I understand the position that Hydro One is taking with respect to what needs to be measured and perhaps I should have stated my question more clearly. If we're going to look at this at a physical level, Meter 1 is going to measure flow coming out of the Abitibi complex in the operating situation where the co-gen is operating, and meeting the load and the surplus is coming out through F2B; right? 458 MR. PORAY: That is correct. 459 MR. MORAN: Meter 1 will measure that. 460 MR. PORAY: Meter 1 measures the flow on line F2B. 461 MR. MORAN: That's right. Under that operating situation, of course, there isn't any electricity being supplied from the regulated transmission facilities, right, because the flow is outwards. 462 MR. PORAY: I would disagree about the regulated transmission facilities because, as I stated, I believe that Abitibi's transmission facilities are also regulated. 463 MR. MORAN: All right. Well, before I ask my next question then, why don't we just examine that point for a moment. I was going to touch on that later. 464 As a result of the exemption regulation, the Abitibi transmission facility doesn't require a licence; right? 465 MR. PORAY: That is correct. 466 MR. MORAN: It doesn't require a rate order; right? 467 MR. PORAY: That is correct. 468 MR. MORAN: And as a transmitter, Abitibi doesn't require the approval of the Board if it wants to acquire generation facilities under section 80; right? 469 MR. PORAY: That is my understanding. 470 MR. MORAN: And it doesn't have to set up an affiliate to keep its transmission activities separate from its other activities, right, pursuant to section 71. 471 MR. PORAY: That is my understanding. 472 MR. MORAN: And if it wants to buy or sell or acquire interests in transmission systems or distribution systems, it doesn't require the Board approval under section 86. 473 MR. PORAY: That is my understanding. 474 MR. MORAN: That's what the regulation does. Then what's left to regulate? Can you indicate what other sections that the Board would assert authority over at the Abitibi transmission system or Abitibi as a transmitter? 475 MR. PORAY: I think what remains are what I termed the obligations of the transmitter, which are no different to other transmitters in terms of constructing, maintaining, operating the transmission facilities to set standards. 476 MR. MORAN: Does the Board regulate that? 477 MR. PORAY: I believe that is -- 478 MR. MORAN: Mr. Pattani, you look like you want to add something. 479 MR. PATTANI: The electricity act establishes the IMO which administers the market rules which in turn requires transmitters, Abitibi or Hydro One, to ensure that the transmission is operated in a safe and reliable manner in accordance with the market rules. So if you look at the hierarchy then, and I'm just talking about this particular aspect, there is a requirement in the electricity act for Abitibi to operate and maintain its transmission facilities in accordance with the requirements of the market rules. 480 MR. MORAN: Right. And if we look at, and I think this has been cited by Hydro One in its evidence, the IMO is involved in the TSC review process and is trying to suggest that perhaps the transmission system code could be used to regulate a non-licensed facilities; right? That's essentially what they're saying. 481 MR. PATTANI: And you have hit the nail there, because it's the transmission system code that will be used to regulate these non-licensed transmission. The term 'regulate', and I'm not saying this defines it all together, but you're saying it's regulated. 482 MR. MORAN: Now, the transmission system code only applies to a transmitter who has a licence because the licence says you have to comply with the transmission system code; right? 483 MR. PATTANI: Yes. 484 MR. MORAN: Right. So if you don't have a licence, then you don't have to comply with the transmission system code because that's the only way it can apply to you; right? 485 MR. PATTANI: Yes. Now, what IMO has indicated, as Mr. Snelson quoted yesterday, is that it should be in the transmission system code that the non-licence transmitters should also abide by the same rules in terms of reliability and maintaining of their system. 486 MR. MORAN: I take it you'd agree if the only way to make the transmission system code apply is to make it a condition of licence; then if you don't have the licence, you can't make it apply, right, based on that assumption? 487 MR. PATTANI: Yes. 488 MR. MORAN: So the IMO may have to consider a market rule. 489 MR. PATTANI: I'd like to mention one other point and maybe I'm digressing here. In terms of regulation, I mean the simple fact that you need regulation 20/02 to define the entity does not need the licence is in itself a regulation. Therefore the transmission falls under the regulated umbrella just because of the fact there are certain rules that are required by -- so that the transmitter can call himself a non-licensed transmitter. 490 MR. MORAN: All right. Dr. Poray, perhaps we can then get back to where we were, section 3.2.1. I think we've already covered off that your interpretation of not connected directly to the transmission system means connected at low voltage; right? 491 MR. PORAY: That's correct. 492 MR. MORAN: And your interpretation of regulated transmission facilities means if there's any kind of regulation at the transmission facility then it's a regulated transmission facility; right? 493 MR. PORAY: I make no distinction between regulated and non-regulated transmission facilities. 494 MR. MORAN: Fair enough. All right. Now, I think we were exploring the relationship of the meter to the flows that take place with respect to Abitibi. If we look at Meter 1, under normal operating conditions the co-generation plant is operating, the Abitibi load is up, and what Meter 1 will show is an outward flow from the facility; right? That's at the physical level. 495 MR. PORAY: That is correct. 496 MR. MORAN: All right. And if the co-gen for some reason is down, and Abitibi wants to continue to run its processes, then Meter 1 will show a flow inwards to the Abitibi complex; right? 497 MR. PORAY: That's correct. 498 MR. MORAN: So on the physical level, what is happening is Meter 1 is showing when and how much electricity is being supplied from the Hydro One transmission system. 499 MR. PORAY: Essentially it's how much electricity is flowing from the Ontario Hydro transmission system. Sorry, Hydro One transmission. 500 MR. MORAN: From Hydro One to Abitibi. 501 MR. PORAY: From Hydro One towards Abitibi. Excuse me, Mr. Toneguzzo would like to add something. 502 MR. TONEGUZZO: I would also like to add, though, if you want to talk about the physical level, in this particular situation the Abitibi load typically needs voltage support from the system. So at the physical level, the transformers you see there on the diagram designated T1 and T2 from 230 to 115 kV are used and are worn out as a result of the Abitibi load being there. 503 So that is occurring at the physical level. There is wear-out of the Hydro One equipment occurring and costs, real costs being incurred, that are included in our rates. 504 So that is occurring at the physical level as well. 505 MR. MORAN: All right. So just so we're clear when we're looking at Exhibit 2.1, when you refer to T1 and T2, you're referring to the T1 and T2 that's in black -- 506 MR. TONEGUZZO: That's correct. 507 MR. MORAN: -- on the left-hand side. Not the T1 and T2 in grey, I guess, next to the co-gen. 508 MR. TONEGUZZO: Correct. I'm referring to the T1 and T2 that's in black, that stepped the voltage down from 230 to 115 kV. 509 MR. MORAN: All right. Now T1 and T2 are network assets; correct? 510 MR. TONEGUZZO: That's correct. 511 MR. MORAN: So if we go back to the Board's findings in relation to whether embedded generation should be treated net or load, the Board discusses a number of other things that are going on and changes in net inefficiency by the load, self-generation, business disruption. I mean, all of these things are going to have an impact one way or other on network assets; right? 512 MR. TONEGUZZO: That's correct. 513 MR. MORAN: All right. So in that context, what you've said, you know, it's no different for all of those reasons from what might happen in relation to the co-gen; right? That's the network, it's serving everybody and the wear and tear happens in the process of serving everybody. Right? 514 MR. TONEGUZZO: The wear and tear there happens specifically for the purposes of serving the Abitibi load at the physical level. 515 MR. MORAN: At the network level? 516 MR. TONEGUZZO: On the network, yes. Those assets are used, yes. 517 MR. MORAN: Okay. 518 MR. BETTS: Mr. Moran, can I just ask how long do you anticipate going on with questions? I'm searching for an appropriate time to take a break. 519 MR. MORAN: I think this would be an appropriate time, Mr. Chair. 520 MR. BETTS: I didn't want to interrupt your line of questioning. If you feel this is appropriate, we can do that. 521 MR. MORAN: This is appropriate. 522 MR. BETTS: We will then break and let's aim for a 20-minute break. That would see us returning here at 25 minutes after 11. So we will recess until that time. 523 --- Recess taken at 11:05 a.m. 524 --- Upon resuming at 11:25 a.m. 525 MR. BETTS: Thank you, everybody. Please be seated. 526 We left or recessed as Mr. Moran was questioning the witness panel. Before we resume with that, are there any preliminary matters? 527 Mr. Moran, please proceed. 528 MR. MORAN: Thank you, Mr. Chair. 529 Dr. Poray, I think we had finished our discussion of 3.2.1 of the 0044 decision. 530 I want to take you next then to paragraph 3.2.33 of the same decision. 531 MR. PORAY: 3.2.3? 532 MR. MORAN: 3.2.33. 533 MR. PORAY: 33? I'm sorry. 534 MR. MORAN: And we have the Board's finding then which says: 535 "On balance then, the Board finds that net-load billing shall apply to network transmission service. Current users of the transmission system will continue to pay for the level of transmission service they use. In the Board's view, given the circumstances presented, net-load billing for network service is a fair, more practical and simpler system to apply. It removes the arbitrary necessary inherent in gross-load billing. It removes the uncertainty over transmission pricing for embedded generation and it does not frustrate the objectives inherent in open access, particularly the opening up of the energy markets to alternative generation. The Board recognizes that there will be some costs impacts as a result of its findings, but they ought to be mitigated by anticipated developments in new generation." 536 So that's the Board finding on how embedded generation ought to be treated. On that basis, I take it you would agree if the Board were to determine that WCP was an embedded generator, then that's the finding that ought to apply; right? 537 MR. PORAY: No, and the reason I say that is that what the Board dealt with specifically in RP-1999-0044 was net-load billing which was, in essence, as we explained, where you have load and generation connected at the load's delivery point behind the load meter, the netting out takes place there, and as a result of that netting, there is a reduction in the demand that's drawn from the transmission system at the delivery point. 538 MR. MORAN: Right. 539 MR. PORAY: The issue that is before the Board is not net-load billing. 540 MR. MORAN: As I understand the issue that's before the Board, the question is whether the co-gen is an embedded plant, an embedded generator, and if it is, then should Abitibi be billed net load or gross load; isn't that the issue? 541 MR. PORAY: That is correct. 542 MR. MORAN: So if the Board determines ultimately that the co-generator is embedded, then based on the Board's findings as we've read them, net load billing is what ought to apply to Abitibi; right? In that event. 543 MR. PORAY: I don't agree because of how I defined net-load billing and how net-load billing is applied and how it's defined. 544 MR. MORAN: Right. I understand that you have a view on whether Abitibi should be billed on a net basis and I'm not asking you to change your position on that. All I'm suggesting is that if the Board were to determine in this proceeding that the co-gen was an embedded plant, if the Board did that, I'm saying it has done it or will do it, but if it did it, then the result of such a finding would be that Abitibi should be billed net; right? 545 MR. PORAY: That's correct. 546 MR. MORAN: Now, we had a bit of a discussion about the difference between the Abitibi transmission system and the Hydro One transmission system, and you've indicated your view that they're all part of a larger transmission system. 547 I take it you'd agree that the costs associated with the Abitibi transmission system are not borne by the ratepayers of the province; right? 548 MR. PORAY: That's correct. 549 MR. MORAN: They're borne by Abitibi? 550 MR. PORAY: They're borne by Abitibi and its customers. 551 MR. MORAN: Right. And it doesn't have any customers that it charges rates to; right? 552 MR. PORAY: It has customers for its products which are pulp and paper. 553 MR. MORAN: Right, but on the electricity side it doesn't recover anything in rates; right? 554 MR. PORAY: It does not have rates and it does not charge for the use of its transmission system. 555 MR. MORAN: That's right. And as far as recovering its costs for its products, it would recover all the other costs it incurs, including whatever it takes from the transmission system and whatever power it buys and whatever paper supplies it needs and so on; right? 556 MR. PORAY: I assume that would be so. 557 MR. MORAN: Moving to the line-connection issue, again in 0044, if I could get you to turn to paragraph 3.2.35? 558 MR. PORAY: Okay. 559 MR. MORAN: Under the heading of "Line and Transformation Connection Pools," firstly, the transformation pool has no bearing here because Hydro One doesn't provide transformation on the line connection side; right? 560 MR. PORAY: Abitibi owns its own transformation facilities, yes. 561 MR. MORAN: The only thing that's relevant is the line connection pool; right? 562 MR. PORAY: That is correct. 563 MR. MORAN: And at 3.2.35, we see that OHNC proposed that the line and transformation connection pool charges should be based on gross-load billing. That was Hydro One's position in 0044; right? 564 MR. PORAY: That's correct. 565 MR. MORAN: And again, presumably the underlying rationale was a concern about losing revenues if the billing was going to be done on a net basis; right? 566 MR. PORAY: No, it was to recognize the fact that those facilities were billed specifically for those customers. 567 MR. MORAN: That's right. And if the rates didn't reflect that, then all the other ratepayers would have to bear that cost; right? 568 MR. PORAY: That's correct. 569 MR. MORAN: That was the underlying concern. And the Board determined ultimately that gross load billing would apply to line connection service only for new embedded generation; right? 570 MR. PORAY: That is correct. 571 MR. MORAN: And if we want to see how it dealt with existing embedded generation that was dealt with separately, perhaps you could turn to section 3.3.1. 572 MR. PORAY: Okay. I'm there. 573 MR. MORAN: What we see there is: 574 "Existing embedded generation is defined as embedded generation for which required approvals are obtained before October 30th, 1998, when the Energy Competition Act (1998) came into being. All other embedded generation is referred to as new embedded generation. Historically, customers with existing embedded generation have been billed for both network and line transformation on a net-load basis." 575 And in 3.3.32 we see Hydro One's position. Hydro One's position was for existing embedded generation, that should continue; right? 576 MR. PORAY: That is correct. 577 MR. MORAN: And the Board's findings are set out at 3.3.3; the Board accepts that proposition. 578 MR. PORAY: That is correct. 579 MR. MORAN: All right. So that's the Board's finding. If the Board were to determine in this proceeding that the co-gen was an embedded plant, then that's the finding that ought to apply. 580 MR. PORAY: If it was determined that Westcoast is an embedded generator and that it is an existing embedded generator. 581 MR. MORAN: It's certainly existing, so it meets that part of the test. The part that's controversial is whether it's embedded. 582 MR. PORAY: It's an existing generator, yes. 583 MR. MORAN: All right. And to the extent that there is an inconsistency between a finding that this is an embedded generator and the definition of delivery point in the rate order, I think you agreed earlier that the rate order would have to be interpreted in a manner consistent with the appropriate Board findings; right? 584 MR. PORAY: That's correct. 585 MR. MORAN: All right. And that brings me to the delivery point issue. You have focused on the definition of the delivery point in the rate order as part of the rationale for why Abitibi should be billed on a gross load basis; right? 586 MR. PORAY: That's correct. 587 MR. MORAN: Perhaps a starting point, Mr. Chair, the package of material that you've just received is excerpts from material that was filed in the 0044 decision and I'd like to mark that as Exhibit 2.3. 588 MR. BETTS: Thank you. 589 EXHIBIT NO. 2.3: EXCERPTS FROM MATERIAL FILED IN THE 0044 DECISION 590 MR. MORAN: This was previously circulated to the parties. 591 All right. Dr. Poray, the first item in this package is an excerpt from the transcript and it's an excerpt from testimony that you gave at 0044; right? 592 MR. PORAY: That's correct. 593 MR. MORAN: And if you turn to page 44 of that transcript, starting at line 4, you indicate that: 594 "OHNC proposes that customers should be charged for transmission services based on the per-delivery-point basis. What I mean by delivery point is that point on the transmission system from which electricity is supplied to the customers. A customer may have one or several delivery points." 595 Now, to understand what that means in the context of your evidence here, if we look at Exhibit 2.1, the diagram, as I understand your evidence, you say that the delivery points essentially are the Abitibi-owned transformer stations at T3, T4A, T4B and T5; right? 596 MR. PORAY: That's correct. 597 MR. MORAN: And then the next paragraph you indicate in the transcript: 598 "The intent of using the delivery-point approach is that it clearly identifies the customer's point of connection to the transmission system and, therefore, identifies what assets the transmission customer is linked to." 599 Right? 600 MR. PORAY: Correct. 601 MR. MORAN: In the context of the evidence that you were giving at that time, you were speaking at a high level I think as you indicated earlier, Hydro One thought it needed more time to discuss this issue with its stakeholders; right? 602 MR. PORAY: No, I think the issue of the delivery point was discussed with stakeholders, prior to submission of the evidence. 603 MR. MORAN: All right. And for your purposes in this hearing, the transmission assets that the customers linked to, for your purposes, are the Abitibi transmission assets; right? 604 MR. PORAY: That is correct. 605 MR. MORAN: Now, as part of what was filed, of course, some definitions had been filed in Hydro One's evidence and if you turn to the next document, there's a document that says "Glossary" at the top, "Ontario Hydro Services Company". That was part of what was filed in the 0044 case; right? 606 MR. PORAY: That is correct. 607 MR. MORAN: If we look at how the definitions are dealt with there, on page 59 of that document: 608 "Delivery point is defined as the point of supply to the customer, or group of customers, from the transmission system." 609 MR. PORAY: That's what it says, yes. 610 MR. MORAN: And this was Hydro One's document so presumably Hydro One was talking about Hydro One's transmission system. 611 MR. PORAY: I think the context that we were dealing with at that time was really trying to define the delivery point in relation to the customer's -- in relation to the LDCs and their customers and that was captured in the whole discussion on who is a transmission customer. 612 MR. MORAN: And which industrials would you be talking about? 613 MR. PORAY: Well, industrial end-users would also be customers, but one of the key elements of that discussion is who is a transmission customer because at that time we were moving from the power district, as you mentioned earlier on and we talked about, and in the power district you had customers that were actually connected to the distribution system that were direct customers of Ontario Hydro. Those were the issues we were trying to address in coming up with a definition of transmission. 614 MR. MORAN: All right, if you turn to page 60, there is a definition for embedded generation: 615 "A generator that is not directly connected to the IMO-controlled grid (or to the transmission system)." 616 I take it those are interchangeable terms; that's why it's set out that way. 617 MR. PORAY: Yes. 618 MR. MORAN: And the IMO-controlled grid is the grid that's composed of Hydro One and Great Lakes Power and the other smaller transmitters that participate in the uniform rate scenario; right? 619 MR. PORAY: That's correct. 620 MR. MORAN: And if we want to just confirm that, there's a definition of IMO-controlled grid further down the page: 621 "The transmission system with respect to which, pursuant to operating agreements, the IMO has authority to direct operations." 622 MR. PORAY: That is correct. 623 MR. MORAN: All right. If we turn to page 61, there is a definition, "load displacement generation:" 624 "The generation that is located within the premises of the end-use customer and behind the electricity meter of that customer. This generation therefore reduces the electricity demand or consumption of the end-use customer from the transmission system (if the end-use customer is directly connected to the transmission) or from the transmission and distribution systems (if the end-use customer is connected to the distribution system)." 625 This is very similar to the definition of embedded generation that we've discussed, isn't it? 626 MR. PORAY: Load displacement generation would qualify as embedded generation. 627 MR. MORAN: It would qualify? 628 MR. PORAY: Yes. 629 MR. MORAN: All right. Then we have a definition of merchant generation, which is generation that is not load displacement generation. 630 "The merchant generation may be connected to transmission or distribution systems. The merchant generation that is connected to the transmission system shall always sell electricity and ancillary services through the IMO-administered spot, day-ahead or bilateral markets. The merchant generation that is connected to the distribution system may also sell these services through the IMO-administered market. However, such merchant generation may choose to bypass the IMO-administered markets and may, instead, make bilateral arrangements with the end-use load customers and\or retailers within the LDC's in which the generation is located (using processes established by the host LDC). Such bilateral arrangements may be for short duration (for example, one hour) or for several years (for example, up to 30 years)." 631 So I raise this to clarify, I think, some of the evidence that has been given earlier by this panel. When WCP participates in the market, it's not necessarily the IMO-administered markets, it also has the ability to enter into bilateral agreements bypassing the IMO-administered market; right? 632 MR. PORAY: It could. 633 MR. MORAN: Right. Now, the next document in the package is also a glossary and also filed in 0044, this is part of the pre-filed evidence. If we use the page numbers at the top of that document, turn to page 3. 634 MR. PORAY: Okay. 635 MR. MORAN: At the bottom of that page, there is a definition for delivery point: 636 "The term delivery point refers to each supply point from the transmission system from which the electricity is supplied to the customer. In most cases, the delivery point is an OHNC-owned transformation station. In some cases, the delivery point is a customer-owned transformation station that is connected to an OHNC-owned transmission line." 637 What that definition suggests is that there needs to be some flexibility with respect to delivery points; right? 638 MR. PORAY: I don't think so. I think it's fairly clear how it defines delivery point. It doesn't preclude any other arrangements that might exist. 639 MR. MORAN: Okay. It doesn't preclude other arrangements that might exist. All right. And if we want to look at the supply point, your position in this hearing is that the supply points are the four transformers owned by Abitibi; right? 640 MR. PORAY: The supply point is the point at which the customer withdraws electricity from the transmission system which is typically through the transformation from above 50 kV to below 50 kV. 641 MR. MORAN: You said "typically." Is it always? 642 MR. PORAY: That is the case always. 643 MR. MORAN: And in this particular case, you say it's the four Abitibi-owned transformers; right? 644 MR. PORAY: That is correct. 645 MR. MORAN: The other possibility on the other side of the argument is that it's at Meter 1. 646 MR. PORAY: That is not withdrawal from the transmission system. Meter 1 just measures the flow on the transmission system. 647 MR. MORAN: All right. That's fair. The dead-ending insulators, that's the competing argument in this proceeding, right, as the delivery point? 648 MR. PORAY: No, the delivery point is the transformation that steps down from above 50 kV to below 50 kV. 649 MR. MORAN: That's Hydro One's position; right? 650 MR. PORAY: That is what is in the rate order. 651 MR. MORAN: Right. And that's Hydro One's position; right? 652 MR. PORAY: Well, the rate order applies to all transmitters in the province. 653 MR. MORAN: The competing point of view, as I understand it, is the delivery point is where the dead-ending insulators are located between Hydro One's assets and Abitibi's assets? 654 MR. PORAY: That was the delivery point which was used in the contractual arrangement between ICG and Ontario Hydro. 655 MR. MORAN: Right. Finally, I'd like to take you to the rate order itself, the rate schedule, and that's in Exhibit 1.3 at tab 5. The rate order is found at the back of tab 5, it starts about five or six pages in from the back. 656 MR. PORAY: I have it. 657 MR. MORAN: And the first page of the rate order or the rate schedule behind the title page is headed up "terms and conditions" and item C, "transmission delivery points" sets out the definition; right? 658 MR. PORAY: That is correct. 659 MR. MORAN: The definition we see there is: 660 "The transmission delivery point is defined as the transformation station owned by a transmission company, or by the transmission customer, which steps down the voltage from above 50 kV to below 50 kV and which connects the customer to the transmission system." 661 MR. PORAY: That is correct. 662 MR. MORAN: All right. If we were to compare the two definitions, the one we've just referred to and the one that we just finished looking at in the package of materials, Exhibit 2.3, one appears to be written with a bit more flexibility than the other. I wonder if you could explain what the difference is? 663 MR. PORAY: I'll ask Mr. Pattani to do that. 664 MR. PATTANI: Okay. As you say, on page 3 of 21 in the glossary of 0044, the definition was the delivery point refers to the point from the transmission system from which the electricity is supplied to the customer. The rate schedule, by IMO's request, needed to be firm and specific so that there is no grey area in it, and as a result, I assume this definition of transmission delivery point was put here, but it is still consistent with the definition here in the sense that since transmission system is defined by the voltage of 50 kV and above. Therefore, the withdrawal from the transmission system takes place when you step down from above 50 kV to below 50 kV, and the definition that you see in that order then is consistent with the other definition but is more specific. So when the IMO is using it to determine the charges for transmission customers, it can use it objectively and without any grey areas. 665 MR. MORAN: Was there any debate about the definition of delivery point in 0044, that you recall? 666 MR. PATTANI: No, there was no debate about the definition of delivery point. The only debate that there was, was in terms of whether or not different delivery points should be aggregated or not. 667 MR. MORAN: All right. So on the basis of what was before the Board in 0044 prior to the development of the rate order, there was no debate about what a delivery point ought to be, and if we look at the decision, there is no discussion of what the delivery point ought to be in the decision, which assume reflects the lack of debate; right? 668 MR. PATTANI: Well, the decision does say that the transmission delivery point is the point at which the customer is connected to the transmission system, and I guess in terms of the rate order, that's the way it is and that's the way it's applied. I mean, whether or not there is a debate is -- I agree it may be important but it's not pertinent to the question at hand. 669 MR. MORAN: Fair enough. Given that we've agreed that the interpretation and application of the rate order has to be consistent with the Board's findings, in the context of a finding that WCP is an embedded generator, then they would have to be treated as an embedded generator, despite the fact that the definition of delivery point would suggest that there were a number of different delivery points for Abitibi; right? 670 MR. PATTANI: And one thing I would like to make it clear here: What we do is we take the transmission rate order as it stands as implement it, where it is clearly identified as what is a delivery point and what is an embedded generation. I presume it's not for us to go one step further and say well, what was the intent here and why did the Board do that? Where it's clearly laid out, we need to implement the transmission rate order exactly as it stands. 671 MR. MORAN: Right. To the extent there might be competing positions on how to interpret a particular finding, then that has to be debated here and ultimately decided by the Board; right? 672 MR. PATTANI: I guess what is to be debated is whether we are complying with the transmission rate order or not. 673 MR. MORAN: Right. Including whatever relevant Board findings apply to the situation. 674 MR. PATTANI: Yes. 675 MR. MORAN: I'd like to turn you now to Exhibit 1.2 which contains the witness statements that were filed by Abitibi, and specifically tab B of Exhibit 1.2. Actually, for the purposes of this question we can also use your Exhibit 2.1. Why don't we use your Exhibit 2.1. That's probably easier. 676 MR. PORAY: Can I get clarification? It's 1.2, tab A? 677 MR. MORAN: I'm making it a bit easier for you. I can use this diagram as well, Exhibit 2.1. I'll use that instead. 678 Exhibit 2.1 shows metering points of ACI and WCP. As I understand it, the metering points that you -- that you would say exist are the six transformer points on the ACI property, two belonging to the generator, four belonging to Abitibi; right? 679 MR. PORAY: The delivery points are those six transformer stations, yes. 680 MR. MORAN: My mistake, yes, the delivery points. And you have a choice of metering each of those delivery points or doing it alternatively, the way it's actually done, taking Meter 1 and subtracting the readings from Meter 2; right? Those are the two alternatives you would have for metering. 681 MR. PORAY: That is correct. 682 MR. MORAN: Now, you say that Abitibi is a separate transmission customer and it's got four delivery points and it should be billed on a gross load basis; right? 683 MR. PORAY: It should be billed in accordance with the demand at those delivery points netting out the generation that it owns, which is the hydro-electric generation. 684 MR. MORAN: Yes. But not netting out the capacity -- sorry, the power that comes from the co-gen; right? 685 MR. PORAY: That is correct. 686 MR. MORAN: Okay. And so, I assume, then, on that basis when there is a demand from the -- from WCP it should be treated the same way; right? 687 MR. PORAY: I'm sorry, I don't understand. 688 MR. MORAN: If the co-generator is down but it has a demand for lighting and maintenance purposes, right, it should be treated the same way. 689 MR. PORAY: That is correct. 690 MR. MORAN: So it should be billed on a gross basis as well. 691 MR. PORAY: That's correct. 692 MR. MORAN: And do you know if it is? 693 MR. PATTANI: I hope there is not a misunderstanding here. When you say that the WCP should be billed on a gross-load basis, if by that you imply that when Westcoast is taking -- when it's generating as well as feeding its own supplies, it's output should be included in its charge determinate, then that's not true. 694 I believe when you say gross load billing, what you're saying if WCP is out of service altogether and then there is station supplies that are being taken from the transformer. Then it is billed, and here the network billing doesn't apply because the generator is out of service to begin with. So they are billed on the basis of their own demand, I understand. 695 MR. MORAN: Right. There is a load there, aside from the generator capacity, there is an actual load at the station; right? 696 MR. PATTANI: Yes. 697 MR. MORAN: And most of the time that load is met by the power that it generates; right? But sometimes the generator is down and that load has to be met. 698 So if I understand the rationale that's being put forward by Hydro One in this case, that would mean that it should be billed on a gross-load basis for that load, given that it's a separate transmission customer just like Abitibi is, leaving aside the generation power. 699 MR. PATTANI: We may be talking the same thing, but I want to make sure that the term gross load billing here is not misinterpreted because the term gross load billing implies that if there is a generator behind the meter, that generation is included in calculating WCP's charge. So if we use the term here what it would mean is this generator, even when it's generating say 100 megaWatts. And when it is supplying its own one megaWatt, the term gross load billing would be interpreted to mean they are being charged on the basis of 100 megaWatt generation plus that one megaWatt load and if that is what is being meant, then it's definitely not, no. 700 MR. MORAN: That's not what I'm asking. For the purpose of the load that exists at the generator, is it billed every month for that load? 701 MR. PATTANI: If there is a load as a result of all the generation being out of service, if the load is being withdrawn from the transmission system and not supplied by the generator, then that load is billed for the purpose of transmission charges. 702 MR. MORAN: All right. So in other words it's being billed on a net basis; right? If it displaces its own load you're not going to bill it. If it can't displace its own load, you are going to bill it. 703 MR. PATTANI: Yes, it's billed on a net basis for Westcoast generation. 704 MR. MORAN: Thank you. I would like to take you now to your Exhibit 1.7 which was a set of diagrams that showed a number of different scenarios. Looks like this. 705 MR. PORAY: I don't have a copy of that with me. 706 MS. ALDRED: Give us a moment to find that, please. 707 MR. MORAN: Have you seen this document before? 708 MR. PORAY: Yes, I have. 709 MR. MORAN: In figure 1, forms of connection to the transmission network, there are three different scenarios; right? 710 MR. PORAY: That's correct. 711 MR. MORAN: And in scenario one, we see two loads being served by the transmission network; right? 712 MR. PORAY: That's correct. 713 MR. MORAN: And one load is directly connected to the Hydro One transmission network, as I understand the schematic; right? 714 MR. PORAY: It's connected by the licensed transmitters facility. 715 MR. MORAN: Load 2 is connected partly through non-licensed connection and partly through licensed connection; right? 716 MR. PORAY: That's correct. 717 MR. MORAN: So in that scenario, the approach is very simple. You're taking service off the network, you get billed for that service; right? 718 MR. PORAY: Correct. 719 MR. MORAN: All right. If we go to scenario 2, or B, I'm sorry, that scenario has the addition of generation, also connected to the licensed transmission system; right? 720 MR. PORAY: Correct. 721 MR. MORAN: And that's not uncommon. There are a number of generators throughout the province and that's the way most of them are connected; right? 722 MR. PORAY: That is correct. 723 MR. MORAN: So they're injecting power into the grid and customers are taking power off the grid. 724 MR. PORAY: That's correct. 725 MR. MORAN: And so they're getting billed for transmission network services. 726 MR. PORAY: That is correct. 727 MR. MORAN: All right. And, then, if we look at scenario C, a generator -- there is an additional generator connected to the non-licensed connection for load 2; right? 728 MR. PORAY: That's correct. 729 MR. MORAN: Now, let's look at that one and see how different variations of that scenario could play out. Scenario one could be that load 2 owns generator B; right? That's one possibility? 730 MR. PORAY: That's possible, yes. 731 MR. MORAN: All right. So looking at that possibility, load 2 owns generator B, and load 2 owns the wires as well; right? 732 MR. PORAY: Yes. 733 MR. MORAN: In that scenario, if load 2 uses the generator that it owns and operates to displace its load, would you consider it to be an embedded generator? 734 MR. PORAY: No, I would not. 735 MR. MORAN: And why wouldn't you? 736 MR. PORAY: Because they're both connected to the transmission system. 737 MR. MORAN: All right. So for you, the only reason why generator B can't be considered an embedded generator is because the bit of wire coming out of the generator is high voltage? 738 MR. PORAY: The generator is connected to the transmission system through its own delivery point. 739 MR. MORAN: All right. Now, if load 2, still owning generator B, built to generator B, so that the output from generator B was supplied to load 2 at distribution voltages, would you consider generator B to be embedded under that scenario? 740 MR. PORAY: Are we talking about generator B being connected with load 2 at load 2's delivery point? 741 MR. MORAN: If load 2 owns generator B and takes the output of generator B at low voltage, would you consider generator B to be embedded? 742 MR. PORAY: Yes. 743 MR. MORAN: All right. So the only distinction between those two scenarios is the connection between load 2, on the one hand it's high voltage and on the other hand it's low voltage and, for you, that's what makes the difference for embedded generation? 744 MR. PORAY: That is correct. 745 MR. MORAN: Now, in a situation where load 2 is configured in such a way that it's more economic, it has a choice, it can choose to connect its generator and take the output from its generator at high voltage or low voltage, but it's more economic to do it at high voltage, if it had the choice of taking it at distribution voltage but didn't, would you still say it's not embedded? 746 MR. PORAY: That is correct. 747 MR. MORAN: Okay. In other words, in order to claim whatever benefits flow from being treated as an embedded generator, you would have to construct it at low voltage regardless of how inefficient that might be. 748 MR. PORAY: An embedded generator typically -- yes, I would agree with that. 749 MR. MORAN: All right. So to apply that scenario to the fact situation that's before the Board, in the year 2008, Abitibi will own the co-generator; right? 750 MR. PORAY: I understand that that is an option they have, yes. 751 MR. MORAN: And, well, either way they're going to own it. They have an option to purchase it earlier, as I understand the evidence, but by 2008 they own it for a buck. 752 In the year 2008, the power purchase agreement also comes to an end; right? 753 MR. PORAY: That is my understanding. 754 MR. MORAN: So in terms of ownership, there won't be different owners; right? They'll be the same owners. Abitibi will own the generator and Abitibi will own the right to the output. Right? 755 MR. PORAY: That would be my understanding, yes. 756 MR. MORAN: The financial arrangements that exist right now between WCP and OEFC will have ended? 757 MR. PORAY: I assume that's what might take place, yes. 758 MR. MORAN: Right. In that scenario then, if I understand what you've said, Abitibi wouldn't be entitled to consider the generator as an embedded generator because there is that one last impediment from your point of view, it's connected at high voltage. 759 MR. PORAY: First of all, what I'd like to say, this is not the matter that is before the Board. We're now looking at a situation that is different from what exists today. 760 MR. MORAN: Right. But I'm asking you what your opinion would be in the set of facts that will exist in 2008. 761 MR. PORAY: In my opinion, they are still two separate -- generator and load are connected through separate delivery points to the transmission system. 762 MR. MORAN: Okay. Thank you, Dr. Poray. I would like to now go back to the decision again, and at 0044, paragraph 3.2.23, could you turn that up, please? 763 MR. PORAY: I'm sorry, can you state those again, please? 764 MR. MORAN: In the decision, paragraph 3.2.23. 765 MR. PORAY: 3.2.23. Yes, I have that. 766 MR. MORAN: And the issue I want to touch on now is the idea of the revenue impact concern that's been raised. At 3.2.23, we see what the Board says: 767 "Unlike connection facilities, network facilities were built for a mix of customers. The mix is not static, it changes continually. The customers who will use the system at market opening will not necessarily be the same customers for whom the transmission network was built." 768 That's a fair statement; right? 769 MR. PORAY: That's what it says, yes. 770 MR. MORAN: "Transmission lines built for one purpose may be adapted to another depending on changing service needs." 771 Now, I think it was you, Mr. Pattani, who indicated that when you were deriving the revenue requirement for the rates, that you used historical data; right? 772 MR. PATTANI: No, we used the forecast data that is based on the historical data. 773 MR. MORAN: Right. You used the historical data to derive a forecast and the forecast was then used to develop a revenue requirement for the purpose of setting rates? 774 MR. PATTANI: Yes. 775 MR. MORAN: In that context, clearly the historical data is not going to continue to be the situation moving forward. Businesses will come, businesses will go; right? 776 MR. PATTANI: Yes. 777 MR. MORAN: So the forecast is your best estimate based on previous usage, but it doesn't necessarily match up with what happens in the future. 778 MR. PATTANI: Yes. 779 MR. MORAN: One of the ways that the forecast is going to be off is as a result of things that are occurring in the economy; right? The cycles that happen naturally in the economy, the economy grows, it fades, businesses come into being, they disappear; right? 780 MR. PATTANI: Yes. 781 MR. MORAN: And as new businesses come in and old businesses exit, you start rearranging the assets and changing their use and maybe rewiring them to new customers or maybe selling them off, right, to other people who can make better use of them if they become surplus to you. 782 MR. PATTANI: Yes. I'd like to make sure we understand this. In terms of the line of questioning that's going on - and I'll definitely answer that in a second - but I'm wondering, I'd like to make clear that I don't think it is pertinent to this issue here which is the application of the rate schedule. So as far as the application of the rate schedule is concerned, that's a different matter here. 783 Let's go on with your line of questioning. Yes, demand would change. 784 MR. MORAN: Right. And one of the things that can change, of course, as a result of the Board's decision is that new embedded generation can come along; right? 785 MR. PATTANI: Yes. 786 MR. MORAN: And if it's embedded generation, it will displace load; right? 787 MR. PATTANI: Yes. 788 MR. MORAN: And if it displaces load, the rule is that the load is billed on a net basis? 789 MR. PATTANI: Yes. 790 MR. MORAN: And every time that happens, that affects Hydro One's revenue? 791 MR. PATTANI: It's the four transmitters who share in the revenue. 792 MR. MORAN: That's right. Including Hydro One because it gets split up on a proportionate basis; right? 793 MR. PATTANI: Yes. 794 MR. MORAN: There are many other things that affect the revenues. Utilities love bad weather, don't they? 795 MR. PATTANI: Well, and there are times when the weather is bad in the sense that it's cooler than it would have been in summer, that's bad weather, too. We don't love that. 796 MR. MORAN: That's right. If it's very hot, you make more money; if it's very cold, you make more money. 797 MR. PATTANI: If it's cooler than hot, then we don't. 798 MR. MORAN: There's a whole bunch of factors and the rates are set on the best possible bases that people can forecast. 799 So the Board essentially has said in 0044, that's the way it is, Hydro One, you've got to take those revenue hits along with the ones that increase your revenue; the system is there for everybody and the rules, the system is capable of absorbing that kind of change in revenue. 800 MR. PATTANI: Yes. And all the scenarios that you have just described, if I were to consider them, lump them into so-called bona fide or genuine demand variations, I agree, that's part of our business. 801 MR. MORAN: Then what it really comes down to as I think we've said and you said earlier is this an embedded generator, the WCP facility; right? That's what it really comes down to. 802 MR. PATTANI: Is this an embedded generator in accordance with the transmission rate order. 803 MR. MORAN: All right. And the logic behind it as is set out in the decision; right? 804 MR. PATTANI: Sorry? 805 MR. MORAN: And the logic behind it, as it's set out in the decision, the various Board findings. 806 MR. PATTANI: The logic as it was taken into account in preparing the transmission rate order. 807 MR. MORAN: Dr. Poray, just one last question for you. I want to take you back to the scenario, Exhibit -- that's Exhibit 1.7, the last scenario I want to explore with you on the last variation of scenario C in figure 1 that I want to explore with you is this. 808 Load 2 owns generator B; right? In the scenario. And generator B is not owned -- I'm sorry. Load 2 does not own generator B but generator B is hooked up at low voltage. So generator B is a separate company from load 2 but generator B delivers its output to load 2 at low voltage. 809 Would you consider that to be an embedded generator? 810 MR. PORAY: Yes, I would. 811 MR. MORAN: All right. So where that takes us then is that ownership isn't really the issue. It's not really whether the generator is owned by different entities. It's really a question of the physical arrangement, and in your view, the physical arrangement has to include a low-voltage connection. 812 MR. PORAY: That is correct. 813 MR. MORAN: And if load -- sorry, if generator B was a market participant and had bilateral agreements with other parties for its output, would you consider it to be embedded at that point? 814 MR. PORAY: Yes, I would. 815 MR. MORAN: So the financial arrangement isn't really an issue either, it's really the physical arrangement. 816 MR. PORAY: That's correct. 817 MR. MORAN: Mr. Pattani, you expressed a concern about gaming opportunities and I want to understand what that concern is about. 818 First of all, when we look at a co-generation plant like WCP, how many examples of that kind of co-generation approximately do we have in Ontario? 819 MR. PATTANI: Well, I've not made an assessment of that, unfortunately, but I would say in the ballpark right now there may be anywhere between four and 10 co-generation facilities. 820 MR. MORAN: Okay. 821 MR. PATTANI: I'm talking -- there what you're now referring to is just co-generation? If you allow me to further go into the gaming I'll go later. 822 MR. MORAN: My first question is how many co-generation plants approximately are we dealing with in Ontario. 823 MR. PATTANI: Today, currently? Again, I have not made an assessment. 824 MR. MORAN: But it's less than 10; right? 825 MR. PATTANI: Likely. 826 MR. MORAN: And out of that group of co-generation plants which of course would include WCP, how many of those are connected at high voltage, do you know? 827 MR. PATTANI: I know how many are connected to the high voltage in terms of this, but I would not be able to know exactly how many are co-generation, but I guess, again, it may be up to the order of two to four, perhaps. 828 MR. MORAN: All right. And out of the total, how many of the co-generation plants are actually owned by the load that they're located with for steam sales? 829 MR. PATTANI: Again, I would not be able to estimate an absolute amount, but I know of two that are not owned by the load customer. 830 MR. MORAN: All right. And of the two that are not owned by the load customer, how many would that -- would one of those be Abitibi, the WCP facility? 831 MR. PATTANI: Actually I would say three. Three that are not owned by the load customer. 832 MR. MORAN: So WCP is one of them, and what are the other two? 833 MR. PATTANI: I wonder if I should be naming them. 834 MS. ALDRED: I'm not sure we can reveal customer information. I think we're not allowed to unless we're directed to by the Board. 835 MR. MORAN: The names of the companies are a matter of public record. I'm not asking you for any confidential information, Mr. Pattani. 836 MR. PATTANI: I'd like to get permission from my counsel. 837 MS. ALDRED: If you don't mind I would like some direction from the Board on that. 838 MR. MORAN: Mr. Chair, all I'm asking is what other generators are out there. All generators in Ontario have to have a licence and those licences are public documents and they're named by their name, and any company who wants to operate in Canada, including Ontario, has to register its existence with regulators. So the names, clearly, are not confidential matters. 839 I'm just asking how many of the co-generators that he's talking about, who are they and that's public information. 840 MR. BETTS: Ms. Aldred, any further submission? 841 MS. ALDRED: I guess if that's all he's asking, if he's going to get into billing information or things that are confidential, then that was my concern. 842 MR. MORAN: I think Ms. Aldred has misanticipated where I'm going with this line of questioning. 843 [The Board confers] 844 MR. MORAN: Maybe I can help you. Celanese is a co-generation plant, right, that isn't owned by the load that it serves. 845 MR. PORAY: Frankly -- is there a different name for Celanese? Because if there isn't, then I was not even aware of it. 846 MR. MORAN: TransAlta is an example, isn't it? 847 MR. PATTANI: Yes. 848 MR. MORAN: Casco is an example. 849 MR. PATTANI: Not Casco. 850 MR. MORAN: Cardinal Power, in relation to Casco. 851 MR. PATTANI: Yes. 852 MR. MORAN: So when you said that you were concerned about other generators rewiring or reconnecting, what generators were you talking about, other than those four that already are wired the way they are? 853 MR. PATTANI: Okay. When I was talking about reconnecting, number one, it may be co-generation but it doesn't need to be co-generation. In fact, reconnection can happen with any generation. It doesn't need to be co-generation. It can happen with existing generation, for example, that's owned by a large generating company. 854 And when I say reconnection, if you don't mind, can I go back to the figure that we were just looking at? This is Exhibit 1.7. And figure 1.C, that's the context in which we are talking about gaming and so on. 855 The generator B here need not be co-generation and it need not be any particular type of generation. You can have one of the large generators that's owned by a large generator company to be reconnected near an industrial site to feed the industry directly. That's a type of gaming. 856 The other type of gaming is when someone installs a new generator and even though it's meant to be participating in the market in order to enhance energy efficiency and so on, it goes out of its way to install it in such a way that a situation as represented in 1.C takes place and thereby it benefits one load customer, a third-party generator benefits one load customer at the expense of other transmission customers who now have to bear a larger burden for the transmission costs. 857 Once again, this gaming could be not just with co-generation, it can be with any generation and it can be with existing generation or a new generation. 858 MR. MORAN: So what you're concerned about is the possibility that a generator whose currently participating in the IMO marketplace and entering into bilaterals and bidding into the spot market, might decide to give all that up, take down its transmission connection and rebuild a connection with a load and service only that load? 859 MR. PATTANI: Yes. In the concern that I'm expressing, the first part of your question is not very relevant although that can happen too. But the second part, which is where a generator, and again this is one aspect of gaming I'm looking at, a generator that is currently connected to the transmission system makes a commercially-based decision to disconnect himself from that point on the transmission system and connect himself to another point in the transmission system to supply a load customer directly as indicated by this, right inside of figure 1(c). 860 MR. MORAN: So that generator would have to decide, essentially, to exit the market and decommission its facilities and then duplicate those facilities in order to change its connection? 861 MR. PATTANI: I'll let Jim Patterson take this question, but before I do that, I'm not concerned as much about that generator no longer participating in the market or not. In practice, that generator could connect itself to the non-licensed transmission and still participate in the market. 862 So when I'm talking about the gaming, I'm talking in the context of reconnecting on to a non-licensed transmission and still it would have the option of either participating in the IMO market or not participating in the IMO market. 863 Sorry, I would like Jim Patterson -- 864 MR. PATTERSON: I was basically going to make that same point, that whether they participate or not in the IMO-commodity market does not have a bearing on how the transmission tariffs are calculated. 865 MR. MORAN: Right. But somebody would have to build new connection assets and that would have to be economic for that scenario to even become feasible; right? 866 MR. PATTERSON: You could create an economic situation where a person could build miles of line to connect into another customer's point to be able to avoid transmission tariffs and that might be justified just to gain system and avoid transmission charges. 867 MR. MORAN: Right. If somebody was going to build miles of line to do that they would have to come to the Board and get an approval and leave to construct; right? 868 MR. PATTANI: Yes, and two aspects here. One, and the most important one is if it's not the miles, but rather it's less than a two-kilometre line or just an interconnection right next-door, then they don't have to come to the Board under section 92, leave to construct. 869 MR. MORAN: All right. So in terms of existing generators that you say might take advantage of this, I mean, I assume we could rule out OPG's large stations; right? Darlington is not likely to reconfigure for a 10-megawatt load in order to help a load customer when it's directly connected for 3,000 megawatt station; right? 870 MR. PATTANI: Let me answer that in two parts. One is that you are taking the example of Darlington, but there are some other stations which are very near industrial plants that can do it, the whole unit. 871 But even in terms of the Darlington plant, there is nothing that would prevent Darlington plant to feed off a part of that generation. It doesn't need to feed off the whole unit in a situation like the load. It can feed a part of its own generation into the transmission system that's non-licensed and then, according to the scenario you are putting, that customer will no longer pay the transmission charges. 872 In short, it doesn't have to be a whole unit. It can be part of a station that feeds into the non-licensed transmission in the gaming opportunities. 873 I must say one thing, too. The market after it opened as we can see with all the proceedings that are going on and all the things that are going on, the creativity and the ingenuity of the market is unlimited, frankly speaking, and all wsorts of imaginations are being put forward. 874 MR. MORAN: So if I understand what you're saying then, what you're really concerned about is not so much somebody gaming the system to become an embedded generator, but rather somebody bypassing the Hydro One assets and stranding them. That's the real concern, isn't it? This is a bypass issue? 875 MR. PATTANI: It's more than the bypass, frankly. Yesterday Mr. Snelson, in cross-examination on this, he mentioned the grey areas and all that, and in my mind, while transmission bypass that affects other transmission customers and other transmitters is an important issue, the important issue also is that the Board needs to regulate the business of transmission in the province, the Board needs to administer regulation and the transmitters need to conduct their businesses appropriately. 876 And if we have grey area in the transmission business, it's going to be difficult for the Board to regulate and for the transmitters to carry out their business. 877 So my concern is both. In fact, there are probably other concerns, but the most important one is the grey area of regulating without -- or a grey area of not having a regulation or not having an oversight over the non-licensed transmission which can be a problem for transmitters. 878 MR. MORAN: So what you're concerned about, though, at the heart of all of this is that Hydro One assets might be bypassed; right? Or stranded? 879 MR. PATTANI: Hydro One assets might be bypassed. The transmission customers may be affected. There may be uneconomic investments both in generation and transmission as a result of bypass, and our role, it would affect the province as a whole because the consequences of this can go into secondary consequences, too. 880 MR. MORAN: And Hydro One's concerned about assets by passed or stranded is that they still have to be paid for and they get paid for out of the pool of customers who are still paying transmission rates; right? That's what it comes down to for Hydro One? 881 MR. PATTANI: Yes, that is true. But I wouldn't put it as a Hydro One concern. I believe it's a provincial concern to make sure that the transmission facilities that exist are not by-passed and they are not left stranded. This includes the network and the connection by the way. 882 MR. MORAN: But if we were to focus on Hydro One's concern, Hydro One's concern would be that its assets are being stranded and it's going to affect its revenue requirement and there's fewer customers who will be available to pay for those assets and rates go up. That's Hydro One's issue; right? 883 MR. PATTANI: It's one of the issues, yes. 884 MR. MORAN: And in the transmission code review that's underway, another proceeding, bypass and when that's appropriate and when it's not is squarely raised before the Board; right? 885 MR. PATTANI: Yes, it is. But what has, I believe, not been identified clearly in that is the matter of non-licensed transmission and whether or not such a situation like 1(c) would be considered. 886 MR. MORAN: We know that's been raised because we've seen in this case, in this hearing, a reference to a submission from IMO on that very issue. 887 MR. PATTANI: Yes. 888 MR. MORAN: Right. 889 MR. PATTANI: That submission was more in terms of IMO's accountabilities with respect to making sure that the system is operated in a reliable manner and so on. 890 And in the context of IMO's concern from that, yes, it has been raised. 891 MR. MORAN: Right. 892 MR. PATTANI: However, there have also been submissions that the way the transmission system code is going up to now, the issue of the transmission licence and non-licensed transmission has not been addressed and maybe that's not the forum this can be addressed effectively. 893 MR. MORAN: Hydro One is a party in that proceeding; right? 894 MR. PATTANI: Yes, it is. 895 MR. MORAN: And to the extent that Hydro One is concerned that an existing generator might reconfigure the wires in order to become an embedded generator and to the extent that that's a concern to Hydro One, Hydro One obviously can raise that as part of its participation in that proceeding, and in fact, has already raised it. Right? 896 MR. PATTANI: Yes, we have. But we have also indicated that the way the proceeding has gone until now, the issue of the licence and the transmission licence -- sorry, licensed and the non-licensed transmitters has not been dealt effectively during the stakeholdering and, therefore, that is a separate issue. 897 I agree that the issue of generators has been discussed, but the issue of the licensed and non-licensed transmission has not been discussed to the extent that it needs to be discussed. 898 MR. MORAN: Well, that proceeding isn't over yet though, is it; right? 899 MR. PATTANI: It probably remains to be seen whether this is the right process for it. 900 MR. MORAN: Thank you very much. 901 Those are all my questions, Mr. Chair. 902 MR. BETTS: Thank you, Mr. Moran. 903 I believe we have still two parties that wish to question this panel and I'm going to ask those two parties to try to indicate for me how long they might need for their questions. 904 MR. SIDLOFSKY: Sir, I can be three-quarters of an hour to an hour. 905 MR. BETTS: Okay. Mr. King? 906 MR. KING: I expect I'll only be 10 to 15 minutes. 907 MR. BETTS: Okay. Well, clearly we will not be able to conclude cross-examination and re-examination before lunch break, so it looks like this is probably an appropriate time to break for lunch and we will come back with the final round of questioning of this panel. Things are taking a little longer than anticipated so everybody perhaps might talk about how the schedule might work out for the rest of the day during that break. 908 I think we will allow at least an hour and 10 minutes to keep it to an even point which will bring us to 1:45 reconvening, so we will recess now until 1:45. 909 --- Luncheon recess at 12:35 p.m. 910 --- On resuming at 1:45 p.m. 911 MR. BETTS: Welcome back. 912 We are at the stage of questioning by two more parties in this hearing. Before we go into that, are there any preliminary matters? Has there been any order established or is there any order suggested in terms of questioning? Mr. Sidlofsky, would you prefer to go first or last? 913 MR. SIDLOFSKY: Sir, I'll go after Mr. King. 914 MR. BETTS: Okay. Mr. King, are you ready? 915 MR. KING: I am. 916 MR. BETTS: Please proceed. 917 CROSS-EXAMINATION BY MR. KING: 918 MR. KING: My questions are for Dr. Poray. Mr. Moran took you through parts of the Board's decision in RP-1999-0044 this morning and you agreed with him the issue of how imbedded generation should be treated from a rate perspective was settled, in that Board decision; correct? 919 MR. PORAY: That's correct. 920 MR. KING: So what's left for us to determine in cases like this one is whether something is embedded generation or not; correct? 921 MR. PORAY: That's correct. 922 MR. KING: And I think you'll agree with me that there's very little in the evidentiary record in the RP-1999-0044 proceeding that dealt with how we ought to define embedded generation; correct? 923 MR. PORAY: I believe that there is sufficient clarity in terms of the record in RP-1999-0044 in terms of as to what is embedded generation. 924 MR. KING: Can you point me to those parts of the proceeding? 925 MR. PORAY: I'm just trying to get that. Okay. It is at section 3.2.1 under the title of "Net Versus Gross Load Billing" in terms of the definition of the embedded generation. It's on page 25 of the decision. 926 MR. KING: I agree; that's where the question of what embedded generation is in the decision. My question was whether you think there was a fulsome discussion of what constituted embedded generation during the course of the 44 proceeding. 927 MR. PORAY: I believe that there was. 928 MR. KING: Maybe you could outline what the positions of the various parties were with respect to how you define embedded generation at that proceeding. 929 MR. PORAY: I'll let Mr. Pattani address that. 930 MR. PATTANI: I'd like to refer to first of all the rate filing evidence itself that we had prepared, and this was in Exhibit -- Exhibit -- okay ... 931 There are two places where we began with the definition of embedded generator. One is during the workshops that took place during the summer of 1999 when I believe there were many stakeholders who participated in a small working group. There were 15 members, I can see here there are two of them sitting here, and we discussed embedded generation in significant detail. And in all of those discussions, we said that embedded generation is the generation that's not connected to transmission system. 932 After those stakeholders were finished, we prepared the pre-filed version of our evidence and this was submitted under what we call now the Transmission 2000 Submission. In that submission, for example in the glossary, we have a definition of embedded generator which is exactly as we have in the rate order now, for example. And then as part of the discussions I believe Abitibi has sent in the evidence from Exhibit D, tab 5. There, too, there is a definition of embedded generation and much discussion about it. 933 All of these then came into the hearing and the hearing itself lasted for about I believe three weeks, of which more than half the time was spent on discussions to do with the network billing and the gross load billing. 934 So once again, there was a fulsome discussion of the issue and I believe the discussion of the definition as it was used for the filing by Hydro One. Then we ended up with the transmission rate schedule which was prepared as a result of the decision. 935 So all in all, it was a very exhaustive stakeholder process, and to our mind, the definition was discussed to the same detail as the issue of the network billing and the gross load billing. After all, the definition was part and parcel of the network billing issue. 936 MR. KING: So in your mind, there was as fulsome a discussion about the definition of embedded generation as there was about how to treat the embedded generation in terms of the net versus gross load billing debate? 937 MR. PATTANI: Yes, sir, I would say in our mind that's true. 938 MR. KING: And then you, Dr. Poray, would say that the outcome of that fulsome discussion is captured in section 3.2.1 of the Board decision; is that correct? 939 MR. PORAY: That's correct. 940 MR. KING: And that 3.2.1 looks like an introductory paragraph. It doesn't appear to be under the heading "Board findings" anywhere in the decision; is that right? 941 MR. PORAY: Let me just refer to it. It's at the beginning of the discussion of net versus gross load billing. 942 MR. KING: And the Board findings on that issue are immediately preceding section 3.2.15; correct? 943 MR. PORAY: That's correct. 944 MR. KING: Given that you feel that section 3.2.1 is essentially a definitive finding by the Board, that the definition of embedded generation is a settled question, it's my impression, then, that you believe determining whether something is embedded generation or not is a fairly sort of cut-and-dry, technical determination; correct? 945 MR. PORAY: I believe we have the information in the Board decision that enables us to define embedded generation for the purpose of transmission charges. 946 MR. KING: And that determination is basically a technical one, which is why when Mr. Moran was putting hypotheticals to you or even, for example, to use the Abitibi example of the hydraulic generation, what we boiled it all down to was whether something was connected at transmission voltage or distribution voltage. That's the sort of outcome of the very strict technical interpretation of section 3.2.1, correct? 947 MR. PORAY: That outcome is based on the discussion and the deliberations that went on as part of the net versus gross stakeholder consultation that was carried out. 948 MR. KING: But that is always the end point, correct? I mean, that is the sole determining criteria in defining embedded generation? 949 MR. PORAY: As stated in the Board decision with reasons, that is the definition for embedded generation. 950 MR. KING: Do you think that interpretation of embedded generation results in just and reasonable transmission rates? 951 MR. PORAY: I believe that is the case since those rates are now in place. 952 MR. KING: If that is your view of section 3.2.1, why in your evidence do you deal with a host of other factors, such as the fact that Abitibi or Westcoast sells its power in the IMO- controlled grid? And you also dealt extensively with the contractual issues, why is that important at all if embedded generation, the sole determining criteria is the voltage? 953 MR. PORAY: Okay, Mr. Pattani will address that. 954 MR. PATTANI: The reason it has been discussed, the two other factors that you mentioned, among others that we have included in the submission is, number one, the Board needs to be informed about the term, definition of a transmission customer. That is to say, that irrespective of the fact that this generation is connected to the transmission system or whether or not some would have an opinion this is an embedded generator, there is also another issue, and that is they are two distinct transmission connected -- to customers connected to the transmission system. 955 We believe it is important to inform the Board about this matter. We also believe it's possible for the Board to understand the genesis of this generation and to understand that this generation was put in as a NUG outside, it was an agreement between Hydro One -- sorry, Ontario Hydro and the generator, and now, between OEFC and Westcoast Power. 956 It's a matter of giving the Board all the information so that they can form a judgment whether or not we have complied with the transmission rate order. 957 MR. KING: I guess my point is, why would the Board need all that information? If your interpretation of section 3.2.1 is correct, they don't need to know anything else other than Westcoast is connected to that transmission voltage. 958 MR. PORAY: I think, in all fairness, to try and establish that Westcoast is not an embedded generator, we had to address all of the issues that were, in fact, raised by Westcoast in their original evidence. 959 MR. KING: So it was in the nature of a reply then? 960 MR. PORAY: It was in the nature of explaining the situation in terms of Hydro One's defense of its compliance with the transmission rate order and its licence. 961 MR. KING: Okay. But the fact that there is a nexus between Abitibi and Westcoast through steam arrangement, through a contract whereby Abitibi agrees to eventually own the facility, that's really by the way. It doesn't really matter much, does it? 962 MR. PORAY: It's got nothing to do with the matter before the Board, which is Hydro One's compliance within its licence and the application of the approved transmission rate schedules. 963 MR. KING: Mr. Pattani, towards the end of Mr. Moran's cross-examination we talked about transmission bypass, and Hydro One's concerns about transmission bypass. And Mr. Moran put to you that your concerns about bypass or the company's concerns about bypass were being dealt with in the transmission system code hearing, correct? 964 MR. PATTANI: Let me first answer that by putting this into perspective. The matter before the Board here is not bypass or not bypass or whether we are concerned about the bypass. The matter before the Board is our compliance with the transmission rate order. 965 Beyond that, Mr. Moran asked me if we were concerned about transmission bypass and other issues, and I responded that, yes, we are concerned about transmission bypass, as we are concerned about the fact that other transmission customers could be affected as a result of a decision that arises out of here. 966 So, in general, I would say that's the second order of concern of ours. 967 MR. KING: But determinations that the Board may make in this proceeding regarding how to define transmission customer, where you demarcate the delivery point, how you define embedded generation, that is a concern for Hydro One and that concern stems from lost revenue, correct? 968 MR. PATTANI: I guess I'd like to make one thing clear. Our primary concern is rightful, correct application of the transmission rate order objectively, without any sort of subjective decisions by anybody, whether be it Hydro One or the transmission customers. That is our primary concern. 969 If it so happens that as a result of this discussion there will be less bypass, that is of some importance to Hydro, yes. 970 MR. KING: And you're aware that any, quote unquote, transmission bypass over two kilometres, for an entity to do that they'd have to come to the Board for a leave to construct? 971 MR. PATTANI: Once again, I believe this is not pertinent for the proceeding today, but I agree that any transmission connection, new transmission connection that requires construction of a line more than two kilometres doesn't need -- sorry, it needs a leave to construct. 972 On the other hand, anything lower than two kilometres does not need leave to construct, and the other pertinent point, too, is that we're not sure how you tackle the issue of someone coming here for leave to construct more than two kilometre of a non-licensed transmission. 973 Are we certain that the Board will look at these issues at that time on a leave to construct facilities? We're not too sure about that too. 974 Everything here points to a fact that we need to be objective about it and the best objectiveness is through the proper application of the transmission rate order. 975 MR. KING: Your concerns about whether the Board would consider bypass wouldn't preclude you from raising them before the Board, would they? You would raise bypass if someone came with essentially a transmission bypass case, a leave to construct application? 976 MR. PATTANI: We would, because it could affect transmission customers, yes. 977 MR. KING: And you mentioned bypass under two kilometres. For that type of bypass there would still be a public process. There would be an application for a transmitter licence, correct? 978 MR. PATTANI: Well, if as Mr. Snelson pointed out there is a non-licensed transmission, then there may not be a process with respect to application for a licence. 979 MR. KING: But any bypass would involve serving a customer, and once you serve a customer you're no longer eligible for the regulatory exemption from getting a transmission licence. 980 MR. PATTANI: Yes, but there could be a way for a customer to build a non-license transmission allowing that customer to connect to a generator, then it's not clear why they would want -- they would be obliged to get a licence. We are not sure of that. Much like the case that's happening right now in two of the cases, or three. 981 MR. KING: The one exception would be that it would have to be -- well, you know what? I think I'll leave it at that. 982 Thank you. I have no further questions. 983 MR. PATTANI: Thank you. I would like to make one clarification, too. In terms of our understanding of the definition of embedded generation, Mr. King referred to the fact that we are now interpreting this embedded generation definition as it is. 984 To be certain, the rates that are applicable now were finally calculated in their final form after the Board decision was prepared. And when we calculated those rates, we assumed that the definition as it applies is the one that will be in effect, and therefore, we assumed that the Abitibi load would be paying transmission charges, as would the other two issues. 985 Therefore, we calculated the rates on the basis of all of this demand included in the denominator where we calculated the rates. 986 I'm just trying to say this because it's not as if we had sort of changed the definition after the fact. We used the definition as it existed in the decision in order to calculate the rates. 987 MR. BETTS: Mr. Sidlofsky? 988 MR. SIDLOFSKY: Thank you, sir. 989 MR. BETTS: Are you prepared to begin your questions? 990 MR. SIDLOFSKY: Sir, I had what I thought was going to be a fairly lengthy cross-examination, I think I mentioned before the break, three-quarters of an hour to an hour. Thanks in large part to Mr. Moran's work, that's been significantly reduced and the other reason I think it's been reduced is that there seem to be some issues that may be off the table here. 991 CROSS-EXAMINATION BY MR. SIDLOFSKY: 992 MR. SIDLOFSKY: I'm a little confused. Perhaps I could take this up with Mr. Poray or Mr. Pattani. When I originally reviewed your witness statement, Hydro One Networks takes a number of positions here, and there seem to be a number of ways in which Hydro One says that Abitibi is ineligible for net load billing; is that correct? Dr. Poray? 993 MR. PORAY: I think basically our focus is that it's not eligible for net load billing because the generator is not an embedded generator. 994 MR. SIDLOFSKY: And it's not an embedded generator because the transmission voltage -- excuse me, because the voltage isn't distribution voltage. 995 MR. PORAY: That's correct, because the generator is connected to the transmission voltage through its own delivery point. 996 MR. SIDLOFSKY: And it's connected at the transmission voltage through its own delivery point because the Abitibi transmission system is a regulated transmission system. 997 MR. PORAY: Irrespective; it's connected to the transmission system through a separate delivery point. 998 MR. SIDLOFSKY: So the issue of whether you have a regulated transmission system or a non-regulated transmission system isn't really an issue for you; is that right? 999 MR. PORAY: No, it's part of the issue as well, one of the elements, because in our opinion, all systems are, in fact, regulated. 1000 MR. SIDLOFSKY: If for no other reason there are regulations saying they are not regulated? 1001 MR. PORAY: They're only exempted from certain parts of the electricity and OEB acts and therefore the other, the remaining parts of the acts must still apply. 1002 MR. SIDLOFSKY: They're not required to provide open access, are they? 1003 MR. PORAY: I believe that they are exempted from section 26 of the electricity act. 1004 MR. SIDLOFSKY: That would mean they're not required to provide standard supply service. They're not required to connect a customer, another load, to their system; is that right? 1005 MR. PATTANI: I believe those are some of the sections that they are not required to adhere to and there's no question that there are certain sections in the electricity act with respect to which the non-licensed transmitters may be exempted from. 1006 MR. SIDLOFSKY: And Mr. Moran took you through a fairly lengthy list of requirements, regulatory requirements that a non-licensed or, excuse me, an exempt transmitter is not required to comply with. Rate regulation is one of those; correct? 1007 MR. PORAY: That's correct. 1008 MR. SIDLOFSKY: The transmitter does not have to obtain a rate order. 1009 MR. PORAY: That's correct. 1010 MR. SIDLOFSKY: The transmitter does not have to obtain a licence. 1011 MR. PORAY: That's correct. 1012 MR. SIDLOFSKY: The corollary to that is that the transmitter wouldn't have to comply with any licence requirements that would otherwise apply if it were licensed; correct? Any licence conditions, excuse me. 1013 MR. PORAY: That's my understanding. 1014 MR. SIDLOFSKY: No licence; no conditions apply. One of those conditions is compliance with the transmission system code and Mr. Moran took you through that, and the answer, I believe, was that the transmission system code wouldn't apply. 1015 MR. PORAY: As it currently stands, no. 1016 MR. SIDLOFSKY: Okay. And I'll get back to that in a moment, but I'm still interested in your written evidence. At page 1 of tab 1, Schedule 2 of your witness statement, that's your overview section. 1017 MR. PORAY: Okay. 1018 MR. SIDLOFSKY: And under item 1 you provide the Hydro One Networks position on the Abitibi-Consolidated -- actually it's a summary of your position. Item 2 is a slightly more direct response to Abitibi's application; is that correct? 1019 MR. PORAY: That's correct. 1020 MR. SIDLOFSKY: And what we seem to start off with under item 1 is the contractual arrangement where Abitibi purchases its power from the IMO-administered market and Westcoast is bound to sell its power to the IMO for the administered market; is that correct? 1021 MR. PORAY: That's correct. 1022 MR. SIDLOFSKY: And your conclusion on that item is because of that, since Abitibi buys its electrical requirements from the IMO-administered market, it's required to pay its transmission charges for network and line connections. That's in the second paragraph of your overview. 1023 MR. PORAY: Excuse me. Let me just read that. 1024 MR. SIDLOFSKY: Certainly. 1025 MR. PORAY: Yes, that's what it states. 1026 MR. SIDLOFSKY: But that's not the issue anymore, I think, is it, because you told Mr. Moran that the contractual provisions don't apply. Excuse me, I think Mr. Pattani might have told Mr. Moran that the contractual provisions aren't in issue now. 1027 MR. PATTANI: I'm not sure if I said it but I would agree that the contractual provisions per se do not apply. 1028 However, the fact that the entities are connected to transmission system and it's because they are connected to the transmission system, because of which they can execute those contractual arrangements, in that respect, it is -- it informs the Board that these entities are using the transmission system, they're connected directly to the transmission system in order to access the market. And in that respect, it's of some importance, we believe. 1029 MR. SIDLOFSKY: Well, sorry. Is what's of importance the connection to the transmission system, the physical connection to the transmission system, or the fact that Abitibi buys its power from the IMO-administered market? 1030 MR. PATTANI: For the purpose of transmission rates, it's the physical connection to the transmission system that is the most important element. 1031 MR. SIDLOFSKY: So we can leave aside the contractual issue because that's not your position anymore; is that right? 1032 MR. PATTANI: Once again, it's not a question of position. The section that you are mentioning was meant to inform the Board that Abitibi and Westcoast are connected to transmission system and they use the transmission system in order to execute the contracts. 1033 MR. SIDLOFSKY: Sorry, I'm just trying to understand what your evidence is. It's not clear to me your evidence is the same this morning is the same as the evidence you filed in February. 1034 The evidence this morning seems to be contractual relationship doesn't matter because it doesn't matter what kind of contract you enter into for power; is that correct? 1035 MR. PATTERSON: For the commodity purchase, it doesn't matter. You could be an embedded customer or connected to the transmission system or not connected at all and you can buy and sell commodity. The flow, or transactions for commodity do not have an impact on the transmission tariff calculation. 1036 MR. SIDLOFSKY: Okay. 1037 MR. PATTERSON: But the fact, I think what we were trying to demonstrate here - was that the overview section? - that was an overview section of the evidence which was really just trying to point out that, I think, Westcoast and Abitibi make use of the transmission system. 1038 MR. SIDLOFSKY: Sorry, it reads to me like a statement and a conclusion, but that's okay. I'll move on from that. 1039 As I said, my understanding from your responses to Mr. Moran were that the sole issue here appears to be the connection of the Westcoast facility to transmission voltage; is that right? 1040 MR. PORAY: The issue here is whether Westcoast is an embedded generator or not. 1041 MR. SIDLOFSKY: And in your view, Westcoast is not an embedded generator because it's connected to the transmission voltage. 1042 MR. PORAY: That's correct, and it's connected through its own delivery point. 1043 MR. SIDLOFSKY: And, sorry, the drawing that's up there that's on the easel is the metering points, but there are in Exhibit 2.2 six delivery points -- excuse me, there are two delivery points; is that right, between Abitibi and Westcoast? 1044 Sorry, Exhibit 2.2, the ownership and delivery point sketch. 1045 MR. PORAY: Let me get that out. 1046 MR. SIDLOFSKY: Certainly. 1047 MR. PORAY: Yes, there are two delivery points. That is correct. 1048 MR. SIDLOFSKY: So there is the Abitibi delivery point that's delivery point 1 and that comprises four transformers; is that right. 1049 MR. PORAY: That's correct. 1050 MR. SIDLOFSKY: And the Westcoast delivery point, delivery point 2, comprises two transformers? 1051 MR. PORAY: That is correct. 1052 MR. SIDLOFSKY: And you were asked by Mr. Moran how things would change in 2008 if Abitibi were to acquire the Westcoast generation facility. I believe your answer was that nothing would change because the generation is still connected to the transmission voltage, to the Abitibi system. 1053 MR. PORAY: That's correct. 1054 MR. SIDLOFSKY: Dr. Poray, I'm going to ask you to pull out Hydro One's responses to the Abitibi interrogatories. I believe you have those. And while you're at it, I'll ask you to take out Hydro One's responses to the Casco interrogatories. 1055 Now, perhaps we could start -- sorry. 1056 MR. PORAY: Hang on a second. I'm not there yet. All right. I think we're in business. 1057 MR. SIDLOFSKY: Okay. Now, in Interrogatory No. 6 -- 1058 MR. PORAY: Which one, Abitibi or Casco? 1059 MR. SIDLOFSKY: Sorry, we'll start with Abitibi. Interrogatory No. 6, I think that would be page 7 of your response, at least on the copy I have. 1060 MR. PORAY: Yes, I do. 1061 MR. SIDLOFSKY: You were asked at that point, or Hydro One was asked, whether or not net-load billing is being applied in other situations that have similarities to the Abitibi situation at the Fort Frances complex. You were asked how many situations there are with these certain characteristics, and in each category you were asked whether some, all or none of the customers were receiving net-load billing and the rationale for the treatment or the variation in treatment. 1062 Now, the first item in that interrogatory, the first scenario in that interrogatory is an industrial customer that owns transmission and has generation connected to its transmission system. That's item 1. 1063 Your response to that was that there is at least one situation where an industrial customer that owns transmission facilities has generation owned by that same customer connected to the transmission system at that site. 1064 You went on -- excuse me, the response goes on to say: 1065 "In accordance with the current Ontario transmission rate schedules, the load and generation for that customer are aggregated for the purpose of assessing transmission charges and that customer is treated as a single transmission customer at that site." 1066 That was your response. 1067 MR. PORAY: That is correct. 1068 MR. SIDLOFSKY: Can you tell me what situation that is? 1069 MR. PORAY: Are you asking me to name the customer? 1070 MR. SIDLOFSKY: That would be helpful. Yes. 1071 MS. ALDRED: I think you can, as long as you don't reveal the billing information. 1072 MR. PORAY: The particular customer in this case is Inco. 1073 MR. SIDLOFSKY: Okay. Now, given your evidence this morning, sir, in Abitibi's case, if Abitibi were to own the Westcoast facility, in this morning's example it was in 2008, maybe you can tell me if there would be any difference if it owned the Westcoast facility now, but your evidence was that you would not aggregate the load and the generation to come up with net-load billing; is that right? 1074 MR. PORAY: That's correct. 1075 MR. SIDLOFSKY: And yet, you're doing that exactly right for Abitibi -- excuse me, for Inco; is that correct? 1076 MR. PORAY: That's correct. And the reason why we are doing it for Inco is because of historical decisions which Inco made to build its own generation to displace some of the demand that it takes from the power pool at that time, which was administered by the Ontario Hydro, it made an economic decision that obviously pointed to the fact that putting in some of its own generation would benefit it and that particular customer to do so. 1077 So that was a load displacement generation which Inco built. It belongs to them, and it was for the purpose of displacing some of their load. 1078 MR. SIDLOFSKY: So, first of all, Inco owns that generation? 1079 MR. PORAY: That is correct. 1080 MR. SIDLOFSKY: And Inco decided to build that generation on its own to displace load? 1081 MR. PORAY: That is my understanding. 1082 MR. SIDLOFSKY: But you indicated earlier that ownership isn't the issue here. Ownership is the connection to the transmission system? 1083 MR. PORAY: That's correct. I would like to elaborate on that. In the case of Westcoast and Abitibi, Abitibi does not own the Westcoast generator at this point in time, and the decision to put the Westcoast generator on the Abitibi site was made specifically not for load displacement, but that generator was built to supply power to the Ontario Hydro power pool. 1084 Mr. Pattani will add something. 1085 MR. PATTANI: I would like to add something here in relation to Inco. Obviously, the Inco situation is different than what we are currently looking at in this proceeding, in that Inco owns the load and the generation. 1086 But leaving that aside, in our rate filing for the RP-1999-0044, and I know that we haven't distributed the papers because I did not expect this question, but specifically on page 8 of Exhibit A, tab 2, schedule 1 of that rate filing, in our recommendations we did say that customers who have installed self-generation prior to the rate filing, that is, prior to October 1998, customers who installed self-generation and therefore do not pay transmission charges under the Ontario Hydro tariff, for them we shall not introduce new transmission charges. And that was indicated in our rate filing. 1087 Needless to say, that in itself was not an issue during the hearing for the RP-1999-0044. But as a result of that, and the historical context that Inco had this self-generation within their property for a long time under Ontario Hydro's scheme, having told the Board about the recommendation, we continued to treat Inco in the same manner for the purpose of the rate structure. And that is the reason why we sort of allowed the aggregation in that particular situation. Once again, which is a bit different from the relationship between Westcoast and Abitibi. 1088 Abitibi did not install it before 1998, and it was not considered to be self-generation for them, while for Inco, the generation in the transmission system was considered self-transmission during Ontario Hydro days. 1089 MR. SIDLOFSKY: So, it appears that one of the distinctions you're drawing between Inco and Abitibi is that in Inco's case there's been a historical circumstance whereby Inco enjoys load net billing; is that right? 1090 MR. PATTANI: I personally -- not personally, but for the purpose of this application, I believe we should not use the term net-load billing for Inco. The term net-load billing goes hand-in-hand with the definition of embedded generation. 1091 In the context of Inco, the generation is not embedded generation. What we are doing here is we are aggregating the demand of Inco and the generation for Inco which are located within their own site, the self-generation that they provided and we are aggregating that. 1092 The end result is the same, it is net load billing, but within the context of transmission tariff application, we have been using the term "net load billing" to go hand in hand with embedded generation. In this case, the load and generator and Inco are connected to transmission voltages and we are aggregating them the same way as Ontario Hydro was aggregating them so as not to penalize them compared to the historical treatment. 1093 MR. SIDLOFSKY: So, sorry, it sounds like it's net load billing but it's not really net load billing. The effect is not load billing; is that it? 1094 MR. PATTANI: The effect is net load billing but for the purpose of rate application we don't call it network billing. (sic) 1095 MR. PORAY: I think to add to that is when the Board was dealing with the issue of net load billing in connection with the rate calculations under RP-1999-0044, it was looking at the generation which was connected within the LDCs' territory at the distribution and generation that was connected with the customer's load at a delivery point. So it would be either load-displacement generation or a NUG that was connected in the load of the vicinity of the load customer. 1096 From the definition of embedded generation, embedded generation is generation that is connected at the distribution voltage level and it's behind the meter and it's typically in relation to a delivery point for that customer, whether it's the customer is an LDC or whether the customer is a direct user. 1097 The reason why we differentiate that from the situation that we have here and what we call aggregation is that generation and transmission connected at the transmission level cannot be netted or net-billed. They can only be aggregated and the aggregation that takes place is aggregation of the separate delivery points which was not the case with net load billing that was being discussed by the Board in RP-1999-0044. 1098 MR. SIDLOFSKY: At the end of the day, when Abitibi gets an invoice, its delivery points are aggregated; correct? For the purpose of billing? For the purpose of transmission billing? 1099 MR. PATTERSON: That's correct. 1100 MR. SIDLOFSKY: And that would be the same result whether the delivery points are aggregated or there is what it sounds like you would suggest is more pure net load billing, which is that the generation is at the distribution voltage; is that right? 1101 At the end of the day, is the amount of the bill for transmission any different? 1102 MR. PORAY: The amount of the bill for transmission as per the IMO billing and settlement is in relation to Abitibi's demand as it's taken off the transmission system at the four transformer stations. 1103 MR. SIDLOFSKY: Sorry, maybe I didn't make my question clear. In Inco's case, you've said that Inco doesn't have net load billing. 1104 MR. PORAY: That's correct. 1105 MR. SIDLOFSKY: And Inco doesn't have net load billing because its generation isn't embedded generation. 1106 MR. PORAY: That's correct. 1107 MR. SIDLOFSKY: Inco has an aggregation of delivery points. 1108 MR. PORAY: That's correct. 1109 MR. SIDLOFSKY: Is the effect on Inco's bill for transmission any different whether you characterize this as net load billing or aggregation of delivery points? 1110 MR. PORAY: No. 1111 MR. SIDLOFSKY: Either way, the effect is that what is generated and injected into their transmission system is netted out from their transmission rate liability; is that right? 1112 MR. PORAY: The net demand that they draw from the transmission system is reduced, yes, by that generation. 1113 MR. SIDLOFSKY: Abitibi wouldn't get that benefit of net load billing, but now you say Inco doesn't have net load billing. So Abitibi wouldn't get the benefit of aggregation even if it were to own the Westcoast facility. 1114 MR. PORAY: That's correct. 1115 MR. SIDLOFSKY: And that's correct because of the historical circumstances of Inco? 1116 MR. PORAY: That's correct. 1117 MR. SIDLOFSKY: I'm just trying to understand why Inco is being treated differently, excuse me I guess more accurately, Abitibi would be treated differently from Inco. 1118 MR. PATTANI: the primary reason, as I said earlier, is with the new rate structure we applied for in 1999, we wanted to make sure that customers that are being charged for transmission on a certain basis, granted it was all under the bundled tariff, but a customer that did not pay transmission charges under the bundled tariff. 1119 As a result of the decisions of the Board, unless the Board has made specific decisions otherwise, that type of a customer should not be penalized because of the unbundling and open access with respect to transmission service charges. So, in that respect, we had recommended to the Board that where there are customers that are being -- that are currently being charged on the basis of netting out for the self-generation that they hold on the transmission system, they continue to do so and it goes without saying if the Board makes other decisions with respect to other situations, then we would change the historical circumstances. 1120 And I'm sure, just to give you an example: For example LDCs were being charged on a gross load billing, and I'm sure you'd ask us, Why, then, did you not continue with historical treatment for the LDCs and the gross load billing for the embedded generation that were located within the LDCs. 1121 Within the LDCs, the Board made a specific decision that LDCs shall not be charged on the basis of gross load billing for existing generation that is within their territory, even if they were being gross load billed before. So we turn around and charge them on a net load billing basis after the open access. 1122 With respect to Inco, they had being charged on a net-load or aggregated basis which is similar to net-load basis, and they continued getting that charge treatment. So that they are not affected any worse than what they were before the open access. 1123 MR. SIDLOFSKY: We agree, I think, that the Westcoast facility is not directly connected to the Hydro One transmission system; is that correct? 1124 MR. PORAY: That's correct. 1125 MR. SIDLOFSKY: And there is a transmission rate order and a transmission rate schedule. The transmission rate order from RP-1999-0044 relates to Hydro One's application for its cost-allocation and rate-design approvals from the Board; correct? 1126 MR. PORAY: That is correct. 1127 MR. SIDLOFSKY: And there are three other licensed transmitters in the province that now are allocated some of the transmission revenues that are generated from postage-stamp rates; is that correct? 1128 MR. PORAY: That's correct. 1129 MR. SIDLOFSKY: Those would be Great Lakes Power, Canadian Niagara Power and Five Nations Energy. 1130 MR. PORAY: That's correct. 1131 MR. SIDLOFSKY: Abitibi has nothing to do with that rate schedule. 1132 MR. PORAY: Abitibi is not included in that rate schedule, no. 1133 MR. SIDLOFSKY: And you had said earlier that Abitibi is not subject to rate regulation, in any event. 1134 MR. PORAY: That's correct. 1135 MR. SIDLOFSKY: Now, if we could just speak to the transmission service that's taken by both Abitibi and Inco. Are the levels of transmission service that are taken different between Abitibi and Inco? 1136 Now, before you answer, I know that they may have different loads, they will have different loads, but in terms of the transmission service that is taken from the Hydro One transmission system, leaving actual quantities aside, does Abitibi's situation differ from that of Inco? 1137 MR. TONEGUZZO: The transmission service between -- I'm not really familiar completely with the types of services that Inco would draw from the system, to tell you the truth. I've not gone into details around the type of service they would draw. I don't know the system that well. 1138 MR. SIDLOFSKY: Okay. But you've spoken to matters like voltage support and transformation service, at least transformation in the context of the network assets that Abitibi would use. 1139 MR. TONEGUZZO: Yes, in Abitibi's case I understand it very well. I've looked at the details of that system and I know that they draw -- essentially continuously draw about 40 megaVARS of capacity in order to sustain the voltage support they need for the large loads they have at their site, and what that does is basically wear out our large transformers that transform voltage from 230 to 115 kV. They continuously need to use the facilities in those transformers to control their voltages, and create a substantial amount of costs in terms of maintenance and operations as a result of that. 1140 With respect to the Inco situation, I am not familiar with the details of their operation and the degree to which they would use the facilities in the area because I just haven't looked into it. 1141 MR. SIDLOFSKY: That's fine, sir. But, presumably, there are other network assets that are installed in the vicinity of Inco that you would suggest Inco makes use of? They may not be the same types of assets, but there's network infrastructure around the Inco site. 1142 MR. TONEGUZZO: Certainly, yes. There would be network infrastructure nearby, but I'm not familiar with the different power flows and how the different equipment would be used as a consequence of those power flows. 1143 MR. SIDLOFSKY: And I hadn't planned to ask this now, but I might as well. The Fort Frances transformer station, the Hydro One Fort Frances transformer station at 8th street -- 1144 MR. TONEGUZZO: Yes? 1145 MR. SIDLOFSKY: -- isn't only connected to the Abitibi property, correct? 1146 MR. TONEGUZZO: That's correct. There are other loads, very small loads, typically, connected to that, and there are other lines connected to that at 115 kV, yes. 1147 MR. SIDLOFSKY: Now, the town of Fort Frances is connected to that. That was Mr. Gartshore's evidence yesterday. 1148 MR. TONEGUZZO: That's correct, it is connected there. 1149 MR. SIDLOFSKY: And I think Mr. Gartshore also mentioned a lagoon, it's actually an Abitibi lagoon, but it's a separate connection to the network station; is that right? 1150 MR. TONEGUZZO: That's correct. 1151 MR. SIDLOFSKY: Oh, sorry, and there is also the interconnection between Ontario and Minnesota. I shouldn't forget that. 1152 MR. TONEGUZZO: Yes, there is also an interconnection on F3M and it is interconnected to Minnesota. 1153 MR. SIDLOFSKY: And those all use the assets, presumably, from the Fort Frances TS? 1154 MR. TONEGUZZO: Network assets are common assets that are used by all customers, that's correct. In this particular case, though, I am aware of the fact that, again, 40 megaVARS of capacity does flow at F2B towards the Abitibi site in order to service their loads and support their voltage so it can be directly related to the loads at Abitibi for that much capacity. There is other capacity, I agree. 1155 MR. SIDLOFSKY: Now, sir, is that a reason for not netting out the Westcoast generation from the Abitibi transmission rates? 1156 MR. TONEGUZZO: No, the reasons would be the reasons Dr. Poray gave. 1157 MR. SIDLOFSKY: Okay. I just want to be clear. Are you suggesting that the reason that Abitibi should be paying for transmission on a gross basis, do those reasons include the fact that Abitibi is using network assets in the vicinity of the Abitibi complex? 1158 MR. TONEGUZZO: The specific reasons are the reasons Dr. Poray gave -- 1159 MR. SIDLOFSKY: Okay. 1160 MR. TONEGUZZO: -- for not net-load billing. 1161 MR. SIDLOFSKY: So you are not suggesting that Abitibi should be gross-load billing because there are benefits of being attached to the transmission system? 1162 MR. TONEGUZZO: I'm just identifying that Abitibi does benefit from being connected to the system, that Abitibi does use the system on a continuous basis, and I can testify that the facilities at Fort Frances are continuously used and Abitibi continuously benefits from access to those facilities. 1163 MR. SIDLOFSKY: Now, if the Westcoast generation were connected, let's say at what's marked as T5 on the delivery point drawing, it's actually T5 on the metering point drawing as well, that's at the Abitibi kraft mill just for the sake of discussion. 1164 MR. TONEGUZZO: Okay. 1165 MR. SIDLOFSKY: The use that Abitibi would make of the Hydro One asset, the network assets of Fort Frances TS wouldn't change, would they? 1166 MR. TONEGUZZO: Sorry, could you ask your question again, please? 1167 MR. SIDLOFSKY: Yes. If the Westcoast facility were connected to Abitibi at the Abitibi kraft mill at a distribution voltage, I should have mentioned that, would the use that Abitibi makes of the Hydro One network assets at the Fort Frances TS be any different? 1168 MR. TONEGUZZO: I'm not sure. It would depend on how the generators are operated. If the generators supplied all the voltage support directly, then the use would change. 1169 If they didn't, then it would remain the same. It's a rather complicated question. 1170 MR. SIDLOFSKY: Okay. Were you here yesterday for Mr. Gartshore's evidence? 1171 MR. TONEGUZZO: Yes. 1172 MR. SIDLOFSKY: And you'll recall that Mr. Gartshore referred to administrative instruction No. NW150, that's an operating agreement between -- sorry, an operations agreement between Ontario Hydro and Stone Consolidated. 1173 MR. TONEGUZZO: Okay. 1174 MR. SIDLOFSKY: Do you have that handy there, Dr. Poray? 1175 MR. PORAY: Yes. 1176 MR. MORAN: That's Exhibit 1.4. 1177 MR. SIDLOFSKY: Thank you. As I took Mr. Gartshore, sir, if I could take you to page 6 of that administrative instruction, paragraph at the top of the page, it says that: 1178 "Within the generator capability, Stone Consolidated Corporation co-generation will be expected to provide voltage support due to short-term abnormal system conditions in the form of VAR output at the request of the Ontario Hydro controlling authority. Normal communications between controlling authorities will keep the other informed of the reason for the VAR requests and the capability of the generators." 1179 I think that's probably I need from that, sir. 1180 Can we agree that Stone Consolidated in this agreement, now Abitibi Consolidated, provides voltage support to Hydro One? 1181 MR. TONEGUZZO: It says here "due to short-term, abnormal system conditions." So it would depend on the conditions. 1182 MR. SIDLOFSKY: But the provision of support is required. 1183 MR. TONEGUZZO: The provision of support can be requested, yes. 1184 MR. SIDLOFSKY: Okay. So the support can go both ways then? This is really my question. 1185 MR. TONEGUZZO: If the generator operates in a different manner, yes, it can be requested from the system, yes. 1186 MR. SIDLOFSKY: If you could excuse me for just one second. 1187 Sorry, Dr. Poray. If I could just ask you a couple more questions. You suggested, and this is taking us back to Inco and I'm sorry we detoured a bit, but taking us back to the Inco versus Abitibi situation, you indicated that the Inco generation was installed by Inco to displace load. Correct? 1188 MR. PORAY: That's correct. 1189 MR. SIDLOFSKY: To displace load in its complex? 1190 MR. PORAY: That's correct. 1191 MR. SIDLOFSKY: And I take it then that that decision by Inco to take that step on its own, or in its own name, it from Abitibi in the sense that Westcoast established the NUG, albeit on the Abitibi complex, but the NUG was not established to serve Abitibi. 1192 MR. PORAY: That is correct. 1193 MR. SIDLOFSKY: Now, we know the NUG does serve Abitibi because it conveys steam to Abitibi under a contract with Abitibi; correct? 1194 MR. PORAY: That is my understanding, yes. 1195 MR. SIDLOFSKY: And physically it conveys electricity to Abitibi; is that correct? 1196 MR. PORAY: If you means in terms of the electrons flowing, yes. But there is no contractual arrangement for those electrons. 1197 MR. SIDLOFSKY: I agree with you, and I think Mr. Gartshore agreed with you yesterday, there is no contractual arrangement. And I think you also agreed with Mr. Moran this morning that the contractual arrangements aren't relevant to this issue; is that right? 1198 Mr. Moran took you through a number of different possibilities. He said that generator B, using the chart that was referred to before, and I don't need you to pull it out now, if generator B had bilateral for output and connected at the low voltage, you would still consider that generator embedded; correct? 1199 MR. PORAY: Yes. 1200 MR. SIDLOFSKY: Regardless of who owned the power. 1201 MR. PORAY: That's correct. 1202 MR. SIDLOFSKY: And regardless of the contractual flow of the power. 1203 MR. PORAY: That's correct. 1204 MR. SIDLOFSKY: So as far as the flow of electrons go, aside from any contractual relationship, we agree the electrons flow through the Abitibi complex from the Westcoast facility. 1205 MR. PORAY: That is correct. 1206 MR. SIDLOFSKY: And in the Inco situation, the electrons flow from the Inco generator, that happens to be owned by Inco, through the Inco complex. 1207 MR. PORAY: I believe that is correct, yes. 1208 MR. SIDLOFSKY: And in the Inco case, the delivery points are being aggregated so the effect is the same as that of net load billing. 1209 MR. PORAY: In the Inco case, the generation that is connected to Inco's transmission system and the load that is connected to Inco's transmission system are aggregated, yes. 1210 MR. SIDLOFSKY: So the net effect - I probably shouldn't use the word net - the effect of that is that the Inco transmission bill will reflect the existence of the Inco generation. 1211 MR. PORAY: The Inco bill will reflect the fact that the generation owned by Inco reduces its demand, yes. 1212 MR. SIDLOFSKY: But the Abitibi bill clearly does not reflect the existence of the Westcoast generation. 1213 MR. PORAY: No, it does not. 1214 MR. SIDLOFSKY: Sir, in the case of the LDCs - and I'm not sure if it would be you, Dr. Poray, or Mr. Pattani, but I'm sure whichever one of you it is will jump up and give me an answer - in the case of the LDCs, the generators that are being considered embedded generation are connected at low voltage, at distribution voltage; correct? 1215 MR. PORAY: That is correct. 1216 MR. SIDLOFSKY: Is Hydro One suggesting at all that the generation -- excuse me, that the generators that were built and connected to the LDCs were built for the purpose of supplying the LDC with power? Or, I'll give you an alternative: Were the generators, and particularly generators that had NUG contracts similar to Westcoast, built for the purpose of selling electricity to Ontario Hydro? 1217 MR. PORAY: It's the latter case. 1218 MR. SIDLOFSKY: It's the latter. So it's for the purpose of delivering electricity to Ontario Hydro. 1219 MR. PORAY: That is my understanding of those contracts, yes. 1220 MR. SIDLOFSKY: That would be why historically the LDCs, back when they were known as municipal electric utilities, would have been billed on a gross basis; correct? 1221 MR. PORAY: They were billed on gross basis because they purchased from the power pool. 1222 MR. SIDLOFSKY: They purchased from the power pool and the quantity that they purchased was their entire demand. 1223 MR. PORAY: That is correct. 1224 MR. SIDLOFSKY: So that was their entire demand which was made up of the power that was delivered to them by the generators that were embedded within their distribution systems plus whatever power they took from the Ontario Hydro transmission system. 1225 MR. PORAY: That is correct. 1226 MR. SIDLOFSKY: Sorry, Mr. Chair. I'm trying to cut down on some of my cross-examination given my friend's work to this point. Just one last line of questioning. 1227 When you were going through the delivery points for the Abitibi site, you confirmed that there are two delivery points on the complex, and as we discussed, delivery point one is represented by the four Abitibi transformers; correct? 1228 MR. PORAY: That's correct. 1229 MR. SIDLOFSKY: And delivery point two would be represented by the two Westcoast transformers. 1230 MR. PORAY: That is so. 1231 MR. SIDLOFSKY: You have agreed that four transformers could be aggregated into one delivery point; correct? 1232 MR. PORAY: That is correct, yes. 1233 MR. SIDLOFSKY: And on what basis have you done that, sir? 1234 MR. PORAY: The reason for the aggregation of those four transformer stations is that they essentially feed the same load, the same customer. 1235 MR. SIDLOFSKY: Well, the Board spent a bit of time on billing on a per-delivery-point basis in its decision; is that right? Do you recall that? 1236 MR. PORAY: That is correct, yes. 1237 MR. SIDLOFSKY: And the Board's decision was that transmission customers would be billed on a per-delivery-point basis; correct? 1238 MR. PORAY: That is correct, yes. 1239 MR. SIDLOFSKY: Now, there are provisions in the rate schedule that deal with aggregation. 1240 MR. PORAY: That is correct, yes. 1241 MR. SIDLOFSKY: Now, the provisions in the rate schedule that deal with aggregation don't deal with aggregation of delivery points; correct? 1242 MR. PORAY: They deal with aggregation at a delivery point, yes. 1243 MR. SIDLOFSKY: That's right. So if there were, for example, a second -- well, maybe you could give me an example, a T3 which is the top of the Abitibi delivery point. Could you give me an example of aggregation at a delivery point? 1244 MR. PORAY: That would be if there were several feeders, low-voltage feeders leading off on the low-voltage site. If I may illustrate this for the Board, what that would mean is that rather than just this one feeder, there were several feeders leaving from that transformer station supplying that customer. Those could all be aggregated as per the transmission rate schedule to date. 1245 MR. SIDLOFSKY: So provided it was a single entity or an affiliate, an affiliate of an entity, those feeders could be aggregated? 1246 MR. PORAY: That is correct. 1247 MR. SIDLOFSKY: So what's your basis for aggregating four delivery points? That's not in the rate schedule, is it? 1248 MR. PORAY: No, this is not in the rate schedule. I'll get Mr. Patterson to answer that. 1249 MR. PATTERSON: I guess in the rate schedule there is a paragraph that describes when we can aggregate load and it's 1250 "For demand registered by two or more meters at any one delivery point should be aggregated for the purpose of assessing transmission charges at that delivery point. The corresponding distribution feeders and the delivery point or the plants taking power from that delivery point are owned by the same entity within the meaning of the Ontario Business Corporations Act." 1251 MR. SIDLOFSKY: And that's for a single delivery point? 1252 MR. PATTERSON: That's aggregating delivery points. Aggregation is what we're doing there. 1253 MR. SIDLOFSKY: No, I'm sorry, this is aggregation of -- this is aggregation of the demand registered by two or more meters at any one delivery point. 1254 MR. PATTERSON: Yes. 1255 MR. SIDLOFSKY: That's what the transmission rate schedule goes with. On what basis are you aggregating delivery points for Abitibi or aggregating delivery points for Westcoast? 1256 MR. PATTERSON: In the case here, Abitibi and Westcoast are clearly separate entities, so it's clear that they cannot be aggregated. And for industrial customers who have multiple transformers serving their load on the contiguous property, the way it was set up in the province is there normally would be one meter there that would meter all that load, and that's the way it was always historically billed and it was historically aggregated and we continue to do that in those situations. 1257 MR. SIDLOFSKY: So you can't point to a specific provision of the rate schedules or the rate order that would provide for aggregation of delivery points? 1258 MR. PATTERSON: Not beyond what's written here. 1259 MR. SIDLOFSKY: Well, it's not written here though, is it. 1260 MR. PATTERSON: Aggregating feeders, for example. 1261 MR. SIDLOFSKY: Well, but that's not aggregated delivery points. 1262 MR. PATTERSON: Okay. 1263 MR. SIDLOFSKY: Okay. But, at some point Ontario Hydro or Hydro One has made a decision to aggregate four Abitibi delivery points for billing purposes? 1264 MR. PORAY: I think what we are saying in this particular case is that at the changeover from the old Ontario Hydro to the new system where transmission is unbundled and new rates apply, there were no changes in metering at the site. So we were using the existing metering for the purpose of the calculation of transmission charges. 1265 Otherwise, in order to do -- to fully comply with per delivery point basis, you would have to have a meter at each of those separate delivery points. 1266 MR. SIDLOFSKY: Well, sir, you were asked earlier if you would allow for net load billing in the event that Abitibi owned the Westcoast facility and the answer was no. Correct? 1267 MR. PORAY: That's correct, yes. 1268 MR. SIDLOFSKY: The answer was no because of the voltage at which the Westcoast facility is connected to the Abitibi system? 1269 MR. PORAY: It's a separate transmission customer, yes. 1270 MR. SIDLOFSKY: Going back to Inco, you're suggesting that you're not net-load billing, but you're aggregating delivery points, correct? 1271 MR. PORAY: That's correct. 1272 MR. SIDLOFSKY: You're aggregating delivery points which reduces the quantity of electricity that Inco takes from the Hydro One system, correct? 1273 MR. PORAY: That's correct. 1274 MR. SIDLOFSKY: Now, if Abitibi were to own the Westcoast facility, it would also own the two delivery points at Westcoast; is that right? 1275 MR. PORAY: I believe that would be the case, yes. 1276 MR. SIDLOFSKY: Okay. If Abitibi were to own the Westcoast delivery points, you would still not net bill, correct? You wouldn't call it net billing; is that right? 1277 MR. PORAY: That's correct. 1278 MR. SIDLOFSKY: You wouldn't allow for net billing. Would you allow for the aggregation of those now six delivery points? 1279 MR. PORAY: No, I would not. 1280 MR. SIDLOFSKY: You would not. But you would for Inco? 1281 MR. PORAY: Because Inco had under historical treatment had put in the generation for its own purposes to reduce the demand, its demand. That is not the case for Westcoast. 1282 MR. SIDLOFSKY: So transmission voltage still gets Inco the benefit of the equivalent of net billing, but it wouldn't get Inco -- excuse me, it wouldn't get Abitibi the equivalent of net billing because of history. 1283 MR. PORAY: The purpose of Westcoast was different from the purpose of the generation that was built by Inco. 1284 MR. SIDLOFSKY: Sir, can you show me anything in the transmission decision or in the transmission rate schedule where the Board determined that transmission billing would differ depending on the purpose of the generation facility? And just while you're looking for that, we already discussed the LDC situation and the NUG generators that were built connected to LDC systems. We agreed that they weren't billed for the purpose of supplying the LDC; correct? 1285 MR. PORAY: That's correct. 1286 MR. SIDLOFSKY: And yet the LDC is now getting that billing, correct? 1287 MR. PORAY: Yes, it is. 1288 MR. SIDLOFSKY: Okay. Now maybe I could ask you to find an answer. 1289 MR. PATTANI: I guess one of the things that we need to put here is the proper perspective. At issue here is Westcoast and Abitibi, two distinct entities connected to the transmission system. They are being treated as two separate transmission customers and we are saying that as a result of that, we cannot aggregate the demand for Abitibi and supply from Westcoast. 1290 That is the primary focus of this proceeding. 1291 I guess the counsel is going through -- I assume you are going through the hypothetical example of where Abitibi were to own Westcoast now and then how this question would apply. Am I correct in understanding that? 1292 MR. SIDLOFSKY: I don't have to answer that, but -- but, first of all, I would say that that's not necessarily hypothetical. You heard Mr. Gartshore's evidence, I think you were here yesterday as well. You're aware at that a Abitibi can acquire the Westcoast facility now, correct? 1293 MR. PATTANI: Yes. 1294 MR. SIDLOFSKY: Okay. And Abitibi operates the facility and is the registered market participant -- 1295 MR. PATTANI: For operating the facility. 1296 MR. SIDLOFSKY: -- for that facility, with the independent market operator; correct? 1297 MR. PATTANI: I must stress here, my understanding here is they are the registered market participant with respect to operating the facility. They are not the registered market participant with respect to the energy output of Westcoast generation. I guess we are clear about that, I assume. 1298 MR. SIDLOFSKY: Well, they are not the market -- they are not the metered market participant, correct -- 1299 MR. PATTANI: Yes. 1300 MR. SIDLOFSKY: -- when it comes to the ownership or the invoicing for the power, for the commodity that's generated by that facility, correct? That's OEFC. 1301 MR. PATTANI: Correct. 1302 MR. SIDLOFSKY: Operationally, it's Abitibi. 1303 MR. PATTANI: Yes. 1304 MR. SIDLOFSKY: Excuse me, for the purpose of commodity contracting, that's OEFC. 1305 MR. PATTANI: Yes. 1306 MR. SIDLOFSKY: But we're not here about the commodity contract anymore, despite what your written evidence said. 1307 MR. PATTANI: Definitely not. The fact that Westcoast and OEFC is a separate entity with respect to the commodity informs that it is a separate entity that owns that plant, that owns that generation, and that's what I'm getting at here, that when we say that Abitibi is a registered market participant with respect to Westcoast generation, it is a registered market participant with respect to operating it, and needless to say, as Mr. Snelson pointed out earlier, under the paradigm we are in, I can imagine, for example, numerous generators going into an agreement with several other operators, whether it's ABB or Simmons or someone that would operate the machines. And they would be the market participant with respect to operating the machines. 1308 In this case, we agree that Abitibi is a registered market participant with respect to operating the plant. What I would like to make clear is that in this case here, Westcoast is a separate owner with respect to the main business of the generating plant and that is to sell the energy. 1309 So I assume that - we can set that aside if you want - but that is an understanding that we have? 1310 MR. SIDLOFSKY: Well, I'm trying to understand. I'm still trying to understand what the difference is, sir. Both Inco and Abitibi proportionately make the same use or draw the same -- excuse me. 1311 Both Abitibi and Inco draw electricity from the networks system after electricity from generation that's located in their complexes has flowed through the wires, flowed through the transmission system in their complexes, correct? 1312 MR. PATTANI: Correct. 1313 MR. SIDLOFSKY: Okay. And I can see you want to go on. 1314 MR. PATTANI: Yes. In our testimony, in several cross-examination questions, we have informed that the transmission pricing or the transmission rate design in Ontario is not based on power-flow conditions. If it were based on power-flow conditions, for example, there may be certain situations where exactly the similar situation such as F2B occurs in Mississauga, where there is a large generating plant, and if we started discussing transmission pricing on the basis of power- flow conditions, the basis of uniform transmission pricing would fall down and we need to rethink the whole structure of the transmission pricing. 1315 What I'm trying to say is the pricing, transmission pricing, transmission rate design at least today in Ontario, is based on uniform rates which are based on what you withdraw from the transmission system. They are not based on what is the power flow on the circuit of F2B, for example. 1316 MR. SIDLOFSKY: Well sir, I'm not aware - and maybe you can help me if you are - I'm not aware of Abitibi having made any requests for a change to the postage-stamp transmission rates that apply across the province. 1317 MR. PATTANI: I believe earlier your question was that if Abitibi is consuming certain demand and Westcoast is generating certain demand, would you agree that Abitibi is making less use of the transmission system. That's what you asked, and therefore you are saying that therefore they should be paying less charges. 1318 MR. SIDLOFSKY: Well sir, what concerns me is that Inco is being treated in one way even though it has generation on its complex that's connected at the transmission voltage and Abitibi is being treated a different way even though it has the same generation connected on its complex at a transmission voltage. That's my concern, sir. 1319 MR. PATTANI: Excellent. Now, with respect, let's understand the two significant differences between the two situations. 1320 MR. SIDLOFSKY: Sorry, I will let you answer that, but maybe I should tell you what my second concern is. My second concern is I'm not able to find anything in the transmission decision or in the transmission rate schedule that distinguishes between the treatment of generation at a transmission voltage connected to a non-licensed, unregulated transmission system based on who owns the generation or why the generation was installed. 1321 MR. PATTANI: I believe you have now introduced a third variable or perhaps the fourth variable in the question by talking in the context of non-licensed, unregulated transmission. 1322 If it's okay with you, I would like to, since we have dealt with the matter of unregulated and non-licensed in other situations, if it's all right with you, I would like to leave it aside for the time being before I answer your question with respect to the Inco and Abitibi situation. 1323 MR. SIDLOFSKY: We can do that, sure. 1324 MR. PATTANI: So, setting aside the unregulated or whether or not it's really unregulated, the two major differences between Abitibi and Inco are -- in fact maybe three -- the two major differences are in this case Abitibi and Westcoast are different entities under the Business Corporation Act, they are different entities that are connected to the transmission system. That is the one difference. 1325 The second difference is that in the case of Inco, which by the way is the same entity that owns the generation, historically, they provided that self-generation under the Ontario Hydro's bundle environment whereby when Inco put in that plant, they looked at the economics of generation and then they put in the plant. And when we got to open access, as I said earlier, we recommended to the Board that we will make sure that where a customer is today not being billed for transmission, we will make sure that he shall not be billed for transmission after open access. 1326 Therefore the two main differences are - and I'm not saying one is exclusive of the other or one falls off - but we are guided by the fact that here we have two different entities, there we have the same entity, and then setting that aside, Inco historically was treated, all of the delivery points there and the generation of the load were treated as one entity by Ontario Hydro historically, and it behooves us to continue that treatment so as not penalize them as a result of open access. We are not having any economic penalty or anything for Abitibi as a result of open access. 1327 MR. SIDLOFSKY: There is no incremental penalty for Abitibi as a result of open access, but Abitibi has been paying a bundled price for electricity, a bundled cost of power since 1991 when the Westcoast facility commenced operations; is that right? 1328 MR. PATTANI: Yes, because Westcoast was selling its power to Ontario Hydro. 1329 MR. SIDLOFSKY: And that was a contractual matter at that point. 1330 MR. PATTANI: It was, and it so happened that Inco did not have such a contractual matter with respect to their generation. 1331 MR. SIDLOFSKY: So for 11 years until market opening, even though the electrons stayed inside the Abitibi complex, Abitibi was paying a bundled price for power that included transmission; correct? 1332 MR. PATTANI: Under the Ontario Hydro tariff, with Westcoast or ICG selling its power to the power pool, and the power pool in turn selling power to Abitibi, there was no other way than to charge Abitibi for both energy and transmission as a bundled tariff. 1333 MR. SIDLOFSKY: Which is pretty what much what Mr. Gartshore said yesterday; correct? 1334 MR. PATTANI: Yes. Once again, the key difference here is, unlike Inco, where the generation was not being purchased by Ontario Hydro, where the generation was not owned by a separate load customer, or here, the Westcoast generation was being purchased by Ontario Hydro and it was owned by a separate entity. 1335 MR. SIDLOFSKY: So it's all about the contract again. 1336 MR. PATTANI: Well, I wouldn't call it the contract. It's all about a separate entity to begin with. 1337 MR. BETTS: Mr. Sidlofsky, I'm just tempted to interrupt now. I'm not hearing new evidence coming out at this point. Can you kind of focus in and bring forward what you feel is important? I'm hearing the same things being said. 1338 MR. SIDLOFSKY: Sir, I think I'm waiting for Dr. Poray to come back to me with an answer based on his review of the transmission decision. I hadn't meant to get into a debate with Mr. Pattani, but Mr. Pattani wanted to answer my question at length. It looks like Dr. Poray may have an answer for me, too. 1339 MR. PORAY: Can I ask you to repeat that question again, please? 1340 MR. SIDLOFSKY: I'm not sure if that says something about my questions or Mr. Pattani's answers. But the question was: Can you show me anything in the transmission decision or the transmission rate schedule that would differentiate between the treatment of transmission customers on the basis of the reason for installing generation or the ownership of the generation? I don't think that's quite the way I put it 10 or 15 minutes ago. 1341 MR. PATTANI: In terms of that question, as I said earlier, under the rate schedule, we have two different entities here, separately owned generation, in Inco it's the same entity. And what informs again is, as I said earlier, we informed the Ontario Energy Board under proceeding RP-1999-0044 that if a customer, in this case - although we didn't name the customer, for obvious reasons - but say Inco is being billed in such a way for a self-generation that it does not pay transmission charges with respect to its own generation, then we will not introduce new transmission charges for such a customer as Inco. 1342 That is, I guess, the primary reason, in other words the historical reason for -- as a result of which we are treating Inco as we are, and we are treating Westcoast and all other customers similar to Westcoast in an identical manner. The only exception happens to be Inco because of their particular situation, historical context that they had, and as I said, consistent with what we told the Board in the last rate filing. 1343 MR. SIDLOFSKY: I think that addressed the ownership. That may have addressed the question about the ownership of the generation. I don't think I have an answer as to whether there's anything in the transmission decision or the transmission rate schedule that differentiates between transmission customers on the basis of the reason for the installation of the generation. That is, whether it was to serve the specific customer or to sell into the market or to Ontario Hydro before market opening. 1344 MR. PATTANI: If it's already with you, let's go to the transmission rate schedule that is currently in effect, please. This is the Ontario transmission rate schedule. 1345 MR. PORAY: I think it can be found under 1.1, tab -- 1346 MR. SIDLOFSKY: Sorry, you were looking for the transmission rate schedule? You could find it under 1.2, that's the Abitibi witness statement, tab 2.H. 1347 MR. PATTANI: Okay. If we go there, and in section C, the second paragraph, first of all, let's go through the first paragraph just to make sure that we all understand it. 1348 The first paragraph says that: 1349 "The transmission delivery point is defined as the transformation station which steps down the voltage from a above 50 kV to below 50 kV and connects the customer to the transmission system." 1350 I'll leave out ownership of the transmission station for the time being because that's not an issue. 1351 The next paragraph says: "The demand," and I'd like to stress here the term "demand," it's not the demand and supply, it's demand. 1352 "The demand registered by two or more meters at any one delivery point shall be aggregated for the purpose of assessing transmission charges. At that delivery point, if the corresponding distribution figures from that delivery point or the plants taking power from the delivery point are owned by the same entity within the meaning of Ontario's Business Corporations Act." 1353 So it is the demands that are aggregated, not the demand and the supply at two different delivery points. 1354 MR. SIDLOFSKY: Sir, in the Inco example, you have demand at some number of delivery points; you have supply at some other number of delivery points because Inco installed generation of the transmission voltage; and you are aggregating those delivery points, correct? 1355 MR. PATTANI: Correct. As I noted earlier, the key difference is that Inco, the same owner of the generation since before open access, was treating that generation as self-generation before open access, and Ontario Hydro was billing Inco in such a way that they were not paying transmission charges at that time. 1356 And we did not, as we put to the Board last time, we were not going to put in more charges on Inco just because of open access. 1357 MR. SIDLOFSKY: Dr. Poray, I still don't think I have an answer on my question about the reason for the installation of the generation. 1358 MR. PORAY: I'm not aware of anything in the Board decision dealing with the installation of generation other than the treatment of existing embedded generation for the purpose of net-load billing. 1359 MR. SIDLOFSKY: Thank you. Just one more question for Mr. Pattani. You were talking about all the generators that are like Westcoast. You mentioned that you were -- I think you said something to the effect that the rule was being applied the same for all generators like Westcoast. 1360 MR. PATTANI: Which are owned differently and which are connected to transmission system. 1361 MR. SIDLOFSKY: Sir, I think from your responses to Abitibi's interrogatories, Hydro One has confirmed that Abitibi's situation is unique. Maybe Dr. Poray, could you answer that? 1362 That is, you have a load that owns transmission facilities and has its own load and a third-party generator connected to the transmission system, to its transmission system, excuse me. 1363 We can do this using the Casco interrogatories, which you might already have turned up. 1364 MR. PORAY: Okay. We have the Casco interrogatories. 1365 MR. SIDLOFSKY: Thank you, sir. 1366 MR. PORAY: Number 6? 1367 MR. SIDLOFSKY: That's right. And I believe that Abitibi's situation falls under customer situation B, in the table at the bottom of page 13, which is the first page of Hydro One's response? 1368 MR. PORAY: Yes, that is correct. 1369 MR. SIDLOFSKY: So customer situation B is the Abitibi situation, and there is only one situation like that? 1370 MR. PORAY: That appears to be the case. 1371 MR. SIDLOFSKY: And all told, it looks like there are only four situations that are, even in part, similar to Abitibi or could even be considered to be similar to that of Abitibi; is that correct? 1372 MR. PORAY: I think what we've indicated in here are specifically in response to the interrogatories that were asked. 1373 MR. SIDLOFSKY: Now, Abitibi is being treated the same as other loads with generators similar to Abitibi. Correct? Is that accurate? 1374 MR. PORAY: Yes, it is. 1375 MR. SIDLOFSKY: Okay. 1376 MR. PORAY: For the embedded generation, which is the hydroelectric generation located on the site. 1377 MR. SIDLOFSKY: And it's also being treated, you would suggest, consistently because the output of the Westcoast facility isn't being aggregated? 1378 MR. PORAY: That's correct. 1379 MR. SIDLOFSKY: Mr. Pattani, you were talking about ownership of the facility and how Inco installed its own generation, correct? I don't want you to tell me about it again because I'm sure the Board has heard that. 1380 But if I could just keep you with Hydro One's responses to the Casco interrogatories. Customer situation A is a situation in which the generator owns transmission facilities and has its own generation and a third-party load connected to its transmission system. That's situation A? 1381 MR. PATTANI: Yes. Which is not the one that we are dealing with in the proceeding today, but yes, that's the situation A. 1382 MR. SIDLOFSKY: That's the situation. And you've indicated there that the transmission charges for those loads are not aggregated; correct? 1383 MR. PORAY: Correct. 1384 MR. SIDLOFSKY: Sir, I note that a little later on in the response, and if you could just bear with me, I'll just find it here. Yes, on the next page, which would be page 14, item A.3. Item A.3 involves a scenario in which a change of ownership of generation has occurred since 1998, such that an embedded generator previously owned by the load customer is now owned by a party other than the load customer. Correct? 1385 MR. PATTANI: Yes. 1386 MR. SIDLOFSKY: And you indicate in your response to scenario A.3 that: 1387 "Hydro One Networks is aware of only one such situation, and one of the cases described in the table above is situation A, and again, that's a situation where the generator owns transmission facilities and has its own generation and a third-party load connected to its transmission system, there are certain embedded generators connected at the distribution voltage that have changed ownership since 1998. The loads served by these generators continues to be billed for transmission charges or a net load basis." 1388 Is that because of the historical net billing for that? 1389 MR. PATTANI: No, it's not because of historical. It happens that it is the same as historical, but what informs here, is -- once again, I would like to make sure we put this in the proper perspective. When we looked at the table on page 13 and the scenario A, that scenario was discussing generation and load that are both connected to transmission system. Now, in one of those situations, there is also a second scenario, our sub-scenario. 1390 In that, for that particular one there is not only load and generation connected to the transmission, but there is also some generation that is connected to the distribution voltage for that customer, and what is being referred to here in A3 is the generation that is connected to the distribution voltage, which therefore, by definition of embedded generation in the Board decision, qualifies to be embedded generation irrespective of its ownership, just as you pointed out earlier with respect to generation, that is an LDC. 1391 So in this case A3, the generator that's connected to the load side or the distribution side for that transmission customer, that generator, although it has changed ownership, we are continuing to treat that on a network billing basis because the Board decision did not say anything about the ownership with respect to what is connected on the distribution voltage. 1392 MR. SIDLOFSKY: Those are my questions, sir. Thank you. 1393 MR. BETTS: Thank you. Ms. Aldred, in terms of re-examination, how long do you think you might need? 1394 MS. ALDRED: I have about a dozen questions and they're not long questions and I don't know how long the answers will be but I would think 20 minutes. 1395 MR. BETTS: Okay. I think, just respecting the pressure the court reporter is under more than anybody else, I think we will take a short break then and return. Let us aim for 4:50 to return -- 3:50, thank you. That's an extended break. Maybe it's a Freudian slip and I feel I need it, I'm not sure. 1396 Anyway, we will return in 20 minutes which will be 3:50 p.m. 1397 --- Break taken at 3:30 p.m. 1398 --- On resuming at 3:50 p.m. 1399 MR. BETTS: Thank you and welcome back. Ms. Aldred, as you did before, if you'd like to go through re-examination. The Board may or may not have questions afterwards and you will be invited to re-direct again based on those, if required. Please proceed. 1400 MS. ALDRED: Thank you. 1401 RE-EXAMINATION BY MS. ALDRED: 1402 MS. ALDRED: Dr. Poray, you were asked in cross-examination whether there was discussion about embedded generation at the RP-1999-0044 hearing or in the evidence filed for RP-1999-0044. I want to have you refresh your memory by giving you an excerpt from the evidence that was filed in that case. 1403 MR. MORAN: Mr. Chair, that will become Exhibit 2.4, excerpt from the evidence filed in the RP-1999-0044 pleading. 1404 EXHIBIT NO. 2.4: EXCERPT FROM THE EVIDENCE FILED IN THE RP-1999-0044 PLEADING 1405 MS. ALDRED: That excerpt is from Exhibit A, tab 2, Schedule 1, page 8 of 15 of that evidence. 1406 MR. PATTANI: That's correct. 1407 MS. ALDRED: If I could have you review the first paragraph, entitled "Existing Embedded Generation", please. 1408 DR. PORAY: What this paragraph says is: 1409 "For load customers who have installed self-generation prior to December 31st, 1998, to serve their existing load, there will be no additional transmission charges levied with respect to the load supplied by self-generation. This recommendation recognizes that unbundling past decisions would compromise the economic decisions load customers made when installing this generation. Stakeholders tended to support this premise." 1410 MS. ALDRED: So this proposition was before the Board during that hearing. 1411 MR. PORAY: That's correct. 1412 MS. ALDRED: And it refers to stakeholdering? 1413 MR. PORAY: That is correct. 1414 MS. ALDRED: If I can just direct you now to our definition included in the decision with reasons concerning existing embedded generation, found at page 25 of the decision with reasons. 1415 MR. PORAY: I'm there. 1416 MS. ALDRED: And as you're aware, there's been considerable discussion about this particular definition. If you could just read the first part of that definition. 1417 MR. PORAY: This is the definition at section 3.2.1? 1418 MS. ALDRED: Yes. 1419 MR. PORAY: "Generation that is not connected directly to the transmission system --" 1420 MS. ALDRED: If you could stop right there. It has been your evidence that that means what? 1421 MR. PORAY: Transmission that is typically connected at low voltage, at distribution voltage. 1422 MS. ALDRED: If you can look at that phrase for me, can you tell me if that phrase can possibly mean anything else other than something connected at distribution voltage? 1423 MR. PORAY: No. 1424 MS. ALDRED: Thank you. You also had a discussion with Mr. Moran about the difference between licensed and non-licensed transmission, and Mr. Moran took you through various provisions of the Ontario Energy Board Act which you agreed would not apply to non-licensed transmission. 1425 There were also discussions about the IMO and its opinion on non-licensed transmission. I just wanted to talk for one minute about the IMO. Does the IMO have the ability to deal with non-licensed transmission? 1426 MR. PORAY: It does. 1427 MS. ALDRED: In what circumstances? 1428 MR. PORAY: In the circumstances that if the IMO feels it's necessary to include that transmission as part of the IMO-controlled grid, it has that flexibility under the market rules. 1429 MS. ALDRED: Also in Mr. Moran's cross-examination, he took you through the rate schedules and he also took you through the decision with reasons, and he suggested that there may be some inconsistencies between the definitions in the rate schedules and the decision with reasons. Do you remember that cross? 1430 MR. PORAY: Yes, I do. 1431 MS. ALDRED: When assessing whether a customer is subject to certain transmission charges, what documents does Networks apply? 1432 MR. PORAY: We refer to the transmission rate schedule. 1433 MS. ALDRED: Does Networks have an ability to amend that rate schedule? 1434 MR. PORAY: No, it does not. 1435 MS. ALDRED: Mr. Moran also, when he was talking about definitions of various transmission customers and delivery points in particular, referred you to a glossary there was filed in the RP-1999-0044 proceeding. 1436 MR. PORAY: Yes. 1437 MS. ALDRED: And he went through some of the definitions in that schedule. Can you tell me the reason that that glossary was filed in that proceeding? 1438 MR. PORAY: It was to provide a clear understanding of the various terms that were used in support of the submission which Hydro One made at that time. 1439 MS. ALDRED: And - excuse me - does Hydro One have regard to that glossary now when applying the definitions contained in the rate schedules? 1440 MR. PORAY: No, we don't use that glossary. 1441 MS. ALDRED: There were also discussions now about the Westcoast Power generator and you were asked a question about whether the Westcoast Power generator could participate in the market or participate or sell its electricity through bilateral contracts. Do you remember that question? 1442 MR. PORAY: Yes. 1443 MS. ALDRED: Do you have any knowledge one way or the other what Westcoast Power does? 1444 MR. PORAY: I believe that the Westcoast Power participates in the IMO-controlled markets by selling its power to OEFC under the NUG contracts. 1445 MS. ALDRED: You were led through a series of hypothetical questions by Mr. Moran and you were asked during the course of those questions whether the overriding principle or the overriding criterion was whether a customer was transmission connected or not. Do you recall that? 1446 MR. PORAY: Yes. 1447 MS. ALDRED: And that was a series of hypothetical questions. In this real case that we have before us, are there other considerations that have to be taken into account? 1448 MR. PORAY: There is the consideration that Westcoast is a transmission customer and it's not behind the meter that measure still demands for Abitibi withdrawal from the transmission system. 1449 MS. ALDRED: We examined section 1 of the OEB Act and the principles pursuant to which the OEB will be making its decisions, and one of the principles that you were directed to was the principle of competition. 1450 In your opinion, will the ruling that the Board makes today affect installation of future generation? 1451 MR. PORAY: No, I believe it does not. 1452 MS. ALDRED: Just give me one second, please, just to review. 1453 Thank you. Those are my re-direct questions. 1454 PROCEDURAL MATTERS: 1455 MR. BETTS: Thank you. And the Board has no further questions of this panel. 1456 That, then, concludes, I believe, the evidence required from this panel and I thank you very much for your participation and you will be free to go very shortly. I'll just sort out, if we can, the issues of arguments. 1457 The Board is somewhat constrained to receive oral arguments today, therefore we are looking at a schedule for written arguments and we'd like to make that as rapid a schedule as possible and yet leaving sufficient time for all of the parties to do what has to be done. 1458 The schedule that I would like to propose is as follows and I'm prepared to receive submissions if there's anything in the schedule that's inappropriate. 1459 First of all, the argument in chief from Abitibi for submission by Friday, this Friday, June 27th, 4 p.m., delivered to the three other parties that will be making submissions. Is it appropriate to assume that TransAlta will be filing a supportive argument to the position of Abitibi? If so, I would expect it to be delivered at the same time. 1460 MR. KING: You're correct, we will be filing a supportive argument and we can meet that deadline. 1461 MR. BETTS: Thank you. And I'll go through the whole schedule and then we'll see if there are any problems. 1462 The Board would be expecting responses from Hydro One Networks and I assume the supportive responses from the Power Workers Union by Thursday, July 3rd, again, delivered to all parties by 4 p.m. 1463 And the Board would be expecting reply arguments from Abitibi only by - I think I've got the date wrong here - Tuesday, July 8th, 4 p.m. 1464 Does that seem reasonable to all the parties? So far I'm seeing three nods and one head being scratched. So I'll give the head scratcher a little bit longer to consider that schedule. 1465 MR. MORAN: Mr. Chair, I just wanted to point out that the Casco proceeding starts on the 8th and Mr. Sidlofsky is counsel in that matter as well. So your original date of Monday, the 7th, might be the date you intended. 1466 MR. BETTS: I don't know whether that helps because it's 24 hours earlier, but when I looked at the schedule that I originally was considering, I thought it may be unfair to make it that 24 hours earlier, but then again, if you're busy all day Tuesday that probably doesn't help. 1467 Mr. Sidlofsky, what do you think you can do for us here? We'd like to have the arguments in, ideally, before the Casco proceeding begins, and we would like to be able to make a prompt decision on both issues very, very shortly, either at the conclusion of the Casco hearing or very shortly afterwards. How can you help us with that? 1468 MR. SIDLOFSKY: I would like to help you with that. I suppose, as far as the calendar goes, Monday, the 7th would be -- frankly it doesn't make much of a difference, simply because I'm going to be here all day on the 8th, but the end of the day on the 7th, assuming you want the reply before Casco starts, then the 7th will have to do. 1469 MR. BETTS: If you can live with that schedule, the Board would be very appreciative. It would resolve our problem and -- 1470 MR. SIDLOFSKY: We'll certainly work toward that. 1471 MR. BETTS: And the Board obviously has the most serious concern about the timing of the reply, so if it was -- if it was delayed until the morning of the 8th, it would not be a problem. 1472 MR. SIDLOFSKY: Thank you. I'll keep that in mind. I don't expect it will be but -- 1473 MR. BETTS: Okay. 1474 MR. SIDLOFSKY: I'm just -- it's the end of the day on Wednesday now. I'm actually just thinking in terms of the deadline for Friday for argument in chief. Clearly I'd like to be able to consult with Mr. Snelson and Mr. Snelson tells me that he's tied up in meetings all day tomorrow. 1475 I wonder if it would be possible to have until Monday for argument in chief. 1476 MR. BETTS: Then I would ask Hydro One and the Power Workers whether they could forfeit that extra day in trying to keep the end deadline in shape. 1477 MS. ALDRED: I think we can do that, yes. 1478 MR. BETTS: That's very good. 1479 MR. SIDLOFSKY: Thank you, sir. 1480 MR. BETTS: Thanks to all of you for working through that schedule, and perhaps Mr. Moran, you can help me by restating the schedule as you understand it now. Okay, maybe I will. 1481 I think the only change to my original schedule was that instead of expecting argument in chief to be filed by Friday, June 27th, we are now going to allow it to be filed on June 30th at the same time, 4 p.m. All of the other dates will remain unchanged. 1482 Again, thank you all for your flexibility and supporting the Board in its effort. 1483 Mr. Moran? 1484 MR. MORAN: One minor housekeeping matter, Mr. Chair. Dr. Poray's CV was filed earlier but it was never given an exhibit number and it would become Exhibit 2.5. 1485 EXHIBIT NO. 2.5: CURRICULA VITAE OF DR. PORAY, MR. PATTERSON AND MR. TONEGUZZO 1486 MR. MORAN: I'm sorry, there are a series of CVs one for Mr. Patterson, Mr. Poray, Mr. Patterson and Mr. Toneguzzo. That whole package becomes Exhibit 2.5. 1487 MR. BETTS: Are there any other items that need to be brought to the Board's attention? 1488 I'm going to thank everybody for their participation and the previous panel as well, and as I warned you, this room gets a little bit warm and stuffy in the afternoon and that adds to the pressure for everybody, but I think we've all done well in the circumstances. 1489 I appreciate your efforts to get arguments in as the Board has required and the Board will try to do its part and get you a decision as quickly as possible. 1490 With that, thank you all once again. Thanks to our court reporters and our staff for their support and we will now adjourn. 1491 --- Whereupon the hearing concluded at 4:08 p.m.