Rep: OEB Doc: 12QQM Rev: 0 ONTARIO ENERGY BOARD Volume: VOLUME 3 14 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 14 MAY 2003 5 HEARING HELD AT TORONTO, ONTARIO 6 APPEARANCES 7 JENNIFER LEA Board Counsel GORDON RYCKMAN Board Staff JAMES FISHER Chatham-Kent Hydro JAMES WICKETT Municipality of Chatham-Kent MARY ANN ALDRED Hydro One Networks ANDREW LOKAN Power Workers' Union ANDREW LOKAN Power Workers Union 8 TABLE OF CONTENTS 9 APPEARANCES: [23] PRELIMINARY MATTERS: [34] EXPEDITED AMENDMENT REQUEST - CHATHAM-KENT HYDRO INC.: [52] MUNICIPALITY OF CHATHAM-KENT - PANEL 1; PAVELKA, BORDUAS: [53] EXAMINATION BY MR. WICKETT: [61] CROSS-EXAMINATION BY MS. ALDRED: [309] CROSS-EXAMINATION BY MS. LEA: [629] QUESTIONS FROM THE BOARD: [716] RE-EXAMINATION BY MR. WICKETT: [736] CHATHAM-KENT HYDRO INC. - PANEL 1; SCHWARZ, KENNEY, HOGAN: [777] EXAMINATION BY MR. FISHER: [781] CROSS-EXAMINATION BY MS. ALDRED: [952] CROSS-EXAMINATION BY MS. LEA: [1221] QUESTIONS FROM THE BOARD: [1449] FURTHER CROSS-EXAMINATION BY MS. ALDRED: [1472] RE-EXAMINATION BY MR. FISHER: [1547] HYDRO ONE NETWORKS - PANEL 1; STEVENS, KLOOSTRA, GEE: [1582] EXAMINATION BY MS. ALDRED: [1586] CROSS-EXAMINATION BY MR. FISHER: [1707] CROSS-EXAMINATION BY MR. WICKETT: [1738] CROSS-EXAMINATION BY MS. LEA: [1796] RE-EXAMINATION BY MS. ALDRED: [1845] 10 EXHIBITS 11 EXHIBIT NO. C.3.1: CURRIC ULUM VITAE FOR MR. SCHWARZ [846] EXHIBIT NO. C.3.2: MUNICI PALITY OF CHATHAM-K ENT CUSTOMER SAVINGS COMPARISON [916] EXHIBIT NO. C.3.3: CHATH AM-KENT HYDRO INC. SERVICE AREA RATE SCHEDULE [1476] EXHIBIT NO. C.3.4: HYDRO ONE NETWORKS - PANEL 1 CURRICULU M VITAES [1593] 12 UNDERTAKINGS 13 UNDERTAKING NO. D.3.1: (1) RECALCULATE SCENARIO 2 FOR THE 3,000 MEGAWATT CUSTOMERS ASSUMED IN THIS SCENARIO, REPLACING THEIR SERVICE CHARGE AND DISTRIBUTION DEMAND CHARGE WITH THE SERVICE CHARGE AND DISTRIBUTION DEMAND CHARGES THAT WOULD APPLY TO A TIME-OF-USE CUSTOMER IN THE RATE CLASS THAT YOU SAY YOU NO LONGER INCLUDE PEOPLE IN; [1537] UNDERTAKING NO. D.3.2: HYDRO ONE NETWORKS TO PROVIDE COST ESTIMATE TO SUPPLY ONE 27.6 kV LINE FROM THE M1 UP BLOOMFIELD ROAD TO THE PARK, AND A SECOND LINE FROM THE M18 SOUTH OF THE 401 TO THE PARK [1832] 14 --- Upon commencing at 9:34 a.m. 15 MR. SOMMERVILLE: Thank you very much. Please be seated. 16 Good morning, everyone. The Board has convened this morning in the matter of an application made by Chatham-Kent Hydro Inc. for an expansion of its service area to include certain premises identified as the Bloomington 401 Industrial and Commercial Park. The application has been assigned file number EB-1999-0216. The application is opposed by Hydro One Networks Inc. 17 This application is one of a number of service-area amendment applications which have been joined by the Board in a file which bears 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. 18 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. 19 It is the Board's preference to deal with the generic issues involved with the service area amendments in the combined proceeding. 20 The applicant in this case has made representations with respect to the urgency of the in-service requirement, and the Board will consider them today on the basis of the evidence adduced by all parties. 21 The primary issue facing us today is the consideration of the urgency of the in-service requirement. If the Board is not convinced that such urgency exists, it will defer its consideration of this case until the combined proceeding. If the Board does find that there is urgency in the in-service requirement, it will make whatever interim orders, and as light-handedly as possible, that commend themselves arising from the evidence. 22 My name is Paul Sommerville, and sitting with me is Cathy Spoel. May I have appearances, please. 23 APPEARANCES: 24 MR. FISHER: Good morning. James Fisher on behalf of the applicant, Chatham-Kent Hydro Inc. 25 MR. SOMMERVILLE: Thank you, Mr. Fisher. 26 MR. WICKETT: Yes, my name is James Wickett and I appear on behalf of the intervenor, the Municipality of Chatham-Kent. 27 MS. ALDRED: Good morning. My name is Mary Anne Aldred and I'm here on behalf of Hydro One Networks this morning. 28 MR. SOMMERVILLE: Ms. Aldred. 29 MS. LEA: Jennifer Lea for Board Staff. 30 MR. LOKAN: Andrew Lokan for the Power Workers' Union. 31 MR. SOMMERVILLE: Thank you, Mr. Lokan. 32 Are there any other appearances? 33 Are there any preliminary matters? 34 PRELIMINARY MATTERS: 35 MR. FISHER: Yes, Mr. Chair. As far as the intervention of the Power Workers' Union in this, as you indicated this morning, the proceeding is to determine the urgency of the critical connection. The Power Workers' Union has not provided any evidence with respect to the application by Chatham-Kent Hydro to amend its service territory. I do understand that it is an intervenor in the generic proceedings to be decided upon at a later date. And I submit that this is the -- the appearance of the Power Workers' Union in this case is contrary to the principles of natural justice in that the witnesses for the applicant and the Municipality are not prepared to -- have no idea what the position of the Power Workers' Union is in this regard. 36 MR. SOMMERVILLE: It's not uncommon, Mr. Fisher, that witnesses are exposed to cross-examination, the nature of which they don't know ahead of time. Are you suggesting that the Power Workers' Union ought not to be permitted to cross-examine in this case? 37 MR. FISHER: Yes, sir. 38 MR. SOMMERVILLE: I'll take that under advisement, and my colleague and I will consider that prior to -- prior to that eventuality. 39 Mr. Lokan, do you have submissions to make on the subject? 40 MR. LOKAN: Just briefly. As you know, we have been attending the other hearings this week. The Power Workers' Union does have a more direct interest in the outcome of the individual proceedings than perhaps some of the other general intervenors. We are generally supportive of Hydro One. We don't intend to lead any evidence. If it's of assistance to the Board, we would be content not to cross-examine any witnesses, but simply make some submissions at the end which we would anticipate would be quite brief. 41 MR. SOMMERVILLE: Are you undertaking to not cross-examine so that I don't have to deal with Mr. Fisher's proposition? 42 MR. LOKAN: Yes, that's fine. Sure. 43 MR. SOMMERVILLE: Board Staff, do you have any -- 44 MS. LEA: No, thank you, sir. 45 MR. SOMMERVILLE: Well, on that basis, I presume you're satisfied, Mr. Fisher. 46 MR. FISHER: Yes, sir. Thank you very much. 47 MR. SOMMERVILLE: Thank you. 48 Is that the only preliminary matter that arises? 49 Are you prepared to call evidence, Mr. Fisher? 50 MR. FISHER: My friend, Mr. Wickett is calling evidence on behalf of the Municipality first. 51 MR. SOMMERVILLE: Very good. The witnesses will be sworn. 52 EXPEDITED AMENDMENT REQUEST - CHATHAM-KENT HYDRO INC.: 53 MUNICIPALITY OF CHATHAM-KENT - PANEL 1; PAVELKA, BORDUAS: 54 J.PAVELKA; Sworn. 55 G.BORDUAS; Sworn. 56 MR. WICKETT: Mr. Chair, just one matter for the purpose of the record. The name of the business park or industrial park is actually the Bloomfield Industrial Park. 57 MR. SOMMERVILLE: Did I say Bloomington? 58 MR. WICKETT: Yes. 59 MR. SOMMERVILLE: I'm betraying my youth. Bloomfield, I beg your pardon. 60 MR. WICKETT: Thank you very much. 61 EXAMINATION BY MR. WICKETT: 62 MR. WICKETT: Mr. Pavelka, you are the chief administrative officer of the Municipality of Chatham-Kent; is that correct? 63 MR. PAVELKA: Yes, I am. 64 MR. WICKETT: And for how long have you held the CAO position, sir? 65 MR. PAVELKA: For four and a half years. 66 MR. WICKETT: And I understand the Municipality is developing a business park on the Bloomfield Road interchange on the 401; is that correct? 67 MR. PAVELKA: That is correct. 68 MR. WICKETT: And what decision-making process has been followed by the Municipality leading to the decision to develop the business park? 69 MR. PAVELKA: A rather lengthy process. In 1998, after the municipality was restructured, it focused on -- when 23 municipalities were brought into the one in order to benefit from the economies of scale, the benefits of being a larger municipal government rather than the small 23 entities, it focused on trying to reverse the population decrease, the migration away from -- by local businesses to other areas; and it tried to build a stronger economy, the local economy, creating jobs. 70 It then specifically went about retaining PricewaterhouseCoopers, an international consultant with emphasis on international, in order to enhance its business opportunities. Previously, because the City of Chatham, being the largest jurisdiction, never had a presence on the 401 because its property was not on the 401, there was no opportunity to have a business/commercial park in that area. So with this amalgamation, and then having the properties available to do so, the Municipality went about creating this business/industrial park. 71 PricewaterhouseCoopers was engaged to give us some direction, and the results of that study is quite a substantial -- what they titled the "Economic Opportunity Study", was to develop a 300-acre industrial/commercial park on the 401 in order to have a presence because of the transportation network corridor. 72 As well, PricewaterhouseCoopers study indicated that the Municipality should in fact have ownership of property in order to expedite sales of property to any kind of client. I mentioned earlier that the municipality has had a population decrease with that reduction in employment opportunity, so in fact this particular initiative is very, very significant in the municipality. It's, quite frankly, their penultimate goal to reverse erosion of jobs, elimination of population. It's its opportunity to turn the municipality around, quite frankly. 73 MR. WICKETT: And, Mr. Pavelka, did the council adopt the recommendations of PricewaterhouseCoopers with respect to the Bloomfield Business Park? 74 MR. PAVELKA: Yes, it did, because ultimately with them adopting it, there was a formal presentation to the Ontario Municipal Board for the rezoning of that for those lands from agriculture to industry/commercial. 75 MR. WICKETT: The process that's been followed, has that been discussed on the council floor publicly in the Municipality of Chatham-Kent? 76 MR. PAVELKA: Yes. Yes, it has been addressed extensively and over several years in order for it to come to the status that it is today. 77 MR. WICKETT: And you mentioned that this strategy is regarded as the penultimate. Can you just expand upon what you mean by that? 78 MR. PAVELKA: I tried to give some flavour of the background of the municipalities. They are urban/rural municipalities. As I've mentioned, the population originally with restructuring was 110,000. The latest statistics indicate that there's a drop to 107,000. So there is a migration away by people, partly because there's been a migration away by jobs, by manufacturing jobs. 79 The Municipality, now that it has the synergies of the 23 jurisdictions, when the province, by restructuring it in '98, wants to reverse that by being an attractive employment opportunity. As I said earlier, there was no presence -- you can drive through Chatham-Kent on the 401, the transportation corridor, and all you can see is agricultural land. In fact, there's no indication that you're actually in Chatham-Kent versus any other jurisdiction. 80 The Municipality has gone about reversing that by having -- it's now created an identity arrangement with its logos, and the next biggest thing is to have this industrial/commercial park in order to attract jobs to that community. 81 MR. WICKETT: And how would you rank this in the scale of importance, as far as economic strategy for the Municipality? 82 MR. PAVELKA: This, quite frankly, is a ten, and anything else would be in the order of a five or six. 83 MR. WICKETT: Now, has the Municipality acquired lands of its own as part of this industrial park? 84 MR. PAVELKA: Yes. About a year ago, the -- again prompted by the PricewaterhouseCoopers study, that in order for the Municipality to be in a position to assist the client in expediting acquiring land rather than negotiating with the private sector, at that point in time the Municipality went about acquiring approximately 120 acres. 85 The rezoning of that area is for 300 acres, so the Municipality doesn't want a sole proprietorship or monopoly. But certainly it's understood that the -- part of the industrial park will be carried out by the private sector. The reason the Municipality has gone about getting some of the property is quite often the clients that we deal with, when they want to move, they want to move very quickly. They want that property. 86 At that point in time, they usually have contracts in place, and as I said, at the advice or recommendation of PricewaterhouseCoopers, yes, the Municipality has proceeded with acquiring 120 acres. 87 MR. WICKETT: And was this what we call a greenfield site? 88 MR. PAVELKA: Oh, yes. After PricewaterhouseCoopers made its point about having an industrial presence on the transportation corridor, we then did an engineering analysis of the five interchanges within Chatham-Kent. And engineering studies substantiated that the least costly to service with water, sewer, hydro was the Bloomfield 401 interchange. And for that reason, we've gone about acquiring the property. 89 MR. WICKETT: And being a greenfield site, were there any services of any significance available to that site? 90 MR. PAVELKA: No. This area was previously unserviced. There was a couple of car or truck resale businesses located at this area. But beyond that, there was nothing else. 91 MR. WICKETT: It was farmland? 92 MR. PAVELKA: Yes. In fact, the property acquired by the Municipality was farmland, and the area rezoned beyond that, the 180 acres making up the 300 acres, is also farmland. 93 MR. WICKETT: And has the Municipality proceeded with a public planning process in addition to your strategic economic development process? 94 MR. PAVELKA: Yes. Extensive public planning process, particularly in an area, again, with emphasis on agriculture, for the rezoning to change this area from agriculture to industrial/commercial, and wanting a smooth process, not wanting a protracted process which would carry on and on and on, because time is of the essence in the Municipality's mind with the objective of creating the employment. 95 There were several public meetings. Coincidentally, I chaired a number of them. Being responsive to the public, we actually increased the number of alternatives on how we evolved that before we ultimately designated this area. 96 So there was, in the newspapers -- the recommendations ended up being on council, which are televised. So yes, there was probably a nine- to ten-month period before -- and knowing that the area had to be rezoned by -- and ultimately accepted by the Ministry of Municipal Affairs and Housing, yes, there was an extensive public process. 97 MR. WICKETT: Mr. Pavelka, I understand that at the conclusion of that process, the approval of council was sought with respect to the planning recommendations; is that correct? 98 MR. PAVELKA: Yes, that is correct. 99 MR. WICKETT: And I believe that a report was submitted to council at that time? 100 MR. PAVELKA: Correct. 101 MR. WICKETT: And is that report at tab 2 of the Municipality's first filing as an intervenor? 102 MR. PAVELKA: Yes. That's our staff report to the -- our mayor and members of council. That one is specifically dealing with the official plan amendment for that property. And actually, the plan at the -- in that report outlines the geography of the property at Bloomfield 401 going all the way over to the Dylan Road interchange -- or Dylan Road. 103 MR. WICKETT: And that report was dated June the 14th, 2002, and it was submitted at the next council meeting after that date; is that correct? 104 MR. PAVELKA: Yes, that's correct. 105 MR. WICKETT: Were the recommendations contained in this report approved and adopted by the council of the Municipality? 106 MR. PAVELKA: Yes, they were, enthusiastically. 107 MR. WICKETT: I'd like to refer to page 7 of that report. 108 MS. ALDRED: I'm sorry to interrupt. What exhibit number is that? We're having trouble finding it. 109 MR. WICKETT: That's the first filing of the Municipality as intervenor. I'm not sure of the date of it. February the 20th, Mr. Fisher says. 110 MS. LEA: That would be B.3.5, tab 2. 111 MR. WICKETT: Yes, tab 2, page 7. 112 Mr. Pavelka, at page 7, I believe there's a reference to some servicing issues. I'm wondering if you could explain for the Board the issue of servicing that was addressed at page 7 in this report to council. 113 MR. PAVELKA: Yes. Under the title of "Budget Impacts," we specifically included sections saying, (a): "Infrastructure required immediately ensuring phase 1 land is available in 2003." 114 As the Municipality, Mr. Chair, got into the development of industrial/commercial lands, it became well-known to us that in order to be competitive with the other municipal jurisdictions also vying for this -- the same kind of manufacturing jobs, we had to be in a position to provide serviced land immediately. 115 Up until 1999/2000, without an economic development department, the Municipality of Chatham-Kent was not even being considered for these jobs. Without an economic development department, we were not in the position to even respond to requests, with requests being in the order of 70-, 75-page questionnaires and completing these -- the questionnaires whereby we would be able to say we had the amenities, the facilities, to accommodate that kind of industry. 116 PricewaterhouseCoopers was very clear that in order to be -- in fact, what happens is, because you have so many municipalities bidding for these manufacturing companies to come to there, the Ministry of Enterprise, Opportunity and Innovation actually looks for ways by which your application is discounted. So not being able to complete the questionnaires would disqualify Chatham-Kent. Not having serviced land would disqualify Chatham-Kent, and as a consequence we were not even in a position on the radar screen. 117 Knowing that, after the Municipality -- or part and parcel of acquiring the land, we moved forward expeditiously in order to service this same industrial/commercial park to be competitive with the other players on the scene. 118 MR. WICKETT: Mr. Pavelka, you've dealt with the issue as to the fact that you identified that the services required were required immediately. I believe that this portion of the report also deals with your intended cost recovery. Could you explain that, please. 119 MR. PAVELKA: Again, Chatham-Kent is a quasi-rural/urban, quite frankly, and with the migration of jobs and population, has no assessment growth, making cost of living each year onerous for the existing taxpayers that have to carry everything. So when the Municipality embarked on this, the $11 million investment in order to buy the land and service it, was not on the property tax base. It is a self-financing arrangement that the Municipality has entered into whereby the Municipality has up-fronted the $11 million. And we had evolved a financial model which leans on the sale of the property, the direct sale of hydro and water to ourselves, as well as the indirect spin-offs of having the wages in the community. And through that kind of financial model we've been able to substantiate how we can pay back the $11 million. 120 So it's what we call a business model, self-contained. 121 MR. WICKETT: So insofar as direct cost, what is your strategy? 122 MR. PAVELKA: The direct costs are to leverage from the Municipality the $11 million, sell the property in order to recover the costs so that the property taxpayers are not having to pick up any part of the industrial park. 123 MR. WICKETT: Now, Mr. Pavelka, with respect to these public processes, has there been media coverage regarding your various meetings? 124 MR. PAVELKA: Yes. It's been extensive. I didn't mention earlier. Even prior to the restructuring in 1998, the Municipality has talked about this. So even though I've only been there four and a half years, you know that people have talked about this, the lack of presence. So that as this evolved, I know the council is absolutely ecstatic the fact that we forged ahead as quickly as we had. Although it's been five years of restructuring, it's not as fast as they wanted, because the bottom line is until there's jobs, they're not satisfied because the end results haven't been satisfied. 125 But there has been extensive television coverage by the council. Certainly all the appropriate advertisements have been in the local newspapers with respect to the rezoning. We've touched base with all the appropriate ministries, again, in order to expedite the whole project. 126 I might say that when this did go to Municipal Affairs and Housing there were no opponents to this, public or government, understanding that it was good planning. 127 MR. WICKETT: Are your council meetings televised? 128 MR. PAVELKA: Yes, they are. 129 MR. WICKETT: On cable 10? 130 MR. PAVELKA: Correct. 131 MR. WICKETT: And there's been other press reporting with respect to these issues, your process? 132 MR. PAVELKA: Again, I should emphasise, it's important to that area, not just to the council but to the local economy. So yes, there's been extensive newspaper coverage by a number of reporters. 133 MR. WICKETT: Mr. Pavelka, has the Municipality proceeded with your servicing plans? 134 MR. PAVELKA: Yes. Part of the $11 million included the provision for water, sewer. Water has just been delivered there about a month, six weeks ago. We have the contracts for the sewer, the pumping station that's required for that. We have negotiated successfully with the MTO for the crossing. We have to go from the north side to the south side to access this property to provide the services. We've lumped all of the utilities together -- hydro, gas, water, sewer -- in one corridor so that there is one crossing beneath the 401, just to the west. So we have all the approvals, and servicing is underway. 135 But I have to emphasise that the services have to get finished before we are in a position to represent this as favourably as we want to potential clients. 136 MR. WICKETT: Do you have some of the services there now? 137 MR. PAVELKA: Yes. Water has been delivered there about five, six weeks ago, and the sewer contracts are about to be awarded. The funding is in place and they're scheduled to be there late spring. 138 MR. WICKETT: And have you followed an RFP tendering process with respect to the service provision? 139 MR. PAVELKA: Yes. In our municipal world, regardless of what initiative the council is pursuing, it's absolutely implicit on every action we take that issues are either tendered or RFP so we can substantiate whatever contract work we do, whatever work is done, that it's done at the at least cost to the taxpayer or the least cost to, in this case, the business case. And again, the only way we have as a municipality to be able to substantiate that is to go for a competitive bid or an RFP. 140 MR. WICKETT: And you mentioned the figure of $11 million earlier in your testimony. Is that the intended initial investment of the Municipality in this business park? 141 MR. PAVELKA: That's correct. We've done some long-range forecast on that, and that was the amount that was identified and the council set aside for that. 142 MR. WICKETT: And what generally or approximately would that include? What does the $11 million buy you? 143 MR. PAVELKA: The acquisition of the land; the provision for the services, as well as carrying that debt until we can retire it. Included in that financial model is selling the property in the order of 13 acres per year, until we retire that debt. 144 MR. WICKETT: And, Mr. Pavelka, did the Municipality request proposals for the provision of hydro service from Hydro One and Chatham-Kent Hydro? 145 MR. PAVELKA: Yes, that's correct. Realising that in our area those two authorities can provide the hydro necessary for this area, we went about, as I said earlier on, having in this case an RFP rather than a tender, asking both jurisdictions to quote so that we could deliver the power in the most cost-efficient Manor. 146 MR. WICKETT: And I understand that the letters that were sent out requesting the proposal are included in the written material filed with the Board. 147 I'd like to refer to tab 2, first of all, in the first submission, the application of Chatham-Kent Hydro. I understand that's the October 18th filing of Chatham-Kent Hydro, October 18th, 2002. And at tab 2 would be the letter to Dave Kenney of Chatham-Kent Hydro Inc. And similarly, I'd like to refer to the response of Hydro One. I believe it's at tab 2 of the Hydro One submission. It would be the letter to Mr. Tom Coffey of Hydro One. 148 Were the responses received, Mr. Pavelka, by the Municipality to those two request letters? 149 MR. PAVELKA: I'm sorry, I don't have them in front of me. Yes, I have the letter. And your question again, sir? 150 MR. WICKETT: Were the responses received by the Municipality to those letters? 151 MR. PAVELKA: Yes. Yes, there were definitely responses by both jurisdictions. 152 MR. WICKETT: Just for purposes of the record, the responses are also filed with the material that the Board has as well respectively at tab 3 of each of the Chatham-Kent Hydro and the Hydro One submissions. 153 Mr. Pavelka, did you retain a consultant to analyze the responses? 154 MR. PAVELKA: Yes. We had Dillon Consultants as our overall planners, engineers on this project. And specifically when we got into this, because of the specialized nature of electricity, Dillon retained a specialist called Stevens Associates. 155 MR. WICKETT: Do you know whether or not the -- well, first of all, let's have a look at that. It's important, because it's in the filings. It's at tab 3 of the Municipality's submissions that was made in February, I believe. Is that the report that was received from your consultant, Mr. Pavelka? 156 MR. PAVELKA: Yes, it is. 157 MR. WICKETT: Does this report make any reference to any further dialogue between the consultant and both Chatham-Kent Hydro and Hydro One? 158 MR. PAVELKA: Yes. I guess when Stevens went over this report, there were things he wanted to ensure, which is natural, of course, within -- typically with an RFP where there's usually some latitude. 159 On page 1, under "Impacts on Future Occupants," Stevens specifically says, "And there was subsequent communications with the two utilities." 160 MS. LEA: I do beg your pardon, sir. I think I have not found the right thing to look at yet. 161 MR. WICKETT: I'm sorry. 162 [P.A. Announcement] 163 MS. LEA: I'm sorry, sir. The document to which your witness is now referring -- I found everything else, but this one in particular is which? 164 MR. WICKETT: This is tab 3 of the Municipality's first filing as intervenor, which I believe was in February of 2003. 165 MR. FISHER: February 20th. 166 MR. WICKETT: February 20th. 167 MS. LEA: Yes. Okay, and we're looking at what page of that filing? 168 MR. WICKETT: I believe Mr. Pavelka is looking at page 1 of 6, so it would be just after the cover. 169 MS. LEA: Well, please go ahead, sir. We'll sort ourselves out. Thanks very much, sir. 170 MR. WICKETT: Mr. Pavelka, we were dealing with the question as to whether or not the report reflects any dialogue between the consultant and Chatham-Kent Hydro and Hydro One. 171 MR. PAVELKA: Yes. Page 1 of 6 specifically makes reference by Stevens, a consultant, that -- and subsequent communications with the two utilities, so it's not unusual that our consultant would contact each jurisdiction to clarify different issues. 172 Also on page 3 of that same submission, mention is made mid-way down the page. On the left-hand side, it starts off: "These are the rates currently in effect. They will change over time." 173 But based on discussions with Hydro One and Chatham-Kent staff, so there was follow-up from the RFP that was submitted by Stevens. 174 MR. WICKETT: Did the municipal council accept and act upon the recommendations in this report? 175 MR. PAVELKA: Yes. Our normal process is to take issues like this to council, so they're aware of the RFP case or a tender process, so they're aware of the element of competition. And then the awarding of the work is by council. 176 So council ultimately did approve our staff recommendation to award the RFP to Chatham-Kent Hydro. 177 MR. WICKETT: And you mentioned there was a staff recommendation following the consultant's report. 178 MR. PAVELKA: Yes. The -- invariably, regardless of which consultant does work for us, and regardless of what kind of recommendations are by the consultant, staff ultimately, as the permanent rapport with council, has the responsibility to take those recommendations, either accept them and/or modify them, and ultimately make the recommendation to council. 179 And in this case, it took the recommendations of Stevens, which was to go along with the appointment of Chatham-Kent Hydro to supply that Hydro service. 180 MR. WICKETT: And could you tell me what the basis of that decision was, sir. 181 MR. PAVELKA: There were a few factors in that. The first one, and probably the most critical one in the minds of staff and the council -- recommendation of staff to council was the fact that on a monthly basis, annual basis, the rate charged by Chatham-Kent Hydro was substantially less than Hydro One's power usage rate. 182 And the reason that that's so critical in our minds is realizing that Hydro provision is one of the components, one of the variables that a new business is going to inherit in its business plan. Of essence to us was getting the least-cost supplier, not only to the Municipality as a client, but ultimately to the end-user, being a manufacturing business that is going to be locating there. 183 Knowing that they are going to be competitive in the market, it was critical in our minds that we were positioning them so that they would incur the least cost for the Hydro usage. 184 MR. SOMMERVILLE: Mr. Wickett, I hesitate to interrupt you, but I'm going to ask Staff to listen in the hall with respect to the alarm situation. I'm hearing some noises, and I'd like, Mr. Ryckman, if you would be kind enough to just investigate. You can quietly provide me with a note when you get back. 185 In the event that there is a fire alarm, there is a procedure, and the procedure basically consists of the following: I will be your fire warden, for all intents and purposes, and we will exit through that door at the back and muster at a stairway that is just down the hall immediately as you come out of the hearing room complex. And we'll take that stairway downstairs to the ground floor where we will muster in the square in front of the building. 186 Hopefully we're not going to -- that's not going to happen, but it behooves us to know what our procedure will be if that happens. 187 Mr. Wickett, please continue. 188 MR. WICKETT: Thank you, sir. 189 Mr. Pavelka, were there competitive issues? 190 MR. PAVELKA: Yes, there were competitive -- actually, I didn't finish. 191 In addition to the cost, there was a capital cost. Hydro One's being more expensive, up-front capital cost than Chatham-Kent energy. Thirdly, there's also a reliability issue in our minds in that Chatham-Kent Hydro presents a more reliable source of Hydro from the point of view of maintenance. 192 In Chatham-Kent, whenever there's storms or problems, Hydro One, quite frankly, has problems in delivering any maintenance, and particularly when there are power interruptions, in restoring that power. Where Chatham-Kent Hydro's performance on that is far superior to anything we've experienced from Hydro One. 193 MR. WICKETT: And, Mr. Pavelka, have you had any personal involvement with any previous issues of reliability of supply of power? 194 MR. PAVELKA: Yes, I have, particularly with a firm called Solvay Industries in Glenheim. 195 MR. WICKETT: I'm wondering if you could spell that for the record. 196 MR. PAVELKA: S-o-v-o-y. 197 MR. WICKETT: I think it might be S-o-l-v-a-y. 198 MS. LEA: You did ask him to spell it. 199 MR. SOMMERVILLE: There's a new emphasis on phonics. 200 MR. PAVELKA: I am an engineer, too. 201 MR. WICKETT: Yes, S-o-l-v-a-y. 202 MR. PAVELKA: You're correct, S-o-l-v-a-y. 203 MR. WICKETT: Perhaps you could expound on the involvement that you had with respect to the liability issues you had Solvay. 204 MR. PAVELKA: For a couple of years, the manager of Solvay Industries would phone me regularly whenever there was a power interruption, frustrated, because their particular process was an injection-molding process, which relied on continuous power. And every time there was a power interruption, it would stop -- even though it was intermittent for split seconds, it would stop the molten plastic from going into the molds. That in itself is not problematic until he is explaining to you that he had to shut down the whole line in order to clean out all the molds. So in fact you would lose the shift and periodically maybe even two shifts. His frustration is he was operating the plant in Blenheim and another one of their plants was in Michigan, and he was in constant fear with his boss, who overlooked both plants, that he was not maintaining competition with the Michigan plant. 205 The problem was the constant interruptions and not being able to settle them down. Ultimately, because I, as an advisor to the Chatham-Kent Energy Board appear as an advisor to them, I ultimately recommended to the Board that we get on with the cost sharing of an energy audit. So despite it being in Hydro One's territory, Chatham-Kent Hydro undertook an energy audit, shared 50/50 with Solvay Automotive, to identify the problems. 206 There were some problems internal and some problems external. Only upon the identification of external problems did Hydro One respond, and finally put in some lightning arresters, whatever else they did to improve the situation. The problem is the length of the transmission line in this case; I can't remember the exact length, but it was lengthy. 207 Finally, there was some satisfaction. I must admit, Solvay also did some internal modifications to their Hydro arrangements. But that constant frustration is our experience with Hydro One in that area, and, quite frankly, trying to improve the reliability of the Hydro fell to us ultimately to do that energy audit. 208 MR. WICKETT: Any other customers where there's been a reliability issue? 209 MR. PAVELKA: Two years ago, prior to the director of economic development coming on, I was the acting director or economic director as well as being the chief administrative officer. During that point in time I was involved with the -- an industrial advisory committee where we have senior players from the local industry advising our economic development people on issues that are in Chatham-Kent. And the issue of reliability of power is a constant issue, particularly with the Hydro One customers. 210 MR. SOMMERVILLE: Mr. Wickett, I just want to remind you of the focus of our proceeding today is not a global justification or ultimate solution or desire of customer preference; none of those issues are really the focus of what we're interested in today. If we can associate this somehow with the urgency of the requirement, and what is needed, and in what kind of time frame, that is the focus of our proceeding. I just don't want you to go too far down the road here into areas that are really not of particular interest to us in this proceeding. 211 MR. WICKETT: Yes, sir, I'm aware of that. I felt that this background was of importance to get to that particular issue. 212 MR. SOMMERVILLE: Thank you very much, and we do appreciate it. 213 MR. WICKETT: We're leading into that. 214 MR. SOMMERVILLE: Thank you. 215 MR. WICKETT: And, Mr. Pavelka, when is it that the Municipality is intending to have service lots available for sale? 216 MR. PAVELKA: The council's preference was last year; therefore, the answer is as soon as possible. And technically, as soon as these tenders are awarded with the sewer, we hope to be in a position to have serviced lots, so late spring of 2003. 217 MR. WICKETT: And has this been made known publicly? 218 MR. PAVELKA: Yes. We've told the council that; the council has told the public that. We have, even as of three weeks ago, where we came in and hosted a number of chief executive officers and site selectors here in Toronto. We are advertising that we're going to have serviced lots by spring of this year. 219 MR. WICKETT: Does the Municipality have a web site? 220 MR. PAVELKA: Yes. 221 MR. WICKETT: Is there any reference on the web site to this industrial park? 222 MR. PAVELKA: That as well is on the web site as well, yes. 223 MR. WICKETT: Is the timing of the availability of serviced lots important to Chatham-Kent? 224 MR. PAVELKA: It is critical and, quite frankly, why we're here. I stated earlier on about the position the Municipality is in. Unless we have serviced lots, we're not in competition. By not having serviced lots, whether it's the ministry or site selectors or even a client, it's the way by which we are eliminated from being considered. 225 Secondarily, as I mentioned earlier on, the $11 million debenture that we've undertaken needs to be repaid, and whether ambitious or not, our schedule of repayment starts in 2003 with the sale of 13 acres. 226 Thirdly, I can tell you that recently we were in competition with the City of London with a German automotive manufacturer, where I stood on the field with a chief executive officer and he took a picture of the land and asked where the servicing was. And I said, well, we ultimately drove by the contractor installing the water, which I said earlier on is in place, and after that meeting, I'd written to him confirming that all the funding was in place to provide the sewer and the other infrastructure so that everything would be in place for the spring of this year, knowing that that was of concern to him. 227 A couple of months after that meeting in the field with him, when we learned through their chief financial officer that we were second to London, we explored with that chief financial officer why we were second. And one of the issues he brought to our attention was that when the -- his chief executive officer was standing in London, he was able to see the concrete curbing gutters, the hydrants, and the Hydro already in place. As they explained to us, when you're moving from a different country and you're moving a whole business, manufacturing process into Ontario, you're hiring up, you have to eliminate the variables. And having serviced land is one of those variables. 228 MR. WICKETT: Mr. Pavelka, what would the effect be on Chatham-Kent if the Hydro service provider was not determined until the end of this year? 229 MR. PAVELKA: Well, as I just said, I -- I should have added fully serviced lands, meaning all components are important. The other component of that, when we are representing our land to clients, they want to know what their capital costs for internal connections are, what their annual operating cost is going to be. And until we can define who the Hydro supplier is, we don't have the answer to those questions. Again, that puts us in a position, by not being able to answer those questions, to be deselected or removed from consideration which is, quite frankly, unacceptable to our council from being in a point of competition. 230 MR. WICKETT: What about other financial impacts on the Municipality? 231 MR. PAVELKA: Well, the financial impacts would be extending that $11 million debt longer. And as soon as we start missing our objectives, we would be compounding the interest that we would be accruing. And because the formula we've established is not to effect a property tax dollars, we would start to escalate the price on our land in order to recover the cost. If we incurred a larger debt, we'd still have to recover that in the sale of the land. 232 MR. WICKETT: And is the preference of the Municipality of Chatham-Kent still Chatham-Kent Hydro as the Hydro supplier for the Bloomfield Business Park? 233 MR. PAVELKA: Absolutely. The council is of that opinion, because there are lower annualized costs, better reliability, because there's two sources of Hydro coming from Chatham-Kent Hydro and -- 234 MR. WICKETT: When you say "two sources," are you talking about the requirement for a dual feeder? 235 MR. PAVELKA: Correct. Dual feeder looped arrangement or whatever the Hydro technical term is. So that if one feeder was cut, there's Hydro from an alternate source. 236 MR. WICKETT: Is that your requirement as a customer for this business park? 237 MR. PAVELKA: Absolutely. 238 I mentioned earlier on Brose Automotive International and the 74-page questionnaire that we had completed in order to be considered, that was one of their questions: Does it have a dual power source? 239 MR. WICKETT: And what capacity are you looking for for this particular site at the outset? 240 MR. PAVELKA: 10 megawatts. 241 MR. WICKETT: Those are all the questions that I have of Mr. Pavelka. I would like to ask Mr. Borduas some questions. 242 Mr. Borduas, I understand that you are the director of Smart Growth Services for the Municipality of Chatham-Kent? 243 MR. BORDUAS: Yes, I am. 244 MR. WICKETT: And what are your responsibilities in relation to the Bloomfield 401 Industrial Park? 245 MR. BORDUAS: As the director of Smart Growth Services, it's our -- my direct responsibility to market and seek potential clients for that particular industrial park. 246 MR. WICKETT: And what is it that you're attempting to market? 247 MR. BORDUAS: What we are attempting to market is a fully-serviced, prestige industrial park on the 401 corridor for those particular clients that -- that -- within our five target sector groups, as Mr. Pavelka had indicated under the PricewaterhouseCoopers report. We've been working with a -- targeted sectors of manufacturers, aircraft manufacturers. As Mr. Pavelka also indicated, plastics, as well as call centres and automotive manufacturers are the key sectors that we are diligently marketing towards. 248 MR. WICKETT: And have you had any inquiries to your marketing efforts? 249 MR. BORDUAS: We've had a significant number of inquiries. Since the public marketing and the response that has been generated with the discussions and public meetings entering into the park and our marketing efforts, we receive on a weekly basis some two to five requests for information with respect to those properties within the municipality. 250 MR. WICKETT: And when you say "fully serviced," are you able just to enumerate what those services are. 251 MR. BORDUAS: Yes. Our marketing provisioning, we are marketing the lots as being fully serviced, so inclusive of water, sanitary sewer, storm sewer, electrical, and telecommunication services. 252 MR. WICKETT: And have you been able to identify what are the needs of your target customers? 253 MR. BORDUAS: Certainly. The direct needs for our -- or from our customers are certainly the sense of urgency on their part. We are given very, very short time frames for which to respond. Mr. Pavelka had indicated in the case with Brose International, we were provided with a 78-page technical questionnaire, and we had 24 hours to have that back into the client's hands. And so we did have to determine issues of certainty with respect to the business park and be able to provide them with technical information about the capabilities, not only in the Hydro servicing, but also in the water, waste water, storm sewer, and other issues. 254 MR. WICKETT: Okay. So you've indicated that there's -- certainty is one of the needs of your target customers, and are you able to expound upon this issue of certainty? What is it that you mean about certainty in relation to services? 255 MR. BORDUAS: Really, a couple of indicators. One of them is reliability of power. We've -- in the case with Brose International, as an example, we were asked to provide specific information around the provision of service, duality, as well, a number of -- also reliability, number of outages at that particular transmission location, as well as the issue of access to that particular service upon construction. 256 So there are quite a number of issues of certainty that we respond to the client and that we have to represent to that particular individual client. 257 MR. WICKETT: Are there, Mr. Borduas, any inquiries regarding certainty of immediate capacity to the business park? 258 MR. BORDUAS: Correct. They are looking at capacity. They are also looking at the financial implications as well, what are -- their connection costs are going to be, what are their annual costs for utility usage, so power usage. 259 We are asked to be able to represent those with a very high degree of certainty, as we are being compared to other jurisdictions, not only in Ontario and Canada, but also, in this particular case, with Brose, we were compared against three other U.S. southern states. 260 MR. WICKETT: Mr. Pavelka in his evidence has indicated that your strategy here, your financing strategy is to attempt to recover your capital costs from lot sales. Is the certainty to you of capital cost an issue? 261 MR. BORDUAS: Yes, it is. We are actively marketing those sites at -- and we are providing a one all-in cost aspect. So we have set a pricing structure for the lots in order for us to be competitive with those jurisdictions. 262 And those costs have been derived based on the $11-million investment that has been provided, and those costs, the $11-million cost assumed the capital costs that have -- that were provided to us by Chatham-Kent Hydro in that RFP process. 263 So when we are looking at that, we are on a cost-recovery basis for the sale of that land, and so we do have to have a -- the certainty of the issue of those financial arrangements with the service provider to that location is paramount. 264 MR. WICKETT: And that is paramount so you can set the lot price? 265 MR. BORDUAS: Correct. 266 MR. WICKETT: You mentioned that typically with potential customers, there's an information exchange process. Maybe you could expound upon that just a little bit more, if you don't mind. 267 MR. BORDUAS: Yes. We as a municipality would be approached in a confidential Manor by either the principals of the company themselves or an agent on their behalf and/or potentially on behalf of the Province of Ontario through the Ministry of Economic -- I'm sorry, Ministry of Enterprise, Opportunity, and Innovation representing these projects. And we are asked to provide significant amounts of information about the -- our community and about the -- our ability to be able to take on such projects and investment. And so we would have a series of escalating interchanges and exchanges of information back with the clients. 268 Initially, that information request is used to, as Mr. Pavelka has indicated in his testimony, as a deselection process. So they may start out with a dozen or as many as 20 or 25 communities, and what they're looking for are characteristics to take communities off that list so that they can narrow down and provide a sense of surety to the client that the site that we are representing is representative to their client's needs and that there would not be any areas of ambiguity which could cause their client financial hardship and/or the lowest cost, price or location for them. And so they are demanding areas of surety in those particular cases. 269 MR. WICKETT: What happens if you can't answer questions with respect to electricity supply? 270 MR. BORDUAS: If we're put in that particular position, we will not be considered for this investment. 271 MR. WICKETT: And how does that impact upon your ability to sell lots? 272 MR. BORDUAS: What it does is it actively removes that -- the potential of that client entering into an agreement of purchase and sale with the Municipality for those lots and ultimately does not allow us the cash flow in order to service the capital costs of the park. 273 MR. WICKETT: So it has an impact on your ability to sell lots? 274 MR. BORDUAS: Correct. 275 MR. WICKETT: Do you end up on anybody's short list if you can't answer the questions? 276 MR. BORDUAS: Ultimately, we have zero percent for error in this particular aspect, and certainly reputation is a major issue for us. If we're not able to deliver on what we're representing, we will not be considered for any future investment by these particular organisations. 277 MR. WICKETT: Are you able right now to provide any certainty with respect to Hydro services to potential customers at the Bloomfield site? 278 MR. BORDUAS: At present, under the current arrangements, we are not. 279 MR. WICKETT: And has this lack of certainty already impacted upon your marketing? 280 MR. BORDUAS: Yes, it has. We have -- at the present time it would -- as Mr. Pavelka has stated, our -- we have been asked by our council to start in the land sales process in the spring of 2003. At the present time, the Municipality could not enter into agreements of purchase and sale for fully serviced lots at the present time and under this schedule that has been requested of us by council, to enter into those agreements because of the lack of Hydro servicing to the site. 281 MR. WICKETT: Have you had any personal service yourself with a customer where this was a factor, where you didn't have the certainty with respect to electricity? 282 MR. BORDUAS: As was stated with the case with Brose and their site selection process, we would have been very hard pressed in order to enter into that agreement and to provide service to that customer. Had we been selected, and ultimately, as Mr. Pavelka has stated, that was one of the criteria for which we were not selected for that investment. 283 MR. WICKETT: Can you explain this customer, what type of an employer were they, how many people were they going to employ, and what was their electricity need as articulated to you? 284 MR. BORDUAS: In this particular case, the client -- the investment was going to be an $80 million investment in plant, property and equipment. The investment was going to be some 5 to 700 jobs in our community. They were looking at purchasing 60 acres of land out of the park, so almost half of the Municipality's holding. So the consequences for the Municipality in this particular case, as far as lost opportunity, were massive. And certainly from a learning experience in this particular case, you know, and the feedback, that we had received that we do not want to put ourselves in a situation that would be identical to this in the future. 285 MR. WICKETT: Do you know what the power requirement was for Brose? 286 MR. BORDUAS: The power requirement was going to be in the 3 to 5 meg range on an annual basis. 287 MR. WICKETT: And, Mr. Borduas, is this sale of business park lots to attract new employers, is this a competitive business? 288 MR. BORDUAS: It's an extremely competitive business. As I mentioned earlier in my remarks, in this site selection process that we were -- conducted, at the initial onset, we were compared against four other communities within the province and three U.S. states. So not only are we competing against interests within the Province of Ontario and within the country, we are also competing against interests across North America. As well, in some of these cases, it would be a global location decision, so looking at North America and Europe. 289 MR. WICKETT: Okay. And do your competitors have fully serviced lands with known capacity and costs? 290 MR. BORDUAS: Yes, they do. 291 MR. WICKETT: And you mentioned something about the timing of the business decisions of your target customers. I'm wondering if you could expand upon that. 292 MR. BORDUAS: In most cases, the timing is very urgent. In this -- in the case with most of our potential clients, they may have secured a contract. So if they are an automotive supplier, as was Brose, they have already secured a contract with an assembler and they have an obligation in order to provide parts in a set time frame. And so if there are any indications where time delay is an issue, in this particular case time sensitivity, in most cases for our clients is significant. 293 MR. WICKETT: What would the impact, Mr. Borduas, be on the Municipality and your ability to market this business park if you did not get a decision today from the Board with respect to the Hydro supplier? 294 MR. BORDUAS: We need immediate attention on this issue. As I mentioned earlier in my remarks, that we get a -- the flow of interest, it comes into our department, as I mentioned, two to five contacts per week. We would not -- we would be severely crippled in our ability to enter into agreements of purchase and sale if we were not to get a decision today. 295 MR. WICKETT: Those are all the questions I have of Mr. Borduas. Thank you. 296 MR. SOMMERVILLE: Thank you, Mr. Wickett. 297 Cross-examination, Ms. Aldred? 298 MS. ALDRED: I'm going to confine my cross-examination to rely upon -- to urgency issues. 299 Mr. Pavelka also testified as to reliability issues, and if the Board were to decide to continue on with the hearing later in the day, I would want to examine him on those issues as well. Should I just finish with this panel now, or shall I just confine myself to urgency? 300 MR. SOMMERVILLE: I think it's probably better if you deal with the reliability issues now too. 301 MS. ALDRED: That's fine, thank you. 302 MR. SOMMERVILLE: It's now a quarter to a eleven. We normally take our break at around 11. Does it fit the convenience to take the break now and then you can go straight through? 303 MS. ALDRED: That's fine. 304 MR. SOMMERVILLE: We'll break until 11:00. 305 --- Recess taken at 10:45 a.m. 306 --- On resuming at 11:05 a.m. 307 MR. SOMMERVILLE: Thank you very much. Please be seated. 308 Ms. Aldred. 309 CROSS-EXAMINATION BY MS. ALDRED: 310 MS. ALDRED: I'm going to try to be as organised as I can about this. I don't know if the mics are on. 311 The first set of questions I'm going to ask are going to be directed to Mr. Pavelka. Mr. Borduas, you can chip in if you want to, but they arise out of your testimony this morning. I was then going to ask some questions that I think are more properly directed to Mr. Borduas, but again, feel free. And I may follow up with a few more questions for Mr. Pavelka. 312 Mr. Pavelka, the decision to use Chatham-Kent Hydro as a service provider for the business park, that was made around July 2002, was it not? 313 MR. PAVELKA: That's correct, with the benefit of the RFPs. 314 MS. ALDRED: And that was also made with the benefit of the report prepared by Stevens in association with Dillon Consulting? 315 MR. PAVELKA: That's correct. 316 MS. ALDRED: And that report pointed out to the Municipality that if Chatham-Kent Hydro was used as a service provider, there would be an amendment required to the licence of Chatham-Kent Hydro, did it not? 317 MR. PAVELKA: Yes. 318 MS. ALDRED: So you were aware at that time that there had to be a licence amendment? 319 MR. PAVELKA: Yes. 320 MS. ALDRED: And from the materials we have before us, it would appear that the application for the licence amendment was not filed until October 2002; does that sound correct? 321 MR. PAVELKA: Yes. 322 MS. ALDRED: And am I correct that the land for the business park was actually purchased by the Municipality, and the transaction closed in October of 2002? 323 MR. PAVELKA: Quite frankly, I'm not familiar with -- it was in 2000 (sic) for sure. 324 MR. BORDUAS: Portions of that particular agreement in purchase and sale were concluded in the fall, and there were some residential properties that were -- that the Municipality assumed as a part of that sale, that those closed in the spring, but were not a part of the major park. 325 MR. SOMMERVILLE: Spring of 2003? 326 MR. BORDUAS: 2003, yes. 327 MS. ALDRED: I'm sorry. I'm a little deaf today, 2002 or 2003? 328 MR. BORDUAS: 2002 for the major purchases of the land with respect to the park, but there were other parcels that were a part of the overall agreement in purchase and sale of residences that the Municipality assumed, and those were in this spring. 329 MS. ALDRED: Okay. Thank you very much. 330 And, Mr. Pavelka, you're an engineer. I'm sure you'll agree with me that you couldn't have been out there servicing the lands in terms of water and sewer installations before this spring, could you? You wouldn't do that in the winter normally, would you? 331 MR. PAVELKA: Yes, that's possible. 332 MS. ALDRED: But in this case, you're doing it now, I take it? 333 MR. PAVELKA: That's correct. The tenders are under -- the water is already in place, in fact, was carried out over the wintertime. And the sewer contract is ready to be awarded. 334 MS. ALDRED: Okay. And in fact, that contract, the tender closes May 20th; does that sound right? 335 MR. BORDUAS: Correct. 336 MS. ALDRED: So those services will go in sometime after May 20th? 337 MR. BORDUAS: That's correct. As Mr. Pavelka had indicated, the contracts for the provision of water service, those were carried out over the winter months. 338 MS. ALDRED: Thank you. 339 And, Mr. Pavelka, you mentioned -- you characterized the request to both Chatham-Kent Hydro and Hydro One to provide information on servicing your business park as an RFP. And you referred to a letter in your evidence which was sent to both utilities asking them a series of questions. Is that the sum total of the documentation included in the RFP? 340 MR. PAVELKA: I don't know the answer to that. 341 MS. ALDRED: Okay. Are you aware if there was any other documentation sent out as follow-up documentation to Hydro One or Chatham-Kent Hydro? 342 MR. PAVELKA: I don't know. 343 MS. ALDRED: And are you aware whether the Municipality, once it decided that it was going to try to use Chatham-Kent Hydro as a service provider, whether it's had any discussions with Hydro One since about August of 2002 about whether it could get servicing from Hydro One and what the time frames would be? 344 MR. PAVELKA: Sorry. Just say that again, please. 345 MS. ALDRED: I'm wondering whether since -- after you decided that you would prefer Chatham-Kent Hydro, whether you had any discussions at all after that with Networks, which is the utility that would normally provide the services. 346 MR. PAVELKA: Again, I don't know the answer to that. I've relied on our Hydro One people to coordinate that. 347 MS. ALDRED: Your Hydro One people? 348 MR. PAVELKA: Or sorry, the Chatham-Kent Hydro. 349 MS. ALDRED: All right. I'll address that to them. Thank you. 350 Did the letter that was sent to the various utilities indicate an urgent in-service date or any in-service date at all for the proposal? I can refer you to the letter, if you'd like to take a look at it. 351 MR. PAVELKA: Thank you. 352 MS. ALDRED: It would be in the evidence of -- filed by Chatham-Kent. Sorry. If you'd just give me a minute. It's at tab 2. I'll just give you a minute to review that letter, A.3.1, tab 2. 353 MR. PAVELKA: Yes. The -- specifically on page 1 of the February 8th letter to Dave Kenney from our manager of development services, item number 3 asks: "What is the lead time required to supply this development?" 354 Then again on the second page, item number 5 requests: "Please provide the same response time percentages as reported to the OEB and the location of your nearest service centre." 355 And then in the paragraph following item number 6: "As this is a proposed commercial industrial park, reliability of the supply will be a significant issue." 356 MS. ALDRED: Can we agree, though, that paragraph 3 that you referred to on the first page of the letter of February 8th just asks what the service suppliers' lead time would be to service. It doesn't say that there's a critical in-service date of March 2000, for instance. It doesn't name any date, does it? 357 MR. PAVELKA: You're correct. It just asks for the lead time. 358 MS. ALDRED: And then if you want to turn over at least again, I think you may find that the service response time percentages refers to the time that it takes to fix an outage or respond to a service call. I don't believe that -- 359 MR. PAVELKA: Correct. 360 MS. ALDRED: Okay. One of the financial components of the plan to use Chatham-Kent Hydro would require a capital contribution, would it not? 361 MR. PAVELKA: That's correct. 362 MS. ALDRED: And that capital contribution -- that capital contribution would be in the order of about $700,000 up front; is that correct? 363 MR. PAVELKA: My recollection is 970,000. 364 MS. ALDRED: And of the capital contribution, is it your understanding that if the Municipality uses Chatham-Kent Hydro as a provider, only about half of the capital contribution isn't contemplated to come back to the Municipality? 365 MR. PAVELKA: Again, I'm not familiar with that aspect of it. All I know is the comparison with Hydro One, we're talking 970,000 from Chatham-Kent Hydro versus the 2.7 million from Hydro One. 366 MS. ALDRED: And you're not familiar with whether your municipality will, in fact, only receive $350,000 back and not their entire capital contribution? 367 MR. PAVELKA: I can't recall the details of the financial payback. In fact, I don't know the details of the financial payback on that. 368 MS. ALDRED: Is there going to be someone who can speak to that? 369 MR. FISHER: Yes, representatives from Chatham-Kent Hydro will be able to address the capital contribution. 370 MS. ALDRED: Okay. Thank you. 371 Now, Mr. Pavelka, you also -- you testified this morning about reliability concerns with Hydro One Networks. Now, would you agree with me that the Chatham-Kent utility, as it's currently configured, distributes power in the urban areas of your municipality? 372 MR. PAVELKA: Yes. 373 MS. ALDRED: And Networks, Hydro One Networks, distributes power in the urban areas of your municipality; is that correct? 374 MR. PAVELKA: In the rural areas? 375 MS. ALDRED: I'm sorry. In the rural areas of your municipality. 376 MR. PAVELKA: You're correct. 377 MS. ALDRED: And therefore Networks, distributes power in the urban areas. 378 MR. PAVELKA: Thank you, Ms. Aldred. 379 MS. ALDRED: I think we were just establishing the various territories. Would you agree with me that the length of line, call it feeder but lines, electricity lines that Chatham-Kent Hydro has to service in its utility area would be generally shorter than the rural lines that Networks has to service? 380 MR. PAVELKA: Absolutely. 381 MS. ALDRED: And would you concur with me that, given the longer length of line of the Hydro One service territory, there is more probability of outages on those long lines than there would be on the shorter urban lines? 382 MR. PAVELKA: Very substantially. 383 MS. ALDRED: And so to compare the urban reliability of Chatham-Kent and the rural reliability of Networks is an unfair comparison. 384 MR. PAVELKA: When you're a customer -- when you're a customer, you want power. So that's unfair to even position that like that. 385 MS. ALDRED: And if you were to -- and if Chatham-Kent Hydro were to service the business park, it would be extending lines out into the rural area, would it not? 386 MR. PAVELKA: Yes. My understanding, shorter than the Hydro One line, though. 387 MS. ALDRED: You referred in your evidence this morning to problems with the Solvay plant in Blenheim, I believe. 388 MR. PAVELKA: Actually, that's Solvay, S-o-l-v-a-y. 389 MS. ALDRED: Yes, I already knew that. I'm not an engineer. 390 MR. PAVELKA: You can learn too, though. 391 MS. ALDRED: If you could turn to Exhibit B, tab 3. 392 MR. PAVELKA: Exhibit B? 393 MS. ALDRED: Exhibit B, yes. That would be Hydro's evidence. B3, tab 7. 394 MR. FISHER: Is this the evidence of February 21st? 395 MS. LEA: B3, number 7, letter from Hydro One Networks, dated March 12th. 396 MS. ALDRED: Do you have it, Mr. Pavelka? No? 397 MR. SOMMERVILLE: It's the page that begins, "Urgent Connections". 398 MS. LEA: The letter begins, "Hydro One Networks has reviewed the applicant's reply argument." 399 MR. SOMMERVILLE: Okay, thank you. 400 MR. PAVELKA: The letter of March 12th? 401 MS. ALDRED: That's correct, sir. I just wanted to refer you to page 2 of that letter, and specifically to the first paragraph where it's stated that with respect to the Solvay plant, and I'm going to start reading in the middle of the, sort of, second paragraph there. It says: 402 "Networks did upgrade M17 and its tie to the M18 supply feeder, including the installation of lightning arresters, in 2000 and 2001. The more recent Dillon and Stevens reports obviously took these upgrades into consideration." 403 Were you aware that Networks had improved the reliability on the line by installing lightning arresters after the Solvay problems arose? 404 MR. PAVELKA: Absolutely. That was in response to the energy study, energy audit study that the Municipality co-shared in paying for. So, yes, I referred to that earlier on. In response to the audit study, Hydro One did come forth and make some adjustments there. 405 MS. ALDRED: And would you agree with me that one of the reasons for outages on those lines, or perhaps was the main reason, was lightening strikes on the line? 406 MR. PAVELKA: That's correct, as I understand it, lightning and squirrels, animals. 407 MS. ALDRED: Thank you. 408 Mr. Borduas, I now have a few questions for you. 409 MR. BORDUAS: Yes. 410 MS. ALDRED: And as I understand your evidence this morning, you're in charge of marketing the proposed Bloomfield business park and attempting to attract new business into the municipality and retain existing business; is that correct? 411 MR. BORDUAS: That is correct. 412 MS. ALDRED: And I gather it's part of your role to guide a potential customer through the various municipal processes that would be required to be followed by a new business in the municipality? 413 MR. BORDUAS: Yes, but not ultimately all. 414 MS. ALDRED: And you know, Mr. Borduas, that at least in this preliminary part of this hearing, we're attempting to understand the real nature of the urgency that the applicant is claiming and the Municipality is also claiming, and we'd like to understand what electrical demands your municipality really has now, urgently, before the combined proceeding takes place. 415 Is it your evidence that you have not, at present, sold any lots in the business park? 416 MR. BORDUAS: Yes. We have not sold any business -- any lands in the business park, and we've -- our ability to be able to sell will be compromised by our ability to enter into agreements of purchase and sale for fixed prices for the property. 417 MS. ALDRED: So you're not coming to the Board this morning to say that your application is urgent because you've signed up three big customers and they need power right away; is that correct? 418 MR. BORDUAS: That is correct. 419 MS. ALDRED: And specifically, you're claiming that you cannot market the park because it cannot immediately accommodate a load of 10 megawatts; is that also correct? 420 MR. BORDUAS: That is correct. 421 MS. ALDRED: So what you're suggesting to the Board is that the nature of the urgency is related to your immediate need for 10 megawatts in order to market the park to potential investigators. 422 MR. BORDUAS: That is correct. And as I had previously indicated, that with -- we require this certainty in order to make those representations to clients, and that in our particular case, we have not been in a position to do that or conduct business in that way. As well, it does impact them on their business planning functions; that if there is an unforeseen delay, that it could have serious negative consequences to their establishment and their budgets and their plans. 423 As well, by not having that particular commitment at this particular time, could move them into another construction season or into a situation where they are constructing over the winter months where the prospect of that construction could add significant cost impact to their construction values of their project and ultimately the viability of that project. 424 MS. ALDRED: Would it be fair to say that a very large business, such as perhaps an automotive plant, would need 10 megawatts of supply? 425 MR. BORDUAS: That's a very real possibility, yes. 426 MS. ALDRED: And would it also be fair to say that a smaller business, such as perhaps a warehouse complex, would have a smaller electrical load? 427 MR. BORDUAS: It certainly is dependent on the nature of their equipment and processes that would be in place. 428 MS. ALDRED: So you would agree that there would be in your business park varying electrical loads which could potentially locate there. 429 MR. BORDUAS: Yes. 430 MS. ALDRED: One of the items that you filed with your evidence was your official plan amendment. 431 MR. BORDUAS: Yes. 432 MS. ALDRED: And I gather that amendment passed with no appeals? 433 MR. BORDUAS: That is correct. 434 MS. ALDRED: Congratulations. 435 MR. BORDUAS: Thank you. 436 MS. LEA: Indeed. 437 MS. ALDRED: If you could please turn to Exhibit B.3.5, take a look at the official plan amendment for a minute, at tab 2. 438 MR. BORDUAS: Is this the one entitled "Amendment Number 16 to the Official Plan"? 439 MS. ALDRED: It is. That's the amendment that will allow the Municipality to place the business park in the location where it is being built; is that correct? 440 MR. BORDUAS: This particular amendment allows us -- allows the land-use provision in that particular case to be converted from agriculture to industrial purposes. 441 MS. ALDRED: And if you would just turn to page 11 of the amendment. 442 MR. BORDUAS: Yes. 443 MS. ALDRED: And if you look at paragraph 8.A.2(1), would you agree that that identifies the business park for us in general terms. It talks about advance technology, office and business support, et cetera? 444 MR. BORDUAS: That paragraph indicates the broad-based types of businesses that could locate in the park, and the section -- the second provision that was provided there, which is the zoning application that had -- was also for the same time, outlines the specific uses that are allowed in that particular park. 445 MS. ALDRED: So you're referring to paragraph 2 below, which says: 446 "Main permitted uses within the business park shall include light industrial uses that involve assembly, fabrication, manufacturing, printing, packaging, distribution, storage and/or warehousing within wholly-enclosed buildings, business support services, advanced technology industries, research and development facilities, customer contact call centres, and business and professional offices." 447 MR. BORDUAS: Those are the broad uses of that particular land use that are permitted, and the zoning bylaw then indicates the specific types of uses and indicates a specific designation of use. 448 MS. ALDRED: And so that -- that paragraph tells us what types of businesses can, if they bought a lot in the park, locate there legally pursuant to the provisions of your overarching planning document, which is the official plan? 449 MR. BORDUAS: In general terms, yes. 450 MS. ALDRED: And just finally before I leave this point, there's also a list of secondary uses there too, isn't there? And that includes restaurants, financial institutions, service commercial, commercial recreation facilities, trade schools, hotels, motels, conference facilities. 451 I won't keep reading them, but there's a range of secondary uses that's also permitted there? 452 MR. BORDUAS: Yes, and those -- those particular uses under our zoning bylaw, as it indicates here, are secondary uses and cannot be the principal or primary use of that particular function. 453 MS. ALDRED: And so we've covered the range of uses that could go into the business park. Would you agree with me that the occupants, the eventual occupants of the business park could, according to the official plan amendment, range from a restaurant to a call centre to a large warehouse to light manufacturing? 454 MR. BORDUAS: I would disagree with that reference. 455 As I indicated in my previous statement that the permitted uses that are provided, there is a principal and a secondary use, the principal use being those items captured by item number 2, and those ancillaries or not primary uses are captured by item number 3 in here. 456 So consequently, there could be a large manufacturer that would be -- with the principal use established, and they may, for instance, have as a secondary use, a tenant which could be a restaurant on-site, but it cannot be the principal use of that particular business. 457 MS. ALDRED: But you'd agree -- you're quite right. But you would agree with me that the principal uses that I've outlined here vary quite a bit from a warehouse to light manufacturing. Various types of uses can go in. 458 MR. BORDUAS: Yes, I would concur with that. 459 MS. ALDRED: And can you agree with me that it's really not possible to predict right now who would build first or in what order? 460 MR. BORDUAS: Certainly what -- we can provide you with a prediction and from a degree of certainty are the -- are the expressions of interest that we have been receiving from actual clients, potential clients for that park. 461 And that based on those interactions that we have had, and Brose being used as one example here today, we've been able to establish a frame of reference for the type of use and their energy requirements. 462 MS. ALDRED: Well, I think your chief administrative officer suggested that the sale of lots was important to the municipality in terms of getting some revenue back in order to pay back the debenture that you're using to finance the park. 463 MR. BORDUAS: That is correct. 464 MS. ALDRED: And so I take it that if a customer came to you that was a smaller customer that wanted a usage which, perhaps, would only use a small amount of electricity, you would still sell the lot to that customer. 465 MR. BORDUAS: We would. We have placed limits on the size and nature of the lots to be created and sold, and so for a small user that let's -- for which you are attempting to represent at the half-acre lot or of that nature, would not be permitted at this location. 466 MS. ALDRED: But I presume you wouldn't turn away a purchaser just because they didn't want the whole 10 megawatts at once; is that correct? 467 MR. BORDUAS: No. Our issue in this particular case is that we have to establish credibility and certainty, that if we -- that we can service a wide range of uses. At the present time, we cannot serve any use. 468 MS. ALDRED: Isn't it reasonable to assume that the lots will sell one at a time o, perhaps, several at a time, and it's quite possible that the electrical need will not necessarily materialize all at once, but quite likely in a more gradual fashion? 469 MR. BORDUAS: In our particular case from a servicing perspective, we need to approach it for -- in the same rationale that we approach water, waste water, and storm water. We have to provide services to take in all ranges. We cannot, for instance, just on a water provisioning, put in a half-inch line and then tell the customer somewhere down the road that requires a 4-inch connection that it will be there. 470 And so the reference that you're making that we would look at maybe providing a smaller amount of service in order to allow us to sell lots, the Municipality has made the commitment that we will be servicing it to certain levels, including water, waste water, and storm sewer, and our commitment is entirely the same for Hydro service. 471 MS. ALDRED: I'm not sure that's quite what I asked you. I just asked whether it was possible that electrical needs will not necessarily come along all at once, customers' real needs, not what the Municipality wants to put in now. But a customer on the ground, their real needs will not necessarily come in all at once up to the 10 megawatts, will they? 472 MR. BORDUAS: That's a distinct possibility. 473 MS. ALDRED: Now, once you do sell a lot, there are certain procedures which would have to be followed, and there would be events that had to take place, would there not, before a business would be up and running and in need of electricity? 474 MR. BORDUAS: The -- there would be municipal approvals that would be necessary in order to allow us to issue a building permit for construction. 475 MS. ALDRED: So the first thing that would have to happen, would you agree, is that the sale transaction itself would have to close. 476 MR. BORDUAS: Correct. 477 MS. ALDRED: And then I assume, as you've just mentioned, that a building permit would be required. 478 MR. BORDUAS: Correct. 479 MS. ALDRED: And so that application would have to be made and processed and then approved? 480 MR. BORDUAS: Yes, it would. 481 MS. ALDRED: And what is the normal lead time for that process for a light industrial customer in your municipality? 482 MR. BORDUAS: What usually happens in those particular cases, because we have an ongoing relationship with the client, several of those issues are negotiated at the same time. And so consequently, we may be able to approve a condition of purchase and sale and as well have an application for a building permit occur simultaneously and at the same approvals meeting. 483 MS. ALDRED: Well, I understand that, but what's the time frame from the time an application is submitted, whether it's done at the same time as the agreement of purchase and sale or not? What's the time frame from the time a building permit application goes in for a light industrial building to the point at which the permit is actually issued and in the hands of a contractor? 484 MR. BORDUAS: You're asking me to speculate on that, and it's different in all different client cases, and it's dependent on the size and nature of the project. 485 MS. ALDRED: Well, what's the range? 486 MR. BORDUAS: As I mentioned to you before in -- that in most cases, we have those discussions simultaneously. And for instance, to give you -- you know, to draw back with our testimony with Brose, it was our intention that we would enter an agreement of purchase and sale and as well have all of the review of their engineering requirements done and would occur -- and those decisions would happen simultaneously. 487 MS. ALDRED: Do you have a chief building official in Chatham-Kent? 488 MR. BORDUAS: Yes, we do. 489 MS. ALDRED: And does he do monthly or quarterly or even bi-yearly reports on building permit applications in the municipality? 490 MR. BORDUAS: Yes. It's an obligation of that reporting for us to Stats Canada. 491 MS. ALDRED: And as an economic development officer, do you have access to those reports? 492 MR. BORDUAS: We do. 493 MS. ALDRED: And so why can you not provide me some sort of range of the type of time frame that's required to getting a building permit through in your municipality? 494 MR. BORDUAS: You're asking me to speculate on the size and nature of a project, and you've indicated that it would be a light manufacturing operation. Certainly, we would not have any indication about whether or not -- the size and nature. It could be light manufacturing. It could be 120,000 square feet. It could be something in the neighbourhood of 10,000 square feet. And each application is different, and each client is treated based on their particular needs. 495 So it would be -- I wouldn't -- would not be able to give you an answer with any certainty that it is ten days or five days or three days or 15 days. 496 MS. ALDRED: You have the -- you know a fair amount about the Brose site that you lost to London, and I'm quite sure you know how big that building would have been. What do you think the time frame would have been for the Brose project, to get a building permit? 497 MR. BORDUAS: In that particular application, we would have seen the documents, and certainly for us to be able to go from agreement of purchase and sale to building permit, most likely would have been anywhere between five to ten business days. 498 MS. ALDRED: Brose would have put in a building permit application for a very large facility, and it would have been processed and approved in five to ten days? 499 MR. BORDUAS: That is correct. 500 MS. ALDRED: Does the type of building which is going to be put in the business park require site plan approval in your municipality? 501 MR. BORDUAS: I'm not -- I don't know the specific answer to that. 502 MS. ALDRED: You don't know whether the Brose site, for instance, would have had to go through site plan approval? 503 MR. BORDUAS: As I indicated to you, that review around site plan approval and issuance of building permit, those issues, they happen simultaneously. 504 MS. ALDRED: Is it not the case, though, that a site plan approval has to be obtained before a chief building official can issue a building permit? 505 MR. BORDUAS: Yes. 506 MS. ALDRED: And then following all those municipal approvals, there would have to be lead time for construction; is that not correct? 507 MR. BORDUAS: It depends on the client and whether or not they have a contractor selected. In most cases when we see those drawings, they have been prepared by a contractor and that a contractor has been approved by the client. Our issue is just a technical review. Our chief building official would do the building review as well as the technical review on the site plan, so that chief building official would look after both of those issues. 508 MS. ALDRED: Yes, sorry; I was just referring to the actual time to construct the facility. It would take some time on the ground for a facility to be constructed, once the approvals are obtained. Can you agree with me on that? 509 MR. BORDUAS: Correct. 510 MS. ALDRED: Would you agree with me that even if someone came to you today and purchased a lot right this minute, adding up the time required for the closing of the sale transaction, obtaining a building permit and site plan approval, and then the construction time, that it's unlikely that a customer would be likely actually to need power for a few months? 511 MR. BORDUAS: I would disagree with that, because we would not be, in our current situation, because of the certainty, we could not even contemplate getting to that particular point in the process because we would -- they would not be able to budget, nor could they -- could their contractor be able to have any discussion with the local Hydro representatives in order to allow that construction to proceed. So we would not even be in that situation. 512 MS. ALDRED: Sorry, my question was premised. You're here arguing that this is urgent. My question was simply this: If you left today knowing that Chatham-Kent Hydro was going to be the service provider, or if you left knowing that it was not going to be the service provider, and someone came in to you today and they bought a lot, there would still be a lead time or lag time, would there not, before power was needed by that customer in your building -- in your business park? 513 MR. BORDUAS: It's dependent on certain -- certainly, on the client. As it stands right now, you know, we would not even have the power necessary in order to have a connection to our pumping station that's currently under consideration. I'm not being elusive by any stretch of the means here. You're asking me to comment on a hypothetical situation, and I'm indicating to you that we may not even get to that particular point, based on the situation that has occurred. 514 MS. ALDRED: But assuming we get there, there will be a lead time, will there not? 515 MR. BORDUAS: Yes, and -- probably so. 516 MS. ALDRED: Just maybe a question for Mr. Pavelka again. 517 I understand, Mr. Pavelka, from your testimony this morning that Chatham-Kent came pretty close to getting the Brose plant, and in fact came second to London. 518 MR. PAVELKA: That's correct, yes. 519 MS. ALDRED: And, in fact, was competing against other top flight municipalities, I gather, in North America. 520 MR. PAVELKA: Guelph, Woodstock, and three southern United States, American states. 521 MS. ALDRED: And Brose is actually a German company, has actually got headquarters in Auburn Hills, Michigan; is that correct? 522 MR. PAVELKA: Correct. 523 MS. ALDRED: I understand also, though, from your testimony that it's your view that the reason that Brose did not locate in Chatham-Kent was this, shall we say, confusion over the electricity servicing issue. 524 MR. PAVELKA: It was servicing, period, one of which was the Hydro. 525 MS. ALDRED: Well, what were the concerns about the other servicing issues? 526 MR. PAVELKA: They weren't there on site at the time the chairman was there. 527 MS. ALDRED: It wasn't just the electricity? 528 MR. PAVELKA: It was all of them; correct. 529 MS. ALDRED: And is that, in your view, the only reason that Brose did not locate in Chatham but instead went down the highway to London? 530 MR. PAVELKA: No. They made it clear to us that that was one of the issues. 531 MS. ALDRED: And can I please refer you to Exhibit B.3.1. I'm sorry, it's B.3.9. 532 MR. PAVELKA: You're talking the second tab in our submission? 533 MS. ALDRED: B.3.9 is a letter from your Municipality, dated March the 31st, 2003, to the Energy Board, and it has a series of articles appended to it, if that's helpful, newspaper articles. 534 MR. WICKETT: March the 31st? 535 MS. ALDRED: Yes. 536 MR. FISHER: Mr. Chair, I was just wondering if, in fact, these communications are in evidence, because they were written prior to the Procedural Order Number 1 in relation to the consolidated hearings, and they haven't been introduced in any way other than that and they weren't -- you know, they were before the consolidated proceedings, basically. That's why I'm questioning whether they are -- 537 MR. SOMMERVILLE: I would consider them to be part of this proceeding, Mr. Fisher. Are you suggesting -- are you making a formal objection to their use by Ms. Aldred? 538 MR. FISHER: I guess what I'm asking for is a determination as to whether or not they are in evidence in this proceedings, given the fact that they were written prior to Procedural Order Number 1 which consolidated all the applications for service-area amendments. 539 MR. SOMMERVILLE: You have a determination. I do consider them to be before us today. 540 MR. FISHER: Okay, thank you. 541 MR. SOMMERVILLE: Thank you. 542 MS. ALDRED: Mr. Pavelka, the letter I'm referring to is dated March 31st, 2003 -- 543 MR. PAVELKA: I have it. 544 MS. ALDRED: -- and it's a letter signed by you and it's to the Energy Board. 545 If you could just flip to the second article that you appended to the letter, page 5, if that's helpful. 546 MR. PAVELKA: I have it, yes. 547 MS. ALDRED: This article, I guess you included it because you wanted the Board to see it, and it quotes the mayor of Chatham-Kent. And the mayor of Chatham-Kent here is giving her thoughts on the Brose issue. She's congratulating the Municipality on coming a close second, and also she's stating the reasons why, in her view, Brose didn't locate in Chatham-Kent; is that correct? 548 MR. PAVELKA: That's correct. 549 MS. ALDRED: And your mayor gives as reasons, if you look at the -- I guess it's the second paragraph in the middle column, she talks about other reasons why the Forest City was selected. And she talks about health care, including specialists, London not having such an extensive doctor shortage. The company also felt that the education facilities in London, including the University of Western Ontario and Fanshawe College, provided greater access to education as well the opportunity to have a sustainable, skilled work force in the future. Is that correct? 550 MR. PAVELKA: That's correct. 551 MS. ALDRED: So your mayor thought there were other issues surrounding the location of Brose in London, and in fact I don't think she mentions electricity supply or servicing in this article at all, does she? Or whoever wrote the article doesn't quote her, anyway, as having mentioned those. 552 MR. PAVELKA: I was with the mayor when she received this information from the chief financial officer from Brose in Auburn Hills, and these were the other issues in addition to the servicing issues that were of concern to them. 553 MS. ALDRED: Okay, thank you. 554 MR. PAVELKA: Mr. Chair, I can help you with the questions to Mr. Borduas with the processing of the building permits and the timing of that, the issue that you were grappling with there. 555 First of all, as Mr. Borduas was saying, we work with the clients to phase the building permit application in, such that we can, in accordance with the building code, do half of the permit by doing the foundations early. That gets the building up and running, and then do the detailed analysis of the later -- of the balance of the building after that. 556 The other issue of significance, and we're in that situation right now, and actually, your Hydro One people should be aware of this, where we actually have a -- in fact, one of the largest greenhouses under construction just north of Glenheim, and unfortunately, they don't have power, so they've been working on generators since November. 557 MS. ALDRED: That greenhouse was attracted to Chatham-Kent by the economic development office? 558 MR. BORDUAS: That is correct. 559 MS. ALDRED: And that greenhouse lies along the Hydro One line? 560 MR. BORDUAS: That is correct. 561 MS. ALDRED: And it will be a Hydro One customer? 562 MR. BORDUAS: That is correct. 563 MS. ALDRED: And it's locating in Chatham-Kent, despite the fact it'll be a Hydro One customer; is that correct? 564 MR. BORDUAS: They are locating in Chatham-Kent, and I wouldn't characterize it despite thereof. Certainly that they -- there has been an application made for extension of service to that particular property, and as of yet, that connection has not been made to the customer. 565 MS. ALDRED: Okay. I wasn't aware of that. That's not before us here today. 566 MR. BORDUAS: Correct. 567 MS. ALDRED: Has it been filed? Has the application been filed with the Board? 568 MR. BORDUAS: Oh, no. It will be a Hydro One customer, and -- but as I said, they have made application to the local service office in order to have that connection in place. And as of yet -- the greenhouse has started construction in January, and as of yet, there is no formal Hydro connection to that site to be used by the contractor during construction. So they have had to go to generated power at that particular location. 569 MS. ALDRED: Is it not possible that there's upgrades being put on the Hydro One line in order to serve this customer? 570 MR. BORDUAS: That particular process is underway, but even the prospect for that particular client to get initial power is not available. 571 MS. ALDRED: Mr. Borduas, would you disagree with me if I said that other municipalities maintain inventories of serviced industrial land and also unserviced industrial land that can be serviced in time to meet a buyer's building requirements? 572 MR. BORDUAS: The municipalities will keep both serviced and unserviced land in inventory, yes. 573 MS. ALDRED: Can we discuss the present status of the business park, sort of, on the ground so that I can picture what's there and what's not there. Are the roadways in yet? 574 MR. BORDUAS: The internal servicing of the park will occur after the services are provided to the site. 575 MS. ALDRED: So -- 576 MR. BORDUAS: So there's a roadway that fronts the front of the property as we speak, yes. 577 MS. ALDRED: Is that Bloomfield Road or -- 578 MR. BORDUAS: No, it is the 7th Line. 579 MS. ALDRED: So that's a pre-existing roadway? 580 MR. BORDUAS: Correct. 581 MS. ALDRED: So if I were driving by right now, on the 401, your proposed business park, what would I see this minute? 582 MR. BORDUAS: You would see -- immediately you would see a Hydro One transmission line that goes -- that runs across the front of the property. You would see primarily a greenfield site, and there would be some indication of water servicing to the site with the hydrants running along the boundary of the site at the present time. 583 MS. ALDRED: So there's no streetlights or signage yet or -- 584 MR. BORDUAS: Not at the present time, no. 585 MS. ALDRED: Is there a sign up that says, "Future site of Bloomfield Business Park"? 586 MR. BORDUAS: We're in the process of having that sign constructed. 587 MS. ALDRED: So it's not up yet? 588 MR. BORDUAS: It's not up. 589 MS. ALDRED: Would it be good from a marketing point of view to be able to get streetlighting in and signage up to improve the visibility of the park? 590 MR. BORDUAS: It would be our intention to have a sign. As far as streetlighting is concerned, we have not made those provisions at this particular time, since there is -- at the present time, there is no access to allow that to occur. 591 MS. ALDRED: Are you aware is that Hydro One Networks already has assets in place so that it can supply 1 megawatt of power, enough for streetlighting, signage, construction power, and enough to supply several customers in very short order? 592 MR. BORDUAS: They've indicated that is their intent. 593 MS. ALDRED: Are you further aware that this 1 megawatt would not require a capital contribution from the Municipality? 594 MR. BORDUAS: I'm not aware specifically of that, but I would refer to our Chatham-Kent Hydro folks to deal with that. 595 MS. ALDRED: You're the developer, though. You're not aware of that? 596 MR. BORDUAS: I was -- in our particular -- no, I was not aware of that. 597 MS. ALDRED: Now, I understand that the Municipality intends to invest approximately a million dollars -- sorry, $11 million in the park? 598 MR. BORDUAS: That is correct. 599 MS. ALDRED: And that there will be no return for the Municipality on its investment until the park is occupied; is that correct? 600 MR. BORDUAS: That is correct. 601 MS. ALDRED: And -- but I understand that the solution that you're asking for today is to be allowed to -- for Chatham-Kent to be allowed to go ahead and build the line at a cost of $700,000 up front to the Municipality; is that correct? 602 MR. BORDUAS: 970,000. That's part of our $11-million budgeted amount that has been approved by council. 603 MS. ALDRED: Would it not make sense to you from a financial and risk-mitigation standpoint for Networks to build two spans of line into the park which would not cost the Municipality anything, and which would enable the Municipality to get up the signage and streetlighting and some customer load, so you can then be able to service those customers who do come along in the interim between now and the main hearing? 604 MR. PAVELKA: Mr. Chair, does it matter who responds to that? 605 MR. SOMMERVILLE: No. 606 MS. ALDRED: No. 607 MR. PAVELKA: No, that's not an option for a few reasons: One is the customers are asking for the ultimate load in the same way that we cannot provide interim storm water, sanitary water, and water. They are asking for the ultimate so that they can not only build, as in the Brose case, ultimately a 60-acre site which was in the order of 3 to 5 megawatts, but they also have to know who their energy supplier is so that they know what capital costs are for the ultimate connection beyond our roadway. 608 And secondly for their -- they have business plans of five to eight years, and they want to know what their annualized costs for Hydro is going to be. That's another component. 609 So to phase in this is not the answer. 610 MS. ALDRED: So you wouldn't consider incremental electricity supply, which would cost your Municipality less or, at least, stage their investment? 611 MR. PAVELKA: No, because that's not what the customers are asking for. 612 MS. ALDRED: Did I hear you correctly this morning -- I wasn't sure -- have you already proceeded with the underground electricity under the 401? 613 MR. PAVELKA: No. Provisions have been made with the MTO to have servicing on the west side of the interchange for all of the underground, for water, sewer, Hydro, gas -- or not for Hydro, for gas. Hydro is going to go out aerially on the east side of the interchange. 614 MS. ALDRED: So I misunderstood you. 615 MR. PAVELKA: Correct. 616 MS. ALDRED: If you would just give me a second, I'll just make sure I don't have anything else. 617 I do have something else. Mr. Borduas, you indicated, I thought, this morning that you're actively marketing the business park with an all-in cost. 618 MR. BORDUAS: That is correct. 619 MS. ALDRED: And so that would include -- I believe you said you would be assuming the capital costs of Chatham-Kent Hydro in that all-in cost. 620 MR. BORDUAS: In the -- our costs, which -- Chatham-Kent Hydro costs are included in the 11 million, and our established cost-breaker is based on those particular capital costs that have been submitted by them. 621 MS. ALDRED: So if you're assuming the capital costs associated with Chatham-Kent Hydro, and Chatham-Kent Hydro is not ultimately the service provider, will you not be actually telling people the wrong information when you're marketing? 622 MR. BORDUAS: We've made an indication based on the information that we have, and used those figures that were provided to us by Chatham-Kent Hydro. And those are the numbers that we need in order to be able to provide a certain amount of -- a certain degree of certainty to our clients. 623 And as we had stated earlier that that degree of certainty, we can't go in and set a price on the land and then change our mind. We have to come up with a -- with an established price, and we've established that price based on the cost factors going into the land, which includes the capital costs that have been provided by Chatham-Kent Hydro. 624 MS. ALDRED: So you've done your calculations of what the lots would cost, assuming that Chatham-Kent Hydro is the provider. And if it turns out in the long run that Hydro One Networks is the provider, those costs will change? 625 MR. PAVELKA: First of all, Mr. Chairman, we would have increased capital costs by increasing it in the order of 1.7 million that Hydro One is asking for, and then that would, yes, affect the direct cost of the lots. 626 MS. ALDRED: Those are all my questions. Thank you. 627 MR. SOMMERVILLE: Ms. Lea. 628 MS. LEA: Thank you, sir. 629 CROSS-EXAMINATION BY MS. LEA: 630 MS. LEA: Good morning, gentlemen. I have a few questions for you as well, please. 631 Probably, Mr. Pavelka, most of these questions arise out of your evidence, but Mr. Borduas, please feel free to jump in at any time. We don't have been formal about who's answering. 632 To follow up a little bit with the phasing of the business park, I did hear you earlier in your evidence in chief refer to phases for this business park. Can you give us an understanding of the phases, physically, and then what the power needs of those phases are, and the timing of them, if you can. 633 MR. PAVELKA: No. 634 MS. LEA: All right. 635 MR. PAVELKA: Other than saying -- I'm sorry, I didn't mean to be facetious. 636 MS. LEA: That's all right. 637 MR. PAVELKA: Other than, there's 120 acres purchased by the Municipality which are invariably going to be sold first. Beyond that, immediately there was an additional 180 acres rezoned, so there's a total of 300 zoned. And even beyond it, there's another 500 for phase B, if you will. So the phase we're talking about, that initial 300, is what we're requiring the 10 megawatts for. 638 MS. LEA: Okay. And is this whole 300, then, the servicing that you've been talking about that you hope to have in place this spring or late spring or summer? Is that all of the 300 acres, or is it the first 120? What are we talking about? 639 MR. PAVELKA: The 10 megawatts is for the 120 acres of municipal property. 640 MS. LEA: All right. So you need the 10 megawatts for the 120. And have you yet done any determination of what you'll need for the next 180, whether you'll need more power or not? If you haven't, that's all right. 641 MR. PAVELKA: Mr. Chairman, that's best answered by the Chatham-Kent Hydro people, or even the Hydro One people. 642 MS. LEA: Okay. You've mentioned that water is already on the site; and sewer, the tender is about to be awarded. There are also, I gather, other services that need to be completed. For the sorts of services that you would like to have in the ground and visible, to the extent that they're visible, for a customer to come look at the site, except for Hydro, when would those other services be anticipated to be completed and ready to look at? 643 MR. BORDUAS: The telecommunications services are already there. They are -- they service one of the adjacent properties. So from a -- both a regular telecommunications service and a fibre access, there is already predominantly very, very close to the site, so they would be to the boundary of the site. The water -- the water is there. Waste water, that contract will be there and completed in the spring of this year. 644 MS. LEA: Okay. We're in mid-May. Spring for you, does it end in May or June? I don't want to be persnickety about this or anything. I'm just trying to get a grip here. 645 MR. PAVELKA: It would be in by June for the sewer. Left is gas, and we have made arrangements with Union Gas to be there. I don't know the exact date, but it will be there by June 2. 646 MR. BORDUAS: They have their permit for crossing of the 401 already. 647 MS. LEA: All right. And with these other utilities that are going into the site, if Chatham-Kent were to be serving you from the north, I gather, they would have to cross the 401 as well? 648 MR. PAVELKA: Realising that they're all coming from the north to the south to feed the industrial park, we made arrangements with the MTO for a corridor so that gas is with the water/sewer area, so it's all in one tunnel. 649 MS. LEA: And would there be synergies to be gained by building the electrical supply through at the same time as these other services? 650 MR. PAVELKA: No, it's significantly more expensive to build Hydro underground as opposed to aerially, and I guess that's one of the reasons they chose to go to the east of the great separation rather than the west. 651 MS. LEA: Okay, thank you. 652 Mr. Pavelka, I heard you give three reasons in your evidence in chief why you prefer the service from Chatham-Kent. The first was rates, the amount that the customers, the ultimate customers of the business park would pay; the second was the cost to connect the business park which the Municipality will at least initially have to bear; and the third was reliability issues. Are there other factors I left out? 653 MR. PAVELKA: Beyond those, timing; which of course is the primary reason for this hearing. 654 MS. LEA: Timing drives your choice of service provider? Your belief is that you would get faster service from Chatham-Kent? 655 MR. PAVELKA: Two issues. The timing in that Chatham-Kent can provide that Hydro quickly in comparison to Hydro One; and secondly, you've triggered something else with respect to timing, timing with respect to service and/or maintenance. In our area, because of the rural nature of the Hydro One lines and the problematic time to service them, Hydro One has entered into a contract with Chatham-Kent Hydro such that in emergency circumstances, storms, whatever, if Hydro One cannot make arrangements to be there, they make arrangements for Chatham-Kent Hydro to actually do the maintenance work. So timing from that perspective as well works to Chatham-Kent Hydro's advantage. 656 MS. LEA: I was curious about that, because in your evidence in chief this morning you referred us to your evidence which was -- had a cover letter dated February the 20th, 2003. And if I can find my exhibit list, I think that's A -- no, it would be B, B.3.5, and you referred us to tab 3 of that document, which is the electricity supply options that was put forward by Stevens and Dillon. 657 MR. PAVELKA: I have the Stevens report. 658 MS. LEA: Okay, thank you. At page 1 of that report, when you look under the paragraph "Impacts on Future Occupants," the first bullet point indicates that Hydro One's response time is better than that of Chatham-Kent for the same time period. There is other evidence in this proceeding which compares a response time in 120 minutes to a response time within 60 minutes. But this direct comparison that was drawn to our attention earlier today appears to give a better response time for Hydro One. 659 MR. PAVELKA: I have no explanation for that, other than referring you to subsequent speakers, both Hydro One and Chatham-Kent Hydro. 660 MS. LEA: Okay. But in your mind, despite that statement, in your mind, there was a concern with response time from Hydro One. 661 MR. PAVELKA: Absolutely. 662 MS. LEA: Okay. Now, let's, then, talk about the other -- the timing -- 663 MR. PAVELKA: Mr. Chair, I'll just add to that. That's beyond my mind. That's the industrial community of Chatham-Kent. Earlier on I mentioned about the industrial advisory committee. In addition to my concern and my involvement with the Solvay automotive in Blenheim, I'm getting that from a number of the industrial manufacturers in Chatham-Kent about exactly the same thing. 664 MS. LEA: Yes, Mr. Pavelka, I'm asking you because you're the one that happens to be here today to talk about these issues, and you can only tell us what other people have said to you. But I wanted to understand what your view was about it as the CAO for the Municipality, okay? Thank you. 665 Have you had the opportunity to read the evidence from Hydro One? There were two pieces of evidence they filed. The first was with a cover letter dated February 21st, 2003, and then Hydro One also filed evidence in response to Procedural Order Number 3 in this proceeding. Have you had an opportunity to read that evidence? 666 MR. PAVELKA: No. 667 MS. LEA: No, you have not read that evidence? So what is your understanding, then, of Hydro One's proposal for connection of the business park as that proposal currently stands? 668 MR. PAVELKA: That they can do it initially for 1 megawatt, and that does not include a dual feed. 669 MS. LEA: Okay. 670 MR. PAVELKA: And although again I haven't even read it, other than being told, there are -- there's different changes to the original RFP as they originally bid on the arrangements. 671 MS. LEA: Okay. 672 MR. PAVELKA: And so things have changed from that original RFP. 673 MS. LEA: Right, and we haven't heard their evidence today yet. 674 MR. PAVELKA: Correct. 675 MS. LEA: I just wanted to ask you about a couple of things in that evidence, though. It appears to be suggested in the evidence, which is filed with a cover letter of February 21st, 2003, that Hydro One's cost to provide the full 10 megawatts of service is $500,000. Do you have any understanding as to whether that's your understanding or not? 676 MR. PAVELKA: I can -- my understanding is for Hydro One to provide the full 10 megawatts with the dual feed, that their cost is 2.7 million as opposed to the 970,000 bid by Chatham-Kent Hydro. 677 MS. LEA: Okay. And that's for a dual feed? 678 MR. PAVELKA: Correct. 679 MS. LEA: I understand. And when did you get that information, sir? Was that part of the original reply to the request for proposal or -- 680 MR. PAVELKA: I can't categorically say, but I've had that impression from virtually day one, so I would -- it was relatively close to that RFP time, because I've had that opinion for quite some time. 681 MS. LEA: Okay. The second thing that I noticed in Networks' evidence which was filed in response to Procedural Order Number 3, which is the latest thing that they filed, they talk about the time to provide the full 10 megawatts of supply. 682 And at page 4 of that submission, it states: "Networks can provide the entire 10 megawatts of supply, should the Municipality desire within eight weeks from the time an offer to connect is signed and an appropriate capital contribution is provided." 683 Was that your understanding, sir? 684 MR. PAVELKA: No, it's not. Plus, as I'm saying to you, that's now the third change to the original RFP. When we put the business plan together, the reason we went out for an RFP is to nail down some of these numbers, and that was the original 970,000 that Chatham-Kent Hydro put forth. 685 And, yes, I'm aware, or I've been advised that there have been a second and third changes to the original Hydro One RFP, but that's not in our business plan. That original business plan included 11 million -- for the $11 million included the least-cost energy provider, which was Chatham-Kent Hydro. And we've gone forth on that basis. 686 Everything else is a change, and as I've said, the latest one that you're referring to, my understanding is the dual feed, ultimate 10 megawatts is at a cost of 2.7 million. That's 1.7 million over and above the 11 million we have provided for in this business case. 687 MS. LEA: Okay. Thank you. 688 If it turned out that the Hydro One option was cheaper than the Chatham-Kent option, would that change your mind about who should be your service provider? 689 MR. PAVELKA: Absolutely. If they were the most economical capital-wise, annualized operating cost, and they could provide the reliability, and those three factors, well, we have something to talk about. 690 MS. LEA: Okay. So there were three factors there. You listed again that the first was the rate, the cost to the ultimate consumers. The second was the cost to connect, and the third was reliability. You'd have to be assured on those three points? 691 MR. PAVELKA: We and the customers that we're luring to Chatham-Kent -- 692 MS. LEA: Yes, well -- 693 MR. PAVELKA: Or trying to attract may be a better word. 694 MS. LEA: Okay. One moment, please. 695 Yes, "luring," we won't go there. Gentlemen, you both mentioned that to you and to the customers which you hope to attract to Chatham-Kent, that certainty, certainty of costs both with respect to capital costs initially and annualized costs in the future is extremely important; is that correct? 696 MR. PAVELKA: Let's say it simultaneously. Absolutely. 697 MR. BORDUAS: Absolutely. 698 MR. PAVELKA: Yes. 699 MS. LEA: Yes. Okay. But certainty is not as important, from what I took in your evidence, as having Chatham-Kent as your Hydro provider; is that correct? 700 MR. PAVELKA: We're looking for the least-cost provider. 701 MS. LEA: Okay. The reason that I'm asking this question is that, of course, you could have achieved certainty by signing up with Hydro One some time ago. Possibly, your evidence is, to your disadvantage, but certainty could have been achieved in that fashion. 702 MR. PAVELKA: I don't think so, from the point of view of the customers are asking for 10 megawatts. We don't know -- we don't have the luxury to know whether or not someone is going to walk in tomorrow and offer to buy 2 acres versus the 60-acre scenario that we found ourselves in two months, and -- 703 MS. LEA: What was your understanding about the timing -- your understanding about the timing for Hydro One to provide the 10 megawatts? 704 MR. PAVELKA: That it would take at least a year beyond what Chatham-Kent Hydro could provide. 705 MS. LEA: I see. So in that respect, then, you found the certainty of Hydro's offer unacceptable, that there wasn't sufficient certainty, or timing issues? 706 MR. PAVELKA: There was -- they were not able to be there in time, they had the $1.7 million premium attached to their service, and their annualized costs for the example that I've been shown in the Stevens example with a light industrial, that there was a 60 -- $58,000 per year premium for their rates over the Chatham-Kent Hydro rates. 707 MS. LEA: Okay. And, sir, I think I heard you refer to in your evidence in chief, and correct me if I'm wrong, that there would be some advantage to the Municipality in being able -- I gather you're the shareholder of Chatham-Kent Hydro? 708 MR. PAVELKA: Sole shareholder. 709 MS. LEA: Yes, okay. In being able to have Chatham-Kent Hydro serve, because the -- the rates or the electricity that you could provide would be -- would provide some revenue to the Municipality. Did I misunderstood you, or is that the case? 710 MR. PAVELKA: I'm sorry. Your question again? 711 MS. LEA: Yes. Do you -- is there an advantage to the Municipality in having Chatham-Kent Hydro serve the business park, because you are the shareholder of it? Is there some benefit to the Municipality? 712 MR. PAVELKA: No. They're a separate corporation. 713 MS. LEA: Okay. Thank you. 714 One moment, please. Thank you very much, gentlemen. Those are my questions. 715 MR. SOMMERVILLE: Ms. Spoel? 716 QUESTIONS FROM THE BOARD: 717 MR. SOMMERVILLE: Just a couple of questions to the panel. 718 Just to follow up directly on what Ms. Lea asked you, are there any arrangements in place or understandings between the utility and the Municipality as the developer of this property with respect to either a rebate of capital contribution, a rebate of any kind, a rate support of some kind, a rate undertaking? Is there any relationship of that nature? Are there any arrangements of that nature between the Municipality and the utility? 719 MR. PAVELKA: I understand the question, Mr. Chair. Unfortunately, I think that the Chatham-Kent Hydro CFO is the best person to respond to that. 720 MR. SOMMERVILLE: That's fine. I'll hold that question until then. 721 Just further with respect to the -- and just so that we're clear, the idea of certainty, you are not under the impression that Hydro One couldn't provide you power today if you -- or couldn't begin the process to provide you power today without any further regulatory activity of any kind? 722 MR. PAVELKA: Well, no. Clearly, I have an understanding they could. They just couldn't provide it as economically nor as reliably as Chatham-Kent Hydro could. 723 MR. SOMMERVILLE: According to your understanding, that was the issue. It wasn't certainty with respect to supply, but certainty with respect to the cost of supply was at issue for the project, as you say? 724 MR. PAVELKA: It was the combination of the cost of supply plus this dual feed issue. 725 MR. SOMMERVILLE: Thank you. 726 And just finally, in terms of a development like the Brose development -- that's unnecessary. Thank you. Those are my questions. 727 MR. FISHER: Mr. Chair, do I get an opportunity to have a friendly cross-examination? 728 MR. SOMMERVILLE: That wouldn't be within my contemplation. I'm prepared to hear submissions on the point. 729 Typically cross-examination relates to parties adverse in interest, and I take it that you're not one of those, Mr. Fisher -- 730 MR. FISHER: Correct. 731 MR. SOMMERVILLE: -- with respect to these witnesses? 732 MR. FISHER: Hence the word "friendly." 733 MR. SOMMERVILLE: Right. 734 Certainly Mr. Wickett has the opportunity to -- for redirect and any questions arising from our questions. 735 MR. WICKETT: I just, sir, have a couple of questions, if you don't mind. 736 RE-EXAMINATION BY MR. WICKETT: 737 MR. WICKETT: Mr. Borduas or Mr. Pavelka, are we not looking at some kind of a Catch-22 here? Because I heard a question that came to you about you don't have two or three customers wanting Hydro service right now, and the implication is, so what's the hurry? Could you deal with that. 738 MR. PAVELKA: Mr. Chair, I'll start first of all. First of all, from economic development, in fact, we have staff out there today, and I understand as of phone calls that they're talking with people interested in viewing that site, and we are getting two to five people reviewing that site a week; two some weeks, five other weeks. 739 The problem we have is when we get into representing that, we have to say whether or not we have that site serviced, and right now it is not serviced. We are working away on the sanitary arrangements. Water is there. Union Gas is on its way. Telecommunications is on the way. Hydro is up in the air, and that's the reason for the urgency, in our minds. 740 And then over and above, once we get the Hydro issue settled, we are then in a position to represent to our clients what their costs would be, their annualised the operating costs in the rates. And until we have that information, we cannot represent that detail on the short-short list. The only reason we know this and we're so adamant is because we've been there. 741 MR. WICKETT: The other issue that came up in cross-examination was this timing with respect to the building permit, site-plan approval, and I believe one of the answers to the questions that were put to you was that you have a setup right now where you deal with these things together and in conjunction with the customer; is that correct? 742 MR. BORDUAS: In my capacity as the director of Smart Growth Services, I have reporting to me the economic development function, the building department and the planning department. And so what we do is this team approach. We sit down with a client and try to resolve the issues at once. And so what that does, for our benefit, at least we think -- we hope for our benefit, is that it reduces the time to get to project in order to get into the ground. 743 So we spend a lot of that time, in fact, in preparation prior to us getting into agreements of purchase and sale. So once the agreement of purchase and sale is established, then we can also have site plan approval proceed at the same time. 744 MR. WICKETT: And, Mr. Pavelka, with the economic situation that you've described earlier in your evidence, what is your direction to your staff in the building department, in the economic department, in the planning department, with respect to response times for customers that might be interested in this park? 745 MR. PAVELKA: I can say this, because I've said it to the staff, when we get a lead like this to -- and in fact, we created the concept of giving a partial building permit just for the foundation so that they can get on with designing the balance of it and get on with the footings. 746 Secondly, if it takes overtime and weekends, our staff have been told to expedite, because that's an advantage in a smaller jurisdiction. We have -- we can turn things around time -- we've given direction to staff to expedite as quickly as possible. To the extent that, even as Mr. Borduas indicated earlier on, that we would ask for their plans as soon as possible, as soon as that they know that we're entertaining a sale of the property so that it happens as -- in as much parallel as possible. 747 MR. WICKETT: Is this a view shared by the mayor and council of the Municipality? 748 MR. PAVELKA: They probably would put it at a higher scale than I would. 749 MR. WICKETT: Just one other matter. It's been raised in the cross-examination about the timing of the application to the Board for approval of the Hydro One -- of the Chatham-Kent Hydro application. In the application material of Chatham-Kent Hydro that was filed to begin this proceeding, at tab 3 is a letter from Chatham-Kent Hydro to Mr. Oostveen who is the manager of development services at the Municipality. I'm wondering if you could have a look at that, Mr. Pavelka. Tab 3 of the application of Chatham-Kent Hydro. 750 MS. LEA: The letter dated March 11th, sir? 751 MR. PAVELKA: Correct. 752 MR. FISHER: The letter dated March 11th, 2002. 753 MS. LEA: Thank you. 754 MR. WICKETT: I wonder if you could look at that and tell me if there were any issues discussed at that time with regard to timing of such an application to the Board. Can you look at paragraph 3, Mr. Pavelka. 755 MR. PAVELKA: Yes. As I review this, and this is one of the letters I did read. I recall the fact that Chatham-Kent Hydro indicated that they would also have to go to the Ontario Energy Board to get the extension of the licence to service this area. 756 MR. WICKETT: And there was a time frame that was actually represented in this letter to you. 757 MR. PAVELKA: Chatham-Kent Hydro committed to this project that -- I'm reading, "we'll do everything within our control to expedite the regulatory process to make that arrangement." 758 MR. WICKETT: Right. There was also reference in the third paragraph about the time lines that would be required to deal with this application by the Board. 759 MR. PAVELKA: The information we have here is that "the OEB has informed us that the approval process may take two to three months." 760 MR. WICKETT: Thank you. No further questions. 761 MR. SOMMERVILLE: We will -- that's the conclusion of your evidence? 762 MR. WICKETT: That's the conclusion of the evidence on behalf of the Municipality with respect to the urgency issue. I believe Chatham-Kent Hydro has a witness that they wish to call as well. 763 MR. SOMMERVILLE: I anticipated that. Thank you. 764 I think we'll rise now until 2:00, and at that time we'll hear your evidence, Mr. Fisher. 765 I see a comment; Ms. Aldred. 766 MS. ALDRED: Yes. I just wanted to indicate that -- excuse me. We'll have -- just say it. We'll have witnesses on urgency as well. 767 MR. SOMMERVILLE: Indeed. 768 MS. ALDRED: Thank you. 769 MR. SOMMERVILLE: I wonder. If it's 12:25, I wonder if it might be worthwhile to start back at 1:30; it is our hope to conclude the matter today. And so if we start back at 1:30 with your evidence, Mr. Fisher, and then we'll proceed to Hydro One's case. We'll stand adjourned until 1:30. Thank you. 770 --- Luncheon recess taken at 12:25 p.m. 771 --- On resuming at 1:24 p.m. 772 MR. SOMMERVILLE: Thank you very much. Please be seated. 773 Mr. Fisher? 774 MR. FISHER: Thank you, Mr. Chair. 775 MR. SOMMERVILLE: The witnesses will have to be sworn. 776 MR. FISHER: Yes. 777 CHATHAM-KENT HYDRO INC. - PANEL 1; SCHWARZ, KENNEY, HOGAN: 778 B.SCHWARZ; Sworn. 779 D.KENNEY; Sworn. 780 J.HOGAN; Sworn. 781 EXAMINATION BY MR. FISHER: 782 MR. FISHER: The first witness is Dave Kenney. 783 Mr. Kenney, could you please tell the Board your position with the applicant, how long you've been with the utility, and the nature of your duties. 784 MR. KENNEY: My position is president of Chatham-Kent Hydro. I've been in that position since October 2000. I've spent 27 years in the electricity distribution business with Ontario Hydro, Chatham-Kent PUC, and Chatham-Kent Hydro. 785 As president, I'm responsible for the engineering and operation of the distribution system of Chatham-Kent Hydro and ensuring we meet future and customer demands. I'm also responsible for business planning, financial -- and ensuring we meet our financial targets and our regulatory requirements. 786 MR. FISHER: Do you adopt the evidence filed on behalf of Chatham-Kent Hydro in these proceedings? 787 MR. KENNEY: Yes, I do. 788 MR. FISHER: Mr. Kenney, as you're aware, we're here today to establish the urgency of a connection for the Municipality's industrial park and its desire to have Chatham-Kent Hydro as the service provider. We've heard from representatives from the Municipality this morning about the urgency for this connection and their preference for Chatham-Kent as the distributor, and I'd just like to confirm a few things for the Board. 789 Would you please tell the Board about the nature of the connection that Chatham-Kent Hydro would provide in terms of new plant construction, lead time, ability to provide the required capacity, and the quality and reliability of the power supply. 790 And, first, how long will it take Chatham-Kent Hydro to supply the business park with 10 megawatts of service? 791 MR. KENNEY: As we submitted in the original RFP, and our submission was on March 11th of 2002 to the Municipality, we can supply a double feeder capable of 10 megawatts each within six to eight weeks. 792 MR. FISHER: What arrangements has Chatham-Kent Hydro made in preparation to construct service for this development? 793 MR. KENNEY: Arrangements for this development actually began, as Mr. Pavelka indicated earlier, in 1998. When the amalgamation of the Municipality occurred, the future expansion of a proposed business park was under consideration. At the same time, Chatham-Kent Hydro -- at that time Chatham-Kent PUC -- was undertaking a load forecasting plan of our own to determine the future needs of our customers. 794 In 1998, we sent some information, and we included that in the evidence of February 28th, 2003, under tab 2. In that evidence we informed Ontario Hydro at that time that the Municipality is considering an industrial development along the 401, and there was some other issues that we were informing them of about the issues of power quality in the area. But we made it clear then that there was -- this was in the forecast of the Municipality. 795 Part of our future planning, we take a reasonable approach to planning in our system, as we operate 11 service territories within -- all within the municipality of Chatham-Kent. Hydro One indicated to us -- we asked for load capacity information at our -- the transformer stations that supply us. We received information from Hydro One in 2002 -- actually, it's 2001, August 14th, 2001, that there was 45 mVa capacity at Kent transformer station, which is the station that will eventually provide this development. 796 Knowing that and other considerations, and knowing our capacity of our own feeders, we knew that there was 8 to 10 megawatts of capacity each year in our five-year plan for our system per feeder. 797 Knowing all this, Chatham-Kent was able to submit a proposal to respond to the RFP to extend two feeders out to the Bloomfield development with the capacity to meet the request of the customer. The same -- and we've also at this time proceeded to complete the engineering for the project. The material procurement of the project is complete. We have received approval across the 401 from the MTO, which is a process that took approximately four months. 798 We've received approval from the public works authorities to build and construct down the municipal right-of-way. We've received approval from Hydro One Networks to cross under their tower line at the 401. It was mentioned earlier there's a transmission line. You need approval to cross under those things, and we have approval from Hydro One for that. 799 MR. FISHER: What type of system will Chatham-Kent Hydro provide, and at what cost to the Municipality? 800 MR. KENNEY: Chatham-Kent Hydro will provide a dual feed, 27,6 system at a cost of 998,000 as indicated in our March 11th, 2002, quotation. 801 MR. SOMMERVILLE: What was that number? 802 MR. KENNEY: 998,000. I believe that was mentioned earlier at 970, but the actual quotation is 998. This also assumes the developer, which is common in our business, will contribute 100 percent of the costs. And the recovery of those costs will be as per section 3 of the Distribution Code, capital contribution policy. 803 This system will also include remote operating switches, which will enable Chatham-Kent to transfer customers from feeder to feeder in the event of emergencies or high-load situations. The feeders are interconnected to our other five 27,6 feeders in the Chatham area system, all supplied from Kent TS. 804 Our supply feeders are all interconnected for good reason. We serve a lot of industry in Chatham-Kent, and at times, we are required to transfer loads from feeder to feeder in event of emergencies. Our system can be transferred remotely from our operating control room located in Chatham in the event of emergencies through SCADA automated switches. 805 MR. SOMMERVILLE: That was -- 806 MS. LEA: That was SCADA, S-C-A-D-A all in capitals? 807 MR. KENNEY: That's correct, S-C-A-D-A. Sorry. It's an acronym, Supervisory Control -- go ahead. 808 MR. SCHWARZ: Automatic Control System. 809 MR. KENNEY: Automatic Control System. 810 The supply feeders we proposed are short urban feeders of less than 10 kilometres in length. This will be very important to commercial/industrial customers who cannot tolerate short- or long-term power interruptions. Obviously, short urban feeders are much more reliable than long rural ones. As Hydro One would agree, if you also look on the February 28th document, 2003, under tab 5, I'm referring to a document signed by Mr. Mark Steeves, account executive. He states that, "The data clearly indicates ..." 811 We were requesting the feeder interruptions on one of the supply feeders out of Kent TS, that: "The data clearly indicates that there were more interruptions on long rural feeders than there were on much shorter urban feeders." 812 That's the type of system we've -- 813 MR. FISHER: Would this result in any duplication of distribution assets as between Chatham-Kent Hydro and Hydro One? 814 MR. KENNEY: No. There would be no duplication, because both -- either party would have to build two 27,6 systems out there. There's no current 27,6 system in the area. 815 MR. FISHER: Thank you. 816 Mr. Kenney, I believe the Board has -- may also be interested in understanding what experience Chatham-Kent Hydro has had in supplying the types of business customers that we've heard that the Municipality is trying to attract to the site. Would you please tell the Board about your company's experience in providing distribution services to large commercial and industrial loads. 817 MR. KENNEY: Chatham-Kent Hydro has 17 customers with average peak loads greater than a megawatt, and an additional 27 interval meter customers. Some of them require double-feeder systems to meet the -- for us to meet their requirements for reliability. We have some customers who have that. 818 One, for example, has a double-feeder supply similar to what we're proposing for this development. He also has a 3 1/2 megawatt embedded generator in his system, a total capacity load of 8 megawatts. We supply them with two feeders that also have remote trip capability, which means that they will see a fault on the generator. This is the type of systems that are required. We have those type of systems in Chatham-Kent Hydro. We have a lot of experience dealing with these type of customers. 819 We also report to the OEB as an urban LDC, and we exceed the urban criteria of 60-minute response, 80 percent of the time. Today's commercial/industrial customer who is operating in the just-in-time delivery environment requires this type of reliability indices to be met and exceeded. 820 Some of our customers are embedded in the Hydro One system and are supplied by the long rural feeders. Many of the cases where they are experiencing power outages, we can't control those interruptions because we don't have control of those feeders. Mr. Pavelka had earlier talked about a customer called Solvay Automotive; I won't spell it. I just want to clarify that customer is a Chatham-Kent Hydro customer. They are, though, supplied on the end of a 24-kilometre -- 21-kilometre Hydro One feeder line. 821 We've included in our February 28th documentation some of the issues they have pertaining to the power quality, and the fact that, as Mr. Pavelka indicated earlier, we actually hired a third party consultant to try and resolve not only their internal power quality plans -- problems, but also to prepare something to respond to -- or take to Hydro One to try and encourage them to upgrade that feeder to meet the requirements of this customer. This was completed and -- at our cost also, the expense of this third party project. 822 Chatham-Kent Hydro also is a member of the local Chamber of Commerce, the home builders association, and Ontario Electric League. We're very involved in the community and we take part in industrial advisory committee meetings so we can be quick to respond to the industrial clients' issues. 823 MR. FISHER: We've heard evidence from Hydro One this morning that some measures had been taken to address the interruptions with Solvay Automotive in terms of -- 824 MR. SOMMERVILLE: Mr. Fisher, I'm not particularly interested in that aspect of the evidence. As you know, what we're interested in is this proposal that we're talking about and the urgency that that is viewed with. I don't think we need to go into a lot of detail respecting that situation. 825 MR. FISHER: Okay, Mr. Chair. 826 MR. SOMMERVILLE: Thank you. 827 MR. FISHER: You talked about the ability to provide the physical service. Now I'd like you to describe for the Board the local service support your company provides with the Municipality. 828 MR. KENNEY: I have a map. May I go up to it, Mr. Chair? 829 MR. SOMMERVILLE: Sure. 830 MR. KENNEY: Just to give the Board an indication of the area. As I mentioned earlier, we operate on a regional basis. We have service centres in these communities, and the shaded communities are the ones we service. Chatham-Kent Hydro is supplied by five transformer stations, which means we have to take a regional approach to planning our system. 831 We also have an automated distribution SCADA system which is designed specifically to respond to and meet the industrial customers' needs. All our economic -- valuations and designs are completed at the 320 Queen Street location, located in Chatham. 832 MR. FISHER: Do you have any service centres in the community? 833 MR. KENNEY: Yes, we have five service centres in the community. 834 MR. FISHER: Okay. And what do you do about reviewing this system in terms of your planning and capital -- planning maintenance and capital programmes? 835 MR. KENNEY: On an annual basis, we infrared-scan our entire system to ensure we're proactive to respond to our potential power outages, and we use that data to assist us in planning our maintenance and capital programs. 836 MR. FISHER: Over the past five years, how many times has Chatham-Kent assisted Hydro One in restoring service to Hydro One's customers? 837 MR. KENNEY: About three times we've helped them with times in emergencies when power outages have occurred in Chatham-Kent, and our work was completed. We have an agreement that tends to change when Hydro One changes managers, but we did have an agreement officially that we would be able to respond to them at their request, if Chatham-Kent -- customers they serve are out more than 24 hours. That's happened about three times. 838 MR. FISHER: Thank you, Mr. Kenney, I have no further questions. 839 We've heard from the Municipality that power quality and reliability are important factors for automated plants that the Municipality is trying to attract to the business park. In this regard I'd like to ask some questions of Mr. Schwarz. 840 Mr. Schwarz, in order for you to provide expert evidence to the Board, we need to establish your credentials for the Board. Would you please describe your education and experience as it applies to the evidence that you have provided. 841 MR. SCHWARZ: Okay. I'll try to be brief. I have a long history, so there's a lot of things to it. 842 MR. FISHER: Oh, excuse me, I do have a CV available for Mr. Schwarz. Sorry. 843 MS. LEA: Do my friends have copies, or do you need copies? 844 MR. FISHER: I've provided them. 845 MS. LEA: Okay. Thank you very much. This CV, then, if it please you, Mr. Fisher, and please the Board, will become C.3.1, please. C.3.1. 846 EXHIBIT NO. C.3.1: CURRICULUM VITAE FOR MR. SCHWARZ 847 MR. SOMMERVILLE: Mr. Fisher, I sense that you are about to qualify Mr. Schwarz as an expert, I presume for the purpose of providing expert evidence to the Board; is that your intention? 848 MR. FISHER: Correct, to -- so that he's able to speak to the reliability analysis that he provided -- that was provided in evidence by the applicant. 849 MR. SOMMERVILLE: I'm going to suggest that that doesn't require him to be qualified as an expert. As the author of the report, and with his otherwise qualifications, he has already provided material that is before the Board, that's the Elecsar report. So he doesn't have to be qualified as an expert in order to do that, and I think there are some complexities if he was to be qualified. I think you can proceed with Mr. Elecsar on the basis of his report and the reliability of it. 850 MR. FISHER: Mr. Schwarz. 851 MR. SOMMERVILLE: Mr. Schwarz, I beg your pardon. Thank you. 852 MR. FISHER: Thank you, Mr. Chair. 853 Mr. Schwarz, have you reviewed all of the evidence that's before the Board in this proceeding? 854 MR. SCHWARZ: Yes, I have. 855 MR. FISHER: Representatives from the Municipality provided evidence as to the type of businesses they're trying to attract to the industrial park. What would be the reliability characteristics that these types of businesses would be seeking? 856 MR. SCHWARZ: Well, basically this type of customer would require nothing different than Ontario Hydro and Chatham Hydro -- if I go back and forth between Hydro and Chatham Hydro, please excuse me. I have been with Ontario Hydro for 36 years, so I seem to drift back in. But anyways, they would want a system that is dual element; in other words, they would have a main and an alternate feed to their location, in the event that there is a single contingency, their entire facility doesn't go down and they are without power. 857 The second part that goes with that is that they would also like to have a very secure power quality type of situation that is sort of devoid of sags and swells and all of these things that are caused by lightning, weather, animals, tree limbs falling on the lines, car and truck accidents that might rock the pole and cause conductors to fall together; all of these things should be minimised to this supply location. 858 Typically customers of this nature, they have equipment on site that are either PLC in nature, like programmable logic controllers, or computer-type equipment, and this equipment is all always designed from a standard that was put in place a long time ago, which was called CBEMA, which was a computer manufacturers' association electrical equipment. 859 MS. LEA: Could you spell that please, sir? 860 MR. SCHWARZ: CBEMA, and that's short for computer -- do I get that word right again. 861 MS. LEA: I don't think we need to know. The reporter needs to have all these acronyms spelled, please. 862 MR. SCHWARZ: Okay. C-B-E-M-A. 863 And in that, what it does is it outlines how the power supplies are created inside this equipment so that things that happen to the lines, et cetera, do not fall outside of the circle. And therefore, you can go back to the manufacturer and say to him, The power quality that I received is outside the realm; and therefore, you could be held liable for damages that would occur to his equipment. So that's what he's attempting to do. 864 And based on anything else that -- there is nothing else at this point in time that customers can use as a guideline. 865 MR. FISHER: Based on your review of the proposals by Chatham-Kent Hydro and Hydro One, would you please give the Board a brief description of the feeders that would be required to bring service to the park. 866 MR. SCHWARZ: Okay. Actually, I looked at the report, and I went out and drove the two routes in question, the one that Ontario Hydro -- Hydro One proposed, and the one that Chatham-Kent proposed. 867 Chatham-Kent's proposal was to extend on their existing M3 and M8 feeder out of Kent TS, which, by the way, was a good choice because one of the things that you're looking for is that no single contingency can cause a problem. And one feeder is off one bus, and the other feeder is off the other bus, which is good. 868 They would extend 3.8 kilometres beyond the border of the existing city of Chatham out to this park. They were going to be using a new wing-type configuration for their lines, which meant that the surface area that the lightning can see from the air and also tree limbs can see, if they happen to come down on, would be minimal. And in the route that they've chosen, there, actually, are no trees to be had, so there is no problem there as far as that build. 869 I then looked at Ontario Hydro proposal, which was to extend the MAT feeder, which actually goes out Queen Street, which is all treed, and then to go to the 8th Concession, which is just on the other side of the 401, on the same side as the proposed site is. And they were going to be on the 8th concession and build approximately 5 kilometres of new 27,6 feeder. 870 I'm just going to get myself a drink of water here. 871 MS. LEA: Those are trick jugs, sir. We put them there to provide amusement during the hearing. 872 MR. KENNEY: So getting back to that, then, Hydro were going to build their M18 feeder, then, along this road which was completely tree-lined on both sides, which tended to also, if it was built that way, the power quality would suffer, because of the trees that were along that route, and they would have to zigzag back and forth across the road in order to get to this location. 873 So that would be the one route, and I think as the original consultant had pointed out, he kind of said that there were no real differences. 874 And I think what he based his decision on was that coming from Kent TS, which is where Chatham Hydro was coming and where Ontario Hydro were coming from, to this location was approximately the same distance. 875 So Hydro One's proposal was about 10 kilometres total from Kent, and Chatham-Kent Hydro was 9.1. so for all intents and purposes, they're very close to being the same length. The problem was that as well as coming out to this location on the M8 -- M18 feeder, Hydro One have exposure in the excess of 80 kilometres on that -- or 60 kilometres on that particular feeder. So as well as this little customer sitting out here, there's another 60 kilometres of exposure to lightning, to trees, to accidents, to animals, et cetera, that will tend to detriment the power quality for this particular customer. So that was the one route. 876 The second route was going to be on the M1 feeder, which is another feeder. And like Chatham Hydro, they did pick a feeder on either bus, which meant that a bus outage at Kent would not impact on this customer as a single contingency, and they would then bring the M1 -- it actually goes to the Bloomfield Road right now before it heads on to Comber. And the right-of-way for Hydro ends at the -- it doesn't end, but it's -- that's where their feeder would be capped off. And then they would head along Bloomfield Road using the exact same route that Chatham Hydro was to this location. 877 So therefore, from Kent to -- again, to this location, the distances are the same. 878 The second problem is that M1 feeder, like the M18, goes on into the country for another 80 kilometres. So its exposure, then, is 80 kilometres in this direction. The other feeder is 60 kilometres in this direction. And this poor little park is going to be subjected to the faults across the whole territory as far as lightning is concerned, animals, and that kind of stuff. 879 So I think that's -- that explains the two routes. 880 MR. FISHER: Okay. And based on your review of the proposals and the power quality and reliability data, which distributor is in the best position to provide distribution services for the Municipality to the park, and how did you reach that conclusion? 881 MR. SCHWARZ: Okay. Actually, just based on the length of line, there was no question in my mind that Chatham-Kent could supply the most reliable power for this particular park. 882 Hydro One says in their statements and in the indices that they presented as far as faults, et cetera, were concerned, they substantiate that themselves. 883 MR. FISHER: So your conclusion is -- 884 MR. SCHWARZ: Chatham-Kent could supply the -- sorry. 885 MR. FISHER: Those are my questions. 886 Thank you, Mr. Schwarz. I'd now like to turn to Mr. Hogan. We've heard evidence from the Municipality that it wants the applicant, Chatham-Kent Hydro, to provide distribution services for its industrial park. And the Municipality believes that the rates are an important element in attracting businesses to the park. 887 And I'd like to ask some questions in this regard to Mr. Hogan. Could you please tell your -- tell the Board your position and relationship with the applicant and how long you've been with the utility and the nature of your duties. 888 MR. HOGAN: I'm the chief financial and regulatory officer for Chatham-Kent Energy. Chatham-Kent Energy is the holding company of Chatham-Kent Hydro, and we provide financial and regulatory services to Chatham-Kent Hydro. 889 I've been with Chatham-Kent Energy since July 2001. Previously to that, I've held positions at a gas utility. I've also held positions at another larger LDC, local distribution company. My experience mostly has been in financial. I've done a lot of work on rates and spent some time in the regulatory department. 890 MR. FISHER: Do you adopt the evidence filed on behalf of Chatham-Kent Hydro in these proceedings? 891 MR. HOGAN: Yes. 892 MR. FISHER: When did you first become aware that the Municipality wanted to develop a business park at the Bloomfield site? 893 MR. HOGAN: It's been well-known in the municipality that their intention was to expand out to the 401. As provided earlier today, it was something that, in the Municipality, has been out there since amalgamation in 1998. 894 For myself personally, day one when I started with Chatham-Kent Energy, we were on this project. And the reason why we were is because of our knowledge in the community, and we knew that this was going to be happening soon. 895 So August 2001, we did hire a consultant to assist us in the possibilities of a licence expansion. So we started going down that road, trying to learn about what we may encounter in coming here to the Ontario Energy Board. 896 Along with that we've had discussions with the -- some Ontario Energy Board Staff, and what we originally did was we filed an application to the Ontario Energy Board in January 2002. This was more of a general licence expansion rather than the specific licence expansion as we are here today to talk about. 897 And the reason why we were going there to talk about a general licence expansion is because we knew that this was going to be happening, we knew the Municipality was going to be expanding to the 401, and we wanted to do what we can to speed up that process if we were lucky enough to be chosen as the distributor. 898 At that time, we had meetings with Board Staff, and with their advice and direction, it was decided that we would, I guess, withdraw that application, because the advice and the conclusion we came up at the time would be, Let's wait until there's a specific case and get a specific connection and with a customer or the developer. 899 And in these discussions we had with the OEB Staff, we always referenced and strongly emphasized the 401 development. We knew that that was going to happen. We wanted to speed up the process. We were looking for advice. So communication between ourselves and OEB Staff have been going on for some time. 900 Then along with that, we -- in the summer of 2002, we did, I guess, we did get accepted as the distributor of choice from the Municipality of Chatham-Kent, and that was done after they had a third-party consultant review both RFPs. So an analysis was done there. And then we followed up with the application in October 2002. 901 So we've been working on this, because of the urgency, because we knew the Municipality was going to be investing significant money, we've been working on this for quite some time. 902 MR. FISHER: Thank you. 903 The Municipality has stated that businesses wishing to locate in the industrial park are attracted by a number of factors, including reliability, quality of power, as well as the costs associated with distribution services. In Hydro One's evidence of February 2003, Hydro One states that: 904 "It would not be appropriate at this time to compare the rates that would be offered, because they are transitional and not based on recent cost-of-service data." 905 Hydro One also contends that Chatham-Kent Hydro's rates would increase when Hydro One recovers the deferred low-voltage charges that it is not now able to charge to Chatham-Kent Hydro or any other customers. 906 I just have a few questions about these rate issues. Will Chatham-Kent Hydro's rates be lower than Hydro One's rates for businesses in the park; and if so, why is that? 907 MR. HOGAN: Yes. Hydro -- or Chatham-Kent Hydro's rates are lower than Hydro One's. On two occasions, the Ontario Energy Board approved rates for Chatham-Kent Hydro, in RP-1999-0033 and in RP-2002-0081. And both times the Ontario Energy Board found our rates to be just and reasonable. 908 In analysis for this industrial park, we're comparing the Chatham-Kent Hydro general service rate -- rate class, and these are customers with monthly demands greater than 50 kilowatts, and we're comparing that to the Hydro One class, and that class is the industrial/commercial general service, and that's the three-phase G3 class. 909 We've done this analysis as well as Stevens Associates. Stevens Associates was the consultant that the Municipality of Chatham-Kent used in their analysis, and that's part of the submission that the Municipality made on February 20th. 910 And on page 3 of 6, the consultant concludes that the Chatham-Kent Hydro rates are three to eight times less than Hydro One rates. They also conclude that the overall electricity costs would be lower from Chatham-Kent Hydro, between 28 and 36 percent. 911 Some of the reasons why Chatham-Kent Hydro's rates are lower, I've provided that -- or we've provided that in the February 28th submission, and that's on pages 12 and 13. 912 Chatham-Kent Hydro applied for a maximum rate of return of 6.05 percent. That compares to the OEB maximum of 9.88 percent return. That's roughly two-thirds of our maximum. Therefore, we would expect our rates would be lower or should be lower than other utilities that have applied for the maximum return on equity. 913 Some reasons why the 6.05 was chosen: It was with our shareholder, and the shareholder direction is to keep rates down for our current customers and to do what we can for economic development. So trying to attract customers in the community such as the Bloomfield Business Park. Another reason why our rates would be lower, or I would expect our rates to be lower, we amalgamated 11 utilities back in 1998. We had significant operational savings of $759,000. That represents about 13 percent reduction in our O&M costs, and we passed those savings on to our customers. 914 MR. FISHER: Now, I understand you've done an analysis of comparing the cost for a 700-kilowatt and 3,000-kilowatt customer, and I've provided copies of that to Ms. Lea. Copies were given to my friends this morning. 915 MS. LEA: Thank you. These two sheets together, entitled "Municipality of Chatham-Kent Customer Savings Comparison," be given Exhibit Number -- I'm sorry; now I've lost it. It's C.3.2. Thank you. 916 EXHIBIT NO. C.3.2: MUNICIPALITY OF CHATHAM-KENT CUSTOMER SAVINGS COMPARISON 917 MR. FISHER: Would you explain for the Board the results of your analysis, please, and what the difference in cost would be between the 700-kilowatt and 3,000-kilowatt customers. 918 MR. HOGAN: As a quick summary, just looking at the individual customers, and this is also substantiated from the Stevens Associates report, a 700-kilowatt customer would save about $5,000 a month or $60,000 a year. A 300-kilowatt customer -- I'm sorry. A 3,000-kilowatt customer, and I'd like to point out that that's who the -- that's the range of customers that are contacting the Municipality of Chatham-Kent today for this business park. This would be -- the range of the Brose that we talked about this morning. They would be in this range, the 3,000-kilowatt range. 919 The savings for this customer is $21,000 per month, $252,000 annually. And again, I'd like to point that out that Stevens Associates, the third-party consultant, has confirmed these numbers. 920 So what I did in these two schedules, in scenario 1 and scenario 2, was to try and identify or summarize the end-use customer savings of what could be expected in this industrial park if Chatham-Kent Hydro was the distributor. 921 The first scenario, which is very similar to what Stevens Associates did, they said one new customer, 700 kilowatts per year, so the total demand in each year is 700, 1,400, and so on. Cumulative savings in the first five years is $866,000. Stevens Associates had rounded it to $900,000, so we're confirming what they came up with. 922 However, the savings from your six to ten are significantly higher than that, because we now have more customers there. And that savings in that period is $2.3 million. So in a ten-year horizon, these customers will save almost $3.2 million, and that's significant. 923 Scenario 2, scenario 2 is putting one new customer, 700 kilowatts per year for six years, but also introducing one of the larger customers, the 3,000-kilowatt customers, in year 1 and 2. And again, that's probably more realistic to who's been contacting the Municipality of Chatham-Kent. Savings from year 1 to 5, $3.1 million for these customers. And at this point, there's seven customers. Savings 6 to 10 is $4.2 million, and that's eight customers. 924 So the cumulative savings for that period is seven point -- almost $7.4 million, and again, that's for eight customers. Significant. 925 And I think we need to take a look at the Stevens Associates report, and in there they claim that the cost of Hydro may be -- is a significant choice for these customers, the end-use customers, and it may be a deciding factor such that they do not come to the Municipality of Chatham-Kent, they do not come to the Bloomfield Business Park. And then what that does is that puts the $11 million investment the Municipality is making at risk. 926 The risk increases of them stranding that asset. 927 MR. FISHER: When Chatham-Kent Hydro is required to pay Hydro One for the LV services, how will that impact the rates of your customers? 928 MR. HOGAN: I've provided some evidence in the February 28th submission, pages 14 -- pages 14 and 15. The low-voltage charges are only going to be on the load that is embedded. Chatham-Kent Hydro is an embedded distributor, as well as we are a distributor that is connected directly to the transmission system, directly to Kent transformer station. Therefore, less than 50 percent of our load is embedded; therefore, less than 50 percent of our demand will incur the low-voltage charge. 929 The low-voltage charge -- and this is an estimate, because they are not being allocated or charged to us at this point -- so the estimate is $477,000. And if we allocate that over the total revenue base of Chatham-Kent Hydro in 2002 of $80.3 million, that translates into a .6 percent rate increase overall; therefore, very marginal and much lower than the OEB 10 percent threshold and, in my opinion, not a significant factor to sway the advantage of our prices. 930 Another solution that there could be in allocating these costs, or in the revenue recovery of these costs, probably should be on the user-pay basis, and that's how these costs are being allocated to the embedded distributors, in that only those embedded distributors are going to pay the low-voltage charge. This business park will be fed off the Chatham-Kent Hydro system that is directly connected to the transmission system; therefore, no costs will actually be charged to Chatham-Kent Hydro for these and therefore probably no cost should actually be allocated to this business park. So one scenario is these low-voltage charges will have zero impact on these customers. 931 What I'd also like to do is make a comment or two. 932 Hydro One, in their submission, and this is in their -- I believe it's their February 21st submission, on page 12, they claim that Chatham-Kent Hydro's 11 non-contiguous service areas, and they are all connected to the Hydro One low-voltage facilities -- that's incorrect, totally false. The financial impacts of that have just come forward. What kind of concerns me, and it concerns me on behalf of the Municipality of Chatham-Kent, this is an example of Hydro One not knowing their customers, not knowing their embedded customers. They don't know whether they're going to charge us low voltage or not. 933 What it also comes to question is Hydro One claims to be a regional distributor, and again, I would have concerns as to whether they really are a regional distributor in the Municipality of Chatham-Kent when they don't really know that 75,000 kilowatts per month goes through their distribution system or not. And I guess I just have concerns whether they truly are -- they truly know the Municipality of Chatham-Kent and the facilities that are there, and are they the better distributor for this business park. 934 MR. FISHER: We've heard from the Municipality that they are willing to pay Chatham-Kent Hydro at the outset for the capital costs of this project. Would you explain for the Board your understanding of the differences of the capital contributions procedures as between Chatham-Kent Hydro and Hydro One, please. 935 MR. HOGAN: Chatham-Kent Hydro's capital contribution policy does meet the OEB requirements in section 3 of the Distribution Code -- section 3 of the Distribution Code. And our procedures or policy in order to meet that is that the developer will pay the capital costs up front. And if load does materialise, the developer will receive rebates and these rebates will occur between the years 1 and 5. 936 Our understanding is the Hydro One policy, or what's being proposed here, is that they will charge the developer on an ongoing basis if -- if the load is not there. So I think the end result is both will come up with about the same number. Both utilities are applying the Distribution Code the same. And that's also confirmed in the Stevens Associates report. They do claim that both utilities are abiding by the OEB regulations. 937 Our -- we believe the way our policy works can be better for the developer in that there are no surprises as time goes on, and that we won't be asking them for more money. They'll know their costs up front and they have the potential and the probability of money going back to them. 938 MR. FISHER: We've heard from the -- from Mr. Kenney that the total capital costs for the double feeder of 27.6 supplies slightly under a million dollars. What opportunity does the Municipality have to recover its capital contribution? 939 MR. HOGAN: There is a strong possibility that the Municipality will be rebated 100 percent of their load, and in the offer to connect that we provided to the Municipality, and that is in our first -- that's in our application. If I can turn to it and look at a couple of examples we have there. It's in tab 3 of our original application. What we have there is the offer to connect that would provide to the Municipality of Chatham-Kent as a response to their RFP. Page 8 of 9 in the offer to connect, it provides a few different scenarios of rebates. And one scenario there is if a 5-megawatt load is connected in year 1, that would provide $752,000 in rebate, so that's just for one customer of 5 megawatts. 940 So if this industrial park does get filled up quickly, the likelihood is that the Municipality will be rebated 100 percent of the $998,000. 941 MR. FISHER: And what happens if the load does not materialise? 942 MR. HOGAN: If the load does not materialise, the maximum capital cost to the Municipality is $998,000. 943 MR. FISHER: Just one other thing. Mr. Pavelka, this morning, indicated that the Bloomfield park could be as much as 300 acres. What would be the additional costs to the Municipality to service this entire 300 acres by Chatham-Kent Hydro? 944 MR. HOGAN: The additional cost to go from 10 megawatts to 20 megawatts is nothing. The reason being -- Mr. Kenney has been saying that we will have 10 megawatts there right now. It truly is a maximum of 20, and we're saying 10 because that's what's being requested. But those feeders have capacity of 20 megawatts. 945 Therefore, the Municipality of Chatham-Kent, as they expand, and we heard today that there's 300 acres that are zoned for commercial that could be expanded in the phase 2, phase 3, whatever it is, there's zero additional cost to the Municipality. 946 And what I'd like to do is point to the Stevens Associates report, and it's on page 5 of 6, and it's in the section on the connection costs in the middle of the second paragraph. What they say is that the -- the expansion would be slightly more expensive in the medium term, so the capital cost to the Municipality would be slightly more expensive, you know, to the 10 megawatts. However, much more expensive in long term when the loads exceed to 11 megawatts. So much more expensive from Hydro One in the longer term. 947 MS. LEA: Can you just refer me again to that piece of evidence you're reading from, sir. 948 MR. FISHER: Yes. This is the Municipality's evidence of February 20 at tab 3. 949 MS. LEA: Thank you. 950 MR. FISHER: Thank you. Those are my questions, Mr. Hogan. 951 MR. SOMMERVILLE: Ms. Aldred? 952 CROSS-EXAMINATION BY MS. ALDRED: 953 MS. ALDRED: Mr. Kenney, I'll ask you questions first, since you went first. Can you walk over to your map for me, please, just for a minute. 954 MR. KENNEY: Sure. 955 MS. ALDRED: I just wanted to confirm with you that the orange -- the orange areas on the map are your utility; is that correct? 956 MR. KENNEY: That's correct. All but this one. 957 MS. ALDRED: And the white areas that you see in between those utilities are all serviced by Hydro One Networks? 958 MR. KENNEY: That's correct. 959 MS. ALDRED: And if we look at the area surrounding the proposed Bloomfield Business Park, does Chatham-Kent Hydro currently have any assets in that area? 960 MR. KENNEY: No, we do not. 961 MS. ALDRED: I'll come back to that. I just wanted to clear one thing up. 962 The Chairman had asked earlier what the financial arrangements were between Chatham-Kent Hydro and the Municipality. I just wanted to confirm with you that the Municipality is the 100 percent shareholder of Chatham-Kent Hydro; is that correct? 963 MR. KENNEY: Correct. 964 MS. ALDRED: And as such, 100 percent of the dividends from Chatham-Kent Hydro would go back to the Municipality; is that correct? 965 MR. HOGAN: If there were dividends, yes, they would go there. 966 MS. ALDRED: If you could show us on the map which way -- which way Chatham-Kent Hydro proposes to build a line down through Networks' territory into the business park? I'm not sure it was clear. 967 MR. KENNEY: It would be this area right here. 968 MS. ALDRED: So you'd build a line down -- is that Bloomfield Road? 969 MR. KENNEY: Bloomfield Road, yes. 970 MS. ALDRED: And does Networks, in fact, have existing assets on Bloomfield Road? 971 MR. KENNEY: Not that I'm aware of. 972 MS. ALDRED: Can you show me where there's -- the Networks' 8 kilovolt line along the edge of the park there, please. 973 MR. KENNEY: They have 8 kV along here -- 974 MS. ALDRED: And that's the Networks line? 975 MR. KENNEY: I understand it is. 976 MS. ALDRED: And it goes right by the park? 977 MR. KENNEY: No, not that I know of. 978 MS. ALDRED: Is it to the adjoining property? 979 MR. KENNEY: I believe it is. 980 MS. ALDRED: Now, if Chatham-Kent Hydro were to build this -- the line that it's proposing down into Networks' service territory to the park, would the line serve only Chatham-Kent Hydro's customers in the business park? 981 MR. KENNEY: That's correct. 982 MS. ALDRED: Because you don't have any other customers along there that you would be serving; correct? 983 MR. KENNEY: In which area? We have customers in here we are serving. 984 MS. ALDRED: No, but in the Bloomfield Business Park area. 985 MR. KENNEY: No, we would not. 986 MS. ALDRED: And if the expected load of 10 megawatts did not materialize, then, would you agree with me that to the extent that it didn't materialize, your line would be underutilized, because you have no other customers in the area that you could serve off that line? 987 MR. KENNEY: We are building it for a 10-megawatt load. 988 MS. ALDRED: And if you don't get the 10-megawatt load, will it be underutilized? 989 MR. KENNEY: That's correct. 990 MS. ALDRED: Now, if you bring a line down the Bloomfield Road, as you're proposing to do, would that in fact -- you're an urban -- since you're an urban utility, would that, in fact, be your longest line or one of them? 991 MR. KENNEY: Yes, I believe it would be. 992 MS. ALDRED: And given the fact that it's your longest line, do you think it would be subject to the same lightning and animals that it would be if it were a Hydro One line? 993 MR. KENNEY: No, it wouldn't. 994 MS. ALDRED: Why would the lightning not strike your line, but it would strike Hydro One's line? 995 MR. KENNEY: It's a matter of distance and type of plan to construct, the type of systems you put in place. Lightning can strike, but it also helps to be suppressed if you install lightning protection. 996 MS. ALDRED: And would the line be subject to the same car accidents that a Hydro One line would be subject to? 997 MR. KENNEY: In the exact location? 998 MS. ALDRED: Yes, in the same location? 999 MR. KENNEY: Oh, yes. 1000 MS. ALDRED: And do you think the same animals wouldn't get up on the line as they would on a Hydro One line in the same location? 1001 MR. KENNEY: In the exact location, oh, yes. 1002 MS. ALDRED: Yes. 1003 MR. KENNEY: We do install animal-protective devices on our poles, too, if required. We have several of those locations in Chatham where we have installed squirrel protection devices. 1004 MS. ALDRED: Can you point out to me where the Chatham-Kent service centre is, the nearest one to the Bloomfield Business Park. 1005 MR. KENNEY: That would be right about that location right there. 1006 MS. ALDRED: And is that in the City of Chatham itself? 1007 MR. KENNEY: Correct. 1008 MS. ALDRED: And can you tell me where the nearest Networks service centre is. 1009 MR. KENNEY: Just down the street. 1010 MS. ALDRED: Are you pointing a little bit closer to the Bloomfield Business Park? 1011 MR. KENNEY: I haven't measured theirs. 1012 MS. ALDRED: Well, is it, in fact, a little bit closer -- 1013 MR. KENNEY: We have the same -- we're on the same street, and we're 7.8 kilometres away. 1014 MS. ALDRED: And so is Hydro One Networks? 1015 MR. KENNEY: They're down the street, 2 kilometres roughly from us. 1016 MS. ALDRED: 2 kilometres closer? 1017 MR. KENNEY: No. They're down the street in a southerly direction. The park's over here. 1018 MS. ALDRED: Okay. Thank you. 1019 Mr. Kenney, I take it that as president of a local utility, and I think you told us this already, you must be mindful of areas of potential growth in your existing service territory, and you need to be able to plan to be able to service that growth if and when required. 1020 MR. KENNEY: That's correct. 1021 MS. ALDRED: And would you agree with me that that would also include making sure that your existing system is performing properly and also looking to the future to plan for realistic contingencies in your utility? 1022 MR. KENNEY: That's correct. 1023 MS. ALDRED: Would you agree with me that if your utility was not interested in servicing this business park as a customer that Networks would be obliged to supply the business park, as it is in its service territory and lies along one of its lines? 1024 MR. KENNEY: I believe it would be. 1025 MS. ALDRED: And would you accept the proposition that consequently Networks does its planning, too, on a regional basis, planning for a need in larger areas than does your utility? 1026 MR. KENNEY: I don't -- I'm not sure what Networks' planning practices are. 1027 MS. ALDRED: Well, will you agree with me that Networks has to plan in a larger area in Chatham-Kent than you do currently? 1028 MR. KENNEY: No, I do not. We service more customers. 1029 MS. ALDRED: The geographic area is larger, is it not? 1030 MR. KENNEY: Geographically? Yes. 1031 MS. ALDRED: Would you agree with me that since Networks is obliged to connect customers in this area if requested to do so that Networks must plan sufficient capacity and infrastructure in the area to serve whatever customers are expected to come along? 1032 MR. KENNEY: I'm not aware of Networks' planning practices. 1033 MS. ALDRED: Is it your plan to build for the ten -- it is your plan to build for the 10-megawatt capacity all at once? 1034 MR. KENNEY: That's correct. 1035 MS. ALDRED: And your proposal doesn't try for any sort of staging for the Municipality? 1036 MR. KENNEY: We provided a proposal that met what the Municipality had asked for. 1037 MS. ALDRED: Are you planning to build the line at the same time that the park is being built, if you are granted the licence territory amendment? 1038 MR. KENNEY: If we're granted licensing, we will be constructing in two weeks. 1039 MS. ALDRED: So that the idea would be that the park and the line will be ready at around the same time, in your plan? 1040 MR. KENNEY: In our plan, the park would be ready in six to eight weeks, as we submitted. 1041 MS. ALDRED: So you would be hoping that the park is finished and the line built around the same time? 1042 MR. KENNEY: Assuming that's -- yes, that's correct. 1043 MS. ALDRED: And you're hoping, then, that there would be plenty of customers in the park to take up the electrical load there? 1044 MR. KENNEY: That's up to the Municipality. They're funding the project, so -- 1045 MS. ALDRED: And if the initial capacity falls short of 10 megawatts, would you agree with me that you wouldn't build an asset that is standing idle or partially idle? 1046 MR. KENNEY: As you mentioned earlier we must reconstruct our systems or redesign them for future load growth, and that's what this system would be able to support. 1047 MS. ALDRED: What will happen if the load never does materialise as expected? 1048 MR. KENNEY: That's a risk every LDC in the province would have to take. Certainly in this case, this is part of our regional way of managing our utility. Customers' needs need to be met when they're required. 1049 MS. ALDRED: I understand from your evidence that you've been aware of the Municipality's plans for a business park for some time; is that correct? 1050 MR. KENNEY: Yes, that's correct. 1051 MS. ALDRED: And I think you mentioned that around 1998 you started making arrangements to be able to service this park if you had the opportunity to do so. Is that what you said? 1052 MR. KENNEY: In 1998 we were aware of the intention of the Municipality to service this park, and we felt the onus was on us to participate in that process. 1053 MS. ALDRED: And so you were aware of the business park substantially in advance of February 2002, when the letter came out from the Municipality asking for a proposal? 1054 MR. KENNEY: Yes. As Mr. Pavelka indicated earlier, it was a very public process. Since 1998 it's been in the papers, it's been mentioned at probably chamber meetings; council has discussed it at open council. It was very easy to be aware of the business park. If you were a member of the community in Chatham-Kent, you didn't have to be in business yourself, if you were just a member of the community, you would know about it. 1055 MS. ALDRED: Did you also mention in your evidence that you've already procured material to build the line? 1056 MR. KENNEY: That's correct. We have procured the material, it's on two-week order standby. We have not purchased the material. Our suppliers have indicated to us in writing that they're able to supply it within two weeks. 1057 MS. ALDRED: And is there a penalty involved in not completing the order? 1058 MR. KENNEY: No. We have just-in-time delivery arrangements with our suppliers. Do you want me to continue standing here? 1059 MS. ALDRED: No, you can go sit down. I didn't mean to leave you standing there. 1060 The line that you would be building down the Bloomfield Road comes out of your urban utility area and down into the rural area, does it not? 1061 MR. KENNEY: That's correct. 1062 MS. ALDRED: I'm interested in your characterisation of that line as an urban feeder. 1063 MR. KENNEY: The OEB establishes that criteria. 1064 MS. ALDRED: But we've already established that it would be basically subject to the same physical constraints that a Hydro One feeder would be in the same area, correct; and they're classified as rural feeders. 1065 MR. KENNEY: That's correct. That's the OEB who has classified us as we report our SQIs in the urban criteria. Hydro One reports theirs as a rural, indicating they are a rural distributor, and we are an urban distributor. 1066 MS. ALDRED: If I can just turn to Mr. Schwarz now. 1067 I understand that when the Municipality originally -- considered the original proposal from Chatham-Kent Hydro, they were considering a report prepared by Dillon Engineering. And I'm quite sure you would agree with me that Dillon is a pretty well-known engineering firm and I suppose that's why the Municipality retained them in the first place; would you agree? 1068 MR. SCHWARZ: That's correct. 1069 MS. ALDRED: As we all know, they did end up recommending Chatham-Kent Hydro, I think it's fair to say based on the rate issue. But would you agree with me that the report looked at two things, rates and quality of service; is that right? 1070 MR. SCHWARZ: If I can find it, maybe somebody can help me find their report. In their first sheet they qualified their whole report, saying that they were not suitable to rule on a certain thing. 1071 MS. ALDRED: Can you turn to -- I'll help you out -- 1072 MR. SCHWARZ: Page 1 of 6. 1073 MS. ALDRED: It's Exhibit B.3.5, at tab 3, isn't it. 1074 MR. SCHWARZ: Okay. It's "Electricity Supply Options, Highway 401, Bloomfield"? 1075 MS. ALDRED: That's right. And if you turn to page 1 of that report, at the bottom of the page, Stevens sets out an analysis where it says: 1076 "Based on the information available, there are no obvious differences in the quality of service offered by the two utilities. Both are likely to offer reasonable standard of service." Is that correct? 1077 MR. SCHWARZ: Is that on the bottom of the sheet? 1078 MS. ALDRED: I'm sorry, it's on the top of page 2. I apologise. 1079 MR. SCHWARZ: Okay. Yes, it does say that. 1080 MS. ALDRED: And so at the time the decision was made, that was the information that the Municipality would have had; is that correct? 1081 MR. SCHWARZ: Well, in a way. If you go back one page, which is preceding what you're saying, it says, "Although an analysis of quality of service is beyond the scope of this study", so they've qualified their report based on that. 1082 MS. ALDRED: That's true. But it also goes on to say too, doesn't it, "there have been two proposals and subsequent communications with the two utilities and they were examined for any obvious differences." 1083 He does goes on to say that, doesn't he. 1084 MR. SCHWARZ: Yes, he does say that. 1085 MS. ALDRED: Now, one of the recent criticisms of Networks' plans to initially connect on the 8 kiloVolt feeder is that it would not be reliable. Do you understand why that feeder is in wide use in the province, both by Networks and by many LDCs? 1086 MR. SCHWARZ: Could I expand on that? You're true -- you're right that they are using the 8 kV. But if you also look at Hydro One Networks at this particular instant in time, they have changed all their transformer stations over to a 27.6, 16 kV distribution system so that they can unload all the 8 kV DSs that are out in the rural municipalities at this point in time, because they are not a reliable source. 1087 MS. ALDRED: And maybe I'll address this to -- possibly to Mr. Kenney. You talked about industrial and commercial customers that you serve at Chatham-Kent Hydro. Do you serve industrial/commercial customers on lines that are less than 27.6 kV lines? 1088 MR. KENNEY: Very few. 1089 MS. ALDRED: But you do serve some? 1090 MR. KENNEY: Yes. 1091 MS. ALDRED: How many would that be? 1092 MR. KENNEY: I don't have that information. There's a few. 1093 MS. ALDRED: And Mr. Schwarz, do you agree that what was proposed by Networks was only to serve the initial 1 megawatt of load on that 8 kV line? 1094 MR. SCHWARZ: Yes. And I guess from our experience that we've seen, that when you put a park in place and you bring in the first customer, the first customer is your best advertisement for all subsequent dealings after that. If that customer has a problem with his power quality, that is going to filter down to all the other customers that would come along. So we wouldn't recommend an 8 kV supply for this class of customer. 1095 MS. ALDRED: You would recommend that you overbuild for the first customer? 1096 MR. SCHWARZ: Yes. 1097 MS. ALDRED: Would you agree with me that, as an urban utility, the experience that Chatham-Kent Hydro would have would be with urban feeders and not with rural feeders? 1098 MR. SCHWARZ: Well, they're adding 3.8 kilometres to their existing system. 1099 MS. ALDRED: But would you agree with me that your experience is with urban feeders? 1100 MR. SCHWARZ: Well, I guess you would have to say that, yes. 1101 MS. ALDRED: And would you also agree that the Networks' feeders are largely rural and travel, therefore, over longer distances? 1102 MR. SCHWARZ: I would agree with that entirely. 1103 MS. ALDRED: So if we compare Chatham-Kent reliability statistics and Networks' statistics we're, to some extent, comparing apples and oranges. 1104 MR. SCHWARZ: No. Statistics are statistics, and Hydro One's statistics are indicating that long lines are problematic. Short ones are not. And the idea behind this whole industrial park is to get a reliable source of power. 1105 MS. ALDRED: But when Chatham-Kent quotes its statistics, it's quoting short urban feeders, isn't it? 1106 MR. SCHWARZ: Yes. That's the advantage. 1107 MS. ALDRED: Part of the issue with reliability seems to center around the need for high reliability on the assumption that the business park will attract a certain type of sophisticated high-tech customer; is that a fair summary of the concern? 1108 MR. SCHWARZ: Yes. 1109 MS. ALDRED: Would you agree with me that such a sophisticated customer is concerned with what I'll call blips, or few-second outages on the line? 1110 MR. SCHWARZ: Yes. They are just as important as total interruptions. 1111 MS. ALDRED: That's correct. And would you agree with me that that type of thing might occur if, for example, the tree branch interrupted the flow of power, and they usually only last a few seconds before closing devices kick in and the power flow continues? 1112 MR. SCHWARZ: Yes. 1113 MS. ALDRED: But they're of concern to a certain type of industry. 1114 MR. SCHWARZ: Yes. To the type of industry that Chatham is trying to attract, they are a concern. 1115 MS. ALDRED: And is it not the case that that type of sophisticated industry which requires uninterrupted power flows would often install an uninterrupted power supply system on their equipment in order to protect themselves from that kind of blip? 1116 MR. SCHWARZ: Sometimes they do, but they're very expensive. If they can secure from the front end a supply that is transferrable or whatever you want to call it, so that they don't have to install the expensive equipment inside, that's their option. 1117 And usually these uninterruptible power supplies are small, and they deal with a certain piece of equipment that's inside the plant. So if you have an extrusion process, for instance, that you have something there that will pull the -- like a vacuum and pull the product out of the line while the interruption is occurring so that you don't have this long delay to restart your equipment. 1118 MS. ALDRED: But you'd agree with me that is one tactic that can be employed by that kind of industry in order to protect themselves from that problem. 1119 MR. SCHWARZ: Yes. 1120 MS. ALDRED: Just going back to the rural feeders for a minute, if we could. 1121 MR. SCHWARZ: Okay. 1122 MS. ALDRED: Would you agree with me that on a long, 60-kilometre feeder, if a fault occurs on the line that not all customers will experience an outage on that line necessarily? 1123 MR. SCHWARZ: It depends what type of fault it is. 1124 MS. ALDRED: Well, would you agree with me that many of these long -- most of these long, long lines have reclosers on them? 1125 MR. SCHWARZ: Can we just talk about the two in question, M1 and M18. M1 has a recloser on it, and actually, I was responsible for installing that recloser some 20 years ago, and I know why it's there. And it will offer very little assistance to this particular park. 1126 The M18 has no recloser and, therefore, offers no sort of sectionalizing ability, if you want to call it that. 1127 MS. ALDRED: But do rural feeders often have switches every -- every while or so in order that the line can be sectionalized and that the outages can be limited to certain parts in a line? 1128 MR. SCHWARZ: That's true, and that's why Chatham Hydro has installed SCADA-controlled disconnects out on their lines, so they can from their control centre operate them quickly. Hydro One, to my knowledge, has none out on their system. 1129 MS. ALDRED: Does -- a SCADA system, though, doesn't stop an outage, does it? 1130 MR. SCHWARZ: No. It only helps you restore. 1131 MS. ALDRED: Since both the Chatham-Kent and the Hydro One feeder emanate from the Chatham-Kent transformer station, would all feeders in that area have the same power quality in terms of voltage and harmonics? 1132 MR. SCHWARZ: Whatever happens out on any feeder associated with Kent TS is going to reflect on all feeders. There's a bus voltage, then, at Kent that is going to be symptomatic of what takes place. 1133 So yes, from that point of view, it's true. 1134 MS. ALDRED: And Kent TS is the interface with the transmission system; is that correct? 1135 MR. SCHWARZ: That's right. 1136 MS. ALDRED: So that whether the business park is connected to Chatham-Kent Hydro or Hydro One Networks, both utilities would be affected by the same events? 1137 MR. SCHWARZ: That's right, but there was never any question about that. That was the closest TS, and that's what was going to supply it. 1138 MS. ALDRED: Thank you, Mr. Schwarz. 1139 I'll just talk to Mr. Hogan about rates now. One of the primary advantages cited by the consultant who advised the municipality was that the Chatham-Kent rates would be lower. And I understand that the Municipality felt that lower rates would attract customers to the business park; is that correct? 1140 MR. HOGAN: Lower rates would attract economic growth in all of the community, not just the business park. 1141 MS. ALDRED: Are you aware that Bill 210 froze distribution rates until 2006? 1142 MR. HOGAN: Yes, I am. 1143 MS. ALDRED: And Chatham-Kent had, I understand, previously been required, like every other LDC in the province, including Networks, to unbundle their rates? 1144 MR. HOGAN: That's correct. 1145 MS. ALDRED: And do you agree that this essentially meant separating out the distribution charges from the energy component of the bill? 1146 MR. HOGAN: Yes. 1147 MS. ALDRED: And this was done in accordance with a Board document called the "Distribution Rate Handbook"? 1148 MR. HOGAN: Yes. 1149 MS. ALDRED: And this exercise was -- is supposed to be a staged process, and the first step was simply to unbundle or separate out the distribution and energy components of the bill? 1150 MR. HOGAN: That is the outcome of the PBR Rate Handbook. 1151 MS. ALDRED: And would you agree that one of the objectives in the handbook was to minimize bad outcomes; thus, it was a simplified unbundling model? 1152 In other words, there was an attempt to avoid undue impacts on people as the bills were unbundled? 1153 MR. HOGAN: That's correct. 1154 MS. ALDRED: Did that mean, then, that none of the utilities had at that point to undertake a cost allocation study? 1155 MR. HOGAN: Cost allocation studies were not part of the basis of unbundling the rates -- 1156 MS. ALDRED: And -- 1157 MR. HOGAN: -- however, the rates that were approved that were all used in the unbundling of the rates were approved by Ontario Hydro, who was the regulator at that time, and those rates were approved on a pooled cost allocation model. So they were, I guess, fair by rate class initially, before we came to the unbundling of rates from the handbook, PBR handbook. 1158 MS. ALDRED: Would you agree with me that Chatham-Kent Hydro was not required to, nor did it undertake a cost-allocation study at the time of the approval of its most recent rates? 1159 MR. HOGAN: Chatham-Kent Hydro did not do a cost-allocation study. 1160 MS. ALDRED: Nor did it do a cost-of-service study? 1161 MR. HOGAN: Cost-of-service studies were not required, and no, Chatham-Kent did not. However, again, I'd like to say that our original rates that were approved going into the unbundling of our rates were based on a cost-allocation pool that was approved by our regulator at that time. 1162 MS. ALDRED: And the next time that a rates approval is sought for the Municipality, will a cost-of-service study have to be done? 1163 MR. HOGAN: No. 1164 MS. ALDRED: According to the rate handbook, will it have to be done? 1165 MR. HOGAN: A cost-allocation study? 1166 MS. ALDRED: A cost-of-service study, I'm sorry. 1167 MR. HOGAN: I do not believe a cost-of-service study is required. 1168 MS. ALDRED: Would you agree with me the next time you go to the Board, your cost may be reallocated between rate classes? 1169 MR. HOGAN: That is a potential outcome of our cost-allocation study that we will have to provide, I guess, for 2006. However, I have no information to assume that our rates do not -- or are not covering the cost by rate class. I would also like to say that in performance-based regulation, and this comes out in the PBR decision, 1999-0034, I believe it was, is that rates and costs do decouple in PBR, so it is a natural outcome of being in PBR. 1170 So if there is -- if there is some differences, it's expected. 1171 MS. ALDRED: Would you agree with me that the rates which are quoted in your application might change after 2006? 1172 MR. HOGAN: There is a potential that rates will change in 2006. 1173 MS. ALDRED: Is it, indeed, possible that the rates you quote in your application may go up or down for the class of customer in the business park, or up and down for other classes of customers in your municipality? 1174 MR. HOGAN: There is a possibility that rates will change; however, as I've mentioned, I have no information to assume that the rates currently do not -- are currently significantly different than the cost by rate class. 1175 MS. ALDRED: Would that be because you haven't done a cost study? 1176 MR. HOGAN: It's because I have no information or evidence to assume that they are incorrect. 1177 MS. ALDRED: The cost -- customer savings comparison that you filed as Exhibit C.3.2 -- 1178 MR. HOGAN: Yes. 1179 MS. ALDRED: -- it contains various time horizons, and one of them is a ten-year time horizon. And when you make your calculations of savings, are you not assuming that there will be no change in rates? 1180 MR. HOGAN: In this analysis, we are using rates being the same, and that would be the same for Hydro One and Chatham-Kent for the ten-year period. 1181 I would also like to maybe point out in the Stevens Associates report, in their analysis, they did -- talked about Hydro One and in Chatham-Kent, and it's on page 3 of 6 in their analysis. And in their conversations with the two LDCs, their feedback from the staff of the two companies was that there is no reason to expect large changes, other than adjustments for inflation, or rather just the normal PBR changes. So both utilities, from their report, do not expect any significant changes. 1182 MS. ALDRED: Well, I think, as you already pointed out, you don't know, do you? 1183 I think one thing you said in your evidence was that you experienced -- one of the reasons your rates were lower is that you experienced operational savings through the amalgamation of 11 utilities, and that those had been passed on to customers. Did you say that? 1184 MR. HOGAN: Yes. That was some evidence that we put in our original rate unbundling application to the Ontario Energy Board. 1185 MS. ALDRED: How could this savings be passed on when the rate unbundling process simply separated distribution costs from existing rates and added market-adjusted revenue requirements, MAR, to increase the rates to include taxes and return on equity? 1186 MR. HOGAN: The reason being is our base, our starting point had those costs out, so therefore those costs were not -- the amalgamation and everything was done prior to the rate unbundling and then therefore those costs were out of our application or use of the model to unbundle rates. 1187 MS. ALDRED: Wasn't that true of everyone else? 1188 MR. HOGAN: Can you clarify that for me again. Sorry. 1189 MS. ALDRED: Wasn't that the case for all LDCs? 1190 MR. HOGAN: What was the case? 1191 MS. ALDRED: That you simply added PILs and MAR, that that's all anyone did when you unbundled. 1192 MR. HOGAN: Well, the unbundling is where we were at, and our starting point was lower, which is where the $759,000 came from. And then, yes, we did have the two adjustments that you referred to. 1193 MS. ALDRED: You used the example of a 700-kilowatt customer in your application and the savings that you say would accrue to that customer per month. Would you accept that the savings per month would be smaller per customer if the park filled with smaller customers? 1194 MR. HOGAN: Can you rephrase that for me again. Sorry. 1195 MS. ALDRED: I'm only making the point that a smaller customer would have smaller savings. 1196 MR. HOGAN: I think that's correct in the analysis that we did and Stevens Associates did, that a larger customer -- individual larger customer will save more money. So I guess if a customer is smaller, they would save less. 1197 MS. ALDRED: If we look at the chart that you prepared. I see that one of the customers you've got on here is a large customer; you've assumed two large customers in here. 1198 MR. HOGAN: Is this scenario 2 you're referring to? Okay. 1199 MS. ALDRED: And I note that the monthly service charge for that particular type of customer is $152.96. 1200 MR. HOGAN: Yes, it is. 1201 MS. ALDRED: Is it not the case that a large user, such as a 3-megawatt customer, would be interested in controlling its energy costs through the use of a time-of-use meter? 1202 MR. HOGAN: All new customers that are greater than 500 kilowatts will be required to have a time-of-use, or interval meter. 1203 MS. ALDRED: And they would have that meter so that they can have access to spot market pricing, or they can manage their energy supply in such a way as to take advantage of lower rates from time to time, energy prices? 1204 MR. HOGAN: This analysis is on the distribution revenue, the distribution rates. So the benefit, I believe, that you may be referring to is really on the commodity and the cost of power, that interval metering and the customer being able to shift load to cheaper times. 1205 MS. ALDRED: And a 3-meg customer who installed interval metering, what would the monthly service charge for that customer be; would it be 152.96? 1206 MR. HOGAN: Yes, it is. 1207 MS. ALDRED: Would it not be $4,588? 1208 MR. HOGAN: I believe you're referring to one of our rate classes, being a large-user rate. Large-user rate is 5,000 kilowatts and above, which would be -- I believe, is consistent with Hydro One's direct customers. So it's 5,000 kilowatts that puts the customer into a different rate class; 3,000 -- so as mentioned, I guess, maybe again, the rate class this is demand greater than 50, and it's up to 5,000. Above 5,000, they're then in a large user class. 1209 MS. ALDRED: What about 1- to 3-megawatt customers? What class are they in? 1210 MR. HOGAN: The same. The same as the analysis here. 1211 MS. ALDRED: Thank you. Those are all my questions. Thank you. 1212 MR. SOMMERVILLE: Thank you, Ms. Aldred. 1213 Ms. Lea. 1214 MS. LEA: Thank you. I'll be between 15 and 20 minutes. Do you wish me to proceed at this time? 1215 MR. SOMMERVILLE: Why don't we take a short break. We'll reconvene at 3:15. Thank you. 1216 --- Recess taken at 3:00 p.m. 1217 --- On resuming at 3:20 p.m. 1218 MR. SOMMERVILLE: Please be seated. Thank you. 1219 Ms. Lea. 1220 MS. LEA: Thank you. 1221 CROSS-EXAMINATION BY MS. LEA: 1222 MS. LEA: Good afternoon, gentlemen. I have a few questions. Thank you. I think the first set of questions will be to Mr. Hogan and Mr. Kenney, but anyone can jump in at any time. 1223 In preparing your analysis as you did for the economic evaluation of this project, and also in preparing Exhibit C.3.2, can you tell me what your annual load growth assumptions are with respect to this business park, please? How much load in year 1, year 2, year 3? 1224 MR. KENNEY: We took the business park, as we do with any developer who requests a system installed, as -- what they requested for. This developer requested a 10-megawatt supply, dual feeder, so we are assuming that will be the load growth for that development. 1225 MS. LEA: So your assumptions and calculations are based on a year 1, 10-megawatt take-up? 1226 MR. KENNEY: Our assumption is based on a hundred percent contribution by the customer for a 10-megawatt, two-feeder supply, and the contributing capital would be a hundred percent based on no load growth in year one, if there was none. 1227 MS. LEA: Okay. 1228 MR. KENNEY: As we indicated earlier, there is the potential for load growth through the five year -- in the first year there's potential. 1229 MS. LEA: Okay. Mr. Hogan, then, when you prepared Exhibit 3.2, did you choose 700 kilowatts, or 3 megawatts, for any particular reason, or were those just illustrative and represented nothing with respect to your expectations of this park? 1230 MR. HOGAN: The 700 kilowatts was taken and used for each year to be consistent with the Stevens Associates report. That's what they used; they used 700. So I used 700 to expand on their analysis. And I think also in their report they were suggesting that that would, I think, be the smallest, or maybe the average, something like that. 1231 MS. LEA: The average size of customer, in other words. 1232 MR. HOGAN: The average size of customer. 1233 The second analysis was used with the 3,000 because that's the expected size that we would have had from Brose. So if we would have -- if the Municipality of Chatham-Kent would have had -- been lucky enough to have made that deal, the estimate would be 3,000 kilowatts. So that's where we came up with that. And with the information that Mr. Borduas provided and Joe Pavelka, that that's the size of customers that they're getting phone calls regularly. 1234 So that's why I used the 3,000 one in each of the first two years, because of the information that they had been -- 1235 MS. LEA: Did the Stevens report make any assumptions with respect to load growth in the park? 1236 MR. HOGAN: I think the only assumption that they made -- and I can't identify it directly -- I believe that they made was conservatively 700 kilowatts per year, and then that's where they came up with the after-rebate cost of our proposal, being $350,000. 1237 MS. LEA: And do you regard that 700 kilowatts, or, actually, we've been talking in megawatts mostly today, so 0.7 megawatts -- if I think I've got my math right -- do you regard that as a reasonable assumption upon which to base their analysis? 1238 MR. HOGAN: No, I don't, and that's because of the phone calls and the contacts that the economic development in Chatham-Kent has had. 1239 And I think if he had the services, all services, he would be able to attract much larger than the 700. 1240 MS. LEA: So you do have an opinion, then, about what the most likely load growth is for this business park. If you think the 700 kilowatts is unreasonable, what is your view as to the reasonable expected load growth in the park on an annual basis? 1241 MR. HOGAN: I think my scenario, too, is probably more reasonable to what may happen in the industrial park in the next few years. And again, that's from the work that the economic development group has been doing and who they've been contacting. 1242 So with that, I'm suggesting that we'd have one large customer in each year 1 and 2 and then smaller customers in each year for six years. 1243 MS. LEA: And so it is not until between years 5 and 6 that the 10 megawatts that the customer has requested is achieved under the scenario that you've given us here? 1244 MR. HOGAN: That's correct. However, if the 10 megawatts and the full services are not there now, he's not going to get any customers, and I think that's what they were, the economic development group and Greg Borduas, talking about today. They need the services now before they can even get a -- somebody to sign on the dotted line. 1245 MS. LEA: Can you indicate to me, given the illustrative example you've given us in your scenario 2, how the rebate would flow to the customer. I gather that he wouldn't get a full rebate, but he might get close to a full rebate by year 5; is that what I'm seeing? 1246 MR. HOGAN: I think in this scenario, he -- I have run some scenarios on the rebates, and I can't recall offhand. However, I guess I can go back to the offer to connect and -- which I mentioned earlier, and that was in our response to the RFP that the Municipality came up with. 1247 And 5 megawatts in year 1 would get them a rebate of $752,000 just on the load that got connected in year 1, so -- 1248 MS. LEA: Okay. Sorry. I was looking at your year 1 on your scenario 2, which is 3.7 megawatts. 1249 MR. HOGAN: Right. I don't have a rebate analysis to tie in with this. I haven't done that. 1250 MS. LEA: All right. 1251 MR. KENNEY: May I say something about -- 1252 MS. LEA: Certainly. 1253 MR. KENNEY: Requests of developers come in regularly, and when we supply a development, we supply what they've requested, and they pay accordingly. 1254 And this isn't different than any other development. Whether it be industrial or residential, the developer, if he's selling a hundred -- if he wants to develop a hundred residential lots, he wants to be able to service the house at the front of the -- at beginning of the development and at the end of the development. 1255 He doesn't want one wire put in and then another wire added later. He can't sell his lots that way either, so this is no different than any other developer. 1256 MS. LEA: So as I understand your interpretation and implementation of the Distribution System Code, you accept the developer's forecast of load and then require 100 percent capital contribution to make sure that you are not at risk for that forecast? 1257 MR. KENNEY: That's correct. We treat every developer, whether it be this development or any other development in the municipality the same way, 100 percent based on their forecast, and they will be refunded accordingly. 1258 MS. LEA: So in that scenario, then, this customer will be bearing the risk of the achievement of the forecast? 1259 MR. KENNEY: That's correct. 1260 MR. HOGAN: I might add, though, the risk of the $998,000 to the total project compared to Hydro One's original letter to them, being $2,750,000, and they would have a similar, I guess, payment plan with the Municipality, such that the Municipality would have to pay monthly or annually as to when load is not there. 1261 So the risk to the Municipality with our proposal is 998,000 compared to the 2,750,000. 1262 MS. LEA: We'll certainly get to your understanding of Hydro's proposal in a moment. I just wanted to concentrate for a moment on yours. Thank you. 1263 Now, you mentioned -- I think it was Mr. Kenney, in the very first part of your evidence in chief, that you had had a look at your capacity with regard to the Kent transmission station and your capacity there, and you had calculated that you had 8 to 10 megawatts available. Did I understand you correctly? 1264 MR. KENNEY: That's correct. 1265 MS. LEA: And over what time period of years -- pardon me. Perhaps I should rephrase that. Would you have to upgrade, or would there have to be an upgrade to the Kent transmission station to provide you with more than that? 1266 MR. KENNEY: No. Our forecast is 8 to 10 megawatts per feeder, and I've indicated that there were seven feeders in the system, which is approximately 40 to 50 megawatts of growth -- 1267 MS. LEA: Okay. That was the bit that I was missing, then. 1268 So for the -- do we look, then, at two feeders? I'm just trying to figure out if there's any sort of upgrade needed to serve this business park if it exceeds its 10 megawatt prediction. 1269 MR. KENNEY: We -- that's why we did the analysis earlier in 2001 and 2002, to ensure there wasn't any transmission upgrade and to make sure that wasn't on the table either. 1270 MS. LEA: Okay. So that is not needed, even if it goes up to 20 megawatts? 1271 MR. KENNEY: That's correct. And there's a vacant breaker position currently at Kent TS, which is included in the transmission system agreement between us and Hydro One. 1272 MS. LEA: Okay. Thanks. 1273 Now, if you could, please, give me your understanding of Hydro One's current proposal for service to this customer. 1274 MR. KENNEY: Which date would that one be? 1275 MS. LEA: The current proposal, sir. The one that's on the table here today before us. 1276 MR. HOGAN: So it would -- 1277 MS. LEA: I think that I referred the municipal witnesses to it. It's relatively easy to find. It's in Hydro One's evidence, dated February 21st, 2003, page 7. It's also contained in Hydro One's evidence in response to Procedural Order Number 3 at pages 3 and 4 of 7 of that submission, giving you costs and timing. 1278 I just want to know your understanding of it, please, because we haven't heard from Hydro One yet; right, so I need to get your understanding. 1279 MR. HOGAN: Sure. I believe it's table 1 that you're referring to and on page 7 in the submission from Hydro One Networks. 1280 MS. LEA: All right. That's the February 21st, 2003, submission from Hydro One Networks. Yes. Go ahead. 1281 MR. KENNEY: Okay. Well, as I understand it, what this proposal is offering, it's certainly not meeting the customer's request of two -- of dual supply. It's suggesting that 1 megawatt supply could be completed at a capital cost of $100,000. 1282 MS. LEA: Yes. 1283 MR. KENNEY: An additional supply of a different voltage could be supplied up to 9 megawatts at 400,000 for a total of $500,000 in the first 12 months. 1284 MS. LEA: I'm sorry. I don't understand the different voltage. You have to explain that to me. 1285 MR. KENNEY: Okay. They're supplying the first one at 8 kV. 1286 MS. LEA: Okay. 1287 MR. KENNEY: The second one at 27,6. 1288 MS. LEA: At 27,6, yes. 1289 MR. KENNEY: Which is -- 8 kV is the system that they're proposing for -- 1290 MS. LEA: For the first megawatt? 1291 MR. KENNEY: For the first megawatt, but that is restricted to one 500 kVa connection in this proposal. In other words, they are saying 1 megawatt, but they can't have a 1 megawatt customer connect to it. They're earlier saying it's restricted to a 500 kVa connection which, even in the Stevens Associates review of this plan, they use the small customer of 700 kilowatts for their analysis, which is -- this offer that they're providing here won't even connect that customer. 1292 MS. LEA: Can you show me -- I don't understand these things very well, but could you show me, please, the restriction in the evidence that you're talking about. 1293 MR. KENNEY: I believe it was in the appendixes. 1294 MS. LEA: In the appendices? 1295 MR. KENNEY: Yes. 1296 MS. LEA: Of this same document that we're looking at? 1297 MR. KENNEY: Yes. Or it could be in the original letter of the year previously. 1298 MS. LEA: So the earlier letter when they replied to the Municipality's request? 1299 MR. KENNEY: March 2002. 1300 MS. LEA: Okay, just a moment. There seem to be some letters at the back here. I have a March 14th, 2002 letter as the very last set of pages attached to the evidence of February 21st, 2003. I think I've found it, sir. Yes. In the back of my evidence dated February 21st, 2003 that we were just looking at, the last two pages in my copy are a letter dated March 14th, 2002. 1301 MR. KENNEY: I can't find that. 1302 MS. LEA: Okay. Can someone provide that. 1303 MR. KENNEY: Yes, I have it. 1304 MS. LEA: And under "Preliminary Estimated Cost Supply Options and Timetables," we're looking at the first paragraph there. 1305 MR. KENNEY: Yes. That's where it's found, the 500 kVa, that's correct. 1306 MS. LEA: Okay. I'm not sure I understand what this sentence means. Can you tell me what it means? 1307 MR. KENNEY: The -- even though it's a 1 megawatt load or supply line, it's not capable of supplying one individual customer of 1 megawatt. In other words, the system is a rural, residential system that cannot supply industrial load. To me that's what that's saying. 1308 MS. LEA: All right. So do I understand you to be saying, then, that your understanding of this is that several customers with an aggregate load of 1 megawatt could be supplied as long as no one of those customers exceeds 500 kVa? 1309 MR. KENNEY: That's correct. 1310 MS. LEA: Thank you. Now, with respect, then, to going back to the page you referred me to before, which is page 7 of Hydro One's submission, there appears to be an aggregate cost, using those two lines that you've spoken of, of $500,000 for a 10-megawatt supply. Is that your understanding, sir, too? 1311 MR. KENNEY: Yes, 9 megawatt supply is the way I take it. But it contradicts, I believe, that other letter where they were offering 5 megawatt supply on the previous year. So it contradicts the other proposal that they submitted that the Municipality based their selection process on. 1312 MS. LEA: Yes. The Municipality did base its selection process on not this evidence that is before us today. 1313 MR. KENNEY: That's correct. 1314 MS. LEA: Perhaps the best way to look at it is to look at the most recent evidence of Hydro One Networks, which is the submission in response to Procedural Order Number 3. I wonder if you could have that before you. And that's -- oh, if I have to find the exhibit number, I'm sunk. It's Exhibit B.3, number 12, and it's entitled "Hydro One Network's Submission in Response to Procedural Order Number 3". And on page 3 of that, under "Urgent Connections," the last paragraph, it says: 1315 "Networks' costs to provide 1 megawatt and 10 megawatts are $100,000 and 400,000 respectively, for a total cost of $500,000." And then it talks about your cost to supply being 713,000, which we understand is not correct, it's 998,000, isn't it? 1316 MR. KENNEY: No, that's correct. For one feeder. The two feeder was 998. 1317 MS. LEA: All right. That's very helpful, because I didn't understand that difference either. So the one feeder supply for Chatham-Kent Hydro was where the $713,000 came from. 1318 MR. KENNEY: One feeder at 27.6, and 10-meg capacity; that's correct. 1319 MS. LEA: Okay. And the $998,000 is for two feeders with the same characteristics? 1320 MR. KENNEY: Two feeders with an additional 10-meg capacity; that's correct. 1321 MS. LEA: All righty, that's clear. 1322 If we turn over the page and look at the second bullet point, beginning at line 5, it indicates here that: "Networks can provide the entire 10 megawatts of supply, should the Municipality desire, within eight weeks from the time an offer to connect is signed and an appropriate capital contribution is provided." 1323 To to get your understanding of the Hydro One proposal, is it your understanding that they can provide 10 megawatts, as the customer is requesting, in eight weeks? Is that what you take from that evidence? 1324 MR. KENNEY: No, I don't. 1325 MS. LEA: And what is different, sir? 1326 MR. KENNEY: It gives you 9 megawatts of 1 voltage, and 1 -- which is very restricted -- megawatt of another voltage. It's not a dual supply because these metres don't coordinate with each other. They are different voltages. 1327 MS. LEA: Okay. This dual-feeder aspect, do you understand Hydro One's proposal to be that they would be providing a dual feeder in the sense that Chatham-Kent is talking about a dual feeder? 1328 MR. KENNEY: I understand their March 2002 proposal was a dual feeder at $2.7 million. 1329 MS. LEA: I'm not talking about a proposal that's apparently no longer on the table. I want to focus on the current proposal, please. 1330 MR. KENNEY: The current one? 1331 MS. LEA: Mm-hm. 1332 MR. KENNEY: Okay. In this proposal, it seems the dual feed is the two different voltage option. 1333 MS. LEA: Okay. And, sir, when did you become aware of these changes in the Hydro One proposal yourself, or Chatham-Kent Hydro? When did you become aware of those changes? 1334 MR. HOGAN: We were aware of it when Hydro One made their submissions in this proceeding. There was no information to us beforehand. 1335 MS. LEA: And did you, sir, communicate that knowledge to the Municipality when you determined that there had been a change in the Hydro One proposal? The reason I ask is that the witnesses from the Municipality, on a couple of occasions, referred questions to you, saying that you were their source of information about the various options they had for electrical supply. And so I'm interested in understanding what information you provided them when you became aware of Hydro One's change of proposal. 1336 MR. HOGAN: Ms. Boud of Chatham-Kent is an intervenor in this proceeding, so they have received this information as well. There were some folks at the Municipality that had seen this when it first came out. I can't -- I do not know exactly who there reviewed it and analysed it. But there were some members there that have received this. 1337 MS. LEA: Okay. The only reason I ask, sir, is the evidence we heard earlier today from the municipal witnesses. Did anybody, as far as you're aware, from Chatham-Kent Hydro communicate this information to the Municipality? 1338 MR. KENNEY: I think it's quite possible it was communicated. 1339 MS. LEA: You don't have personal knowledge of it? 1340 MR. KENNEY: No, I don't. 1341 MS. LEA: Thank you. 1342 MR. KENNEY: Our engineering may have worked with their engineering people. 1343 MS. LEA: Okay. Sir, do I understand you to be saying that it is not a fair comparison to compare Hydro One's proposal at a cost of $500,000 to connect, with your proposal at a cost of $998,000 to connect because the same supply is not being -- same type of supply or quality of supply is not being provided? 1344 MR. KENNEY: That's correct. 1345 MS. LEA: Okay. Do you wish to elaborate on that? 1346 MR. KENNEY: Well, it's definitely not fair because it's -- it's not -- doesn't meet with the requirements of the development, it won't meet the needs to -- for an economic development officer to sign an agreement with the company and say he has dual supply. He doesn't have dual supply. He's got an 8 kV, outdated, rural system and a restricted 27.6 system that's obviously restricted at, I believe, 9 kV; originally it was 5 kV, now they're saying it can do 9 kV now -- 9 megawatts, I mean. 1347 MS. LEA: You're going to have to show me where we see that in the evidence, about the restriction on the 9 kV for 27.6. 1348 MR. KENNEY: I guess you're right, we're referring to the newest evidence. 1349 MS. LEA: I'm trying to look at the new evidence, sir. Yes. 1350 MR. KENNEY: Well, I was giving my opinion. 1351 MS. LEA: Well, that's all right. People do that here. 1352 MR. KENNEY: But I guess, just to summarize that, I feel there -- it's something that -- to sell those lots and be able to check that off, that it's a dual supply, it's not. 1353 MS. LEA: It is not. All right. Thank you very much for that evidence. 1354 Now, you've heard possibly from the Board Chair today and also, no doubt, from -- in planning your case, you've understood that the Board is interested, if possible, in interim solutions. Did Chatham-Kent Hydro give any mind to what possible interim solution there could be, and by an "interim solution," I mean one that doesn't settle today who the final provider may be but at least gives the customer a connection, and the final decision as to the final provider is put off until the main proceeding. 1355 Did Chatham-Kent Hydro give any thought to that? 1356 MR. HOGAN: Yes, we have thought long and hard about that. That was -- in some discussions with Board Staff that it's something for us to think about and to work on. I guess one solution that we'd like to bring forward, we have some pros and cons. I don't know if we really like it, but I'd like to put it out as an option. 1357 And that would be that we would connect to the industrial park using the Chatham-Kent Hydro route. 1358 MS. LEA: You mean down Bloomfield Road? 1359 MR. HOGAN: Down the Bloomfield Road. This will help us meet -- or both distributors meet what the Municipality requires in order to start marketing this park. That will be a 27,6 feeder. It will have at least 10 megawatts, and, actually, you know, it would be more than 10 megawatts load. It will have the service quality that will assist them in attracting -- in attracting the business. 1360 No decision on ownership, so there may be a couple pros and cons, like, I kind of have here is, you know, if Hydro One is awarded the area, you know, they can purchase the facilities and assets from Chatham-Kent Hydro. That new line, as we've all -- as we've heard a little bit today is all in Hydro One's service territory, so there isn't anything that we have to decide upon there, or there's no issues as to whether we'll connect up with any other customers. 1361 MS. LEA: Sorry. To back up, sir. So this would be -- the customer would be a Hydro One customer in the interim; do I understand that? Because you said -- 1362 MR. HOGAN: Yes, I guess -- 1363 MS. LEA: I think you just said no order was needed about service area, so I'm just trying to make sure I understand the proposal. 1364 MR. HOGAN: I guess there I meant there would be no change -- or change to customers from our boundary to the industrial park. There would be no change on customers there. I guess I was thinking and assuming that that customer, well, I guess, would be ours now on an interim basis. And then the final decision through the generic proceeding or the group proceeding, would come forward as to who the customer would be. 1365 It will -- you know, one of the real pros is it will allow the Municipality, in order to start marketing the project, there will be facilities there. Thinking of some of the cons, if it is awarded to Hydro One, we're thinking that there would have to be some metering tanks from our boundary to their boundary, and that could potentially go up to $200,000. And I think that's why I was thinking the customer would be ours in the interim, because we wouldn't have to invest in that metering tank. That would get deferred until the final decision. 1366 Some of the other cons would be this could restrict or would restrict Chatham-Kent Hydro's ability to use that feeder inside our boundaries because it will -- you know, Hydro One will have, I guess, control over it after our boundary. And they can, I guess, possibly expand, which could create some operational difficulties for Dave. 1367 And I think one stumbling block with that for the Municipality would be they really can't say -- I mean, they're going to be able to say, The facilities are here, and that's one good stumbling block that they can check off on their list. However, the problem would be who will be the supplier, and what will be the ongoing costs, the operating costs for the end-use customer. 1368 I guess it provides them a solution to get facilities there. They'll know what the capital cost is, because it's 998 with the possibility of rebates, but they would still have the difficulty of what will be the ongoing costs for the end-use customer. And that, I guess, is one of the other key factors they need to know and use to sign up. 1369 MS. LEA: Thank you, sir. I appreciate that evidence, and I just wanted to make sure I understood it. 1370 Your proposal, as I understand it -- and, Mr. Fisher, please jump in if I get the legal stuff wrong, or I'm putting this witness into a position where he can't answer. The Board would make an interim order granting the service-area amendment sought by Chatham-Kent to enable it to hook up the business park, and Chatham-Kent would build the line as discussed, requiring a capital contribution from the customer of $998,000; am I right so far? 1371 MR. HOGAN: Yes. 1372 MS. LEA: Okay. And then at the time of the final -- so the customer would be hooked up with 10 megawatts as requested. And at the time of the final decision of this Board, if the final decision is awarded to Chatham-Kent, no problem. If, however, the Board decides to make the business park a Hydro One customer or to reverse its interim decision of granting the licence area -- service-area amendment, then Hydro One would be acquiring that asset from you? 1373 MR. HOGAN: Yes. 1374 MS. LEA: Okay. And I didn't understand why you had to have a metering tank involved if they acquired the asset from you. 1375 MR. HOGAN: Because the line is connected to our line -- 1376 Actually, maybe you should answer that. 1377 MS. LEA: Whoever can help best. 1378 MR. KENNEY: It is connected to our line, which is metered back at the TS, our metering is, and so there would have to be a meter point put -- installed for Hydro One at a cost of $200,000, 100,000 per feeder. We would also have to apply for a low voltage -- we don't have a low-voltage rate. They would become an embedded distributor of ours. 1379 This proposal is one we've thought of. It's the only proposal, I think, would -- would meet what -- somewhat what the customer wants, but it certainly will not be able to give them any guarantee of rates to their -- to their potential clients. 1380 It also would -- down the road, it could cause us some serious operational issues with -- Hydro One would then take that plant and extend it out into the rural system, possibly, and we would lose all that capacity that we had planned in our five-year plan. 1381 But it's the best we can come up with. 1382 MS. LEA: Well, I thank you for that evidence. I appreciate your efforts. 1383 Turning to Mr. Schwarz, I just have a few questions for you, sir. 1384 MR. SCHWARZ: Okay. 1385 MS. LEA: Part of my function here is to ensure that the information before the Board is accurate and so on, so I hope you'll pardon me if I go into a couple of details with respect to your report. 1386 MR. SCHWARZ: Okay. 1387 MS. LEA: I was looking at your report which is attached to the supplementary evidence of Chatham-Kent Hydro. 1388 MR. SCHWARZ: Okay. 1389 MS. LEA: And in your report, you've provided us with a series of indices, SAIDI -- I've given these to the court reporter already today -- SAIDI, CAIDI, SAIFI, and IOR. Yes? 1390 MR. SCHWARZ: Yes. 1391 MS. LEA: And then at the bottom of page 3, you've given us a chart which lists various figures from calculation of those indices; is that correct? 1392 MR. SCHWARZ: That's right, and it's really just a tabulation of what other people had supplied -- 1393 MS. LEA: Yes. All right. So this isn't your data? This is someone else's data? 1394 MR. SCHWARZ: No, because if it was my data, I would have corrected some of the things on it. 1395 MS. LEA: I was wondering about that, sir. I had understood that CAIDI times SAIFI equals SAIDI. Am I understanding that correctly? 1396 MR. SCHWARZ: CAIDI times SAIFI? 1397 MS. LEA: Yes. The unit seems to suggest it, sir, if nothing else? 1398 MR. HOGAN: CAIDI -- are you looking for CAIDI? 1399 MS. LEA: No, I'm looking for SAIDI, and it's going to get really silly. It's coming towards the end of the day. 1400 When I was -- I was trying to calculate the -- trying to understand the relationship of the numbers that appear in the chart on the bottom of page 3. Let me tell me what I did, and then you can tell me where I went wrong, okay? 1401 MR. SCHWARZ: Okay. 1402 MS. LEA: I understood that the SAIDI, the index that occupies the top row, could be understood as a product of CAIDI and SAIFI, the indices that appear on the two rows that follow. And when I multiplied those -- let's take the Chatham-Kent 5 M8 feeder. When I multiplied 0.5597 by 5.3144, I obviously do not get 0.2787. I get an order of magnitude above that. 1403 And I was wondering whether I had either misunderstood the derivation of SAIDI or there was some other explanation for this apparent problem. 1404 MR. SCHWARZ: Actually, I never went into it in that detail. I just looked at the definition of what it means, and I didn't try to derive another number from the numbers that are there. 1405 MS. LEA: So where did the SAIDI numbers come from? 1406 MR. SCHWARZ: Okay. I did say in here that you've got to look at these numbers with a grain of salt, because people can put into it different numbers and there are no justifications here for the number of customers. 1407 MS. LEA: I guess what I'm trying to understand, sir, the first row of the chart, was it derived through some sort of calculation exercise from the other rows, or was it simply data that you received and does not apparently bear a relationship to the other numbers in the chart? 1408 MR. SCHWARZ: I don't think it bears a relationship to the other numbers. It stands on its own, as a number. 1409 MS. LEA: Okay. 1410 MR. SCHWARZ: Just in that vein, you see here on Hydro One -- say 5 M1 and 5 M18, for instance, and it gives a SAIFI number of .382 and .384. If you go back to the definition of what SAIFI is, it's total customer interruptions over the total customers served. So if you just had one customer and one interruption, the SAIFI number would be 1. You can't never get a number less than 1. So I don't know what the number means. That's why I say you have to take these numbers with a grain of salt. 1411 What I typically use for a number is the number of interruptions on a feeder, real ones, because no matter what duration it is, the customer sees a trip and a reclose and he has to respond to it. 1412 MS. LEA: I understand. That would suggest, though, that the SAIFI numbers are the most important. 1413 MR. SCHWARZ: That's correct. 1414 MS. LEA: According to this number, and you said the numbers are suspect, the SAIFI, the index on that, is far better for Hydro One than it is for Chatham-Kent. 1415 MR. SCHWARZ: If you believe the number. 1416 MS. LEA: Right. So you're suggesting, then, that we don't accept the numbers in this chart. 1417 MR. SCHWARZ: I'd suggest that, yes. 1418 MS. LEA: All right. Just then turning to the definitions. You gave a definition at the top of the page to CAIDI; I was wondering whether the numerator there should be total customer hours of interruption over total customer interruptions. 1419 MR. SCHWARZ: It almost seemed that it is, but it is a definition right out of the book. 1420 MS. LEA: Whose book? 1421 MR. SCHWARZ: The OEB's. 1422 MS. LEA: The who? 1423 MR. SCHWARZ: The OEB. 1424 MS. LEA: I see; so you're blaming it on us, are you? 1425 MR. SCHWARZ: I'm just copying the definition. 1426 MS. LEA: You're giving testimony based on the experience that you have with electrical systems. I'd like your understanding of what that definition is supposed to be, please. 1427 MR. SCHWARZ: Okay. Well, to me it's the total customer hours of operation divided by total customer interruptions. 1428 MS. LEA: That's your understanding? 1429 MR. SCHWARZ: That's my understanding of it. 1430 MS. LEA: All right, thank you. At page 4 of your evidence you give response times, and I'm just trying to find that. There we go. In the third paragraph, you give response times for Chatham-Kent and for Hydro One. What we seem to be lacking is a direct comparator, because one is on the urban requirement of 60 minutes and the other is on the rural requirement of 120 minutes. Do you have any evidence to offer us with respect to the direct comparators there? 1431 MR. SCHWARZ: The only evidence, really, is it's the requirement for this particular type of customer to be responded to as quick as possible, and all this was trying to point out is Hydro One are allowed to respond to this customer complaint or interruption in two hours, whereas an urban situation, they must respond in one hour, so that the customer at the end, then, gets a level of, if you want to call it, comfort that he's going to be looked at quicker. That's all it was meant to show. 1432 MS. LEA: Okay. So the couple of last sentences, then, that give the percentages -- percentage success rates is not the thrust of this evidence. 1433 MR. KENNEY: Can I add something? 1434 MS. LEA: Certainly. 1435 MR. KENNEY: the 120 minute response time, as I've indicated, we don't report that to the OEB; we report on a 60 minute. As I indicated, in our proposal to the Municipality, we were on target for a 93 percent in 60 minutes. 1436 MS. LEA: In 60 minutes, okay. 1437 MR. KENNEY: And we hit that target in 2002. We also, after receiving the evidence from Hydro One, did a calculation of 120 minute -- if we were to use 120 minutes, and our number was 98.6 percent. 1438 MS. LEA: That was a bit of a different number than we saw in the evidence we looked at earlier today, which was the Stevens & Associates evidence, where they gave you a response time of 87.1 percent in 120 minutes. Perhaps things have changed since then. I don't know. 1439 MR. KENNEY: I'm not aware of Stevens, where they got that evidence of 100 -- 87.1 percent. 1440 MS. LEA: Thanks. That helps. 1441 The last thing, Mr. Schwarz. Ms. Aldred questioned you a little bit to get a better understanding of reliability on rural and urban feeders. What I took from that, in part, is that a lot depends on the configuration, on the sectionalisation of the line with respect to reliability. 1442 MR. SCHWARZ: Yes. There is a concern with that as well. 1443 MS. LEA: Okay. So if you had a very long rural feeder, if it had been sectionalised with automatic systems, the concern about length would be reduced. 1444 MR. SCHWARZ: Somewhat. Usually, the relays back at the station will see that first lightning shot, no matter where the sectionalising device is, and it will operate back to the station; the idea is that it closes back in again, there is a time coordination between the recloser and the station. So, theoretically then, you take out less of the line on the second attempt. 1445 MS. LEA: If you were assisting Hydro One, then, with this proposal, would you be advising them to increase the sectionalisation or improve the ability to reclose lines if they want to increase reliability on their long feeders? 1446 MR. SCHWARZ: Yes. 1447 MS. LEA: Thank you. One moment. 1448 Thank you very much, gentlemen. Thank you very much, Mr. Chair. 1449 QUESTIONS FROM THE BOARD: 1450 MR. SOMMERVILLE: Just one area, Mr. Hogan. Have you, in your discussions with the Municipality, have you provided a guarantee with respect to rates going forward? 1451 MR. HOGAN: No. We have explained to them the -- I guess the expected rate changes that will be happening over the next few years. Right now we know it's a rate freeze for a few years, and outside of that they do know that 2006 and some of the implications of what may be happening there. 1452 MR. SOMMERVILLE: And has part of that indication been that there may be an increase in rates at that time? 1453 MR. HOGAN: That is true, that there may but with this cost allocation study, it could mean that it's going down as well. It's just the basis that we're using as we go forward. 1454 MR. SOMMERVILLE: Did you specifically discuss projects of this nature from a cost allocation point of view in those discussions with the Municipality? 1455 MR. HOGAN: I think in general we've provided them information as to what could happen. So with that, you know, that 2006 there's going to be a rate change, there's going to be a cost allocation, it could mean some changes. 1456 MR. SOMMERVILLE: Fair enough. Have there been any -- are there any understandings between your company, the LDC, or any of its affiliated companies and the Municipality with respect to the capital contribution? Is there an arrangement with respect to dividends or any premature repayment of the capital contribution to the Municipality, or is the rebate entirely dependent upon the taking up of lots by prospective customers? 1457 MR. HOGAN: The rebate is based upon the Distribution Code. The Municipality is treated no differently than any other customer, and I think that's partly why they went with a third party, you know, a consultant to review everything, to ensure that their analysis was correct, and who to decide would be the distributor. But there is no special treatment in any way of the Municipality Chatham-Kent. 1458 MR. SOMMERVILLE: Thank you. Those are my questions. 1459 MS. ALDRED: Mr. Chairman, if I can ask for your direction. The Exhibit C.3.2 on the rates was filed this morning. At the time of cross-examining Mr. Hogan, I didn't have a copy of the Chatham-Kent Hydro rates. I now have a copy of them and there are a few more questions I'd like to ask. I can either ask Mr. Hogan now, or I can just take my witness through it. 1460 MR. SOMMERVILLE: Mr. Fisher, what is your comment on that? 1461 MR. FISHER: I have no -- 1462 MR. SOMMERVILLE: -- on each of those proposals? 1463 MR. FISHER: I would prefer the former so that Ms. Aldred could ask Mr. Hogan the question. 1464 MR. SOMMERVILLE: That would be acceptable. Thank you. 1465 MS. ALDRED: Thank you, Mr. Chairman. We'll just hand out the rates schedule, so everyone has them. 1466 MR. SOMMERVILLE: I should indicate that it is now four o'clock. 1467 Ms. Aldred, your witnesses are here. How long do you anticipate from now until the conclusion of your evidence might be? 1468 MS. ALDRED: I have about four minutes with Mr. Hogan, and then -- frankly, I would anticipate I'll be 45 minutes, half an hour, 45 minutes with my witnesses. Maybe -- maybe less, but it will be that long, I think. 1469 MR. SOMMERVILLE: The Board is not inclined to sit beyond five o'clock today. We have some commitments. That would make it difficult for us to have argument, and I wonder if the parties might think about the form of argument in this case, whether written argument might be appropriate in this case. 1470 I don't think we're going to get to oral argument today. And frankly, rescheduling is complicated over the next couple of weeks. The Board is busy. And so I'd ask the parties to think about that. 1471 And so, Ms. Aldred, please proceed. 1472 FURTHER CROSS-EXAMINATION BY MS. ALDRED: 1473 MS. ALDRED: Thank you. 1474 I've just handed out what -- the Chatham-Kent Hydro service area rates schedule. Mr. Hogan, can you take a look at that and make sure you're satisfied that that's the -- I can advise you we got it off your web site. 1475 MS. LEA: Ms. Aldred, we'll give that Exhibit Number C.3.3, if it's accepted by the witness. C.3.3, please. 1476 EXHIBIT NO. C.3.3: CHATHAM-KENT HYDRO INC. SERVICE AREA RATE SCHEDULE 1477 MS. ALDRED: Does that look right to you, Mr. Hogan? 1478 MR. HOGAN: Yes, it does. 1479 MS. ALDRED: As you'll recall, I was cross-examining you a bit on the chart that you had produced, and I was wondering if we could match up the chart and some of my questions now that we've got the rates schedule. 1480 I take it in your scenario number 2, which is the one that I was talking to you about, when you were quoting the service charges, can you just take me to the portion of the rate schedules that you were applying there? 1481 MR. HOGAN: As provided, it's the general service monthly demand greater than 50 kilowatts. So service charge, $152.96. Distribution demand charge, 96 cents. 1482 MS. ALDRED: And those are the numbers that you used on the chart to do your calculations of savings; is that correct? 1483 MR. HOGAN: That's correct. 1484 MS. ALDRED: And what I was attempting to do was to address customers who would be inclined to install general time-of-use meters, and what I was wanting to ask you was whether there was a different service charge that would apply to time-of-use customers. 1485 So if you can just go down to the next paragraph and explain to me what the general service time-of-use category is down there. What does that apply to? 1486 MR. HOGAN: Those are -- I believe it's two customers that were a -- that are of a mid-range size. That's a rate class that is carried over from the old -- I guess before the unbundling of the rates. But that is not a rate class that we use for any new connections. 1487 MS. ALDRED: Well, does that rate class apply to customers below 5 megawatts? 1488 MR. HOGAN: Those couple of customers that are on that class, it is below 5 megawatts. 1489 MS. ALDRED: And I believe when you asked me -- when I asked you this question originally, you took me to the top of the next page, the large user class; is that correct? 1490 MR. HOGAN: Yes. 1491 MS. ALDRED: And you answered me that the service charge would be 11,298.32. I don't think you were that specific, but you said 11,000-something; is that correct? 1492 MR. HOGAN: I don't recall saying an amount, but that is the service charge for large user customers. 1493 MS. ALDRED: And would those be customers, generally speaking, over 5 megawatts of use -- of load? 1494 MR. HOGAN: Yes, it is. 1495 MS. ALDRED: And so is it not the case that there could be some customers in this business park who consume less than 5 megawatts and who would fit into your category, general service time-of-use, if they had a time-of-use meter to take advantage of spot-market pricing? 1496 MR. HOGAN: No, because that rate class, I guess, is being grandfathered for the one or two customers that are currently and were in that rate class. Any new connections, we're using the general service monthly demand greater than 50, the one that I used in the analysis. 1497 MS. ALDRED: And does it indicate somewhere here in that rate schedule that this particular rate class is grandfathered in some way? 1498 MR. HOGAN: No, it does not, or I don't believe it does, anyway. 1499 MS. ALDRED: If you were to apply the general service time-of-use rate class to a customer who did have an interval meter or time-of-use meter, would you agree with me that the service charge would go from 152.96 per month to 4,588? 1500 MR. HOGAN: If we were still charging customers that rate or still having customers go into that class, yes. 1501 MS. ALDRED: Is there anything in your Board order that would keep people out of that class? 1502 MR. HOGAN: Not that I can recall. 1503 MS. ALDRED: And if we were to substitute the 4,588.58 for the 152.96 that you have calculated to calculate the savings, would this not substantially reduce the rate differential between Networks and Chatham-Kent Hydro? 1504 MR. HOGAN: It would. However, we are not putting any customers in that rate class. 1505 MS. ALDRED: Could you calculate for me what the difference would be. I can take that as an undertaking if you want to file it after a break. 1506 MR. HOGAN: Sure. Okay. 1507 MS. LEA: Certainly. We'll have undertakings under group D, so this would be D.3.1. 1508 Is the Board also seeking a similar calculation for a customer who falls under the over 5-megawatt class, the large-volume class? 1509 MS. ALDRED: Well, I would like to ask for one. That would be useful. 1510 MS. LEA: I don't know what your capability is, sir, of doing these calculations on the fly, as it were. 1511 MR. HOGAN: I don't have with me the comparative rates of Hydro One for a customer -- a direct customer, I think, is their group, a customer greater than 5,000. 1512 MR. SOMMERVILLE: It looks as though we're going to have an interval in any event, and if within reasonable efforts you can produce the undertaking as soon as reasonably practical, that would be helpful. Thank you. 1513 MS. ALDRED: I think we can supply our rate schedules, if that's helpful. 1514 MR. SOMMERVILLE: Thank you. 1515 MS. LEA: Undertaking D.3.1, to prepare the calculations in Exhibit C.3.2 for -- can you give the things you wish, Ms. Aldred? 1516 MS. ALDRED: Yes, if he would redo the calculation in scenario 2 for the 3-megawatt customer that he's got in here. And instead of applying a $152.96 service charge, he would apply the general service -- time-of-use service charge, which is 4,588.58. 1517 And also, although I didn't take you through it, the distribution demand charge goes from 96 cents to 142, so you should adjust that as well, please. 1518 And also if you would do the same calculation for the large users over 5 megawatts. 1519 MR. HOGAN: If I may, what is it you're looking for with the 5 megawatts, replace the two, 3,000 customers with a 5,000, or can you please give me a little more detail. 1520 MS. ALDRED: You didn't use an over-5, did you? 1521 MR. HOGAN: No, I did not. 1522 MS. ALDRED: That's fine, then. Don't do that one. 1523 MS. LEA: Sorry? Did you want a calculation? 1524 MS. ALDRED: He didn't have it on his charts, though. 1525 MS. LEA: Right. I didn't know if you wanted a comparison of the large user class. 1526 MS. ALDRED: I guess you'd have to create those categories on the chart and calculate that for us. Can you do that? 1527 MR. HOGAN: If I'm being requested to do that, I can probably do that, if it's an undertaking that I'm going to -- 1528 MR. SOMMERVILLE: I think that is not unreasonable, if you could produce that. 1529 MR. FISHER: So could we have the exact description, please? 1530 MS. LEA: All right. I'll try it this time. 1531 MR. SOMMERVILLE: I'm glad you have to do that, Ms. Lea, and not me. 1532 MS. LEA: First of all, sir: Could you please recalculate scenario 2 for the 3,000 megawatt customers that you've assumed in this scenario, and replace their service charge and distribution demand charge with the service charge and distribution demand charges that would apply to a time-of-use customer in the rate class that you say you no longer include people in. 1533 A second calculation and a different calculation: Could you please substitute a 5-megawatt customer for the 3-megawatt customers that you have here, and use your large-user class rates for that as well as Hydro One's. So what I would suggest is simply a direct substitution of 5 megawatt customers for the 3 megawatt customers that you have here for the second calculation. 1534 Is that acceptable? 1535 MS. ALDRED: Yes. 1536 MS. LEA: Thanks. That's Undertaking D.3.1. 1537 UNDERTAKING NO. D.3.1: (1) RECALCULATE SCENARIO 2 FOR THE 3,000 MEGAWATT CUSTOMERS ASSUMED IN THIS SCENARIO, REPLACING THEIR SERVICE CHARGE AND DISTRIBUTION DEMAND CHARGE WITH THE SERVICE CHARGE AND DISTRIBUTION DEMAND CHARGES THAT WOULD APPLY TO A TIME-OF-USE CUSTOMER IN THE RATE CLASS THAT YOU SAY YOU NO LONGER INCLUDE PEOPLE IN; 1538 (2) SUBSTITUTE A 5-MEGAWATT CUSTOMER FOR THE 3-MEGAWATT CUSTOMERS, AND USE THE LARGE-USER CLASS RATES FOR THAT AS WELL AS HYDRO ONE NETWORKS', BY MEANS OF A DIRECT SUBSTITUTION OF 5 MEGAWATT CUSTOMERS FOR THE 3 MEGAWATT CUSTOMERS 1539 MR. SOMMERVILLE: Just for the parties' edification, the transcript of the proceeding is available typically the day of the proceeding, or the morning following, so that, Mr. Wickett, I don't know whether you're from Toronto or not -- 1540 MR. WICKETT: I'm not. 1541 MR. SOMMERVILLE: I'm sure Mr. Fisher would be prepared to procure your copy and make sure that you've got it, and Mr. Fisher can, so that the description of the undertaking will be codified once and for all. 1542 MR. FISHER: We've made that arrangement. Thank you. 1543 MR. SOMMERVILLE: Thank you. 1544 MS. ALDRED: That's all. Thank you very much. 1545 MR. SOMMERVILLE: Thank you. Is there anything arising from those questions, Mr. Fisher? 1546 MR. FISHER: A few quick ones, Mr. Chair. 1547 RE-EXAMINATION BY MR. FISHER: 1548 MR. FISHER: First, my friend, Ms. Aldred, was asking if Chatham-Kent Hydro built the plant to supply 10 megawatts and the load did not materialise, that the asset would be underutilised. Do you recall that? 1549 MR. KENNEY: Yes. 1550 MR. FISHER: Is there a physical impact on the plant if it's not being used? 1551 MR. KENNEY: No, there's not. 1552 MR. FISHER: And given the fact that this is a risk that the Municipality will bear, is there a negative impact on the customers of Chatham-Kent Hydro? 1553 MR. KENNEY: No, there is not. 1554 MR. FISHER: Thank you. With respect to interruptions on the feeders and their similar lengths, is it not true that the connection to Hydro One lines are in the order of 80 kilometres? 1555 MR. KENNEY: The connection is 80 -- yes, in evidence, it's about 80-kilometre lines. 1556 MR. FISHER: And yours and theirs is the site is approximately the same number of 9 kilometres, but they have the other 80 beyond that; is that correct? 1557 MR. KENNEY: They have 9 plus their other 80. A part of their 80 is 9 whatever. 1558 MR. FISHER: And was it established that this length of the 80 kilometres has what they refer to as stabilisers throughout? 1559 MR. KENNEY: Reclosers? The point was made there were reclosers, and Mr. Schwarz indicated there are no reclosers on the M18 feeder. There is a recloser located on the M1 feeder, in a place it was built 20 years ago but will not do anything to support this development. 1560 MR. FISHER: Thank you. Mr. Schwarz, you indicated that you drove both of the routes. 1561 MR. SCHWARZ: Yes. 1562 MR. FISHER: Of the Chatham-Kent Hydro and Hydro One. Which -- can you tell the Board which of these routes is more treed? 1563 MR. SCHWARZ: This is the new addition? 1564 MR. FISHER: Pardon me? 1565 MR. SCHWARZ: The new addition that we're talking about here or the whole feeder? 1566 MR. FISHER: The 10 kilometre, and whatever else -- 1567 MR. SCHWARZ: The new addition, the 5 kilometres along the ninth concession that Hydro One are proposing are all treed. 1568 MR. FISHER: And what is the implication for that, as far as reliability is concerned? 1569 MR. SCHWARZ: Well, it just adds to the problem of animals, trees, that kind of thing, falling down on the -- in other words, the reliability is going to suffer. 1570 MR. FISHER: And what about the route proposed by the Chatham-Kent Hydro? Are there trees there? 1571 MR. SCHWARZ: No, it's a clear road. 1572 MR. FISHER: Ms. Lea spoke to the capacity available at the Kent TS for Chatham-Kent Hydro. Now, I think, Mr. Kenney, you indicated in your evidence that 45 mVa was allocated to Chatham-Kent Hydro to allow you to plan for growth of 8 to 10 megawatts per year for five years; is that correct? 1573 MR. KENNEY: 45-megawatt capacity was available at Kent TS and not necessarily allocated to any distributor, but available. 1574 MR. FISHER: Thank you. Just to get this final clarification with respect to your understanding of the difference of the $500,000, 10-megawatt proposal of Hydro One versus the proposal of Chatham-Kent Hydro that's just under a million dollars. Is it true that Chatham-Kent Hydro's proposal is two, 27.6 kilovolt feeders with the capacity of 10 megawatts each, and that the Hydro One proposal is one, 8 kVa feeder and another of 27.6, neither of which have 10-megawatt capacity? 1575 MR. KENNEY: That's correct. 1576 MR. FISHER: Thank you. Those are my questions, Mr. Chair. Thank you. 1577 MR. SOMMERVILLE: Thank you. I have no questions arising. The witnesses are excused. Thank you. 1578 Ms. Aldred, I said 5:00. I don't want you watching your watch, but with the reporter's indulgence, we can go slightly after that. 1579 Is that all the evidence you propose to call, Mr. Fisher? 1580 MR. FISHER: Yes, it is, Mr. Chair. 1581 MR. SOMMERVILLE: I think it's probably prudent to re-swear the witnesses. 1582 HYDRO ONE NETWORKS - PANEL 1; STEVENS, KLOOSTRA, GEE: 1583 R.STEVENS; Sworn. 1584 W.KLOOSTRA; Sworn. 1585 R.GEE; Sworn. 1586 EXAMINATION BY MS. ALDRED: 1587 MS. ALDRED: Very briefly, Mr. Gee, Mr. Kloostra, and Mr. Stevens, can you inform the Board one by one what your positions are and your experience; I know the Board is familiar with you, but the other parties are not. 1588 MR. GEE: My name is Mr. Gee, and I work in the lines and forestry operations department within Hydro One. I'm the manager of work management and deployment. I'm responsible for work programming, resourcing of work, field engineering, and overall reporting and performance. 1589 MR. KLOOSTRA: My name is Walter Kloostra. I've been with Hydro One and its previous predecessor for approximately 20 years. I currently work as manager, network distribution strategies. 1590 My experience is in the area of operations management, distribution engineering, and currently, rates support. 1591 MR. STEVENS: I'm Rick Stevens, director of distribution and development strategy, and I've been in the industry about 20 years. Most of my experience is in financial planning, wholesale rate design, and retail rate design. I recently participated heavily in the consolidation of the industry, including the acquisition of 89 utilities, and also set the unbundled rates for those. And I've also participated in some of the OEB activities regarding the design of the unbundling process. 1592 MS. LEA: Ms. Aldred, I've given Exhibit Number C.3.4 to the curriculum vitae that were recently handed out. C.3.4. 1593 EXHIBIT NO. C.3.4: HYDRO ONE NETWORKS - PANEL 1 CURRICULUM VITAES 1594 MS. ALDRED: Thank you. 1595 Mr. Kloostra, could you, please, use the map to assist the Board and the intervenors in understanding what facilities Networks has in its service territory surrounding Chatham-Kent, and specifically surrounding the proposed business park. 1596 MR. KLOOSTRA: Sure. 1597 If I could indulge the audience, we have taken a look at maps similar in nature today, and I'll try to be brief. Significant on this depiction of what assets Networks has in the region have to do with colour coding; specifically, red lines refer to 27.6 kilovolt lines that Hydro One Networks currently owns. Kent TS is located in this vicinity common to both LDCs. 1598 We have the M1, which travels west along Queen Street, Highway 2, and we have the M18, which travels south along Chairing Cross Road. And the remainder of the lines in this area which surround the proposed business park are, in fact, blue lines, and these are the 8,320-volt system that Hydro One has in place. 1599 To be correct, I heard earlier in evidence that the M18 does not have a recloser on the M18, but I've been advised that late last year, a recloser was located out beyond the tie points between the M18 and M17 of Hydro One Networks. 1600 MS. ALDRED: Mr. Kloostra, can you explain for us what electricity can be supplied by Hydro One to the Bloomfield Business Park immediately. 1601 MR. KLOOSTRA: Hydro One Networks in its submission has indicated that it can provide up to 1 megawatt of supply for the 8,320-volt system. In addition to that, we can provide 10 megawatts immediately from our M18 feeder, or alternatively, we can provide 10 megawatts from our M1 feeder. But in our submission, we've indicated that we desire to use our system from the east to come across the 8th Line to supply the proposed park. 1602 MS. ALDRED: Could you just show us briefly on the map where you would be bringing the 27.6 line, if you were to bring one. 1603 MR. KLOOSTRA: The M18 is the red line that traverses the Chairing Cross Road. We anticipate that we will be constructing the 27.6 line down 8th Line. When we get to Bloomfield Road, depending on the developer's needs, either highway access or rear lot access, we'll either bring the line here, or we'll bring it across and access that point. 1604 MS. ALDRED: And just outline for the Board that 8-kV line that would be used to supply the 1 megawatt. 1605 MR. KLOOSTRA: The 8-kV line currently is here. It serves existing three-phase customers, and that line would be brought across this lot on the roadway to the business park. 1606 MS. ALDRED: What are three-phase customers? 1607 MR. KLOOSTRA: Three-phase customers are customers similar to those that would be connected in the proposed business park. 1608 MS. ALDRED: Why do we suggest -- why does Hydro One suggest an interim solution of supplying 1 megawatt of power immediately? 1609 MR. GEE: Based on the information that we received, there was not a lot of detailed information on what the customer's needs and requirements were, and we wanted to offer some options, some prudent options, to the developer of the business park. 1610 Thus we had proposed an initial connection out at 1 megawatt, which would allow them to put their sewage pumping station in, would allow lights, construction power. The line being built would be suitable for the eventual 10-megawatt line. It would not need to be changed and wasted, and really, it would allow the park to be supplied initially right away and really able to stage the future development. And we presented that as an option to consider. 1611 MS. ALDRED: When you say "line being built," can you be specific. The 8-kV line is already there. What would you need to add to it? 1612 MR. GEE: From the line that Mr. Kloostra mentioned coming down either the highway side or the back lot, we would build that line suitable for the eventual 27.6 line. So from that point of view, that line would be extended, energized at 8 kV. And when the 27.6 supply, the 10 megawatts was required, the very same line could be used with no changes. 1613 MS. ALDRED: Can you give us some sort of idea of what kind of facilities could be supported with a 1-megawatt supply, Mr. Kloostra. 1614 MR. KLOOSTRA: Yes, we've heard earlier today about the kinds of customers that could connect to different systems. Clearly, up to 1 megawatt, it could be any host of secondary-use customers as described by the Chatham-Kent development folks. 1615 It certainly includes customers like call centres, warehousing, business office support of industrial facilities, engineering consulting companies, water pumping facilities, sewage pumping facilities, industrial park lighting, signage, any realm of connection of that order. 1616 MS. ALDRED: Can you give us some idea of what kind of facilities would require 10 megawatts. 1617 MR. KLOOSTRA: Based on connections that Hydro One Networks is familiar with, and given that we serve well in excess of 35 customers above 5 megawatts and, in many cases, above 10 megawatts, I would suggest that those customers are large auto manufacturers, mineral extraction companies, companies that are largely electrically intensive. And indeed, Hydro One serves not only those kinds of customers, but in excess of 300-plus customers that are served off of LD lines that require 1 to 5 megawatts of power. 1618 Indeed, what we find is the customers usually engage us in discussions around their requirements, and we set in motion opportunity to provide them with prompt, appropriate, reliable supply. 1619 MS. ALDRED: Is Networks nonetheless able to provide all 10 megawatts at once; and if so, in what time frame? 1620 MR. GEE: Yes. If it was decided that they wanted to proceed with the 10-megawatt solution, yes, we could provide the 10 megawatts for initial supply. That would not be a problem. It is our belief, in fact, if we had a signed contract and the capital contribution, we could have the line built in eight weeks. 1621 MS. ALDRED: And, Mr. Gee, can you explain to the Board why it's relatively recently that Networks has indicated that it can supply the 10 megawatts within eight weeks. 1622 MR. GEE: In this particular case, the only real contact that we've had as far as being provided information was the letter referred to earlier. That letter came -- was sent to both us and Chatham-Kent, I understand. We responded to that letter with some general information. We did not understand that to be a request for proposal. 1623 In reading through that letter, it did not indicate any urgency. It did not provide time lines. It didn't have an in-service date. We really considered it a request for some general information, and that's how we've replied in that case. 1624 MS. ALDRED: And -- 1625 MR. GEE: The details that we've actually been able to get, the proposals that we've started to put together here have only come through the submissions of this hearing. As we've got a submission from -- from -- as part of this hearing, we're starting to see more of the needs of the customer. And in fact, it was actually -- today it was the first time it was clear to us that the customer was interested in a two-circuit supply for reliability purposes, two circuits to serve 10 megawatts rather than two circuits to serve the eventual supply the 300 acres in the park. So from our view, our proposals have kind of come together piece by piece as new information has been presented to us, mainly through this process. 1626 MS. ALDRED: Just to dwell for a minute on the business of needing the dual supply. Is that something that Networks is able to provide for the customer? 1627 MR. GEE: Yes, absolutely. We could do that. In fact, if the customer's needs are really for the high reliability, it would be our proposal to build two supplies on two different pole lines. I think it's definitely the case that two supplies coming to the park from different routes have a significantly better reliability than two circuits coming on the same pole line. Both lines won't be hit by lightning; they are not affected by trees and not affected by animals. And thus there's likely a proposal here, if we got to do some further study, that there's like here that for 2 or $300,000 more would have a significantly increased reliability here, if we had a chance to study this and put a proposal out. 1628 MS. ALDRED: And the Chatham-Kent proposal is to -- how are they proposing to bring the dual supply in? 1629 MR. GEE: They're going to bring two circuits up Bloomfield Road on one pole line, so you have one set of poles on the side of the road. If anything happened to the pole, a car accident, an animal got in there, it very well could flash and take both circuits out. So although there is both supplies, they're both impacted. If in fact your route was two different roads, the probability of that happening is, you know, decreases dramatically and thus improves the reliability. 1630 MS. ALDRED: If I can just turn you to the letter at B.3.6, which is the letter that the Municipality has been referring to as their request for proposal. 1631 MR. GEE: B.3, tab 2? 1632 MS. ALDRED: That's right. That letter is dated February 8th, 2002. 1633 MR. GEE: Yes, that's correct. 1634 MS. ALDRED: And what was it about this letter that led you to believe that this was a preliminary inquiry? 1635 MR. GEE: In going through this letter, it indicates no particular time lines; it doesn't indicate an in-service date for the park. It talks about anticipated load growth. It is asking, really, for a request for information. And although it provides -- asks some specific questions, our understanding of this was not such that this was a request for proposal. And I think if you look at our response to this that we sent in, pretty clearly we did not provide the information in a request for proposal. We deal for request for proposals on a rather routine basis, especially in the provision of services to utilities. And they usually have a little more detail and are a little more firm in their requirements in this case. 1636 MS. ALDRED: And is our response, then, just located at tab 3, if you can look at that. 1637 MR. GEE: Yes, that's correct. 1638 MS. ALDRED: And did the last sentence of that response say that the writer, Tom Coffey, would enjoy the opportunity to meet to discuss the proposal? 1639 MR. GEE: Yes, it does. That would have been our expectation in this process, that we were provided some general information and thus we would have sat down and had some serious discussions on requirements, needs, what exact reliability, time requirements were, what the time lines were. 1640 MS. ALDRED: And are you aware whether there was ever any request for a formal meeting on the proposal? 1641 MR. GEE: I'm not aware of a request for a meeting. 1642 MS. ALDRED: If you turn to the first page of the letter, I note in the second paragraph that it says that the estimates are very preliminary. 1643 MR. GEE: Yes, that's correct. 1644 MS. ALDRED: Just going back to the idea of an interim solution for a minute, and we've been talking about the full 10 megawatts. But if the Board were interested in an interim solution: If the Board were to order that on an interim basis that until the general principles have been set, Networks should supply the immediate 1 megawatt, but then in August, for example, a 6-megawatt customer firmed up their occupancy at the site and they wanted to proceed, could Networks meet that time frame? 1645 MR. GEE: Yes. It would be my full expectation we could. In the eight-week scenario, I am confident that from the time the customer is making commitments, that we would be able to meet the requirements. 1646 MS. ALDRED: Mr. Kloostra, the report filed a week ago by Elecsar alleges that Networks has power quality issues. Do you have any comments you'd like to make on that report? 1647 MR. KLOOSTRA: I'd like to make some comments because my friend has spent a great deal of time explaining what the report does say. 1648 I'd like to point out that, indeed, reclosers, as he indicates, do enhance reliability, not only for the customer connected upstream of the reclosing capability, but as well if it were replaced on a radial tap that enables automatic close and opening capability for the customer connected at the end of that facility as well. So indeed, reclosers do enhance reliability. 1649 As you heard, my good friend is making suggestions about our capability with respect to reliability, and what we've reported in the evidence are some existing statistics that are dated; they date back prior to 2002. And as they ably suggested to us, and as we capably undertook, in discussions with Solvay we did arrive at solutions which increased the reliability to the M17 feeder to Solvay's satisfaction. In fact we've increased that reliability by 300 percent, and as late as last year we made some additional investments on the M18 which is tied to the M17 and is only there as a backup to the M17 to further enhance the reliability M18. Indeed, short of the ice storm this past string, there hasn't been any forced and sustained outage on the M17 since June of last year. 1650 So I would question some of the assertions made about our ability to provide reliable supply. As I've indicated to the audience today, once approached by customers, and with our experience with existing customers, if the customer have needs, we do sit down with them and look at options for investments to improve supply. 1651 MS. ALDRED: Does Networks have the ability to serve sophisticated, high-tech customers? 1652 MR. KLOOSTRA: Indeed, we do serve customers similar to those propositioned as Brose, and in different parts of the province quite successfully. 1653 MS. ALDRED: I'm not quite sure whether this was clear. Mr. Gee, can I just circle back with you on the 10 megawatts and how quickly that can be supplied. 1654 MR. GEE: From the time there is an offer to connect and the capital contribution, we can connect it in eight weeks. 1655 MS. ALDRED: Now, if I can just take you through our costing evidence, and if I could refer you to Exhibit B.3.6, which is the Networks' submission with regard to the license amendment. 1656 MS. SPOEL: What's the date of that? 1657 MS. ALDRED: It's February 21st, 2003. And if I could turn you to page 7 of that tab, please. There is a costing table on that page. Could you explain to me the amounts that are contained in that table, and how they would apply to the development. 1658 MR. GEE: Yes, I can. Basically what we're presenting here is three different options that could happen in trying to explain what happens. 1659 The first option, which shows the 1 megawatt, and then next 1 to 9, is offering the -- is offering the proposal that we could connect some initial loads at 8 kV; we could serve small loads, their sewage pumping station, lighting, some of those needs initially. And then as customer requirements increase and loads materialise, we could then -- we could then increase that to 10 megawatts and it would not be two lines; it would in fact, as I stated earlier, the original line would be converted in voltage and the whole 10 megawatts would be done there; so it's not two. 1660 The other option we're presenting is the one the customer had indicated as their preference, and if that's the way they would like to go, we can supply 10 megawatts immediately. The capital contribution on that would be approximately $400,000. If the material -- if the load materializes as the Municipality hopes and plans, that will be at no cost. There will be no cost to the Municipality for that line. 1661 The third chart is based on what, perhaps, was a misunderstanding from us at the beginning. We believed their request for two-circuit supply was based on load growth, the park continuing to grow and going on 300 acres and growing to 18 megawatts. And from that view, if we had existing customers in an area that was growing in growth, it would be our responsibility to reinforce the line, and there would be no cost there. 1662 I'm not sure that was the scenario they were looking for or not, but that is what we had proposed at the time with the load growth. 1663 MS. ALDRED: If I can just go back to the proposal for the 10 megawatts, that doesn't take into account what you heard today about wanting a dual feeder, does it? 1664 MR. GEE: No, it does not at all. That was something new today. If I may talk about that a little bit. I have not had any time to do any detailed study, but in the time I've had to think about it, we would propose building a line as proposed from the M18, which would be about the 400,000. 1665 We would also recommend, then, building a second line up Bloomfield Road from our M1 feeder. We would have two separate supplies, two different routes. And from our initial preliminary -- that was about 750. So for 1.2 million, they could have a double-circuit supply with two totally different routes and dramatically increase reliability as an option for them. 1666 MS. ALDRED: If the interim solution were to be implemented, and I think you've described a few spans of line that would have to be built by Networks in order to connect the 8-kV line into the business park, if after the full hearing the Board were to decide that the -- that the business park should be Chatham-Kent's customer, what would happen to that line that had been built, and what is the cost to build that line? 1667 MR. GEE: If the decision today was an interim solution where we were going to go with the 8 kV, we would work with Chatham-Kent on their plans and how they would supply this park. And we believe we could build the line suitable that either party could use it at the end and arrange to transfer the assets based on the final decision. We believe there would be nothing wasted there. 1668 MS. ALDRED: I know you just heard the Chatham-Kent proposal a few minutes ago, and you may not have had time to formulate any ideas on it, but would one of you like to comment on the proposal, as you understood it, as Ms. Lea repeated it a few minutes ago, the interim proposal? 1669 MR. KLOOSTRA: Not wanting to make any commitments, because we just heard about this just moments ago, but indeed, if the Board ruled that Chatham-Kent should build this facility, without prejudice, and if they were not awarded that customer and have to transfer that asset to Hydro One, then indeed, we would have a double-circuit supply at a million dollars, but we'd have to install at least $200,000 worth of metering equipment to monitor the load coming into our territory. So we'd be up $1.2 million. 1670 And I think you just heard from Mr. Gee that we have a more reliable option for the customer at about the same cost, but that's not where we're at. That's just some quick thinking on my feet, and we'd like to go back and consider what interim options are available that are different from those that we propose. 1671 Any comments from anyone? 1672 MS. ALDRED: I thought maybe I'd just spend a few minutes with Mr. Stevens on rates. 1673 I do believe I'm going to be pretty well through by five; right, Mr. Stevens? 1674 MR. STEVENS: As long as I don't talk faster than the recorder can record. 1675 MR. SOMMERVILLE: Mr. Fisher, how long do you think you may be in cross-examination? 1676 MR. FISHER: A maximum of ten minutes. Plus my friend, he may want to cross as well. 1677 MR. SOMMERVILLE: Mr. Wickett, would you like to provide your own estimate. 1678 MR. WICKETT: Five to ten minutes, sir. 1679 MR. SOMMERVILLE: Thank you. 1680 And Board Staff. Ms. Lea, how long do you think you might -- 1681 MS. LEA: My last estimate wasn't very good, so I hesitate. I have about 20 minutes of questions. 1682 I think what I'm struggling with is that so much of this evidence is kind of brand-new, and if it -- if it would please the Board better to have these gentlemen do their cross-examination live, I could always give written questions to Hydro One. In other words, I don't have to delay you today going through that oral cross-examination if that's inconvenient. I can do it in writing, or I can complete it today, hopefully, in a short time frame. 1683 MR. SOMMERVILLE: Now, we would accommodate in that process -- obviously, there would be a distribution of those questions and answers. 1684 MS. LEA: Oh, absolutely. 1685 MR. SOMMERVILLE: There would be an opportunity, I guess, for further written questions arising, only if absolutely necessary, we would hope. The Board will have to stifle its curiosity to some degree, but I think that's probably a workable solution. Do you have any comment, Mr. Fisher? We're really running up against a wall in not too long from now. 1686 MR. FISHER: I understand that, and I also would agree with your proposition that the final argument be written. I don't have a -- that would be acceptable for myself and my friend Mr. Wickett. 1687 MS. ALDRED: That would be fine with me, the written argument. 1688 MR. SOMMERVILLE: Okay. Let's proceed, then, Ms. Aldred, and we'll try to complete, at least, Mr. Fisher's and Mr. Wickett's cross-examination. 1689 Ms. Reporter, we are mindful of your requirement. Thank you. 1690 Please, Ms. Aldred. 1691 MS. ALDRED: Thank you. 1692 Mr. Stevens, you've heard testimony from Chatham-Kent, the Municipality today, that they would prefer to be a Chatham-Kent Hydro customer, because they would be -- customers in the business park would be paying lower rates. Can you comment on the role that customer preference based on rates should play in the Board's deliberations at this point. 1693 MR. STEVENS: My opinion at this point in time is that customer preference is premature, because I don't believe customers fully understand the transitional nature that rates are currently in. 1694 Case in point, in our own acquisition of the 88 utilities, we have not integrated those into our system and fully expect that when they are integrated that rates are going to come down substantially for a number of our classes of customers. 1695 Similarly, in that analysis, we also spent a fair amount of time looking at rates across the province and noticed some very wide deviations, and as part of this, spent some time looking at Chatham-Kent's rates and noticed that some of the rates that were proposed and some of the analysis done by Stevens Associates were based on a class. 1696 When I compare against, say, LDC average, was substantially below average; however, when I looked at, say, the residential rates or the large-user rates or their time-of-use rate, they're substantially above average. So I would suspect on that basis that those rates would come up. 1697 So having said that, I would just indicate that I think rates are very transitional at this point in time. 1698 MS. ALDRED: Did you have any further comments that you would like to make on the Stevens report? 1699 MR. STEVENS: My assessment of the Stevens report is that the analysis was accurately done based on the rate classes that were presented. However, I did also notice that the actual -- the actual analysis was probably not broad enough to look at the full impacts to potential customers coming into the park. 1700 Indeed, we heard that the 3,000-megawatt customer was very likely. In my expectation, it would be that a customer of that size would want access to the spot-market price or at least be able to hedge their commodity cost going forward. 1701 When I looked at the rate schedules that'll -- provided that opportunity to the customer, that rate class was not in the analysis, and that was the rate class that we've discussed where the 4,500, approximately, service charge and substantially higher volumetric rate. I actually pushed that calculation through some of my own analysis, and quite substantially the impact between our customers and their customers diminishes quite substantially. 1702 MS. ALDRED: Thank you very much. Do you have any further comments you'd like to make about rates at this time? 1703 MR. STEVENS: No, that's fine. 1704 MS. ALDRED: Then that would be my direct evidence -- our direct evidence, Mr. Chairman. 1705 MR. SOMMERVILLE: Thank you, Ms. Aldred. 1706 Mr. Fisher? 1707 CROSS-EXAMINATION BY MR. FISHER: 1708 MR. FISHER: You've indicated that the letter that Hydro One received in its Guelph office, that Hydro One did not consider it to be an RFP. Did you phone the Municipality to figure out what the nature of the response actually required by Hydro One was? 1709 MR. GEE: No, we did not. In our reading of the letter, we made an understanding and thought we gave an appropriate reply. 1710 MR. FISHER: Okay. 1711 MR. GEE: I would add that I think in our response, in our letter, I think it was -- when you look at our letter, you will find that it is actually very clear that what we understood, based on our comments that further study was required, estimates were preliminary, and so on. 1712 MR. FISHER: It does say the preliminary cost estimate, that's true. In the applicant's reply evidence of February the 28th, 2003, at tab 6. 1713 MR. GEE: A2, tab 6? 1714 MR. KLOOSTRA: A3. 1715 MR. GEE: A3, tab 6. 1716 MR. FISHER: Sorry, this is the applicant's reply evidence of February 28, 2003. I don't have the list of exhibits in front of me. I apologise for that. 1717 MS. LEA: A3, number 6, probably. 1718 MR. FISHER: This is a letter from Chatham-Kent Hydro, January 30, 2002, to Mark Boucher in Essex. 1719 MS. LEA: Is it enclosed in another exhibit, sir? Yeah, okay. Yeah, it's A3, number 2, tab 6. Thanks. 1720 MR. GEE: Yes, I have it. 1721 MR. FISHER: Thank you. The second paragraph there says: 1722 "Chatham-Kent Hydro crews transferred our customers in Chatham and Blenheim over to the Y bus within an hour. We then offered to switch our remaining customers in Merlin over, but the response from Hydro One operators was that the Hydro One line would not want Chatham-Kent crews operating their switches. The result was that Chatham-Kent Hydro customers remained without power for an additional two hours, and Hydro One customers were off for nine and a half hours." 1723 What do you say to that as far as reliability and response times? 1724 MR. GEE: My response is that that was a very unfortunate incident. We were in a transition of our operating centre. It is not the kind of service that we would expect on an ongoing basis. And, in fact, if you were to look at our response times, not on the provincial basis that we report to the OEB, but in fact if you look at the response times for the Kent office, our average response time for emergency calls is 54 minutes. So this particular scenario was really not acceptable for us either. But it's also not a common occurrence in our response. 1725 MR. FISHER: Mm-hm. Mr. Pavelka, this morning, indicated that counsellors within the municipality are receiving complaints from Hydro One customers, and also the same type of issues arise at the industrial advisory committee meetings monthly, on an ongoing basis. He didn't indicate that these complaints were decreasing. 1726 Did you -- do you -- first off, does Hydro One have a representative at these meetings; and how do you propose to -- or do you propose to attend these meetings to find out what these are? And how do you want to -- how would Hydro One address them? 1727 MR. GEE: I was -- I was not aware of the complaints. We are not invited or aware of the meetings, that I know of. We may appoint someone locally, but I'm not aware of us being invited to the meetings. I believe -- I know that if those complaints and those customer issues were made aware to us, we would take them seriously. I think Mr. Kloostra has stated that we have a good track record of working with customers and going through and solving their individual reliability needs. The case of Solvay that Mr. Kloostra talked about is one example. 1728 It is my understanding in that case that this customer was experiencing problems for a period of time, before they were really -- really approached us in any serious Manor. Once they did, I think Mr. Kloostra talked about the kind of improvements we made. 1729 So we would be willing to attend the meetings, we'd be interested in talking to customers. And if they have issues, we would sure be glad to work with them to solve them. 1730 MR. FISHER: Mr. Kenney, I believe, gave evidence that Chatham-Kent Hydro contacted Hydro One on several occasions with respect to the Solvay situation, and nothing was done; and in fact, as Mr. Pavelka indicated, the Municipality and Chatham-Kent Hydro, I believe it was, engaged in a study in order to persuade Hydro One to undertake some action. 1731 MR. GEE: With regards to the study, I think it's important to realise that Solvay was, in fact, Chatham-Kent's customer; it is their customer to start with. I am not aware and really can't comment whether there were discussions and problems raised before. I guess I would state that once we were made aware of it at an appropriate level, we dealt with it. And I really can't comment if there were other discussions. 1732 MR. FISHER: What is the appropriate level? 1733 MR. GEE: There would be a number of ways that the Municipality could deal with us. It could be as simple as dealing with our call centre. There is a means that calls would get routed to the appropriate person. So if a person didn't know or didn't have a contact, the call centre is stated -- has the ability to route it to the appropriate person. 1734 The local manager that serves in the area, if they were contacted from the line's operation point of view, that would be fine. The Chatham-Kent utility has an account executive, I believe, and if he was contacted, I believe we could also deal with it from that as well. 1735 MR. FISHER: I believe Mr. Kenney said there were discussions between the local account executive and Chatham-Kent in this regard, and nothing had happened. It is recognised that Solvay is a customer of Chatham-Kent Hydro, but the feed to that station is Hydro One, and that was what was causing reliability issues. 1736 MR. GEE: That's correct. I guess I really can't comment on the discussions of timing. I really wasn't involved. I guess in the end, we have a customer that is getting -- having his requirements met, and that's what we hope to do in all cases. 1737 MR. FISHER: Thank you. 1738 CROSS-EXAMINATION BY MR. WICKETT: 1739 MR. WICKETT: Gentlemen, are either of you responsible for the various submissions that we have from Hydro One that we see, starting with the response to the request for proposals of March 14th, then the response to the original application of Chatham-Kent Hydro, then the supplementary response, and then your position today? Is there any one of the three of you that's responsible for those responses? 1740 MR. KLOOSTRA: I guess I would respond by saying that certainly there have been a core team that have been consistently meeting to ensure that our responses are supported by the corporation. 1741 MR. WICKETT: The first submission is the letter, I think it's at tab 3 in your response to the original application of Chatham-Kent Hydro, and you're saying that you weren't sure what it was that was being asked by the Municipality. 1742 MR. GEE: No, I don't think so, that that's what I said. I believe that we read the letter, and we understood it to be a request for information which we tried to fill. We just did not understand it as a request for proposal. 1743 MR. WICKETT: But you heard this morning, I believe, in the evidence that Stevens did contact you to ask for more information. 1744 MR. GEE: As I understand it, the Stevens contact did not come through Mr. Coffey, based on his proposal. The Stevens request for information seemed to come from a number of various contacts at different parts in the organisation. In us trying to review it, it did not seem to come as a formal request. Various people were provided information through various streams that we have not been able to pull all together as to how it was provided. 1745 MR. WICKETT: So you're not sure. 1746 MR. GEE: I'm not sure. 1747 MR. WICKETT: But you would agree with me that the Stevens report clearly says they had a dialogue with Hydro One. 1748 MR. GEE: I've read the report. 1749 MR. WICKETT: And after the dialogue with Hydro One, is there evidence today that anyone from Hydro One contacted the Municipality to request some clarifications on the nature of the process? 1750 MR. GEE: Not that I know of. 1751 MR. WICKETT: What is it that you were quoting on in this particular letter of March the 14th, 2002, in response to the RFP? What is it that you were quoting on with respect to the extra $2 million? 1752 MR. GEE: When you say the RFP, do you mean the letter that was sent to us? 1753 MR. WICKETT: Yes. I'm actually asking you, in your letter of March the 14th, 2002, to the Municipality, what is it that you were quoting on with respect to that $2 million. 1754 MR. GEE: From our very preliminary analysis, we were trying to answer the question of an immediate supply of 10 megawatts, and the talk of a second supply. In the letter from the Municipality, that's question number 2, based on that we were looking at the need being load growth for the park and thus needing to have a second supply for the future -- future load growth. So that proposal was based on two feeders in that case. 1755 MR. WICKETT: So you did quote two feeders in this letter? 1756 MR. GEE: We -- we quoted the ability -- yes, we quoted the ability to supply the additional load of the whole park for two feeders, which was the very -- which was the very preliminary estimate of $2 million. 1757 MR. WICKETT: And that was in addition to the 750,000; is that correct? 1758 MR. GEE: Yes, that's correct. 1759 MR. WICKETT: So your preliminary estimate was $2,750,000. 1760 MR. GEE: That's correct. 1761 MR. WICKETT: So you had a chance to change that in your answer to Hydro One's application; is that correct? 1762 MR. GEE: Yes. As we've got and received more information -- 1763 MR. WICKETT: Chatham-Kent's application. 1764 MR. GEE: yes. As we receive more information about the project and the customer needs, we've been able to refine the project plan and tailor it more to the needs of the customer. 1765 MR. WICKETT: But I didn't see in your response to the Chatham-Kent Hydro application that you changed this at all, that you changed the original quote of the 2 million plus the 750. 1766 MR. GEE: I think yes, we did. In our submission -- it was the table referred to earlier. 1767 MR. WICKETT: Yeah, I think you did change it to 500,000. But I didn't see anything in there about the dual feeder. There was no change in that proposal to the dual feeder cost; is that correct? 1768 MR. GEE: Yes, that's correct. We did not, until today, understand that the park's need was for two circuits for reliability purposes. It was our understanding that the park -- the Municipality was looking at the two feeders to handle the load growth, the eventual 300 acres, the other development going on here. So from the pieces we've been able to pick up, that's what we understood here. The view of having two circuits to supply 10 megawatts for reliability purposes is a different scenario altogether. 1769 MR. WICKETT: Than what you understood at the beginning. 1770 MR. GEE: Yes, that's correct. 1771 MR. WICKETT: But you could see in the Chatham-Kent Hydro proposal that they had quoted the dual feeder there. 1772 MR. GEE: Yes, that's correct. 1773 MR. WICKETT: But even having seen that, you didn't think that you had to change your original quote from March the 14th? 1774 MR. GEE: Once the submissions come in in evidence, it starts to get more difficult to go back to the customer, talking about changing what's going on here. So I think at that point we're seeing information. But what we do with it and how we develop it, it starts to get a little more difficult. 1775 MR. WICKETT: Did you make any attempt to contact the Municipality after that? 1776 MR. GEE: Not on that particular issue. We did have contact with the Municipality. The Municipality contacted us regarding supply for a sewage pumping station, and we did, in fact, provide a letter on March 26th to the Municipality on our ability to supply the sewage pumping station, at the 8 kV load. 1777 MR. WICKETT: The time line issue was also something that has come up where you initially had said that there was going to be a one-year time line; is that correct? 1778 MR. GEE: That's correct. 1779 MR. WICKETT: And I believe you carried through with that position in your response to the Chatham-Kent application to the Board. There was still a one-year time line. 1780 MR. GEE: Yes, that's correct. Until we heard the Municipality articulate their urgency, their need, their whole plans for marketing this park, we would have expected that, based on our previous experience, that the line and load would have been built with customers, and thus it's very common for customers of this size to have a planning horizon over a year, knowing what they're doing, having to build and plan their facilities. 1781 So in a scenario where you're not pre-servicing the park, it is very common to have those kinds of time lines. It allows the companies to budget and plan. However, if that is the need of the Municipality, and we've heard that, we wanted to be sure they understood we would be able to meet those needs. 1782 MR. WICKETT: All right. So other than contacting -- the contact with the Municipality to feed Hydro to the pumping station, have you had any other contact, or a record of any other contact, initiated by your company to the Municipality of Chatham-Kent after the letter of March 14th, 2002? 1783 MR. GEE: Not that I'm aware of. 1784 MR. WICKETT: And you're telling us today that you now have a sense as to what it is the needs are of the Municipality, and I understand you have now just said sort of an off-the-cuff quote, I'm not sure of the exact words, but 1.2 million would be your capital cost to do a dual feeder of 10 megawatts per feeder to the site. 1785 MR. GEE: Are we talking -- again, I'm still unsure. Are we talking about 10 megawatts per feeder? Are we talking 10 megawatts dual supply? Are we talking about an extra 20 megawatt eventual load? It seems to go back and forth. I'm not quite sure what scenario you're -- 1786 MR. WICKETT: And you're now suggesting that you need to talk to the customer? 1787 MR. GEE: Yes. We would probably need to -- yes, it would be very advantageous to have the customer's needs and timing, and are they -- do they want to build now for 20 megawatts of supply, which is what you're suggesting, or do they want to build for 10 megawatts, is what I heard this morning, and have the dual supply. So -- 1788 MR. WICKETT: But since March the 14th, 2002, you've indicated you have no record of anyone from your company seeking out the Municipality to find out what their actual needs are, but you're saying today, when we're at the hearing, that that's what you'd like to do. 1789 MR. GEE: It is very common, in our experience in dealing with customers, that we get a preliminary request on our ability and capability to service undeveloped lands. It happens very routinely across the province. It is very common that we will provide the information requested, and when the customer is ready and interested, it has a need, they will come back to us and we'll start a serious planning scenario. From our view, from our initial reply in March, we've been waiting for a response back for the serious planning, when and if they were ready. 1790 It would appear they had started, based on their decision to go with Chatham-Kent, not to communicate with us on those needs. 1791 MR. WICKETT: I don't have any further questions. 1792 MR. SOMMERVILLE: Thank you. 1793 Ms. Lea, it's now ten after. Have you revised your timing? 1794 MS. LEA: Yes, I think I can proceed quite expeditiously. Thank you, sir. If you could indulge me to that extent. 1795 MR. SOMMERVILLE: Thank you. 1796 CROSS-EXAMINATION BY MS. LEA: 1797 MS. LEA: Gentlemen, in your evidence that you filed in response to Procedural Order Number 3, that's the most recent evidence, you give some costing at the bottom of page 3 of that submission. I think this also repeats the costing that you gave in your earlier evidence of 100,000 and $400,000 respectively for 1-megawatt and 10-megawatt service, for a total of $500,000; is that correct? 1798 MR. GEE: Can you help me locate it? 1799 MS. LEA: Yes. I'm looking at your most recent evidence. 1800 MR. GEE: B3? I could go by numbering, but it's probably best to look at it. 1801 MS. LEA: No, that's fine. Your most recent evidence, which is your response to Procedural Order Number 3, and I once again have lost my exhibit list. No, okay. Yeah, it's B3, number 12, and I'm looking at page 3 of that. 1802 MR. GEE: Thank you. 1803 MS. LEA: Costing appears at the bottom of that page. 1804 MR. GEE: Yes, I have it. 1805 MS. LEA: All right. Now, does that costing include the load guarantee that you would require of the customer? 1806 MR. GEE: That would be the capital contribution we would require from the customer up front. If the full 10 megawatts came, there would be a full rebate. 1807 MS. LEA: Okay. The $500,000 is what you would require up front. If the full load did not arrive, then not all of that would be rebated. 1808 MR. GEE: That's correct. 1809 MS. LEA: But there would be no additional cost to the customer if the full load did not materialise? 1810 MR. GEE: There would be no additional in the 500,000, that's correct. 1811 MS. LEA: Thank you. And that's for a 10-megawatt load, with the line configuration that you were talking about in this particular submission? 1812 MR. GEE: That's correct. 1813 MS. LEA: All right. Now, your -- you gave a suggestion today that you could also supply through two supplies on two different pole lines, and there are, as I understand it, two scenarios for that; one, you're providing 10 megawatts in total through those two pole lines; or, two, you're providing 20 megawatts as a potential through those pole lines. Do I understand that to be? 1814 MR. GEE: Those are two options, and I have not studied that at the level -- I'm not quite sure what the customer needs in this case. 1815 MS. LEA: Have you costed those options? 1816 MR. GEE: No. 1817 MS. LEA: Would you be willing to cost those options? Do you have enough information? Tell me. 1818 MR. GEE: Mr. Kloostra, from a planning perspective, says that we can provide 10 megawatts from the M1. We know we can provide 10 megawatts from the M18. Thus, I believe we can supply the 20 megawatts from those two supplies, and that would include the total cost that I provided earlier. 1819 MS. LEA: I don't understand you correctly, sir. Are you saying you could supply that amount of power, 20 megawatts, with the configuration we've just spoken of for $500,000? 1820 MR. GEE: No, that's not what I meant to say. 1821 MS. LEA: Okay. Have you costed that option? 1822 MR. GEE: What I used for the costing, I quoted a number of approximately $1.2 million earlier. 1823 MS. LEA: Okay. 1824 MR. GEE: What I did to get that number is we had initially thought about bringing up a line up Bloomfield Road from M1. Our very preliminary estimate of that was 750,000. That would get us one supply line and 10 megs. The proposal we're now considering is from the M18, a different route at 500,000. I simply added those two together. 1825 MS. LEA: I guess what I'm asking you, Mr. Gee, is if you have costed these options in your head now, and you're willing to rely on that evidence, that's fine. I can also take an undertaking for you to provide costing for the various options you've outlined today, as it seems that we may have written argument in this matter. Would that be preferable? 1826 MR. GEE: Yes. 1827 MS. LEA: If that's acceptable to the Board, it will take Undertaking D.3.2, for Hydro One to cost the options we've discussed. And I think it's best for you to tell us what those options are. 1828 MR. GEE: We would supply one 27.6 kV line from the M1 up Bloomfield Road to the park, and we would supply a second line from the M18, which is our last proposal, south of the 401 -- south of the 401 to the park. 1829 MS. LEA: Okay, thank you. And do I understand this costing evidence is going to deal with an option that you're providing 10 megawatts of supply through those lines and/or 20 megawatts of supply through those lines? 1830 MR. GEE: Yes, we could do that. 1831 MS. LEA: Yes, the Undertaking D.3.2, please. 1832 UNDERTAKING NO. D.3.2: HYDRO ONE NETWORKS TO PROVIDE COST ESTIMATE TO SUPPLY ONE 27.6 kV LINE FROM THE M1 UP BLOOMFIELD ROAD TO THE PARK, AND A SECOND LINE FROM THE M18 SOUTH OF THE 401 TO THE PARK 1833 MS. LEA: My last question deals with your interim solution. I wanted to clarify one aspect of that. You indicated that if the Board were, on an interim basis, to deny the service-area amendment application of Chatham-Kent and defer its final consideration of that application to the main proceeding, that Hydro One could immediately connect the customer at 1 megawatt. And then I think I heard you say today, although I don't think it appeared in your other evidence, correct me if I'm wrong, that you would build at the customer's request during that interim period, if the customer provided you with a capital contribution. Did I hear you correctly? 1834 MR. GEE: If we get to building the main line on the capital contribution, I don't believe we any longer have an interim solution. The interim solution is to ask the Municipality to live with only one 1 megawatt of supply until such time, and I think that's the issue at hand. 1835 MS. LEA: Okay. So the interim proposal from Hydro One, then, is the supply of 1 megawatt until the final decision of the Board is rendered. 1836 MR. GEE: Yes, that's correct. 1837 MS. LEA: You heard Chatham-Kent suggest that it would be possible to build a line during the interim period that would supply the entire amount of the customer's needs. Did you hear that proposal? 1838 MR. GEE: Yes, I did. 1839 MS. LEA: And do you have comments, first, on their proposal; and, secondly, could Hydro One provide the same sort of interim solution? 1840 MR. GEE: Based on a double circuit supply, which -- I guess I'm still unclear if that's the requirement, but if the requirement is a double circuit supply, we would not be able to build up Bloomfield Road with a double circuit supply. We only have one circuit at the end. 1841 MS. LEA: Okay. Thank you very much for your answers. 1842 Thank you, Mr. Chairman and Ms. Spoel. 1843 MR. SOMMERVILLE: Do you have any redirect, Ms. Aldred? 1844 MS. ALDRED: I just had one or two questions just on this business of the second supply that we've just been discussing here. 1845 RE-EXAMINATION BY MS. ALDRED: 1846 MS. ALDRED: The second supply for increased load as opposed to the second supply for reliability. I'm not sure I understand, and I want to make sure everyone in the room is clear as to the difference in these two options and why they're costed so differently. 1847 MR. GEE: With the case of two circuits over 10 megawatts, which is the reliability issue, the 10 megawatts is the load that has to support the construction cost, thus you would have to do the evaluation and determine if that load would recover the capital contribution. If you had 20 megawatts of supply, our analysis would suggest that there would be no cost if that load materialises. So it is potentially the second circuit of 10 megawatts may require a capital contribution that would not be refunded, based on 10 megawatts of load. 1848 MR. FISHER: Mr. Chair, if I might suggest, in order to remove all doubt, that we ask Mr. Pavelka to describe exactly what the Municipality wants. 1849 MR. SOMMERVILLE: I don't see Mr. Pavelka. 1850 MR. FISHER: Oh. I don't have eyes in the back of my head, I'm sorry. 1851 MR. SOMMERVILLE: Thank you for returning, Mr. Pavelka. But I think Mr. Pavelka -- 1852 MR. PAVELKA: I want to apologise, Mr. Chairman. You should understand that I was talking with our local MP and this situation in Chatham-Kent about international has unfolded quite quickly, and that was the nature of the conversation that I -- 1853 MR. SOMMERVILLE: I hope it's good news. I hope it's good news, Mr. Pavelka. 1854 MR. PAVELKA: It's good if you have $10 million. 1855 MR. SOMMERVILLE: Well, I'm sure you'll work on it. 1856 I think the most appropriate -- Mr. Pavelka's evidence is on the record with respect to the Municipality's requirement, and I think the parties can glean from that what he has indicated is his requirement. Are you content with that, sir? 1857 MR. WICKETT: Yes, I am. 1858 MR. SOMMERVILLE: Thank you. 1859 MS. ALDRED: I have one more question in redirect. 1860 Mr. Ray (sic) or Mr. Kloostra, after Hydro One filed its submissions, did anyone from the Municipality contact Hydro One to say, You're a little bit confused about what we want, and try to straighten it out? 1861 MR. GEE: No, not at all. 1862 MR. SOMMERVILLE: The Board has no questions. 1863 I think there is a consensus in the room with respect to written argument. I'm going to suggest the following timetable for that. I'm suggesting that the applicant -- and I think that will include the intervenor, the City of Chatham-Kent as well -- the Municipality -- written argument to be filed on the 23rd of May, reply argument -- intervenor's argument from Hydro One to be filed on the 27th. The Power Workers' Union will have an opportunity to file argument at that point too. Reply argument due from the Municipality and the applicant on the 29th. Is that satisfactory? 1864 MS. ALDRED: Yes, Mr. Chairman. 1865 MR. SOMMERVILLE: We will adjourn. 1866 The Board will issue a decision after considering the arguments of the parties. 1867 Mr. Fisher, do you have a comment? 1868 MR. FISHER: I'm sorry, I was just conversing with Mr. Hogan. Could you repeat that, please. 1869 MR. SOMMERVILLE: The Board will make a decision after considering the arguments, as we receive them. And we will stand adjourned. I'd like to thank the court reporter particularly for her indulgence. The witnesses are excused. Thanks. 1870 --- Whereupon the hearing adjourned at 5:23 p.m.