Rep: OEB
Doc: 12KPC
Rev: 0













ONTARIO ENERGY BOARD

Volume: 4

12 FEBRUARY 2003


BEFORE:



R. BETTS

PRESIDING MEMBER

P. SOMMERVILLE

MEMBER

B. SMITH

MEMBER



1
RP-2002-0142 EB-2002-0420 TRANSCRIPT VOLUME #4

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 #4


4
12 FEBRUARY 2003

5
HEARING HELD AT TORONTO, ONTARIO


6
APPEARANCES

7

LAURIE KLEIN

Board Staff

DAVID BROWN

Board Staff

PATRICIA JACKSON

OPGI

MICHAEL PENNY

OPGI

TOM ADAMS

Energy Probe

MARK MATTSON

Energy Probe

JUDY KWIK

VECC

MICHAEL JANIGAN

VECC

DAVID POCH

GEC CIELAP OSEA

ROBERT WARREN

CAC

ANDREW LOKAN

Power Workers Union



8
TABLE OF CONTENTS

9

PROCEDURAL MATTERS:

[18]





SUBMISSIONS BY MS. JACKSON:

[31]





SUBMISSIONS BY MR. POCH:

[196]





WRITTEN SUBMISSIONS BY CANADIAN MANUFACTURERS AND EXPORTERS INSERTED:

[266]





WRITTEN SUBMISSIONS BY IPPSO INSERTED:

[279]





SUBMISSIONS BY Mr. WARREN:

[340]





SUBMISSIONS BY MR. JANIGAN:

[368]





SUBMISSIONS BY MR. MATTSON:

[391]





SUBMISSIONS BY MR. LOKAN:

[415]





10
EXHIBITS

11

12
UNDERTAKINGS

13

14
--- Upon commencing at 9:32 a.m.
15
MR. BETTS: Thank you, ladies and gentlemen. Please be seated.

16
Welcome back to day 4 of this proceeding, and we are reconvening to consider application RP-2002-0142 submitted by Ontario Power Generation. At this stage we have completed the evidentiary portion and we are beginning arguments.

17
Just one procedural item before we seek procedural issues from you, that being cost awards.

18
PROCEDURAL MATTERS:

19
MR. BETTS: Any parties that are seeking cost awards, we would ask that they be submitted to the Board by 4:45 p.m., Friday, February 28th, and hopefully everyone will read the transcripts that are not present today.

20
Are there any procedural matters from the applicant first?

21
MS. JACKSON: Just one, Mr. Chair, and it relates to the question of the redacted confidential documents that were earlier circulated pursuant to procedural order number 5. You'll recall that under that order people who had not signed the undertaking were to return the documents, and people who had signed the undertaking were to return them at the end of the hearing. And particularly in light of the fact that people in the former category particularly, and possibly even in the latter, may not necessarily be reading the transcript and/or reminded of that, on behalf of the applicant I wanted to ask the Board if the Board would consider sending out a separate directive to solicit the return of those documents for the reasons that we expressed at the beginning, that confidentiality remains of concern.

22
MR. BETTS: We will, indeed.

23
MS. JACKSON: Thank you, Mr. Chair. That's all I had by way of procedural matters.

24
MR. BETTS: Thank you. Are there any procedural matters from the intervenors?

25
MR. WARREN: Mr. Chair, I wonder if I might enter an appearance on the record in the oral phase of the hearing. My name is Robert Warren. I'm counsel to the Consumers' Association of Canada. We had written to the Board indicating that we would not have counsel present for the evidentiary portion of the hearing, but we would reserve the right to read the transcript and make an oral argument. I've been instructed to appear here today to deliver that oral argument, which mercifully for everyone, will be brief.

26

MR. BETTS: Thank you, Mr. Warren, we did receive that correspondence, and welcome today.

27
MR. WARREN: Thank you.

28
MR. BETTS: Any other items?

29
Then let us proceed with the applicant's final arguments, final statements, Ms. Jackson.

30
MS. JACKSON: Thank you, Mr. Chair.

31
SUBMISSIONS BY MS. JACKSON:

32
MS. JACKSON: Thank you, Mr. Chair. May I just start by explaining you will have before you, as does everybody else, two things which are intended, I hope, to assist with respect to this argument. The first is a list of the topics that I will be covering, and I've primarily given that to everyone, and particularly to the reporter, with the request that those headings be inserted in the transcript for ease of reference after the fact and for those who, I guess, become impatient as I proceed, there's some sense of whether progress is being made or not.

33
The other is what's called "A Compendium of Ontario Power Generation". This contains all -- and frankly, in fact in hindsight, slightly more than all of the matters -- of the evidentiary references which I propose to make during my argument. I will actually be taking you to some of the documents in this book, but apart from that my intention, as far as I'm able, is to give you both a reference in the evidence and a place where you can quickly find it in this compendium.

34
So with that by way of background, let me start down this list of topics and deal first with the question of the background to this application, and in particular beginning with the minister's directive and licence.

35
BACKGROUND

36
MINISTER'S DIRECTIVE AND LICENCE

37
As the Board is aware, following the Macdonald Report and the white paper on Energy Directions for Change, the government established the Market Design Committee to study and make detailed recommendations on energy restructuring in Ontario. The work of the Market Design Committee is summarised in four reports, the last of which was completed in January of 1999. An important element of the Market Design Committee's work involved a negotiation and agreement on the market power mitigation framework. That proposal was largely accepted by the government and given effect by the Minister's directive to this Board of March 24, 1999. The relevant provisions of the minister's directive were approved as the terms and conditions of the OPG generation licence by this Board, and it is those terms and conditions which form the basis of this application and this proceeding.

38
The application arises from OPG's licence which provides, in part 4, paragraph 4, that OPG may apply to the Board for a determination of whether a specific transaction by OPG represents the transfer of effective control over the output of the generation unit, and confirmation of the appropriate adjustments to the CRQ and the Qs for that generation capacity if -- for purposes of determining what rebate, if any, is required in accordance with part 3 of the licence.

39
Let me take you to an overview of part 3 of the licence. That leads me to an overview of the issues.

40
OVERVIEW OF ISSUES

41
There are, as the Board has established, three issues in this application.

42
First, does the long-term lease of the Bruce nuclear generation station to Bruce Power represent a transfer of effective control of the Bruce output? Effective control, according to the licence, means control over the timing, quantity, and bidding of output into the Ontario market.

43
Second, did Bruce Power, as a result of the transfer, gain effective control over 25 per cent or more of total in-service tier 2 capacity or total in-service tier 1 and tier 2 combined capacity?

44
And third, do there exist any ongoing arrangements which facilitate interdependent behaviour between OPG and Bruce Power?

45
And as a consequence of those three issues, OPG further seeks confirmation of the appropriate adjustments to the CRQs and the Qs -- the CRQ and the Qs in accordance with part 3 of the licence.

46
Tier 1 of capacity is of course all nuclear and hydroelectric generation in Ontario. These generation technologies tend to have lower marginal operating costs and in the case of nuclear generation plants in particular, as you've heard, they are not designed to vary their production levels to meet changes in demand. These units, in fact, are best suited to running whenever they are available.

47
Tier 2 capacity, on the other hand, is the balance of production capacity, including intertie capacity and demand-side bidding. The generation technologies involved in tier 2 facilities, often referred to as intermediate or price-setting facilities, are better suited to varying their production level in response to changes in demand.

48

It is apparent from the prefiled evidence, the interrogatory process and the oral evidence in this case, that as a result of these matters there is really only one issue of potential controversy in this application, and that relates to whether the ongoing arrangements between OPG and Bruce Power can be said to facilitate interdependent behaviour between them. But let me touch briefly on the first two elements of the test. So that leads me to the heading on this list, transfer of effective control over timing quantity and bidding.

49
TRANSFER OF EFFECTIVE CONTROL OVER TIMING, QUANTITY AND BIDDING

50
The market opened on May 1, 2002. OPG is expected within 10 years of market opening to reduce its effective control to 35 per cent or less of the total Ontario market, including tier 1 and tier 2 capacity, and that's of course set forth in the OPG licence which is found in the evidence at I.6.5, part 4, paragraph 3 of that licence, and you'll find it in the compendium at page 2.

51
Under the rebate mechanism, a predetermined amount of OPG's expected energy sales in Ontario is subject to an average annual price cap of 3.8 cents per kilowatt hour. OPG is obliged to pay a rebate to Ontario energy consumers via the IMO to the extent that the annual average price exceeds this threshold. The amount of the rebate, however, is determined using a formula which is called the contract required quantity, or CRQ, and which reduces that amount by 110 per cent of the amount of any generating capacity over which OPG has, as approved by this Board, transferred effective control. That's found at part 3 of the licence, and that's at page 1 of the compendium.

52
On the evidence before you, I suggest there is no doubt that the first part of the transfer of effective control test has been met. There was no challenge made to part 1 of that test during intervenor cross-examination. Bruce Power has a lease granting it exclusive possession and control of the Bruce generation station until 2018 with an option to renew for up to an additional 25 years. More significantly, OPG's authority to operating the Bruce nuclear facility expired at midnight on May the 11th, 2001, by order of the Canadian Nuclear Safety Commission. Exclusive legal authority to operate the Bruce Power station was conferred upon Bruce Power by that commission effective the next day. Bruce Power has operated the Bruce station since then. It is also the registered market participant for the Bruce facility and is therefore the only party permitted to offer the Bruce output into the IMO-administered market, and that's described in the evidence at Exhibit A, tab 4(b), page 34. You'll find that in the compendium at page 4.

53
And I'll suggest on the evidence, therefore, the Board can come to no other conclusion but that the effective control over the timing, bidding, and output of the Bruce facility has been transferred to Bruce Power.

54
The next issue in the test is the question of market power.

55
MARKET POWER

56

I submit it is uncontroversial that Bruce Power does not before, or as a result of this transaction, have control over 25 per cent or more of the capacity of the Ontario market. Bruce Power is a new entrant into that market. Prior to the transaction, its market share with respect to Tier 1 or Tier 2 was zero. The Bruce B units have a net station output of 3,160 megawatt-hours, and you'll see that at Exhibit G.2.2 which is at the compendium at page 5. Total in-service capacity, which is also at the same exhibit, in Ontario is approximately 34,000 megawatt-hours. Accordingly Bruce Power has, as a result of this transaction, effective control of less than 10 per cent of the total in-service capacity in Ontario. Again, there was no challenge to the evidence on this issue during cross-examination and I suggest on the evidence the Board can only conclude that that portion of the test has been met.

57
That takes me to the issue that did -- that was canvassed in the evidence, the question of whether the transaction does or does not facilitate interdependent behaviour, and the applicant says that it does not.

58
THE TRANSACTION DOES NOT FACILITATE INTERDEPENDENT BEHAVIOUR

59
THE TEST

60
The genesis of the requirement that the requirement not facilitate interdependent behavior is reviewed, amongst other places, at paragraphs 15 to 17 of Mr. Hunter's evidence, and you'll find that at Exhibit A, tab 6, page 8 and 9, and in the compendium at pages 7 to 8. And briefly stated it is this: The Market Design Committee, whose recommendations formed the foundation for the market power mitigation framework, sought to impose conditions on decontrol and specifically in this regard the interdependence test to prevent situations in which a transaction results or is likely to result in implicit or explicit arrangements or behaviour which materially harm competition. It is evident, I suggest, that the requirement that the transaction not facilitate interdependent behaviour is drawn with this objective in mind and with reference to the concept of interdependent behaviour as that concept is understood in competition policy.

61
That concept is well understood in competition policy, and in the words of both Mr. Hunter and the Competition Bureau, it is joint or coordinated behaviour by two or more parties undertaken for their mutual benefit and to the significant or material detriment of competition. In Mr. Hunter's case, that evidence is at Exhibit A, tab 6, page 5, paragraph 9, and that's page 6 of the compendium. The Competition Bureau's evidence is at Exhibit D.8, pages 2 to 3, pages 14 to 15 of the compendium.

62
Lawson Hunter, the former director of a Competition Bureau, and a well-established expert in competition law, has provided the Board with a specific definition of this well-understood concept, interdependent behaviour, for use in respect of the licence test. That's found at his evidence at tab 6, at page 10, paragraph 20, and it's found in the compendium at page 9. His definition is that interdependent behaviour is, "joint or coordinated action by two or more parties that is anti-competitive in nature and has a materially negative effect on the market."

63
I'd like to pause over several important points that I say flow from the application of this definition and the test of facilitating interdependent behaviour which results from it.

64
In the first place, ongoing arrangements which facilitate interdependent behaviour must be arrangements which are joint -- which facilitate joint or coordinated action, in this case by both OPG and Bruce Power, undertaken for their mutual benefit.

65

Let me just take you to those aspects of the evidence in the compendium, first of all, looking at Mr. Hunter's evidence, which you'll find at the top of page 6 of the compendium. He says, and this is page 5 of his evidence at the top -- just so you have it, the compendium page references are in the upper right-hand corner of the compendium. "From a competition law perspective, the term interdependence implies joint, anti-competitive behaviour by two or more parties that has the effect of materially distorting market outcomes to the mutual benefit of the parties."

66
And if you turn to the Competition Bureau's evidence, which you'll find at pages 14 and 15 of the compendium, you'll see this, and in particular I'm looking at page 14 for this extract, under the heading, 2, Interdependent Behaviour Under Canadian Competition Law. "The Bureau views interdependent or coordinated behaviour as behaviour by a group of firms in recognition that each of them will be better off by accommodating the cooperative conduct of other firms."

67
The second important feature, and consistent with the purpose of the test, is that it focuses on the impact of any violation; namely, the likelihood that the arrangements will have a materially negative effect on competition. In the words of the evidence, and this is found at the interrogatory response I.15.5, which is at the compendium page 16, the issue is not whether the arrangements could facilitate interdependent behaviour but whether they do so. As Mr. Hunter put it, the question is whether the arrangements are likely to produce a materially negative effect. And could I ask you to turn up his evidence at page 17. This is an excerpt from his oral evidence last Friday and I'm reading, commencing at paragraph 229 of that evidence.

68
"Well, I'm not trying to be obtuse or difficult, I hope, but there are two parts to this, in my view. You have to have the circumstances that would facilitate the interdependent behaviour, and, in my view, they would actually have to be happening. I think you could look at this arrangement and say they've all entered into all these arrangements and they're sharing this information so that has happened, this is happening.

69
But the Board, in my view, should not just look at that and say, therefore, it's bad. You have to look at why you're worried about this in the first place. And that's where, to me, it's very important to do two additional things that I put in my test, which are different obviously from the Competition Act because they look at, sort of, do we need the definition and then they say, what's the impact. And I'm saying, in my view, that's what the Board should do, it should make sure that when it looks at these things, even when they occur, is it going to have a materially negative effect on the market; and secondly, I made this distinction as well, it should be anti-competitive.

70
There are lots of things that business people do that might be sharing of information that are pro-competitive, that are beneficial, that are efficiently-enhancing, and you don't want to drag all those into this as well. So you need, in my view, to zero in on the things that are anti-competitive in nature."

71

And then if I could skip further down that page to Mr. Poch's questions commencing at paragraph 236: "I think the crux of my question is this: If we have a situation where the Board, having looked at the safeguards, finds them inadequate for whatever reason or not applicable to the licence test, and finds that whatever test of materiality it adopts there could be an impact greater than that, the fact that the behaviour, other than the sharing of information has not occurred in the market, yet the gaming has not occurred, that in and of itself would not allow OPG to pass the test, would it? Answer: "No, I don't think it would. I think -- again maybe this is adding another wrinkle to my test. I think the Board should use a similar test to the Bureau. You have to look at likelihood of that occurring. You'd have to look at the behaviour and then you'd have to look at the likelihood of the impact. It wouldn't merely be that, well, the practice is there and the effect hasn't happened yet and we think it will never happen but nevertheless they don't pass the test. I think you'd have to look again at the likelihood of that occurring too."

72
In other words, Mr. Hunter recommends, as does the applicant, that the test, to be effective, should focus on the likelihood of a detrimental impact.

73
The importance of focusing on the likelihood of a materially negative impact on competition is reinforced in a number of ways. In the first place, the avoidance of a materially negative impact is clearly the objective of the test as it applies in the decontrol situation. The test focuses on what should be of concern: The likelihood of harm to competition. It is clear that the test of facilitating interdependence is not met by the existence of market conditions per se. For example, the fact that this transaction is taking place in a market with a small number of sellers and certain barriers to entry, for example, does not by itself facilitate interdependent behaviour. The test requires ongoing arrangements between the parties. Equally, it cannot be the case that any ongoing arrangements between OPG and another party in connection with decontrol represent the facilitation of interdependent behaviour. A long-term lease such as the one that is -- such as the one that's in issue in this case is, by definition, an ongoing arrangement between the parties. Yet it is one of the two means of decontrol for which the Market Design Committee expressed, in their words, a strong preference. And you'll find that reference, the Market Design Committee's reference at Exhibit A, tab 2, page 7, and that's at page 20 of the compendium.

74
So with those elements of the test in mind, let me turn to the elements of the Bruce transaction. First I'd like to address the necessity for the ongoing service arrangements.

75
NECESSITY FOR ONGOING ARRANGEMENTS

76
And the first issue here is safety and efficiency. There is a need for the ongoing arrangements between OPG and Bruce Power for reasons of nuclear safety, to address the concerns expressed by the regulator and for operational and economic efficiency. There are many references that support that proposition. It's set forth clearly in the prefiled evidence at Exhibit A, tab 3(d), pages 27 to 28, and that's at the compendium at pages 21 to 22; at Exhibit A tab 4(c), page 40, at the compendium at page 25; and at interrogatory I.7.2, section 4.5, which is at the compendium at page 26.

77
The conclusion which, in many ways, I suggest, is self-evident from the discussion that you have before you and the evidence is also supported by Mr. Hunter at paragraph 25 of his prefiled evidence, where he notes that he found that there were practical and compelling reasons, business reasons for entering the service agreements. The inherent complexity of nuclear power stations, the limited sources of expertise in serving particularly Candu-style reactors and Bruce Power's lack of familiarity with the Candu system meant that these arrangements were necessary as a practical matter to close this transaction.

78

The safety significance of the arrangements is further emphasised by the proceedings before the Canadian Nuclear Safety Commission when it approved Bruce Power's lease as noted in the executive summary of the CNSC staff report at -- in an extract which you'll find at page 27 of the compendium. Let me ask you to turn that up. This is taken from Exhibit I.15.9 and I am -- I'm sorry, I'm told I said the CNSC approved the Bruce Power lease, they of course approved the licence. This is the Board's -- the staff's executive summary of the report in that regard.

79
If you were to -- actually, in fact, you'll see on this extract the portions I wish to take you to have already been highlighted and show up on the photocopy. I'm looking at the fourth paragraph. "Core technical capabilities which are provided centrally by OPG will be retained through transfers and short-term contracts with OPG," and skipping down to the next paragraph: "In the short term, CNSC staff finds Bruce Power's application for licence to be acceptable for the following reasons", and the third "Bruce Power has contracts in place for technical support from OPG." And the entirety of that report and the Board's decision, in my submission, with its particular focus on safety, make it clear that this was an important element of that approval.

80
The evidence indicates as well that these are -- that the service arrangements are common features of these kinds of transactions, which is my next point. That's noted in the prefiled evidence at Exhibit A, tab 4(c), page 40, and you can find that in the compendium at page 25. Essentially the point is that the arrangements are common in transactions involving nuclear facilities for many of the reasons that have been canvassed as to their necessity with respect to the Bruce Power transaction. The references in the evidence include recent transactions involving sales of nuclear facilities in the U.S., notably Oyster Creek, Indian Point 1 and 2, and Vermont Yankee, all of which involved ongoing service arrangements.

81
Let me talk for a minute about the nature and quality of the information exchange.

82
NATURE AND QUALITY OF THE INFORMATION EXCHANGE

83
The information exchange, pursuant to the transaction conveys very little, in my submission, of relevance to market operation. First of all, and I take this summary of that information from Exhibit I.6.23, which you'll find at page 28 of the compendium. First of all, neither Bruce Power nor OPG receives information about the other's generating costs. In fact, Bruce Power is not expected to receive any relevant information about OPG's gen -- operations, and while OPG receives some information about Bruce Power's outages, even this information is not specific. Instead, and this is described both in that interrogatory answer and it was elaborated before you in oral evidence, Bruce provides a window of services -- a window in which services related to an outage are required from OPG. But as noted in the oral evidence, and you'll find this at volume 2, paragraph 2, pages 353 and 5, and in the compendium at pages 29 to 30, the information is general information. It does not provide a specific start time or end time, or indeed, the duration of a Bruce Power outage.

84

Mr. Hunter made some observations about the significance of this information, and I'd ask you to turn that up at compendium page 31. This is from the oral evidence on Friday, and I'm reading from the top of the page starting at paragraph 151: "I think I was most concerned --" he had been asked what was the information -- what had he focused on: "I think I was most concerned about outage information, because it struck me that that could be very relevant in one -- in how one would bid, if you had knowledge of that. There could be other things that might have some competitive significance. If you had detailed cost information about your competitor, that could be a factor," as I've referred to earlier; of course, that's not the case here. "But I guess I'd like to make one point about this, that compared to a lot of situations -- in a lot of situations where you would see ring fences in the competition world, the quality of the information here, from a competitive importance point of view, I thought, was at the very low end of the spectrum. I did not think that we were dealing with the types of information that would be of most concern in most competition situations, which would be detailed information about pricing to customers, who your customers were, what your strategic plans were. It's not that sort of information."

85
So while there is some information that passes, and we don't say it's without significance -- it's very general, it's not specific, and, in Mr. Hunter's words, it's at the very low end of the spectrum.

86
Moreover, the evidence indicates that the information exchange which has occurred from the outset will decline over time, and that much of it is transitional in nature. That's really my next point.

87
DECLINING/TRANSITIONAL NATURE OF INFORMATION EXCHANGE

88
Over time, the information provided to OPG from Bruce Power will decline; this will occur for a number of reasons. First, as can clearly be seen from the record, many of the agreements between OPG and Bruce Power have already expired; for example, the one set out in Exhibit F.1.1, and those that is extracted at the compendium page 32 to 33. Secondly, as you've heard, Bruce Power has already obtained them from third parties independent of OPG. That information was detailed at volume 2, paragraphs 439 and 440, 445, and Exhibit I.15.10, and those references are found in the compendium at pages 34 to 35.

89
And third, some of the service organisations that were previously within OPG have been divested to third parties, specifically nuclear safety analysis, and others are being considered for divestiture, specifically the Inspection Services division. You'll see references to that at volume 2, paragraph 332 to 335 of the oral evidence, which is found at the compendium, page 36, and interrogatory response 11.12, which is at the compendium page 37.

90
Ms. Velshi's testimony illustrated the decline that has taken place so far in respect of engineering services, as she said, and you'll find this at page 34 of the compendium.

91
"In 2001, when we first got into this service arrangement with them, under the engineers services we had about 165 full-time equivalents worth of support under the NOSS agreement. Last year, as I mentioned, there were 75."

92
The reduction in information flow can be expected to continue but it will not fall to zero because of OPG's ongoing position both as the owner of the Bruce facility and because of its responsibilities related to nuclear waste. You'll find that reference at volume 2, paragraph 672, and that's at page 38 of the compendium. But to the extent that information continues to flow, it will be subject to the ring fence because of the way that the ring fence was designed, and I'll elaborate on that shortly.

93
But that it will continue to flow, you'll find -- that it will continue to be subject to the ring fence, you'll find the reference to that at pages 40 and 45 of the compendium, and I'm taking that from Exhibit A, tab 8(a), page 2, and volume 2, paragraph 740 to 743 of the oral evidence.

94
In fact, in the unlikely event that new information flows as a result of any changes to the transaction, this information too will be subject to the ring fence. That's set forth at paragraphs 736 to 738 of volume 2 and you'll find that at the compendium pages 44 to 45.

95
The ring fence is one of the many ways in which the information flow that exists as a result of these transactions is controlled, and that's my next point.

96
CONTROLLING THE INFORMATION FLOW

97
The ongoing arrangements that exist are necessary to complete a transaction, and the flow of the information -- and the flow of information to support the provision of those arrangements is indispensable. But OPG has provided that access to all information which flows pursuant to these transactions will be clearly limited to only those individuals who require it in connection with the provision of those services. That result comes about as a result of a series of significant actions taken by OPG to ensure the security of the information it receives as a result of Bruce transaction.

98
The first step, the Competition Legislation Compliance Programme, was rolled out in July of 2000, well in advance of market opening, and provided a background on competition legislation and procedures for employees. The reference here is Exhibit I.15.16, and extracts of what is a longer presentation and set of information made available to employees is found at pages 48 to 58 of the compendium. And what you will see -- I'm not going to take you to that particular section of materials right now because there's a lot in it, but I just draw your attention to the fact that it includes a guide which highlights the importance of these issues to employees, a strong statement from the president of OPG, and amongst the following key points that are emphasised to employees that competition has now been introduced or is about to be introduced into the electricity market, and that a number of steps -- a number of requirements result from that, including the absolute obligation that competitive information not be misused. It's made clear in that guide that all employees are required to immediately comply with the new imperatives of this competitive market and the constraints that apply, and that there will be no learning curve, although they will be provided with training and consultation, and that a violation will be the subject of discipline up to and including dismissal. This programme applies to all OPG staff, not just those within the ring fence, but with particular emphasis on those who interact with suppliers or who are responsible for OPG's commercial activities and in particular OPG's Energy Markets staff.

99
Then, in February 2001, the next step, OPG revised the existing Ontario Hydro corporate policy and issued the Ontario Power Generation Code of Business Conduct. That's found in the evidence at Exhibit I.24, and it's extracted in the compendium at pages 59 to 63. This Code applies to all OPG employees and sets the standard for ethical conduct to which all OPG employees must adhere. I think I would like to ask you to turn up that -- that portion of the evidence, so I'll take you to 59 of the compendium. And I'll just take you, if I may, to certain of the pertinent points which may help -- may give you some more insight, in fact, into the commitment that you saw from the senior executive of OPG to the protection of confidential information and to the issues that that confidential information and competitively sensitive information raises.

100

First of all, if you were to turn to page 60, there is a discussion of what is sensitive information. I'm looking at 6.1: "Sensitive information includes information that is proprietary, technical, business, financial or personal requiring confidentiality. It is owned by, or has been entrusted to, OPG and it must be kept confidential for the following reasons:" and the most pertinent one in this case, of course, is the second bullet point, "to comply with legal, regulatory, or contractual obligations."

101
And skipping down to the next paragraph, employees are enjoined to, "know what information must remain in confidence," and to "ask your manager when you are in doubt." And then the next paragraph they are admonished, "not to disclose sensitive information, except as required by law, to anyone outside OPG, including family and friends." And in the next paragraph, within OPG not to "disclose sensitive information to colleagues unless they need to know the information in order to carry out their accountabilities."

102
Section 7 enjoins employees with respect to fair competition principles, and at page 9 -- paragraph 9, talks about compliance. Let me just highlight a few elements of the compliance section. Second paragraph: "All employees are required to complete training on the Code on an annual basis." Next paragraph: "Senior management employees are required to complete a statement on an annual basis that acknowledges they have read and will comply with OPG's Code of Business Conduct. In addition, managers will be required to confirm that all of their employees have completed the annual training."

103
Skipping down to the -- to the fourth paragraph on that page: "Employees, who are aware of conduct by others that violates or appears to violate the Code, are expected to report it to their manager or to the Chief Ethics Officer. There will be no reprisal against employees for making the report in good faith. Efforts will be made to keep confidential the identity of the employee who disclosed the information. Managers must immediately report a violation or a suspected violation to the Chief Ethics Officer."

104
And over on the next page, consequences of non-compliance: "Those who do not comply with the Code of Business Conduct will be subject to disciplinary procedures up to and including dismissal and/or legal action."

105
The accountability section, having in mind the obligations I've just reviewed with you, is particularly important. Under the heading "Executive Vice-Presidents" they are responsible for monitoring compliance with the Code within their businesses and submitting an annual due diligence report that confirms that all of their employees have completed annual training on the Code, that senior management group employees have completed the annual sign-off, and that all violations have been reported to the Chief Ethics Officer.

106
On the next page, taking the accountabilities down to the next level: "Managers, at all levels in the organisation, are accountable for," amongst other things, "ensuring that all of their employees, both current and new hires, understand their responsibilities under the Code and are in compliance; ensuring that all of their employees complete annual training on the Code; ensuring that all senior Management employees complete the required sign-off on an annual basis; reporting as part of due diligence, suspected violations to the Chief Ethics Officer as soon as they are known; taking appropriate management action to investigate and address known or suspected violations of the Code," and in the last column. "Employees throughout the organisation are accountable for: completing annual training; understanding their responsibilities under the Code and for being in compliance; carrying out their accountabilities ethically and with integrity; and seeking advice when they are uncertain."

107
This is a significant Code, and you saw from those who testified to it and who are influenced by it that those responsibilities exist, are known, and are taken very seriously.

108
At the close of the Bruce transaction, Ron Osborne, OPG's CEO, sent out two communications to all employees addressing the need to keep information confidential, and reminding everyone of what we've already seen in this material, that OPG and Bruce Power are now -- are now competitors. You'll see that at Exhibit I, and that's page 64 of the compendium. In his communication on May 18th, 2001, Mr. Osborne made it clear that employees providing services to Bruce Power are required to keep any information they obtain about Bruce Power confidential. And Mr. Charlebois further indicated that this was reinforced.

109
Let me remind you of Mr. Charlebois's evidence and that of Mr. Boland. I'll ask you to turn to page 66 of the compendium, paragraph 903. This was in respect of a recent presentation with respect to the ring fence, and I'll come when I'm going to develop the ring fence -- in more detail, but this is illustrative of the commitment of which I spoke and the knowledge.

110
"Mr. Charlebois: That's correct. It is a fairly recent presentation. But the importance of protecting information that is obtained through the service agreements for Bruce Power has been, in fact, something that we've discussed with our staff that are involved with the services since the close of the transaction. And this was done in the context of the discussions around the Code of Business Conduct, and then followed by some training on the importance of controlling commercially-sensitive information as well as, finally, by the discussions with the ring fence.

111
Mr. Boland: If I can just add to that. Also in the attachments to the interrogatory that we're referring to, there are samples of other training that was done. For example, one of the training sessions given to the Energy Markets staff is here dated April 24, 2002. There were a variety of presentations given in and around that time to Energy Markets staff, so the training and the awareness of the ring fence and the other initiatives, such as the Code of Conduct, and so on, and the guide for the exchange of information, I think it's fair to characterise them as ongoing communications which really started in 2001."

112
And then skipping down the page to Mr. Boland, at paragraph 909: "I would say, as a member of senior management of Energy Markets, it's been ongoingly -- reinforced own an ongoing basis, really since late 2001, is my recollection of kind of the first senior official of OPG sending information about the sensitivity of information associated with the Bruce lease transaction. That came from David Drinkwater. I know that I and the other senior vice-president ..." And he carried on with his description.

113
Let me carry on with a further comment that's found at page 67 from Mr. Boland: "Just to add that briefly. The guide of exchange that we've referred to earlier and I know is an attachment to one of the interrogatories, and I would say that the ring fence came out of -- it was a formalization of this and a development of controls around this."

114

And then finally, as Mr. Charlebois indicated at paragraph 988: "As I indicated earlier, once the transaction closed with Bruce Power, we had discussions, in fact communications with our staff involving providing services as to the importance of protecting commercially sensitive information, and that's consistent with our Code of Business Conduct. So for us the process started, in fact, with the transaction close at Bruce Power" -- a point that Mr. Boland, I note, makes paragraph 986. "And this has been essentially something that's been reinforced since that through further communications as well as the -- and the introduction of the ring fence and the training associated with that." And they go on to confirm, of course, that they have both received that training.

115
Let me touch briefly on the guide for exchange of information to which they referred. Another initiative of significance in this protective wall that came out in November of 2001, and that guide you'll find at Exhibit I.6.7, and also at page 71 to 74 of the compendium. And I'd ask you to turn that up as well. My purpose here, in addition to drawing your attention to the clarity of the communication that follows the statement of general principles is to ask you to look at the statement of general principles which you'll see at page 72.

116
And I'm reading from the second paragraph: "Our OPG colleagues of yesterday are now employees of the competition. There has been a change and certain interests are no longer common. This fact is recognised by both OPG and Bruce Power and is reflected by several provisions relating to Confidentiality that appear in our agreements. These provisions serve to protect both OPG and Bruce Power in the competitive arena.

117
"For the OPG staff that may be working on Bruce Power projects and tasks, awareness and understanding the confidentiality provisions and sensitivities will be even more important." And that point is elaborated in that paragraph, and he -- the paragraph completes with the point that "in the case of Bruce units, the information must not be shared with OPG personnel except on a "need to know" basis to perform the services OPG is providing to Bruce Power.

118
"For all OPG staff, if through your work or personal contacts, you become aware of any Bruce Power pricing, station operating constraints, outage scheduling information, or return to service times, you should not disseminate this information within OPG and in particular you must not communicate this information to staff within OPG Energy Markets. Similarly, this type of information about any (nuclear and non-nuclear) OPG facilities must not be communicated to Bruce Power staff, or for that matter to other third parties.

119
"In general, do not communicate any future operating plans or pricing related information between OPG and Bruce Power."

120
And then, as I say, the guide goes on to give a number of very clear directions as to how those principles should operate.

121
RING FENCE - COMMON PLACE

122

Finally, we have the OPG ring fence initiative, a formal system which augments the security already ensured by those other initiatives. Mr. Drinkwater put the matter this way in his oral evidence found at volume 2, paragraph 207 and in the compendium pages 78 to 79. "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."

123
And he elaborate further at paragraph 291, page 80 of the compendium, but this is not an unusual activity to have to ask employees to engage in. In other words, the protection of confidential information or competitively sensitive information occurs in the world all the time. As he says, "exchange of confidential information ... 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 his. 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." And in my submission OPG has.

124
The comprehensive nature of the ring fence eliminates any subjectivity with respect to what's covered. All information provided by Bruce Power pursuant to the transaction is covered. In the end, that makes the decision as to what's covered and what isn't, and the future application of the ring fence very simple. The ring fence exists for the duration of the lease. You'll find that reference in many places but, for example, at page 41 of the compendium. Only those staff that have a need for ring fence information will have access to it. Again, you'll see that at page 41 of the compendium. Inclusion within the ring fence does not allow individuals to access all ring-fenced information, rather just that portion of the ring-fenced information which they have a need to know to perform their jobs. You'll see that again in many places, but amongst them, paragraphs 1007 to 12 of the evidence of day 1, that's at page 82 of the compendium and paragraph 805-9 of day 2 at page 83 of the compendium.

125
May I just commend to your attention the materials that show the following, the extensive communication and training programmes associated with the ring fence and the other security-related provisions. You'll see those detailed at Exhibit A, tab 8(b), page 3, table 1. E-mails from executives, Exhibit A, tab 8(b), page 3, table 1, and Exhibit 15.13. Presentations to staff within and external to the ring fence and the associated training materials and computer assisted learning modules, Exhibit 15.13. And the breadth and nature of the training materials and the communications were characterised by Mr. Hunter in terms that I would like to take you to, because from his experience, of course, in the competition area and in relation to the ring fence initiatives he's described that he has seen, he made the following comment. And I'd ask you to turn to page 87 of the compendium, and I'm reading from paragraph 316.

126
"Well, I guess I'd put it another way. I think the Board needs to be satisfied that the ring fence is being complied with, and the question is how do you do that. My view is that what OPG has done here and the seriousness with which they are taking this programme, even though it's arguably voluntary, in my view, is sufficient. In fact, I've done a lot of these things over the years, and I think that the quality of the information, the user-friendliness of the information that OPG has given its employees is among he best I've ever seen. I think they are clearly taking his very seriously. It's really a question of the effectiveness and making sure that it's being implemented."

127

So I say the various -- the many steps that have been taken by OPG, culminating with the ring fence, provides the Board with he assurance that the low grade information that is being exchanged pursuant to these arrangements will not facilitate interdependent behaviour. And just dealing with the ring fence for a moment: The imposition of a ring fence, and the requirement for one, is quite common and has been successfully employed in numerous competition matters, as Mr. Hunter indicated, to protect against the misuse of sensitive information. So we're not reinventing the wheel here, as it were, or doing something remarkably novel. This type of mechanism for the protection of confidential and sensitive information has a track record and a track record that demonstrates its effectiveness. You will see references to that, for example, at Exhibit A, tab 6, page 16 -- sorry, tab 6 paragraph 30. That's page 16 of the compendium; Exhibit I.9.17, page 90 of the compendium; and volume 3, paragraphs 129 and 142 and 152 of the oral evidence, which is at pages 91 to 93 of the compendium.

128
INTERNAL AUDIT

129
May I talk for a moment about the Internal Audit and the ongoing monitoring of the ring fence which would result from that. As the evidence indicates, one of the enforcement mechanisms which makes up part of the ring fence is the involvement of OPG's Internal Audit Group, particularly with respect to the assessment of the effectiveness of a ring fence. The Audit Group is within the finance organisation of OPG, and the evidence indicates, they are unrelated to the operations or Energy Markets Group or, in fact, any aspect of the Bruce transaction.

130
At volume 2, paragraph 892 of the oral evidence, and you'll find this at page 94 of the compendium, it's indicated that the Audit Group will evaluate specific components and risk areas of the ring fence, whatever areas they, that is the Internal Audit Group, think are most critical. The auditors will establish the optimum level of operation of the plan and compare that to what actually happens based on interviews and assessments of the various controls. Based on that assessment, the Audit Group will make recommendations which go to management but ultimately, and this is of significance, to the Board of Directors.

131
The evidence, I suggest, clearly notes the independents of and indeed respect for the Internal Audit Group. As Mr. Drinkwater said, and he made this observation at paragraph 899 on day 2, and we've extracted it at page 95 of the compendium: "The Audit Group tends to be relatively independent, and in my experience in other areas, trying to suggest benchmarks to them hasn't gone down very well. They'll develop their own dialogue with Colin," that is, Mr. Anderson, "and others, in my expectation."

132
Mr. Singer elaborated on this point in an extract you'll find at page 96 of the compendium, it's at paragraphs 903 to 905 of the oral evidence on day 2. I'm reading at paragraph 903 on page 896: "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.

133
"Mr. Moran: You say that with a certain ruefulness.

134
"Mr. Singer: Well, you know, an audit is not something that people look forward to."

135

In a similar vein, Mr. Sommerville asked Mr. Anderson on the second day whether he would be developing protocols for the internal audit on the ring fence. And Mr. Anderson's response, which you'll find at volume 3, paragraphs 979 and following, and page 97 of the compendium, indicates, in line with the sentiments expressed by Mr. Drinkwater and Mr. Singer, that the Audit Group would always be prepared to discuss protocols with anyone -- with Mr. Anderson or others, but they will make their own determinations independently and decide on what they think is necessary.

136
And at a structural level, in my submission, it is most telling of the -- with respect to the independence of the Audit Group that they report ultimately not to management but to the Audit Committee of the Board of Directors of OPG. You'll find that described by Mr. Drinkwater on day 2, at paragraph 912, and that's extracted at paragraph [sic] 98 of the compendium.

137
An issue was raised in the course of cross-examination as to, even if these people have a demonstrated track record, structural independence, and all of the features that I've reviewed with you, mightn't it be a good idea to bring somebody in from the outside, and Mr. Drinkwater's response, in my submission, makes it clear why the internal audit is more the effective route. I'll ask you to turn to 98 of the compendium, this is paragraphs 918 to 921 of day 2.

138
In fact, I'll just summarise the question from Mr. Moran. He is asking whether it would make sense to have an external audit, and Mr. Drinkwater's response comes at the top of page 99, in response to Mr. Moran.

139
"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 someone to 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 you look at the process and the things they looked at, I think that 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."

140
In other words, because of their track record and structural independence, the Internal Audit Group can combine its independence and its audit expertise with knowledge of OPG, and, in Mr. Drinkwater's words, get a better outcome.

141
Let me turn, then, to the other issue raised as a potential issue with respect to the facilitation of interdependence, and that's supplemental rent payments.

142
SUPPLEMENTAL RENT PAYMENTS

143
One of the features of the Bruce transaction that is designed to maximise the value of the lease is the provision for supplemental rent payments. In summary, in each year in which the Bruce B unit is operational, an annual supplemental rent will be paid, and similar provisions apply to the Bruce A unit upon the return to service. This is outlined at Exhibit A, tab 4(c), pages 38 to 9, and found in the compendium at pages 23 to 24.

144

What the supplemental rent payments do is basically recognise the value of the Bruce lease to Bruce Power is directly linked to the future actual market price for electricity and the availability of units to generate power. The supplemental rent payments will not influence the operational approach of either Bruce Power or OPG. Bruce Power's operational approach is not influenced because Bruce Power will maximise its revenues by maximizing its production of baseload units across all hours. Moreover, there's nothing, in my submission, to incent Bruce Power to alter its operation of the Bruce reactors.

145
OPG's incentives are similarly unaffected because the supplemental rent payments are unchanged once the prices exceed $30 a megawatt hour. As stated in the prefiled evidence, this is at Exhibit A, tab 4(c), page 40, and you'll find it at page 25 of the compendium. "As a practical matter, there is neither the incentive nor the ability for joint, anti-competitive conduct as a result of the shared revenue payment mechanism."

146
And indeed, the unchallenged evidence of Mr. Hunter concurs with this conclusion, as he says at Exhibit A, tab 6, pages 19 to 20, and you'll find this at page 13 of the compendium, "interdependence is therefore not an issue in this regard."

147
MARKET SURVEILLANCE PANEL

148
Let me just touch on one remaining aspect of matters that the Board may wish to consider and which we suggest the Board should consider in respect of this issue of facilitating interdependence, and that is the Market Surveillance Panel. It is, I suggest, an important structural feature of the electricity market relative to decontrol and interdependence and, in particular, the work of the Market Surveillance Panel and its administrative arm, the market assessment unit.

149
The Electricity Act 1998 created the IMO with a mandate to establish and operate wholesale electricity markets in Ontario, as you know. The Act required the IMO to appoint a Market Surveillance Panel independent of any market participant and the IMO with the power to investigate any activity related to IMO-administered market or conduct of any market participant. The panel's role is to monitor behaviour in Ontario's electricity market to -- and to identify, among other things, any inappropriate conduct by a market participant, such as gaming or abuse of market power.

150
The panel has had the power since the enactment of the Reliable Energy and Consumer Protection Act 2002, in the course of its investigation into anomalous or potentially abusive behaviour, to compel the production of information and the testimony of witnesses. The panel is also charged with reporting the results of its monitoring investigations, including making any recommendations it feels appropriate. And as you know, the first report of the Market Surveillance Panel covering the first four months of market opening was issued in October of this year.

151

Not only is the Market Surveillance Panel an independent body, but, as you heard from Mr. Hunter, it is staffed by individuals with really quite extraordinary experience both with respect to economics and competition, including investigation and enforcement. The chair, Mr. Gorbet, is a well recognised economist and former Deputy Minister of Finance. One of the panel members, Mr. McFetridge, is one of the leading competition economists in Canada and a man retained by the Competition Bureau from time to time. And the director, Mr. Chandler -- the director of the market assessment unit, Mr. Chandler, is also an economist who worked for many years with the Competition Bureau and has had both criminal and civil enforcement responsibilities. In short, these are people who know what they're doing and are known to be good at what they do.

152
In my submission, it's important to understand how the Market Surveillance Panel sees its mandate, and that's set out, in part, at page 114 of the compendium, which is an extract from the first Market Surveillance Panel report.

153
"A key responsibility of the Market Assessment Unit, under the direction of the Panel, is to monitor regularly for 'anomalies' in the market. These are behaviours or outcomes that are inconsistent with expectations, or activities that fall outside of predicted patterns or norms. The MAU's definition of anomalous activity and the metrics that they apply to identify their occurrences are still evolving. Currently, the MAU monitors market activity on a daily basis, always trying to identify the crucial factors that influenced each day's events. Each morning, as part of a market watch committee, the MAU reports their findings to key IMO officials; a forum which provides a form of 'pier review' for developing a more rigorous understanding of the dynamics of the new market and the functioning of the market systems and algorithms. Through ongoing operations, the MAU is developing a keener understanding of the crucial factors influencing market outcomes. It's also beginning to identify emerging patterns in participant behaviour. As the market data reflecting these factors and patterns become increasingly available, we have asked the MAU to continue to develop more rigorous metrics for discerning market anomalies, which will streamline its market monitoring activities."

154
It's important, in our submission, when interpreting the meaning of OPG's licence conditions around interdependence, to consider the features of the market in which OPG operates and the full protections which were contemplated and introduced as part of the industry restructuring. This includes the comprehensive powers and the scrutiny of the Market Surveillance Panel over hourly behaviour of market participants, and it is an important and telling component of the market. And while we do not say that it is dispositive of the issue, the fact that the market assessment unit and the Market Surveillance Panel found no instance of abuse, or even potential abuse of market power during the first four months of market opening is relevant and compelling evidence that OPG's ongoing arrangements with Bruce Power do not facilitate interdependent behaviour.

155
A summary of the conclusions by the panel are found -- if you flip over the page in the compendium. I'm looking at the second paragraph. "The Market Assessment Unit monitors the conduct of market participants on behalf of the Panel and reports to us on a regular basis. The MAU has ongoing discussions with market participants to clarify behaviour that raises questions and to ensure that participants are aware that regular monitoring is taking place. At times the MAU has undertaken such discussions on its own initiative and at times it has done so at our request."

156
This next sentence is important: "During the four-month period under review, the MAU has not reported any instances that have led us to conclude that an investigation of market participant behaviour is warranted under section 3.4.1 of the Market Rules. Most significantly, we have not identified any instances of the abuse or potential abuse of market power, in the sense of collusive or predatory conduct or other types of behaviour designed to restrain or prevent competition."

157
Not withstanding the ongoing monitoring, the ongoing conversations that they have with participants throughout the period, there's nothing that has even warranted an investigation.

158
I'd like to just briefly touch on two matters as a result of the pending transaction with respect to -- that will change the ownership of the Bruce Power facility, that's I guess my next heading, new owners.

159
NEW OWNERS

160
Simply stated, the change in the ownership of Bruce Power will actually improve the situation by eliminating potential areas of concern, and it does nothing to facilitate interdependent behaviour between OPG and Bruce Power or its new owners. When I say the situation may actually be improved, I'm really referring to the deferral agreement under which OPG had the right, albeit in extremely unlikely and limited circumstances, to participate in the management committee of Bruce Power. They had that opportunity in the event of certain non-payments.

161
The deferral agreement, which might have given rise to those rights, will terminate on the close of the British Energy transaction, and moreover the associated changes to the underlying arrangements will push out by a further two years the earliest date on which Bruce Power could exercise the early termination provisions that exist in the contract. The reference for those submissions is Exhibit A, tab 11(a), pages 1 to 2. Those are found in the compendium at pages 100 to 101.

162
Other changes to the ownership of Bruce Power and resulting modifications to the Bruce transaction can be found at Exhibit A tab 11(a), and the principal issues are that there is no change in the operational control of Bruce Power by the Bruce Power management team. There is no change in the services delivered by OPG to Bruce Power or by Bruce Power to OPG, and no change in the nature and quality of the information flow between the parties that I have reviewed earlier.

163
PORTLANDS

164
The reference on the list to Portlands is -- just to allow me to touch briefly on something that was kind of raised and not pursued at an earlier stage in the evidence, and that's the suggestion that the fact that TransCanada Pipelines will participate in the new ownership of Bruce Power and might be a partner of OPG in the potential development of a natural gas facility in the downtown Toronto area that raise the interdependence concerns.

165
First of all, let me say about that that it's clear, as I've noted earlier in these submissions, that no relevant information is expected to flow from OPG to Bruce Power. So even if this transaction materialises, there's no reason to think that will change. Moreover, and as I've reviewed, the quality of the information does not raise concerns regarding interdependent behaviour, but it's also important to remember what has been said about the possibility of this future relationship between OPG and TransCanada, and that's summarised at Exhibit A, tab 11, pages 3 to 4, and it's page 103 of the compendium.

166

The project is just at the stage of assessing viability. Before there's any suggestion that it will proceed, feasibility has to be assessed, viability has to be assessed, an environmental assessment has to be done, it has to be designed, there has to be a decision taken to construct, all of the things that would have to be taken before a project of that size would be undertaken. None of them have. So there is, at the moment, no such arrangement.

167
That takes me, in effect, to the determination which we ask the Board to make as a result of the submission we make that decontrol has been established, and that is the CRQ adjustment to which I referred to at the outset of my submissions.

168
CRQ ADJUSTMENT

169
Paragraph 4(a) of part 3 of OPG's licence provides that if OPG completes the transfer of effective control over the output of a generation unit as determined by the Board under the licence, that each hourly quantity of energy of that transferred capacity used in the calculation of the rebate subsequent to the completion of the transfer is to be reduced by 110 per cent. Accordingly, a decontrol determination would lead to the result that the drop adjustments, in the words of the licence, shall be made to the CRQ by 110 per cent of the hourly quantities associated with the Bruce facility. The adjustments that would result to the CRQ are set out at Exhibit G.2.2, found at page 5 of the compendium.

170
Although, for all of the reasons that you've been given in the evidence, that I've summarised this morning, OPG is of the view that it has taken steps that really meet and exceed what would be required to deal with really the only issue that I suggest has been raised here, and that is the fact that, as a result of the service agreements that necessarily exist between Bruce Power and OPG, certain information will flow; however, as a result of questions by intervenors and the Board, other commitments have been made to take further steps if the Board is of the view that they are desirable, and let me just review with you what those are.

171
ADDITIONAL COMMITMENTS BY THE COMPANY

172
Mr. Drinkwater, speaking on behalf of the company, indicated that OPG would not be opposed to making the ring fence a mandatory condition of its licence if the Board considered that was desirable. He also agreed to provide status reports to the Board with respect to the arrangements between OPG and Bruce Power, if the Board would find that useful. He agreed that copies of the internal audit reports and other internal ring fence monitoring reports produced by the ring fence administrator, suitably redacted to protect individual information, could be provided to the Board in confidence. So if the Board is of the view that any of those are a useful or necessary addition, they are -- OPG is content.

173
CONCLUSION

174
Let me close by summarising what I hope I have said to you this morning, and that is: Our submission is that OPG has clearly met the decontrol standard that this Board is asked to assess. Effective control over the timing, quantity, and bidding of the output of the Bruce facility has passed to Bruce Power, which is the only entity licensed to operate it and bid that capacity. It's also beyond dispute that Bruce Power did not obtain, as a result of this transaction, effective control over 25 per cent or more of either total Tier 2 capacity or total Tier 1 and Tier 2 capacity.


175
And finally, on the basis of the evidence, in my submission, there are no ongoing arrangements that facilitate interdependent behaviour between OPG and Bruce Power. The decontrol tests have been met, and we ask the Board to so find.

176
Thank you. Those are my submissions.

177
MR. BETTS: Thank you, Ms. Jackson.

178
It is now a quarter to 11 and we did agree previously that we would allow a break after the argument in chief from the applicant to allow intervenors an opportunity to make any changes if they felt they were necessary for their arguments. Are there any -- well, first of all, we will take a short break regardless. I think that's appropriate. Are there any intervenors that would be prepared to present their oral arguments without the need for an extended break?

179
Mr. Poch.

180
MR. POCH: I guess it's always a matter of the definition of an extended break.

181
MR. BETTS: Let me give you a bit of a problem that we have. There is a Board meeting this afternoon and the Board has hopes that the three of us can attend at least for a half hour of that Board meeting for some two specific items. Their meeting starts at 1:00. They would accommodate this hearing by allowing that item to be delayed until -- until we could free ourselves up. We obviously have a lunch break as well if we can't deal with this prior to the 1:00 time. We're not sure whether anybody can help me with that schedule.

182
Mr. Poch.

183
MR. POCH: Mr. Chair, I was just going to suggest that I would need -- 10 minutes would be inadequate, but 20 minutes to half an hour would be enough, and I'm looking at my colleagues and I sense there's some agreement. I shouldn't speak for them.

184
MR. BETTS: There's been a suggestion that half an hour would be sufficient. Would all intervenors find that acceptable? Is there anyone that needs a little more time?

185
MR. JANIGAN: I might need slightly more time, Mr. Chairman; thanks to Air Canada and the 401 this morning, I wasn't able to arrive here until a quarter to ten. But I wouldn't be substantially require much longer than that, about say 45 minutes.

186
MR. BETTS: Okay.

187
[The Board confers]

188
MR. BETTS: Then the panel will agree to that timing. We will reconvene at 11:30 and we will get into the intervenors' final arguments at that point. We'll see where that takes us to and we'll begin to adjust from that point on. If that is agreeable to all of the parties, we will now adjourn until 11:30 a.m. Thank you.

189
--- recess taken at 10:52 a.m.
190
--- On resuming at 11:35 a.m.
191
MR. BETTS: Thank you, everybody. Please be seated.

192
May I ask first of the intervenors, who all, if I could just see your hands even, who of you intend to present arguments orally today. And I see five hands. Thank you.

193
Then we will, I think, because we have some new seats and new faces, we'll just follow the order of the seating pattern at this point, so I'll begin with Mr. Poch, Mr. Warren, Janigan, Mattson, and Lokan.

194
Mr. Poch.

195
MR. POCH: Thank you, sir.

196
SUBMISSIONS BY MR. POCH:

197
MR. POCH: Panel, these submissions are made on behalf of the Green Energy Coalition which I may have not noted yet is comprised of the Sierra Club of Canada, Greenpeace Canada, and the Energy Action Council of Toronto. I'm also here on behalf of the Canadian Institute for Environmental Law and Policy and the Ontario Sustainable Energy Association, whose members are community-based organisations working to foster community-based dispersed renewable generation as well as energy efficiency.

198
These groups are concerned that the arrangements between OPG and Bruce Power could reduce competition and could hurt or deter entry of new competitors with cleaner generation, and that would be to the disadvantage of electricity consumers and the public more generally.

199
In our respectful submission, the arrangements between OPG and Bruce Power do, in fact, facilitate interdependence such that CRQ relief cannot be granted unconditionally at this time. I will canvass the basis for that submission and then suggest a remedy that should allow the benefits of the deal to survive and enable OPG to obtain relief at a subsequent time without great delay or difficulty.

200
In our submission, the evidence is clear that three of the arrangements between OPG and Bruce Power are of particular concern. They were noted by OPG in interrogatory response I.6.17, as the agreements with respect to NOSS, steam generators, and reactor fuel channel maintenance.

201
OPG is quite clear in its prefiled evidence that there is legitimate concern that information shared by reason of the arrangements could be abused; hence the ring fence proposal. As we interpret the test, we really don't have to go further than that to say that the arrangements facilitate interdependence.

202
The witnesses were asked to expand on the nature of the problem at paragraphs 754 to 803 of OPG's first witness panel, that would be volume 1 of the transcript, agreed that outages, including forced outages that aren't scheduled well in advance, need to be coordinated with the Energy Markets Group that bids into the market, and that the personnel servicing the reactors for some of these outages will be people or resources shared under the arrangements, and that the level of information available to Energy Markets, the OPG Energy Markets Group, exceeds that available to other players in the market who will, at most, only get aggregated information.

203
Mr. Hunter agreed that absent protections the arrangements would be problematic, and the reference there is to volume 3, in two places, paragraphs 137 to 140, and 239 to 240. I'll just read you one of them. I asked him: "Without controls in place, such as the ring fence, the Code of Conduct, and the market surveillance which you've spoken of, would you reach the same conclusion?

204
"Mr. Hunter: Well, when I look at this, given the degree of information that was going to be shared and, in particular, that was going to come into OPG's hands, I thought that it was essential that there be protections with respect to the use and sharing of information. And the question is, what is the right way of doing that? And so certainly in principle, in my view, there needs to be provisions in place to control the use of that competitively sensitive information, whether that means this ring fence was -- goes too far, it may very well. All I'm saying is something has to be there in my opinion."

205
I ask him, "All right. To paraphrase then, absent the protection of the ring fence, the various protections we've listed, or some other set of protections, you would have been concerned about -- that the arrangements were facilitating interdependent behaviour, but with these arrangements you believe there is no concern.

206
"Mr. Hunter: That is correct."

207
So it is beyond debate that the arrangements facilitate sharing of information that could be abused. We'll come back to the difference between OPG and our position. They feel the protections are adequate; we don't. But let me first proceed.

208
Fortunately the plan, OPG's plan, is for these areas of interaction to be eliminated by development of independent capabilities at Bruce Power or by spinning these services off to arm's length third parties, or simply by Bruce Power obtaining these services from existing arm's length service providers. We've heard that the Safety Services Group has already been spun off. The Inspection Group is likely to be spun off within a year, according to Mr. Drinkwater, assuming a satisfactory deal can be struck. Bruce Power has committed in the contracts to support that effort.

209

Ms. Velshi informed us that the remaining group, supply and engineering support, has fallen from approximately 80 to about 15 full-time equivalent personal due to Bruce Power's increasing self-reliance and its use of third parties, and that trend is expected to continue.

210
So even if these arrangements were necessary because of the nature of complex technology and the issues that my friend for OPG listed this morning, they were only needed on a temporary basis and not on an ongoing basis. And indeed this morning OPG took us to, in their compendium, to -- there was some reference to the CNSC documents, page 27 of the compendium, and even there the CNSC noted that these services will be retained through transfers and short-term contracts. So it was made apparent to the safety regulator, at least implicitly in the terms short-term contracts, that this transition problem was going to be managed in the public interest in a safe and responsible fashion. And it would be difficult to complain about that.

211
It is a question whether they need to be permanent. And as we've heard, as I've just recited, the suggestion from OPG is that they won't be. The question is to what extent can we rely on that.

212
It's our submission that if these remaining sensitive ties are in fact broken, we will have a structural solution, to use the Competition Bureau's words, that is durable and doesn't rely on the vagueries of a ring fence. When these ties are broken there should no longer be significant concern about arrangements that facilitate interdependence. A related concern is the various joint committees that deal with these three arrangements and thus create further opportunity for interdependency to develop. However, a structural solution that eliminates the need for these sensitive interactions in the safety, inspection, and engineering areas will reduce the need for and the scope of these liaison committees and therefore -- thereby reduce the likelihood of abuse.

213
Similarly, the early termination clause will -- is another area of concern. It will amplify any incentives that OPG has to watch out for Bruce Power's welfare in the first six years. OPG, understandably, doesn't want to inherit a loser plant back from Bruce Power.

214
Just while I'm listing the problem areas for information and incentives, I should say we do not see difficulty from a competition standpoint due to the arrangements such as those dealing with waste, and laundry, used fuel or isotope production. While these could give some after-the-fact insight into patterns of production, the fact that it will be after the fact allays our concern.

215

Does the existence of these arrangements "facilitate interdependence" such that OPG cannot obtain the relief it seeks? OPG's position is that the totality of arrangements don't facilitate interdependent behaviour because the ring fence, Code of Conduct, and external monitoring, principally by the Market Surveillance Panel, will curb abuse or stop any abuse from being effective at hurting competition. We submit that OPG's position is based on a misinterpretation of the test in the licence. OPG incorrectly equates interdependence with market effects. The test does not read, on balance, is it likely that interdependence will be facilitated such that competition will be hurt, it simply says that "the existence of any" -- note that word "any" "-- ongoing arrangements that facilitate interdependent behaviour will result in effective control being deemed not to have passed." It is not a test that says weigh the risks to the market and the overall situation at the moment. It is a test that recognizes that the picture can change over time. And that test makes sense in the context we find ourselves. We can't note today how effective the Market Surveillance Panel will be at catching systematic abuse. In that regard you've heard how the bilateral market is less transparent than the spot market, and therefore, presumably, less subject to surveillance. You'll recall the testimony of OPG that contracts of both longer and shorter duration are included in typical bilateral portfolios, that is, contracts are included that are shorter than the 18-month notice arrangements that we see in some of the OPG-Bruce Power agreements.

216
Of course, we're all too familiar with the failure of security regulators to catch corporate abuses in a timely in the broader economy. It's a tough job. And we should not have to rely on trust, which is what the ring fence is premised on. We can't know today what the corporate cultures of Bruce Power and OPG will be like in 20, 30, or 40 years.

217
Let's be clear. The ring fence is simply a specialised version of the Code of Conduct. Even if externally audited, it is system that relies on goodwill. It is easy to imagine a group of players working together to effectively cover the trail of abuse. Is this a realistic concern? As I said, when examining the witnesses, I'm not suggesting that OPG is filled with dishonest folks, but we must not be Pollyanna about this.

218
During Board staff's cross of OPG's second panel, we heard how in just one year, there were 49 alleged breaches of OPG's Code of Conduct that were sufficient to warrant investigation by OPG's internal security, and 13 of these investigations ended with employees leaving the organisation. The reference is to volume 2, paragraph 884. So people do break the rules and not always in insignificant ways, and presumably some or all of these folks that had to leave OPG last year broke serious rules and broke them intentionally. Perhaps the ring fence will be a more effective deterrent; perhaps not.

219
Consider the fact that all 1,346 employees in the ring fence, as well as those in the Energy Markets Group, have performance pay agreements that give them financial rewards if the company does better, as it would if it systematically abused information to benefit its bidding and contract strategies. The references for the numbers I've just referred to are at I.6.8 and 12.

220
Given Bruce Power's conspicuous absence from these proceedings, we can only can only guess at whether Bruce Power employees have similar incentives in place. Consider the fact that people higher up the ladder at OPG, people who are in a better position to act interdependently with Bruce Power, and all of whom are people that oversee the ring fence employees under their direction, all have an even greater portion of their incomes tied to corporate performance; I.6.13. After all, in a post-Enron world, we cannot pretend that major energy companies are incapable of becoming cheaters or market manipulators at some point.

221
As Mr. Moran noted in his question, you can't ring fence knowledge inside people's mind. So even without intentional misbehaviour, we must recognise that there is a risk of ring-fenced knowledge influencing decisions. And even if the ring fence were perfect and OPG sends its employees off to meditation school to obtain perfect mind control, the ring fence at OPG will still be a suboptimal answer because it doesn't protect against Bruce Power abusing any information it may glean about OPG from these various interactions.

222
It's very important to note that under the direction that stipulates the licence conditions, once a determination of effective control, having passed, is made, it is not within your jurisdiction to revisit the matter with respect to these facilities. So this is a determination you are making that must withstand changes for the life of arrangements, which we have heard could be as long as 40 years.

223
The licence test must, therefore, be understood to be a forward-looking test. You should not presume that the trustworthy witnesses you met will necessarily be in charge in 25 years. The players will change, corporate cultures will change, market pressures will change. That's why any arrangements that facilitate interdependence are unacceptable, despite the fact that no interdependence may exist at this stage and despite whatever mechanisms are in place to band-aid over the problem. The band-aids may peel away or be overcome in time.

224
The Competition Bureau witnesses noted their preference for structural rather than behavioural remedies. They agreed a ring fence is in the nature of a behavioural remedy. In the situation herein, where units must make one decision for all time by virtue of a structural solution is amplified. This forward-looking aspect is one reason why the test in the licence is not the same as the test -- not the same test as those utilised under the Competition Act. Under the Competition Act the tests require a likelihood of substantial lessening of competition. Under the licence, there is no similar provision or requirement. The licence test denies CRQ relief if there are any ongoing arrangements that facilitate interdependence, full stop.

225
OPG tries to evade the clear implications of this wording by seeking to import the other elements of the competition law tests into that phrase, interdependent behaviour. If that was the intent of the test, then we submit the drafters of the licence conditions would have used language like that used in the Competition Act. They did not. The Competition Act is an act that takes an existing marketplace and policies against abuse by denial -- I'm sorry, the Competition Act is an Act that takes an existing marketplace and polices against abuse by denial or reshaping of mergers or, in some cases, with criminal or quasi-criminal sanctions. In these situations, it is not surprising that there is a high hurdle before the government will intervene in the marketplace and disrupt commercial relations or levy penalties. In contrast, the market power mitigation framework is about making a market, during a situation where market power already exists and competition is either non-existent or fragile.

226
Here it makes sense for a government to be proactive and to require that we start off toward a competitive market on the right footing. The Competition Bureau witnesses noted this distinction in their evidence when they suggested you should take little or no comfort from the advance ruling. Mr. Hunter's opinion is based predominantly on his Competition Act experience. He largely ignores the different wording of the tests, the different contexts, and, most important of all, the fact that the test in the licence even exists, for if what was required was for OPG's arrangements to meet the test in the Competition Act, there would have been no need to include the test in the licence at all. The Market Design Committee could have relied on the Competition Bureau to handle the matter.

227
Mr. Hunter helpfully reproduces some of the market design committee's third interim report at page 9 of his evidence. In the first quote he recites the MDCs saying that interdependence should be strongly discouraged; in the second quote where the MDC directly addresses both the inadequacy of competition law and of monitoring solutions, "recognising that this may raise serious concerns under the Competition Act but also recognising that more subtle or tacit forms of interdependent behaviour are difficult to detect and sanction." In other words, don't trust the police to handle this. Avoid the problem in the first place.

228

Again, we want to stress that under the Competition Act, interdependent behaviour is just one element of a multi-element offence, something the Competition Bureau witnesses spoke to at volume 1, paragraphs 226 to 231. And I'll just read you part of that. "You prefer to find that there is -- to successfully prosecute, if you will, or intervene then, it's a multi-part test under the Competition Act?" Mr. Ronayne answers: "And the test -- there's a standard process to go through for looking at market power is used which Richard has talked about and has articulated well in the merger enforcement guidelines. So there's that standard approach. But going beyond that there are a number of elements that vary according to specific provisions of the act."

229
And I ask: "So to be clear, under the Competition Act you could have a situation where arrangements between a party could be seen to facilitate interdependent behaviour but that would not be sufficient for the Bureau to intervene in the absence of other factors or tests being met.

230
"Mr. Ronayne: Yes, you could have some ..." And he goes on.

231
So under the Competition Act you can have interdependent behaviour or the facilitation of interdependent behaviour, which is all we're talking about here, that is no problem, whereas under the licence it is the only element in the test, the only consideration.

232
Nevertheless, we can learn much from the experience of the Competition Bureau. Many of the factors that led the Competition Bureau to sound the alarm under -- that lead them to sound the alarm under their act are present here. As discussed with OPG's first witness panel at volume 1, paragraphs 698 to 745, the two prerequisite conditions, high concentration in the market and no ease of entry for new competitors, are present here. And when we went to the chart of facilitating factors at page 3 of the Competition Bureau evidence, even OPG's witnesses acknowledged that many of these factors are present. The presence of these factors, in the opinion of the Competition Bureau witnesses, makes the risk of interdependent behaviour higher, increasing the risk from any arrangements that are in place that facilitate such behaviour.

233
Mr. Hunter, at paragraphs 26 to 28 of his evidence, acknowledges the importance of the problem. He states that advance access to information, pursuant to the arrangements, "could conceivably give an advantage to parties if the information were inappropriately used to influence their commercial bidding behaviour." He states: "A similar concern arises from the fact that representatives from both OPG and Bruce Power participate in certain joint committees." And he concludes that: "It is imperative that effective insulation mechanisms be put in place." That was my emphasis on the word imperative.

234
He finds the ring fence to be adequate with the other protections he's spoken of. For the reasons I have discussed earlier, we submit that a ring fence is inadequate and, more fundamentally, does not meet the test under the licence.

235

Mr. Hunter also takes comfort in what he termed the "extensive monitoring" of regulatory agencies, and he mentioned the OEB, the Market Surveillance Panel, and the Competition Bureau. As you're well aware, the OEB is not a monitoring body per se. That's the job of the Market Surveillance Panel, although it may come to you -- matters may arrive before you if the problem does arise. Monitoring is the job of the Market Surveillance Panel, but it will not be auditing the organisations routinely. Mr. Hunter agreed that he expects their approach to be to watch the market for signals of abuse, and only then would they scrutinise further. His evidence is at paragraphs 294, 295, and my friend took you to -- in their compendium at page 114, took you to an excerpt that describes the process there.

236
Discovering abuse in the first place won't be easy. This is not a situation where we have a mature market where deviations from the norm are obvious. Hopefully we will have a developing market, and in that context, where there is no baseline for comparison, systematic abuse might never stand out. Mr. Hunter agreed that there could be subtle abuse that is not detectable, and that it may be a challenge for a surveillance body given the lack of a baseline. And that discussion occurs at paragraphs 298 and 299 which would be volume 3. He also agreed that anti-competitive behaviour --

237
MR. BETTS: Mr. Poch, we have one technical glitch. Do we have it now?

238
MR. POCH: I'll back up a sentence or two. Mr. Chairman, I'll just repeat the last couple of sentences in case the record isn't clear with that interruption.

239
Discovering abuse in the first place won't be easy. This is not a situation where we have a mature market where deviations from the norm are obvious. Hopefully we will have a developing market, and in that context there is no baseline for comparison. Systematic abuse might never stand out.

240
Mr. Hunter agreed that there could be subtle abuse that is not detectable, and that it may be a challenge for a surveillance body given the lack of a baseline. That's at paragraphs 298 and 299. He also agreed that anti-competitive behaviour could occur in a ring-fence situation that is below the level of detection; paragraph 133 of volume 3. Again, recall his quote from the MDC: "Subtle or tacit forms of interdependent behaviour are difficult to detect."

241
And Mr. Hunter also agreed that there could be abuse that is inappropriate under the licence test but doesn't cross the line under the Competition Act, which means that agency's monitoring will not sound the alarm; paragraphs 308 to 309. In short, these safeguards, while helpful, suffer shortcomings and they are a poor substitute for avoiding the problem in the first place. But more fundamentally, as with the ring fence, we submit that even if they were highly reliable, the licence says that's not the test.

242
Similarly, Mr. Hunter's importing into the phrase interdependent behaviour a requirement for the likelihood of material anti-competitive impact is neither in the wording of the licence test, as it is in the Competition Act which speaks of substantial lessening of competition, nor is material impact a test he could help define when asked to do so. And there's an exchange from paragraphs 241 to 249 where we discussed that.

243

That highlights why it is a sound approach to construe the words of the licence test strictly. We can't know today in advance of a competitive market developing just how robust and resilient it will be. A very minor problem, even the appearance of a problem may be enough to scare new entrants -- new entrants into the generation business -- away, and ultimately that would be material. So quite wisely the drafters of the licence condition decided that we don't need to guess today what is a likely material effect to say that OPG has failed to pass the test. In effect, they have said, the drafters, that this is a novel and unpredictable situation so we must presume there will be an unacceptable risk of negative impact if the arrangements facilitate interdependence, and we should tolerate no such arrangements.

244
I don't suggest that arrangements that have diminimus risk are a problem, and I think I made that distinction earlier.

245
So what should be done? If you simply deny OPG relief for all time you will have not helped the market to evolve through competitive instinct. However, if you grant OPG's request, you will set a precedent for all future decontrol arrangements that accepts arrangements that embody considerable risk of abuse, and you will also, in our submission, be ignoring the clear language of the directive forbidding any arrangements that facilitate interdependence. In short, you will risk allowing an anti-competitive situation to take hold either now or in the future.

246
There is a workable solution, in our submission, wherein we can have our cake and eat it too. If CRQ relief is denied until such time as OPG dismantles the arrangements of particular concern, that is, until the Inspection Services and the few remaining engineering support arrangements are no longer internal to OPG and shared, OPG will then have a strong incentive to move in that direction, a direction that it has already committed to, and you will have a mechanism to ensure that such progress actually occurs.

247
You could word this as either a denial until then or a granting of relief if and when OPG meets these conditions. I hasten to add that it may not be appropriate to impose a hard deadline for OPG to comply. That could result in a fire-sale situation for the Inspection Services business. Rather, if you simply say decontrol will have been proven effective at such time as that state is achieved, and only then will the CRQ be adjusted, you will place pressure on OPG to get on with it but you will not place them in an untenable bargaining position and hamper their efforts to sell that business.

248
I should add, as we discussed with Mr. Singer during his attendance on the technical panel, paragraphs 625 to 626 of volume 1, in that scenario the date of effective control having passed is the day the Board finds that the conditions have been met, and then the CRQ is adjusted on a non-retroactive basis. In our submission that's not draconian, although I'm sure OPG will characterise it as such. OPG has stated it wants to move in this direction of severing sensitive server sharing. As a practical matter, if OPG foregoes revenues due to a delay in CRQ relief while getting to that state, this will simply be a benefit to the financial corporation that receives the rebates which it, presumably, uses to help achieve the 4.3 cents retail gap. There will be less potential of a dividend from OPG which would go to that same body and more rebate. The net effect is that OPG will lose the flexibility to reinvest rather than dividend those monies as it will have to rebate them analogous to a dividend. It's a subtle difference, but hopefully an effective incentive, and in the interim OPG will have a reduced to gain the market while, in the long run, fair competition will be fostered.

249
Now, that we recognise that it could, depending on the balance in the account at the time and the timing, be difficult for OPG to manage, so there's an alternative, we suggest, which is to await OPG's curing of the problem which, once done, would be evidence that the arrangements were not "ongoing," something we can't say with certainty today. At that point we can -- you could retroactively change the CRQ.

250

In either circumstance OPG should be required to report back on a regular basis on its progress, and at the point where it has severed these particularly sensitive arrangements, it should be required to submit evidence of that fact and be required to formally request an order. The current hearing can be adjourned sine die to allow the Board to retain jurisdiction and effect a subsequent resolution in an efficient manner, presumably with a simple written procedure at that time. In the interim, OPG should be required to maintain the ring fence. It should be externally audited and reported upon to this Board at regular intervals. And either as a condition of any eventual declaration of decontrol order, or as an added licence condition, that requirement should also persist throughout the life of the other less-concerning arrangements as a convenient safeguard, something I think OPG has already, in effect, accepted as a reasonable approach.

251
We also submit that conditions be put in place that forbid OPG to enter into new arrangements with the parties, Bruce Power, including OPG participation in any new facilities being built by Bruce Power, or its owners, beyond the commitment that OPG has already made to partner with TCPL in its Toronto waterfront project. Otherwise we risk facing an increasing opportunity for interdependence and of reversal of any progress made thus far for the competition.

252
It would be rather odd if you could have a condition in the licence that says you can't create a situation out there that's causing somebody else to have more than 25 per cent, find that hasn't occurred yet, relieve them, give them the declaration and then tomorrow they could go out and enter into a new arrangement, build some new generation, and help these same folks both get a much more effective control in the market but also put back in place opportunities for interdependence. That would be unfortunate.

253
Finally, Mr. Chairman, having been found eligible for costs at the time of our intervention, and hopefully having been of some assistance to the Board, we respectfully request that our reasonably incurred costs be awarded, subject to assessment by the Board's cost award officer. Unless there are any questions, those are our submissions, and I thank you for the opportunity to make them.

254
MR. BETTS: Thank you.

255
MR. SOMMERVILLE: Mr. Poch, just so I understand, -- I want to understand your submission properly, you're suggesting that the existence of, the nature of, the effectiveness of any of the protective measures is irrelevant to our consideration of the test.

256
MR. POCH: Yes. On a strict reading of the test, that doesn't come into it. The test says if there's any arrangements that facilitate, and I qualified that saying it can't be diminimus, then there's a problem. And I say those protections, as nice as they may be to have, on a 40-year time horizon, they're not reliable enough.

257
MR. SOMMERVILLE: Thank you.

258
MR. POCH: Thank you.


259
MR. BETTS: I believe, first of all, perhaps staff can present to the panel, if we haven't got them already, two submissions that have been received which are written arguments from the Canadian Manufacturers and Exporters and IPPSO. They have been circulated to all parties. This may be a little bit unusual, but I'm not as used to the courtroom procedures as others. Would anyone object if we asked the court reporter to actually type these into the record? I'm just thinking of them becoming a full part of the argument record which would allow people to concentrate on transcripts. Would that --

260
MS. JACKSON: We have no problem with that. I think I've actually seen that done before.

261
MR. BETTS: Oh, good.

262
Does anyone else have an objection to that?

263
So we will ask our court stenographer to somehow pass these two records in a written form onto the transcript, so that will be all we need to refer to. And we will insert them at this point in the transcript.

264
MS. JACKSON: And I think they came in on disk, just to assist the reporter.

265
MR. BETTS: That's probably true.

266
WRITTEN SUBMISSIONS BY CANADIAN MANUFACTURERS AND EXPORTERS INSERTED:

267
RP-2002-0142

268
IN THE MATTER OF sections 70 and 74 of the Ontario Energy Board Act, 1998, S.O.1998, c.15, Schedule B;

269
AND IN THE MATTER OF Transitional Generation Licence issued to Ontario Power Generation Inc.

270
AND IN THE MATTER OF an application of Ontario Power Generation Inc. to amend its licence obligations to a rebate to consumers under specified circumstances.

271
Argument of Canadian Manufacturers & Exporters ("CME")

272

1. In CME's intervention by written submission, dated October 3,2002, it indicated its concern that: "A reduction in the Rebate will result in increases in the cost of electrical energy to many Ontario businesses that are members of CME."

273
2. Under the Market Power Mitigation Framework in the transitional licence issued to Ontario Power Generation Inc. ("OPG"), the reduction in the rebate, as a result of the decontrol of OPG generation units, was to be balanced by lower wholesale electricity prices from the competition resulting from decontrol.

274
3. In order to ensure such competitive conduct, and also to permit OPG to provide, non-market related services to Bruce Power; OPG has put in place safeguards, such as the "ring fence", on a transitional basis. These safeguards are behavioral safeguards, not structural safeguards. They must be adhered to, if they are to facilitate competitive conduct.

275
4. Behavioral safeguards require effective independent monitoring, enforcement and sanctions. CME submits that the OEB should require, as a condition of any approval of the subject application, that these responsibilities should be undertaken by an entity independent from OPG and Bruce Power.

276
5. The non-availability of a nuclear generating unit operated by either OPG or Bruce Power has an impact on the overall provincial electricity supply and electricity prices, due to the size of these units. CME submits that the non-dominant generator's (Bruce Power's) schedule for planned outages should have priority over the dominant generator's (OPG's) schedule. This should also be a condition of the approval of the application.

277
Submitted this 12th day of February 2003;

278
by: Canadian Manufacturers & Exporters

279
WRITTEN SUBMISSIONS BY IPPSO INSERTED:

280
RP-2002-0142 EB-2002-0420

281
IN THE MATTER OF the Ontario Energy Board Act, 1998, S.O. 1998, c. 15, Sched. B, as amended;

282
AND IN THE MATTER OF Transitional Generation Licence EG-0333, issued to Ontario Power Generation Inc.

283
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.

284

FINAL ARGUMENT OF THE INDEPENDENT POWER PRODUCERS SOCIETY OF ONTARIO ("IPPSO")

285
February 12, 2003

286
George Vegh

287
Elisabeth (Lisa) DeMarco Macleod Dixon LLP

288
Canada Trust Tower

289
161 Bay St., Suite 3900

290
P.O. Box 505

291
Toronto, Ontario M5J 2S1

292
Telephone: (416) 203-4430

293
360-8277

294
INTRODUCTION AND SUMMARY OF POSITIONS

295
1. IPPSO is a non-profit organization with membership that includes virtually all electricity generators in Ontario. IPPSO's primary concern is promoting and furthering the orderly and responsible development of electricity production in Ontario. In the context of this application, IPPSO's intervention is limited to the impact that the Board's decision may have on facilitating the development of a competitive generation market in Ontario. Although OPG is a member of IPPSO, it is mutually understood and agreed with OPG that IPPSO represents the interests of non-OPG generators in market power mitigation matters such as this proceeding.

296
2. IPPSO's central position is that decontrol should be a mechanism to bring about a more effective electricity market, including greater competition and, as such, the Board should interpret and apply the Market Power Mitigation Agreement ("MPMA") in a manner that enhances competition. In other words, where there is ambiguity over the implementation of the MPMA, the Board should resolve that ambiguity in a manner that favours more competitive and market enhancing outcomes.

297
3. Although IPPSO has decided not to address the question of the adequacy of the present targets for mitigation of market power in Ontario, discussions with market participants clearly indicate that there is sufficient interest to require another appropriate forum in which these targets can be discussed.


298
4. As a general matter, IPPSO is supportive of the lease of the Bruce Nuclear Facility which is the subject of this proceeding. IPPSO also recognizes that the decontrol of nuclear facilities results in unique issues that may have to be addressed through servicing and other arrangements, such as those identified in the proceeding that result in sharing information that should otherwise be treated as commercially confidential. However, in light of the purposes of the MPMA, this information sharing is an extraordinary and unusual activity driven by the specific requirements of serving nuclear generating facilities in the present context.

299
This leads to two corollaries: First, that the sharing only be allowed to the extent that OPG can demonstrate it to be necessary to provide Bruce the technical services and support currently specified by the terms of the Bruce Lease Transaction, with due regard for the importance of maintaining a competitive market; second, that approved information sharing should be limited to the unique requirements of nuclear facilities and should expressly not be permitted for other types of decontrol.

300
5. In summary, IPPSO's submissions are as follows. With respect to the first point, IPPSO submits that the protocols respecting information sharing proposed by OPG are deficient for two related reasons: (i) they are voluntary; and (ii) they are internally audited and enforced. There would be greater confidence in the market place if the information sharing were administered through an impartial third party and failing this, if compliance with these protocols were a mandatory condition of OPG's licence, and subject to external auditing that reported to the Board in a manner that allowed the Board to consider the positions of stakeholders with respect to the terms of reference and substantive conclusions drawn by the audit, and the impact on the competitiveness of the electricity market. Specifically, IPPSO submits that OPG's licence be amended to address the following:

301
* The nature of the information that Bruce may share with OPG;

302
* The specific categories of employees within OPG who may have access to the information (including specific means to ensure that people who either are or were in the ring fence cannot work for or with the Energy Markets Group, or any other OPG position involved in generating, wholesaling or retailing physical or financial electricity products in the future);

303
* A requirement that an independent auditor establish and make available the protocols that must be in place with respect to access to systems and documents that contain the information;

304
* An annual review by the independent auditor that is filed with the Board and made available to the public respecting (i) the appropriateness of the protocols; (ii) systems in place to ensure compliance; and (iii) any instances of intentional or unintentional non-compliance with the protocols;

305
* A positive obligation on OPG to report any information that comes to its attention respecting compliance with the Ring Fence to the external auditor;

306
* A requirement that the independent auditor have an information sharing and dispute resolution process that is available to third parties, and make publicly available the results of complaints with appropriate safeguards to protect the confidentiality of individuals; and

307
* Recognition that a violation of the protocol will be considered a violation of OPG's generation licence.

308
6. With respect to the second point, IPPSO respectfully requests the Board to specifically acknowledge in its decision that the permitted information sharing is a unique exception driven by the exceptional circumstances of nuclear facilities at the present time and will not be appropriate for the decontrol of other types of facilities. Both of these issues will be addressed in greater detail below.

309
ISSUE ONE: MANDATORY AND AUDITABLE RING FENCING

310
7. As part of the Bruce Lease Transaction, OPG and Bruce have entered into service agreements allowing OPG to provide technical services and support to the Bruce facility.

311
8. OPG acknowledges that, as a result of providing these services, OPG staff may be exposed to information, such as plant outages that "could potentially raise issues relating to the Market Power Mitigation Framework" (Prefiled Evidence, S. 8(A), pl.1, line 10-12.) Specifically, this information could be used to influence bidding behaviour. As noted by OPG's Anti-Trust expert: "It is imperative that effective insulation mechanisms be in place to prevent such information from being incorporated into the pricing, output and bidding decisions of the parties." (Pre-filed Evidence of Lawson Hunter, paragraph 28).

312
9. To address this concern, OPG proposes a number of internal staff training courses, codes of conduct and internal audits. In addition, it makes the following commitment, which it calls the "Ring-Fence":

313
"OPG will limit access to all information provided by Bruce Power as required by the Bruce Lease Transaction, to only those individuals who require this information in connection with OPG's provision of services to Bruce Power, or in connection with OPG's involvement on related committees that principally facilitate the service agreements, except where required by law or regulatory authority." (Pre-filed evidence, Section 8(A), p.1, lines 21-25)

314
10. Although OPG originally insisted that this arrangement be voluntary, in the sense that the Board not impose it as a mandatory licence condition, it could not provide a good reason why it should not be mandatory. When asked by the Presiding Member why OPG was reluctant to the ring fence being a mandatory licence condition, Mr. Singer said, "I think it's just - you have to draw the line somewhere, and this is where, after some debate, we drew the line." (Transcript, Vol. 1, para. 1068). In response to the same question, Mr. Boland stated, "There's always a reluctance to see your dirty laundry aired in a public forum." (Transcript, vol. 1, para. 1069).

315

11. Similarly, OPG did not put forward a strong reason why compliance with the Ring Fence could not be audited externally, as opposed to using OPG's internal audit process. OPG witnesses asserted that the internal audit process was effective. According to Mr. Boland, "From the point of view of management being audited, it's an extremely independent audit, I can assure you." (Transcript, Vol. 1, para. 1031). According to Mr. Charlebois, "the corporation itself has its own audit committee, and from my perspective they are a third party and they come and look at us very hard in terms of making sure that they have compliance with all these things." (Transcript, Vol. 1, para. 1029).

316
12. OPG's position on both of these issues is that compliance with the Ring Fence is a matter of internal staff discipline. OPG thus seeks to ensure that it can satisfy itself that it is in compliance. In IPPSO's view, this perspective is too limited. The reason why the Ring Fence is important is to ensure that the goal of decontrol - enhancing the market and the quality of competition - is furthered. That goal is a policy goal to be overseen by the Board, not an internal employee relations matter to be overseen by OPG. If managed internally by OPG, there is a risk that matters of concern to the entire market would be resolved internally within OPG without anyone else having knowledge of the issues, to say nothing of input or consultation.

317
13. Approaching the issue this way is consistent with the Board's approach to similar regulatory issues. For example, OPG's retail licence contains a set of "Special Conditions" respecting the application of forward price curves to different customers as well as a detailed Appendix addressing OPG's use of transitional information (See: OPG Retail Licence, Ex. I 6.5, Attachment 1). Similarly, the OEB requires electricity retailers and gas marketers to comply with an arms-length dispute resolution process (See: Code of Conduct for Gas Marketers, s. 2.9, and Electricity Retailers Licence, s. 16).

318
14. A mandatory approach subject to regulatory supervision is also the preferred approach of the Competition Bureau. The Competition Bureau's representatives testified that they understood OPG's proposed Ring Fence to be a behavioural remedy (Transcript, volume 1, para. 270). As such, "the Bureau strongly prefers to have the relevant behaviour abandoned subject to a consent agreement registered with the Tribunal." (Letter from Competition Bureau to Board Secretary, January 28, 2003, p. 9, emphasis added). Bureau representatives also agreed that such remedies should have "enforcement mechanisms associated with them." (Transcript, Volume 1, paras. 206-207).

319
15. As for the specific terms of licence conditions, in an ideal world, the detailed provisions could have been addressed in the proceeding. Unfortunately, OPG's refusal to consider a licence condition until the close of proceedings makes this approach impractical. IPPSO therefore suggests that, if the Board concludes that a licence condition is appropriate, the Board should direct OPG to file a proposed licence condition for stakeholder review and comment that the Board may consider in finalizing the terms of a condition. IPPSO submits that the licence conditions should, at a minimum, specify:

320
* The nature of the information that Bruce may share with OPG;

321
* The specific categories of employees within OPG who may have access to the information (including specific means to ensure that people who either are or were in the ring fence cannot work for or with the Energy Markets Group, or any other OPG position involved in generating, wholesaling or retailing physical or financial electricity products in the future);

322
* A requirement that an independent auditor establish and make available the protocols that must be in place with respect to access to systems and documents that contain the information;


323
* An annual review by the independent auditor that is filed with the Board and made available to the public respecting (i) the appropriateness of the protocols, (ii) systems in place to ensure compliance; and (iii) any instances of intentional or unintentional non-compliance with the protocols;

324
* A positive obligation on OPG to report any information that comes to its attention respecting compliance with the Ring Fence to the external auditor;

325
* A requirement that the independent auditor have a dispute resolution process that is available to third parties, and make publicly available the results of complaints with appropriate safeguards to protect the confidentiality of individuals; and

326
* Recognition that a violation of the protocol will be considered a violation of OPG's generation licence.

327
ISSUE TWO: IMPACT OF THIS DECISION ON FUTURE DECONTROL ACTIVITY

328
16. According to OPG, the service agreements leading to the need for ring-fencing are necessary features of operating a nuclear facility: "Another important facet of the nuclear industry is the degree of co-operation and exchange of information that exists between operators, even in places where there are competitive markets such as the United States. In recognition of the importance of safety and the challenges of complex technology and systems, operators of nuclear facilities share safety-related and technical information and parts within the industry. A number of industry groups exist as forums for information exchange including the Institute of Nuclear Power Operators (INPO), the World Association of Nuclear Operators (WANO), and the CANDU Owners Group (COG). The mandates of these various organizations include recognition of the benefits to be gained from sharing experiences, information and best practices, providing mutual assistance, and training and developing of nuclear staff. All programs promote the underlying objective of promoting the highest levels of safety and reliability across the industry. Historically, OPG has provided assistance to other nuclear operators such as New Brunswick Power and Hydro-Quebec, as part of these industry group commitments." (Pre-filed Evidence, Section 2(C), p. 12, lines 4-17, emphasis added).

329
17. As counsel for OPG put it, these service agreements are "due to the inherent complexity of nuclear facilities, safety concerns, limited sources of expertise in servicing CANDU reactors, and the fact that OPG has well established highly specialised in-house technical support capability for its nuclear facilities" (Transcript, Vol. 1, para. 512). Such cooperation between producers who are supposed to be competitors would be highly unusual outside the nuclear industry.

330
18. As indicated, these agreements lead to potential significant harm to the market that necessitate ring-fencing. Although IPPSO is prepared to support mandatory and auditable ring fencing as a necessary means to guard against inappropriate access to information, this is very much a second best supplementary solution made necessary by the unique requirements of nuclear facilities. It should not be a practice that may be employed for other facilities. IPPSO therefore submits that it is appropriate for the Board to provide some direction in this case that the information sharing permitted here is unique and should not be taken to be an appropriate model for future decontrol.

331
COSTS

332
19. IPPSO submits that it participated responsibly and efficiently in this process to bring issues to the Board's attention from the perspective of parties interested in competitive generation. IPPSO hopes that its participation assisted the Board, and respectfully requests recovery of 100% of its reasonably incurred costs.

333
All of which is respectfully Submitted.

334
__________________________________

335
George Vegh

336
Counsel for IPPSO

337
28305.v1 02/12/03

338
MR. BETTS: I thank you, Mr. Poch, and we'll turn the podium over to Mr. Warren.

339
MR. WARREN: Thank you, Mr. Chairman and members of the panel.

340
SUBMISSIONS BY Mr. WARREN:

341
MR. WARREN: Ms. Jackson, at the commencement of her submissions this morning, took you to the three issues that you have to resolve in this case; the first is -- and these all fall out of the terms of OPG's licence, the first is a determination of whether a specific transaction by OPG represents the transfer of effective control over the output of a generation unit. In CAC's respectful submission, the answer to the question, on the evidence, is yes, it does represent the transfer of effective control.

342
The second issue, which is framed in the licence and referred to by Ms. Jackson is the double negative in the licence which says: "The transfer of effective control of output shall be construed not to have occurred if the Board determines that the transferee has or obtains as a result of the transfer effective control over approximately 25 per cent or more of either, A, total in-service Tier 2 capacity, or B, total in-service Tier 1 and Tier 2 capacity, in each case at the time of completion of the transfer." In our respectful submission, the evidence is that that has not occurred. We agree with OPG on that.

343
The fulcrum issue, in our respectful submission, is the third, and that is: "A transfer of effective control of output shall be considered not to have occurred if the Board determines that there exists any ongoing arrangements which facilitate interdependent behaviour between OPG, any subsidiary of OPG, the transferee."


344
Now, I think it would be useful at this stage if we were to highlight our position by joining issue directly with Mr. Poch on this question, and particularly in light of Mr. Sommerville's question. Mr. Poch's interpretation of this test is that any agreement which facilitates interdependent behaviour results in a failure to meet the test. In our respectful submission, that is too strict and, therefore, an incorrect interpretation of the test. Mr. Poch has invited you to scrupulously parse the terms of the test, and I would invite you to do the same.

345
It's interesting that the test doesn't say there exists any "agreements" between OPG and anyone else which facilitate interdependent behaviour, it says "arrangements" which facilitate. In our respectful submission, that means that you have to look at the totality of the arrangements which exist, and those would necessarily include the protective measures and devices which OPG has designed. In other words, it has to be a more broadly framed test. There are policy and practical considerations which support that conclusion. But in our respectful submission, on a strict reading of the test itself, Mr. Poch's strict interpretation fails.

346
Now, the proper interpretation, in our respectful submission, is that you have to look at the totality of the arrangements which have been set up, which in this case would include what I call the protective protocols which include the Code and the ring fence, in addition to the external components of the arrangements which would be the ongoing monitoring and oversight by both this Board and the IMO and the surveillance panel.

347
The correct interpretation, in our respectful submission, can be found in the exchange which took place between Messrs. Moran for Board staff and Mr. Singer, which appears in volume 2 of the transcript, at paragraphs 726. And this exchange followed the delightful analogy of Mr. Moran about the horse going to the water and then drinking or not drinking, which I thought was very informative. But the following exchange, in my respectful submission, captures the essence of the issues.

348
Mr. Moran says, and I begin at paragraph 727 of volume 2: "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 to facilitate interdependent behaviour. Is that a fair characterisation of your approach?"

349
And Mr. Singer says: "I've modified slightly as per the answer to interrogatory 15.5 that you reference, that looking at the circumstances, there are agreements which could facilitate interdependent behaviour but they do not because of the existence of numerous controls up to and including the ring fence that we've put in place."

350
That exchange, and particularly Mr. Singer's response, seems to me captures the correct interpretation of what is meant by this provision in the licence when they talk about arrangements and whether the arrangements overall facilitate interdependent behaviour.

351

Now, there are several factors which influence the CAC's view in addition to our interpretation of the wording of the licence provision. One of those is what I would call a practical consideration, and that is that there are a number of arrangements which are necessary, arrangements which have been -- sorry, I'm guilty of being imprecise when I've invited you to be precise -- there are a number of agreements which exist between OPG and Bruce Power which are necessary for safety and operational reasons. There is no evidence on the record to contradict that.

352
We do not believe that either the MDC or the minister intended that this provision would preclude the existence of those arrangements, and that double -- the bind that OPG would be in is evident when we look at the terms of the licence that was issued to Bruce Power and the analysis that was given by the staff of the licencing authority. This is found at page 27 of the book of materials which my friend, Ms. Jackson, tendered this morning.

353
"CNSC Staff found that Bruce Power's application for licences were acceptable for the following reasons, including Bruce Power has contracts in place for technical support for OPG."

354
Now, that's a reasonable set of circumstances in the practical world. And as Ms. Jackson has pointed out, and there is no evidence to the contrary on the record, these kinds of agreements are characteristic of transactions involving the sale or release of nuclear facilities. Certainly as a common-sense matter, the MDC or the minister wouldn't have insisted on a provision in the licence of OPG which precluded these kinds of necessary arrangements, and they're necessary agreements, they're necessary because the CNSC has said they are necessary to get a licence issued.

355
So at a common-sense level in our respectful submission, the provision on the licence should be interpreted in such a way which is consistent with the real-world necessity that these kind of agreements take place. And I say with great respect to my friend, Mr. Poch, you just can't whisk that away. You just can't imagine a universe in which these agreements have to exist and say they must not exist.

356
Now, the second consideration which effects the influence of CNSC's position is that there are -- there is no evidence on the record that the protocols which OPG has put in place will not work effectively. And I distinguish between evidence that they won't work effectively and speculation that they might not work effectively. The test surely isn't that you've got an absolutely perfect ring fence, but there surely has to be some evidence from where these kinds of arrangements have existed elsewhere that they fail either on an occasional and a material basis or on some systemic basis. But there is no evidence before. The speculation that somebody -- that you may have a rogue employee, the speculation that somebody may willingly engage in quasi-criminal or criminal behaviour is not sufficient reason, in our respectful submission, for the Board to find that decontrol has not taken place.

357

We are comforted in this that OPG has agreed to additional commitments and/or conditions as Ms. Jackson expressed. First that the ring fencing will be made mandatory, and CAC supports that; secondly, the requirement that status reports to the OEB be given on the ongoing relationship between OPG and Bruce, and we support that -- the inclusion of that requirement; thirdly, a requirement with the provision of internal audits on the ring fencing and other protective protocols or protective measures be provided to the Board. The only -- and we support that. The only other consideration that we ask the Board to enter into is whether or not there would be value in adding to the requirement a periodic external audit of the operation of these protocols.

358
Now, we note in that respect, in volume 2, at page 805 -- I'm sorry, at paragraph 918, that the issue was put to Mr. Drinkwater, if I am correct -- I'm sorry, I apologise, Mr. Chairman, I'm just finding my reference. And while he said, as I recollect it -- I'm just trying to find it -- while he said that he would prefer an internal audit and thinks an internal audit would be better, he didn't exclude as saying a non-workable external audit. In our respectful submission, it would give greater comfort for the public and the stakeholders here if there were a periodic external audits of the operation of the ring fencing and other protocols.

359
The final factor which influences the CAC is, if you want, broadly speaking, it's a fairness consideration, and, reduced to its essence, in our respectful submission, OPG should not be required to refund revenue it didn't earn. It shouldn't be required to bear that burden. This structure was put in place by a deliberate decision of the government that there would be this CRQ mechanism. And to require that they bear this additional burden where there is no evidence that these protocols won't work, in our respectful submission, simply isn't fair.

360
I listened with care to Mr. Poch's suggestion that there be a requirement for, if you wish, divestiture of these arrangements, and I'd invite the Board, when you deliberate on this matter, to consider the exchange that took place between Mr. Poch and Mr. Drinkwater on this very issue and it appears in volume 2, at paragraph 403 and following.

361
Mr. Poch put the following question to Mr. Drinkwater: "Okay. It's not, I take it, then, an insurmountable -- it wouldn't be an insurmountable condition of 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?"

362
Answer from Mr. Drinkwater: "I think it would, actually. We have every intention to try and out-source 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 the 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. If we didn't get 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 other revisions that we have put in place. To impose this condition would impose a very difficult position on OPG."

363
Now, there is no evidence to the contrary. Mr. Drinkwater's assertion that this would be a problem for OPG stands unchallenged. Now, in circumstances where there's the unanswered, if you wish, assertion from OPG that it would cause a problem, why would the Board do that in circumstances where, at the highest, the evidence you have is, I say with great respect to my friend Mr. Poch, speculative that these controls won't work. In our respectful submission, the correct and the fair interpretation of the test is that the arrangements looked at in their totality may facilitate interdependent behaviour, the arrangements looked at in their totality which must necessarily include these protocols, both internal and external, could not facilitate interdependent behaviour, and the relief that's requested by OPG should be granted, subject to the three or four conditions which I've discussed.


364
Thank you for listening to my submissions, and I will, in the ordinary course, be making a request for cost. We hope our intervention, as modest as it's been, has been of assistance to this Board in understanding the issues. Thank you.

365
MR. BETTS: Thank you.

366
Mr. Janigan.

367
MR. JANIGAN: Thank you very much, Mr. Chair.

368
SUBMISSIONS BY MR. JANIGAN:

369
MR. JANIGAN: I will not be repetitive of some of the points made by counsel speaking previous to me.

370
VECC has been cognizant of the external developments in the electricity industry in Ontario that have made this particular proceeding seem like a boat on a storm-tossed ocean, but we still believe that there are some important matters that have to be -- that have to be addressed in this particular proceeding.

371
I think in VECC's perspective, while there may be a price cap for small-volume consumers in place until 2006, the Bruce transaction is likely to be in place beyond the expiry of the price cap, and it's important that the MPMF is carried out as intended and that the first determination with respect to decontrol of an OPG facility or output is -- takes place in a way which sets a sound precedent.

372
That having been said, the only issue that we have effectively focused upon in this proceeding, after a review of the evidence, is the issue of interdependence and whether or not there exists any ongoing arrangements which facilitate interdependent behaviour between OPGI and a subsidiary of OPGI and the transferee as a condition contained within the licence of OPG.

373
And I believe that our focus upon interdependent behaviour in the circumstances of the arrangements as described by OPG is well-founded in [indiscernible], actually. We will note that the Competition Bureau, in their independent submission, they noted that of the 22 characteristics -- industry characteristics which facilitate interdependent behaviour, in our count and hopefully I've got this correct, all but six are present in -- are applicable in the current circumstance to the arrangements or the agreements between OPG and Bruce Power.

374
That having been said, we also agree that Mr. Singer, the witness for OPG, effectively put the appropriate concern for the Board in his testimony in volume 2, paragraph 273, where he indicated, and I'm paraphrasing, that if the Board did not find any exercise of interdependent behaviour but found that the arrangements facilitated, in his opinion, under the terms of the licence, that would be a violation of the interdependence test, and we agree with that.

375
So in looking at the arrangements and what has transpired, our focus has been on whether or not any of the agreements which have been necessary to facilitate the transfer of the generation stations to Bruce Power, whether any of those arrangements are facilitating interdependent behaviour. And we would note that company witness, Mr. Lawson Hunter, as cited by Mr. Poch, in volume 3, paragraph 138, conceded that really absent effective controls, these agreements would facilitate interdependent behaviour and thus run afoul of the licence arrangements.

376
So our focus, then, has been what arrangements have been constructed to, in effect, counter the effect of the agreements between Bruce Power and OPG that were a necessary precursor to the transfer of output.

377
Our concern has been from the start that these arrangements not simply be internal arrangements, that they should not solely be a matter of corporate conduct and procedure, particularly in light of Mr. Hunter's comment that, in fact, it is the ring fence mechanism and the Code of Conduct and the MSP which saves this transaction from being considered interdependent behaviour. In our opinion, it was important that it would not be solely an internal matter, leaving the aside the activity of the MSP.

378
We also note that the competition witnesses, Competition Bureau witnesses that appeared first in this proceeding indicated that in circumstances such as these, where a behavioural remedy has been sought, the preference is usually to have a consent order before a tribunal to have an instrument which can effectively be implemented and enforced in a matter similar to a court order. And to that effect we believe that the arrangements that have been made with respect to the ring fence mechanism should be put in as a condition of licensing.

379
Now, I note that, in the context of this proceeding, OPG has also indicated its willingness to consent to the incorporation of such terms into its licence, and I don't want to be accused of refusing to take yes for an answer, but I want to just amplify a little bit on that matter.

380
Considering the essential role of OPG's ring fence in the determination of whether the Bruce transaction meets the interdependence test, and the high potential for interdependence in the Ontario market VECC strongly recommends that the Board make OPG's ring fence mechanism a regulatory requirement as a condition of the generation licence.

381
In our view, a ring fence mechanism as a regulatory requirement will be no more effective than a voluntary ring fence unless the ring fence framework also includes a reporting requirement and potentially an audit process that will allow the assessment of the effectiveness of the ring fence and provide a basis for regulatory recourse in cases of non-compliance.

382

I just want to respond briefly to the comments from Ms. Jackson with respect to the presence of the Market Surveillance Panel as an additional safeguard in the process, and that we should take comfort from that. I believe we should take comfort in a general sense that that's -- that such a safeguard exists in the process. But the Market Surveillance Panel, in our opinion, is more a policeman, effectively whistling down conduct after the event than an active participant in ensuring that something does not take place before the event. In our view, if the worst occurs, and problems are detected by the Market Surveillance Panel, it may not be sufficient to suggest to the government and the public that we relied upon the corporate culture and the corporate conduct of OPG to police itself, particularly in the sensitivities of today's Energy Markets and the additional public scrutiny of the industry. So in our view it's important that we not only put in place an appropriate mechanism to ensure monitoring by the Board, that we are publicly seen to do so.

383
In conclusion, VECC realises the necessity of having OPG move forward with decontrol of its generation capacity so that its market power may be removed as an impediment to the development of effective competition in the Ontario electricity market. Having been the sole owner and operator of nuclear facilities in the Province prior to the Bruce transaction, and considering the scarcity of expertise on the Candu system, VECC understands the need for the service agreements between OPG and Bruce Power. However, VECC is of the opinion these arrangements could potentially facilitate tacit or explicit interdependent behaviour. While there are monitoring activities in place, such as the Market Surveillance Panel, for detection of after-the-fact market abuse, OPG's ring fence can act as a proactive safeguard against anti-competitive, interdependent behaviour.

384
Anti-competitive, interdependent behaviour can result in higher prices for low-volume customers that take standard supply service. From VECC's perspective, therefore, a proactive safeguard that can prevent anti-competitive, interdependent behaviour under the arrangements of the Bruce transaction is a necessity. Therefore, VECC strongly recommends that the Board make the ring fencing mechanism a regulatory requirement as a condition of the OPG's generation licence, which requires reporting of non-compliance, filing of audit reports with the Board, and may impose penalty under certain conditions of non-compliance.

385
Finally, with respect to the matter of costs, VECC hopes that its participation has been of assistance to the Board in the determination of the issues at hand. VECC notes that through no fault of any of the parties, this is a proceeding that may have benefited from an ADR process, and may well have been an agreement that may have eventuated. However, that's only conjecture at this point in time.

386
We realise that there have been a great number of developments since this proceeding has began to where we are today. We've attempted to adjust both our participation and submissions both based on those developments and on the evidence in this proceeding, and would request an order of costs recognising the -- VECC has responsibly participated in this proceeding.

387
Thank you, Mr. Chair.

388
MR. BETTS: Thank you, Mr. Janigan.

389
Mr. Mattson.

390
MR. MATTSON: Thank you, Mr. Chairman.

391
SUBMISSIONS BY MR. MATTSON:


392
MR. MATTSON: I think, Mr. Chairman, you will agree that the facts -- the record as they speak to the facts before you are quite extensive and quite clear, and there isn't a great deal of argument about the facts. However, the interpretation of those facts and how -- what exactly should be done with OPG's application, however, there are a number of different nuances that the parties are putting before you. And I think I should at the outset, before I even argue it, indicate that we find ourselves more closely aligned with my friends from CAC and VECC in this respect than with Mr. Poch's argument, and that we too feel that the test shouldn't be applied -- the third test with respect to whether ongoing relationships facilitated independent behaviour shouldn't be applied so strictly so as to not allowed for certain conditions that could ameliorate the concerns with respect to the arrangements made.

393
Accordingly, Mr. Chairman, I think it's very important for the Board then to look at OPG's evidence that tries to give comfort to the Board by saying that to date, to the date of the application, there has been no interdependent behaviour, that there's no evidence of interdependent behaviour. As my friend from CAC puts it, going forward, it's just speculation.

394
We think that that, in fact, Mr. Chairman, is where the Board needs to direct its attention, because all of OPG's evidence today really tries to crystallise this decision that you're about to make, and not have you look forward over the next one year, two years, three years, 10 years, 40 years, as my friend Mr. Poch would ask you to do, and we would agree with him in that respect. We feel that what the Board really needs to do, what section 1 of the Act asks the Board to do, and what your role here with respect to this application is is to ensure that there is not interdependent behaviour in the future. There's no suggestion before you that there has been in the past, but if you accept my friend, Ms. Jackson's test, as she puts it before you in interrogatory I.15.2, that the test is just whether -- not whether it could facilitate interdependent behaviour but whether the arrangements do facilitate interdependent behaviour, that test in and of itself blinds you to the future, it asks you not to look forward. Again, it asks you to find whether or not it could, and you can't do that today, looking forward.

395
So we would say that the test my friend from OPG puts forward is not the appropriate test, but rather it's -- it is whether or not, in the future, there are adequate arrangements put in place so that the public and the Board can ascertain whether it does facilitate interdependent behaviour if you give them approval through this application.

396
Now, I'm just going to go backwards. That was sort of -- I'm trying to be as quick and efficient as I can, Mr. Chairman. That was an oversight of the argument. Let me just begin again, first, of whether or not it could facilitate interdependent behaviour.

397
Mr. Hunter, and Mr. Poch questioned him on interrogatory I.15.5, page 1 of 1, the interrogatory of Mr. Hunter and -- Mr. Singer and Mr. Drinkwater, I should say, says "OPG's opinion is that it is not a question of whether the arrangements could facilitate interdependent behaviour, but rather do the arrangements facilitate interdependent behaviour?" Mr. Poch questioned Mr. Hunter on this at page 222 of the transcript, and I think it's important that Mr. Poch establish this in the record, where he asks: "So there can be arrangements that facilitate interdependent behaviour where at the moment there's no interdependent behaviour occurring," and Mr. Hunter agreed that's correct. So, again, Mr. Poch brought OPG to the future. I think that's important for the Board to look to.

398

Secondly, OPG, in its evidence, has spent a great deal of time asking the Board to look at the ring fence as an important initiation that the company has put in place to give the Board comfort that interdependent behaviour will not go -- will not be a problem in the future. However, again, Mr. Chairman, and I think during the cross-examination of some of the witnesses, we saw the problems with that which is that attachment I.15.13, which is dated November 18th, 2002, which is following Issues Day for this hearing, you'll see that the handouts a number of times refer to the reason for the ring fence being put in place, being the approval at the Ontario Energy Board of the decontrol hearing, or the decontrol application.

399
You'll note that one of the consequences of breaching the ring fence, and this is at page 13, is liability with regard to OPG's chances of a successful decontrol outcome.

400
So, again, if the Board accepts OPG's application with just the ring fence as it is currently put before you by my friends from OPG, what is there, going forward, to protect the public? What is there, going forward, to ensure that there is not interdependent behaviour in the future? What is there, going forward, with respect to public oversight, accountability, or any jurisdiction that the Board could have, or may have, in order to help ensure that there isn't interdependent behaviour, or to help other statutory bodies with the same responsibility, such as the market design -- Market Surveillance Panel.

401
I asked that of Mr. Singer. He did indicate that the Market Surveillance Panel really has this responsibility, and I asked him if it would be of assistance to the Market Design Panel if they had this information reporting, going forward, as a mandatory requirement of OPG, and he disagreed that it was. He clearly said that he felt that the MDC -- the market design -- Market Surveillance Panel had all the requirements it needed to do its job.

402
Just on that point I would underscore some of Mr. Poch's comments, that -- and my friend Mr. Janigan just recently, that it's not good enough, again, for this Board to wait until the problems occur, such as the Market Surveillance Panel would ultimately, as Mr. Singer indicated, find problems; that is, they would wait until they see a problem in the market and then they would address it. This Board, and I believe the other intervenors, along with Energy Probe, feel that we need to be proactive in that respect. We need to ensure that the information is on the record so that surveillance panels or others can prevent anti-competitive behaviour from occurring, so that we don't have to wait until there are problems and then address them once the problems have taken place. And so I would disagree and my client would disagree with Mr. Singer in that respect. We think that if you, in fact, put in place proper disclosure rules, mandatory external audits, it would, in fact, assist the Market Surveillance Panel with its job. And I think that's an important role, again, for this Board to undertake.

403

Now, it's very difficult for my client to really sit here and come up with an exact solution to the problem, and we've thought about it long and hard. As I indicated, we don't believe the application should be rejected. We don't think that's fair. We agree with my friend from CAC in this respect that OPG should not be paying rebates from revenue that they're not receiving. We also do agree with OPG that there are structural relationships that are particular to nuclear power, and that this industry, as is usually the case, does require special consideration and rules. We've seen that over the decades, really, in Ontario. And sometimes normal situations are turned on their head as a result of nuclear power, and certainly this is the case again where we have limited resources, special knowledge; we have really limited expertise. And we don't want to force, or this Board should not force the Ontario Power Generation company could do anything that would risk increase costs or risk doing things that they don't think are in their best interests currently, or at Bruce for that matter.

404
But we think that the best way to pursue this is to ensure that there is mandatory reporting, yearly reporting, and external audits. We think that the more onerous the requirements you make, the more incentive there is for OPG to ultimately undertake structural reform and move from the current behavioural protections. So, in other words, although my friends from OPG say that these are onerous requirements and nobody really wants to have this sort of external auditing undertaken of their activities, we accept that; however they should accept that that provides an incentive for them to move more quickly, to change the behavioural to structural change.

405
We believe that if you do make these more onerous requirements more onerous than the ones suggested by OPG later in their argument this morning, that it would improve the credibility of the market, would help the Market Surveillance Committee do its job better.

406
And we believe that in the context of gas, Mr. Chairman, where this panel -- about where this Board also regulates, that it would bring about closer parity between your regulation of gas matters and electricity matters, because in the context of gas, the Board is very clear to recognise the types of relationships where the -- the utility have shared commercial interests or, in the gas situation, shared ownership interests, that there are strict affiliate relation Code -- affiliate relationship Code guidelines that are in place. And those affiliate relationship Code guidelines demand high standards and they also demand that the public have access to the dealings that were done in a public forum. In other words, there's an opportunity to get information disclosed, interrogatories asked, and even cross-examination and argument. And these affiliate relationship codes have been, as recently as yesterday in 0032, a decision of the Board, they are reinforced and the importance of those codes were reinforced.

407
So we think that this Board ensuring that there is clear disclosure and reporting requirements for areas where there are shared services and shared information that could potentially affect competitive markets is consistent with the actions of this Board in gas utilities. And certainly it's a step in the correct -- the right direction with respect to your regulation over OPG.

408
Finally, one issue that hasn't been raised by my friends, and we just wanted to raise it briefly, is the issue of the CRQs, which we raised in cross-examination, and the fact that there's 16 months missing currently from the application currently before you. I believe I cross-examined Mr. Singer on this issue and he indicated that OPG felt that this is something that would be left to government to deal with in the future.

409
We think, Mr. Chairman, that this Board should flag this issue for the government. The CRQs currently do not extend for the full four years of the new market; therefore, there's a gap for the purposes of calculation of the rebates and that gap is 16 months, currently. We're not suggesting impropriety on behalf of OPG here that they didn't raise it, rather, we suggest that the CRQ release that we think should be granted by the Board can only extend until the end of 2004, currently, and that any further CRQ relief as requested by OPG, should be part of an application made again before this Board. It may not require a hearing. It's something that might be more administrative than controversial. But certainly there should be some evidence put before this Board and approved by this Board with respect to those missing 16 months prior to OPG receiving the CRQ relief.

410
Finally, Mr. Chairman, if there are no questions, those are our submissions with respect to the application before you. And certainly we know it's not an easy issue for you to resolve, as even my friend's application and what they're requesting seems to be changing as the hearing progresses. However, I think certainly your choice of oral argument and the evidence before you should give you substantial information upon which to make a decision that will protect the electricity market and facilitate competition going forward, so thank you.

411
MR.. BETTS: Thank you.

412
Thank you, Mr. Mattson.

413
Mr. Lokan. Am I pronouncing it right, Lokan?

414
MR. LOKAN: Yes. Thank you, Mr. Chairman.

415
SUBMISSIONS BY MR. LOKAN:

416
MR. LOKAN: The Power Workers Union supports the application and adopts the submissions of OPG. There are, as you know, three issues that are put forward, but I'll address only the third. We agree that the first and second have been largely uncontested.

417
On the third issue of what constitutes interdependent behaviour and whether there are, in this case, any ongoing arrangements to facilitate interdependent behaviour, we submit that the test and the evidence must be evaluated in the context of the regulatory scheme as a whole. We would draw your attention to the Act, section 1, in particular the statutory objectives of competition and even more so facilitating a smooth transition to competition. There are also the objectives of energy efficiency and economic efficiency that are set out in the Act.

418
We would simply say that an approach to the test and the evidence on interdependent behaviour, that the approach taken by the Board must not penalise OPG for entering into a series of rational and reasonably necessary arrangements that, in this context, could be said to facilitate a smooth transition into a competitive market. We've heard a great deal of information about the necessity of service arrangements, including technical expertise in this context because there -- previously only OPG ran Candu reactors in the province of Ontario, and the need to share services and some knowledge because of that.

419
For this kind of transaction to occur at all, you must have these kinds of arrangements, and it would be perverse to create a disincentive and say to OPG, because you've done this and notwithstanding all the great care you've taken with ring fencing and other measures, we're going to penalise you for having somehow not met the conditions of obtaining rate relief -- sorry, obtaining rebate relief under the CRQ arrangement.

420

We would also suggest that part of the regulatory context is the issue of safety. You have a public interest jurisdiction. The primary jurisdiction over safety is possessed by the Canadian Nuclear Safety Commission, and it is of great significance that the CNSC looked at these arrangement and thought that they were reasonably necessary for the safe operation of Bruce. You should think very long and very hard before effectively disagreeing with them, again, I say, by creating any kind of disincentive for those safety-oriented arrangements.

421
Now, we also say that whatever potential there may be in the arrangements for any mischief has been comprehensively addressed by OPG in the measures spoken to this morning; the Competition Legislation Compliance Programme, the Code of Business Conduct, the communications and training given to employees, the guide for the exchange of information with Bruce Power, and finally the ring fence mechanism. We would refer you to the evidence of Mr. Hunter, the expert evidence of Mr. Hunter, at paragraph 152, where -- and this has been pointed out to you -- he points out that the information gained by OPG through these arrangements is at the low end of the sensitivity spectrum, and his conclusions that the measures taken by OPG, at paragraph 35 of his prefiled evidence, that the measures taken were effective to deal with any issues that might arise.

422
We would also comment and agree with the CAC that there has been no basis in the evidence to question or doubt the professionalism of OPG's employees.

423
As to the test that should be adopted, we agree with OPG that the test as set out by Mr. Hunter in paragraph 20 of his prefiled evidence is appropriate, and we specifically disagree with the approach urged by Mr. Poch. The test that Mr. Poch gives is so strict as to be practically very unreal in this context. There was some discussion in the evidence of Mr. Hunter, at paragraphs 229 through to 233, about the reasons why Mr. Hunter advocated that test. In particular, Mr. Hunter said it makes no sense to talk about interdependent -- I'm paraphrasing -- behaviour in a vacuum. You have to look at a material negative effect on the market. If you took as strict an approach as Mr. Poch urged, he says any interdependent behaviour counts, Mr. Hunter went so far as to point out that some information sharing, in fact, increases competitiveness. So you should certainly exclude any information sharing or interdependence on the ground that has no material negative effect because it could be beneficial or it could be neutral. You have to be careful to put this in the context of the statutory scheme and the desire to facilitate the opening up of the market and the transitioning competition. There has to be some content to the test; there has to be some thresholds met, not simply a parsing of the words and any remote speculative possibility that information might be used in some way. That should not be enough.

424
Just some comments on the additional conditions that some of the intervenors have suggested, and these comments are confined to conditions that go beyond the ones that OPG has said it could live with if the Board suggested them, and so these are just the additional ones.

425
There's been some suggestion by some of the intervenors that we need external auditing. I'd refer you to paragraph 921 of the evidence of panel 2, where Mr. Drinkwater spoke of the fact that external audits may not work as well in this context as internal audits. We would certainly echo the submission that the OPG world is a very complex world and it requires a great deal of understanding. And there was really no basis to challenge Mr. Drinkwater's evidence on that point.

426

Likewise, the suggestion that there be an order that the Inspection Services Division be spun off, Mr. Drinkwater gave evidence at paragraph 403 about the commercial hardship that that kind of an order could work on OPG, that it could interfere with the current initiative to spin that division off and affect the way in which the transaction is being approached. There would also, if such an order was made, conceivably be labour relations difficulties, and that would certainly also apply to any suggestion that the remaining 15 full-time equivalent positions, even after the planned ISD spin-off, any suggestion that those should be divested as well. No basis in the evidence for saying that there's any real reason why that should occur and there would be hardships to OPG and labour relations difficulties in making any such order.

427
Mr. Hunter, in his evidence, made a comment at paragraph 370 that in terms of arrangements to give comfort in this area, it's a little bit like buying insurance and that at some point you just have to draw the line. He gave his professional opinion that the measures already taken and implemented by OPG met the standard. Indeed, he described the standard reached in glowing terms in some respects and in his professional opinion that was enough. OPG has gone further to say there are three additional conditions that the Board, if it ordered, they might see them as being appropriate. But going beyond that, it really is a question of how much you're going to pay for how much insurance. Extra insurance always come at a cost, and the considerations put forward by Mr. Drinkwater outline some of that cost.

428
We would suggest to you that unless there is a clear rationale for the need for the extra insurance, those costs should not be forced to be undertaken by OPG.

429
So to summarise and conclude, the Power Workers Union's position is that the application should be allowed without any conditions, and in particular without any of the additional conditions beyond those that OPG has spoken of today. Those are my submissions.

430
MR. BETTS: Thank you, Mr. Lokan.

431
No questions from the panel. That does conclude, then, the oral submissions of arguments from intervenors. We have, as you all have noted, two others that have been received in writing and they will be added to the transcripts. That will leave us convening tomorrow morning at 9:30 a.m. to hear the final closing arguments from the applicant. Following that, there will be a conclusion, obviously, to this hearing portion.

432
If any of you, and I assume this is the case, will not be here tomorrow, I did want, on behalf of the panel, to thank you. This has been a very efficient and effective hearing. We have gained a great deal of insight from all of your input, and we sincerely would like to thank you for your involvement at this stage.

433
If -- are there any procedural matters that we need to consider for tomorrow, or that have arisen since we spoke last?

434
MS. JACKSON: None from the perspective of the applicant, Mr. Chair.

435
MR. BETTS: Thank you. Any other points requiring clarification or otherwise?

436
Then I thank you all for helping us achieve a fairly tight time line, and we will adjourn this hearing until 9:30 a.m. tomorrow morning. Thank you.

437
--- Whereupon the hearing adjourned at 1:08 p.m.