Rep: OEB Doc: 12KP9 Rev: 0 ONTARIO ENERGY BOARD Volume: 2 7 FEBRUARY 2003 BEFORE: R. BETTS PRESIDING MEMBER P. SOMMERVILLE MEMBER B. SMITH MEMBER 1 RP-2002-0142 EB-2002-0420 TRANSCRIPT VOLUME #2 2 IN THE MATTER OF sections 70 and 74 of the Ontario Energy Board Act, 1998, S.O. 1998, c.15, Schedule B; AND IN THE MATTER OF Transitional Generation Licence EG-0333, issued to Ontario Power Generation Inc. AND IN THE MATTER OF an application by Ontario Power Generation Inc. to amend its licence obligations to provide a rebate to consumers under specified circumstances. 3 RP-2002-0142 EB-2002-0420 TRANSCRIPT VOLUME #2 4 7 FEBRUARY 2003 5 HEARING HELD AT TORONTO, ONTARIO 6 APPEARANCES 7 PAT MORAN Board Counsel LAURIE KLEIN Board Staff DAVID BROWN Board Staff PATRICIA JACKSON OPGI MICHAEL JANIGAN VECC JUDY KWIK VECC DAVID POCH GEC CIELAP OSEA MARK MATTSON Energy Probe ANDREW LOKAN Power Workers Union 8 TABLE OF CONTENTS 9 PRELIMINARY MATTERS: [22] ONTARIO POWER GENERATION INC. - PANEL 2 [34] EXAMINATION BY MS. JACKSON: [61] CROSS-EXAMINATION BY MR. JANIGAN: [141] CROSS-EXAMINATION BY MR. POCH: [220] CROSS-EXAMINATION BY MR. MATTSON: [536] PRELIMINARY MATTERS: [647] CROSS-EXAMINATION BY MR. MORAN: [664] QUESTIONS FROM THE BOARD: [974] PROCEDURAL MATTERS: [988] 10 EXHIBITS 11 EXHIBIT NO. F.1.1: RESPONSE TO UNDERTAKING F.1.1 [25] EXHIBIT NO. G.2.1: ESTIMATED IN-SERVICE CAPACITY AS AT MAY 12, 2001 [29] EXHIBIT NO. G.2.2: CRQ VALUES FOR BRUCE TRANSACTION [31] 12 UNDERTAKINGS 13 UNDERTAKING NO. F-2.1: TO SUPPLY CONFIRMATION OF U02 SUPPLIED BY CHEMICAL [151] UNDERTAKING NO. F-2.2: TO PROVIDE THE ACTUAL NUMBER OF EMPLOYEES ASSOCIATED WITH THE 15 FTES REFERRED TO [435] 14 --- Upon commencing at 9:32 a.m. 15 MR. BETTS: Good morning, everybody. Please be seated. 16 Welcome back, everybody. We're now entering the second day of our hearing in this matter. Perhaps what we can begin with is just the question of whether any procedural matters have popped up. I do see some new faces, so perhaps introductions of any parties that were not hear yesterday will aid the Board. 17 MS. JACKSON: Mr. Chair, I'm Patricia Jackson, I'm not Michael Penny. I'm hear today for OPG. I know, the physical resemblance is striking. 18 MR. BETTS: Thank you, Ms. Jackson. 19 MS. JACKSON: When you are ready, I have a few procedural matters outstanding from yesterday which I can deal with whenever the Board finds convenient. 20 MR. BETTS: Very well. I think everybody else was here yesterday so please proceed. 21 MS. JACKSON: Thank you, Mr. Chair. 22 PRELIMINARY MATTERS: 23 MS. JACKSON: Yesterday an undertaking was given with respect to those agreements that were listed on a letter to Mr. Poch shown as expired. I believe the question was which of them had expired before or after the market opening date. OPG has prepared an exhibit which, pursuant to the numbering system, we've identified as Exhibit F.1.1, which I believe has been distributed around the room and which sets out the dates of expiry of those agreements. So if the Board's content, I think we'll just mark it as that exhibit. I will have one question for the witnesses about it. 24 MR. BETTS: I guess I'll ask somebody. Have we got a copy of that up here? I'm always reluctant to ask those questions because usually I do and don't know it. 25 EXHIBIT NO. F.1.1: RESPONSE TO UNDERTAKING F.1.1 26 MS. JACKSON: Then perhaps while that's just being distributed to you, Mr. Chair, I should say that the Board had asked OPG to provide some information with respect to the estimated in-service capacity at the time of the Bruce transaction, as well as the derivation -- pardon me, the numbers for the CRQ values that are asked to be adjusted in this application, and two documents have been prepared in answer to those questions; one is entitled "Estimated in-service capacity as at May 12, 2001," and it shows, as the Board requested, tier 2 capacity and tier 1 capacity, that's a three-page document. The other is the CRQ values for the Bruce transaction, it's a one-page document, and it might perhaps be appropriate, if the Board is willing to assign those as exhibit numbers. 27 MR. BETTS: Thank you. 28 MR. MORAN: Mr. Chair, Exhibit G.2.1, entitled estimated in-service capacity as at May 12, 2001. 29 EXHIBIT NO. G.2.1: ESTIMATED IN-SERVICE CAPACITY AS AT MAY 12, 2001 30 MR. MORAN: And G.2.2, CRQ values for Bruce transaction, both filed by OPG. 31 EXHIBIT NO. G.2.2: CRQ VALUES FOR BRUCE TRANSACTION 32 MR. BETTS: Thank you very much. Please proceed. 33 MS. JACKSON: That completes the preliminary matters as far as OPG is concerned, Mr. Chair. And if the Board is content, we'll call the next panel of witnesses who are before you and who perhaps should first be sworn. 34 ONTARIO POWER GENERATION INC. - PANEL 2 35 MR. BETTS: Thank you. Mr. Sommerville will do the honours. 36 MR. SOMMERVILLE: Will you be affirmed or sworn? 37 MS. VELSHI: Affirmed. 38 R.VELSHI; Affirmed. 39 MR. SOMMERVILLE: State your name for the record, please. 40 MS. VELSHI: Rumina Velshi. 41 MR. SOMMERVILLE: How do you spell it? 42 MS. VELSHI: V-e-l-s-h-i. 43 MR. SOMMERVILLE: Will you swear or affirm? 44 MR. DRINKWATER: Swear. 45 D.DRINKWATER; Sworn. 46 MR. SOMMERVILLE: State your name for the record, please. 47 MR. DRINKWATER: David Drinkwater. 48 MR. SOMMERVILLE: Could you spell your last name. 49 MR. DRINKWATER: D-r-i-n-k-w-a-t-e-r. 50 MR. SOMMERVILLE: Mr. Singer, I think you've already been sworn. 51 J.SINGER; Previously sworn. 52 MR. SOMMERVILLE: Do you prefer to be affirmed or sworn? 53 MR. ANDERSON: Sworn. 54 C.ANDERSON; Sworn. 55 MR. SOMMERVILLE: State your name for the record, please. 56 MR. ANDERSON: Colin Anderson. 57 MR. SOMMERVILLE: Can you spell your last name. 58 MR. ANDERSON: A-n-d-e-r-s-o-n. 59 MR. SOMMERVILLE: Thank you. 60 MR. BETTS: Thank you, Mr. Sommerville. 61 EXAMINATION BY MS. JACKSON: 62 MS. JACKSON: Perhaps I could begin, then, by introducing the panel to the Board. 63 Ms. Velshi, I understand that you are currently the director of commercial activities of nuclear strategy and support at OPG. 64 MS. VELSHI: Yes, I am. 65 MS. JACKSON: That's a position as I understand it that you assumed in April of 2002, and before that you were director of the Bruce lease management office in which capacity you were responsible for the oversight, coordination and management of the obligations and interfaces associated with the Bruce transaction. 66 MS. VELSHI: Yes, I was. 67 MS. JACKSON: And your educational background is you have a BASc in civil engineering, a masters of nuclear engineering, and an MBA, all from the University of Toronto. 68 MS. VELSHI: Yes, I do. 69 MS. JACKSON: Thank you. Could you, in brief terms, describe for the Board the areas of evidence for which you will bear responsibility. 70 MS. VELSHI: The area I'll be covering is primarily the day-to-day operations and interfaces between OPG and Bruce Power as they pertain to the various arrangements between the two companies, and it will be mostly section 3D of the filed evidence. 71 MS. JACKSON: With respect to the interrogatories, Ms. Velshi, there are some that were initially answered by Mr. Patrick McNeil who is not here. As I understand it, between you and Mr. Drinkwater, you will bear responsibility for those interrogatories; is that correct? 72 MS. VELSHI: Yes, I will. 73 MS. JACKSON: And with that caveat, is the evidence for which you are responsible and the interrogatories which bear your name true? 74 MS. VELSHI: Yes, it is. 75 MS. JACKSON: Thank you. 76 Mr. Drinkwater, you are the executive vice-president of corporate development and legal affairs of OPG. 77 MR. DRINKWATER: That's correct. 78 MS. JACKSON: And I understand, sir, that prior to that you had a series of positions in relation to Bell Canada and before that were with Osler Hoskin. 79 MR. DRINKWATER: That's correct. 80 MS. JACKSON: Including as head of their corporate department and securities practice group. 81 MR. DRINKWATER: That's correct. 82 MS. JACKSON: You have a honours bachelor of business degree, a law degree and a masters of law from LSE. 83 MR. DRINKWATER: That's correct. 84 MS. JACKSON: Thank you. And could you briefly describe for the Board the areas of the evidence for which you will be responsible. 85 MR. DRINKWATER: I'll be responsible for the overall Bruce transaction itself and also the fact that the transaction meets the decontrol tests set out in their licence. 86 MS. JACKSON: And, Mr. Drinkwater, is the evidence for which you are responsible -- the prefiled evidence for which you are responsible and the interrogatories which bear your name or that of those Mr. McNeil true? 87 MR. DRINKWATER: Yes, it is. 88 MS. JACKSON: Yes. 89 Mr. Singer, you were introduced yesterday to the Board. Can I just ask you to tell them today, with respect to the issues that will be dealt with by this panel, what areas you will be responsible for. 90 MR. SINGER: I'll be covering the tier and quantity for decontrol purposes, the regulatory aspects of the application of the decontrol tests, and the conclusion. That material is found in sections 3E, 4A, B, C and D and 5. 91 MS. JACKSON: And, Mr. Singer, is the prefiled evidence for which you are responsible and the interrogatories which bear your name true? 92 MR. SINGER: Yes, they are. 93 MS. JACKSON: Thank you. 94 And, Mr. Anderson, you are senior advisor of regulatory affairs at OPG. 95 MR. ANDERSON: That's correct. 96 MS. JACKSON: And you have been in that position since May of 2001. 97 MR. ANDERSON: Yes. 98 MS. JACKSON: Before that, as I understand it, you have meld a number of engineering and consulting positions with Ontario Hydro, Westinghouse Electric and Deloitte Consulting. 99 MR. ANDERSON: That's correct. 100 MS. JACKSON: And you have an honours bachelor degree in applied science for chemical engineering and a masters of business administration. 101 MR. ANDERSON: Yes, I do. 102 MS. JACKSON: And could you advise the Board, please, what areas of the evidence you will be responsible for. 103 MR. ANDERSON: My evidence describes the Bruce Power ring fence design and implementation. It's found at tabs 8A and 8B of OPG's prefiled evidence. 104 MS. JACKSON: And is the prefiled evidence for which you are responsible and the interrogatories which bear your name true? 105 MR. ANDERSON: Yes. 106 MS. JACKSON: Thank you. 107 I have just three areas of preliminary examination, if that's agreeable, Mr. Chair. 108 MR. BETTS: Please. 109 MS. JACKSON: First of all, to you, Mr. Drinkwater, yesterday there was some discussion with respect to OPG's commitment to the ring fence that was -- that has been described in the evidence and the question of whether or not it was necessary or desirable to make that a mandatory term of the OPG licence. Could you comment on that, sir. 110 MR. DRINKWATER: I could, counsel. 111 Well, first let me reaffirm the commitment that was made yesterday by my colleagues with respect to -- 112 MS. JACKSON: Mr. Drinkwater, could I ask you to speak a little more into the microphone. 113 MR. DRINKWATER: I was told not to speak too close to it, but obviously not close enough. 114 MR. BETTS: They should come with instructions, really. 115 MR. DRINKWATER: I just first of all would like to reaffirm the commitment my colleagues expressed yesterday to the Board about the ring fence. The issue that seemed to take some of the discussion and questioning was the question of voluntary versus mandatory. And having reflected on that, I'd just like to advise that from OPG's perspective it would be acceptable for this to become a mandatory commitment and be included in our licence to deal with that particular issue. 116 MS. JACKSON: Thank you. 117 Ms. Velshi, can I ask you to turn to Exhibit F.1.1 which was filed this morning. Of the contracts that are listed there, the following ones appear to have expired after market opening; first of all, the one shown as -- at tab 12, the contract for differences for a vacuum building outage. It's shown as expiring in May of 2002, and as we know market opening was May 1st, can you tell us with a little more precision when that contract expired. 118 MS. VELSHI: It expired on May the 7th of 2002. 119 MS. JACKSON: Thank you. The other contracts that are shown as expiring after market opening are number 16, drive fuel storage containers and tool letter agreement; number 31, interim pension administration agreement; number 33, interim investment of pension assets letter agreement; number 45, indemnity letter agreement with respect to miscellaneous items; and on the second page at the end, number 57, letter agreement and transfer of pension assets. 120 Could you advise the Board, Ms. Velshi, if any of those agreements involve the provision of services or the exchange of information between OPG and Bruce Power. 121 MS. VELSHI: Of these agreements that you just went through, there are two that are services agreement; numbers 31 and 33. And both those were transitional services that OPG was providing to Bruce Power until Bruce Power's pension asset got transferred to them. So when that happened, which is agreement number 57, agreements 31 and 33 expired. And the nature of those two service agreements was -- the first one was around administering pension benefits for the Bruce Power employees, and the second one, number 33, was around managing their pension assets until it got transferred. So the kind of information that would have flowed from the conducting of those services would have been related to the pension side of it and HR-type information. 122 MS. JACKSON: And not operations. 123 MS. VELSHI: No operation information. 124 MS. JACKSON: Thank you. 125 Mr. Singer, my last question is for you and it would be helpful for -- with respect to that question to have regard to Exhibit D.8, that's the Competition Bureau evidence that was the subject of examination yesterday. Could I ask you to turn that up and I'd like to look in particular at page 3 of that exhibit. 126 MR. SINGER: I have it before me. 127 MS. JACKSON: Just give the Board a moment to have it before them. Thank you. 128 Now, there was some discussion yesterday, Mr. Singer, with respect to the factors that are listed on page 3, and these are factors or indicators in a market that would make it easier to enter into and enforce an agreement, and there was some discussion yesterday of which of those factors are present in the market in which OPG is operating. Could you briefly run through with the Board which of those factors are not present. 129 MR. SINGER: Certainly. 130 The second row on the table, "no fringe of small sellers," in fact in the Ontario electricity market there is a fringe of small sellers made up of excess production by customer-owned generation and excess production by other small generators, mostly renewables. The next row, "transparency of price output cost customers and other supply terms," there's a five-minute spot market price that's published by the IMO and there are aggregate output figures. But other than that, the information on cost customers and other supply terms in both the spot market and in the bilateral contract market, as was discussed yesterday, that information is not transparent. 131 Turning to the next page, 4, "stability of underlying costs." The costs of electricity generation vary considerably depending on what types of generation are on the margin, and as fuel costs, underlying fuel costs vary considerably. Firms have similar costs and size. I think one of the issues that's been discussed throughout this is this is a market that is characterised by one firm that is dominant and a number of smaller firms. "Stable or predictable demand," toward the middle of that same page. Again, demand for electricity is historically very much dependent on whether and, to a lesser extent, economic conditions, and neither of those are particularly stable or predictable in the short term. 132 And then finally at the bottom of page, "history of cooperation," that's not a characteristic of this market as we are transitioning from a monopoly to a more competitive market. Similarly, "history of explicit attempts at cartelisation in the market" on the next page. Again, not a future of this market. 133 The next one is the third row on page 5, "repeated or multiple market contact." Here again in the spot market people offer in their generation on an hourly basis, but it's into an auction-based market, it's not customer-specific contact. On the bilateral side there are contacts but they tend to be very private contacts, not known to other competitors. 134 Finally, "meeting the competition clauses," generally not a feature of bilateral electricity contracts. Neither are most favoured nation clauses. 135 And the last one on that page, "price leadership and advance notice of price changes." In the spot market the price is published after the fact and there's not any advance notice. And again in the bilateral contract market prices tend to be very closely guarded. 136 MS. JACKSON: Thank you, Mr. Singer. Thank you, panel members. 137 Members of the Board, those are my question and the panel is available for cross-examination. 138 MR. BETTS: Thank you very much. 139 Then we will extend the opportunity now to intervenors for cross-examination, and I believe Mr. Janigan you will be up first. 140 MR. JANIGAN: Yes, thank you, Mr. Chairman. 141 CROSS-EXAMINATION BY MR. JANIGAN: 142 MR. JANIGAN: In your evidence, and I don't think you need to turn it up, but section 3C at page 22, lines 13 to 16, OPG states that "Chemical is the exclusive supplier of fuel to Bruce and to the generation station and also supplies the fuel for OPG's Darlington and Pickering nuclear stations. In edition to its 15 per cent partnership interest in Bruce Power, Chemical will manage all fuel services required by the Bruce nuclear generation station. 143 How much of OPG's fuel service requirement does Chemical provide? 144 MR. DRINKWATER: It's not an area that I have exact figures on so I'll -- I think we should undertake to confirm to you. But I think it's around 30 to 40 per cent. UO2 is something that then gets made into the final fuel pellet by another supplier. But I think it's in the range of 30 to 40 per cent. 145 MR. JANIGAN: So that 60 per cent is supplied by suppliers other than Chemical. 146 MR. DRINKWATER: Yes, that is my understanding, but I'd like to confirm that. 147 MR. JANIGAN: Okay. Can I have an undertaking on that, please. 148 MR. MORAN: Mr. Chair, undertaking F2.2 -- F2.1, sorry, to supply confirmation of fuel supplied by Chemical. 149 MR. DRINKWATER: It's the UO2 as opposed to the fuel. We actually get the fuel from a third party, not Chemical. They are involved in the fabrication process. 150 MR. JANIGAN: That's the UO2 I was referring to. 151 UNDERTAKING NO. F-2.1: TO SUPPLY CONFIRMATION OF U02 SUPPLIED BY CHEMICAL 152 MR. JANIGAN: Now, are there contract terms in place between Chemical and OPG and Chemical and Bruce Power that addresses the times of nuclear fuel supply and service constraint? 153 MR. DRINKWATER: Can you repeat that question, sir. 154 MR. JANIGAN: Yes. Are there contract terms that are in place between Chemical and OPG and Chemical and Bruce Power that addresses the times of nuclear fuel supply and service constraint? 155 MR. DRINKWATER: I'm not sure of the nature of the question in a sense. I mean we would order this months in advance and usually have a year's inventory on hand. But we do that with our other supplier, we don't deal with -- we don't deal with Chemical directly on that. We deal with GE, in fact, is our supplier. 156 MR. JANIGAN: I guess the question arises in the possibility that Chemical might give priority to Bruce Power in terms of -- in times where there would be a constraint on the delivery of nuclear fuel. 157 MR. DRINKWATER: Well, I don't think that's something that's practical to happen given the inventory we typically carry and the fact that we basically rely on GE as our fuel supplier. 158 MR. JANIGAN: So there's no specific terms in place with respect to -- 159 MR. DRINKWATER: I'm not familiar with that. I mean, it's not something that's been in issue given the length and extent of the inventory we carry. 160 MR. JANIGAN: Now, in testimony and I believe in evidence that's been outlined -- sorry, do you want to complete that? 161 MR. DRINKWATER: Sorry. No, it's okay. 162 MR. JANIGAN: In testimony and I believe in evidence as well that's been given, some of the means by which OPG would be maintaining enforcement of the ring fencing proposal, and that includes the code of conduct, the culture of compliance, the internal audit, and, I believe it was mentioned by Mr. Singer yesterday as well, the activities of the Market Surveillance Panel. Have I got that correct? 163 MR. DRINKWATER: I think you have. 164 MR. JANIGAN: Now, what will be the monitoring activities of the Market Surveillance Panel that they will conduct to ensure OPG's compliance with the ring fencing proposal, to your knowledge? 165 MR. SINGER: The Market Surveillance Panel is charged with looking at the performance of the Ontario market both to examine issues of the abuse of market power and also to look at structural imperfections in the market having to do with design and rules. To the extent that the concern underlying the ring fence is that OPG would gain operational information about Bruce Power, that would then be used to impact its activities in the market, its bidding and offering strategy, its availability. That would be the kind of information that the Market Surveillance Panel routinely examines. 166 MR. JANIGAN: So it would be a part of their routine function that they would, they might -- or would probably discover any incidents where there was a breach of the terms of the ring fencing proposal? 167 MR. SINGER: One of their main missions is to look at the performance of the market from the perspective of abuse of market power. To the extent that that causes them to use the market assessment unit in the IMO to routinely look at the patterns of offers by different generators, you would think that if there was all of a sudden an anomalous set of offers from a particular generator, that that would be investigated. In fact it has been investigated and the IMO Market Surveillance Panel concluded in their most recent report that there was no evidence of abuse of market power in the Ontario market. 168 MR. JANIGAN: Has the Market Surveillance Panel reviewed your ring fencing proposal? 169 MR. SINGER: Not that I'm aware of. 170 MR. JANIGAN: Were they -- they weren't asked to review it, I take it, by OPG or Bruce Power. 171 MR. SINGER: No. I can't speak for Bruce Power. But by OPG, certainly. 172 MS. JACKSON: Is there some reason why they would not have reviewed this in advance of your application here? 173 MR. SINGER: The Market Surveillance Panel, as I indicated, is charged with looking at the performance of the market both for issues of market power and for structural imperfections. The ring fence is an OPG internal set of controls that augment preexisting controls so as to prevent the flow of information. So if you look at it kind of the iterative process, if you do the ring fence that is additional protection to avoid the kinds of behaviour that would get to the Market Surveillance Panel. The Market Surveillance Panel, in other words, looks at conducts in the market, not the precursors to conduct, such as the ring fence. 174 MR. JANIGAN: Now, in response to IPPSO interrogatory number 28, which I believe is Exhibit I.1. There's a November 20th 2001 memo from Ms. Rumina Velshi to Mr. Brian Armstrong with regard to a process for requesting OPG documents. And it describes a process by which Bruce Power staff are to request information from OPG for a Kinetrics intellectual property rather than directly from Kinetrics. 175 Can you tell me, what type of service does Kinetrics provide to OPG? 176 MR. DRINKWATER: That was the original Ontario Hydro Technologies so it was a combination of research on areas plus aspects like non-destructive engineering, examination, rather, testing. So they have various labs, and chemistry. So they would do a variety of support to work on analyzing steam-generators or fuel channels. They also do environmental work, so they might come out and test environmental issues on a site. 177 MR. JANIGAN: Does Kinetrics provide the same type of service to Bruce Power as it does to OPG? 178 MR. DRINKWATER: I don't think so. I know they were trying to get work from Bruce Power, but I don't believe they do. If they do it's not very much work at all. I don't know, Rumina, whether you would know the answer to that. 179 MS. VELSHI: I don't know. I know in some of the work that we do for Bruce Power we subcontract some of the work to Kinetrics. 180 MR. JANIGAN: Is there any concern about communications between Kinetrics and Bruce Power in terms of maintaining confidentiality information? 181 MS. VELSHI: No, none whatsoever. 182 MR. JANIGAN: Not in the terms of what they're being retained to provide. 183 MS. VELSHI: That's correct. 184 MR. JANIGAN: Okay. Now, in response to GEC/CIELAP/OSEA's interrogatory number 5. 185 MS. JACKSON: Sorry, could you give us the number, Mr. Janigan. 186 MR. JANIGAN: I.6.5. OPG included a copy of the draft minutes of July 25th, 2001, the Bruce Lease Management Liaison Committee, Meeting 1, Item 2. And in the draft minutes the following concerns are indicated by Bruce Power. 187 MS. JACKSON: Mr. Janigan, I wonder if you could give us all a moment just to turn this up. 188 MR. JANIGAN: Sure, no problem. 189 MS. JACKSON: Thank you. 190 MR. JANIGAN: And the concerns included validation testing results and unavailability of TSS for Bruce outage could extend the outage duration by six days, and there was some other concerns raised related to inspection services provided to Bruce Power by OPG in that memo. Could you tell me what TSS is? 191 MS. VELSHI: TSS is a tool. It stands for -- it's one of the tools used for fuel channel inspections. Terminal Solid Solubility is what TSS stands for. It's one of the tools that OPG is developing and we have an obligation to provide that tool to Bruce Power, and it's to be used for fuel channel inspections. 192 MR. JANIGAN: Now, could the availability of inspection services to Bruce Power create some opportunities for OPG to gain the system, as it were? 193 MS. VELSHI: If this tool wasn't available, we do have alternatives for doing so. But as you see in here, not having that tool, they would suffer some pain. Your question on whether would OPG gain from that, I think Mr. Drinkwater will answer. 194 MR. DRINKWATER: Well, we wouldn't do that. It would be a breach of our contract with Bruce Power if we did that. 195 MR. JANIGAN: And your contract addresses the times when OPG's ability to provide inspection service is constrained? 196 MR. DRINKWATER: It's a commercial contract and we're expected to perform to a commercial standard, and if not then we have responsibility to them for that. 197 MR. JANIGAN: So the method for ensuring this wouldn't take place would be effectively a potential rights of Bruce Power to act pursuant to the contract. 198 MR. DRINKWATER: That would be one of them. But we wouldn't want to have to go there. We would work with them to try to find some alternative. For many of these things, these are enhancement tools but there are ways of doing the work today, so it would still get done, in my view. 199 MR. JANIGAN: Now, can we assume that a large percentage of OPG and Bruce Power staff, including the nuclear operators, are previous colleagues from Ontario Hydro days and, until the Bruce transaction, had regular work-related contact with each other? 200 MS. VELSHI: That would be fair. 201 MR. JANIGAN: Is it not likely that this staff, including the nuclear operators, come in contact with each other in social and professional settings at the current time? 202 MS. VELSHI: That would be fair, yes. 203 MR. JANIGAN: Now, considering the common work interests between the staff of the nuclear stations, what aspects of the ring fence mechanism gives you comfort that the tacit exchange of information is not occurring. 204 MR. DRINKWATER: I think you've got to go back to the time that the transaction closed and leading up to the ring fence to get the answer to that. 205 We recognised that we would have to educate people to the fact that this was going to be a different relationship. And if you go into the material that we filed as interrogatories, we started out with e-mails from our CEO, in fact, explaining to people, reinforcing the view that a new relationship was going to exist post-closing and colleagues of today were going to be competitors of tomorrow, and that they had to understand and respect the confidentiality of information between the two organisations. 206 We followed that up with training, as Mr. Charlebois indicated yesterday, of the various support groups in nuclear that were going to deal with Bruce Power on a day-to-day basis. We then followed that up with a document on exchange of information to explain and further reinforce the importance of differentiating between information that could flow and information that could not flow. This was done in the context of a code of conduct that would already ensure, in my view, that information that came in from any third party, Bruce Power or anyone else, would have to be protected within OPG and not used other than for the purpose for which it was given to us. 207 In my view, the ring fence is the final barrier in a fairly extensive set of provisions and education that have been going on since the transaction closed to ensure this doesn't happen. 208 MR. JANIGAN: Just one final question. I'm curious why OPG arranged its local telephony services through Bruce Power. Was there some reason for that? 209 MS. VELSHI: There is one single infrastructure on the Bruce site that -- switching systems and so on that provides telephone services to everyone on the site, and so it was really -- it was the most efficient way of doing so. 210 MR. JANIGAN: And I understand there's a complaint in to the CRTC from Bruce Municipal Telephone Services regarding that. 211 MS. VELSHI: Yes, there is. 212 MR. JANIGAN: Thank you, Mr. Chair. Those are all my questions for this panel. I plan to return on Monday to ask some questions of Mr. Hunter. With your permission, I'll withdraw. 213 MR. BETTS: Permission granted. 214 I assume -- I don't know how we will proceed here. Is Mr. Hunter around if we got to that point? 215 MS. JACKSON: I'm afraid, Mr. Chair, he is not. But based on all the estimates, we don't think that's a live possibility. But we had alerted Board staff that Mr. Hunter, who resides in Ottawa, will not be available today. 216 MR. BETTS: Okay. We will release you, then. 217 MR. JANIGAN: Thank you, Mr. Chair. 218 MR. BETTS: Mr. Poch. 219 MR. POCH: Thank you, Mr. Chair. 220 CROSS-EXAMINATION BY MR. POCH: 221 MR. POCH: Mr. Singer, just this morning in examination in chief, you went over the table that was provided by the Competition Bureau, page 3 of -- 222 MR. BETTS: Mr. Poch, could I just interrupt, and I'm sorry to do that to you, just getting under way, but as Mr. Janigan is preparing to leave the room, I just wanted to pass on some information to he and all of you at this stage that at this point the panel has decided that we will be -- we will be considering oral arguments to follow the evidentiary portion of the hearing. We're not quite certain when that will be. And if perhaps there is any problem with that that anyone would like to submit to us for our consideration, perhaps that could be done this afternoon. But apart from that, that is the direction we're heading at this point. So just a forewarning, Mr. Janigan, that we're -- we would like to move right along to that stage when we're completed. Thank you. 223 Sorry for the interruption, Mr. Poch. Please continue. 224 MR. POCH: No problem at all, Mr. Chair. 225 MR. BETTS: Oh, did I see -- Mr. Mattson? 226 MR. MATTSON: Thank you, Mr. Chairman. Just before Mr. Janigan leaves I'd like him to hear this as well. If we're going to have oral argument, which my client has no concerns with, I'd just ask that the Board consider providing the intervenors at least an hour or two after the argument in chief by the proponent in this application so we have an opportunity to consider their argument which may be changing as we hear the evidence from the original application; there may be some concessions. It would be important to us that we have some time to understand exactly what their argument will be, if it's oral. That's the only thing we lose by having an oral argument. 227 MS. JACKSON: I can say, Mr. Chair, from the applicant's perspective that would not be a problem. 228 MR. BETTS: Thank you. That seems like a reasonable request. We will certainly take that under consideration when we establish the schedule. 229 And now I think we can let Mr. Janigan leave and we can let Mr. Poch continue. And sorry for the interruption. 230 MR. POCH: Panel, I was just going to ask you to turn up Exhibit D.8 which is the Competition Bureau prefiled evidence, and turn to page 3. 231 MR. SINGER: I think we're ready, Mr. Poch. 232 MR. POCH: Mr. Singer, do you recall yesterday I took you through some of these, and a number of these items were in fact the situation in Ontario, and of course I skipped over some that weren't as flattering to my position. And your counsel took you through some of those today and I just wanted to touch on those. 233 In fact, if you turn to page 4, I think there were four of them on that page you identified and let's just look at those. 234 The first was "stability of underlying costs." If you look at the third column there, the explanation of what the concern is there, the Competition Bureau's concern is, which reads "when costs fluctuate significantly it may be difficult to determine whether a price increase represents a deviation from an understanding or is a response to change in costs." Do you agree with me that that's referring to costs changing to the generators in this situation, to the competing suppliers? 235 MR. SINGER: I do. Before I answer I want to correct one thing you said. You took Mr. Boland through this yesterday, not myself, but I'm happy to discuss this with you. 236 MR. POCH: Sure. 237 MR. SINGER: Yes. That refers to changes in costs. And when I looked at this, the changes in costs that I think are most obvious are the changes in fuel supply costs. And because different generators don't know where their competitors are in terms of fuel supply -- have they locked into long-term contracts, are they subject to spot market pricing -- you can't necessarily assume that a change in costs that coincides with the change in, for example, natural gas prices reflects the fact that that generator is subject to fluctuating natural gas prices or could be -- the generator could be completely immune from those fluctuations because of long-term contract. 238 MR. POCH: It's fairly typical in your industry for large, especially baseload suppliers to have long-term contracts for fuel, is the not? 239 MR. SINGER: I would think what is more typical is that a large baseload generator would have a portfolio of fuel supply options. Generally a big percentage would be subject to long-term contract and some would be subject to fluctuation, because other than nuclear generators and some very large hydro generators, even baseload coal plants do manoeuver. 240 MR. POCH: Right. But you're not picking up fuel on the day-to-day spot market for that day's transactions by any means. 241 MR. DRINKWATER: We could be. 242 MR. POCH: You could be. But there's quite a lag in the delivery process. Coal, for example, you've got a chain of supply that has to -- things have to work their way through that chain. 243 MR. SINGER: The coal plants have a supply at site. But the way the economics work is that you price them based on the marginal supply which could be something that's not yet present but certainly you've committed to, and so it factors into your generation cost estimates. 244 MR. DRINKWATER: But gas plants could take it on the day. 245 MR. POCH: Yes. Now, in the middle of the page there's one you noted which was "stable or predictable demand" and the concern expressed by the Competition Bureau witnesses was that a -- an increase in quantity sold by one firm may not be at the expense of the competitor but as a result of demand expansion -- if the size of the pie keeps changing day to day in the market then you -- it won't be as obvious what's going on. But that's not the situation, at least an unknown changing size of the pie isn't a concern here. Everybody knows on an hour-by-hour basis what the load and peak of the system is; correct? 246 MR. SINGER: People know that; that information is published. But I think the point that at least I was thinking about, for the marginal unit, to the extent that the marginal unit has extra capacity, that capacity is used depending on where demand is. So I could be the marginal unit today using a very small percentage of my capacity and tomorrow if demand expands, I can still be the marginal unit using a large percentage of my capacity. So the fact is that the marginal unit can swing with demand even though overall demand is known fairly well. 247 MR. POCH: Sure. You're answering all these questions by looking at the manoeuverable units that OPG -- or by reference to manoeuverable units which OPG has and which we've discussed already that some of the -- at least one of the owners of Bruce Power is developing. I take it that's your understanding of these concerns, that the -- if any gaming happens, if any deviation -- in this case, if any deviation from an agreement between the parties occurred, it would be -- the mechanism would be how those other units are bid into the market; is that fair? 248 MR. SINGER: Actually, I think that's not correct. When my counsel asked me these questions this morning, I went through both the spot market and the contract market. And when I was giving these answers and thinking about this, I was thinking about both the contract market and the spot market. Your question seemed to direct me more to the spot market, but I'm happy to talk about the contract market. 249 MR. POCH: That's fine. But you're not thinking about the baseload plants, you're thinking about the more marginal plants. 250 MR. SINGER: The market design is such that the infra-marginal units at any time are a price take. So from an economic perspective the thing that tends to be most relevant is the behaviour of the marginal units. 251 MR. POCH: Now, discussing history of cooperation, you felt that wasn't an issue here. The first descriptor there is "participation in exchanges of information." Is that not the very concern that has us here today? 252 MR. SINGER: I think one of the concerns that's been provided in terms of commentary by intervenors is the exchange of information. 253 MR. POCH: There is an exchange of information that's going on, hence, the ring fence. 254 MS. JACKSON: I think -- could you allow the witness to finish his answer, please, Mr. Poch. 255 MR. POCH: Sure. 256 MR. SINGER: The exchange of information is that necessitated by the aspects of nuclear power and in particular Candu reactors in Ontario that require us to have certain service agreements that have been discussed at some length now. 257 MR. POCH: Certainly there is a -- in the brief history we have, there is a history of cooperation between OPG and Bruce Power. I'm not saying a history of collusion here, I'm saying a history of cooperation. You don't deny that. 258 MR. SINGER: There is cooperation between OPG and Bruce Power pursuant to the agreements that they have entered into. But I thought this, when I read it, was talking more generally about the industry. And I don't think you could accurately say that the Ontario electricity market has been characterised by a history of cooperation. I know you have been involved in many of the proceedings that non-utility generators have had, and those didn't seem to me to be cooperative proceedings. 259 MR. POCH: Fair enough. I'm looking more narrowly at the question of the relationship between OPG and Bruce Power, and I think you would agree with me there, there is a history of cooperation. 260 MR. DRINKWATER: Mr. Poch, just to supplement Mr. Singer's answer. I think it's actually better to characterise it as a collection of service-type arrangements. I don't see it as a cooperation arrangement. They do our laundry. We inspect their fuel channels. It's a commercial service-type relationship. I don't think you'd properly characterise it as cooperation in the sense that you would like to portray it. 261 If we had our druthers, I wouldn't -- I'd have my laundry done somewhere else, they would have their fuel channels done somewhere else. But I think the reality of the situation is that there are things that we do for them and things that they do for us. But it's on a commercial basis. 262 MR. POCH: We'll examine the possibilities for each of you getting your own laundry done separately a little later. But just on that, I understood that you do have an agreement to, for example, cooperate on regulatory concerns. 263 MR. DRINKWATER: We do. 264 MR. POCH: And I assume both organisations belong to a number of trade associations together, the Candu Owners Group, for example? 265 MR. DRINKWATER: Yes. They are members of -- I believe they are members of COG. And we would belong to the World Association of Nuclear Operators, WANO, and others. 266 MR. POCH: At one time in Ontario, I don't know if it still exists, there was -- there was a group that met that involved the various operators of Candu plants and developers, including ACL as it was, it went by the acronym SOATIC S-O-A-T-I-C. 267 MR. DRINKWATER: I'm not familiar with that one, Mr. Poch. 268 MR. POCH: Fine. Let's move on. 269 Panel, could you turn up interrogatory I.15.5. You see this was an interrogatory answered by Mr. Singer and Mr. Drinkwater. And in that answer you made the distinction that the test in the licence is not could independent behaviour be facilitated but do the arrangements facilitate it. 270 I just want to ask you to ensure we're on the same page. If they, in your words, do facilitate such behaviour but none has yet occurred, would you agree that that would be unacceptable under the test, as you interpret it? 271 MR. SINGER: Could I ask you to give me a little bit more context in terms of how do we know they facilitate it if it hasn't occurred. That's where I'm struggling. 272 MR. POCH: Well, if we -- if the Board, after examining the various arrangements, concludes that these arrangements make it too easy for these organisations to cooperate to the disadvantage of the vibrancy of the market, would you agree that the arrangements then fail the test? We don't have to find evidence that these organisations are, in fact, cooperating to the -- to disadvantage the marketplace. 273 MR. SINGER: I think the test is stated in the licence, and if the Board, looking at the totality of the circumstances, including things like the ring fence, were to conclude that the agreements do facilitate interdependent behaviour, yes, I would agree that we've failed the test. But I don't think that's the case here. 274 MR. POCH: So this distinction between "could" and "do", I'm not quite sure what you were getting at. We agree that it's not a question of having to find that interdependence in fact is occurring, interdependent behaviour in fact is occurring, it's enough that the arrangements do facilitate it. I think you've just agreed with me there and I'm just wondering what distinction you were drawing -- correct me if I'm wrong, and if you could just elaborate. What's the distinction you were trying to draw between "could" and "do"? 275 MR. SINGER: What I -- in your previous question, and the reason why I asked for some clarification was that I think that absent a finding that there actually was interdependent behaviour, it would be hard to say that these things do facilitate it. But in your -- as you framed it, let's say the Board had -- didn't find any exercise of interdependent behaviour but found that the arrangements facilitate it, in that scenario I think under the terms of the licence that that would be a violation of the test. It doesn't say which, you know, "which cause interdependent behaviour", it says "which facilitates it", and that's the terms we submitted this application under. 276 MR. POCH: Sure. 277 MR. SINGER: But just so I can finish. The distinction here is that just because there exist arrangements which create the possibility of facilitating interdependence, that's not enough. And what we're getting at is when you look at the totality of the circumstances in this application and the reasons for cooperative behaviour in the nuclear context, I think that you can fairly say that they don't facilitate interdependent behaviour. So what this answer is aimed at is the mere possibility that they could isn't a violation of the test; it's an actual finding that they facilitate interdependence. 278 MR. POCH: Mr. Singer, you agree with me that the nature of this test, the nature of this application was always foreseen as a forward-looking test. 279 MR. SINGER: Well, when I look at the language of the licence it says, "there exists any ongoing arrangements." That's both forward- and backward-looking. 280 MR. POCH: Now, in answering this question, you've answered it a couple of times, you've stressed that it's the totality of the evidence including the ring fence which you -- I think I'm paraphrasing you fairly -- should allay any concern about the possibility of interdependent behaviour. You're nodding in agreement. 281 MR. SINGER: Well, I thought that was a preamble rather than a question. 282 MR. POCH: I'm just noting for the record that the -- 283 MR. SINGER: I indicated that I was understanding your preamble. 284 MR. POCH: Can I take it as agreement that I've paraphrased you fairly, first of all. 285 MR. SINGER: Well, I think that it is the totality of the circumstances. We have engaged Lawson Hunter to supply a definition of interdependence, and we think that is a definition that is appropriate in these circumstances and would hope that the Board would agree with that. 286 MR. POCH: Well, my question to you, then, is: Absent the ring fence, would you -- do you take it that the arrangements are adequate to meet the licence test? Is that OPG's position? 287 MR. SINGER: I guess, as we've spent some time over the past day discussing, the ring fence is the culmination of a series of protections and directives from the senior management that Mr. Drinkwater has just discussed, so I think it was our view that those were sufficient, independent of the ring fence, and the ring fence then ties them together, formalises them, strengthens them. But you could, and we certainly believe that without the ring fence there was protections against the facilitation of interdependent behaviour. 288 MR. POCH: And my apologies, I should have been clear. What I'm trying to distinguish is -- if I was to reword that question: Absent the ring fence and these other protections, the code of conduct, reliance on the goodwill of your employees and so on, absent that self-censoring, if I may, would these arrangements facilitate -- would these arrangements pass or fail the licence test? 289 MR. DRINKWATER: I'm not sure you can even go that far, Mr. Poch, in the sense that you've got to presume that something could happen with this. It seems to me that the Market Surveillance Panel has been very rigorous in dealing with the marketplace, and I think even if you didn't have all of these procedures in place there would be an open issue as to whether or not there was an interdependence. Because it's not at all clear to me that the information they might get or we might get, as a practical matter, could be turned into something that was anti-competitive. But we're not going to debate that. We've put in place all these various procedures to try and make sure that that's beyond doubt. 290 MR. POCH: Can we agree that these arrangements which involve sharing information, as acknowledged by the company, in and of themselves would be a problem but for these safeguards, the internal ones you've spoken of and now you're adding the potential safeguard of the market surveillance mechanism; and that it's these safeguards that give us comfort. 291 MR. DRINKWATER: I agree the safeguards give you comfort. But I guess the point I was trying to make is that exchange of confidential information, in my view, is a factor of many aspects of life. Law firms get confidential information; doctors, regulators, governments. And people know and have different procedures in place to deal with this. So the fact that there could be information flowing doesn't presume that there's a problem. The issue is have you done enough to make sure that it's beyond doubt. 292 MR. POCH: Mr. Drinkwater, I certainly agree with you that information exchange is a concern in a number of situations in the economy and we have, as you and I know as lawyers, serious constraints on us in that regard. And that's why I'm asking you: But for the constraints at play here, those internal ones Mr. Singer just described and you've described, and the market surveillance, you'd agree that we have a situation where arrangements, because of the very nature of sharing information, would -- we'd have a problem -- you'd have a problem meeting these licence conditions because clearly these arrangements -- 293 MR. DRINKWATER: We clearly have a much more significant issue to deal with, Mr. Poch. I agree with that. 294 MR. POCH: All right. Fair enough. 295 Now, could you turn up interrogatory I.6.7. Do you see, Mr. Anderson, you've answered this interrogatory, but the attachment is in fact a guide for exchange of information between OPG and Bruce Power that was authored by Mr. Drinkwater, or at least -- 296 MR. DRINKWATER: The cover letter was from me, Mr. Poch. 297 MR. POCH: Yes, fair enough. So I take it both of you are familiar with this document and its intent? 298 MR. DRINKWATER: Yes, I'm generally familiar with it. I haven't read it for a little while, but I certainly read it at the time it was being prepared. 299 MR. POCH: That's fine. If you turn to the attached document behind your cover letter, Mr. Drinkwater, on the first page, in the fourth paragraph, there is a listing of some specifics -- specific types of information of concern; Bruce Power pricing, station operating constraints, outage schedule information, and return to service times. And I just wanted to take you to those one at a time and ask you what -- why that kind of information is strategic and needs to be safeguarded from others in your organisation. 300 MR. DRINKWATER: Well, I think it's fairly self-explanatory. I mean the -- if this information got to the Energy Markets people, it might be something that they could use to inappropriately bid OPG plan. 301 MR. POCH: Okay. And it also cautions with respect to technical- and safety-related information. I'm just looking for the cite there. Yes, I think it's in the next paragraph. Can you tell me what the concern is there? 302 MR. DRINKWATER: Well, I may not be looking at the -- it says "exercise caution when changing technical- and safety-related information." But it goes on to say "as a general rule, information needed to public or workers' safety in emergency, etc. should be exchanged." So it's really just trying to make sure people think about whether or not this is something that should be exchanged. But I think obviously from the point of view of issues such as safety, the environment, that's information that has a different standard and different sorts of criteria around it as opposed to just information about outages. 303 MR. POCH: It's not -- the technical or safety information per se you're concerned about sharing, it's just that in the course of the proper exchange of that, they should exercise caution with respect to these other strategic categories of information; is that fair? 304 MR. DRINKWATER: Well, I think there's some information that you can say fairly clearly is commercially sensitive information of Bruce Power. There's other information that might start to mix between the two. It might be information that could indicate, for example, that there might have to be an outage, but in addition it might have attached to it a safety component. So you have to kind of balance both of those aspects of it and you might, for example, have to raise the safety issue within OPG in a different line of course than would otherwise be the case if it was just straight pricing-related information. 305 MR. POCH: So there were mixed -- examples of mixed information packets, if you will; there's a need to exchange them for reasons of safety but there are also some elements of information that are strategic and inevitably these things aren't always distinct. Is that the point? 306 MR. DRINKWATER: That can certainly been the case in some instances, Mr. Poch. 307 MR. POCH: Now, if you turn to interrogatory 7.10, there is a further set of examples. 308 Mr. Anderson, I see your name on this response. 309 MR. ANDERSON: That's correct. 310 MR. POCH: There you'll see a list that includes planned outage information, forced outage information, condition reports, inspection reports, life maintenance documentation, and so on, and fueling information. These are identified here as information that could be relevant to market operations. Were these offered by -- it says they are "examples and include". Could you give me any more -- other obvious examples that come to mind? 311 MR. ANDERSON: Certainly in answering the interrogatory those were the examples that came to mind and that were most relevant to the service agreements that exist between the two entities. 312 MR. POCH: Okay. 313 MR. ANDERSON: Sorry. To the service agreements that exist between Bruce Power and OPG. 314 MR. POCH: Now, could you turn to 6.23. Here the question is about British Power having knowledge of OPG's schedule and so on. Mr. Singer, you responded part way through the paragraph that "BPI is not expected to have any specific knowledge of OPG station availability beyond that available to other market participants." 315 Is there -- in any of these service agreements where we have exchanges of information, sharing of resources, scheduling of resources, is there some asymmetry that I've missed here? Wouldn't Bruce Power often have the same kind of information about OPG's schedules that OPG gleans from -- about Bruce Power when you're trying to schedule, for example, we were discussing yesterday this specialised SLAR tools? 316 MR. SINGER: No. The situation is such that Bruce Power will give OPG a window under which it needs certain services performed. OPG will then look at the availability of the personnel and material necessary to perform those services and either accept the window or propose alternative windows. That gives Bruce Power no information about OPG's availability in terms of its nuclear generation. All it does is tell Bruce Power that a window that was acceptable to OPG has -- a window proposed by Bruce Power is acceptable to OPG. Bruce Power doesn't know if that's because OPG's units are not on outage during that time or it's because there's sufficient material and personnel of a specific type to accommodate both the outages. 317 Yesterday Mr. Charlebois gave an example of that in the SLAR context where he said that, with enough advance notice, outages could be accommodated at multiple nuclear facilities on SLARing. So there's a huge asymmetry. 318 MR. DRINKWATER: There's another important point just on that, Mr. Singer, if I could, and that is that the inspection services division does work for parties in addition to OPG and Bruce Power, so that even if you could get that information, you wouldn't know whether the reason someone wasn't available was because they were on OPG or some other outage, for example, Hydro Quebec. 319 MR. POCH: So earlier today when you were talking about the possibility of OPG, in some fashion, manipulating the availability of services, particularly in the case where you've got an unplanned outage or the need to extend an outage, you, Mr. Drinkwater, said, well, we couldn't do that to advantage ourselves because we have a contract, a commercial contract, that you had to honour to provide these services to Bruce Power in a business-like fashion. But -- is that right, first of all? 320 MR. DRINKWATER: Well, I don't think so, Mr. Poch. I think what you were suggesting to me earlier was that we would delay the availability of a certain tool, the TSS tool, and thereby impact our outage. That's a different issue from scheduling the availability of our resources. We do make a commitment, and I'm not that familiar with the detail, but I know there is a commitment in the Inspection Services contracts that we have to have a certain level of staff available at all times for Bruce Power, to give them priority. 321 MR. POCH: Well, you just told me a minute ago, Mr. Singer and Mr. Drinkwater, that you may say that window doesn't work for us, we can't accommodate you, and they wouldn't know why. They wouldn't know if it was because you had committed personnel to other projects; that the tool isn't used in your own shop; you're servicing a third party; what have you. Have I understood that correctly? 322 MR. SINGER: Yes, you did. 323 MR. POCH: So then Bruce Power is not in a particularly good example to police this contract commitment, are they? They don't have that information. 324 MR. SINGER: Well, you're talking about a hypothetical situation, and Bruce Power either believes that the service that they'd like at a particular time is unavailable for commercially reasonable reasons, or they don't. And if they have doubts about that, there are mechanisms under which they can raise that. But, as Mr. Charlebois discussed yesterday, most of this stuff happens very far in advance and so while there's at least a theoretical possibility that Bruce Power could come to OPG and say, we'd like the following services, here's a window in which we'd like them performed, and OPG would respond, we don't have the material or personnel available during that window, that's what it is, a theoretical possibility. 325 MR. DRINKWATER: The way that I think, and there may be others, but one way that occurs to me, Mr. Poch, that Bruce Power can monitor this, and I admit it's after the fact, but they would know what outages, after the fact, were done; and if OPG had said something and it turned out that the outage was different or the information was different, Bruce Power would be able to determine some of that after the fact and call us to count. 326 MR. POCH: They won't know if you've serviced a third party with your crew, will they? 327 MR. DRINKWATER: No, but they would notice, after the fact, on the OPG outages. 328 MR. POCH: If it wasn't because of an outage you were taking, if it was because you said your crew was otherwise committed to other work, they wouldn't know that, would they? 329 MR. DRINKWATER: They could certainly find out after he fact from Hydro Quebec whether they'd had an outage. 330 MR. POCH: And if you had simply said your human resources were otherwise committed, they couldn't confirm that, could they? 331 MR. DRINKWATER: I think they could, after the fact. 332 MR. POCH: If these types of services were -- first of all, some of your services were initially joint have been pushed out to a third party, as it were; that's the nuclear Inspection Services; correct? 333 MR. DRINKWATER: That's correct. Sorry, the safety analysis group -- 334 MR. POCH: Safety analysis. 335 MR. DRINKWATER: -- was sold to a third party in last year, and we're currently undergoing a process to look at the sale of the Inspection Services Division which may well be sold before the end of this year to a third party. 336 MR. POCH: And I take it that that -- to the extent these services are contracted out to somebody that's arm's length to both corporations, there's even less concern about a potential abuse; is that fair? 337 MR. DRINKWATER: Yes. 338 MR. POCH: All right. We'll come back to that in a minute, and you can maybe think about in the interim what of these sensitive -- we'll perhaps try to itemise which of these agreements are sensitive in terms of the exchange of information. That's where I'm going to go next. And then maybe we can look at which of those are being pushed out. 339 Could you just first turn up interrogatory 15.39. On page 2, the last item there indicates that -- this is discussing the NOSS agreement. The agreement is that Bruce has to deliver to OPG by September 15th of the preceding year its work programme, its expected work programme; is that right? 340 MS. VELSHI: That is correct. 341 MR. POCH: And that would imply outages in many cases. 342 MS. VELSHI: Not specific outage timing but more generically that would need support during our outages. 343 MR. POCH: But for it to be a work plan, and to fulfil the purposes of this agreement, I take it there would be some estimated time lines attached to it. 344 MS. VELSHI: It would be very general. It would be spring of next year we would expect some support during our outages. 345 MR. POCH: I see. And this is a document that I take it is not distributed to the market as a whole. 346 MS. VELSHI: That is correct. 347 MR. POCH: And could you turn to 15.39A, just over the page. In the discussion of schedule -- on the second page, the second last item, the discussion of schedule A-1(e), this is with respect to the -- if I've got this right, the -- the reactor fuel channel maintenance services agreement; is that correct? 348 MS. VELSHI: Yes, it is. 349 MR. POCH: I see there you're going to get two peaks ahead, one at 18 months and one at -- an update at six months; is that correct? 350 MS. VELSHI: There's a rolling 18-month window, that's correct, that gets updated every six months. 351 MR. POCH: Every six months. And similarly in appendix B, the reference just below that, there's a requirement that you provide OPG with information that will allow it to define specific work activities, work sequencing, work requirements, and durations. Is that the same commitment, or is that with respect to a separate item? 352 MS. VELSHI: It's separate -- it's different in that for inspection services, and just to give you an example for the NOSS services that we talked about previously, the level of support that's required from OPG during an outage is quite small; it's maybe 3 FTEs worth of support. Whereas under inspection services, a lot of resources need to be brought in to carry out the outage, so there is a lot more advance notice that's required and more specifics and exactly what kind of work is required to be done and what window. 353 MR. SINGER: And that, I think, is the point that we were trying to make before, Mr. Poch. They give us windows not their specific outage information. So that says we would need this type of services around this time, not the plant will go down on a specific day and come up on another day. 354 MR. POCH: At some point in time, though, obviously, as you get nearer you get updated and you get more refined information about when the outage is because that's when you have to provide those services; correct? 355 MR. SINGER: More refined information about the windows to the extent that they need an outage -- a 60-day outage and they need us at some portion. We know when they need our services; we don't know that it's a 60-day outage versus a 58-day outage. They won't know when it starts; we don't know when it ends, as a general matter. 356 MR. POCH: You know when you're needed for that outage. 357 MS. VELSHI: That is correct. 358 MR. ANDERSON: Mr. Poch, I think it's also important to understand that all this information that's exchanged is within the Bruce Power ring fence and does not get distributed. 359 MR. POCH: Yes, I understand that. I understand there's a agreement with respect to steam generators as well. 360 MS. VELSHI: Steam generator inspection and special inspection and maintenance, yes, there is. 361 MR. POCH: And again there would be a notice provision there? 362 MS. VELSHI: Yes, very similar to the fuel channel inspection one. 363 MR. POCH: All right. So then if we turn to interrogatory 16 -- 1.6.17. 364 MR. MORAN: Sorry, Mr. Poch, what was the reference again? 365 MR. POCH: 1 -- sorry, I.6.17. There we asked you to identify agreements that convey schedule or cost information, and you list the NOSS, the reactor fuel channel inspection, the steam generator inspection, both of which we've talked about, and the -- 366 MS. JACKSON: I think, Mr. Poch, you're linking up the bullet points with the wrong set of questions -- set of contracts. Small A in the question does not refer to costs, and the section that you're referring to and the answer under capital A. 367 MR. POCH: Yes, fair enough. I took it that A has to do with knowledge about production capability or scheduling. 368 MS. JACKSON: I think that's right. 369 MR. POCH: Yes. 370 MS. JACKSON: That's the way I'm reading it, but I don't think that's what your question said. 371 MR. POCH: Oh, I might have misspoken myself. Thank you. 372 Those three listed in A that I just spoke a moment ago are agreements which you have indicated in this answer would involve conveying this knowledge about schedule to a greater level of detail than was publicly available, and similarly those same three would give information about power production scheduling, and it is only the deferral agreement which you say there may be some cost elements. 373 Now, remind me, is the deferral agreement still in force? 374 MS. VELSHI: Yes, it is, until -- well, until -- for the next couple of weeks. 375 MR. DRINKWATER: As part of the restructuring of the control of Bruce Power, it's been agreed that the deferral agreement will be terminated because the outstanding 225 million is to be paid at closing. 376 MR. POCH: Well, that's great. So we're really down to three agreements that are central to our discussion of strategic information; is that fair? 377 MS. VELSHI: As far as the service agreements, that is fair. 378 MR. POCH: All right. And you say -- you qualified that. Can you expand on that qualification, as far as the service agreements? 379 MS. VELSHI: There is another arrangement between OPG and Bruce Power, the contract for differences for forced outages, and under that we do have audit rights. So if that arrangement ever gets invoked, we would have the right to go and verify that that, indeed, has been appropriately initiated. And in carrying out that auditing, we would have access to outage information as well. 380 MR. POCH: Right. And that would be at that point historical outage information and production information that could give you some insight as to how they're managing the business. 381 MS. VELSHI: Yes. But it would also give us an indication on how long the outage could last. 382 MR. POCH: That particular outage. 383 MS. VELSHI: Yes. 384 MR. POCH: All right. Now, if we were -- if these three agreements -- well, let's talk about this. You've indicated a moment ago that the safety analysis has already been outsourced and that you're moving in that direction with respect to Inspection Services; is that correct? 385 MS. VELSHI: That's correct. 386 MR. POCH: Now, both of those are as teams of capabilities that are at play in all three of these services agreements; is that fair? 387 MS. VELSHI: I'm sorry, could you repeat that question, Mr. Poch. 388 MR. POCH: Well, I'm just reacting to the fact that the titles of those two services, safety analysis and inspection, don't correspond precisely with the three -- the titles of the services agreements I'm focusing on here, and I just want to understand the relationship. 389 MS. VELSHI: Okay. The NOSS transitional technical support and services agreement, an element of that is nuclear safety analysis, but there is more to it than nuclear safety analysis. As far as the other two agreements which we jointly call the inspection services, it covers all of those two agreements. So the services that we're contemplating divesting would cover everything under those two agreements. 390 MR. POCH: Right. So those are going to be shortly, hopefully, out and some of NOSS is already out with the safety analysis. What's the balance of NOSS, and who's responsible for that? What kind of work is involved there that is not captured by these Nuclear Safety Analysis folks or your inspection group? 391 MS. VELSHI: It's engineering services. And to give you an idea, before, when we had Nuclear Safety Analysis as well, we had about 75 FTE worth of support under the NOSS services agreement last year. It used to be much higher in the first year following decontrol of Bruce. This year we expect that to be about 15 FTEs worth of support. 392 MR. POCH: Fifteen, 1-5? 393 MS. VELSHI: 1-5, yes. 394 MR. POCH: And again that's already been moved off -- 395 MS. VELSHI: No, that's the balance remaining within OPG. About 60 FTEs has been moved out. Of about 15 FTEs about 3 FTEs would be supporting an outage; the balance would be ongoing projects. 396 MR. POCH: So we're down to -- if you're successful with moving your inspection group out, which is the intent, and I take it you have agreement from Bruce to cooperate in trying to do that? 397 MR. DRINKWATER: That's correct. 398 MR. POCH: Mr. Drinkwater is confirming. You would have, at this point -- understandably it could fluctuate -- roughly 15 full-time equivalent people left that are really the core of the issue here; is that fair? 399 MR. DRINKWATER: I'm not sure that even those 15 are the core of the issue, Mr. Poch, in the sense, and maybe Ms. Velshi can give more specifics. But the people in the NOSS group tend to be a step removed from understanding timing around outages, et cetera. 400 MS. VELSHI: Yes. As mentioned earlier, it's the 3 FTEs worth of support that's provided during an outage that would have the kind of information that this particular interrogatories are asking about. 401 MR. POCH: All right. 402 MS. VELSHI: So it's a very small group of people. 403 MR. POCH: Okay. It's not, I take it, then, an insurmountable -- it wouldn't be an insurmountable condition if this Board said, complete the outsourcing of inspection and spin off the group that those 3 or 15 employees reside in and deal with them at arm's length? 404 MR. DRINKWATER: I think it would, actually. We have every intention to try and outsource ISD, and I'm hopeful that it will happen. But it's going to be dependent on what sort of arrangement we can structure with a third party. We're not going to give it away. It's going to have to be a transaction for fair value. We're going to have to have a reasonable service agreement. There are a variety of things that would need to be put in place. 405 If we didn't get to a reasonable commercial arrangement, our Board wouldn't approve the divestiture of ISD and we would have to continue to rely on the ring fence and the other provisions that we have put in place. To impose it as a condition would impose a very difficult position on OPG. 406 MR. POCH: All right. I understand that you can't be certain that you're going to find a successful -- you're going to successfully outsource the ISD. But I was just asking with respect to the remaining group of 15 or 3, depending how we categorise it, that aren't in ISD. 407 MR. DRINKWATER: One of the difficulties, I think, for them, Mr. Poch, is that these are people that have a degree of engineering expertise that would be used in other parts of OPG. It's a relatively small group of people. It's not clear to me that there would be a home for them necessarily. And so again that given that their exposure to the actual outage aspects and the level of detail they have is that much more removed, it just seems to me that it would be a difficult thing to do. 408 MR. POCH: Well, can you turn up interrogatory number 15.4. 409 MR. BETTS: Mr. Poch, I don't want to break your train of questioning, but could you help us find an opportunity to take a short break. And I'll just ask you when an appropriate time would be for that. 410 MR. POCH: Well, I was just going to look at this question of what the longer term game plan is for outsourcing, and so I think this is a convenient time to break and I can organise that perhaps a little more precisely. 411 MR. BETTS: Then we will adjourn for 20 minutes. We'll be back, let's say, at 20 past 11 and we will come back to Mr. Poch at that point. Thank you very much. 412 --- Recess taken at 11:03 p.m. 413 --- On resuming at 11:25 a.m. 414 MR. BETTS: Once again, thank you, Mr. Poch, for allowing us to interrupt your questioning there, and please continue. 415 MR. POCH: I enjoyed the coffee, sir, and thank you. 416 Ms. Velshi, I just wanted to ask you, you mentioned three full-time equivalents you actually are involved in FTE at the time of an outage and then a larger group, perhaps 15 FTE, that are doing engineering services that aren't in your -- in either the safety group or the inspection group. 417 MS. VELSHI: I'm sorry, just want to -- it's 12. It's 15 altogether but 3 -- 418 MR. POCH: Okay, 3 plus 12. You've used the phrase FTE, by which I assume it's somewhat larger number that are actually involved -- live people. 419 MS. VELSHI: That's correct. 420 MR. POCH: Can you give me a sense of the multiplier there? 421 MS. VELSHI: I'm sorry, I don't have that with me. 422 MR. POCH: Are we perhaps twice as many but not likely as five times at many? 423 MS. VELSHI: I'd be guessing. I don't know. 424 MR. POCH: Is that something that can be dug out for another day? 425 MS. VELSHI: Yes, it could. 426 MR. POCH: Perhaps we could just get an undertaking -- 427 MS. VELSHI: That the three you're particularly interested in? All 15? 428 MR. POCH: If you could break out the 3 and the 12 separately, it's both that I'm interested in. 429 MS. VELSHI: Okay. 430 MR. POCH: And approximate numbers are certainly adequate for my purposes. 431 MR. BETTS: Mr. Moran. 432 MR. MORAN: That would be undertaking F-2.2. 433 MR. POCH: To provide the actual number of employees associated with the 15 FTEs referred to. 434 MR. BETTS: Thank you. 435 UNDERTAKING NO. F-2.2: TO PROVIDE THE ACTUAL NUMBER OF EMPLOYEES ASSOCIATED WITH THE 15 FTES REFERRED TO 436 MR. POCH: Okay. With respect to this intention to move these services, these shared services out, you've responded -- I have two references here which I'll refer to. Interrogatory 15.4, I don't think you need to turn it up, it just indicates that there are these -- "transitional agreements were entered into for services such as engineering, inspection and maintenance with the expectation that Bruce Power would later seek to contract with other external suppliers and/or build up its own in-house expertise," and you go on to say that's consistent with move you've already made in that respect with respect to the NCC Holdings, so I assume it's the owner of the inspection -- rather the safety services group. 437 MR. DRINKWATER: Correct. 438 MR. POCH: Then at 15-10 you say: "The intent of the agreements that relate to transitional services provision was to provide Bruce Power sufficient time to either develop the required capabilities within our organisation or to develop or acquire the services from a party independent of OPG." And it's really that that I want to focus on. 439 What is the time line you anticipate for accomplishing that, or for Bruce accomplishing has? Let me pause and say -- let's make sure I understand correctly. There are a couple of ways this could occur. Either Bruce could develop its own capability or you could spin out your group to a third party that would then service both organisations and possibly others; is that fair? 440 MS. VELSHI: Or it could find a third service provider altogether. 441 MR. POCH: Okay. So, first of all, let's talk about the Inspection Services. What's your hope, and I appreciate it's subject to the comments Mr. Drinkwater made earlier about finding a suitable purchaser. 442 MR. DRINKWATER: Before the end of the year. 443 MR. POCH: And with respect to these remaining roughly 15 FTEs, is there some game plan there? 444 MR. DRINKWATER: There isn't the game plan with respect to these 15 FTEs from an OPG perspective. We're not familiar with the Bruce Power side of this equation other than the situation, for example, with ISD where we've agreed to cooperate with them with respect to that. So I'm not -- I'm not sure, when we talked about allowing Bruce Power time to transition, that's really something that they're driving from their perspective. We're not familiar with all aspects of how they might do that or when they might do that. Part of it could be a question of training people themselves. I'm just not sure how that could unfold. Maybe Ms. Velshi will have specifics on that. 445 MS. VELSHI: I can maybe share with you the general trend that we have seen around the engineering services support over the last few years. In 2001, when we first got into this service arrangement with them, under the engineering services we had about 165 FTEs worth of support under the NOSS services agreement. Last year, as I mentioned, there were about 75. So out of that 75, about 60 was from the nuclear safety analysis group, and you take that from the 150 or so, it looks like almost 80 FTEs worth of support that we provided them initially. They have found other ways of either getting it or not requiring it anymore. So there's been a marked downward trend in the level of support we're providing. 446 As far as going forward, I don't have any specific plans -- knowledge of any specific plans which Bruce Power may have. 447 MR. DRINKWATER: From our perspective I think one of the issues is that whether we feel this is a core of people that we would prefer to be kept together, albeit with a third party, or whether we'd be happy to have Bruce Power find it separately from the way that we would get the services. Certainly with respect to Inspection Services, for example, where it's specialised training, specialised equipment, I think from our perspective it makes more sense to keep that package together, albeit in a third party's hands. In other areas it's not as important to do that. 448 MR. POCH: I'm sorry, I missed the distinction you're drawing, I apologise. Could you just review that briefly again. 449 MR. DRINKWATER: In some of the areas it's very specialised training, very specialised equipment, and it would make sense, in our view, to keep that core of service providers together in a unit, albeit in the hands of a third party such as NNC. In other areas it's less important that the people be kept as a group, and you could get engineering support from AECL or some other provider. That was the point. 450 MR. POCH: And presumably that's partly what's happened to get from 80 down to 15 already. 451 MS. VELSHI: Likely. 452 MR. POCH: All right. I wanted to take you to the amended and restated agreement, and my reference here is -- first of all, I think the first reference you don't need to turn up. It's at tab 11(c), sub 3, a covenance item Roman numeral III which simply commits your partner to cooperate in your plans to divest nuclear inspection. 453 MS. JACKSON: I'm sorry, Mr. Poch, could you give us that reference again. 454 MR. POCH: Tab 11(c), sub 3, covenance item Roman numeral III is the reference I have. 455 MS. JACKSON: You're in the paragraph on covenance representations and warranties? 456 MR. DRINKWATER: Yes, I've found it. 457 MR. POCH: And simply there, the third covenant item is that they commit to cooperate in terms of Nuclear Inspection Services Division being divested. And then at -- my reference is at 11.12, there is a right granted to Bruce Power to participant in the ISD in the event that it's moved out; is that right? 458 MR. DRINKWATER: I'm not with you on the second reference. 459 MR. POCH: I'm not with myself since I'm struggling to find the paper copy or the electronic copy. I'm doing it from my notes. 460 MR. DRINKWATER: Maybe I can help you. At the time the master agreement was signed in June or July of 2000, there was a commitment on the part of OPG that, in the event we did a joint venture type arrangement with respect to Inspection Services -- because this was something that was contemplated even at that stage although very nascent -- we agreed that, I think the words were that we would offer them an equity position or something if that were to happen. I don't have the exact words in front of me. But I think that's what you may be referring to. 461 MR. POCH: Yes, that's what -- yes. 462 MR. DRINKWATER: Yes, I'm sorry, interrogatory 11.12. And the evolution from the time of the master agreement to now is that we have, in fact, started that process, although I think we've moved away from the concept of a joint venture in the sense of wanting to do it in a joint ownership arrangement with Bruce Power, and both we and they would rather have, as we have done by NNC, it owned by somebody else, albeit providing services back to us. 463 MR. POCH: All right. And I take it -- and your understanding is Bruce Power is not, so far as you're aware, concerned that -- they agree it would be better to be at arm's length. 464 MR. DRINKWATER: They do. 465 MR. POCH: Okay, thank you. 466 There is -- in your restated and amended lease, which is -- my reference here is tab 2(b), section 4.4, perhaps, there's provision for OPG to participate in new generation ventures on the site there at Bruce; is that correct? 467 MR. DRINKWATER: Yes. I haven't looked at this for awhile, but that is correct. 468 MR. POCH: Would you agree that that could lead, depending on how it's structured, for further opportunity for sensitive information about scheduling a plant to be shared between the entities? 469 MR. DRINKWATER: Depending on how that evolved, that would be a possibility, Mr. Poch, yes. 470 MR. POCH: And of course it would lead to some further joint interest in enhancing prices with respect to that facility. 471 MR. DRINKWATER: Well, it would depend on whether or not we decided to take any interest. Let me give you a little bit of background as to why that provision is in there. 472 There had been proposals surfaced, I guess for some time, to run a gas line out to the Bruce site and have a gas facility operate there, and while we think that's highly unlikely given the cost of running a gas line out to Kincardine, we wanted to be in a position to protect ourselves in terms of the value implications under the lease, because we were doing this on the basis that we were leasing two nuclear facilities, one operating, one not; and if it turned out there was additional value generated by the site through new generation, we would want to have a mechanism where we could decide how best to reflect some interest in that, whether it be increased lease payment or some direct involvement in the actual -- in the actual generation facility, hence the provisions in the lease. 473 I'm not aware of any discussions since that time, but perhaps Rumina Velshi could elaborate on that. 474 MS. VELSHI: I have no further details either. 475 MR. POCH: Mr. Drinkwater, does the current lease arrangement require OPG's consent for such a facility to be built? 476 MR. DRINKWATER: I'd have to look at it. I'm not sure it requires our consent necessarily. Let me just turn up the page. What's the section of the lease again, Mr. Poch? 477 MR. POCH: At the time I was looking at tab 2(b), the lease -- I have two references, 4.4 and 8. I think it's 4.4 that we were -- 478 MR. DRINKWATER: As I read that, it's their option to do it in the first instance. But if you go down and read the other details, which I haven't read, I think the basis upon which it would be done would, as a practical matter, end up in us having some benefit as a result of it. For example, 4. -- 4.3, and so forth, Mr. Poch. So in a sense they get to decide whether they want to do it but when you read through all these conditions, which are quite detailed and I haven't looked at it for a while, the essence of this was to provide some form of participation or, rather, a benefit to OPG. 479 MR. POCH: And that's at OPG's option. 480 MR. DRINKWATER: I'd have to read all of that through again, but my recollection was that it was at our option. But if it happens, then there are certain specific provisions that kick in in these conditions. 481 MR. POCH: But these clauses all begin "the landlord shall have the right," "the landlord shall have the option," so similarly you can decline that -- 482 MR. DRINKWATER: It was difficult to draft because other than this concept that someone had floated about the gas line to Kincardine, we didn't really know what we were anticipating here. It's more trying to say, it's an 18-year lease. If something were to happen, we need to have some sort of mechanism that would allow us to get a reasonable chance to either benefit or participate or know what to do at the end of the lease. 483 MR. POCH: Now, there's also a minimum rent provision, and the reference I have is tab 11(c), paragraph 2. 484 MS. JACKSON: So you're now looking at the heads of agreement. 485 MR. POCH: Well -- 486 MR. DRINKWATER: Yes, he is. 487 MR. POCH: I'm sorry, I'm doing this from the screen of my computer. 488 MR. DRINKWATER: Yes, it's the heads of agreement that was recently sign. 489 MR. POCH: My reference, I won't go to it, but my reference is tab 11(c), paragraph 2, Roman numeral IV(j)(a). Hopefully we won't have to get into the detailed wording. I just wanted to make sure I understood that the supplemental rent is, in some fashion, based upon the output of the Bruce reactors and the selling price of power above stated base prices. 490 MR. DRINKWATER: No, that's not correct. 491 MR. POCH: All right. Could you help me? 492 MR. DRINKWATER: Just back up for a second. 493 MR. POCH: Not the supplemental rent, the minimum rent provision is reduced in the same manner as the supplemental rent in the fashion I just stated. 494 MR. DRINKWATER: Let me try and help you by explaining it. 495 The lease contains the concept of a base rent which is set out in a schedule and it's around $60 million a year at the moment and it gets adjusted up in accordance with the schedule. The supplemental rent is based on operating units, and if a unit is operating at any time during the year, it's 25.5 million unless the average annual price for the year is less than $30 in which case it goes down to the 12.25. 496 The concept that you're referring to on this particular page arises out of the conditions that OPG imposed on giving its consent to have the control of Bruce Power transfer to the new consortium, and we stipulated that there had to be a minimum rental during the period 2004 to 2008 of 190 million, whereas the rent that was specified as base rent that had to be paid every year is more like 60 to 65 million. 497 So in order to give them some protection against that, we did allow some circumstances where they would be able to prorate that back if, for example, there was a major outage out of the ordinary course of nuclear plants. So this was specifically intended to require increased guaranteed amounts to OPG for that period from 2004 to 2008. 498 MR. POCH: My read at the time was that you imported similar terms, similar protections as you have in the supplemental rent for the circumstance where price is below $30. 499 MR. DRINKWATER: Yes, that's right. It would operate -- it would be adjusted so that if an event it was under $30, then the calculation would be reduced, the 190 would be reduced. 500 MR. POCH: All right. So we have a situation where, if the price of power falls enough or if Bruce's output falls enough, OPG's rent then falls. 501 MR. DRINKWATER: The price aspect, yes, although if the price of power on an average is below $30 we're going to have bigger problems than this. 502 MR. POCH: Fair enough. 503 MR. DRINKWATER: The second point was? 504 MR. POCH: Or if Bruce's output due to outages falls, then -- 505 MR. DRINKWATER: Not really, because I think the outage circumstances that we've cited here are very unlikely circumstances, and I would say for them to meet the test of these outages, it's not a normal outage. These are outages, major outages, outages out of the ordinary course for a nuclear plant, if there is such a thing. 506 MR. POCH: Well, you've asked my next question. We've had quite a history of major outages, have we not? 507 MR. DRINKWATER: Well, I mean nuclear plants, by their very nature, whenever they have an outage, they tend to be major outages. But I think that this was carefully crafted by us to make it very much the exception rather than the rule. But we did provide that that could be determined by a third party if we came into a disagreement. But it's our view that this is going to increase our rent rather than what would have happened under the supplemental rent by itself. 508 MR. POCH: There's also an early termination agreement, and it's now been changed from 2006 to 2008; is that correct? 509 MR. DRINKWATER: Yes, that's right. One of the other conditions we imposed in giving our consent was to push out into the time the period at which they could exercise this right, so they can't exercise it now until 2008. 510 MR. POCH: And in layman's terms, they can exercise it if they can demonstrate convincingly that they can't make a go of it. 511 MR. DRINKWATER: There's some specific terms in the lease dealing with economic liability. I can't remember the exact terms. But again it's intended to be a fairly strict bar for them to have to jump over, but that's set out specifically in the lease. 512 MR. POCH: Finally I want to touch on the ring fence. According to answers you gave in 6.8 and 6.12, there are some 1,346 individuals in the ring fence and that every one of them has a performance pay arrangement in place that is affected, to some extent, by the profitability of the organisation. And in -- further, in answer to 6.13, we learned that the higher the rank you hold in the organisation, the more that effect -- that arrangement is in place, that is that performance pay is increasingly tied to the profitability of the organisation. Have I interpreted that correctly, first of all? 513 MR. DRINKWATER: Yes. 514 MR. POCH: All right. Now, do the Energy Market folks also have incented pay? 515 MR. DRINKWATER: They do. 516 MR. POCH: So, first of all, let's state the obvious. It's possible, then, that an employee could obtain financial reward from breaching the spirit or the letter of the ring fence, if they weren't found out. 517 MR. DRINKWATER: Just give me an example of how that would -- 518 MR. POCH: Well, to the extent that the ring fence is broken and to the benefit of the corporation's financial well-being, the people breaking that and participating in that venture, would reap a financial reward by virtue of the performance payment. 519 MR. DRINKWATER: I don't accept that the -- even if the ring fence was breached, I believe that the Market Surveillance Panel and the way in which they have monitored this market since it's been opened would mean that the chances of that happening are very slim. We're talking about something that -- you know, it's difficult to say that theoretically it couldn't happen, but in a practical matter I just can't see that happening. 520 MR. POCH: But the answer to my narrow question is if it did happen, these people would be benefited financially by virtue of their performance pay. 521 MR. DRINKWATER: Yes, if all our systems failed, internal and external, that could happen. 522 MR. POCH: And the people responsible for -- internally, responsible for catching such folks, turning them in and doling out punishment, all for the most part also have performance pay? 523 MR. DRINKWATER: Virtually everyone in the organisation has some sort of performance pay. 524 MR. ANDERSON: Mr. Poch, if I can just add to Mr. Drinkwater's response. The hypothetical situation you're detailing would not only involve a breach of the ring fence by the individual who has the information, but it would also involve, on his part, a breach of the code of business conduct, breach of the competition legislation compliance program and a breach of the guide for information exchange. In addition to that, the individual, the hypothetical individual that's receiving the information in Energy Markets, would also have to breach those documents in order to utilise that information, because those individuals, by definition, are outside the ring fence and individuals outside the ring fence are still bound by the other building blocks of security, and also have an obligation under the ring fence to not seek out Bruce Power ring fence information, and if they do come across it, not to use it. 525 MR. POCH: I understand all that. All I'm suggesting is that there is this incentive, this pay incentive which is an incentive that pushes in the opposite direction of all the various arrangements that you've made. 526 MR. DRINKWATER: That one I don't agree with you, Mr. Poch. I think that the incentive arrangements are very focused on other issues, such as meeting our safety, meeting our overall corporate goals. I don't believe that having performance-based pay means that people are pushed in the wrong direction. I think that's going too far, in my view. 527 MR. POCH: Don't let me be misunderstood. I'm not saying that OPG is infested with crooks who are going to try to go in that direction. I'm just saying on the chance that there is anybody who's tempted, this is a further inducement. 528 MR. DRINKWATER: Theoretically, you're right. But let's leave it at that. 529 MR. POCH: Mr. Chair, those are my questions. 530 MR. BETTS: Thank you, Mr. Poch. 531 It's 10 to 12 and Mr. Mattson is coming to bat. Mr. Mattson, would you like to begin at this stage or would you like to delay until after lunch. 532 MR. MATTSON: I'm okay to go ahead, Mr. Chairman. I expect I won't be more than half an hour, maybe shorter than that. 533 MR. BETTS: Let's proceed, then, and if possible we'll try and take all of your questions and break after that. 534 Mr. Mattson. 535 MR. MATTSON: Thank you, Mr. Chairman. 536 CROSS-EXAMINATION BY MR. MATTSON: 537 MR. MATTSON: Members of the panel, if I could just begin. Mr. Singer, yesterday we had some discussion with respect to the ring fence and today you indicated again that it was your opinion that it was in addition to what the company already has in place; I think you called it -- I think it augments the preexisting controls. 538 MR. SINGER: Yes, that's correct. 539 MR. MATTSON: Okay. Are those preexisting controls on the record right now? 540 MR. SINGER: Yes, they are, and Mr. Anderson will probably be able to detail exactly where they are. 541 MR. MATTSON: That would be helpful. 542 MR. ANDERSON: The reference he made to augmenting existing controls, I believe, was taken straight from section 8A of our prefiled evidence. The existing controls to which we have referred have been filed under interrogatories 1.24 which is the code of business conduct which binds all employees of OPG, the guide for information exchange between OPG and Bruce Power staff, which can be found at interrogatory 6.7, and the competition legislation compliance programme, which can be found under interrogatory 15.16. 543 MR. DRINKWATER: There's also a reference to an e-mail from our CEO at interrogatory 15.13. 544 MR. MATTSON: Thank you. I won't go over any of that, but that's helpful for the record, so we have all of that. 545 Now, at I.6.23, Mr. Poch went through this earlier today. It indicates that -- I just wanted to confirm my understanding of this. Mr. Singer, you prepared it, but it clearly indicates in the answer here that there's no need for arrangements at Bruce Power with respect to information that they're gaining about OPG; is that fair? There's nothing sensitive that they're getting out of this arrangement? 546 MR. SINGER: That's our view of the matter, yes. But we're not really in a position to set policy for Bruce Power. 547 MR. MATTSON: So why is that your -- why is that your -- 548 MR. SINGER: I gave some specific examples in my exchange with Mr. Poch on this subject. But the bottom line is we don't believe that Bruce gets any information about our outages or cost of operation that would allow them to materially affect the outcome in the market. 549 MR. MATTSON: And has Bruce had any correspondence with OPG disagreeing or taking another position on that? 550 MR. SINGER: Certainly none that I'm aware of. Perhaps the other panel members could confirm that. 551 MS. VELSHI: None that I'm aware of either. 552 MR. MATTSON: Mr. Drinkwater? 553 MR. DRINKWATER: No. Quite to the contrary. I mean I think they've already respected confidentiality as a general principle, so ... 554 MR. MATTSON: Understanding the confidentiality issue, they may respect that, do they feel that there's any information -- no, it's OPG, that's fair. It's whether you're concerned about the information at Bruce. 555 MR. SINGER: Yes. We have no idea how they feel about things. 556 MR. DRINKWATER: But we're not concerned with the information. 557 MR. MATTSON: Now, much of the discussion we've had today -- yesterday and today seems to focus on the issue of protecting Bruce Power from information shared with OPG and its potential misuse, therefore the need for the ring fence at OPG. Has Bruce Power gone on the record at all as to what their position is with regard to this ring fence? 558 MR. SINGER: There was no occasion that I'm aware of that they would have communicated that to us. Again, the focus is on OPG because it's a condition of our licence that we appear here. 559 MR. MATTSON: And yesterday when we went through the slide -- the slides, there were a couple of reasons for the ring fence, there were many of them, but there was no indication in the slides that Bruce Power was requesting this ring fence. 560 MR. SINGER: Again, we've never talked to Bruce Power about this ring fence. If they've learned about it, they've learned about it through public documents like the documents available in this proceeding. I can certainly speak for myself and for regulatory affairs over the last few years when I've headed it, and there were no conversations like that. Perhaps the rest of the panel could comment more generally. 561 MS. VELSHI: I also don't recall any formal discussions with them at all around the ring fence. That doesn't mean that they don't have our ring fence in place. Because it's such an inherent part of the way we do business, I wouldn't be surprised, because they sense the way -- we treat their information with such care, that they're aware that we do have controls such as a ring fence in place. But there are has been nothing, no discussions around our ring fence plan with them. 562 MR. MATTSON: So then, just to finish off from Bruce Power's perspective, there was no agreement or understanding between the parties, OPG and Bruce, that, as a part of this process, Bruce wouldn't -- Bruce Power would not come before this Board and sort of make arguments that the ring fence or the disclosure or confidentiality rules should be stricter. That wasn't part of the agreement. 563 MR. SINGER: In preparation for this hearing, we've had absolutely no contact with Bruce Power whatsoever, at least up until the end of last year, and I'm quite sure none since. 564 MR. MATTSON: And then if we look at it beyond protection for Bruce Power, we look at it from the other market participants other than Bruce Power and OPG, how does the ring fence protect other market participants? 565 MR. SINGER: Well, the purpose of the ring fence is to make absolutely sure that information flowing from Bruce Power to OPG, pursuant to the transaction, can't be used by OPG. Again, the concern at the base of all of this is that that information would affect market outcomes. And clearly the concern of other market participants would be exactly that; would there be information that OPG would have and could use that could affect market outcomes, that is, the price and quantity available in the market. 566 MR. MATTSON: So if this Board, pursuant to its obligation under Section 1, is concerned with respect to promoting and facilitating competition, your position would be that this ring fence and your current disclosure rules really are sufficient for ensuring that there's no gaming in the market as a result of this application; is that -- 567 MR. SINGER: That's certainly true. And, as Mr. Drinkwater indicated this morning in his direct evidence, if the Board were to decide that that should be a formal condition of our licence, that that certainly wouldn't cause any kind of difficulty at OPG. 568 MR. MATTSON: Okay. I might come back to that issue, but I just wanted to go through some of these things this morning. 569 If I could ask you briefly about the CRQ values. I just have the questions written on the exhibit this morning. But my understanding, Mr. Singer, is that the rebate established by the Market Power Mitigation Agreement extends for 48 months from the market opening. 570 MR. SINGER: That's correct. 571 MR. MATTSON: And the CRQ values shown on the document we received this morning, so it's the exhibit -- I didn't get the exact number. 572 MS. JACKSON: G.2.2. 573 MR. MATTSON: G.2.2. On G.2.2, they extend to December 2004. 574 MR. SINGER: That's when the CRQ values were developed. It was contemplated that the market would open earlier than in fact it did open and so there were CRQ values established for a period that was thought to be sufficient to cover the 48-month period you referenced early. In fact, the delay in market opening has created a situation where, at the end of that period, the CRQ values are yet to be determined, and that's an issue I think for the government and for the industry in general. 575 MR. MATTSON: Hold it. You trailed off there. So these show to December 04 but the 48-month period would extend to May 2006; correct? 576 MR. SINGER: Actually to April 30th, 2006. 577 MR. MATTSON: April 30th, 2006. And so your answer, you don't know what the calculation for rebates will be for the 16-month period in January 2005 until April 2006? 578 MR. SINGER: My answer is no one knows how the CRQ will be determined for that period. We certainly have ideas and have made suggestions about how that can be accomplished, but that's a larger issue than the reduction in CRQ for the Bruce transaction. In other words, should the Board find that this transaction constitutes decontrol and reduce the Qs in the period that's available, the exercise for the missing 16 months would just be to determine a CRQ and Qs without Bruce B because Bruce B would already have been found to be decontrolled. 579 MR. MATTSON: Is this explained to the Board anywhere in the evidence currently? 580 MR. SINGER: I remember there was some discussion about it on Issues Day, but I'm not sure that it's explained formally in the evidence. 581 MR. MATTSON: How, if any, do you feel, Mr. Singer, how should this Board should deal with this issue in its decision, or do you think it's not material to its decision? 582 MR. SINGER: I think it's not material for this decision for the reasons I just gave. In other words, if the Board finds that Bruce B has been decontrolled, that ends the matter. It's fairly clearly set out in our licence that once the Board makes a determination, that determination is binding on subsequent proceedings, so that if the Board says this is decontrol, all that does is, to a small degree, simplify the exercise of coming up with the CRQ in -- for the missing 16 months because it just means that in that exercise you don't have to consider Bruce B because Bruce B has been decontrolled, the Bruce facility has been decontrolled. I mention Bruce B specifically since there was no CRQ value associated with Bruce A. 583 MR. MATTSON: Well, if the Board doesn't need to deal with this -- with this issue in this decision, who is it, Mr. Singer, who you feel has the jurisdiction to deal with this matter, going forward? 584 MR. SINGER: The CRQ was established through a directive by the Minister of Energy, and I think any extension of the CRQ values would need to be accomplished through a similar mechanism. 585 MR. MATTSON: So shouldn't the Board, then, in its decision at least say they're leaving this for government to decide at a future date? 586 MR. SINGER: It's really not for me to comment on what the Board should or shouldn't say. This issue that the CRQs don't exist for the period from January 1st, 2005 through April 30th, 2006 is well known in the industry, it's well known at the IMO, it's, I'm sure, well known by the government. So, you know, if the Board were to decide that a reminder to the government was appropriate, I would have no opinion on that. Equally, if the Board were to decide that the government was well aware of this and no reminder was necessary, I wouldn't have an opinion on that either. That's not for me to opine on. 587 MR. MATTSON: But am I correct in saying that nowhere in the evidence in this application do you identify this issue and bring it to the Board's attention and indicate what the company's position is on how this should be dealt with, this 16-month period. 588 MR. SINGER: Well, the transcript is part of the evidence, and I think I've just given you the answer. But Exhibit G.2.2 is also part of the evidence and it clearly states that there are no CRQ values for January 1st 2005 through April 30th, 2006. We haven't done anything but make this issue explicit. And in terms of how to deal with it, that's really not for us to say, that's for the government to say, in my opinion. 589 MR. MATTSON: I agree, Mr. Singer, but the exhibit today was filed February 7th and your -- the evidence is the transcript today. Again I'm just pointing to the filings, though. This issue has not been dealt with by any witness or anyone for the company. 590 MS. JACKSON: Mr. Chairman, with respect, my friend seems to think it is an issue. I think Mr. Singer has explained why it's -- it is, from the company's perspective, not an issue. With respect, I'm not sure that there's much more that can be said on this point. 591 MR. SINGER: Except to add once again that this was discussed before the Board at Issues Day, so it's been known for months. 592 MR. BETTS: Mr. Mattson? 593 MR. MATTSON: That's why I'm -- Mr. Chairman, that's why I'm surprised, because the company was clearly made aware that this was an issue on Issues Day. I know the members of the panel were not on the Issues Day panel. But the company was made aware that it was an issue by a number of parties. Attention was drawn to this gap in the evidence and yet we still really -- other than my friend Ms. Jackson, and Mr. Singer's opinion that it's not relevant to your decision, we don't have any real evidence that the rest of us can draw conclusions upon as to whether they're correct in their opinion. 594 I don't know if I can take it any further, other than it will go to argument whether or not the application is complete. We can leave it where it is now and -- but I just wanted to be clear that there was nothing I was missing in the application. 595 MS. JACKSON: Mr. Chairman, may I just say that while there was some discussion of this on Issues Day, it was discussion similar to what's occurring today, which is that it is a feature of the regulatory landscape, as it were, that the CRQ has not been set for those 16 months. But it was not suggested then, more in the Board's issues list, that it was an issue for this hearing. It's, as it were, a feature of the government landscape, it's not a question of the evidence in this hearing. But I do suggest, with respect, that there's nothing more that can be said about the point as a matter of evidence. 596 MR. BETTS: It certainly seems to me that there's nothing more that can be gained by continuing this questioning with the witnesses under these circumstances. But that -- I'm not suggesting that it shouldn't be considered an issue. That I'll leave to all of you. 597 MR. MATTSON: Thank you, Mr. Chairman. 598 Mr. Drinkwater, if you could turn up interrogatory I.9.8. 599 Some housekeeping with respect to my client's argument. This was an interrogatory you responded to, and the question was "to provide any analysis supporting OPG's view that the speed of the Competition Bureau's review of the lease indicates that no significant competition issues pertained." And that was referring to schedule -- tab 4, page 38 of your evidence, where that was highlighted. 600 Do you -- what relevance do you make of the quickness with which the Competition Bureau dealt with that application? 601 MR. DRINKWATER: We made reference to it in our application. I don't consider it to be a particularly significant point. It was just something we thought was worth noting. 602 MR. MATTSON: Because your last -- in response to the last paragraph, it says: "The Bureau's processing of this request within the specified 14 days supports the conclusion that it was "non-complex and thus did not present any competition issues." 603 Would you agree that it may not have presented any competition issues because it wasn't -- those competition issues weren't pursuant to the Competition Bureau's jurisdiction, for example; it didn't present competition issues to them under their legislation. 604 MR. DRINKWATER: This -- the transaction between OPG and Bruce Power is within their jurisdiction. 605 MR. MATTSON: It is, but in terms of not presenting competition issues; you see your conclusion there, that "their processing of the request within 14 days supports the conclusion it was a non-complex and thus did not present any competition issues. It just didn't present any issues for the purposes of their legislation; correct? 606 MR. DRINKWATER: I accept that -- yes, for purposes of their legislation, that's correct. 607 MR. MATTSON: And just to be clear about it, then. Despite the ARC, there are competition issues that OPG is attempting to address in this application, i.e., the ring fence; there are competition issues that you think are significant enough that you would -- you're presenting evidence to help address. 608 MR. DRINKWATER: There are clearly issues in terms of complying with our licence and the impact that this could have on the market; yes, there are. I wouldn't read too much into it, counsel. We're just trying to say that if there had been something in the broad competition sense, the Bureau would have taken longer. That's all. 609 MR. MATTSON: But they indicated yesterday that because it really wasn't a market and their test was a lessening of competition that they really had no choice other than to approve this. 610 MR. DRINKWATER: That's true. 611 MR. MATTSON: Okay. Finally, I'm interested in the issue of reporting. The requirements that the company is imposing -- self-imposing, through its current rules and any adoption of the ring fence as mandatory rules, will -- is there a potential that the company could or would undertake some sort of reporting mechanism to ensure that there is an opportunity for the public to assess how the ring fence is operating? Mr. Singer? 612 MR. SINGER: Well, your question was is there a potential and that's -- there's always a potential, I think. Our view is that the Board has a model in front of it in terms of our ring fence related to our retailer licensing, and obviously, I think, that would be a good starting place, and that does not have public reporting associated with it. 613 MR. MATTSON: So how, then, would the public or the Board be able to assess how this potentially mandatory, or voluntary system is operating. 614 MR. SINGER: Again, the Board has ongoing jurisdiction to enforce the conditions in our licence. I don't think we disagree with that in any way. As I say, the model that is before the Board is, I think, the one that the Board previously accepted which is the ring fence and the retailer licence. 615 MR. MATTSON: So if the Board required that there was some reporting mechanism associated with the ring fence, Mr. Singer, you wouldn't -- you're not here to oppose it; is that fair? 616 MR. SINGER: I'm never here to oppose the Board. I mean we're here to present our evidence and our views on matters, and the Board's here to decide things. And having decided things, we'll respect those decisions. I don't know what else I can say besides that. 617 MR. MATTSON: So if I give you the opportunity to give me your best reason why there shouldn't be a reporting mechanism, you would decline right now? 618 MR. SINGER: Again, we were over this quite a bit. My personal view, the view of the management when we prepared this, I was part of that discussion, was that what we had proposed was sufficient. These are exercises of line drawing and that's where, given everything that we've done and invested in the ring fence, we believe the line was appropriately drawn. I accept that at the end of this proceeding the Board may come to a different conclusion. They may agree with us; they may disagree with us. If they come to a different conclusion, we will respect that. We are a licensee here. 619 MR. MATTSON: Do you see the value in having the public having an opportunity to assess the success you've put into your ring fence and your current disclosure rules? 620 MR. SINGER: Frankly, to me the relevance of this to the public at large is really, really attenuated -- it's really a stretch to think that anyone cares in relation to how much it's important to OPG. In other words, we're the people with something at stake here, we're the people who have come before this Board and said, here are the series of processes and the commitment and the training that we've undertaken to make this thing work. There's no one in the public that has nearly as much interest in the success of the ring fence as Mr. Anderson does. And I mean we're talking orders of magnitude difference here. So I mean in the kind of things that are of public interest, I think this is pretty diminimus. 621 But, again, if -- reasonable people could differ on this. I don't think that the public at large is really going to take this as a huge issue, frankly. But if there's a public reporting requirement imposed as a condition of this application, we will fulfil that requirement, end of story. 622 MR. MATTSON: Mr. Singer, just on those two points, though. The ring fence isn't there just to protect OPG employees; you acknowledge that. It's there to protect others than just the employees at OPG. 623 MR. SINGER: It's there, as I've said at the end, to give additional comfort that there won't be adverse outcomes in the market related to competition. And, as we've discussed a few times now, there's a Market Surveillance Panel where one of its two main jobs is to look at those outcomes and decide are there adverse impacts on competition, are people abusing the market. And so to me that's -- the Market Surveillance Panel issues a public report, it receives fairly wide circulation in the electricity industry, and even in the public it was commented on in the media. 624 And I can think that that would be much more of public interest because that's really what we're talking about here, the impacts on the market, not the specific flows of information within OPG. If all of this failed, which I don't think it will, but if it did hypothetically and the market continued to function without any abuse of monopoly power, without any anti-competitive impacts, does that matter to the public? And I guess my answer would be no, it doesn't. 625 MR. MATTSON: But I wasn't looking for that opinion as to whether it mattered, because I think we might have a disagreement on that. I'm saying the ring fence is meant to protect parties other than just OPG employees; am I correct in that? 626 MR. SINGER: The ring fence is meant to prevent outcomes that would influence parties other than OPG's, that is correct. 627 MR. MATTSON: Right. And the Board and a number of the parties here before -- at this tribunal are certainly concerned with how those other parties in the market generally work; is that fair? 628 MR. SINGER: I think it's fair to say the Board will let us know its concerns and its decision, and the parties through their questioning, have certainly given us a sense of what their concerns are, yes. 629 MR. MATTSON: And the only way we're going to know whether that ring fence is working in its protection of other parties in the market is if we get some reporting mechanism; otherwise we have no way of knowing, do we, Mr. Singer? 630 MR. SINGER: No, that's absolutely wrong. 631 MR. MATTSON: How would we know? 632 MR. SINGER: We know because there would be adverse impacts in the market, and those adverse impacts would be the subject of the Market Surveillance Panel. In other words, if the Board were concerned about this, I think the real answer is that there's a whole entity that's established by legislation just to look at the competitive performance of the Ontario electricity market, and that's really, I think, what the ultimate concern is here. 633 MR. MATTSON: Wouldn't the Market Surveillance Panel as well benefit from a reporting mechanism as to how well the ring fence is working? Wouldn't they -- not only would I argue or put to you, suggest to you, that the Board would benefit, but wouldn't the Market Surveillance Panel as well benefit from a reporting mechanism, Mr. Singer? 634 MR. SINGER: Frankly, I don't see that. In other words, hypothetically again, let's say there was a breach of the ring fence, there was some information that flowed pursuant to the transaction and it wasn't adequately contained in the ring fence, but OPG took no action on that and there was no change in the outcome in the market. The Market Surveillance Panel, in doing the job it's been assigned, wouldn't really care, I don't think, because the job -- one of the jobs of the Market Surveillance Panel is to look at the competitive performance of the Ontario electricity market, not to the precursors of how that competitive performance was arrived at. 635 MR. MATTSON: I think we'll just leave that for argument, then. Thank you, panel, and thank you, Mr. Chairman, for the opportunity. Thank you. 636 MR. BETTS: Thank you. 637 And you broke pretty well at the time you promised, so thank you very much. 638 I think we will break at this time and we will -- Mr. Moran? 639 MR. MORAN: I wonder if I could suggest we come back at 2:00, since I'm -- I think the last person, unless I'm wrong, to cross-examine, and since we don't have anybody else to follow this panel, we should finish on time today in any event. 640 MR. BETTS: And we would still strike for a 3:30 adjournment. 641 MR. MORAN: Yes. 642 MR. BETTS: Any submissions or objections to that? So the proposal is to break until 2 p.m. Are you okay with that? The panel has no problem with that either. So we will stand adjourned now until 2 p.m. and we will reconvene with cross-examination from Mr. Moran. Thank you. 643 --- Luncheon recess taken at 12:25 p.m. 644 --- On resuming at 2:05 p.m. 645 MR. BETTS: Thank you, everybody. Please be seated. 646 Okay. Welcome back from our lunch break. I believe we left at the point that Mr. Moran would have the opportunity to cross-examine the witness panel. 647 PRELIMINARY MATTERS: 648 MR. BETTS: Oh, yes, I should ask: Are there any preliminary matters? 649 MS. JACKSON: Well, Mr. Chair, there's just the one small matter and I alerted my friend, Mr. Moran, of this. I'm advised that Mr. Singer had a small augmentation to an answer that he gave this morning. I'm not sure on what subject. And Mr. Drinkwater as well. And I suggested that that happen now so that if there were any questions that followed from that they could be dealt with this afternoon. 650 MR. BETTS: Any objections to that, to those that are present? 651 MR. POCH: Assuming that we can ask questions to follow up if necessary. 652 MR. BETTS: I assume that would be appropriate. Go ahead. 653 MS. JACKSON: I don't know what they are so I'll ask Mr. Singer what answer he wants to augment and in what fashion. 654 MR. SINGER: This morning I had been asked about whether there was any contact between OPG and Bruce Power about the ring fence, and I indicated that, during the time that I was vice-president of regulatory affairs, there was no such contact and that it was my belief that subsequent to the time since I've been -- I haven't been the VP of regulatory affairs at OPG, there haven't been any contact. Those are both correct statements. 655 There was some contact subsequent to my tenure when the Board asked that we produce unredacted copies of the documents. There was a conversation between Mr. Barrett, who is now the vice-president of regulatory affairs for OPG, and Brian Armstrong, who is the general counsel at Bruce Power, pursuant to the confidentiality clauses in the agreements, letting Bruce Power know that we were going to produce unredacted versions to the Board. And then subsequent when the Board made its ruling on what needed to be distributed to intervenors, Mr. Barrett again informed Brian Armstrong, the general counsel of Bruce Power, of that fact. 656 So the answer I gave was correct; there was no discussion of the ring fence per se, but I may have left the impression that there was absolutely no contact and there was contact on this subject in the two instances. 657 MR. BETTS: Thank you. 658 MS. JACKSON: And Mr. Drinkwater? 659 MR. DRINKWATER: Yes. I made reference to the supplementary rent payments this morning and I referred to the lower amount as being, I think, 12.25 million, and, in fact, it's 12 million. I just wanted to correct that. 660 MS. JACKSON: Thank you, Mr. Chairman. Those were the only follow-up matters. 661 MR. BETTS: Thank you. 662 Does that generate any questions from intervenors? Thank you very much. There appear to be none. Then if there are no other preliminary matters, we'll turn the cross-examination over to Mr. Moran. 663 MR. MORAN: Thank you, Mr. Chair. 664 CROSS-EXAMINATION BY MR. MORAN: 665 MR. MORAN: Just to start off, the lease term that we're looking at right now goes to 2018, as I understand it, 15 years to go still. 666 MR. DRINKWATER: That's correct. 667 MR. MORAN: And there's an option to renew for up to 25 more years? 668 MR. DRINKWATER: Yes. In fact there are options. There are a collection of options if they were all exercised within 25 years. 669 MR. MORAN: Up to 25 more years. So theoretically we could be looking at a set of arrangements going forward a period of about 40 years. 670 MR. DRINKWATER: That's correct. 671 MR. MORAN: Okay. There is a lot of discussion this morning, and I won't go over that ground obviously with respect to some of the arrangements and expectation that Bruce Power at some point will become -- and has been becoming more self-sufficient. And with respect to that expectation, in the event that some of these arrangements don't disappear, Bruce, for whatever reasons, doesn't become more and more self-sufficient, is it OPG's plan simply to keep on renewing or extending these agreements over that period of time? 672 MR. DRINKWATER: Well, I think you have to differentiate the agreements. I mean clearly we're in the waste disposal business for the long term. 673 MR. MORAN: Yes. 674 MR. DRINKWATER: If they came back to us -- if we were unsuccessful in the ISD, the Inspection Services outsourcing, and they wanted us to continue to provide that service, we would continue to provide that service for them. We do not have any intention not to continue to do that. So if that were the outcome, we would continue to provide it if they wanted it. 675 MR. MORAN: All right. And that would apply to any of the other arrangements that are, at this point at least, expected to be short term or medium? 676 MR. DRINKWATER: I think so. I'd ask Rumina to chime in because she's more familiar with some of the specifics. The Inspection Services is a bit more complicated in that there are a significant number of people that are up at the Bruce, and if we didn't have that work, we'd be in the position of having to downsize that organization. So I think that one in particular, keeping the critical mass would be relevant. 677 MS. VELSHI: Most of the other services that we do provide to Bruce Power, and it would be about six or seven of those, would be long-term ones. There would be no plans to curtail those. 678 MR. MORAN: All right. And that would include through any options that are exercised through the 40-year period that I just talked about. 679 MS. VELSHI: That is correct. 680 MR. MORAN: Mr. Drinkwater, OPG, in its prefiled evidence, has identified certain information exchanges and the existence of joint committees as two areas that had to be looked at in relation to the issue of facilitation of interdependent behaviour. I wonder if I could get you to turn to tab A4 of the prefiled evidence. 681 MR. BETTS: Mr. Moran, was that 4A you were referring to? I think you said A4. 682 MR. MORAN: Exhibit A, tab 4, page 42. 683 MR. DRINKWATER: Just bear with me. Right. 684 MR. BETTS: Thank you. 685 MR. MORAN: Do you have it? 686 MR. DRINKWATER: I think so. 687 MR. MORAN: Okay. On page 42, just starting at line 7, "employees involved in the execution of services agreements will necessarily have access to information that is required to perform their job functions. Some of this information could be relevant to market operations; for example, information on the potential for planned outages exchanged as part of a request to perform Inspection Services could conceivably allow the receiving party to adjust its bidding strategy and benefit from its access to this information." 688 What we're talking -- what you're talking about in this paragraph is facilitation of interdependent behaviour; right? 689 MR. DRINKWATER: I was looking at it in the context of exchange of confidential information. I hadn't thought about it in the context of interdependence. This is the sort of information that we'd want to have protected through the various procedures we have in place. 690 MR. MORAN: I understand. Right. But just leaving aside the ring fence for the moment, the fact that there is this kind of exchange of information means that a problem has been created and the problem that's created is the one that's described there, that somebody could -- the receiving party could adjust its bidding strategy and benefit from this access to information; right? That's the nature of the problem that's being described there; is that fair? 691 MR. DRINKWATER: Just bear with me for a second. If you turn to -- just in terms of another aspect of our evidence -- to -- 692 MR. SINGER: Tab 6, page 10, paragraph 20. 693 MR. MORAN: Tab 6, page 10? 694 MR. SINGER: Paragraph 20. 695 MR. MORAN: This is Mr. Hunter's evidence? 696 MR. DRINKWATER: Right. I think that would capture our concept of interdependence. 697 MR. MORAN: Okay. Before we get to that, let me just take you back to page 42 again. And again, the paragraph that I was referring to you, what you've described there is a problem that could exist as a result of the exchange of information; right? The problem is that the receiving party could benefit as a result of receiving this information; right? 698 MR. DRINKWATER: I'd agree with that. 699 MR. MORAN: All right. So, in other words, the receiving party is facilitated in its ability to do things in the marketplace; right? Whether it chooses to do so or not is another matter, but the possibility is now created as a result of the exchange of information. 700 MR. SINGER: Well, I guess the reason we took you to the definition was this idea that the -- for there to be interdependent behaviour there would have to be some materially negative impact on the market. 701 MR. MORAN: No, I understand all of that, and I'm not focusing on whether the interdependent behaviour actually occurs. I'm a step before that. In order for it to occur, you have to have information; right? I mean that's key to the whole issue of facilitating interdependent behaviour. There have to understandings, there has to be information available between the two parties, so that each of the parties, having that information, can engage in some sort of a strategy that leads to a better price for them in the marketplace but to the detriment of competition. 702 MR. SINGER: I'd agree there has to be joint or coordinated action, yes. 703 MR. MORAN: All right. So what we see in this paragraph, then, is a description of a problem that exists, there is this information flow, and because of the nature of the information flow, it becomes possible for somebody to take advantage of that information and benefit themselves in the marketplace; right? 704 MR. DRINKWATER: That's correct. I'd differentiate that from an interdependence between Bruce Power and OPG as part of the issue. But the use of that information in the marketplace could be problematic. 705 MR. MORAN: Right. You would differentiate that from actual interdependence, but what we have as a result of the information is that interdependence could be facilitated. Whatever your definition ends up being, it could be facilitated as a result of that information, of receiving that information. 706 MR. SINGER: Yes. I guess this takes us back to an earlier discussion of whether something actually facilitates interdependent behaviour or whether it has the potential to do that. 707 MR. MORAN: Right. 708 MR. SINGER: And I would agree -- 709 MR. MORAN: You can lead a horse to water but it won't necessarily drink; right? So the leading the horse to the water, I would call it a facilitating activity, the drinking of the water, that's the interdependent behaviour. Just to help you understand the concept. In that context the information is leading you to the water; whether you drink the water or not, that would be the interdependent behaviour. Whether you engage in it or not, that would be the interdependent behaviour, but it's facilitated; right? 710 MR. SINGER: It's the distinction between having the potential to lead the horse to water and actually leading the horse to water in your construct. 711 MR. MORAN: All it means is it makes it easier to happen; right? 712 MR. SINGER: Yes, we agree with that. 713 MR. MORAN: And so this information makes it easier for interdependent behaviour to occur; right? 714 MR. SINGER: Yes, it does. 715 MR. MORAN: So if it makes it easier, in other words, it's facilitating interdependent behaviour, it makes it easier for it to occur. Okay. 716 If we go to page 43 in the same exhibit, in the paragraph that starts at line 5: "Despite the fact that certain aggregated planned outage information will be available to market participants, some concern may still exist that the information that OPG receives is more detailed and/or provided further in advance than the information which will exist in the public domain. OPG has therefore voluntarily introduced strict internal control measures as a proactive method of allaying possible concerns and mitigating the perceived potential for any anti-competitive conduct." 717 Again, what we're talking about, what you're talking about in this paragraph is the availability of information that could facilitate interdependent behaviour, right, in the marketplace. 718 MR. DRINKWATER: Mm-hm. Yes. 719 MR. MORAN: Okay. And then if we describe that as the problem, as I understand the case that you're putting forward, the solution to the problem is the ring fence; in other words, the horse may be led to the water, but before it gets to the water there's going to be a big fence in the horse's way; right? 720 MR. DRINKWATER: It's one of the solutions. There are several we have put in place. 721 MR. MORAN: Right. The ring fence with the code of conduct, and all of those things, that's the solution to the problem that we're talking about, the facilitation of interdependent behaviour. 722 MR. SINGER: I guess there's one other element that we've talked about in our evidence which is the need for these agreements; in other words, again, to use your construct, why the horse has been led to the water in the first place. And I think there's quite a bit of evidence where we've discussed both from a safety and an operational efficiency point of view and the lack of alternative suppliers, why these agreements exist. So that I think the import of that is to give the Board some comfort that we didn't create these agreements so that they could facilitate interdependent behaviour. In fact, we created them for reasons of safety and for operational efficiency and for the lack of other suppliers. So that's, I think, another relevant element. 723 MR. MORAN: Right. Your case is, we have to have these agreements for very good reasons and we recognise that because we have to have these agreements and because they involve the exchange of some kinds of information that could be used improperly, we have to deal with that problem too; right? And so we have the ring fence and the code of conduct and everything to prevent the problem that might flow from that, even though there might be some very good reasons otherwise for having these agreements. Is that a fair characterisation of your case? 724 MR. SINGER: Yes. 725 MR. MORAN: Okay, thank you. 726 If I could just get you to turn up interrogatory I.15.5. What we see in the response there is an excerpt from OPG's generator licence and it says: "A transfer of effective control about which shall be considered not to have occurred if the Board determines that", and amongst other things, "there exist any ongoing arrangements which facilitate interdependent behaviour between OPGI or a subsidiary of OPGI and the transferee." 727 Now, if I understand the relief that you're seeking from the Board, what you're saying is that, in effect, and feel free to disagree with me if you want to, the Board should interpret this licence provision on the basis of looking at the arrangements together -- which, in some cases, facilitate interdependent behaviour -- together with the solutions to that problem, and in looking at the total picture, come to a conclusion that there isn't any ongoing arrangements that facilitate interdependent behaviour. Is that a fair characterisation of your approach? 728 MR. SINGER: I'd modify it slightly as per the answer to interrogatory 15.5 that you referenced; that, looking at the circumstances, there are agreements which could facilitate interdependent behaviour but they do not because of the existence of the numerous controls up to and including the ring fence that we've put in place. 729 MR. MORAN: Right. Okay. On that basis, then, we can move on. 730 You've put the arrangements in front of the Board; we know what all of them are. And you've put your ring fence in front of the plan. You've described the code of conduct and the other features of your solution to any problem that might occur as a result of the exchange of information. 731 It's fair to say that any of these arrangements could change over the duration of the lease arrangement; right? I mean every agreement is amenable to amendment; isn't that fair? 732 MR. DRINKWATER: You're talking about the arrangements between Bruce Power and ourselves? 733 MR. MORAN: Yes. 734 MR. DRINKWATER: Yes, they could. 735 MR. MORAN: And of course some of them will terminate, we've seen some of them already terminate. So that's a change to the arrangements as well. And of course there could be new arrangements over time also; isn't that fair? There's nothing to stop you from negotiating other arrangements with Bruce over the course of up to 40 years. 736 MR. DRINKWATER: That's true, although I think it's more likely they'd decline than get bigger. But that's true. 737 MR. MORAN: Okay. And to the extent there are changes to these arrangements, it could raise questions about the integrity of your solution, the ring fence plan and the code of conduct, because if the changes aren't considered or hadn't been taken into account or hasn't been foreseen in some fashion, so the ability of the ring fence to deal with changes going forward might be something that would have to be examined on an ongoing basis; is that fair? 738 MR. SINGER: No, I'd disagree with that. The ring fence covers all information that flows pursuant to the Bruce transaction. That was one of the reasons for taking that approach rather than an approach that depended on the categorisation of specific information as being relevant to market operations or not. So that in the unlikely event, and as Mr. Drinkwater has alluded to, it is unlikely that there are new arrangements pursuant to this transaction, that they would be encompassing the ring fence in exactly the same way as the existing arrangements are. 739 MR. MORAN: All right. So as I understand your answer, then, one of the principles built into the ring fence is, regardless of the nature of the information, if it's from Bruce and if it's as a result of any arrangement, old or new or amended, it's ring fenced. 740 MR. SINGER: Again, any information that flows pursuant to the Bruce transaction is ring fenced. 741 MR. MORAN: Including new arrangements that might be negotiated later on -- 742 MR. SINGER: Exactly. 743 MR. MORAN: -- after the fact. Okay. 744 Would there be any difficulty in making a status report to the Board from time to time with respect to the status of the arrangements as they decline, as you hope they do? 745 MR. DRINKWATER: I don't see why that would be a problem. 746 MR. MORAN: Okay. There's one agreement I want to ask some questions about now and that's the contract for differences. I don't know if you need to -- I wonder, just as a starting point, if you could just explain the purpose and rationale for that agreement. 747 MR. DRINKWATER: I can do that. I'm not as familiar with some of the specific details, but I can certainly give you the background as to why we entered into it. 748 One of the concerns that Bruce Power had in coming into the Ontario market was when was it going to open, what was it going to look like. Their experience had been that they should sell forward a significant portion of their output. I'm not sure what that number is or was, but I know it was relatively significant in terms of their output. Today in the United States we're seeing people sell forward 75-plus per cent of their output. They were concerned that, in the initial stages of a new market, it's uncertain how many players there would be, how liquid the market would be, and they were quite concerned that they could get caught in a circumstance where they had sold forward and it would take them time, if they had the two forced outages, to find other sources to fill that gap between what they'd sold forward and their production. 749 So they wanted us to give them a form of hedge or a form of insurance policy that would help mitigate the situation where they had extended forced outages and couldn't match what they sold forward with what they could produce from their facility. 750 MR. MORAN: All right. So there's a scenario, based on your description, where payments would flow from OPG to Bruce Power. 751 MR. DRINKWATER: And vice versa. 752 MR. MORAN: I wonder if you could explain the rationale for the payments in the other direction. 753 MR. DRINKWATER: It was really just a question of some degree of reciprocity. I mean it was unlikely it was ever going to happen. But if we were going to pay and the circumstances were it went above the strike price, we said, then, you could pay us if it goes below. I don't think there was any anticipation that was ever going to happen, because it's counterintuitive to what the market might do. But it was more a question of just saying, let's make it reciprocal. 754 MR. MORAN: I guess based on what you're saying, it would be reasonable to expect that if half of the units went down at Bruce, you would probably expect the spot market price to -- 755 MR. DRINKWATER: That's my point, yes. We don't have any expectation that we would receive anything under that. 756 MR. MORAN: And is this truly simply a transitional matter, it's really intended to cover just the two years that we see in the term of that contract and there's no intention of it being renewed past that time? 757 MR. DRINKWATER: That's correct. 758 MR. MORAN: And if there was a limitation put in the licence against renewing this agreement, then I take it -- 759 MR. DRINKWATER: We'd be delighted. 760 MR. MORAN: I thought that might be your answer. Okay. 761 The other area -- we talked a little bit about exchange of information, but the other area that was identified as an area of sensitivity was the creation of joint committees. That was, I think, identified as a potentially another area where you could have an exchange of information that could be used improperly in the marketplace, in other words, facilitate interdependent behaviour. 762 I wonder if I could get you to look at interrogatory I.6.5. I have a few questions about the Liaison Committee. Now, behind page 1 there's an attachment, "draft terms of reference for the OPG-Bruce Power Liaison Committee," and if you turn to what's marked as page 2 of that document, you see a membership list. Do you have that? 763 MR. DRINKWATER: I'm not there yet. Just a minute. I'm there, okay. 764 MR. MORAN: It's always a slow race to see who can turn it up because of the way these things are organised. All right. 765 So, on page 2 there's a list of, I guess, job positions; the names appear to have been blacked out. I just wanted to go through these job titles. Starting with vice-president of corporate development, could you just -- 766 MS. VELSHI: Can I just -- sorry to interrupt. I just wanted to let you know. The list you're going to is the membership of the Services Committee? 767 MR. MORAN: Sorry, you're right, at the top it says Services Committee. 768 MS. JACKSON: The Liaison Committee is on the first page in case that's the one you are interested in. 769 MR. MORAN: Let me come back to it, because I've got you on this page now. I just jumped ahead in my own questions, but thank you for that. The Services Committee is composed of a number of people on the OPG side. The first one we see is vice-president of corporate development. Could you just indicate in broad terms what the overall obligations are for that person within the organisation. Not on the Services Committee but within the organisation. 770 MS. VELSHI: Actually that position no longer exists in the organisation. It did when this committee was first struck, and that role has now been replaced by the senior vice-president of nuclear technical strategy and support. 771 MR. MORAN: Okay. And that person's obligations are what within the organisation? 772 MS. VELSHI: He is responsible for ensuring there's adequate support for the operations and maintenance of our nuclear facilities, so he looks after all the support organisations. 773 MR. MORAN: Okay. Rather than me asking about each one, why don't you just walk me through each of the job titles that I see on that list. 774 MS. VELSHI: Okay. The second person on the list is actually, Mr. Charlebois, who is the chief nuclear engineer. The third person, when we were providing nuclear safety analysis, the head of that organisation was on the committee and he no longer is. The vice-president of Inspection Services is responsible for the inspection services that's provided to both OPG and Bruce Power. Similarly, the vice-president of nuclear waste management is responsible for providing waste management services to OPG and, under our service arrangements, to Bruce Power. And the vice-president of technical services, who reports to the chief nuclear engineer, is the single person who is responsible to make sure that the NOSS services agreement works. And the last position there is really my position, where I overlook -- oversee the overall arrangements between OPG and Bruce Power. 775 MR. MORAN: All right. Now, based on your description, it sounds like none of these people have anything to do with marketing, they're all operational people; right? 776 MS. VELSHI: That's correct. 777 MR. MORAN: Do any of these people sit on any committees with marketing people within the organisation? 778 MS. VELSHI: I don't believe so. 779 MR. DRINKWATER: Pierre Charlebois -- sorry, to back up, the first person was Pat McNeil. At one time he was in the corporate development group. He moved into the nuclear group in early in 2002, so that was an older title. Pierre Charlebois is a member of the Executive Committee of OPG, and Graham Brown, who is the -- responsible for Energy Markets, also sits on that committee. 780 MR. MORAN: All right. In terms of the ring fence, given that those two people might sit together on probably one of the more important committees within the organisation, how does the ring fence operate in that context? Maybe Mr. Anderson -- 781 MR. DRINKWATER: Well, Mr. Charlebois would have information by virtue of being inside, but it says inside and he doesn't disclose that to others, whether on the Executive Committee or elsewhere. 782 MR. MORAN: From a practical perspective, then, how would that work? He has the knowledge he has. Decisions are getting made in this other committee. 783 MR. DRINKWATER: The day-to-day operation of the various services agreements are something that can be done wholly within his organisation. We haven't had to deal with issues around that at the Executive Committee. If we were going to amend the lease terms or something, that might be something that gets to the Executive Committee. But nothing from the operation of these agreements has had to get dealt with other than through either that committee or underneath Pierre's direction. 784 MR. MORAN: And then turning to the Liaison Committee, we're going backwards through this document, I apologise. Is this currently the membership of this committee from the OPG side? 785 MS. VELSHI: Yes, it is. 786 MR. MORAN: All right. 787 MS. VELSHI: Except it's not -- it's still Pat McNeil, and he's no longer vice-president of corporate development, and myself. 788 MR. MORAN: Okay. 789 MS. VELSHI: I should, however, let you know that this committee has not met since May of last year, so it's a question of how active it is, or the need for it to even meet. 790 MR. MORAN: Is this sort of an ad hoc committee, then? It meets whenever somebody thinks it's necessary? 791 MS. VELSHI: We did have regularly scheduled meetings through all of 2002. There just simply weren't agenda items for us to meet. So if issues come out on the Bruce Power side, the general counsel and I will usually try to resolve that, and if that doesn't work then Mr. Hawthorn or Mr. McNeil would do it off-line. So the committee hasn't met as a committee for some time now. The meetings were scheduled through to 2002, but the last time they met was -- that we met was in May, 2002, and then the rest of the meetings just got cancelled. 792 MR. MORAN: Mr. Anderson, is there anything in the ring fence plan or the code of conduct or any of the other relevant documents that prohibits membership on either of the two committees we've just been discussing, from the marketing side of OPG? 793 MR. ANDERSON: Well, certainly the ring fence plan, as presented in tab 8A, indicates that people from these committees would absolutely be included within the ring fence. The ring fence itself prohibits people from Energy Markets being inside. 794 MR. MORAN: All right. 795 MR. ANDERSON: So those two facts combined would prohibit -- 796 MR. MORAN: So it would never be possible, then, for anybody from Energy Markets to -- 797 MR. ANDERSON: To be inside the ring fence? 798 MR. MORAN: To be a member of either of these two committees. 799 MR. ANDERSON: No. 800 MR. MORAN: I'm going to stay with you, Mr. Anderson. Is there any examples of individuals within departments who are ring fenced where the rest of the department is not? 801 MR. ANDERSON: There are some examples where we've admitted individuals to the ring fence instead of groups. 802 MR. MORAN: And how does that get managed on the ground given that this person is surrounded by people that he or she would have to interact with on a daily basis. 803 MR. ANDERSON: Generally speaking, the individuals that are included within the ring fence as opposed to groups have very little impact and have very little interface with any information. Thief been included more for -- in order to be comprehensive, which -- the entire ring fence approach has been structured such that, as Mr. Singer indicated, any information of those pursuant regardless of its commercial sensitivity would be included. So these individuals have extremely low probability of being directly involved with commercially sensitive information in the ring fence. 804 MR. SINGER: For example, Mr. Anderson is included in the ring fence but he's the only person in regulatory affairs within the ring fence, and he's included by virtue of his role in designing the ring fence not so much because he gets specific information about transactions. 805 MR. ANDERSON: And that's an excellent example, because I don't get operational information about Bruce Power, despite the fact that I'm in the ring fence, internal segregation between individuals and groups in the ring fence ensures that I don't get that information unless I needed it to do my job. 806 MR. MORAN: Right. So there's limitations on your pass key and your password access, that type of thing. 807 MR. ANDERSON: Yes. Most of the system-type controls would be directory based. So, for example, in using myself, in regulatory affairs, I have no access to Inspection Services Division information, despite the fact that we're both within the ring fence. Likewise, they have no access to regulatory affairs information. 808 MR. MORAN: And is that how it would be for every such individual who isn't otherwise within a ring fenced department? 809 MR. ANDERSON: That's the general approach, yes. 810 MR. MORAN: Is it possible for a ring-fenced individual to transfer to Energy Markets? 811 MR. ANDERSON: Yes, it would be possible. However -- and certainly the ring fence itself has individuals coming in and going out as required as a result of just what you've indicated, transfers of responsibility -- at that time their ring fence membership would be reviewed. And if they were going, for example, to Energy Markets, they would definitely be outside of the ring fence, yet still would be bound by all the other building blocks we have in place, such as the code of business conduct, guide for information exchange and competition legislation compliance programmes which would prohibit them from taking information that they'd gained in their previous position and using it in their new position. 812 MR. DRINKWATER: It's conceivably possible, but it's very unlikely because most of the people within the ring fence that have a particular sense of information would be specialised engineering people which wouldn't really have a prospect of doing something on the Energy Markets side. It's quite different levels of work. 813 MR. MORAN: If it's unlikely -- well, let me ask this: From a practical perspective, somebody who's within the ring fence, has access to information that would be useful in a marketing context, ends up in a marketing position, is there really any practical way from stopping that person from using his own brain as part of doing his job in the marketing context. I mean, you can't really compartmentalize the information, you can't really ring fence internally inside his head. So how would that work? 814 MR. ANDERSON: Well, certainly if I can direct counsel's attention to the code of business conduct, I think it's under interrogatory 1.24. Accountabilities of all employees within that dealing with -- if you just bear with me for one moment I'll find the reference. Within section 6.1, "referencing sensitive information," within Ontario Power Generation: "Do not disclose sensitive information to colleagues unless they need to know the information or to carry out their accountabilities." That obligation stays with employees regardless of their position, so it wouldn't still be appropriate for an individual coming from an area where they had ring fenced information to an area that was specifically forbidden to have that information to use that information. 815 MR. MORAN: All right. 816 MR. SINGER: Let me just give you a bit more information so you'll have a practical sense of this, because I understand the concern that seems to be behind the question. 817 Let's take the hypothetical situation that someone who was within the ring fence happened to get a job in Energy Markets where their responsibility was for placing offers into the market. I'm picking the most sensitive job that I can think of. It's not possible for any individual, no matter what that individual knows, to unilaterally change the offers in OPG's stack. In other words, let's say I was in the kind of situation I think you're positing. I had worked in a position that gave me information about Bruce outage information, and then a month later when the information that was in my head was in still some way live, I became someone who was responsible for putting offers into the Ontario energy market for other OPG generation facilities. I could no more in that position unilaterally and without comment change the offer stack, that is, decide to change the prices that units were offered than anyone who was within the ring fence could. It's just not the kind of thing that you can do inside your head. There's a whole kind of structure around the offers. And similarly, if you could posit that person in an outage position in Energy Markets, again, no individual can unilaterally, no matter what they know in their head, change the outage priorities that are associated with different plans. These are very complex and very involved situations. So that when you have information in your head, you either don't act on it or if you attempt to act on it, you've explicitly breached the provisions that Mr. Anderson has just directed you to. 818 MR. MORAN: As I see the prohibition here, the prohibition is "do not disclose sensitive information to colleagues." In the scenario that you're describing, the person doesn't disclose it to any of his colleagues or her colleagues; instead, that person makes decisions as part of the job that that person is doing that -- that it factors that in in some fashion. I guess if I understand you correctly, what you're suggesting is that if such a individual did that, other people would notice. 819 MR. SINGER: No, I'm saying that no individual could act on his own. No individual could change the offers by him or herself. No individual could change the outage schedule by him or herself. They would have to disclose that. 820 MR. MORAN: Why is that? 821 MR. SINGER: Because -- well, let's take them one at a time. The offers that OPG makes are pursuant to a set of policies and directives about the offer strategy that nobody, as an individual, could change. That's a fundamental core of the business. It's just prudent business practice that no individual could unilaterally change the offer stack. So I would have -- if I were in that position and I wanted to change it, I'd have to propose it to a group of individuals and they would say, well, why are you proposing that, and I would have to disclose the information or else they would think I had lost leave of my senses. And the same thing with the outages. Again, it's an optimisation process that's quite complex. You have a lot of different variables, lot of different units. They have different requirements for planned maintenance. There are forced units that have to be integrated. You can't just decide one day, oh, I think this would be a good time to take this unit down. People don't do this on hunches. They do it pursuant to a pretty organised process, and no individual can control that process. 822 MR. MORAN: All right. 823 MR. SINGER: So there would have to be disclosure. 824 MR. MORAN: Somebody couldn't say, it's just a hunch, work with me here. That's what you are saying right? 825 MR. ANDERSON: In addition to that, if the disclosure part is the part that you're concerned about under 6.1 in the code of business conduct, that individual would still run up against an obligation, being outside the ring fence, which is indicated in section -- tab 8A on page 5 as "employees and agents outside the ring fence will be instructed not to seek out ring-fenced information within OPG and not to use it if they come across it inadvertently." So that gets around certainly the issue regarding disclosure. They can't use the information. 826 MR. MORAN: Just to follow up with you, Mr. Singer. How would that play out in the context of a bilateral agreement in that side of the operation? I'm -- I used to be ring fenced, now I am not. I have the opportunity to negotiate agreements. I have some information in my head which I obviously can't ignore. 827 MR. SINGER: Again, no individual can unilaterally set the price of the bilateral contract. There's a forward price curve -- it's described in some detail in the retail licence, actually, what the prohibitions are in terms of use of a consistent forward price curve. There's lots of factors that go into the development of a forward price curve and some of them are judgemental factors. But no individual can unilaterally change the forward price curve without significant discussion. 828 MR. MORAN: Again, can't do it on a hunch; right? All right. 829 All right. We've already -- you've confirmed already that one of the principles is that all information received as a result of arrangements is ring fenced. I'd like to talk a little bit about safety and environmental information just to try and get a better picture of how that fits in. Maybe, Mr. Anderson, you could just -- in terms of the safety and environmental information that goes back and forth as a result of cooperation, and so on, between two companies, on those kinds of issues, how does that information get managed? 830 MR. ANDERSON: Well, certainly what we've indicated throughout the ring fence design and implementation process, and included within the training, is the idea of any situation in which public or employee safety is in jeopardy would supersede the ring fence. For example, if Bruce Power operating staff came across a situation that was immediately hazardous to an employee or public safety, they would notify us, and that is consistent with the safety culture that exists at OPG and the safety culture at OPG and the safety culture that exists at the CNSC. Certainly regulator would insist on something like that, I would think. 831 MR. MORAN: So this is an exception, I guess, to the ring fence principle? 832 MR. ANDERSON: That's correct. 833 MR. MORAN: All right. Now, is there -- from an organisational perspective, is there any reason why Energy Markets could still be controlled by a ring fence even under those circumstances? 834 MR. ANDERSON: I'm sorry, can you provide a little more context. I'm not sure ... 835 MR. MORAN: If this is an exception to the ring fence, this is information that is not going to be treated as ring fenced information, is there any reason why Energy Markets, even under a situation involving safety or environmental issues, would have to know this information? 836 MR. ANDERSON: Certainly from a practical perspective, I can't see why Energy Markets would need to know the safety information that would flow over top of, if you want to think of it that way, the ring fence. That would be information that would flow exclusively between operations personnel. 837 MR. MORAN: All right. So if you were going to loosen up the ring fence to deal with this issue, you don't have to get rid of it completely, you can still exclude Energy Markets; correct? 838 MR. DRINKWATER: Yes. 839 MR. ANDERSON: Well, as Mr. Singer points out, it's still the need-to-know basis for the people inside the ring fence. And certainly the safety information, which we've already said would be the exception, would also be on a need-to-know basis. Those that would be impacted by a safety issue should know about it. And what I'm saying is, practically speaking, I don't see Energy Markets falling in that category. 840 MR. MORAN: Right. So therefore from a practical perspective there would be no reason not to amend, I guess, the ring fence plan to factor that in, that even under these circumstances Energy Markets still doesn't need to know. 841 MS. JACKSON: I don't think that's what the witness is saying. 842 MR. MORAN: That's what I'm asking. 843 MS. JACKSON: I think what the witness is saying is that is what the plan says. 844 MR. MORAN: Well, let the witness deal with the question. 845 MR. ANDERSON: The plan says that safety information that would jeopardise employee or public safety would not be constrained by the ring fence. Practically speaking, what I'm saying is that I can't envision a situation whereby that immediate safety implication would affect Energy Markets. 846 MR. MORAN: Right. 847 MR. ANDERSON: But it's not, I don't believe, specifically contemplated in the ring fence plan. 848 MR. MORAN: Right. And if I understand Mr. Drinkwater's response a minute ago, there would be little problem with excluding Energy Markets regardless of the nature of the issue. 849 MR. DRINKWATER: I can't conceive of any circumstance when they'd need to see that information. Pardon my hesitation, but I think I agree with you, counsel. 850 MR. MORAN: I have a similar question in relation to the arrangements with respect to intellectual property. Again, is there any conceivable reason why Energy Markets would have to know anything to do with intellectual property? 851 MR. ANDERSON: Certainly none that I'm aware of. But maybe Ms. Velshi would ... 852 MS. VELSHI: Yes, I'm not quite sure what your question is. Intellectual property is ring fenced, and I don't know under what circumstances do you feel that it would get disclosed to anyone outside the ring fence. 853 MR. MORAN: So it's always ring fenced there is no exceptions. 854 MS. VELSHI: Unless there's a safety or regulatory concern, it's always ring fenced. 855 MR. ANDERSON: The only way it would come out is if there was a safety issue associated with that. 856 MR. MORAN: With respect to technical collaboration, is the rule that it's always ring fenced? 857 MS. VELSHI: That is correct. 858 MR. MORAN: All right. Okay. So you've set up your defence, it's the ring plan, the code of conduct, et cetera. There's channels from your end that Bruce is supposed to use. It's conceivable, of course, that the folks over at Bruce might make a mistake and not use the right channels; right? 859 MR. ANDERSON: Yes, that's conceivable. 860 MR. MORAN: Has it happened yet? 861 MR. DRINKWATER: It's happened once to me that I can recall. I had a letter in the fall from Bruce Power with some issues around the level of service under the Inspection Services Agreement which they sent to me. When I saw the nature of the subject matter, I gave it to either Pat McNeil or Rumina and they dealt with the issue. It was, I think, information sort of analyzing what had happened over a period of time after the fact sort of thing. And I asked them to deal with it and asked them to reaffirm to them that this sort of information shouldn't come to the people like me, outside the ring fence. It's the only time I can recall them doing it in my sense. 862 MS. VELSHI: The only other example is in response to interrogatory 1.28, and again we do have formal mechanisms that have been established between OPG and Bruce Power for passing of information back and forth. And in response to 1.28, there was a memo from the general counsel, again clarifying that there is a protocol that we have established, it hasn't been followed, please reinforce it on your side, and that took care of it. 863 MR. MORAN: Okay. Currently there's nothing in Bruce's licence and they're not proposing anything according to their licence that would require them to follow certain rules in communicating with you guys. My question to you is that from your perspective and from the perspective of concern about the integrity of the ring fence process because there is this other player, would it make your ring fence more effective if they had some restrictions or some rules that they had to follow in their licence in order to communicate with you; for example, a requirement to communicate through the channels that you guys have set up so that they don't -- so there's more to their obligation to talk properly with you than perhaps just a voluntary approach that they might be under now? 864 [The witness panel confers] 865 MR. SINGER: Since this involves some new ground, we thought we might make sure that everyone had a consistent understanding. And so I think the view that we share is that even if information were to come from Bruce to someone outside of the ring fence, which, you know, as you've heard, has happened twice at a fairly minor level, in our view, people understand at OPG there is an obligation not to use that information. And people have gone further than that and took upon themselves an affirmative obligation, that this isn't how we do things; that there are established channels. 866 Again, when we step back to the concern that really underlies this is OPG's conduct in the marketplace, we are the person with the dominant position who is subject to the market power mitigation framework, and so we feel in that context, and given the prohibitions that we have put in place that cover both people inside and outside the ring fence, it wouldn't be necessary to put those types of arrangements in Bruce Power's licence. We have commercial arrangements with Bruce Power that we feel are sufficient and we've put into place arrangements within OPG governing OPG's conduct that we feel should be sufficient for purposes of our licence. So we can't see a situation where it would be necessary for the Board to amend Bruce Power's licence to deal with this issue. 867 MR. MORAN: In other words, you're prepared to continue to informally train Bruce on how to talk to you as needed, going forward. 868 MR. SINGER: Again, the two situations are the only two that we could come up with, having canvassed, you know, the people where this is likely. We regard both of them as fairly minor and we were -- you know, we were capable of reminding Bruce of the established procedures under the agreements and Bruce was receptive to that. So we don't, I guess, see it as a big problem and we see it as a problem that has been remedied, in large measure; and were it to pop up again, would be easily remedied, and in any event wouldn't have a consequence in the market. 869 MR. MORAN: You've had a couple of meteors; you're not worrying about the asteroid, in other words. 870 MR. DRINKWATER: Well, a couple of small instances, counsel. They are very conscious of this issue. It's not a question of training them, it's a question of occasionally reinforcing it. But they take this issue of confidentiality seriously as well. 871 MR. ANDERSON: I think it's also -- just for the record, only one of those issues occurred since marketing opening. The other one was well before market opening, in November of 2001. 872 MR. MORAN: Mr. Anderson, I'd like to talk a little bit now about the enforcement of the plan, I guess, for want of a better word. And I guess we've heard some general evidence about how violations get dealt with. You've got a chief ethical officer. Violations can lead to disciplinary action. And I think we heard evidence yesterday that the disciplinary action would depend on the circumstances. 873 Who decides on the disciplinary action? 874 MR. ANDERSON: Generally speaking, enforcement of the ring fence, the initial step of enforcement under the ring fence would be taken by the ring fence administrator who is an individual that resides within the CIO office of OPG. Any breach of the ring fence is automatically reported to him. If the breach itself was intentional in nature, then certainly that would be something that would go to the chief ethics officer who would initiate his own investigation, out of which would come recommendations regarding disciplinary action. 875 MR. MORAN: All right. And who would decide on discipline? 876 [The witness panel confers] 877 MR. DRINKWATER: I think it would be a combination of the management of the individual involved and the chief ethics officer would listen to the submissions and make a decision. At the end of the day they, the chief ethics officer, would be the person who would have that final say. 878 MR. MORAN: And in terms of the plan of action that would be followed, is that set out anywhere? There's a violation, there's a certain plan of action. Is there somewhere I can find the plan of action that takes me from discovery of the violation through to ... 879 MR. BETTS: I see some people in the back indicating that -- as the afternoon goes on our voices are dying down a little, so if we can get that energy back in our vocal chords, that would help. 880 MR. MORAN: Maybe they are just sitting too far away. 881 MR. DRINKWATER: I said the issue of enforcement would be a combination of the management of the individual working with the chief ethics officer, and that's how it would be determined in terms of the sanction. 882 MR. MORAN: All right. Does the chief ethics office have a specific plan that says, this is our plan that we'll follow in the case of these kinds of violations? 883 MR. DRINKWATER: Go ahead. 884 MR. ANDERSON: Certainly for any code of business conduct violation, typically what happens from the chief ethics officer is an investigation is initiated through corporate security in OPG. And to give you some sense of what happened in the code of business conduct area last year, 2002, corporate security initiated 49 investigations as a result of code of business conduct violations or allegations of violations. The results of those, 13 individuals ended up leaving the company at OPG. So certainly the code of business conduct itself is taken very seriously. I believe there are processes in place in the corporate security area for conduct of these investigations. And, again, it's taken quite seriously. 885 MR. MORAN: In the event that a problem happens with the ring fence, is there any plan in place with respect to reassessing the ring plan itself -- the ring fence plan itself and determining whether it needs improvement in particular areas? 886 MR. ANDERSON: We'd certainly -- we will continue to monitor the ring fence. There is a maintenance function, again, that's been taken up by the office of the CIO and the ring fence administrator. And we do have a formalised monitoring function that will be carried out by our risk and assurance services group in terms of internal audits. The result of those audits would be acted on very quickly in terms of modifications that would improve the ring fence. 887 MR. MORAN: Okay. If somebody disclosed information unintentionally, how would that get dealt with? 888 MR. ANDERSON: Unintentional breach, again, it would be reported through the ring fence administrator. Again, all of these situations are going to be looked at based on the situation itself. But certainly if it was a situation whereby there was no malice intended, there was no detriment to the market, it was a slip, we're not going to elevate that to the status of a chief ethics officer for a formal investigation. 889 MR. MORAN: In other words, there wouldn't be a discipline decision taken on this? 890 MR. ANDERSON: I can't respond to the hypothetical without knowing what the situation is. Certainly an intentional breach would be elevated to a code of business conduct violation. 891 MR. MORAN: Now, you've made reference to the internal audit as one of the ways to keep an eye on the ring fence and make sure it's working okay. Could you indicate how that works? What's the audit plan for the ring fence? 892 MR. ANDERSON: What we would do is bring in the internal audit group, the risk and assurance services group, to evaluate probably specific components, specific risk areas associated with the ring fence. Generally speaking, risk and assurance services look at those, the key risk areas that they feel are most critical, look at what actually exists versus what would be the optimum, and then determine if a significant gap exists. From there they would propose recommendations based on interviews and assessments of either electronic or paper controls for improvement of the plan. Those recommendations would go to management in the area that's affected and would be implemented. 893 MR. MORAN: How often would the audit team be examining the performance of the ring fence? 894 MR. ANDERSON: We haven't put forward a formal schedule. Certainly the customer information ring fence has been audited in the past. Two audits from our internal group. And they were done -- one was done in 2000 and one was done in 2002. 895 MR. MORAN: Would it make sense to require a regular audit, particularly in the early years? 896 MR. SINGER: I guess the expectation is it will be audited in the early years, so I don't think it would add anything, nor would it detract from anything if there were such a requirement. 897 MR. DRINKWATER: I think it would be a good idea to audit it early rather than later, because I think if there are issues it's easier to fix them at the front end than later on. 898 MR. MORAN: Has there been development of benchmarks for the audit team that would look at this, or you're not there yet. 899 MR. DRINKWATER: We certainly haven't developed specific items for that. They tend to be relatively independent, and my experience in other areas, trying to suggest benchmarks to them hasn't gone down all that well. They'll develop their own in dialogue with Colin and others, is my expectation. 900 MR. MORAN: Are you aware of any development of any benchmarks at this point? 901 MR. ANDERSON: No, I'm not. 902 MR. DRINKWATER: I suspect they would look at their work on the retail quotas as at least something to compare it to. 903 MR. SINGER: In our experience, the benchmark is perfection. In other words, anything short of perfection is a gap and it's just a question of how significant a gap and how easily it is to be remedied. They recognise that people are human, but they don't give much credence to that fact. 904 MR. MORAN: You say that with a certain ruefulness. 905 MR. SINGER: Well, you know, an audit is not something that people look forward to. 906 MR. MORAN: With respect to auditing risk areas, is the ring fence on the list of risk areas? 907 MR. ANDERSON: The ring fence is on the list, yes. I've already spoken to people in the risk and assurance services area about an upcoming audit. 908 MR. MORAN: And in the event of an audit, what typically happens? Does the audit -- is there a report that comes out of the audit? 909 MR. DRINKWATER: There is a report that comes out. Anything that is subject to internal audit gets reported up through the -- first of all, through the management area that's involved; it then goes to our Executive Committee and then to our audit committee. 910 MR. MORAN: And would it -- 911 MR. SOMMERVILLE: Who was that final committee? I'm sorry. I didn't -- 912 MR. DRINKWATER: The audit committee of the board. Our internal auditors report to the board on all areas that they audit and they give it a grade and it gets assessed as to whether it was satisfactory or whether additional work needs to be done, so that the internal audit group is actually overseen by an audit committee of the board as opposed to management. 913 MR. SOMMERVILLE: Thank you. 914 MR. MORAN: Would it be a problem to share such a report with the board? 915 MR. DRINKWATER: I wouldn't have a problem with sharing it with sort of staff of the board in confidence. The thing that I would be a bit concerned about is if there were references to individual names or other circumstances that might be sensitive, it might be appropriate to have it in the public domain. But I certainly wouldn't be troubled with disclosing it to board staff in confidence. 916 MR. MORAN: And if those concerns could be resolved through deletions of people's names, would that alleviate your concern? 917 MR. DRINKWATER: Well, I don't think I'm comfortable having it in the public domain, but I'm certainly comfortable having the board staff have a look at it just to oversee it, perhaps the way they do, or could do if they wanted the retail ring fence. 918 MR. MORAN: Now, we're all in new territory here, obviously; OPG, the Board, Bruce Power. Do you consider that there would be any value to an external audit, at least in the early years, to ensure that everything is working the way it ought to work? 919 [The witness panel confers] 920 MR. MORAN: Based on what Mr. Singer said yesterday, he might actually prefer that actually over the internal auditors. 921 MR. DRINKWATER: I think that's probably going a bit further than you need to. In the sense -- it would make more sense for me that it's done internally because I think in the first instance, because the internal auditors more readily understand the OPG systems and everything else. I think you'd actually get a better product and a more -- it would be a better outcome to have it done internally. If you wanted to have somebody look to see whether the approach of the OPG internal audit was the right sort of way to go about it, in other words, that they look at the process and the things they looked at, I think it would be putting a lot on an external person to come in and look at something that's this complex. I'm not sure you would get as good an outcome quite frankly. 922 MR. MORAN: Moving back to you, Mr. Anderson. You've talked about the ring fence administrator. How does that person track performance of the ring fence plan? 923 MR. ANDERSON: Any indication to the ring fence administrator is logged of violation or allegation associated with violation, and from there an investigation would be started by him and, as I've said before, could be escalated. The ring fence administrators would be charged with the ongoing maintenance of the ring fence. In addition to that role, he also logs all the training, he logs the systems that have been catalogued, he logs any changes to training, any changes to systems, and keeps a very close eye on anything that could impact the integrity of the ring fence. 924 MR. MORAN: Would that person be in a position to produce a compliance report on an annual basis, say? 925 [The witness panel confers] 926 MR. DRINKWATER: Yes, they would. I -- my pause again was just concerns about the confidentiality. But other than that, certainly I don't see why they couldn't do that. That's part of what they're supposed to be doing. 927 MR. MORAN: Right. And subject to the concerns you expressed about the audit report being given to the Board, is that something that could be provided to the Board? 928 MR. DRINKWATER: On the same basis of confidentiality, we'd be -- I was going to say happy to do it, but we would be. 929 MR. MORAN: Okay. Does Bruce Power have office space at 700 University? 930 MS. VELSHI: Yes, they do. 931 MR. MORAN: And what do they use that space for? 932 MS. VELSHI: They have an office on the ground floor and it's the group that looks after the nuclear safety analysis. It's a -- it's a group of their engineering organisation that's there. 933 MR. MORAN: Okay. And, I guess, why do they have to be in your building? 934 MS. VELSHI: It's -- it's a group of employees that were originally at OPG, at head office, and then got transferred over to Bruce Power. I think mostly because they were reluctant to move to Bruce County, so Bruce Power decided to set up an office in Toronto for them. And now that the service provider, Nuclear Safety Solutions, previously OPG, happens to be in that building, it allows for stronger partnership in the provision of services. So they're closer to the service provider and to accommodate employee needs to stay in the city. 935 MR. MORAN: There wasn't any other office space available nearby to maintain a certain level of independence, or at least the appearance of -- you know, these are competitors, right; that we're talking about. 936 MS. VELSHI: Yes. Well, I don't know if they looked at other facilities. But they are totally separate from OPG. Our Nuclear Safety Analysis service provider is also at 700 University Avenue, and they too had the option of looking for office spaces elsewhere and chose 700 University. 937 MR. MORAN: Right. If I phone the main number at OPG, 700 University, and ask to be put through to the Bruce people, are they able to do that? 938 MS. VELSHI: I'm sorry, I've never tried that, so I wouldn't be able to answer that. 939 MR. MORAN: How plugged in to the infrastructure are there? 940 MS. VELSHI: Oh, they're not. They're totally separate. 941 MR. MORAN: The last area I want to cover with you has to do with binder X. It sounds like a brand name for something. If you could just -- my tabs aren't numbered and I have one that I've lost. I'm sorry, if you could just bear with me for a moment. I'll move to the ones that I have available to me. 942 Tab 4. As I understand it, the rules of engagement here are I'm not supposed to name the document, just draw your attention to it, so if I could bring you to tab 4. As you can see, it's named what it is. 943 MR. BETTS: I'm sorry, mine is not numbered either so I'm going to have to make sure I'm looking at the right one. 944 MR. MORAN: Mr. Chair, for your assistance -- 945 MS. JACKSON: I might be able to assist. Do the first two words on this agreement read "used fuel"? 946 MR. MORAN: Yes. 947 MS. JACKSON: Not necessarily reading further. 948 MR. BETTS: I've got those first two words, thanks. 949 MR. MORAN: All right. And I guess that one, in conjunction with tab 7, three tabs later, which appears to be an amendment to the previous tab, contains the same words, "used fuel," those two tabs together, I wonder if you can describe to me the nature of the information exchange that occurs as a result of these two agreements. 950 MS. VELSHI: Given that we know what the first two words are of the agreement, the information particularly around used fuel would be Bruce Power is required to send us annually how much used fuel they are expecting to produce, so it would be for the next year and then for subsequent years after that, their best estimate of that. So it would be, you know, a thousand bundles, or whatever the unit is. And then also under the agreement they are required to let us know how much of that fuel they want us to pick up over the given year. So it's really mostly around quantities of used-fuel bundles that's going to get produced and go in the fuel bay and how much they want us to pick up. 951 MR. MORAN: And I take it this would be ring fenced information; right? 952 MS. VELSHI: Absolutely. 953 MR. MORAN: Now, my next question is in relation to the next tab, tab 5, the fifth tab, I guess, and I guess the related one, tab 8, which is -- 954 MS. VELSHI: An amendment to that. 955 MR. MORAN: -- which is a letter. 956 MS. VELSHI: Right. 957 MR. MORAN: Again, I wonder if you can just indicate the nature of the information exchange and who's involved in it. If you don't want to get into using the specific words that are in the name of it, that's fine. Just if you can describe the nature of the exchange and who's involved in that kind of exchange. 958 MS. VELSHI: This particular agreement is a service that Bruce Power provides to OPG, which in turn has a contract with a third party service provider. And if you're specifically interested in the kind of information that goes back and forth around the implementation of this agreement, it's similar to the used-fuel one. It's when they have produced this commodity for us, they would advise us on when it's ready to be shipped. 959 MR. MORAN: Again, this is ring-fenced information. 960 MS. VELSHI: Yes. 961 MR. MORAN: The last one, I think, is the very last tab. It's a letter agreement. I wonder if you could indicate what the rationale is for this agreement -- first of all, I'm not sure if this is one of the agreements that might be expired. Can you confirm whether this one is expired already? 962 MS. VELSHI: Yes, it is expired. In the Exhibit F.1.1 that we handed out this morning, it's behind tab 13, and it expired at market opening. 963 MR. MORAN: Is there any intention to enter into a similar agreement? 964 MS. VELSHI: No, there isn't. 965 MR. MORAN: So to the extent that such an agreement might help somebody understand output data, for example, that's not going to happen. 966 MS. VELSHI: No. 967 MR. MORAN: Mr. Chair, I think those are all my questions. Thank you very much, panel. 968 MR. BETTS: Thank you. 969 Ms. Jackson, are you in a position to re-examine? 970 MS. JACKSON: I am in a position to tell the Board that I have no re-examination. 971 MR. BETTS: Thank you. I'll inquire if the panel members have any questions. If there are any -- this came up yesterday, if there are any questions that counsel feels they need to clarify, we won't resist that possibility. 972 MS. JACKSON: Thank you, Mr. Chair. 973 MR. BETTS: Mr. Sommerville. 974 QUESTIONS FROM THE BOARD: 975 MR. SOMMERVILLE: Mr. Anderson, you indicated that the internal audit group of your company, which I take it is in the information organisation -- what department of the company conducts the internal audits? 976 MR. ANDERSON: The risk and assurances services group is actually within the finance organisation at OPG. 977 MR. SOMMERVILLE: Okay. Are you in the process now of developing the protocol for the audit for the ring fence activity? 978 MR. ANDERSON: I have discussed last year with risk and assurance services the possibility of doing an audit at some point this year, probably in the first half of this year, and we had discussed in general the sort of areas that we would be looking at. 979 MR. SOMMERVILLE: Would it be your normal process to develop a specific protocol for that audit to occur? Would you do that jointly with the internal audit group? 980 MR. ANDERSON: I think, as Mr. Drinkwater pointed out, the internal audit group -- 981 MR. SOMMERVILLE: Has a mind of its own. 982 MR. ANDERSON: -- tend to function quite independently and certainly would prefer to put together their own protocol. 983 MR. SINGER: If I might add, Mr. Sommerville, typically they will come and talk to you about the protocols. They just don't always accept your input. 984 MR. SOMMERVILLE: That's generous. Thank you very much. 985 MR. BETTS: Thank you. And I have no questions. Before we take the next step, I would like to thank this witness panel again for contributing greatly to the proceeding, and it will undoubtedly help all parties to deal with the next stages. So thank you once again. And I think there are perhaps some procedural matters that still are to be dealt with, and we'll try to deal with that over the next few minutes. 986 Mr. Moran. 987 [The witness panel is excused] 988 PROCEDURAL MATTERS: 989 MR. MORAN: Yes, Mr. Chair. There's been discussion amongst the parties about scheduling of oral argument. I think the proposal is as follows, and subject obviously to the comments by parties: It's anticipated that the evidence would be completed on Monday, which is always a dangerous thing to say, of course, but on that basis, parties would take Tuesday to prepare argument which would then be delivered starting on Wednesday, with OPG going with its argument in chief in the morning, adjourning for, I think the proposal was up to an hour, if intervenors needed to fine-tune their response, based on what they heard; intervenors presenting their argument in the remaining part of Wednesday and OPG delivering any reply it might have on Thursday morning. 990 MS. JACKSON: and I think that one other aspect of that that was discussed was that for those intervenors who indicated they would be filing simply in writing, the contemplation was that they would do that by noon on Wednesday. 991 MR. MORAN: And this would allow OPG to factor that into their reply to the extent that they needed to reply to anything raised in those written arguments. And this was based on a couple of parties indicating at the outset that while they wouldn't be here, they might want to still make some argument. And I guess the only other issue was the availability of one of the Board members for both Wednesday and Thursday, and the parties have indicated that they have no objection, because it's argument and not evidence, if one of the Board members can't be present for all of the oral argument. 992 MS. JACKSON: We understand it's going to be transcribed. 993 MR. MORAN: On the understanding that it will be transcribed and read and deliberated on at great length. 994 MR. BETTS: As far as that goes, are there any objections from any of the participants from what they heard so far? Okay. Now, I did understand that there was some difficulty with transcribing that -- those oral arguments into our normal kind of package. Could you explain what we -- what the participants might expect to receive, and when? 995 MR. MORAN: As I understand it, there was a possible problem with the availability of court reporters after 3:30 on Wednesday. I understand that that's been resolved now, that there will be somebody here who will be transcribing. The issue I think that you're referring to has to do with how soon the transcripts will be turned around and delivered to parties. And I don't have a whole lot of information about how soon that will be, but my impression is that turnaround is not an issue here because people are going to be hear listening to the argument and responding to it, but subject to what other parties have to say ... 996 MR. BETTS: So no parties will depend on a transcript from the previous day to prepare their arguments for that day in that they will be here to hear the oral argument. 997 MR. MORAN: If parties choose not to attend, they've chosen not to attend and intervenors have to give their argument in the afternoon. So the transcript is definitely not going to be available from the morning for those parties anyway. So if they want to know what was said, they have to be here, I think, is the understanding. 998 And the only person who is coming in on Thursday is OPG, so as long as they don't -- 999 MS. JACKSON: And we do plan to be here Wednesday afternoon. 1000 MR. MORAN: And I expect they will be here, yes. 1001 MR. BETTS: Okay. And then the next -- the next and last question, I guess, is does anyone know at this point when the transcripts would be available to all the parties. 1002 MS. DONISON: Monday morning. 1003 MR. BETTS: Monday morning from a source who knows the answer. So for everybody's information, it would be the following Monday that all of the transcripts would be available. 1004 Having heard all of that, do I hear any objections? It looks as though everybody present anyway is in tune with that. And I hope everybody reads their transcripts when they receive them tonight. 1005 Are there any other preliminary matters to deal with on this Friday afternoon? 1006 MR. POCH: Mr. Chairman, I'm assuming, maybe I should have made this explicit, that given the short schedule that is proposed for argument and the fact that it's oral argument, the Board is not expecting the usual argument with numerous transcript references cited and so on, that given this short hearing, that is fresh enough in your mind that we can -- while certainly recapping the nature of evidence we refer to in support of our arguments, I'm presuming the Board is not expecting us to be able to annotate our oral submissions with paragraph references. 1007 MR. BETTS: I'm not sure that I can guide you in that way, Mr. Poch. You've done a lot more of this than I've heard, so I'm going to have to leave that to you. Certainly if it's something that you feel is important that the Board should be able to connect with, I would encourage you to make that connection. But certainly, I think I have to leave that at your discretion. 1008 MR. POCH: That's fine, Mr. Chair. Thank you. 1009 Anything further? Then I feel we've come pretty close to hitting our deadline. 1010 MR. MORAN: I did promise I would be done by 3:30. 1011 MR. BETTS: You did indeed, and everybody has helped with that. So I think at this point we can adjourn this meeting on this Friday afternoon, and hopefully we'll see everybody's friendly face, and certainly not our witnesses, at Monday at 2:00. Thank you, all. 1012 --- Whereupon the hearing adjourned at 3:35 p.m.