Rep: OEB
Doc: 12N9V
Rev: 0













ONTARIO ENERGY BOARD

Volume: 2

25 MARCH 2003


BEFORE:



R. BETTS

PRESIDING MEMBER

G. DOMINY

MEMBER



1
RP-2002-0133


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 Enbridge Gas Distribution Inc. for an Order or Orders approving or fixing just and reasonable rates and other charges for the sale, distribution, transmission and storage of gas commencing October 1, 2002.

3




RP-2002-0133




4
25 MARCH 2003

5
HEARING HELD AT TORONTO, ONTARIO



6
APPEARANCES

7

PAT MORAN

Board Counsel

COLIN SCHUCH

Board Staff

SUZANNE TONG

Board Staff

HELEN NEWLAND

Enbridge Gas

DAVID POCH

GEC/CIELAP

BRUCE MACODRUM

CME

MURRAY KLIPPENSTEIN

Pollution Probe

SUE LOTT

VECC

IAN MONDROW

Direct Energy

CRAIG PARRY

Energy Probe

JAY SHEPHERD

OPSBA

VINCE DEROSE

IGUA



8
TABLE OF CONTENTS

9

PRELIMINARY MATTERS:

[15]





CME PANEL ON ISSUE 9.6: ROWAN

[40]




CONTINUED CROSS-EXAMINATION BY MR. KLIPPENSTEIN:

[42]





CROSS-EXAMINATION BY MR. POCH:

[346]





CROSS-EXAMINATION BY MS. LOTT:

[689]





CROSS-EXAMINATION BY MR. DeROSE:

[726]





CROSS-EXAMINATION BY MS. NEWLAND:

[794]





CROSS-EXAMINATION BY MR. MORAN:

[1095]





RE-EXAMINATION BY MR. MacODRUM:

[1240]






10
EXHIBITS

11

12
UNDERTAKINGS

13

UNDERTAKING NO. J.2.1:	DOCUMENT REFLECTING CORRECTION FILED BY CME UNDER COVER OF LETTER FROM MR. ROWAN TO MR. PUDGE

[831]





14
--- Upon commencing at 9:35 a.m.
15
PRELIMINARY MATTERS:



16
MR. BETTS:	Good morning, everybody. Please be seated.

17
Good morning, everybody. Before we get going, we'll just cover a couple of housekeeping items.

18
First of all, I should have completed the record by indicating that -- you will all recall that the Board sent out a letter on March 19th requesting some submissions from parties with respect to question number 4. I will report, for the record, that there were no parties that raised any concerns about apprehension of bias with respect to my participation in the hearing.

19
With that said, may I ask if there are any preliminary matters from any of the participants?

20
Ms. Newland?

21
MS. NEWLAND:	Good morning, Mr. Betts.

22
I would like to file Enbridge's response to Undertaking Number J.1.2, which was given by the Enbridge witnesses yesterday at transcript 517 to counsel for Energy Probe, Mr. Parry. I have provided Mr. Schuch with copies for the Board and distributed to the parties.

23
MR. BETTS:	Thank you.

24
Sorry, Ms. Newland, that was J --

25
MS. NEWLAND:	J.1.2.

26
We have one remaining undertaking, which we are working on, Mr. Betts, and we hope to be able to respond later on today, if not -- or perhaps tomorrow.

27
MR. BETTS:	Thank you very much.

28
Any other preliminary matters?

29

MR. MONDROW:	If I could, sir, in the back row.

30
MR. BETTS:	Yes, Mr. Mondrow?

31
MR. MONDROW:	I attended again this morning to try to get a feel for two things. One was scheduling, as we have a scheduling issue in respect of the 8 series. And the second was any discussion that might occur in respect of the disclosure issue further to Mr. Cass's letter to the Board and the consideration of CAC, IGUA, and VECC, and I see that none of that's going to happen this morning.

32
So I will try to coordinate with Ms. Hare. I was interested in that disclosure discussion. Unfortunately, I have to depart shortly. I can be back at the end of the day today, and I can also be back tomorrow afternoon.

33
So through you I would just leave a request with interested parties. If someone, perhaps Board Staff or the company, could let me know if there is any sense of when that discussion might happen, and I will try to make myself available as best I can, and otherwise, obviously, follow it remotely.

34
So I appreciate that, and I just wanted to note that and leave that request with the parties through you.

35
Thank you.

36
MR. BETTS:	Thank you, Mr. Mondrow.

37
Any other preliminary matters?

38
Okay. We left last night with Mr. Rowan on giving evidence, and Mr. Klippenstein, representing Pollution Probe, cross-examining. At that point I asked who would be interested in asking Mr. Rowan further questions, and I had indications from Mr. Poch, Ms. Lott, Mr. DeRose, Mr. Moran, and possibly Ms. Newland. That's not to prevent anybody else that wasn't in that list to indicate an interest in doing so, but at this point that's how we're proceeding.

39
So with that -- and Mr. Rowan, I'm sure I don't have to remind you that you are still under oath -- we will ask Mr. Klippenstein to please proceed.


40
CME PANEL ON ISSUE 9.6: ROWAN



41
M.ROWAN; Previously sworn.

42
CONTINUED CROSS-EXAMINATION BY MR. KLIPPENSTEIN:

43
MR. KLIPPENSTEIN:	Thank you, Mr. Chair.

44
Good morning, Mr. Rowan.

45
MR. ROWAN:	Good morning.

46
MR. KLIPPENSTEIN:	I would like to ask a number of questions this morning on the issue of the dollar savings experienced by Enbridge's customers as a result of Enbridge's DSM programs and specifically as a result of the fiscal 2000 programs.

47
Would you agree with me that one of the purposes of the Enbridge DSM programs is to reduce the overall customer bills of Enbridge's customers?

48
MR. ROWAN:	One of the purposes of a DSM program is to reduce the amount of energy that is consumed. If that translates into a reduction in gas bills on a one-to-one basis, I cannot speculate about that.

49
MR. KLIPPENSTEIN:	Let me just clarify. Let me just repeat my question, because I'm not sure you addressed it.

50
My question is whether you'd agree that one of the purposes of Enbridge's DSM programs is to reduce the overall customer bills of Enbridge's bills.

51
MR. ROWAN:	I'm not trying to evade your question, but you're asking me to speculate what is the motivation of Enbridge in terms of their DSM programs.

52
MR. KLIPPENSTEIN:	In fact, I'm not, and you asked yesterday -- sorry to interrupt, but that's not actually what my question is in the sense that this -- you talked yesterday about the importance of the principles involved here, which is -- you repeated that. That is partly why I raise this issue, and I think it's based on Board -- on settlement agreements which you participated in, and Board policy and Board decisions.

53
I mean, if you can't answer the question, that's fine. But I would think it's not controversial that one of the principles, one of the purposes of Enbridge's DSM programs is to reduce the overall customer bills of Enbridge's customers.

54
MR. ROWAN:	You're asking me to, in fact, make two judgments. One is what is the goal, and I don't dispute it would be a desirable goal, to reduce the gas bills of customers. On the other hand, if at the same time in my response you are going to take from my response that that goal is in fact achieved, I can't say that. I don't know whether there is a one-to-one relationship.

55
MR. KLIPPENSTEIN:	When I asked what is the -- whether that was one of the goals, you don't disagree that it would be a desirable goal, you say.

56
MR. ROWAN:	Absolutely not. I do not disagree, and let me just state for the record, CME supports DSM. What we don't support is a DSM program that is implemented in the way in which it currently is implemented, and at a cost including the SSM cost.

57
MR. KLIPPENSTEIN:	So you say CME supports DSM, and would you not agree that one of the principles -- and if you say no, I'll move on -- but that one of the principles, one of the purposes behind Enbridge's DSM programs is to reduce the overall customer bills of Enbridge's customers?

58
MR. ROWAN:	Again, Mr. Klippenstein, you're asking me to give you a response when you phrase it as one of Enbridge's purposes. All I can suggest --

59
MR. KLIPPENSTEIN:	I didn't say that, I said it was one of the purposes --

60
MR. ROWAN:	Of Enbridge's DSM program.

61
MR. KLIPPENSTEIN:	Yes.

62
MR. ROWAN:	Yes. And what I'm trying to say to you very clearly is it is a desirable goal to reduce customer bills.

63
MR. KLIPPENSTEIN:	Through DSM.

64
MR. ROWAN:	Through DSM.

65

MR. KLIPPENSTEIN:	Right. Would you agree with me that for Enbridge's customers as a group, Enbridge's fiscal 2000 DSM programs in fact result in tens of millions of dollars of bill reductions?

66
MR. ROWAN:	I cannot come to that conclusion.

67
MR. KLIPPENSTEIN:	Are you saying you disagree or are you saying you don't know?

68
MR. ROWAN:	There is no evidence to that effect.

69
MR. KLIPPENSTEIN:	You're saying that there is no evidence to that effect?

70
MR. ROWAN:	Not that I can determine. What I believe the people who put forward that view suggest is that through the TRC methodology of calculating savings, that there would result a significant savings to customers; however, the TRC is calculated based upon a number of assumptions and it's an assumption multiplied by an assumption multiplied by another assumption that comes up with a TRC benefit. And we're very skeptical about those assumptions.

71
MR. KLIPPENSTEIN:	Just so I understand your position this morning, you say there is no evidence that for Enbridge's customers as a group, Enbridge's fiscal 2000 DSM programs result in tens of millions of dollars of bill reductions?

72
MR. ROWAN:	I didn't say that you said it resulted in.

73
MR. KLIPPENSTEIN:	And I believe you said there is no evidence of that.

74
MR. ROWAN:	I cannot see a direct one-to-one relationship between the 2000 DSM programs and tens of millions of savings to customers.

75
MR. KLIPPENSTEIN:	I am having a hard time understanding your position because at one point you said there is no evidence of that and then you're saying you have a hard time seeing a direct one-to-one relationship. Forgive me, I'm just trying to understand your position because I'm going to get into this some more.

76
First of all, I suggest to you there is clear and detailed evidence on the record in this case -- whether you agree with it is another matter -- evidence on the record that in fact for Enbridge's customers as a group, Enbridge's fiscal 2000 DSM programs result in tens of millions of dollars of bill reductions. Now, can you agree with me that there is detailed evidence on the record for us to consider on that?

77
MR. ROWAN:	I would appreciate if you could point it out.

78
MR. KLIPPENSTEIN:	All right. This is a little surprising to me since we addressed this in an interrogatory to you. If you could turn up the Pollution Probe cross-examination reference book, which is Exhibit K.1.5, and turn to tab 4 and flip through the documents at tab 4 until you come to the page that has CME's logo on the top.

79
Do you have that page?

80
MR. ROWAN:	Yes, I do.

81
MR. KLIPPENSTEIN:	And it has interrogatory number 1 and, would you agree with me, this is interrogatory number 1 that Pollution Probe submitted to you earlier in this process with respect to your evidence and your answer in relation to that; is that right?

82
MR. ROWAN:	Yes.

83
MR. KLIPPENSTEIN:	Now, the question to you was: "Please provide your best estimate of the net present value of the TRC benefits produced by Enbridge's year 2000 DSM program."

84
MR. ROWAN:	Yes.

85
MR. KLIPPENSTEIN:	"Please break out your estimates according to, A, prescriptive and, B, custom programs." And your response was: "TRC benefits for all participants on the audit subcommittee were estimated by Kai Millyard Associates under contract with Enbridge Gas Distribution Inc.. See report by Kai Millyard's July 31, 2002 report entitled "Enbridge Consumers Gas Fiscal 2000 DSM Audit SSM Replication, Final Report."

86
Now, that was your answer to that interrogatory; right?

87
MR. ROWAN:	That is correct.

88
MR. KLIPPENSTEIN:	You yourself were a participant on the audit subcommittee as referred to there; right?

89
MR. ROWAN:	That is correct.

90

MR. KLIPPENSTEIN:	And in your response you said TRC benefits for all participants were estimated by Kai Millyard.

91
MR. ROWAN:	That is correct.

92
MR. KLIPPENSTEIN:	Now, am I to take it from the question and your response that the TRC benefits, as estimated by Kai Millyard, are your best estimate of the net present value of the TRC benefits as requested in the interrogatory?

93
MR. ROWAN:	You can take from my response that these are the TRC benefits that come from the methodology that is used. But that does not suggest that CME subscribes to the TRC measure as being the way in which one can identify dollar reductions for customers of Enbridge on their gas bills.

94
MR. KLIPPENSTEIN:	All right. Well, let's set aside the TRC issue for a moment and I'll come back to it. But are you saying, as your interrogatory answer appears to say, that when we asked for your best estimate of the net present value of the TRC benefits and you pointed us to the Kai Millyard report, the Kai Millyard report contains your best estimate of the net present value of the TRC benefits? Am I correct so far?

95
MR. ROWAN:	I'm not in the business of doing estimations for TRC benefits. Kai Millyard is a very competent consultant and knows the methodology that goes with the calculation of TRC benefits. I have full confidence in his capacity or capability to use that methodology to arrive at a number. That doesn't mean to say that I agree with the assumptions that go into the arriving at that number.

96
MR. KLIPPENSTEIN:	Well, how am I supposed to take your answer? We asked you, in good faith, for your both estimate of the net present value of the TRC benefits and you are testifying today presumably as an expert on these topics. Are you saying, as I gather you're saying, that those estimates in the Kai Millyard report are not in fact estimates you believe to be accurate net present value TRC benefits?

97
MR. ROWAN:	What I'm trying to avoid your linking these estimates, which I don't dispute, of TRC benefits with the other concept or notion that you have which is that those benefits then represent the millions of dollars of reductions in Enbridge Consumers Gas bills. That's what I'm trying to avoid, that linkage.

98
MR. KLIPPENSTEIN:	All right. Let's focus on the two sides of that linkage because I'm still a little bit troubled by it.

99
Are you saying, then, that the Millyard estimates are accurate TRC estimates and the next step after the linkage, when we get to what those mean, is where your problem is? In other words, do you agree that the Kai Millyard estimates are the accurate TRC estimates?

100
MR. ROWAN:	I have no difficulty with his calculations. As I said, I have a great deal of confidence in his ability in this area.

101
MR. KLIPPENSTEIN:	All right.

102
MR. MacODRUM:	Mr. Chair, perhaps before Mr. Klippenstein moves on I would just note he used the term, referring to Mr. Rowan as an expert witness. I did not qualify Mr. Rowan as an expert witness on the subject matter yesterday. I qualified him as a person with knowledge and experience on the subject matter that would be useful to the Board, and who had extensive experience in the consultative process. But I think some -- often the term "expert witness" is used in a very precise context and I did not so qualify Mr. Rowan yesterday in that respect.

103
MR. KLIPPENSTEIN:	Well, thank you, Mr. MacOdrum. I don't want to get into debates about what expert witness means. But I do think we need to clarify, then, exactly how or what Mr. Rowan's knowledge and experience is or is not useful for here, and I will try and clarify that.

104
So, Mr. Rowan, you said you had no difficulty with Kai Millyard's TRC estimates; correct?

105
MR. ROWAN:	Yes.

106
MR. KLIPPENSTEIN:	Let me flip to the Kai Millyard estimates just so I can make sure we are talking about the same estimates, and that's found in the Pollution Probe document book, at tab 1.

107
You have at tab 1 an excerpt from the report that we've been referring to; correct? And table 1 identifies various TRC figures, among other things; is that correct?

108
MR. ROWAN:	Yes, it does.

109
MR. KLIPPENSTEIN:	And I look at the column second from the right entitled, "Actual TRC NPV," which I can take it means the total resource cost net present value, and if I go to the bottom of that I see a figure of $74 million, approximately. Would you agree with me that that is Kai Millyard's estimate of the TRC benefits of Enbridge's fiscal 2000 DSM programs?

110
MR. ROWAN:	Using that methodology, that's the number that he arrived at, yes.

111
MR. KLIPPENSTEIN:	And so you have no difficulty with that number?

112
MR. ROWAN:	I have no difficulty that that number -- using that methodology arrives at that number.

113
MR. KLIPPENSTEIN:	Okay. Now, you did say that you had problems with the linkage you suggest I'm making, when I talk about that number and that being the linkage between TRC benefits and my suggestion that that represents millions of dollars of bill reductions for Enbridge customers; right?

114
MR. ROWAN:	Yes.

115
MR. KLIPPENSTEIN:	All right. I would suggest to you that the total resource cost test in fact is a way of calculating the total net bill reductions produced by those programs for Enbridge's customers; is that not an accurate essential statement of the function or meaning of TRC?

116
MR. ROWAN:	It is some people's view that that's what it does, yes.

117
MR. KLIPPENSTEIN:	I take it that's not your view of what it does.

118
MR. ROWAN:	It is not my view that there is a one-to-one relationship between calculating a TRC over a multi-year period and that that is going to then reflect in a natural gas reduction for today's customer.

119
MR. KLIPPENSTEIN:	Let me understand where you part ways with the definition I put to you. Do you agree that the TRC test measures the net present value of the total bill reductions with respect to Enbridge's DSM programs of Enbridge's customers?

120
MR. ROWAN:	It measures what is the outcome of a series of assumptions into the future. That's all it measures.

121
MR. KLIPPENSTEIN:	Would you agree with me that that is intended, and it is accepted by essentially all experts in this process, as measuring the net present value of the total net bill reductions of Enbridge's customers?

122
MR. ROWAN:	Well, I don't want to split hairs here --

123
MR. KLIPPENSTEIN:	It is not splitting hairs but it is absolutely fundamental.

124
MR. ROWAN:	I'm not sure who all of these experts are that you have in mind.


125
MR. KLIPPENSTEIN:	I just want to ask you what your position is, because I --

126
MR. ROWAN:	Well, with respect, sir, you asked me to subscribe to a general statement about all of these experts. Who are these experts? I can't subscribe to a statement that is made in such a general way.

127
MR. KLIPPENSTEIN:	Can you explain to me how you think my suggestion is incorrect when I say to you and put to you that the TRC test measures total net bill reductions? Let me break that out. I'm suggesting to you that TRC measures, A, first, the total; B, or two, net; and 3, bill reductions. Would you agree with me that the TRC test measures in some way bill reductions of Enbridge customers?

128
MR. ROWAN:	That's where I have the difficulty, sir. I cannot -- and no one has ever shown me how a TRC translates into a specific bill reduction. If I brought to you my Enbridge Gas Distribution bill today and the one for last year and I asked you where is the TRC component and where is the reduction in that gas bill, I think you would have, as I have, a very hard time identifying where it is. And I believe ratepayers have a hard time understanding that linkage, if there is such a linkage.

129
MR. KLIPPENSTEIN:	So as I understand it, when you said, "That's the difficulty," you don't accept that the TRC cost test measures bill reductions?

130
MR. ROWAN:	I have seen no evidence of that.

131
MR. KLIPPENSTEIN:	And would you agree with me that, conceptually, the way the TRC test is defined is that it measures, or is intended to measure, bill reductions.

132
MR. ROWAN:	Some people purport that it does, but I have seen no evidence that there is that linkage.

133
MR. KLIPPENSTEIN:	Can you describe for me in your own words the total resource cost test as it's been used in these various reports. You were a member of the audit subcommittee; is that correct?

134
MR. ROWAN:	That's correct.

135
MR. KLIPPENSTEIN:	And you worked closely with Kai Millyard and the company representatives in the work of preparing this audit report; is that right?

136
MR. ROWAN:	Let me clarify for you what the process was because the way you have described it, that is not accurate.

137
MR. KLIPPENSTEIN:	Okay. I don't mean to get into a long detailed description of that. Let me just say --

138
MR. MacODRUM:	Would you let the witness answer the question, please.

139
MR. KLIPPENSTEIN:	You were a member of the audit subcommittee; right?

140
MR. ROWAN:	Yes.

141
MR. KLIPPENSTEIN:	And how many times did it meet to discuss the fiscal 2000 --

142
MR. ROWAN:	Twenty-two times, I believe.

143
MR. KLIPPENSTEIN:	Twenty-two meetings, okay.

144
And the TRC benefit test was part of the subject matter that committee dealt with; am I right so far?

145
MR. ROWAN:	I think it would be useful for the panel to understand the composition of the audit process, the audit subcommittee.

146
There were actually two consultants, if you will, that worked for audit subcommittee. There was the auditor, Xenergy, that did the actual audit of the 2000 evaluation report. Her terms of reference did not include the calculation of the total resource cost. That was -- and the calculation of the SSM claim. That assignment was given to Kai Millyard & Associates as a separate assignment.

147
Mr. Millyard attended some of the audit subcommittee meetings, but not all, and was given, if you will, the task of calculating the TRC net benefits and the SSM contribution, which included in his report differentiating between the positions, the different positions of some members of the audit subcommittee. And those different positions are outlined on Mr. Millyard's report on page 5, because, as you know, there was disagreement as to which assumptions should be used in the calculation of the SSM contribution.

148
I go into this detail, Mr. Chairman, because the audit subcommittee did not, in fact, have very much involvement in Mr. Millyard's calculation. He did that work in his own office and produced a report.

149
So there was not a discussion, if that is the suggestion or the question that I've just received, that the audit subcommittee was involved in the mechanics or the methodology of calculating the TRC.

150

MR. KLIPPENSTEIN:	Mr. Rowan, could you describe in simple terms for me what your understanding of the total resource cost test is.

151
MR. ROWAN:	The object is to look at the savings that would accrue over a period of time using various assumptions. There are assumptions in terms of the measure life, in terms of the -- in terms of the savings per unit, in terms of the number of -- a number of participants. And the calculation is made over a period that could, if the measure life is, say, 15 years, over that period, or if it is the technological or, depending upon the useful life of the appliance, over a longer period, maybe 30 years. And then there is a net present value that is calculated on the savings that would accrue from a particular program.

152
MR. KLIPPENSTEIN:	Mr. Rowan, I believe you said that the TRC is intended to look at the savings that would accrue over a period of time using various assumptions; is that right?

153
MR. ROWAN:	That is correct.

154
MR. KLIPPENSTEIN:	Can you tell me very generally what that formula or concept is in the -- and how it looks at those. Can you tell me how it works.

155
MR. ROWAN:	I think it would be best if you asked an expert on that to give you the kind of detail, and for the panel, the kind of understanding. And I would suggest that those questions might be asked of Mr. Millyard. He's an expert in this. I do not purport to be an expert in this.

156
MR. KLIPPENSTEIN:	I put it to you, Mr. Rowan, that you basically don't really understand how the TRC works.

157
MR. ROWAN:	I understand sufficiently well, sir, that I do not see the linkage between a TRC and a reduction in a gas bill.

158
MR. KLIPPENSTEIN:	I put it to you, Mr. Rowan, that perhaps one reason you don't understand the linkage is that you don't understand basically how the TRC test works.

159
MR. ROWAN:	That may be your opinion, sir, but that is not my opinion.

160
MR. KLIPPENSTEIN:	Well, could you then, please, again let me repeat. Explain to me in simple terms -- I'm not asking for detail, just the basic conceptual way in which the TRC test works.

161
MR. ROWAN:	You are -- in essence, what you're asking me is to forge that linkage that you cannot forge between a TRC and a reduction in a gas bill, and I cannot do that, sir, and I find that the question that you're asking is impossible to answer.

162
All I can do is give you a description, a general description of the way in which the calculation of a TRC, using these various assumptions, is derived. But if you want a more specific and expert description of it, I would suggest that you ask an expert, and I would suggest that Mr. Millyard would be very well qualified to do that.

163
MR. KLIPPENSTEIN:	Would you agree with me that in the calculation of proposed SSM savings or pay-outs, the TRC figure, such as the one of $74 million that I referred to you in the Millyard report, is fundamental and foundational. That's one of the starting points for that calculation?

164
MR. ROWAN:	No, I don't agree with that. I only -- that is only -- that is only true if you have -- if you have tied the TRC to an SSM pay-out.

165
But there are many, many other ways of calculating an incentive for DSM activities. TRC is only one methodology.

166
MR. KLIPPENSTEIN:	Would you agree with me that the process as -- the SSM savings process as implemented, at least attempted to be implemented, through the Millyard report started with the TRC test?

167
MR. ROWAN:	That is correct. And just so that you are clear, we're not here at this stage of the hearing to debate the TRC methodology, per se.

168
What we are here to do is to say that the audit process for the 2000 evaluation report is flawed, that the conclusions that were drawn in identifying the TRC benefits and the SSM pay-out was flawed in the applicant's claim, and that the 2001 SSM claim should not be allowed, because it hasn't been audited. That's what we're here to -- we aren't here arguing that there was -- that it was inappropriate to use the methodology, the TRC methodology, in the 2000 SSM claim.

169
MR. KLIPPENSTEIN:	Let me understand this. Is it your position today that it was appropriate to use the TRC methodology?

170
MR. ROWAN:	It was the methodology that was agreed upon, yes.

171
MR. KLIPPENSTEIN:	Okay. Including by CME; correct?

172
MR. ROWAN:	That is correct, yes.

173
MR. KLIPPENSTEIN:	And by you personally as a representative of CME?


174
MR. ROWAN:	Yes.

175
MR. KLIPPENSTEIN:	Now, I think you mentioned that the TRC is only one method of addressing some of these issues but you're not an expert on the question of what other methods would be available besides the TRC; correct?

176
MR. ROWAN:	I'm not an expert in many things, but I do have an opinion. There are other ways in which this SSM could be -- or an incentive could be given to the applicant if an incentive is required; however, I think that that issue is an issue that's going to be dealt with later in the other 9 series. If you wish to pursue it now rather than later, that's okay. But when we come to the issue of the SSM incentive - I think it's 9.2 if my memory serves me correctly - it would be better to have that discussion there.

177
MR. KLIPPENSTEIN:	Well, let me continue with what I was asking you a minute ago and that is -- if you have at tab 1, the Millyard report that, in table 1, shows a net present value of the TRC at $74 million, approximately; right? Do you see that?

178
MR. ROWAN:	Yes.

179
MR. KLIPPENSTEIN:	And do you agree with me that that is a fundamental part of the calculation of the SSM savings in the formula and approach that was used in the Millyard report?

180
MR. ROWAN:	Yes, it was.

181
MR. KLIPPENSTEIN:	So that $74 million is a key foundational step in the methodology as applied here?

182
MR. ROWAN:	That is correct, yes.

183
MR. KLIPPENSTEIN:	And you don't have any problem with that $74 million representing the TRC NPV?

184
MR. ROWAN:	No, I don't.

185
MR. KLIPPENSTEIN:	Now, your recommendation, when all is said and done, is that the SSM savings should be -- or that the SSM pay-out should be a penalty against the company of approximately $69,000; correct?

186
MR. ROWAN:	It's not that we want a penalty per se, but the way in which the methodology works out, it arrives at a penalty.

187
MR. KLIPPENSTEIN:	Fair enough. And that is the same figure that is suggested by Mr. Norm Rubin on behalf of Energy Probe; correct?

188
MR. ROWAN:	Yes, the principles and approach that CME believes are appropriate and those at Energy Probe are the same.

189
MR. KLIPPENSTEIN:	In fact, however, your numbers, you had a different number in 2002 and you essentially moved towards Energy Probe's principles and approach number; is that right?

190
MR. ROWAN:	That is correct. We amended our position subsequent to the production or -- after the production of Kai Millyard's report when it was -- when Norm Rubin and I discussed as to why it was that our positions on one area was different. And I came to the conclusion that I had made an error in the -- one of the items and subsequently corrected that.

191
MR. KLIPPENSTEIN:	I'd like to draw your attention to part of the approach of Energy Probe which you adopted. If you could turn to tab 5 of Exhibit K.1.5, which is Pollution Probe's document reference book, you will see Pollution Probe's interrogatory to Energy Probe where we ask of Mr. Norm Rubin, as we ask of you, in interrogatory 1, his best estimate of the net present value of the TRC benefits. Do you see that?

192
MR. ROWAN:	You're talking about page 2, are you?

193
MR. KLIPPENSTEIN:	Let's start with page 1, at tab 5. Interrogatory number 1 --

194
MR. ROWAN:	Yes.

195
MR. KLIPPENSTEIN:	-- is a question that says: "Please provide your best estimate of the net present value of the TRC benefits produced by Enbridge's year 2000 DSM program," and so on, and his answer is on the next page and I would draw your attention to the last sentence on that page which gives the answer that begins, "Given the above..."; do you see that?

196
MR. ROWAN:	Yes.

197
MR. KLIPPENSTEIN:	"Given the above simplifying assumption then, my best estimate of the net present value of the TRC benefits produced by Enbridge's year 2000 DSM program is $50,890,609..." and so on.

198
Now, Mr. Rubin seems to be saying that the net present value is approximately $50 million; correct?

199
MR. ROWAN:	He seems to be saying that.

200
MR. KLIPPENSTEIN:	And that appears in the table just above that sentence on the page in a line entitled "Total Net of EC and Overheads", and there's the $50 million in the column entitled "Actual NPV TRC"; correct?

201
MR. ROWAN:	Yes.

202
MR. KLIPPENSTEIN:	Now, it appears to me, then, that Mr. Rubin is saying the correct TRC number is approximately $50 million and Mr. Millyard is saying, in a number we just looked at, that the correct TRC number is $74 million, and it seems to me you don't have trouble with either of them. Which is the right number?

203
MR. ROWAN:	Let me put this into its proper context, and I'll say this, if I may, Mr. Chairman, briefly. But the question that was asked of Mr. Rubin was asked some months after Mr. Millyard had presented his report to the audit subcommittee. There was no question at that time that there was any doubt as to the accuracy of Mr. Millyard's calculation. I have no idea how Mr. Rubin came to his own number, what differences there are between his calculation and Mr. Millyard's. All I can say is Mr. Millyard was engaged by the audit subcommittee to undertake a calculation. Mr. Millyard has the highest credentials and, based on my experience with his work, I have no difficulty with the net present value number that he arrived at.

204
Whether it's 75 or -- 74 or 50 million is -- would be an interesting exercise to determine, but the issue here is: What is the implication of the assumptions, the different assumptions that were accepted or rejected by the parties to the audit subcommittee's work, CME, Energy Probe, GEC and Enbridge. And what you find is that using the $74 million net present value, CME and Energy Probe, given their view of how the assumptions should be implemented, arrived at a penalty of $69,000 in an SSM claim for Enbridge in the year 2000.

205
If a $50-million number had been used, there would still be a difference between Energy Probe's and CME's view of what that SSM claim in 2000 should be as opposed to Enbridge and GEC and the other intervenors. So it's an interesting question, Mr. Klippenstein, but it is academic.

206
Mr. Rubin was not the consultant to the audit subcommittee, Mr. Millyard was and we accepted Mr. Millyard's calculation.

207
MR. KLIPPENSTEIN:	You've said this very morning today that you had no problem with Mr. Millyard's figure of $74 million.

208
MR. ROWAN:	That is correct.

209
MR. KLIPPENSTEIN:	And that's still your position?

210
MR. ROWAN:	That is correct.

211
MR. KLIPPENSTEIN:	However, Mr. Rubin uses a figure, a TRC figure of 50 million; is that correct?

212
MR. ROWAN:	I don't know what he uses. He calculated a 50 million, but for purposes of this SSM claim, Energy Probe is bound by the $74-million claim and the mathematics of working through the assumptions arrive at a $69,000 penalty.

213
MR. KLIPPENSTEIN:	So it's your view that Energy Probe is bound by the $74-million estimate for purposes of this process we're all engaged in?

214
MR. ROWAN:	I would -- I cannot see how they could not be.

215
MR. KLIPPENSTEIN:	So if Energy Probe's and if Mr. Rubin's calculation that we just looked at or if his calculation is foundationed on the $50-million figure, then it would be inappropriate to use because it's bound by the $74-million figure; is that right?

216
MR. ROWAN:	Unless they have changed their view and their submission that they made at the -- prior to the ADR, I -- and I'm not aware that they have changed their position, I would suggest that they are quite comfortable with the 74 million net present value. But that's something that you might want to ask Mr. Rubin.

217
MR. KLIPPENSTEIN:	But anyway, your view is that they are bound by the $74 million?

218
MR. ROWAN:	My view is they are -- I am not aware that they have changed their view.

219
MR. KLIPPENSTEIN:	And therefore, they're bound by the 74 million?

220
MR. ROWAN:	That would be a logical conclusion.

221
MR. KLIPPENSTEIN:	You said you've agreed to the principles and approaches of Energy Probe.

222
MR. ROWAN:	Only insofar as the application of the assumptions.

223
MR. KLIPPENSTEIN:	Okay.


224
MR. ROWAN:	And I don't wish -- I hope you're not suggesting that that then goes beyond that --

225
MR. KLIPPENSTEIN:	No, I'm not.

226
MR. ROWAN:	-- in terms of the TRC calculation.

227
MR. KLIPPENSTEIN:	Well, let's just clarify that. You agree with the way that Norm Rubin arrived at his suggested penalty of 69,000; correct?

228
MR. ROWAN:	I agree with the principles that underline Energy Probe's use or determination of how certain assumptions should be applied, yes; and that, in turn, arrived at a negative $69,000 and the SSM claim.

229
MR. KLIPPENSTEIN:	Can I then ask you to turn to the Pollution Probe reference book, at tab 1, and the second page is table 2. Do you have that before you?

230
MR. ROWAN:	Yes, I do.

231
MR. KLIPPENSTEIN:	And that identifies in table 2 a variety of programs listed down the left-hand side and identifies the proposed adjustments to the way those programs are evaluated, and there's a column for CME which identifies what CME's suggested adjustment is; correct?

232
MR. ROWAN:	Yes. Those were Mr. Millyard's calculations based upon those assumptions, that is correct.

233
MR. KLIPPENSTEIN:	Now, if I, just for convenience, look at the very top measure entitled "DHW Tank Efficient Purchase," the suggestion or proposed adjustment in the next column is that the "Reduced tank lifetime to 12.6 years budget and actual," and so forth. Now, as I understand it, CME, as summarized here, was suggesting that both the budget or forecast figures and the actual figures be adjusted to this proposed new tank lifetime assumption; correct?

234
MR. ROWAN:	That is correct.

235
MR. KLIPPENSTEIN:	In other words, it was symmetrical because both the forecast and the actual were adjusted; correct?

236
MR. ROWAN:	That is correct.

237
MR. KLIPPENSTEIN:	And, indeed, if I go down those columns, with the exception of the program at the end or near the end that was deleted, all those adjustments that are requested or suggested by CMC are symmetrical; in other words, both the budget or forecast and actuals were going to be adjusted; correct?

238
MR. ROWAN:	That is correct.

239
MR. KLIPPENSTEIN:	But then when it comes to the last category, the custom projects where the free riders are the issue and where the effect is by far the largest, suddenly you're not symmetrical anymore. You don't adjust the budget or forecast, you just adjust the actual; correct?

240
MR. ROWAN:	That's correct, yes.

241
MR. KLIPPENSTEIN:	So there is an inconsistency there on its face between the symmetry of the previous programs and the asymmetry of how the free ridership is treated; is that correct?

242
MR. ROWAN:	There is a difference, yes.

243
MR. KLIPPENSTEIN:	Some are treated symmetrically and some are not; correct?

244
MR. ROWAN:	That is correct.

245
MR. KLIPPENSTEIN:	Now, can you point to any ADR agreement or Board decision, including the December 16th, 1999 Board decision or before that, which stated that input adjustments, if they are necessary, should be made to budget and actual TRC calculations in an asymmetric way?

246
MR. ROWAN:	There are two parts to that. Let me deal with the first part.

247
Clearly, since the Board has never dealt with DSM SSM issues, there was never a decision -- there could never be a decision on whether there should be, using Mr. Klippenstein's terminology, symmetrical or asymmetrical application of various assumptions, so that there is no Board decision.

248

With respect to ADRs, there were -- are none, and the reason for that is that the -- this is only the second year or second DSM program where there has been an audit. The first year, the 1999 evaluation report, was at -- to be kind, a very superficial and totally inadequate audit and it was because of that that there was a concern on the part of intervenors that the 2000 evaluation report would be a different kind of audit; A, it would be independent; B, that we would take greater care in terms of the terms of reference; and C, that we would get an auditor who demonstrated that he or she understood the -- what an audit of an evaluation report was all about.

249
We were very fortunate in getting a first-class auditor. She would be the first to admit that there were parts of her experience that, when it came to auditing the 2000 evaluation report, that she didn't have all of the answers, but she was a fast learner.

250
When it came to this whole issue of free ridership of business markets, it became apparent very quickly that there was no road map - there were very few, if any, examples anywhere - and that what the auditor was doing was treading new ground.

251
It also became apparent that the business markets, by definition, should have a, in my view, zero free-ridership rate. And why do I say that? First of all, business markets, DSM projects are discrete, they are unique. And as you heard yesterday by the Enbridge panel, company sales representatives meet each company and discuss their DSM program. And as a result the company has all the opportunity, in fact, it's the only organization that controls whether a company -- a customer gets on the DSM program or not, and all they have to do is ask a simple question: Would you undertake this DSM activity without assistance? If they ask that question, they would screen out all of the free riders.

252
What happened was that --

253
MR. KLIPPENSTEIN:	Mr. Rowan, I'm not going to stop you because I don't think this is in any way responsive or deriving from my question.

254
MR. ROWAN:	I think it is. I think it is helpful to the panel and I'm assuming that we're here to help the panel in the best way we can.

255
MR. KLIPPENSTEIN:	I'm not going to stop you.

256
MR. ROWAN:	What happened was that the auditor came along after the fact, after the evaluation report had been written, and been asked to evaluate or audit the results. And she asked the question of these companies: Would you have undertaken this DSM activity?

257
And what the auditor recommended was that the 10 percent free-ridership rate that had been assumed should be changed to 49 percent. Because what she found was that the people who are in the program, most of them -- or half of them, I'm sorry, half of them would have undertaken this project in any event.

258
So if the auditor's free-ridership rate recommendation is to have any meaning at all in relation to the 2000, fiscal 2000 year, it is that the free-ridership change should be changed in that year, not a future year. Because in 2001, the next year, the same situation is going to happen again when the Enbridge folks, the sales representatives go out to the companies and say, Do you want to be part of our DSM program?

259
If you don't screen at that time, if they don't screen these people, there could well be a number of free riders who are part of it, that program. And the auditor, if there is ever going to be an audit of the 2001 program, the auditor will go in and do what the last auditor did, ask the question. And if the answer to that question is on the part of 20, 30, 40, 50 percent of the companies say, We would have done it anyway, the auditor will say that free-ridership number should be changed.

260
Now, let's take what the Enbridge panel yesterday said about the 2003 DSM program. They've adjusted the free-ridership rate to 30 percent.

261
MR. KLIPPENSTEIN:	Mr. Rowan, I am going to interject, because I don't think that's in any way responsive to my question, and this isn't an opportunity for you to mention things you might have forgotten before or want to repeat without responsiveness to my question.

262
MR. ROWAN:	I'm in your hands, Mr. Chairman.

263
MR. BETTS:	Perhaps, Mr. Klippenstein, you can restate your question for Mr. Rowan.

264
MR. KLIPPENSTEIN:	Well, I'm going to move on, and I'm going to ask a question related to something Mr. Rowan mentioned, and maybe he can answer that question.

265
You've mentioned the 49 percent that the auditor identified as one of the -- as part of the range of better free-ridership answers. We've asked Mr. Rubin to calculate what would happen if that 49 percent was applied symmetrically, in other words, was applied to both the budget or forecast input and the actual input.

266
If you could turn in Pollution Probe's reference book to tab 5, and the very last -- well, it's page 6 of 6. Do you have that?

267
MR. ROWAN:	Yes, I do.

268
MR. KLIPPENSTEIN:	It's identified as interrogatory number 3, part D.

269
MR. ROWAN:	Yes.

270
MR. KLIPPENSTEIN:	And the question was:

271

"Please provide your best estimate of Enbridge's aggregate SSM payment for 2000 assuming that the custom project's budget and actual TRC benefits should be calculated using a free-rider rate of 49 percent."

272
Would you agree with me that's asking what would happen if it was applied symmetrically?

273
MR. ROWAN:	Yes.

274
MR. KLIPPENSTEIN:	And without going through his long answer, the last sentence says that it "would raise the SSM for fiscal 2000 to $4,231,737."

275
Would you agree with me, subject to reading the whole paragraph if you need to or subject to check, that that's Mr. Rubin's answer of what the figure would be for the SSM if the 49 percent free ridership was applied symmetrically?

276
MR. ROWAN:	Yes, but it's not relevant --

277
MR. MacODRUM:	Why don't you read the whole of the last sentence, Mr. Klippenstein, which says:

278
"Since the SSM, with all of my recommended post-audit inputs, is negative 69,262, adding 44,301,000 with this non-recommended change would raise the SSM."

279
MR. BETTS:	Mr. MacOdrum, I need to remind you to direct all your comments through me, please.

280
MR. MacODRUM:	Yes, Mr. Chairman.

281
MR. ROWAN:	As a matter of fact, Mr. Chairman, I was going to say a somewhat similar comment. That is what the calculation arrives at, but it is not relevant.

282
And at the risk of Mr. Klippenstein suggesting that I am not addressing his question, the issue here is what I was trying to explain before; that the free-ridership rate should be applied in the year of the SSM claim, because Enbridge has complete control over who gets onto the program.

283
And if we let people on the program who are free riders, and these are found out after the fact by the auditor, then they should not be included in the actuals. That is the issue.

284
And I think Mr. Rubin, in his answers to the interrogatory, made that point by saying this is not the recommended change. It just happens if you ask the question that way, you come up with another number. But it's an irrelevant number.

285

MR. KLIPPENSTEIN:	Unless the Board decides that a symmetric approach is better; right?

286
MR. ROWAN:	Oh, absolutely, and that's why we're here.

287
MR. KLIPPENSTEIN:	If the Board accepts your recommendations and decided to impose a $69,000 penalty on Enbridge with respect to its fiscal 2000 DSM programs, are you concerned that Enbridge might decide that it wishes to discontinue its DSM programs?

288
MR. ROWAN:	No, I'm not concerned. I don't think they will.

289
Don't forget, there is -- in the interests of being symmetrical, the whole SSM approach is a reward and a penalty. There is another side to this. It can't always be upside.

290
MR. KLIPPENSTEIN:	So you want to change the free-ridership figures retroactively?

291
MR. ROWAN:	No, I want the free-ridership rate to be changed, as the auditor recommended they be changed, in the year in which they apply, 2000, not at some future time.

292
Because that number of 49 percent could well be irrelevant next year. It's only after the audit has taken place will you find out what the true free-ridership rate was. But what the error was was that they allowed more people into the program than they should have.

293
And keep in mind what the company representatives who go out to these companies are. They're salespeople. And as the Enbridge panel said yesterday, they're provided with an incentive on the basis of gross sales. They have no interest in screening free riders, but that should be their job.

294
And one could argue, why is a salesperson going out doing a DSM job? It seems to be a slight conflict of interest, particularly with their incentive scheme.

295
MR. KLIPPENSTEIN:	Mr. Rowan, if the Board accepts your recommendation and decides to impose a $69,000 penalty on Enbridge for these programs using those after-the-fact-discovered figures, are you concerned that Union Gas might decide that it wishes to discontinue DSM?

296
MR. ROWAN:	No, and may I just comment on your use of the words "after the fact". This is an audit by an independent auditor. An audit requires that if there are things that are found that are not appropriate, that there should be some change.

297

MR. KLIPPENSTEIN:	Wait a minute. I said they were discovered after the fact. You don't disagree with that; right?

298
MR. ROWAN:	They were found by the auditor that was a part of a process. It is before the SSM claim has been finally determined.

299
MR. KLIPPENSTEIN:	But it was discovered after the fact in the sense that it was after the implementation of the programs; right?

300
MR. ROWAN:	True, but that is the reason why you have an audit, that if there are things that should not have been done or calculations that should not have been made, then you have an audit to identify those before you move to the next phase.

301
MR. KLIPPENSTEIN:	And indeed one of the big usefulness aspects of an audit is it can be applied for future programs; right? It can make use of knowledge gained from the past experience; right?

302
MR. ROWAN:	The use of an audit is both current corrections that need to be made and lessons learned so that you don't make those same mistakes in the future.

303
MR. KLIPPENSTEIN:	You've mentioned or raised the idea in one of your interrogatories that Enbridge should be subject to a value-for-money audit, right, what you call a value-for-money audit, in addition to everything else; right?

304
MR. ROWAN:	Yes, and that will be an issue that will come up when we deal with the audit process in another section.

305
MR. KLIPPENSTEIN:	But you're recommending it for 2001; is that right?

306
MR. ROWAN:	We're recommending it for 2001, but 2001 audit, we -- which is not really part of this because the claim is an unaudited claim for 2001 which is, in our view, most inappropriate.

307
MR. KLIPPENSTEIN:	Right. Your view for 2001 is it should be a value-for-money audit for 2001 and therefore it's what's before us right now today; right?

308
MR. ROWAN:	I beg your pardon? I'm sorry, I didn't hear that.

309
MR. KLIPPENSTEIN:	You're suggesting that indeed the 2001 claim which is before us this morning should be subject to a value-for-money audit, as you call it.


310
MR. ROWAN:	Should contain a component of a value for money, yes.

311
MR. KLIPPENSTEIN:	All right. Would you agree with me that the present SSM methodology bases Enbridge's incentive on its net TRC savings?

312
MR. ROWAN:	Yes.

313
MR. KLIPPENSTEIN:	And the greater the net TRC savings, the greater the potential payment is to the shareholders; right? So everything else being --

314
MR. ROWAN:	Excuse me. The greater the TRC savings above the agreed-upon amount, yes.

315
MR. KLIPPENSTEIN:	Right. So everything else being equal, if Enbridge can lower its DSM costs per cubic metre saved, then it has a larger potential for -- or rather, then, it's -- the net TRC savings are greater; right?

316
MR. ROWAN:	That is part of the calculation, yes.

317
MR. KLIPPENSTEIN:	Right. And so the present SSM methodology motivates, has a built-in incentive to motivate Enbridge to achieve DSM savings at as low a cost as possible; right?

318
MR. ROWAN:	But it's how those dollars are used and through which organizations those dollars are -- flow. And in the 2000 DSM program, and here, Mr. Chairman, we're getting into -- you have to keep in mind that the 2000 DSM SSM is being heard in this rate case, but in fact the issues and interrogatories that surround it, the 2000 evaluation report, were in a previous rate case. And that was the 2001-0032 rate case, I believe.

319
So my comments, in trying to respond to the question, deal with issues that arose in a previous rate case and I'm not sure whether that is allowed, my comment there. But let me just go on and maybe you can decide whether it's appropriate.

320
We were very concerned when we looked at the 2000 --

321
MR. KLIPPENSTEIN:	Mr. Rowan, I really don't see how this is any answer to the question.

322

MR. ROWAN:	I'm trying to answer your question. I'm trying to answer your question. Because I indicated a value for money is not just how much money was spent but how it was spent and through whom it was spent. And we were very concerned about the way in which hundreds of thousands of dollars were flowed to Enbridge Home Services as one of the channel partners in the delivery of some of these programs and we were asked a number of interrogatories in this area and we were denied the information; they said this was confidential.

323
So it was because of that kind of experience that we believe that a value-for-money audit would be a component, would be important for the audit of future evaluation reports.

324
So that is the reason why that issue has come up.

325
MR. KLIPPENSTEIN:	Well, you've agreed with me that the SSM has a built-in incentive that motivates Enbridge to achieve DSM savings as lowest cost as possible; is that correct?

326
MR. ROWAN:	Only as far as the dollar amount is concerned. But through whom that money or through which organizations that money flows is a different issue.

327
MR. KLIPPENSTEIN:	It's a different methodology from SSM methodology; right?

328
MR. ROWAN:	It's a different issue if you don't think it doesn't matter through whom that money flows and if the amount of money could have been reduced even further. Don't forget it could be going from one pocket to another pocket in the same overall organization.

329
MR. KLIPPENSTEIN:	Well, I'm suggesting to you, Mr. Rowan, given the built-in cost reduction incentive in the current SSM methodology, that, in fact, instead of devoting ratepayer money and Enbridge management money to dealing with issues of 20/20 hindsight and how Enbridge's DSM programs could have been improved if they had had perfect knowledge, wouldn't it be a little more cost effective, if cost effectiveness is your concern, to focus on the development of better DSM programs for the future?

330
MR. ROWAN:	I think both are important.

331
MR. KLIPPENSTEIN:	All right. I have no further questions.

332
MR. BETTS:	Thank you. It's 11:00 at this point. I think it's an appropriate time to take a break. We will return, and is it still the intent of those that I mentioned earlier to question Mr. Rowan?

333
MR. POCH:	Yes, Mr. Chairman, I will do my best to try not to be repetitive.

334
MR. BETTS:	And if you can during the break just sort out the order for me, that would be helpful and then I don't have to take numbers to do so.

335
So we will break for 20 minutes. Let's return at 11:15.

336
--- Recess taken at 10:55 a.m.
337
--- On resuming at 11:20 a.m.
338
MR. BETTS:	Thank you, everybody. Please be seated.

339
Did we sort out the order for cross-examination?

340
MR. POCH:	I believe we did, sir. I will start and then --

341
MS. LOTT:	I will follow very quickly.

342
MR. POCH:	VECC, and then IGUA may have some questions; they will reserve their rights and follow if necessary.

343
MS. NEWLAND:	And I will play clean-up.

344
MR. BETTS:	Thank you, Mr. Poch; then please proceed.

345
MR. POCH:	Thank you.

346
CROSS-EXAMINATION BY MR. POCH:

347
MR. POCH:	First of all, Mr. Rowan, very simply, may we assume that you've discussed the issues before the Board in this case with CME officials, and any positions you are offering today are CME-approved positions?

348
MR. ROWAN:	Yes.

349
MR. POCH:	We can agree that the years 2000, 2001 and 2002 are over, the DSM program delivery with respect to those programs is finished; correct?

350
MR. ROWAN:	The programs are finished, yes.

351

MR. POCH:	So changing rules or assumptions now as opposed to considering them for 2003 forward has only one effect, does it not? And that is that it impacts the SSM pay-out is for those historical years.

352
MR. ROWAN:	It could.

353
MR. POCH:	It could. It doesn't change the incentive for the company in those years because those years are past.

354
MR. ROWAN:	That's correct.

355
MR. POCH:	Right. Now, we didn't see any substantive proposals in CME's evidence for changes to measure screening assumptions or program design. Your evidence on this topic, that is, the 2000 and 2001 SSM issue, and indeed with respect to the 2003 DSM issues, focuses on process issues including how assumption and changes are to be applied; is that fair?

356
MR. ROWAN:	With respect to 9.6, the issue is how the calculations shall be determined.

357
MR. POCH:	Fair enough. And indeed, your entire evidence pertaining to all the issues is primarily about process and -- how assumptions, the rules for how assumptions should be made and applied; is that fair?

358
MR. ROWAN:	That is correct. We believe that the Board needs to focus on these issues and make determinations as to how best the DSM should function generally.

359
MR. POCH:	Okay. And your evidence is reflective of the fact -- may I take it as reflective of the fact that CME is not proposing in this hearing, in any part of this hearing, that the Board deal with changes to assumptions per se, that is the underlying inputs per se, or program selection or particular screening inputs; is that fair? That's for another time.

360
MR. ROWAN:	If you mean inputs to program design, is that what you mean?

361
MR. POCH:	Screening, design, those sorts of inputs, yes.

362
MR. ROWAN:	However, if you are meaning whether or not when the auditor says a free-ridership rate needs to be changed, then we are asking the Board to make that determination.

363
MR. POCH:	Sure, I understood -- I was categorizing that as a process issue that is -- and that in this particular example as to whether we do it with respect to the historical years or on a forward-going basis. I appreciate that that would be your process-related concerns that you are asking the Board to deal with in this hearing; correct?


364
MR. ROWAN:	Yes.

365
MR. POCH:	All right.

366
Among other things you want -- you've made clear, I think, that you want the clearance of the 2001 accounts to await an audit, and you state that you want to have the consultative, the DSM consultative participants be able to review the monitoring evaluation report and make suggestions to the auditor before that process occurs; is that correct?

367
MR. ROWAN:	Before which process?

368
MR. POCH:	The audit M&E report occurs, and I'm thinking here of 2001.

369
MR. ROWAN:	More specifically, we are saying that the 2001 SSM claim should not be made before an audit.

370
MR. POCH:	I understood that, and you're saying that the audit should not occur until the consultative members have had an opportunity to review and comment on the M&E report and that that should be input that the auditor can take into account; is that correct?

371
MR. ROWAN:	No. The comments on that report have already been made.

372
MR. POCH:	All right.

373
Did you, in fact, submit formal comments to the auditor in that report?

374
MR. ROWAN:	No. The comments are not made to the auditor. Those comments are made to Enbridge.

375
MR. POCH:	All right. And did you submit such comments?

376
MR. ROWAN:	Yes.

377
MR. POCH:	And I'm thinking here of this distinction we've discussed a moment ago on the substance of inputs.

378
MR. ROWAN:	Made comments on the 2001 evaluation report with respect to the conclusions that were drawn in that report.


379
MR. POCH:	And are those comments on the record in this hearing?

380
MR. ROWAN:	No, not that I'm aware of.

381
MR. POCH:	All right. You're also calling for a value for money --

382
MR. ROWAN:	Excuse me. I'm sorry.

383
MR. POCH:	Go ahead.

384
MR. ROWAN:	If I may, Mr. Chairman. I just want to amend that last statement.

385
In our response to the partial settlement agreement, we did make comments, and it would be on page 7 and 8 and possibly 9 of our response, and in particular --

386
MR. POCH:	Just so I can follow you, is that under the heading, "2001 M&E Report Audit Process"?

387
MR. ROWAN:	No, this is -- I'm sorry, yes, that is correct, Mr. Poch, that section on page 7.

388
And then on page 8 there is a table, table 4, which is a listing of all of the 2001 programs that arrived at a $13.7 million SSM claim for 2001.

389
MR. POCH:	Okay. Thank you.

390
MR. ROWAN:	And one of those programs, if I may just continue, one of those programs in particular -- this would be number 2 on that list in that table, IN4 Agriculture, which it makes a contribution to the $13.7 million claim of $6 million --

391
MR. POCH:	Mr. Rowan, let me interrupt you, because my purpose -- Mr. Rowan, let me interrupt you, just in the interest of time just so you won't feel the need to go into that if -- in answer to me.

392
I wasn't asking for a discussion of your substantial concerns. I just -- was just asking about the chronology here. And let me just -- by all means, finish your answer if you feel it's germane to the issues in this case. But you're not raising such concerns with inputs for this Board to determine in this hearing. These are matters that you are -- you suggest go through -- be handled in this other process?

393

MR. ROWAN:	That is correct, because it is our view that the 2001 claim should be rejected and that it should not be even considered without having an audit of that 2001 evaluation report.

394
MR. POCH:	You've also discussed the fact that you've -- with prior examiners that you're calling for a value-for-money audit and that you -- I think the word you used, components of the audit include that, or that would be a component of the audit for 2001. We'll come back to discuss -- perhaps come back to discuss value for money in a later period in this case, but I just for now have one question, which is: At what cost, and how long do you anticipate such a value-for-money audit would take?

395
MR. ROWAN:	I think I've answered that in interrogatory. I can look it up if you wish.

396
MR. POCH:	If that would jog your memory, or if you can do it from memory that's fine too.

397
MR. ROWAN:	Let me just see if I can find it.

398
MR. DOMINY:	It's Pollution Probe interrogatory number 4, I believe.

399
MR. ROWAN:	Pardon me?

400
MR. DOMINY:	I think it's Pollution Probe interrogatory number 4 that addresses the matter.

401
MR. ROWAN:	Thank you.

402
Would you like me to read my response?

403
MR. POCH:	If you could just give us the gist of it so it's all in one place on the record, I think that would be helpful.

404
MR. ROWAN:	The question was: "Please state your recommended terms of reference and budget for a value-for-money audit of Enbridge's DSM programs." And the answer was: "With respect to possible terms of reference for a value-for-money audit, see attached description of value-for-money audits and specifically the section on pages 1 and 2 that outlines the key areas to be examined and the functions of the auditor."

405
"Assuming that the auditor of the M&E program would also undertake a value-for-money audit, it would be inappropriate to try to disaggregate the cost of one component of the overall assignment. It's more appropriate to let the competitive billing process place a value on the work to be done."

406
So you are asking me a question about something that is impossible until we know the scope of the job.

407
MR. POCH:	You don't have anything to offer this Board today in terms of what the appropriate scope would be or what the cost of that would be. I think that's -- you've made that clear. But do we have -- do you have anything to offer this Board in terms of how long this process would take?

408
MR. ROWAN:	No. Again, the length is a function of many things, including the scope.

409
MR. POCH:	Okay. Now, you're aware that the audit process in fact is already underway and the audit is underway for 2001.

410
MR. ROWAN:	Much to our objection, as you know.

411
MR. POCH:	Yes. So I take it part of your recommendation would be to abandon that and start again including such components as this.

412
MR. ROWAN:	If the Board rules that the process was inappropriate, that would be the conclusion.

413
MR. POCH:	All right. Now, I don't think I'm overstating your position to say that you've been amongst the most -- well, you've been the most vociferous of all parties on -- in complaining that the DSM evaluation and audit process has been suffering some lengthy delays in the last couple of years; is that fair?

414
MR. ROWAN:	I'm not sure that I would like be associated with the word "vociferous", but I think I have expressed my views on a number of occasions.

415
MR. POCH:	And wouldn't your proposals for value-for-money audit, amongst other things, indeed for clearance of the 2001 accounts, pending all that, exacerbate that problem of Enbridge getting back on track?

416
MR. ROWAN:	You should keep in mind -- the answer is no, not necessarily. But keep in mind that in the ADR agreement of May 2002, members of the ADR, including Green Energy Coalition, agreed to the consideration of a value-for-money audit, to the consideration of.

417
MR. POCH:	Yes. Yes, and I think there's correspondence before the Board where our position is clear that we believe that consideration has occurred. I take it you don't believe there's been adequate consideration of that concept.

418
MR. ROWAN:	That is correct.

419

MR. POCH:	All right. And would you agree with me that, although you don't adopt the proposed settlement for the 2000 and 2001 SSM and LRAM, that there would be -- there's some virtue in it insofar as it allows the company to focus on the forward-looking matters?

420
MR. ROWAN:	I see no virtue in the payment of $8.1 million when $4.6 million is associated with an evaluation report that has not been audited. I see no virtue in the payment of -- that was for 2001. I see no virtue in the payment of $3.5 million when that means that certain very fundamental principles of how you apply recommendations of the auditor have been ignored.

421
MR. POCH:	Mr. Rowan, you've also called for changes in the audit subcommittee selection process. Are you also suggesting that those occur before the 2001 audit and before any clearance of the 2001 accounts?

422
MR. ROWAN:	No, not necessarily. You must keep in mind that the proposed changes in the manner in which the DSM consultative operates is an issue that is going to be heard by this Board in a later segment of the 9 series.

423
What we are hopeful of, that those changes will occur quickly. We -- I should remind you that there were no DSM consultatives called for 12 months between November of 2001 and November of 2002.

424
MR. POCH:	In answer to my simple question, you are not suggesting that those changes be made before the 2001 audit?

425
MR. ROWAN:	I said not necessarily; it depends on when the decision is made and what the implications of that would be in terms of the agenda, upcoming agenda for the DSM consultative.

426
MR. POCH:	You also complained that a vote was not the appropriate selection method for members of the audit subcommittee, and, indeed, this is a -- I don't think you have to turn it up. I can paraphrase it. Tab 3 of your evidence, page 3, near the top, you -- one of your complaints is that there was no verification of proxies that were used -- that were voted at that time.

427
Do you dispute the honesty of the consultative members who asserted proxies to vote?

428
MR. ROWAN:	Before I answer that, I'd just ask, Mr. Chairman, the issue of the audit process will come up in a later matter. The issue that is being dealt with in 9.6 is whether or not the SSM claim, which has not been audited, should be considered by this Board and accepted by this Board.

429

What Mr. Poch is raising now has nothing to do with this SSM claim as presented, the partial settlement agreement as has been presented. It would become an issue if there is an audit that is based upon the current audit process that is underway.

430
MR. POCH:	Well, Mr. Chairman, I'm just trying -- the Board has before it two alternatives, one of which is Mr. Rowan's, and that is what is the process for the 2001 accounts, including the audit thereof and the purpose of the audit, and so on. And it will be a little late in the day if the Board were to decide to agree with Mr. Rowan in principle and issue that in a report some months from now. And then we somehow have to engage in understanding what that means.

431
I think -- I'm just trying to compare the two routes ahead of us, and we want to look at the practicalities of these things. I wasn't intending to get into any detail on what the rules for the consultative process are.

432
Just Mr. Rowan, in his evidence, has laid some complaints before the Board with respect to the 2001 audit process, and I just wanted to deal with that tranche of it, if you will.

433
MR. BETTS:	Mr. Rowan, will you have difficulty answering that specifically with respect to the process involved with the 2001 audit?

434
MR. ROWAN:	I would be happy to answer it if you think it's germane. I don't, but if you think it's something that we should proceed with, I'd be happy to do that.

435
I should say that in the evidence that we presented, there are three letters to the Board, one of which was dated November the 25th of last year, that sets out our concerns and -- in a very clear way.

436
If -- and I find the comment that it's a little late in the day now to be --

437
MR. POCH:	No, I'm sorry, I wasn't suggesting it's late in the day now. I'm suggesting we deal with it now rather than leave it for another six months or a year.

438
MR. ROWAN:	But it was a little bit late in the day to be -- if one turned back the clock, in other words, stop the process, the audit process of the 2001 audit that is now underway, that would be late in the day. That was the inference that I took from the question.

439
I should remind the panel that I am -- that I raise this issue -- CME raised this issue on November 25th. We wanted to stop the process then.

440

MR. BETTS:	I think, Mr. Rowan, I would ask -- perhaps Mr. Poch could rephrase his question, but I think it would be helpful to the panel if we could deal with the issue of the 2001 audit so that we have a fairly clear understanding as to what remedies might occur based on the position of all the parties.

441
So please, Mr. Poch, could you repeat what you're looking for.

442
MR. POCH:	Thank you, Mr. Chairman.

443
Mr. Rowan, you've raised some concerns, as you did, as you just spoke of, with respect to the way the 2001 audit is proceeding. And a moment ago you allowed for the possibility, depending on the timing, that that audit would continue to proceed as -- or might have to be restarted.

444
And I'm just -- I'm trying to understand the nature of your complaints with that process, and one of them was with respect to a verification of proxies, and I'm just asking you, do you dispute the honesty of the consultative members who carried forward proxies for others to vote at that time?

445
MR. ROWAN:	CME objected on two main grounds, as you may recall. First, there was no discussion of Enbridge's proposed approach. No discussion was allowed on the approach, including the size of the subcommittee, the qualification of the candidates, whether the subcommittee members represented ratepayers, the need to ensure --

446
MR. POCH:	Mr. Rowan, I'm going to ask you to be responsive to my question. I asked you -- you'll have an opportunity to make whatever statements you wish. I please must insist on first getting an answer to my question.

447
You've raised a concern specifically about the verification of proxies. Are you challenging the honesty of the members of the consultative who carried forward those proxies.

448
I think those parties and this Board has a right to an answer to that question.

449
MR. MacODRUM:	Mr. Chairman, I think if Mr. Poch was patient, he would get his answer.

450
MR. ROWAN:	I'm trying to answer the question, because I want to give you the context within which the issue of proxies was raised, and --

451
MR. BETTS:	I'm prepared to hear Mr. Rowan's answer, then.

452
MR. ROWAN:	Among the issues that were not allowed to be discussed was a need to ensure that there was a balance of interest on the committee, specifically those ratepayers who will have to pay Enbridge's SSM claim and whether certain interests would be overrepresented in the selection process if it were based on a vote of the consultative members.


453
This is the background to this issue of proxies. There were approximately two, maybe three people who did not attend the DSM consultative. However, they sent their -- it was alleged that they had sent, I'm not suggesting that there was any collusion, I'm not suggesting that the people who said they had a proxy didn't have a proxy. All I'm saying is that people at the time a vote was made said, Oh, I have so and so's proxy. The person wasn't there. There was no advanced warning that there would be a vote, but those votes were cast and the way in which the voting procedure proceeded was that each person had the vote for three individuals. So if there were groups who represented one set of principles who had -- either were overrepresented on the DSM consultative as there are, who are not per se ratepayer representatives, if they combined their votes, they could ensure that the people who are elected to the audit subcommittee are their kind of people with their view of how to go about an audit and they can exclude people who they don't find have interests common to theirs.

454
Our approach was that a vote should not be required; that any party, any intervenor, ratepayer representative who wanted to be on the audit committee should be allowed on the audit committee because they had a right to ensure that there was an appropriate and accurate audit.

455
The reason that we've taken this approach is that we have gone through two audit processes. We know how important it is to ensure that the audit process is done properly, that the right issues are considered, that the process is professional. And we were very concerned that the way in which this vote was undertaken and proposed and the use of proxies, that that was not going to happen.

456
So, Mr. Poch, I am not questioning the honesty of people. I'm questioning the appropriateness of the process and even the way in which the process was foisted off on to the DSM consultative.

457
We were advised, Mr. Chairman, when we arrived, that Enbridge had appointed a facilitator. Now, a facilitator, to my mind, has a definition of an impartial individual who will try to bring sides together. We found that the facilitator was the legal counsel of Enbridge who is before this Board on DSM matters. Not impartial. His approach was partisan. Not the way to run a DSM consultative, in our view.

458
MR. POCH:	Mr. Rowan, are you finished your answer?

459
In your evidence, you say in this proceeding, "Some groups claim they held proxies with other intervenors, but there was no verification of those assertions." Are you raising a concern about verification of proxies with this Board? Are you doubting the veracity of those parties asserting those or are you accepting them; and if you are accepting them, can you explain to me what this assertion is about?

460
MR. ROWAN:	I'm raising the concern that A, that people provided proxies or said that they had proxies when there was no verification. I'm raising concern that proxies was a -- an allowed approach.

461

MR. POCH:	Just stopping at your first one. You are raising a concern that because there was no verification of the proxies in your view, that was -- it was -- we have to discount the proxies; is that what you're saying?

462
MR. ROWAN:	Let's go one step back. Raising a concern that the whole issue of having a vote on the audit subcommittee members was not a -- an appropriate approach.

463
MR. POCH:	No, I understand that you have broader concerns with respect to voting. But you raised a specific question here which calls into veracity of members of that committee and I just wanted to make sure that I had understood you correctly. Do I now understand you that you are indeed questioning the veracity of those proxies?

464
MR. ROWAN:	I have no way to question whether or not they were actually given. I'm questioning their use.

465
MR. POCH:	And so what does "verification of the assertions of proxies" pertain to, then?

466
MR. ROWAN:	That there was no process to verify whether or not they had been given.

467
MR. POCH:	Then you have some doubts in that regard? Is that a live issue? Or is this a theoretical issue?

468
MR. ROWAN:	The only doubts I have, Mr. Poch, is that I don't know whether they were or whether they were not. I have no way of proving it.

469
MR. POCH:	You have some doubts, then. You are not saying this is a theoretical issue, you have some doubts.

470
MR. ROWAN:	So what?

471
MR. POCH:	I won't argue that.

472
Now, in answer to my question, you gave the Board a long response about -- I think where you set out your reasons why you don't think a vote is appropriate and your concerns about representativeness on the committee; correct? Just a moment ago.

473
MR. ROWAN:	Yes.

474

MR. POCH:	That's -- I'm not going to say it word for word, but you recall you gave a -- made a similar submission to the consultative members at the meeting you've just spoken about; correct? And you're -- when you say that there hasn't been consideration given to these ideas including your value-for-money audit, what you're really saying is we didn't engage in a long discussion about it. The committee concluded to the contrary without significant discussion; is that fair?

475
MR. ROWAN:	Yes.

476
MR. POCH:	Okay. So it's not that the process hasn't allowed for it, it's simply you didn't like the opinions of the other committee members and how quickly they were able to come to a conclusion.

477
MR. ROWAN:	Well, if you're suggesting, Mr. Poch, that it was a democratic process, that kind of reminds me of the discussion between two wolves and a lamb about what to have for dinner. I don't think there's any doubt as to what the conclusion will be.

478
MR. POCH:	You also make an assertion in your -- you question the assertion that eight groups were -- participated in voting. You're saying only four were present.

479
I take it that's just another expression of your person about the proxies; is that fair?

480
MR. ROWAN:	Well, that would suggest that there were eight people -- or eight votes made, but only four people were represented.

481
MR. POCH:	Yes. So you are saying -- you're discounting the proxies, and you're discounting, I think it was, Mr. Thompson for IGUA, who had to leave the meeting early, and knew a vote was coming and left a written vote with the chair. You're saying those shouldn't count?

482
MR. ROWAN:	No, I'm not saying that. What I'm saying is the proxy process and the whole way in which the selection of the audit subcommittee was made is inappropriate.

483
MR. POCH:	All right.

484
Now, in -- I'll give you the reference.

485
Mr. Chairman, I don't think anyone needs to turn it up.

486

But in the first tab of your evidence, page 9 of 17 at paragraph 31, you accuse the subcommittee members, the audit subcommittee members, of having a conflict of interest, and I just want to ask: Are you suggesting that if the 2001 audit were to uncover a problem that wasn't already captured in the 2000 audit that Mr. Thompson, counsel for IGUA, or Mr. Neme, the professional DSM consultant there on behalf of GEC, or Ms. Kwik, VECC's consultant and a former OEB staff member, would just look the other way for some reason?

487
MR. ROWAN:	No. Would you point me to the reference, please.

488
MR. POCH:	Yes, page 9 of 17 at paragraph 31.

489
You say there:

490
"The impartiality of the process and the outcome of audit are highly suspect. There is a clear conflict of interest."

491
MR. MacODRUM:	I think you should read the whole of the paragraph, Mr. Poch.

492
Which explains those last two sentences, Mr. Chair.

493
MR. POCH:	You say, you objected:

494
"As currently constituted, all members of the fiscal 2001 audit subcommittee are signatories of the partial settlement with respect to SSM and LRAM."

495
And then you say:

496
"The impartiality of the process and the outcome of the audit are highly suspect. There is a clear conflict of interest."

497
MR. ROWAN:	Here is my rationale for that, Mr. Chairman. What you have is a partial settlement agreement that says it's quite appropriate for the Board to agree to the payment of a $4.6 million SSM claim in 2001. And they're saying that even without an audit.

498
Now you've got an audit subcommittee that is composed of the same group of people who signed the partial settlement agreement being in an audit subcommittee giving direction to an auditor and are going to be making recommendations with respects to an SSM claim.

499
It would seem to me that they are not going to come up with an SSM claim that is wildly different after the fact than the one that they supported in a partial settlement agreement that's before the Board right now.

500

So they have a conflict of interest. It's in their interest to make sure for their own constituency. And I reference Mr. Warren's comments yesterday about risk reward and stating that it's -- that members of associations, as he was trying to suggest to me, should focus on the risk reward for their members alone, which I rejected.

501
But since that's their position, it would seem to me that their risk reward is going to be to make sure that the SSM claim could be -- to make sure the SSM claim that comes out of the audit is not that -- well, that far off the $4.8 million claim.

502
So that's the background for our concern in paragraph 31.

503
MR. POCH:	Mr. Rowan, you understand that the signatories to that agreement all believe that the 2001 audit, if it discovers any new information, that that information should be used on a forward-going basis to effect the programs as they unfold and the incentive facing the company in conducting those programs?

504
MR. ROWAN:	Yes, and we disagree with that position, because we believe that if there is something found in an audit, it should apply in the year of the audit.

505
MR. POCH:	No, I've heard you on that. I just want to make sure you understand and you appreciate that the signatories to that agreement accept and are -- indeed, that they don't view the audit as an academic exercise. They want the -- any information it finds, because it's to be applied on a forward-going basis; correct?

506
MR. ROWAN:	It's certainly academic as it applies -- would apply to 2001, not academic, maybe, as it applies to future years.

507
MR. POCH:	All right.

508
Are you suggesting that IGUA or CAC or VECC or the environmental groups would have any interest in unjustly enriching Enbridge with rewards for inefficient energy efficiency programs on a going-forward basis?

509
MR. ROWAN:	I think that they have already taken that position by enriching Enbridge in the settlement -- partial settlement claim.

510
MR. POCH:	I see. Okay. Thank you.

511
In changing topics, you made some comments about TRC earlier today. Is it fair to say your concern with the TRC, if I understood you correctly, is not the architecture of the test per se, but rather the uncertainty in inputs that leads you to distrust the result.

512
MR. ROWAN:	That is certainly one factor, yes.

513
MR. POCH:	All right. Are there other significant factors? I took that to be the thrust of it.

514
MR. ROWAN:	That's a principal factor.

515
MR. POCH:	And you accept, I take it, that the inputs that have been used in these various spreadsheet calculations, they were not Mr. Millyard's. They came either from assumptions agreed to in prior ADRs and, indeed, agreed to by CME in prior ADRs, or they came from results at the end of the year as measured by Enbridge or by external evaluators and as reviewed by the auditor; correct?

516
MR. ROWAN:	Yes, as amended by the auditor as a -- is an important part, yes, and as we get more information, more knowledge.

517
MR. POCH:	Okay. Thank you.

518
Now, specifically with respect to this free-rider rate as applied to the custom projects, I think this is one of your principle objections, if I may, to the proposed settlement of the 2000 and 2001 deferral accounts. You feel that they -- it doesn't -- that settlement doesn't reflect an appropriate treatment of the custom project free-riders issue. That's the main one I think that you referred to earlier; is that fair?

519
MR. ROWAN:	In percentage terms, it is the main one, yes.

520
MR. POCH:	And you agree, you understand that the proposed settlement is a compromise of a number of factors and doesn't purport to resolve that issue, the treatment of free riders on a forward-going basis; indeed, that's specifically an issue in this case with respect to 2003 forward. And there is -- proposed principles to resolve that have been set out in the evidence of, in the settlement of the proposed 2003 partial settlement as well as in pieces of evidence in that case; correct?

521
MR. ROWAN:	I didn't hear the question.

522
MR. POCH:	I'm asking if you appreciate that the settlement of the 2000 and 2001 matters on its face does not purport to resolve that issue on a forward-going basis and, indeed, that issue on forward-going basis is explicitly addressed with respect to 2003 in the partial settlement and with respect to evidence filed amongst other --

523
MR. ROWAN:	That is my understanding, and we disagree with that approach.


524
MR. POCH:	Right. I'm just asking if you -- that you understand and you've indicated you do.

525
Now, earlier, I thought I heard you say that your client's concern in raising these matters with respect to 2000 and 2001 is not about dollars but getting the rules right for the future; did I understand that correctly?

526
MR. ROWAN:	Not quite. CME's concern broadly, more broadly based than apparently some of the other intervenors, we want to have the rules, the right rules in effect and have them apply starting with the 2000 evaluation report. That includes the application of the auditor's recommendations, specifically as it applies to business market free ridership.

527
When that application is made, it results in a considerable reduction in Enbridge's SSM claim. Dollars are important, but equally important is that the rules are fair, the rules are known, and that it is not one of the rules that the applicant can pick and choose which of the assumptions it wishes to adopt at any one time, as it has done so in this case.

528
MR. POCH:	Let's look at that. Could you turn up, I think the easiest place to see this is in Mr. Klippenstein's cross-examination materials. This is the excerpt from the 1999-0001 ADR agreements, behind tab 3 of Exhibit K.1.5.

529
If we look at the bullet that's been discussed already under Exhibit 6.1.1, the second bullet, I know you've made some comments about disagreeing with assertions about what this paragraph might mean and let's not deal with that debate which we've already aired. Let's deal with what it does -- we can agree it does speak to and that is with respect to the four items enumerated, being energy savings per measure, avoided costs, discount rates, and measure lives (sic).

530
Is your understanding of this paragraph that this paragraph says if new information comes to light with respect to any of those four items, it is to be applied - not only recognized in the result, but applied - symmetrically to adjust the budget against which that result will be compared for the purposes of SSM?

531
MR. ROWAN:	I don't subscribe, if I understand the question correctly, to the use of the word "symmetrically."

532
MR. POCH:	Fine. Nothing turns on the phrase. Let me just ask it, then. Do you understand this paragraph to mean that if new information comes to light with respect to any of those four variables, you recognize it in the result and you go back and change these, if that's a neutral enough word, change the pivot point against which the results will be measured to reflect that new information with respect to any of those four items.

533
MR. ROWAN:	That's what it says.

534

MR. POCH:	All right. Now, could you turn up Exhibit A.7, tab 5, schedule 1, which is the 2001 evaluation report, monitoring evaluation report, and turn to page 50.

535
Does the panel have that?

536
MR. BETTS:	We do, thank you.

537
MR. POCH:	Mr. Rowan, page 50.

538
MR. ROWAN:	Yes.

539
MR. POCH:	And I'm looking in the -- at the paragraph underneath table 5.2 and the last sentence there, and I'll read it:

540
"The May 2001 update of avoided gas costs results in a $12.8 million increase in the net resource benefits compared to incorporating the original assumptions used in the fiscal 2001 DSM plan and increases the fiscal 2001 SSM claim by $4.5 million."

541
So first of all, do you have any reason to differ with that statement?

542
MR. ROWAN:	Since I've just seen it, not for the first time. But again, I have to think about the context, but let's accept it as a statement.

543
MR. POCH:	All right.

544
Do you understand, Mr. Rowan, that when the -- these questions were discussed in the settlement, and I don't want to get into the discussions in the settlement, but you understand that on the going-in position that the 13.7 million, which was Enbridge's position for 2001 and the position they would presumably revert to if the 2001 settlement isn't accepted by this Board, in effect honours the clause we've just been speaking to by going back and changing the pivot point, in light of this new information, this change in avoided cost. And the effect of that is that there's $4.5 million in that $13.7 million claim.

545
MR. ROWAN:	Is that a question?

546
MR. POCH:	Do you understand that?

547
MR. ROWAN:	If you say so.

548

MR. POCH:	All right.

549
Well, and do you appreciate that the -- first of all, can we agree that on a going-forward basis at least, virtually every party agrees that the SSM should be about incenting matters, behaviour of the company with respect to factors that it can influence, and it shouldn't be about rewarding them for factors beyond their control.

550
MR. ROWAN:	Again, is that a question?

551
MR. POCH:	That's a question. Do you agree with that?

552
MR. ROWAN:	That is the theory, yes.

553
MR. POCH:	And, in fact, there's widespread support for that theory? I'm not sure anybody disagrees with that theory. Is that your own experience in these discussions, various discussions --

554
MR. ROWAN:	If you feel that an incentive is required, then, yes, sure.

555
MR. POCH:	Sure. Okay.

556
And so you understand that if we were to take a strict approach and say if it's been agreed to in the past, we can't go and change it, then the company is quite on solid ground in expecting to get paid that extra $4.7 million, even though avoided cost isn't really something that they can affect, is it?

557
MR. ROWAN:	That is correct with -- let me just, however -- you referred to the RP-1999-0001 ADR.

558
This raises a question, Mr. Chairman, and that is: What is the half life of an ADR agreement? This ADR agreement for 1999 applied to the year 2000. There's nothing that I'm aware of that was in the 2000 ADR agreement -- or the ADR agreement that applied to 2001.

559
And so what Mr. Poch is saying is that because you agreed to something that applied to the year 2000, why are you not bound by that for an evaluation in the year 2001?

560
Now, oftentimes intervenors or the applicant uses ADR agreements as though they are precedents that they can -- that carry forward forever, but sometimes they take the position that an ADR agreement was for that specific year, and it doesn't apply after. That was a deal that was made, and I'm not bound by that deal after that period of time is over.

561

And I think that what this line of questioning suggests is one of those situations where they are applying something that -- in one year and carrying and trying to carry it over for another.

562
But even if it applied, even if it applied, our argument has nothing to do with this issue. Our argument is that the claim for 2001 shouldn't be accepted by this Board, because the evaluation report for 2001 has not been audited.

563
So regardless of what the size of the increase that's stated on page 50, really is not the issue. The issue is ratepayers, in my view, expect SSM claims to be made only after an audit has taken place, an independent audit.

564
Now, if the numbers came out higher, so be it, but let's go through the process.

565
MR. POCH:	Mr. Chairman, I just have a couple of follow-ups, and then it would be a good place to break, so if you will allow me to do that.

566
Mr. Rowan, I guess I'm trying to trying to understand -- let me preface my question with this: I view the settlement as a practical attempt to move forward, catch up, come to a compromise where there is competing positions that have merit on both sides and move forward and focus on where we can affect behaviour and affect the real world in the future.

567
Now, you're saying you object, if I understand you correctly because -- as a matter of principle you object, because the prior agreement said, Here's the protocol we're going to follow, including the -- that the audit comes first, and you believe there's -- as a matter of principle that we ought to adhere to that rule that we agreed to in the past.

568
Have I got you right so far?

569
MR. ROWAN:	That we're committed to an audit.

570
MR. POCH:	Yes.

571
And yet when I -- and I'm bringing up for your review another rule that was agreed to prior, that if we also strictly adhere to it would -- and virtually inevitably -- increase the outcome of the 2001 SSM by another $4.7 million.

572
And I'm just suggesting to you that is there not -- I'm asking you is there not merit in a settlement in which the companies come forward and said they recognize that strict adherence to those rules wouldn't be appropriately circumstances they are prepared to compromise.

573

And we on our part have done the same with respect to an appreciation of what was facing the company and free riders.

574
Do you see that as somehow -- whether or not you agree with the particular saw-off -- are you suggesting that there's somehow something wrong with this -- this process, trading these things off in the interests of practicality?

575
MR. ROWAN:	In answer, Mr. Poch, I'd like to refer you to paragraph 15 of our evidence on page 6 which says, "Like Enbridge, CME wants to move forward. Unlike Enbridge, CME does not believe ratepayers should pay $8.1 million for that privilege." Let me just finish. "The cost, if any, to ratepayers of moving forward should be determined after the Board rules on the issues surrounding the fiscal 2000 audit and after the fiscal 2001 M&E report has been independently audited."

576
MR. POCH:	Mr. Chairman, from memory I seem to recall the Board wanted to break closer to noon. This is a convenient spot.

577
MR. BETTS:	We will not be breaking for a coffee in the afternoon so I don't mind going a little bit longer for a lunch break. It will shorten the afternoon.

578
MR. POCH:	I'm at the Board's pleasure.

579
MR. BETTS:	How long did you anticipate you might require to finish your line of questioning?

580
MR. POCH:	From the way it's been going, it's very difficult to judge. I might be another 20 minutes.

581
MR. BETTS:	Please proceed. I think that would be appropriate, then.

582
MR. POCH:	All right.

583
Mr. Rowan, I wanted to ask you one other question of your perception. And if you turn to the materials that we filed for purposes of assistance of cross-examination, Exhibit K.1.3, what we did there is we set out what the SSM would look like for 2000 and 2001. In the first case, if you accept the auditor's recommendations and apply them with respect to the prescriptive programs -- which is largely the residential programs and a bit of the industrial/commercial -- and you simply suspend the SSM with respect to the custom programs where this free ridership issue arose in 2000 and 2001 and that's the top line, does that accord with your understanding of how this would shake out? I'm not asking you to be -- indeed we haven't offered numbers to the third significant digit; but does that accord with your understanding?

584

MR. ROWAN:	I can't comment on that. I mean it's an interesting table but what's behind it, I have no idea.

585
MR. POCH:	All right. Now, just to be clear, you've suggested that the SSM be cleared on the basis of roughly $4 million lower for 2000 because you would hold the free-rider rate in the pivot point to that originally assumed, the 10 percent number we've heard of. And you would, but you would recognize this 48 or 49 percent mid-point of the auditor's suggestion in the result. So we would be -- have I got that correct?

586
MR. ROWAN:	Yes. It wasn't a suggestion, it was a recommendation, I believe.

587
MR. POCH:	Of your recommendation?

588
MR. ROWAN:	No, it was the auditor's recommendation.

589
MR. POCH:	I thought this ground has been plowed. Are you saying that the auditor has directed that that should be done with respect to clearance of the SSM? I thought the auditor explicitly left that up to the committee to discuss.

590
MR. ROWAN:	The auditor, and I would be happy to read the thing again, I would be happy to read it. The recommendation, Mr. Poch, was, and by the way, this is in the auditor's report, section 5, page 523: "We recommend that the current business market free-rider assumption of 10 percent be replaced" -- be replaced -- "by a value between the low and high end indicated in table 5-17 above."

591
MR. POCH:	You've mentioned that before and I thought your attention was drawn to -- the easiest place to see this in the report is at page 1-2, paragraph 6, and this is of the Xenergy Canada audit report. And I'll read it.

592
MR. ROWAN:	Would you give us that reference again.

593
MR. POCH:	"Xenergy Audit Report on Enbridge Consumers Gas 2000 DSM Evaluation Report"; this is the audit report.

594
MR. ROWAN:	Page?

595
MR. POCH:	Page 1-2. And it says there, I'm reading number 6: "The specific conditions under which budget and/or actual inputs would be changed based on new information from this audit or other sources will be determined by the audit subcommittee."

596
MR. ROWAN:	Yes.

597
MR. POCH:	Isn't that an explicit acknowledgment by the auditor that the auditor was not charged, was not going to make that decision, that that was being left to the consultative?

598
MR. ROWAN:	But that's precisely why we're here. When it went to the audit subcommittee, there was a difference of opinion.

599
MR. POCH:	Yes.

600
MR. ROWAN:	And -- and -- we believe that the auditor identified that there was a 49 percent free-ridership rate and it should replace the 10 percent.

601
MR. POCH:	Yes, there's just no question about that. I'm just pointing out that the auditor explicitly didn't make a recommendation whether it should be replaced both in the actuals and the budget or in just one or just on the forward-going basis.

602
MR. ROWAN:	And that's why we're here, sir.

603
MR. POCH:	Right. So the auditor didn't make a recommendation on how you should apply it and it's your recommendation that you apply it by applying it in the actuals but not in the budget; correct?

604
MR. ROWAN:	There are two issues. And you are trying, it would seem, to blend both issues. The auditor recommended that the 10 percent free ridership in business markets be replaced by the 49 percent free-ridership rate. That's issue number one.

605
Issue number two, and the reason why we are here, is when it would be applied. And it is our view that it should be applied in the 2000 year and I would be more than happy to give you the explanation as to why I think that should be the case.

606
MR. POCH:	I think we've heard you a few times, but let me just make sure that the record is perfectly clear here. You're not suggesting that the auditor has recommended that it be applied in the fashion you're advocating or indeed in any particular fashion. And the fashion you're recommending -- first of all, stop there. You're not suggesting that?

607
MR. ROWAN:	She made the recommendation it should be replaced. We accepted that recommendation.

608
MR. POCH:	I hear you, and you're not suggesting that that recommendation included any submission with respect to that it be replaced in the result but not in the budget, for example?

609

MR. ROWAN:	No, and she made no recommendation that would support your position either.

610
MR. POCH:	Fair enough. I'm not suggesting she did. She remained neutral on that question. We agree.

611
And it is your recommendation that the way you would like to see that 49 percent applied is by applying it in the actuals but not in the budget; correct?

612
MR. ROWAN:	That is correct, because it's the only reasonable thing to do, the only logical thing to do.

613
MR. POCH:	Right. And we had some sympathy for that position, and prior to considering one specific factor, and let me ask you if this is where we differ, and that is the extent to which the company actually could have and did control free ridership in its delivery approach. And we --

614
MR. ROWAN:	Is that a question?

615
MR. POCH:	And I'm just saying, Is this where we really differ on this, that we've concluded that in these historic years, the company did not exercise such control, and you are concluding that -- is it your conclusion that they did, in fact, exercise control or that they could have exercised control?

616
MR. ROWAN:	It isn't up to me to determine the extent to which the company exercised control. It was the auditor who found that there were free riders involved in that program to the extent of 49 percent.

617
MR. POCH:	Absolutely.

618
MR. ROWAN:	And that's why she recommended the 10 percent number be changed.

619
MR. POCH:	But the reason you would choose to change it, I assume -- correct me if I am wrong -- in the result but not in the budget is because you believe that the company should be in some sense held accountable for that change, that they are somehow the author of that change; is that correct?

620
MR. ROWAN:	That is correct. The company has the exclusive ability to determine who gets in a program and who doesn't.

621
MR. POCH:	All right.


622
And I think it's fair to say there's a recognition on a going-forward basis that there may be some opportunity to try to influence that, but with respect to the historic period prior to this issue coming to light, do you agree that while in theory they might have had some possible -- possibilities in influence, do you agree with the evidence we've heard that, in fact, the extent of the free-rider rate came as a surprise to all of us, including the company?

623
MR. ROWAN:	That is true, but that doesn't suggest that the auditor's recommendation should not be applied in the fiscal 2000 year.

624
MR. POCH:	Okay. Now, you've also complained that the -- that there was a delay in uncovering this new information, and you've laid that at the feet of the company, and you -- your concern is that they didn't do timely evaluations; am I correct?

625
MR. ROWAN:	No -- well, in one sense in that the -- the evaluation report was delayed by eight months or more beyond the time when they said it would be available. That, in turn, led to a -- the report not being available to the auditor until some number of months.

626
And that, in turn, led to a compression of time for the auditor to do a proper audit.

627
MR. POCH:	Indeed, just today -- I hear you, and indeed, just today you've commented that you were dissatisfied with the scope the '99 audit process that you were --

628
MR. ROWAN:	No, I didn't say that. I was dissatisfied with the quality of the '99 audit.

629
MR. POCH:	Well, I won't get into that, since we all signed off on that, and the company doesn't now have the opportunity to defend itself on that one, do they?

630
Let me just ask you about this question of delay. If we had had evaluation earlier on that did capture, uncover this problem with free ridership, that we were all labouring under a misconception with respect to free-ridership levels in the custom projects, if we had discovered that early on, is it fair to say that when we negotiated, if we had that information at the time when we negotiated the 2000 pivot point, the 2001 pivot point, and, indeed, the 2002 SSM pivot point, it would have informed that budgeting process?

631
MR. ROWAN:	Yeah, I don't think you meant the 2000 pivot point, because we're dealing with the --

632
MR. POCH:	Well, if we found there was a problem with custom evaluation prior to 2000, it would have informed that, too. But certainly if we found it in the middle of 2000, it would have informed -- early in 2000, we would have found it in 2001 in time to -- whenever we found it.


633
MR. ROWAN:	Yeah.

634
MR. POCH:	It would inform all subsequent discussions of pivot point setting; correct?

635
MR. ROWAN:	That is correct, and that is why during an ADR settlement agreement that the company committed to have the evaluation report available in a timely fashion, which it did not meet that commitment.

636
MR. POCH:	Right.

637
And indeed, if you look at the settlement proposal in this case, that is the 2003 case -- I guess I should be clear -- in the 9 series, and I'll just turn up the page here. This is -- I'll read it, so you don't need to scramble through your binders. This is at page 64 of Exhibit N.1, tab 1, schedule 1.

638
There's a partial -- and I appreciate there's a partial settlement which -- with respect to the volume target, which reads:

639
"Enbridge Gas Distribution's volume target will be approximately 72.5 million cubic metres, assuming a free-rider rate of 30 percent for custom projects. This volume target is equivalent to Enbridge Gas Distribution's original proposed volume target of 84.9 cubic metres, assuming a free-rider rate of 10 percent for custom projects."

640
So indeed, isn't that -- that's a real example of how this information gets incorporated. If we know it, we change the pivot point to reflect it; correct?

641
MR. ROWAN:	Yes, but it also is an example of how wrong the application of the -- or interpretation of the auditor's recommendation was.

642
MR. POCH:	Well, leaving aside the 30 percent, which is a whole separate discussion, which we'll have.

643
MR. ROWAN:	However, you raised the 30 percent, sir; you raised it. But that's an example of how wrong it is.

644
MR. POCH:	Fine. Mr. Rowan, I hear you. I'm just suggesting that rather than going off on that tangent, we agree we'll talk about the 30 percent rather than the 49 on the 2003 front.

645
I was just citing this as an example of how, when we have new information, we use it in the budgeting process. I think you've already agreed to that; fair?

646
MR. ROWAN:	We did not agree to this number.

647
MR. POCH:	No, I know you didn't agree to that number and I know you are not part of this partial settlement. I'm just asking you that this is your understanding of how the process would likely take into account new information; whenever it's available, it's going to inform the pivot-point budgeting process.

648
MR. ROWAN:	However, just so the panel is clear, and as I said earlier this morning, Mr. Chairman, the -- in logic and in -- in logic, given the types of program involved, DSM programs involved in the business markets, the free-ridership rate should be zero because the company has total control of who gets into that. This 30 percent here is a red herring. It doesn't make sense.

649
MR. BETTS:	I don't think Mr. Poch is particularly focused on the 30 percent; that's the panel's perspective.

650
MR. POCH:	I hear you, Mr. Rowan, and I assure you we'll have an opportunity to discuss that later in the hearing. And I'm agreeing with the Chairman.

651
The point I am simply making is, and I think you've agreed - correct me if I am wrong - when new information like this does comes to light, we would apply it if it is available at the time in the target setting exercise; you don't disagree with that.

652
MR. ROWAN:	I don't disagree with that.

653
MR. POCH:	So had we found out this information earlier on about the custom free rider problem, presumably in some fashion it would have affected the pivot-point setting exercises in these historic years, had it been available. And it wasn't.

654
MR. ROWAN:	Yes. Indeed, you could see that had it been available it would have affected the pivot point or could have affected the pivot point or other parts of the budget-setting process for 2001, 2002, and 2003.

655
MR. POCH:	And, indeed, if it was available before we set the 2000 target, it would have affected that one too.

656
MR. ROWAN:	Sure, but we're now talking about this one and this was part of our concern about the process. The fact that the company delayed and delayed and delayed has affected the program design.


657
MR. POCH:	Okay. I know -- I won't pursue that, whether it's affected program design, because I heard the company's witness already speak to that and explain how it does and doesn't. But had it been known and had we incorporated it, it would have lowered the TRC pivot point in each of those years and the result of that would have been that the company would not be facing the kind of penalty you are now suggesting they should face as a result of this change in the free-rider rate; correct?

658
MR. ROWAN:	Not necessarily. And the reason I say that is if the auditor comes in and finds that the -- in the business market programs that there is a large percentage free rider component, it could dramatically impact the SSM claim of the company.

659
MR. POCH:	Well, Mr. Rowan, I'm just positing a hypothetical for you. If we had recognized this situation earlier, we had changed the pivot point accordingly, it would be, in effect, analogous to going back and changing it in both the pivot and the result after the fact, and the result of that is they wouldn't be facing a $4-million penalty. I think Mr. Moran took us there yesterday. I think the impact is something like $196,000.

660
MR. ROWAN:	If I understand your comment, I don't agree with it because it has assumption included in it, I think, and that is that it assumes that the lessons learned in 2000 carried over to future years would also include the lesson that, when the company deals with a business market DSM program, it doesn't allow free riders into the program.

661
If that behaviour had -- does not change, if that behaviour doesn't change and the auditor comes in and finds that they have a lot of free riders, it will effect the SSM claim.

662
MR. POCH:	So, Mr. Rowan, it boils down to this: You're suggesting that the company face a -- some $4-million penalty in 2000 and presumably in 2001 and presumably in 2002 as well, simply because none of us caught this problem early on. Had we caught it, they would have either been immunized against this penalty because we would have adjusted the budget or perhaps, in your scenario, not necessarily agreeing with you, but you would change program design to avoid it; is that right?

663
MR. ROWAN:	No, you said that we are proposing that the company be imposed a $4-million penalty. We're not. In 2000, we're not. The outcome of the calculation is a minus 69,000 penalty.

664
MR. POCH:	And the difference in the sums that got you to minus 69 there is a figure of negative $4.499 million; correct? And it's attributable to this.

665
MR. ROWAN:	And this comes out of Mr. Millyard's --

666

MR. POCH:	And you've already been very graceful in acknowledging Mr. Millyard's credentials in that regard. So leaving aside any errors or omissions on that, we're talking about that number, 4.5 million, against the company in the SSM in each -- that's the number for 2000 and it's presumably similar numbers in the 2001 and 2002 years. And what I'm saying is you would exact that against them in essence because this problem wasn't caught early enough. Because had it been caught early enough, either we would have adjust the pivot and it wouldn't face this differential or, if possible, they could have, as you suggest, changed the program design.

667
MR. ROWAN:	The way in which you phrase that, I find it very interesting. Because Enbridge has an expectation of a particular number and we have a recommendation of another number and you subtract one from the another and come up with a $4-million difference, you call that a penalty. I don't subscribe to that.

668
MR. POCH:	Mr. Rowan, you don't have to use the word "penalty". I think you agree, though, that your -- you've adopted this calculus, you share that the -- that you would have a negative number. In the sums making up the SSM, you would put in a negative 4.5 million, roughly, in each of those years for the reasons I've just stated.

669
MR. ROWAN:	I'm sorry, I don't know where you get your $4.5 million from.

670
MR. POCH:	It's -- I think, again, the easiest place to see this is in Mr. Klippenstein's cross-examination materials, if I'm not mistaken, behind tab 1, which is page 5 of Mr. Millyard's reconciliation report. And I'm referring to the number that Mr. Klippenstein has pencilled a box around near the bottom there. Under the CME column, in the row for custom projects is bracketed as a negative number, $4.499694 million.

671
MR. ROWAN:	But the only penalty that if there is one, that Enbridge would suffer would be a 69,000. The fact that they came up with a larger number is irrelevant.

672
MR. POCH:	Fair enough, Mr. Rowan. I don't want to get hung up on semantics here. I think I withdrew the word "penalty". I'm saying in the calculus of the SSM in each of those three years you would include this negative $4.5-million item for the reasons I've said to you a couple of times now, that is, the delay in this.

673
MR. ROWAN:	I would rephrase that and say that Enbridge would not be eligible to that amount of money simply because they aren't -- they don't deserve that amount of money.

674
MR. POCH:	Fair enough. Thank you.

675
And I believe, Mr. Chairman, the rest of my questions for Mr. Rowan really pertain to 2003 and I understand he'll be back at some point in the proceeding. At this point those are my questions.


676
MR. BETTS:	Thank you. We will take this time for a lunch break. We will allow for maybe an hour and 20 minutes today and return, then, at 2:00 p.m. and we will go through until 4:00 p.m. this afternoon. And Mr. Rowan will return to the witness seat when we return for this session.

677
So with that, we will stand adjourned until 2:00.

678
--- Luncheon recess taken at 12.40 p.m.
679
--- On resuming at 2:03 p.m.
680
MR. BETTS:	Thank you. Please be seated.

681
I think we're losing a few people with each break, but that's, perhaps, understandable as well. Maybe there's a few that just didn't have a chance to finish their lunch in the short time that we had.

682
MR. POCH:	I'm just wondering if we lost you, sir. That's --

683
MR. BETTS:	We're still here. No, quite frankly, it's been very informative.

684
I believe, Mr. Poch, you finished your questioning, and that would take us to Ms. Lott to begin to question Mr. Rowan.

685
MS. LOTT:	That's correct, sir. Thank you very much.

686
MR. BETTS:	Sorry to interrupt.

687
Are there any preliminary matters that arose during the lunch break?

688
Sorry for the interruption. Please continue.

689
CROSS-EXAMINATION BY MS. LOTT:

690
MS. LOTT:	Thank you very much, Mr. Chair.

691
Good afternoon, Mr. Rowan. I'm going to be making reference to Exhibit L, tab 4, which is your pre-filed evidence, and also making reference to Exhibit K.1.1, where we have Exhibit A.7, tab 5, schedule 6, which is the 2000 -- the December 2002 partial settlement agreement.


692
MR. ROWAN:	Okay.

693
MS. LOTT:	I'd first like to speak to you about your testimony this morning in your exchange with Mr. Poch of GEC, and also in this question I'm going to be making reference to your own pre-filed evidence, page 3 -- sorry, page 9, paragraph 31.

694
So what I understand from your exchange this morning with Mr. Poch, that you had suggested that members of the audit subcommittee, of which VECC was one of those members, would bias the settlement process because the members would want to ensure that the audit outcome would be in line with the settlement agreement.

695
MR. ROWAN:	I didn't quite phrase it that way, Ms. Lott. I suggested that there was a clear conflict of interest, having signed off on the partial settlement agreement at 4.8 million for the fiscal year 2001 SSM claim and then participate in an audit of that very evaluation report.

696
MS. LOTT:	But you've said -- you admitted that you've said it was a clear conflict of interest.

697
In your evidence of -- your pre-filed evidence on paragraph 31, you also state that -- you just state there is a clear conflict of interest.

698
MR. ROWAN:	Yes, I also said the impartiality of the process and the outcome of the audit are highly suspect.

699
MS. LOTT:	Correct.

700
You're aware, of course, that the settlement agreement, the December 2002 partial settlement agreement was a compromise agreement?

701
MR. ROWAN:	Oh, I understand that.

702
MS. LOTT:	So I don't need to take you to that -- paragraph 25 of that agreement, which states that:

703
"All of the parties to this agreement believe that this compromised position is supported by the evidence and represents a settlement that is fair to Enbridge and ratepayers."

704
MR. ROWAN:	Yes, but you will recall my comments this morning, Ms. Lott, were within the context of the comments made yesterday by Mr. Warren, who talked in terms of risk and reward and the importance for, according to him, for intervenor clients that they -- that they had weighed those risks and reward carefully.

705
And in that context, having signed off on a partial agreement, the compromise that it might be, there would certainly be an incentive to make sure that the outcome of the audit process was not far removed from the compromise.

706
MS. LOTT:	Well, our concern about that is that it has a clear inference that impugns the integrity both of VECC and of its representative on that audit subcommittee.

707
Are you, therefore, prepared to resile from that testimony, which is now on the record in this hearing?

708
MR. ROWAN:	I talked about the impartiality of the process and the outcome of the audit being highly suspect. The outcome isn't determined yet, so we don't know.

709
MS. LOTT:	So you are not prepared to resile from that testimony about --

710
MR. ROWAN:	No. No.

711
MS. LOTT:	-- VECC, among others, being in a conflict of interest --

712
MR. ROWAN:	No, because we don't know the outcome of the audit, and we will not until it's finished.

713
MS. LOTT:	Thanks for that.

714
I'd like to move on to -- back to your pre-filed evidence, page 3. I'm looking here at point 5(e) and (f) where you state, and I'll just read it:

715
"Ratepayers' interests are not well served by the payment of millions of dollars to Enbridge based on principles that are in dispute."

716
And then in 5(f):

717
"CME further states the Board has never addressed the principles of an incentive mechanism and their application. In these circumstances, the Board should determine those principles, not Enbridge and a few intervenors."

718
Mr. Rowan, in your opinion, are there other DSM-related principles that are in dispute in addition to those related to the incentive mechanism?

719

MR. ROWAN:	Well, the whole issue of the audit process. There are issues that are going to be dealt with in other series 9 issues that will come before the Board that require, in our view, clarification and determination.

720
MS. LOTT:	So, in your view, would an OEB regulatory framework or a road map - I think you've used that word this morning - that would clearly enunciate DSM principles for energy distributors in Ontario, do you think that would facilitate the consultative and audit committee processes?

721
MR. ROWAN:	Yes, I do.

722
MS. LOTT:	Thank you. Those are my questions.

723
MR. BETTS:	Thank you very much, Ms. Lott.

724
Mr. DeRose, did you have questions?

725
MR. DeROSE:	Yes, just one line of questioning.

726
CROSS-EXAMINATION BY MR. DeROSE:

727
MR. DeROSE:	Good afternoon, Mr. Rowan.

728
MR. ROWAN:	Good afternoon.

729
MR. DeROSE:	And my questions will also relate to your allegations with respect to the impartiality of the audit committee and the conflict of interest as you've stated it to Mr. Poch.

730
Let me start by trying to understand or ensure that we are all on the same page. If I understand, your allegations are to the effect that members of the audit committee have signed on to the partial agreement, that the audit results will be, by their very presence on the audit committee, questioned. Is that fair?

731
MR. ROWAN:	I don't think I said that, if I understood your question. I didn't say the audit results would be questioned.

732
MR. DeROSE:	You said that the impartiality is highly suspect

733
MR. ROWAN:	The impartiality of the process and the outcome are highly suspect.


734
MR. DeROSE:	And when you say the impartiality, you would be referring, by inference, to the members of the audit committee.

735
MR. ROWAN:	Having signed off on a partial agreement.

736
MR. DeROSE:	And you are aware that Peter Thompson is on that audit committee?

737
MR. ROWAN:	Indeed.

738
MR. DeROSE:	And you are not suggesting that Peter Thompson would compromise his ethics in the audit committee, are you?

739
MR. ROWAN:	I'm not suggesting that at all. I am saying that having signed on to a partial agreement, the members of the audit committee have a benchmark, if you will, in their minds. And it gets to the issue, again, of what Mr. Warren was saying yesterday about risks and reward. You have to demonstrate, according to him, that you are doing your job for your members.

740
MR. DeROSE:	You are not suggesting that Peter Thompson would ignore findings or recommendations of the auditor, are you?

741
MR. ROWAN:	No, I'm not. However, at the same time, I have no knowledge of the diligence with which he will participate in that process. You know that IGUA has not been a member of the DSM consultative and in fact only participated once, to my knowledge, and that was last November, and only for a short time.

742
MR. DeROSE:	Mr. Rowan, before we get into the integrity of Peter Thompson, would you like to talk to your counsel before I go on?

743
MR. ROWAN:	I have not said anything about the integrity.

744
MR. DeROSE:	Well, you've just said that Peter Thompson would not be capable of being impartial in this -- as a member of the audit committee because IGUA has signed on to the partial agreement. Is that not what you have just said?

745

MR. ROWAN:	No. Let me try and put it in the context of what a member of an audit subcommittee can and cannot do. And I think that the -- it's instructive to look at the history of the 2000 audit and compare that audit process with the 1999 audit process. There were many, many discussions about the procedure, the scope, the depth of the work with which the auditor should undertake her audit. And what I am really concerned about is that the members of that audit committee, being chosen the way they were chosen, will not be represented by -- that audit committee will not have on its membership somebody who will provide the same kind of diligence that was undertaken in the 2000 audit. And that was our concern.

746
MR. MacODRUM:	Mr. Chairman, before Mr. DeRose proceeds, I have a concern. Mr. Rowan's testimony is -- his written testimony and as I understand his oral testimony up to this point has been focused on the process and the integrity of the process. He has not focused on personalities. It is Mr. DeRose who has raised the subject of the specific personality. And quite frankly, I think that's not only beyond the scope of -- not germane to Mr. Rowan's written and oral testimony, but I think it's highly inappropriate for him to put Mr. Thompson's situation and role specifically into play.

747
Mr. Rowan did not name any specific individual. He has been talking about the process and the importance for the Board to exercise some supervisory guidance over the process. And for Mr. DeRose to raise the specific individual, albeit a partner of his, by name, is, in my view, both objectionable and offensive.

748
MR. DeROSE:	With all due respect, Mr. Rowan has brought into question the partiality of the audit committee. He knows who the members of the audit committee are. And what I'm simply -- I've put it to him quite bluntly. I want on the record that he is in no way questioning the ethics of Mr. Thompson, or the capability of Mr. Thompson to remain partial -- or, I'm sorry, impartial -- in the audit process, and Mr. Rowan has not answered those questions.

749
MR. MacODRUM:	Mr. Chair, Mr. DeRose invited Mr. Rowan to seek counsel's advice and I'm going to give Mr. Rowan some advice right now and I'm going to advise him not to answer that question.

750
MR. DeROSE:	So I guess to be clear, you are refusing to let Mr. Rowan say whether he is or is not bringing into question the ethics of the members of the audit committee?

751
MR. MacODRUM:	I don't think that is a question that is germane to Mr. Rowan's evidence in this proceeding. I think it's an introduction of a wholly inappropriate subject matter to this proceeding. Mr. Thompson is not the subject matter of this proceeding.

752
MR. MORAN:	Mr. Chair, if I may, I'm just wondering what the relevance of any of this might be with respect to the cost consequences of the DSM program and how those might be recovered in rates. I just raise that as a question.

753
MR. DeROSE:	If I can respond and then we'll have your decision.

754
MR. BETTS:	Plead.

755
MR. DeROSE:	Any time the integrity of a member of the audit committee - not just a member, of the audit committee in its entirety - is raised, it impugns the integrity of the members. And what I am simply seeking is for Mr. Rowan to confirm that that's not what he was doing, and that that was not the intent nor the meaning of his evidence. And if that is the case, then so be it.

756
MR. ROWAN:	Then let me respond to that. Clearly I am not -- made no reference to Mr. Thompson. As Mr. MacOdrum said, we're concerned about the impartiality of the process, and I hope that that puts it to rest.

757
MR. BETTS:	Does that put it to rest, Mr. DeRose?

758
MR. DeROSE:	Just one last question to confirm my understanding. So Mr. Rowan is not questioning the integrity of any members of the audit committee, as individuals working on the audit committee.

759
MR. ROWAN:	As individuals, I have a problem with that because I've already stated that they have signed on to a partial settlement agreement on the one hand which provides Enbridge with a $4.8-million claim, and then they have, on the other hand, a role to audit the very report that they've signed off on. And it seems to me, that is a conflict of interest.

760
Now, if that is impugning somebody's reputation, I don't think it is, I'm just stating a fact.

761
MR. BETTS:	In all fairness, I tend to agree with Mr. Moran that this is perhaps not germane to the issue of rates. But there is an issue that has arisen and it does, from my perspective, throw a cloud over the process which is apparently what the witness is prepared to discuss. And I think it is important to fully understand the witness's position with respect to that process. The question, I believe, and I don't want to reword it or interpret it incorrectly, but it does relate to the individuals of the committee, is there -- and I -- Mr. DeRose, I believe you were saying, is there any doubt about the integrity of the members of that committee and their ability to sit on that committee to perform its function; is that correct?

762
MR. DeROSE:	Correct.

763
MR. BETTS:	Mr. Rowan, can you answer that? Or if you refuse, I'll take a refusal.

764

MR. ROWAN:	No, it's not a refusal, sir, it's a matter of what is a possibility that you've signed off on something and now you've got the responsibility to actually go out and audit that very thing you've signed off on. And if -- without suggesting that these people aren't honourable people, and I think Mr. Thompson is an honourable person, but having said that, what you've got is a potential conflict of interest. You, sir, were -- had a suggestion -- it was suggested that you might have a conflict of interest at the beginning of this proceeding. Well, was somebody saying that you didn't have integrity? I don't think so. I don't think so at all.

765
MR. BETTS:	Mr. DeRose, does that satisfy you?

766
MR. DeROSE:	I'm --

767
MR. BETTS:	I think I'm prepared to say that we've pursued this as far as it's reasonable to. If anyone wants to pursue it, perhaps at a later time, with a different kind of mechanism, the panel would consider that. But at this point I think I'd like you to continue with your questioning.

768
MR. DeROSE:	Now, again, Mr. Rowan, did I understand you correctly this afternoon -- this morning when Mr. Poch was examining you that you said that the consumer groups had unjustly enriched ECG by signing on to the settlement proposal? Or did I misunderstand you?

769
MR. ROWAN:	I'm not quite sure I used those words. But what I believe we have said is that it is inappropriate to include in the settlement agreement a $4.8-million settlement -- 4.6 million, I forget the numbers here, a $4.6-million settlement on the basis of something that has not been audited.

770
MR. DeROSE:	And Mr. Rowan, do you recall yesterday saying that -- well, first of all, you will recall that 300,000 of the 4.6 would be payable by what has been called the commercial rate classes, which includes both commercial and industrial rate classes, over two years.

771
MR. ROWAN:	Yes, that was discussed yesterday.

772
MR. DeROSE:	And do you recall admitting that 300,000 over two years is a pretty good deal for those classes?

773
MR. ROWAN:	I don't think I ever said it was a good deal for those classes. I may have said that, but let me put it into the context of the discussion that I had with Mr. Warren. It might be a good deal; however, the CME comes at this whole DSM issue from a broader perspective than the narrow, rather narrow approach that the -- some of the intervenors that have signed on to this agreement. We're not here only to look at what's the lowest number that we can achieve this year by cutting a deal. That would be a very inappropriate and narrow view of how one should regulate the DSM component of Enbridge's activities.


774
What we believe, and the basis of our being here today, is to ensure that there are clearly understood rules, regulations, principles, if you will, that govern how this DSM should be operated and that those rules, regulations, principles, should be determined by the Board and not by a haphazard collection of ADR settlement agreements. That's what I said yesterday, in other words.

775
MR. DeROSE:	I guess -- let me make two points, then.

776
First of all, in reference to the 300,000, I believe, and the record will show that you said 300,000 was a pretty good deal and I understood your evidence to be, but 300,000 aside, you felt like because of the principles you still had to go ahead and refuse to sign on; is that not a fair statement of your evidence so far?

777
MR. ROWAN:	Well, clearly for this -- the 2000 settlement component, the 3.5 that you folks signed on to, we don't think it should be anywhere near that. And it's not just a matter of principle in that sense, it's our interpretation and application of what the auditor said it should be.

778
MR. DeROSE:	Okay. Well, the record will be clear.

779
Now, I did agree that if the Board rejects the settlement proposal, Enbridge will be seeking 20.2 million.

780
MR. ROWAN:	They can seek what they feel appropriate and let the process decide what the amount should be.

781
MR. DeROSE:	And you also agreed that if they seek that amount, there is risk for everyone. You did agree to that; that everyone could pay more.

782
MR. ROWAN:	There is risk on both sides, yes.

783
MR. DeROSE:	And if the Board accepts the settlement proposal with respect to 2000 and 2001, my understanding is in this hearing, that the SSM principles will still be addressed in the remaining 9 series of issues; is that correct?

784
MR. ROWAN:	Yes. And I would just refer you to paragraph 15 on page 6 of my testimony that talks in terms of -- CME does not believe ratepayers should pay 8.1 million for the privilege of moving forward.

785
MR. DeROSE:	Correct. But you would agree that even if the Board accepts the settlement with respect to 2000 and 2001, the principles are still argued in this case.

786

MR. ROWAN:	They still could be argued; I hope they would be argued in this case.

787
MR. DeROSE:	Do you have any reason to think that the remaining 9 series would not be argued in this case?

788
MR. ROWAN:	No.

789
MR. DeROSE:	Those are all my questions.

790
MR. BETTS:	Thank you, Mr. DeRose.

791
If there are no more questions from the intervenor group, Mr. Moran.

792
Ms. Newland first, sorry.

793
MS. NEWLAND:	Thank you.

794
CROSS-EXAMINATION BY MS. NEWLAND:

795
MS. NEWLAND:	Good afternoon, Mr. Rowan.

796
MR. ROWAN:	Good afternoon, Ms. Newland.

797
MS. NEWLAND:	I'm first going to refer to page 3 of your pre-filed evidence, that is, Exhibit L, tab 4. I don't know if you need to turn it up, but in paragraph 4 of that evidence you talk about urging -- that CME will urge the Board to determine the principles that should govern how SSM and LM claims are calculated. And yesterday, during cross-examination by Mr. Warren on behalf of CAC, you confirmed that CME's position -- you confirmed CME's position that the SSM mechanism should not continue in fiscal 2003 and beyond; correct? That is your position?

798
MR. ROWAN:	Yeah, that would be our view, but -- however, we would also argue in the alternative that if there is to be one, this is how it might be constructed.

799

MS. NEWLAND:	Thank you, sir. And you also confirmed with Mr. Warren that in the result any guiding principles determined by the Board in this proceeding would, if your position regarding the future of SSM, if SSM is accepted, would have applicability for fiscal years 2000, 2001 and 2002 only. So if you win on -- if the Board accepts CME's position that SSM should not continue for 2003 and beyond then the guiding principles that the Board may determine in this proceeding would only have applicability for three years.

800
MR. ROWAN:	That would be by definition, yes, keeping in mind that there is a lot of money at stake, millions of dollars at stake in just those three years.

801
MS. NEWLAND:	And yesterday you had a discussion, a debate with Mr. Warren regarding CME's position on what these principles of limited temporal application should be. And you told Mr. Warren, I think, that there is no heading or section in your written pre-filed evidence that articulates these principles; correct?

802
MR. ROWAN:	That is correct.

803
MS. NEWLAND:	Now, CME is, however, making a recommendation to the Board regarding the amount of the SSM that should be determined for fiscal 2000, and that amount is a negative or a penalty amount of 69 -- approximately $69,000; correct?

804
MR. ROWAN:	Yes.

805
MS. NEWLAND:	Now, could I get you to turn up Exhibit A.7, tab 5, schedule 5, which is the -- what has been referred to as Kai Millyard's report.

806
Mr. Chairman, that's in tab 4 of your black binder.

807
MR. ROWAN:	This is the calculation of the SSM? Yes.

808
MS. NEWLAND:	Yes.

809
Now, I'd like you to refer to table 5, and that's the table that you've been referred to a number of -- by a number of other counsel before me. It's a table entitled "Summary of Impacts of Positions of Intervenor Audit Committee Members" --

810
MR. BETTS:	I believe you referred to that as table 5.

811
MS. NEWLAND:	I'm sorry. It's page 5, sir, table 2. I misspoke.

812
Mr. Rowan, CME's position is set out on this table in the first column of the table; correct?

813

MR. ROWAN:	Yes.

814
MS. NEWLAND:	And it's shown to be a positive $108,720, and as you discussed earlier with Mr. Klippenstein this morning, you subsequently corrected your -- CME's position such that the corrected position results in an SSM penalty of 69,000 and change; correct?

815
MR. ROWAN:	That is correct.

816
MS. NEWLAND:	Now, just for the sake of the record, I'm not sure whether your correction has ever been filed on the record, and perhaps I could just leave it with your counsel to see if it has been included --

817
MR. ROWAN:	Well --

818
MS. NEWLAND:	I could have overlooked it. I did look through your evidence, and I couldn't find...

819
MR. ROWAN:	This was filed -- this was part of the ADR, prior to the ADR, so I don't know whether it is, but we will make sure that it is.

820
MS. NEWLAND:	Just for the completeness of the record, Mr. Chairman, I was just bringing it to Mr. MacOdrum's attention.

821
MR. MacODRUM:	If the material was filed -- as I can certainly take some direction -- the material was filed as part of the ADR negotiations, is it appropriate for it to be brought into this proceeding?

822
MS. NEWLAND:	No, Mr. Chairman, I believe that the document that reflected that correction was filed by CME under cover of letter from Mr. Rowan with Mr. Pudge. So I believe it was prior to the ADR, and I think it's a document that was filed with the Board. I just don't believe it's been given an exhibit number. I could be wrong, but I wasn't able to find it.

823
MR. ROWAN:	I have no difficulty, and it's a two-page document -- three-page document, so sure.

824
MS. NEWLAND:	Okay.

825
MR. BETTS:	Do you require an undertaking for that?

826

MR. ROWAN:	I'll bring it tomorrow.

827
MR. MacODRUM:	We'll undertake to produce it.

828
MR. BETTS:	Thank you. Just for the record, we'll keep that.

829
Mr. Moran, what would the --

830
MR. MORAN:	That would be Undertaking J.2.1, Mr. Chair.

831
UNDERTAKING NO. J.2.1:	DOCUMENT REFLECTING CORRECTION FILED BY CME UNDER COVER OF LETTER FROM MR. ROWAN TO MR. PUDGE

832
MR. BETTS:	Thank you.

833
MS. NEWLAND:	Mr. Rowan, the way we get to the CME's corrected position of a penalty of $62,000 and change is shown by adding up the positive and negative adjustments that CME is recommending be made to the company's post-audit SSM claim; correct?

834
MR. ROWAN:	That's how I understand that Mr. Millyard did it, so...

835
MS. NEWLAND:	Right. Now, I understand that this is Mr. Millyard's table, but it does describe or depict CME's position, and that's why I would like to ask you these questions.

836
In response to a question from Mr. Klippenstein this morning, you stated that CME's approach and principles regarding the determination of the SSM amount for fiscal 2000 is the same as that of Energy Probe, and I believe that's a correct quote because I wrote it down as you were speaking.

837
MR. ROWAN:	Essentially that -- our position and their position on each of the areas, with the exception of the RN 1.2, which is the second item of that page 5, was at that time -- were essentially the same.

838
MS. NEWLAND:	Okay. You mentioned RN 1.2. I believe there may be also a difference with respect to RN 1.1.

839
MR. ROWAN:	1.1, yes. There was a minor difference there as well. I'm sorry.


840
MS. NEWLAND:	Okay, but in all other regards, your position as reflected in this table is identical?

841
MR. ROWAN:	Yes. And the total amount was about $42,000.

842
MS. NEWLAND:	The total amount of what, Mr. Rowan?

843
MR. ROWAN:	Of the difference, under this earlier calculation. As you'll note, if you look down at the bottom, the -- I'm sorry, it was more than that. Our position was $108,000 to the plus side and it then changed to minus $69,000.

844
MS. NEWLAND:	So about a difference of $180,000.

845
MR. ROWAN:	Yes.

846
MS. NEWLAND:	Now, is it fair to say, then, Mr. Rowan, that in arriving at the $69,000 -- approximately $69,000 penalty that CME is recommending be assessed against Enbridge, you -- CME simply adopted Energy Probe's position regarding the underlying adjustments to assumptions and input?

847
MR. ROWAN:	No, that's not true.

848
MS. NEWLAND:	So you arrived there independently of Energy Probe?

849
MR. ROWAN:	The answer is yes and through a very long and -- process of discussion at the audit subcommittee that took place over a number of weeks.

850
MS. NEWLAND:	Okay. Nevertheless, your evidence, your written evidence does not reflect or discuss the principles by which you arrived at that point.

851
MR. ROWAN:	I'm not sure that I understand the relevance of it. But could you help me? Is that a question?

852
MS. NEWLAND:	Yes.

853
MR. ROWAN:	In what way is it a question?

854
MS. NEWLAND:	The question is you arrived at a position that presumably was guided by principles.

855
MR. ROWAN:	Yes.

856
MS. NEWLAND:	But those principles are nevertheless not reflected in your evidence.

857
MR. ROWAN:	That is correct; however, in determining what the position of the CME would be, CME, along with the other intervenor members of the audit subcommittee, commented on the Enbridge revised SSM claim outline of July 26th, 2002, and it was from -- and that was part of the process that went through -- was gone through and that information was turned over to Mr. Millyard who then produced his report.

858
MS. NEWLAND:	So what you are saying is you provided principles to Mr. Millyard, or he understood the principles that grounded your position, and that's reflected in this table.

859
MR. ROWAN:	Using that word "principle" in that sense, yes.

860
MS. NEWLAND:	Mr. Rowan, is CME advocating making adjustments to input assumptions subsequent to the fiscal year in question?

861
MR. ROWAN:	What kind of input assumptions?

862
MS. NEWLAND:	Any input assumptions.

863
MR. ROWAN:	Well, that's very broad. DSM --

864
MS. NEWLAND:	Input assumptions in relation to the calculation of the SSM amount.

865
MR. ROWAN:	For 2000 and --

866
MS. NEWLAND:	For 2000.

867
MR. ROWAN:	For 2000, we've already made our comments.

868
MS. NEWLAND:	And for 2001?

869

MR. ROWAN:	We are not part of the audit subcommittee, so depending upon the process that is gone through, the audit subcommittee presumably, if they follow the 2000 pattern, will go through an analysis like we did in the 2000 case where each party will look at the recommended assumptions and make comments that could change the claim that Enbridge makes. And if one could refer to --

870
MS. NEWLAND:	Mr. Rowan, I'm not trying to cut you off, but I was really just trying to set up my next set of questions, which was just to get an understanding that you are recommending adjustments subsequent to the end of a fiscal year, and that's obvious.

871
MR. ROWAN:	We don't know.

872
MS. NEWLAND:	Okay.

873
MR. ROWAN:	We won't know until the process is over.

874
MS. NEWLAND:	Okay. Thank you.

875
Now, going back to fiscal 2000, does CME make any distinction between adjustments subsequent to the end of the fiscal 2000 year to variables in the inputs the company can influence, such as program costs and number of participants, and those inputs that it cannot influence?

876
MR. ROWAN:	What we agreed with or came to the conclusion that on prescriptive programs, if there were going to be changes, it should be on both sides, symmetrical. And if there were -- but on business projects, they should be asymmetrical, certainly insofar as the free-rider issue is concerned.

877
MS. NEWLAND:	And I understand that and I think maybe you've misunderstood my question. My question really did not have to do with the asymmetry/symmetrical issue but more to do with the -- I hesitate to use the word retroactive adjustment, because you've taken exception to the word "retroactive". But subsequent, adjustment subsequent, a judgment -- adjustment to budget subsequent to the end of the fiscal year. Are you making any distinction when you recommend adjustments between adjustments to inputs that the company has influence over and adjustment to inputs that the company has no influence over?

878
MR. ROWAN:	We did and it could arise again. For example, the measure life of a new water heater was, I believe, 15 years but the auditor said it should be 12.6 years, and that change was made in both the budget and in the actual. That was our position, that it should be.

879
Enbridge, on the other hand, said there should be no change. So if you're asking the question could there be changes, yes, there could, of that kind.


880
MS. NEWLAND:	So this -- let's look at changes to the measure life of new water heaters. Those are the adjustments reflected, I believe, Mr. Rowan, in the first two proposed adjustments in table 2 of Mr. Millyard's report; correct?

881
MR. ROWAN:	I believe they are. Let me just get it again. Yes, one was for a full year and the other was for a half year. One was for new water heaters and the other one was for existing water heaters. This would be RE 1.1 and RE 1.4.

882
MS. NEWLAND:	So you're saying R -- you'll have to help me here; I'm sure you know much more about this than I do. RE 1.1 is new tanks; correct?

883
MR. ROWAN:	Yes.

884
MS. NEWLAND:	And RE 1.4 is --

885
MR. ROWAN:	Existing tanks.

886
MS. NEWLAND:	That's not what it says here, Mr. Rowan, it says new tanks, existing houses.

887
MR. ROWAN:	New tanks, existing houses, but that's where you have --

888
MS. NEWLAND:	I'm looking at the third --

889
MR. ROWAN:	I'm looking at that too.

890
MS. NEWLAND:	I think really, Mr. Rowan, that both of these adjustments relate to the same --

891
MR. ROWAN:	No, that's correct; I'm sorry. There is another RE 1.4 below.

892
MS. NEWLAND:	Yes.

893
MR. ROWAN:	And that's the one I'm referring to.

894
MS. NEWLAND:	I see. But just focusing on the recommendation of CME to adjust the measure life of new water tanks from 15 years to 12.6 years.

895
MR. ROWAN:	Yes.

896
MS. NEWLAND:	I'm trying to understand the principle that guides CME in making that recommendation to change the budget number.

897
MR. ROWAN:	Because the auditor said it should be changed.

898
MS. NEWLAND:	But I think we've agreed that the auditor did not say it should be changed, going back in time.

899
MR. ROWAN:	No, I don't think we agreed to that at all.

900
MS. NEWLAND:	So you are saying that the auditor recommended that it be changed, that this number be changed to the -- that the budget be changed.

901
MR. ROWAN:	Remember I had a discussion with Mr. Poch.

902
MS. NEWLAND:	I do recall.

903
MR. ROWAN:	There are two issues; what the auditor said and when should the change be made. We agreed on what the auditor said with respect to the business market free ridership. What we didn't agree on was the application of that. We agreed that the auditor made no mention as to the application. She said that that should be determined by the audit subcommittee. But it's because the audit subcommittee can't agree that we're here today.

904
MS. NEWLAND:	And I know all that and I've heard you say that, Mr. Rowan, and I -- I'm not taking issue with that. What I'm trying to understand is you said in response to my earlier question that the auditor said that the adjustment should be made to the budget side. And I took it from what you were saying, perhaps incorrectly, that the auditor -- that you looked to the auditor for supporting your position, and adjustment should be made to the budget side for this program in fiscal 2000.

905
MR. ROWAN:	Budget and actual.

906
MS. NEWLAND:	May have a moment, Mr. Chairman, to consult with my experts.

907
MR. BETTS:	Yes, go right ahead.

908

MS. NEWLAND:	Would you agree, Mr. Rowan, that with respect to the measure life of new tanks, Enbridge had no reason to - did not - had no reason to know that the measure life might be more appropriately set at 15 years than 12.6 years, going into the fiscal year; it was as a result of the auditor's findings that that information came to light.

909
MR. ROWAN:	That's correct.

910
MS. NEWLAND:	It's a new learning.

911
MR. ROWAN:	Yes.

912
MS. NEWLAND:	Mr. Rowan, what is your position with respect to changing the avoided cost of gas to update it from the value that was used in the budget pivot point to what it might be at the end of a fiscal year?

913
MR. ROWAN:	The avoided gas cost issue is a problematic one because of the wild fluctuations in gas costs. And our view is that it would be best just to not deal with that issue.

914
MS. NEWLAND:	Because it's difficult?

915
MR. ROWAN:	Well, because it's difficult, and because it -- it does provide wild fluctuations. But to make the adjustment continually is...

916
MS. NEWLAND:	But do you agree that I could posit a scenario where by changing the input value for the avoided costs at the end of the fiscal year, the company could enjoy a large windfall?

917
MR. ROWAN:	They could.

918
MS. NEWLAND:	And conversely, they could be penalized.

919
MR. ROWAN:	Yes, they could. And certainly that would be one of the things that you'd want to watch out for in any new SSM system that you set up.

920
MS. NEWLAND:	And these factors -- the price of gas is something the company has no influence over.

921
MR. ROWAN:	That is correct, and that's why it would be -- one would need to be very careful - let me repeat again - very careful that you don't set up an SSM that would either penalize or benefit the company simply because of wild gyrations in gas costs.


922
MS. NEWLAND:	And you see a distinction between an input variable such as avoided costs and an input variable such as the new learning brought to light by the auditor's finding that the company --

923
MR. ROWAN:	Yes, I do.

924
MS. NEWLAND:	And the basis for that distinction is...

925
MR. ROWAN:	That the company had direct -- if we're talking about the free-rider issue --

926
MS. NEWLAND:	No, no. I'm not talking about the free ridership, sir. No, my question hasn't got to do with that, sir. My question has to do with the measure life of new water tanks. That's the example that I used.

927
MR. ROWAN:	Oh, the measure life of new hot water tanks. Well, it -- you say it was new information that came to light. What --

928
MS. NEWLAND:	Well, you agreed with me that it was a new learning.

929
MR. ROWAN:	It was a new learning. You say that. But let me just go on, if you will let me.

930
MS. NEWLAND:	Could you answer my question first and then go on.

931
MR. ROWAN:	And your question again was?

932
MS. NEWLAND:	And my question was: Could you explain to me the distinction that you make between a variable such as avoided costs that the company has no influence over and a variable such as the measure life of a new water tank.

933
MR. ROWAN:	Well, let me -- yes, I will, and the distinction I have with those two examples is that a hot water tank is an inanimate object that is -- that does have a measure life, and that the change in the -- the change in the measure life from 15 to 12 is almost minuscule in comparison to the change that could take place in these wild gyrations in natural gas prices that we've experienced over the last two years, so it's a matter of degree.

934
MS. NEWLAND:	So your argument is a de minimis one.

935
MR. ROWAN:	Yes, it's a matter of degree.

936
MS. NEWLAND:	So it's okay to punish the company by a small amount, but it's not okay to reward the company by a large amount?

937
MR. ROWAN:	Nobody's punishing the company. The 15 years is something that the company put up.

938
You say it's a new learning, but at the same time that information was out there. It took the auditor to bring that information to light.

939
So whether it's a new learning in that sense, it certainly was for us. We were grateful to the auditor, but the information was out there.

940
MS. NEWLAND:	Mr. Rowan, would you -- one moment. We've covered a lot of ground here, Mr. Rowan. Maybe I can cross some of my questions out.

941
Give me a moment, Mr. Chairman.

942
MR. BETTS:	That's fine.

943
MS. NEWLAND:	Okay, Mr. Rowan, I can move on. And I would like to move on to a new area, and that has to do with the purpose of the SSM.

944
Would you agree, Mr. Rowan, that one underpinning of the position that Energy Probe takes with respect to how subsequent adjustments to the SSM amount should be made is its view of the purpose of the SSM?

945
MR. ROWAN:	I don't know. You would have to ask Energy Probe that question.

946
MS. NEWLAND:	Have you read their evidence?

947
MR. ROWAN:	Well, even so, it would be presumptuous of me to comment on that evidence as to what their -- what their purpose is.

948
MS. NEWLAND:	Well, then, would you take it from me that I have read their evidence and that is, indeed, one of the underpinning tenets of their position?

949
MR. ROWAN:	I'll accept that that's your understanding, yes.

950

MS. NEWLAND:	And would you also accept that my understanding of their position is that Energy Probe believes that the SSM amount should be calculated on the basis of the best information available at the end of the fiscal year, because the shared savings are a measure of actual gas savings?

951
MR. ROWAN:	On the best information, yeah, okay.

952
MS. NEWLAND:	Because the purpose of the share savings is actually a measure of actual gas savings. That's one of the positions that is articulated in Energy Probe's evidence.

953
MR. ROWAN:	If you say so, yeah.

954
MS. NEWLAND:	I do.

955
MR. ROWAN:	Okay.

956
MS. NEWLAND:	Does CME share this view?

957
MR. ROWAN:	In terms of the -- I'd have to read their evidence more closely to put that in context, but it seems appropriate.

958
MS. NEWLAND:	I don't want to take this lightly because I think it's an important distinction, sir, because it is a matter of some debate in this hearing. So let me be fair and put the question to you again. Is it CME's position that the purpose of the shared savings mechanism is actual to measure RT quantum of actual gas savings achieved to the fiscal year?

959
MR. ROWAN:	No, I think the purpose of an SSM is, has been described, is for some parties to provide an incentive for the company to undertake DSM activities when, in the view of some parties, they would otherwise not be able to do so or to put the kind of efforts that is required to produce a result.

960
MS. NEWLAND:	And I'm nodding because I think that's closer to the Enbridge position than it is to the Energy Probe position, Mr. Rowan.

961
So just to be clear, the purpose, in your view, of the -- let me ask you if you can accept that it is the purpose of the SSM to incent the company to increase participation in DSM programs, thereby increasing the actual TRC benefit calculation.

962
MR. ROWAN:	Well, under the current methodology, that flows from that, yes.


963
MS. NEWLAND:	Okay. And in fact that's the -- that is the statement of purpose that is articulated in the settlement proposal that was approved by the Board in EBRO 497-001.

964
MR. ROWAN:	Yes, well, I take your word for that.

965
MS. NEWLAND:	And CME was a party to that.

966
MR. ROWAN:	Yes.

967
MS. NEWLAND:	Now, given your agreement on this point or your position on this point, Mr. Rowan, isn't updating a forecast, and here I'm referring to the forecast of TRC benefits, the pivot point, isn't updating the pivot point subsequent to the fiscal year in question inconsistent with the methodology of the determining the delta or the difference between a forecast and an actual amount?

968
MR. ROWAN:	Let me ask you to rephrase that or to say it again because let me tell you where my problem is. If you are suggesting in that question that CME is trying to change the pivot point, I don't think we've ever suggested that. In fact, I, in response to some questions from Pollution Probe, I indicated that that was not what we were endeavouring to do.

969
MS. NEWLAND:	One moment. I have to refer to my experts because I'm just a mouthpiece here, Mr. Chairman.

970
MR. BETTS:	That's okay.

971
MS. NEWLAND:	Mr. Rowan, following up from your last comment that CME was not suggesting changes to the pivot point, the adjustment that CME is recommending and that it is shown in the first two columns, the first two rows of table 2 of Mr. Millyard's report, are in fact adjustments to the pivot point, are they not?

972
MR. ROWAN:	That may be the consequence of those adjustments recommended by the auditor, yes.

973
MS. NEWLAND:	But any time you adjust the budget side, by definition you are adjusting the pivot point.

974
MR. ROWAN:	Yes, exactly.

975
MS. NEWLAND:	So your previous statement was incorrect.


976
MR. ROWAN:	Well, no, I -- no, with respect, it wasn't incorrect in the sense of that is what we are attempting to do. What we are attempting to do is to ensure that when the auditor says there was something wrong with the assumptions that went into a calculation that arrived at the pivot point, then that should be changed.

977
MS. NEWLAND:	You're changing the pivot point.

978
MR. ROWAN:	Maybe we're changing it, but we're doing it not because we want to, it's because the auditor said it should be done.

979
MS. NEWLAND:	Your reasons are pure. But the auditors -- and I don't want to belabour this point, but I think it's very important that the record be clear that the auditor did not say go back and change the pivot point.

980
MR. ROWAN:	No.

981
MS. NEWLAND:	Yes or no?

982
MR. ROWAN:	No, the auditor did not. However, what the auditor said, these assumptions should be changed. And that then causes the pivot point to be changed.

983
MS. NEWLAND:	Okay. Mr. Rowan, I want to move on to a new area and that is to follow up on responses you gave this morning to Mr. Klippenstein and that has to do with his line of questioning -- or maybe it was just a response from you, rather -- dealing with DSM programs that were delivered in fiscal 2000 through companies affiliated with Enbridge such as Enbridge Home Services.

984
MR. ROWAN:	Yes.

985
MS. NEWLAND:	And I believe you stated this morning and I tried to listen carefully, Mr. Rowan, but I believe you stated that hundreds of thousands of dollars had been funneled through EHS. What is the basis for your statement in this regard?

986
MR. ROWAN:	Well, the basis is that when you look at the evaluation report and I -- I'm not quite sure whether Mr. MacOdrum has that material I gave him the other evening that had to do with interrogatories that were in the earlier hearing. But in any event, the statement was -- had to do with the channel partners that Enbridge has for delivering the certain programs. And if I can just take a moment, Mr. Chairman, just to refresh my memory here.


987
Our concern at that time was to determine the extent to which Enbridge Home Services is involved in residential DSM programs and what we got from Enbridge's answer was to suggest that there were a large number of contractors that they used. But while this was true, in our view it was misleading in that Enbridge's 2000 evaluation report states that Enbridge Home Services is the only contractor in the following programs, and they included water heating for existing homes; that is, the efficient purchase for water tanks that are direct vent tank, temperature turn-down and in equipment replacement, the furnace replacement, the window replacement, temperature turn-down and water heating in new homes.

988
And then what we also found was that Enbridge Home Services requested that no third party contractor touch any of the equipment that was owned by Enbridge Home Services. And in the information provided on the 2000 program there was $660,000 paid by -- to Enbridge Home Services by Enbridge and that was the only contractor. And what we were concerned about is that Enbridge said that the information as to why their relationship with Enbridge Home Services was confidential, because -- and so that was a concern.

989
MS. NEWLAND:	Okay. I do want to explore that, because we've taken great exception to your testimony. And perhaps the best way to do that is just to provide you, through your counsel, with copies of the interrogatory responses from RP-2001-0032 that are the -- that are in -- at issue here.

990
And for the record, that's Exhibit I, tab 4, schedule 49, schedule 50, and I'll also be referring to schedule 22.

991
Mr. Chairman, I apologize. I don't have a copy for you, but what I would suggest doing is just a small -- I would suggest I would read into the record that portion that I'd like to refer to, if that's appropriate.

992
MR. BETTS:	That would resolve that for us. Thanks.

993
MS. NEWLAND:	Thank you, sir.

994
Mr. Rowan, let me start with Enbridge's response to interrogatory number 49, and in that response, you asked for Enbridge to provide a list of contractors involved in the Taps Partner Shower Program and show how much each partner received in fees.

995
And for the record, our response was as follows:

996

"As reported in CME interrogatory number 36, four contractors were involved in the Taps Partner Showerhead Program. ECG declines to provide the requested information on the grounds that the data sought is confidential and is not relevant to the determination of the issues included in the Board's list of issues. The information sought is of a confidential nature because it pertains to DSM expenditures in respect of specific contractors as opposed to a category of contractors. As a general matter, ECG will not disclose contractor-specific information for two reasons. The information may be commercially sensitive in and of itself. Moreover, disclosure of disaggregated information may also allow a contractor's competitors to derive or generate information about the commercial operations of the contractor in question."

997
And then the response goes on, Mr. Rowan, to discuss why ECG declines to provide the requested information on the basis of relevance. But for the purpose of my question, I'd like to focus on the first reason that is given in this response, and that is our concern about disclosing information that may be damaging to a particular contractor.

998
Do you have any reason to dispute this reason or the validity of this reason for not providing the information you asked for?

999
MR. ROWAN:	With respect, I don't think I, in my earlier comments if only a few moments ago, mentioned the Taps program at all. I don't know what relevance this has.

1000
MS. NEWLAND:	No, sir, you didn't, but you mentioned -- I'm using this as an example of the reason for refusing to provide information specific to any contractor, whether it was Enbridge Home Services or any other company that is a channel partner.

1001
MR. ROWAN:	But you do acknowledge I -- this is not relevant to the issues that I raised, that it's not a Taps program issue.

1002
If you want to deal with the issue of confidentiality in the subject matter that I raised, I would be happy to discuss it with you, but that's not -- that's not relevant.

1003
MS. NEWLAND:	Okay. I'll move on.

1004
Let's turn to schedule 50, which is our response to interrogatory number 50, and that does deal with EHS, and that was the subject matter of your earlier testimony.

1005
Can we agree that this response has some nexus to the earlier testimony you provided this morning?

1006
MR. ROWAN:	Yes.

1007
MS. NEWLAND:	Thank you. Now, the question here was:

1008
"What is ECG's justification for providing EHS, an affiliate company, with funds to increase the sale of replacement furnaces?"


1009
And the response is as follows:

1010
"The Equipment Replacement Program did not provide any company, including EHS, with funds 'to increase the replacement of replacement furnaces.'"

1011
And the response in that first paragraph goes on to explain what the program is. I'm not sure it's relevant. I can read it if you want, Mr. Rowan, but I'd like to focus on the second paragraph:

1012
"ECG makes its DSM programs available to all qualifying contractors and service providers chosen on the basis of objective and non-preferential selection criteria and in accordance with the provisions of the affiliate relationships code for gas utility. ECG cannot and will not discriminate against the customers of any qualifying contractors simply because a contractor may be affiliated with ECG."

1013
Do you have any reason to dispute that response?

1014
MR. ROWAN:	I don't dispute that you've said it and that it's there. What I dispute is that this is the same kind of outsourcing issue that the Board will be dealing with in other parts of this hearing. It's a concern of having an affiliate out there, that affiliate receives money to do certain work, and it was a basis of our -- of CME's concern that there needed to be a value for money on it in this audit.

1015
What is the purpose of that money? Is it well spent? Did it need to be spent in order to achieve the DSM objective? And we still hold that view.

1016
I understand the responses, I understand the concerns about confidentiality, but that will be an issue that will be dealt with in detail, I'm sure, under the outsourcing.

1017
MS. NEWLAND:	And do you dispute that Enbridge Consumers Gas does not preferentially endorse any contractor who is a delivery partner of DSM programs?

1018
MR. ROWAN:	I have no basis on which to make a judgment one way or the other.

1019
MS. NEWLAND:	And do you accept that all contractors are evaluated against specific and unbiased criteria --

1020
MR. ROWAN:	Again, I have no basis; I have not seen your criteria. That was not provided in this particular case.

1021
MS. NEWLAND:	So what was the basis for your negative tone of your comments this morning?

1022
MR. ROWAN:	I've already indicated that the concerns that we had that there were hundreds of thousands of dollars that were made available to an affiliate of Enbridge to undertake certain DSM programs for which there was no basis as to information that we could get from the company as to -- that would satisfy us that that was a reasonable thing to do.

1023
MS. NEWLAND:	So I take it from your response that you do dispute that the selection of channel partners is done on an unbiased and objective way?

1024
MR. ROWAN:	We have a question, we have a concern about the process, And so in that sense, since we have not received and were not able to get the information, we still have a concern and that's why -- let me repeat -- we think a value-for-money component in the audit would be useful. It would alleviate that kind of concern.

1025
MS. NEWLAND:	The programs that were delivered by affiliates of Enbridge were subject to the same audit process and are subject to the same audit process as programs that were -- program results of programs delivered by non-affiliate channel partners; correct, Mr. Rowan?

1026
MR. ROWAN:	Yes, that is correct.

1027
MS. NEWLAND:	Thank you.

1028
MR. ROWAN:	However, none of the expenditure of the money was audited, it was only the SSM component that was audited.

1029
MS. NEWLAND:	And that's the same as for affiliate channel providers and non-affiliated DSM providers, program providers; correct?

1030
MR. ROWAN:	Yes.

1031
MS. NEWLAND:	I'd like to move on with some trepidation. I have a few questions on the audit subcommittee election process and I promise to not plow ground that has already been plowed, Mr. Chairman.

1032
Mr. Rowan, would you agree that there was broad-based ratepayer representation at the meeting of the November of 2002 at which the members of the audit subcommittee were elected?

1033
MR. ROWAN:	"Ratepayer", would you define that? What does it take to be representative of a ratepayer group.


1034
MS. NEWLAND:	I don't know. You tell me.

1035
MR. ROWAN:	I'm asking for clarification of a question. It's your question.

1036
MS. NEWLAND:	Well, then, I'll make it -- well, let me ask a follow-up question and maybe we can get over this. I thought, in your earlier testimony, you had questioned whether ratepayer interests had been properly or were properly represented by the choice of the members of the audit subcommittee who were elected members in November of 2002. Was that -- did I take that correctly from your testimony?

1037
MR. ROWAN:	The concern that we have has to do with the balance of interests that are represented on an audit committee. And let's go to your -- the definition that you didn't give for a ratepayer representative. One could ask the question is Green Energy Coalition a representative of a ratepayer group? Is Pollution Probe a representative of a ratepayer group? Is CME a representative, which I think they are. So you could go down that list and say, Are they representatives of a ratepayer group? And then you could say, What are the interests that these people have, where is it they're coming from as a group, and is there a balanced representation on the committee?

1038
MS. NEWLAND:	Balance in terms of what criteria?

1039
MR. ROWAN:	In terms of their values, their interests; or is there a preponderance of interest that in one camp or another.

1040
MS. NEWLAND:	So let me put it to you this way: IGUA represents a certain segment of the rate-paying, of the company's ratepayers; correct?

1041
MR. ROWAN:	I'm sorry?

1042
MS. NEWLAND:	IGUA represents a certain segment of the company's ratepayers.

1043
MR. ROWAN:	Yes.

1044
MS. NEWLAND:	VECC represents a certain segment of the company's ratepayers.

1045
MR. ROWAN:	Yes. Now tell me, do they represent the same interests as the Consumers' Association of Canada? Are they so aligned in their interests? And if they are not, what is the difference between the two?

1046

MS. NEWLAND:	Well, that's a question you'll have to ask them. I couldn't possibly answer it. My point really is, Mr. Rowan, that there are a number of representatives in the audit subcommittee who represent various segments of the population of ratepayers; you've agreed with that, I think you have already agreed with that.

1047
MR. ROWAN:	Yes.

1048
MS. NEWLAND:	Now, turning to the process by which the audit subcommittee members were elected, would you agree that at the November 2002 meeting, there was a discussion as to whether to proceed with a vote?

1049
MR. ROWAN:	Yes, it was, if I may use the phrase, it was ramrodded through. There was not discussion. None allowed.

1050
MS. NEWLAND:	You are saying that none was allowed. And who was the ramrodder?

1051
MR. ROWAN:	The so-called facilitator.

1052
MS. NEWLAND:	So you are saying, just to be clear for the record, it was Mr. Dennis O'Leary.

1053
MR. ROWAN:	That is correct.

1054
MS. NEWLAND:	And you are saying he ramrodded the vote through and shut down discussion.

1055
MR. ROWAN:	Discussion.

1056
MS. NEWLAND:	And that's your perception of what happened that day.

1057
MR. ROWAN:	Indeed.

1058
MS. NEWLAND:	It's fair to say that although there was no consensus, the majority of the attendees at the meeting were in favour of proceeding with a vote?

1059
MR. ROWAN:	Indeed.

1060
MS. NEWLAND:	And the vote proceeded, notwithstanding your objections.

1061

MR. ROWAN:	Yes. This, however, is not a democracy, this is interest -- how interests are going to be represented. And as I indicated this morning, if a party feels that they should be represented on the audit committee, there should be no prohibition or barrier to that representation.

1062
MS. NEWLAND:	Then, Mr. Rowan, what would be the point of having a subcommittee in the first place? Isn't a subcommittee, by definition, a collection of individuals who represent a larger population?

1063
MR. ROWAN:	Yes, it is. But that also, if I follow your logic, suggests that everybody wants to serve on the subcommittee. Not everybody might want to serve.

1064
MS. NEWLAND:	I can probably agree with that one.

1065
I mean my following comment with the greatest respect personally, Mr. Rowan: But doesn't this whole issue have to do with the fact that you're annoyed that you didn't get elected?

1066
MR. ROWAN:	I don't take that in any way other than what it was meant. The answer is no, I was -- I think that the process was wrong and should be changed and that there is a balance of interests in the audit committee. Election is -- it has nothing to do -- should have nothing to do with how interests are represented.

1067
MS. NEWLAND:	Are you taking -- I just want -- this is, I think, an important issue because we do -- well, I think it's an important issue. I want to understand the basis of your objection. Is it that you don't think that the members who were elected represent the spectrum of ratepayer interest, or do you not like the process by which they were represented, or is it both?

1068
MR. ROWAN:	No, I think it's -- I'm concerned about how professionally the process, the audit process will be conducted, and that my confidence would be increased significantly if I were there and part of that process.

1069
MS. NEWLAND:	Thank you, sir.

1070
Now, I'd like to take you to the last area of my questions. Could you turn up CME's responses to interrogatory 8B and C from Enbridge.

1071
MR. MacODRUM:	Can we be sure we're on the right page?

1072
MS. NEWLAND:	Yes, it's...


1073
MR. ROWAN:	I have it.

1074
MS. NEWLAND:	One moment, please. Oh, right. We're almost finished, Mr. Rowan.

1075
Now, Mr. Rowan, in the interrogatory 8B, Enbridge asks CME to specify the date on which notice of approval of CME's evidence was conveyed by the management of CME to Mr. Rowan, and in interrogatory 8B, Enbridge asked for copies of all communication between yourself, Mr. Rowan, and your client pertaining to such review and approval of your pre-filed written evidence. And your response was to refer us to your response to a previous interrogatory at interrogatory number 6. So could I get you to turn that up.

1076
MR. ROWAN:	I have that, yes.

1077
MS. NEWLAND:	And could you tell me which bullet in your response to interrogatory number 6 responds to Enbridge's interrogatories in number 8B and 8C?

1078
MR. ROWAN:	The terms of reference which I have from the CME are general terms of reference whereby I have a responsibility to be the case manager for CME. I provide the person, the vice-president Ontario division, with a report of the proceedings and what position is being taken, and receive from him either a yes or a no in terms of proceeding. And that is the basis of -- in terms of memoranda and whatever, these are oral discussions and I have the confidence of the CME vice-president to proceed as outlined.

1079
MS. NEWLAND:	And just to follow up on that, Mr. Rowan. Did the person that you report through to in CME actually review a draft of your written evidence?

1080
MR. ROWAN:	No.

1081
MS. NEWLAND:	Do you know whether, Mr. Rowan, and you may not, but do you know whether CME seeks the views of all or some of its members before authorizing you to advance positions before this Board on DSM issues?

1082
MR. ROWAN:	No, and --

1083
MS. NEWLAND:	You don't know, or they do not?

1084
MR. ROWAN:	No -- I'm just saying, they do not, and it would be very difficult for them to do that. There are over 1,000 members so it would be an impossible job to do that.

1085

MS. NEWLAND:	Were you aware that Enbridge Gas Distribution Inc. is aware that we are a member of CME?

1086
MR. ROWAN:	Yes.

1087
MS. NEWLAND:	And were you aware that we pay approximately $7,000 a year for that privilege?

1088
MR. ROWAN:	Yes.

1089
MS. NEWLAND:	And would you accept that CME is not advancing Enbridge's interests when it recommends that a penalty of $69,000 be assessed against Enbridge?

1090
MR. ROWAN:	If you are suggesting that I have a conflict of interest, or I should have a conflict of interest, I'm not quite sure which one of those you are proposing.

1091
MS. NEWLAND:	Thank you, sir, those are my questions.

1092
Thank you, Mr. Chairman.

1093
MR. BETTS:	Thank you, Ms. Newland.

1094
Mr. Moran.

1095
CROSS-EXAMINATION BY MR. MORAN:

1096
MR. MORAN:	Thank you, Mr. Chair.

1097
Mr. Rowan, I would just like to walk through the practical implications and try to understand the rationale for the approach that you're advocating to the Board. As I understand, the overall position is that for the year 2000 you say that Enbridge's SSM claim should be reduced from $6.5 million to minus 69,000, approximately; right?

1098
MR. ROWAN:	That's the way the math works out, yes.

1099
MR. MORAN:	And as I understand it, in the context of your position with respect to that proposed reduction, free ridership is the main issue.

1100

MR. ROWAN:	It is the bulk of it, yes, for the business -- business markets programs.

1101
MR. MORAN:	And the reason that it's the main issue is because it represents the largest component of that reduction from 6.5 million down to minus 69,000; right?

1102
MR. ROWAN:	Yes. Yes.

1103
MR. MORAN:	On a dollar basis.

1104
And you take the position with respect to free ridership on the basis of the outcome of the audit report, as I understand it, which suggests that the free-ridership assumption should be something in the order of 49 percent rather than 10 percent; right?

1105
MR. ROWAN:	Yes.

1106
MR. MORAN:	All right.

1107
Now, if I could just get you to turn to Kai Millyard's reconciliation report.

1108
MR. ROWAN:	I have it.

1109
MR. MORAN:	It's in the black binder at tab A.4, Mr. Chair.

1110
If you could just turn up page 5. It sets out table 2, which has been referred to several times today. You have it?

1111
MR. ROWAN:	Yes, I have that.

1112
MR. MORAN:	All right.

1113
And if we look at the free-ridership issue as it's reflected in this table, we see that down near the bottom of the page; right, under custom projects?

1114
MR. ROWAN:	Yes.

1115
MR. MORAN:	And what we see reflected in the columns on that page are the impact of CME's position, right, along with the impact of the position of other parties? We see that on the right-hand side.

1116
MR. ROWAN:	Yes.

1117
MR. MORAN:	And on the custom projects, the free-ridership issue, the impact of your position is that CME's -- sorry, Enbridge's SSM claim should be reduced from 6.5 million by an amount of 4,499,694; right?

1118
MR. ROWAN:	Right.

1119
MR. MORAN:	All right.

1120
And I wonder if you could -- and as you've indicated, your rationale for that is because the audit report says that the free-ridership assumption ought to be in the order of 49 percent rather than 10 percent; right? That's the rationale for that reduction?

1121
MR. ROWAN:	That's what the math produces, yes.

1122
MR. MORAN:	And in terms of the math.

1123
Now, this represents a change to the actual outcome of the DSM program; right? That's what that number reflects?

1124
MR. ROWAN:	Yes, it does.

1125
MR. MORAN:	All right.

1126
Now, to try to understand how this works, in the context of the year 2000 number, you say change the actual but don't change the pivot point; right?

1127
MR. ROWAN:	That's correct.

1128
MR. MORAN:	And then for the year 2001, I assume you would take the same position, because that's behind us now; change the actual, but don't change the pivot point?

1129
MR. ROWAN:	If the audit identifies that there is a different free-ridership rate in the business market programs, then the assumption that was used -- and this could be higher or lower -- then there would be a change in the actual, yes.

1130
MR. MORAN:	All right.

1131
So if the 2001 audit indicated that the free-ridership assumption ought to be 40 percent, then you would say, then, change the actual based on that assumption?

1132
MR. ROWAN:	That is correct.

1133
MR. MORAN:	And then if -- going forward into the stuff that hasn't happened yet, what is your position with respect to the free ridership would be -- would you be suggesting that the company ought to use what the auditor indicated in the audit report for the year going forward?

1134
MR. ROWAN:	No. As I indicated this morning, in logic, if you look only at these programs, the free ridership for these business-market programs should be zero, and it should stay zero through the whole program.

1135
It only doesn't stay zero if Enbridge allows companies to participate that were free riders.

1136
MR. MORAN:	All right.

1137
MR. ROWAN:	And in fact, that's what the auditor found in 2000; and in fact, what the auditor said after examining a sample of these programs found that 49 percent of the people participating were free riders.

1138
MR. MORAN:	Right.

1139
MR. ROWAN:	So the 49 percent is a number that relates to the year in which it -- the actual -- they actually happened, not to a subsequent year, because the audit will find, perhaps, another number.

1140
MR. MORAN:	All right.

1141
So your position, then, if I understand you correctly, is that going forward, everybody should assume that there will be no free ridership in order to set the pivot point, and then we should wait until the auditor figures out how much free ridership there actually was and then adjust the actual; is that correct?

1142
MR. ROWAN:	Yeah. That would be the -- that would be the preferred route to go, yeah.

1143
MR. MORAN:	So that in setting the target, there would be assumption of no free ridership?

1144
MR. ROWAN:	That's right. There is a 10 percent now that's assumed, and that reduces the pivot point.

1145
But if they bid it zero, then that 10 percent would be included.

1146
MR. MORAN:	All right. We already have an audit report that from one year indicated that the free-ridership number was in the order of about 49 percent. On what basis would you justify assuming that there won't be any free ridership given that at least in one year we know it can be as high as 49 percent?

1147
MR. ROWAN:	Well, this goes back to the discussion that we had earlier and you learn from -- I think it was with Mr. Poch that this discussion took place; you learn from the audit report and you adjust your behaviour.

1148
MR. MORAN:	Going forward.

1149
MR. ROWAN:	Going forward. Adjust your behaviour. Now, if the auditor now says 49 percent took place in the year 2000, and if that information were provided early enough that the -- and before the fiscal year 2001 DSM program came into effect, then the behaviour of the people who are organizing and going out and talking to business market customers, they are going to be very careful, very careful about which business market customers they allow in the DSM program.

1150
So that 49 percent would go down. And if their behaviour is changed sufficiently and they are very careful, as they should be, then the number of free riders would be zero going into the program.

1151
So at the end of the year when the auditor comes along and does an audit, the auditor should find in a there are no free riders in the program. Now, some can slip through, but that's for the auditor to find.

1152
MR. MORAN:	So the objective is to make sure that the savings don't reflect the impact of free riders; right? That's your objective.

1153
MR. ROWAN:	The objective is to ensure that the savings that are going to be claimed by Enbridge in the calculation of the TRC that subsequently gets translated into an SSM claim do not reflect free riders, right.

1154
MR. MORAN:	And one way you're suggesting is to try to get the program to work in such a way that no free riders will in fact be enlisted in the program to begin with; in other words, to achieve zero free ridership.

1155
MR. ROWAN:	And yes, and that shouldn't be too hard, because Enbridge has total control over the entry into the program.


1156
MR. MORAN:	Of course the other way to do that is to make educated assumptions about the extent to which there will be free riderships and build that into the pivot point and essentially achieve the same goal; right?

1157
MR. ROWAN:	Yes, and that's okay if your assumptions are educated enough that the anticipated number and the actual number aren't wildly divergent. But in 2000, they were 40 percent, 40 percentage points divergent, and that resulted in a $4.5-million difference when it came to SSM claim.

1158
MR. MORAN:	Right, based on a pivot point that was calculated using a 10 percent free ridership and actual calculated on using a 49 percent free ridership; right?

1159
MR. ROWAN:	Yes.

1160
MR. MORAN:	So the extent that you say that that is represented by a $4.5-million figure, that should be taken out of the claim in order to do what, to ensure that the company makes a reasonable and educated assumption about free ridership going forward?

1161
MR. ROWAN:	That would be part of it. The other part is not to reward the company for bringing in free riders and claiming their savings.

1162
MR. MORAN:	Right. If they estimated 10 and there was 49 percent then they shouldn't be rewarded for that difference; right? That's how you approach it.

1163
MR. ROWAN:	And that's $4.5 million reward for something that should not take place in that year.

1164
MR. MORAN:	So in terms of whether it's a reward or punishment, depending on how you look at it, would you agree with the proposition that such a reward or such a punishment should be proportional to the impact of the failure, if you want to call it that?

1165
MR. ROWAN:	I hesitate to say yes and then you say that's all you need to say.

1166
MR. MORAN:	I have more questions.

1167
MR. ROWAN:	Yes, yes. However, this is proportional because this $4.5 million is proportional to the amount of claimed TRCs that they shouldn't have claimed.

1168
MR. MORAN:	Right. So you agree that it should be proportional and you take the position that the 4.5 million is in fact proportional.

1169
MR. ROWAN:	Right.

1170
MR. MORAN:	All right. Now, one way to assess the impact of what you would call, I guess, Enbridge's failure to take out a reasonable guess of what the amount of free ridership ought to be is to look at what would happen if, in fact, they had done so, right, in order to measure the impact. They used 10 percent and they should have used 49 percent. One way to assess the impact of that failing on their part, as you would characterize it, would be to figure out what the situation would have been like if they, in fact, had used the 49 percent.

1171
MR. ROWAN:	No, I -- I think that's the wrong way to come at it. You don't assume a 49 percent because that's assuming a sieve when they -- when they need a screen that allows no free riders through.

1172
MR. MORAN:	All right. But if you have a pivot point that was based on 49 percent, and actuals that were based on 49 percent free ridership, and that was verified by the audit, in fact, we've achieved your objective of zero free ridership; right?

1173
MR. ROWAN:	Absolutely.

1174
MR. MORAN:	So on that basis, then, one way to assess the impact of failing to do that is to look at what the numbers might be if they had done that; right? Because your objective would have been achieved if they had done the 49 percent.

1175
MR. ROWAN:	I suppose you could go that route.

1176
MR. MORAN:	All right. So if Enbridge had used 49 percent, and if the actual free ridership turned out to be 49 percent, you wouldn't be here today complaining; right?

1177
MR. ROWAN:	That's right.

1178
MR. MORAN:	All right. And if they had used 49 percent, yesterday I asked Enbridge to tell the Board how much of an impact that would turn out to be, and they pointed me towards an exhibit -- the same exhibit as we're looking at right now -- in one of the appendices. If you could turn to appendix B, page 3.

1179
Do you have that, Mr. Rowan?

1180
MR. ROWAN:	Table B-4?

1181

MR. MORAN:	Table B-4.

1182
Now, in this table, the pivot point and the actuals were recalculated so that each of them were using the 49 percent free-ridership figures, the figures from the audit report, and what you see in the bottom line is the range of differences between the existing claim today, the 6.5, and what the claim would be if, in fact, 49 percent had been used as a free-ridership figure in the pivot point.

1183
MR. ROWAN:	Could you point me to that specific line that you're referring to.

1184
MR. MORAN:	The "Total" line.

1185
Well, let's go back and take one step at a time. Let's go to the audit report. Do you have the audit report?

1186
MR. ROWAN:	Yes.

1187
MR. MORAN:	And if you go to the -- to page 523, I believe it is, which is where the auditor's recommendations are set out.

1188
MR. ROWAN:	Yes.

1189
MR. MORAN:	You have those, table 5-17?

1190
MR. ROWAN:	Yes.

1191
MR. MORAN:	You'll see that your 49 percent comes from the medium column; right? That's the total. And then you'll see there's two other columns there, "Low" and "High," and there's two other numbers there; do you see that?

1192
MR. ROWAN:	Yes.

1193
MR. MORAN:	If you flip back now to Table B-4 in the Kai Millyard report, those free rider -- total free-rider percentages, the 45 percent, the 49 percent, the 52 percent, were applied to the budget and the actuals. A yes-yes adjustment, I think, is how people have been referring to this.

1194
And the difference between what the claim was and what it would be with those adjustments is now calculated in the "Total" line in that table.

1195

MR. ROWAN:	Yes.

1196
MR. MORAN:	So to take the medium, which is the 49 percent that you've been using for the purpose of your discussion in your evidence -- it's that middle column; do you see that?

1197
MR. ROWAN:	Yes.

1198
MR. MORAN:	If Enbridge had used 49 percent in its target, and 49 percent in its actuals, the change to its SSM claim is minus $198,694.

1199
MR. ROWAN:	From what?

1200
MR. MORAN:	From 6.5 million.

1201
MR. ROWAN:	But in fact, that's not what they did. They didn't use a 49 and a 49. They used a 10 and a 49.

1202
MR. MORAN:	Right. This table shows what the effect would be if they did.

1203
MR. ROWAN:	But it's an interesting mental exercise, but it really doesn't go to the point. That's not what happened.

1204
MR. MORAN:	All right. Well, let's pick up on your interest in the exercise.

1205
If they had done it, first of all, if they had used 49 percent for the divot and 49 percent for the actuals, your objective would have been achieved zero free ridership; correct?

1206
MR. ROWAN:	Yes, but we are suggesting that if there is a change, it should be only changed on the actuals, not the budget.

1207
MR. MORAN:	I understand that.

1208
MR. ROWAN:	But you are changing the rules there.

1209
MR. MORAN:	I'm not changing any rules. I'm simply asking questions, Mr. Rowan.

1210

Your objective would have been met if Enbridge had assumed 49 percent, because that's what the audit report indicated it turned out to be; right? So you would have had zero free ridership under that approach; right?

1211
MR. ROWAN:	But that's not how it happened, but that --

1212
MR. MORAN:	I understand that, but that would have achieved your objective, wouldn't it?

1213
MR. ROWAN:	Not -- you're trying to go back in time and create something that -- the way in which this should be operated is there should be a zero, not a number, a forecast number of free riders. It should be zero.

1214
MR. MORAN:	Right.

1215
MR. ROWAN:	And then you go and check what it -- in fact, actually happened. That's the best way to do it.

1216
MR. MORAN:	Right. And another way you already agreed is that if you assumed 49 percent, and it turned out to be 49 percent, you would have achieved your zero free-ridership objective; right?

1217
MR. ROWAN:	That's the way in which the -- but you want to change the budget and the actual, and I don't want to change the budget.

1218
MR. MORAN:	I understand that. My question was: If they had assumed 49 percent, and the outcome actually showed 49 percent free ridership, your objective of zero free ridership would have been met; right?

1219
MR. ROWAN:	Not if you change both the actual and the budget.

1220
MR. MORAN:	Maybe you don't quite understand my question, Mr. Rowan. I'm not talking about your position on this and I'm not talking about what actually happened. All I'm suggesting to you is that if Enbridge, going into the year 2000, had assumed 49 percent free ridership, if they had actually guessed it right, and based on the audit we see that it's 49 percent, there wouldn't be an issue because free ridership would have been properly screened out; right?

1221
MR. ROWAN:	That's correct.

1222
MR. MORAN:	Okay. And so if they had done that, table B 4 indicates what the results of that would be to their SSM claim for the year 2000. What it shows is something just under $200,000 less of an SSM claim than it would have been otherwise; right?

1223
MR. ROWAN:	But you're asking me to agree to something where the change applies to budget and to actuals.

1224
MR. MORAN:	I'm not asking you to agree that's the right way to do it; I understand your position on that, Mr. Rowan. All I'm suggesting to you that if they had done it, the actual impact to their SSM claim would have been that the SSM claim to 2000 would have been about $2,000 (sic) lower than the 6.5 million.

1225
MR. ROWAN:	That's the mathematics that came out.

1226
MR. MORAN:	Right. So that's the impact of not doing it that way. The impact is $200,000. If they had done it that way, that's a measure of the impact, is it not? If they had done it that way, their SSM claim would have been $200,000 lower than if they did it the way they did it in the year 2000.

1227
MR. ROWAN:	I guess.

1228
MR. MORAN:	So against an impact of $200,000, you are proposing a $4.4 million reduction in the claim and I'd just like to understand what your rationale for such a huge reduction in the claim for the impact that it can be measured in the order of $200,000.

1229
MR. ROWAN:	That's where I'm having difficulty. You're postulating something, that if something had happened; but it didn't happen that way.

1230
MR. MORAN:	I know it didn't happen.

1231
MR. ROWAN:	And I'm having difficulty trying to answer your question. I want to be as responsive as possible but I can't be responsive because you are asking me to sign on to something that I don't believe in.

1232
MR. MORAN:	I'm not asking you to sign on to anything. In fact, I'm asking you, given that you suggest that the claim should be reduced by $4.5 million in the context where the impact of not guessing the right number is measured in the order of $200,000, what would be your rationale for a $4.5 million reduction in the face of a $200,000 impact for failing to get it right?

1233
MR. ROWAN:	Because -- because the way the mathematics works out. And that's one of the crazy things about this SSM system that we have. You can make this thing -- skew this thing a variety of different ways depending on which assumptions. That's our point. This is not a sane system.

1234
MR. MORAN:	So from your perspective you are saying that the appropriate measure of the failure by Enbridge to predict the 49 percent free ridership is $4.5 million rather than the actual $200,000 impact that that would cost.

1235
MR. ROWAN:	That other assumed approach that you described, yes.

1236
MR. MORAN:	All right. Thank you.

1237
Mr. Chair, those are all my questions.

1238
MR. BETTS:	Mr. MacOdrum, just for anybody that is representing a panel, it's this panel's preference that we hear your re-examination first and then we'll see if there's any questions that we have remaining. But we would, if our questions generate any concern from counsel, we would be prepared to allow you to clarify those as well. So if you wouldn't mind re-examination at this point.

1239
MR. MacODRUM:	Thank you, Mr. Chair.

1240
RE-EXAMINATION BY MR. MacODRUM:

1241
MR. MacODRUM:	Mr. Rowan, in response to Mr. DeRose, you described Mr. Thompson as an honourable person.

1242
MR. ROWAN:	Yes.

1243
MR. MacODRUM:	Do you also believe that Mr. Thompson is a vigorous advocate of his client's interest?

1244
MR. ROWAN:	Very much so.

1245
MR. MacODRUM:	Could you turn to the partial settlement agreement which is the subject matter of the last two days' deliberations, dated December 23rd, 2002 and turn to page 8 of 9, the final bullet. I just want to read that and the bullet on the top of the next page. "The agreement to settle the amounts to be cleared from the fiscal 2000 and fiscal 2001 SSM and LRAM will be without prejudice to the position that any party to the agreement including Enbridge may wish to advance in respect of Enbridge's SSM and LRAM claims in fiscal 2002 and beyond, or in respect of the SSM mechanism or DSM generally."


1246
Then the next bullet is, "In the event that the Board decides to hold an oral or written hearing to consider Enbridge's SSM and LRAM claims for 2000 and 2001 or both, the agreeing parties shall participate in such hearing/hearings and shall actively support the agreements embodied in the settlement proposal."

1247
Do you see that reference?

1248
MR. ROWAN:	Yes, I do.

1249
MR. MacODRUM:	And, Mr. Rowan, was IGUA a signatory to this partial settlement agreement?

1250
MR. ROWAN:	I believe, yes, they are listed on the following paragraph.

1251
MR. MacODRUM:	Mr. Rowan, Mr. Klippenstein in his evidence referred you to what was tab 3 of the material that the -- the Pollution Probe material, which included -- which is a reasons -- a decision with reasons dated -- and he took you through some comments on pages 29 of 33.

1252
Do you have that reference?

1253
MR. ROWAN:	Yes.

1254
MR. MacODRUM:	And what was the date of that decision with reasons?

1255
MR. ROWAN:	December 16th, 1999.

1256
MR. MacODRUM:	And if you turn to tab number 1 of Mr. Klippenstein's material, which is the cover page of the audit subcommittee final report, what's the date of that final report?

1257
MR. ROWAN:	This is the Kai Millyard report?

1258
MR. MacODRUM:	No -- the final report, yes.

1259
MR. ROWAN:	This is July 31, 2002.

1260
MR. MacODRUM:	So the Board did not have the benefit of these reports in its RP-1999-001 decision?

1261

MR. ROWAN:	No, it couldn't have.

1262
MR. MacODRUM:	Thank you. Those are all my questions on re-examination.

1263
MR. BETTS:	Thank you, Mr. MacOdrum. Excuse us for just one moment.

1264
[The Board confers]

1265
MR. BETTS:	We're quite satisfied that the questions to this witness have covered our issues and concerns and certainly any questions that we have, so the panel has no further questions of Mr. Rowan.

1266
And we thank you, Mr. Rowan, for participating to the extent that you have, which is quite a long time.

1267
And I wonder in the last ten minutes whether it makes any sense to swear in the next panel or whether we just want to stop at this point and call it a day?

1268
MR. O'LEARY:	The company is in your hands, Mr. Chair. We would be pleased to continue for as long as you like, or if now is a suitable time. We're in your hands.

1269
MR. BETTS:	Is there a position from the company? We obviously don't want to go too far past the four o'clock hour, but if we can do something that will save some time tomorrow, that would be fine, too.

1270
MR. O'LEARY:	Mr. Chair, we think that, perhaps, in the interest of continuity of this panel's evidence, it might be preferable to start, perhaps, ten minutes earlier tomorrow, and then we have not lost any time.

1271
MR. BETTS:	I don't think we need to start any earlier tomorrow. We'll just, I think, adjourn at this point and reconvene at 9:30 tomorrow, then, and that's fine and fully understandable.

1272
Has your entire panel waited through the day, by the way? They have. Well, they are probably exhausted already --

1273
MS. NEWLAND:	They loved every moment of it.

1274
MR. BETTS:	I have no items to tidy up for, kind of, the end of the day report, so I think it's appropriate that we do as I suggested and adjourn at this point to reconvene tomorrow morning at 9:30 a.m. Thank you all.

1275
--- Whereupon the hearing adjourned at 3:50 p.m.