Rep: OEB Doc: 12QQL Rev: 0 ONTARIO ENERGY BOARD Volume: VOLUME 2 13 MAY 2003 BEFORE: P. SOMMERVILLE PRESIDING MEMBER A. C. SPOEL MEMBER 1 RP-2003-0044 2 IN THE MATTER OF the Ontario Energy Board Act, 1998, S.O. 1998, c.15 (Sched. B); AND IN THE MATTER OF applications by Centre Wellington Hydro, Veridian Connections Inc., EnWin Powerlines Ltd., Erie Thames Powerlines Corp., Chatham-Kent Hydro Inc., Essex Powerlines Corp., Cooperative Hydro Embrun Inc., and Hydro One Networks Inc. pursuant to subsection 74(1) of the Ontario Energy Board Act, 1998 to amend Schedule 1 of their Transitional Distribution Licences. 3 RP-2003-0044 4 13 MAY 2003 5 HEARING HELD AT TORONTO, ONTARIO 6 APPEARANCES 7 JENNIFER LEA Board Counsel GORDON RYCKMAN Board Staff ANDY CHAN Centre Wellington Hydro ANDREW LOKAN Power Workers' Union MICHAEL ENGELBERG Hydro One Networks 8 TABLE OF CONTENTS 9 APPEARANCES: [21] PRELIMINARY MATTERS: [34] EXPEDITED AMENDMENT REQUEST - VERIDIAN CONNECTIONS INC.: [57] OPENING SUBMISSIONS BY MR. CHAN: [58] OPENING SUBMISSIONS BY MR. ENGELBERG: [82] OPENING SUBMISSIONS BY MR. LOKAN: [95] VERIDIAN CONNECTIONS INC. - PANEL 1; RUSHLOW, ARMSTRONG, STARCK: [106] EXAMINATION BY MR. CHAN: [115] CROSS-EXAMINATION BY MR. ENGELBERG: [271] CROSS-EXAMINATION BY MR. LOKAN: [426] CROSS-EXAMINATION BY MS. LEA: [475] FURTHER CROSS-EXAMINATION BY MR. ENGELBERG: [495] FURTHER CROSS-EXAMINATION BY MS. LEA: [525] QUESTIONS FROM THE BOARD: [625] RE-EXAMINATION BY MR. CHAN: [698] HYDRO ONE - PANEL 1; STEVENS, KLOOSTRA, GEE: [747] EXAMINATION BY MR. ENGELBERG: [758] CROSS-EXAMINATION BY MS. LEA: [851] CROSS-EXAMINATION BY MR. CHAN: [976] VERIDIAN CONNECTIONS INC. - PANEL 1; RUSHLOW, RECALLED: [1089] FURTHER EXAMINATION BY MR. CHAN: [1094] FURTHER CROSS-EXAMINATION BY MR. ENGELBERG: [1101] SUBMISSIONS BY MR. CHAN: [1120] SUBMISSIONS BY MR. ENGELBERG: [1136] SUBMISSIONS BY MR. LOKAN: [1150] DECISION: [1178] 10 EXHIBITS 11 EXHIBIT NO. C.2.1: PAMP HLET ENTITLED "NOT-FOR-PR OFIT DIFFERENCE IN SERVICES FOR SENIORS" [127] EXHIBIT NO. C.2.2: LETTE R DATED APRIL 9TH, 2001, FROM MR. PINE [133] EXHIBIT NO. C.2.3: COST BREAKDOW N, DATED DECEMBER 2, 2002 [294] EXHIBIT NO. C.2.4: CURRI CULAE VITAE FOR HYDRO ONE WITNESS PANEL 1 [757] 12 UNDERTAKINGS 13 14 --- Upon commencing at 9:35 a.m. 15 MR. SOMMERVILLE: Thank you very much. Please be seated. 16 The Board has convened this morning in the matter of an application made by Veridian Connections Inc. for expansion of its service area to include certain premises operated as the Hastings County Manor Long-term Care Facility in Belleville, Ontario. The application has been assigned file number EB-2003-0020. The application is opposed by Hydro One Networks Inc. this application is one of a number of service area amendment applications which have been joined by the Board in a proceeding which has been given the file number RP-2003-0044. The Board has decided to consider a number of such cases together in order to facilitate the development of principles which may assist the Board in considering service area amendment matters. 17 In the Procedural Order establishing that combined proceeding, the Board invited applicants to make submissions to the Board to consider their application, or some portion of their application, on a more expeditious basis if it could be shown that their application involved critical in-service requirements. 18 As I indicated, it is the Board's preference to deal with the generic issues involved in the service area amendment cases in the combined proceeding. The applicant in this case has made representations to the Board with respect to the urgency of the connection for the long-term care facility, and the Board will consider them today on the basis of the evidence adduced by all the parties. 19 The primary issue facing us today - and I can't emphasise this enough - the primary issue facing us today is the consideration of the urgency of the in-service requirement. And if the Board is not convinced that such urgency exists, it will simply defer its consideration of this case until the combined proceeding is held. If the Board does find that there is urgency in the in-service requirement, we'll make whatever interim order commends itself in order to address that need, in as light-handed a manner as possible. 20 So with that guidance, are there any preliminary matters that I should -- I beg your pardon. Could I have appearances, please. 21 APPEARANCES: 22 MR. CHAN: Good morning, Mr. Chair, Board member. My name is Andy Chan and I'm here representing Veridian Connections Inc. in this matter. 23 MR. SOMMERVILLE: Thank you, Mr. Chan. 24 MS. LEA: Good morning, Mr. Chair. Jennifer Lea for Board Staff. 25 MR. SOMMERVILLE: Ms. Lea. 26 MR. ENGELBERG: Good morning. Michael Engelberg on behalf of Hydro One Networks. 27 MR. SOMMERVILLE: Thank you, Mr. Engelberg. 28 MR. LOKAN: Andrew Lokan for the Power Workers' Union. 29 MR. SOMMERVILLE: Thank you, Mr. Lokan. 30 Are there any other appearances? 31 MS. LEA: I think that Mr. O'Leary indicated that someone from Wirebury Connections would be here today. Is that the case? 32 MR. SOMMERVILLE: We'll watch the attendees carefully to see if they arrive. 33 Are there any preliminary matters? 34 PRELIMINARY MATTERS: 35 MR. CHAN: Mr. Chair, I'd like to raise a preliminary matter, same as the one as I raised yesterday in regards to the costs under Section 3.06, if we can have that noted on the record. 36 MR. SOMMERVILLE: Indeed. Just for the benefit of Mr. Engelberg, that submission, as I understand it, Mr. Chan, you will be making submissions seeking a cost awards order from the Board, notwithstanding that you are an applicant, based on your interpretation of sections in the Cost Award Procedures. And I've indicated to you, and I'll indicate again, that the Board will consider -- we expect you to make those representations more fully in the combined proceeding, and we'll consider that request at that time. And we won't make a cost awards order arising from this case today. 37 MR. CHAN: That's correct. Thank you, Mr. Chair. 38 MR. SOMMERVILLE: Do you have witnesses, Mr. Chan? 39 MR. CHAN: I have a number of witnesses. I'd like to begin with an opening statements as well for today. Given that what you spoke about with respect to the urgency, we have crafted that opening statement with respect to that. However, you'll note that with respect to this particular proceeding, we will have to delve into issues that were not the same as yesterday's hearing. 40 MR. SOMMERVILLE: That's fine. 41 MR. CHAN: And I ask for the Board's indulgence in that matter. 42 MR. SOMMERVILLE: Well, you bring the case you need to bring. We'll hear your opening statement. 43 Mr. Engelberg. 44 MR. ENGELBERG: I'd like to speak right now to a preliminary matter that I thought Mr. Chan would be raising. 45 MR. SOMMERVILLE: Please. 46 MR. ENGELBERG: There will be no issue today between the parties that there is urgency for the connection. That is agreed upon. The issue is what should be done right away in order to provide service to the customer, and it's my understanding that, from a conversation I had with Mr. Chan yesterday evening, that it will be Veridian's submission that an interim solution, here in this case, will not be possible or will not be feasible. And if I'm misstating that, Mr. Chan can correct me. 47 But I wanted to state that what Hydro One's position will be on that issue is there is an interim connection here that would be possible and feasible; however, we should bring to the Board's attention that whether the interim connection is made by either Veridian or by Hydro One and the Board subsequently in the fall awards the territory and the customer to the other utility, there will have been some money spent by the customer, Hastings Manor, that will not be recoverable. 48 MR. SOMMERVILLE: Indeed. That is a very helpful understanding, and, Mr. Chan, I take it that you adopt Mr. Engleberg's comments that there is no issue with respect to urgency. 49 MR. CHAN: I adopt some parts of it, meaning that the issue of urgency, my friend has indicated to me that they're willing to concede it. However, I would like to get that evidence into the record, given that it provides a good understanding of the issues which we would like to bring to the Board's attention regarding the permanent nature, or the permanent aspect with respect to this application. So I will go on and ask the customer, or the witness to speak to that matter, albeit briefly. 50 MR. SOMMERVILLE: That will be fine, so long as we do focus our efforts today to the issue that is outstanding, which is how do we accommodate the urgent need that is there on an interim basis, if that in fact is possible. That's the issue, it seems to me, that's before us. Is that fair? 51 MR. CHAN: Yes. 52 MR. SOMMERVILLE: Thank you, Mr. Engelberg, that's very helpful. 53 MR. ENGELBERG: Thank you. 54 MR. CHAN: Thank you. 55 MR. SOMMERVILLE: So your opening statement, and, Mr. Engelberg, I'll give you an opportunity to make a brief one too, and Mr. Lokan, likewise. 56 MR. CHAN: Thank you. 57 EXPEDITED AMENDMENT REQUEST - VERIDIAN CONNECTIONS INC.: 58 OPENING SUBMISSIONS BY MR. CHAN: 59 MR. CHAN: The Hastings County Manor is a not-for-profit, publicly funded long-term care facility that tends devotedly to its residents. From the complex care requirements of the frail elderly to the needs of the more independent seniors, the Hastings County Manor is a wonderful example of what the proper use of public funds will accomplish in this society. 60 We are here today for a critical customer connections hearing relating to the Hastings County Manner. For the purposes of this hearing, we wish to satisfy the Board of two things: Number 1, that the connection is of the utmost urgency to the Manor, despite what was spoken of this morning in the preliminary issues; and, number 2, that the reasons for this specific service area amendment is consistent with the statutory mandate bestowed upon the Board. 61 The Board will first hear evidence from the customer relating to the urgency of the connection. This evidence will provide, among other things, the immediate need to address issues that directly affect the actual and future operations of the not-for-profit facility. 62 Secondly, the Board will hear evidence as to why the residents of the Hastings County Manor require not only an immediate response but also a permanent solution relating to the required connection in this case. This is a specific matter and we ask that the Board give careful consideration to the intricacies relating to this specific customer. 63 In reviewing the guiding statutory objectives that form the basis of this hearing, section 1, schedule B of the Ontario Energy Board Act asks that the Board, in carrying out its responsibilities, be guided by the objectives of, 1, non-discriminatory access; 2, protection of the customer; and 3, economic efficiency. 64 More importantly, and as it applies to the Hastings County Manor, we ask the Board that it exercise its authority under section 74, sub 1, sub (b) of the OEB Act to amend the distribution licence of Veridian Connections Inc. to accommodate this particular customer as it is in the public interest to do so. 65 The principles we have articulated here, in my respectful submission, are the bedrock of the Board's mandate, which is to protect the customer. 66 In this case, the customer seeking protection are residents of the Hastings County long-term care facility. Tab 5 of Veridian's submission on April 8th, 2003, provides detailed information relating to the case at hand. The simplified facts are as follows: 67 Hastings County is in the process of building a new long-term care facility in Belleville, which lies along Belleville's former city limits just outside of Veridian's existing licence service area. The site for the Manor currently sits on the fringe of Hydro One's service area. Accordingly, if this customer were connected according to Hydro One's proposal, they would have to pay for the installation of a new set of poles stretching across an area approximately a half a kilometre against their wishes. 68 The proposed long-term care facility is located in a fringe area specifically contemplated for in subsection 70(6) of the OEB Act, which allows for a connection to be made by Veridian in this case, since Hydro One cannot claim any right to exclusivity to the area. 69 A number of principles will flow out of the evidence provided by the panel this morning; however, I would like to focus on the principle of customer choice. For the compelling reasons that will be presented today, the customer has chosen Veridian to be its service provider. 70 Hydro One will try to cloud the issues this morning with arguments that do not recognize the practical and public-interest implications of the matter at hand. Essentially, what they are saying is that a publicly-funded, not-for-profit, long-term care facility should be forced into paying for an unnecessary powerline extension. 71 In addition to this, the customer is expected to subsidize a previously contemplated powerline investment in amount of over $365,000 to a multi-national for-profit corporation. 72 At this point I would like to ask the Board to briefly reflect upon that proposition, especially in light of the public-interest implications relating to the Hastings County long-term care facility. 73 Would well over half a million dollars be better utilized by residents of the Hastings County Manor or by a company such as the one referred to in Hydro's submission. Hydro has indicated that this is an issue of bypass whereby the long-term care facility is avoiding Hydro One's assets. However, the evidence will quite clearly show that this is not an issue in this case, since the contemplated connection by Veridian is the most direct. 74 Given that the long-term care facility investment is a new and significant initiative of Hastings County to provide affordable long-term care for the elderly, we ask that the Board rule inasmuch the same way as it has expeditiously dealt with similar cases by Veridian. This includes the St. Francis Elementary School decision, and I'll state for the record, EB-1999-0260, and the Loyalist Veterinarian Hospital decision. Again, I'll state that for the record, EB-1999-0063. 75 More particularly, we ask that the Board rule as follows: 76 First, to connect the Hastings County Manor to Veridian's system in accordance with the statutory guidelines and objectives I have previously alluded to. Number 2, rule that this connection be on a permanent basis. And finally, any other order as the Board deems fit in consideration of the public-interest implications of this matter. 77 Those are my opening submissions. 78 MR. SOMMERVILLE: Thank you, Mr. Chan. 79 Mr. Engelberg, would you like to make an opening statement at this time, or would you like to wait until later? 80 MR. ENGELBERG: I'd like to make one at this time. 81 MR. SOMMERVILLE: Thank you. 82 OPENING SUBMISSIONS BY MR. ENGELBERG: 83 MR. ENGELBERG: Hydro One's submission today will be that the goals of the Board as cited by Mr. Chan from the Ontario Energy Board Act would be fulfilled by leaving this customer within the territory of Hydro One and having the customer served by Hydro One. 84 This customer is within Hydro One's service territory. Hastings Manor is a presently existing customer of Hydro One that has been supplied by Hydro One for years, and the evidence today will show that, notwithstanding what Mr. Chan has submitted regarding the facilities in the neighbourhood, the evidence will show that the lowest incremental cost of connection would be the connection to the Hydro One system, which is 490 metres away from the new building at Hastings Manor. 85 In fact, what you will hear today is that the amount quoted by Hydro One to make the connection to its system for the construction purposes that have to be paid to Hydro One is approximately $46,000. The amount that was quoted by Veridian for construction cost to be paid by the Manor to Veridian to connect to the Veridian system is $127,000. 86 Now, indeed, Mr. Chan is correct in saying that there are issues here between the parties, and they are very much the issues that are going to be heard in the combined hearing in the fall that's before the Board. 87 First of all, there's the issue of customer preference, and what does that mean? The second is issue of impact on customers in the amendment area, to which Mr. Chan spoke. And thirdly, the impact on distributors and their customers. 88 In Hydro One's submission, it has built its system, designed, planned, and built in a way that provides for service and growth to all of its service territory. And Hydro One will provide evidence that that is the reasonable thing of the licence distributor in the area to have done in order to plan for future growth. 89 Also, in the case of the impact on distributors and their customers, Mr. Chan has referred to an already existing customer of Hydro One. I don't know whether it will be relevant; certainly, it will be Hydro One's submission that the case that one customer is a for-profit customer, and that it employs 700 people in Belleville, how does one compare that, and what relevance of that is -- is of that to a customer that is a senior citizens' care facility that is not-for-profit. 90 The Board will have to come to grips with whether that is something to be taken into consideration when determining whether territory can be awarded to another utility to enable a not-for-profit facility to avoid the consequences of the Distribution System Code which provides for rebates. 91 It will also be Hydro One's position, finally, that the two OEB decisions cited by Veridian are not relevant to this one in that the circumstances were completely different. 92 And those are our submissions. 93 MR. SOMMERVILLE: Thank you, sir. 94 Mr. Lokan? 95 OPENING SUBMISSIONS BY MR. LOKAN: 96 MR. LOKAN: Just some very brief comments. 97 The Board is well aware that there are many larger policy implications in these hearings. From the Power Workers' point of view, those policy debates are much best left to the combined hearing. If there is an interim without-prejudice solution possible, the parties and the Board should strive to reach that. 98 If not, and what Mr. Chan says, that you really need to decide this one finally at this time, if that turns out to be the case on the evidence, I would submit that he should have a correspondingly heavier onus to satisfy, if this is for all time, because you don't have the benefit of the range of views of all stakeholders, and this is a very important matter. However, I think the strong preference of the Power Workers' Union would be that the order take interim form, if that's at all possible. 99 Even if it's simply on an interim ruling basis, we could analogize to the way Courts look at this. They look very strongly for the balance of convenience. This is a bit like an interim injunction application, and what dominates is the idea of where does the balance of convenience fall? 100 And we adopt the submissions of Hydro One, that the balance of convenience falls strongly in favour of the status quo in terms of the existing territory of Hydro One, that the connection should be to Hydro One assets. And generally we adopt the position of Hydro One. 101 Those are my comments. 102 MR. SOMMERVILLE: Mr. Chan, are you ready to lead evidence? 103 MR. CHAN: Yes, I am. 104 MR. SOMMERVILLE: Ms. Spoel will swear the witnesses. 105 MS. LEA: The witnesses should stand up and come forward, please. 106 VERIDIAN CONNECTIONS INC. - PANEL 1; RUSHLOW, ARMSTRONG, STARCK: 107 C.RUSHLOW; Sworn. 108 G.ARMSTRONG; Sworn. 109 A.STARCK; Sworn. 110 MR. SOMMERVILLE: I'm sorry, I didn't quite hear your last name, sir. 111 MR. STARCK: Starck, with a C. 112 MR. CHAN: For the record, that's Starck? 113 MR. STARCK: Starck. 114 MR. SOMMERVILLE: That's with a C and a K. 115 EXAMINATION BY MR. CHAN: 116 MR. CHAN: I guess the first thing I would like to do, Mr. Chair and Ms. Board Member, is, given the experience from yesterday, try to introduce the additional exhibits up front. For today there are only two of those. I have provided these potential exhibits to my friend, and he has indicated to me that they object to having them entered as exhibits in this matter. And I think it's up for the Board to determine whether or not these should be entered. 117 Now, the first exhibit here -- 118 MR. ENGELBERG: Excuse me, I'm sorry to interrupt, but Hydro One has no objection to filing of the exhibits. I was provided with them 15 minutes ago. I've read them and they're fine. 119 MR. CHAN: Thank you. 120 MR. SOMMERVILLE: Thank you, Mr. Engelberg. 121 MR. CHAN: There are two. A third piece of correspondence I'd like to provide is a map. Now, this is in the materials, and I don't want that entered into an exhibit given that one is already in the materials. However, we made a couple of notes on them which we believe would be helpful from a descriptive standpoint, and I'd like to provide those to the Board as well, if that's agreeable to my friend. 122 MR. ENGELBERG: Yes. 123 MR. CHAN: Thank you. I'll speak briefly about it. 124 MS. LEA: Mr. Chan, shall we have the letter, dated April 9th, 2003, as the first exhibit; is that agreeable? Which one would you like first? 125 MR. CHAN: I guess the background to the long-term -- 126 MS. LEA: Okay. The pamphlet entitled "Not-for-profit Difference in Services for Seniors" will be Exhibit C.2.1. 127 EXHIBIT NO. C.2.1: PAMPHLET ENTITLED "NOT-FOR-PROFIT DIFFERENCE IN SERVICES FOR SENIORS" 128 MS. LEA: And the next one? 129 MR. CHAN: That would be the letter itself. 130 MS. LEA: Okay. The letter dated April 9th, 2001, from Mr. Pine? 131 MR. CHAN: That's correct. 132 MS. LEA: That will be C.2.2. 133 EXHIBIT NO. C.2.2: LETTER DATED APRIL 9TH, 2001, FROM MR. PINE 134 MR. CHAN: Just to provide a bit of background to these letters: The first is quite self-explanatory and the witness will speak, or provide evidence relating to the long-term care facility. The second one relates to a specific customer choice matter which indicates, I guess, briefly how the customer made their choice in their service provider. And, finally, the map. Either Mr. Armstrong or Mr. Starck will speak to the actual systematic implications of the matter. 135 Starting with closest to me, Mr. Starck, can you please provide, I guess, to the Board some information about your background and how you are particularly relevant to these proceedings, and then we'll move forward from there to Mr. Armstrong and finally to the customer, Mr. Rushlow. 136 MR. STARCK: Thank you, Mr. Chan. Again, for the record, my name is Axel Starck. I'm Executive Vice President of Veridian Connections. Veridian Connections is the LDC component of Veridian as a group of companies, and my responsibility is to head that distribution function. I have some almost 30 years experience, I guess, in Ontario distribution, including Ontario Hydro and a few municipal utilities, so I'm well-versed with the technical and economic requirements, I guess, of the cost of providing service to this customer. 137 MR. ARMSTRONG: I'm George Armstrong. I'm the manager of regulatory affairs with Veridian Corporation. I've worked in the electricity distribution sector for about 15 years, and have positions in both the operational side and now in the regulatory side of the business. I was involved with the last two applications that have been referred to earlier, in which the Board did approve amendments to our licence service areas to accommodate two other customers. 138 MR. RUSHLOW: My name is Colin Rushlow. I'm the manager of environmental services for Hastings Manor, as well as the project coordinator for Hastings County on the new Hastings Manor; a life-long citizen of Belleville; volunteer at Hastings Manor, prior to working for them; and my background is in construction, in architectural technology. 139 Hastings Manor has been in existence, the existing one, since 1951. We are a 251-bed municipal non-profit home. Our commitments are to not only our residents but to our tax-paying citizens of Hastings County, and our goal is to make life enjoyable for our seniors. 140 MR. CHAN: Mr. Rushlow, how is the Manor funded? 141 MR. RUSHLOW: The Manor is funded between the City of Belleville, the City of Quinte West and Hastings County, and fund-raising that's done in the Manor itself. 142 MR. CHAN: And how are the Manor's funds managed and controlled within that? 143 MR. RUSHLOW: The funds are controlled and managed directly by Hastings Manor. Like any business, we have our budget that's given to us each year, and we are to work inside that budget. 144 MR. CHAN: Now, given the way the Manor is funded and how the funds are utilised, could you please provide a more descriptive background of the Manor itself and what it does. 145 MR. RUSHLOW: We provide care for not only elderly. We have residents that are in their 40s that are unable to take care of themselves. Whether rich or poor, the level of care is the same. We provide palliative care for families that try to keep their loved ones at home but need a break off and on. We provide different kinds of services in our home for our residents, like physiotherapy, in-house doctors, rehabilitation, just -- the list is too long to go into. 146 MR. CHAN: Mr. Rushlow, you heard from my friend this morning, Hydro One, and you've also just mentioned right now that the Manor has been in existence since, was it, 1951, I believe. 147 MR. RUSHLOW: Yes. 148 MR. CHAN: Can you please provide the Board, I guess, with a background with respect to the proposed facilities. 149 MR. RUSHLOW: The proposed facility is approximately 200,000 square feet, which is double the size of our existing facility. Our existing facility has a lot of common rooms where you would have four residents staying in the same room. The existing facility has semi-private, private, and a basic, which all have some type of barrier between the residents so they actually have their own space. It also has, again, an enormous amount of common areas where the residents can go and enjoy their days; outdoor therapeutic gardens for Alzheimer's residents. 150 There's a big call in Belleville area for Alzheimer's beds, and we have a waiting list of approximately 80, I think it's around 80 right now, just at our own home. And our existing facility can accommodate, I believe it's 55 residents at this time, and we will be going up to approximately a hundred. 151 MR. SOMMERVILLE: That's an additional 50, Mr. Rushlow? 152 MR. RUSHLOW: Yes. 153 MR. SOMMERVILLE: Okay. 154 MR. CHAN: And where is this new facility located with respect to the existing facility you're describing right now? Is it a separate building, or is it a part of the attachment of the existing building? Can you please explain to the Board that. 155 MR. RUSHLOW: The new facility is a free-standing, separate building from the existing one. It will be approximately 50 feet in front of the existing building which, when the new facility is completed, the old facility will be demolished. It will be taken down. 156 MR. CHAN: Finally, just to confirm what you said earlier, would it be fair to say that the -- actually, let me rephrase this question. Does the Manor operate under tight budgetary constraints; and if yes, how so? 157 MR. RUSHLOW: Very tight budgets. With the new construction, we've had to cost cut $2 million out of the project just to get it off the ground, to get the construction going where we could afford to do it. And the mortgage that will be held on the property will be at a level that we will be able to operate, but we will not have much leeway for any unexpected costs that will come up. 158 MR. CHAN: Thank you. 159 Moving on, Mr. Rushlow, can you please explain to the Board why there's an urgent and immediate need for connection for these new facilities. 160 MR. RUSHLOW: We really need the power -- or the connection by approximately August of this year, and the reason that the urgency is is because we have already installed duct banks, underground duct banks because of underground services, parking lot, and curbs that already had to be installed prior to construction, because we had to redo the whole facility property with b underground services: Storm, sanitary, water, gas, Bell telephone cable. It all had to be installed prior, because the old services ran across where the new building is being constructed, so we had to put the new stuff in. 161 So therefore, we had to make a decision back last, I believe it was in late summer, early fall, on who would be best to serve our facility and then move on from there. And that's the reason why we had to put the underground duct banks in from the Veridian pole on our property at a cost of approximately $40,000, I think it was. It was something that we had to do. It had to be done. 162 MR. CHAN: Why does this particular connection need to be of a permanent nature? 163 MR. RUSHLOW: Again, anything temporary at this time is only going to be an added cost to Hastings Manor. To put in a temporary service of Hydro One and then later on possibly change it or not change it is only an added cost on top of the cost of the permanent connection, where we feel a decision would be best served at this point now, so we know what our final costs are. 164 MR. CHAN: I'm going to ask you more in detail about these added costs later on. For now, I'd like you to describe to the Board how you've analyzed the potential supply and connection alternatives for the Hastings County Manor Long-term Care Facility. 165 MR. RUSHLOW: We have a consulting firm, LKM Engineering, from this area that took the estimates of Hydro One and reviewed them and brought them to myself, as well as the committee, to examine them. 166 Hydro One's estimate was approximately 600,000 with a plus or minus 50 percent of a $100,000 fee as well. Hydro One actually advised us on March the 15th to approach Veridian Connections for an estimate, which we did. And Veridian Connections came in with a firm price of 127, no hidden costs. So it was more or less a no-brainer of which service provider we were going to go with. 167 MR. CHAN: In light of the due diligence and analysis you have performed with respect to reviewing your connection, which service provider did you choose, for the record? 168 MR. RUSHLOW: We chose Veridian Connections. 169 MR. CHAN: Why did you choose Veridian? 170 MR. RUSHLOW: Veridian has proven in our area to be a customer-oriented electrical provider. 171 MR. CHAN: And what other critical components and parameters were taken into account before you made this choice to choose Veridian to be your electricity service provider? 172 MR. RUSHLOW: We looked at location of service existing. Veridian Connections' pole is right at the corner of our property, where Hydro One is approximately half a kilometre down the street. We did look at the cost. I mean, that's a -- that's a big item for us, the difference in cost of almost $500,000, and what was best served to our residents and to the taxpayers of our community. 173 MR. CHAN: Mr. Armstrong or Mr. Starck, can you try to provide a bit more context to what Mr. Rushlow just said, just remaining on the cost aspect of it -- of this issue and not into the other, I guess, bypass or other issues that we'll discuss later on. 174 MR. STARCK: Will you take that, George? 175 Let me speak to the cost, perhaps, of the servicing methodology that we used in providing our quote to the Manor. As Mr. Rushlow mentioned, Veridian has a pole at the southeast corner of the Manor's property. That is the very westerly edge of the former City of Belleville limits; therefore, it's also the limits of our present supply system. 176 MR. CHAN: Sorry to interrupt, Mr. Starck. You can probably refer to the map, which we provided to the Board for descriptive purposes, and it might help in describing what you're saying right now. 177 MR. STARCK: Thank you. If you have that in front of you, it -- we've scribbled them on here, and pardon the informal graphics, but it's scribbled on the drawing, the 8 1/2 by 11 drawing that was shown to you. 178 And again, as Mr. Rushlow mentioned, Hydro One services about a half a kilometre to the east along Dundas Street, Dundas Street being the western gateway to the City of Belleville. It's a fairly pleasant-looking boulevard, I guess, with a lot of facilities like the -- like the Manor and similar facilities. 179 When we were approached by the Manor for a proposal for servicing them, it was fairly straightforward for us to do that. They constitute, for us, a lies-along customer under the provisions of the Code. We looked at the service we have available, and concluded that the 1,500 kVa service size that they were requesting was within the capacity of our present system available at that pole that I mentioned. 180 So our estimate -- our estimating work was done based on an underground extension in front of the Manor to eliminate any aesthetic impact to either the Manor or the City's boulevard, and is inclusive; it's the duct work, the cabling required, as well as the transformer required to service the Manor. And that was done in keeping with our normal design standards, I guess. 181 And as has been our practice for some years now, since the coming into force of the versions of the Code, our quotes to customers are all done on a firm-price basis. We've had very strong input from different customer groups in our service area, that they really want certainty when they're requesting a provision of service. And attempting to deal with customers on an estimate basis typically leads to either -- well, both confusion and occasionally disputes after the fact. 182 So our price to them was given to them at $127,000, approximately. I think you've heard already a number of different figures thrown out in terms of what the differences in the pricing are. I'll suggest to the Board, I guess, that the numbers are all in the evidence that's been submitted to you both by Veridian and Hydro One. 183 Hydro One's opening comment that their actual price is $47,000, I think, is ignoring two very substantial additional costs to Mr. Rushlow. And as you've heard, he's commented that his consultants reviewed the figures, and in fact, they are several hundreds of thousands of dollars more. 184 MR. CHAN: Can you, please, provide a bit more detail -- I guess, Mr. Armstrong, you can do the same -- with respect to some of the costs that might have been mistakenly missed by Hydro in quoting their price. 185 MR. ARMSTRONG: Yes, what's excluded, and maybe I can point to a table that's provided in Hydro One's submission on page 6, which itemizes the costs associated with the Veridian servicing arrangements and the Networks servicing arrangements. 186 And what's excluded in that cost comparison is an additional cost of $183,000 that Manor would have to invest in an on-site 44 kV substation. So that substation under Veridian supply arrangements would not be needed, but would be needed under the Hydro One supply arrangements. 187 MR. SOMMERVILLE: Perhaps you could just go over that carefully for me, Mr. Armstrong. 188 MR. ARMSTRONG: Okay. 189 MR. SOMMERVILLE: I'm looking at the table on page 6. 190 MR. ARMSTRONG: Okay. 191 MR. SOMMERVILLE: So what should I be adding or subtracting? 192 MR. ARMSTRONG: Under the actual connection costs, the first row, Veridian's connection costs includes the high-voltage underground cables and a PAD-mount transformer which provides Hastings County with a low-voltage supply that they need for their service. Hydro One's $45,000 connection costs, the way I understand it, is strictly for the extension of their system to the pole on the frontage of the Manor's property, which is shown on the drawing that Andy has handed out. 193 And from that point, Hastings County would also be responsible to employ a private contractor to extent high-voltage, underground cables to a privately owned transformer, and Hastings County has obtained a quotation for that work in the amount of about $183,000. 194 So that brings the bottom-line cost differential between the two options up to something in the range of $465,000 and that's where -- you've heard that number quoted earlier today. 195 MR. CHAN: I'd just like to note for the Board that the customer refund on that same page 6 of 9 of Networks' submission is of substantial debate in this matter, and that number -- and that number may be, at this point, ignored, given that we will have upcoming testimony in regards to that matter. 196 MR. SOMMERVILLE: Okay. You don't want to -- you don't want me to consider any changes to that number now; you're going to come back to that? 197 MR. CHAN: We'll come back to that, and we'll be providing evidence that that shouldn't be applicable in these circumstances. 198 MR. SOMMERVILLE: Let me be clear, then, about the actual connection costs. 199 Mr. Armstrong, your suggestion is that instead of $45,981 in that box in the graph, it should be? 200 MR. ARMSTRONG: I guess what I'm saying is there should be another row. The $45,000 represents the costs from Hydro One to the customer. There's another row for third-party, on-site service requirements that the customer would have to pay for. In Veridian's case, that would be zero; in Hydro One's case, it would be 183,000. 201 MR. SOMMERVILLE: That's what I wanted. 202 MR. ARMSTRONG: Yes. 203 MR. SOMMERVILLE: So we should be, in effect, adding $183,000, according to your evidence, on this connection cost. 204 MR. ARMSTRONG: Yes. 205 MR. SOMMERVILLE: Thank you. 206 MR. CHAN: I'll turn -- do you have anything else to add, Mr. Starck? Your brief indulgence. 207 I'd like to turn back to Mr. Rushlow for a bit. Mr. Rushlow, in light of what you've just heard from Mr. Armstrong and Mr. Starck, are you aware of the costs associated with connecting Hydro One against those associated with connecting with Veridian? 208 MR. RUSHLOW: Yes, I am. 209 MR. CHAN: Can you please explain to the Board your understanding of the costs associated, first, with connecting with Veridian; and secondly, the costs associated with connecting with Hydro One. Just begin with Veridian. 210 MR. RUSHLOW: The Veridian cost is a firm price of $127,000, complete, all work completed; nothing extra, nothing hidden, to the Manor. 211 MR. CHAN: Mr. Armstrong or Mr. Starck, can you confirm that? 212 MR. STARCK: Yes, that's correct. 213 MR. CHAN: Now, I guess if we can move on to your understanding of the costs associated with connecting to Hydro One, for the Board's information. 214 MR. RUSHLOW: My understanding of the Hydro One costs is approximately $362,000 of this cost is to subsidize Nortel Networks and Stream International for connection to a 44 kV line that Stream has had installed by Hydro One. And to suggest that Hastings Manor should connect to Hydro One just so Stream and Nortel can recoup some of their money is shameful. A non-profit organisation should not be subsidizing large, international companies. 215 The connection is going to require approximately -- I'm not going to say approximately -- It's going to require poles down Dundas Street to our property, a half a kilometre away, which is going to go past churches and other facilities on that street, coming from Stream down. The on-site -- 216 MR. CHAN: Take your time. 217 MR. RUSHLOW: Yes. The on-site transformer system that they're talking about is going to be approximately 25 feet by 25 feet, fenced in, sitting in full view of Dundas Street, beside our existing facility where our residents are going to look out over this fenced-in area of electrical equipment. 218 MR. CHAN: Let me just confirm; this is relating to Hydro One's connection proposal? 219 MR. RUSHLOW: This is Hydro One's connection. 220 MR. CHAN: Mr. Armstrong, Mr. Starck, do you have anything to speak to with respect to Hydro One's proposal? 221 MR. STARCK: Perhaps picking up on Mr. Rushlow's comments. I know there are no requirements for aesthetics in the Code, and they are not normally things the Board, I guess, considers in making its decisions, but I'll suggest there's certainly a very significant factor to the customer. And again, I'll suggest that's the basis of the reasoning why we're here and why this has been presented to the Board. This is not a simple jurisdictional dispute between two large LDCs, this is an issue where the customer is requiring and wishes to connect at the lowest cost to him and with some additional benefits, one of them being reduced aesthetic impact to both the Manor and to Dundas Street, which I'm sure was considered by owner of the Manor, being the City and the County. 222 Other than that, in terms of Hydro One's proposal, I don't know whether Hydro One has any technical witnesses or whatever, but my knowledge of the area and of the system there, as Mr. Rushlow said, Hydro One has an existing, very high-voltage, 44,000 volt line coming from the north cross country to pick up a customer approximately half a kilometre to the east of the Manor. Hydro One's proposal to the Manor was based on extending that line using an overhead pole line to just actually in front of the Manor, and that was the extent of their work. And they did indicate to the Manor that they would have to take it from there, using their own private contractor. And the Manor, Mr. Rushlow, did obtain a quote for that of the $183,000 I think that Mr. Armstrong referred to. 223 When we submitted our proposal to the Manor, I should also comment that we considered this to be a new customer, in fact. In discussing with the Manor and with their consultants what was happening, it was quite evident that the existing Hydro One customer effectively disappears. The buildings will be razed, bulldozed, and Hydro One's existing service will be effectively abandoned. That is the common case. It applies to Hydro One's new servicing proposal; their proposal also includes an abandonment and removal of the existing services. So, again, we felt very clear that this was a new customer connection under the lies-along provision, as opposed to Hydro One's proposal which comes under the expansion parts of the Code. 224 MR. CHAN: In light of what you've just said, and I'd like to turn again specifically to the issue of the rebate, how does this rebate relate to Hydro One's claims of -- and I'm using the term bypass, although I don't agree to that definition. But since it's in the materials, it's probably the best way to refer to it for purposes of this proceeding. Why is bypass not applicable in this particular instance? Go ahead. 225 MR. STARCK: I guess I'm certainly familiar with the rebate principle. We apply this and use this ourselves in connections and multiple requests for connections coming up in our service area, and I can appreciate Hydro One's position on it. 226 I'll suggest several issues, perhaps. Firstly, from a concept of bypass, as I've mentioned, I'll argue that some of that is moot because Hydro One's existing system, existing supply to the old Manor is not being bypassed. Or the other way to look at it is, it's being bypassed by both LDCs in the new service connection, as I've mentioned. It's being removed; it's being abandoned both, under both the Veridian scenario and the Hydro One scenario. 227 The existing facility that Hydro One built to service the customer a half a kilometre to the west was funded by Hydro One out of their rates, and the balance was funded by that customer, as is the Board's and the Code's requirement in doing an expansion and doing an economic model of the cost of that expansion. 228 So I guess I would suggest one argument would be that it is -- that it has been properly financed and paid for, and there was no real expectation or promise that the customer would recover some of that money. The provision of the Code that deals with rebates, I guess, suggests that if there is a connection; it doesn't suggest that the LDC make every effort to find another connection or to somehow establish a large catchment area, and any new customers in that catchment area, then, be required to connect to that facility solely for the purposes of recovering some of those costs. 229 I guess I'd also suggest, if Hydro One was, in fact, the sole distributor in this area, operating both the Hydro One 44 kV system, the Hydro One lower voltage 8 kV system that feeds the existing Manor and the City of Belleville 13.8 kV system that Veridian has at the southwest corner, I'd suggest that from a technical merit point of view and from a cost, that Hydro One would make the same decision that the logical extension -- or the logical connection for this customer would be from the 13.8 kV system. Again, from a point of view of lowest overall cost. 230 MR. CHAN: I guess I'm nearing the final questions, one of the final ones I'd like to ask the members of this panel. 231 Why should the Hastings County Long-Term Care Facility be connected to Veridian? Just a simple answer relating to the principles that you've articulated today. 232 MR. STARCK: I'd probably suggest the simple answer is customer choice. And this customer has made a fairly straightforward decision based on a cost. Whether or not you consider the -- any value to the type of customer making that decision, clearly the Manor, as a publicly-funded member of the MUSH group, I guess, has been under some considerable strain, as we've been advised, with the financing for this project. 233 Their budgets are limited. They were capped some time ago, and they are now struggling to make this thing happen. For them to find an additional $400,000 to $500,000 simply for Hydro servicing, electrical servicing, where they have a cheaper alternative is something that I think the Manor, its Board, its directors, and probably the politicians who oversee the operation of the Manor, find that a very difficult decision. 234 MR. CHAN: Can you just -- oh, sorry. 235 MR. STARCK: The -- sorry. I was going to comment, the issue of the rebate may be a challenge for the Board, clearly, but I guess I'll suggest that the -- if you ignore that, simply the basic cost of connection, the 45 -- $47,000 from Hydro One for the actual line extension, as well as the Manor's then cost on-site of $180,000 is still in excess of the cost to connect by Veridian. 236 And I'll suggest that -- two reasons for that: Number 1 is the voltage level of the system Hydro One simply has available there. It's a much higher voltage, more expensive. And second, the fact that Veridian is a lies-along offer. It's the best alternative in most cases. The system is already there; whereas, in Hydro One's case, the system is not available and has to be extended, therefore, typically creating higher costs for both parties. 237 MR. CHAN: You referred to an acronym, MUSH. Can you just provide a brief -- 238 MR. STARCK: Sorry, MUSH, that's the -- 239 MR. CHAN: I'm not too good with acronyms. 240 MR. STARCK: It comes from Bill 210 and the rebates that all LDCs are going through at the moment. It's -- I may have to ask George to help me on that one. 241 MR. ARMSTRONG: Municipalities, universities, schools, and hospitals. 242 MR. CHAN: Thank you. 243 Are there any other -- oh, go ahead. 244 MR. ARMSTRONG: I just wanted to add that we have come from an environment whereas, as mentioned by Andy in his opening remarks that over the past year or so we've had two applications which Hydro One has indicated are different than this, but I would contest that. I think they are very similar, where we had customers that were -- where there were customers just on the periphery of our service area in Hydro One's area, and that those customers got offers to connect from both distributors, chose the Veridian Connections offer, and we went through a Board process and received approval to service that customer. And in both of those cases, Hydro One did not contest those applications. 245 And in reverse, we currently have two other applications where Hydro One, in fact, has serviced two customers within our service area. The Board has not yet approved those -- those connections, but they are in place, from what I understand. And we're not contesting those, because they seem to be the most efficient way to expand our respective distribution networks. 246 And the way we see this is this is just one additional, you know, situation similar to those previous four. And we recognize that the Board wants to deal with these matters in a more wholistic manner going forward, but the customer in this particular case was led to believe that he did have choice. As was pointed out earlier, the customer was advised by a Hydro One representative that they could get a competing offer from Veridian Connections. 247 So the customer has made some decisions. So the customer was working on faith that they believed that they had choice on the basis of past Board decisions, and has already made service arrangements, you know, on that basis. 248 So we do request that, without prejudice, that there be a decision made on this particular application on its merits, and without prejudice to the Board's more generic hearing in the fall. 249 MR. CHAN: Do you have something to say? 250 MR. STARCK: I just wanted to comment. I'm aware, and I think the Board's opening comments were -- I think suggested the word "temporary," and I believe Hydro One made some reference to that in their opening statements. 251 I think, as, perhaps, Hydro One suggested, both parties have looked at what the options are to, in fact, find a temporary solution for this and postpone this decision, and I think that there's no dispute in the fact that regardless of what temporary measures are made, those temporary measures represent significant additional cost to the customer over and above either quote that's been presented to the customer. 252 So we've concluded, and I believe Hydro One -- I can't speak for them -- but I believe Hydro One has concluded that there is no practical economic temporary solution to this. Either party -- if either party goes ahead and makes a connection, that represents a sunk cost to the customer that cannot be recovered. And then the customer would at a later date be forced to make some alternate investment to switch over to the other LDC. 253 So there's no practical or economic technical way around this, and we have certainly considered that. 254 MR. CHAN: Are there any other comments by the panel members? 255 MR. RUSHLOW: I'd like to just reiterate again on the cost-cutting of the $2 million that we had to do just to get the project started, and now to go back to County Council, and if we're forced to, to ask them for another half a million dollars because we're being forced into using a provider that we do not choose, it's going to be hard on my part to ram that down their throats. And it will be my place to report back to Council on how this hearing has been completed. 256 And just to justify subsidizing large for-profit companies by a non-profit agency, I don't know how I can justify it. I mean, if -- I mean, if by chance Hydro One wanted to donate the difference in money to the Manor, I mean, maybe we could think of connecting with them. I mean the difference between Veridian and Hydro One and donate that money back to the building fund, so we don't have to make items away from the residents to pay Stream International. 257 MR. SOMMERVILLE: Thank you, Mr. Rushlow. The Board has heard your comment. 258 Are those all of your questions, Mr. Chan? 259 MR. CHAN: Yes, they are. 260 MR. SOMMERVILLE: Mr. Engelberg? 261 MR. ENGELBERG: Yes, I have some cross-examination, Mr. Chair. 262 MR. SOMMERVILLE: Thank you. 263 Would you like a few minutes before you begin the cross-examination? Is this a convenient time to take a break? 264 MR. ENGELBERG: Certainly. That would be fine. Thank you. 265 MR. SOMMERVILLE: We will rise until 10 to 11. Thank you. 266 --- Recess taken at 10:35 a.m. 267 --- On resuming at 10:55 a.m. 268 MR. SOMMERVILLE: Please be seated. 269 Mr. Engelberg. 270 MR. ENGELBERG: Thank you. 271 CROSS-EXAMINATION BY MR. ENGELBERG: 272 MR. ENGELBERG: Before we get to the general policy issues, I'd like to ask a few questions regarding the specific numbers that we heard, and I'll -- I hope that the question will be answered by the appropriate member of the panel. 273 I understood the evidence, the direct evidence to have been that Hydro One quoted a cost of $600,000; am I correct on that? And if so, where did that come from? Because it's my understanding that the quote from Hydro One, in writing, is an estimate of $411,536, including the amount that had to be rebated to the existing customer. Is there an issue on that? 274 I can take you, perhaps, to tab 4 of B.2.2 of Hydro One's submissions. It's a letter from Hydro One to the Manor's consultant, dated November 22nd, 2002, and it says that the -- do you have that in front of you? 275 MR. SOMMERVILLE: Is that a question for Mr. Rushlow? 276 MR. ARMSTRONG: I think what was referred to, I'm not sure we used the term $600,000, but I think that's the total evaluated cost including the cost of the customer-owned substation that would be constructed by a private contractor. 277 MR. ENGELBERG: Okay, I wanted to be clear on that. Thank you. 278 Now, the number that was given regarding the additional amounts that would have to be paid by the Manor in order to connect to the Hydro One system that would not be paid to Hydro One but to the electricity contractor was 183,000. This is a number we have not seen in any document filed by anyone. Where does that number come from? 279 MR. ARMSTRONG: That came from a consultant's report that was provided to Hastings County, and I believe we do have that documentation available and it can be shared. 280 MR. CHAN: That's not in the materials? 281 MR. ARMSTRONG: It's not in the materials. 282 MR. CHAN: Let me provide that to my friend. I thought it was in the materials. 283 MR. STARCK: Maybe Mr. Rushlow can correct me, but it's our understanding that that is a quote from Carlos Electric, a local electrician, electrical contractor, submitted through his consultant LKM, or whatever the initials are. 284 MR. ENGELBERG: And that documentation has not been provided to the Board or to Hydro One? 285 MR. ARMSTRONG: It was not in our hands, in Veridian's hands at the time we made our submission. It was really a customer issue in terms of evaluating the two competing offers. So Mr. Rushlow made this information available to us just recently. 286 MR. CHAN: I do have copies of this. If I can ask for a moment, so my friend can review this material, and hopefully they'll consent to it being entered as an exhibit. 287 MR. SOMMERVILLE: You can give it to us now, and if Mr. Engelberg wants to make submissions with respect to it, we'll put it aside. 288 MS. LEA: Thanks very much. 289 MR. SOMMERVILLE: Do you have any submissions on this document, Mr. Engelberg, as to whether we should receive it? 290 MR. ENGELBERG: Yes, Mr. Chair. I'm not going to oppose the filing of this, but in light of the fact that the document is from last year, I can only comment that it certainly would have been very helpful, from the standpoint of allowing Hydro One to prepare for this, if we had been provided with this information earlier. We could have explored also, during that time period, the accuracy or inaccuracy of the document, since these are estimates provided by a third party to a third party. 291 MR. SOMMERVILLE: So we will receive this as an exhibit. 292 MS. LEA: It will be C.2.3. Let's call it a cost breakdown, dated December 2nd, 2002. 293 MR. SOMMERVILLE: Thank you. 294 EXHIBIT NO. C.2.3: COST BREAKDOWN, DATED DECEMBER 2, 2002 295 MR. ENGELBERG: In the exhibit that was just filed, I note that it says at the end, the advice from the consultants, is that Hastings Manor should request Veridian to apply to the OEB for a licence amendment; is that correct? 296 MR. ARMSTRONG: Yes. 297 MR. ENGELBERG: And that the agreement to proceed with Veridian will depend upon the Board's final decision. 298 MR. ARMSTRONG: That's correct. 299 MR. ENGELBERG: There has been no decision yet to proceed with Veridian, has there been, Mr. Rushlow? 300 MR. RUSHLOW: On behalf of the company? 301 MR. ENGELBERG: Yes. 302 MR. RUSHLOW: Yes. 303 MR. ENGELBERG: But the County has not taken steps to do so, pending a decision from the Board; is that correct? 304 MR. RUSHLOW: That's correct. That's correct. 305 MR. ENGELBERG: Thank you. Now, I believe that it was said in direct evidence that Hydro One told Hastings Manor to obtain a quote from Veridian; is that correct? 306 MR. RUSHLOW: They advised us to obtain a quote from Veridian Connections. 307 MR. ENGELBERG: If I can take you to tab B.2.5 in the Hydro One documents, there's a letter from the consultant, Leipciger Kaminker to Hydro One dated March 15th, 2002. Have you had an opportunity to review that letter from your consultant? 308 MR. RUSHLOW: Yes. 309 MR. ENGELBERG: I'd like to take you to tab 7, where it says: "LKM," that's the consultant, "expressed the concern of the high cost for the 44 kV proposal, which would have a great impact to the project overall budget constraint. Mr. Steve Ethier advised that the customer should approach Veridian Connections for alternative options." 310 Who is Mr. Ethier? 311 MR. RUSHLOW: From what I understand, he's a Hydro One employee. 312 MR. ENGELBERG: None of you are familiar with Mr. Ethier? 313 And would you read the next point, bullet number 8, please. Would you agree with me that Hydro One confirmed that for the customer to approach Veridian for a connection would be acceptable as per the OEB guideline? 314 MR. RUSHLOW: Yes. 315 MR. ARMSTRONG: That's accurate. 316 MR. ENGELBERG: Thank you. 317 Now, I believe you mentioned in your direct evidence that what we have here is, if the customer connects to the Veridian system, would be subsidization of a not-for-profit company. Is that the Manor's position in this hearing, that this is a matter concerning subsidization? 318 MR. RUSHLOW: Not totally. 319 MR. ENGELBERG: In part? 320 MR. RUSHLOW: In Hastings County's and Hastings Manor's eyes, this is in regards to -- number one, it's in regards to choice, freedom of choice; number two, what's best for our taxpayers, our residents; number three, costs. 321 MR. ENGELBERG: Is it your submission that the overriding goal of the Ontario Energy Board Act is to provide customers with freedom of choice? 322 MR. CHAN: I'd like to just interject there. I don't think it's appropriate for the customer to provide his interpretation of a specific provision which he's not privy to. 323 MR. SOMMERVILLE: Well -- 324 MR. ENGELBERG: I'd like to explore the answer that the customer -- that the customer just gave. 325 MR. SOMMERVILLE: I think you can probably get at that in another way, Mr. Engelberg. You raised that point very directly, Mr. Chan, in your submissions earlier, but I'll ask Mr. Engelberg to try to find another way to get there. 326 MR. CHAN: Thank you. 327 MR. ENGELBERG: All right. 328 In your evidence in chief, Mr. Rushlow, you led quite a bit of evidence concerning the non-profit status of the Hastings Manor and the fact that Hydro One's existing customer, who would be able to get a rebate under the terms of the Distribution System Code if Hastings Manor connected to the Hydro One system, is a company that has the goal of making a profit; is that correct? 329 MR. RUSHLOW: I don't think that's the way we're looking at it. 330 MR. ENGELBERG: Okay. Could you perhaps, then -- perhaps I'm not putting it fairly. Could you tell me how it is that you're looking at it. 331 MR. RUSHLOW: We're looking at funds that we, number one, don't have, and funds that there is an option that we don't need to pay. And the option is Veridian Connections is right on our property. 332 MR. ENGELBERG: So insofar as you're looking at it in terms of funds that you don't have, are you saying that the Board should consider the relative economic status of a new customer with an existing customer and make a comparison on that basis? 333 MR. RUSHLOW: Can you rephrase that again? 334 MR. ENGELBERG: Are you saying that in making a decision that the Board should consider the relative economic status and financial goals of one customer as compared to another customer, in making a decision on a licence amendment? 335 MR. RUSHLOW: I'm saying I don't think that a customer should be forced to use a provider that they do not wish to use. 336 MR. ENGELBERG: So we're back to the issue of choice? 337 MR. RUSHLOW: Choice. 338 MR. ENGELBERG: Now, is Hastings Manor aware, or is Veridian aware that there would be an allowance in the Hydro One charges over a period of time if the Manor connects to Hydro One to compensate the Manor for the need to purchase a transformer? 339 MR. RUSHLOW: Can you expand on that? What's the allowance? 340 MR. ENGELBERG: Well, I'm just here to ask -- I'm not here to introduce new evidence, but are you aware that there is an allowance in the Hydro One ongoing rate to compensate customers who need to purchase a transformer? 341 MR. RUSHLOW: I understand -- I believe -- if you're talking about a 60-cent allowance, if that's what you're talking about -- 342 MR. ENGELBERG: Yes. 343 MR. RUSHLOW: I understand that. But number one, first you have to have the money to pay for it. The allowance is no good if you can't afford to pay for it up front. 344 MR. ENGELBERG: All right. And once you pay for it, what is your understanding of how the allowance works over a period of time? 345 MR. RUSHLOW: I don't belong to an electrical company, I'm not a lawyer, so I don't know the ins and outs of the allowance. 346 MR. ENGELBERG: Are your fellow panel members able to help you here? 347 MR. STARCK: The 60-cent transformer allowance is a standard or universal, I guess, ownership allowance across the province predating deregulation. And I think it's in the evidence somewhere. I believe I've seen it cited in some of the paperwork that's been filed. 348 I don't know what consideration the Manor gave to that, but from what I'm hearing, their concern is first and foremost the capital cost of installing the service. They have not considered the future costs, nor do I think they've considered the difference in rates or operating costs from the either utility. Their concern is minimizing their servicing costs. That's what they're facing this -- right now. 349 MR. ENGELBERG: Would you agree with me, Mr. Starck, though, that over a period of time, the 60-cent allowance brings down the capital cost of the transformer? 350 MR. STARCK: That's -- that's the intent. It's intended to -- well, I'm going way back in memory here, but I think it's intended to, over 25 to 30 years, the life of the substation, it defeats the cost of the substation. 351 I'll suggest it remains, that it's still a significant up-front cost, as well as the site impact that Mr. Rushlow mentioned. They need to find a space on their site for an outdoor substation that they have not considered. 352 MR. ARMSTRONG: And I think if you're -- if the customer was to undertake an evaluation of the ongoing costs associated with the two options, the transformer allowance is only one component of that evaluation. They would also have to look at the comparative distribution rates, which are in the evidence and are skewed significantly to the choice -- the Veridian choice. 353 MR. ENGELBERG: Okay. We can get to that in a minute, but I wanted to explore two items that may serve to compensate the customer for the connection to the Hydro One system. 354 We've talked about the transformer allowance. Are you aware, Mr. Rushlow, that section 3.2.7 of the Distribution Code which is the section that we've spoken about that entitles the existing customer of Hydro One to obtain a rebate as there are new connections would also operate in favour of Hastings Manor if Hastings Manor connects to the Hydro One system? 355 And what I mean by that is are you aware that if other customers come online during the five-year period spoken of in the section, that Hastings Manor would also be entitled to the kind of rebate that we've been talking about here? 356 MR. RUSHLOW: I have heard -- I have heard of that, but I don't -- I don't put my hopes up that somebody is going to jump out and do it. I mean, that's something that's unforeseen. 357 MR. ENGELBERG: But it may happen? 358 MR. RUSHLOW: It could. 359 MR. ENGELBERG: Now, Mr. Armstrong, you wrote to the Board at page 3 of your letter, which is at tab A.2.1, your letter dated January 28th, 2003, to Mr. Pudge. In item B, the second sentence of item B, that: "Veridian Connections' existing electricity distribution network in Belleville has adequate capacity to meet the requirement of the Manor." Is that correct? 360 MS. SPOEL: Sorry, Mr. Engelberg, I'm lost. When I look at tab 2, I see a letter from Brian Gable dated the same date. 361 MR. ENGELBERG: A.2, number 1, in the Veridian submission, the application. This is not in Hydro One's materials. 362 MS. SPOEL: No, I'm looking at Veridian's materials. 363 MR. ENGELBERG: It's the letter to Mr. Pudge concerning the proposed amendment. 364 MR. SOMMERVILLE: Dated July 8th? 365 MR. ENGELBERG: January 28th, 2003. 366 MS. LEA: The first thing past the tab 2 marker. 367 MS. SPOEL: It's at tab 3. I heard February 28th, which happens to be the Brian Gable letter behind tab 2, so I got lost. 368 MR. ENGELBERG: Sorry. 369 MS. SPOEL: I have it now. Thank you. 370 MR. ENGELBERG: We're at page 3 of that letter, three-quarters of the way down the page, item B. 371 MR. SOMMERVILLE: Thank you. The expected peak demand? 372 MR. ENGELBERG: Yes. It says that: "Veridian Connections' existing electricity distribution network in Belleville has adequate capacity to meet this requirement." 373 Would you agree that Hydro One's system there also has adequate capacity to meet the requirement? 374 MR. ARMSTRONG: I'm probably better to defer to Axel on that question. He has more knowledge of the technical aspects of the servicing arrangements. 375 MR. STARCK: Could you be clear as to which Hydro One system? There are two in that vicinity. There is the 44 kV system, which is proposed in the Hydro One offer, and there is the existing 8 kV system. 376 MR. ENGELBERG: I'm talking about the existing 44 kV system that would be extended by 490 metres in order to connect the new building. 377 MR. STARCK: Capacity is not an issue between either of the two offers as presented to the customer. 378 MR. ENGELBERG: Okay. Would you disagree, then, with the proposition that has been put forward by Hydro One in its submission that Hydro One planned and built its system in its service territory to be able to handle an increase in the number of houses and buildings and customers in its territory, including the portion of its territory where Hastings Manor is located? 379 MR. STARCK: I'll have to state that I'm really not that familiar with Hydro One's grid system in that specific location. From what I do know of it, what's available to me visually by driving around, it is an older, lightly-built or rural, if I can use that term, as opposed to urban system, to serve the loads that were there. It's my belief that if there is significant growth in that area, or redevelopment such as the Manor is going through, Hydro One would face significant investments to meet that. 380 At the 44 kV level, for large single-point loads as the Manor is presenting, that capacity is there. That capacity comes from the Belleville transformer station, a Hydro One asset located in the City of Belleville, and that also is a supply point for Veridian's network. 381 So, again, from a point of view of overall supply planning, I'll suggest again that if this was suggested to be one overall system and the ownership or the licence franchisee were ignored, the nature of the beast is such: That there is a 44 kV source at the Belleville TS; there are two distribution systems in the area, 13.8, and 8 kV. A customer lies along the 13.8 system and the 8 kV system. The 8 kV system is not adequate for this kind of load. The 13.8 can supply it. 382 I will admit, it's the limit of the supply. If the customer were significantly bigger than this, we would have had to have bowed out; we don't have that ability. But at 1,500 kV, 13.8 is quite adequate. It's supported by a well-built -- a sturdy urban system in the city. So the option from Hydro One to meet this size of load was to construct an expensive, to Hydro One, and to the customer, 44 kV expansion. 383 MR. ENGELBERG: And how long is that expansion? 384 MR. STARCK: Half a kilometre, I believe the evidence is. 385 MR. ENGELBERG: Thank you. 386 Now, I'd like to ask a couple of questions about rates that we get to in that same letter of Mr. Armstrong's to the Board. At page 3, in the second paragraph, under item A. It begins with the words, "The second consideration is that of ongoing electricity delivery costs." 387 Mr. Armstrong, do Veridian's delivery charges in Belleville reflect the true cost of service? 388 MR. ARMSTRONG: Well, they're based on Belleville's traditional rates. I'm not a rate analyst, so I cannot speak to whether they reflect the true cost of service or not. I know the Board is commencing a cost-of-service study to determine that. But I can't really speak to that at this point in time. 389 MR. ENGELBERG: So these rates, although they have been approved by the Board, is it fair to say that they are transitional, as they are of all LDCs? 390 MR. ARMSTRONG: I don't know how you would define transitional. They are the rates that will be in place until 2006 and they are the rates that are currently approved by the Board. I can't really speculate how rates are going to change post-2006. 391 MR. ENGELBERG: Is it your evidence that Veridian's delivery charges in the Belleville area do, in fact, reflect the true cost of service? 392 MR. ARMSTRONG: Again, I'm not in a position -- I'm not a rate analyst, so I'm not in a position to answer that question accurately. 393 MR. ENGELBERG: Where is Veridian's headquarters? 394 MR. ARMSTRONG: In Ajax. 395 MR. ENGELBERG: And do all the head office staff work there, in Ajax? 396 MR. ARMSTRONG: Yes. 397 MR. ENGELBERG: And how many different service territories does Veridian have? 398 MR. ARMSTRONG: Rate areas, you mean? 399 MR. ENGELBERG: Yes. 400 MR. ARMSTRONG: We have four different rate structures that are dependent on geography. 401 MR. ENGELBERG: Are the territories in which those rates apply contiguous to each other? 402 MR. ARMSTRONG: We have one rate class for Ajax, Pickering, Clarington and Uxbridge. They are not contiguous. Another rate class for Brock Township, a third for Port Hope and a fourth for Belleville. 403 MR. ENGELBERG: Okay. And Belleville's are the lowest; is that correct? 404 MR. ARMSTRONG: I'm not sure if they are the lowest for all classes. However, they are lower in this particular class, I believe, yes. 405 MR. ENGELBERG: All right, then. If I can just take you to Hydro One's submission, which is at tab B.2, item number 2. 406 MR. ARMSTRONG: Sorry, we're at Hydro One's submission now? 407 MR. ENGELBERG: Hydro One's submission, B.2. It's a 19-page submission. I'm asking you to look at item 3.7 on page 11. Have you found that, Mr. Armstrong? 408 MR. ARMSTRONG: Yes, I have. 409 MR. ENGELBERG: There's a table there that shows Veridian's charges in Belleville and in three other Veridian territories; is that correct? 410 MR. ARMSTRONG: That's correct. 411 MR. ENGELBERG: The table in the middle of the page. They vary greatly, do they not? 412 MR. ARMSTRONG: They, they do. 413 MR. ENGELBERG: If we look at the first line, Veridian Belleville, total charges, $326.55, and Veridian Brock, $3,540.11. That's greater than a multiple of 10 in difference, is it not? 414 MR. ARMSTRONG: Yes, and the reason for that is, as you know, we -- Veridian is the result of a merger and acquisition activity, and we bundled together seven utilities and formed one. We successfully harmonised our distribution rates for the first four mergers and acquisitions prior to the rate freeze, and the other three were not grouped. So there is some difference in rates across our service areas. 415 MR. ENGELBERG: Does Veridian expect that kind of difference of a multiple of more than 10 to continue for the long term? 416 MR. ARMSTRONG: No. It's our commitment to harmonise rates. As we know, we're working in a rate-freeze environment at this point in time, so I can't really speculate when those rates are going to be harmonised. However, even if they were harmonised, the rates that Veridian charges for distribution services for this particular class of customers are about half of what Hydro One charges for the same service. 417 MR. ENGELBERG: But put another way, it's not possible that the true cost of Veridian's service in Belleville is less than one-tenth of Veridian's service in Ajax, Pickering, Clarington, and Uxbridge, is it? 418 MR. ARMSTRONG: It's unlikely, but I can't say with any certainty what the true cost of service is. That would be a subject of a cost-of-service study. 419 MR. STARCK: Perhaps just to note, if I may, that Veridian did submit a harmonization application to the Board that was suspended by Bill 210. 420 MR. ENGELBERG: I'm sure that many other LDCs did as well; right, Mr. Starck? 421 MR. STARCK: Exactly. 422 MR. ENGELBERG: Thank you very much. 423 I have no further questions for the panel. 424 MR. SOMMERVILLE: Mr. Lokan? 425 MR. LOKAN: Just a couple of questions on Exhibit C.2.3. 426 CROSS-EXAMINATION BY MR. LOKAN: 427 MR. LOKAN: Mr. Rushlow, do you have that exhibit handy? This is the letter we were just provided a short while ago. 428 MR. RUSHLOW: Yes, I have it. 429 MR. LOKAN: Do we have anywhere in the materials -- I'm looking on the left-hand column under "Company," the first box. "Carlos Electric Limited, refer to letter dated November 8th, 2002." 430 Do we have that letter anywhere in the materials? 431 MR. RUSHLOW: No, I don't think I have that. 432 MR. LOKAN: If you look at the second page, I see that there are three options that were analyzed. And as I understand this letter, your choice was to go with option 2; is that correct? 433 MR. RUSHLOW: Can I just answer your first question? I do have that letter. I have found the letter, November 8th, you were asking about. 434 MR. LOKAN: Is it possible that we could have a look at it? 435 MR. CHAN: Could I have a brief indulgence. 436 MR. SOMMERVILLE: Sure. The Board does have facilities to copy materials. We can facilitate that. 437 MR. CHAN: I'll just provide it to Mr. Lokan for now, and -- unless the Board would like to see this letter as well. 438 MR. SOMMERVILLE: That's a good start. Thank you. 439 MR. LOKAN: Do I now have the only copy? 440 MR. RUSHLOW: Yes. 441 MR. LOKAN: I take it from that letter and from Exhibit C.2.3 that Carlos Electric Limited actually put in a tender for what's listed as item B but didn't for what's listed as item C? 442 MR. RUSHLOW: I think he's quoted both. 443 MR. LOKAN: I'm seeing a quote on both, but I see for item 1: "Primary service is 13.8 kV from Veridian supply." That's the 69,400. "This price is included in tender amount." 444 And then 2: "Primary service is 44 kV substation from Hydro One supply." That's the 182,600. "This is a separate price not included in the tender amount." 445 I'm just trying to understand what that difference is there. 446 MR. STARCK: I think -- I think Carlos must have included some -- an allowance for electrical servicing in the tender to the -- to the overall building. 447 MR. RUSHLOW: The overall building. 448 MR. STARCK: For the general contract? 449 MR. RUSHLOW: Yes. That's correct. 450 MR. STARCK: Of 69,400. That's what I'm assuming by reading this. I have no idea what that was based on. I think that's what the meaning is, "in contract." 451 MR. RUSHLOW: Yes. The total -- the total -- 452 MR. STARCK: The electrical contract Carlos submitted was -- included the 69,4 in the contract. And the 44k, 182,8, was not included in the contract, so that's an additional cost. 453 MR. LOKAN: Okay. Now, if I can go back to my question of a minute earlier, it was Hastings Manor's choice, if I understand from what you said to the Board, to go with option 2 on page 2. 454 MR. RUSHLOW: Yes. 455 MR. LOKAN: Okay. So it looks like you have rejected the idea of having Carlos Electric Limited perform the work listed in item B. 456 MR. STARCK: If I can comment, perhaps, to try and clear this up. I mean, the -- this letter, in option 1, introduces some confusing numbers, perhaps, for us here to look at and for the Board. I'm going to suggest, based on my experience with general contracts for large commercial services that it's quite common for the electrician who's bidding on the building contract to include an allowance often called, in fact, hydro-allowance for bringing the service from the street light into a point in the building. 457 And I have no knowledge of this 69,4 number, I will freely admit, but I'll -- again, based on similar projects, and I'm assuming that LKM, the consultants for the Manor, considered this, and that the allowance from Carlos Electric was not adequate or proper for the actual service that was available. 458 It -- I can't offer any suggestions as to why the customer would have rejected an even cheaper offer. 459 MR. LOKAN: Well, that's why I'm asking the -- 460 MR. STARCK: The item A and item B, Veridian's prices and LDC, there is always work involved with it which is exclusive involving energized equipment which the customer cannot bid on. That would have been the 17,5. 461 Under option 2, Veridian repeated that at 17,5. And then the 111 was, in fact, a firm price quote to the customer that the customer had the option of getting an alternative bid on from a contractor. And I guess the evidence we have here today is that the Manor, with the advice of their consultants, rejected the 86,9 as being invalid and went with the 128. But I really can't offer you any further background than that. 462 MR. LOKAN: That certainly is what it appears from the document, which is why I'm asking. Mr. Rushlow, why did you choose or it looks like you chose option 2 rather than option 1? 463 MR. RUSHLOW: I honestly don't have the breakdown for option 1, so I can't really say at this point. 464 MR. LOKAN: It looks like your choice was between having Carlos Electric do the work listed in item B or having Veridian do the work listed in item B, and you have expressed your preference for Veridian. My question is: Why is that? 465 MR. STARCK: If you note in item 2 of that letter on that page, at this point in time, December 2nd, the consultant actually recommended option 1. But clearly we're missing something in the technicalities and the pricing as to why that option fell off the table. 466 MR. LOKAN: And maybe Mr. Rushlow can tell us why option 1 was rejected. 467 MR. RUSHLOW: The only thing I can think of is at one point Carlos Electric did install some underground duct banks from where the substation was proposed to the southwest corner of the property where Hydro One would have come to. And so, therefore, the only thing I can think of is that -- it's -- it couldn't have included everything. That's all I can say. I don't have that in front of me right now, so I can't tell you exactly why. LKM Engineering, our consultant, advised us that option 2 was the way to go. 468 MR. LOKAN: Although, in this letter, your consultant says, "We recommend to pursue with option 1." 469 MR. RUSHLOW: But I don't have the information of what option 1 was. 470 MR. LOKAN: Did you ever get competitive quotes on the item C, the 44 kV system, including substation, or was it just Carlos Electric? 471 MR. RUSHLOW: Again, that would have been the LKM Engineering, the consultants, that would have done this. And as far as I know, Carlos would have been the only one. 472 MR. LOKAN: Thank you. Those are my questions. 473 MR. SOMMERVILLE: Ms. Lea. 474 MS. LEA: Thank you. 475 CROSS-EXAMINATION BY MS. LEA: 476 MS. LEA: I have a few questions. Mr. Starck or Mr. Armstrong, I wonder if you could give the Board a fairly explicit description of the service area amendment that you are seeking in order to connect this particular customer on an urgent basis. 477 There are a number of requests in your original submission with respect to service area amendments, and they are not all before us today, I understand, but maybe they are. And I need a good description. Either is it an area you're seeking, or merely an address of this customer, or what is it precisely you're asking the Board to do today in order to enable you to connect this customer? 478 MR. STARCK: I'll suggest that we're asking the Board to do precisely what it did with the Bowmanville Elementary School and the Bell Boulevard Veterinary Clinic. This is a request to connect a specific customer in a very specific location. It is not a generic, licence area issue whatsoever. 479 MS. LEA: Okay. So in those -- I'm sorry, I don't have those two other decisions before me. Did the Board list an address as the licence area amendment or did it list a metes and bounds description? What sort of thing was it? 480 MR. STARCK: My understanding, it's an address, probably matched with the physical description of that property. 481 MS. LEA: Okay. And what address and physical description does the Board need in order to complete the order that you're seeking? 482 MR. STARCK: I would ask Mr. Rushlow, perhaps, to provide the legal description of the client, of the customer. 483 MS. LEA: Okay. You don't have to provide it to me at this moment on the stand. But I just wanted to let you know, before the end of today, we need the exact description of the amendment that you're seeking on your licence. 484 MR. ARMSTRONG: It is provided in my original application. 485 MS. LEA: It is, okay. Can you point that to us, please. 486 MR. ARMSTRONG: Tab 3 on page 2 of the letter dated January 28th, 2003. 487 MS. LEA: Okay. So what you're seeking today -- I guess I perhaps didn't understand this description. Do all of these three things relate to the same property? 488 MR. ARMSTRONG: Yes, that's correct. 489 MS. LEA: And does the Board need to include these three paragraphs or descriptors in order to accurately describe the property? 490 MR. ARMSTRONG: That's correct. 491 MS. LEA: Okay, thank you, that's helpful. 492 MR. ENGELBERG: Mr. Chairman, may I ask two questions to clear up some confusion in my mind as a result of the questions just asked? 493 MR. SOMMERVILLE: Sure. 494 MS. LEA: Sure. 495 FURTHER CROSS-EXAMINATION BY MR. ENGELBERG: 496 MR. ENGELBERG: Mr. Rushlow, did I understand you to say to the representative of the PWU that the contractor had already built something in order to connect to the Hydro One system at the southwest? 497 MR. RUSHLOW: What you heard was that we did construct the duct bank to the southwest corner of the property which was at a point where we were going to turn to go to Veridian. We stopped it at that point because underground services in that area were completed. 498 Underground services along the south end of the property were not started at that point so we didn't need to proceed. But in the end, they did start; we had to proceed and finish the duct bank to the southeast corner at Veridian's call because of underground services that had to be completed at that time. 499 MR. ENGELBERG: Thank you. My second question is, if you would turn to tab B.2.2, and tab number -- the document after tab number 3 at B.2.2. It's an exhibit to the Hydro One submission. There's a letter from Leipciger Kaminker to Hydro One, dated November 8th, 2002. 500 MR. STARCK: Is that in Hydro One's submission? 501 MR. ENGELBERG: Yes, it is. 502 MR. ARMSTRONG: We don't seem to have a B.2.2. 503 MR. ENGELBERG: B.2.2, tab number 3. 504 MR. SOMMERVILLE: So the letter dated -- an e-mail -- no, it's a letter, I guess. I don't see a date. 505 MR. ENGELBERG: November 8th, 2000-- 506 MR. SOMMERVILLE: November 8th, yes. 507 MR. ENGELBERG: Have the witnesses located that? 508 If you turn to the third page of the document, where it has "Option 1" at the top. This is what arose out of my friend's cross-examination. Option 1 is Veridian Connection; option 2 is Hydro One. You've located that? 509 MR. RUSHLOW: Yes. 510 MR. ENGELBERG: Okay. Under option 1, item number 1 underneath that says what Veridian Connections will supply and install; correct? 511 MR. RUSHLOW: Yes. 512 MR. ENGELBERG: And if you go down to option 2, item number 1 says what Hydro One will supply and install; correct? 513 MR. RUSHLOW: Yes. 514 MR. ENGELBERG: If you go up to Veridian, item number 2 under Veridian says, "Electrical contractor shall include in contract the following," and it has all the items that the electrical contractor will do; is that right? And if you go down to the option number 2 for the Hydro One, there's also an item number 2, "Electrical contractor shall include in contract," and it has what the contractor will do in those circumstances. 515 MR. RUSHLOW: Mm-hm. 516 MR. ENGELBERG: Are you telling us that, with the Veridian proposal, the work that the electrical contractor is supposed to do is included in the price and the work that the electrical contractor would have to do for the Hydro One proposal is not included? 517 MR. STARCK: That's the way I understand it. If I may be -- 518 MR. ENGELBERG: I understood that to be the evidence earlier. But how do you tell from this page that everything is inclusive in the connection to Veridian, despite all the work to be done by the contractor, and nothing is included in the Hydro One work? 519 MR. STARCK: Veridian has offered to the customer -- I'm not sure whether it was presented to the consultant or the customer directly, I believe it was presented to the customer -- and I believe a copy of the offer, or at least a summary page of the offer is included in the evidence somewhere. But it was -- it is clearly spelled out, and I believe the customer is clearly under the understanding, the right understanding that the Veridian offer will provide the utilisation voltage level at the customer's building wall, if you will, where the customer requires the power. 520 So in fact Veridian's offer, the 127 or $128,000, and I'm referring to an earlier document we just looked at, indicative numbers being something in the order of 17,000 for item 1 of that citation you had and 111,000 being item 2. And, yes, Hydro One was just that first part, and then the customer got part 2, the contractor part separately. 521 MR. ENGELBERG: Okay. But we wouldn't have been able to tell from this page; is that correct? 522 MR. STARCK: That's a snapshot from the customer's own electrical drawings. They are not our drawings, nor, I think, Hydro One's. 523 MR. ENGELBERG: Thank you. 524 MS. LEA: Thank you, Mr. Chairman. I'll proceed. 525 FURTHER CROSS-EXAMINATION BY MS. LEA: 526 MS. LEA: Just to reiterate some facts which I think are clear on the record, but just to get them crystal clear. I think the proposal is to build a new building on this site and to demolish the existing Hastings County Manor; is that right, Mr. Rushlow? 527 MR. RUSHLOW: That's correct. 528 MS. LEA: What's the time frame for the demolishing of the old Manor? Can you give us an idea of the time frame for the building of the new one and when you're going to move the residents and the sort of roll-out of the whole plan. 529 MR. RUSHLOW: The original time frame was that the new facility will be completed by February of 2004, and the move-in date would be in February. Demolishing the old building was supposedly to start roughly around June -- 530 MS. LEA: Of 2004? 531 MR. RUSHLOW: Of 2004, yes, and completed within, say, by the end of July. 532 MS. LEA: And you're using the word "original." Have your plans changed? 533 MR. RUSHLOW: Well, we've -- we're behind schedule approximately six weeks at this point waiting for different things. 534 MS. LEA: Okay. So do I understand correctly that until that old Manor is -- well, just before it's demolished, I would presume, Hydro One will continue to serve it along its 8 kV facility? 535 MR. RUSHLOW: That's correct. 536 MS. LEA: Okay. 537 Mr. Starck, I understood from something that you said that it wasn't going to be possible to serve the new facility from the old 8 kV system. Can you elaborate on that, please. What are the requirements of the new building that are going to be different from the old building? 538 MR. STARCK: The electrical demand, the electrical consumption, if you will, and the level, the amounts calculated by the Manor's consultants and submitted to both Hydro One and to ourselves are in excess of my professional knowledge of what an 8 kV system can handle. 539 MS. LEA: Okay. So it's not possible to serve the new Manor off the old line, then? 540 MR. STARCK: Exactly. And I'm suggesting that's why Hydro One concluded a -- the 44 option was their -- their choice. 541 MS. LEA: Okay. So if -- if Veridian connects the new facility, and the old facility is demolished, Hydro One will be losing a customer. 542 MR. STARCK: That's a given. That was initiated by the construction of the new facility by Hastings County Manor. 543 MS. LEA: Will there be any use made of those old 8 kV assets if Veridian connects the new facility? From Veridian's point of view, you would not be seeking to acquire assets from Hydro One? 544 MR. STARCK: Not at all. 545 MS. LEA: Okay. 546 MR. STARCK: They continue to serve the surrounding customers. 547 MS. LEA: All right. 548 There was a suggestion made by Hydro One's counsel about the application of section 3.2.7 of the Code, which is the one that deals with giving a rebate or refund to connecting customers if another customer connects along the line. There's a reference in there to a five-year period. Now, I understand that you also implement that section of the Code, you've indicated, with respect to your expansion facilities. 549 In your way that you implement it, does the five-year period start to count from the initial building of that line and initial connection of the first customer, or does the five-year period run from the time a second customer connects? 550 What I'm trying to get at is if in your application of the Code -- I'm not asking you to speak to anyone else's -- if the Hastings County Manor attached three years along in the original five-year period, would he have five years to wait for a new customer to attach and get a refund, or only two years to wait for a new customer to attach and get a refund, in your implementation of the Code? 551 MR. STARCK: That provision of the Code is a tricky one to implement, and the applicant -- 552 MS. LEA: It's unique in the Code. 553 MR. STARCK: Yes. The application of the economic calculations that go with it are also tricky and interesting to implement. 554 It's my understanding, the way we would -- we operate, that there's a five-year connection horizon that begins to tick the day the offer is made. And with the offer goes the results of the economic modelling, the economic calculation that sets out how much the LDC is able to invest, given its rates, and how much the customer must support from a shortfall. So that five years starts ticking from the date of the offer. 555 If a second customer connects to that facility, there's a new five-year clock that starts to tick, the way I understand it, for that second customer. 556 MS. LEA: Okay. Thank you. 557 Mr. Rushlow, did Hydro One ever make you any offer that would allow you to avoid that amount that would have to be paid to the existing customer along the line? 558 MR. RUSHLOW: Not to the best of my knowledge. 559 MS. LEA: Okay. And you would know if such an offer had been made? 560 MR. RUSHLOW: The consultants would have told me. 561 MS. LEA: Okay. I gather from your testimony that the rate differential between the two utilities was not an issue for you in deciding which utility you preferred? 562 MR. RUSHLOW: No. 563 MS. LEA: I'd like to discuss with the panel at large the possibility of an interim solution here. Has Veridian considered any kind of connection that could be made on an interim basis, or could you discuss the pluses and minuses of such an option. 564 MR. STARCK: I guess, as was suggested before, an interim connection, some form of temporary service that would meet the customer's requirements to finish construction and, perhaps, even to open the facility that is different than either the offer made by Veridian or the offer made by Hydro One would be a cost to the customer and then would be an additional overall cost to this project that the customer would have to fund. 565 MS. LEA: Can you be a little more explicit about that. Why would it be different than a final connection? 566 MR. STARCK: Well, I'm assuming you're suggesting that some form of temporary installation be made in order to provide power to the customer. 567 MS. LEA: Well, frankly, I don't know what I'm suggesting, because I don't know the facilities. 568 MR. STARCK: Okay. 569 MS. LEA: I'm asking you to assist the Board in either determining whether there is an interim solution that's possible, what the parameters of that would be, or there is not. And if not, I need the reasons for it. 570 MR. STARCK: The technical proposals from Hydro One and Veridian are both mutually exclusive; they are both completely different. They come from different directions, they involve different voltage levels, different types of construction, and different equipment. Were the Board to consider an interim resolution to this and allow one of the LDCs to go ahead and service them subject to a possible reversal at a later date, that then implies that the customer pays twice. Pays not only the first servicing installation, but presumably also, then, the second one, if there was a reversal. 571 So that's why we've concluded that technically there's no way to do this on a temporary basis. 572 MS. LEA: If Veridian were to connect to the customer, would you have to spend the amount of money that is referred to in the evidence, the $127,000? Would the customer have to spend that to achieve that initial connection? 573 MR. STARCK: Yes. 574 MS. LEA: And I'd presume that the utility would also be spending some money in this regard. 575 MR. STARCK: For Veridian, this is a connection rather than an expansion. 576 MS. LEA: Okay. 577 MR. STARCK: And under our conditions and service, and as, I think, contemplated in the Code, the entire cost of a connection is borne by the customer. 578 MS. LEA: Okay. 579 Mr. Rushlow, you've indicated that you've already done some duct work, I think you said; is that correct? 580 MR. RUSHLOW: Yes. 581 MS. LEA: Moving towards an electrical connection? 582 MR. RUSHLOW: That's correct. 583 MS. LEA: And can you be specific on the map as to where that has occurred, please. 584 MR. RUSHLOW: On the map, the underground duct work -- 585 MR. SOMMERVILLE: Could you show us, Mr. Rushlow. Just hold the map up and show us -- 586 MR. RUSHLOW: Okay. This is the map. This is Dundas Street. The duct work now runs from the east corner of our property across to the west corner, and then straight back to approximately this area here. 587 MS. LEA: And was that route chosen to accommodate other facilities besides electricity? Did I hear you say that or -- 588 MR. RUSHLOW: There's other underground services in the area, sanitary sewers, storm sewers, water lines, Bell, CableView. They're all in the same area. And we were working on that area at the time that we installed the duct bank down the west end of our property, so we had to install it at that time. 589 And then we waited on the south end of the property until something could be arranged or figured out, who was going to supply the power, or who we were going to choose. And it come to the point where the underground services for the front end of the property were proceeding, so we had to put the duct bank in at that time. Make our choice and do it. 590 MS. LEA: So the duct bank accommodates service from Veridian? 591 MR. RUSHLOW: From Veridian. 592 MS. LEA: And how much did you spend in order to get that done? 593 MR. RUSHLOW: Exact costs? 594 MS. LEA: No. No. Certainly not the exact cost. Just a ballpark. 595 MR. RUSHLOW: I'm just going to ballpark it. Twenty-five? 596 MR. STARCK: Over 30, something in the area of 30 -- 597 MR. RUSHLOW: Thirty-some thousand. 598 MS. LEA: Okay. And do you know if there are other costs to you besides the 127 that we've already heard about for Veridian to make the connection? Other costs to you of completing the connection with Veridian? 599 MR. RUSHLOW: Not to the best of my knowledge. That's complete. 600 MS. LEA: Okay. If the Board's decision in this matter is to allow Hydro One to continue to serve that area, and you would therefore be their customer. What ducting would have you have to install, or what facility would you have to install in the way of duct work, for the moment, in order to accommodate service from Hydro One? 601 MR. RUSHLOW: On Hydro One, I believe they could probably tap into the existing duct work only at the southwest corner. 602 MS. LEA: At the southwest corner. 603 MR. RUSHLOW: The southwest corner of the property. The west of the duct bank would have been for nothing. 604 MS. LEA: Okay. Now, I understand that it was -- was it Hydro One that told you that you had to have private transformation equipment on your property? 605 MR. RUSHLOW: I believe it is. I believe it's Hydro One. 606 MS. LEA: In any event, that was your understanding, that if you were going to be served by Hydro One, your understanding was that you needed a transformer on the property. 607 MR. RUSHLOW: At our cost, yes. 608 MS. LEA: Yes, okay. And do you recall being told about the transformation allowance? 609 MR. RUSHLOW: Again, are we talking the 60 cents? Is that what we're talking about? 610 MS. LEA: I think that's what we're talking about, yes. 611 MR. RUSHLOW: I have read it in the documents, yes. 612 MS. LEA: Thank you. Now, sir, apart from any additional costs which you may incur, or sunk costs which you may not recover, is an interim solution a problem for you -- I think I heard you say something about uncertainty about costs being a problem. Is that an issue for you as well; that is, that not knowing what your final cost will be, even if you never have to spend them? Is that an issue for the Manor? 613 MR. RUSHLOW: I believe the issue is the cost that we do know. That's the issue. The issue right now, we know that Veridian, firm, 128. Right now, Hydro, unfirm, almost $600,000, with a possible 50 percent plus or minus on that. 614 MS. LEA: I guess what I'm trying to ask you, sir, is the following: If the Board -- and I don't know whether this is possible or not, but if the Board made some kind of interim order that would not require you to pay any costs now, but you remain in the position of not knowing what costs you would pay in the future, would that be a problem for you? 615 MR. RUSHLOW: Major. 616 MS. LEA: What problem? 617 MR. RUSHLOW: We don't have the money. I mean, the project is down to $30 million, and we don't have 600,000 or anything to go above. We would have to go to the County and ask the County for the additional funds if they could give them to us, which I doubt, or we have to start taking away from the residents to pay for this electrical service. 618 MS. LEA: Okay. Has Hydro One suggested to -- not just yourself, anyone on the panel can answer this question -- has there been the suggestion of an interim solution put by Hydro One? 619 MR. STARCK: It's my understanding that both counsels did kick that around. Our counsel certainly discussed with us whether there was a possibility of coming up with some kind of an interim plan that wouldn't impact the customer in order to allow the servicing to proceed and their project to proceed but not to prejudice the decision, whether it stays Hydro One or Veridian. And it was my understanding that counsel concluded with our sort of technical support there was no reasonable solution to that. 620 MS. LEA: Mm-hm. I may have misunderstood. I thought I heard Mr. Engelberg earlier today suggest that there might be an interim solution. If you are not aware of the proposal, then I'm not going to ask you about it. If you are aware of what that proposal is, I'd invite your comments on it. But if you're not sure of the details, then I guess we'll have to leave it. 621 MR. STARCK: I am not. 622 MS. LEA: Okay. One moment, please. 623 Thank you very much, gentlemen. Those are my questions, Mr. Chairman. 624 MR. SOMMERVILLE: Thank you, Ms. Lea. 625 QUESTIONS FROM THE BOARD: 626 MS. SPOEL: I'd just like to follow up, if I might, on the question of the duct work that you've installed along the southern boundary of the property. And I -- I understand that you went ahead and did that work because you had other servicing that was being done at the same time, presumably in the road allowance that runs along the boundary; is that correct? 627 MR. RUSHLOW: That's correct. 628 MS. SPOEL: What other kind of work was being done at that time? 629 MR. RUSHLOW: The parking areas, the storm sewers. We have a storm septor (sic) that's in the same area, water lines, cable, telephone, sanitary sewers. 630 MS. SPOEL: And what would the cost have been if you had not done the work along the southern boundary? What would the likely cost implications have been if you had waited and done it later, once -- if Veridian were successful in getting approval from the Board to connect you? 631 MR. RUSHLOW: I'm honestly not sure that you could. You would have to be working through gas lines, items that are stationary and can't be moved. So what you would end up with is duct work going down, up, down, up, and you probably wouldn't be able to pull the cables. 632 MS. SPOEL: And when was that work actually done? 633 MR. RUSHLOW: It was in the fall of the year, exactly the date, I'm not sure. I'm going to guess somewhere around November. 634 MS. SPOEL: That's all. Thank you. 635 MR. SOMMERVILLE: I just want to clarify a couple of things with Mr. Rushlow. 636 In terms of your analysis as to which company you are going to use, were you -- at what point did you become aware that you may have a choice with respect to Hydro One or Veridian? When did that crystallise in your mind? 637 MR. RUSHLOW: When the consultants came to me with the costs for Hydro One. 638 MR. SOMMERVILLE: And that would have been somewhere in March of 2002, spring of last year? 639 MR. RUSHLOW: It could have been. Could have been. 640 MR. SOMMERVILLE: In your analysis as to which company you were going to use, I take it it didn't include any consideration of what the ultimate rate picture might be for the Manor, what you would pay on an ongoing rate basis? That wasn't something that you took into account? 641 MR. RUSHLOW: We did look at it. We did look at the rates, but the overall concern was the cost of the initial -- 642 MR. SOMMERVILLE: The capital cost. 643 MR. RUSHLOW: Yes. 644 MR. SOMMERVILLE: And in terms of that capital cost, did you take into account, have you got anything that shows us that you took into account the cost of the transformer allowance, for example? 645 MR. RUSHLOW: I'm not sure what you're asking me for. 646 MR. SOMMERVILLE: Did you -- in considering the capital cost that you were being asked to address, did you take into account the transformer allowance that you would have been entitled to in doing that assessment? 647 MR. RUSHLOW: And we're talking the 60 cents -- 648 MR. SOMMERVILLE: Indeed. Did you take that into account? 649 MR. RUSHLOW: Yes. Yes. 650 MR. SOMMERVILLE: Do you have anything that shows your cost breakdown, and when that 60 cents may have reached a point of interest for your organisation? 651 MR. RUSHLOW: Personally, no, because I didn't really know I was coming into this until yesterday. 652 MR. SOMMERVILLE: Okay, fair enough. When you were doing your analysis, did you consider with some precision or care the idea that you may be entitled to a rebate for subsequent customers? 653 MR. RUSHLOW: Yes, we did know that. 654 MR. SOMMERVILLE: And did you do a financial breakdown of any kind as to how that would play into the decision of the County in choosing its supplier? 655 MR. RUSHLOW: We didn't do a financial breakdown. But now we're talking somewhere between March and, let's say, September of 2002. 656 MR. SOMMERVILLE: Right. 657 MR. RUSHLOW: In that time period, we never even had a contractor confirmed for the construction because the construction cost was too high. We didn't sign our contract with the contractor until September 6th, I believe it was, 2002, after a $2 million cost-cutting venture between the County and the contractor to get the price down to what we could afford. 658 MR. SOMMERVILLE: You didn't have a green light for the project at all? 659 MR. RUSHLOW: Not at that time. 660 MR. SOMMERVILLE: Okay. But in going through that exercise, you didn't sort of compare -- you didn't look at the comparison of these options with that rebate number in mind. 661 MR. RUSHLOW: We looked at it with it in mind, but we still looked at capital first. 662 MR. SOMMERVILLE: Okay, fine. When you did the construction in the fall of 2002 -- 663 MR. RUSHLOW: Yes. 664 MR. SOMMERVILLE: -- you indicated in your evidence that you decided that Veridian was going to be your supplier at that time. 665 MR. RUSHLOW: Yes. 666 MR. SOMMERVILLE: And that you built the underground duct work with that in mind; is that right? 667 MR. RUSHLOW: Yes. On the west side of the property, at the time that we built that was not when we had final decision. I believe it wasn't done at final decision for Veridian. We built that because of services being put in. 668 MR. SOMMERVILLE: Fair enough. When did you make the final decision and therefore the final decision with respect to the rest of that duct work? 669 MR. RUSHLOW: I believe it was roughly around October. 670 MR. SOMMERVILLE: And how much money was wrapped up in that duct work that was conducted -- that was attributable to the decision to go with Veridian? How much money was involved in that? 671 MR. RUSHLOW: Again, I'm ballparking, 25 to 30, somewhere around there. 672 MR. SOMMERVILLE: Okay. Thank you. That's good. Thanks. 673 The other area that I'm interested in is the question of urgency, Mr. Rushlow. You've indicated to me that the project is -- should resolve in, say, February or March of 2004 with the transition from the old building to the new building? 674 MR. RUSHLOW: Correct. 675 MR. SOMMERVILLE: And you're going to build the new building between now and February or March of 2004? 676 MR. RUSHLOW: That's correct. 677 MR. SOMMERVILLE: And when all of the patients can leave the old building and take up residence in the new, then you're going to demolish the old building starting, say, March of 2004? 678 MR. RUSHLOW: No, it would be more around June. 679 MR. SOMMERVILLE: Around June? 680 MR. RUSHLOW: Yes, we have to give a time period to remove excess equipment and stuff out of the building. 681 MR. SOMMERVILLE: Right. I guess my question is: Is it required, and you understand that the Board is interested in ensuring that you get what you need in order to proceed, but that we preserve as much as possible the opportunity to deal with applications of this nature, this kind of service area amendment, on the basis of principles that are going to be developed in a broader hearing. You understand that that's kind of the background to our -- the case today. Perhaps not? 682 What I'm getting at is that if we can find an interim solution that does not prejudice your requirement, that's something that we wanted to do. And my mind is drawn to the idea as to whether the construction project, per se, which is what we're really talking about until, say, February of next year, does that require the full 13.8 kilovolt service? 683 MR. RUSHLOW: I believe it does. This building is going to have to be up and operable -- systems, heating systems, everything, lighting systems for the building, for construction purposes. 684 MR. SOMMERVILLE: Okay. And I guess I'm wondering at what point in the construction process that's really required? I mean, we have an existing system right now that is going to be in place until February or March of 2004, which is the 8 volt system, and I'm wondering if that, as a measure to take you into the fall of 2003, whether that 8 volt system isn't adequate to the purpose of the construction project. 685 MR. RUSHLOW: The old 8 volt system has no effect on the new construction at all. That's just on the existing facility. 686 MR. SOMMERVILLE: And you're not talking about energizing the site, per se, until 2004? 687 MR. RUSHLOW: No. No. The site will be energized roughly around August of this year. 688 MR. SOMMERVILLE: For what purpose? 689 MR. RUSHLOW: For heating the building over winter, for running the mechanical systems, for the construction. I mean, the contractor is liable to keep that building heated and the mechanical systems running. 690 MR. SOMMERVILLE: So the building that we're talking about is the new facility? 691 MR. RUSHLOW: The new facility. 692 MR. SOMMERVILLE: And is that built now? 693 MR. RUSHLOW: It's in -- it's being built right now. It's not -- 694 MR. SOMMERVILLE: Okay. Those are my questions. Thank you. 695 Do you have any further evidence, Mr. Chan? 696 MR. CHAN: No, but I'd like to, I guess, clarify a couple of points with respect to the panel. 697 MR. SOMMERVILLE: Fair enough. 698 RE-EXAMINATION BY MR. CHAN: 699 MR. CHAN: Mr. Rushlow, is LKM Consulting an independent company? 700 MR. RUSHLOW: Yes, they are. 701 MR. CHAN: Independent of -- let me clarify that -- of the Hastings County Manor? 702 MR. RUSHLOW: Yes, they are. 703 MR. CHAN: And do you trust the opinion of the consultant for which -- your board has hired? 704 MR. RUSHLOW: Very much so. 705 MR. CHAN: Do you think that the consultant would consider, I guess, whatever data that would be available to it before it renders a decision to you? And before you answer that, if you can, I guess, go through some of the data that this consultant would have considered in light of what's been said today. 706 MR. RUSHLOW: In the data of what, of Hydro? 707 MR. CHAN: With respect to the connection or the alternative choices for connection. 708 MR. RUSHLOW: The consultants would have looked at all options that were open to us, and they would have brought the options that they felt that were to our -- to our benefit, and we have reviewed those options. And then it would have been up to Hastings County, Hastings Manor, to make a decision of who they're going to talk to. 709 MR. CHAN: What is your understanding as to which option the consultant advised you to go with? 710 MR. RUSHLOW: Well, I don't think it took the consultant to advise us on that one. I mean, Hastings Manor and Hastings County decided on their own when they looked at the total package from each provider. And we actually made the decision, which concurred with what LKM was going to advise us with. 711 MR. CHAN: Would you be willing to have your board confirm their decisions in that regard with respect to, I guess, all the data provided to them -- 712 MR. RUSHLOW: Could you say that again? 713 MR. SOMMERVILLE: I think Mr. Rushlow is in a position to speak for the board at this stage. Unless someone raises that as an independent issue, I don't think we need to invite that kind of confirmation. 714 MR. CHAN: Okay. 715 MR. SOMMERVILLE: If it becomes an issue, we'll deal with it. 716 MR. CHAN: Okay. I think there is just a bit of a confusion here with respect to some of the correspondence provided to the Manor with respect to the options that they listed out for the board to consider. And what I'm trying to ask Mr. Rushlow is, is he willing to, you know, speak to the consultant as to their, I guess, process in processing the information they received with respect to the two offers. 717 MR. RUSHLOW: Am I willing to? 718 MR. CHAN: Yes. 719 MR. RUSHLOW: By all means. 720 MR. CHAN: Now, would you be -- if required, would you be willing to provide that information to the Board? 721 MR. RUSHLOW: Yes. 722 MR. CHAN: Okay. You also mentioned -- Ms. Lea questioned you on the things that put you behind schedule, and you answered her question using the term "different things," which put you behind schedule. Can you please elaborate for the Board what different things you were referring to? 723 MR. RUSHLOW: Some of the -- some of the different items that put us behind was, number one, weather. I mean, we were working through winter. Number two was services -- existing services not located where they should have been, and so, therefore, our underground contractor that was providing the new services, it took the better part of probably four weeks to locate a lot of the services and then change the information on the drawings, because the elevations of sanitary and storm all were changed, because the surveyor that did the surveying at the beginning of the project didn't give exact locations. 724 So that was the majority of the delays. 725 MR. CHAN: And my final question: Could you, I guess, show on the map that you have how Hydro One would tap -- actually, how Hydro One would physically tap into this duct bank, which has been the subject of a lot of discussion. How would that physically happen? 726 MR. RUSHLOW: From what I understand, Hydro One's pole existing at the front of our property is right at the southwest corner of our property, and half a kilometre down to the west is Stream. 727 So they would have to install poles along Dundas Street to this section here and then go down the pole, and an underground duct bank would be added from the pole to the existing splice box that we have on that corner. 728 MR. CHAN: What's your understanding of that cost? 729 MR. RUSHLOW: True cost or a guess? 730 MR. CHAN: Give a guess. 731 MR. RUSHLOW: Guesstimate for that work only, 50,000. I'm guessing, because I really don't know. 732 MR. CHAN: Those are my questions. 733 MR. SOMMERVILLE: Thank you. It's now 12 -- is that all of your evidence, Mr. Chan? 734 MR. CHAN: Yes, Mr. Chair. 735 MR. SOMMERVILLE: Thank you. 736 Mr. Engelberg, do you intend to call witnesses? 737 MR. ENGELBERG: I do intend to call witnesses. 738 MR. SOMMERVILLE: I'm going to suggest that we break now and reconvene at 1:30. 739 And, Mr. Lokan, is it your intention to lead evidence? 740 MR. LOKAN: There will be no evidence from the Power Workers'. 741 MR. SOMMERVILLE: So we will reconvene at 1:30. Thank you very much. 742 --- Luncheon recess taken at 12:15 p.m. 743 --- On resuming at 1:50 p.m. 744 MR. SOMMERVILLE: Please be seated. Thank you. 745 Mr. Engelberg. 746 MR. ENGELBERG: Mr. Chairman, I'd like to call the three Hydro One witnesses. Have they been sworn in? They are, from the front of the room to the back of the room, Mr. Rick Stevens, Mr. Walter Kloostra, and Mr. Ray Gee. 747 HYDRO ONE - PANEL 1; STEVENS, KLOOSTRA, GEE: 748 R.STEVENS; Sworn. 749 W.KLOOSTRA; Sworn. 750 R.GEE; Sworn. 751 MR. ENGELBERG: I would like to file the three CVs for the three witnesses for Hydro One, please. 752 MS. LEA: Mr. Engelberg, is that acceptable that they be labelled as one exhibit? 753 MR. ENGELBERG: Yes, that's fine. 754 MS. LEA: That will be Exhibit C.2.4, curriculum vitae for the Hydro One witnesses. 755 MR. SOMMERVILLE: C.2.5? 756 MS. LEA: C.2.4, I have. 757 EXHIBIT NO. C.2.4: CURRICULAE VITAE FOR HYDRO ONE WITNESS PANEL 1 758 EXAMINATION BY MR. ENGELBERG: 759 MR. ENGELBERG: Gentlemen, I don't propose to take you through your CVs. But could each of you, from Mr. Gee on, just describe your job function at Hydro One and what you do. 760 MR. GEE: I'm the manager of work management and deployment in our lines and forestry service operations. I'm responsible for work programming, the scheduling, the resourcing for execution of work in the field. I've had 17 years distribution experience, and I'm a resident of the City of Belleville. 761 MR. ENGELBERG: Thank you very much. 762 Mr. Kloostra. 763 MR. KLOOSTRA: My name is Walter Kloostra. I have twenty years with the predecessor and currently Hydro One in the electrical industry. I'm currently manager, network strategies, and essentially that means that from an asset manager point of view, I support regulatory matters. My previous experience as well has gotten me involved in operations management and distribution engineering. 764 MR. SOMMERVILLE: Thank you. 765 MR. STEVENS: Hi, Rick Stevens, director of development strategies with Hydro One. I have also about twenty years of experience in the industry, primarily with Ontario Hydro, and now Hydro One. Previous background, most predominantly in financial planning and also I have spent a lot of time on retail rate design. I've actually been involved directly as one of the taskforce members of the development of the unbundling model that we're using today. And also, the acquisition of the 89 utilities, I was responsible for doing the unbundling of the rates for them as well. 766 MR. SOMMERVILLE: Thank you. 767 MR. ENGELBERG: Thank you, gentlemen. 768 Now, I understand that as a result of the evidence that we heard in morning, in particular the evidence concerning the construction schedule of the new building at Hastings Manor and the timetable for the construction and the construction needs, as well as the Board's interests in exploring a possible interim solution, that Hydro One does have an interim solution to propose that would take this project through to the time that full power is needed by the facility. So if you could lead off and explain what that proposal is, Mr. Gee. 769 MR. GEE: Yes, sure. 770 If I could refer you to the evidence, I believe it is -- 771 MR. CHAN: Mr. Chair, could I just, I guess before Mr. Gee begins, I would like to indicate that the parties have spoken with respect to this particular proposal, and if the Board requires, I'd like the Board to note that the customer has, I guess, a response in those regards after this evidence is led in, or is brought forward by Hydro One. 772 MR. SOMMERVILLE: You would have an opportunity for redirect evidence, Mr. Chan, and we'll cross that bridge when we get there. Thank you. 773 MR. GEE: If you can refer to, under the tab B.2, and it is -- B.2, tab 2 -- I'm sorry, tab 3. There is -- 774 MR. SOMMERVILLE: Is this the Veridian evidence, Mr. Gee? 775 MR. GEE: It's Hydro One evidence. There's a letter -- 776 MR. ENGELBERG: Tab number B.2, and it's at tab 3 after B.2.2. It's the letter from Leipciger Kaminker dated November 8th, 2002, that we looked at this morning. It's addressed to Hydro One. 777 MR. GEE: That's correct. On page 2 of that letter there is a load calculation chart which indicates the demand load in kilowatts for the various months of the year. You can see that that shows the load profile that the consultants have told us that they expect the facility to have, and it is that design load that the connection has been designed to. However, I think, as we've discussed here, with the facility not being into full operation until next summer, it would be highly expected that not that full load would materialise. 778 So our interim solution is not providing this full load at this time. We believe from our experience that we can have a solution that would give 90 percent of this load for the months where it indicates 8.25, and probably 75 percent during the months that show June, July, August and September. 779 If you were to go through one, two, three, four more pages, there's a page that shows a load calculation chart that says "base price" at the top of that. 780 MR. SOMMERVILLE: Indeed. 781 MR. GEE: You can see a load calculation chart in the bottom. These indicate the loads that make up that load calculation. You can see that kitchen and laundry equipment are two loads that are fairly significant. It would be our expectation that until the Manor was fully operational that those loads wouldn't happen. There would also be a question of whether you need full air-conditioning load. 782 From our view here, we think an interim solution is possible, if, in fact, we supply 90 percent of the load during those months and 75 percent during the peak months. 783 If I may go to the chart, our interim solution. This is the Manor property right here, this dotted line. We have an 8 kV line on the southwest corner of this property. This chart shows it in the wrong spot; it's slightly down in the corner. We actually have 8 kV around the southwest corner of this facility. We could build a temporary line of a few overhead spans directly to where their eventual station transformer would be located. We could install 500 kVa transformer, pole mounted, at that location. That size of transformer would be able to meet those loads I discussed earlier. 784 From that spot we could run secondary cable into their service room, and they could go. When and if there was a permanent solution, we would take down that line. When the other was in place, we'd be able to reuse the transformer; we'd be able to reuse poles and wire, what would have been invested is the labour to install that and the labour to remove that, which -- our estimate is about $5,000. 785 In that case, what it does, it does not quite meet the full load there, although we think it is very probable that would be enough, and there would be a cost to the customer of $5000 until we got to the full, combined hearing. 786 MR. SOMMERVILLE: Okay. 787 MR. ENGELBERG: Those are my questions of our witness panel on this particular point. Perhaps it would be a good time if Mr. Chan, or anybody else, wished to ask any questions before we go forward with the rest of the evidence. But I'll leave that up to the Board. 788 MR. SOMMERVILLE: I think it's probably best if you continue, Mr. Engelberg, and then Mr. Chan and others can question on your examination-in-chief as a whole. 789 MR. ENGELBERG: That's fine, thank you. 790 MR. SOMMERVILLE: Thank you. 791 MR. ENGELBERG: Could you tell me, please, whether Hydro One is in agreement with the applicants that the new building of Hastings Manor requires some sort of connection promptly? 792 MR. KLOOSTRA: Yes, we do agree. 793 MR. ENGELBERG: Is Hydro One prepared to provide that connection promptly, whether it be the temporary solution you've proposed or the permanent? 794 MR. KLOOSTRA: Yes, indeed. 795 MR. ENGELBERG: Has Hydro One delayed the customer in any way? 796 MR. KLOOSTRA: Not that we're aware of. 797 MR. ENGELBERG: Okay. What would Hydro One build in order to connect the customer on the permanent solution basis? 798 MR. KLOOSTRA: Hydro One, in its proposal, has indicated that it would construct about 490 metres of 44 kV line along Dundas Street West. Now, what has not been indicated as such is that we'll do that along an existing pole line. So this isn't a new pole line; this is an existing pole line that will be rebuilt. 799 MR. ENGELBERG: I'm sorry. Are you saying that there wouldn't be any -- you wouldn't be putting poles down any street where there weren't already poles? 800 MR. KLOOSTRA: That's correct. 801 MR. ENGELBERG: And what sort of connection would that be, the 490-metre connection? What would the facilities consist of? 802 MR. KLOOSTRA: The facilities would consist of wood poles along Dundas Street with aluminum 556 or 336 wire. It would cross the street, and it would terminate on a pole previously identified by the other parties in the southwest corner of the Veridian -- I mean, of Hastings Manor's property. 803 At that point it would drop down and enter into the not yet constructed duct bank that will cross the property to their substation. 804 MR. ENGELBERG: All right. Now, I believe we heard this morning that the construction cost quoted by Hydro One that the Veridian -- Veridian's proposed customer Hastings Manor would have to pay to Hydro One was in the neighbourhood of $46,000; is that correct? 805 MR. GEE: Yes, that's correct. 806 MR. ENGELBERG: Now, I think it's fair to say there was -- it was mentioned this morning during the evidence and, perhaps, the cross-examination that the proposal was plus or minus; that it wasn't a fixed quote in the same way that the Veridian quote was. Could you explain if that was true, and if so, why? 807 MR. GEE: Yes, it is true that that was not a fixed price quote. The consultant was given the option of us conducting some field engineering -- 808 MR. ENGELBERG: I'm sorry. When you're talking about the consultant, is that Hastings Manor's consultant? 809 MR. GEE: Yes, I'm sorry. That's Hastings Manor's consultant. It was given the option of us performing some field engineering, and in doing so, we would be able to remove a lot of the unknowns, be able to come up with a higher quality estimate. And when we did so, we would offer a fixed price. 810 Our policy is that the customer would pay for the engineering fees in those cases. With our service territory, we have large tracts of undeveloped land, and we get thousands and thousands of inquiries in any given year about providing service, many that don't go. Part of our screening-out process is to have a customer who is serious provide the cost for some field engineering to allow us to get a higher quality estimate and a fixed price. We offer at no fee a lower quality estimate that is of no cost, and it has some uncertainties, typically the plus or minus 50 percent. 811 And so I think it's important to realize that when we've talked about the total cost here being plus or minus 50 percent, I believe we know the rebate is fairly firm. The plus or minus 50 percent is done on the $46,000, so there is not the huge uncertainty that some might have thought. 812 MR. ENGELBERG: When you provided the quote of the $46,000, plus or minus, to Hastings Manor, at the same time did you give the amount of $365,000 for the rebate? 813 MR. KLOOSTRA: Yes, we did. 814 MR. ENGELBERG: And after you presented both of those numbers to Hastings Manor or to their consultant, did they come back to you later for a firmer quote on the $46,000 construction portion? 815 MR. KLOOSTRA: No, they didn't. 816 MR. ENGELBERG: Did they indicate to you after receiving the figures of $46,000 for the construction and the $365,000 rebate as to which direction they were going to be proceeding in? 817 MR. KLOOSTRA: Not that we're aware of. 818 MR. ENGELBERG: Could you tell me, and perhaps it would be Mr. Kloostra. Could you tell me what facilities Hydro One has in the area and how Hydro One does the planning and design of facilities in its service area? 819 MR. KLOOSTRA: Sure. 820 If I could refer the Board and the audience to B.2, Hydro One Networks' submission, item 2. And in that submission behind tab 2, there is a map similar to the one shown on the easel, and I'll use that for reference. The first map that you have, in fact, is a regional map, and it shows a blow-up inset in the lower half of the map which depicts what you see against the wall. 821 On each of these maps, you'll note two colours of line, a red line depicting 44,000 kV line supply, and a purple line indicating the 8,320 volt supply that Hydro One Networks has in the vicinity to the west of Belleville. Specifically as well, Hastings Manor is located on the map within a dotted red line and yellow colouring, and it locates Hastings Manor relative to our distribution system. 822 You can see from those maps that, indeed, we do have 44 kV supply at a neighbouring customer, which is 490 metres from Hastings Manor along Dundas Street. In addition, we have the 8,320 volt LD facilities surrounding Hastings Manor, and that is the line which we just proposed an interim solution from. 823 As Mr. Axel pointed out earlier, we would typically not connect permanently to that 8,320 volt system, because it wouldn't accommodate the full load that -- as indicated by the consultant and, hence, the need to go to our 44,000 volt system. 824 Now, I would like to point out a couple of other things with respect to the assets that exist and the fact that they are there to serve existing customers and new load. Clearly, the loss of Hastings Manor would, indeed, subtract load from our system, load that already has been planned and facilities have been built to serve customers. By the loss of Hastings Manor, the load currently served off of the 8,320 volt system finds its way back to a transformer station, which is served by the same 44,000 volt system that emanates from the Belleville TS, which serves both Hydro One Networks and Veridian. 825 I'd be -- I would take any questions at this point with regards to the clarity of this illustration, if you like. 826 MR. ENGELBERG: The question I'd like to put forward to the witnesses is we've spoken about the loss of -- possible loss of Hastings Manor as a customer and the assets in the area. In general, what effect does it have, if any, on Hydro One ratepayers as customers are lost or new customers are not obtained inside the service territory when facilities have been planned and designed for them? 827 MR. STEVENS: I guess this specific example is twofold: First of all, loss of that load, load we have to recover that existing capacity over a -- over a much smaller base. As Mr. Kloostra indicated, if we do not connect a new customer, then, in fact, we're stranding an additional part of our 44 kV system, because, in fact, it goes back to the same source. 828 Similarly, we do plan on a regional basis, and we do plan to meet the loads of an area defined by what we believe to be our service territory. So any changes to that, specifically on an ongoing basis, would have a detrimental and upward pressure on rates today and, you know, more substantially, the longer term. 829 MR. ENGELBERG: We heard some evidence this morning about two previous instances in which customers were connected where there was a boundary between Hydro One's service territory and Veridian's. Do you know about those? 830 MR. STEVENS: Yes. 831 MR. ENGELBERG: I believe one was an animal hospital and one was a high school. 832 MR. STEVENS: An elementary school. I think the main differentiating point here -- first of all, I will state we have a principle that we have adopted that basically says, if a neighbouring LDC can connect a customer at a lower incremental cost, and in fact it does not strand any of our facilities causing upper pressure on rates, that we would look at that as a feasible solution and entertain that. 833 In this case -- or, sorry, in the two specific cases, I think that was in fact the case. We were quite a distance from those customers. They were contiguous or very near to the Veridian facilities. We weren't stranding any assets. It seemed very logical that that connection would proceed. 834 This one is different. I've already mentioned one reason, in that the loss of the existing Hastings Manor not replacing with a new customer will strand facilities. As Mr. Kloostra mentioned, we do have capacity in the area to serve our distribution territories currently defined, and there is of course also the issue of the neighbouring customer who has paid substantial amount to be connected, and has a contract with us for refund of contributed capital. 835 I think those are the main points that differentiate between the two customers, or the two sets of customers. 836 MR. ENGELBERG: We also heard this morning some evidence about the transformer that would need to be purchased by Hastings Manor in the event of a permanent connection to the Hydro One system, and there was some discussion of transformer allowance which I believe Mr. Rushlow referred to as the 60-cent item. Could any of you explain to us how that works. 837 MR. KLOOSTRA: Sure. I'll take a stab at it. 838 We received this evidence this morning and we haven't had an opportunity to review some of the costs associated with that evidence. What we couldn't find there was -- were the basis for the business proposition around the costs associated with the transformer in Hydro One's case, and we suspect it was not included in the assessment. When a customer owns its own transformer, it receives a 60 cents per kilowatt demand use in each and every month that customer is connected to the grid. So based on the loading that the consultant has provided us, we would -- we would anticipate that they would receive nothing less than 6 to $7,000 per year of refund from Hydro One Networks. 839 So given that the timing planned frame -- the timing -- excuse me, I'm muddling my words here. Given the business horizon that was mentioned earlier today of 25 to 30 years, that would indeed provide the customer with upwards of $180,000 worth of refund, and would cover the cost of the reported estimate for the transformer and transformer station at Hastings Manor. 840 MR. ENGELBERG: I have no further questions of my witnesses. 841 MR. SOMMERVILLE: Thank you, Mr. Engelberg. 842 Mr. Lokan, why don't we -- 843 MR. LOKAN: No questions. 844 MR. SOMMERVILLE: Thank you. 845 Mr. Chan. 846 MR. CHAN: If I could have a brief moment. 847 MS. LEA: Unless you would like me to proceed, sir. I could do that if it would help my friend. 848 MR. CHAN: Yes. 849 MR. SOMMERVILLE: Sure. 850 MS. LEA: Okay, now I need a moment, sorry. 851 CROSS-EXAMINATION BY MS. LEA: 852 MS. LEA: Gentlemen, I wonder if you could give us more detail about the interim proposal that you have put forward to us. First of all, I don't think that was anywhere in your evidence filed, right, or did I miss it? 853 MR. KLOOSTRA: It wasn't in the evidence. 854 MS. LEA: It was a proposal you have evolved today, or just recently? 855 MR. KLOOSTRA: We heard from the Board that there was a matter of urgency, and we heard that an interim solution that would move the issues to the proceeding in the fall would be desirable, and so we developed this proposal and discussed it with the others here today. 856 MR. GEE: If I may add, the point that helped bring this up was the whole discussion of the timing of when people were in, the discussion and the answers around June of 2004. I think some of that timing also really brought up the idea that maybe that full load wasn't required right away and why it was relatively new. 857 MS. LEA: That's fine. The reason I ask is that we heard from your counsel that you didn't have any quarrel with the fact that an urgent connection was needed and you reiterated that in your evidence. But I understand what you disagree, possibly, with the applicant, is that you disagree about how much of the load is urgent. Would that be a correct characterisation of your disagreement? 858 MR. KLOOSTRA: Yes. I think you're interpreting correctly what we tried to convey. 859 MS. LEA: You're giving evidence that, on the basis of your experience, you have a better idea of what loads will materialise than possibly Veridian or the customer. We haven't heard from them yet on your proposal, but that's your evidence, is it? 860 MR. KLOOSTRA: We're just providing some suggestions around what we've seen in the past with construction of facilities of this magnitude. Typically on cross-over day, you'll see full load at an institution, but during construction phase, they'll commission any number of pieces of equipment as they construct these pieces of equipment, and as such you won't see full load on the facility. 861 MS. LEA: All right, thanks. Let's, then, go back to the evidence you helpfully pointed out, which I think was in the Veridian submission where you -- 862 MR. STEVENS: It was in our submission. 863 MS. LEA: It was in yours, thank you. If we can go back to that load chart. The second chart you pointed out to us, where was that located? I think it was tab 3, was it? 864 MR. KLOOSTRA: It was behind tab 3, and under the fax header it shows page 7 of 9. 865 MS. LEA: Okay, thanks. We see here a load calculation. Can you be more specific, please, about the timing of your proposal exactly? How much would you be providing, and what months? And what aspects of this load calculation do you think will not materialise as quickly as the consultants' report might indicate? 866 MR. GEE: Earlier we had heard that Hastings Manor would be interested in an August connection for power, and we believe we can meet that date. That would not be problematic at all. 867 MS. LEA: So an August connection. As I understand it, looking at these two charts, you'd be providing 75 percent of the required load -- required according to the consultant -- in August? 868 MR. GEE: For a full load of the Manor, yes; 75 percent in the month of August, when it was fully occupied and in use. 869 MS. LEA: I'm sorry? 870 MR. GEE: Sorry, I guess the point I was trying to make is one Mr. Kloostra made. August of this year? 871 MS. LEA: That's what I understand. 872 MR. GEE: In August of this year, we would not expect that it would need a full load. But by August of any given year, yes, we would meet approximately 75 percent. 873 MS. LEA: Sorry, I'm not getting it. 874 MR. KLOOSTRA: I think what Mr. Gee is trying to convey is that Mr. Rushlow this morning indicated to us that the residents wouldn't be moving into the new facility until sometime in 2004. 875 MS. LEA: That's correct. 876 MR. KLOOSTRA: Approximately June of 2004. 877 MS. LEA: I think it was earlier than that. 878 MR. KLOOSTRA: March of 2004. 879 MS. LEA: I think he needed a connection, very clearly, by August of this year, 2003. And then there was some evidence, as I understood it, that he would anticipate a moving date beginning in February of 2004, and that he would consider shutting down the old Manor in March and demolishing it possibly in June. 880 Now, I may have that wrong, but that's my recollection. So let's take it a little slowly, then. August of 2003, that's this year, right, the consultant has suggested that -- I'm looking now at the customer information and load profile in the Hydro One evidence, tab 3 -- of kilowatt demand of 1,100 kilowatts. And you're saying that you can provide 75 percent of that in August of 2003? 881 MR. GEE: That's correct. 882 MS. LEA: All right. And then you would continue to provide 75 percent of the 1,100 in September; correct? 883 MR. GEE: That's correct. 884 MS. LEA: Then in October, the estimate here goes down. October is 825 kilowatts. You're saying you could provide what percentage of the 825 -- 885 MR. GEE: Approximately 90 percent. 886 MS. LEA: About 90 percent from October onwards. 887 MR. STEVENS: It may be easier to understand -- I think what we're talking about is supply and capacity at 750 kVa. 888 MR. GEE: It's constant. Our supply is constant at 750. 889 MS. LEA: Okay, that's helpful. Thank you. 890 MS. LEA: When I look at this customer information and load profile, this is for the 2003 year we're looking at, is it? Because it says "estimated ready for service date April 2002," and I don't know exactly what was being contemplated here. Do you? 891 MR. GEE: I think that's the point I was fumbling over. What we usually get from the consultant is their end-state full load -- 892 MS. LEA: So it's any given year, these months. 893 MR. GEE: That's correct. This is what they would expect when they are fully loaded and operational in a given year, and it is thus our belief that in August of 2003, if they are just doing a connection, we would not expect that full amount, and that was the point I was fumbling over. 894 MS. LEA: All right. That's fine. Now I understand you, and I'm sorry if I misunderstood you earlier. So in August of 2003 -- okay, now, by the time residents are going to be moving into the Manor, the new one, suppose that to be February, you would not, obviously, be able to supply the full 825 kilowatts required at that juncture through your 8 kV line. 895 MR. GEE: That's correct. That's correct. And our temporary solution is based on an expectation that combined hearings would be done at the end of the year. 896 MS. LEA: Okay. How much time would Hydro One require to do the work that would convert it from this interim solution into the full solution on your 44 kV line to give this customer all the power he needs? 897 MR. GEE: We could complete that work in about eight weeks, would be my estimate. 898 MS. LEA: So you would need at least two months after a Board decision to complete the construction to full service? 899 MR. GEE: That would be correct. 900 MS. LEA: Okay. Now, let's talk about the types of load that you don't think this customer is going to require. 901 If we go -- I think it's the third page on from there, did I hear you say that you did not anticipate, in August 2003, for example, the full air-conditioning or heating load would be needed? 902 MR. GEE: Yes, that's correct. Typically what would happen is that the -- at some point, the air-conditioning would have to be installed. It would be tested and commissioned. There's a need to run it. But while construction was going on, they -- they would probably not need full air-conditioning load. 903 MS. LEA: And you also mentioned kitchen and laundry equipment as a possible place where you don't think load might be required to the extent listed here. 904 MR. GEE: That's correct. We believe those are loads that very much are tied to having occupants in the building and using them. 905 MS. LEA: All right. Now, I gathered from what my friend Mr. Chan said that the customer here does not agree with your assessment. Do you know what the points of disagreement are, or do you want to speak to those? 906 MR. GEE: Yes, I can. I don't believe the major disagreement was around the loads. I think the discussion was that that was a -- very probable. I think they had some other concerns around their total knowledge and expectations of what's happening with their project. 907 MS. LEA: Let's talk a little bit about what the cost to the customer would be of getting that interim solution into place. Does he need a transformer? 908 MR. GEE: For the interim solution, we would be willing to supply the transformers, add a -- transformers of 500 kVa, which would supply the load that we had indicated. Hydro One would supply that. And we would be able to reuse the transformers afterwards, so there would be no cost for the transformation for the temporary service. 909 MS. LEA: What would there be costs -- what would involve costs? 910 MR. GEE: We would be looking to recover our labour to do the temporary installation and the eventual removal. We believe that we would reuse the material and transformers and would not have to charge for that. 911 MS. LEA: All right. So it's the labour cost, and you estimated that cost, if I understood you correctly, at $5,000? 912 MR. GEE: Yes, that's correct. 913 MS. LEA: And that's to put it in -- all right. So you estimated that labour cost at about $5,000? 914 MR. GEE: Yes, that's correct. 915 MS. LEA: And I understand that whoever ends up serving the customer in the long term, the put-in and take-out cost would be incurred by the customer, because Hydro One would not continue to serve through that line, even it retained the Manor as a customer; is that correct? 916 MR. GEE: Yes, that's correct. 917 MS. LEA: Okay. Thank you. I wasn't clear on what assets you said would be stranded if the Board decided to grant Veridian the service area amendment it requested. We're talking here about an expansion to a customer, and I'm not sure what upstream assets -- I think you were talking about upstream assets -- you labelled as possibly stranded. Can you assist us? 918 MR. KLOOSTRA: Sure. When I was at the diagram, I was referring to two systems: The 8,320 volt system that currently serves Hastings Manor and that which would be used for the interim solution. And we would lose that connection eventually, because the old Manor would be bulldozed, as we heard this morning. 919 MS. LEA: Can I stop you there. You're going to lose that connection whatever the result of the Board's decision; correct? 920 MR. KLOOSTRA: That's right. 921 MS. LEA: Okay. So that isn't an asset that's being stranded by the choice the customer is making. 922 MR. KLOOSTRA: That's correct. What we need to understand is that we're talking about incremental load here. Currently Hastings Manor takes load from Hydro One system, and with the construction of the new facility, they'll need some additional load over and above the current load they're taking from Hydro One. And it would be -- it would be the incremental load that we would lose in our system. Because currently the system is taking care of the load that we're serving. 923 MS. LEA: So you're losing incremental load, but is there a stranding of assets involved? 924 MR. STEVENS: I think the point we're trying to make is that we have the customer now, and the replacement of the customer at the existing -- the same property, same location. Losing the customer and then not getting back the incremental load, in fact, does strand capacity on our system, because the capacity is there. 925 MS. LEA: Okay. Thank you. One moment, please. 926 One of the contentious points, as I understand it, in this matter is the cost to the customer of the rebate to the existing customer on Networks' system, and you may have heard me ask the question of the Veridian witnesses earlier today. In your application or implementation of 3.2.7 of the Distribution System Code, when would the five-year date for which this new second customer attaches, would it -- could -- okay. 927 Does the five-year period start to run from the build of the line or from a second customer attaching that allows a rebate to that second customer? 928 MR. KLOOSTRA: We believe that when the second customer connects, they would be entitled to rebate for their portion of line for five years. 929 MS. LEA: For their portion of the line? 930 MR. KLOOSTRA: That's correct. And they would -- they would also be entitled to rebate from the original line for a period of time as well. 931 MS. LEA: Okay. Let me get this clear, then. There has been some 44 kV line built for the first customer, who is presently upstream of this customer that's before us today. So the first customer, the clock started to run on that line, I think, in the year 2000; correct? 932 MR. KLOOSTRA: Right. 933 MS. LEA: And how much of the cost that you wish to charge this customer for the DSC rebate is attributable to that portion of the line? 934 MR. KLOOSTRA: The Code speaks to distance of line and relative load being served from that line. 935 MS. LEA: Yes. 936 MR. KLOOSTRA: And I believe our calculation was completed based on that analysis. And so the 365,000 is the cost that would be returned to the adjoining customer based on that analysis. 937 MS. LEA: Okay. 938 MR. KLOOSTRA: So that's for the construction of the initial piece of the line. 939 MS. LEA: All right. 940 MR. KLOOSTRA: Not for the construction of the 490 metres. 941 MS. LEA: All right. Okay. Maybe you think I'm asking a more intelligent question than, in fact, I am. 942 MR. KLOOSTRA: Sorry. 943 MS. LEA: I'm trying to -- I understand the calculation in the Code and that there is a calculation to be made, and I don't doubt that you've made -- you've made that calculation. What I'm trying to understand is how long a period does Mr. Rushlow have to possibly get another customer on the line that will help pay him back? 944 And what I heard you say is that for the existing portion of the line -- and if you don't know the answer, you can tell me that -- but for the existing portion of the line, he has two years, basically, because the clock started in 2000. And if he's connected in 2003, he'd have until 2005. But for his new portion of the line, which I didn't think was part of the rebate, you see, and this is where I'm getting confused, he'll have five years. So if you could just help. 945 MR. KLOOSTRA: Two years for the originally constructed line to the adjoining customer. 946 MS. LEA: Okay. And what I was then trying to determine is the amount that we're calling the rebate in this case, the 325,000, something like that -- yeah. Is that all to do with the existing line? 947 MR. KLOOSTRA: That's correct. 948 MS. LEA: All right. So he has two years to get any rebate for the cost that he is paying for the use of that portion of the line? 949 MR. KLOOSTRA: That's correct. 950 MS. LEA: Okay. Thanks. 951 So the extension to that line and everything else that Hydro One is going to build for the customer is included in the $46,000? 952 MR. KLOOSTRA: That's correct. 953 MS. LEA: Okay. Thank you. 954 When you talked about the interim solution, you'd said that you would provide a transformer to the customer. If Hydro One eventually ended up serving the customer, you would take that transformer away and the customer would then be responsible for installing his own transformer; is that correct? 955 MR. GEE: Yes, that's correct. 956 MS. LEA: But you have not -- I haven't heard anybody at Hydro One say that they agree with the estimate of $183,000 to install that transformer. 957 MR. GEE: We haven't seen any details to be able to say that, and it raises some questions. 958 MS. LEA: You don't know how much it would cost them to do that, okay. One moment, please. 959 There was one other aspect of your evidence that I was just trying to make sure I understood. In several places in Networks' evidence you referred to the customer as an existing customer, and that's because you're presently serving the existing Manor; is that correct? 960 MR. KLOOSTRA: That's correct. 961 MR. GEE: Yes, that's correct. It's an existing customer, same address, same tax-roll lot. We just see it as an increase in load in the same location. 962 MS. LEA: But you're also -- if you're intending to provide a rebate to another customer on the basis of this customer's attachment, he is then an unforecasted customer for the purposes of the Distribution System Code. 963 MR. GEE: Yes, that's correct, in the same way we deal with customer who have service increases, service upgrades. So it is a common issue we deal with, existing customers requiring an additional supply. 964 MS. LEA: So it's -- an incremental load can qualify, in your view of the Code, as an unforecasted customer. 965 MR. GEE: Yes, that's correct. 966 MS. LEA: Thank you very much, Mr. Chairman. Those are my questions. 967 Thank you, gentlemen. 968 MR. SOMMERVILLE: Thank you, Ms. Lea. 969 Mr. Chan. 970 MR. CHAN: Thank you. I'll deal with the specific proposal near the end of my questioning, and hopefully that will give an opportunity for the customer to get back on and respond to -- 971 MR. SOMMERVILLE: What I would -- if I may indicate my expectation, you'll do your cross-examination and then Mr. Rushlow will have the opportunity, if you want to put him back in the witness box, to provide redirect evidence with respect to the propositions being made. 972 MR. CHAN: That's fine. 973 MR. SOMMERVILLE: Mr. Engelberg, do you have any comment about that order of proceeding? I think that's appropriate. 974 MR. ENGELBERG: I think that's very practical, Mr. Chairman. 975 MR. SOMMERVILLE: Thank you, sir. 976 CROSS-EXAMINATION BY MR. CHAN: 977 MR. CHAN: Mr. Kloostra, isn't it true that customers locate in and out of service areas at pretty much any given time? 978 MR. KLOOSTRA: Locate in and out? 979 MR. CHAN: In and out of service areas. You're referring to how the loss of, I guess in this particular case, the Hastings County Manor as being a strain on your -- I guess the over -- your load requirements, or a better way to put it, a strain on your specific projections as to the amount of load that would be taken by the customers in the area. Isn't it true that customers, those load requirements go up and down in any given year? 980 MR. KLOOSTRA: The number of customers that an LDC serves certainly does change over time. In this specific case, the customer isn't moving. The load isn't evaporating, in fact there's an incremental increase in load. So from a regional perspective, one needs to be able to plan for that kind of additional load. From a regional perspective, an LDC needs to ensure that it has adequate facilities and capacity in place for that expected load increase. 981 MR. CHAN: Thank you. You also mentioned, I guess, for the purposes of the particular map and how the poles have to be extended down, that you'd be using existing, rebuilt pole lines. 982 MR. KLOOSTRA: Correct. 983 MR. CHAN: Now, can you provide us some clarification of what exactly you mean by that. 984 MR. KLOOSTRA: Often utilities have facilities in place, and where there are needs of new customers or increasing needs of current customers, they may have to undertake construction to facilitate those needs. In this particular case, we have an existing pole line along Dundas Street. It doesn't have 44,000 volt supply on the pole line, and so what we're proposing is that pole line would be rebuilt to include 44,000 volt facilities on it to serve the customer. 985 MR. CHAN: And in rebuilding these pole lines, what you mean is, and correct me if I'm wrong, that you will have to just refurbish or bring these particular pole lines up to the standards for which they're required in order to bring the energy -- the electricity to the proper location. 986 MR. KLOOSTRA: I guess by rebuilding the facilities there, yes. 987 MR. CHAN: At what cost? How much is that going to cost? 988 MR. KLOOSTRA: I wouldn't speculate what those costs are, other than the cost that we presented to you in our submission. 989 MR. CHAN: And who do you propose would have to pay for these costs? 990 MR. KLOOSTRA: We've made an offer to Hastings Manor to supply them at 44,000 volts for a contribution of approximately 47,000 customers. 991 MR. CHAN: So essentially what you're saying is that you're proposing that Hastings Manor absorb those costs. 992 MR. KLOOSTRA: No. 993 MR. CHAN: What do you mean? 994 MR. KLOOSTRA: We need to provide them with supply, and this is expansion to their facility and so the Code requires that we estimate those costs and that the customer contribute to that expansion. And so that's our -- that's our cost to the customer. 995 MR. CHAN: Expansion to their facility? 996 MR. KLOOSTRA: Expansion to the LDC's facility. 997 MR. CHAN: To which LDC? Hydro One's? 998 MR. KLOOSTRA: Hydro One. 999 MR. CHAN: In order to accommodate this connection, despite the fact that a connection can be direct to Veridian in this case. 1000 MR. KLOOSTRA: Are you speaking about our expansion costs or are you speaking about something else? 1001 MR. CHAN: No. I'm speaking about, the expansion that you're talking about has to go down 500 metres, when in fact the direct connection can be made with Veridian's system a short distance away. 1002 MR. KLOOSTRA: I don't understand the question. I'm not sure whether you want me to speak to Veridian's costs or whether you want me to speak to Hydro One's costs. 1003 MR. CHAN: Well, I've already asked you to speak to Veridian's -- I mean Hydro One's costs. What I'm essentially saying is that there's a much shorter and more logical solution to this matter, and that solution is to connect directly with Hydro (sic) which does not require any, in your words, rebuilding of pole lines -- or rebuilding existing pole lines. Essentially what I'm saying is, with your expertise, and looking at your extensive CV here, would it not make sense to have a direct connection in this particular case? 1004 MR. KLOOSTRA: I believe not. I will like to say that the customer's interest is their incremental connection cost. They're interested in knowing how much it's going to cost them to connect to the grid, and there are -- there are -- there are economic evaluation models that are used to determine what contribution the customer must make for that expansion. And so Networks has undertaken that analysis and have provided the customer with a cost, and that's the cost that the customer will need to pay. 1005 MR. CHAN: That's fine. 1006 Now, you were mentioning that -- I don't believe it was Mr. Kloostra or Mr. Gee -- that there is currently an agreement or a contract between Hydro One and the large customer with respect specifically to the DSC rebate; is that correct? 1007 MR. STEVENS: That's correct. 1008 MR. CHAN: Can you show me a copy of this contract? 1009 MR. STEVENS: I think there's some of it in the evidence. I don't recall exactly -- forgive me, I have the old file here. 1010 MR. KLOOSTRA: I believe tab 6, under B.2.2. 1011 MR. GEE: Tab 6. 1012 MR. CHAN: This is the Board's letter -- this is the letter dated November 3rd of 2000; is that correct? 1013 MR. GEE: Yes, that's correct. 1014 MR. CHAN: And -- 1015 MR. GEE: In there you will see this is the contract signed with the neighbouring customer, and it refers to our conditions of service. And part of our conditions of service for the distribution system quote includes the protection of capital contribution. 1016 MR. CHAN: I don't see any here that -- anything here that -- and as you just testified to, that it explicitly says anything about a particular agreement between Hydro One and your large customer. I have the copy here with the blacked-out names that speaks specifically to that large customer's contemplation of expecting a rebate, DSC rebate in this particular matter. 1017 And from my understanding, you said that the customer, or, you know, correct me if I'm putting words in your mouth, the customer anticipates receiving this particular rebate and explicitly agreed to -- as a condition to signing this agreement that it was going to get one. 1018 MR. STEVENS: I draw your attention to the very last paragraph. It says he turned -- basically what it says is he turns over the line to us in accordance with our conditions of service. Part of our conditions of service include capital contribution protection, consistent with what's in the Distribution System Code today. 1019 MR. CHAN: Yes, but that doesn't say -- 1020 MR. STEVENS: We cannot put a specific amount there. 1021 MR. CHAN: This is the full contract, from my understanding? 1022 MR. STEVENS: This is what the customer signed, and then it relates back to our conditions of service. 1023 MR. CHAN: There's nothing else; is that correct? 1024 MR. STEVENS: There is nothing else. 1025 MR. CHAN: Thank you. 1026 MR. STEVENS: I just wanted to allude that we cannot put a specific amount, if you're leading towards the 365,000, because until we know where the customer might locate and what size of load, we would never know that amount in advance. 1027 MR. CHAN: No, I wasn't alluding to the 365,000 -- 1028 MR. STEVENS: Okay. Sorry. 1029 MR. CHAN: -- in this case. Thank you. 1030 Your brief indulgence. 1031 MR. SOMMERVILLE: Continue, Mr. Chan. We can listen and talk at the same time. 1032 MR. CHAN: Much better than myself. 1033 I'm going to stay with that -- I guess what we've just been talking about. In the area between this particularly large customer and Hastings Manor, there are no possible properties in this area that could potentially be hooked up to the 44 kV line; is that correct? 1034 MR. GEE: I would not agree with that assessment. If you were to go back to 2000, there are no new lands being developed here. Both the neighbouring company and the Manor, in fact, were existing customers who had an increase in service requirements. And thus, I would suggest that with the commercial nature of Dundas Street in Belleville that any other customers could proceed the same way. 1035 MR. CHAN: So are you implying, Mr. Gee, that if, in fact, the Board ruled today that Hastings Manor be connected to Hydro One and Hastings Manor would be required to pay for that DSC rebate that there's a high likelihood of the Hastings Manor recovering a part of that rebate for which now they're entitled to? 1036 MR. GEE: I wasn't speculating on the possibility. I was stating the facts that there have been three customers -- two customers in the last three years. 1037 MR. CHAN: From my understanding -- I guess Ms. Lea put it forward much better than I'm putting it forward now, but there's about two years left in that particular provision for which the -- that's left in order to get the rebate? 1038 MR. KLOOSTRA: That's correct. 1039 MR. CHAN: So if these two years expire, then Hastings Manor would not have the opportunity to recover any amounts under this DSC rebate; is that correct? 1040 MR. KLOOSTRA: Not -- not for the original amount that was used to construct to the adjoining customer. 1041 MR. GEE: But they would be eligible for the new amount, the 490 metres, for up to five years. 1042 MR. CHAN: Thank you. 1043 I'd like to turn now to the proposed solution. I do understand, and as I've mentioned before, that the Board has placed a degree of significance relating to finding an interim solution in this matter. Now, I'm a bit hesitant to go too far into the process, given that we might be touching on some without-prejudice, you know, settlement-type discussions; however, with that being said, a lot of it -- 1044 MR. SOMMERVILLE: We'll leave that up to Mr. Engelberg to stop you if he thinks that you're crossing the line, Mr. Chan. 1045 MR. CHAN: Yes, and with that -- 1046 MR. ENGELBERG: I can say right now Hydro One has no concerns about the release of anything that it's said, and Hydro One was careful not to say anything that Veridian has said. 1047 MR. CHAN: And in any event, a lot of the evidence that we -- Hastings Manor or that I let through today, it was also part of those discussions. So I guess it works well, and if it works for my friend, that's okay. 1048 I guess as a general question to any three members of the panel, do you have an intimate understanding of the personal nature of the customer's load requirements? 1049 MR. GEE: I would say we do not necessarily have a personal knowledge of the load, but I'm not sure exactly what that means. We have had a lot of experience in the business in dealing with large customers and dealing with consultants and load projections and what load actually materializes over what time. 1050 MR. CHAN: But you don't know what they need exactly? 1051 MR. GEE: I'm going only by what the consultant submitted to us for his load calculations which we used in our financial model and was linked to the financial contribution that the customer would have to make. 1052 MR. CHAN: And would I be fair in suggesting that the entity that would know this best would be the customer itself? 1053 MR. GEE: From my experience, I would say it's not the customer who would knows this the best, probably his consultant, his engineer, his discussions with the utility. That's our experience. 1054 MR. CHAN: The customer would not know the best? 1055 MR. GEE: That's correct. That is really why they hire consulting firms, engineers to do their work. 1056 MR. CHAN: In light of what you just said, the consultants and engineers or any third party that a customer hires to evaluate their particular needs are usually in a good position to provide the customer with advice that is up to the level -- the standards that a particular consultant is required to possess; is that correct? 1057 MR. GEE: I'm sorry, could you repeat that question. 1058 MR. CHAN: If a customer hires a consultant, do you think that consultant would be well versed in the areas for which they are hired to be consulting in? 1059 MR. GEE: I'm not sure I can answer that question. 1060 MR. CHAN: You also proposed that a temporary 500 kW transformer installation be put in place to provide 750 kilowatts of capacity, and recognizing that the customer's peak demand is projected for the summer months during times of high ambient temperatures, would operating these transformers at 150 percent of capacity conform with the manufacturer's -- or the recommendations, the manufacturer's recommendations? 1061 MR. GEE: I'm not sure I can answer that with regards to the manufacturer's requirements. However, it is very common for us to load distribution transformers to 150 percent on a short-time basis. 1062 We would not want to serve a customer full load at 150 percent all the time, but on a -- that is a reasonable loading for a distribution transformer for short periods of time. 1063 MR. CHAN: Would I be fair to suggest that if this 150 percent load stays, that it would have a detrimental effect on the reliability of the supply? 1064 MR. GEE: I'm sorry, can you expand on what you mean by "stays at 150 percent"? 1065 MR. CHAN: Well, if transformers are operating at 150 percent of rated capacity for an extended period, would that not have a detrimental effect on the reliability of supply? 1066 MR. GEE: I think there's two points there. I think the 150 percent loading of transformers is not an uncommon thing. We would not want to do it long term. Distribution assets are a long-term investment, and that's what you tend to worry about. 1067 The other fact is a customer's loads never run at one level constantly, never runs at one peak level constantly. The building will have demands that go up and down during the day, air-conditioning go on, people will sleep, and thus what you're suggesting is not what we would experience in the distribution business for loading of transformers. 1068 MR. CHAN: Is it Hydro One's standard business practice under its conditions of service to install temporary services on a labour-cost basis only? 1069 MR. GEE: We have -- we actually have a miscellaneous fee and a service to provide temporary service, so we do have that service that we offer customers. I would not say it exactly lines up with this scenario, but providing temporary services is a very common scenario. 1070 MR. CHAN: So no is the answer? 1071 MR. GEE: I think my answer was the answer, Mr. Chan. 1072 MR. CHAN: Does Hydro One's proposal not represent the subsidisation of Hastings County at the expense of other Hydro One customers, then? 1073 MR. GEE: Our proposal was that we were not going to be absorbing the $5,000 in costs. We were looking to that to be paid for the customer as part of his temporary service in our proposal. 1074 MR. CHAN: Do you agree that the issue of the transformer ownership allowance should be evaluated by the customer? 1075 MR. GEE: I believe if a customer is getting electrical service that they probably should look at life-cycle costs of their facility overall. They should look at their connection cost; they should look at allowances and fees that come. I understand Mr. Rushlow's intense pressure on his capital budget. Based on the question you've asked me, I believe there is a whole life-cycle cost here and, absolutely, the transformer allowance, as part of the overall cost to serve should be considered, in my view. 1076 MR. CHAN: So what you're saying is that it is a component of costs; right? 1077 MR. GEE: The transformer allowance should have been considered as part of the capital cost evaluation, yes. 1078 MR. CHAN: And shouldn't the customer be the one to evaluate that cost? 1079 MR. GEE: Yes. 1080 MR. CHAN: Thank you. I have no further questions. 1081 MR. SOMMERVILLE: Thank you, Mr. Chan. 1082 Mr. Engelberg, you have an opportunity for redirect questions at this stage. 1083 MR. ENGELBERG: I have no redirect. Thank you. 1084 MR. SOMMERVILLE: Thank you. Thank you very much to the witnesses for your very cooperative and able assistance. Thank you. You're excused. 1085 Mr. Chan, I understood you to be indicating that you were going to call Mr. Rushlow -- 1086 MR. CHAN: I'll be very brief. 1087 MR. SOMMERVILLE: Thank you. 1088 Mr. Rushlow, you are still under oath. 1089 VERIDIAN CONNECTIONS INC. - PANEL 1; RUSHLOW, RECALLED: 1090 C.RUSHLOW; Previously sworn. 1091 MR. SOMMERVILLE: I'm expecting, Mr. Chan, that your examination of Mr. Rushlow is directed to the interim solution and the proposal that's been -- 1092 MR. CHAN: -- suggested; that's correct. 1093 MR. SOMMERVILLE: Thank you. 1094 FURTHER EXAMINATION BY MR. CHAN: 1095 MR. CHAN: I'll make this easy for you. In light of the proposed solution by Hydro One, what are your comments with respect to them? You've heard, we discussed, I guess, prior to convening at this time, and you understand what Hydro One is suggesting in this matter. What are your comments with respect to that? 1096 MR. RUSHLOW: My comments are that this is just going to delay the process of whether we need to spend $500,000 or not. At the point today, if we need to spend that money, if we're forced into doing this, we can make cuts that are going to be cuts on the building that won't necessarily reflect right to the resident. We may be able to do cuts on landscaping, on building finishes on the exterior, on equipment for the new facility. 1097 If we make cuts later on, we're going to be too far into building that we can't make these cuts. We're going to make cuts on therapeutic tubs; we're going to lose handicapped showers, resident furnishes, new beds. Everything is going to be coming from the residents at that time so the residents -- that the residents will physically use at a later date. Today we might be able to make cuts somewhere if we're forced into this where they may not see it, and it will not affect them personally. 1098 MR. CHAN: That's it. 1099 MR. SOMMERVILLE: Mr. Engelberg? 1100 MR. ENGELBERG: I just have one question, Mr. Rushlow. 1101 FURTHER CROSS-EXAMINATION BY MR. ENGELBERG: 1102 MR. ENGELBERG: We went through the costs quite carefully this morning. We talked about the Hydro One proposal of $46,000; we talked about the Veridian proposal of 127. Then you mentioned that the -- it came out in evidence that the transformer was not included, and certain other things in the Hydro One amount because Hydro One had not been asked to give those numbers. Hydro One has said that the customer was responsible for those. Where does this 5 or 600,000 number come from? That's not the difference that we're talking about here, is it? 1103 MR. RUSHLOW: I thought I was brought up here to talk about your proposal. 1104 MR. SOMMERVILLE: Mr. Engelberg, I think the redirect is limited to a consideration of the interim proposal. Can you associate that question with that idea? 1105 MR. ENGELBERG: That's fine. If we're not going to be going there, but because the response included this item about the 5 or $600,000 extra to find, I did not believe that number was in evidence. 1106 MR. SOMMERVILLE: You can argue that, I think, on the basis of what's already in place, Mr. Engelberg. 1107 MR. ENGELBERG: Thank you. 1108 MR. SOMMERVILLE: Are those all of your questions? 1109 MR. ENGELBERG: They are. 1110 MR. SOMMERVILLE: Mr. Lokan? 1111 MR. LOKAN: No questions. 1112 MR. SOMMERVILLE: Ms. Lea? 1113 MS. LEA: No, thank you, sir. 1114 MR. SOMMERVILLE: In which case you are excused -- do you have any questions? I have no questions, Mr. Rushlow. Thank you very much. 1115 MR. RUSHLOW: Thank you. 1116 MR. SOMMERVILLE: We will have brief argument. It is now almost 3:00. I propose to give the parties a few minutes to compose their thoughts for succinct presentation, so we will rise until 3:10. Thank you. 1117 --- Recess taken at 2:58 p.m. 1118 --- On resuming at 3:12 p.m. 1119 MR. SOMMERVILLE: Mr. Chan. 1120 SUBMISSIONS BY MR. CHAN: 1121 MR. CHAN: If we were able to provide the Board with a practical interim solution today that would be fair to the customer requiring this connection, we would have. The Board has heard from the customer that a permanent solution is required, given the urgency of this matter. The customer needs power now, but if it is dragged kicking and screaming, the customer must know now so that they can start taking drastic measures to accommodate the costs associated with being connected to Hydro One. 1122 We think the interim proposal is suspect, and in any event, the customer is unable to properly assess this particular proposal without taking it back to his Board. 1123 There are three additional critical points that should be articulated here with respect to that proposal. 1124 Number 1, we believe that the interim solution does not give us confidence at all that it is a suitable interim solution. In any event, it would also have to be assessed by the general contractor in addition to the Board. 1125 Number 2, it provides no final price certainty for Hastings County, a principle that has been spelt out by the customer throughout the hearing today. 1126 And finally, and in any event, it still increases the cost associated with temporary supply to this customer. 1127 The importance of customer service, customer focus and benefits to the customer generally has been articulated throughout this hearing. In this critical connection hearing, the Hastings County Manor connection to Veridian would not only accomplish these objectives, but it will would do so without having an adverse effect on Hydro One's business -- a material adverse effect. 1128 We do believe that Hydro One is concerned with the best interests of the customer; however, it's sometimes easy to overlook that in some instances, such as the case at hand, it just makes sense for the customer to be served by another distributor. 1129 We've also heard today from a customer who has spoken loud and clear as to their wishes in this particular case. Mr. Rushlow used terms such as "cost," "service," and "community," but most importantly, he's just saying one thing: "I want the choice." 1130 The Hastings County Manor is one of these customers. Mr. Rushlow is here today not only to justify the choice but the manner in which he based it. There's something inherently wrong with that. 1131 Mr. Rushlow has also stated today that his consultants advised him of all aspects of the connection options. As a result of that information, the Hastings County Manor made a choice in consideration of all the issues facing the long-term care facility. They chose Veridian Connections Inc. 1132 Section 70(6) specifically states that there is no right of exclusivity to a service area. Its intention is to promote customer choice in all instances, including this particular hearing. 1133 Those are my closing submissions. 1134 MR. SOMMERVILLE: Thank you, Mr. Chan. 1135 Mr. Engelberg? 1136 SUBMISSIONS BY MR. ENGELBERG: 1137 MR. ENGELBERG: Thank you, Mr. Chairman. 1138 Hydro One's submission is that the interim solution proposed by Hydro One's staff with technical knowledge, which would cost approximately $5,000, is a reasonable solution that would work, that meets the customer's needs. And Hydro One would submit that the customer adduced no evidence against the practicality of the technical solution of providing power at the levels that Hydro One stated it could supply power during the entire construction period and up until the opening of the building. 1139 The only complaint by the customer is that a solution is wanted immediately for financial certainty, but no objection or criticism to the proposal; and therefore, in Hydro One's submission, the interim solution should be adopted. 1140 On the merits of the case, Hydro One submits that it is the licensed distributor. It serves the area. Its evidence shows that it has built its system in the area so as to be able to add new load as customer growth occurs. Hastings Manor is an already existing customer of Hydro One on the same piece of land as the new building. 1141 Hydro One's evidence was that its assets would at least be under-utilized, if not stranded, and that this has a negative impact on Hydro One and its ratepayers. Hydro One submits that the test that it must meet is not whether there is an immediate material effect on its entire ratepayer base, but what the effect of this type of connection and the loss of the use of the facilities can result in. 1142 Secondly, there's the matter of the Distribution System Code, section 3.2.7, which speaks of the entitlement of another already existing customer inside Hydro One's service territory. It is only -- as we pointed out in large part, that is the basis on which the decision was made by Hastings Manor for the new building to look to a way to avoid being responsible for contributing to that rebate. 1143 Now, we've heard today that the Veridian system can handle this customer and its load. I'd like to submit on behalf of Hydro One that the Hydro One system can handle it as well. 1144 The difference between the two abilities to handle the system is that when Hydro One designed, planned, and built its system, it was supposed to look to the future inside its service territory to the future of customer growth there, including the spot where Hastings Manor is adding a building. Veridian, as not being the licensed distributor for that area, was not entitled to design and plan its system for future growth inside that territory. 1145 So moving the customer to Veridian will result in an underuse of Hydro One's facilities, and is, therefore, not rational and not in the best interests of the ratepayers at large. If not moving the customer also results in an underuse of Veridian's facilities, in my submission, the Board should ignore that. 1146 Finally, there was evidence adduced today regarding the financial ability of Hastings County versus the financial ability of an already existing customer of Hydro One that is a for-profit business. In Hydro One's submission, the Ontario Energy Board Act goals do not speak of rectifying the distribution of wealth in the province through the determination of electrical connections, and if there were such a consideration, I would be submitting on behalf of Hydro One that the Board consider the interests of the 700 employees of the other already-connected customer as well as the new customer, Hastings Manor. 1147 Those are my submissions. 1148 MR. SOMMERVILLE: Thank you, Mr. Engelberg. 1149 Mr. Lokan? 1150 SUBMISSIONS BY MR. LOKAN: 1151 MR. LOKAN: Thank you. 1152 Like Hydro One, we would submit that the interim solution that is being proposed is preferable. This Board, in these particular circumstances, we submit, should have a strong bias towards adopting interim solutions where they are practical. We did not hear from the applicant any functional reason why the interim solution would not work. Their only concerns were those around financial planning. 1153 While their financial considerations may be unfortunate, there is a bigger picture to consider here. This is a province-wide issue involving many parties. The approach to be taken, generally, I'm speaking of here, towards service amendments and, in these circumstances, the financial concerns of this particular applicant, I'd submit, should give way. If there were functional limitations that made it impossible, that would be one thing; but if all they're talking about is their need to plan financially around a cost they may or may not have in future, that should not trump this process. 1154 In the alternative, if the Board does wish to make or find it necessary to make a final decision, we note that the applicant chose the expedited process and has sought to come before the Board in this expedited manner. The Board has thereby lost the advantage of hearing the broader range of submissions of all parties and stakeholders on the policy issues. We would submit that that should make the applicant's onus of convincing you somewhat higher. 1155 At the very least, even if it's not a higher onus, the applicant does have an obligation to come before this Board with the information and evidence that's necessary for this Board to make its decision. We suggest that the applicant has not met that onus. 1156 In terms of the real costs of the connection on the two competing proposals, we have some numbers from Veridian of $127,000 to implement their proposal. To that I would suggest you should add the $30,000 already spent, which was admitted in evidence to be money that, if you like, goes towards the Veridian proposal, leaving you with something in the range of $160,000 to connect their way. 1157 On the Hydro One side, there was a $46,000 figure in evidence for the extension of the lines. There was also some very unsatisfactory evidence about an additional cost for a transformer station. You heard the number 182,000, but the evidence, I would suggest to you, is very unsatisfactory in that regard, and you cannot rely on that number. 1158 The number was not even in evidence at all until today. It was not subject to investigation by Hydro One. It wasn't even divulged to Hydro One. They couldn't go and check it out, nor could any other party. It was not corroborated by any documents. There was no breakdown given. It was not apparently part of any tender process, nor were any competitive quotes obtained. 1159 And for all of those reasons, though you may have heard an offhand figure for what it might cost for a transformer facility, it's not one that you can rely on in any way. 1160 In any event, it appeared from the evidence that the customer may, through the 60-cent rebate mechanism, recapture those costs over the life cycle of the project, the expected life cycle of 30 years. As to the rebate, if the rebate is payable -- and it's certainly not clear from the contractual document -- to the other customer of Hydro One, it is because the Board has already decided in the Distribution System Code that that is the public policy of the province, that rebates should be payable in this kind of circumstance. 1161 And beyond that we adopt the submissions of Hydro One, particularly in the areas of stranding under-utilised assets and the need for regional planning. 1162 Thank you. 1163 MR. SOMMERVILLE: Thank you, Mr. Lokan. 1164 Ms. Lea. 1165 MS. LEA: I have no submissions to make, sir. There was one question, loose end, I suppose, that I should have asked earlier, but perhaps counsel could assist with at this time. 1166 If -- we've had several proposals of possible Orders that this Board could make. If the Board chose to make an order which amended Veridian's service area in its licence to include the property as described, would it be necessary at this time to amend Hydro One's licence to remove that, or do we propose to have an overlap on a temporary basis? Has anyone given any thought to this? Perhaps that's something that we can address at the time, if and when it becomes necessary. It's something that occurred to me. 1167 MR. SOMMERVILLE: There's no inherent vice to an overlapping licence -- 1168 MS. LEA: No, it's one of the issues on the -- in the main proceeding, and there's been no policy outlined for it. So perhaps we'll just leave it and, you know, if it becomes a question, we can deal with it. 1169 MR. SOMMERVILLE: Thank you, Ms. Lea. 1170 Mr. Chan, you have a right of reply. 1171 MR. CHAN: Oh, no, it was just in response to Ms. Lea's question. I think for purposes of this hearing, it would be an order that would specifically connect this customer, given the urgency and his reasons for the amendment. 1172 MR. SOMMERVILLE: There being no further submissions, what the Board proposes to do is to retire for a short time to see if we can arrive at a decision in this case. It is our hope to try to do that today so that the parties can leave here with a decision in hand. And I'm hoping that that's possible for us to do. 1173 So we will rise for 10 minutes and we will come back with a determination as to whether we can arrive at a decision, perhaps with a decision, and perhaps with a brief further adjournment so that we can -- having found that we can come to a decision, to come to that decision. If that's clear. I hope the reporter is able to follow that rather awkward syntax. 1174 So we will rise for 10 minutes to reconvene at, say, twenty to four. Thank you. 1175 --- Recess taken at 3:30 p.m. 1176 --- On resuming at 4:00 p.m. 1177 MR. SOMMERVILLE: Please be seated. Thank you. 1178 DECISION: 1179 MR. SOMMERVILLE: The Board has been able to arrive at a decision in this case. This is a very difficult case in many respects. I want to thank counsel, in particular, for their very able assistance today, and the witnesses who toiled bravely in the witness box. 1180 The Board, as we started in this case, has indicated the preference that all of the current service amendment -- service area amendment matters be considered within the context of the combined case which has the file number of 0044. We did recognise in the Procedural Order giving rise to that case that circumstances could materialise which would make a more expeditious handling of the given case necessary. This is such a case. 1181 The case, it seems to us, does require, and I think there was a consensus among the parties that this is a case that does require a resolution of some kind arising from today. 1182 If you'll bear with me as I find my scratchings. 1183 The interim solution that was proposed by Hydro One seems to us to be a very fair and apparently sincere attempt on the part of Hydro One to address the short-term needs of the consumer. Regrettably, we do not believe that the interim solution proposed forms a firm foundation or basis for the problem that confronts us in this case. 1184 We have three primary concerns with the proposal made -- very creatively and ably presented, may I say -- by Hydro One. Our concern with the interim decision proposed, first of all, has to do with the timing, the possibility that the completion of the generic proceeding may crowd the construction project in a manner that I think may be dysfunctional; and working to that kind of timetable, I think, is not really the kind of tension that either the consumer in this case requires or that really serves any of the parties. 1185 It's also true that the interim solution complicates the budgetary process of the consumer in a way that is, to use your word, Mr. Lokan, dysfunctional. 1186 And finally, we note that the Manor would be compelled to expend $5,000 in a manner which really does not go towards any portion of the final solution in this case. 1187 Accordingly, we cannot adopt the interim solution, however sincere and fairly it was created by Hydro One. 1188 Accordingly, the Board will make a determination in this matter as it concerns the licence amendment sought by Veridian Connections Inc. The application will be approved. The amendment sought is found to be in the public interest, pursuant to the Ontario Energy Board Act, section 74(1)(b). The licence territory of Veridian Connections Incorporated will be amended in accordance with the evidence filed by that company, to be found at A.2.1, at tab 3, page 2. 1189 In approving the application, the Board wants to emphasise, and we cannot do this strongly enough, that this decision ought not to be regarded as having a precedential value whatsoever. This case raises important issues involving virtually every aspect of distribution system planning. The issues raised are precisely the reason for the Board's determination to consider the issues in a broader proceeding. 1190 The Board had concerns respecting the underuse or stranding of assets, the reasonable expectations of upstream and downstream customers, the relevance of rebate entitlement, consideration of non-capital and capital costs in connection decisions, customer preferences, and, may I say, the acuity of the analysis giving rise to the customer preferences. All of these issues will profit from a more thorough consideration in the combined proceeding. 1191 In approving the application, the Board was influenced by the fact that the 13.8 kilovolt line, which forms the basis of the Veridian proposal, is right-sized for the application and offers a cost-effective solution for the customer at this time. 1192 In addition, the fact that Hydro One would require a rebate payment from the Manor to upstream distribution system customers creates a difficulty of considerable magnitude in this particular circumstance. 1193 Let me say that the fact that the Manor is a not-for-profit corporation has had no influence on our decision, nor has the size or character of the upstream distribution system customers. The Board cautions all concerned that parties should be extremely cautious about sinking funds into works on speculation of a particular outcome of a licence amendment application. Such funds are expended at that party's risk and should not be expected to be linked in any way to an amendment application. And any party counselling or undertaking such expenditures should assure that the constructor appreciates the rather perilous nature of such expenditures. 1194 That's our decision. I'd like to thank all the parties for their very able assistance. Are there any comments arising from the decision? 1195 With that, we stand adjourned. Thank you very much. 1196 --- Whereupon the hearing adjourned at 4:08 p.m.