Rep: OEB
Doc: 12NB8
Rev: 0













ONTARIO ENERGY BOARD

Volume: 2

11 APRIL 2003


BEFORE:



P. SOMMERVILLE

PRESIDING MEMBER

G. DOMINY

MEMBER



1
EB-2003-0056

2
IN THE MATTER OF the Ontario Energy Board Act, 1998, S.O. 1998, c.15 Schedule B; AND IN THE MATTER OF an Application by Union Gas Limited for an order or orders approving or fixing just and reasonable rates and other charges for the sale, distribution and transmission and storage of gas as of May 1, 2003. AND IN THE MATTER OF the Quarterly Rate Adjustment Mechanism approved by the Ontario Energy Board.

3
EB-2003-0056


4
11 APRIL 2003

5
HEARING HELD AT TORONTO, ONTARIO


6
APPEARANCES

7

JENNIFER LEA

Board Counsel

CHRIS MACKIE

Board Staff

HIMA DESAI

Board Staff

MICHAEL PENNY

Union Gas

MARCEL REGHELINI

Union Gas

BRYAN GOULDEN

Union Gas

BRYAN GOULDEN

Union Gas



8
TABLE OF CONTENTS

9

REPLY ARGUMENT BY MR. PENNY:

[19]





QUESTIONS FROM THE BOARD:

[134]





DECISION:

[175]





10
EXHIBITS

11

EXHIBIT NO. D.3: ALTERNATIVE CUSTOMER NOTICE

[164]









12
UNDERTAKINGS

13

14
--- On commencing at 9:08 a.m.
15
MR. SOMMERVILLE: Good morning. Please be seated. Thank you.

16
For the record, this is the reconvening of the matter that has been allocated Board file number RP-2002-0130/EB-2003-0056. We are convened this morning to hear the reply argument of the applicant in the matter.

17
My name is Paul Sommerville. I'm the presiding member, and sitting with me is George Dominy.

18
Mr. Penny, are you prepared to proceed?

19
REPLY ARGUMENT BY MR. PENNY:

20
MR. PENNY: I am, Mr. Chairman, thank you. And you will be pleased to know that I prepared my reply submissions on the understanding that we only had until ten o'clock, and notwithstanding I now understand that you are not sitting until 11:30, I will nevertheless keep my submissions to the original plan.

21
What I propose to do, Mr. Chairman, is to deal with overall eight points; although, the first is by far the most significant. So I will deal with the issue of flexibility costs and Union's proposal to allocate to system sales only in the prospective recovery. I will secondly deal with the intervenors' submissions on the recovery methodology.

22
And I will, third, deal with the intervenors' submissions on the true up disposition methodology. My fourth issue will deal with an issue raised by one intervenor on the customer -- overall customer impact of Union's proposals. The fifth will be the use of the March consensus forecast. The sixth point will be a brief submission on the content of the customer notices.

23
Seventh, I will have, again, a brief submission on the -- on some comments that have been made generally on the QRAM methodology. And finally, I will have a brief submission on an issue relating to costs.

24
So let me turn first to the reallocation of flexibility costs. The representatives of the direct purchase market are supporting Union's proposal. Those who tend to represent system sales market are opposed to Union's proposal. It is in this sense a little like the DCC issue, I suppose. It depends on whose ox is getting gored.

25

The School Board Association which represents school boards, who are actually direct purchasers, opposes Union's proposal, but actually seems unaware that they are direct -- that the school boards are direct purchasers and would be benefitted by Union's proposal.

26
And then we've got the School Business Officials, who support Union's proposal in principle, they say, because under the current allocation methodology, direct purchasers are disadvantaged. However, they do ask the Board to, at least, consider deferring the allocation decision until the 2004 rate case.

27
Now, Union, of course, has no financial stake in this issue, because it will recover these costs under either scenario. And it is for this reason, frankly, that I submit to you that Union's proposal should be given the greatest weight.

28
It is rooted in principle -- in two principles: First, the principles of cost causality, and second, the minimization of out-of-period adjustments.

29
The most significant objection to Union's proposal is that because the allocation proposal is a change from the way it was done last time and applies to costs that have already been incurred, it is allegedly retroactive. And for this reason, for example, Mr. Aiken, supported by many others, says to accept Union's proposal but only have it apply from costs that are incurred from May 1 forward.

30
And since the costs have all been incurred and mostly credits will accrue after May 1, Mr. Aiken's solution, happily for his customers at least, assigns all of the costs to both direct purchase customers and sales service customers, but then reserves to only sales service customers all of the credits that are expected during the balance of the year. Union opposes Mr. Aiken's approach on the basis that it is both unprincipled and opportunistic.

31
The argument, in my submission, depends entirely on the proposition that the change in allocation is unfair, because it is allegedly retroactive. And "retroactive," of course, is a somewhat ambiguous term and can mean different things in different contexts. And I understand "retroactive" in this context, as used by the intervenors, to be used in the fairness sense of changing the rules of the game after the costs have been incurred, thereby limiting customers' choice to have taken other measures, which I think can only be to have selected a direct purchase option at an earlier stage.

32
But there is, as used in this sense, in my submission, nothing retroactive about Union's proposal. And the reason I say this arises from the very nature of deferral accounts, which by definition defer the determination of how much is paid by whom until after the full extent of the costs are known.

33
When a cost is deferred in a deferral account, the amount of the cost, whether the cost is prudently incurred, and by whom the cost is paid are all issues that remain to be decided later on disposition. And with respect to an amount recorded in a deferral account, in my submission, unless ordered otherwise, the Board has decided nothing about -- in advance about why -- about the questions of what, why, and who?

34
So it is, I say, meaningless to talk about retroactivity in the context of a deferral account, at least, retroactivity in the fairness or unfairness sense of the word. This disposition -- their disposition, that is the disposition of deferral accounts is by definition retroactive in the broader sense, being decided after the fact, but not retroactive in the sense of unfairness by changing the rules. Because again, the whole point is that the how much, the whether prudent, and the paid by whom questions are all known to be decided later.

35
There's ample precedent for this. There is, of course, the circumstance I already mentioned a few days ago with respect to the reallocation of unbundling costs in RP-2000-0078.

36
The allocation of load balancing costs from 2000, which was dealt with in the RP-2001-0029 case is another example. Load balancing costs from 2000 were dealt with in the spring of 2002, and the proposal that was accepted was to allocate those costs on the basis of March 31 imbalances, not December 31 imbalances, which was the basis upon -- I'm sorry, I have that backwards. The proposal that was accepted was to allocate those costs on the basis of December 31 imbalances rather than the March 31 imbalances which had been the basis upon which they had been used to assigning those costs previously in rates.

37
LRAM balances, there is another example, the forecast cost in rates are allocated on the basis of a certain assumption about the distribution of programs. And when those balances are trued up on disposition, they are allocated on the basis of the actual and therefore a different distribution of programs and, therefore the allocation is changed in the broader sense after the "costs," are incurred, but it is not retroactive in the sense of being unfair because people know that by virtue of them being deferred, the issues of whether they were prudent, how much they are, and by whom they should be paid is left until final disposition.

38
Those issues are in -- to put it simply, are all up for grabs when the accounts are reviewed, when the final balances are reviewed for disposition.

39
So no one can say, in my submission, that the potential for changes to allocation methodology for flexibility in load balancing costs was not on the table for Union and its customers because that was the very essence of the Board's load balancing and flexibility directive. How allocation is done for deferred charges one year is not an order or a determination or a guarantee or even a representation of how it will be done in any subsequent year.

40
If Union were not seeking perspective recovery, the allocation methodology would have been proposed during the 2004 case based on proper cost causality principles and by that point, 100 percent of the cost would have been incurred. So to say no, the Board can't change the allocation from how it was done last time in setting 2003 rates would be ignoring the very essence of what a deferred charge is and what a deferral account is for, and it would be asking the Board to ignore cost causality during the period during which the deferral accounts were accumulated.

41

Now, the Consumers' Association argues that if the whole 41 million of flexibility costs had been embedded in rates already as the benchmark, for example, and allocated in a certain way, then Union would not have been able to change the allocation. Now, in my submission, that's not necessarily so, so we don't necessarily accept that proposition for the reasons I've outlined. But even if it were correct, the whole point is that this charge is not in rates, there's been no final order of the Board determining how these amounts should be allocated. And that's the difference between a final rate order and a deferral account. The submissions that the intervenors make on this issue and, in particular the submission that Mr. Warren makes on this point, would all be true if we were dealing with the final rate order, but we're not. We're dealing with the deferral account.

42
Mr. Aiken argues that customers have a right to expect that how it was allocated last time is how it will be allocated next time, and there just is no such principle, Mr. Chair. There's no such right with respect to deferral accounts. It's as I said, the very nature of a deferral account dictates otherwise.

43
And finally on this particular point, the only retroactive effect in the negative or unfairness sense of the word that will result from adopting Mr. Aiken's approach is recovering the costs on one basis and then disposing of them on another. And so the concern Union has is if we recover them on one basis and then dispose of them on another, then there will be a retroactive adjustment in the negative sense of the word, and so Union's proposal seeks to avoid that retroactivity.

44
Just finally, if notwithstanding my submission the Board is concerned about affecting even an interim change, because remember -- I will be making some further submission on this in a moment -- but this is of course a interim change in the flexibility cost allocation. But if notwithstanding this the Board is concerned about affecting an interim change in flexibility cost allocation, Union submits that the appropriate, and frankly the only logical thing to do is to leave the allocation as it is for the time being to be reviewed fully on disposition of the final balances.

45
But that's clearly Union's much less preferred approach. And you can see that -- Union gave some evidence on this through Mr. Kitchen at paragraphs 1047 and 1048.

46
The second issue under flexibility has to do with the submission that Mr. Aiken and Mr. -- and VECC principally made that relates to the issue of customer choice. This objection is that customer choice will have been disadvantaged by virtue of this change in allocation, and that's, as I understand it, because the argument goes had a customer known that out of an entirely unforeseen and unknown commodity-related deferral balance that might accumulate in the future, some of that based on one component, the flexibility component, might be allocated entirely to sales service customers instead of both to sales service customers and direct purchase customers, that if the customer had known that then they might have opted to go to direct purchase earlier. And this, I can only say, is even as stated a farfetched and speculative argument that is, quite frankly, totally unsupported by any evidence.

47

The fact is that it is an argument that is totally unsupported by the direct purchase community who are the ones who are really in a position to know. If they had a concern about this, they'd be the first to raise it and that should also tell you something about the merit of that argument. Common sense tells you, in my submission, that a factor like this, and remember this is in the context of a future unforeseen and unknown event, there might not even be deferral account balances, and they are affected by price, weather, all kinds of things, that would be unlikely in the extreme, in my submission, to influence even the most astute market observant sales service customer considering direct purchase.

48
Obviously what a customer would look at is what's Union's got on an offer and what's the direct purchase representative got on an offer.

49
At page 4 of its argument, VECC argues that, I think I've got this right, "The dollar amount of the flexibility change will be passed off as if they were part of rising market gas costs."

50
And with great respect to the author the VECC's argument, that is precisely what the flexibility cost increases are. They're not being passed off as gas cost increases, they are gas cost increases. And the allocation change is to enable Union to charge customers for Union's actual commodity costs for gas that has already been consumed. The whole point of the commodity exercise is to recover Union's actual costs of the commodity.

51
Similarly at page 9 of the VECC argument they say: "If the commodity price of gas is loaded up with costs associated with prior periods and changes in allocated costs, there is clearly a distortion of the 12-month forward price of natural gas."

52
Now there's a number of problems with that submission. First, there are no prior periods under Union's proposal. The whole point of Union's -- the whole point of Union's proposal is to avoid having customers paying for costs that are incurred in prior periods. And second, if the change in allocated cost is justified, as we say it is, on cost causality principles, then the commodity costs are not being loaded up with allocation changes, these are the portion of Union's actual commodity costs that are caused by that group of customers.

53
And third, there is no distortion, no distortion of the 12-month forward price because that -- and even if there were, it's totally irrelevant. The presumption in this argument seems to be that the 12-month forward price is the proper comparator if the customer is considering going to direct purchase, but that is quite wrong. The customer should not be comparing the broker's price to the 12-month forward price because that's not the alternative. The alternative is Union's actual all-in cost of gas being paid by that customer. The 12-month forward price has nothing to do with it, and that's not the basis of Union's price.

54

So if we're talking about appropriate price signals, in my submission, the appropriate price signal is, what is Union's all-in cost of the commodity for that customer at the end of the day, and that is what this proposal is all about. We are trying to convey that price signal by letting the customers know what that all-in cost is likely to be at the end of the day. That's why Union has projected the year-end deferral account balances, including prospective recovery and flexibility allocation, and that's Union's best estimate of what it's all-in cost is. The customer neither needs the components nor do they care about the components, what they care about is the all-in cost. That was reviewed in cross-examination with Mr. Birmingham in the transcript at perhaps 1108 to 1113.

55
Also at page 9 of whoever authored the VECC argument, it also -- it's also said that "As VECC has referenced above, to embed flexibility costs into a commodity rate charge without clear disclosure to customers is an inappropriate effort to potentially mislead customers into believing the rate they are paying is merely due to increased gas costs."

56
Now this, in my submission, shows that VECC does not know what it is talking about, because the flexibility costs are commodity costs. There isn't even any controversy about that. The only reason that these costs were recovered in delivery rates is because under what we're saying was the -- is now the outdated methodology, they had to be recovered from all general service customers, not just sales service customers. And, of course, the only way to do that is to recover those commodity costs in delivery rates, not in the commodity rate. So it's not a question of what the costs are, there's no delivery component to the cost, they were recovered in delivery rates for the purposes of the prior methodology which called for recovery -- from both groups of general service customers.

57
If the evidence is clear about nothing else, in my submission, it is clear about the fact that flexibility costs are commodity costs. And so in my submission, this argument of VECC's is so overreaching that it has really stumbled over itself by misapprehending this basic central fact.

58
The third major objection to the flexibility allocation proposal is -- it relates to notice. Another concern has been -- or this concern that's been raised is whether interested parties had adequate notice of these proceedings and particularly of the fact that a change in the proposed allocation of flexibility costs would be proposed.

59
Union basically agrees with Mr. Vegh on this issue. You have to bring an air of reality to bear on this and say, are all relevant interests represented; and of course the answer is yes, in my submission, some of them more than once. But we don't need to get into any of that, frankly, because whether additional notice should have gone or whether intervenors might have filed evidence if they'd known or had more time, or any of those issues, and that's because the complete answer to all of these concerns is that this is not an application for a final rate order. It's an application for prospective, interim recovery forecast deferral account balances brought in an attempt to avoid having to impose well into 2004 large, after-the-fact adjustments to 2003 costs.

60
They are, of course, subject do final disposition and true up. Final disposition of these balances will require Union to prove the amounts, that they were prudently incurred and that they were appropriately allocated in the interim recovery. That will be in the context of a full blown rate case, the 2004 rate case. There will be the full publication of notice and intervenors can seek to put forward evidence on this issue if they deem it appropriate to do so. So when VECC complains about the lack of notice for what they -- I think they say is a "permanent change," that's not correct. This is not a permanent change, this is an interim disposition of a deferral account in an effort to avoid large out-of-period adjustments.

61

Union brought this proposal now because it thought it that it would be inappropriate, if not irresponsible, to stand in the weeds on this allocation issue knowing the cost causality justification was not there and knowing its proposal ultimately would be to change the allocation for recovery to sales service customers. And it would have been, as I say, irresponsible and inappropriate to just blithely carry on with the outdated methodology as if nothing had happened.

62
Notice, in my submission, is not in issue because this is in the nature of interim recovery.

63
As an aside, while I'm on this topic, let me just respond briefly to what I regard as a somewhat mean-spirited and unnecessary suggestion from VECC that the sole motivation for this application is the avoidance of public outcry and that Union is somehow trying to dupe customers to avoid that outcry. Apart from the fact that this isn't mean-spirited and unnecessary, and apart from the fact that it's completely unsupported by any evidence, it's frankly unfair because this was never put to Union's witnesses. And if Mr. Janigan wants to make these kinds of irresponsible and cynical arguments about motive, then let him at least do the witnesses and the company the courtesy of putting that suggestion to them when they are here so they have the opportunity to respond to it instead of piping up with these speculations for the first time in argument.

64
Union is not bringing this application to avoid public outcry, it is bringing this application to avoid what was the cause of public outcry, and that quite properly was the accumulation of large deferral account balances that are not cleared until well after the period or even the calendar year in which they were incurred. VECC, in fact, is a signatory to a settlement agreement in our last case that contemplated clearing deferral accounts more often than annually to avoid these out-of-period charges, and that's why this application's been brought. There's no basis for these inappropriate allegations relate to go motive or for the use of the kind of extravagant and excessive language that has been used.

65
My last submission with respect to flexibility costs relates to the submission from the School Board Association that is founded on the -- what they say is the inappropriateness of the QRAM methodology. The School Board Association argument is that essentially none of what Union is asking for in this application, other than the WACOG change, should be allowed because the QRAM methodology is inadequate, and that this application is somehow an attempt to amend or change the QRAM methodology.

66
Perhaps the School Board Association was at a different hearing, but this is no part of Union's -- it is clearly no part of Union's application to change the QRAM methodology. Union is applying the QRAM methodology and, as well, the existing deferral account methodology which explicitly contemplates proposing not only a forward-looking change to WACOG and the reference price to avoid further accumulations but proposals for clearing existing balances if they exceed the $20 trigger for an average residential customer.

67

It is true that Union is asking for more than the QRAM normally does, but that is not by virtue of trying to shoehorn something new into a QRAM application, but rather additional requests for additional relief beyond those available under the QRAM. And it's really to deal with a particular problem, and that is the combination of the change in cost causality of flexibility charges due to the advent of the vertical slice and the magnitude of the price spike which resulted in a large -- in a large magnitude of deferral account balances.

68
The appropriateness and the effectiveness of the QRAM methodology will have its day in due course in Union's next main rates case. All we are seeking here is an interim order made in the bona fide effort to avoid large out-of-period adjustments.

69
But it is appropriate in this context to raise another issue which goes beyond just the allocation of flexibility costs. The School Board Association, purporting to represent school boards, is vehemently opposed under this heading of misuse of the flawed QRAM methodology, is vehemently opposed to any prospective recovery of accrued balances of any kind. And for reasons that remain obscure, this association says that the forward WACOG change is the only change that should be allowed to Union's rate. And so the 90 million in accrued costs for the gas customers who have already -- for gas that customers already burned, they say, should remain in deferral until disposed of sometime in 2004 it appears. And I would note parenthetically that this position is difficult to understand given that the Association of School Boards filed a petition to cabinet seeking to reverse the Board's decision in RP-2001, matter 29, which approved the disposition of those large deferral account balances. And one of the grounds for that petition was the alleged failure of Union Gas to properly manage and pass through its gas costs.

70
And they said, I quote, "Union Gas failed to institute proper systems to track and adjust for gas price changes during 2000 and 2001, and as a result failed to pass those costs on to customers in a timely manner as they arose."

71
They concluded that submission by saying that: "The Board erred in failing to consider whether Union Gas not passing these costs on in a timely way should be considered to be a management failure, the cost of which should be borne by the shareholders of Union Gas rather than the ratepayer."

72
So we appear on the on the horns of a dilemma here. When we did pass these costs on, we were accused of not -- indeed mismanagement for not trying to recover them on a more timely basis, and now of course that we are trying to recover them on a timely basis we are meeting with stiff opposition.

73
But then we have the Association of School Business Officials, also purporting to represent the public school boards, submitting argument that is equally adamant that the 90 million in accrued cost should be recovered prospectively to avoid large dispositions later in 2004.

74
And there's also a discrepancy, which I already touched on, frankly, over the treatment of the allocation of flexibility costs, because the Association of School Boards is adamant that there be no change, and the Association of Schools Business Officials says that this is a -- that they are predisposed to support Union's proposal. Frankly, the School Board Association is taking the position that the QRAM process is totally deficient, and the Association of Schools Business Officials takes no such position.

75

So one of the concerns I raised on the intervention issue has come to pass. Two intervenors representing exactly the same customer are taking opposing positions on the same issue, and I, for one, do not know at this point what the position of the school boards is, if they even have one.

76
And it frankly doesn't seem right, in my submission, that the Board is now left to try to reconcile some internal dispute over policy that the two organizations representing the same customer can't work out for themselves.

77
In any event, from the perspective of a responding party it makes it difficult, because one doesn't know which is the position of the public school boards, and, therefore, which position to properly respond to.

78
So that concludes my submissions on the flexibility reallocation issue. I have now -- I will now turn to the second submission that deals with the recovery methodology.

79
Mr. Aiken, supported by VECC, argues that the recovery methodology over the eight months May to December of 2003 is not the way to go, that what Union should do is recover these costs over three monthly installments of $24 in July, August, and September.

80
Union's principal submission in response to this is that customers don't like these monthly installments. It was the six monthly installments from the 2000 and 2001 balances that contributed to the extreme customer unhappiness last fall.

81
The only evidence, as opposed to Mr. Aiken or Mr. Janigan's speculation on what customers prefer or, alternatively, what they abhor, is from Union's witnesses. And specifically, Mr. Kitchen at paragraphs 994 to 1002 spoke to this issue and made it quite clear that Union did not want to go this way, precisely because customers didn't like that.

82
And Mr. Aiken said: "Why is Union not proposing a similar charge to recover the costs from this proceeding?"

83
Mr. Kitchen says that: "I think the customers have indicated to us they don't like lump-sum in some ways. They also -- the fact that we started recovering this in May, the same time we're also recovering the retro-charge from the prior case, we would be doubling up those amounts for at least the May through June period. Then we'd continue those, let's say -- and let's say six months, whatever we choose to do. It would appear as though we weren't actually taking those -- we weren't removing that adjustment from the prior case."

84
And then Mr. Aiken asks: "Wouldn't it be of benefit to customers to pay these in a period when their consumption is low? "

85

And Mr. Kitchen says at 998: "We could do that, however we don't believe that our customers would appreciate that, given that they would be just finishing up paying an approximately $20 charge, and we would continue it. In addition, for our budget billing customers, we wouldn't be able to pick that up -- pick up those adjustments for them."

86
Then another question: "Don't you think customers would appreciate a lower overall cost?"

87
Blah, blah, blah. And Mr. Kitchen: "I think that certain customers may appreciate the nuance, but I'm not sure that the mass necessarily would. I think they would view it as a continuation of a retroactive adjustment from 2001/2002. I think our call centre would be barraged with calls as to why it hasn't stopped."

88
Union, accordingly, is very strongly opposed to this approach and believes its customers would react very negatively to it.

89
Mr. Aiken argues that there are benefits, such as reducing uncertainty over the final balances due to weather variance, which might occur in the fall of 2003, or, he says, the reduction of a little interest. And these are, in my submission, de minimis considerations.

90
No system of recovery is going to perfectly dial in every customer to zero, and the Board has acknowledged this on a number of occasions. But in its November QRAM order EB-2001-0533 it was dealing with a slightly -- with a different issue, obviously. But the Board there indicated that -- it said:

91
"The Board has considered the evidence and finds that it is appropriate to adjust Union's rates and reference prices to reflect the evidence of changes in gas costs. In approving the rate rider, the Board notes that the adjustment is directionally correct and that the details of the disposition will be addressed in the customer review process. Parties who raised concerns regarding the mechanics and details of the rate rider and the accounting methodology will be able to examine these matters in the customer review process."

92
And that, in my submission, applies in spades to the current situation.

93
Union's approach will keep the final adjustments to a minimum. Mr. Aiken's approach, frankly, seeks what we submit is an unreasonable level of perfection.

94
Interest, for example, accounts for only 4 percent of the $90 million. The difference in interest between Mr. Aiken's three monthly installments in the summer and Union's proposal is at most only about $690,000 or 0.8 of a percent. This represents about 60 cents on the total annual bill of the average residential customer.

95

So in my submission, Mr. Aiken's submission on this issue should be rejected.

96
Now, the Consumers' Association does not support the LPMA or Mr. Aiken on their proposal, but they are advocating a slightly, yet again, different approach. And that is spreading the recovery over 12 months rather than 8 months, in other words, over a calendar year instead of the balance of 2003.

97
Union has at least two objections to this: First, using 12 months takes the recovery beyond the calendar year in which the costs were incurred, and this is contrary to the objective of trying to keep the cost recovery in reasonable proximity to the period in which the costs were in fact incurred.

98
Second, by taking the recovery period out beyond 2003, you run the risk of overlapping or doubling up on adjustments that may be required to avoid accumulating balances in 2004. You have to pay the piper, Mr. Chairman, at some point and the longer the amortization period, particularly if it goes beyond the calendar year, the more likely it is that you end up paying not only debts from 2003 but potentially debts from 2004 as well at the same time.

99
The settlement agreement in the 2003 rate case contemplated, at a minimum, annual clearances and that principle should be honoured as much as possible for the recovery as well, in my submission.

100
Let me then turn to the third issue, the true-up calculation methodology. This is the summer peaking issue that was raised. And the LPMA and a number of others take issue with Union's proposed true up methodology. Let me first respond by saying that Union has brought its proposals for true up forward now so that parties have early notice of how Union proposes to deal with the true-up process. But Union has not requested approval of the final disposition methodology in this proceeding. Union's evidence on this is for information only. The methodology will be, of course, for determination at the time that the final disposition and true-up is done.

101
So accordingly, in my submission, Mr. Aiken and the others who raised this issue are effectively premature in their objections. Union's disposition methodology including the true-up portion of that will be brought forward and will be a live issue when the final deferral account balances are known and disposed of, and there will be ample opportunity to resolve how that should be done at that time.

102
In any event, just by the by, Union's approach to dispose of final balances using the January to March volumes as the benchmark seems, frankly, prima facie the right approach since virtually all of the load balancing and flexibility costs were incurred in this time frame. Then you can see from Exhibit T.1, schedule 5, page 3 that in fact the January to March 2003 portion of the projected $90 million in costs is actually 109 percent. So it's more than the total final balance, that balance reduces over the balance of the year and doesn't, of course, increase. And the same, frankly, is true for the PGVA.

103

I also submit that Mr. Aiken is, in any event, chasing a false and unattainable precision with his submissions on this issue. Allocation methods attempt to fairly allocate costs on the basis of cost causation, but they're not attempting to identify perfectly or every dollar of cost and match that perfectly to every customer or customers who caused that cost. To do so would result in an overly complex and costly administration of rates. But, as I say, this is an issue for another day. Union is not asking the Board to rule on the final true-up disposition methodology.

104
Let me then turn to the fourth issue on my list of issues being responded to which deals with customer impact. This arises from an argument put forward by the Association of School Boards and, significantly, only by the Association of School Boards. They've advanced the argument that because the cost of the commodity increased over what is in rates by a lot, 140 million in total, the cost impact is too great and recovery should not be allowed.

105
This position, again, I have -- I point out is not shared by the other representative of the public school boards, the Association of School Business Officials.

106
Frankly, this argument displays an alarming lack of understanding of how the natural gas business is regulated and how natural gas deregulation has evolved. In this province, of course, since 1985 the price of the commodity has been deregulated. Customers pay the market price for the commodity. If the market price goes up, customers have to pay more. If the price goes down, customers pay less.

107
Bundled customers, however, but even direct purchase customers were -- sorry, bundled customers, even direct purchase bundled customers, however, continued to receive commodity-related services from Union Gas and that is what is represented by the load balancing and flexibility costs. Customers who want to avoid commodity charges based on Union's cost of the commodity can do so, but they have to take on the concomitant risks of managing their own portfolio and managing their own load balancing and winter acquisitions.

108
Union, remember, makes no profit or return on its sales of the commodity. Union's commodity costs, subject only to review for prudence, are a pure flow-through to customers.

109
In this case, customers have already consumed the gas which is represented by the flexibility and load balancing costs. This is -- they've had the benefit of this. Union is only asking for recovery of the cost to Union of supplying that gas. So there's no dodge here; there's no shell game. This is not some kind of bail-out. There's nothing more than recovery of the market price of commodity services which customers have already taken the benefit of.

110
So there is no rate shock, in my submission. If customers do not pay these costs, they're getting 100 percent free ride. And in the absence of a finding of imprudence, frankly, any refusal to permit recovery of these costs would be unlawful expropriation or even worse. So, in my submission, there is no merit whatsoever to the Association of School Boards submission on this issue and that point is emphasized by the fact that no other intervenor has even hinted at a comparable position.

111

Let me turn then to the fifth submission that deals with the argument that the March consensus forecast should be used.

112
Union used the February consensus as a practical matter because it takes several weeks to turn around all of the financial analysis necessary to prepare and file evidence. So if Union had waited for the March consensus forecast, we couldn't have had an April 7th hearing. It's as simple as that.

113
Now that the hearing is underway, of course, yes, we do have a March consensus. And so the question has been posed by intervenors, Why not use the March consensus forecast? There's several problems with it.

114
First all of, the forecast balances would have to be redone and the unit rates needed for prospective recovery would also have to be redone. And if those were all redone and then were used for the purposes of the rate order, that would involve using numbers that had not been reviewed by any of the parties to this proceeding. If we took the time to let parties review all of those numbers, we would not be able to implement by May 1. And, frankly, even if we didn't leave the time to redo all those numbers, if the Board ordered -- if we didn't take the time to review all of those numbers throughout the entire intervenor community involved in this case, but if the Board just ordered Union to use the March forecast, I'm advised Union could not also, in any event, meet the May 1 implementation date.

115
In any event, the difference between the February and the March consensus forecast is relatively small as outlined by Mr. Dent in paragraphs 351 to 353 of the transcript. And finally, it seems to me a complete answer to this issue is that if there is any residual concern over the differential between -- the small differential between February and March, it is answered by the fact that if there is a material impact over the coming months, that July QRAM will pick them up. And that is also dealt with by Mr. Dent at paragraphs 351 to 353 of the transcript.

116
I've a brief submission on the content of the customer notices, the sixth issue. And I'm asking Mr. Goulden to pass out a revised draft of the exhibit that dealt with the M-2 residential notice. This arises, Mr. Dominy, out of a concern you raised in the transcript the 1441 to 1448. Union has, in response to that concern, drafted an alternative form of notice that would be - and we're calling it a draft - it would be responsive, at least it's a proposal that would be responsive to the questions that you asked the other day. And it's of course the underlined part.

117
We don't prefer this approach, however, essentially because of what Mr. Birmingham said at paragraphs 1108 to 1113 of the transcript which I alluded to earlier, and that is simply the burden of which was to say that really, essentially what customers care about is the bottom line cost. And so it seems to Union unnecessary to do this, but if the Board wants it done this way, of course, we would do it this way. So this is provided to you as a possible approach if the Board is concerned about that issue.

118

Part of the concern is that in a sense, all commodity rates are interim because of the QRAM mechanism and the final true up process. So if one were being totally precise about these things that even on the WACOG change you would go so far as to say, Well the WACOG may also change because there may be another WACOG application in July. So there's a balance, obviously, between how much information is put out there, how much would be useful as opposed to how much would be helpful. We can break out the charges as proposed in this draft. We're not sure how helpful it will be to customers in the end, but we wanted the Board to have some proposed language to deal with that issue if, in the end, the Board feels it's important to address that.

119
Just I guess before -- I didn't list this as an item. I have a note about the City of Kitchener. They put in argument on a couple of issues. The argument begins with the admission that they have no interest in this application so they are truly -- I don't say this in a negative way, at least I don't mean it in a negative way, -- they are truly officious intermeddlers on this application.

120
There's no evidence before us to support any of Mr. Quinn's allegations but, in any event, it's all relevant only to the prudence issue, as I think, Mr. Chairman, you as pointed out to him, and it's not relevant to the issues before you. So for these reasons we're not going to respond to the City of Kitchener's arguments in these proceeding and we will look forward to see if those become live issues as a subsequent point in time.

121
I did want to make a submission on the QRAM methodology generally because a number of intervenors commented on various aspects of the QRAM methodology. This is my 7th point.

122
While Union does not necessarily agree that the QRAM methodology is in need of dramatic overall, Union has agreed to a full review of the QRAM in its 2004 rate case and that -- there's a provision, 5.6, in the ADR agreement from our last case that touches on this. And it's certainly Union's intention and expectation that there will be a full review of the QRAM methodology in its next case.

123
Union is not, as I've said earlier, trying to amend the QRAM methodology in this application nor is this an appropriate time for a consideration, in our submission, of the adequacy or appropriateness of the methodology as such. We're preparing -- we will be preparing evidence for a review of the QRAM, and particularly as it relates to commodity pricing mechanisms, to deal with retroactivity and related concerns. And that will all come forward in the 2004 rate case.

124
And finally, I did say that I had a brief submission on costs. It arises, sadly, from the diametrically opposed submissions that you received on many issues from the Association of School Boards and the Association of School Business Officials. They represent, as I've said, exactly the same client, the public school boards in Union's franchise area. And as I have alluded to, it cannot be right that the inability of these two associations to agree on a common policy for the same client should leave the Board having to recognize conflicting positions with respect to the same customer.

125
This proceeding is only a one-issue case, in effect. But it's a glimpse into the future of what you can expect in a more multi-faceted case and, in my submission, this phenomenon, what you've seen in these arguments on this issue between -- from these two parties, this phenomenon will not assist the Board, it will not assist Union Gas, it will not assist the process. It will lead to problems, to more problems, and it will lead to additional hearing time and cost.

126
And to prevent this from getting out of hand, I submit, you have to send a message that creates an incentive for these organizations to get their act together.

127
Your admonition, Mr. Chairman, when the Board granted the Association of School Boards intervenor status was clearly not enough, because now the very problem that was contemplated has come to -- one of the very problems has come to pass. They're taking inconsistent positions on behalf of exactly the same client.

128
Only a clear and concrete step will send the right message, in my submission, and you should send that message by only granting one set of costs to both associations by, in effect, giving them each one half of their claimed costs.

129
So those are my submissions, Mr. Chairman. Subject to any questions, that will conclude Union's application.

130
MR. SOMMERVILLE: Thank you, Mr. Penny.

131
[The Board confers]

132
MR. SOMMERVILLE: Mr. Dominy has some questions.

133
MR. PENNY: Yes.

134
QUESTIONS FROM THE BOARD:

135
MR. DOMINY: A couple of clarifying questions, and I'm not sure, Mr. Penny, whether you will be able to answer them. You've got staff with you --

136
MR. PENNY: Yes. I'll do my best, sir, or we will do our best.

137
MR. DOMINY: It's my understanding -- one of the arguments given with regard to changing the methodology of flexibility costs is the concern that some parties would be doubly -- double-counting or doubly paying the flexibility. And my understanding was that related to new direct purchase customers who were edited under the regime of the vertical slice. That was my understanding during the evidentiary portion.

138

I was wondering whether there was any indication as to what proportion of the direct purchase customers you currently have, the new direct purchasers working under the new vertical slice system comprised; is there any indication of that? It may have already been given in the evidence.

139
MR. PENNY: I'll let Mr. -- perhaps, I'll let Mr. Reghelini supplement what I'm about to say, but the evidence really covers off both issues, in a sense. It is true to say that the -- that post vertical slice direct purchase customers have taken their pro rata allocation of the upstream assets used to serve, and so with respect to those customers, we say that they should not be attracting flexibility costs, because that's what those flexibility costs are.

140
With respect to pre-vertical slice customers, the evidence addresses that on the basis that they were -- when they were getting pure TCPL, those contracts were, you know, coming to term on a staggered bases.

141
And we know from -- you may recall from past cases on this issue that upwards of 50 percent of that -- of those contracts were coming up for renewal in relatively short periods of time.

142
So the principle that Union applies is to say that even those who were pre-vertical slice are not currently sitting with 100 percent TCPL, that when those contracts came to term, they then, effectively, became like post-vertical slice. They replaced that with whatever they wanted. So they have diversified portfolios as well.

143
That was the -- I gather that was the point that Mr. Reghelini was going to make as well. I will just give you the evidence reference for that, Mr. Dominy, in case you want to look that a little more carefully later.

144
MR. SOMMERVILLE: What you're saying, then, Mr. Penny, is that there is no dichotomy between the pre-vertical slice and post-vertical slice direct purchasing community?

145
MR. PENNY: In general, that's right. From a directional point of view, that's right. It may not -- we can't say it's a perfect match-up, because it clearly isn't. But from a directional point of view, that because these contracts were terminating, those customers that were pre-vertical slice have similarly diversified their portfolios.

146
MR. SOMMERVILLE: There may be some remnants, but that's what they are?

147
MR. PENNY: Yes, that's right. C.28.1 deals with that, and then the -- but it's in the pre-filed evidence, and I'll just -- if I just take a second, I'll find it.

148
While we're looking that up, did you have another question, Mr. Dominy?

149

MR. DOMINY: Yes, I did, and that was I believe that you were proposing your method of changing the methodology for flexibility to -- one of the reasons was to minimize the out-of-period adjustments from your introduction off the topic.

150
MR. PENNY: Yes.

151
MR. DOMINY: And I wondered to the extent that if one used the existing methodology or one -- or contrast the case of using the existing methodology and using the proposed methodology in making an adjustment, a prospective adjustment now, what is the difference in the --

152
MR. PENNY: The relationship between the change in methodology to making -- to out-of-period adjustments is as follows -- there's three possibilities:

153
The first possibility is that Union's proposal is followed and that -- so that the change is made now and then on final disposition that allocation is finally approved, and therefore, there's a match between the interim recovery and the final disposition, so there's no out-of-period adjustment.

154
The flip side of that, which also results in no out-of-period adjustment, is that we don't change the recovery now -- the basis of allocation for the recovery now, and later, on final disposition, Union's proposal is rejected. And therefore, the current methodology continues. That also does not result in any out-of-period adjustment.

155
What results in an out-of-period adjustment is if there's a mismatch between the allocation used for the purposes of recoveries and the allocation used for purposes of final disposition.

156
So if Union -- and that's the very reason that Union is proposing this methodological change now, because -- and letting parties know is because we've come to the conclusion that the flexibility charge is no longer justified to be collected from all general-service customers.

157
And so rather than leave the current methodology in place for recovery purposes but then propose that change for purposes of disposition, which does result in a mismatch and that $20 charge you heard about, we thought it better to bring forward the proposal now and -- with a view to letting parties know that that's the conclusion that Union had come to. And we propose adopting that on an interim basis, because in our view, it's likely that that's the way that that would be accepted for purposes of final disposition.

158
MR. DOMINY: So the risk exists that if the Board adopts the proposed methodology and then has the more fulsome discussion of the subject, that you suggest it would take place at the time of the disposal of the deferral account balances --

159

MR. PENNY: And does not accept Union's proposal, then there's a mismatch. But it's equalled by the risk that if we leave things the way they are, and then Union, as we know it will, will propose new methodology because of cost-causation principles, that there -- that will also result in the mismatch, because we will have recovered from everybody.

160
But then later we're going to have to adjust that back to being just system sales customers, so there will have to be a $20 claw-back from system sales customers and $20 credits given to direct purchasers.

161
MR. DOMINY: I think I understand. Thank you, Mr. Penny.

162
MR. SOMMERVILLE: I have no questions, Mr. Penny --

163
MS. LEA: I have one procedural matter, Mr. Chairman, and that is I'd like to assign an exhibit number to the alternative customer notice that was provided. That will be Exhibit D.3, please.

164
EXHIBIT NO. D.3: ALTERNATIVE CUSTOMER NOTICE

165
MR. SOMMERVILLE: Mr. Penny, the Board is mindful of the legitimate interest in the applicant in receiving a decision in this matter promptly.

166
What I propose to do is for the Board to retire now to deliberate and to determine whether we can arrive at a decision at some point today or at some point in the very near future. Really, to determine whether we can do it today so that we can make some scheduling decisions for today, and failing that, to make some scheduling decisions for early next week.

167
And we will communicate through Staff the outcome of that initial deliberation, and so we'll leave things there for the moment.

168
If you can be available for the next hour or so, that would be helpful so that we can make that communication, or your delegate will be fine.

169
MR. PENNY: Yes. Well, what we'll do is just stay in the nearby office, then, for roughly that hour. Is that acceptable?

170
MR. SOMMERVILLE: That's perfectly acceptable. Thank you.

171
With that, we will adjourn. Thank you very much, Mr. Penny, and we'll get back to you very shortly.

172

MR. PENNY: Thank you, Mr. Chairman.

173
--- Recess taken at 10:01 a.m.
174
--- Upon resuming at 11:30 a.m.
175
DECISION:

176
MR. SOMMERVILLE: Thank you, please be seated.

177
The Board is in a position to render a decision in the case of RP-2002-0130/ EB-2003-0056.

178
Over the last number of years, the price of natural gas has been subject to very considerable volatility. Managing this volatility in the interests of consumers who ultimately must pay for the gas has proven to be a very challenging aspect of utility management and regulatory oversight. Last year, for example, utility customers were faced with a very significant, out-of-period adjustment related to spikes in gas prices. In that case, the deferral accounts which hold the variances between the actual price paid for the gas by the utility and the commodity price charged to customers throughout the year held a large deficit balance which it was agreed by way of settlement agreement had to be cleared.

179
The result of that clearance was a large, lump-sum levy against customers months following the time during which they had actually used the gas. This retroactivity made the levy even more objectionable to consumers, insofar as it came without warning and without any reasonable opportunity for them to assess their usage or energy supply choices in light of the price they were ultimately obliged to pay.

180
It is important to highlight the fact that the commodity portion of the utility's overall rate is intended to be more than a pass-through of the actual price paid by the utility for the commodity. This pass-through aspect of the commodity portion of the overall rate is a fundamental element of rate design in this jurisdiction and every other analogous jurisdiction.

181
It is not intended that there be any opportunity for profit nor risk of loss for the utility associated with the purchase of the commodity per se. One way or another, either retroactively or prospectively, increases in the cost of gas must be covered by consumers of that gas.

182
The Board has approved and mandated a quarterly rate adjustment mechanism which is designed to enable the utility to adjust the commodity price portion of its overall rate in response to price signals from the gas purchasing market on a quarterly basis between rate applications.

183
The QRAM is designed to provide a formulaic, non-controversial adjustment to the commodity portion of the rates.

184
In Union's case, the QRAM is based on the price projections made by a board of experts who develop their projections on the basis of a variety of factors affecting current -- and according to their consensus forecast -- future prices for the commodity.

185
Union responds to the consensus forecast through an abbreviated application process which is designed to do no more than pass through the adjustment in commodity price.

186
In February of 2003, the consensus forecast predicted an increase in the Alberta WACOG. The March forecast, which was filed since the applicant's original filing, indicates a further projected increase in the Alberta border WACOG. The appropriate response from the utility was an application pursuant to the QRAM methodology to increase the commodity portion of the rates it charges its customers to reflect the increase reflected in the consensus forecast.

187
The Board considers that the appropriate basis for all of the adjustments sought by the application in this case is the March consensus forecast, which is the most recent available forecast. However, Union has indicated that it is unable to accommodate the March forecast in developing the sought-for May 1st implementation.

188
In this instance, the Board accepts Union's submission, and the adjustments which are approved later in this decision will be based on the February consensus.

189
It should be noted that a substantial portion of the application before us is no more than the formulaic application of the consensus forecast to the commodity portion of the rate schedules. All parties who addressed this issue, with the exception of School Boards, recommended that action be taken to minimize the possibility of significant retroactive levies.

190
Another aspect of the matter before us arises pursuant to a Board directive to bring -- to Union to bring application for the disposal of deferral accounts when such accounts reach a threshold, which would result in an impact on the average residential customer greater than $20.

191
One of the effects of the consensus forecast is to create a projected balance in the purchased gas variance account and the other purchased gas costs account, which would exceed the threshold.

192
The innovation in this application is that the utility seeks Board approval for the prospective collection of the projected debit balances in these accounts. Under the utility's proposal, the increase projected by the consensus forecast would be added into rates effective May 1, 2003.

193
The increase would be collected over the remainder of 2003, and the accounts will be cleared early in 2004.


194
Of critical importance is the fact that the balances at the time of clearance would be subject to a definitive true-up, which would correct for any over- or under-collection. In other words, if the consensus forecast proves to be inaccurate, and the utility is under- or over-collected, an adjustment will be effected to address the same.

195
The alternative to the utility's proposal is to await developments and to address the resultant debit or credit balances at the time of disposal of the deferral accounts in 2004. If a consensus forecast is directionally correct, and gas purchasing costs are going to be higher than is currently reflected in the rate structure, customers will be faced once again with retroactive levy.

196
Not only have customers expressed distaste for such levies, such an approach does not enable consumers to make decisions respecting source of supply, usage, or energy selection based on an accessible understanding of the predicted cost of the gas commodity they are using over the period.

197
The utility's proposal has the virtue of building the reasonably anticipated costs of the commodity into the current rate, subject to a true-up at the time of disposal. This prospective approach has a further advantage for institutional and commercial customers who will at least be able to budget for gas costs on a basis that minimizes the extent -- to the extent reasonably possible the risk of material shortfalls at year's end when the deferral accounts are disposed of.

198
In the event that the utility pays less than the anticipated rate for gas over the period, that customers will be reimbursed to the extent of such overpayment early in 2004.

199
Taking all factors into consideration, including some proposals made by intervenors with respect to alternate methods of dealing with this subject matter, the Board considers it most appropriate to approve the prospective recovery of the projected deferral account balances, subject to true-up, rather than subject the consuming public to the high risk of a significant retroactive levy to address debit balances at year end.

200
There are two additional elements of the application: The first of these involves Union's proposal to increase the magnitude of load balancing costs recovered in delivery rates to recover the increased costs of load balancing.

201
The utility purchases spot gas in the winter to ensure that the system as a whole contains enough gas to meet system requirements. Direct purchase customers are obliged to deliver gas in balance with their contracts, but only at year-end and only within 4 percent of their contractual obligation. System customers use proportionately more gas in the winter than in the summer. If the utility did not replace overusage in the cold weather months, the system would not meet requirements.

202
In the Board's view, the utility's proposal in this respect is well-founded, and it is approved, subject to review in the application which will settle rates in 2004.


203
These rates will have to be, and the applicant acknowledged this, the rates will have to be readjusted when the Board considers the final disposition of the deferral accounts.

204
Another issue, which involves the changes beyond the merely formulaic implementation of the QRAM or deferral account methodologies is that part of the applicant's proposal which would change the flexibility costs -- the allocation of flexibility costs between direct purchasers and sales service customers.

205
The applicant's proposal would eliminate any allocation of flexibility costs to direct purchasers within its franchise area.

206
Flexibility costs are those costs associated with a provision of gas from sources other than firm TCPL supply. These costs represent the differential between the cost of the commodity procured from TCPL to its transmission assets and the cost of gas acquired from other sources, for example, the Alliance Vector pipeline system, Trunkline system.

207
In the early stages of direct purchasing, TCPL supply was the lowest cost supply. When direct purchaser withdrew gas from the system the gas they withdrew was low-cost, firm TCPL supply.

208
For some time, the Board has expected that the applicant would bring forward a comprehensive proposal respecting load balancing and flexibility cost for the Board's consideration. The most appropriate forum for the consideration of a proposal in the allocation of the flexibility cost is in connection with the Board's consideration of that comprehensive proposal. Our expectation is that -- and our understanding is that Union will be bringing such a comprehensive proposal in the upcoming rates case, and that this issue will be deferred for decision until that time.

209
The Board recognizes that there is a possibility for a estimated $20 levy to sales service customers if the allocation suggested by Union is approved at that time. The Board directs Union to prepare its rate schedules arising from our decision in this case on the basis of the current methodology respecting the recovery of flexibility costs. In other words, there will be no change with respect to the flexibility costs mechanism at this stage.

210
Some intervenors raised the question of the adequacy of notice in the instant application. The Board is authorized by the Act to determine the adequacy of notice in any give case. For the purposes of this matter, the Board concludes that notice to the body of the intervenors recognized for the current rate case is a very comprehensive list of interests and was adequate. At no time did the Board receive any representations from any party seeking more time to prepare for or consider the evidence in this case. In fact, the intervenors of record are highly familiar with the subject matter under consideration as they are very able cross-examination, and argument attests.

211

The Board notes the prospective recovery it approves in this case with respect to deferral accounts is subject to reconsideration both with respect to the quantum and allocation of those deferral accounts at the time they are disposed of.

212
It is also I think useful to note that a very substantial portion of this application concerned the implementation of QRAM methodology and the Board directive representing the deferral accounts. The notice provided in this case meets or exceeds that normally provided for in such cases.

213
The Board is concerned that consumers of the -- customers of the utility be appropriately informed of the changes affected by this decision, especially those effects of the decision which are temporary in nature, those which are subject to true-up, and those which are inextricably linked to the increase in gas prices experienced and predicted by the consensus forecast. The utility shall develop, in consultation with Board Staff, appropriate customer information language. The Board notes that the applicant provided today a refinement of a previous filing on that subject and invites the applicant to work with Board Staff to further refine that document or that template, I suppose.

214
The adjustments approved herein shall be identified as a temporary surcharge added to the commodity price of gas and delivery rates rather than as an adjustment in the Alberta WACOG. So there's a clear definition of the increase. It is expected that the adjustments approved herein will take effect as of May 1st, 2003.

215
The Board requires Union to file a QRAM application respecting July and October 2003. Such applications shall include their most recent consensus forecasts and projected year-end deferral account balances and shall be based upon the most recent available consensus forecasts.

216
There is one outstanding matter that the Board will not deal with today but will decide soon and in due course related to submissions with respect to costs. The Board by separate decision will address that issue.

217
That's the decision of the Board in this matter. Are there any questions arising?

218
There being none, we adjourn.

219
MR. PENNY: Thank you, Mr. Chairman.

220
May I just say on behalf of the applicant our thanks for the timely manner in which you were able to both conduct the hearing - and also to Board Staff, of course - both conduct the hearing and render the decision. Thank you. It's most appreciated.

221
MR. SOMMERVILLE: Thank you, Mr. Penny.

222
--- Whereupon the hearing concluded at 11:47 a.m.