Rep: OEB Doc: 12N9R Rev: 0 ONTARIO ENERGY BOARD Volume: 0 20 MARCH 2003 BEFORE: R. BETTS PRESIDING MEMBER G. DOMINY MEMBER 1 RP-2002-0133 PRESENTATION OF SETTLEMENT PROPOSAL 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 PRESENTATION OF SETTLEMENT PROPOSAL 4 20 MARCH 2003 5 HEARING HELD AT TORONTO, ONTARIO 6 APPEARANCES7 PAT MORAN Board Counsel COLIN SCHUCH Board Staff SUZANNE TONG Board Staff DENNIS O'LEARY Enbridge Gas Dist. FRED CASS Enbridge Gas Dist. MURRAY KLIPPENSTEIN Pollution Probe DAVID POCH GEC JAY SHEPHERD OPSBA IAN MONDROW Direct Energy THOMAS BRETT OASBA ROGER HIGGIN VECC VINCE DEROSE IGUA BRIAN DINGWALL HVAC THOMAS ADAMS Energy Probe MARK MATTSON Energy Probe ELISABETH DEMARCO CEED MALCOLM ROWAN CME JIM HAMILTON OESC TIBOR HAYNAL TCPL PAT MCMAHON Union Gas Limited 8TABLE OF CONTENTS9APPEARANCES:[20]PRELIMINARY MATTERS:[48]SUBMISSIONS BY MR. CASS ON SETTLEMENT PROPOSAL:[78]SUBMISSIONS BY MR. CASS ON QRAM:[365]PROCEDURAL MATTERS:[437]DISCUSSION ON BOARD LETTER - POINT 4:[455]DISCUSSION ON BOARD LETTER - POINT 1:[552]DISCUSSION ON BOARD LETTER - POINT 3:[617]DECISION:[686]PROCEDURAL MATTERS:[696]10EXHIBITS1112UNDERTAKINGS1314--- Upon commencing at 9:30 a.m.15MR. BETTS:Good morning, everybody, please be seated.16The Board is sitting today in the matter of application -- no, we're not. We're not on the air yet. I think now we're officially sitting.17The Board is sitting today in the matter of application RP-2002-0133, submitted by Enbridge Gas Distribution Inc. for an order or orders approving or fixing rates for the sale, distribution, transmission and storage of gas in their fiscal year 2003. The Board's procedural order number 3 established this hearing day as the opportunity for the parties to present a proposed agreement, settlement agreement, to the issues involved in the application as outlined in procedural order number 2.18My name is Bob Betts. I will be the presiding member in this hearing, and joining me today is Board member George Dominy.19May I have appearances, please, from the applicant.20APPEARANCES:21MR. CASS:Yes, thank you, Mr. Chairman. My name is Fred Cass and I'm here for Enbridge Gas Distribution. With me nd beside me is Dennis O'Leary, and also with me somewhere at the back is Ms. Tania Persad.22MR. BETTS:And the intervenors.23MR. KLIPPENSTEIN:Good morning, Mr. Chair. Good morning, Mr. Dominy. My name is Murray Klippenstein for Pollution Probe.24MR. POCH:Good morning, panel. My name is David Poch, here for GEC and CIELAP, the Green Energy Coalition and the Canadian Institute for Environmental Law and Policy.25MR. SHEPHERD:Good morning; Jay Shepherd on behalf of the Ontario Public School Boards' Association.26MR. DeROSE:Good morning. My name is Vincent DeRose here on behalf of IGUA. I can say that Peter Thompson as anticipated will be hear at some point during the hearing, and also if I can indicate on behalf of CAC, Bob Warren is not here today but just to register an appearance that he will be here commencing on Monday.27MR. HIGGIN:Good morning, my name is Robert Higgin. I'd like to register an appearance on behalf of Michael Janigan, counsel for the Vulnerable Energy Consumers Coalition, who cannot attend today but will be here next week.28MR. BRETT:Good morning Mr. Betts, Mr. Domini. My name is Tom Brett. I'm appearing on behalf of the Ontario Association of School Business Officials.29MR. MONDROW:Good morning Mr. Chair, my name is Ian Mondrow. I'm here for Direct Energy, and I'd also like to register an appearance for John Rooke who will act for Direct Energy in respect of issue 8.3 on the Board's issue list.30MR. MATTSON:Good morning Mr. Chairman. Mark Mattson, counsel for Energy Probe and I should register an appearance for Mr. Craig Parry who will be assisting and leading on issue 9 on the Board's issues list, which is the DSM and SSN issues.31MS. DeMARCO:Good morning, Mr. Chair. Elisabeth DeMarco on behalf of the Coalition for Efficient Energy Distribution, or CEED.32MR. HAMILTON:Good morning, panel, my name is Jim Hamilton. I'm appearing on behalf of Ontario Energy Savings Corp.33MR. ROWAN:Good morning Mr. Chairman, my name is Malcolm Rowan. I'd like to register an appearance for Mr. Bruce MacOdrum who will be counsel for the Canadian Manufacturers & Exporters and will be here starting on Monday.34MR. HAYNAL:Good morning, my name is Tibor Haynal and I appear on behalf of TransCanada PipeLines Limited.35MR. McMAHON:Good morning, I'm Pat McMahon, appearing on behalf of Union Gas.36MR. SOMMERVILLE:Thank you.37Are there others further back that didn't get a mike. Okay, that would be everybody, thank you. For the Board.38MR. MORAN:Pat Moran, Board counsel, Mr. Chair.39MR. BETTS:Thank you, Mr. Moran.40Before I ask for preliminary matters from the parties, I did want to bring to everybody's attention a letter that was faxed out last night to all participants. I apologize at the outset for the very late timing of that, but unfortunately, it was kind of thrust upon us, so anybody that does not have a copy of that letter, there are copies available in this room.41The letter basically makes four requests from all the parties for submissions on specific issues.42Some of which -- could have an effect as the Board considers the settlement proposal and some others that relate to other matters in the hearing.43Can everybody hear me at the back, is the volume okay? Okay, thank you.44I would like to just address one of them, a matter that relates to me personally. It involves some involvement that I have with a -- another business that is in some ways related to the heating business. It's addressed in Section 4 of that letter.45I appreciate that there's not a lot of information in there, and prior to seeking comments from parties, I will be prepared to answer any questions that anyone might have to expand on that information, if that would be helpful.46All of these matters will be dealt with after we go through the settlement proposal, and there may be some other matters at that point to deal with as well.47So that being said, I would now ask for preliminary matters from the parties, and perhaps Mr. Cass, first.48PRELIMINARY MATTERS:49MR. CASS:I have no preliminary matters Mr. Chairman, thank you.50MR. BETTS:Are there any other preliminary matters?51MR. MORAN:I don't believe so, Mr. Chair.52MR. BETTS:Any intervenors with preliminary matters?53MR. DeROSE:Mr. Chair, one preliminary matter that relates to the letter which was sent out last night, and it relates to what has been identified as issue number 2, and which relates to the anticipated motion, which relates to efficiency gains.54And on behalf of IGUA and CAC and VECC, we would ask the Board to consider adjourning that matter until first thing Monday morning for the following reasons. We -- I received this letter very late last night. I got a phone call, actually, at about 9:30, and it was read to me over the phone. CAC's legal counsel is not here today, neither is VECC's and I can indicate that senior counsel for those three intervenors are working on the motion at the moment, and we anticipate being in a position on Monday to address all of the Board's concerns that appears to be raised in issue number 2.55And in terms of the effect on the proceeding, we would submit that there would be no delay, because all of the evidence that is to be heard next week would be heard in any event regardless of the Board's decision with respect to the settlement proposal.56And by Monday morning, we anticipate being in a -- certainly a much better position to address the issue with the Board in terms of both the timing of the motion and the content of the motion.57MR. BETTS:Okay, well, we will consider that comment as we deal with this this afternoon, and that is exactly the type of submission that the Board would be interested in receiving on this question, so -- and hopefully anybody that is only viewing that letter for the first time right now would have at least a little bit of time to review it and consider it as we go through this presentation.58MR. MONDROW:Mr. Chairman, if I might just ask, Ian Mondrow here for clarification --59MR. BETTS:As you speak, I have to see whose lips are moving, so wave or something back there. That's great.60MR. MONDROW:I took from your opening comments that to the extent that any party has questions in respect of item 4 -- factual questions in respect of item 4 on the letter that will be dealt with after the proposal settlement is reviewed. Is that correct?61MR. BETTS:That's correct.62MR. MONDROW:Thank you, sir.63MR. BETTS:I believe, then, it's time to begin this portion. I'll turn it over to Mr. Cass, and I see people are sitting in the witness section and perhaps that's a procedural matter that has to be taken care of.64MR. CASS:Yes, Mr. Chairman. Thank you. With the Board's concurrence, it was my intention to endeavour to take the Board through a high level -- and I emphasize high level -- review of the settled issues in the settlement proposal, should the Board feel that that is something that is appropriate for today.65I may succeed when I endeavour to do that in showing no more than my own ignorance of a lot of important rate-making issues -- but we do have a group of witnesses here, whom, I think, can assist the Board to the extent that there are any detailed questions beyond the high level explanation that I'm going to try to provide.66I'll just identify for the record the witnesses now. Starting closest to the Board is Mr. Rob Bourke; sitting next to him is Ms. Pascale Duguay; then next is Don Small; and finally, Kerry Lakatos-Hayward. And also Mr. Tom Ladanyi is just sitting around the corner but he is also available to assist with the detailed questions and to bail me out when I get in over my head with any questions the Board may have.67Would the Board consider it appropriate to swear these witnesses at this time in the event that they do have the need to answer questions as we move forward?68MR. BETTS:I think that would allow basically an unrestricted response, so let's do that, if that's okay.69MR. CASS:Thank you, sir.70R.BOURKE; Sworn.71P.DUGUAY; Sworn.72D.SMALL; Sworn.73K.LAKATOS-HAYWARD; Sworn.74MR. BETTS:Mr. Dominy, the witnesses are sworn in.75Mr. Cass, please proceed.76MR. CASS:Thank you, sir.77MR. BETTS:And the Board was quite satisfied with your suggestion on how to deal with this.78SUBMISSIONS BY MR. CASS ON SETTLEMENT PROPOSAL:79MR. CASS:Thank you. Before speaking to any of the specific issues in respect of which settlement has been achieved, perhaps I can just make some brief comments about the overall settlement proposal.80As set out at page 11 of the settlement proposal, the process started with quite a long list of issues. The Board itself, of course, would be well aware of this from its knowledge of the issues list.81I haven't done the count myself, but it's reflected at page 11 of the settlement proposal that there were 85 issues to begin with, and in the boxes on page 11, one can readily see the success that was achieved at the settlement conference in addressing those issues. And I think it's fair to say that a high degree of success was achieved because looking just at the complete settlement box one can see that the total is 65 out of 85.82I think the Board would also be aware that the settlement process -- settlement conference did extend much longer then originally anticipated in the Board's procedural order. All of the parties put a considerable effort, a lot of discussion and a lot of care into coming up with a settlement proposal that would reduce that original list of 85 issues as much as possible. And as much care as possible went into providing the Board with the evidence in support of each settlement and the rationale for the settlement.83On an overall base, I think I speak on behalf of all the parties in respect of areas where there is a complete settlement, where the parties believe that considerable effort has gone into finding what they hope the Board will consider to be a very good and fair and reasonable resolution of many issues.84That's just by way of general introduction to the settlement proposal as a whole.85Again, Mr. Chairman, it's not my intention to get into a great level of detail in reviewing the settlement proposal, so what I would do is endeavour to hit what I would see to be the highlights. And to do that, I propose to start at issue 1.1, which is gas volume budget, and in respect of which there is a complete settlement.86The words, of course, speak for themselves, and I will endeavour not to repeat and read to the Board the words that are already in the settlement proposal. In respect of the gas volume budget, as the Board would see here, and from the company's evidence, the company believes that it has an existing methodology, including its regression models used to protect average uses, that is performing very well for the purposes of coming up with the gas volume budget.87Also as reflected here, intervenors did have some particular issues with the volumes proposed by the company. They're set out in the text here, and I won't read that.88I think all parties believe that a reasonable and fair compromise was reached, which allows the company to continue, as stated here, to use the methodology which it believes is performing well, yet at the same time, comes up with a reasonable and fair compromise for the purpose of setting 2003 rates.89MR. BETTS:Thank you, Mr. Cass.90MR. CASS:The next issue that I would turn to is 2.1, service charges.91Maybe a little bit of background explanation is needed here, but I will not in any way be departing from what is in the evidence and what is in the document.92Service charges, I think, traditionally have been treated as a credit to O&M, so in a presentation that the Board would see, there would not be traditionally a revenue line item for service charges, it would be something netted out of the O&M charges.93For the purposes of the settlement in this case, all parties agreed that from this point forward those service charges will be moved up and shown as a revenue line item.94MR. BETTS:Yes, please continue.95MR. CASS:Thank you.96Now, this does have an effect on the O&M numbers, if I can use that term, that the Board may want to bear in mind. The original O&M numbers presented by the company would have had the service charges netted out. The settlement proposal is now on a new basis where service charges are not netted out but are a revenue item. So in comparing the company's original filing and its proposal to the settlement proposal, as far as O&M numbers are concerned, that's just something to be borne in mind; that originally service charges were netted out, now they appear, and will from this point forward appear as another revenue item.97Now --98MR. BETTS:Mr. Cass, before -- are you through with that particular section?99MR. CASS:I was going to say a little more about the service charges.100MR. BETTS:Please do. I think there are a couple of questions as of now. We will wait until you're finished.101MR. CASS:Another point that I was going to make about the traditional treatment of service charges, is they have not been subject to an individual approval by the Board in the past, where the Board would look at each charge and say yes, the Board approves that charge in that particular amount for a test year.102The Board has, in the past, looked at them as part of the overall rate making process, and the impact by way of netting these out from O&M, but it has not been the subject of a specific approval.103Insofar as the settlement proposal is concerned, I don't believe any parties are taking a specific position. There is no position advanced in the settlement proposal that the Board needs to or does not need to approve specific service fees. However, in the event that the -- the parties have certainly in the settlement proposal left that open as something the Board may do, may wish to determine whether it will start approving the service fees themselves, in which case parties have left open to themselves the opportunity to argue that. And the concept of the settlement proposal, is that if the Board does see the need to start approving the individual service charges, then that would be effective as of the next case, given how far we are already into the test year for this case.104MR. BETTS:Thank you.105Mr. Dominy.106MR. DOMINY:My only question is: Does this mean that parties will be making the argument with regard to whether or not the Board should be approving service charges? The question is jurisdiction.107MR. CASS:Yes, the parties have, as indicated in the settlement proposal, Mr. Dominy, reserved to themselves the right to make arguments on that. I'm not aware of the extent to which any party at this time has a position on it. It's not in the settlement proposal and I don't know, but the right to make argument on that has been reserved in the settlement proposal.108MR.. DOMINY:So it's an issue for argument.109MR. CASS:Yes.110MR.. DOMINY:Thank you.111MR. BETTS:One question about notice. There's reference to Enbridge's intention to publish notice of changes of the service charges on the web site. Is that rather than putting it in either an insertion into the billing or some other, let's say, normal rate notice to consumers? Is -- does the company have a position on whether they would object to it being included in a rate notice?112MR. CASS:Yes, I believe, Mr. Chairman, the reason why it's not done as part of a billing, sir, and it's difficult for me to address this without having a list of service charges in front of me, but for in customers they wouldn't be relevant. They are particular charges for particular items of service, and I think that's why it has not been the intention to have a bill insert that going to go out to every single customer -- I think it is a fairly lengthy list of all these different service charges.113MR. BETTS:To your knowledge, that's the only reason that the company would prefer not to do that.114MR. CASS:That's to the best of my knowledge, Mr. Chairman, but I'm not sure that we have with us today the people that could address it in any more detail than it's been taken so far.115The point that's being made to me, Mr. Chairman, is something like this going into a bill that is not necessarily relevant to a large group of customers, can often have the effect of simply generating a lot of calls by people who are seeking to understand something that may have no application to them.116MR. BETTS:The point is well taken. Thank you.117I think that's fine for that issue, if you want to proceed.118MR. CASS:The next part of the proposal to which I would take the Board is issue 3.1, dealing with transactional services.119As indicated in the company's evidence, and in the settlement proposal, the company did have some concerns about the manner of sharing of risks and rewards under the existing transactional services sharing methodology.120The parties, during the settlement conference, agreed on a new sharing methodology that is proposed here for the Board's approval, that addresses the company's concern about an asymmetrical sharing of risks and rewards, but at the same time provides to ratepayers much or all of what ratepayers would be looking to see in a sharing methodology.121And although the wording is perhaps a little complicated, it is fairly basic. It's a 75/25 sharing of gross margin with an $8 million minimum to ratepayers, and with the company being responsible for all of the O&M costs related to transactional services.122So although -- in order to put that in words for the purposes of the settlement proposal, it comes out a little more complicated, that's what it is. So it gives the ratepayers an $8 million minimum of transactional services gross margin, it makes the company responsible for the O&M expenses, and then it has what the parties believe to be a fair sharing mechanism of 75/25 linked in with those other elements.123So again, it meets the company's concern about the asymmetrical sharing, but it gives to ratepayers the $8 million minimum and the other elements I've described.124MR. BETTS:Thank you. We can go onto the next one.125Sorry, one question.126MR.. DOMINY:Have you finished on that one?127MR. CASS:Yes, I have.128MR.. DOMINY:I just wanted to understand, at the end of that section there's a comment about CEED making a statement suggesting that the Board hold a genetic review of the competitiveness of the transaction services market in Ontario. I made the assumption that that is their statement. That's in the settlement agreement, and this is not an issue that's going to be argued. They've just given us that information saying this is what we recommend.129MR. CASS:I believe that's correct, Mr. Dominy.130MR.. DOMINY:Thank you.131MR. CASS:The next issue is gas costs transportation and storage, issue 4.1.132In a nutshell, the company followed its risk management program in 2002, and there were no issues in that regard as reflected in the settlement proposal. However, the risk management program of Union Gas is under review at this time. I'm not personally aware of what stage that review is at, but a review either is being or has been conducted. And all parties agreed that it would be appropriate to have a similar review of the Enbridge program.133All parties also agreed that in order to do this in the most cost effective manner, it would be appropriate to do as much as possible to pick up the benefit of the findings, observations, and conclusions that flow out of the Union review, and this is what is reflected in the settlement proposal.134So the parties have agreed that there will be a review of the company's risk management program as described, and that it will endeavour to pick up from the similar review that is occurring in respect of Union's program.135MR. DOMINY:A very small question. The settlement agreement includes the line, "the parties have agreed that the prudently incurred cost of having a consultant conduct this review would be recoverable in rates as appropriate." I wondered whether there was any discussion of the mechanism of how you perceive this being done if these costs are spent in this test year.136MR. CASS:No, Mr. Dominy. I don't think there was an intention that it would happen in this test year. It would be something to be addressed whether the review is complete and the costs are known.137MR. BETTS:Thank you. Please proceed.138MR. CASS:Issue 4.2 is the QRAM methodology. I believe it's fair for me to say that there is general agreement that the QRAM methodology has been working well and requires only what I would call some tweaking.139So what the settlement proposal reflects is, in fact, some of the changes to the QRAM methodology, which in my view would tend to be on the procedural side more than anything else. So for example, one proposed change to the QRAM methodology -- and I'm just trying to find the specific place that it's reflected -- in any event, the notion is in the fourth quarter, when the QRAM is necessary and there's only 3 months left in the fiscal year over which the amount can be spread that there could be some flexibility, in fact, to do it over a period of six months, but the onus being on the company to justify that as being appropriate.140So that is described in the first paragraph on page 23 under settlement change in QRAM methodology.141So without getting into any more detail than that, Mr. Chairman, again, the notion was to bring some procedural enhancements to the QRAM methodology, but maintain the underlying process as described here in the settlement proposal.142MR. BETTS:Thank you.143MR. DOMINY:Just a point of clarification; for the July 1st 2003 QRAM, I'm assuming, then, that the volumes that will be used will be the volumes that flow out of the settlement agreement.144It says the volumes in the latest application, assuming the settlement agreement were approved.145MR. CASS:Yes, Mr. Dominy, I'll turn this over to Ms. Duguay.146MS. DUGUAY:That would be correct for the purpose of establishing the rates underpinning the new utility price for the July 2003 QRAM. However, as contained in the settlement proposal on page 23, as Mr. Cass was pointing or referring to earlier, for the purpose of -- if applicable -- designing a rider to recover the projected QRAM PGVA balance, there was agreement that the company may elect, to the extent there would have been significant migration between system sales customers and T-service for the purpose of calculating the unit rate underpinning the rate rider, that there could be a re-forecast at that stage.147MR. DOMINY:Thank you.148MR. BETTS:We have no further questions on that one.149MR. CASS:Issue 4.3 I'll try to address very quickly. This is system gas management and direct purchase costs.150In its previous decision, that is the RP-2000-0040 decision, if I've got the number correct, the Board said in paragraph 4.6.4 that the company should file a fully allocated costs study in two formats for the purposes of the discussion of this issue arising out of that case.151What was resolved in this case was that it would be appropriate to have those -- have the study completed as directed by the Board, and filed, and then at that time, as reflected here, all parties agree that system gas management fees and direct purchase costs can be fully examined.152MR. BETTS:No questions on that, thank you.153MR. CASS:The next issue that I propose to address, unless there is anything before that -- any questions before that -- is cost of capital, issue 5.1.154MR. DOMINY:Can I ask the question of 4.4, clarification question, and it's to do with the underutilization of the link pipeline.155And as I read it, am I correct that for the year 2003, and just for this test year, that any underutilization will be to the account of the shareholder. Is that what that sentence implies?156MR. SMALL:I believe that's correct.157MR. DOMINY:Thank you.158MR. BETTS:Thank you. Go ahead with cost of capital.159MR. CASS:Cost of capital, I hope, as well, is one that I can deal with very quickly, Mr. Chairman. The parties have agreed on the ROE that flows from applying the Board-approved formula. Issues about the formula itself, as the Board is aware, will be addressed in a separate proceeding.160MR. BETTS:Thank you.161MR. CASS:Issue 5.2 reflects the party's agreement with the company's financing plan for the test year, and specifically, the projected cost of short term debt of 3.54 percent was accepted and agreed to.162MR. BETTS:No questions.163MR. CASS:Under issue 6.1, which is rate base, the major components of this issue are described in the evidence, and to some extent referred to here. I won't go into that.164The parties during the settlement conference discussed areas of possible reduction, and in fact, agreed to two reductions to the capital budget that are described in the settlement proposal.165This brought the capital budget for the test year, if memory serves, to $250 million, and be I should point out that does not include the EnTRAC proposal, which is discussed separately, so a capital budget of $250 million, not including EnTRAC, based upon the reductions that are described here.166Again if memory serves -- someone can correct me if I'm wrong -- but I believe that that $250 million capital budget is reflective of the 2002 year, what the spending was, so on that basis, I think the parties were able to agree to the reductions and see this as an appropriate number.167MR. BETTS:Thank you.168MR. CASS:Issue 6.2 is a depreciation study, and it was explained in the evidence that the company's current depreciation rates have been in place since the start of fiscal 1997, and in fact, based on a 1994 study. So without getting into all of the explanation and the evidence, it was time for a review of the company's depreciation rates to ensure that they remained appropriate.169Experts were engaged for that purpose. They produced a study and recommendations. In the settlement proposal, the parties have accepted the recommendations with respect to depreciation rates with one exception. The one exception is that in respect of NGV rental cylinders, that the depreciation rate should be the same as that for NGV cylinders on company vehicles, and that is reflected in the settlement proposal.170So there was a complete settlement on the depreciation study accepting the recommendations, with one exception.171MR. BETTS:Thank you.172MR. CASS:The company -- moving on to issue 6.3, which is the property plan, there are three elements to this, which essentially link together as a package complete settlement on property plan.173The Board will recall that in the evidence, the company provided its property plan, indicating its intentions for properties owned by the company and specifically that there are a number of properties that it intends to sell in the test year.174The company expects to realize gains upon the sale of the land in the test year. The parties agreed that the ratepayer and the shareholder should share these gains on a 50/50 basis for the test year.175As indicated in the company's evidence and in the settlement proposal, this is consistent with the EBRO-465 decision, but in the context of this settlement of property plan issues, on each of the three sub issues, parties reserve their rights to -- in respect of positions they may take in future years on future fact situations.176So it's a settlement for the 2003 test year of the property plan issue. The parties also agreed on a variance account to capture any difference between the actual gains realized on sales in the test year and the forecast gains.177The other elements of the settlement on property plan are the remaining two subissues. Without going into a lot of detail, in the test year, the use of some buildings by affiliates and customer works limited partnership will continue, the company had proposed to use a rental recognition method to take this usage into account. Intervenors proposed a continued use of the rate base elimination method, and again, as part of this overall settlement on property plan, the company agreed to the intervenors' position and agreed to continue the rate base elimination method.178The third element is the carrying charges for vacant space, and I think it really is self-explanatory. I'm not sure that I could say anything more other than reading the words of the third element of the property plan settlement.179These three elements make up the complete settlement on property plan, without prejudice to positions parties may take in the future.180MR. BETTS:Thank you.181MR. CASS:Perhaps I'll spend a little more time on issue 6.4, which is EnTRAC, because it is something that actually does tie in with the letter that the Board sent out yesterday and the schedule for the hearing. So with the Board's indulgence, I'll do my best to explain a little more about what the settlement agreement is saying on EnTRAC.182EnTRAC, in essence, is an attempt to develop a system that will integrate the company's current systems and processes for dealing with direct purchase and large volume contracts. And I'm only speaking here as to what's in the evidence, but I think it is important for the Board to have some understanding of this.183Obviously the direct purchase market is one that has grown and evolved. Also large-volume customers in the context of current markets have evolving expectations.184As the evidence reflects, in current markets, customers are increasingly being frustrated with the company's ability to provide information that they need. On two levels, it's the frustration with the quality and the timeliness of the information that the company is able to provide.185So EnTRAC is the solution to these problems, and to the frustration that customers have been experiencing.186It is a multi-year project that entails capital expenditure in the test year. Because of the concerns about the quality and timeliness of information, it's something that the company believes it really needs to get on with, and I won't go into the implications of the quality and timeliness of information, but it is discussed in the evidence, which is primarily the business case for EnTRAC.187There is a real issue there that needs to be addressed.188The concern is that if EnTRAC's approval needed to await the full course of this hearing, and the Board's decision, and without speculating as to the timing of when a decision might be, the go-ahead for EnTRAC could well be very late in the fiscal year. At that point it almost becomes a fiscal 2004 project, and the delays really just continue.189So the concern is if there is to be a go-ahead from the Board on EnTRAC, to find a way that that could be provided at an early opportunity so the work can start in the test year, and this is what's addressed in the settlement proposal.190Obviously, this is all subject to the Board's concurrence, but what the parties agree on and propose is that EnTRAC be the first issue for the Board to consider in the hearing. Now, that as reflected in the settlement proposal is subject to the letter the Board already issued on DSM that it wanted 2000 and 2001 DSM-related issues first. But subject to that, the proposal is that EnTRAC be addressed first, and that evidence be presented, cross-examination, and argument, with a view to a possible early decision from the Board on it, so if there is an approval, work can start in 2003.191Just by way of further clarification, there is an EnTRAC issue described in the settlement proposal about allocation of costs and benefits. That doesn't require an early approval. It would merely be the go-ahead or the approval so that work can start on the project that would be the subject, if the Board agrees, of an early approval. The allocation of costs and benefits would, of course, be addressed, but as long as the company knows that it can start work in the test year, there's no need for an early decision on how the costs and benefits will be allocated.192So I hope that explains what is indicated in the settlement proposal on EnTRAC. When we come to the Board's letter about the DSM issues and what I call the front part of the hearing, I will address that a little bit more about what might be done with EnTRAC. But for this purpose -- for present purposes, I just wanted to explain to the Board the reason for the proposal that the Board deal with this at the beginning of the hearing.193MR. DOMINY:Mr. Cass, there's just that last paragraph in the settlement agreement dealing with costs. And I wasn't quite sure, I think I understand what you said, but if you could just clarify.194It says that: "The costs of the EnTRAC project has been dealt with in the terms of settlement and have led to a reduction in the deficiency of 1.4 million," which I assume to mean that there was 1.4 million in the previous or the applied for revenue requirement and that's now being removed. And -- but then it goes on to say: "No further adjustment to this calculation will be made as a result of the Board's determination on this issue."195I just wonder if you to explain to me what that meant.196MR. CASS:Mr. Bourke, I think, can bail me out on this, but let me attempt to start on it and he can interrupt me as soon as I go astray.197In the nature of capital projects Mr. Dominy, my understanding and my recollection is -- as I'm sure the Board will be aware -- that although there can be capital spending in the initial year because of capital cost allowance implications and so on, the effect can actually be a reduction in the deficiency. And so my understanding is, and Mr. Bourke can correct me where I go wrong, is that in respect of EnTRAC, the effect actually of having it in the numbers, so to speak, is a reduction in the revenue deficiency of the $1.4 million for the test year.198And that is part of the overall settlement, that reduction is in there.199MR. BOURKE:Mr. Cass has explained it correctly.200MR. DOMINY:What was the contemplation, no further adjustment? What was the expectation, what adjustment might occur?201MR. BOURKE:I guess I'm not clear. Adjustment in respect to --202MR. DOMINY:It says you've made a reduction of -- a deficiency of 1.4 million reduction. Then as part of the overall settlement as a result of the Board's determination in the issue, no further adjustments to this calculation will be made as a result.203MR. LADANYI:Can I help, Mr. Dominy? What this means is if the Board decides that EnTRAC should not go ahead, we would then not make any adjustment. This credit, as a result of the capital cost allowance, would remain basically in the revenue requirement.204MR. DOMINY:Thank you, Mr. Ladanyi. That helps me.205MR. BETTS:Thank you. I may have a couple more questions as we go through that letter request later this afternoon in terms of the scheduling of the timing. Perhaps I could address them now.206Just the -- no, I will leave them for that occasion.207Thank you Mr. Cass. Please proceed with the next issue.208MR. CASS:I would propose to move onto issue 7.1, which is the 2003 O&M budget.209MR. BETTS:That's fine.210MR. CASS:With the Board's indulgence, this is one area where perhaps I would provide a little more explanation, and it may assist when we do come to a consideration of the Board's letter later today.211I think the O&M issue is very representative of the comments that I made at the start of this review of the settlement proposal in the sense that the parties went into ADR with a long list of O&M issues, and in my submission to the Board, they were successful in coming out of ADR with a reasonable settlement that has made great strides to reducing that long list of O&M issues to something that is much more manageable for the purposes of a hearing.212How is that achieved? Well, first of all, as the Board would be well aware from reading the document, there is an agreement on what I think has been called an O&M envelope, an overall O&M expensed envelope for the test year of $270 million plus DSM amounts. That is obviously a key element of the overall O&M settlement that allowed this long list of issues to be reduced.213However, that's not the end of the story, and in my mind, at least, there's two additional elements of the settlement that need to be explained, and perhaps even differentiated a little bit.214One additional element of the O&M settlement relates to the intervenors' desire to pursue at the hearing an issue about the extent to which, in the intervenors' view, efficiency gains have been achieved in affiliates of the company during the targeted performance based regulation period.215The overriding desire at the settlement conference, and I actually meant to say this in my introductory comments, was to come to a settlement that would allow rates to be put in place as quickly as possible.216I think all parties recognize that with a full cost of service hearing and the time the Board needs to write a decision, that without an effort to get rates into place as quickly as possible, we would all be facing the prospect of rates after a decision long into the test year.217So the intervenors have this point that they intend to make about efficiency gains, but there was a need to find a way to deal with it to allow rates to be put into place. The way that all parties agreed to deal with this issue about efficiency gains so that rates could be put into place was a deferral account.218I don't think that the Board need approach this deferral account as if it's like all other deferral accounts. It was a mechanism used to address this issue that the intervenors want to pursue to get rates into place, and so as reflected in the settlement proposal, what the parties contemplate is that anything going into a deferral account will be credited to ratepayers at a time in a manner to be determined by the Board.219So that full determination can occur in this case, which may well be unlike many other deferral accounts. The amount will go in, if any, as a result of the board's decision, and the Board's decision, may well, if the Board sees it appropriate to do so, determine how and when the amount comes out, all in the same decision.220Again, the purpose of it was just to find a way to get rates in place and address this other issue. And as indicated in the settlement proposal, this remains, of course, subject to the Board's decision as to how it ultimately decides that any amount reflected in that account should be cleared.221So that's the first element that was needed as part of a package to get this settlement on O&M to reduce this long list of issues down to something far more manageable.222The second element, and I wish to emphasize, at least in my mind and I hope in others' minds, it's separate. It's not a deferral account issue.223There are policy issues that intervenors wish to pursue in respect of O&M. Again, in order to get rates in place, intervenors were prepared to -- all parties were prepared to agree on the 2003 overall number, but there are still underlying issues that intervenors wish to pursue in relation to O&M.224And for the purposes of the settlement proposal, what was done is these were gathered at issue 7.45, really to get them all in one place.225Issue 7.45, though, is only reflecting things that were elsewhere on the issues list and that as part of the overall settlement on O&M, intervenors intend to continue to pursue. So I'm just trying to make clear that whether they're in 7.45 or elsewhere, these are things that as part of the O&M package settlement intervenors desire to pursue. Gathering them in 7.45, I think, is a convenience for everyone, but they remain issues for intervenors regardless of where one puts them.226These, though, are not deferral account issues. So for example, number 5 of the list that appears under issue 7.5 is cost allocations from the Enbridge Inc. corporate office. The Board probably would have noticed the wording in issue 7.45 specifically indicating that that is not an issue for the deferral account.227These are policy issues that intervenors wish to pursue, but they are different from the first issue that I described, because the first issue, the intervenors' interest in pursuing these alleged efficiency gains is for the deferral account; these are not.228MR. BETTS:There still is a little bit of confusion here as to what you have just said. I thought I understood it, and maybe I don't understand it. I'm not even sure I can ask a question that will help you explain it better. Perhaps Mr. Dominy can.229MR. DOMINY:Can I take 7.45 as an example. Cost -- number 5, cost allocations to Enbridge Gas Distribution Inc. from the EI corporate office including changes in the scope of services provided.230Now, you say these are policy issues to be addressed in the hearing, but you said, as I understood what you just said, that this is not an issue that is the subject of a deferral account.231MR. CASS:That's right. For greater clarity, Mr. Dominy, these 7.45 issues would not have 2003 cost consequences, given the overall O&M settlement on the $270 million plus DSM number, there are no cost consequences of these issues for 2003.232MR. DOMINY:To clarify it further, if for instance, the Board were to make a decision that the charges for the corporate office were unfairly allocated or overly allocated to EGDI with regard to certain activities that are supposedly included, that would then be a decision which would be applied in test year 2004 onwards, at least, the finding would be -- the basis of work the company would do in producing its revenue requirement for 2004, but that no adjustment would be made to the 2003 overall O&M number, despite the Board's finding that some of the charges were inappropriately charged to EGDI. Is that what that means?233MR. CASS:That is correct, Mr. Dominy. Bearing in mind, of course, that the O&M number reflected in the settlement proposal, contains within it a very large reduction already from the company's proposed number.234So to the extent -- it's difficult for me not to, perhaps, stray into argument here, but at least in the company's view, to the extent that the Board had concerns on something like EI corporate office allocations, the company's view would be, well, there's already been a big reduction, when you take the 270 from the O&M recovery that the company was proposing to begin with.235So the reduction has been settled for 2003 within that very large reduction down to 270, and it would be future implications that would be the purpose for which these issues would be considered.236But just in relation to that last part of my sentence, the future implications, I'm getting a little beyond what I can talk about there, because these, of course, are intervenor issues; and the company perhaps as much as the Board is interested to hear what the intervenors think they will do with these in the future.237MR. DOMINY:No, I understand that that would be part of the discussion. I was just trying to understand the statement you made that these are not issues related to the deferral account, and the issues that are related to the deferral account are issues -- issue 8. Are those issues related to the deferral account?238MR. CASS:No Mr. Dominy -- well, yes, 8 ties into the deferral account, I believe, in my mind and I'll explain why. The deferral account issue, as I understand it, is intervenors are saying as a result of rebasing of the targeted performance based regulation plan, they seek to look for some efficiency gains, and they seek to look for those in affiliates.239They say to the extent they find those in affiliates, they should go in the deferral account on the basis that I have discussed. That does tie into 8, the 8 series of issues, because 8 series is outsourcing, which brings it to affiliates. So in that sense, yes, there is that link.240But the deferral account, there is these, can I call it, rebasing efficiencies that the intervenors seek to have reflected because they say that's appropriate in this rebasing year coming out of targeted PBR.241MR. DOMINY:If I look at item number 3 from 7.45, "where and how efficiency gains and the benefits of efficiency gains are realized in each of the years 2000, 2001, 2002." Is that not tied to the efficiency gains you've just been describing?242MR. CASS:I think it is, yes.243MR. DOMINY:Yet you say it's not part of the deferral account.244MR. CASS:The deferral account is separately described in 7.1. Yes, 7.1 presumably has some element of overlap with 7.5, subissue 3, yes. But the deferral account is described in issue 7.1, and is an issue 7.1 matter.245You're right, there is this element of overlap that you've pointed out. I should have mentioned that myself. I in fact, overlooked that until you brought it to my attention, yes.246MR. DOMINY:We will no doubt hear a lot of discussion of these matters.247MR. CASS:Yes, again, not knowing where intervenors are going with these issues, I don't know whether there is something in 7.45, subissue 3, that is above and beyond the deferral account, or whether it is the same thing.248MR. DOMINY:Thank you.249MR. BETTS:I think Mr. Dominy's questioning has helped me, but I still have to ask one question, and I may look foolish in doing so, but I'll take that risk.250Do I understand correctly that if the Board pursues the issues on policy related to these matters and decided, as Mr. Dominy suggested, that there was a more appropriate way to allocate costs or whatever, would that suggest that that decision could create a balance in that deferral account beginning at the point the decision is made?251In other words, I guess I'm confused, but I'm sensing from what you're saying that there will be a zero balance this these deferral accounts they end of the year no matter what happens; am I wrong?252MR. CASS:Yes, I haven't described it very well, Mr. Chairman.253MR. BETTS:I haven't understood it very well either.254MR. CASS:I'm struggling with this. It's one deferral account. It's been described in the settlement proposal as the O&M deferral account.255The basis upon which anything would go into that account is described under issue 7.1, okay. It's not intended to be described under issue 7.5, although, Mr. Dominy has pointed out quite rightly an area of overlap between subissue 3 under 7.45 and the deferral account.256But the deferral account is issue 7.1. The concept is that through the course of this hearing, the intervenors would advance their position about these efficiency gains that should be, in their view, recognized as a rebasing matter. To the extent that the Board agrees with that, in the decision at end of this hearing, the Board would say X dollars go into that deferral account in this decision, and the Board -- again, this is all subject to how the Board sees fit to deal with it -- the Board in the same decision may see fit to say, "And these dollars will be cleared in the following manner." All in the same decision.257MR. BETTS:I now understand. Thank you.258That's fine, please proceed.259MR. CASS:Yes, thank you, sir.260I didn't propose to say anything about the 8 series of issues. There is no agreement to settle them. Where they stand in relation to the hearing is described under each issue. My concern would be that because they are not settled issues for me to endeavour to say any more would really amount to argument of the company's position.261If there are questions, of course, we would do our best to respond to them, but I didn't propose to address them, because they are not settled issues and the party's position as to how they should be taken into the hearing is described in the settlement proposal?262MR. BETTS:Thank you, we agree, and we have no questions.263MR. CASS:That, then, brings us to the nine series of issues, which is DSM.264Most of this is partial settlement. I don't know how much the Board wants to hear about DSM, given that almost all of it is partial settlement. To the extent that the Board wants to be taken through all or any part of it, I would ask that Mr. O'Leary do that and rescue me from my lack of knowledge of DSM issues.265MR. BETTS:That's quite appropriate.266Mr. O'Leary, perhaps you could really focus in for us what the settlement will do to decide issues and focus in on those and certainly the disputed aspects of DSM will be dealt with at a later time.267MR. O'LEARY:That, Mr. Chair, may mean my comments will be very brief, because there is only one aspect of DSM, which is the subject of a complete settlement, and that's set out on page 64 under issue 9.1, and it relates to the O&M budget for 2003.268You'll see at the bottom of the page the parties were able to reach a settlement for the purposes of setting rates and to allow the department to have some certainty as to its budget for the test year. The parties agreed on an O&M budget of 10.9 million, and there is complete settlement on that figure.269It's subject to the parties at the hearing taking a position that that number is either too little or too much, and ultimately, if the Board should determine that a different figure should be approved, then any variance will be included in the DSM variance account, and that amount would be cleared pursuant to an order of the Board.270Aside from that one item, the balance of all of the DSM series of issues are all subject of a partial settlement, and unless you would have any additional questions, I would suggest or simply move on to the next issue.271MR. BETTS:Just give us a moment, please.272Mr. O'Leary, when you you're saying move on, are you referring right now specifically only to 9.1 or DSM issues in general.273MR. O'LEARY:I'm in your hands as to if you have any other questions, we would be prepared to do our best to answer them.274MR. BETTS:On all of the nine series?275MR. O'LEARY:Except 9.6. Mr. Chairman, there is one comment I may have slightly misspoke myself and that in respect of the complete settlement any clearance of the DSM VA which may arise as a result of a difference between the agreed upon 10.9 million and any Board-approved amount, it would also be contemplated that that be cleared with your decision as well.276MR. DOMINY:Mr. O'Leary, I just have one question, and really, you're probably not the right person to ask this question of, but I'm going to ask you your interpretation. And that is, throughout this we have the statement, the parties which don't agree take the position that the Board must review and determine all matters pertaining to Enbridge Gas Distribution DSM initiatives for the test year and beyond, and I was wondering if you could give me some understanding of what the scope of that review and determination the parties had in mind.277MR. O'LEARY:I certainly will not attempt to speak on behalf of the other parties, other than to indicate that it's my belief that a good number of the parties welcome a Board-completed examination of DSM issues and would invite the Board to make certain decisions and determinations in respect of the various issues that will be raised in the context of the hearing.278My interpretation is simply that the Board is -- or that the parties are attempting to indicate that they would like the Board to deal with DSM in a full and complete way at the hearing.279MR. DOMINY:Thank you.280MR. BETTS:Thank you, that covers our questions on that. Please proceed.281MR. CASS:Thank you, Mr. Chairman.282The next series of issues is the ten series which addresses deferral and variance accounts. There is a considerable amount of detail in here about 2002, 2003 deferral and variance accounts and so on. It's hard for me to generalize or give a high-level overview of this.283I think the best I could do, perhaps, is indicate that there's one account that merits some specific discussion. That's the manufactured gas plants deferral account.284Again, I would ask Mr. O'Leary to address some comments to the Board on that, and then, to the extent that there are questions about other specific accounts, of course, we have the witnesses here to address any specific questions.285MR. BETTS:Perhaps, Mr. Cass, you did indicate that Mr. O'Leary could speak to the manufactured gas deferral account, and that's certainly one I'd like to hear about. I had a question with respect to one statement in here. Do you want to move to that at this stage or --286MR. CASS:Whatever suits you, Mr. Chairman.287MR. BETTS:Then please do. If you could speak to that and you may be able to answer my question before it's asked.288MR. O'LEARY:I'd like to do that.289It may have come as somewhat of a surprise, because that deferral account, of course, didn't appear in any other prior document. It arises out of an occurrence that took place in the middle of February when the company was served with a statement of claim issued by the plaintiff Cityscape, which at which time the company through its counsel put all of the intervenors on notice that it been served with the claim.290And the particulars of that claim are set out in a recent filing by the company as part of the record in this case, which was done on March 13th, 2003, anticipating that there will be a number of costs that are associated with the investigations and the defence, and perhaps the resolution of that claim. The company put forward a proposal to create the -- a manufactured gas plant deferral account.291Given the lateness of the filing of the evidence, and I use that word only in relation to the fact that it is only something that came up very recently, the intervenors didn't have a real opportunity to consider the proposal for the purposes of putting forward for your consideration a complete settlement, if one was achievable. And so we have included -- the company has included it as one of the issues that will be going forward at the hearing.292I can't tell you at this time whether or not any party is going to take a position adverse to the deferral account or recommend something different, but the intent of it is to address an issue which as can be seen from the evidentiary filing, it's one that has been anticipated that might come forward, and that is that issues in respect of the environmental impact of the operation of these manufactured gas plants might be the subject of future litigation. It now is, and the company is proposing that this deferral account be created to deal with those costs and that litigation.293Did I answer the question that you had?294MR. BETTS:I will be specific. The sentence that says: "This proposal does not fall within the ambit of this settlement proposal at this time." You are stating clearly that the panel is not deciding at this time to include it as a deferral account?295MR. O'LEARY:The intent of the wording of the settlement proposal is to simply indicate, as I attempted to, that the parties did not have enough time to deal with it during the ADR process because of the recent receipt of the statement of claim and the filing of the evidence.296The company proposes that the Board deal with the deferral account as an issue during the course of the hearing. Certainly if there was some overwhelming desire to reach a settlement on it today, perhaps that would be something we can put forward to you for your approval now, but we anticipate that it's going to go forward to the hearing for discussion.297MR. BETTS:Thank you.298That is the only question we have with that group of issues.299MR. O'LEARY:Mr. Chair, I've been advised that there may be several intervenors that are prepared to make comments today for the purposes of possibly putting forward a settlement.300MR. BETTS:I think it's difficult to deal with the settlement proposal in this environment, and I would encourage parties to perhaps do that in a private setting, and if there is a consensus to bring it forward. This whole proposal has been established based on a consensus of all participants. I'm not sure you would be able to accomplish that today, but I think that would be the Board's expectation.301If there is to be an agreement on this, there would have to be a sign-off of all parties.302MR. O'LEARY:I understand.303MR. BETTS:Please proceed.304MR. CASS:Mr. Chairman, just before we leave deferral and variance accounts, this is not strictly speaking, an issue arising from the settlement proposal, but the company thinks it's appropriate to update the Board on the current balance of the 2003 PGVA. Rather than me undertaking that, I would suggest I perhaps turn that over to Mr. Small and Ms. Duguay to update the Board on that.305MR. BETTS:Mr. Cass, does this relate specifically to the settlement proposal?306MR. CASS:Not really, Mr. Chairman. It's more just a matter of making the Board aware of what's happening with the 2003 PGVA as of the current time.307MR. BETTS:I think that's much appreciated and a very valuable piece of information. I'd like to, if I could, though, if it doesn't relate to the settlement proposal, to separate it from that and perhaps before the witnesses leave their seats, they could inform us as you have suggested, but let's focus on the settlement proposal and not stray from that at this point. I get very easily confused.308Please proceed.309MR. CASS:The fact is, Mr. Chairman, I don't have a lot more to say about the settlement proposal. There are a few isolated issues that are the subject of complete settlement, such as 11.1, which I think is very self-explanatory. The main part of what we have left by way of the rest of the settlement proposal are rate design issues.310I went through these with a mind to coming up with some better way that I might explain each of these to the Board, but I really can't do it. I think they're explained in a better fashion than I can do it in the settlement proposal.311If there are questions about the rate design issues, again, ill be more than pleased to address them, but I don't really have anything specific to add to what was said on rate design.312MR. BETTS:I think we're all right with that as well, Mr. Cass.313MR. CASS:That, then Mr. Chairman brings me to 13 --314MR. BETTS:Perhaps we do have a question.315MR. DOMINY:I just have one question and that's on 12.7. And I was wondering two simple questions.316It says that, "the 2 million per annum savings target will include energy savings achieved to date through the Enbridge programs." I'm wondering if there is any indication of how much of that 2 million has been saved.317MR. CASS:I don't have any answers to that. I don't know whether Ms. Duguay can help or not.318MS. DUGUAY:I was not involved in that aspect of the issue at all.319MR. DOMINY:I wouldn't mind at some stage going through the process if someone could let me know.320The second thing is are the costs of this activity that may be incurred incorporated in the DSM budget? I mean, assuming there is some cost incurred by the company to undertake this activity.321MR. CASS:Yes, the concluding sentences were intended to address that, Mr. Dominy. I'm not sure if they're sufficiently clear, but the indication is that to the extent these things can be brought within existing budgets they will be implemented. To the extent they require something new, they will be proposed in the next case.322MR. DOMINY:Sorry; I should have been more careful reading the last two sentences. Thank you.323MR. BETTS:Thank you. That covers our questions on that section.324MR. CASS:That then brings me to the 13 series of issues under the heading of rate retroactivity.325Under 13.1, which is proposals or options to minimize rate retroactivity, of course, the settlement proposal in itself, and the efforts -- the extensive efforts by all parties to come up with a settlement that allowed rates to be put in place as quickly as possible, is the first big step that everybody took, I think, to as much as possible, minimize any issues about rate retroactivity.326For future purposes, and what more might be done in the future, I think all parties are understanding that this is an important issue and reserved to themselves the right to make submissions to the Board as to how that can be addressed.327With respect to the implementation of the rate outcome, if I can call it that, of the settlement proposal, as the Board can see under issue 13.2, all parties have agreed on an implementation date of May 1st, with an effective date of October 1st, 2002, and schedules were put together in order to demonstrate impacts on customer classes of the proposed implementation, as well as the other adjustments that will take place at the same time.328And I think all parties were very pleased to see that the result of the schedules was one where there shouldn't be a concern on the part of ratepayers about the impact that's going to occur on -- or as of the implementation date of May 1st.329Now, I'm not conversant with all the numbers in the schedules. I think probably the witnesses can help with those, but for example at schedule 10 of the N-1 series of attachments, there is a very detailed schedule indicating the expected outcome in May 2003, which I think should be very helpful to the Board in understanding that there need not be reason to be concerned about a ratepayer impact on May 1st.330MR. BETTS:Just give us a moment, please.331MR. DOMINY:Actually, the only question I had related back to page 12, and the sentence was at the bottom of the page: "The intervenors acknowledge however that these financial consequences are subject to the impact and adjustments to be made pursuant to the QRAM methodology discussed at issue 4.2." And I just wondered exactly what that meant. Will these numbers be changed as a result of any decision the Board makes with regard to the outstanding QRAM that currently exists?332MS. DUGUAY:I guess what this sentence was meant to represent is those would be the final 2003 rates and let's say that the Board accept that these rates would be implemented starting in May of 2003; for example, under the normal QRAM guidelines, the company would file an application in July in order to essentially replace or recalculate its new utility price if the thresholds are exceeded, and these rates would, essentially, be incremental to the final 2003 rates and would supercede -- I guess what is meant by this paragraph is to say this decision will deal with the distribution rates and anything that has to do with gas costs and long-haul upstream transportation costs will be dealt with through the QRAMs procedure.333MR. DOMINY:There's a QRAM currently before the Board.334MS. DUGUAY:Yes, there is.335MR. DOMINY:And that could have effects on the delivery distribution rates?336MS. DUGUAY:That's correct, yes.337MR. DOMINY:And those effects if incorporated, and therefore, would change the numbers shown here by the time you do your final rate order; if the Board approves it?338MS. DUGUAY:Yes, the new rates would be implemented in April of 2003, and stemming from the final 2003 rates they would essentially supercede the new rates that were affected in the billing system in April.339Each time there's a rate change, the existing rates are being replaced by another set of rates.340MR. DOMINY:It's just that there are certain gas costs that affect certain of the distribution rates, as I understand your QRAM.341MS. DUGUAY:That's correct.342MR. DOMINY:And those are a function of the gas cost forecast. That would be another tweak on the rates that we've got now which will be adjusted when you make your final rate order or request? Because there are higher gas costs included in the QRAM than I assume are in this application?343MS. DUGUAY:If I understand the question, that would be true for the loss and unaccounted for gas, and the unaccounted for gas, per se, as well.344However, essentially that variance would be there for a month, potentially two months, but you're quite correct that given that the revenue requirement supporting these rates did not include the April QRAM proposal, because the rates have not yet been approved by the OEB, that there would be a difference there.345Unfortunately, I don't know one month how much it means, but that certainly -- you're quite right about that.346But with regard to the other aspects of the April QRAM, typically the delivery component is fairly small, but those would be taking into consideration whenever we would implement the final rates for 2003 with regard to the gas supply charge as well as the gas supply load balancing charge.347MR. DOMINY:So if the Board were to accept the settlement agreement, and the implementation date is May the 1st, the first thing that will come up is a rate order proposal?348MS. DUGUAY:Yes.349MR. DOMINY:Which intervenors would have an opportunity to look at.350MS. DUGUAY:Yes, absolutely.351MR. DOMINY:And that would make any adjustments that were necessary?352MS. DUGUAY:Correct.353MR. DOMINY:Thank you.354MR. BETTS:Thanks. That covers the questions on that item.355MR. CASS:That leaves only issues 14.1 and 15.1, Mr. Chairman, in respect of each of which, there is a complete settlement, and they are, I believe, very straightforward. So again, as in the case of certain of the other issues, I didn't propose to read out to the Board this settlement that's been achieved on each of these issues.356If there are any questions, of course, they can be addressed.357MR. BETTS:No, that's fine. Thank you, Mr. Cass, no questions.358That concludes the presentation of the settlement proposal?359MR. CASS:Yes, it does, sir.360MR. BETTS:I'm not really sure whether this is normal practice or not, but I think I would invite other parties to this to make any comments. I don't want to go through anything that Mr. Cass has covered already, but if there was something that Mr. Cass said that was not as you thought you had agreed or something that needed clarification, I think it would be important for the Board to hear that. But apart from that, I'm making the assumption that Mr. Cass did deal with the settlement fairly and neutrally.361Are there any comment from intervenors or from parties who participated?362And there appear to be none. Thank you.363I think what we'll do now, to make the best use of time, Mr. Cass, you indicated that you wanted to bring some information to our attention regarding QRAM. This might be a good time to do that. It may be appropriate to take a break after that and then come back and conclude any of the other matters.364And I would suppose any information that this witness panel can provide us with respect to QRAM or anything else would be appropriate to hear now, and then we can offer our thanks and allow them to take a more comfortable seat. But Mr. Cass, please continue.365SUBMISSIONS BY MR. CASS ON QRAM:366MR. CASS:Thank you, sir.367I would just turn the issue of the 2003 PGVA over to Mr. Small and Ms. Duguay.368MR. SMALL:Thank you.369As part of our April 1 QRAM application, we filed an exhibit that was at that time projecting a year-end balance in our 2003 PGVA account of approximately $40 million. Since that time, we've seen a significant increase in natural gas prices through the latter half of February and through the month of March, and a rippling effect of prices throughout the remainder of the fiscal year.370And coupled with additional gas supplies we required to meet the increased demand through February and March, we're now looking at a possible PGVA balance at the end of September of some approximately $260 to $270 million. So there has been a significant increase in that from that time.371MR. BETTS:I'm not sure where we go from there, quite frankly. If you're waiting for me to say something, I'm not sure what to say, but perhaps I'll --372MR. CASS:I think it's really in the nature of a heads-up, Mr. Chairman.373MS. DUGUAY:I think that came about, since the company wanted to, essentially, give the Board and interested stakeholders a heads-up to the effect that, typically, we would come forward in July of 2003 with the -- which would be the next QRAM proposal, provided that the Board accepts the April 2003 QRAM.374However, in light of gas prices that have essentially sky rocketed this winter due to the weather, and given the fact that based on Mr. Small's numbers that the forecast year end PGVA balance has increased drastically, the company is -- or at least initially -- contemplating to essentially advance its QRAM filing from essentially June of 2003 rather than July 2003.375The company is, however, very concerned about the magnitude of the balance in the PGVA and the fact that -- and essentially reflecting market price, the proper market price signal in the market place.376So there was a discussion late yesterday afternoon with Board staff, essentially, inquiring with the company as to whether we would consider doing or amending, somehow, our April 2003 QRAM application such that we could start to -- well, I shouldn't say "start," but as Mr. Small indicated earlier, we have applied to recover through a rate rider a projected year-end balance of approximately $40 million within our April QRAM application. That 40 million is now expected to be 250.377So what the company could do rather than having the April QRAM approved as filed and turning around and filing another QRAM application in June, because if this persists, I don't think we would wait until July to file another application, would be to amend or change the rate rider that is designed to recover the forecast year-end PGVA balance to a higher level.378There are some other issues around that, and those issues are around the fact that the $250 million in the PGVA based on the existing QRAM guidelines would essentially assume that that price variance is totally attributable to the acquisition of system supply. And by that I mean for the purpose of serving system supply customers only.379However, this is not the case. Those price variances have been incurred mainly -- well, I shouldn't say mainly, but partially to serve system supply customers and to load balance the system on behalf of all customers inclusive of direct purchase customers.380So the company -- were we to review the amount that would be recovered through rider C, which is applicable to customers on system supply only, the company would take the position that imputing $250 million is inappropriate, that it should be apportioned between system supply and direct purchase, and the company would like to consider, given the magnitude of the amount, rather than amortizing it over a six-month period, for example, to consider using a larger nine-month period, for example.381Those are new facts, and essentially questions that were -- that arose as a discussion with Board staff late yesterday afternoon. I don't have all the numbers or anything like that, but those are considerations or concerns that the company has identified following that conversation.382MR. SMALL:Just maybe -- just to add one thing, what we were contemplating and subject to verifying some of the numbers, we've quickly assessed the impact of the load balancing costs, if you will, on that end of year balance in the PGVA and that would be approximately $90 to $100 million, so that load balancing amount would be distributed or a rider established if we could manage it against all customers inclusive of the T-service customers, so we would have a little bit of work to do, I guess, in coming up with unit rates.383MR. BETTS:One option you've suggested has been discussed is the possibility of adjusting the current QRAM application that's before the Board. From a timing perspective, is it possible to make those changes that you've suggested might be required in time for your April 1st change?384MS. DUGUAY:From a billing implementation, I've placed a phone call this morning. Since I've been here, I don't have the answer in terms of whether we can effect that.385I'm confident that we can, but I could probably provide you with a definite statement after lunch or maybe the answer is on my voice mail right now, but I don't know.386I think another thing as well that we need to consider is (a), coming up with a number; (b), coming up with the load balancing component of the PGVA; and (c), calculate the rate rider, which wouldn't be too difficult to do, deal with the amortization period, and we also need no change our customer rate notices.387And we indicated in the April QRAM application that in order to implement rates and have the bill insert accompany the bill starting in the first billing cycle of April, that we required a rate order by March 26th, which is next Wednesday.388MR. MONDROW:Mr. Chairman, if I might -- given that this isn't really part of this process but has arisen -- make an additional comment. In addition to the list of factors that Ms. Duguay has just identified, I must admit I'm certainly not nearly as knowledgeable as any of the witness panel members on QRAM right now, but it sounds to me like the company is suggesting some methodology changes in light of a particular extreme circumstances, and I think in addition to the list of to-dos that Ms. Duguay has mentioned, there would clearly or most likely would be an increased need over and above a standard mechanical QRAM process for interested parties to first digest the implications of the proposed changes and then provide comments on those.389So perhaps when Ms. Duguay is turning her mind to the timing of all of this, she might bear that in mind. I think it would take longer to process given the significant methodology departures that are being kind of, you know, tossed around. And that's a concern.390MR. BETTS:Mr. Brett?391MR. BRETT:Mr. Chairman, thank you. Just very briefly, I have a number of concerns with this -- Mr. Mondrow has touched on one of them, but I think it would be necessary to have some fairly significant documentation on these issues that have been raised. These are -- and I say that -- I don't want to get into a lengthy discussion now with obviously the witnesses. This is not a cross-examination, but from what I read, and it's mostly the trade press, gas prices are extraordinarily volatile at the moment. The average gas prices apparently have fallen 47 percent since the middle of February, spot prices according to what I read. So there have been very fast run-ups and we're now in the process of seeing some very fast run-downs. So I would be very skeptical about a proposal that came in and somehow crystallized an increase in gas costs that wasn't kept very, very current on an ongoing basis. Because prices are -- have -- they did move up very, very quickly earlier in the winter there, and they're in the process of moving down very, very quickly as we speak, partly because oil prices are moving down very quickly and partly for some other reasons.392So I think that needs to be looked at very carefully and I would be a little bit uneasy about any kind of effort on a hurry-up basis ram something through here, which contains, as Mr. Mondrow said, departures from established practice in terms of how you would charge out these increases, but more than that, simply makes a massive adjust to the rate in the face of what might be declining prices.393I haven't seen any of this evidence or any of these studies and documentation and I think people would want to see that.394MR. SMALL:Just maybe to clarify one thing, I think what we would be proposing is that the gas supply charge that we calculated to implement for April 1 wouldn't change, but what we would be looking to do is changing the rider for the -- what we would want to charge to collect an updated projected year-end balance.395MR. BETTS:Ms. DeMarco.396MS. DeMARCO:Mr. Chairman, if I could just echo Mr. Mondrow's concerns bout the needs for documentation in two lights in particular, the first being in light of the agreed methodology that currently exists pursuant to 2002-0040 settlement agreement, and secondly in light of the settlement agreement that we now have before us. This doesn't appear to be a significant change to what is reflected in issue 4.2 and certainly, I believe, all intervenors would definitely need to have clear and thorough documentation to see how the settlement agreement proposal is affected by the information that's been provided.397MR. BETTS:I can assure you, we're not going to be making a decision in the next half hour on this, for sure, and I wouldn't disagree with anything that anybody has said that has spoken so far.398I would be interested in any other comments that -- certainly there have been three comment from intervenors at this point. Is there anything different that anyone would care to add.399Yes?400MR. SHEPHERD:Mr. Chairman, just a point of clarification. Do I understand the witnesses to be saying that they propose to recover the full 250, 260 million in a rate rider now, or just move in that direction and see what happens for July 1st?401MS. DUGUAY:I just want to clarify that what I have said is really in response to concerns that were conveyed to the company, and this is the way we were to contemplate this or if the Board would ask the company to adjust the level of its proposed rider through or included in the QRAM application, this is the way we envisaged this to work to be fair to all customer groups and mitigate any large year-end adjustment.402And essentially, I think, one advantage of it is instead of having a rate change in April, another rate change in May, followed, presumably, by another or possibly QRAM in June or July, that that would essentially minimize the frequency of the rate change.403But really turning -- I just wanted to make that clear that the company has not cooked this up overnight, we're just responding to Board staff.404To your question, the rider C currently has been designed as it is filed to recover a forecast year-end balance in the PGVA of roughly $40 million.405So under this proposal -- or I'm not sure how I should call it -- the 40 million would now be 250. But here again, there's this issue around the 40 million is presumably or is assumed to be entirely commodity related and goes to system supply only. We know that the 250 contains approximately 100 million of load balancing variances there, so if we were to say okay, the rider would go to system supply customers only, we would probably say, okay, we're going to take the 250, back out 100, and clear 150, and given the existing QRAM guidelines, we have six months to clear it. Starting in April through to September, volumes are typically low; it's the slower months and the summer months. So it's such a large balance, the company would like to have the ability to at least examine and say, well, maybe, six months isn't appropriate because the rider is too high, and say, Well, we would like the rider to be in place for nine months instead of six months.406I think we're dealing here with very exceptional -- hopefully, anyway -- circumstances and we're just trying to respond.407MR. BETTS:I think what I would suggest the parties do, if possible, is to not get too focused on the dollar amounts, because I agree with everybody, they would definitely have to be tested and analyzed and reviewed, and I'm sure that the applicant themselves are still wanting to define those numbers better.408What I'd like everybody to put their minds to particularly is this scenario generically and how we might proceed to deal with it as a group, whether there is anything that can be done for the April 1st QRAM; if that's not possible, what might be a practical way to do it.409I think we all share the very common interest of not seeing a severe impact on consumers at any time and allowing rates to be, as much as possible, smooth through the year.410So with that being said, give me a moment to decide what we're going to do next.411I do see some hands and I will come to your comments -- perhaps I'll take your comments first. Yes.412MR. HAMILTON:Mr. Chairman, I share the concerns that have already been expressed by other parties, but I wanted to add one additional comment. We are gone through two very extended ADR settlement proposal processes, and within that was an extensive examination and revision and establishment of a methodology to deal with QRAM process.413This process, as I understand, what is being proposed now flies directly in the face of achieving objectives that were set out for that QRAM process in the first place. I share your concern about volatility and large price impact on customers, but that is the very purpose of having price transparency through QRAM is so that customers, when prices are volatile, customers know they are volatile. They should not have it masked by having spread over the recovery, February, March, April, May, costs well into 2004 calendar year. It's just totally contradictory to the objectives that were set forth in the first place.414MS. DeMARCO:Mr. Chairman, in addition to Mr. Hamilton's concerns, he gets to the point of process that I think is quite important.415In receiving information in this fashion and having assumptions that appear to be floating around right now about price moving, I think we are doing all the intervenors and the actual customers a disservice by not having something concrete we can examine in a principal fashion on the basis of both the prior objectives that were agreed to in the 2000-0040 settlement agreement, and in the instance settlement agreement that is now before the Board.416I do feel that we are now getting down a road that is quite dangerous.417MR. BETTS:Mr. Mondrow.418MR. MONDROW:Thank you, sir; briefly from hopefully a high level, given the concerns just expressed over the last few minutes, and I appreciate this sentiment about trying to deal with this quickly in respect of the outstanding application, but it seems to me we have an agreed QRAM process in place. Board staff and/or the company have raised legitimate concerns about current exigencies. I would encourage the Board to consider divorcing the two, let the current application proceed given the time frames involved in these, and if there is a really serious concern that needs review that it be done properly in a separate process which is then fed back into QRAM at the appropriate point pending the outcome of those considerations.419While I think the discussion would be useful and the concern is properly raised, I fear that continuing on behalf of trying to mesh this problem into a very carefully crafted QRAM on a very short time frame is probably impossible, and in any event raises a lot of procedural concerns. While the panel is considering a response to all this, I would urge them to consider that approach of dealing with them separately and then adjusting as appropriate once the latter and larger process issue has been sorted out.420Thank you very much.421MR. BETTS:Thank you.422Any other comments at this point?423The panel has a few things to think about, including the settlement proposal as presented earlier.424What I will be recommending is that we break for approximately two hours.425We will come back at 1:30. We may be in a position to make some comments about the settlement proposal at that time; we may not. We may have to reserve those until later or reserve them until we've heard input on the questions raised in the letter.426We may have some comments with respect to the PGVA issue that's been presented to us as well. And it perhaps will give those of you out there an opportunity to consider the -- how to manage these kinds of things, if there is a way to manage them and provide us with more input when we return as well.427That being said, the panel will now stand adjourned -- one more comment, or if there are more comments I'm happy to receive them as well.428MR. DeROSE:One question coming out of your last comments. I want to be sure that the Board will not be making any decision with respect to the separation of cost consequences and policy issues before hearing submissions on your letter this afternoon, on what has been in your letter identified as number 1; or did I misunderstand you?429MR. BETTS:Definitely we will be receiving submissions on the questions included in that letter before we make any decisions, and whether or not there will be a decision forthcoming even after those this afternoon, the panel will decide.430MR. DeROSE:Thank you.431MR. MATTSON:Mr. Chairman, just briefly. I'd ask if the Board entertain submissions we will be speaking to number 3 in your letter with respect to the DSM scheduling, and ask that Mr. Adams be able to speak to that, because I do have a meeting at 1 o'clock and I may return, but if the issue comes up Mr. Adams can speak to that issue.432MR. BETTS:The Board would welcome that. Thank you.433Any other points before we adjourn.434Thank you, we will return at 1:30.435--- Recess taken at 11.39 a.m.436--- On resuming at 1:33 p.m.437PROCEDURAL MATTERS:438MR. BETTS:Please be seated, everybody.439Welcome back, everybody.440The panel this afternoon will try to deal with things, I think, in the following order unless we hear recommendations to the contrary. I will ask if there are any procedural matters that was occurred during the lunch period.441We will accept submissions on the letter that was sent out yesterday. We will ask for any comments that may have arisen during the break regarding the issue of the PGVA or the information that we learn from Enbridge today. The panel will then break at that point to see what decisions, if any, will come out of today's proceeding, and will return with that information.442So that's the direction we will take at this point.443The first item, then, would be to ask if there are any preliminary matters, then, at this point in the hearing.444Yes, Mr. Mondrow.445MR. MONDROW:Sir, if I might. In respect of the proposed sequencing that you just put forth, I have tried over the break to contact two people in particular that I need to consult with to confirm my instructions with respect to point 4 in the Board's letter of notice that went out yesterday. I've had some discussions, although brief with each, but none with both. I think the latter is going to be required.446As input to those discussions, I do have right now two particular questions I would raise pursuant to your offer this morning, and in order to arrange that in a timely fashion, I'd like to try to arrange a telephone meeting to that effect at the end of the day.447What all that dictates to me and the reason I'm giving you this background is a request that I be given and anybody else interested be given a opportunity to seek that factual clarification relatively early in the process you've outlined, in the event that the process slips later in the day and I don't have a chance to have the discussions I need to have to provide our submissions on point Number 4.448And in respect of those submissions, I noted that the Board's letter of notice offered parties the opportunity if they couldn't be here today to make written comments by the end of tomorrow. Even though I am here today, given the lateness of this issue arising I would seek permission to provide our position on point 4 following my discussions at the end today and by way of writing which we would get in as early tomorrow as possible.449So I wanted to (a), ask for the opportunity to ask you questions early; and (b), ask for the opportunity to provide our position on point 4 in writing at some time tomorrow.450MR. BETTS:I don't see any problem with either one of those requests.451MR. MONDROW:Thank you.452MR. BETTS:So we could deal with that item -- in fact, we will deal with the submissions on the letter at this point in time, and we will allow you or any party the opportunity to move to number 4 first and get that out of the way and then well take submissions on the rest. And appreciating that at this point it isn't submissions, it's questions.453Are there any other procedural matters?454Then if I could ask everybody to turn their attention to the letter in question, and Mr. Mondrow has asked to take me up on the offer of answering any questions related specifically to item number 4, and certainly I extend -- that offer stands for any participants. So, Mr. Mondrow, please go ahead.455DISCUSSION ON BOARD LETTER - POINT 4:456MR. MONDROW:Thank you.457One's actually likely a question for you sir, and the second is likely a more general question. Perhaps Mr. Moran will have some input. The question for you directly is whether you would be able to and be prepared to just provide some sense on a factual basis of the degree of your involvement with the HVAC company in question, so that -- in respect of perception of bias, a factual assessment can be made.458MR. BETTS:I can do that verbally or orally, if that's satisfactory.459MR. MORAN:Mr. Chair, if I may, I note that in the paragraph 4 of the Board's letter there are a number of facts set out there. I wonder if Mr. Mondrow might be a bit more specific about what it is that he's looking for in order to be of assistance.460MR. BETTS:That would be helpful and I don't mind a direct question, Mr. Mondrow. I won't take any offense to it.461MR. MONDROW:Thank you. By degree of involvement, I mean are you actively involved in running this business on a daily basis.462MR. BETTS:No, I can tell you I would spend on the average probably four hours a month on it.463MR. MONDROW:And are you involved in making decisions in respect of supplier agreements, contracts, and product lines and the like?464MR. BETTS:No.465MR. MONDROW:Could you tell us, then, what your involvement is?466MR. BETTS:I, first of all, am the major shareholder. My wife is the other shareholder.467The Board was advised when I first came that it was my intent to relinquish ownership of the business, and I've gone through three efforts to do so, and each one in the 11th hour has not been successful, so that is still a goal of mine.468At this point, I have a general manager and an office manager. That's among a staff of seven people who basically are managing the operation for me, so I'm very much separated from it, and I work at the Board on a full-time basis.469MR. MONDROW:Thank you, that is very helpful.470The second question, which is a more broader question, as I alluded to, is what the implications would be, since I don't understand them, from a procedural perspective for the hearing, were you to be persuaded that in the circumstances you should excuse yourself from this proceeding in respect of issue 8.3, and I know Mr. Moran and I had an off-the-record discussion about this, which is why he may well wish to provide some background.471MR. BETTS:Perhaps I'll let Mr. Moran answer that, then.472MR. MORAN:Mr. Chair, it's my suggestion that if Mr. Mondrow's client has a concern, then I would suggest we wait to see if that's actually the case, and in the event that is the case, then I would suggest that, perhaps, it would be for Direct Energy to suggest what Direct Energy believes is the appropriate approach to take, and then it would be for the Board to decide at that time.473I don't believe it's appropriate for you to advise or give an indication of what you might decide in the absence of an actual request.474MR. BETTS:Mr. Mondrow.475MR. MONDROW:Let me be clear, sir, and that's with respect not particularly helpful.476We have to make a decision about whether we believe there is a reasonable basis at law and in fact to request or urge you to consider excusing yourself. If you do so, whether (a), the hearing can continue without you on that issue, in isolation; and (b), if not, whether someone is available to replace you; and (c), even if there is someone available to replace you whether that's going to add 6 months to the hearing. A relevant consideration from my perspective, for us to make an internal determination about our degree of concern and whether in our own minds that degree of concern is high enough to warrant what might be significant disruption to the process. I just don't know if it will be, and that's why I raise the question.477MR. BETTS:Mr. Moran, I'm aware of some procedural alternatives that the Board has in these cases.478MR. MORAN:I was going to suggest, Mr. Chair, that depending on the position that Direct Energy takes, the Board may decide that it is or isn't appropriate for you to continue depending on what the position is and what your view is of that position and whatever flows from that, then, is an administrative issue for the Board to handle and I'm not sure it's appropriate for that to be discussed at this point and in this context.479The issue of bias, which is what this is, is one that either exists or it doesn't, and is a -- a party either has a position on it or it doesn't, and until a party has a position on it, I'm not sure that there's much that you can indicate to any party who wants to know what might you do if we want to object to you. That's essentially what you're being asked.480I think what you would do if you're asked to excuse yourself, is you would think about it, and then you would advise parties of your decision in due course and then the consequences of that decision would occur in due course as well.481MR. BETTS:Mr. Mondrow, if I -- maybe I can help with this. If it was my decision to withdraw from this hearing based on comments from participants, the Board does have mechanisms to continue with this hearing, and I would say that those -- among those mechanisms there would be at least some that would not create an appreciable delay.482I think the key thing for you is to determine whether that apprehension of bias exists, regardless of the consequences. If it exists then it's important enough for you to state. If it doesn't exist, then the rest is a non-issue.483So I think in due respect, and listening to Mr. Moran, I think he's correct in stating you must first decide whether you have that apprehension or not and then put it to the Board to deal with.484MR. MONDROW:More accurately, sir, with respect to Mr. Moran as well, I think what we have to decide is whether we wish to raise a concern in respect to that apprehension of bias, not whether or not we have one, and there is in my mind a distinction, which is why I was asking this information.485I appreciate the information you have been able to provide.486If I could follow up with one particular question, just because I don't know what the Board's process is, regardless of the work around mechanisms, because the Board's put out this notice, I'm assuming that we would address whether there's an apprehension of bias in respect of issue 8.3 to be precise on the list, and if there was, would ask you to consider withdrawing from participating on that issue.487I guess, just again generally to the Board perhaps through staff counsel, whether that approach would be an acceptable one to consider were you to conclude that the apprehension was real and require you to withdraw.488That is, would we be ask you go you to withdraw from issue 8.3, or from the case? My view is the former. I'd like to know whether that's not procedurally workable.489MR. DINGWALL:I think what Mr. Mondrow is saying though presumes that 8.3 is stand alone, that there's no linkage to 8.1 or 8.2.490MR. MONDROW:Let's say 8. Not much turns on whether it's 8.3 or 8. I appreciate that point, r.491MR. DINGWALL:And whether there's any linkage between issue 8 and the global O&M settlement and how that's addressed. I'm sorry, but they quite frankly do provide the appearance of all being linked.492MR. MONDROW:If that's the case, then obviously the question is moot. If any party feels that way then the question is moot, so I'll withdraw it. I think I have my effective answer. Thank you very much.493MR. BETTS:Are there any other questions that we can answer at this point?494Yes, Mr. Shepherd.495MR. SHEPHERD:Thank you, Mr. Chairman. I have a couple questions.496Tell me if these questions are indelicate. Is it fair to say that your interest in this is a large part of your financial wealth?497MR. BETTS:By the way, I was local municipal counsellor and mayor, so nothing is delicate in my mind. You are used to having this stuff out all of the time.498No, it is -- sorry, would you rephrase the question.499MR. SHEPHERD:Is the interest, your financial interest in Central Plumbing, is it a significant component of your personal wealth, your family's personal wealth?500MR. BETTS:Not on an income basis. It would be significant in terms of an asset.501MR. SHEPHERD:Then I guess our general comment would be -- see I'm not actually concerned that you have a bias in this case and I don't think anybody is, but I'm -- it would occur to me that if a significant portion of your wealth was in Enbridge shares, I would be very concerned, even though I still wouldn't feel that there was a bias. So I'm concerned with the precedent value of this, and for that reason, I would like to know what the consequences for this hearing are in more detail before we take a position.502If the consequences of you recusing yourself on the issue or other things is that we have rates in September, then I'm going to have to get instructions from our client.503Those are our submissions.504MR. BETTS:Let me undertake to try and provide that. I'm not sure that I can now, but I think it is a reasonable request, and it may, if the parties are willing, I will seek legal advice as to what the alternatives would be for myself and the Board, and try to circulate that to the parties.505Is there anything else that should be included in that that somebody has not heard yet?506Mr. Poch?507MR. POCH:Just a suggestion, Mr. Chairman. I notice that in all likelihood DSM matters are going to proceed near the front of this case, and my sense is the DSM are a large part of this proceeding that are severable from the package, since any resolution of the DSM issue doesn't affect the striking of rates by agreement of all parties, assuming the Board accepts that.508And so just a suggestion that, just in terms of the management, if you are required to recuse yourself from issue 8 or the broader related issues, it may be possible for you for at least sit in the initial phase while your replacement gets up to speed on the case and you could hear the DSM matter. And I just put that out, to make sure that -- that wouldn't raise any sensitivities amongst other parties.509MR. BETTS:Is there any comment with respect to that comment?510MR. DINGWALL:I don't know about Mr. Mondrow, but I don't see any linkage whatsoever between issues 8 and 7 and the DSM issues.511MR. BETTS:Mr. Mondrow.512MR. MONDROW:Nor do I, sir.513MR. BETTS:So that's certainly something we can consider if we end up following that road.514Any other comments or questions?515MR. MONDROW:I guess just -- and I apologize -- I'm trying to think this through as we go.516MR. BETTS:No problem. I appreciate it was dropped on everybody very quickly.517MR. MONDROW:One position we might well consider putting forward tomorrow is that our concerns in respect of apprehension of bias turn on the disposition of our motion, which will entail either expressly or implicitly some direction on the scope of the proceeding in respect of the issues raised by my friend Mr. Dingwall's clients how to handle the case, which leads me to conclude if we do make a submission raising a concern, the concern might hinge on the outcome of that motion, which in turn would dictate perhaps that some other issues might proceed until we get to that motion and the determination of the motion; following which, if you bought our view, you would either excuse yourself or not depending on the outcome of the motion. So perhaps in the context of your kind undertaking to provide whatever additional procedural information you can, you might turn your mind to that. And it seems to me that turning your mind to that entails considering whether you would have to remove yourself from the case in its entirety, or just from some portions of it as might be more particularly defined.518If the former, then a decision, if we raise a concern, would have to be made Monday before anything starts. If the latter, then we could wait until the outcome of the motion, if that's what we propose, to determine whether there remains an apprehension of bias in our view.519I hope that's clear enough. I'm trying to construct it as clearly as I can while I'm thinking it through.520MR. BETTS:I think it is. It may be difficult, I think, to accomplish what everyone would like, and I appreciate the position that parties are taking. I know you're looking for a way to make this nice and tidy and allow everything to happen. That's understandable.521I will have to confer with legal advisors as to whether we can provide you with that kind of a road map through the end of this or whether the question may be just more straightforward than that. We will do our best.522I think I understand where we're going, and we will do our best to help you with that, but other that we can only help you to the degree possible.523MR. MONDROW:Understood, and we will make a determination as quickly as we possibly can and certainly before the end of the day tomorrow.524MR. BETTS:Thank you.525Mr. Moran, is there any other comment you would like to make? I'm really looking for Board legal on this.526MR. MORAN:Not at the moment, Mr. Chair.527MR. BETTS:Any final comments or questions.528MR. DINGWALL:Simply, sir, just that it does appear that if there is to be a suggestion of a potential of bias to be raised, that seems to be just from the point of logic, the next step, if that were the case, then that should happen as quickly as possible, as that's what drives any of the uncertainties related with the balance of the process, and that's the contingent element.529I don't believe that contingency should be left until the determination of the motion. In fact, I think leaving that contingency until the determination of the motion is kind of -- and I don't like to put this in negative light -- leaving Mr. Mondrow's client with the free option to determine whether there's bias after they see what the decision is like.530MR. MONDROW:Let me be clear on the record for the benefit of my friends who may be interested. I'm trying to balance here, because I actually don't have instructions, and we don't have a determination, but it seems to me that one logical option is to conclude at that a reasonable apprehension of bias exists. To the extent that Mr. Bergsma and the substance of his evidence does in play, but not if the converse is true, which is precisely what our motion is to [inaudible].531So you may well get from us tomorrow a submission that concludes that and therefore concludes that if the motion is successful, and we then get to the issues, we don't have a problem with focusing on the ratepayer and tax, but if it's not, and we're wrong in our interpretation of the scope of the issue, then we do have a problem, because there are other considerations.532I'm not attempting to debate the merits of that or seeking your view on it, but I want Mr. Dingwall and others to be clear on why I raised the question in the first place.533MR. BETTS:Thank you.534MR. SHEPHERD:Mr. Chairman, presumably if Mr. Mondrow is correct, then the motion has to be heard by someone other than yourself. Because otherwise it's circular.535MR. MONDROW:The reason why I don't think that's necessarily true, sir, because in our view the panel has already made a determination on the scope of the issue, and that panel included you, and what we're seeking is confirmation of that.536So, you know, parties may different when we get to arguing the motion, depend on the outcome of this discussion, but that's the logic that I have been working with.537MR. BETTS:Anything further, ladies and gentlemen?538Thank you, I appreciate your input. The matter will not be decided today. We will decide it as promptly as possible.539Mr. Mondrow, can you tell me again when you're likely to have your comments in, or are you hoping to wait until we provide you with the undertaking?540MR. MONDROW:We're going to proceed with the information we have and I'm trying to set up a meeting for later this afternoon. To the extent that we have the information you've offered, that might help, and if not, we will have to work with that. I was hoping to have it so that we could provide our submission, as I said, in accord with your letter, no later than 4 p.m. tomorrow and earlier if possible.541MR. MORAN:Mr. Chair, just on the timing of the issue, the letter actually refers to a deadline at the end of today, not tomorrow.542With respect to Mr. Mondrow's request to file his client's position on this matter, I would suggest, given the start date of the hearing on Monday, that perhaps it would be appropriate to direct Direct Energy to file their position on this by noon tomorrow to give the Board time to contemplate its view prior to the hearing starting on Monday.543MR. BETTS:Short of that direction, is that possible Mr. Mondrow?544MR. MONDROW:I misread the notice. I apologize for that, and whether you direct us or not I'll undertake to do that.545MR. BETTS:Then the direction won't be required. Thank you. If you'll undertake to do that -- I would encourage you to communicate with Board legal and clarify any questions that they can help you with in terms of Board procedures anyway.546MR. MONDROW:I'll attempt to do that. Thank you, sir.547MR. BETTS:I think that certainly covers everything I needed to hear about number 4 for now, and we'll turn our minds then to item number 1 on the letter, and I have heard from Mr. DeRose that item number 2, I believe, is one that he would prefer to have deferred until next week.548Are there any objections to that, that it would be dealt with early in the week?549Then we will go to item number 1, at this point, in the letter. This -- and perhaps to give you some background, if it isn't clear there, the issue that came to the panel on this was that it appeared as though since these particular issues did not have rate impact, and since there was apparently a lack of evidence available for intervenors to act upon these particular issues, and since even if the Board were to rule on this, there's a bit of a doubt as to how quickly intervenors would be able to get the evidence they need to deal with this, all those things in mind we've raised those questions.550I can assure you that the Board has not taken any position on this. Our preference -- we are open to either forging ahead or considering a deferral, and at this point we have not made up our minds at all and are seeking your input on that. So I'd welcome comments from anybody.551Mr. Cass?552DISCUSSION ON BOARD LETTER - POINT 1:553MR. CASS:Thank you, Mr. Chairman.554In relation to point 1 of this letter, Mr. Chairman, most of what I have to say I did in fact, cover when we went through the settlement proposal and specifically the portion of the settlement proposal dealing with O&M issues.555As I said at the time, I spent a little more effort discussing the O&M portion of the settlement, because I think it does tie into this point number 1.556What I was trying to say and am trying to say is that the O&M settlement was a package, so to speak. In other words, in order to achieve the settlement that was achieved and to reduce the issues down as much as they were reduced, there were things that flowed out of that, including these policy issues that intervenors seek to pursue. So I think that's important for the Board to bear in mind on this point number 1, that all of this is tied together with the overall O&M settlement.557I don't think I can say too much more to help the Board on point 1, and looking specifically at the questions, the benefit of proceeding with these issues and so on, I'd be hard pressed to address that for the Board. It's other parties that seek to pursue them, and I'd have to leave it to them to address the benefit.558My point is simply to again emphasize that it is part of an overall O&M settlement, the fact that these issues flowed out the way they did. Anything that can be done by other parties to bring some clarity to what these issues are or define them further, I don't think the company would have any difficulty with at all, obviously.559That's number 1, if I may also say something to number 2, Mr. Chairman. I know it's being deferred to Monday, but this is relevant to Monday, and before I embark on this, I should make sure that the appropriate caveats are in place.560The company, does not, of course, and I think the settlement proposal makes this clear, accept where the intervenors propose to go with the information they're seeking, and this is on issue 2 in the Board's letter. This is relating to these efficiency gains that intervenors allege can -- or should be looked for in affiliates.561The company doesn't accept that as somewhere that this hearing should go. However, on the other hand, the company does want to create in everyone the understanding that it is doing its best and will continue doing its best to make disclosure. The company is very concerned about any perception that it is being difficult or stubborn on disclosure.562So even in advance of the note that came out from the Board yesterday, the company has been looking very carefully at what it can do, without in any way conceding the intervenors' issues, to make some form of disclosure. Unfortunately, it's a process that takes some time because of the number of parties involved. We had hoped to have had a letter to the Board, if I get my days straight, yesterday, and we didn't accomplish it.563We are still working towards that, if we can pull something together. It would be a proposal to bring forward some information in accordance with the Board's confidentiality guidelines. And if we could pull it together, we would hope to have a letter out tomorrow that then could perhaps be a discussion piece for Monday as to what the company would try to do.564Again, without in any way conceding anyone else's position, but just trying to get us somewhere past disclosure concerns. I can't pretend to say to the Board that the company is ever going to satisfy all the disclosure that intervenors might want, but at least to get a step down that road, if we can, under the confidentiality guidelines. So our objective is to get that letter out to everyone tomorrow, if we can pull something together on it, and then I think that will be something that everyone would have to talk about on Monday.565Thank you, sir.566MR. BETTS:Thank you for that information.567Can I receive submissions or comments from intervenors?568Yes, Mr. Shepherd.569MR. SHEPHERD:Thank you, Mr. Chairman. I have three submissions with respect to issue number 1.570First, I would like to agree with Mr. Cass that the settlement proposal was based on the notion that the policy issues would be debated in this hearing, and the monetary issues would be dealt with in a sort of a short form, as it were. So I'm disagreeing with him.571The second thing, however, is there's a practical implication to that and that is that the decisions this Board makes with respect to those policy issues will be built into the filing for next year's rate case and the result is that we won't have to have that debate based on an inconsistent filing next year. Those things will already be resolved. This is a substantial benefit in terms of dealing with next year.572The third specifically relates to my clients. You may have seen the evidence filed by the school boards with respect to the budgetary process of school boards, and the school boards, like many other customers, need as much visibility as possible about what future rates will be.573Right now, school boards are budgeting for 2004 rates, and to the extent that these issues -- the policy aspects of these are resolved and a deferral account is established in the next two months, that will be included in their budgets and will prevent them from having unexpected rate impacts several months later.574Those are my submissions.575MR. BETTS:Thank you.576Yes?577MR. DeROSE:Thank you, Mr. Chairman. As with Mr. Shepherd, I have three short points. The first is -- and, again, as Mr. Cass said, this settlement was a whole package, and in that regard, I would simply highlight to you at page 13 of the settlement agreement, and it's the paragraph that reads: "It is acknowledged and agreed that none of the provisions of the settlement proposal are severable if the Board does not, prior to the commencement of this hearing of the evidence in RP-2002-0133, accept the settlement proposal in its entirety." There is no settlement proposal. And that was a very important clause. I think it's fair to say for all of the parties, certainly for IGUA.578With that in mind, there's two additional points I would make. The first would be with respect to the rationale for separating the cost consequences from the policy issues, and secondly would be the consequences of not hearing the policy issues in this case or not allowing for that separation.579The rationale for separating the cost consequences from the policy issues in this case was an awareness and concern on the part, certainly of IGUA, I think again, it's fair to say on behalf of either all of parties or certainly most of them that parties should try and find a solution that allows for rates to be put in as early in the test year as possible.580And with this context in the background, there were still a number of issues that had significant policy ramifications and the separation of the cost consequences from the policy issues, I would submit, was a good faith effort to minimize the impact that rates would have on customers if the rates were not in place until, say, September or October or November.581And so there was a practical rationale for separating cost consequence from the policy issues, and it was to get just and reasonable rates in place at an early date without prejudicing intervenors' positions on the policy issues. And we would submit that the policy issues that we intend to address in this case have an impact, not only on this test year, but will have an impact on future test years as well.582So from our perspective, it's essential that we do it as soon as possible, and this is the test case to do it.583In terms of the consequences, and I think this goes to your 1(b), which is, is there harm that might result, and I don't know whether it's fair to say that it would be harmful, but the consequence of not allowing the separation of cost consequences for the purpose of interim rates and policy issues is that our position is if you can't hear the policy issues without the cost consequences, then we will argue the cost consequences in this hearing and our position will be that there is no settlement agreement on those issues, and that this will become a full cost of service hearing.584That's -- whether one calls it harm or not, I don't know whether that's fair to say, but it's certainly a consequence from IGUA's perspective if we are not permitted to separate the policy issues and argue those separate and apart from the cost consequences.585MR. BETTS:Thank you. Mr. Higgin.586MR. HIGGIN:Just to inform you that Mr. Janigan will be filing a written submission as per what schedule the Board sets for our submission.587MR. BETTS:Mr. Brett.588MR. BRETT:Mr. Chairman, panel, thank you. Most of what I would say has already been said. I would agree with the point made by all the speakers that the settlement conference really was a package, and our client certainly agreed to it in the expectation that we would be able to argue these policy issues, and I think it would make me more reluctant to agree to settlements in the future if they were separated.589I think there are two other things, and they've been touched on, but perhaps I could just add another point to it. We don't know yet what exactly the nature of the Enbridge next year's submission is going to be. At least I'm not clear in my mind whether it's going to be a full-fledged PBR case or something in between. Certainly if it was the former it would be a very complicated case all and by itself, and then if you were to lay on top of that or layer on this series of outsourcing issues and other policy issues, I think it would get very, very complicated.590The third, and I think in a sense now having disposed of through the settlement conference the -- all of the cost issues, it's not a bad time to just -- we have in a sense been given some time. The issue is fresh in everyone's mind. They know the issues. They haven't forgotten about them. Six months from now it will be like they're on another planet. They will have to go back and become familiar with them again, the way most lawyers work.591And finally, what concerns me is if we don't address these now the company -- let me step back half a step.592The Board was very clear in its recent Consumers case, 0032. It set out quite clearly the principles that it thought a utility had to follow when it wished to enter into outsourcing arrangements with affiliates or pseudoaffiliates.593What we have if we don't deal with this now is we get a longer period of time, a delay, a longer period during which the utility can continue to operate, perhaps, certainly I guess in our view, in ways that are inconsistent with the Board's decision in 0032. So I don't care for that very much. I'd like to try and get that straightened out as soon as possible, and get the utility back on the right track as far as compliance with the affiliate code and compliance with the Board's decision in 0032, which as we sit here, is the law.594So those are my submissions.595MR. BETTS:Thank you. Any further submissions.596MR. DeROSE:Sorry, Mr. Chairman, I'm not trying to double dip, but I've just been advised that CAC supports IGUA's position that was just provided.597MR. BETTS:Thank you.598Yes?599MR. DINGWALL:In terms of the policy road map, policy isn't just happening within this room, within this case; policy was also supposed to be happening with the implementation of the gas distribution access rule which has been put off for some time by virtue of the Enbridge appeal and by virtue of the Board's decision to then defer the filing of certain compliance reports associated with the implementation of the gas distribution access rule.600As a result of this, the development of the competitive market for energy and energy-related services in this province has frozen. It's my contention, therefore, that with all these external as well as internal developments taking place, that it's even more important to retain the policy elements within this case.601MR. BETTS:Thank you.602MS. DeMARCO:Mr. Chairman, we would endorse, certainly, the school's submissions in relation to what was required in the Board's 2001-0032 decision and how it impacts the issues that you're considering in issue number 1. If we could, without reiterating, elaborate however on first, the benefits and secondly the benefits proceeding immediately with those policy issues which appear to include matters decided in the last Board decision; and secondly, the harm.603First, in relation to the benefits, we are talking about an existing Board order that is in play, so there are both procedural benefits and integrity of the system benefits that are definitely forwarded by proceeding with these issues immediately, and ensuring that, Enbridge is required to deal with the information and the stipulations the Board has set out in that decision.604Secondly in terms of the harm, certainly both marketers and participants in those proceedings would face significant harm and prejudice in not seeing those issues dealt with in a timely manner. In effect, what we would be entering into is a groundhog day type scenario, where we in effect relive and relitigate the same issues, almost like two kicks at the can. We certainly believe there is significant harm in second-guessing Board decisions in this matter, and as a result they should be dealt with immediately.605MR. BETTS:Thank you.606Any other submissions or comments at this stage?607MR. CASS:Mr. Chairman, if I might just very briefly take an opportunity to respond to some of the things I think I'm hearing, I'm not sure whether my ears are behaving correctly or not.608First of all, with respect to what I thought I heard from Mr. Brett, I don't know where this takes us in relation to the issue we're now discussing arising from the Board's letter of March 19th, but I thought I heard Mr. Brett talking about issues of non-compliance with the affiliate code and non-compliance with previous decisions and so on. Suffice it to say the company takes great exception with those comments and completely disagrees with any submissions that Mr. Brett is making in that regard. I don't think that really is something that needs to be addressed for present purposes, but I didn't want to let that sit on the record without saying something in response.609And then just having Ms. DeMarco's comments, I'm a little at a loss also to understand what she was saying. She made some reference to an existing order, and I'm not clear what order she was referring to, because as far as I know, there hasn't been an order made or rising out of the decision that was issued in December, so I'm a little at a loss to understand where she was going and what her comments were intended to convey either, but as far as I can tell, I don't see that they have a lot of bearing on what you're asking parties to address at this point in time.610MR. BETTS:Thank you.611Any final submissions from parties on this?612Thank you, we appreciate those comments, and we will certainly give them due regard.613I think the last item to deal with on that letter is item number 3, and that's regarding the Board's interest -- I think generally just from a procedural point of view and to make the hearing more meaningful to participants as well as others that might refer to it in the future, attempt to keep like subjects grouped together, and specifically the DSM issues, which are certainly complicated enough that I for one would like to put on my DSM hat and leave it on until the matter was dealt with.614I appreciate that there's a practicality of the applicant trying to make a case the way that they would like to try and make it, and I respect that, but within that, and also the timing concerns of all of the participants in this, we wondered whether there was an opportunity to compress those into kind of a consecutive days, two, three, or four, whatever it takes.615And I wonder if parties have had a chance to consider that and whether there is any opportunity or whether we're going ahead on the schedule that we have.616Mr. Cass, would you like to kick it off?617DISCUSSION ON BOARD LETTER - POINT 3:618MR. CASS:Yes, thank you, Mr. Chairman.619The Board can correct me if I'm wrong, but it seems to me that perhaps there are two things operating in relation to the desire to have all the DSM issues grouped together. The first is the presence of EnTRAC sitting on the schedule in between some DSM issues, and I'll address that, and then second, there have been some scheduling difficulties in relation to DSM representatives and witnesses that the company has tried to accommodate in the schedule, and that has resulted in a number of revisions that I think all of us have seen, in case anybody was wondering about those revisions.620I can only go so far in addressing that. I think that the Board would need to hear from the people that do have the scheduling difficulties.621If I can come back to EnTRAC, again I spent a little bit of time on this issue in reviewing a settlement proposal to explain the reasons why in the settlement proposal the parties agreed that the issue be heard first, so to speak. Now, that first is subject to the fact that the Board had already said 2000 and 2001 DSM issues be heard first. I think the company would be prepared to go either way in the sense of move EnTRAC right to the front of the hearing and then do all of the DSM issues after that, or in the hope that perhaps we could get to EnTRAC at least by the end of next week, say Friday of next week, do all of DSM first and then get to EnTRAC.622I believe that the company would be prepared to look at either alternative, although -- again for the reasons I explained about EnTRAC perhaps the preference would be if it could just somehow be dealt with first and then get on with all of DSM.623So that's the EnTRAC point and then, again, I can't say too much more about the particular scheduling difficulties that arise in relation to DSM. The company has tried very hard to accommodate them as it issues revised schedules, but there are some difficulties that I guess other parties will have to address.624MR. BETTS:Mr. Moran.625MR. MORAN:Yes, Mr. Chair. I've had a chance to canvass this issue with the parties, and as Mr. Cass has indicated, Enbridge would certainly be prepared to put both of its DSM panels at the beginning of the hearing, and he has an alternative that's also satisfactory to Enbridge.626CME is represented by Mr. Rowan -- indicated that they wouldn't have any objection to that either. The only issue that arises is that Mr. Rowan isn't available from the afternoon of March 26th onwards, so if Enbridge put its DSM case in starting on the 24th and was cross-examined and so on, and if CME was the next panel to go up, it's quite likely that he could be accommodated before he becomes unavailable on the afternoon of March 26th.627He becomes available again later on, and you'll see it's further down the schedule, so I guess that would be the fall-back position if he couldn't be slotted in at the front end, we would end up having to accommodate him at the end.628I also spoke to Energy Probe, and right now their scheduled to speak to the 2000/2001 DSM issues on March 31st. And that has to do with the availability of their witness. He's not available any earlier than that, but they indicated that their witness would be prepared to speak to all the DSM issues starting on that date so that it could be done at one time.629Mr. Poch for his group of clients indicated that he probably has some flexibility about when he calls his panel, and they might be available on the 25th, 26th, 27th, depending on how this works out, but he can perhaps provide a bit more detail about that.630Overall, it looks like it's possible to put the DSM package up front, except for Energy Probe which would be March 31st. So there might be a slight gap there.631I also note that there is a motion issue and possibly even two motions, and it may be that if there is a gap, that that might be capable of being filled with a motions day as is also being contemplated.632MR. BETTS:Okay. Any other --633MR. POCH:Sorry. Sorry to interrupt, Mr. Chairman. I just thought I should fill in the one gap that was left there which was about the availability of our witness. Mr. Neme, he would be speaking to both the 2000-2001 issue and the 2003 issues as apparent from his evidence. It would be difficult for him to appear before the 27th, both because he has some conflicting commitments that -- it's possible he may be able to get them shifted, because -- he may be shifting them anyway because right now he's flat on his back with the flu. We're reasonably confident that by the 27th he would be up and available, and that's a realistic.634I would just ask that, if at all possible, because he has to make travel arrangements and he has to make arrangements to accommodate some -- care for a family member, that we just get some certainty and some notice on that. But the 27th could work for him, as could the 31st, which is where he is presently scheduled.635MR. BETTS:Thank you.636Any other specifics that we should be aware of at this point?637If there were a motion day set early in that schedule -- in fact, I'm not sure -- this certainly isn't the easy way to set a schedule when you're looking at so many people with so many different issues on their own schedules and trying to do it in a formal setting such as a hearing. I think what I'm tempted to do at this point -- we do have another comment.638MR. DeROSE:Sorry, Mr. Chairman. I'm a little bit slow on the get go there. Just to indicate that we would support the company's proposal that EnTRAC be done up front. I think in all fairness to the company, that was always an issue at the settlement ADR process, and it was clearly important to the company that EnTRAC be dealt with early, and if it appears that DSM would be taking the entire first week and that EnTRAC would not be coming up until the second week, I think in part that would not defeat the purpose but certainly would limit what the company was attempting food by putting EnTRAC up early. So we certainly would support the company's proposition that EnTRAC be done as early as possible, and perhaps it can be put before DSM and be the first issue.639I wouldn't anticipate it taking more than -- from our perspective, I don't think it would take more than a half a day or a day.640MR. BETTS:Do I understand correctly that the applicant would like to deal with the EnTRAC issue from start to finish, like right through to arguments? Is that correct?641MR. CASS:Yes, on the approval part of the issue, not so on the cost allocation part of the issue.642MR. MONDROW:I wonder if I could seek further clarification on that particular point.643MR. BETTS:Yes, Mr. Mondrow.644MR. MONDROW:Does the company envision that the early review of EnTRAC, the evidentiary review would or would not encompass the allocation issues? Are the allocation issues to be segregated for later argument or segregated for later review altogether?645MR. CASS:I think we can be open on that, Mr. Chairman, to Mr. Mondrow through you. It seems to be logical to get all of the evidence out of the way together, and it seems to me to be less confusing to do it that way with the thought in mind that argument and decision on cost allocation part of it doesn't need to be addressed until later on.646But, you know, it could be the other way if parties had a concern. It could be just evidence on the approval issue. It strikes me that's going to end up being more confusing. What I'm suggesting is all the evidence, but because only part of the issue is the part in respect of which an early decision is needed, then that's all that would need to be addressed immediately in argument and a possible decision if the Board agreed to proceed that way.647MR. BETTS:Mr. Higgin.648MR. HIGGIN:Yes, our client feels that we should keep the evidence with respect to costs and benefits and then the allocation methodology together, because if we separate those, then there will be -- need to replough the same ground again with respect to costs and benefits and then the allocation thereof to rate classes.649So our clients feel that that was most appropriate, to keep it all together.650MR. BETTS:Any further input on that?651MR. MONDROW:I just wonder, sir, listening to the comments, whether that means parties are really advocating review and decision on all aspects of EnTRAC together.652I guess I'm wondering -- perhaps we should have the discussion off-line, but it's not clear to me how the arguments would be put to the Board on EnTRAC without necessarily arguing the allocation point.653MR. BETTS:I think rather than getting a ruling from the panel at this point, I would encourage you to talk about this off-line. This hasn't gone exactly where I wanted it to, but obviously we're all learning more about the case we're about to deal with. That's great. Maybe it will overcome some impasses in the future.654What I'm going to do now is leave it up to all of you, because I've chickened out on this thing, and you know the Board's position on it. You know what we would like to do, but you all do have your own confinements, and I would ask, if possible, that you -- based on what's been discussed so far, see if you can accomplish those minor objectives of the panel as well as fulfilling your own objectives in doing so and then come back to us with a schedule, and we will accept whatever schedule that is.655And we have -- I think I can speak for my fellow panel member, I have not heard any of the suggestions that have been made that would be objectionable to us, so with that wide scope, please try to nail down a schedule for us.656I think that covers the letter. I was doing a little more thinking, if I may, Mr. Mondrow.657You asked me a question, it was a very good question, one I hadn't thought about, but I have given some thought now specifically about item number 4.658You asked me basically, how can I phrase it, how significant this was in terms of my personals assets and so on and I've thought about it a little more thoroughly, because I said it was sizeable and I guess sizeable is a relative term, but I'll try to be more specific.659It would represent somewhere in the order of 10 to 15 percent of my family's personal wealth, my wife and my personal wealth. I have zero income from it -- and my wife's income from it would be in the order of -- I'm really getting personal stuff here, but would be in the order of $40,000 a year, so that's the total package.660MR. MONDROW:Thank you very much.661MR. BETTS:I've learned it's better to put everything on the table, and you can deal with it after that.662Okay, now, we earlier talked a little bit about some information that has just come to Enbridge regarding the PGVA balance, and at this point I'm seeking -- if any of you can contribute at all I'm seeking your comments on that question, and again not so much about the numbers but the scenario that has been presented.663Has anyone got any ideas on how the Board might go forward on that particular scenario, appreciating there is no application for it at this point and that's what would start it all. The Board would not be prepared to move on anything on its own motion in that regard, so it would inevitably fall -- the onus would fall with the applicant to begin such a process.664Is there any comments that anyone would like to make at this point about that? You all have been involved with the mechanism, so you all are well informed. I'd be interested in your input.665Mr. Shepherd?666MR. SHEPHERD:Mr. Chairman, we're all I guess a little bit at a loss because we haven't had a chance to get instructions, but in the absence of instructions I'll forge ahead anyway.667It appears to me that this extreme example either demonstrates that the QRAM methodology is flawed, or it doesn't. If it does, we need to fix the methodology. If it doesn't, we should stick to what we have and follow it the way it's intended.668Fixing the methodology requires that evidence and analysis be put forth, perhaps in the context of this rate case, perhaps elsewhere, I don't know; and parties that are interested in the impact should have a chance to present their own evidence perhaps to cross-examine company's witnesses, et cetera. I don't think that's a process that could happen in a few days. I think it's something that would take a while.669As the Board may well be aware, no one is more paranoid about rate shocks than school boards, but having said that, it seems to us that we have to decide whether we're going to fix something that's broken or not, and if we are, we should fix it properly, not haphazardly.670Those are my submissions.671MR. BETTS:Thank you for those comments.672MS. DeMARCO:Mr. Chairman, I just want to note that Mr. Hamilton has stepped out for a moment, and he may have some comments on this.673And without instructions and in the same position Mr. Shepherd is in, I want to float that a suggestion of a generic hearing on system gas has come up in the past and it may be something for the Board to fully consider.674MR. BETTS:Any other comments?675Okay, if perhaps when Mr. Hamilton returns, if he does have a comment we certainly could entertain it at that time as well.676Ms. DeMarco, Mr. Dominy did remind me and I believe you would understand this, that the generic hearing would be a long, timely process and wouldn't really deal with the specifics of that need but may very well deal with the issues of methodology. They would have to be separated, the actual dollars and cents of an application versus the methodology.677Is that your understanding as well?678MS. DeMARCO:Just in terms of process, just to point out that there appears to be short-term process issues and long-term process issues. Most definitely the debate that we appear to be having today goes to a long-term process issue that may very well need to be addressed.679MR. BETTS:Okay. Thank you for that clarification.680Are there any other comments on that?681Then the panel at this point would like to adjourn and consider some of the things it's heard, and I would expect that we should be able to reconvene in 30 minutes. Let's make it quarter after the hour of 3, so we will make it 3:15 and we'll see if we have anything that we can tell you at that point.682So we will stand adjourned until 3:15.683--- Recess taken at 2:37 p.m.684--- On resuming at 3:18 p.m.685MR. BETTS:Thank you, everybody. Please be seated.686DECISION:687MR. BETTS:We were able to accomplish quite a bit over this last half hour, and I'll start off by saying that the Board will accept the settlement agreement for rate making purposes. That includes all aspects of the agreement, including those recommendations in series 7 and 8, so we accept it in its entirety.688With respect to the letter that the Board sent out earlier, and specifically item number 2, whether or not it's dealt with on Monday is probably less of an issue. It certainly will be dealt with as the occasion arises during the hearing. So when parties need to address the issue of evidence, if the indicated letter from Enbridge does not solve that for the participants, then we can deal with it at that point in time.689With respect to the schedule, I understand that there are efforts out there to try and nail down the schedule, and as I said earlier, we will put that in your hands, and we will simply be available as you propose for each one of the items, and we do thank you for your efforts in trying to help the panel with the scheduling issues.690With respect to the QRAM, the panel did listen to all of the comments and certainly we understand the way that the information was brought forward, which was on a very preliminary basis by Enbridge and as a heads-up, and we appreciate that. So the panel feels at this point it would appear to be impractical to assume that that information would be able to change the nature of the April 1st QRAM, but we will turn this back to the applicant, and basically indicate that it seems to us that it would be important to apply to the Board as soon as possible, assuming that the numbers that were indicated this morning prove to be real and true numbers so that this matter can be dealt with as promptly as possible and thereby mitigate potential impacts to consumers.691We do feel and have heard the concerns of the intervenors that if the application does involve deviation from the standard methodology that we would expect that the -- there should be more time available for intervenors to consider not only the evidence, but the impact of that deviation from the methodology, and please consider that when you're making your application.692And finally, I think the only loose end is the item number 4 with respect to the -- any concerns about apprehension of bias. I will await input from all of you or any of you on that matter and consider it, and in all likelihood, will announce my position on it on Monday morning.693Certainly, if I'm aware of a position prior to that, it would be circulated, but it would probably be Monday morning at that point.694Are there any questions that those statements cause in anyone's minds?695Mr. Cass, I see you reaching for the microphone there.696PROCEDURAL MATTERS:697MR. CASS:I hesitate, because I'm certainly not about to start another round of discussion, but I wanted to throw out the current state of our thinking on the schedule if the Board thinks that might be appropriate.698MR. BETTS:I've got the time if everybody else does.699MR. CASS:I have to say at the outset, it seems apparent to me, we can't meet absolutely everybody's issues around the schedule, so to the extent that I displease anyone, it's because it's not possible to please everyone.700What we're contemplating is perhaps, if the Board were to agree, fixing Thursday afternoon for EnTRAC. Then what that would mean is that the hearing would start as scheduled with the 2000/2001 DSM issues. The hearing would proceed from there into the remainder of the DSM issues.701I don't know what state -- I can't pretend to predict what state the DSM issues would be at by Thursday afternoon, but obviously as much as possible would be accomplished prior to then, but whatever happens, then there would be a break, if necessary, in DSM so that EnTRAC can start Thursday afternoon so that issue can be disposed of, and if it's still necessary to come back to DSM, then that would occur.702This seems to be the best that we've been able to come up with given all the input we've received.703MR. BETTS:Would anybody like to comment?704Mr. Poch.705MR. POCH:Mr. Chairman, I'm sure we can make that work.706I would like to suggest that given it's Mr. Rowan that's unavailable after -- that would be after the start of that EnTRAC until very late in the hearing, so presuming he's going to be the first intervenor to go ahead once the company -- assuming the company finishes its DSM evidence in the first part of the week, and given that I gather Mr. Reuben, the witness for Energy Probe, isn't available until March 31st anyway, the panel is going to have to start dealing with it again anyway. I would like to ask your indulgence that I advise Mr. Neme that he would be reached at some point on the 31st, rather than have him come for perhaps a few hours next week and have to go back. He travels from quite a distance.707With that indulgence, that would be most helpful.708MR. BETTS:Is there any objection to that?709Then that's fine.710MR. POCH:Thank you so much, sir.711MR. BETTS:Thank you.712Any other comments about the proposed schedule?713Thank you very much for doing that, and it does resolve some minor issues for us, and we look forward to continuing with that schedule.714I believe that concludes the issues for today and allows us -- oh, we do have another one.715MR. HAMILTON:Mr. Betts, Jim Hamilton, from Ontario Energy Savings Corp. I apologize for not being available for the discussion immediately preceding the break, but I have spoken with Mr. Shepherd and others with respect to his comments around QRAM and I am in full agreement with those comments.716MR. BETTS:Thank you and that does complete the record. Thank you very much.717If there is nothing else then -- perhaps, sorry, I won't let you get away that easily. Just so you can understand the schedule for the hearing, the panel would like to begin every day's hearing at 9:30. We would -- we are prepared to take a break in the morning and break for lunch as close to the noon hour as possible and we would try to allow an hour and a quarter to an hour and a half for lunch.718It's our hope then, and we tried this out in a recent hearing, to go through the afternoon without a break but finish no later than 4 p.m. We found it beneficial to actually sit in our offices for a half an hour and review what went on during the day, capture what was important and consider what happens for the next day, and that will be done. And that by stopping at four o'clock it would allow us that opportunity -- it allows you the opportunity to confer with other parties as well as get off onto the highway prior to the rush. But if that schedule is satisfactory -- and that is one of the reasons we would avoid the coffee break in the afternoon, but to anybody that's dealing with a witness panel, obviously if parties need a break, then the panel will be willing to hear that.719And furthermore, I'd like to point out that the panel is not confined to those hours. If for any reason it's important to the process to go longer or into the evening or whatever, we will be open-minded to any suggestion from any party.720So with that, I believe we're ready to adjourn, and we will see you all on Monday morning. Thank you.721--- Whereupon the hearing adjourned at 3:27 p.m.