Rep: OEB Doc: 12RWZ Rev: 0 ONTARIO ENERGY BOARD Volume: 1 8 JULY 2003 BEFORE: R. BETTS PRESIDING MEMBER B. SMITH MEMBER F. PETERS MEMBER 1 RP-2002-0143 EB-2002-0423 2 IN THE MATTER OF the Ontario Energy Board Act, 1998, S.O. 1998, c.15 (Sched. B); AND IN THE MATTER OF a Notice of Intention to Make a Compliance Order under section 75 of the Ontario Energy Board Act. 3 RP-2002-0143 EB-2002-0423 4 8 JULY 2003 5 HEARING HELD AT TORONTO, ONTARIO 6 APPEARANCES 7 PAT MORAN Board Counsel NABIH MIKHAIL Board Staff HAROLD THIESSEN Board Staff JAMES SIDLOFSKY Casco MARY ANNE ALDRED Hydro One ANDREW LOKAN Power Workers Union RICHARD KING TransAlta Energy Corporation 8 TABLE OF CONTENTS 9 APPEARANCES: [20] PRELIMINARY MATTERS: [42] CASCO INC. - PANEL 1; SNELSON, GARDNER: [59] OPENING STATEMENT BY MR. SIDLOFSKY: [64] SUBMISSIONS BY MS. ALDRED: [105] SUBMISSIONS BY MR. MORAN: [115] REPLY BY MR. SIDLOFSKY: [125] SUBMISSIONS BY MR. LOKAN: [137] FURTHER REPLY BY MR. SIDLOFSKY: [141] FURTHER PRELIMINARY MATTERS: [152] CASCO INC. - PANEL 1; SNELSON, GARDNER: [186] EXAMINATION BY MR. SIDLOFSKY: [187] CROSS-EXAMINATION BY MR. MORAN: [488] CROSS-EXAMINATION BY MS. ALDRED: [587] RE-EXAMINATION BY MR. SIDLOFSKY: [833] QUESTIONS FROM THE BOARD: [907] HYDRO ONE NETWORKS - PANEL 1; PATERSON, PATTANI, PORAY, TONEGUZZO [932] EXAMINATION BY MS. ALDRED: [937] CROSS-EXAMINATION BY MR. MORAN: [1197] CROSS-EXAMINATION BY MR. SIDLOFSKY: [1592] PROCEDURAL MATTERS: [1754] 10 EXHIBITS 11 EXHIBIT NO 1.1: ORIGINAL COMPLAINT BY CASCO, DATED AUGUST 26, 2002. [46] EXHIBIT NO. 1.2: PRE-FILED EVIDENCE OF CASCO, DATED MAY 13, 2003. [49] EXHIBIT NO. 1.3: PRE-FILED EVIDENCE OF HYDRO ONE, DATED MAY 13, 2003. [52] EXHIBIT NO. 1.4: LINE USE AND TRANSFER AGREEMENT BETWEEN CANADA STARCH OPERATING COMPANY INC. AND CARDINAL POWER OF CANADA LP, DATED SEPTEMBER 3, 1992. [158] EXHIBIT NO. 1.5: SPREADSHEET ENTITLED "CASCO CARDINAL TRANSMISSION COSTS 2002/2003". [167] EXHIBIT NO. 1.6: AERIAL PHOTO OF THE CASCO/CARDINAL COMPLEX. [176] EXHIBIT NO. 1.7: PACKAGE OF MATERIALS FILED BY HYDRO ONE FOR CROSS-EXAMINATION PURPOSES. [363] EXHIBIT NO. 1.8: LINE DIAGRAM ENTITLED "SIMPLIFIED MULTIPLE TRANSMITTER DIAGRAM". [410] EXHIBIT NO. 1.9: COPY OF AN ABRIDGED VERSION OF THE AGREEMENT BETWEEN ONTARIO HYDRO AND CARDINAL POWER OF CANADA LP, DATED MAY 29, 1992. [429] EXHIBIT NO. 1.10: COPY OF REGULATION 20/02 AMENDING ONTARIO REGULATION 161 OF 1999. [1002] EXHIBIT NO. 1.11: DIAGRAM ENTITLED "METERING POINTS OF CASCO AND CP". [1052] EXHIBIT NO. 1.12: DIAGRAM ENTITLED "OWNERSHIP AND DELIVERY POINTS OF STELCO AND IMPERIAL OIL". [1057] EXHIBIT NO. 1.13: DIAGRAM ENTITLED "OWNERSHIP AND DELIVERY POINTS OF ABITIBI, ERCO AND BOWATER". [1140] 12 UNDERTAKINGS 13 UNDERTAKING NO. U.1.1: TO PROVIDE INFORMATION WITH RESPECT TO WHETHER THE OTHER UTILITIES CAN BE PROVIDED TO CASCO EVEN IF THE GENERATOR IS DOWN. [572] UNDERTAKING NO. U.1.2: TO PROVIDE A CALCULATION SHOWING THE EFFECT OF NET-LOAD BILLING FOR THE PERIOD OF TIME COVERED IN EXHIBIT 1.5. [1390] UNDERTAKING NO. U.1.3: FOR HYDRO TO PRODUCE ITS INITIAL SUBMISSIONS WITH PROPOSED AMENDMENTS RELATING TO BYPASS. [1675] 14 --- Upon commencing at 9:30 a.m. 15 MR. BETTS: Thank you, everybody. Please be seated. 16 Good morning, everybody. The Board is sitting today in the matter of application RP-2002-0143, transmission rate order compliance hearing, involving Casco Inc. and Hydro One Networks Inc. 17 On August 20, 2002, the Board received a complaint from Casco which alleged that Hydro One was not in compliance with section 9 of its transmission license which requires Hydro One to charge transition rates only in accordance with the transmission rate order. A different panel of the Board considered the complaint and, on January 7th, 2003, issued a Notice of Intention to make a compliance order to Hydro One Networks under Section 75 of the Ontario Energy Board Act, 1998. The compliance order would order Hydro One to comply with its transmission license. On January 17th, 2003, Hydro One requested a hearing in this matter. 18 My name is Bob Betts; I will be the presiding member in this hearing. Joining me on the panel are fellow Board Members, Mr. Brock Smith and Mr. Fred Peters. 19 May I have appearances, please. 20 APPEARANCES: 21 MR. SIDLOFSKY: Good morning, sir. James Sidlofsky, S-i-d-l-o-f-s-k-y, counsel for Casco this morning. 22 MR. BETTS: Thank you, Mr. Sidlofsky. 23 And Ms. Aldred? 24 MS. ALDRED: I'm Mary Anne Aldred, A-l-d-r-e-d. I'm counsel for Hydro One Networks this morning. 25 MR. BETTS: Thank you. 26 Any others appearing today? 27 MR. LOKAN: Andrew Lokan, counsel for Power Workers' Union. 28 MR. BETTS: Mr. Lokan. 29 MR. KING: Richard King, counsel to TransAlta Energy Corporation. 30 MR. BETTS: Mr. King, thank you. 31 MR. MORAN: Pat Moran, Board counsel. 32 MR. BETTS: Mr. Moran. Thank you. 33 In a similar proceeding earlier, June 24th and 25th, TransAlta and the Power Workers' Union participated as intervenors but did so on a somewhat limited basis. It would be helpful to the Board if we could understand at this point the level of -- or the intention to participate in this hearing. 34 Mr. Lokan? 35 MR. LOKAN: Yes, we did receive a letter confirming our intervenor status for this hearing, but we would intend to conduct it in the same way as last time, that is, simply make submissions at the end. 36 MR. BETTS: Thank you. 37 MR. KING: The same is true for TransAlta. We may conduct a limited cross-examination of the Hydro One panel and then submit a brief final argument. 38 MR. BETTS: Thank you. That will assist the Board. 39 We seem to have a minor technical problem so let's make sure our court reporter can hear what's going on. We'll take a short break at this point until we get the technical bugs out. 40 We're ready to go. Those two were just not technicians, they're actually Board Secretary and the Assistant Board Secretary, but they do everything around here. Thank you. 41 Okay, we're back in session, then. Are there any preliminary matters that the Panel should consider before we begin? 42 PRELIMINARY MATTERS: 43 MR. MORAN: Mr. Chair, just a couple of things relating to exhibits, if I may. 44 You have three binders, two of which were filed by Casco. One was Casco's original complaint, the second one is Casco's pre-filed evidence, and the third binder is Hydro One's pre-filed evidence. 45 So Exhibit 1.1 would be the August 26th, 2002, original complaint by Casco. 46 EXHIBIT NO 1.1: ORIGINAL COMPLAINT BY CASCO, DATED AUGUST 26, 2002. 47 MR. BETTS: Thank you. 48 MR. MORAN: Exhibit 1.2 would be the May 13, 2003, pre-filed evidence of Casco. 49 EXHIBIT NO. 1.2: PRE-FILED EVIDENCE OF CASCO, DATED MAY 13, 2003. 50 MR. BETTS: Got that. Thank you. 51 MR. MORAN: And Exhibit 1.3 would be the May 13th, 2003 pre-filed evidence of Hydro One. 52 EXHIBIT NO. 1.3: PRE-FILED EVIDENCE OF HYDRO ONE, DATED MAY 13, 2003. 53 MR. BETTS: Thank you. Any other preliminary matters? 54 Then, Mr. Sidlofsky, would you like to introduce your panel. And would you like them sworn in at this stage? 55 MR. SIDLOFSKY: They could be, Mr. Chair, that would be fine. I have a brief opening statement, and I do promise Mr. Moran that it's briefer than my opening statement in the Abitibi proceeding, if I might have the Board's indulgence this morning. 56 MR. BETTS: Thank you. We will be happy to receive a brief opening statement. 57 MR. SIDLOFSKY: Thank you, sir. 58 MR. BETTS: And we will swear in the witnesses. 59 CASCO INC. - PANEL 1; SNELSON, GARDNER: 60 J.SNELSON; Sworn. 61 D.GARDNER; Sworn. 62 MR. BETTS: Thank you, and please continue. 63 MR. SIDLOFSKY: Thank you, Mr. Chair. 64 OPENING STATEMENT BY MR. SIDLOFSKY: 65 MR. SIDLOFSKY: Sir, the evidence of both Casco and Hydro One is already on the record through the initial Casco submission and the witness statements of both Casco and Hydro One. Casco's witnesses will touch on the key points of their witness statements. They have already adopted Casco's August 2002 submission to the Board as updated, including that April 3rd update. 66 With the Board already having spent two days hearing evidence on similar issues in the Abitibi matter, RP-2002-0118, Casco's witnesses will focus on the differences in the facts between Abitibi and Casco, and on the appropriate treatment of Casco with respect to transmission charges. 67 I would ask that the Board consider the transcripts of evidence and the written arguments presented in the Abitibi matter as having been filed in today's hearing. In that way, we and the Board can focus on any matters that may distinguish the Casco situation from that of Abitibi, while ensuring that the Board has a complete record relating to the facts and issues that are common to both. 68 This should also avoid the need to revisit matters already addressed at length in the Abitibi hearing in both evidence and argument, such as what constitutes the regulated transmission system, or matters that were acknowledged to be irrelevant in that proceeding but were also raised in the Hydro One witness statements in the Casco matter. 69 I'll just make a few comments before Casco's witness panel is sworn and gives its evidence. 70 Casco has prepared a few items - you'll see them on the easels in front of you - that are similar to those used in the Abitibi proceeding, to assist you in understanding Casco's circumstances. Mr. Gardner is Casco's Director of Energy Management and one of the two members of Casco's witness panel, and he'll be taking you through them in more detail. 71 The first item is an air photo of the Casco complex, that's on the Board's right. The building at the upper right-hand corner of that air photo is the Cardinal Power co-generation facility, comprised of two generators with a total capacity of almost 200 megaWatts. At 11 megaWatts, Casco's demand is about 5 percent of the capacity of the Cardinal Power facility. 72 The Cardinal Power facility produces steam, compressed air, and de-ionized water for use by Casco. The operations of the Casco plant depend on those various product streams from the co-gen facility. In the normal course of Casco's operations, the Cardinal Power facility provides all of the electricity for the complex. Cardinal's power is licensed as a generator, it's not a licensed transmitter. 73 You will also hear from Mr. Gardner that when the Cardinal Power facility is not operational, it is likely that Casco will not draw any significant amount of electricity from the Cardinal Power transmission line because Casco's processes rely on Cardinal Power's other products. 74 The second item - it's behind the air photo right now but Mr. Gardner will take you to it - is a site plan drawing that shows the location of the Cardinal Power plant. That particular item can be found in Casco's original August 2002 submission, at tab 2A. 75 The third item, and that's to the Board's left, is a simplified single-line diagram of the electrical system at the Casco complex. 76 The area shown in the drawing includes the Cardinal Power H bus. The Casco plant and the Cardinal Power facility are both connected to that H bus, and Casco takes its power directly from the Cardinal Power facilitate through that bus. 77 Approximately 95 percent of the output of the Cardinal plant then goes through -- excuse me, goes from the H bus through Cardinal Power's 115 kV transmission line to a remote switching station that, in turn, delivers power to the Hydro One transmission system. 78 As with Abitibi, a power-purchase agreement between Cardinal Power and Ontario Hydro, now administered by OEFC, provides that the output from the Cardinal Power plant is sold to Ontario Hydro. It is now being sold into the IMO-administered wholesale electricity market. Historically, Casco was billed for its electricity by Ontario Hydro on a gross basis because it doesn't own the output of the Cardinal Power facility. As Mr. Pattani confirmed in his evidence in the Abitibi proceeding - and this is in terms of Abitibi and Westcoast Power, with Westcoast Power selling its power to the power pool and the power pool in turn selling power to Abitibi - there was no other way than to charge Abitibi for both energy and transmission as a bundled tariff. Casco has been in the same situation historically. 79 Before market opening, Casco was wielding approximately 5 megaWatts electricity from generators that it owns and operates in Port Colborne and London, and it was paying Ontario Hydro for that service. That allowed it to avoid some of the bundled cost of power, but that arrangement ended with market opening. 80 The only substantive difference between the Casco and Abitibi situations is that, unlike Abitibi, Casco does not own the transmission line that connects the complex to the Hydro One transmission system. That line, in this case, is Cardinal Power's line. 81 The issues before you today are whether Casco is a transmission customer and subject to the payment of transmission rates, and whether any transmission charges billed to a transmission customer on account of Casco's demand should be billed on a net or gross basis. 82 Casco's position in this proceeding is that it is not a transmission customer of Hydro One. It is not connected to any licensed transmitter. The only transmission customer that might be subjected to transmission charges on account of Casco's demand would be Cardinal Power, Hydro One's transmission customer. 83 Any transmission charges in respect of Casco's demand must be billed on a net basis. They must take into account the level of Hydro One transmission service taken in supplying Casco. In the normal course, that level is zero, and you'll hear that from Mr. Gardner in his evidence. 84 Casco is here today because Hydro One is insisting on charging Casco on a gross-load basis for network and line-connection service. 85 As is the case with Abitibi, Casco maintains that Hydro One's approach to Casco is not consistent with the Board's transmission decision in RP-1999-0044, and that Hydro One's insistence on gross-load billing is an example of exactly the kind of rules and regulations that have nothing to do with the level of transmission services taken or the cost of providing transmission service and that the Board rejected in opting for net-load billing. 86 Casco is before the Board asking for the following relief: 87 First, that the Board confirm that Casco is not subject to transmission charges as it is not a transmission customer of Hydro One. 88 Second, that the Board direct Hydro One to take all steps necessary to ensure that no transmission charges are levied against Casco or collected by the IMO from Casco, and that the IMO billing and settlement process for Casco reflects no charge for transmission in reflect of the Casco plant. 89 Third, that the Board order Hydro One to reimburse to Casco, with interest, all payments which may have been made by Casco to the IMO or to any other person on account of transmission. 90 Fourth, that the Board, if necessary, amend Hydro One's transmitter license so as to prohibit Hydro One from imposing transmission charges in respect of the Casco plant. 91 And finally, that the Board order Hydro One to pay all of Casco's costs related to this proceeding. 92 I should also note that Hydro One has raised a number of reasons for denying Casco's submission. Among them are that Casco purchases its power from the wholesale market and not from Cardinal Power; that Casco does not own the Cardinal Power generation; that Casco has historically paid for electricity on a gross basis; that Casco makes use of the Hydro One transmission system to purchase power from the IMO-administered market and to receive power quality support; and that the generation wasn't installed for the purpose of supplying all or part of Casco's load. 93 That should sound familiar to the Board from the Abitibi proceeding, and you will have read it in Hydro One's witness statements in this proceeding. You may hear it again from Hydro One in its oral evidence in this hearing. 94 I expect that you'll be hearing it from Hydro One because we received on Monday morning, although it may have been delivered after 5 on Friday, a 150-or-so-page package of material from Hydro One which includes about 80 pages of transcripts from the Board's transmission hearing. I expect the Board would have those now as well. 95 We would simply ask the Board to keep in mind the fact that Hydro One itself has acknowledged that contractual arrangements for the output of the generation, ownership of the generator, historical gross-load billing, the receipt of power-quality support, and the reasons for installation of the generation are irrelevant. The particulars of those acknowledgements are contained in Abitibi's final argument. 96 Having these reasons for refusal repeated once again by Hydro One in the context of the Casco proceeding will not, in Casco's submission, restore their relevance. 97 Sir, as you know, we have two witness this is morning. Mr. Gardner, as I mentioned, is Casco's Director of Energy Management, and he's the manager of Casco's London plant. He's a chemical engineer with both a bachelor's and master's degree. He's a practicing professional engineer in the Province of Ontario, and has been since 1988. In 2001, he assumed additional responsibilities at Casco for overall management of Casco's energy portfolio. 98 You heard Mr. Snelson's qualifications in the Abitibi proceeding. I'm happy to take the Board through them again, but I trust that there's still no objection to his being qualified as an expert witness to give opinion evidence in this proceeding. 99 I'd remind the Board that Mr. Snelson was a witness in the Hydro One transmission rate proceeding, sat on the Board's Transmission System Code Task Group and Working Group on unbundling of distribution rates, and was a witness in the 2001 Hydro One distribution rate proceeding. 100 Sir, without further ado, I'd be happy to go to my panel. 101 MR. BETTS: Thank you. 102 Ms. Aldred? 103 MS. ALDRED: There's something I would like to address, and I hate to interrupt the flow. But counsel has asked you to consider -- I think he said, consider the transcripts as having been filed in today's hearing. And since I'd like to say something about that, I think it would be better to get that off the table before he starts in with his witnesses, if that's... 104 MR. BETTS: I was going to ask you, actually, so please -- I will ask for submissions from all those participating today on that particular matter. Please proceed. 105 SUBMISSIONS BY MS. ALDRED: 106 MS. ALDRED: Well, Mr. Chairman, Hydro One appreciates that the Casco proceeding is similar in many ways to the Abitibi proceeding, and we appreciate that you've already sat through the Abitibi proceeding. However, they were constituted, as you know, as separate proceedings and Hydro One, therefore, objects to the outright adoption of the entire record from the Abitibi proceeding into this proceeding. 107 And I'm sorry, I'm going to be a little bit scrambled here. I have not had much notice of the fact that this was going to be requested this morning, so my submissions are probably not too organized. 108 But these are different cases with different facts. Some of the evidence will, indeed, be similar, but some will be different, because these are two different complaints and the physical set-ups are different; and there are some similarities but also some differences. 109 It would have been possible maybe earlier for us to have, you know, decided what parts of the transcripts could go in and what parts not, if we had been able to sit down and do that. And we did have just a very brief discussion about that on Friday, but at that point, of course, everyone was busy getting ready and there was final argument to go in, so we haven't had a chance to do that. In terms of that kind of efficiency, it just hasn't been able to happen. 110 I believe that the only way that the transcript from Abitibi can be adopted into this proceeding is with consent of all parties. And, as I said, we don't consent to that. 111 MR. BETTS: Does that conclude your submission? 112 MS. ALDRED: And that concludes my submissions, yes. 113 MR. BETTS: Are there any other submissions on this request? 114 Mr. Moran? 115 SUBMISSIONS BY MR. MORAN: 116 MR. MORAN: Thank you, Mr. Chair. 117 I think there's a straightforward approach available to the Board to deal with this issue. 118 The first thing that I would note is that, and Ms. Aldred on behalf of Hydro One is proposing to file the transcripts from another proceeding as well. You haven't got this yet, but it's in a package that was circulated. And I think -- as I understand the proposal by Mr. Sidlofsky, all that's happening is he's proposing to file the transcripts from another proceeding, namely the Abitibi proceeding, in this proceeding today. I don't think that the request is based on having you adopt that evidence and find that that evidence leads in any particular direction, because at the end of the day, at the end of this proceeding you are going to have to weigh all of the evidence that's filed before you in order to make the decision on the Casco issues. 119 So, as I understand it, this is a straightforward proposal just to file the transcripts in this proceeding, and then parties are free to argue how much, if any, is relevant to this proceeding and to what extent the Board should rely on any of the evidence that's filed, including the evidence in the form of transcripts from this other proceeding. You do have the statutory authority to admit into evidence transcripts from the other proceeding. And that is set out in Section 15 of the Statutory Powers Procedure Act, and 15 says that: 120 "...a tribunal may admit as evidence at a hearing, whether or not given or proven under oath or affirmation or admissible as in evidence a court, (a) any oral testimony; and (b) any document or other thing" - this is a very broad power that you have - "relative to the subject matter of the proceeding and may act on such evidence, but the tribunal may exclude anything unduly repetitious." 121 As I understand it, the point of bringing in the transcript is to avoid exactly that, because many of the questions and answers in the previous transcript would have some relevance to the issues in this hearing and introduction of the transcript and reliance on the transcript would mean that you would avoid unduly repetitious questions in this proceeding. 122 So no consent, obviously, is required. The tribunal has full authority to control what it will admit into evidence in any proceeding. And that's all that's being proposed here, as I understand it. 123 Those are my submissions. 124 MR. BETTS: Mr. Sidlofsky, any comment in reply? 125 REPLY BY MR. SIDLOFSKY: 126 MR. SIDLOFSKY: Just one, sir. 127 If I could give you something of a concrete example, and this doesn't involve quoting chapter and verse from the Abitibi transcript, but Mr. Snelson has taken no small amount of pains to try and scope his evidence down to address the particular features of the Casco submission. I'm sure he'd be quite prepared to go over the same ground he went through in the Abitibi proceeding, but I don't think that would be helpful for the Board and I don't think that would assist in saving anyone's time in this second matter. Mr. Snelson will refer generally to comments that he made in the Abitibi proceeding, but in terms of reintroducing the same evidence, I simply don't think that benefits anyone. 128 Clearly, Hydro One may want to say that what they said in Abitibi isn't what they meant, and Ms. Aldred is free to do that, but the Abitibi record is what it is, after two days of hearings plus two rounds of argument. So, sir, we are trying to scope the Casco proceeding. We're quite conscious of the Board's concern about getting this matter completed today and tomorrow, and this will simply help to do that. 129 Certainly, if we have issues on argument about, you know, changing the positions, or changes in positions that may have been taken in the Abitibi proceeding, we may have to deal with that on argument as well. But I submit that this will be of assistance to the Board. 130 MR. BETTS: Thank you. And for clarification, were you asking that just the transcripts be included or... 131 MR. SIDLOFSKY: Sorry, sir, transcripts and argument. 132 MR. BETTS: And argument. 133 MR. SIDLOFSKY: And that's of both Abitibi and Hydro One. Certainly Mr. King's and Mr. Lokan's arguments as well would be legitimate. We're proposing that it go in as a package. Clearly there's going to be fresh argument on this hearing. We don't suggest that that would take the place of oral argument or written argument in this proceeding, but it is part of the record. 134 MR. BETTS: Ms. Aldred, I see you reaching for your microphone. 135 MS. ALDRED: I don't think argument is evidence. I mean, it's one thing for Mr. Moran to tell you that you can adopt -- or, excuse me, you can refer to transcripts from a prior proceeding. But argument is not evidence and so I wouldn't have thought -- at the very least, you shouldn't admit the evidence into this proceeding -- the argument, sorry. 136 MR. BETTS: Any further submissions before the Panel considers this? 137 SUBMISSIONS BY MR. LOKAN: 138 MR. LOKAN: Just from the Power Workers' point of view, the practical thing you could do is just, witness by witness -- a party that calls the witness could suggest that their prior testimony be adopted, rather than a holus bolus of the entire hearing. Mr. Sidlofsky, for example, could say, when he calls Mr. Snelson, can we adopt his evidence from last day, and just add whatever additions he has for this particular hearing. And then you can decide, witness by witness, whether it is appropriate or helpful to the streamlining of the hearing. 139 When it comes to final argument, we certainly will be asking that the Board look at our submissions on the Abitibi hearing, that we would repeat and rely on. But again, I would think we can do that by hearing from each party whether they would like to have their submissions in for the purposes of this hearing as well. 140 MR. BETTS: Thank you. The Panel will deliberate this question. 141 FURTHER REPLY BY MR. SIDLOFSKY: 142 MR. SIDLOFSKY: Sir, I wonder if I might respond to Mr. Lokan's comments. Simply in terms of asking each witness whether they adopt their evidence, the evidence is what it is; that matter is closed. My reply argument in that proceeding was submitted yesterday afternoon. I don't agree that this is a matter for adoption or refusal to adopt evidence that's on the record that's in the transcript of the proceeding. It says what it says. It's a complete record. 143 To approach each witness and say, Well, Mr. Snelson, well, Mr. Pattani, do you adopt the evidence from your previous appearance in Abitibi, I don't see that that accomplishes anything. I see the risk of that being a debate on whether the evidence said what it should have said, said what the witnesses intended it to say. That's not the point of this, sir. 144 The point of this is to scope the proceedings. If the witnesses want to talk about how their current evidence might differ from their in evidence the Abitibi proceeding, they can certainly say that in this proceeding. But to canvass each witness to see if they adopt their evidence simply isn't appropriate, sir. 145 MR. BETTS: Thank you. We will now deliberate. 146 [The Board confers] 147 MR. BETTS: Thank you. 148 The Panel has decided that we will allow the transcripts to be accepted as having been filed, and that will obviously allow any parties to clarify or review any of the matter included in those transcripts. But we will not be allowing the arguments to be considered to be filed in this matter. All parties can make whatever arguments they wish at the conclusion. 149 There was one other item that required just some clarification and that was regarding Mr. Snelson's qualifications. The Board's quite happy to, once again, accept Mr. Snelson as an expert in this matter, then. 150 Any further matters or discussion regarding that brief opening statement? 151 Then, Mr. Sidlofsky, please proceed. 152 FURTHER PRELIMINARY MATTERS: 153 MR. MORAN: Sorry, Mr. Chair, just before Mr. Sidlofsky starts, another housekeeping matter. There was a line use and transfer agreement between Canada Starch Operating Company and Cardinal Power of Canada, an abridged version filed. I don't know if the Panel has this or not, and I thought it would be important to check to make sure whether you do or not. 154 MR. BETTS: I think the easy way is to make certain that we get copies of it now. It may very well be here, and I don't think we can put our hands on it at this point. 155 MR. MORAN: All right. And perhaps, just while we're on it, then, while the copies are being made, this would be marked as Exhibit 1.4. 156 MR. BETTS: Thank you. 157 MR. MORAN: Line use and transfer agreement between Canada Starch Operating Company Inc. and Cardinal Power of Canada LP, dated September 3rd, 1992. 158 EXHIBIT NO. 1.4: LINE USE AND TRANSFER AGREEMENT BETWEEN CANADA STARCH OPERATING COMPANY INC. AND CARDINAL POWER OF CANADA LP, DATED SEPTEMBER 3, 1992. 159 MR. BETTS: Do all the parties have copies of that? 160 MS. ALDRED: I don't appear to have my copy with me. Mr. Mikhail, if you could make me a copy, too. 161 MR. BETTS: Let's have a few copies. 162 MR. SIDLOFSKY: Sir, I have a few copies available. I don't think they would be enough for everyone. Mr. Mikhail's taking care of it so... 163 MR. BETTS: And Mr. Moran, are there any other preliminary items that we should be taking care of? 164 MR. MORAN: I think that's all I have, Mr. Chair. 165 MR. SIDLOFSKY: Mr. Chair, perhaps while we're at it, I had distributed a copy of the spreadsheet that simply shows the charges that Casco has incurred for transmission from market opening through April of this year. Maybe now would be a good time to have those marked as exhibits -- excuse me, to have that marked as an exhibit. It's a one-page document. 166 MR. MORAN: That would be Exhibit 1.5, Mr. Chair, a spreadsheet entitled "Casco Cardinal Transmission Costs 2002/2003." 167 EXHIBIT NO. 1.5: SPREADSHEET ENTITLED "CASCO CARDINAL TRANSMISSION COSTS 2002/2003". 168 MR. BETTS: Thank you. 169 MR. SIDLOFSKY: And one last item, sir. As I mentioned, I think I mentioned, the site plan for the Casco plant and the single-line diagram, those are both in Casco's August 2002 submissions, so I don't think they'd need to be marked as exhibits. 170 The air photo hasn't been marked. I'm not sure if the Board will want to keep that or not. Mr. Gardner will be using that for illustrative purposes. I'm not sure if the Board will want that as part of the file or not. 171 MR. BETTS: I'm thinking on the practical side, just the size of that. If it's going to be referred to in any detail, I think we should have a copy of it for our records. But perhaps I could ask the applicant in this case to see if they could reduce the size of that so it could be included in our files in a more convenient manner. 172 MR. SIDLOFSKY: I think Mr. Gardner may have a reduced copy of that. If we could just get a few copies made of it, I think we can solve your problem. 173 MR. BETTS: Okay. 174 MR. MORAN: On that basis, Mr. Chair, then we would mark it as an exhibit. That would be Exhibit 1.6, aerial photo of the Casco/Cardinal complex. 175 MR. BETTS: Thank you. 176 EXHIBIT NO. 1.6: AERIAL PHOTO OF THE CASCO/CARDINAL COMPLEX. 177 MR. BETTS: And I assume there's only one copy of that right now. 178 MR. MORAN: I was just going to say, sir, I don't have extras, but I was going to make sure we get one for you at the break. 179 MR. BETTS: That's fine. And we'll just refer to the larger picture at this point. 180 I think we can proceed, then, Mr. Sidlofsky, unless that one item that's being photocopied is going to be referred to immediately. 181 MR. SIDLOFSKY: No, sir. Just a bit of background on that one document. That document was referred to in the original Casco submission. There had been issues about confidentiality, and as you know, there's been an abridged version put on the Board's file. And I haven't heard any concerns from any of the parties that there was any problem dealing with the abridged version. 182 Mr. Gardner's evidence won't be going into that agreement in any detail. The provision of the agreement that had been referred to in the submission is simply that Cardinal had agreed that it wouldn't be charging Casco for delivery of electricity. 183 The agreement was the subject of requests by Board Staff and Hydro One, and after dealing with the confidentiality issues with the owners of the Cardinal Power plant, we were able to release it. But, for our part, we're happy to go ahead. Mr. Gardner won't be referring to it in detail. 184 MR. BETTS: Well, in the interest of time, let's proceed, then. 185 MR. SIDLOFSKY: Certainly. Thank you. 186 CASCO INC. - PANEL 1; SNELSON, GARDNER: 187 EXAMINATION BY MR. SIDLOFSKY: 188 MR. SIDLOFSKY: Mr. Gardner, could you tell the Board about your position with Casco and your familiarity with this matter. 189 MR. GARDNER: I am the Director of Energy Management for Casco. And maybe I could start with a little bit of background about Casco because we are a significant company in the agricultural/commodity business. 190 We are the largest producer of sweeteners, starches and feed ingredients from corn. And we supply customers in the beverage, food, industrial, and animal feed sectors. Our customers include major food companies like Coke, Pepsi, Labatt, Molson, Nestle, Heinz, Purina, and even Abitibi that we heard about two weeks ago. 191 Our products are in about 80 percent of the products that you find in the grocery store, whether they be a food ingredient or the packaging of that product. 192 We have three manufacturing plants in Ontario; in London, in Port Colborne, which is near Welland, and in Cardinal. Between these three plants we process about a third of the corn that's produced in the province of Ontario, and the nature of our processes are very energy-intensive. We use a lot of natural gas and a lot of electricity in all three plants. 193 A little bit about my background. I am a chemical engineer with a bachelor's and master's degree. I'm a practicing professional engineer since 1988. I've been an employee of Casco since 1990, initially hired as a process engineer. And through my career at Casco, I've assumed increasing responsibility in our operations. 194 In 1988, I became the plant manager of our Port Colborne facility, and in the year 2000, moved over to our London plant. 195 In 2001, I assumed additional responsibility for overall management of our energy portfolio, and that's for all three locations. And in that role, I'm responsible for ensuring that a cost-effective and reliable supply of energy is available for all three manufacturing plants. 196 In this proceeding, we're specifically talking about the Cardinal plant. And although I'm not directly involved in the management of that facility, I am very familiar with the operation, both from an energy perspective and just general plant management. 197 The Cardinal plant, which is located on the St. Lawrence Seaway due south of Ottawa, has about 220 employees. It's our oldest facility; it's over 150 years old. And it's a plant that consists of several industrial buildings of various ages. It houses the co-generation facility of Cardinal Power and all the associated utilities that come from that facility into our plant. 198 MR. SIDLOFSKY: Sir, Casco's initial submission to the OEB was filed in August of 2002. It was updated April 3rd of 2003, and Casco filed responses to OEB Staff and Hydro One interrogatories as well as your May 13th witness statement. 199 Do you adopt that material as part of your evidence in this proceeding? 200 MR. GARDNER: Yes, I do. 201 MR. SIDLOFSKY: Now, could you tell the Board about Casco's electricity consumption at its Cardinal plant. 202 MR. GARDNER: The average demand of the Casco Cardinal plant is about 11 megaWatts. It can vary from about 10.5 up to 12.5, but on average it would be about 11. 203 The plant is served by the Cardinal Power facility, which is owned by Sithe Energy, and it's located on a portion of the Casco property. 204 If I can refer you to a couple of the photographs and drawings here. This is an aerial photograph of our plant, of the Casco site... 205 MR. BETTS: You might even want to stand to this side to try and project your voice to the back. 206 MR. GARDNER: This is an aerial photograph of the Casco site. This would be looking due south. And in this photograph you can see the Casco facility, consisting of a variety of industrial buildings, and then this is the Cardinal Power co-generation facility. 207 Our plant is surrounded by the town of Cardinal. Many of the people that work in our plant grew up in the town of Cardinal, and we're somewhat integral to the operation of that city. Up until a couple of years ago, we were the provider of water and waste treatment for the City of Cardinal. 208 MR. SIDLOFSKY: And just for the purpose of the transcript, sir, that's Exhibit 1.6 that you are referring to; correct? 209 MR. GARDNER: Exhibit 1.6; correct. 210 This diagram will be very difficult to see, but this is a plot plan of the site. It shows the variety of buildings that we have on this location. In this picture, north would be at the top of the drawing, and that red dot will refer to the Cardinal Power facility. 211 Also in this drawing, this piece of property here is Benson Public School, and that's an important point, because Cardinal Power also supplies steam to that facility for heat. And then this is the residential area to the north of our plant. 212 MR. SIDLOFSKY: And not to interrupt you any more than I feel like I should, but that, Mr. Chair, that can be found at Exhibit 2A, the drawing that Mr. Gardner was referring to. Excuse me, not Exhibit 2A, tab 2A of the original Casco application. 213 MR. BETTS: Thank you. 214 MR. GARDNER: The Cardinal Power facility, as I said, occupies a portion of Casco's plant, and we have a premises lease and facilities agreement, that was adopted in 1992, where Casco is the landlord, Cardinal Power is the tenant, and the National Trust Company is the trustee. The term of that agreement will be extended up till the year 2030, and power began to flow to Casco from the Cardinal Power facility in early 1995. Construction of the facility was over the course of about two years and it started up in January of 1995. 215 The total generation of the Cardinal Power facility is about 200 megaWatts. My understanding, it consists of two sources of generation. There's 143 megaWatt gas-fired turbine, and then the waste heat from the gas turbine is used to produce steam, and the steam goes to a heat recovery generator which produces an additional 57 megaWatts for a total of about 200 megaWatts on a nominal basis. 216 One of the very important parts of that operation is not only does it supply electricity to the Casco site but it also supplies steam, de-ionized water, and compressed air. 217 When that facility was built, the Casco plant decommissioned its utility operations. Several of the employees in our utilities area moved to that facility, and we shut down our complete utilities infrastructure and now we're fully reliant on the utilities provided by Cardinal Power. This is to say, a very important point, if the Cardinal power facility does not run, then our plant is forced to shut down because all those utilities are integral to our operation. 218 I mentioned before that Cardinal Power also supplies steam to the Benson Public School, and I guess most importantly from a economic perspective, integration of the Casco and Cardinal Power facility was of significant economic benefit to both parties. I believe when the project was developed by Cardinal Power they required a steam host to be successful and be able to acquire certain tax benefits. But it also allowed the aging Casco facility to remain competitive by shutting down an infrastructure that was essentially obsolete, and now we're getting those utilities provided in a very cost-effective manner. 219 MR. SIDLOFSKY: Sir, you mentioned that if Cardinal Power can't supply the utilities, the steam, the water, the Casco plant also has to shut down. Has that happened? 220 MR. GARDNER: Very rarely. The last time that that occurred was, I believe, in April of 2002, where Cardinal Power needed to do some major maintenance on some of their equipment. They were forced to shut down. And as a result we had to shut our plant down for about 60 hours while they conducted that maintenance. 221 During that time, our electrical load would be very small, probably less than a megaWatt, and that would just be for lighting and office buildings, things like that. 222 MR. SIDLOFSKY: Mr. Gardner, if Casco takes 11 megaWatts of power, what happens to the remaining 189? 223 MR. GARDNER: Cardinal Power has a power-purchase agreement with Ontario Hydro, which was transferred to the OEFC on market opening. To my knowledge, Cardinal sells all of its electricity output exclusive to OEFC, and then OEFC sells that to the IMO-administered market. 224 Casco's not a party to that PPA, and Casco has never taken the position that it has a contract with Cardinal Power for the purchase of electricity. However, as we've stated several times in the evidence, Casco physically does receive electricity from the Cardinal Power plant. Maybe if I could refer to the single-line diagram. It would be difficult for people to see the drawing up there, but it's in the evidence. 225 MR. SIDLOFSKY: And I mentioned, Mr. Chair, that's at tab 2B of the original Casco submission, if you have that handy. 226 MR. GARDNER: Perhaps for your benefit, this is the single-line diagram showing the generation facility, the Casco facility, and its interconnection to the Hydro One system. The two generators are indicated in the lower left part of the drawing. They are connected through to the Casco facility on Casco property through what we call the H bus. Then there is a line that runs from the H bus approximately 5 kilometres to the Ontario Hydro -- or Hydro One Networks system, and that's connected through a meter to the delivery points and it's interconnected to two lines at L2M and L1MB. 227 I point out on this drawing that there are two meters. One is a HONI meter number 225, which would measure the total amount of power flowing from this facility to the grid and, in their normal operations, there would be a net output of approximately 190 megaWatts. 228 MR. SIDLOFSKY: Sir, could I just stop you there. When normal operations aren't happening, if the complex is drawing power from the Hydro One system, will that meter show that as well? 229 MR. GARDNER: It should show the flow of electricity back through this meter to the Casco site. 230 The second meter is the meter that identifies the consumption at the Casco facility, and that's meter number 224. It's located on our property at our transformer on the 115 kWh side. 231 MR. SIDLOFSKY: And do you use that meter in settling with the IMO? 232 MR. GARDNER: We use that meter in settling with the IMO; correct. 233 MR. BETTS: Mr. Sidlofsky, the Board tries not to ask questions until you're all done, but that will bother me unless I get it now. 234 MR. SIDLOFSKY: Certainly. 235 MR. BETTS: There is a third meter indicated there. It's called HONI meter backup. I wonder if your witness could just address that. 236 MR. GARDNER: I'm not aware of the purpose of that meter. I see it on the drawing but I'm not aware of that. 237 MR. BETTS: Thank you. 238 MR. GARDNER: Casco's plant is not directly connected to the IMO-controlled grid or to Hydro One's licensed transmission system. Casco is a participant in the IMO-administered wholesale market, and revenue meter 224 indicates our consumption. I mentioned before that meter 225 looks at the net flow of electricity from the Casco site or back, if the site for Cardinal Power facilities shuts down. 239 A little bit more background on our relationship with both Hydro One and Cardinal Power. 240 Casco does not have a connection agreement with Hydro One. In mid-2002, after market opening, Hydro One presented Casco with a transmission connection agreement between Hydro One and Casco. Casco refused to execute it on the premise that it's not connected directly to the Hydro One transmission system and Casco is not a Hydro One transmission customer. And there is a copy of the correspondence between myself and Michael Lesychyn in the original evidence, under schedule F. 241 MR. SIDLOFSKY: Sorry, just to clarify that, sir, I think you'll find that's on BLG letterhead, so that would probably be my correspondence. 242 MR. GARDNER: Thank you. 243 MR. SIDLOFSKY: And that's at tab 2F of the original submission, sir. 244 MR. GARDNER: It's also my understanding that Cardinal Power does have a connection agreement with Hydro One and that Casco is referred to as an embedded customer at the end of the Cardinal Power 115 kVa line. 245 Under normal course of operations, all the demand for the Casco-Cardinal facility is satisfied by Cardinal Power. And that's at the meter that's registering electricity supplied to or taken from the IMO-controlled grid. 246 There is the exceptional circumstances that was identified before, where, if Cardinal Power was shut down for any reason, then we would be able to withdraw electricity from Cardinal Power's transmission line through the H bus system. Hydro One will have conveyed that electricity to Cardinal Power from the IMO-controlled grid. At no time, though, whether we're receiving electricity from Cardinal Power facility or electricity which has been conveyed to Cardinal Power through the IMO-controlled grid, would we withdraw electricity from the transmission system owned by Hydro One. 247 And again, I do want to emphasize that when Cardinal Power is not operational, it's most likely that the Casco facility will not be operational as well, because we require steam, compressed air, and de-ionized water from the power facility for our plant to operate. 248 It's very rare that they conduct major maintenance, and as I said, the last time that that occurred was in April 2002. 249 MR. SIDLOFSKY: And, sir, is Cardinal Power obligated to supply electricity to Casco? 250 MR. GARDNER: Yes, subject to the loss of interruption or supply of electricity that's beyond the control of Cardinal. But beyond that, they are obligated to supply us power. 251 In the line use and transfer agreement that we were referring to here, it does specifically spell out that: 252 "All electricity supplied to Casco under the terms of the agreement is being purchased by Casco from Hydro but it is being delivered by Cardinal Power on behalf of Hydro with no charge to Casco for such transportation or delivery..." 253 And: 254 "...all matters pertaining to billings related to electricity are the exclusive responsibility of Hydro and Casco." 255 So that's spelled out in the line use and transfer agreement in section 3. 256 MR. BETTS: I don't believe that we've had that agreement delivered up here to the Panel. 257 Thank you. And sorry for the interruption. 258 MR. SIDLOFSKY: I apologize, sir. If I could just have your indulgence. Since the agreement has been handed around, perhaps it would be helpful if I just had Mr. Gardner read sections 2 and 3 of that agreement into the transcript. 259 MR. BETTS: Thank you. 260 MR. SIDLOFSKY: And you'll find that at page 4 of the agreement, sir. 261 MR. GARDNER: Section 2 is titled: "Transportation and Delivery of Electricity", and it states: 262 "Following receipt by Cardinal of written notice from Casco, which may not be given until the commencement date as defined in the ESA, that Casco wishes to commence receipt of electricity from Hydro, Cardinal shall promptly thereafter commence delivery of electricity to the delivery point/Casco. 263 "Casco shall reasonably cooperate with Cardinal in connection with necessary arrangements associated with commencing such deliveries. Following such commencement of delivery of electricity to Casco, and assuming supply is available from Hydro, electricity will be transported by Cardinal from the delivery point/Hydro over the transmission line through the facility substation and the Casco interconnect to the delivery point/Casco." 264 MR. SIDLOFSKY: And paragraph 3? 265 MR. GARDNER: Paragraph 3 is, "The Role of Ontario Hydro": 266 "All electricity supplied to Casco under the terms of this agreement is being purchased by Casco from Hydro and delivered pursuant to paragraph 2 above by Cardinal on behalf of Hydro with no charge to Casco for such transportation or delivery. All matters pertaining to billings related to electricity are the exclusive responsibility of Hydro and Casco." 267 MR. SIDLOFSKY: Physically, sir, you don't have any connection to the Hydro One transmission system; correct? I think you said that already. 268 MR. GARDNER: That's correct. 269 MR. SIDLOFSKY: Mr. Gardner, on what basis is Casco currently being charged for transmission? 270 MR. GARDNER: Casco's being charged for network and line connection services for the Cardinal plant on a gross basis, even though the plant does not withdraw electricity from the regulated transmission system. 271 MR. SIDLOFSKY: And have you considered whether and how Casco should be charged for transmission? 272 MR. GARDNER: Yes, I have. Casco is not a customer of Hydro One, or any other transmitter that receives the proceeds of transmission charges in the OEB's transmission rate order. Casco is not directly connected to Hydro One transmission system or to the transmission system of any other licensed transmitter or any transmitter that receives any portion of the uniform transmission rates. Casco does physically receive its electricity directly from Cardinal Power and the electricity does not physically enter the Hydro One transmission system or the transmission system of any other transmitter who receives a portion of the uniform transmission rates before it reaches Casco. 273 Our agreement with Cardinal Power provides that Cardinal Power has to deliver electricity to Casco and that it will not charge for delivery. As I stated before, in the rare event that Cardinal Power is unable to produce power but is still able to deliver other utilities to Casco, and instead is forced to withdraw power from the IMO-controlled grid to meet its obligation to Casco, then I would expect that Cardinal Power would be subject to transmission charges before it is a Hydro One transmission customer and it is withdrawing electricity from the IMO-controlled grid. 274 Any liability that Casco may have for reimbursement for transmission charges paid by Cardinal is a matter between Casco and Cardinal. And again, as I stated before, if that event were to occur, it's likely that we would be talking about one megawatt or less of power that would be forced to be delivered through the grid to Casco. 275 Because Cardinal Power, and not Casco, is a transmission customer of Hydro One, and because Cardinal Power, and not Casco, is connected to the transmission system for which transmission rates are collected, than Casco should not be subject to transmission charges under the OEB transmission rate schedule. 276 MR. SIDLOFSKY: And, sir, I take it that you've said that any charges that would be payable would be a matter between Casco and Cardinal. Are you confident that that can be worked out? 277 MR. GARDNER: I am. 278 MR. SIDLOFSKY: Thank you. 279 Now, Mr. Gardner, Hydro One has suggested that Casco has historically paid for transmission on a gross basis without compliant. And I wonder if you could tell Board why you are now disputing your liability for transmission charges? 280 MR. GARDNER: Cardinal's power output is being purchased by OEFC under a 1992 PPA between Ontario Hydro and Cardinal Power. At that time, or prior to that time, Cardinal Power -- sorry, the Casco plant was served by a 44-kV Ontario Hydro line. We were pleased to have Cardinal Power facility located on our site because of the benefits I talked about before, including more reliable source of supply and the other utilities that it's providing. 281 Since the Cardinal Power facility commenced operations, Casco has used the power generated by Cardinal Power facility and delivered directly to Casco. 282 The effect of the 1992 power-purchase agreement is that, even though the power to operate the Casco plant physically comes from the Cardinal Power facility, Casco does to the own that power. Before the wholesale market opened, we had no option but to purchase power directly from Ontario Hydro, and once Ontario Hydro was restructured, from Ontario Power Generation Inc. 283 As the Board obviously knows, the cost of power paid by the province's electricity consumers prior to market opening was bundled. Like all other consumers, Casco paid a cost for its power that included power generation and transmission. With the Cardinal output being sold to Ontario Hydro, there was no way for Casco to pay only for the commodity, we were forced to participate in the Ontario Hydro market. 284 Mr. Sidlofsky mentioned that we also had a unique situation. Casco was one of two companies in the province that wield up to 5 megaWatts of power from our generation that we have in London and Port Colborne down to our Cardinal plant, and we paid Ontario Hydro a small fee for that privilege. But this did allow us to avoid some of the bundled costs of power. That arrangement ended on market opening. But during that time, we were able to financially deliver up to 5 megaWatts of power, avoiding the bundled cost of power which included transmission. And this was the only permissible way we had to avoid transmission costs. 285 On market opening, the electricity rate was unbundled, and transmission charges became a separate component. After seven years of paying transmission service, even though our power was delivered from Cardinal Power's generator through Cardinal Power's transmission assets and not from Ontario Hydro's transmission system or the transmission system of any other licensed transmitter, there was an opportunity to correct the situation by having Casco pay only for the commodity. 286 However, Hydro One has insisted on charging Casco for network and line connection on a gross basis, even though we are still not connected to the regulated transmission system and we do not take power from the regulated transmission system. Casco addressed this matter with Hydro One during market opening and there was an interrogatory, number 4, in which Hydro One asked Casco to confirm that prior to open access, Casco was a direct customer of Ontario Hydro One, to which we responded affirmatively. Casco did pay bundled electricity rates in accordance with the power pricing tariffs that were in existence prior to market opening on May 1st, 2002. 287 MR. SIDLOFSKY: And finally, Mr. Gardner, if the Board determines that Hydro One is entitled to gross billing, what are the consequences for Casco? 288 MR. GARDNER: If the Board allows Hydro One to charge Casco on a gross billing basis for network and line connection, it's estimated that the cost to Casco would be about $500,000 per year, and I think in Exhibit 1.5 we've actually summarized our costs for the first year from May 1st, 2002, till the end of April, 2003 and the costs were $514,000. 289 As noted in our submission, gross billing with perpetuate the discriminatory treatment of Casco and provide a competitive disadvantage and Hydro One will continue to be paid for services that it does not provide to Casco. 290 The economic impact to Casco is significant. Over recent years, Casco has seen our energy costs nearly double due to the rising prices of natural gas and the higher costs for electricity in the Ontario market. This has dramatically reduced our competitiveness on a North American basis, and particularly at Casco-Cardinal and it really does significantly jeopardize the long-term viability of our business. The Casco-Cardinal plant, in particular, is our oldest facility of all our facilities we have and it's one of the least cost-competitive, because of the nature of its facility. Any means to attempt to lower energy costs will reduce the impact and move to improve the profitability and allow Casco to maintain jobs and economic activity in the Cardinal area. 291 MR. SIDLOFSKY: Sir, could I just ask you, the single-line diagram, that looks to be a fairly large area. Could you just tell me which part of that drawing is on the Casco site? 292 MR. GARDNER: You're right, it's not to scale in any way, but this whole area here is on the Casco site. The distance from this connection point to the connection to the Hydro One network is about five miles, of which a portion of that cable is buried underground through the town of Cardinal, and then goes above ground out across the 401, and about two miles north of the 401. 293 MR. SIDLOFSKY: So that would be the entire lower half of the single-line diagram. 294 MR. GARDNER: That's correct. This is all on Casco's site. 295 MR. SIDLOFSKY: Okay. So would it be fair to say that everything roughly from the 115 kV bus, the horizontal line in the middle to have drawing? 296 MR. GARDNER: This is on Casco's site. 297 MR. SIDLOFSKY: Okay. 298 MR. GARDNER: And this cable here runs north of our property. 299 MR. SIDLOFSKY: So the demarcation point would be where the 115 kV underground cable is noted; is that right? 300 MR. GARDNER: That's correct. 301 MR. SIDLOFSKY: Is that where it leaves your property? 302 MR. GARDNER: That's correct. 303 MR. SIDLOFSKY: Okay. And could you perhaps give the Board a sense of what area that takes up on the Casco plant. 304 MR. GARDNER: Again, this is the Cardinal Power facility, and this is our property here. The underground cable is underground along this main road here, it goes out to the 401. And maybe if I can sort of simplify our case, we're essentially paying, right now, Hydro One Networks $514,000 to move the electricity from this facility here to our property here, which is about ten feet. 305 MR. SIDLOFSKY: Sorry, sir, did you say ten feet? Okay, thank you. 306 Mr. Chair, I would like to move on to Mr. Snelson. I don't know if this would be a good time for a break, or I'm happy to keep going. 307 MR. BETTS: I was looking at that myself. How long do you feel you would like to deal with Mr. Snelson on direct? 308 MR. SIDLOFSKY: I think he'd probably be a half hour to three-quarters of an hour. 309 MR. BETTS: Well, I think, then, it would be appropriate if we take a short break now and then we'll come back with your questions for Mr. Snelson. 310 We will break now and reconvene at 11:05. 311 MR. SIDLOFSKY: Thank you, sir. 312 --- Recess taken at 10:47 a.m. 313 --- On resuming at 11:10 a.m. 314 MR. BETTS: Thank you, everybody. Please be seated. Thank you. 315 Just by way of a preliminary announcement as well, I know we have scheduled today and tomorrow for this hearing, and the Board does have a conflict for tomorrow afternoon. So it will put even greater pressure on all of us to try and work through this matter by that time. And the Board is prepared to work late today, if that would assist in any way. And we'll allow all of you to consider those options and maybe let the Board know what your feelings are after the lunch break. 316 Are there any preliminary matters before we resume? Mr. Sidlofsky, please continue. 317 MR. SIDLOFSKY: Thank you, Mr. Chair. I think we were just about to begin with Mr. Snelson's evidence. 318 Mr. Snelson, I won't take the Board through your qualifications, but could you simply highlight the experience you have that's relevant to this matter. 319 MR. SNELSON: Yes. I was a member of the Ontario Energy Board Transmission System Code Task Group. I was a witness in the Hydro One transmission rate proceedings, where the decision on the definition of embedded generation and the decision on net versus gross billing was made. I've also been involved in various other OEB processes, as Mr. Sidlofsky outlined in his introduction of me. 320 MR. SIDLOFSKY: And, Mr. Snelson, do the Casco facilities and the Cardinal Power co-gen facilities at Cardinal correspond to the characteristics of an embedded facility, as they were discussed in the hearing at RP-1999-0044? 321 MR. SNELSON: Yes, I believe they do, and we have had that definition read into the record several times. It's 3.2.1 of the transmission rate order. The definition of embedded generation is that it is: 322 "...generation that is not connected to the transmission system and is located behind the meter that registers the electricity supplied from the regulated transmission facilities is referred to as 'embedded generation.'" 323 MR. SIDLOFSKY: Mr. Snelson, I think you were responsible for at least a couple of readings of that last time. Can I understand or can the Board understand that you adopt your evidence from that Abitibi proceeding? 324 MR. SNELSON: Yes, I do. 325 Now, before discussing the specifics, I would like to just review a few of the general characteristics of the Casco plant and how that fits with the general concept of a co-generation facility. 326 The Casco plant is within the mill property. Steam, compressed air, de-ionized water, and electricity are supplied from the Cardinal Power facilities to the Casco mill, and you've heard about that from Mr. Gardner. 327 That makes the Cardinal Power facility, in a technical sense - ownership may be different - but in a technical sense, it is an integrated part of the Casco and Cardinal facilities on that site. 328 This is the normal circumstances where embedded co-generation will facilitate economic efficiency and energy efficiency. 329 The reasons for that were outlined in my witness statement in this proceeding and in my oral evidence in the Abitibi proceeding, and I won't go any further into them here. 330 MR. SIDLOFSKY: Sir, are there any unusual characteristics in the co-gen facility at Cardinal? And if so, how do those characteristics affect whether the facility should be considered embedded? 331 And just for the court reporter's benefit, that was "co-gen," c-o-g-e-n. 332 MR. SNELSON: There are the same three unusual characteristics with respect to the Casco facility as to the Abitibi facility. It's connected at transmission voltage. Casco is connected at transmission voltage within the Cardinal-owned electricity system that also serves Casco. 333 The embedded generation is not owned by the load. They are in different ownership. And because of the contractual situation, recognizing the Cardinal co-generation as embedded generation will effectively cause some loss of transmission revenue. 334 MR. SIDLOFSKY: Sir, maybe we could deal with each of those characteristics in turn. 335 First, the connection of the co-gen facility at the transmission voltage within the plant. Would that disqualify it from being considered an embedded generator? 336 MR. SNELSON: In my opinion, no. The connection at distribution voltage is more usual. The over 50 kV connection is either an accident of history or a matter of technical convenience, and that doesn't affect whether the facility and the generation and load are embedded together. 337 The load and generation are connected together within unlicensed transmission facilities. The connection between the generator and the load is entirely on the Casco property, and we've heard from Mr. Gardner that it's... I think the response was ten feet or something like that. A very short distance. 338 And they are embedded together with respect to their connection to Hydro One regulated transmission. There are further details of that in the witness statement and the Abitibi evidence. 339 MR. SIDLOFSKY: Should the separate ownership of the co-generation disqualify it from being considered an embedded generator? 340 MR. SNELSON: No. Again, it's unusual but not unique for generation embedded in an industrial facility. It's not unusual for generation embedded in a local distribution system. The reasons were given in my Abitibi evidence and in the written witness statement. And Hydro One witnesses in the Abitibi proceeding have agreed that ownership of the generation is not a factor in deciding whether the generation is embedded or not. 341 In addition to not owning the generating plant, you will have heard that Casco does not own the output of the generating plant: The commodity, the electricity that it produces. This is an issue that relates to the contract for energy. And as we've heard in the Abitibi proceeding, energy contracts are irrelevant in transmission charging. 342 MR. SIDLOFSKY: Should the loss of transmission revenue disqualify the co-generation plant from being considered an embedded generator? 343 MR. SNELSON: No. All new and some existing embedded generation results in some loss of transmission revenue. The purpose of the rate order was to define when net-load billing would be allowed, and to what degree revenue loss would be allowed. 344 Again, that's in my witness statement and in the Abitibi evidence. And we've established through interrogatories that Hydro One already allows net-load billing and the associated revenue loss from non-utility generators located within local distribution systems. 345 MR. SIDLOFSKY: Sir, in your opinion, is Casco a transmission customer of Hydro One or of any other licensed transmitter? 346 MR. SNELSON: Casco is not a transmission customer of Hydro One. Cardinal Power owns the transmission that Casco connects to and therefore Cardinal Power would be a transmission customer. Cardinal Power is an unlicensed transmitter, and therefore, Casco is not directly connected to Hydro One-owned facilities or to the facilities of any other licensed distributor -- licensed transmitter. 347 Casco does not have a delivery point that is physically connected to the Hydro One facilities. And the other general reasons regarding definition of transmission customer are dealt with in the Abitibi proceeding and in the witness statement. 348 MR. SIDLOFSKY: Mr. Snelson, in your opinion, was the definition of "transmission customer" and "transmission delivery point," as it applies when there are privately-owned facilities at transmission voltage, adequately explored in the stakeholder-ing and consultation that preceded the transmission hearing? And I take it you were involved in that stakeholder-ing and consultation, is that right? 349 MR. SNELSON: Yes, I was. I attended most of the stakeholder sessions. I was a member of the gross net billing advisory team that worked on the gross and net billing issue, and I was actively involved in the alternative dispute resolution process that led to the settlement agreement which Hydro One has submitted in the Abitibi case, and that settlement agreement included a proposed settlement of the issue of the definition of "transmission customer," even though the Board, in fact, did not rely upon that settlement agreement. 350 So I was there throughout the process. And the issue of "transmission customer" was certainly a big issue in that hearing. But, as it applies to situations like Abitibi and Casco, where there are privately-owned transmission facilities, those issues were not adequately addressed in that process. 351 The big issue on the definition of "transmission customer" was that Hydro One wanted to continue with a definition which said: Anybody who was a customer of Ontario Hydro directly for the bundled tariff would be a transmission customer. And a number of alternatives were explored for replacing that with a definition that would be appropriate in the new paradigm of the new energy market. And the biggest issue was whether customers connected at distribution voltage within local distribution companies should be considered transmission customers. 352 This was a very large impact decision. It would affect enormous numbers of customers and fundamentally affect the design of transmission rates. It would fundamentally affect who would collect the transmission rate. And the decision was that the transmission customers would be only the directly connected parties. 353 The issue of -- there was a smaller issue with respect to whether customers who are connected at transmission voltage to Hydro One transmission within a local distribution company's service territory would be allowed to become transmission customers, or whether they had to remain customers of the local distribution company. That was a secondary issue on that. But the issue as to the treatment, who was the transmission customer when there was private transmission facilities, was not addressed in the hearing. 354 MR. SIDLOFSKY: Mr. Snelson, you'll recall I mentioned to the Board that I received a package from Hydro One yesterday with about 150 pages. 80 of those appear to be pages taken from the transcript of the Board's transmission hearing in RP1999-0044. 355 Have you had a chance to take a look at that material? 356 MR. SNELSON: Yes, I have. 357 MR. SIDLOFSKY: Okay. And if I can take you about... Do you have it handy? 358 MR. MORAN: Mr. Chair, I don't believe that this has been filed or marked as an exhibit yet. I understand that Ms. Aldred has additional copies available. 359 MS. ALDRED: Yeah, I have copies here that we can put in. 360 MR. BETTS: Thank you. Let's do that now. 361 MR. SIDLOFSKY: I'll only be referring to a couple of pages of it, but it might as well go in now. 362 MR. MORAN: This will become Exhibit 1.7, package of materials filed by Hydro One for cross-examination purposes. 363 EXHIBIT NO. 1.7: PACKAGE OF MATERIALS FILED BY HYDRO ONE FOR CROSS-EXAMINATION PURPOSES. 364 MR. BETTS: Thank you. 365 MR. SIDLOFSKY: Now, Mr. Snelson, I'm going to take you to tab 4 of the additional Hydro One material, and I'll take you about six pages in, seven pages in, until we get to a diagram that appears to be showing transmission customers. Do you have that drawing, sir? 366 MR. SNELSON: Yes, I do. 367 MR. SIDLOFSKY: Are you familiar with that drawing? 368 MR. SNELSON: Yes, I originally drew it. 369 MR. BETTS: Mr. Sidlofsky, could you help me again with that reference, guide me to it? 370 MR. SIDLOFSKY: Tab 4 of the additional Hydro One material. 371 MR. BETTS: Yeah. 372 MR. SIDLOFSKY: Six pages past the cover page. 373 MR. BETTS: I have found it now, thank you. 374 MR. SIDLOFSKY: Okay. 375 Mr. Snelson, you said you drew that diagram. 376 MR. SNELSON: That's correct. 377 MR. SIDLOFSKY: Okay. And does that diagram illustrate the issues that were debated at the hearing with respect to the definition of a "transmission customer?" 378 MR. SNELSON: Yes, it certainly does. And this was used by Mr. Fisher, the counsel for AMPCO in his cross-examination of the Hydro One witnesses and it illustrate the big issue that I referred to, which is whether or not customers that are within local distribution companies and are not directly connected to transmission should be treated as transmission customers. 379 And in particular, it was pointing out the circumstances of the industrial customer C and the industrial customer D. They are both connected at distribution voltage and one is within the service territory of a former municipal electric utility. And the other one is in the service territory of the Ontario Hydro distribution system. And under Hydro One's proposals, customer D would have been a transmission customer and customer C would not. This was the issue of whether the customers embedded in LDCs would be transmission customers, and that was very thoroughly discussed and explored in the hearing. 380 The other circumstance that was discussed in the hearing I referred to in my answer to the previous question, and that is with respect to industrial customers A and B. Industrial customer A is directly connected to Hydro One transmission within the service territory of a municipal electric utility. And there were customers in that circumstance who, although they used no municipal electric utility facilities, with Hydro One's proposal, would not have been transmission customers, because they were customers of a municipal utility. 381 The similarly situated customer, customer B, in the Ontario Hydro service territory, would have been a transmission customer. 382 So those were the two situations with respect to who is a transmission customer that were focussed on in the hearing. 383 This diagram does not show a situation that is similar to the Casco or Abitibi circumstances. 384 MR. SIDLOFSKY: Well, sir, does the figure have any relevance to the current case on Casco? 385 MR. SNELSON: Yes, it does, but only indirectly. 386 This figure was probably the origin of the terms "inner" and "outer ring of meters" that's referred to in the Board's summary of evidence. The Board effectively chose the inner ring of meters to define "transmission customer," although it didn't use that specific term in its findings. The "inner ring of meters" is the first meter encountered when leaving the transmission system for which the charges are being made. And in this diagram, the inner ring of meters are shown with the sign M small i and you will see that those directly connected to the transmission are shown to have meters with that designation. The outer ring of meters are those shown Mo, and they are not directly connected. 387 Now, if you were to apply that concept to Casco, you have you have the Hydro One transmission line, and as you leave that transmission line, the regulated transmission for which charges are being made, the first meter you encounter is the Cardinal meter, the meter which is at the switching station where Cardinal connects to the Hydro One line. 388 And that would be, if you applied the inner ring concept to that circumstance, that would be the meter that would define "transmission customer". 389 Carrying that on, the Casco meter which is at the Casco load is an outer ring meter, by that definition. 390 MR. SIDLOFSKY: Mr. Snelson, in your view, is the co-gen facility at the Casco site an embedded generation facility within the meaning of the Board's May 26th, 2000, decision on Hydro One transmission rates? 391 MR. SNELSON: Yes, it is. I've already read the definition, I won't read it again. Cardinal is an unlicensed transmitter. It's exempt from transmission rate regulation by the Ontario Energy Board, by this Board; therefore, in my view, it doesn't constitute a regulated transmitter in the context of the transmission rate order. 392 The co-generation facility is behind the meter that register it is electricity supply from the regulated transmission facilities. That meter is the meter at the connection between Cardinal Power and Hydro One. In my view, and we've been through the idea of whether this is a one or two-part test, and I think we've established that not connected to transmission and being behind the meter that measures the electricity supplied from the regulated transmission means the same thing. 393 So, in my opinion - and you've heard my reasons this morning; you've got my reasons in my witness statement and also Abitibi evidence - Cardinal co-generation facility and the Casco load are embedded together, and the Cardinal plant is an embedded plant within the meaning of the transmission rate order. 394 MR. SIDLOFSKY: Mr. Snelson, I'm going to take you to one more item from the material that Hydro One distributed. And that's, for the Board's reference, the first of three drawings that Hydro One provided at the back of their submission. Or, excuse me, at the end of their material. There are three -- I have three colour drawings. The first one is one called "Simplified Multiple Transmitter Diagram". 395 MR. BETTS: This is in the last exhibit, 1.7, you're referring to? 396 MR. SIDLOFSKY: I received it with 1.7. 397 MS. ALDRED: I don't think it became bound up in that exhibit. It was distributed at the same time separately. We have extra copies we can provide the Board. 398 MR. BETTS: That's fine, then. 399 And what are the parties' preferences, to establish this as a new exhibit or just attach it to the previous exhibit? 400 MS. ALDRED: It might be easier if it were a new exhibit. I intend to cross-examine on it too, so... 401 MR. BETTS: Thank you. 402 MR. MORAN: Mr. Chair, this would become Exhibit 1.8, line diagram entitled "Simplified Multiple Transmitter Diagram". 403 MR. BETTS: Now, did I understand that there are three diagrams, or more than one diagram? 404 MR. SIDLOFSKY: That's what I have, sir. 405 MS. ALDRED: There were two further diagrams which we distributed on Friday and which the Hydro One Networks' witnesses will be referring to in their testimony, whenever we get to that. 406 MR. BETTS: So we'll just introduce this one at this stage. 407 MS. ALDRED: I think that would make sense, yes. 408 MR. BETTS: And Mr. Moran, that became Exhibit 1.8. 409 MR. MORAN: 1.8, diagram entitled "Simplified Multiple Transmitter Diagram". 410 EXHIBIT NO. 1.8: LINE DIAGRAM ENTITLED "SIMPLIFIED MULTIPLE TRANSMITTER DIAGRAM". 411 MR. BETTS: Thank you. 412 Please proceed. 413 MR. SIDLOFSKY: Thank you, sir. 414 MR. BETTS: And, Mr. Sidlofsky, at this point I think we only have one of the three drawings as exhibits. 415 MR. SIDLOFSKY: That's the only one that Mr. Snelson will be speaking to. 416 MR. BETTS: Thank you. 417 MR. SIDLOFSKY: Except possibly on redirect, if that's necessary. 418 MR. BETTS: Thanks. 419 MR. SIDLOFSKY: Now, Mr. Snelson, with this diagram, if Casco's proposal were accepted, which generators and loads would be able to claim to the benefits of net-load billing? 420 MR. SNELSON: Load F and generator E, that are connected to the unlicensed transmission, would be able to claim to be embedded facilities. And that is because the delivery point from the licensed transmission facilities takes place at the change of ownership, which is where the line changes from black to red. And that should be the delivery point, that's the point at which the transmission customer is defined, that should be the delivery point for the power into the unlicensed transmission facilities, the owner of the unlicensed transmission facilities would be the transmission customer at that point. And so they would be embedded with respect to the regulated transmission facilities. 421 Now, the other loads, for instance, load D and load C, are -- 422 MR. SIDLOFSKY: Sorry, is that load D and generator C? 423 MR. SNELSON: Sorry, load D and generator C are separately connected to regulated transmission, according to this diagram, and would not be able to claim the benefits of net-load billing. 424 MR. SIDLOFSKY: And, presumably, load B and generator A are connected to Hydro One transmission assets so they wouldn't be able to claim the benefit; is that right? 425 MR. SNELSON: That's correct. 426 MR. SIDLOFSKY: Sir, I wonder if I should stop you there. 427 Mr. Chair, just at the end of the break, we received a copy of an abridged version of the power-purchase agreement between Ontario Hydro and Cardinal Power from Mr. Moran. I'd like to ask Mr. Snelson a couple of questions about that. That may be a good time to do that. I'm not sure if the Board has copies of that agreement yet. 428 MR. MORAN: Mr. Chair, this would become Exhibit 1.9, a copy of an abridged version of the agreement between Ontario Hydro and Cardinal Power of Canada LP, dated May 29, 1992. 429 EXHIBIT NO. 1.9: COPY OF AN ABRIDGED VERSION OF THE AGREEMENT BETWEEN ONTARIO HYDRO AND CARDINAL POWER OF CANADA LP, DATED MAY 29, 1992. 430 MR. BETTS: Thank you. 431 MR. MORAN: Just so you understand what the abridgement is, Mr. Chair, there was a schedule that had all the pricing information. That has been removed as a result of confidentiality concerns raised by OEFC. 432 MR. BETTS: Thank you. 433 MR. SIDLOFSKY: And the reason I stopped you there, Mr. Snelson, was because you mentioned the delivery point being the point at which the unlicensed transmission is connected to the Hydro One transmission in Exhibit 1.8; is that right? 434 MR. SNELSON: That is correct. 435 MR. SIDLOFSKY: Okay. And can you tell me if anything assists the Board in understanding your view of the delivery point in light of the power-purchase agreement? 436 MR. SNELSON: Well, I too have only seen this agreement very briefly, but I have noticed that the definition of delivery point is consistent with the place where Cardinal Power connects to the Hydro One facility. And I would take you to paragraph 1.5 on page 2. And that says that: 437 "Delivery point means the disconnect device on the 115 kV circuits, L1MB and L2M as indicated in schedule B, figure 2." 438 I'm not sure whether schedule B, figure 2, is here. 439 MR. SIDLOFSKY: Sir, I think there are some diagrams toward the back of the agreement. Maybe just to save a bit of time, I could take you to what looks to be page B4. 440 MR. SNELSON: Yes, I have that. 441 MR. SIDLOFSKY: And that's the third page from the end, Mr. Chair. 442 MR. SNELSON: And you will see that at the top of that diagram, it indicates -- 443 MR. SIDLOFSKY: Sorry, Mr. Snelson. 444 Does the Board have that? 445 MR. BETTS: Yes. Everybody has it. Thank you. 446 MR. SIDLOFSKY: Thank you. 447 MR. SNELSON: And you will see that at the top of that diagram, it labels "delivery point," and that is very close to the dotted line that says "Hydro-side and generator side," which I presume indicates the change of ownership. And that is within the switching station where the Cardinal facility is connected to the Hydro One transmission line. 448 So this is consistent with the view that "delivery point" for a private transmission system, an unlicensed transmission system, has always been considered, in this kind of circumstance, to be where the change of ownership takes place. It certainly has in this case. 449 MR. SIDLOFSKY: And this agreement was entered into in 1992, I believe; is that right? 450 MR. SNELSON: The date on the front of the cover letter is July 11, 1992. The date on the agreement is May 29th, 1992. 451 MR. SIDLOFSKY: And in your admittedly quick review of the agreement, were you able to find anything else that would assist the Board in this matter? 452 MR. SNELSON: Section 5, page 4, is entitled: "Delivery of power," and section 5.0 says: 453 "Subject to the terms and conditions in this agreement, Hydro shall connect the generating facility to Hydro's electrical supply system at the Delivery Point." 454 "Delivery Point" has capital letters, which I presume means that it has the meaning given to it within the definition section of the agreement. 455 MR. SIDLOFSKY: Just so there's no misunderstanding, in terms of the sale and purchase of the power produced by the facility, perhaps I could just get you to go to page 3 of the agreement, Mr. Snelson, and look at section 2. 456 Now, I think Mr. Gardner's evidence was that Casco has never suggested that it purchases electricity from the Cardinal Power facility; correct? Do you recall that? 457 MR. SNELSON: I recall Mr. Gardner's evidence, yes. 458 MR. SIDLOFSKY: And it looks like section 2 would confirm that; is that right? 459 MR. SNELSON: According to my reading, that is correct; that Cardinal Power was obliged to sell its power to Ontario Hydro and to sell that power at the delivery point, in accordance with this agreement. 460 MR. SIDLOFSKY: Thank you, Mr. Snelson. 461 Going back to Exhibit 1.8, if we could, the simplified multiple transmitter diagram. Now, my understanding of the implication of this diagram is that only load F and generator E would be in a position to claim embedded status. 462 MR. SNELSON: Yes, that's what I said in answer to the previous question. 463 MR. SIDLOFSKY: And, sir, do you consider it equitable that load F and generator E should be able to get the benefits of net-load billing while, for example, load D and generator C, which are connected to a licensed transmitter, do not? 464 MR. SNELSON: Within the context of postage stamp transmission rates, I consider that to be fair. 465 Now, this diagram has been specifically drawn to make the unlicensed transmission and the other licensed transmission company situations look very similar. As regards the diagram, they are mirror images of each other. But in some ways, that is a little misleading. 466 The situations are likely to be very different between loads and generations connected via a licensed transmitter and load and generation connected within an unlicensed transmission facility. 467 The unlicensed transmitter is almost certain to be confined to a relatively small area. It will be confined to one industrial complex or it will be confined to one generator's plant and its connection to the transmission system. 468 In this case, we've heard that the generator and the load are a very small distance apart within Casco's plant, and the unlicensed transmission just takes the surplus power out to the Hydro One transmission system. 469 There will likely be a close relationship between the load and the generator, a close business relationship. It may or may not constitute common ownership; in the past it often did. In the future it may be more of a symbiotic relationship such as that of Casco and Cardinal, and of Abitibi and Westcoast. And in both the Casco and the Abitibi situations, there is an element of co-generation between facilities that kind of links them in an energy sense. 470 On the other hand, a licensed transmitter can cover a wide area. It's in the business of supplying transmission services to the public. It's required to provide open access to its transmission lines. It receives a share of the regulated transmission revenue. And, although it's not necessarily so, it's likely that situations such as load D and generator C will be separate businesses. And because they are separately connected to licensed transmission, then they are separately receiving transmission services from the regulated transmission company to which they are connected. 471 MR. SIDLOFSKY: And, sir, in the context of unlicensed transmission, would it be typical that the transmitter itself would be either the load or the generator? 472 MR. SNELSON: Yes. It would be normal for one or other of those parties to be the owner of the unlicensed transmission facility. 473 MR. SIDLOFSKY: Would that be the case with the licensed transmission company? 474 MR. SNELSON: No. I believe that licensed transmission companies are not allowed to own generation, and licensed transmission companies are not industrial companies making products and starch or paper, whatever it might be. So it's highly unlikely, in fact, as I say, I think it may even be impossible, for load D or generator C to be under the same ownership as the licensed transmission company. 475 MR. SIDLOFSKY: Mr. Snelson, if the Board adopts your views as to the definition of "transmission customer" or "transmission delivery point" and "embedded generation," will it lead to a large-scale erosion of Hydro One transmission revenues, as increasing numbers of closely related loads and generators claim net-load billing? 476 MR. SNELSON: No, I don't believe that deciding in favour of accepting Casco or accepting Abitibi or both as embedded generation will lead to a substantial erosion of revenue. Hydro One raises the spectre of the slippery slope as more generators and loads that are in reasonably close proximity try to claim embedded status. 477 In this case, we are just looking at the clarification of the existing rate order. It only applies to a few cases where there are unlicensed transmission facilities and so there's no impact of deciding this on other situations that are substantially different, where there are not generators and loads connected within the same unlicensed transmission facility. 478 MR. SIDLOFSKY: And I think the limited number of similar situations were covered in Hydro One's responses to Casco's interrogatories; do you recall that? 479 MR. SNELSON: Yes, I do. There were very few situations that were similar. It may well be that Abitibi and Casco in their own ways are both unique situations. 480 MR. SIDLOFSKY: And, sir, Hydro One has talked, in its evidence, or written in its evidence, and spoken in its evidence, in the Abitibi matter, about parties constructing new transmission lines to achieve the same situation as Casco or Abitibi. Is that form of bypass a concern, and if so, what would be the appropriate proceeding to consider this? 481 MR. SNELSON: Well, that form of bypass may well be a concern if the purpose of the new transmission is solely to bypass transmission charges. But the construction of new bypass lines is different to the Casco and Abitibi situation. 482 Casco and Abitibi are not proposing to build new lines for bypass, they are proposing to use the existing connections that were arranged to connect the load and the generation to the transmission system. There are no Hydro One connection facilities that will be physically bypassed in the sense of, if you were to build a transmission line to go around Hydro One, that is not being done. 483 This is one of several forms of transmission bypass that are possible. And these kinds of bypass issues are being actively considered within the Transmission System Code proceeding. And that is the appropriate forum, I believe, for that issue to be settled. 484 MR. SIDLOFSKY: Those are my questions. Thank you, sir. 485 MR. BETTS: Thank you, Mr. Sidlofsky. 486 Mr. Moran, would you like to lead off cross-examination? 487 MR. MORAN: Thank you, Mr. Chairman. 488 CROSS-EXAMINATION BY MR. MORAN: 489 MR. MORAN: Mr. Gardner, a couple of questions for you just to understand, perhaps, in a little bit more detail what exactly is happening on the ground at the Casco-Cardinal site. I think you've already indicated that power is physically delivered to Cardinal -- sorry, by Cardinal to Casco over a transmission system that's owned and operated by Cardinal; right? 490 MR. GARDNER: That's correct. 491 MR. MORAN: all right. And as I understand it, the capacity of the co-generation plant is about, I think you said 220 megaWatts? 492 MR. GARDNER: About 200. 493 MR. MORAN: And of that 200 megaWatts before that power reaches the grid, there's about a 10 megaWatt demand by Casco. 494 MR. GARDNER: Yeah, on average, I think, 11.3 last year. 495 MR. MORAN: Okay. And then the balance of that power goes out to the grid. 496 MR. GARDNER: That's correct. 497 MR. MORAN: All right. And as I understand, the primary difference in terms of the transmission facilities - perhaps this is a question for you, Mr. Snelson, rather than Mr. Gardner - the primary difference between the Abitibi situation that was discussed in the previous hearing and the Casco situation in this hearing is that the internal transmission facilities that deliver power from the co-generator to the customer in Abitibi, those are owned by the load customer, whereas in the Casco situation the equivalent transmission facilities are owned by the co-generator. 498 MR. SNELSON: That is correct. 499 MR. MORAN: Okay, and one of the other differences between the two situations is that in the Abitibi situation, the co-generator is operated under contract by the load customer; right? 500 MR. SNELSON: That is correct. 501 MR. MORAN: And in this particular case, the co-generator is operated by a completely independent entity, that would be Sithe; right? 502 MR. SNELSON: Well, maybe Mr. Gardner would be better to answer that question. 503 MR. GARDNER: That is correct. 504 MR. MORAN: Mr. Snelson, do you agree that the issue, with those differences in mind, is essentially the same, though; it's the question of how this generation should be characterized, whether it's embedded or not? 505 MR. SNELSON: That is the key issue, I believe, for this hearing, yes. 506 MR. MORAN: Okay. And again, just to draw the parallel between the Abitibi situation and this situation, Casco plays the same role here as Abitibi did in the previous proceeding; right? Other than the fact that Casco doesn't operate the co-gen. 507 MR. SNELSON: I'm sorry? I don't think I follow the question. 508 MR. MORAN: If we're going to compare the two situations, the load customer in the Abitibi situation was Abitibi and the load customer here is Casco; in the Abitibi situation the co-generator was WCP and here the co-generator is Cardinal Power. 509 MR. SNELSON: That's correct. 510 MR. MORAN: All right. And as I understand it, Cardinal Power leases land from Casco. 511 MR. GARDNER: That is correct. 512 MR. MORAN: Okay. And I think, Mr. Gardner, you indicated that Casco is the landlord but that there's a trustee. Could you just explain what the role of the trustee is.? 513 MR. GARDNER: I'm not sure I know the answer to that. 514 MR. MORAN: Okay. Now, if I could just get you, then, to turn up Exhibit 1.4. This is the abridged agreement, the line use and transfer agreement between Canada Starch and Cardinal Power. 515 And starting at page 1, we see a number of recitals that begin on page 1. And in recital A, as I read it, what we see there is that Casco is going to operate the co-generation -- sorry, Cardinal is going to operate the co-generation facility on premises owned by Casco adjacent to its plant, and that that co-generation facility is going to generate electricity for sale to Ontario Hydro; right? 516 MR. GARDNER: That's correct. 517 MR. MORAN: And then it goes on to say, "and thermal energy for sale and compressed air for delivery to Casco." 518 And the reference to thermal energy there, of course, is steam. 519 MR. GARDNER: That's correct. 520 MR. MORAN: And in recital B they say: 521 "An indication that in order to deliver the electricity that's produced by the facility to Hydro, Cardinal will construct a 115 kV transmission line from the co-generation station out to connect with the grid." 522 Right? 523 MR. GARDNER: That's correct. 524 MR. MORAN: And the points of interconnection are the same points that have been referred to previously as the delivery points. It's the two disconnect switches at the border of the property at Casco; right? 525 MR. GARDNER: The disconnect switches, I believe, are at the Hydro One network, up north of the 401. 526 MR. MORAN: I'm sorry, yes, not at the property line, but what you had described as the generator side of the facilities; right? 527 MR. GARDNER: That's correct. 528 MR. MORAN: Okay. And if we look over at page 2, there's a recital that indicates that: 529 Casco currently purchases its electricity from Hydro at the usual retail tariff rates and receives delivery over an existing 44 kV line." 530 Right? 531 MR. GARDNER: That's correct. 532 MR. MORAN: So this is a recital that deals with the preexisting situation prior to the co-generation coming on line. 533 MR. GARDNER: That's correct. 534 MR. MORAN: And then the next recital talks about "a condition of development of the facility on the plant site," and it discusses the fact that this is being done so that Casco can obtain a less expensive and more reliable electricity supply. There's a recital to the effect that Cardinal will be required to deliver electricity on behalf of Hydro, directly to Casco. Right? 535 MR. GARDNER: That's correct. 536 MR. MORAN: And this would be over Cardinal Power-owned facilities? 537 MR. GARDNER: That's correct. 538 MR. MORAN: And then finally we have recital E, which says that: 539 "The parties wish to set forth in this agreement the terms and conditions under which Cardinal will construct the necessary facilities, will deliver electricity to Casco on behalf of Hydro, and will otherwise make available the transmission line and related equipment to supply electricity to Casco." 540 MR. GARDNER: That's correct. 541 MR. MORAN: So, as I understand it, then, we have to look at the rest of the agreement to understand how that gets implemented, but that's the purpose of the agreement. 542 MR. GARDNER: Correct. 543 MR. MORAN: And looking at the agreement itself, then, on page 4, in section 2, is a provision entitled, "Transportation and Delivery of Electricity", which states: 544 "Following receipt by Cardinal of written notice from Casco that Casco wishes to commence receipt of electricity from Hydro, Cardinal shall promptly thereafter commence delivery of electricity to the delivery point/Casco." 545 Do I understand this correctly to mean that, because of the use of the two phrases "delivery point" and "Casco," that this is to reflect the fact that some of the power is delivered to Casco before it gets to the delivery point, and it's the balance of the power that's being delivered to the delivery point? 546 MR. GARDNER: I believe that's correct. 547 MR. MORAN: Okay. And then in paragraph 3, on the same page, there's a section that talks about the role of Ontario Hydro, and I think you've already referred to this provision previously. And this is where Cardinal agrees not to bill Casco for transportation? 548 MR. GARDNER: That's correct. 549 MR. MORAN: Okay. Those are all the questions I wanted to ask on that exhibit. 550 I had a couple of questions on Exhibit 1.5, which was the spreadsheet that you produced with respect to the transmission costs that were actually incurred by Casco/Cardinal. 551 And I think, as I understand it, you produced this to indicate that for the actuals that are set out, which cover a month -- is this a fiscal year for you? 552 MR. GARDNER: No, this is the first year since market opening, May 1st, 2002, until April 30th, 2003. 553 MR. MORAN: So what we see in this spreadsheet, then, is what you were actually billed since market opening up until the end of April of this year? 554 MR. GARDNER: That's correct. 555 MR. MORAN: For a total of $514,676. 556 MR. GARDNER: That's correct. 557 MR. MORAN: And if you were to have been billed on a net-load basis as opposed to a gross-load basis, what would you indicate to the Board as to what you would have been charged? Would it be zero or something more than zero? 558 MR. GARDNER: The Casco/Cardinal facility would not be aware of when the Cardinal Power facility is not transmitting power up to the Ontario Hydro -- or the Hydro One network. The only time I know that they were completely down was prior to market opening, which was the April 16th, for 60 hours. So based on the information that's available to me, I would say we would be billed zero, because there's been no interruption of power flow from Cardinal Power to our facility. 559 MR. MORAN: All right. So what we see in this spreadsheet for the months from May 2002 through to April 2003, there were no shutdowns during that period. Casco's power needs were fully met by the Cardinal Power facility? 560 MR. GARDNER: That's correct. 561 MR. MORAN: All right. So on a net-load basis, then, I assume it's reasonable to conclude that you would have been billed zero, as opposed to 514,000 on a gross-load basis. 562 MR. GARDNER: As far as we know, we would recognize all of the other utilities were being delivered by the Cardinal Power facility. So we can only assume that their generation was also operating, but I don't know that for sure. 563 MR. MORAN: Okay. But the key point is that all of your power needs were met by Cardinal Power during this period of time? 564 MR. GARDNER: Correct. 565 MR. MORAN: If the generating side was down, is it still possible for the Cardinal plant to deliver the other utilities to Casco? For steam and so on? 566 MR. GARDNER: I don't know that for sure. 567 MR. MORAN: You don't know. Is there a way for you to check that? 568 MR. GARDNER: We would need to contact, probably, Cardinal Power to determine that, I guess. I'm not aware of what backup capabilities they would have on their facility. 569 MR. MORAN: All right. Could you just undertake to check what the situation would be in those circumstances. If there was a generation problem, do they have backup to provide the other services to Casco? 570 MR. GARDNER: Sure. 571 MR. MORAN: And, Mr. Chair, that would become Undertaking U.1.1. 572 UNDERTAKING NO. U.1.1: TO PROVIDE INFORMATION WITH RESPECT TO WHETHER THE OTHER UTILITIES CAN BE PROVIDED TO CASCO EVEN IF THE GENERATOR IS DOWN. 573 MR. BETTS: Thank you. Mr. Moran, could you repeat that, just for the record. 574 MR. MORAN: Yes. This would be an undertaking by Casco to check with Cardinal Power with respect to whether the other utilities can be provided to Casco even if the generator is down, if there's no electricity being generated. 575 So, for example, for the steam requirement, if the generator was down, it may be that Cardinal could generate the steam through the use of natural gas directly to heat a boiler; right? 576 MR. GARDNER: Perhaps. 577 MR. MORAN: And that's what you will check and report back on? 578 MR. GARDNER: Right. 579 MR. MORAN: Thank you, Mr. Chair. Those are all the questions I have. 580 MR. BETTS: Thank you. 581 Ms. Aldred? 582 MR. MORAN: Just for the record, again, given the answers that Mr. Snelson gave in the last proceeding during my cross-examination, I don't intend to repeat all of those questions. 583 MR. BETTS: Thank you. 584 And, Ms. Aldred, I would assume that at some point during your cross-examination it will probably be an appropriate time to break. And I'll allow you to pick the appropriate time for that. 585 MS. ALDRED: All right. Well, I have a series of questions for Mr. Gardner, and then some for Mr. Snelson, so I'll probably break between those two, if that's okay with you. 586 MR. BETTS: That sounds fine. 587 CROSS-EXAMINATION BY MS. ALDRED: 588 MS. ALDRED: Mr. Gardner, you talked this morning about the reconnection to the 115 kV line that occurred when the Cardinal generator was installed. 589 MR. GARDNER: Correct. 590 MS. ALDRED: Did Ontario Hydro cooperate with you at that time, in terms of approving the disconnection and accepting the reconnection and having discussions with you about operational changes which would occur at that point? 591 MR. GARDNER: I wasn't involved with any of those discussions so I wouldn't know. 592 MS. ALDRED: Would you agree that you couldn't reconnect from the 44 kV line to the 115 kV line without Ontario Hydro's consent? 593 MR. GARDNER: Again, I wouldn't know. 594 MS. ALDRED: We were just here last week on a similar matter where there was a NUG contract, and you testified this morning that the Cardinal Power generator does have a NUG contract with OEFC. And we've now been through it and Mr. Moran's been through it too so I don't propose to go through it, but we can agree that the NUG sells all of its output into the market. We can agree that the NUG, the Cardinal Power generator, does sell all of its output into the IMO market. 595 MR. GARDNER: That's my understanding, yes. 596 MS. ALDRED: And we also agreed that Casco buys all of its power from the market. 597 MR. GARDNER: That's correct. 598 MS. ALDRED: Okay. And how does Casco settle its purchases with the IMO? 599 MR. GARDNER: We've had a couple of different fashions, either through physical bilateral or just buying off the spot market. 600 MS. ALDRED: Do you settle directly with the IMO? 601 MR. GARDNER: We do. 602 MS. ALDRED: And just to confirm, in the Abitibi case, of course, last week we heard evidence that Abitibi probably would at some point own the Westcoast Power generator. There was a contract in place that contemplated that purchase. That's not the case here. There are no plans in place or contract that would allow Casco to purchase the CP generator; is that correct? 603 MR. GARDNER: I'm not sure. 604 MS. ALDRED: You're not aware of any? 605 MR. GARDNER: I'm not aware. 606 MS. ALDRED: And you testified this morning that the Cardinal Power generator has a capacity of about 199 megaWatts, I believe, and that the Casco plant draws about 11 megs, normally? 607 MR. GARDNER: That's correct. 608 MS. ALDRED: And so I gather you would agree that about 95 percent of the electricity generated by Cardinal Power is sold into the IMO market. 609 MR. GARDNER: That's correct. 610 MS. ALDRED: And it would travel down the line owned by Cardinal Power. 611 MR. GARDNER: That's correct. 612 MS. ALDRED: And then that output into the market would be measured as meter 225 on your diagram. 613 MR. GARDNER: That's correct. 614 MR. SIDLOFSKY: Sorry. This isn't an objection, but I think Mr. Gardner's evidence was that Cardinal sells all of its electricity into the market. Roughly 5 percent of that is physically delivered to Casco. And just to be clear, Mr. Gardner hasn't suggested that Casco purchases any portion of -- excuse me, of the Cardinal Power output. 615 MS. ALDRED: Yes, I didn't mean to imply that. I was just really focussing on a meter 225 there. 616 Now, on page 3 of your evidence, you say that you have a line -- can you hear me if I'm just like this? Okay. 617 MR. BETTS: Yes, I think you can actually probably sit back a little. 618 MS. ALDRED: On page 3 of your evidence, you say that you have a line use and transfer agreement with Cardinal Power, and in fact, we had a look at that this morning. And that agreement -- by that agreement, I guess, Cardinal Power provides you with transmission services; is that correct? 619 MR. GARDNER: Correct. 620 MS. ALDRED: And Ontario Hydro is not, or was not, a signatory to that agreement, was it? 621 MR. GARDNER: That's correct. 622 MS. ALDRED: And so that's a private agreement between two parties, Cardinal Power and Casco; is that correct? 623 MR. GARDNER: That's correct. 624 MS. ALDRED: And I gather you would agree with me that because that agreement is a private agreement between two parties, it wouldn't bind the Board in any way. 625 MR. GARDNER: That would be correct. 626 MS. ALDRED: Now, I think you also testified this morning that when the Cardinal Power generator is not operating, the Casco plant still draws some load, and I think we agreed it was -- or you stated that it was about 1 megaWatt. 627 MR. GARDNER: When the Cardinal Power facility was down, we were forced to shut our plant down to do maintenance, and so the only load would be lighting and for the office building. So it would be between a half a megaWatt and 1 megaWatt. 628 MS. ALDRED: But you're still drawing load at that point. 629 MR. GARDNER: Correct. 630 MS. ALDRED: And I gather that your position is that when you're drawing load, it's coming from the grid, and it's being conveyed to you by Cardinal Power; is that correct? 631 MR. GARDNER: That's correct. 632 MS. ALDRED: And you also testified this morning, I believe, that the arrangement between Cardinal Power and Casco does not include a pass-through of transmission charges from Cardinal Power to Casco; is that correct? 633 MR. GARDNER: That's correct. 634 MS. ALDRED: And we also agreed that Cardinal Power does not have a transmitter's license; is that correct? 635 MR. GARDNER: That's correct. 636 MS. ALDRED: Can you explain to me how it is that Cardinal Power, which does not have a transmission license, can provide transmission services to Casco? 637 MR. GARDNER: I'm not sure what the official definition of "transmission services" are, but -- 638 MR. SIDLOFSKY: Sir, I'm not sure if what's being asked for here is a legal opinion or something else. If it's a legal opinion, it's not appropriate for the witness. 639 MS. ALDRED: Well, I'm just trying to explore the relationship between Casco and Cardinal Power, and we've heard that Cardinal Power is not a licensed transmitter. I'm just asking the witness what his understanding of the arrangements are. 640 MR. GARDNER: Well, just, in my opinion, Cardinal Power owns the wires and the electricity is conveyed on their wires. 641 MS. ALDRED: Just give me one second. I'll figure out whether I've got another question here. 642 You said just before the end of your direct evidence that when the Cardinal Power generator is down you may not even know that; is that what you told me? 643 MR. GARDNER: Yeah, we would not know where the electricity is flowing from. 644 MS. ALDRED: So if you don't know whether the electricity is flowing, doesn't it make sense that, in fact, if the Cardinal Power generator is down, you're being supplied from the transmission network without knowing it? 645 MR. GARDNER: That would be possible. 646 MS. ALDRED: Thank you. Those are my questions for you. Thank you. 647 MR. BETTS: Mr. Sidlofsky, any questions in re-examination of your witnesses? 648 MR. SIDLOFSKY: Well, sir, our witnesses are a panel so I'd prefer to wait until Ms. Aldred has dealt with Mr. Snelson as well. 649 MR. BETTS: Sorry, until when? 650 MR. SIDLOFSKY: Our witnesses are presented as a panel so I'd prefer to wait until -- 651 MR. BETTS: I apologize. We haven't dealt with Mr. Snelson yet. I'm sorry. 652 MR. SIDLOFSKY: Unless there are no questions. 653 MR. BETTS: Let's not make that assumption at this point. 654 Ms. Aldred, you were very frugal with your time in that case. How long do you think you would need with Mr. Snelson? 655 MS. ALDRED: I think I'll probably be about 45 minutes, but I would appreciate some time to reorganize a little bit. I think there are some questions that may fall by the wayside over a break period. 656 MR. BETTS: Okay. Then we will take this opportunity to break. And I'd like to compress it into an hour, which hopefully we can all work with, so we'll return or we'll reconvene at 1:15. 657 Thank you. We will adjourn now. 658 --- Luncheon recess taken at 12:15 p.m. 659 --- On resuming at 1:15 p.m. 660 MR. BETTS: Thank you, everybody. Please be seated. 661 Welcome back after our lunch break. I asked everybody to consider the possibility - hopefully it won't be necessary - but the possibility of working late in order to conclude at least the evidentiary portion of the hearing. 662 Was there an opportunity to pursue that, Mr. Moran? 663 MR. MORAN: Yes, Mr. Chair. I think everybody, including the court reporter, is prepared to sit a bit later if that's necessary, subject to the court reporter being able to take a break or two, if we are sitting later. 664 MR. BETTS: We'll make certain of that. Thank you all for that level of cooperation. 665 Are there any preliminary matters before we continue? 666 Then, Ms. Aldred, please continue. 667 MS. ALDRED: Mr. Snelson, in response to questions from your counsel this morning which were posed around Exhibit 1.7, which was the package of documents which Hydro One had circulated on Friday regarding RP-1999-0044, you had some discussion with your counsel about the process followed in order to arrive at the rate order. And I'm not going to take you back through all of that discussion that you've had. And in fact, I've been able to shorten my cross-examination a little bit as a result of that discussion. 668 I believe you testified this morning that you are a member of the Gross Versus Net-Load Billing Task Force. 669 MR. SNELSON: That is correct. 670 MS. ALDRED: And that you attended stakeholder workshops that were conducted prior to the hearing? 671 MR. SNELSON: Yes, I did. 672 MS. ALDRED: And I think you also told us that the concepts of transmission customer and delivery points were discussed at those stakeholder workshops; is that correct? 673 MR. SNELSON: They were. 674 MS. ALDRED: And that, in fact, the definition of transmission customer was agreed to in a settlement agreement. The settlement agreement itself wasn't actually accepted by the Board ultimately, and they went on to hear the whole hearing, but the idea of transmission customer was accepted by the parties, was it? 675 MR. SNELSON: The settlement agreement included a settlement of the transmission customer issue. And, as you say, the Board did not accept that holus bolus, but the decision they came to was pretty close to that settlement agreement. 676 MS. ALDRED: Okay. And I think we both agree, probably everyone in this room now, that the issue of non-licensed transmitters was not discussed prior to the hearing, or, indeed, during the course of the hearing; is that correct? 677 MR. SNELSON: Specifically, that was not discussed, that's correct. 678 MS. ALDRED: And so I gather we can agree that, given the fact that it wasn't discussed, it's not reflected either in the order that came out of the proceeding. 679 MR. SNELSON: The specifics of how to handle a transmitter that is exempt from regulation under 20.2 could not have been included in that transmission rate order because the regulation post-dates that transmission hearing. 680 MS. ALDRED: Correct. Now, if you can just turn to tab 3 of the package, which is Exhibit 1.7. 681 And if you can, please, take a look at page 1 of tab 3. And you'll note in the second to the last paragraph, it states that: 682 "The issue of net-load billing and gross-load billing were described in a July 5th, 1999 transmission background-er document." 683 Are you familiar with that document? 684 MR. SNELSON: I'm sure I read it at the time. I haven't reviewed it recently. 685 MS. ALDRED: Would you agree that it treated the issue of net versus gross-load billing? 686 MR. SIDLOFSKY: Well, sir, sorry to jump in here, but it seems a little unfair, if Ms. Aldred is going to be asking questions about a document, to not have received that document until Mr. Snelson is being cross-examined, and in fact, Mr. Snelson still hasn't received that document. 687 MS. ALDRED: Well, that was my one question. I'm happy to move on if that strikes the Board as unfair. 688 MR. BETTS: Thank you. 689 MS. ALDRED: This also refers to a September 17th stakeholder advisory team report. And you were involved in the stakeholder advisory team, were you not? 690 MR. SNELSON: We're looking at the last line of the page; is that correct? 691 MS. ALDRED: I am, yes. 692 MR. SNELSON: Yes, I was a member of that stakeholder advisory team. 693 MS. ALDRED: Okay. And over the page, and actually for the next few pages, if you start on page 4 of schedule 1 here, page 4 of 40, there's a series of definitions, and the evidence tells us that these definitions were used in the discussions. 694 And if I can just take you to the top of page 5, and you'll see there's a definition of embedded generation there, and it reads: 695 "The generation that is not connected to the transmission system is defined as embedded generation. For the purpose of this schedule, this term refers to the generation that is located behind the meter that registers the electricity supplied from the regulated transmission facilities." 696 And so can you agree with me that even in the pre-filed evidence we have a definition of embedded generation which is quite close to what was reflected in the order? 697 MR. SNELSON: Yes, and I would note that the two parts of the definition are made one, because the second is an explanation of the first, and that there is a definite mention that it's behind the meter that registers the electricity supplied from the regulated transmission facility. 698 MS. ALDRED: And then I'll just take you briefly through the rest of this exhibit. 699 Starting at page 8, if you'll just turn there, Mr. Snelson, there's just a series of potential options that appear to have been considered regarding net-load billing. And I won't take you through each one, but if we all want to flip, we will note that up to page 12 there's a series of various net-load-billing options that had been discussed and considered. Remember that? 700 MR. SNELSON: Yes, I do. 701 MS. ALDRED: And would you agree that the issue of net versus gross-load billing was actually quite a dominant theme in stakeholder debate prior to the hearing? 702 MR. SNELSON: Yes, it was. 703 MS. ALDRED: And is it the case that there was general agreement in the stakeholder-ing leading up to the hearing that existing embedded generation should continue to be net-load billed? 704 MR. SNELSON: I believe so. 705 MS. ALDRED: And at the end of the day, that's what the order provided for, isn't it, that existing embedded generation would continue to be net-load billed? 706 MR. SNELSON: That's one provision of the order, yes. 707 MS. ALDRED: And so would you agree with me if I suggested to you that there wasn't much debate at the stakeholder workshops about the definition of embedded generation? 708 Did everyone understand what they were talking about when they agreed that existing embedded generation should continue to be net-load billed? 709 MR. SNELSON: I think at the time people probably did, but I suspect that as time has progressed, it's become clear that people at that time had different opinions as to what they considered embedded generation to be, in certain special circumstances. 710 MS. ALDRED: Sorry, but you would agree with me that those special circumstances weren't discussed at that time? 711 MR. SNELSON: Some of them were not. 712 MS. ALDRED: Do you recall any specific discussion at the hearing about whether embedded generation is connected at distribution voltages? 713 MR. SNELSON: I recall a lot of discussion about embedded generation connected at distribution voltage. I don't recall any discussion that would say that embedded generation was exclusively connected at distribution voltage. 714 MS. ALDRED: And this morning, you quoted our oft-quoted section of the reasons, which is 3.2.1, which is the definition of embedded generation. Would you agree with me that, if one were to search for another definition of embedded generation in the decisions with reasons that one would not find another definition of embedded generation? 715 MR. SNELSON: I don't know another one in the Board's decision. 716 MS. ALDRED: Now, if we can just pause for one minute on that phrase that's contained in the 3.2.1... 717 Did you want to turn to that or... 718 MR. SNELSON: Sure. I'm sorry, what was the number again? 719 MS. ALDRED: It's 3.2.1, I believe. 720 MR. SNELSON: I'm sorry, okay. 721 MS. ALDRED: Of the decision. I think it's page 25. 722 MR. SNELSON: Yeah, I have that. 723 MS. ALDRED: Thank you. And we have the phrase "generation that is not connected directly to the transmission system," and I just want to focus on that phrase. 724 Would you agree with me that that phrase can only mean that the generation is connected at distribution voltage? 725 MR. SNELSON: Looking at that in conjunction with the definition of embedded generation that you put in front of me just recently, just in these questions from Exhibit 1.7, which carefully explains that that means generation that is behind the meter that measures the power delivered from the regulated transmission system, then I would interpret that to mean not connected to the regulated transmission system, the same as Hydro One's own evidence did. 726 MS. ALDRED: But without going outside of the decision with reasons, and not using something else to aid you to interpret it, would you agree with me - only looking at those words that are printed in black and white in the decision - that "not connected directly to the transmission system" must mean connected to the distribution system, or connected at distribution voltages? 727 MR. SNELSON: I think in this -- in practical circumstances, the other -- if you get to parsing words, it could mean not connected to anything. But I think in practical circumstances, that's what the words mean, taken in total isolation from the context. 728 MS. ALDRED: Now, after the Board heard all of the evidence, obviously, it rendered its decision. And if we turn to the very end of the decision with reasons, at page 78, and I don't know that you need to turn there, but the Board directed that OHNC should file a draft rate order and draft schedules. That's 4.2.3 on page 78. 729 MR. SNELSON: Yes. 730 MS. ALDRED: And then, at 4.2.4, the Board directed that intervenors be afforded the opportunity to comment on those drafts. And do you agree that OHNC did follow those instructions from the Board contained in the decision with reasons? 731 MR. SNELSON: I don't know that for sure so I can't say positively yes. 732 MS. ALDRED: Now, we've talked both at the Abitibi hearing and at this Casco hearing today about the concept of licensed versus non-licensed transmission, and if I could summarize your concerns, would it be fair to say that in both cases your clients are attached to unlicensed transmission? 733 MR. SNELSON: Yes, they are. 734 MS. ALDRED: Okay. And it's regulation 20/02 that makes these transmitters unlicensed. 735 MR. SNELSON: I think so, yes. 736 MS. ALDRED: And I think you've already agreed with me that that wasn't passed until February of 2001, that regulation. 737 MR. SNELSON: That's correct. 738 MS. ALDRED: And I think you've also agreed with me previously that the rate order would not have reflected that regulation, because it wasn't passed yet? 739 MR. SNELSON: That, I think, is obvious. 740 MS. ALDRED: So if my client were look to the decision for reasons for some guidance on the issue of the treatment of unlicensed transmission, they would not find anything in the reasons, would they? 741 MR. SNELSON: Not specifically on how to deal with unlicensed transmission; that's correct. 742 MS. ALDRED: And do you also agree with me that the rate schedules as they currently stand do not take into account unlicensed transmission either? 743 MR. SNELSON: I believe so. There are still references to regulated transmission and so on. And it seems to me that there were some -- possibly some ideas floating around at the time of the rate hearing that there were facilities that were not regulated, but it wasn't well defined. And what regulation 20/02 has done, it's codified that. It's created a clear distinction between regulated and unregulated, licensed and unlicensed transmission, whereas before, I think there were some question as to what status different facilities had. 744 MS. ALDRED: Now, I guess the only point that I was making was that - I appreciate what you just said to me - but that the rate schedules as currently drafted have not, don't appear at this point to have taken into account this notion of licensed versus non-licensed. 745 MR. SNELSON: They certainly have taken into account at times the reference to licensed so, for instance, the rate schedule that was produced after the uniform transmission rate hearing and... 746 MR. SIDLOFSKY: Sorry, I wonder if it would be fair to actually allow Mr. Snelson to look at the rate schedules that he's being asked about. 747 MR. SNELSON: Yes. I'm looking at the rate schedule, the second rate schedule that was issued April 30th, 2002, and I have it under tab C in Exhibit 1.2. There's quite a number of documents under that tab. The rate schedule appears to be in about perhaps ten pages. But it was not specifically the rate schedule that I wanted to get to, it was really the letter interpreting the rate schedule that Ontario Hydro put out. And the date of this rate schedule is April 30th, 2002, so this post-dates the February 2002 regulation. 748 And under the letter that we have referred to before which is towards the back of that tab, and that's the next to last page in my copy, you have Ontario Hydro writing to the Ontario Energy Board with a letter recommending that this be sent to transmission customers. And it says: 749 "You have been identified as being a transmission customer. 'Transmission customer' has been defined by the Ontario Energy Board as being an entity who own it is facilities that are directly connected to the transmission system owned by a licensed transmitter in Ontario." 750 MS. ALDRED: Just to harken you back to the rate schedule itself, though, if I could. 751 MR. SNELSON: All I'm pointing out is that that's Hydro One's interpretation of that rate schedule. 752 MS. ALDRED: Yes, I understand. And I think at the Abitibi hearing, if I'm not mistaken, you also testified that you thought that there had been perhaps some changes between the two rate schedules in order to reflect the other licensed transmitters in the province. 753 MR. SNELSON: That's correct. 754 MS. ALDRED: I just wanted to talk for a minute about delivery points, and I think earlier on we agreed that the concept of delivery point was stakeholder-ed and discussed at the hearing; is that correct? 755 MR. SNELSON: To some degree. 756 MS. ALDRED: And is the term "delivery point" defined in the Ontario rate schedules to which you've just referred? 757 MR. SNELSON: Yes, it is. 758 MS. ALDRED: And if you don't mind opening that again, could you read the definition of delivery point for us. 759 MR. SNELSON: This is the April 30th, 2002, Ontario transmission rate schedule, and this is paragraph C, "transmission delivery point": 760 "The transmission delivery point is defined as the transformation station owned by a transmission company or by the transmission customer which steps down the voltage from above 50 kV to below 50 kV and which connects the customer to the transmission system." 761 MS. ALDRED: Thank you. And now if we can turn to your witness statement on the Casco matter at page 14. 762 MR. SNELSON: I have it, yes. 763 MS. ALDRED: You have it? And in bold at the top of the page, there's a question: 764 "In your opinion, is this a suitable..." 765 You've just quoted the definition of transmission delivery point. And then you're asked: 766 "Is this a suitable definition of transmission delivery point for the application of the transmission tariff? If not, what definition should be used for the delivery point?" 767 The answer on the page then is no. And if we skip down to paragraph 19, you say: 768 "I do not consider the definition suitable for the connection between a licensed transmitter and a non-licensed transmitter." 769 Is that correct? 770 MR. SNELSON: That's correct. 771 MS. ALDRED: And then if we just move over on to page 15, you go on to offer a different definition, which would be the connection between the licensed and non-licensed transmitter. Actually, I'm sorry, I think it's on the same page. Sorry, at the -- 772 MR. SNELSON: On line 26, I believe. 773 MS. ALDRED: Yes. Thank you. 774 Now, if we use the definition which is contained in the rate schedule to which we've just referred, where is the delivery point on the Casco site? Would you mind showing us on the diagram. 775 MR. SNELSON: If you interpret it absolutely literally, then it is at the step-down transformation, which I think is over here, that feeds the Casco load. 776 MS. ALDRED: And if we use the definition that you're suggesting, can you show us again on the diagram where the delivery point would be. 777 MR. SNELSON: With my definition -- or with the definition that the delivery point is the connection between non-licensed and licensed transmission, then there is no delivery point to Casco, because Casco is not connected to licensed transmission. 778 MS. ALDRED: Did you suggest this morning that for purposes of this case, that it was instructive to use the definition of delivery point which was contained in the contract between now-OEFC and Cardinal Power? 779 MR. SNELSON: I pointed out that the delivery point for the Cardinal Power facilities, for Cardinal Power generation, was at the step-down -- or at the connection to the Hydro One line, where the Cardinal Power line connects to the Hydro One line. 780 Now, according to the definition in the rate schedule, the delivery point between Cardinal Power and Hydro One is within the Cardinal Power generating facilities where the step-up transformation occurs to the transmission voltage. And that's quite inconsistent with all previous ideas as to the delivery point for that kind of power. 781 MS. ALDRED: But I take it you'll agree with me that the rate schedule would govern over the contract in terms of the definition of a delivery point? 782 MR. SNELSON: I think that's probably a legal question. 783 MS. ALDRED: Okay. Now, if we can just turn again to the rate schedule, and look at the definition of transmission customer. Sorry. And if you can just read for me the definition of transmission customer which is contained in the April 30th, 2002, rate schedule, please. 784 MR. SNELSON: And this is under section A, "Applicability," and it's the first bullet. I believe I had this included in my written evidence and also in my evidence in Abitibi. 785 "The provision of provincial transmission service to the transmission customers who are defined as the entities that withdraw electricity directly from the transmission system in the province of Ontario." 786 And that replaced, in the previous rate schedule, a definition that was more explicit, that referred to transmission customers being those who were directly connected to Hydro One facilities. 787 MS. ALDRED: And I gather for the purposes of the Casco case, you're suggesting a different definition of transmission customer would be more suitable; is that correct? 788 MR. SNELSON: I am suggesting that the definition be consistent with the definition that was in the original transmission rate schedule, and that it be extended to include other licensed transmitters. 789 So, in that case, transmission customer becomes those who are directly connected to the facilities of a licensed transmitter. 790 MS. ALDRED: And if I can just refer you again to your witness statement, at page 12. At the bottom of the page, am I right in saying that this amended definition is a rewording? And you would, therefore, like the transmission schedule to read as follows: 791 "The provision of provincial transmission service to the transmission customers which are defined as the entities which own those facilities or are directly connected to a transmission system in Ontario owned by a transmitter licensed by the OEB." 792 MR. SNELSON: That is a way of extending the definition that was in the previous transmission rate schedule to include the other licensed transmitters. 793 MS. ALDRED: So, if I can just sum up your position, is it your view that the introduction of the concept of unlicensed transmitters via regulation 20/02 renders the current rate schedule definitions unsuitable for entities who happen to be connected to unlicensed transmission, and you are, therefore, suggesting some alterations to the definitions to take account of unlicensed transmission? 794 MR. SNELSON: I'm suggesting they need interpretation in the event of there being unlicensed transmission, yes. It isn't, however, necessary for the Board to adopt these new definitions through this proceeding. All the Board needs to do in this proceeding is to accept that Cardinal Power -- sorry, that Casco and Cardinal Power are embedded together and that the Cardinal Power generation is embedded generation for the purposes of the transmission rate order. 795 MS. ALDRED: Well, this morning we went through - and so I don't intend to repeat it - a diagram which we had provided to your counsel on Friday. It's Exhibit 1.8. It was the simplified multiple transmitter diagram, Mr. Snelson. 796 MR. SNELSON: Yes, I have it. 797 MS. ALDRED: And I'm not going to repeat the line of questioning. 798 I just wanted to confirm my understanding of what you said this morning, and that was that the only entities on this diagram who can benefit from net-load billing would be E and F; is that correct? 799 MR. SNELSON: That is correct. 800 MS. ALDRED: And the only reason that they can benefit is that there is an intervening unlicensed transmission between them and the Hydro One-owned lines? 801 MR. SNELSON: That's not necessarily the only reason, but it's the specific reason in this circumstance, yes. 802 MS. ALDRED: Mr. Snelson, in your direct evidence this morning - I harken you back - you referred to your proposal about the inner and outer metering rings for the purpose of defining transmission customer; do you recall that? 803 MR. SNELSON: Yes, I do. 804 MS. ALDRED: And if you wouldn't mind turning your attention to section 3.1.15 of the Board decision. I'll give you a minute to find that. 805 MR. SNELSON: Yes, I have that. 806 MS. ALDRED: Would you mind reading that for us. 807 MR. SNELSON: "In the Board's view, proposals made for the definition of a transmission customer on the basis of explicit or implicit linkage to the definition of wholesale customer are not necessary. The linkage is not necessary because the IMO can still calculate transmission charges payable by embedded large users on the basis of the rates, terms and conditions for which OHNC and LDCs have obtained approval of the Board. 808 "Moreover, from the transmission utility's perspective, there ought to be a relatively high degree of stability in the design of transmission rates. For these reasons, the Board does not accept AMPCO's outer-ring-of-meters definition." 809 MS. ALDRED: So you would agree that the inner and outer meter methodology of defining transmission customer was not, in fact, accepted by the Board? 810 MR. SNELSON: No, I wouldn't agree with that. 811 MS. ALDRED: Well, if I could get you to read 3.1.117, please. 812 MR. SNELSON: "The Board agrees that the direct connection for defining a transmission customer is a clear, practical and unambiguous method of defining transmission customers. It is also widely used in other jurisdictions. The direct connection definition ensures objectivity and stability in setting transmission rates and revenue collection for OHNC, the LDCs and the IMO. 813 "The Board therefore directs OHNC to adopt its preferred long-term definition upon market opening. A transmission customer shall be defined as being directly connected to the transmission system." 814 And I would interpret that as being, effectively, the inner ring of meters. It doesn't say so, and I said in my direct evidence this morning that the Board didn't use that in its findings, but effectively, that is the concept of the inner ring of meters. 815 MS. ALDRED: Mr. Snelson, you began your direct evidence today with reference to the Casco plant, and you noted that the Cardinal NUG is an embedded generator because it is located in that plant. Can you please explain your claim a little bit more. Are you claiming that the Cardinal generator is an embedded generator because it is located within the Casco complex, or because it is connected to non-licensed transmission? 816 MR. SNELSON: I'm claiming it is embedded generation because it is behind the meter that measures the power delivered from the regulated transmission system. 817 MS. ALDRED: And if we can look at the diagram that we just looked at, 1.8, I believe, simplified multiple transmitter diagram -- I'm sorry, scrap that. If we can look at the diagram of the Casco site that you filed this morning. 818 The non-licensed transmission which comes down from the Hydro One line to the Casco complex is about 6 to 8 kilometres long; is that about right? 819 MR. SNELSON: Mr. Gardner says it was about 5 miles, which is about that distance, yes. 820 MS. ALDRED: Right. And what would happen if another third party generator was connected to this non-licensed transmission line but it was located outside of the Casco complex? Would you consider that the generator was also an embedded generator, according to your criteria? 821 MR. SNELSON: Well, first of all, to be connected it would have to have some kind of business relationship with Cardinal Power, the owner of that transmission line. Cardinal Power is not required to provide open access to its transmission system to other users. 822 MS. ALDRED: So that could just be a private agreement between two parties whereby one can connect to the other's line; correct? 823 MR. SNELSON: I believe so, yes. 824 MS. ALDRED: And if that happened, would it be an embedded generator? 825 MR. SNELSON: Yes, it would, within the specific meaning here. One of the things I was talking about for the Cardinal and Casco situation is that, apart from the formal question of whether it's an embedded generator, does it meet the physical characteristics that are expected of embedded generation? And a non-related plant might not meet the general expectation, but it would meet the specifics of that definition. 826 MS. ALDRED: So, in that circumstance, you would agree with me, then, that that third party also would escape transmission charges in that scenario? 827 MR. SNELSON: If it was a generator who was connected there, then they wouldn't be liable for transmission charges while they were generating. 828 MS. ALDRED: Thank you. 829 Those are all my questions. Thank you. 830 MR. BETTS: Thank you. 831 Mr. Sidlofsky, any redirect? 832 MR. SIDLOFSKY: Just a few questions, sir. 833 RE-EXAMINATION BY MR. SIDLOFSKY: 834 MR. SIDLOFSKY: Mr. Snelson, there was some discussion before the lunch break, and in particular that was a number of questions that were put to Mr. Gardner about whether Casco would be aware that Cardinal is generating at all times or whether it was possible that some of that power could have been coming from the Hydro One transmission system. 835 If some of that power were coming from the Hydro One transmission system through Cardinal's transmission assets, would that change your position on the appropriate approach to transmission charges for Casco? 836 MR. SNELSON: No, it would not. That power, if there was power being delivered, it would be measured on the meter at the connection between Hydro One and Cardinal, and transmission charges would be applied. If Cardinal is the transmission customer, then there has to be some arrangement to sort that out among Cardinal and Casco, but that's something for them to sort out. 837 MR. SIDLOFSKY: So it really doesn't matter whether the power is going to Casco from Cardinal or through the Cardinal transmission facilities from the Hydro One transmission system? 838 MR. SNELSON: Not as regards whether it's embedded generation, no. 839 MR. SIDLOFSKY: Mr. Gardner, Ms. Aldred was asking you how it was possible for Cardinal to provide transmission service to Casco and I think your answer was that electricity was being conveyed over the Cardinal wires to Casco. You mentioned earlier that the -- or you confirmed earlier that the power-purchase agreement has been in place since 1995; correct? 840 MR. GARDNER: That's correct. 841 MR. SIDLOFSKY: And your understanding -- 842 MR. GARDNER: That's the power-purchase agreement, 1990... 843 MR. SIDLOFSKY: Sorry, the power-purchase agreement between Cardinal and Ontario Hydro, that was actually 1992. 844 MR. GARDNER: 1992, I believe. 845 MR. SIDLOFSKY: Yes, 1992. So the agreement's been in place since 1992, and power's been flowing, I think that was your evidence, since 1995. 846 MR. GARDNER: That's correct. 847 MR. SIDLOFSKY: And as far as you know, is this your evidence as well, power was being sold to Ontario Hydro throughout that time? 848 MR. GARDNER: That's correct. 849 MR. SIDLOFSKY: Are you aware of any suggestion in the eight years that that plant has been operating that Cardinal is not authorized to convey electricity to Casco? 850 MR. GARDNER: No. 851 MR. SIDLOFSKY: Mr. Snelson, Ms. Aldred suggested that you not use anything else to assist you, and look at the phrase "not connected to the transmission system" and tell her that that has to mean that the generation can only be -- excuse me, the connection can only be at a transmission voltage; do you recall that question? 852 MR. SNELSON: I think the question was, can it only be at a distribution voltage. 853 MR. SIDLOFSKY: I'm sorry, only at a distribution voltage. I apologize. And that was the conclusion that you were expected to draw from that? 854 MR. SNELSON: I recall that discussion, yes. 855 MR. SIDLOFSKY: Okay. And you also gave an answer that reflected other things that you would use to assist you, like Hydro One's letter to the OEB in April of 2002; correct? 856 MR. SNELSON: Yes. 857 MR. SIDLOFSKY: Now, at the time of the initial transmission rate schedule and at the time of the Board's transmission decision in 2000, what transmission system was being considered at that time? 858 MR. SNELSON: That was a proceeding to determine the form and level of transmission rates for Hydro One, for the Hydro One transmission system. 859 MR. SIDLOFSKY: Was there any other transmission system being considered at that time, in the context of that application? 860 MR. SNELSON: No, there was not. 861 MR. SIDLOFSKY: And that proceeding was followed by the January 15th, 2001, transmission rate schedule; correct? 862 MR. SNELSON: Yes. 863 MR. SIDLOFSKY: Okay. And I think you mentioned in your evidence that that transmission rate schedule referred specifically to customers that were directly connected to the transmission system owned by Hydro One Networks. Maybe I could take you to that initial decision -- or, excuse me, that initial schedule. 864 MR. SNELSON: I have it under tab E, in exhibit -- I think it's 1.1. 865 MR. SIDLOFSKY: That would be the Casco submissions, sir? 866 MR. SNELSON: Yes. Exhibit 1.1, tab E. 867 MR. SIDLOFSKY: And in that rate schedule, transmission customers are defined as: 868 "The entities which own those facilities that are directly connected to the transmission system owned by Hydro One Networks Inc." 869 MR. SNELSON: That is the definition, yes. 870 MR. SIDLOFSKY: Okay. And the uniform pool transmission rate proceeding, or proceedings, followed the Hydro One transmission application; correct? 871 MR. SNELSON: That is correct. 872 MR. SIDLOFSKY: And is it fair to say that as a result of those proceedings, because they do seem to be listed in the transmission rate schedule, in the current version of the transmission rate schedule, is it fair to say that as a result of those proceeds, we arrived at the April 30th, 2002, transmission rate schedule? 873 MR. SNELSON: I believe so. 874 MS. ALDRED: I don't know if my friend has any more redirect questions but if he can maybe avoid leading the witness? 875 MR. SIDLOFSKY: Well, I didn't think I was, but I'll try to keep an eye on that anyway, sir. 876 Could I take you to section D of the terms and conditions of the April 30th, 2002 transmission rate schedule. 877 MR. SNELSON: I have that. 878 MR. SIDLOFSKY: And could you tell me what the references are to the "functional pools into which transmission facilities are organized"? Could you tell me what transmitters those pools refer to? 879 MR. SNELSON: Well, the pools are pools of costs which are then going to be divided up into rates for cost recovery purposes. And the uniform transmission rate hearing allowed the other non-licensed -- the other licensed transmitters to add their costs into the network pool to come up with a total network pool cost for all the licensed transmitters, and then that would be used to establish a total network rate for all licensed transmitters. And similarly with the line connection pools and the transformation pools. 880 MS. ALDRED: I think we're hearing new direct evidence here. Redirect is supposed to be reserved for straightening out matters that came up in cross-examination. I don't recall asking a question about that. 881 MR. SIDLOFSKY: Sir, Ms. Aldred took Mr. Snelson through a number of questions about the definition of transmission customer, the phrase "not connected to the transmission system," and she asked Mr. Gardner questions about Cardinal's authorization to convey electricity to Casco. 882 I'm simply trying to confirm with Mr. Snelson what transmitters the transmission rate schedules relate to. I think that's completely legitimate, seeing as Ms. Aldred has raised that in cross-examination. 883 MR. BETTS: We will allow the question. 884 MR. SIDLOFSKY: Thank you, sir. 885 So the question was, I believe the question was, or what I asked you to do was describe what pools were being dealt with in the April 30th, 2002, transmission rate schedule. 886 MR. SNELSON: And I believe I gave some of that description, that is, that the pools were the costs of the licensed transmitters divided up into these three categories for the purposes of setting the rates on a uniform basis for all licensed transmitters to recover the cost of the licensed transmitters. 887 MR. SIDLOFSKY: And sir, you referred to the letter from Mr. -- excuse me, from Hydro One to the OEB that refers to the definition of a transmission customer when you were responding to Ms. Aldred, I think. 888 MR. SNELSON: Yes, I did. 889 MR. SIDLOFSKY: Are you aware of any correspondence from Hydro One to the OEB that would have incorporated changes to the transmission rate schedule on the basis of regulation 2002? 890 MR. SNELSON: What I'm looking for, I believe that in this package, is a covering letter indicating that the new rate schedule is to implement the uniform rate transmission decision. 891 MR. SIDLOFSKY: Sir, maybe I could have you turn up tab C of your witness statement, tab 2C. 892 MR. SNELSON: Too many binders. I'm trying to find it. 893 MR. SIDLOFSKY: Probably in the middle of that tab is what you're looking for. 894 MR. SNELSON: Yeah, I have an April 26th, 2002, letter from Brian Gabel of Hydro One to the Secretary of the Board. 895 MR. SIDLOFSKY: And I'll give you a minute to take a look at that letter, but could you describe it to me, please. 896 MR. SNELSON: This letter, I believe, attached the updated provincial transmission rates for the transmitters, following the hearing on uniform transmission rates. And it attached a marked-up copy and a clean copy of the proposed Ontario transmission rate schedule that could be used in the Province by all transmitters. 897 And these transmission rates refer to -- there are several references in this letter to licensed transmitters, that they have agreed to these rates and so on. 898 MR. SIDLOFSKY: And if I look at the last paragraph of that letter, would you tell me what's there? 899 MR. SNELSON: Also attached is a copy of the customer notice that transmitters can send directly to their customers explaining the new rates. This notice was previously sent to the Board for approval in a letter dated March 27th, 2001. 900 So that is the letter to which I have referred, where Hydro One interprets the transmission customer definition to mean direct connection to a licensed transmitter. 901 MR. SIDLOFSKY: If I could just ask for your indulgence for a moment, sir, I think I'm just about finished. 902 Sir, just to finish off, do you see any need to amend the current transmission rate schedule in order to implement the relief that Casco is seeking? 903 MR. SNELSON: If Casco is judged not to be a transmission customer, then the apparent difficulty over the definition of delivery point goes away, because you can't have a delivery point to somebody who isn't a customer. So it is not necessary to have a definition of delivery point to somebody who's not a customer, it's not applicable. 904 So provided that the Board accepts that the connection to the provincial transmission system means connected to the licensed provincial transmission system, consistent with the history through the Hydro One rate schedule, through the wholesale -- the uniform wholesale transmission rate hearing, if the purpose was to extend that to other licensed transmitters, then apart from that, there is no need to adjust the schedule. 905 MR. SIDLOFSKY: Thank you, those are my questions, sir. 906 MR. BETTS: Thank you. 907 QUESTIONS FROM THE BOARD: 908 MR. BETTS: Just one question for Mr. Snelson, and perhaps I should know this answer, but it will help me to hear it. 909 If Casco is not defined as a transmission customer, in the event that they require energy from the transmission system -- in other words, if the generator is not available -- what do they become at that point? 910 MR. SNELSON: I believe that in those circumstances then the power will be delivered to them through the Cardinal facilities. Cardinal has an end-of-the-line use and transfer agreement out, an obligation to deliver that power to Casco. And if there are transmission charges generated from that, they will be measured on the meter at the connection between Hydro One and Cardinal and then it's up to Cardinal and Casco how they sort out that bill. 911 MR. BETTS: Thank you. Yes, I recall that now. Thank you very much for that. 912 There are no further questions from the Board Panel. 913 Mr. Sidlofsky, any need to redirect on my single question? Not necessary? 914 MR. SIDLOFSKY: No, I think that will be fine, sir. Thank you. 915 MR. BETTS: Thank you. I believe, then, we can thank the witness panel for their contribution to today's proceeding and that would therefore bring to us the point that we're about to change witness panels. I think it would probably be appropriate if we take at least a short break. 916 I think rather than a normal coffee break, let's just make it a ten-minute break to change witnesses and stretch our legs. So let us aim to be back at 20 minutes past the hour. Thank you. 917 --- Recess taken at 2:10 p.m. 918 --- On resuming at 2:20 p.m. 919 MR. BETTS: Thank you, everybody. Please be seated. Thank you. 920 Before we proceed to the introduction of the next witness panel, are there any preliminary matters? 921 MS. ALDRED: No. 922 MR. BETTS: Ms. Aldred, please proceed. 923 MS. ALDRED: All right. I'll just proceed to qualify my witnesses first. 924 Mr. Toneguzzo, can you tell us what your experience is with Ontario Hydro and Hydro One and what area of testimony you'll be covering today. The CVs need to be filed. 925 MR. BETTS: Since many of us know these gentlemen from a previous engagement, is it necessary to requalify these people at all? Anyone feel the need? 926 MR. SIDLOFSKY: I'm tempted to say I've done some thinking since the last hearing but I won't. I think they'll be fine, sir. 927 MS. ALDRED: May I just confirm, then, that we can requalify Dr. Poray as an expert as we did Mr. Snelson. 928 MR. BETTS: Any submissions with that respect? Most definitely, we're happy for that qualification. 929 MS. ALDRED: Thank you. Then I'll just start into the evidence. 930 I'm not sure the witnesses have been sworn yet. 931 MR. BETTS: No, you're right. We will proceed with that. 932 HYDRO ONE NETWORKS - PANEL 1; PATERSON, PATTANI, PORAY, TONEGUZZO 933 J.PATERSON; Sworn. 934 N.PATTANI; Sworn. 935 A.PORAY; Sworn. 936 J.TONEGUZZO; Sworn. 937 EXAMINATION BY MS. ALDRED: 938 MS. ALDRED: Dr. Poray, can you explain the nature of the dispute between Casco and Hydro One? 939 DR. PORAY: The disagreement is two-fold. First, Casco claims that it is not a transmission customer and therefore it should not pay transmission charges. Second, Casco also claims that even if it were a transmission customer, it should pay transmission charges only on a net-load basis with respect to the Cardinal generation located on the site. 940 Networks disagrees with the Casco claims. First and foremost, Networks' position is that Casco is a transmission customer; and secondly, Casco should be charged for the transmission on its full demand of 11 megaWatts. 941 MS. ALDRED: So can you please further explain Networks' position. 942 DR. PORAY: First, Casco is a separate transmission customer that is connected to the provincial transmission system and is therefore required to pay the applicable transmission charges based on the electricity it withdraws from the transmission system. 943 Secondly, Casco generator is not embedded generation, and does not qualify for net load treatment in respect of Casco's transmission charges in accordance with the current transmission rate schedules. 944 Third, Cardinal is a separate transmission customer that is contractually obligated to deliver all of its output to OEFC, which in turn sells it to the IMO-administered markets. Casco purchases all of its electricity requirements, including transmission services, from the IMO-administered markets. Therefore Casco is a separate transmission customer, Cardinal Power is not an embedded generator, Casco uses the transmission system, and Casco should pay the applicable transmission charges on a gross-load basis. 945 MS. ALDRED: The Board is also dealing with a similar matter in connection with Abitibi-Consolidated and Westcoast Power. Can you please identify the similarities between the two cases? 946 DR. PORAY: In both cases the generator and load are connected to the transmission system, and also each is a separate customer. As such, the generation is not embedded within the load. 947 Furthermore, the proponent in each case desires to aggregate the load with on-site transmission connected generation that is owned by a third party in order to escape paying transmission charges when the generator is operating under normal conditions. 948 Also in both cases, the on-site generation was developed not to displace the on-site load but rather to sell the generated output to the electricity market, irrespective of the contractual arguments which may have been made to supply other energy services, for example, steam or the operation of the plant. 949 Finally, both proponents claim that the transmission facilities to which the load and generation are respectively connected are non-licensed facilities which have been exempted from certain sections of the Electricity Act and OEB Act. As such, the proponents claim that these exemptions allow them to be treated differently from transmission customers connected to licensed transmission facilities in respect of payment of transmission charges under the existing transmission rate schedules. 950 MS. ALDRED: Now can you identify for the Board the differences between the two cases. 951 DR. PORAY: One of the differences between the cases is the ownership of the transmission system to which the respective load and generation are connected. In the case of Abitibi-Consolidated, it is the load customer that is the owner of the transmission facilities to which Westcoast is connected. In Casco's case, it is the Cardinal generator that is the owner of the transmission facilities to which Casco is connected. 952 Another difference between the two cases is the location of the meters that register the electricity withdrawn by the load from the transmission system. In the Abitibi case, there is no meter that directly registers the electricity withdrawn by Abitibi and Abitibi's consumption can only be established by combining the readings of two sets of meters located at different positions. In Casco's case, there is a specific meter that registers the electricity withdrawn by Casco from the transmission system. 953 A third difference is that, while the transmission owned by Abitibi is within the Abitibi property, the transmission facilities owned by Cardinal Power are relatively longer and extend beyond the Casco property. 954 MS. ALDRED: Dr. Poray, during the cross-examination at the Abitibi hearing, you were asked to identify whether a transmission customer, transmission delivery point and embedded generation were discussed during the RP-1999-0044 proceedings. Have you had an opportunity to review the filings and the transcripts from those proceedings? 955 DR. PORAY: Yes. These areas were discussed in the RP-1999-0044 proceeding, and I have reviewed the material accordingly. 956 MS. ALDRED: Can you point the Board to any specific references in that proceeding that might be of assistance in understanding the context of these discussions which led the Board to the decision with reasons? First, if you can just deal with transmission customers. 957 DR. PORAY: In terms of the discussions pertaining to transmission customers, the most useful reference is the settlement agreement, Exhibit I-1-1 of the proceeding RP-1999-0044 dated February 15th, 2000, where it can be found that there was general consensus that transmission customers are market participants connected to transmission. 958 Further, the exhibit D-2-1 and D-3-1 of the same proceeding also inform on this matter, as do the transcripts between pages 301 and 308, and further, between pages 799 and 806. 959 MS. ALDRED: Could you please also do the same for transmission delivery point. 960 DR. PORAY: The matter of the transmission delivery point was discussed at an August 30th, 1999 stakeholder workshop, and this is recorded in Exhibit B-9-8 and B-11-2 respectively. 961 In addition, Exhibit D-2-1 addressed the matter of the point of billing. A particularly useful discussion on the transmission delivery point can be found in the transcripts for the oral hearing on pages 14 through 51, and on pages 269 to 272, where it is clearly identified that transmission delivery point entails the transformation from transmission to distribution voltages. 962 MS. ALDRED: And if you could just complete the picture for embedded generation. 963 DR. PORAY: The discussion on embedded generation was fairly extensive throughout the proceedings. Perhaps the best reference could be found at Exhibit D-5-1, where embedded generation is defined as generation that is not connected to the transmission system. 964 Further discussions took place throughout the oral hearing, and the discussions are recorded on various pages in this transcript, and there are numerous references on pages 57 through 59, 348 through 400, 721, and 1054 through 1100. 965 MS. ALDRED: What process did Hydro One follow to develop the transmission rate schedules from the Board's decision with reasons? 966 DR. PORAY: Hydro One's predecessor, Ontario Hydro Networks Company, developed the rate schedule in accordance with the directions contained in the Board's decision with reasons. 967 This meant using the terms and conditions found in the decision, as this was the clear directive to OHNC. These terms and conditions were clear and unambiguous. The draft transmission rate schedule was then circulated to all participants who took part in the stakeholder consultation process for their review and comments. 968 Thus, stakeholders had ample opportunity to review the terms and conditions of the rate schedule. There were no comments received that would suggest to OHNC that it had at that time misinterpreted the Board's decision in developing the rate schedules. 969 Consequently, OHNC and Hydro One now is confident that it has correctly represented the Board decision in the rate schedules which were subsequently approved by the Board. 970 MS. ALDRED: Dr. Poray, I want to touch on the issue of licensed and non-licensed transmission, which was raised and discussed fairly extensively at the Abitibi hearing. We all know that unlicensed transmitters have been exempted from certain sections of the Electricity and the OEB Act. Have they been exempted from all sections of these acts? 971 DR. PORAY: No, they have not. 972 MS. ALDRED: Can you outline for the Board what remaining sections of the Act still apply to unlicensed transmitters? 973 DR. PORAY: Let me begin with the Electricity Act, and the following are some of the sections of the Act that continue to apply to non-licensed transmitters: 974 Section 27, which, in essence, regulates all entities that convey electricity into, out of and through the IMO-controlled grid through compliance with the market rules; section 32, which sets the IMO as the market-rule authority; section 40, which provides for the power of entry on land on which the transmission system is located; sections 41 through 47, which pertain to property interests of transmitters; and section 113, which refers to the electrical safety authority that makes regulation prescribing design, construction, use of, et cetera, of all works used in transmission. 975 The remaining sections of the OEB Act that are applicable include the following: 976 Section 83, which allows the Board to establish standards and targets for performance of transmitters; section 92, which is the requirement for leave to construct; and section 103, which grants entry on to land where leave to construct has been granted. 977 In addition, the IMO may at any time, if it deems so to be necessary for the purpose of maintaining the reliability of the IMO-controlled grid, enter into operating agreements with other entities that own additional transmission systems so that these systems can be included in the IMO-controlled grid. In this respect, the IMO is guided by the market rules, and specifically in chapter 5, section 2.1 and 3.5 respectively. 978 MS. ALDRED: Dr. Poray, in your opinion, does this mean that unlicensed transmitters are still regulated? 979 DR. PORAY: Most certainly they are. The remaining section of the acts that I have enumerated above, ensure that a degree of regulatory oversight is maintained over the unlicensed transmitters so that they meet certain requirements. 980 Not being licensed does not mean that these entities can do whatever they want. It is purely a matter of administrative convenience and efficiency in favour of non-licensed transmitters that these entities are not required to obtain a license and file rates. That does not absolve them from the other obligations that also apply to licensed transmitters. 981 For example, operating equipment in a safe and reliable manner; obtaining permission to construction facilities and the like. 982 In accordance with the IMO's view, and I refer here to Mr. Snelson's witness statement at Exhibit 1.2, tab 2, page 7 of 12, item 7 of the Abitibi evidence, licensed and unlicensed transmitters are expected to behave in exactly the same manner. 983 MS. ALDRED: Why is it important that the behaviour of unlicensed transmitter be the same as licensed transmitters? 984 DR. PORAY: The equipment that is connected to unlicensed facilities is the same as that connected to licensed facilities. Such equipment is capable of increasing short circuit levels; of producing distortions in the voltage wave shape; of introducing interference on the lines and of creating voltage dips, to name but a few examples. 985 Furthermore, there is a need for work coordination and equipment operational hold-off to ensure public and worker safety. The performance of equipment that is connected to the licensed transmission facilities is governed by the Transmission System Code, and as such there is oversight through the code and the connection agreements to ensure that such equipment performs as required by applicable standards. 986 If performance is found to be sub-par, then there are appropriate measures to mitigate such performance through compliance penalties. 987 Since customers' equipment connected to unlicensed transmission facilities is not directly regulated by the Transmission System Code, it is left to the IMO's market rules to achieve some degree of oversight with respect to equipment performance. It is clearly unacceptable that there should be no such oversight for unlicensed transmitters. 988 MS. ALDRED: Dr. Poray, would you agree that the Cardinal generator, which is the owner of transmission facilities, is not required to obtain a transmission license for the transmission facilities that they own and which connect Casco? 989 DR. PORAY: Yes. 990 MS. ALDRED: And can you please read the appropriate clause from regulation 20/02 on which you based your answer. 991 Does the Board require copies of that regulation? 992 MR. SIDLOFSKY: Sorry, Mr. Chair. While that's being handed out, could I just ask for that question to be read back. 993 MR. BETTS: Yes. Could the reporter read that question back. 994 THE COURT REPORTER: The question was: 995 "Dr. Poray, would you agree that the Cardinal generator, which is the owner of transmission facilities, is not required to obtain a transmission license for the transmission facilities that they own and which connect Casco?" 996 Dr. Poray answered yes. 997 Ms. Aldred said: 998 "And can you please read the appropriate clause from regulation 20/02 on which you based your answer." 999 MR. SIDLOFSKY: Thank you. Sorry about that, Mr. Chair. I appreciate that. 1000 MR. BETTS: And, Mr. Moran, can we have an exhibit number for this, please. 1001 MR. MORAN: Mr. Chair, Exhibit 1.10, a copy of regulation 20/02 amending Ontario regulation 161 of 1999. 1002 EXHIBIT NO. 1.10: COPY OF REGULATION 20/02 AMENDING ONTARIO REGULATION 161 OF 1999. 1003 MR. BETTS: Thank you. 1004 MS. ALDRED: Are you ready to read that section? 1005 DR. PORAY: Yes. I'm referring to section 4.0.2(1) which starts: 1006 "Clause 57(b) of the Act and the other provisions of the Act listed in subsection 2 do not apply to a transmitter." 1007 And in particular, I'd like to refer to part (b) of that item, which says: 1008 "The transmission owned or operated by the transmitter was in existence in January 1st, 2002, and since that date has been used only for the purpose of permitting another person that holds a license authorizing the other person to own or operate a transmission system to convey electricity from the IMO-controlled grid to consumers." 1009 MS. ALDRED: And now could you please read that clause again and substitute the names of the parties here, so Cardinal, Hydro One, and Casco. 1010 DR. PORAY: Certainly, so re-reading section (b) again of 4.0.21: 1011 "The transmission system owned or operated by Cardinal was in existence on January 1st, 2002, and since that day has been used only for the purpose of permitting Hydro One to convey electricity from the IMO-controlled grid to Casco." 1012 MS. ALDRED: Therefore, under regulation 20/02, the Cardinal-owned transmission is used for the purpose of permitting Hydro One to convey electricity from the IMO-controlled grid to Casco? 1013 DR. PORAY: That is my understanding. 1014 MS. ALDRED: So what is your opinion about whether or not Cardinal is providing transmission service? 1015 DR. PORAY: If Cardinal is providing transmission service to a third party then it needs a license in accordance with the OEB Act. But if it is not providing transmission service, and if it is only permitting Casco to access the IMO-controlled grid in accordance with regulation 20/02 and section 4.0.21(b) in it, then all that Cardinal is doing is allowing Hydro One to provide transmission service to Casco. 1016 MS. ALDRED: Now, Mr. Paterson, I have a few questions for you. Can you tell us why the Cardinal Power generator was constructed back in the 1990s? 1017 MR. PATERSON: Yes. In the late '80s, Ontario Hydro identified a need for increased electricity supply. To address this capacity requirement, Ontario Hydro undertook several initiatives, including the development of private non-utility generation, or NUGs. The Cardinal NUG was developed as part of this initiative. The Cardinal Power NUG was designed to deliver 200 megaWatts of electricity into Ontario's transmission system with the output being sold exclusively to Ontario Hydro, which is now OEFC. 1018 MS. ALDRED: In the Abitibi hearing you agreed that the power-purchase agreements were not directly relevant to the two-part definition of embedded generation. Are the power-purchase agreements relevant in some other way? 1019 MR. PATERSON: Yes, they are. 1020 MS. ALDRED: How are they of assistance to the Board in determining the application of transmission tariffs? 1021 MR. PATERSON: First, they're relevant as they show how they were historically treated. They also show that the parties were treated as separate entities and that the entity was not installed as load-displacement generation. 1022 MS. ALDRED: Why does historical treatment matter? 1023 MR. PATERSON: One of the broad principles understood by all the stakeholders in the 1999 rate proceeding was that no one should have to pay additional charges as a result of the decisions that the entity may have made, prior to open access, to add self-generation that displaces its own load. 1024 As a result, as noted in Exhibit 2.4 of the Abitibi proceeding, Hydro One had recommended during the proceeding for RP-1999-0044 that for load customers who have installed self-generation prior to October 31st, 1998, to serve their existing load, there would be no additional transmission charges levied with respect to load supplied by the self-generation. 1025 This position was supported by all the stakeholders during that proceeding. This recommendation recognizes that unbundling past decisions would compromise the economic decisions that load customers made when installing the generation. 1026 MS. ALDRED: Can you give some examples? 1027 MR. PATERSON: Yes. For example, this applies to the Inco situation, where their generation is connected at the transmission system voltage. Prior to open access, this was treated as load-displacement generation, and has continued to be treated as such post-open access. 1028 Another example would be in the Abitibi Fort Frances case, where their hydraulic generation was historically used as load displacement generation and it continued to be treated as such, post-market opening. 1029 MS. ALDRED: How does this apply to Casco? 1030 MR. PATERSON: Well, the power-purchase agreement clearly shows that the Cardinal generation was sold to Ontario Hydro, now OEFC, and it was not treated as load-displacement generation for Casco. Casco and Cardinal are separate legal entities and were treated as separate customers prior to open access, and they should be continued to be treated as separate customers post-open access. 1031 MS. ALDRED: Why did Hydro One attempt to enter into a connection agreement with Casco? 1032 MR. PATERSON: Well, whether or not Casco is a customer of Hydro One is not relevant to this matter. What matters is that Casco is a transmission customer that utilizes the provincial transmission system and therefore it is subject to paying transmission charges, because Casco is connected to Cardinal's transmission system, which today is exempted from the requirements of the Transmission System Code, which means that Casco is not required to enter into a connection agreement with Cardinal. 1033 As Casco have a major impact to the safe and reliable operation of the transmission system, Hydro One felt that it was important to establish a transmission connection agreement with Casco. So as a licensed transmitter, Hydro One took the initiative to draft the transmission connection agreement with Casco to ensure the safety and reliability of transmission system. 1034 MS. ALDRED: Mr. Paterson, you recall during the Abitibi hearing Abitibi witnesses were attempting to equate aggregation with net-load billing. Can you please explain why that is not appropriate. 1035 MR. PATERSON: Well, aggregation involves combining loads at the transmission level. Net-load billing involves combining a load with generation that is connected at the distribution level behind the customer's meter. 1036 Aggregation is defined in section C of the terms and conditions of the rate schedule. Aggregation applies to combining demand registered by two or more meters that measures the energy withdrawn from the transmission system by the same entity. 1037 MS. ALDRED: And how does this apply to Casco and Cardinal? 1038 MR. PATERSON: Well, aggregation doesn't apply at all to Casco and Cardinal as the tariff schedule only allows for aggregation of demand and not supply with demand, and the plants must be own bid the same entity. 1039 The situation with Casco and Cardinal does not meet either requirement for aggregating delivery points. 1040 Net-load billing doesn't apply either, as the Cardinal generation is not connected at distribution voltage and is not connected behind Casco's meter. 1041 MS. ALDRED: Is the Cardinal generation embedded in the Casco delivery point? 1042 MR. PATERSON: No, the Casco generation is clearly connected to the transmission system. It is not located behind Casco's meter. Casco is connected separately to the transmission system through its own delivery point, or high-voltage transformer. 1043 MS. ALDRED: Now, Mr. Toneguzzo, I would like to explore the matter of the transmission arrangements that exist at the Casco site and how these may impact on the matter before the Board. Can you please use the diagram entitled "Metering Points of Casco and Cardinal Power", which I believe is on the board over there, and describe for the Board the transmission facilities that supplied Casco both prior to and after the connection of Cardinal Power. 1044 And I'm not sure whether that diagram is an exhibit yet. 1045 MR. TONEGUZZO: Yeah, that's it. We're fine. First I'd like to provide some annotation with regard to the -- 1046 MR. BETTS: Just where is this reference now, just for our reporter? 1047 MS. ALDRED: This was -- remember this morning, there were the diagrams that I'd sent out on Friday. One was used in cross, and now there's one more, I believe, that we're going to refer to in our direct evidence. So I don't think it has an exhibit number yet. 1048 MR. BETTS: No, it doesn't. So let us do that now, please. 1049 MS. ALDRED: I'm sorry. I've confused everybody, and I apologize. This particular diagram is not the diagram we're now handing out. It was filed. I apologize. So the diagram you're now handing out is a different one. Sorry. It's okay. 1050 MR. BETTS: By the way, and this has nothing to do with the confusion that we're feeling right now, but if anyone feels the need to take off their jackets - I've said this before; the heat in this room does rise in the afternoon - the Board will in no way be offended if someone wants to lighten up a little bit. 1051 MR. MORAN: Yes, Mr. Chair. You have a diagram that's entitled: "Metering Points of Casco and CP," and that will become Exhibit 1.12 -- sorry, Exhibit 1.11. I'm getting ahead of myself. 1052 EXHIBIT NO. 1.11: DIAGRAM ENTITLED "METERING POINTS OF CASCO AND CP". 1053 MR. BETTS: We probably need another break. But we'll try and last a little bit longer. 1054 MR. MORAN: Perhaps while we're marking exhibits, we could mark the other diagram as well, if it's convenient. 1055 MR. BETTS: Okay. 1056 MR. MORAN: The other diagram is entitled "Ownership and Delivery Points of Stelco and Imperial Oil," and that would become Exhibit 1.12. 1057 EXHIBIT NO. 1.12: DIAGRAM ENTITLED "OWNERSHIP AND DELIVERY POINTS OF STELCO AND IMPERIAL OIL". 1058 MR. BETTS: Okay. I think we're set. 1059 MS. ALDRED: I think we're ready for you now. 1060 MR. TONEGUZZO: Okay. Thanks. 1061 First, I'd like to provide some orientation with regard to the diagram. 1062 The facilities coloured in black are those owned by Hydro One, that's those over here. These facilities provide transmission access for the Cardinal Power generation and supply to the Casco load. The facilities comprise 230 to 115 kV transformers and switching facilities at St. Lawrence TS, and lines L1MB and L2M. 1063 These facilities are also used to supply other loads in the area, as shown by the extensions to these lines, so there are other loads connected there. 1064 Shown in green are the facilities owned by Cardinal Power, which include a transmission line operated at 115 kV, here, and two transformers that step up the voltage from below 50 kV to above 50 kV. That's to incorporate the generation. 1065 This is the delivery point for the Cardinal Power generator at the point where they step up the power. 1066 Please note that this delivery point is not specifically metered. The output of the generation, which sells into the Ontario energy market, is establishes by summing the readings of meter number 225, here, which measures the flow of the Cardinal Power transmission line, and meter number 224, up here, which measures the amount of power withdrawn from the transmission system by Casco. 1067 The facilities shown in red are owned by the load customer, Casco, and include a transformer which steps down the voltage from above 50 kV to below 50 kV, here. This is the delivery point for Casco, and the magnitude of the power withdrawn from the transmission system is determined by the reading on meter number 224, right there. 1068 MS. ALDRED: Did these facilities historically supply the Casco load? 1069 MR. TONEGUZZO: Casco was originally supplied from a station called Morrisburg transformer station, which transforms voltage from 115 to 44 kV. This is connected to lines L1MB and L2M. In other words, it's connected further down here on these lines. The Hydro One transmission system in the area, which is identified in black on the diagram, was therefore originally designed to accommodate the Casco load, since it was served by this portion of the transmission system originally. 1070 In 1994, when the Cardinal Power transmission line was placed in service, the Casco load was disconnected from the Morrisburg transmitter station and reconnected to the Cardinal Power line. This reconnection did not benefit the transmission system in any way, as investments in the area were already in place to supply the Casco load. 1071 The transmission system also required a number of technical changes to accommodate the Casco reconnection to 115 kV. This also resulted in the under-utilization of facilities at the Morrisburg transformer station when the load was transferred. 1072 The transmission facilities which were to be originally installed to supply the Casco load result in ongoing costs and other customers should not be required to carry the full cost burden of these facilities simply due to the reconnection of the Casco load. 1073 It should also be mentioned that on February 1st, 1995, after the Casco reconnection to the Cardinal Power line, Casco requested Ontario Hydro to increase their contract amount of power supplied from the transmission system from 12 megaWatts to 13 megaWatts, as their transmitter, Ontario Hydro studied the capability of the transmission system in the area, and determined that this increase could be handled by the transmission system. They, therefore, increased the contract amount of power. 1074 This proves that Casco recognizes that their load affects Hydro One's transmission system, and they must consult with Hydro One before changes are made to their load levels. 1075 This is also the case today. Load increases at Casco can affect the transmission system in the area and Casco cannot increase their load without consulting with Hydro One to ensure that the local transmission system is capable of carrying the increased demand. 1076 MS. ALDRED: Are the transmission assets that were placed in service to supply the Casco load still in place? 1077 MR. TONEGUZZO: Yes. All the transmission system assets that were placed in service are still there. These assets result in ongoing costs which benefit Casco, and they should, therefore, continue to contribute to these costs by paying the transmission rates as they are currently charged. 1078 MS. ALDRED: Now, since the definition of an embedded generator requires an understanding of the metering arrangements for Casco and Cardinal Power, can you can you please describe how the delivery points are metered? 1079 MR. TONEGUZZO: Okay. I'll go over this again. 1080 Casco is metered by Hydro One's meter number 224, shown here, where the voltage is stepped down from above to below 50 kV. This meter registered the demand of the Casco load and is used for settlement purposes by the IMO. In their interrogatory response, Casco has acknowledged that the Cardinal Power generators, G1 and G2, are not located behind Casco's meter. 1081 Since Cardinal Power is not located behind the meter which registers Casco's demand, Cardinal is not an embedded generator. This is one of the two key criteria a generator must meet in order to qualify as embedded, as per Board's RP-1999-0044 decision. 1082 MS. ALDRED: In their evidence, Casco claims that their withdrawal from the transmission system is measured by meter number 225. Do you agree? 1083 MR. TONEGUZZO: No, do I not agree with this claim. Casco withdraws electricity from the provincial transmission system at their delivery point. This is where they step down the voltage from above to below 50 kV, and the meter which registers the magnitude of this withdrawal is meter number 224. This is the point where the IMO settles Casco's account for energy supplied from the Ontario energy market. 1084 MS. ALDRED: Casco claims that it does not utilize the transmission system because electrical power flows locally from Cardinal Power to Casco, and should, therefore, not be required to pay transmission rates. Do you agree with that assessment? 1085 MR. TONEGUZZO: No, do I not agree with that assessment. 1086 Cardinal Power sells all of its electrical power to the IMO-administered market through OEFC by virtue of their connection to the Hydro One system. 1087 Cardinal Power cannot possibly deliver simultaneously the very same electrical power to two separate customers, OEFC and Casco. Casco has indicated that it does not have an agreement to purchase electricity from Cardinal Power. Casco has indicated that it purchases all of its electricity from the IMO-controlled grid and settles its electrical power purchases with the IMO-administered market. This is accomplished through the use of Hydro One's connection lines L1MB and L2M and the supporting network owned by Hydro One. 1088 The fact of the matter is that Casco cannot possibly receive its electricity from the IMO-administered market without the use of the IMO-controlled grid, including Hydro One's connection lines L1MB and L2M. Casco, therefore, does receive transmission service and should pay the applicable transmission charges. 1089 In addition to providing access to the Ontario electricity market, the transmission system owned by Hydro One also provides Casco protection from power-system faults, voltage-control system stability, operating control and metering. These are the same services provided to other customers in the province of Ontario who pay transmission rates. 1090 MS. ALDRED: Now, Mr. Toneguzzo, you heard Mr. Gardner's evidence this morning that he is not aware at the Casco facility when the Cardinal Power generator is not operating. Are you aware of how often that would be the case? 1091 MR. TONEGUZZO: Yeah. Our records indicate that this occurs quite often, in fact. Since 1994, the Cardinal Power generator has been down for over 2,700 hours, and during many of these outages, the Casco load has remained at their full power of about 11 megaWatts. In 2002, for example, our records show that the Cardinal Power generator was down a total of seven separate times, and this occurred on over 12 separate days. 1092 For example, from June 21st, 2002, to June 24th, 2002, the Cardinal Power generator was down, and the Casco load continued to withdraw 9 to 11 megaWatts during this entire period. This indicates that the Casco load does continue to operate when the Cardinal Power generator is down, and the Hydro One system must be capable of delivering this power to avoid outages to Casco. 1093 MS. ALDRED: Mr. Toneguzzo, Casco indicates that billing of LDCs with generation connected within their distribution system - that is, at less than 50 kV - changed from gross- to net-load billing in the new market; is that right? 1094 MR. TONEGUZZO: First I'd like to say that the Casco-Cardinal Power connection situation is different than that of generators embedded in LDCs, as I will discuss later. 1095 It is true that the billing for transmission services changed for LDCs which have generators embedded within their distribution system after the market opened. Prior to market opening, LDCs that had non-utility generation embedded in their distribution systems were billed for energy and transmission on a gross-load basis; that is, because the LDCs were required to purchase all their electrical energy requirements from the Ontario power pool. After the market opened, these generators met all the conditions of an embedded generator and therefore, in accordance with the Board's decision, transmission charges were calculated on a net-load basis. 1096 MS. ALDRED: Casco also believes that they should be subject to net-load billing in a similar manner as the LDCs because they claim that the Cardinal Power generator is embedded. Do you agree with that claim? 1097 MR. TONEGUZZO: No, I do not agree with these claims. In the case of the generators embedded within an LDC, within an LDC's distribution system, these generators meet the definition of embedded generation. They are generators that are not connected to the transmission system and are located behind the meter that registers the electricity supply from the regulated transmission facilities. These generators are customers to have host LDC and not transmission customers, unlike Cardinal Power. 1098 In the case of the Casco-Cardinal Power connection arrangement, the generators are directly connected to the transmission system and they are not located behind the meter that registers the electricity supplied from the regulated transmission facilities to the Casco load. The regulated transmission system does not end at the point where ownership changes from that of Hydro One to that of Cardinal Power. 1099 The Cardinal Power transmission facilities are also regulated; they just happen to be unlicensed. Since the Cardinal Power generator does not meet either part of the two-part test for embedded generation, they cannot be considered an embedded generator of Casco and therefore Casco should not be net-load billed. 1100 MS. ALDRED: Mr. Toneguzzo, in their evidence, Casco asserts that Hydro One has accept that Casco does not withdraw electricity from the transmission system owned by Hydro One; do you agree with this? 1101 MR. TONEGUZZO: No, I do not agree. Casco has clearly misunderstood Hydro One's acknowledgment of Casco's actual direct connection to Cardinal Power's 115 kV line contained in the Cardinal Power transmission connection agreement. 1102 Hydro One has always stated that Casco withdraws all of its electricity from the provincial transmission system, as mentioned earlier. Casco has also acknowledged that Cardinal's 115 kV bus and transmission line are part of the transmission system; therefore, Casco is connected to the transmission system and as such is required to pay the provincial transmission rates on the basis of the demand withdrawn from its delivery point, as measured by meter number 224. 1103 MS. ALDRED: Thank you, Mr. Toneguzzo. 1104 Mr. Pattani, I would now like to turn to the matter of the application of transmission tariffs in Ontario. Can you please explain if the application of uniform transmission rates is based on actual power flow conditions on the transmission system. 1105 MR. PATTANI: Power flow is not a factor in calculating transmission charges payable by a transmission customer. It is industry practice in most jurisdictions to use uniform transmission pricing that does not take into account power-flow conditions on the transmission system. The uniform transmission pricing methodology results in a fair and equitable treatment of all entities that use the transmission system. 1106 MS. ALDRED: Now, can you please explain how Casco should be charged for transmission, to be consistent with the legislation, the Board decision, and the Ontario rate schedule. 1107 MR. PATTANI: Since Casco is a transmission customer in its own right, its transmission charges should be collected on the basis of province-wide uniform transmission rates applied at its own transmission delivery point. Also, since Cardinal NUG is a separate transmission customer, its generator should not be netted out from Casco's demand. 1108 This approach is consistent with the Board decision and Ontario rate schedules, and it ensures fairness for all customers. In addition, it avoids complexities that include unintended and varied interpretations of the rules for applying transmission tariffs. It also mitigates the potential for gaming, inefficient investments, and rate increases. 1109 MS. ALDRED: You mentioned fairness; can you explain what you mean by that. 1110 MR. PATTANI: In a uniform postage-stamp pricing environment, transmission costs are allocated amongst all customers on the basis of their individual demands, as measured as their respective delivery points. If one or a few customers were to avoid paying appropriate charges because particular circumstances allow them to do so, then they cease to pay their fair share of costs and other customers have to shoulder a larger burden of costs. 1111 MS. ALDRED: In developing the current OEB-approved transmission rates, what assumptions did you make about the Casco demand? 1112 MR. PATTANI: The load demand for Casco was included in calculating the rates for the network pool and the line connection pool; that is, the Casco load was included in calculating the transmission rates. The Casco demand was forecast using the historical data for electricity supplied by Ontario Hydro to Casco. The output of the Cardinal generation was not considered in deriving the net charge estimate for Casco. 1113 MS. ALDRED: Why did you take that approach? 1114 MR. PATTANI: We took this approach for three reasons. 1115 First, based on the Board decision, Casco is a separate and distinct transmission customer; second, based on the discussions and decision in the proceeding RP-1999-0044, the Cardinal generation is not an embedded generation, since it is connected to the transmission system; and third, under the wholesale tariff of former Ontario Hydro, Casco was treated as a separate customer, distinct from Cardinal that owned the generator at the Casco complex. Thus, historical data used to develop transmission rates was based on Casco being a transmission customer and Cardinal selling its output to the power pool, much the same as it does now, by selling its output to the IMO-administered markets through the OEFC. 1116 MS. ALDRED: What would be the impact of removing the Casco demand from the calculation of uniform transmission rates? 1117 MR. PATTANI: The immediate impact of removing Casco's demand from the transmission charge table is a reduction in revenue for transmitters in the province of about half a million dollars per year. 1118 MS. ALDRED: Well, that doesn't sound like too much, Mr. Pattani, in comparison with Hydro One's revenue requirement. Why is it a big deal, then? 1119 MR. PATTANI: The impact of this issue is significant for all transmitters, and for all transmission customers in the province. Besides an immediate loss of revenue for the transmitters, more significantly, it would also set a precedent that could impact on other pool customers adversely. 1120 Should the Board make a decision that changes the policy, a decision beyond that which pertains to the compliance with the rate order, there could be a larger impact and far-reaching consequences for the transmission customers and the transmission industry. 1121 Over the long term, the impact of removing Casco's demand and the demand of other similar customers from the calculation of uniform transmission rates would be to increase the transmission rates for all remaining customers in the province. 1122 If a precedent is set here, some other customers may look for similar arrangements to escape paying transmission charges. For example, by reconnecting existing generation or by causing new generation to be installed in such a way that it allows them to do so. 1123 In this case, it could lead to an even larger impact on rates for the remaining customers. 1124 Finally, there is also a concern that other customers and stakeholders who may be impacted by a Board decision that sets such a precedent are not party to the current proceeding. 1125 MS. ALDRED: You mentioned that some customers could perhaps escape transmission charges by arranging to reconnect to generating stations if a precedent were set by the Board. 1126 Could you please provide an illustration of such a situation, using a real, practical example for us. 1127 MR. PATTANI: Yes, I can. I will provide two such examples, one for Southern Ontario and one for Northern Ontario, using the two diagrams that have been distributed earlier showing the situation around Nanticoke generating station and Thunder Bay generating station. 1128 The diagram that is to the left of the Board right now refers to the situation around Nanticoke generating station. 1129 MR. BETTS: Just for the record, we're referring to Exhibit 1.12? 1130 MR. MORAN: 1.12, that's right, Mr. Chair. 1131 MR. BETTS: Sorry to interrupt. 1132 MR. PATTANI: I'd like to ask Mr. Toneguzzo to show the lines that I refer to. 1133 Basically, this diagram show it is situation around Nanticoke GS. And the black lines are the transmission lines that supply Jarvis TS from Nanticoke generating station. And the customer, Stelco, is connected to those lines, as you can see in red. The red transformer stations are owned by Stelco, while the black lines are owned by Hydro One. 1134 There is also a line that runs from Nanticoke generating station to Middleport TS, the line that's shown in black. And what is taped to that line in red is Imperial Oil load, using their own transformation facilities. 1135 Anyway, you will note that the two large industrial customers, Stelco and Imperial Oil, are located very near the station, as shown by the blue dashed lines for Stelco and for Imperial Oil, which represent new, unlicensed transmission facilities that can be readily installed. 1136 These customers can arrange to connect themselves to the Nanticoke generating station. Their new transmission connections would not require a transmission license in accordance with regulation 20/02. As shown in the diagram, such an arrangement can be made relatively easily, and such an arrangement does not need to disconnect the customers completely from the IMO-controlled grid, since they could still be connected to it via the generating station, which itself is connected to the licensed transmission system. 1137 Now, in this case, the total demand of the two customers in question is about 130 megaWatts, which is nearly double that of Abitibi, and 13 times that of Casco. 1138 I'd now like to turn to the second diagram, which shows the situation around Thunder Bay generating station. 1139 MR. MORAN: Mr. Chair, Exhibit 1.13 is a diagram entitled "Ownership and Delivery Points of Abitibi, ERCO and Bowater." 1140 EXHIBIT NO. 1.13: DIAGRAM ENTITLED "OWNERSHIP AND DELIVERY POINTS OF ABITIBI, ERCO AND BOWATER". 1141 MR. PATTANI: Thank you. Can I request the Board Panel turn to... Thank you. 1142 Now, this arrangement shows the situation around Thunder Bay, where you see in black the two lines that go from Thunder Bay TS to Birch TS that are owned by Hydro One and that are, today, tapped to supply customers Abitibi, ERCO and Bowater, as you can see in that area. 1143 Now, it can be seen that the three customers, Abitibi, ERCO, and Bowater, near Thunder Bay generating station can also make similar arrangements to reconnect directly to the generating station using non-licensed transmission. That's the blue dashed lines there. As for the Nanticoke example, they too can still remain connected to the licensed transmission obtaining the security and reliability it provides via the non-licensed transmission connection to the generation which itself is connected to the licensed transmission. 1144 In this case, the total demand that could escape transmission charges is about 265 megaWatts. 1145 What I've shown here are only two of the many examples that are available to illustrate the possibility of load reconnecting to existing generation using non-licensed transmission. These examples show that there is a significant and real risk that the arrangements that I noted will take place if the Board rules in such a way that it sets the precedents for aggregating or netting of loads and generators connected to the non-licensed transmission. 1146 MS. ALDRED: Mr. Pattani, two weeks ago, during the Abitibi case, it was noted that Inco, which was also a transmission customer, was treated somewhat differently compared to Abitibi with respect to Inco's generation that is connected to the transmission system. 1147 First, can you please explain what the difference between the Inco situation and the Casco situation? 1148 MR. PATTANI: There are two main differences between the Inco situation and the Casco situation. In the situation of Inco, first, the Inco generation is owned by the same entity as that which is a transmission customer, that is, Inco. 1149 The Inco-owned load and generation are connected to the 69 kV transmission system, which has been historically owned by Inco itself. Second, the Inco generation was installed before open access to reduce demand and energy purchased from Ontario Hydro ostensibly on the basis of economic considerations that included its reduced electricity charges, including transmission charges. 1150 On the other hand, in the situation of Casco and Cardinal, the Cardinal generation is owned by a separate entity, that is, it is not owned by the end-use customer, Casco, which is a separately connected -- which is separately connected to the transmission system. 1151 And the Cardinal generation was installed to sell electricity to the power pool. It was not installed as a self-generation. Indeed, even at this moment, it cannot be considered as a self-generator, since Casco purchases its electricity requirements from the IMO-administered markets. 1152 MS. ALDRED: So why should Inco be able to aggregate its transmission-connected load and transmission-connected generation for the purpose of calculating transmission rates? 1153 MR. PATTANI: As Mr. Paterson noted earlier, the Board and most, if not all, stakeholders agreed during proceeding RP-1999-0044 that for load customers who have installed self-generation prior to October 1998, to serve their existing load, there should be no additional transmission charges levied with respect to load supplied by the self-generation. 1154 Inco's situation feeds the scenario. That is, Inco has owned the self-generation that is connected to its own load and that was used historically to reduce its charges before open access. 1155 Therefore, it is entirely appropriate and fair that Inco should continue to be charged for transmission based on aggregating its own load and its own historic self-generation. 1156 MS. ALDRED: And why should Casco load and Cardinal generation not be given the same treatment as Inco? 1157 MR. PATTANI: In the case of Casco load and Cardinal generation, the situation is entirely different. First, Casco does not own the Cardinal generation. The Cardinal NUG was a generator installed to sell its electrical energy output to the Ontario power pool. The generator is not a self-generator. 1158 Secondly, it was not installed on the basis of economic consideration that included reduction in transmission or other electricity charges for Casco prior to open access. As a result, the Casco situation does not satisfy the criteria of being installed self-generation prior to October 31, 1998, to serve existing load. 1159 The Casco load and Cardinal generation are separately connected to the transmission system. Accordingly, to supply with Ontario transmission rate schedule, the Casco load and Cardinal generation cannot be aggregated. 1160 MS. ALDRED: Mr. Pattani, one final question that I wish to ask you concerns payment of line connection charges. Can you please explain why the transmission delivery point at the Casco plant attracts line-connection service charges? 1161 MR. PATTANI: The Ontario transmission rate schedule states that the transmission customers that utilize lines owned by a licensed transmission company to connect to a station that is a classified as a network station are required to pay line connection service charges. 1162 Casco's evidence and the evidence provided by Mr. Toneguzzo a few minutes ago shows that Casco's load is connected to the station called St. Lawrence TS. This station is classified a network station. Casco is connected to the station through Cardinal Power's 115 kV transmission line and through Hydro One-owned 115 kV transmission circuits, designated L1MB and L2M. 1163 Therefore, since the Casco plant is connected to a network station through a Hydro-owned transmission line, the Casco plant load is required to pay line-connection service charges. 1164 MS. ALDRED: Thank you. 1165 Dr. Poray, I return to you to ask whether Hydro One is in compliance with the current transmission rate schedules with respect to the treatment of Casco and Cardinal Power. 1166 DR. PORAY: Yes, it is. 1167 MS. ALDRED: And can you please provide the Board the rationale for your answer. 1168 DR. PORAY: First I'd like to note that the transmission rate schedules are crystal clear in terms of their application to customers in respect of calculating transmission charges. There is no ambiguity as to who should pay what charges. Therefore, there is no room for misinterpretation. 1169 There are four areas that I believe illustrate Hydro One's compliance with the existing rate schedules. 1170 First, Casco and Cardinal are separate transmission customers in their own right, in accordance with the definition contained in section A of the rate schedule. Hydro One has treated them as such. 1171 Second, Casco and Cardinal Power are connected to the transmission system by separate delivery points as defined in section C of the rate schedule. Therefore, the corresponding demand and supply located at the separate delivery points cannot be aggregated. 1172 Third, Cardinal Power and Casco are separate entities under the Ontario Business Corporations Act; therefore, their demands cannot be aggregated as defined under section C of the rate schedule. 1173 And finally, Cardinal Power is not an embedded generator, since it is connected to the transmission system. Further, it is not connected behind the meter 224 that registers Casco's electricity consumption for the purposes of IMO billing and settlements. 1174 MS. ALDRED: On what basis do you make this statement? 1175 DR. PORAY: I make this statement on the basis of the transmission rate schedules that state that all transmission customers are required to pay transmission charges. 1176 MS. ALDRED: On what authority does Hydro One make the decision to apply rates to Casco? 1177 DR. PORAY: The authority by which Hydro One is guided is the Board decision and the Board-approved transmission rate schedule. The rate schedule is all that is available to Hydro One with respect to the implementation of rates and therefore Hydro One must apply the rate schedule as approved. 1178 MS. ALDRED: Thank you. 1179 Those are my questions, and that's the end of our direct evidence. 1180 MR. BETTS: Thank you, Ms. Aldred. 1181 Mr. Moran, we will proceed with you. I wonder if you can estimate how long you might want to question this panel. 1182 MR. MORAN: Mr. Chair, I might have about 30 minutes, and I could benefit from about a five-minute break, if I could, before I start. 1183 MR. BETTS: Okay. 1184 MR. MORAN: To organize around some of the evidence that we just heard. 1185 MR. BETTS: And Mr. King? 1186 MR. KING: I don't think I'll have any questions for the panel. 1187 MR. BETTS: Thank you. 1188 Mr. Sidlofsky, any estimate? Can you help me with an estimate? 1189 MR. SIDLOFSKY: Sir, I'm going to say a half hour to three-quarters of an hour. I'm not sure that I'll need that once Mr. Moran finishes, and I'm not expecting, at this point, to cross-examine a great deal on things that we've all already heard once in Abitibi. 1190 MR. BETTS: Okay. Well, let us then take this opportunity for a break, and perhaps we need a little more than a short break. We'll make it a 20-minute break and we will reconvene, then, at 3:45. 1191 --- Recess taken at 3:24 p.m. 1192 --- On resuming at 3:48 p.m. 1193 MR. BETTS: Thank you, everybody. Please be seated. 1194 Any preliminary matters before we proceed? 1195 Mr. Moran. 1196 MR. MORAN: Thank you, Mr. Chair. 1197 CROSS-EXAMINATION BY MR. MORAN: 1198 MR. MORAN: Just as a starting point, can I confirm that, as you indicated in the Abitibi hearing, that, essentially, for the purpose of the Casco proceeding, the central issue is still whether the co-generator should be classified as an embedded generator or not; is that fair? 1199 DR. PORAY: That's correct; yes. 1200 MR. MORAN: And in the Abitibi proceeding I asked you quite a few questions about the reasons for why you say that Abitibi isn't an embedded generator, and as I listen to your evidence today, you are essentially proposing the same reasons for why Casco shouldn't be treated as an embedded generator; right? 1201 DR. PORAY: Cardinal should not be. 1202 MR. MORAN: Yes, with that correction. 1203 DR. PORAY: That's correct. 1204 MR. MORAN: Okay. So I don't need to ask you all those questions that I asked you in the Abitibi proceeding; you stand by your answers from that proceeding? 1205 DR. PORAY: I do indeed, yes. 1206 MR. MORAN: All right. And Mr. Pattani, similarly? 1207 MR. PATTANI: Yeah, and maybe one more clarification. The central issue is whether or not Cardinal here and Westcoast there is an embedded generation. 1208 MR. MORAN: Right. 1209 MR. PATTANI: But there is also the issue that there are two different entities, two different transmission customers. In the context of embedded generation - whether or not the definition is true, that's one central issue - but here are still two different entities, that's also an issue here. 1210 MR. MORAN: Right. As part of the position that Hydro One is taking with respect to whether WCP on the one hand and Cardinal on the one hand should be treated as an embedded generator, one of the reasons you point to is that the generators are separate entities from the load. You said that in the Abitibi, and you're saying the same thing here; right? 1211 All right. And I take it you'll agree that, at least when we look at the physical arrangements at Abitibi and the physical arrangements at Casco, essentially, they're the same physical arrangement with the exception, I guess, of where the meter meters are located; is that correct? 1212 MR. TONEGUZZO: Yes. There is also a definition of ownership, but the physical arrangement is essentially similar. 1213 MR. MORAN: Right. My question was with respect to the physical arrangement. So, on the ground, the physical arrangement at Abitibi is virtually the same as it is with the Casco Cardinal arrangement; right? 1214 MR. TONEGUZZO: Yes. Other than the metering, yes. 1215 MR. MORAN: Yes, with the exception of the actual metering points, which I'll come to in a few minutes. 1216 Okay. So then let me just confirm that to the extent that questions dealing with everything that's similar were put to you in Abitibi, you have no desire to try to change your answers to any of those questions in the context of Casco-Cardinal; is that fair? 1217 MR. TONEGUZZO: To the extent that everything's relevant with respect to our evidence last time, we're not here to change our answers, no. 1218 MR. MORAN: Right. All things being equal, your answers will be the same, all right, which saves me, of course, a lot of time having to ask the same questions again right now. 1219 Now, I think, as you've indicated, there are some differences between the two situations and one of the differences are the metering points. If I could get you to turn up Exhibit 1.11, which is the diagram that shows the metering points for Casco and Cardinal Power, just so I can understand the difference. 1220 Now, the first question I have is with respect to something that I saw in another diagram. There was a reference to a backup meter. And if you need to see what that is... 1221 MR. TONEGUZZO: Yes, I recall. There was a backup meter on the output to the G1 and G2 generators on the bus... Oh, you could leave that one up. Doesn't matter. Yeah, I understand where it is. 1222 MR. MORAN: The backup meter appears to be -- 1223 MR. TONEGUZZO: Right there. Yeah. 1224 MR. MORAN: -- located between Cardinal's T2 transformer and the CP line that goes out to the -- 1225 MR. TONEGUZZO: That's correct. 1226 MR. MORAN: -- Hydro One facilities. 1227 MR. TONEGUZZO: Right there, where I have the dot. 1228 MR. MORAN: Right. And what is the purpose of the backup meter? 1229 MR. TONEGUZZO: That backup meter was used by Ontario Hydro formerly, very likely in case one of the other two meters failed, to be able to understand or register the output of the generators. 1230 MR. MORAN: Right. 1231 MR. TONEGUZZO: Today, very likely, the other two meters would have to have their own backup, their own dedicated backup. But that was just an extra backup in case one of the other two meters failed, so they could accurately read the output of the generation. 1232 MR. MORAN: Right. And if you were to ignore for the moment the existence of meter 224, which measures the Casco load, right, just for the moment, and just look at the backup meter and meter 225, that would mirror the meter arrangement that we see in Abitibi; right? 1233 MR. TONEGUZZO: That's correct. Yes. 1234 MR. MORAN: All right. So, if 224 went down, you could use the backup meter in conjunction with 225 to measure what the Casco load is, just the same way as the Abitibi load is measured? 1235 MR. TONEGUZZO: I don't know if that meter is used for that purpose any longer. I'm not sure if it's registered with the IMO or not. I don't believe it is. 1236 Would you know, Jim? 1237 MR. PATERSON: No, I don't think the backup meter is registered with the IMO. But conversely, if it was, then you wouldn't need 225, and that backup meter would actually more appropriately measure the generation output. 1238 MR. MORAN: Right. And just as we see in Abitibi, in the Abitibi situation, the generator there has its own meters and that measures the output from the generator, right, in the Abitibi situation? 1239 MR. PATERSON: Yes. 1240 MR. MORAN: I mean, not a whole lot turns on this. I just wanted to understand how important the difference was. And would you agree that ultimately the difference in the metering point isn't particularly important in the analysis of whether this is an embedded generator? 1241 MR. PATERSON: Often, to save on the cost of metering, we use combinations of meters to create an actual metering point that we'd like to meter. 1242 MR. MORAN: Right. And in the Abitibi situation, you're using such a combination in order to figure out what the output is from the generator as well as what the load is for the customer, because that's an economically efficient way to do it. 1243 Similarly, you're doing the same thing here. It's just a combination of meters to get the numbers you need? 1244 MR. PATERSON: That's correct. 1245 MR. MORAN: All right. So would you agree that essentially there's really no difference conceptually between the Abitibi situation and the Casco situation, as far as meters go? 1246 MR. PATERSON: I think what you're trying to get to is that the location of the metering does not determine where the delivery points are. 1247 MR. MORAN: Right. And the location of the metering doesn't determine whether the generators are embedded or not. 1248 MR. PATERSON: That's correct. 1249 MR. MORAN: Okay. So, in other words, nothing turns on it. 1250 MR. TONEGUZZO: But the embedded generator does need to be behind the meter that registers the withdrawal of the load customer. 1251 MR. MORAN: As we see from 0044. 1252 MR. TONEGUZZO: Correct. 1253 MR. MORAN: Yes. Thank you. 1254 Now, you indicated that you attempted to enter into a connection agreement with Casco. And as I understand, connection agreements are agreements that you would enter into with customers who are connected to your system; right? As a general principle? 1255 MR. PATERSON: That's right. 1256 MR. MORAN: Right. And of course, as we know, Casco's not actually connected to your system. They're connected to Cardinal's transmission system; right? 1257 MR. PATERSON: They're connected to us through Cardinal. 1258 MR. MORAN: Through Cardinal's transmission system. So, in other words, even though they're a transmission customer, they're not actually connected directly to your system. They're connected to your system through Cardinal's transmission system, someone else's transmission system; right? 1259 MR. PATERSON: Yes. 1260 MR. MORAN: Okay. But you indicated that the reason you attempted to enter into a connection agreement with Casco was because they're a large load and they have implications for system reliability; right? 1261 MR. PATERSON: That's right. We have another connection agreement with Cardinal. The Cardinal connection agreement doesn't include the equipment and the protections and things that are associated with the Casco facility. So it's important for us to be assured that the Casco facility doesn't impact on the transmission system in any negative way. 1262 MR. MORAN: Right. You have a connection agreement with Cardinal because they have the transmission facility that connects to your facilities directly. 1263 MR. PATERSON: We attempted to enter into a connection agreement with both Cardinal and Casco. 1264 MR. MORAN: Right. And Cardinal entered into one because they have an actual connection with your system; Casco did not. 1265 MR. PATERSON: That's correct. 1266 MR. MORAN: Because they do not; right? 1267 Okay. Now, the issue of system reliability, of course, is also an IMO responsibility; right? That's -- the IMO has responsibility for system reliability as well; is that correct? 1268 MR. TONEGUZZO: Yes. That's system reliability at the bulk system level or high level of the system for interconnected security, for example. Local reliability, they also have an accountability, okay? 1269 But in terms of, I believe, if Casco were to have loads that caused some inference with other customers connected to the Hydro One transmission system, and causing other load customers to have, say, load shake-off or trip, I don't believe the IMO gets into that kind of thing, they leave that to transmitter. 1270 Jim, perhaps you can elaborate on that or confirm? 1271 MR. PATERSON: There's an equipment compliance standard that the transmitters had to submit to the OEB. And often or -- well, not often but occasionally, there are load customers who create power quality problems, for example, to the transmission system. And that is enforced through the equipment compliance process with the transmitter. 1272 MR. MORAN: All right. And to the extent that the IMO has a responsibility for system reliability, that's one of the reasons that you have an agreement with the IMO; right? 1273 You have an operating agreement with the IMO; right? And that's because there's a market rule that requires that? 1274 MR. PATERSON: That's correct. 1275 MR. MORAN: Right. And to the extent that the IMO was concerned about system reliability issues that might be created as a result of the uncertainty about Casco because of the size of that load, presumably the IMO would be in a position, under the market rules, to require Casco to enter into an operating agreement with them? 1276 DR. PORAY: Well, the IMO has the ability, under the market rules, to include other entities that own transmission facilities to enter into operating agreements if, in its opinion, those transmission facilities impact on the reliability of the IMO-controlled grid. 1277 MR. MORAN: Right. And in this particular case, the transmission facility in question would be the one that's owned by Cardinal, to which Casco is also connected? 1278 DR. PORAY: That's correct. 1279 MR. MORAN: All right. And maybe this is just all a long way of suggesting that perhaps this has nothing, really, to do with whether Cardinal is embedded or not; right? 1280 DR. PORAY: Are you speaking about reliability? 1281 MR. MORAN: From the reliability issue. 1282 DR. PORAY: Well, it's certainly one of the issues that you have to take into consideration as a result of a connection of a customer to a transmission system. 1283 MR. MORAN: Right. And of course that's not an issue in this proceeding. The issue in this proceeding is whether Cardinal should be treated as an embedded generator or not; right? 1284 DR. PORAY: In relation to the Casco load. 1285 MR. MORAN: Right. In relation to the Casco load. Okay. 1286 Now, Mr. Toneguzzo, you talked about how development of the co-generation - I don't know if I remember this correctly, and correct me if I don't have it right - but led to under-utilization of the Morrisburg transmission system. 1287 MR. TONEGUZZO: Not the development of the co-generation, the reconnection of the load. The Casco load, the 11 megaWatts, was originally connected through a 44 kV line from a station called Morrisburg TS, which is connected to L1MB and L2M. That load, Casco requested that it be removed from the Morrisburg TS and connected to the 115 kV bus of the Cardinal Power facility. 1288 Ontario Hydro allowed that to occur, after checking that the transmission system could withstand that change. And as a result of that, I would say the Casco load represents about 1/10 of the capability of Morrisburg transformer station. So that 1/10 of that load was removed from that transformer station and basically was left stranded. 1289 MR. MORAN: Right. So when you were talking about how this led to under-utilization at the Morrisburg transformer station, you were talking about something back in 1995; right? 1290 MR. TONEGUZZO: Correct. 1291 MR. MORAN: And it's fair to say that since 1995 there's been a certain amount of load growth that would be served by the Morrisburg TS; right? 1292 MR. TONEGUZZO: I don't know that. I haven't explored the load growth there. It's very likely this at that load growth could have even reduced there. It depends on the local economy. 1293 MR. MORAN: The Morrisburg TS is a network facility; right? 1294 MR. TONEGUZZO: No, it's a transformation connection facility, it's a Hydro One facility, but it's in the transformation connection pool 1295 MR. MORAN: And in the transformation pool, loads come and go; right? Just through normal economic cycles. 1296 MR. TONEGUZZO: They can come and go through normal economic cycles. This particular load went and got reconnected. It did not go, it remains, and remains connected to the system. 1297 MR. MORAN: Right. But it's likely that the load is not the same today for the Morrisburg transformer station as it was back in 1995. As you said, it might have decreased, but it could also have increased. 1298 MR. TONEGUZZO: That's correct. 1299 MR. MORAN: And you're not suggesting that that under-utilization has anything to do with the issue of whether the Cardinal Power station should be considered to be an embedded generator in relation to the Casco load? 1300 MR. TONEGUZZO: No, it has to do with the fact that the Casco load was originally connected to the system on lines L1MB and L2M, and the system has to be designed to accommodate that load, and costs were incurred for that to happen. And those costs still exist. 1301 MR. MORAN: I think as you indicated, those costs may or may not exist; it depends on how much load is being served by the Morrisburg transformer station today; right? 1302 MR. TONEGUZZO: The net effect is the Casco load is removed from a network station. 1303 MR. MORAN: Right. 1304 MR. TONEGUZZO: The network pool, and has been reconnected. It still exists. So it's load that is still the revenue stream. 1305 MR. MORAN: All right. And this is something that happened in 1995, prior to the current rate order; right? 1306 MR. TONEGUZZO: That's correct. 1307 MR. MORAN: And so, as part of preparing a case before the Board that led to the current rate order, presumably that was taken into account; right? 1308 MR. TONEGUZZO: That magnitude of the load, yes. That load was accounted for as it's currently connected. 1309 MR. MORAN: Okay. 1310 MR. TONEGUZZO: In the design of rates. 1311 MR. MORAN: So that all this information gives us is some of the historical context of what happened back in 1995, but it's not put forward as part of what the Board should consider in determining whether the Cardinal co-generation station is embedded or not. 1312 MR. TONEGUZZO: Not with respect to embedded, but with respect to the fact that costs were incurred within the system to initially install the load. And those costs are still present, basically. 1313 MR. MORAN: All right. Mr. Pattani, you indicated that the Casco load was included in the load forecast for the purpose of the current rate order; right? 1314 MR. PATTANI: Yes, it was. 1315 MR. MORAN: All right. And it's fair to say that that load forecast doesn't necessarily reflect the current situation; right? 1316 MR. PATTANI: Yeah. There are normal variations because of temperature and economic variations, as Mr. Toneguzzo mentioned. 1317 MR. MORAN: Right. And load growth? 1318 MR. PATTANI: Load growth, yes. And sometimes load declines. 1319 MR. MORAN: Right. The rate order that came out of 0044 was based on a 1999 forecast; right? Based on, sorry, the 1999 load as it existed at that time, and factored into a forecast; right? 1320 MR. PATTANI: Yeah. So I think you said it correctly, in that it was based on a year 2000 forecast developed as of 1999, using the historical data then. 1321 MR. MORAN: Right. And that gave rise to a rate order that wasn't implemented until market opened in May of 2002. 1322 MR. PATTANI: Yes. 1323 MR. MORAN: All right. So between the 1999 figures, which you say included the Casco load, and the reality of what exists as of market opening in May of 2002, it's likely that quite a lot has changed; isn't that fair? 1324 MR. PATTANI: Well, frankly, I haven't looked at the load demand now, and whether it is a lot has changed or not, I could not make a comment. But something may have changed; I mean, it may be a little bit higher or... 1325 MR. MORAN: I mean, overall, the total load that you are serving today is larger than the load than you were serving in 1999; isn't that fair? 1326 MR. PATTANI: Yeah, and I'm sure the costs would be higher too. From 1999, our costs would have increased between then and now too, I guess. 1327 MR. MORAN: All right. And the costs may have gone down too because you may have become more efficient in doing what you do; right? 1328 MR. PATTANI: Again, I haven't investigated whether cost or demand, I haven't investigated. 1329 MR. MORAN: Right, because the opportunity to investigate that would be currently in the next rates case, and currently we're under a rates freeze; right? 1330 MR. PATTANI: Yes. 1331 MR. MORAN: All right. Mr. Toneguzzo, you indicated that Cardinal cannot deliver the same electricity to the IMO market and to Casco. And I just wanted to explore that a bit with you. 1332 I mean, the reality is, of course, that Cardinal physically is delivering power to Casco; right? I mean, that's physical reality at the site. 1333 MR. TONEGUZZO: Well, the load is adjacent to the generation. 1334 MR. MORAN: Yes. 1335 MR. TONEGUZZO: So, physically, electrons flow that way, but contractually the generator is selling all of its output at what was deemed to be the old delivery point, which is at the point where meter 225 is. 1336 MR. MORAN: Right. So physically the Cardinal is delivering electricity to Casco; right? Physically. 1337 MR. TONEGUZZO: Physically, electricity that would flow from the generators at the Cardinal plant to the Casco load; correct. 1338 MR. MORAN: Right. And financially, there's a financial arrangement that Cardinal has made to sell its output into the IMO market, but these are quite two different things; right? The financial arrangements are quite different from physical arrangements. That's just how this market works; right? 1339 MR. TONEGUZZO: In order for Casco to access the market, though, they do need a connection. That's the point. They do need a connection from the system and benefit from the system. You're buying from generators that are on the system. 1340 MR. MORAN: In the case of a generator that's embedded within an LDC, that's not necessary, is it? The embedded generator that's embedded in an LDC won't have a physical connection with the transmission grid but it can still participate in the market. 1341 MR. TONEGUZZO: That's true. 1342 MR. MORAN: Right. Okay. 1343 DR. PORAY: If I may, just add to -- 1344 MR. TONEGUZZO: But that isn't the case here. 1345 MR. MORAN: No. Clearly we're not dealing with an LDC. I was just testing your answer with respect to, you have to have a physical connection in order to participate in the market. 1346 That's not the case for somebody who's embedded in an LDC, and they still participate in the market. Financially, they will still sell all their output into the IMO market; isn't that correct, in that example? 1347 MR. TONEGUZZO: Yes, that's correct. However, the load customer does need a connection. The LDC does need a connection. And we're talking about Casco as a load customer here. 1348 MR. MORAN: Right. 1349 MR. TONEGUZZO: And they do need a connection to the IMO-controlled grid, as would the LDC. 1350 MR. MORAN: All right. And physically, in the LDC example, of course, the embedded generator is displacing the LDC load; right? 1351 MR. TONEGUZZO: Yes, it's a true embedded generator on the distribution side. 1352 MR. MORAN: Right. So physically it's delivering all its power to the LDC; financially, it's delivering its output to the financial market. But it doesn't have a connection to the IMO market other than through the contractual relationships that it has; right? 1353 MR. TONEGUZZO: However the load customer, the LDC, does have a connection to the IMO-controlled grid. 1354 MR. MORAN: Right. That's right. And so does Cardinal in this case; right? 1355 MR. TONEGUZZO: Yes. 1356 MR. MORAN: Yeah. And the LDC, of course, is net-load billed; right? 1357 MR. TONEGUZZO: Yes; it has true embedded generation. 1358 MR. MORAN: Right. And that was a change that happened upon market opening -- 1359 MR. TONEGUZZO: That's correct. 1360 MR. MORAN: -- because prior to that it was gross-load billing; right? 1361 Now, I think you advised that the Cardinal generator was down seven times in 2002. 1362 MR. TONEGUZZO: Yes. We have records that indicate it was down seven times and that was over a span of about 12 days. Some of those downtimes resulted in successive days being down. 1363 MR. MORAN: All right. If you could just turn up Exhibit 1.5 for a minute. That's the spreadsheet that shows the Casco transmission costs for... 1364 MR. TONEGUZZO: Okay. We have it here. 1365 MR. MORAN: So what we see here, as I understand it, is the results of Casco being billed on a gross-load basis; right? It shows what they're billed for line and network. 1366 If they were to be billed on a net-load basis, given your knowledge of the times when the generator was down, are you in a position to indicate what Casco would have been billed on a net-load basis? 1367 MR. TONEGUZZO: Well, we'd have to do a number of calculations before we could do that. 1368 MR. MORAN: You would have to have access to the meter information, which I assume you have; right? 1369 MR. TONEGUZZO: Yes. 1370 MR. MORAN: Okay. Would it be possible for you to give an undertaking to produce what the net-load billing picture would look like for the same period of time? 1371 MR. TONEGUZZO: For 2002 only? 1372 MR. MORAN: For the period of time's that is covered in the exhibit. 1373 MR. PATERSON: May I add a point to that? I think it may be helpful for clarification. I think Casco is claiming that even when the Cardinal generation is down and they're consuming load, that they still wouldn't pay then either, because they're not connected to a licensed transmitter. 1374 So if we were to do the analysis based on the way Casco is proposing, the answer would be zero. 1375 MR. MORAN: All right. On the assumption that you would be able to bill Casco on a net-load basis or a gross-load basis, what we see here is the effect that results from a gross-load basis -- I'm just asking: Would you be able to tell me, in an undertaking, what it would look like if you actually billed them on a net-load basis regardless of whatever position you might take? 1376 MR. PATTANI: I think in order to make sure that this record is properly made here, because the issue here is not net load or gross load, can I say that what -- that a meter reading that's 225 will measure the power transferred to this complex when Cardinal generation is out of service. And what you're asking, therefore, is, based on the meter reading at 225 -- 1377 MR. MORAN: That's right. 1378 MR. PATTANI: -- what would be the charges paid? 1379 MR. MORAN: That's right. 1380 MR. PATTANI: So leaving aside whether it's net-load or gross-load billing, essentially what you want is based on the meter reading 225 and nothing else, what would have been the charges? 1381 MR. MORAN: Right. And that would amount to net-load billing for Casco; right? 1382 MR. PATTANI: According to the claim that they're making, yes. 1383 MR. MORAN: Now, of course we do have the slight complicating factor that if the generator's down, it's also a load taking something off, so it might be that the meter reading just from 225 is insufficient. 1384 MR. PATTANI: That's correct. 1385 MR. MORAN: So you would have to use both meter readings. 1386 MR. TONEGUZZO: There would be a withdrawal of the delivery point for Casco and a withdrawal of the delivery point for Cardinal Power. Because when the generator is down, very likely there is some caretaker power required. So it would be necessary to use both meters to establish how those two separate customers would be billed. 1387 MR. MORAN: Right. All right. So are you able to do that for me, then? 1388 MS. ALDRED: We'll take that undertaking, just as long as everyone who's making a calculation understands what it is. 1389 MR. MORAN: All right, Mr. Chair. The undertaking would be Undertaking U.1.2, an undertaking to provide a calculation that would show what the effect of net-load billing would be for the period of time that's covered in Exhibit 1.5. 1390 UNDERTAKING NO. U.1.2: TO PROVIDE A CALCULATION SHOWING THE EFFECT OF NET-LOAD BILLING FOR THE PERIOD OF TIME COVERED IN EXHIBIT 1.5. 1391 DR. PORAY: Mr. Moran, can I just clarify that we're absolutely crystal clear about this? When you say "net-load billing," you're saying with the generator out of service. That's not net-load billing. Generator is out of service. So what happens under those conditions is that you have power flowing into the complex because of the load requirements of the generating station and at Casco load. 1392 MR. MORAN: Right. 1393 DR. PORAY: So I just want to make clear, that's not net-load billing. There is no generation running. The generator is out and the generating station and Casco are now loads. 1394 MR. MORAN: All right. Dr. Poray, if one were to assume that this generator was an embedded generator, then presumably you would only bill Casco on a net-load basis; right? 1395 I'm just asking you to make that assumption. Assume that the generator is an embedded generator so that when the generator is up, you won't be billing the load, right, because net-load billing is the rule that applies if it's an embedded generator? The only time you would bill would be when the generator is down because then power is coming off the grid. As I understood it, that's the difference between gross-load billing and net-load billing and that's all I'm asking you to do. 1396 DR. PORAY: So we would be assuming if this generator was connected at the same voltage level as the load? 1397 MR. MORAN: Whatever other assumptions you want to make, Dr. Poray. Just assume that it's an embedded generator for the purpose of the undertaking. 1398 MR. BETTS: Mr. Moran, can I just ask a question for clarification, for my own use. 1399 MR. MORAN: Yes, Mr. Chair. 1400 MR. BETTS: The spreadsheet you referred to outlines the costs that Casco has been paying; am I correct? And now you're talking about the costs that Cardinal would be paying? 1401 MR. MORAN: No, still talking about the costs that Casco would pay. 1402 Mr. Chair, 1.5 shows the actual billing, which is done on a gross-load basis for the period of time. So it disregards the fact that the generator -- it may or may not be an embedded generator. Hydro One's position is clear that it's not an embedded generator, and that's why they do gross-load billing for Casco, and the result of that is reflected in Exhibit 1.5. 1403 So just for comparison purposes I'm asking Hydro One to assume that the generator is an embedded generator, and therefore, what would the bills look like if they were billing on a net-load basis on that assumption, for the same period of time. 1404 MR. BETTS: But the bills only that would be apportioned to Casco? 1405 MR. MORAN: To Casco. That's right. What would Casco's bill be on a net-load basis on the assumption that Cardinal is an embedded generator? Recognizing, of course, that Hydro One takes the position that it's not an embedded generator. 1406 Are we all right, Dr. Poray? 1407 DR. PORAY: Well, I'm still a little bit confused, because if the generator is out of service, then you have two loads on the site. Now, let me just finish. 1408 If the generator is in service, it's producing electricity, and in this particular case, this generator produces more than the demand. So theoretically, the answer would be zero. 1409 MR. MORAN: Right. Is there anyone else on the panel who understands the question? 1410 MR. PATTANI: Let me reword your request. And I think I know where you're coming from. 1411 Essentially, what you want to know is, assume -- I mean, sorry, calculate the transmission charges that Casco would pay if it were -- at the times when the Cardinal generator is out of service all the time? That's the long and the short of it, I believe? 1412 MR. MORAN: Right. 1413 MR. PATTANI: I mean, in those times that it is out of service. 1414 MR. MORAN: Right. In other words, assume that Cardinal is an embedded generator and that you have to bill Casco on a net-load basis, what would that look like for the period of time that's set out in Exhibit 1.5? 1415 MR. PATERSON: I don't want to belabour it too much, but if the Cardinal generator was actually embedded in Casco, then when it was down, the Cardinal generator also consumes load, and it would be on the Casco bill, if they were embedded behind Casco's meter. 1416 So should we be including the Cardinal load as well? 1417 MR. MORAN: No. 1418 MR. PATERSON: No. So this is a totally hypothetical case that couldn't physically exist. 1419 MR. MORAN: Absolutely. It's based on an assumption that it's an embedded generator and that it's owned by somebody else, as it is in the current situation, and they'll have to pay their own bill. Okay? 1420 MR. PATERSON: When an embedded generator is down, for example, in an LDC, and it's consuming power, the LDC would be charged for transmission charges that that embedded generator would consume. 1421 MR. MORAN: Right. In this case, of course, when we a look at Cardinal and Casco, Cardinal is a separate customer when it's down. It has its own load; right? So it would be billed for that load when it's down. And I'm just asking you to assume that it's an embedded generator on that basis. So the only thing I'm looking for is what would be the bill to Casco on that assumption? 1422 And if you want to give me the both scenarios, that would be fine too, with or without Cardinal's load. 1423 MR. PATERSON: We're happy to give it to you the way you requested it. I just wanted to be clear. 1424 MR. MORAN: Fine. Thank you very much. 1425 So I think we have an undertaking, Mr. Chair. 1426 I'd like to turn now to your two exhibits, 1.12 and 1.13, which I think are your "slippery slopes" exhibits. 1427 Starting with Exhibit 1.12, as I understand what you're putting forward here is the scenario that OPG's generators at Nanticoke, which are currently directly connected to Hydro One's transmission system, OPG might, based on a Board decision out of this proceeding, might decide to disconnect itself from Hydro One's transmission system and reconnect with the Stelco load. Do I understand that correctly? 1428 MR. PATTANI: I'm glad you asked that question, because that is definitely not the understanding. 1429 The concept that we are presenting here, in that concept, OPG will not -- sorry. 1430 The concept that we are talking about here, OPG generation will not at all need to disconnect from the IMO-controlled grid. All the generation shall remain connected to the IMO-controlled grid -- in much the same way as the Cardinal generation is today connected to the, say, the transmission line out of the Cardinal-Casco complex, the Nanticoke generator would still be connected. 1431 The only difference is that there shall be a line, a short line, which is tapped from the Nanticoke generating station and that goes to feed, for example, Stelco and Imperial Oil, so that Stelco and Imperial Oil will still be connected through the Nanticoke facilities to the IMO-controlled grid, and all of the Nanticoke generating station is still corrected to the IMO-controlled grid. So there is not question in this concept for any of the generator to be disconnected from the IMO-controlled group. 1432 MR. MORAN: All right. So if I understand what you're saying, then, what we see in Exhibit 1.12 is a scenario whereby OPG/Nanticoke, currently connected to the Hydro One system, builds a second wire to connect to a load currently connected to the Hydro One system. 1433 MR. PATTANI: One second. I mean, in the concept that I'm presenting here, it is not the OPG that would build the second wire. It is the Stelco or Imperial Oil that would build the second wire. 1434 MR. MORAN: All right. 1435 MR. PATTANI: In other words, it would be a scenario where... Let's look at Casco and Cardinal. Suppose, as of this moment, there was no connection between Casco and Cardinal, and Casco goes ahead and were to build a line to Cardinal. Cardinal still remains connected to the IMO-controlled grid. So in here, what we are talking about is Stelco does something so that it is equivalent now to Casco, and builds a line into the Nanticoke generating station to have the same system as Casco and Cardinal have. 1436 MR. MORAN: All right. So what we see, then, in Exhibit 1.12, is OPG/Nanticoke currently connected to Hydro One's transmission system. Somebody -- it could be OPG, it could be Stelco, it could be Imperial Oil -- might build a second wire out of the Nanticoke system to service that load directly from the generator, and they're -- right? 1437 MR. PATTANI: Right. Now as it stands, the only person who might have an incentive to do so -- I must stress here, OPG will not have a direct incentive to do this. Stelco and Imperial Oil will have an incentive to make it so that such a connection takes place. So when you say someone, OPG or Stelco or Imperial Oil, I'd rather say it's Stelco or Imperial Oil arranges that such a connection is made on their behalf. 1438 MR. MORAN: Okay. So let's run with it on that basis, then, that the person who has the incentive to build this blue line that you have next to Stelco and the blue line next to Imperial Oil will be the customers themselves; right? They're the ones that have the incentive, because if they do that, they would argue, then, under your scenario that they don't have to pay network charges any more except on a network basis; right? 1439 MR. PATTANI: Right. 1440 MR. MORAN: Now, Stelco and Imperial Oil are currently connected customers of Hydro One; right? 1441 MR. PATTANI: They're transmission customers in the province of Ontario. They happen to be connected to Hydro One's transmission system; yes. 1442 MR. MORAN: Stelco and Imperial Oil are currently directly connected transmission customers of Hydro One; right? 1443 MR. PATTANI: I agree with that. I mean, I hope it's not used out of context or otherwise. But I agree with that; they are directly connected to Hydro One's transmission system. 1444 MR. MORAN: Right. So, to the extent that they are directly connected to Hydro One, if either Stelco or Imperial Oil were to engage in building a separate transmission facility, in effect, what they would be doing is bypassing the Hydro One facilities; right? 1445 MR. PATTANI: In the same way as Casco is expected to be bypassing the transmission charges in the current proceeding, yes. 1446 MR. MORAN: Right now, as things stand with both Casco and Abitibi, that's not a possibility. Neither one of those situations are planning to build a new transmission system to strand Hydro One assets, are they; right? I mean, we're dealing with the Abitibi case and with the Casco case, we're dealing with an existing situation, not a future, hypothetical possibility; right? 1447 MR. PATTANI: Okay. 1448 MR. TONEGUZZO: But Casco was originally connected to the Ontario Hydro system, and they moved their load from the network station Morrisburg TS to this unlicensed line. 1449 MR. MORAN: That's right. With the agreement of Ontario Hydro, the predecessor to Hydro One; right? Now, if Stelco in this situation was proposing to bypass you, would you agree that they could do that or would you dispute their right to do that? 1450 MR. PATTANI: Well, there are two questions here, I believe. One is, we as a company, this would be against our interest and against the interests of transmission customers as a whole. So we would... I wouldn't use the word "agree," but we would not like it. Now, in terms of a dispute, if a precedent were set here, for example, that a load customer that is connected to a non-licensed transmission can escape transmission charges, then a customer like Stelco would take that precedent and implement it irrespective of whether we agree or whether we dispute it. 1451 MR. MORAN: Right. But the difference between the Casco situation and this hypothetical situation is that nobody at Casco is proposing to build new facilities to bypass existing Hydro One facilities; right? 1452 MR. PATTANI: Yes. 1453 MR. MORAN: The system exists the way it exists today; right? 1454 MR. PATTANI: Mm-hm. 1455 MR. MORAN: And the same for Abitibi's situation; nobody's proposing to build new transmission facilities to bypass existing Hydro One facilities. 1456 MR. PATTANI: Yes. 1457 MR. MORAN: In this scenario, you would have to have someone prose to build new facilities in order to bypass Hydro One facilities; right? That's the heart of the scenario that we see in 1.12; right? 1458 MR. PATTANI: Yes, it is. 1459 MR. MORAN: Somebody would have to propose to bypass. 1460 MR. PATTANI: And what I'm trying to get at here is, this is a very short line, definitely less than 2 kilometres, much lesser than that. They do not need a leave to construct. Even if we were to have an urge to dispute it, there may not be a process or we may not have much thing to stand on if, as a result of today's or the decision here, Stelco is given an incentive to bypass. What else can we do even if we were to dispute it? 1461 MR. TONEGUZZO: We do not have the ability to prevent a customer from disconnecting from our system. We have no recourse. If a customer wants to disconnect from our system, we can't prevent that from happening. If they wanted to open their switches on their transformers, having built that line, we have no recourse. 1462 MR. MORAN: Right. As things stand today, you have an operating agreement with Stelco; right? A connection agreement with Stelco; isn't that right? 1463 MR. PATERSON: That's right. 1464 MR. MORAN: And as things stand today, you have a connection with Imperial Oil; right? 1465 MR. PATERSON: That's right. 1466 MR. MORAN: And as things stand today, there is a dispute currently before the Board that centres around whether Hydro One should be putting in clauses or requiring clauses in its connection agreements that prohibit bypass; right? 1467 MR. PATERSON: That's the construction agreements, the CCRA agreement, not the connection agreement. Not the transmission issue. 1468 MR. MORAN: I stand corrected, but there is a dispute, a real dispute, about Hydro One's ability to protect itself against bypass through agreements with customers; right? 1469 MR. PATERSON: That's correct. 1470 MR. MORAN: Right. And that dispute is squarely raised in front of the Board in a different proceeding; right? The TSC review proceeding; is that correct? 1471 MR. TONEGUZZO: Yes. But just to elaborate on that, that dispute is with respect to incremental load; correct, Jim? That dispute is with respect to incremental load. 1472 MR. PATTANI: And let me clarify one other thing. 1473 MR. TONEGUZZO: Not existing. 1474 MR. PATTANI: As CCRA, the one that's being discussed, it's CCRA stands for capital... Sorry? 1475 MR. PATERSON: Construction. 1476 MR. PATTANI: Capital construction recovery agreement. A CCRA comes into being if someone is attempting to connect to the Hydro One system. When someone is attempting to disconnect from Hydro One system, and instead connect to a generating station that's owned by someone, we do not even have any resource to a CCRA because there then doesn't need to be a CCRA with someone who's connecting like that. 1477 MR. MORAN: Right. There is a proceeding in front of the Board at the moment, though, that the Transmission System Code proceeding, which is going to address that very issue: Should existing customers be permitted to bypass existing Hydro One facilities? That's an issue squarely in front of the Board in that proceeding, is it not? 1478 MR. PATERSON: That's for the case where customers are making new connections to the transmission system, saying that they can't abandon or bypass the load they're currently taking through other connections. It doesn't address this case. 1479 MR. MORAN: Right. So it's your view that the TSC process can't address this problem and isn't addressing this problem? You may want to check on that and I'm happy for you to -- 1480 MR. TONEGUZZO: It haven't been envisioned to address this problem to date. And there's no guarantee that this problem will be addressed through that proceeding, either. 1481 MR. PATTANI: And there is another risk that we have here, and that is that if a precedent were set here, that could in itself be used as a guideline for the TSC process. So not only as Mr. Toneguzzo says here, it has not been envisioned to capture this particular aspect, but this aspect may fall into place as a result of a precedent that may be set as a result of the hearing here. 1482 MR. MORAN: The Transmission System Code governs construction agreements; right? You mentioned the CCRA; right? 1483 MR. PATERSON: The CCRA is part of Hydro One's transmission connection process -- 1484 MR. MORAN: Right. 1485 MR. PATERSON: -- that was filed with the OEB. 1486 MR. MORAN: Right. And which is being reviewed as part of the Transmission System Code process; right? 1487 MR. PATERSON: Yeah. 1488 MR. MORAN: The Transmission System Code also governs connection agreements that transmission customers have with their customers; right? 1489 MR. PATERSON: Yes. 1490 MR. MORAN: and to the extent that the Transmission System Code is going to address the issue of bypass, it can do that in relation to connection agreements with existing customers and construction agreements with new customers; right? 1491 MR. PATERSON: I think the point that the Transmission System Code just applies to licensed transmitters. So unlicensed transmitters could build lines and not be captured by that process. 1492 MR. PATTANI: And this is a very important point, because for a Transmission System Code and our relationship with the customer and the CCRA only exists to the extent that that customer is connected to our line. If that customer is not connected to our facilities, the Transmission System Code -- and suppose it's connected to a non-licensed facility -- then the Transmission System Code doesn't apply to that transmitter and the customer and the connection agreement that we are talking about cannot be made between transmitter and that customer. 1493 MR. MORAN: Mr. Pattani, this won't work very well if you keep changing the fact situation. The fact situation we're looking at is the one that you put forward in your Exhibit 1.12. Let's just stick with that fact situation, okay? 1494 In that fact situation you have an existing customer, an existing connection to Hydro One's facilities and we have a TSC process underway with respect to the issue of bypass. And one of the things that the code governs is connection agreements. Those are part of what's mandated under the Transmission System Code. Isn't that where that issue can be best dealt with? What ought to be in a connection agreement with respect to bypass? Should existing customers be allowed to by pass existing facilities? Is that issue not in front of the TSC process? 1495 MR. PATERSON: Well, to the extent that they were to request a new connection to us, to a licensed transmitter, then it could be captured. But if Stelco, for example, at Nanticoke were to create a new connection to an unlicensed transmitter, it wouldn't be captured there at all. 1496 MR. MORAN: Except that you have an agreement, a connection agreement, with Stelco which will be governed by the Transmission System Code. 1497 MR. TONEGUZZO: That connection agreement, though, mentions nothing about bypass. 1498 MR. MORAN: Right now it doesn't. 1499 MR. TONEGUZZO: Right, so it currently -- 1500 MR. MORAN: But theoretically, it could; right? At the end of this process, the Board could decide it's perfectly appropriate for the connection agreements to govern bypass and restrict the right of bypass. 1501 MR. TONEGUZZO: To force that on to existing customers. 1502 MR. MORAN: If they want to connect to a transmitter -- 1503 MR. TONEGUZZO: Again, there is no guarantee that will happen, though. 1504 MR. MORAN: Right, but that issue is being fought in that process. There's never any guarantees on what the outcome of the process is but that's where that issue is being fought; right? 1505 MR. PATERSON: The issue there is not to add that to the transmission code, I don't think, it was whether it's included in the transmission connection process, and would remain in those CCRA agreements. I don't know if... Maybe we should suggest that it be actually moved right into the code and the transmission connection agreement as well. But I don't think that's what's being considered. 1506 MR. MORAN: All right. I think we've probably beaten this one to death enough. I think it's fair to say, however, that the difference between your hypothetical situation and 1.12, the fundamental difference, and the actual case before the Board is that nobody's proposing a reconfiguration in the Board -- in the case before the Board here, in Abitibi and Casco. And your scenario's talking about: Well, what happens if somebody does propose a reconfiguration and attempts to bypass; that's the fundamental difference. 1507 MR. PATTANI: Exactly. And I do not deny that except for saying that the context here was if a precedent were set as a result of today's decision now, it could lead to this. 1508 MR. MORAN: All right. Let me then move to your other hypothetical scenario in Exhibit 1.13. 1509 Sorry. Just before I move off 1.12, just a couple of minor points of clarification. The OPG/Nanticoke station G1, in that scenario in relation to Stelco, you've got 500 mVa. The capacity of that plant would be about 500 megaWatts; is that fair? 1510 MR. PATTANI: Actually, the capacity is larger than that. Each unit is rated 500 mVa. For the purpose of illustration, to make it simpler, we are showing it as one unit in the OPG. 1511 MR. MORAN: G1, o-n-e is one of the units and it has a capacity of about 500 megaWatts. 1512 MR. PATTANI: Approximately. 1513 MR. MORAN: Which is much larger than the Stelco load. And similarly for generator G4, in relation to Imperial Oil, again, that's also about 500 megaWatts, and much larger than Imperial Oil. 1514 MR. PATTANI: And there are several more generators in that station. This is supposed to only illustrate the generator for the purpose of the diagram. 1515 MR. MORAN: Thank you. 1516 MR. TONEGUZZO: Even though they're larger, though, that's irrelevant, when it remains connected to the transmission system as it's shown. The load would only draw what it needs through the unlicensed transmission. 1517 MR. MORAN: Right. So turning now to 1.13, here we have OPG in Thunder Bay with a plant that's about 190 megaWatts in capacity. 1518 MR. PATTANI: You mean the Thunder Bay generating station? 1519 MR. MORAN: Yeah. 1520 MR. PATTANI: Approximately, yeah. One unit. 1521 MR. MORAN: That unit that's shown there. And in this scenario, as I understand it, right now OPG Thunder Bay is directly connected to the Hydro One system; right? 1522 MR. PATTANI: Yes. 1523 MR. MORAN: And with a capacity of about 190 megaWatts. And also directly connected to the Hydro One system are three loads: Abitibi-Mission, ERCO, and Bowater; right? 1524 MR. PATTANI: Yes. 1525 MR. MORAN: And those three loaded up to 265 megaWatts. 1526 MR. PATTANI: Yes. 1527 MR. MORAN: So the Thunder Bay G2 station is less than the load of those three combined; right? 1528 MR. PATTANI: Yes. 1529 MR. MORAN: Okay. So as I understand, then, this scenario, am I correct in assuming that that blue line would then replace the connection that OPG has to the system because the load is -- 1530 MR. PATTANI: No. 1531 MR. MORAN: -- the output is less than the load it would meet? 1532 MR. PATTANI: No. What would happen, in the concept that we have discussed here, is that -- you can imagine, then, that you know -- is that 1.5 kilometre from the -- let's look at Abitibi-Mission for a second, and ERCO. 1533 If the tape was made redundant, and instead, they are connected directly to Thunder Bay. The Thunder Bay station would still be connected to the Hydro One station by those black lines. All of that would remain. So they would remain connected to the IMO-controlled grid. It's just that the blue-dashed line would be a connection directly from the station to those load customers. 1534 MR. MORAN: All right. So the people with the incentive to build the blue line, again, would be the customers? 1535 MR. PATTANI: Yes. 1536 MR. MORAN: Okay. As we saw in 1.12. And as I look at that, it looks like that blue line would be longer than two kilometres; right? 1537 MR. PATTANI: No. Actually, we checked these distances before we produced that diagram. Those lines that you see are the current line lengths, but the location of Abitibi, for example, is much closer to the station than the sum total of the two lines that you are seeing. I guess what you are doing is you're adding up the 1 -- 1538 MR. MORAN: Well, it's not so much what I'm doing. I'm just asking you how long is that line so it can serve all three? 1539 MR. PATTANI: At least one of them, Abitibi-Mission, can be supplied with a line that is less than 2 kilometres long. The other one, ERCO, may be just on the borderline, but for Bowater, it would be more than the 2 kilometres. 1540 MR. TONEGUZZO: Now, I'd like to mention here, though, that you could first establish a link, say, in year 1, from Thunder Bay to Abitibi. The year after, you could go less than two kilometres and go to ERCO, and the year after that, you could build the next one, never having to appear before the Board. 1541 MR. MORAN: Right. 1542 All right. So you could have this incremental process that prevents -- or means that nobody has to come in for leave to construct because nothing is longer than 2 kilometres; right? 1543 Now, right now, the leave to construct applications are severely limited by exemption. Essentially, the only thing that needs a leave-to-construct approval is a wire longer than two kilometres; right? Everything else has been exempted by regulation; right? 1544 MR. PATTANI: Yeah, I don't have a legal opinion, but I think it's true. 1545 MR. MORAN: All right. Take it subject to check. 1546 MR. PATTANI: Okay. 1547 MR. MORAN: And to the extent that it's exempted by regulation, of course regulations can be changed if they have to be; right? 1548 MR. PATTANI: Yeah, I mean, again, I don't have a legal -- I'm sure it can be changed but when and how is -- 1549 MR. MORAN: Right. 1550 MR. PATTANI: -- I'm not an expert in that. 1551 MR. MORAN: And the minister responsible for the regulation happens to be your shareholder; right? 1552 MR. PATTANI: Um, I'm not sure if it matters but, yes, they happen to be a shareholder. 1553 MR. MORAN: And to the extent that there's a significant risk of bypass that you're concerned about, and you would like the Board to be able to scrutinize that beforehand, I suppose you could talk to your shareholder about whether the regs should be changed. That's an option; right? 1554 MR. PATTANI: You seem to be implying that we can just step into the minister's office and tell him to change the regulation or, "Here's how things ought to be done. Could you please do this?" 1555 I don't believe that's the way things work. And, again, this is more legal opinion, but I don't think it's as simple as that, frankly. 1556 MR. MORAN: You don't always get what you ask for, but you're not stopped from asking. 1557 MR. PATTANI: Yeah, and most of the time we don't get what we ask for. 1558 MR. MORAN: Fair enough. All right. So leaving that aside, the other issue is, of course, that Abitibi, ERCO, and Bowater are all existing customers with existing connections to your facility; right? 1559 MR. PATTANI: Yes. 1560 MR. MORAN: And just as we discussed with Stelco and Imperial Oil, they had to have connection agreements with you; right? Mr. Chair, in terms of whether we should take a break, I'm almost done. I'm within five minutes, unless the court reporter would like to take a break. She's indicating that she's getting tired. I will attempt to slow down. 1561 All right. Abitibi, ERCO, and Bowater, all have connection agreements with Hydro One; right? 1562 MR. PATTANI: Yes, they do have them today. 1563 MR. MORAN: And the issue, of course, that's posed in your scenario, is the same as we saw in Exhibit 1.12, there's the possibility that Hydro One assets could be bypassed. 1564 MR. PATTANI: And under the scenario we are envisaging, if this blue dashed line were to put in service, then the appropriate customers would not need a connection agreement with us if a precedent were set here. 1565 MR. MORAN: But right now they're governed by a connection agreement; right? 1566 MR. PATTANI: Governed according to today's rules around how the connection agreements should stay, and as long as they're connected to us. 1567 MR. MORAN: Right. And the issue of when bypass should be allowed is, as we've already discussed, an issue before the Board in the TSC review proceeding; right? 1568 MR. TONEGUZZO: But not in existing connection agreements. 1569 MR. MORAN: Right. And that's, I think, the view you've taken, and we'll leave it at that. All right. Okay. Have you looked at this scenario in connection with the exemptions that exist under regulation 20/02, and whether it would work and whether these people would continue to be exempt? 1570 MR. PATTANI: Okay. Now, talking about first the Nanticoke scenario... 1571 MR. MORAN: Let's take a look at the reg. 1572 MR. PATTANI: Yeah. 1573 MR. MORAN: Let's stick with 1.13, okay? 1.13, that's the one we're at, at the moment. We can go back to Nanticoke in a minute, but I'd like to stick with this one first. 1574 MR. PATTANI: Okay. 1575 MR. MORAN: Under regulation 20/02, which amended regulation 161/99, there are some exemptions for certain transmission facilities or certain transmitters. 1576 In your scenario here, in Exhibit 1.13, do you envisage the blue line replacing the connection with Hydro One, i.e., Bowater, ERCO, and Abitibi no longer have any connection to the Hydro One transmission system? 1577 MR. PATTANI: Yeah. I envisage that they would have a connection to the Thunder Bay generating station, and via that, a connection to the Hydro One system. But their main connection would be to the Thunder Bay generating station. 1578 MR. MORAN: So they would maintain a connection with the Hydro One system as a backup, in your scenario? 1579 MR. PATTANI: Not only as a backup but continuously. And again, I know that this is a new construction, but exactly as Casco is maintaining a connection to the Hydro One system through Cardinal, over here, for example, Abitibi would maintain a connection to the Hydro One system through the Thunder Bay generating system, so that connection would be always there, but via the non-licensed transmission. 1580 MR. MORAN: All right. I'm not going to ask you how exemptions would work in your scenarios because that's a legal question and it's not appropriate for me to ask you that. So I'll move on. 1581 MR. PATTANI: Thank you. 1582 MR. MORAN: And I think those are all my questions, Mr. Chair. 1583 MR. BETTS: Thank you, Mr. Moran. 1584 We will, I think, in the interests of just trying to keep everybody as fresh as possible, as we go through this, take a short break. We'll make it a 15-minute break and we will reconvene at five minutes past 5 o'clock. 1585 --- Recess taken at 4:50 p.m. 1586 --- On resuming at 5:05 p.m. 1587 MR. BETTS: Thank you, everybody. Please be seated. 1588 Mr. King, you indicated you didn't think you would have any questions of this panel; is that still the situation? 1589 MR. KING: That's right. I do not. 1590 MR. BETTS: Thank you. 1591 And Mr. Sidlofsky. 1592 CROSS-EXAMINATION BY MR. SIDLOFSKY: 1593 MR. SIDLOFSKY: Sir, I've been trying to cut down my questions, and I think I can almost guarantee you that I won't be a half hour to three-quarters of an hour, so I'm sure that will be welcomed news for everybody. 1594 MR. BETTS: Thank you. 1595 MR. SIDLOFSKY: It might be Mr. Paterson who this could be directed to, but I'll let the Panel decide who is going to answer. 1596 We all spoke briefly, earlier today, about the delivery point in the power-purchase agreement between Cardinal Power and Ontario Hydro. And you're all familiar with where the delivery point in that power-purchase agreement was. That has changed, it seems, at least in terms of the transmission rate schedule; is that right? 1597 MR. PATERSON: That's correct. 1598 MR. SIDLOFSKY: Okay. Historically, the delivery point was at the point identified in the power-purchase agreement? 1599 MR. PATERSON: That was a delivery point that was created solely for the purpose of the power-purchase agreement. Subsequent to that agreement, Casco and Cardinal were treated as separate customers and they were metered based on what they took at their transformation points. 1600 MR. SIDLOFSKY: And I'm not going to take us back to the discussions in Abitibi, but that was, in part at least, because Casco would have purchased its power from the bulk -- from the bulk power pool, and Cardinal would have sold its power into that pool. 1601 MR. PATERSON: That's correct. 1602 MR. SIDLOFSKY: Right. Similar to the NUGs that were embedded within LDCs, Casco's treatment? 1603 MR. PATERSON: Yes. 1604 MR. SIDLOFSKY: That's... 1605 MR. PATERSON: Yeah. 1606 MR. SIDLOFSKY: That's right, because we all know the interrogatories. 1607 MR. PATERSON: Mm-hm. 1608 MR. SIDLOFSKY: The NUGs sold their power into the power pool. The LDCs or the MEUs purchased their power from the power pool, and they were charged on a gross basis until market opening. 1609 MR. PATERSON: That's right. 1610 MR. SIDLOFSKY: Okay. Now, when you say that was created for the power-purchase agreement, that was -- that takes us back to 1992. 1611 MR. PATERSON: That's correct. 1612 MR. SIDLOFSKY: Okay. 1613 MR. PATERSON: The delivery point for the current tariffs was created after that, under a new definition. 1614 MR. SIDLOFSKY: Certainly. And Mr. Moran was taking you through, at some length toward the end of his cross-examination, issues related to the transmission code proceeding and the bypass issues that are that are going on there or that are being addressed in that proceeding; correct? 1615 MR. PATERSON: Yes. 1616 MR. SIDLOFSKY: Okay. And Hydro One initially presented no bypass-clauses, or excuse me, I don't think that's how Hydro One would have termed them; think they were clauses to protect customers. But they were clauses that would have prohibited bypass, that goes back to the fall of 2001. They would have presented those to the Board in September and October of 2001. Do you recall those? 1617 MR. PATERSON: I wasn't involved in that. 1618 MR. SIDLOFSKY: Okay. Anyone on the panel? 1619 MR. PATTANI: I don't think any one of us was involved in it... But I'd like to make a note, to the extent that I know it. The bypass clauses that Hydro One was proposing were in the CCRA, the capital construction recovery. 1620 MR. SIDLOFSKY: Construction cost recovery agreement? 1621 MR. PATTANI: Yeah. 1622 MR. SIDLOFSKY: Okay. 1623 MR. PATTANI: So it was in the CCRA. 1624 In that context, what Hydro One was proposing is that when anyone connects a new -- make a new connection to a Hydro One system, that entity will have to enter into the CCRA. And as part of its CCRA, there shall be this bypass clause to be put in. And that is what Hydro One was putting in. 1625 So once again the CCRA applies to people who are opting for new connections or changing their existing connections to Hydro One, and that's the extent to which the Hydro One was proposing the bypass clause. 1626 MR. SIDLOFSKY: And, sir, unfortunately I don't have it with me here today, I'd be happy to bring it tomorrow if it becomes an issue. But my recollection is that not only were you proposing that sort of clause in the CCRA -- and I think that's one of the reasons that Ontario Power Generation took you to the Board in the fall of 2001 -- but you were also proposing similar bypass-related clauses for either the Transmission System Code itself or for the connection agreement which is an appendix to the Transmission System Code; is that correct? 1627 MR. PATTANI: Now, once again, I am quite far removed from the Transmission System Code. But I believe, my gut feeling is, you are referring to the current process that's going on where Hydro One may have made some recommendations as to how the system code should be worded to prevent bypass. But in general, once again, that was in the context of people who are connected to Hydro One's transmission system or any transmission system, and that transmitter having a bypass protection. 1628 My gut understanding is that what was being proposed did not look at someone just disconnecting and going to connect themselves to another non-licensed transmission. 1629 But again, I'm a bit removed from this. But just to set the context, so that we don't consider that we are proposing even this situation. 1630 MR. SIDLOFSKY: Well, sir, it's not just a matter of having made some recommendations, it's a matter of having drafted clauses for the agreement that would prohibit bypass. It's a matter of having made, by my count, at least our submissions on that issue in the Transmission System Code proceeding. 1631 MS. ALDRED: Well, if my friend has some here, it may be helpful to show them to Mr. Pattani. 1632 MR. SIDLOFSKY: I don't have copies for the group, but I'm happy to show these to the Panel for now, if that's okay with you. 1633 MR. BETTS: That would be fine. 1634 MR. BETTS: I'm afraid if these items become substantial -- 1635 DR. PORAY: They are. 1636 MR. BETTS: -- in terms of the record, it may be necessary to submit them as exhibits. 1637 MR. SIDLOFSKY: Sir, I'm certainly prepared to provide copies for everyone when we return tomorrow morning. I hadn't intended to get into the specifics of each of those submissions, and this only has come up in the context of Mr. Moran's cross-examination. 1638 My point, in raising these or mentioning these to the Panel, is simply that Hydro One -- is simply to establish that Hydro One has been actively involved in this proceeding, and in fact has made submissions on a number of occasions, supporting clauses that would prohibit bypass, and they've made those submissions in the context of the Transmission System Code proceeding. 1639 Not only that, but they effectively initiated the Transmission System Code proceeding in the fall of 2001, with no bypass clauses. 1640 MR. BETTS: And I guess we'll have to hear the level of detail that you're seeking from these witnesses, but if you're looking for an answer of yes or no to that, then you probably don't need to have these submitted as exhibits. 1641 MR. SIDLOFSKY: I don't think it does, sir. What I would be interested in is seeing the clauses that were proposed for the CCRA and for the connection agreement under the Transmission System Code. 1642 I can put those to the witnesses in the morning, or they can simply undertake to provide the clauses and I'd be satisfied with that -- to provide the proposed clauses, and I'd be satisfied with that. This is not the Transmission System Code proceeding, sir. I don't want to make it into that. But following up on Mr. Moran's cross-examination, in which it wasn't completely clear from my recollection of the questions and answers, or at least the answers, it wasn't particularly clear what Hydro One's involvement was on bypass issues in that proceeding. I simply want to make it clear that it's quite a high level of involvement. 1643 But I don't propose to go into their submission. This is not the forum for that, and I think that's the point. 1644 MR. TONEGUZZO: In just scanning these quickly, I concede that these are all related to the construction cost recovery agreement. They're all related to the CCRA or they're related to issues regarding some new concepts associated with bypass related to the extent of depreciation. 1645 Those are the two concepts that I recall seeing in these proceedings or the forthcoming proceeds. 1646 I don't recall anything -- now, my recollection may not be perfect, but I do not recall anything being introduced with respect to bypass clauses in connection agreements. Even in looking at these, I can only see the CCRA mentioned or other concepts. So that would be my reply at this point. 1647 MR. BETTS: Mr. Sidlofsky, does that satisfy you? If not, I think I would be suggesting that we take the Panel up on the offer for an undertaking to include any submissions with respect to bypass that Hydro One has made in the TSC review. 1648 MR. SIDLOFSKY: Sir, as I said, I'd be happy with the undertaking, provided that that undertaking includes the initial correspondence from Hydro One to the Board, which included the proposed clauses for both the CCRA and, as I recall it, the connection agreement. Either the connection agreement or the Transmission System Code itself. 1649 Unfortunately -- do I have it? I don't have it with me. There was only so many boxes I could bring today. 1650 MR. BETTS: Can Hydro One undertake to do that? 1651 MS. ALDRED: Can you just give me one second? I'm trying to ascertain what the volume is here, if you give me one minute. 1652 MR. BETTS: Thank you. 1653 Mr. Sidlofsky, can I ask you too, while that's being considered, your purpose for seeking this? Can you tell the group what your purpose is? Is it just to indicate that there is another avenue that Hydro One is pursuing? 1654 MR. SIDLOFSKY: There's another avenue in which Hydro One is actively involved in dealing with bypass-related issues. I do have a question about the current form of the connection agreement. I'm happy to put that to the panel. 1655 I simply would like Hydro One's acknowledgement, whether it's through an undertaking, or I'm happy to take it verbally, that they're actively involved in the Transmission System Code proceeding. That proceeding is dealing with bypass issues, and I got the sense when Mr. Moran was cross-examining the panel that there was some hedging on the level of Hydro One's involvement in that proceeding. 1656 DR. PORAY: Can we just take a minute to confer? 1657 MR. BETTS: If that's satisfactory to your counsel, that certainly is to us. 1658 MS. ALDRED: Yeah, they can confer. If he's really after a statement, I'm wondering if we can sort of draft something up and read it in. We're happy to do that. Or they can confer. If it's only the initial submission document we could also put that in, although I'm wondering what the relevance is, but we're in your hands. 1659 MR. BETTS: I'm going to allow the witness panel to confer and see if they can provide the answer that Mr. Sidlofsky is searching for. 1660 MR. SIDLOFSKY: Sir, I can tell you, I can give you a bit of a sense of the relevance. 1661 Among the comments I heard were that the proposed bypass provisions would deal with new connections under the construction cost recovery agreement. There hasn't been any acknowledgement yet that there has been any proposed amendment to either the Transmission System Code itself or the connection agreement under that code. I'd like to have an acknowledgement of that. 1662 And the relevance is simply that the scenarios that have been put to you, as Mr. Moran suggested in cross-examination, are scenarios that are better considered and more appropriately considered in the Transmission System Code proceeding. They don't match either the Abitibi or the Casco circumstances. And there is a proceeding going on right now in which consideration is being given to bypass issues. Not only is the proceeding going on, but Hydro One is actively involved in that and has already taken positions on bypass in that proceeding. 1663 I don't intend to cross-examine on all the submissions. They're all available on the Board's web site. It's not particularly privileged information. Even the initial submissions in September and October, I believe it was September and October of 2001, are on the Board's web site. It's public information. I'd simply like to make sure that that's acknowledged by Hydro One. 1664 MR. BETTS: Ms. Aldred, any response to that? 1665 MS. ALDRED: Does the witness panel want to speak to that or should we hand in the original submission? 1666 MR. PATERSON: I think we need to hand in -- we certainly recall discussions on bypass regarding the CCRA agreement with the OE -- with the code changes and the connection process, which is being reviewed concurrently by the OEB. 1667 I don't recall anything specific where we submitted something into the -- to have the code or the connection agreement modified to include bypass. It could be in there, but I don't think anybody on the panel can actually confirm that. So that's our problem here. So we would have to look that up and confirm whether it's there or not. 1668 MR. TONEGUZZO: I'm pretty sure it's not. 1669 MR. SIDLOFSKY: Okay. I'm happy to take the undertaking, sir. As I said, I don't intend to cross-examine on those issues. I'll note in a couple of the submissions though, and I may do this in argument, because they're on the public record, that Hydro One is proposing that bypass be prohibited except in very limited circumstances. It's on the public record; it's not really a matter for cross-examination. 1670 But, if Hydro One can provide the initial correspondence to the Board with the proposed amendments, that's fine. 1671 MR. BETTS: Do you understand the -- 1672 MS. ALDRED: Yes, that's satisfactory, Mr. Chairman. 1673 MR. BETTS: Okay. Then let us establish an undertaking number for that. 1674 MR. MORAN: Mr. Chair, that would be Undertaking U.1.3. 1675 UNDERTAKING NO. U.1.3: FOR HYDRO TO PRODUCE ITS INITIAL SUBMISSIONS WITH PROPOSED AMENDMENTS RELATING TO BYPASS. 1676 MR. MORAN: An undertaking by Hydro One to produce its initial submissions with proposed amendments relating to bypass. 1677 MR. BETTS: Thank you. 1678 DR. PORAY: Can I just add one thing here from the panel's perspective, and that is that, yes, we do acknowledge that we are involved in the transmission system or Hydro One is involved in the review of the Transmission System Code. But the reason why we address the issue in this proceeding, because what we are dealing with here is the avoidance of paying of transmission charges in the application with respect to an existing generator and an existing load. And the reason why we raised these examples were as practical examples of, if a decision were made in favour of allowing those customers to escape paying transmission charges, what that potentially could lead to. 1679 So we weren't addressing -- we were not meaning to address bypass per se because we know that that's being dealt with in another proceeding. We were coming at it from the perspective that this is a matter before the Board dealing with the avoidance of transmission charges in an existing situation for two customers, and that there is a potential precedent that that could be set. 1680 MR. PATTANI: Can I say a word? 1681 MR. BETTS: I think the Board understands that position, quite frankly, and I don't believe we need to pursue that any further with respect to precedent setting of those two hypothetical situations. 1682 Mr. Sidlofsky, please continue. 1683 MR. SIDLOFSKY: Thank you. 1684 Sirs, gentlemen, the Transmission System Code proceeding is ongoing, and there will be a second phase of that proceeding. I'm not sure if you individually are that involved in the proceeding, but are you aware of that? 1685 DR. PORAY: Yes, we are aware of that. 1686 MR. SIDLOFSKY: And the second phase of the proceeding may deal with how to implement the Board's determinations in the first phase, through the Transmission System Code itself or the connection agreement. Is that accurate? 1687 DR. PORAY: That's my understanding. 1688 MR. SIDLOFSKY: Okay. And the connection agreement itself already provides for amendments to the agreement. I'm just going to read you one clause of the agreement. As it happens, it's section 29.2. And what it says is: 1689 "The Board may require amendments to this agreement or to the schedules or appendices to this agreement." I'll go on to 29 -- 1690 DR. PORAY: Can we get -- is it available for us to... 1691 MR. SIDLOFSKY: I can hand it over to you to look at as soon as I read 29.3, if you would like. Section 29.3 says: 1692 "The parties to this agreement agree to forthwith, upon receipt of notice from the Board, do all things and take all actions necessary to amend this agreement as specified by the Board." 1693 I'll just let you take a look at that. And maybe you could confirm that that's the template for the agreement for the Transmission System Code; is that right? 1694 MR. PATERSON: Yes, it's the template. 1695 MR. SIDLOFSKY: Okay. So, if the Board Sorry. I'll give you a chance to finish looking at those two clauses. 1696 MR. PATERSON: The code also is, actually, very limited in the number of areas that we can amend the agreement with a customer; very restrictive, actually. 1697 MR. SIDLOFSKY: That's you; correct? You can only amend the agreement in a very limited number of areas? 1698 MR. PATERSON: That's correct. 1699 MR. SIDLOFSKY: The Board can amend the agreement, period. 1700 MR. PATERSON: Yes. 1701 MR. SIDLOFSKY: Yes. So if the Board were concerned about the prospect of, the scenarios, the bypass scenarios that you've put to the Board, the Board could deal with that by amending individual connection agreements; is that correct? 1702 MR. PATERSON: I don't think the Board would amend individual connection agreements. 1703 MR. SIDLOFSKY: The Board could amend the form of connection agreement; is that right? 1704 MR. PATERSON: They could amend the form. I doubt if they'd do that without consultation but -- 1705 MR. SIDLOFSKY: And that gives you another forum, doesn't it? 1706 MR. PATERSON: Yes, it would. 1707 MR. SIDLOFSKY: It would. And any amendments to the connection agreement would apply to existing and new customers; is that correct? 1708 MR. PATERSON: I guess it depends on grandfathering clauses that the OEB could also add to the amendment to the agreement. So they make amendments that may only apply going forward, and not backward. So I don't know. 1709 MR. SIDLOFSKY: And that will ultimately be the Board's decision, won't it? 1710 MR. PATERSON: That's correct. 1711 MR. SIDLOFSKY: Okay. But the Board has taken on itself or retained the authority to amend the agreement? 1712 MR. PATERSON: Yes. 1713 MR. SIDLOFSKY: And an amendment to the agreement could affect existing customers? 1714 MR. PATERSON: Yes, most certainly. 1715 MR. SIDLOFSKY: Has to, because next clause says that customers will do -- or parties will forthwith implement the amendments. You have my copy so I can't read it word for ward but that's -- 1716 MR. PATERSON: That's correct. 1717 MR. SIDLOFSKY: -- basically what it says? 1718 MR. PATERSON: Sure. 1719 MR. SIDLOFSKY: Thank you. 1720 MR. MORAN: Mr. Chair, did you want to get that portion of the agreement marked as an exhibit? If you did, presumably Mr. Sidlofsky could produce copies later on, but it might be appropriate to have it marked since it was actually referred to and commented on. 1721 MR. BETTS: Mr. Sidlofsky, I think, read it into the record, word for word, did he not? 1722 MR. SIDLOFSKY: I did. Yes. 1723 MR. BETTS: I think the Board is satisfied with that. 1724 MR. SIDLOFSKY: I think it would be Mr. Toneguzzo. 1725 Just going back to Morrisburg for a moment, you acknowledge that there are other loads at Morrisburg? 1726 MR. TONEGUZZO: That's right. 1727 MR. SIDLOFSKY: That there were other loads at Morrisburg in, that would have been 1995. 1728 MR. TONEGUZZO: '94. 1729 MR. SIDLOFSKY: '94 or '95, when Casco was taken off-line there. And anyone else who might have installed what Hydro One would consider to be pure embedded generation might also have reduced their load at Morrisburg, any of the other transmission customers connected to the Morrisburg TS could have installed what you would consider to be pure embedded generation? 1730 MR. TONEGUZZO: That's correct. 1731 MR. SIDLOFSKY: Okay. And no one who would have installed what you consider to be pure embedded generation would be held to the standard of having to make Hydro One whole for the load that was reduced at the transformer station; is that right? 1732 MR. TONEGUZZO: If it was true embedded on the distribution system, the load would just be simply reduced, and we usually wouldn't even know that was happening. 1733 MR. SIDLOFSKY: Okay. Notwithstanding the fact that the transformer station would have been built to accommodate the entire load of that customer? 1734 MR. TONEGUZZO: That's correct. 1735 MR. SIDLOFSKY: Okay. 1736 MR. TONEGUZZO: In that case, typically, the embedded generation would be installed within an LDC, and it may be stranding LDC facilities, but that's none of our concern. 1737 MR. SIDLOFSKY: Well, the LDC is your transmission customer as much as Cardinal is your transmission customer or Abitibi is your transmission customer? 1738 MR. TONEGUZZO: Mm-hmm. That's correct. 1739 MR. SIDLOFSKY: Okay. So if a transaction customer were to install what you consider to be embedded generation, you wouldn't propose to penalize the transmission customer for having reduced its load at your line connection transformation or network assets? 1740 MR. TONEGUZZO: No, that's a policy question... 1741 DR. PORAY: No, I think if it was the case of an embedded generator in a load, then that would, in fact, be allowed to be net billed. 1742 MR. SIDLOFSKY: And if it were an industrial load, whether at Morrisburg or anywhere else, that installed embedded generation - and we'll stick with what you consider to be embedded generation - then the only provision now, and I wouldn't call it a penalty, I guess, but the only provision now that would deal with the recovery of your costs is really the treatment of line connection charges? Because line connection charges are still billed gross, where you have a transmission customer that, after October 30th of 1998, installs embedded generation; correct? 1743 MR. TONEGUZZO: That's correct. 1744 MR. SIDLOFSKY: Okay. 1745 Sir, if I could have the Board's indulgence for just a moment, I think I may be finished. 1746 MR. BETTS: That's fine. 1747 MR. SIDLOFSKY: Thank you. 1748 Those are my questions, sir. Thank you. 1749 MR. BETTS: Thank you very much. 1750 Ms. Aldred, questions in redirect. 1751 MS. ALDRED: I don't have any, Mr. Chairman. 1752 MR. BETTS: Thank you very much. Let me just see if my fellow Panel Members have any questions. 1753 There are no questions from the Panel either. Therefore, we have concluded the need for this witness panel. Thank you very much once again for appearing before us and assisting us with this matter. 1754 PROCEDURAL MATTERS: 1755 MR. BETTS: This leaves us at the stage that we are looking forward to, oral arguments from the interested parties, and we will be aiming to do that tomorrow morning. 1756 Can I ask, perhaps, everyone to look at their crystal ball and give me an idea how long they might need in their oral arguments, and perhaps, Mr. Sidlofsky, what do you expect? 1757 MR. MORAN: Mr. Chair, it might be helpful to understand how long the Panel can sit for tomorrow. As I understand it, there's a conflict in the afternoon and so -- 1758 MR. BETTS: There's a conflict in the afternoon. I would prefer to know how long the participants need [laughter] and that might tell us what time we're getting up in the morning [laughter]. 1759 I would rather not restrict the input from the participants. So, if necessary, as I say, we'll either start early -- and noon would be an ideal time to break, but the Panel could break later than that. We do have an appointment at 1 o'clock that would cause us to leave the room. 1760 A rough idea, if you can, Mr. Sidlofsky? 1761 MR. SIDLOFSKY: Sir, I prepared fairly lengthy submissions in the Abitibi matter, both the submission and the reply. With all the evidence in now, I'm not sure that my position in this matter will be significantly different from my position in the Abitibi matter. Of course, yes, there are a couple of differences and I'll need to deal with those. But what I expect that I'll be doing is providing the Board -- well, the Board already has copies of my argument in Abitibi. 1762 I'd like to adopt that argument in this proceeding. And I'll deal simply with any items that might distinguish Casco from Abitibi. 1763 That being said, 20 minutes to a half an hour. 1764 MR. BETTS: Thank you. And the Board will find that to be a reasonable procedure, to adopt the arguments at this stage -- 1765 MR. SIDLOFSKY: Thank you. 1766 MR. BETTS: -- from the previous hearing. 1767 Ms. Aldred? 1768 MS. ALDRED: I wouldn't anticipate being any longer than about 35 minutes, half an hour. Maybe -- hopefully less. 1769 MR. BETTS: Thank you. 1770 Mr. Lokan? 1771 MR. LOKAN: Again, we would plan to adopt what we had submitted in writing; therefore, five to ten minutes at most. 1772 MR. BETTS: Thank you. 1773 And Mr. King? 1774 MR. KING: I would estimate about 10 to 15 minutes. 1775 MR. BETTS: Okay. And, Mr. Moran, no submissions anticipated from the Board? 1776 MR. MORAN: That's correct. 1777 MR. BETTS: Thank you. So it would look as though we could reasonably accomplish this at least in a two-hour time period. But just for safety's sake, perhaps we could ask everybody to be here at 9 o'clock tomorrow morning. Does that cause any problems? I appreciate that you were anticipating a 9:30 start. Does that conflict with anybody? 1778 MR. SIDLOFSKY: That's not a problem for me, sir. 1779 MR. BETTS: Okay. Then we will adjourn now, and I thank everybody again for the participation today. We will reconvene tomorrow morning at 9 o'clock. Excuse me for one moment. 1780 One of my fellow Panel members has just suggested that we advise the parties at this point - we could do it tomorrow as well - that it is our plan to convene on July the 15th at 9:30 a.m. to deliver oral decisions on both of the matters, Abitibi-Consolidated and also Casco. So if you want to circle that date on the calendar. Again, we wouldn't expect everyone to be there, but certainly if you are interested in hearing the oral decision, that's the target time. 1781 With that, we will adjourn now and reconvene at 9 a.m. tomorrow morning. Thank you. 1782 --- Whereupon the hearing adjourned at 5:38 p.m.