Rep: OEB Doc: 12QQN Rev: 0 ONTARIO ENERGY BOARD Volume: VOLUME 4 15 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 15 MAY 2003 5 HEARING HELD AT TORONTO, ONTARIO 6 APPEARANCES 7 JENNIFER LEA Board Counsel GORDON RYCKMAN Board Staff JEAN MARTEL Cooperative Embrun Hydro Inc. MICHAEL ENGELBERG Hydro One Networks ANDREW LOKAN Power Workers' Union DAVE MATTHEWS Wirebury Connections Inc. 8 TABLE OF CONTENTS 9 APPEARANCES: [23] PRELIMINARY MATTERS: [34] EXPEDITED AMENDMENT REQUEST - COOPERATIVE HYDRO EMBRUN INC.: [53] COOPERATIVE EMBRUN HYDRO INC. - PANEL 1; LAMARCHE, WOOD, LEVAC, PATENAUDE: [54] EXAMINATION BY MR. MARTEL: [60] CROSS-EXAMINATION BY MR. ENGELBERG: [264] CROSS-EXAMINATION BY MR. MATTHEWS: [640] CROSS-EXAMINATION BY MS. LEA: [646] QUESTIONS FROM THE BOARD: [716] HYDRO ONE NETWORKS - PANEL 1; STEVENS, KLOOSTRA, GEE: [745] EXAMINATION BY MR. ENGELBERG: [754] CROSS-EXAMINATION BY MR. MARTEL: [887] CROSS-EXAMINATION BY MR. MATTHEWS: [932] CROSS-EXAMINATION BY MS. LEA: [958] FURTHER CROSS-EXAMINATION BY MR. MARTEL: [1023] QUESTIONS FROM THE BOARD: [1041] FURTHER CROSS-EXAMINATION BY MS. LEA: [1069] FURTHER CROSS-EXAMINATION BY MR. MATTHEWS: [1079] COOPERATIVE EMBRUN HYDRO INC. - PANEL 1 - RECALLED: [1095] EXAMINATION BY MR. MARTEL: [1097] CROSS-EXAMINATION BY MR. ENGELBERG: [1114] CROSS-EXAMINATION BY MS. LEA: [1132] QUESTIONS FROM THE BOARD: [1137] SUBMISSIONS BY MR. MARTEL: [1163] SUBMISSIONS BY MR. ENGELBERG: [1176] SUBMISSIONS BY MR. LOKAN: [1202] REPLY SUBMISSIONS BY MR. MARTEL: [1220] DECISION: [1227] 10 EXHIBITS 11 EXHIBIT NO. C.4.1: ECONO MIC EVALUATION AND LETTERS OF COMMENT FROM COOPERATIV E HYDRO EMBRUN INC. [102] EXHIBIT NO. C.4.2: HYDRO ONE NETWORKS - PANEL 1 CURRICULU M VITAE [750] 12 UNDERTAKINGS 13 14 --- Upon commencing at 9:35 a.m. 15 MR. SOMMERVILLE: Please be seated. Thank you. 16 Welcome to everyone. The Board has convened this morning in the matter of an application made by Cooperative Embrun Hydro Inc. for an expansion of its service area to include a certain project identified as Quartier Frontenac subdivision. My name is Paul Sommerville. With me is Cathy Spoel. 17 The application is opposed by Hydro One Networks. 18 This application is one of a number of a number of service-area amendment applications which have been joined by the Board in file number RP-2003-0044. The Board has decided to consider a number of such cases together in order to facilitate the development of principles which may assist the Board in considering service-area amendments such as this. 19 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 an expedited basis, if it could be shown that their application involved critical in-service requirements. 20 It is the Board's preference to deal with the generic issues involved in the service-area amendments in the combined proceeding. The applicant in this case has made such representations respecting the critical in-service requirements of the Board, and the Board will consider them today on the basis of the evidence presented 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 the 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 order commends itself in order to address the same; or if in fact it is necessary to make a final determination, the Board will do that in this case, as in the others. 22 May I have appearances, please. 23 APPEARANCES: 24 MR. MARTEL: Mr. Chairman, my name is Jean Martel. I will be acting as counsel for the Cooperative. 25 MR. SOMMERVILLE: Mr. Martel. 26 MR. ENGELBERG: My name is Michael Engelberg. I'll be acting as counsel for Hydro One Networks Inc. 27 MR. SOMMERVILLE: Thank you, Mr. Engelberg. 28 MS. LEA: Jennifer Lea, Board counsel. 29 MR. LOKAN: Andrew Lokan, counsel for the Power Workers' Union. 30 MR. SOMMERVILLE: Thank you, Mr. Lokan. 31 MR. MATTHEWS: Dave Matthews. I'm here representing Wirebury Connections Inc. 32 MR. SOMMERVILLE: Thank you. Are there any other appearances? 33 Are there any preliminary matters? 34 PRELIMINARY MATTERS: 35 MR. ENGELBERG: This is one preliminary matter, Mr. Chairman. Hydro One was given yesterday a book with a chart in it and three sworn affidavits. Hydro One has no objection to the chart going in. These were provided us by Hydro Embrun. Hydro One has no objection to the filing of a chart because these are a chart numbers showing service figures and so forth. 36 But the three affidavits Hydro One wants to object to, unless the witnesses are actually going to be here to be cross-examined on the basis that the serving of the affidavits yesterday does not comply with the Board's Procedural Order deadlines, and also on the basis that none of the three affidavits speaks to anything whatsoever about urgency. And there's no opportunity to cross-examine any of the people. 37 MR. SOMMERVILLE: Mr. Martel. 38 MR. MARTEL: It is true that the three persons that did swear the affidavits will not be present here today because they could not be present here today. I think Mr. Benoit (sic), who is the general manager of the Co-op, probably can speak to matters that are raised in any event. So I don't have a big objections to the affidavits not going in. 39 MR. SOMMERVILLE: Thank you, Mr. Martel. In light of your submissions -- let me just -- 40 The Board accepts your objection, Mr. Engelberg, with respect to the -- receiving the affidavits as evidence per se in the case. I would expect that they have the same status as letters that are written and may be received accordingly. But we'll have a -- will not have evidentiary weight that evidence in the case would have. 41 MR. ENGELBERG: Thank you. 42 MR. SOMMERVILLE: I take if that the chart material that's at the front of this booklet, and just for your edification, you should know that I haven't read, nor has my colleague read, the affidavit material, nor have I looked at the graph, although I suspect we'll do so in the course of the proceeding. 43 With that, are there any other preliminary matters? 44 Mr. Martel, our normal way of -- I think this may be your first attendance at the Board. 45 MR. MARTEL: Except for yesterday. 46 MR. SOMMERVILLE: Our way of proceeding is the applicant will bring its case, we'll swear the witnesses, they will give their evidence, and will be subject to cross-examination from the other parties. You can, at some point, you will rest your case and the other side will put their case on and you'll get your opportunity to cross-examine their witnesses. 47 MR. MARTEL: That's fine. 48 MR. SOMMERVILLE: Do you have any questions about our procedures? 49 MR. MARTEL: No, that's fine. 50 MR. SOMMERVILLE: In which case are you ready to present evidence? 51 MR. MARTEL: We are. 52 MR. SOMMERVILLE: The witnesses will be sworn. Thank you. 53 EXPEDITED AMENDMENT REQUEST - COOPERATIVE HYDRO EMBRUN INC.: 54 COOPERATIVE EMBRUN HYDRO INC. - PANEL 1; LAMARCHE, WOOD, LEVAC, PATENAUDE: 55 B.LAMARCHE; Sworn. 56 S.LEVAC; Sworn. 57 W.WOOD; Sworn. 58 R.PATENAUDE; Sworn. 59 MR. SOMMERVILLE: Thank you, Ms. Spoel. 60 EXAMINATION BY MR. MARTEL: 61 MR. MARTEL: The Cooperative's first witness is Mr. Benoit Lamarche, who is the general manager of the Cooperative. 62 Mr. Lamarche, would you give us, or give the Board, a brief history of the Cooperative. 63 MR. LAMARCHE: As you know, the Co-op is the only LDC that operates as a co-op in the province of Ontario. The Cooperative was created on September 21, 2000 under the Cooperative Corporation Act, tab 4 of my material, and is owned by its member. The member are the shareholder of the utility. 64 It is operated on a cooperative basis, which means that it's operated as nearly as possible at cost, and any surplus fund after reserve are distributed to its member by way of a patronage return. And if you want to take a look at tab 40 of the filing -- 13, sorry. This year we gave a patronage return to our customer. Residential customers received a hundred dollars rebate; customers below 50 kilowatts received a patronage refund of $125, and customers over 50 kilowatts received a rebate of $300. 65 Furthermore, Mr. Eves, at that time Minister of Finance, support the idea to be a cooperative. Since then we are the only LDC operate as a Co-op. 66 On the Co-op there are three board of directors. To be a member of the Co-op, a customer has to pay $10 fees. He have also -- we have an annual meeting each year to present our annual report, as per tab 14 of the evidence. 67 And the first goal of the Co-op, it's to give efficient service to member and non-member. 68 MR. MARTEL: Thank you, Mr. Lemarche. Could you tell the Board why the Cooperative considers this to be a critical in-service requirement. 69 MR. LAMARCHE: First of all, Mr. Patenaude is the developer of the new subdivision. He will be ready to connect customer in early June. We -- at the office, we already receive a connection authorization from the electrical safety authority to connect lot 20 on the said subdivision. And for your -- it's tab 7, on the application. That's what it looks like, the subdivision of Mr. Reynauld Patenaude. 70 Mr. Patenaude refers to the Cooperative than Hydro One for the services in Quartier Frontenac, Phase 3. We want to give the opportunity to the prospective customers to be a member of the Co-op and the benefit to receive a patronage return, to offer fast, local efficient services, and lower rate based only on the residential rate. 71 And that subdivision -- on that subdivision there will be no general service over 50, just residential class. And to give the opportunity to Mr. Patenaude, a customer choice. Adding 52 customers to our distribution system will lower our operation cost. If the Cooperative has the opportunity to increase its client base, it will be able to lower its per-client distribution and service costs. 72 MR. MARTEL: Mr. Lamarche, I'd like you to go to tab 7, which is a plan of the subdivision itself in our book, in the Cooperative's book. And I'd like to -- I'd like you to explain to the Board the total number of lots in the subdivisions and the number of lots that would be serviced by the Cooperative and the number of lots that would be serviced by Ontario Hydro. 73 MR. LAMARCHE: So there will be 38 lots in the service area of Fenbrook, and there will be 52 lots in the area of Hydro One territory. 74 MR. SOMMERVILLE: Mr. Lamarche, I wonder if I could ask you to indicate, if you could raise the map that you're looking at, and indicate where those various numbers are. If I could see -- 75 MR. LAMARCHE: Oh, sorry. 76 MR. SOMMERVILLE: No. No. Not at all. 77 MR. LAMARCHE: That's the part of Hydro One -- the Cooperative, that part. 78 MR. SOMMERVILLE: Right. And you're suggesting the numbers on -- 79 MR. LAMARCHE: And that's our service area here -- 80 MR. SOMMERVILLE: And how many are there? 81 MR. LAMARCHE: Thirty-eight. 82 MR. SOMMERVILLE: So there are 38 on this side. 83 MR. LAMARCHE: Yes. 84 MR. SOMMERVILLE: And on the other side? 85 MR. LAMARCHE: Fifty-two. 86 MR. SOMMERVILLE: Fifty-two. 87 Mr. Engelberg, just for your edification, the witness indicated that this side of the line was the Embrun territory, and there are 38 units in that area. And on the other side of the line, which is the contested area, there are 52. 88 MR. ENGELBERG: Thank you. 89 MR. MARTEL: Now, Mr. Lamarche, can you tell us if you know how many foundations are already in -- the 38 lots are within the zone of the Cooperative. 90 MR. LAMARCHE: There's about -- there's about at that time -- maybe Mr. Patenaude will be testifying how many lots, but as my -- at my knowledge, there's about nine foundation already done. And as I told you a few minutes ago, we received a connection authorization to connect one house already. And the distribution underground system, it's not done yet. 91 MR. MARTEL: And can you tell the Board why the underground system is not in yet? 92 MR. LAMARCHE: Because we have to wait -- because we have to wait -- we need a decision, if it's possible, from the Board today, that we can proceed to install all the necessary equipment to install. To do it -- to do it in just one time, to do electricity on both sides. 93 MR. MARTEL: Mr. Lamarche, can you tell the Board of the support that the Cooperative got to make this application to the Board. 94 MR. LAMARCHE: First of all, we received the support from the Corporation of the Township of Russell. It's at tab 11 in my filing document. We also received support from our member on April 16, 2003, annual meeting, and we received support from the developer, Mr. Patenaude. Because Mr. Patenaude, as a developer, requests the Co-op to service a 90-lot subdivision called Quartier Frontenac, Phase 3, the Cooperative in the past year signed agreement with Mr. Patenaude for phase 1, phase 2, phase 2(b) in the Quartier Frontenac. 95 Mr. Patenaude never complained about our services. He also came at the office on a regular basis to get information concerning subdivision design and all the aspects. Mr. Patenaude also have a good relation with our field contractor. We also deal with the engineer of Mr. Patenaude. We also discussed during a process of a new phase project about the economic evaluation, explaining the details. 96 And yesterday, I filed with Mr. Lee a butler -- the blue box butler. On tab 1, there's the economic evaluation for Mr. Patenaude. That economic evaluation is based on lot 39 to 90. 97 And the Co-op is here today to help Mr. Patenaude for -- 98 MR. SOMMERVILLE: Mr. Lamarche, just a second. Has that document been marked as an exhibit? I'm speaking of the now expurgated blue folder. 99 MS. LEA: No, Mr. Chairman. Mr. Martel and Mr. Chair, if it's acceptable, we'll call that Exhibit C.4.1. And as I understand it, the tab 1 is evidence in this proceeding. Tabs 2, 3, and 4 are to be regarded as letters of comment. 100 MR. SOMMERVILLE: Correct. 101 MS. LEA: Thank you. 102 EXHIBIT NO. C.4.1: ECONOMIC EVALUATION AND LETTERS OF COMMENT FROM COOPERATIVE HYDRO EMBRUN INC. 103 MS. LEA: Thank you. 104 MR. SOMMERVILLE: Thank you. 105 Sorry, Mr. Lamarche. 106 MR. LAMARCHE: Okay. 107 The Co-op is here today to help Mr. Patenaude for the expansion service-area amendment. 108 MR. MARTEL: Mr. Lamarche, can you tell us whether you know whether the Mr. Patenaude has satisfied the requirements of the Township with respect to municipal services subdivision agreement? 109 MR. LAMARCHE: Yes. We have some filing evidence of the critical service requirement at tab 16. That letter was sent to the Ontario Energy Board on April 24th, 2003. Mr. Craig Cullen is the superintendent, public utilities. He specified in this letter that all the water distribution system has been done, and they ask the OEB to rule for this issue as soon as possible. 110 Tab 17, a letter from Mr. Michel Gagnon, director of public works, dated April 23, 2003. Mr. Gagnon explained that how the underground municipal service for the above-noted project are now in place, construction of roads work is continuing, and the new home foundation are already being installed where possible. 111 In tab 18, a letter from Mr. Michel Dignard, planning director of the Corporation of the Township of Russell, sent a letter too to Mr. Paul Pudge on April 23, 2003, saying that Mr. Patenaude fully has entered into a subdivision agreement, and he's fulfilling his obligation as expected. As of this date, nine building permit have already been issued for Limoges and more are expected on an ongoing basis. 112 And finally, tab 19, a letter from -- sent to the Ontario Energy Board on April 23, a letter from Mr. Reynald Patenaude - he's the owner of the said subdivision - saying that he need a ruling from the Board as soon as possible. 113 There's my evidence for that case. 114 MR. MARTEL: Thank you, Mr. Benoit. 115 Mr. Benoit, I'd like you to go to tab 7 of our application and talk to the Board about the rates of the Cooperative. Tab 10, page 2 of that tab. 116 MR. LAMARCHE: As I said, that subdivision is based on residential class only. And if you take a look on the monthly consumption, based on -- we're going to use the page 2. Based on 1,000 kilowatt hours, the rate for Embrun Hydro for 1,000 kilowatt hours is $46.64. And if a customer for that same amount of kilowatt hours, the total bill is 64.43. But as I mentioned, it's based on residential customer class. 117 MR. MARTEL: Could you tell the Board, Mr. Lamarche, what the total difference for the thousand kilowatt would be between the Embrun rates and the Ontario Hydro rate? 118 MR. LAMARCHE: The difference will be $17.79 in favour of the Co-op. And if you turn at page 3, if those customer use, let's say, 1,500 kilowatt hours, so the difference at the end will be $22.70. Those number, those rate, I received those rate from Mr. Mike Ritchie from the office of Ottawa. He's working for Hydro One. 119 MR. MARTEL: Mr. Lamarche, could you tell the Board what benefit the addition of 52 customers would have to the operating cost of the Cooperative. 120 MR. LAMARCHE: First of all, those customer will have the opportunity to be a member of the Co-op. They will have opportunity to get a rebate, a patronage return. 121 MR. MARTEL: Will the addition of these 52 customers increase or lower the Co-op's average administrative cost? 122 MR. LAMARCHE: No. As I mentioned earlier, if the Cooperative has the opportunity to increase its clients base, it will be able to lower its per-client distribution and service costs. 123 MR. MARTEL: Mr. Lamarche, I'd like you to talk briefly about the services of the Co-op to its members as far as reliability, time of response, physical presence, bilingual service, service to non-members. If you could start with the first one, reliability. 124 MR. LAMARCHE: As a Co-op, our first goal is to offer the Co-op as -- for first goal, to offer a good service to its customer. We are there. We answer the phone. Our office is right in the middle of the town. So if we have a customer, if the customer call us, we respond to that customer. 125 We also add -- our emergency call is about 25 minutes. We deal every day with customers, some because -- with a kind of -- with a kind of -- that sort of subdivision where because we are all around our specific area. It's all Hydro One's customer and we have some Hydro One customer who called us, and they want to be a member of the Co-op. But we can't because they are -- they belongs to Hydro One, they are connected to the distribution system of Hydro One. And we help people in different way. 126 MR. MARTEL: Do you get -- does the Cooperative get a fairly high number of calls each day from members and non-members alike? 127 MR. LAMARCHE: After our annual meeting we have a lot of call. After our -- when we publish our front page newspaper, everybody call at the office: We want to be a member, we want to get a patronage return. But we have maybe 50 customer, 50 new customer in our area to be a member, and those member will have a chance to get a patronage return next year. We have customer directly in the service area of Hydro One asking if it's possible to be a member of the Co-op. And as I mentioned earlier, it's not possible, but maybe later on, so that's the good point. 128 MR. MARTEL: Thank you. 129 Mr. Lamarche, Ontario Hydro in its submissions refers to the fact that there's a precedent in the village of Embrun for -- wherein two previous subdivisions are -- has a split service. Could you indicate to the Board the difficulty that this creates to the Cooperative. 130 MR. LAMARCHE: First of all, when there's a new subdivision like that, as tab 7 of the filing, 38 lots will be ours, and 52 lots will be on the side of Hydro One. 131 And my concern in that issue is if the first 39 customer has a chance to be a member, and the 52 others customer, they are just nearby, maybe 10 feet away, so they will ask us what happened, why they don't -- they don't have a chance to be a member. And that's what the issue will be, because maybe those customer will -- maybe, I said, those customer will be frustrated, and maybe it's going to have a concern on those customer. 132 MR. MARTEL: Mr. Lamarche, just to focus the issue a little bit more, is this the type of response or questions or telephone calls that you presently get from the existing subdivisions that are split in service between the Cooperative and Ontario Hydro? 133 MR. LAMARCHE: Absolutely. Absolutely. And because, like I told you, when you make the front page for patronage returns, you have a lot of call. 134 MR. MARTEL: Mr. Lamarche, Ontario Hydro, in its submission, refers to the issue of a stranding of its assets, specifically in relation to the construction of the Cooperative's substation that was built in 1988. Would you have any comments in relation to that? 135 MR. LAMARCHE: Yes. Yes. Because Ontario Hydro states it's -- of their submission, it's page 7, lines 1 to 10, just a brief. Hydro One states that the issue of the stranding of assets, it's already a major, ongoing issue for Networks in the area of Embrun, as a result of decision made by Embrun's predecessor in late '80s, the applicant. The applicant -- since two years, so it takes me maybe two or three hours to get that file from that substation construction. And in my file, I find minutes dated July 17, 1987. 136 During the course of a meeting between two staff of Ontario Hydro and two staff of Embrun Hydro, it was state by the Ontario -- Ontario Hydro staff that there was no rush to cut up power -- off, but something had to be done with the distribution. Because at peak period during winter, Ontario Hydro had problem supplying the police village of Embrun. 137 And it was further suggest by Ontario Hydro that former police village of Embrun built its own DS. And even after going ahead with our own DS, Ontario Hydro, two plants, will be running at full capacity for rural area. 138 And in my -- in my research, I also have a -- an article. I get that article from the Russell Villager, dated August 26, 1988. And it states that the substation is needed for the area, since the two existing station -- the two existing ones are not sufficient for the growing population in Embrun, and Ontario could not supply the extra power needed. So I think from there, the stranded asset, it's not a big issue in that filing. 139 MR. MARTEL: Mr. Lamarche, would you have anything else to say or comment that I would not have addressed or asked you questions on? 140 MR. LAMARCHE: Just my point of view. 141 The only thing we want at the Co-op, we want to get members from the Co-op. We are a local community, and we want to preserve our clients on a good service, because, as you know, we are a small utility, and a small utility knows every customer. We know every -- at least Jeanette -- Jeanette, she my assistant -- know if -- she work there since maybe 15 years, and everybody knows everybody. It's based on local community. 142 That's it, Mr. Martel. 143 MR. MARTEL: I have no other questions of this witness, Mr. Chair. 144 MR. SOMMERVILLE: The way we will manage this, Mr. Martel, is if you complete your evidence with all of your witnesses, and then the cross-examination can be to each or any of them. 145 MR. MARTEL: Okay. My next witness, then, will be Mr. Bill Wood. 146 Mr. Wood, I'd like you to give a bit of background information to the Board with respect to your experience in the electricity industry. 147 MR. WOOD: I'm an electrical engineering technologist, 35 years-plus experience in distribution systems, design, maintenance; 25 years with Hydro One and 10 years on my own in consulting. I've been involved in pretty well anything that you get involved with in distribution system design or layout. 148 MR. MARTEL: Have you done work for the Cooperative before, Mr. Wood? 149 MR. WOOD: Yes. I did an operating diagram for them some years back. 150 MR. MARTEL: Do you know the electrical distribution system of the Cooperative? 151 MR. WOOD: Yes. Since I've been working on load studies and line-loss studies and voltage profiles, I've got very familiar with the Embrun system. 152 MR. MARTEL: So you know the -- you know the poles, the wires, the substations? You've visited them all. 153 MR. WOOD: I've looked at every pole and every piece of wire in Embrun, yes. 154 MR. MARTEL: Mr. Wood, I'd like to bring you to tab 7 of our application which shows the proposed subdivision of Mr. Patenaude. 155 MR. WOOD: Can I just switch my chair? It keeps trying to buck me off backwards. 156 MR. MARTEL: Certainly. 157 MR. WOOD: That's better. 158 Yes, sir. 159 MR. MARTEL: So what comments can you make to the Board with respect to the layout of this subdivision and how -- and the service requirements with respect to the 38 lots and the other 52 lots? 160 MR. WOOD: Yeah, I guess one -- one concern was if there was some thought of Embrun Hydro serving as well as their own 38 lots another 52, was it possible or was it reasonable to do that, would probably be a big comment. And they brought the layout of the subdivision and it was instantly obvious that this was the way to go on the layout, not talking about regulatory or anything else, but on a pure electrical-distribution layout basis, this was the ideal subdivision. You could come in one end, go out the other. 161 If you're looking at tab 7, at the end of that street, at the bottom right corner of the drawing, that's another subdivision going in in Embrun territory. That's going in this year. 162 MR. MARTEL: Did you make a reference to any -- would that be at the end or beside block 91? 163 MR. WOOD: Yes, block 54, lot 91; that street right there goes right into another subdivision that's going in this year, which is already in Embrun service territory. So it makes a perfect setup. You go in one end, you come out the other; you pick up your side streets with loops. Usually it's not this nice a layout you get for a subdivision. Usually you have to fool around with patch work and butting phases together to keep your loops in your subdivision. 164 MR. SOMMERVILLE: Just as a matter of clarification, Mr. Wood, I'm looking at tab 7 and I'm wondering if you could indicate exactly what you mean by you come in one way and out the other. 165 MR. WOOD: Oh, of course. Look at bottom left-hand corner, Boulevard Frontenac, block 21. We have 3-phase underground right at that location; that's where we would tap into our existing system. We would come up Boulevard Frontenac, make a right turn on Centenaire, follow it right to the end and then we'd be right into another subdivision that's going in this year. 166 MR. SOMMERVILLE: Where it says block 92? 167 MR. WOOD: That's correct. And the beauty of this also is that the both ends, we can feed from both ends with open points in the middle. We can also feed off two different feeders. Reliability-wise, you couldn't ask for a better setup as far as reliability and flexibility in how you feed the thing. This one was pretty obvious when I looked at it. 168 MS. SPOEL: Can I just clarify, then, that there's a yellow highlighter drawn down the middle of the subdivision showing which side -- one half being in the Cooperative area and the other half in Hydro One Networks. Can I then take it there should also be a yellow highlighter along the south side of the subdivision, and that south of that is also the Cooperative's service area? 169 MR. MARTEL: Yes, that's correct. 170 MR. WOOD: Along that line, if you look at tab number 9, it makes it very clear, you can see how the Embrun service territory essentially surrounds this subdivision. It's almost, in fact, embedded in the Embrun systems. That seems to be a common term nowadays, "embedding". You do not see any streets there at the moment, because it's just under construction, that subdivision, this year. 171 So I basically advised Embrun Hydro that, yes, this is a perfect location to pick up a subdivision because of the ability of you to feed it. And I've heard that Hydro One in order to feed this subdivision is going to have to build a temporary line across the field, which is certainly -- one point of supply, no back feed, certainly isn't an ideal situation. 172 MR. MARTEL: And, Mr. Wood, would this temporary line have to be taken down at some point in time in the future? 173 MR. WOOD: Oh, yes. As the subdivision develops, that line is going to be right in the way of the subdivision developing. There's also going to be, you know, all the heavy equipment having to work around this overhead line, which is also the chance of possibly knocking it down, and there's your electrical hazard involved as well. 174 MR. MARTEL: You made a reference to the number of feeders. I wonder if you could elaborate on that a little bit. 175 MR. WOOD: Yes. With this setup, Embrun will have the possibility of feeding off either one of two feeders, or it might be fed off both with an open point in the middle. We've got that flexibility; we can make the decisions as the load develops. Hydro One, on the other hand, will have one feeder to feed off. There's only one anywhere in the vicinity. And we'll have two points of supply, with even a third, if we needed it, on Centenaire, and Hydro One will have one point of supply. From a reliability point of view it makes more sense to feed it off the Embrun system. 176 MR. MARTEL: Thank you, Mr. Wood. 177 Mr. Wood, you've also visited the Embrun substation? 178 MR. WOOD: Yeah. The other point is there's no point of us considering feeding this subdivision when we don't have the capacity to do it. So I looked into the substation, got our January peak load for this year, and then prorated that up based on standard diversity tables, so many kilowatts per lot, and came to the conclusion that the existing substation -- it's a 7.5 mVa station with an ultimate load ability of 10 mVa with fans, which it does have on it -- my conclusion was we could handle up to 500 lots with the existing 7.5 mVa rating, and the reasonable overload factor, and then you would have your 10 mVa fans in reserve. 179 The condition of the substation is excellent. It's a 1988 transformer, relatively new as power transformers go, and we just completed a complete maintenance overhaul of it. 180 MR. MARTEL: Thank you. I'd like to bring you to tab 2 of Ontario Hydro's submission. 181 MR. ENGELBERG: Excuse me, Hydro One. 182 MR. MARTEL: Excuse me. 183 MR. WOOD: Could you give me the page. 184 MR. MARTEL: That would be the page that shows the electrical distribution system surrounding the -- 185 MR. WOOD: Oh, okay. Now I've got you. 186 MR. MARTEL: Now, in their submission, Hydro One makes reference to the stranding of assets. Would you have any comments with respect to the feed lines that surround the village of Embrun? 187 MR. WOOD: Yes. The biggest problem around Embrun is that there's a mixing together of 8 kV and 16 kV. For various reasons, north of Embrun -- it has nothing to do with Embrun -- they had to get a 16 kV feed up there to relieve overload problems in the past. And I guess the most -- it was done before I was -- worked in the Winchester area so I'm not sure of the reason, but they ended up surrounding Embrun with 16 kV which did trap a lot of 8 kV assets inside a ring of 16. But nothing to do with Embrun Hydro. These were all Ontario Hydro -- no, Hydro One -- at the time it would be Ontario Hydro at the time the decision to bring that 16 around. 188 And most of that was going up around Limoges where the load problems were that they were trying to solve. And the 16, because of its higher voltage, they could push it that far. And I guess they didn't have any other assets to solve that specific problem; or someone decided this was the best way to do it. But as a consequence it did trap some 8 kV assets in the Embrun area. 189 MR. MARTEL: Thank you very much, Mr. Wood. 190 Mr. Chairman, my next witness will be Sylvain Levac, who is the accountant of the Cooperative. 191 Mr. Levac, could you tell the Board, give the Board a bit of your professional background. 192 MR. LEVAC: I'm working for BDO Dunwoody since 1989, since I graduated from Ottawa U. I'm a CA since 1991. I've been with the firm since I've been out of university. I'm a partner since the year 2000. And I'm involved with -- I've been involved with the Co-op and the former -- the predecessor, the police village of Embrun hydro system for most of these 14 years, either as in charge of file manager or partner of the firm. 193 MR. MARTEL: When you say that you're in charge, are you the one who does the auditing and the financial statements for the Cooperative and what used to be the police village of Embrun? 194 MR. LEVAC: Right now I'm the partner in charge of the file, so I'm not the one doing the actual audit work on -- in field. But I'm the one who supervise the employees and review the files presented to the board of directors in the annual meeting. I'm also doing most of the work involved in -- as a consultant for the Cooperative and all the changes that went through since the last two years. 195 MR. MARTEL: If I bring you, Mr. Levac, to tab 14 of the Cooperative's application, you have the financial -- the second-year financial statements of the Cooperative. 196 Would you be able to make any comments as far as the reliability and the financial stability of the Cooperative in relation -- with respect to its -- at the end of its second year of operation? 197 MR. LEVAC: If we look at the financial statements, first if we look at the income statement, we could see that the Cooperative had a very profitable year in the year 2002, and that's one reason why the board of directors have decided to go ahead and declare a patronage return to their members of $53,000. 198 On the balance sheet, you could also see that the financial position of the Cooperative is fairly strong. They have over $800,000 in cash. They have a long-term debt of 2.8 million, but that debt is -- there is no interest on the debt. It was -- that debt was created when the assets were transferred from the former police village to the -- to the cooperative. And at the time, the assets were owned by the police village, and the police village was, at the time, almost like a municipal entity. 199 So there was an agreement signed between the Cooperative, the police village, and the municipality stating that there was a long-term debt, but there's no interest accrued under that debt, and it's not repayable unless the Cooperative is sold, goes into bankruptcy, or something like that. 200 So their -- the balance sheet is very strong for the Co-op. 201 MR. MARTEL: I'd like to now, Mr. Levac, to talk about the rate of return on equity of the Cooperative as compared to the rate of return on equity of Hydro One. 202 MR. LEVAC: When the -- when the Cooperative had -- first had to calculate their rates, there was a phase-in period of three years to go up to the 9.88 percent that was authorized by the Board. 203 Over the years, the rate of return of the former or the predecessor was lower, because at the time, those local MEUs were not authorized to deal with -- like, they were acting almost as a not-for-profit organization. They were not allowed to build up large amount of profit, so they had to have their rates authorized by Ontario Hydro on an annual basis. 204 And if their -- they had too big of a surplus, they had to reduce their rates. So their rates of return, when the -- that -- this new regulation came in was fairly low, so they had to increase up to 9.88 over two years. And that phase-in was stopped this year. 205 So right now, their rate of return was -- authorized in their rates is 7.85 percent, so it's lower than the 9.88 percent authorized. 206 MR. MARTEL: Now, Mr. Lamarche talked about the difference in rate between the Cooperative and Hydro One. I wonder if you could make any comment with respect to the impact on the rates, if you can take into account the patronage return that the Cooperative gave to its members. 207 MR. LEVAC: First of all, we could -- first of all, the Cooperative always prides itself that it was able to respond to the needs of its member and customer. And also they have worked very hard over the years to keep their cost at the very low -- at the minimum and the lowest level possible. And that was -- because of that, their -- their rates that they were charging has always been lower than Ontario Hydro over the years, as most of MEU were like that. 208 If we go at tab 10 that Benoit presented a few minutes ago on the difference of rates between Hydro One and the Co-op, he mentioned that there was $17 difference over a 10 -- 1,000 kilowatt hours invoice, which represent about 27 percent. But really, if we look, the revenue of the Cooperative is really the first two line, which is a service charge and the volumetric charge. The other five items on the invoice is really a pass-through or temporary differences that accumulates in variance accounts. 209 So if we look at -- just at the first two lines, you would compare this invoice, the revenue of the Co-op is $35 compared -- is $18.61 compared to the income of Hydro One of $35.49. So really, there's a 90 percent difference between the rates. 210 And on top of that, in those rates, the patronage return is not -- not taken into consideration. If we would take this into consideration, the rates of the Co-op would be reduced by 12.7 percent, if we take the example of the last-year patronage return of 53,000. 211 So there's really an even greater difference between the rates of the two distributor. 212 MR. MARTEL: Mr. Levac, at section 3.4 of Hydro One's application, they make a reference to the possibility that the large-volume customer may be subsidizing the large-volume residential and general-service customers. Now, that is at paragraph 3.7, page 12, I believe. 213 MR. LEVAC: I think the basic reasoning between -- Networks' comments is there's some cross-subsidizing of -- from the general service to the residential service. There might be. I'm not saying it's not. The Co-op and the predecessor had always calculate their rates and had always been approved by Ontario Hydro and the OEB, but in -- because in -- we're in a small community, the general service above 50 kilowatt hours, which shows in their comments that it's 10 percent above the LDC average of the province, it's not representing a big number for the Cooperative. 214 They only have 12 members -- only 12 customers that have over -- that have a general service above 50 kilowatt hours, and it represents only 10.6 percent of their total revenue. 215 If we would like to correct that cross-subsidizing, and let's say we would like to reduce the average general service above 50 kilowatt hours by, let's say, 30 percent to be in line with the others, that would increase the residential and general service below 50 kilowatt hours by only 3.56 percent of the total invoice. So there might be a cross-subsidizing, but if we would like to correct that in future years, that would not increase the rate of the residential by a large number. 216 MR. MARTEL: Thank you, Mr. Levac. 217 Mr. Chairman, my next witness will be Mr. Patenaude himself. 218 Mr. Patenaude, could you tell the Board where your place of residence is. 219 MR. PATENAUDE: It's in Russell, 500 Russell which is adjacent to -- the same municipality as Embrun. 220 MR. MARTEL: And how many number of years of experience do you have as a residential subdivision developer? 221 MR. PATENAUDE: I started in 1980. 222 MR. MARTEL: Can you briefly comment about the housing market in the last few years in the area of the village of Embrun, which is close to Ottawa. 223 MR. PATENAUDE: The last three years have been very good, probably the best years we've had ever since I started. We've sold -- well, I limit myself to 15 homes a year for this last year and this year, but that's about what it's -- it's very good for me. 224 MR. MARTEL: And historically, is this unusual? 225 MR. PATENAUDE: We've never seen that before now. 226 MR. MARTEL: Do you expect that to last for quite a while? 227 MR. PATENAUDE: We hope it will. 228 MR. MARTEL: But being realistic -- 229 MR. PATENAUDE: We think it's probably going to slow down in the next year or so, I think. But for this year there's no sign of slowing down, and it looks good for next year too. 230 MR. MARTEL: So you expect the lots on the Frontenac subdivision to sell quite rapidly? 231 MR. PATENAUDE: I'm afraid we're going to run out of lots. 232 MR. MARTEL: Could you talk about your subdivision to the Board, the state of your subdivision at the moment. 233 MR. PATENAUDE: At this point my phase 2 is completely sold out, and we started to sell in phase 3 which is the phase that is concerned here, and we have already, oh, about 20 homes sold altogether there in that phase. And we started to sell there in, what, February; January, February. 234 MR. MARTEL: Now, you've dealt with the Cooperative before. Can you briefly make comments with respect to the level of service and reliability that you have with the Cooperative. 235 MR. PATENAUDE: Since we built the two other phase with them, everything went pretty good. I was really pleased with the speed we got things done with the utility and all that. Everything seems to be very simple. It works very well for us, because it's all local people. We deal with local people, so if we need something, it's there the next day. The same thing with a connection. Once we get the authorisation to -- for the connection, we get it the next day. And with Hydro One, it usually takes five working days. So right there, I mean, there's a difference, like there's always -- and since we -- the time frame to build a house now is a big issue. It's always a big issue to us, how quickly we can get the services. 236 MR. MARTEL: What comments would you have to make to the Board with respect to the fact that your potential -- that your potential customers would be serviced by a Cooperative. 237 MR. PATENAUDE: The people, I guess they really like the idea because, it's a selling factor for us. I guess there was a bit of bad publicity too over the Hydro One and all this with what happened in the past, and so the people, they like to hear that they're part of Embrun Hydro system. For us, like I say, it's a selling feature, so it's good. 238 MR. MARTEL: As far as you know, are the people aware that the local electrical service company is a cooperative and they can get a patronage return if they become a member? 239 MR. PATENAUDE: Everybody is aware of that, definitely. Word goes around. 240 MR. MARTEL: And what about your competitors? Are they within the territory of the Cooperative? 241 MR. PATENAUDE: Well, I have -- I have, actually, some of my people that do my servicing and stuff like that. But in this case it's Robert Excavation which is involved in a subdivision that's into Hydro One's sector, and they started about the same time as me and we compared the prices and we compared a lot of stuff, and it's definitely a big advantage for me to be with Embrun Hydro, for me and my customers, actually. 242 MR. MARTEL: You've been provided with a design, an electrical design for your subdivision, by the Cooperative? 243 MR. PATENAUDE: We did get for the part that's in Embrun, we did get a design. The other one, we're still waiting for the design at this time, which I don't know, we're not sure when we're going to get that. But it should be soon. 244 And then we compare the prices to, on the connection on the side of it, and after the economical evaluation, just for connection fees from the street line to the house is with -- Hydro One is $237.54, where in Embrun it's $53, so you get a saving there just for these 52 lots of $9,568 for me. So there are a lot of issues like this we compared, so there's a big advantage going with Embrun Hydro. 245 I'm totally against having some overhead temporary lines through the fields, like, that we'll have to deal with for the next three other phase that will be in the way, and we also have to get an easement -- well, it's an easement from the neighbours, which I don't own the land, which is one of my competitors, and I'm sure they won't be pleased to give an easement to Hydro One for something that benefit me. That's going to be a problem, I can see it as being a problem. So we have a lot of issues like this that we're concerned about. 246 And the time frame is very important. Like I said, we're ready right now. We need the hydro within the next couple of weeks. And I also have some lots to Woodfield Homes, I've got 13 lots that I've sold, and -- in my contract, he's supposed to start the first week of June, so he'll need the hydro by the middle of June to service those homes. We need it soon, soon, soon. 247 MR. MARTEL: Have you been provided by the Cooperative with an economic evaluation study? 248 MR. PATENAUDE: Yes, I was. We have the prices here which I was very pleased with, actually. Because the total cost is $24,591 after the evaluation. 249 MR. MARTEL: Mr. Patenaude is referring to tab 1 of our second document that we submitted to the Board yesterday. 250 MS. LEA: Exhibit C.4.1. 251 MR. PATENAUDE: That is, of course, only for the part that's in the Embrun sector. I compared these prices, as I say, with Robert Excavation, which is involved in the subdivision, and their cost was 36,000 for -- I don't have the calculation, for 36 lots, and the price was 36,000, more or less. And there was a design fee of 3,900. That was 36 lots. So if you figure the price here in comparison, there's a big difference. 252 And I have to take it a little further, because this is one phase, phase 3 that we're talking about, but there are three more phases to come, phase 4, phase 5, and phase 6. They told me for phase 3, Hydro One would supply me with a design at no costs, but these rules will not apply for the next three phases. So at the end of the day, when I do the next phases, I will be paying for all this stuff that I'm not paying now that they're giving me a deal on this one so they can keep this part. But it's at the end of the day, I'm going to be paying for the next -- 253 MR. MARTEL: Are there any other comments, Mr. Patenaude, that you'd like to make to the Board? 254 MR. PATENAUDE: I think it's -- we pretty well covered -- like, the main thing is the -- oh, and there's another thing, too, like, I want to mention is that if we do go -- only for this phase here, if we split it, and we go half to Embrun and half to Hydro One, I will need a switch cabinet, like, that'll cost about $10,000, like, to buy and install. I need it one way or the other if I go with Embrun. 255 But if I go with Hydro One, because we're splitting it, we need another one. That's another $10,000 that I have to spend that's completely useless. It's only because we split the power. And it's cost after cost after cost that gets added, because we split those servicing. 256 MR. MARTEL: Mr. Chairman, I don't have any more witnesses. 257 MR. SOMMERVILLE: Thank you, Mr. Martel. 258 We'll take our morning break now, and we'll reconvene at 11:05. 259 --- Recess taken at 10:47 a.m. 260 --- On resuming at 11:14 a.m. 261 MR. SOMMERVILLE: Please be seated. Thank you. 262 Mr. Engelberg? 263 MR. ENGELBERG: Thank you. 264 CROSS-EXAMINATION BY MR. ENGELBERG: 265 MR. ENGELBERG: Mr. Lamarche, I'd like to ask a few questions about exactly what it is that Hydro Embrun is applying for. 266 If we take a look at the filings, first at A.4.1 of Embrun's filing. 267 MS. LEA: That's the first filing by Embrun. 268 MR. ENGELBERG: There's a letter from Hydro Embrun to Hydro One. Are we all there? 269 MS. LEA: Tab? 270 MR. ENGELBERG: A.4.1. 271 MS. LEA: Oh, pardon me. 272 MR. LAMARCHE: And that's in -- well, it's not included in my filing, in my first filing. 273 MR. ENGELBERG: It's a letter dated January 21st, 2003, from Hydro Embrun to Glen MacDonald at Hydro One from Mr. Lamarche. 274 MR. LAMARCHE: Yes. But it's not in my filing. 275 MR. ENGELBERG: Maybe the Board does not have that letter. 276 MR. SOMMERVILLE: I don't have any such letter in front of me. 277 MR. LAMARCHE: No. No. No. 278 MS. LEA: Okay. One moment, please. 279 We appear to have three things, Mr. Engelberg. We have a November 12th, 2002, letter attached to a package; is that -- 280 MR. ENGELBERG: To Mr. Pudge. 281 MS. LEA: Yes, that's right. Is that the one we're looking at? 282 MR. ENGELBERG: No. We're looking at the one dated several months later in January to Mr. Glen MacDonald at Hydro One. 283 MS. LEA: From Hydro Embrun? 284 MR. ENGELBERG: From Hydro Embrun. 285 MS. LEA: And is it listed on our exhibit list, sir? If it's not, that why we may be having some confusion. 286 MR. ENGELBERG: Okay. I believe it is not. 287 MS. LEA: Okay. So I'm sorry. We don't have that. 288 MR. ENGELBERG: Well, then, I can get at it another way. If we found the letter dated November 12th at A.4.1 from Hydro Embrun to Mr. Pudge, we can proceed with it that way. 289 Does everyone have that document? 290 MR. LAMARCHE: State it, please. 291 MR. ENGELBERG: November 12th, 2002, a letter from Hydro Embrun to Mr. Pudge at the Ontario Energy Board, signed by Mr. Lamarche. 292 MS. LEA: Do you want to have a look at it? I only have the one copy, Mr. Martel, but I can bring it down to you. 293 MR. SOMMERVILLE: Thanks very much. 294 Thanks, Ms. Lea. We have that now, Mr. Engelberg. 295 MR. ENGELBERG: Thank you. 296 The second page of that letter starts with the word "background," and the typing is in all capital letters. And under "Purposes," it refers to -- 297 MR. LAMARCHE: My filing of -- 298 MR. ENGELBERG: For a new subdivision, 90 lots, 52 of which are in the service area of Hydro One, and 38 in the service area of the Co-op; is that correct? 299 MR. LAMARCHE: Correct. It was my first filing that I sent to the Board on November 5th. 300 MR. ENGELBERG: All right. And then the next document is at A.4.2, which is another letter from Hydro Embrun to Mr. O'Dell at the Ontario Energy Board, dated March 31st, 2003. Do you have that letter? 301 MR. LAMARCHE: Mm-hm. 302 MS. LEA: Does the panel have that letter? 303 MR. SOMMERVILLE: We have that. 304 MS. LEA: Thank you. 305 MR. ENGELBERG: And I draw your attention to the second paragraph. It refers to 38 lots in Hydro Embrun's service area and 52 lots in Hydro One's. 306 MR. LAMARCHE: Okay. 307 MR. ENGELBERG: Then if we could go next to A.4.3, which is the application of Hydro Embrun to the Board, the covering letter is dated April 28th, 2003, and that letter is signed by Mr. Martel. 308 Now, if we go into the actual application itself, which is at tab 2 after A.4.3, so this is tab 2 of Hydro Embrun's documents. It refers under section 2.1 to 90 lots, 52 of which are in the service area of Hydro One; is that correct? 309 MR. LAMARCHE: Mm-hm. 310 MR. ENGELBERG: Section 2.2, which is entitled "Location of the Expansion Area," it says that the subject land contains 21 hectares, and it refers to the expansion area being shown at tab 9; is that correct? 311 MR. LAMARCHE: Yes. 312 MR. ENGELBERG: If we could all turn to the map at tab 9, which we looked at before, the expansion area, I believe, in blue says: "Land to be acquired by Cooperative Hydro Embrun Inc." Is that correct? 313 MR. LAMARCHE: Yes. 314 MR. ENGELBERG: Now, it seems to me, and perhaps I have this wrong, but it seems to me that that area is much, much, much larger than the 52 lots that Hydro Embrun continues to mention in its documentation to the Board; is that correct? 315 MR. LAMARCHE: It's correct, but our goal, when we applied for that parcel, we applied for all the parcel, but -- because we were aware maybe in the future that -- at that time when we filed with the Board on November 12th, maybe there will be more phases, and that's why we applied for all that part. 316 MR. ENGELBERG: So am I correct in saying that the application before the Board today is not just for 52 lots but for a much greater area? Because the wording of the application says that you're applying for an expansion of your territory to the area that is in blue on tab 9. 317 MR. LAMARCHE: Yes, because -- because in my first filing, when it start, Mr. Patenaude contact us around October 11, 2001, saying that there will be -- there will be some -- a new subdivision will be done at -- on that parcel. And we applied to the Board to have all that parcel, because we were aware maybe, like I told you that maybe there will be more phases at that time. The application was for the 52 lots. 318 MR. ENGELBERG: Thank you. I'm not really questioning the reason so much as I am trying to get clear what we're -- what we're trying to decided today. 319 Could you point out on the blue map the portion where the 52 lots are? 320 MR. LAMARCHE: It's hard to see, because if you can refer to tab 7, on April -- April 28, the yellow line here, it's maybe -- it's maybe one-third of that parcel. 321 MR. ENGELBERG: One-third? 322 MR. LAMARCHE: If you have a look at tab 7 of April 28 filing, yeah. 323 MR. ENGELBERG: Is it possible that the 52 lots are even significantly less than one-third of the area in blue? 324 MR. LAMARCHE: But our part, it's about one-third. Not one-third, about -- maybe refer to Mr. Patenaude. Mr. Patenaude? 325 MR. PATENAUDE: There's a total of about -- in that blue section, there's a total of another 120 lots. 326 MR. ENGELBERG: 120 lots on top of the 52? 327 MR. PATENAUDE: Yes, so there's a total of 170 lots. 328 MR. ENGELBERG: What phase number would you call that? 329 MR. PATENAUDE: This is phase 3. And like I said before when I was interviewed, there's going to be phase 4, phase 5, and phase 6. And I mentioned that before. 330 MR. ENGELBERG: Are phase 4, 5 and 6 to the south of the area in blue? 331 MR. PATENAUDE: To the east. 332 MR. ENGELBERG: To the east. So are you applying today for the 52 lots in phase 1 that are on the Hydro One side of the boundary, or are you applying for those plus phase 4, phase 5, and phase 6? 333 MR. PATENAUDE: The total: Phase 4, 5 and 6. 334 MR. LAMARCHE: It was an introduction saying that a development is going -- was going on that parcel. That's why we applied for that parcel, because that parcel is vacant, there is no house on that parcel and we applied to the Board to get all that parcel there. That's why. 335 MR. ENGELBERG: Okay. So is it fair to say that your application -- 336 MR. LAMARCHE: We don't apply for the 52 lots -- we talk about the 52 lots, but we apply for, let's see, appendix C said "An Amendment to the Service Area". 337 MR. MARTEL: Maybe I can clarify. Our application today, as far as the hearing for the critical issue requirement, is restricted to the 52 lots that are not really the 90 lots that are the subject of the Frontenac subdivision. 338 MR. ENGELBERG: So you're not asking the Board today to expand the service territory to the area encompassed in blue? 339 MR. MARTEL: No. 340 MR. ENGELBERG: Thank you. When do you propose to develop the other 120 lots? 341 MR. LAMARCHE: Like Mr. Patenaude said, maybe there will be phase 3 coming up, and maybe there's going to be one phase -- 342 MR. PATENAUDE: We're going to apply in June for phase 4. 343 MR. LAMARCHE: How many lots? 344 MR. PATENAUDE: That's going to be 48 -- no, 38, sorry. 345 MR. ENGELBERG: So of the 120 lots over and above the 52, what phases do you call those 120 lots? 346 MS. SPOEL: Sorry, I don't want to interrupt, just to clarify. Mr. Martel has said that in terms of the critical issue that we're dealing with today, we're talking about the 52 lots. Do I take it, then, that the remaining portion of the parcel in blue, which is the subject of your original application, will be -- are you intending to have that dealt with as part of the combined proceeding in the fall, or whenever we hold it? 347 MR. MARTEL: That's correct. 348 MS. SPOEL: Thank you. 349 MR. ENGELBERG: Thank you. I was not clear on that. 350 MS. SPOEL: Neither was I. I tried to clarify it for everyone to save some time. 351 MR. ENGELBERG: And can you tell me what phase the additional 120 lots are, on top of the 52? 352 MR. LAMARCHE: It will be phase 4. 353 MR. PATENAUDE: Phase 4? 354 MR. ENGELBERG: They're all in phase 4? 355 MR. PATENAUDE: The 28? 356 MR. ENGELBERG: No. You just said that you have 120 lots that you intend to be building on top of the 52. What phase are the 120 lots? 357 MR. PATENAUDE: Fourth-eight, and there's going to be -- 358 MR. LAMARCHE: So phase 4 will be 40 lots. 359 MR. PATENAUDE: Well, 38, and then you're going to have phase 5 which is going to be 50, maybe, and then you're going to have phase 6 that will be the remaining. 360 MR. ENGELBERG: And then we will have used up the 120? 361 MR. PATENAUDE: Yeah. 362 MR. ENGELBERG: Okay, thank you. 363 MR. SOMMERVILLE: Mr. Patenaude, you have a clarification of your last answer? 364 MR. PATENAUDE: Yeah, I want to add something. It's one subdivision done in different phases. That's what it is. 365 MR. ENGELBERG: What's the phase number, in case we need to refer to it again in the future, what's the phase number of the phase that you're building right now? 366 MR. PATENAUDE: Phase 3. 367 MR. ENGELBERG: Phase 3? Thank you. 368 All right. Now that we have that clear, I'd like to ask a few questions about Hydro Embrun, and whoever would be the appropriate person to answer; I guess it would probably be Mr. Lamarche for these. 369 How many employees does Hydro Embrun have? 370 MR. LAMARCHE: We have two employees. 371 MR. ENGELBERG: Two? 372 MR. LAMARCHE: Yes. And we contract a line contractor. We contract Mr. Wood as a technician. We contract a meter-reader, and we contract a line contractor. 373 MR. ENGELBERG: Who is your line contractor? 374 MR. LAMARCHE: It's Mike Vandelst. 375 MR. ENGELBERG: So is he the one who does the line repairs? 376 MR. LAMARCHE: Yes. 377 MR. ENGELBERG: He lives in Finch; is that correct? 378 MR. LAMARCHE: Yes. 379 MR. ENGELBERG: About how far away is that from Hydro Embrun's present service territory? 380 MR. LAMARCHE: About 25 minutes. 381 MR. ENGELBERG: Are you aware of where Hydro One's service office is, where its people emanate from? 382 MR. LAMARCHE: In Winchester. 383 MR. ENGELBERG: Is that probably the same distance to Finch? It's a little bit closer; right? 384 MR. LAMARCHE: I'm not familiar with it. What would be the Winchester -- 385 MR. WOOD: I think it says somewhere in Hydro One's submissions it's 27 kilometres. I remember reading that somewhere. 386 MR. ENGELBERG: It's approximately the same distance as where your guy comes from. 387 MR. WOOD: Ballpark, yes. Ballpark. 388 MR. ENGELBERG: You mentioned the office that Hydro Embrun has. What hours of the day is that office open? 389 MR. LAMARCHE: Nine to five, and we transfer our calls to Metro Alert. 390 MR. ENGELBERG: To? 391 MR. LAMARCHE: Metro Alert. 392 MR. ENGELBERG: What kind of calls are transferred? 393 MR. LAMARCHE: Every call are transferred there, and our linesman has a pager on him. So if we have a trouble call, Metro Alert call our contractor, page our contractor, and from there ... 394 MR. ENGELBERG: Now, for billing purposes, if someone wants to discuss a new bill, a bill that he or she received for getting a service -- 395 MR. LAMARCHE: Metro Alert take the message and they call us in the morning and we call those customer. 396 MR. ENGELBERG: When you say the morning, do you mean the following day? 397 MR. LAMARCHE: Yeah, for the billing inquiries only. For emergency call, right away, always. 398 MR. ENGELBERG: So the people who want to discuss their billing or a new service, the service that answers the phone after 5:00 can't discuss that with them? 399 MR. LAMARCHE: No. 400 MR. ENGELBERG: Are you aware of the hours of the day that customers in the area can speak to someone at Hydro One? 401 MR. LAMARCHE: Yes, from five to nine. 402 MR. ENGELBERG: From five p.m. -- 403 MR. LAMARCHE: Would you repeat your question, please. 404 MR. ENGELBERG: Are you aware how many hours of the day customers in Hydro One's service territory can speak to someone at Hydro One about their bills or new service? 405 MR. LAMARCHE: No. 406 MR. ENGELBERG: If I told you that it's 24 hours a day, seven days a week -- 407 MR. LAMARCHE: Mm-hm, yes, I'm aware of that. 408 MR. ENGELBERG: And are you aware that they have an 800 number? 409 MR. LAMARCHE: Yes, I'm aware. 410 MR. ENGELBERG: And are you aware that they can speak to someone in either language they choose? 411 MR. LAMARCHE: Yes, I'm aware. 412 MR. ENGELBERG: Now, the name of the municipality where Hydro Embrun operates is the Township of Russell; is that correct? 413 MR. LAMARCHE: The Corporation of the Township of Russell, yes. 414 MR. ENGELBERG: The material that Hydro Embrun filed with the Board says that Hydro One is the distributor surrounding the town of Embrun. There really is no such town or municipality; is that correct? 415 MR. LAMARCHE: Yes, but there's Casselman and there's -- if you check appendix -- if you have a look on the appendix 8, it's our actual service area. In grey it's Embrun -- it's the Co-op, and in yellow, it's all Hydro One customer. 416 MR. ENGELBERG: So Hydro One area surrounds the area served by Hydro Embrun? 417 MR. LAMARCHE: Yes. 418 MR. ENGELBERG: Is it true to say that every single electricity customer in the township of Russell is served by Hydro One, except for the ones that are served by Hydro Embrun? 419 MR. LAMARCHE: Yes. 420 MR. ENGELBERG: Is it your understanding that Hydro One has about three times as many customers in the township as Hydro Embrun does? 421 MR. LAMARCHE: Yes. 422 MR. ENGELBERG: Would you agree, Mr. Lamarche, that it's possible that there are customers in your area who like the idea of being able to deal with their electricity distributor 24 hours a day, seven days a week? 423 MR. LAMARCHE: We never had a complaint from our customer. We, since -- 424 MR. ENGELBERG: I wasn't asking whether they prefer it, but would you agree that there are some customers who like dealing with their electricity supplier 24 hours a day? 425 MR. LAMARCHE: As a small local community, we tend -- everybody knows everybody, so we can deal with customers, because we are very close to our customers. They are -- for the emergency call, we respond directly. 426 MR. ENGELBERG: But how about -- I'm talking about the non-emergency calls. 427 MR. LAMARCHE: Okay. You're talking -- not really. We never had complaint that the -- for the billing inquiry, we never had a complaint from a customer that we never returned our -- their call. 428 MR. ENGELBERG: Well, you told us earlier in your evidence in chief that there were two other subdivisions already built and that part of each of those subdivisions is in Hydro Embrun's service territory, and another part is in Hydro One's territory. 429 MR. LAMARCHE: Yes. 430 MR. ENGELBERG: And I believe you said that the customers on the Hydro One side were frustrated, because they were paying more. 431 MR. LAMARCHE: Frustrated, yes, yes, because -- because, after -- like I told you -- like I told before, because the rate -- I'm talking only on residential class rate, okay? 432 MR. ENGELBERG: Yes. 433 MR. LAMARCHE: Okay. And when we -- because at our annual meeting on April 16th with our members, there was maybe around -- between maybe 30 to 50 members at the annual meeting, and reporter was there. And like I told before, when we give the patronage return to our customer, in our local newspaper, we received call from customers from Hydro One saying that -- is it possible to be a member of the Co-op? 434 To those customers we say, No, we can't, because your distribution company is Hydro One. 435 MR. ENGELBERG: And from that -- 436 MR. LAMARCHE: And in the local newspaper, saying the rates, the service charge and the volumetric charge compare to the service charge and the volumetric charge from Hydro One. 437 MR. ENGELBERG: How many years have those subdivisions that have part of their territory on one side of the electrical utility boundary and part on the other? How many years have they been operating like that? 438 MR. LAMARCHE: Since the beginning. 439 MR. ENGELBERG: And they continue -- 440 MR. LAMARCHE: And since the beginning, but at that time, Ontario Hydro rules were not allowed to apply. There was no rule -- no code at that time to apply to the Board to get an expansion area. 441 MR. ENGELBERG: Are those subdivisions operating like that to this day? 442 MR. LAMARCHE: What do you mean? 443 MR. ENGELBERG: The two that have already been built, they continue to be divided? 444 MR. LAMARCHE: Yes. 445 MR. ENGELBERG: And Hydro One continues to be the supplier on the other side? 446 MR. LAMARCHE: Yes, absolutely. 447 MR. ENGELBERG: Would you agree with me, Mr. Lamarche, that there are boundaries all over the province between municipalities, for example. People on one side of the street may pay higher rates in taxes, property taxes and so forth than people on the other side of the street? 448 MR. LAMARCHE: Yes. 449 MR. ENGELBERG: Now, I understand from the maps that Hydro Embrun's system is at the west end of the subdivision; is that correct? 450 MR. LAMARCHE: I will refer that question to Mr. Wood. 451 MR. WOOD: I'm sorry? 452 MR. ENGELBERG: Hydro Embrun's system is on the west side of the subdivision, and you would be coming in from the west? 453 MR. WOOD: West and south. 454 MR. ENGELBERG: Okay. 455 MR. WOOD: And the existing abutment is on the west, but there'll be one by the end of this year on the south as well. 456 MR. ENGELBERG: Okay, and Hydro One's system is to the east of the subdivision? 457 MR. WOOD: East is correct. 458 MR. ENGELBERG: So Hydro One would be coming in from the east? 459 MR. WOOD: Correct. 460 MR. ENGELBERG: And Hydro One abuts the subdivision; is that correct? 461 MR. WOOD: No. Not this section we're talking about. 462 MR. ENGELBERG: We're talking about the subdivision, though, not this section. 463 MR. WOOD: You're talking about the full package in blue? 464 MR. ENGELBERG: Yes. 465 MR. WOOD: Yes. They have a three-phase line on the road on the east edge of the full package, but there's no access from there to this section we're talking about right now. 466 MR. ENGELBERG: Now, Mr. Lamarche, you said in your evidence in chief as well as in the submissions that if the Cooperative has the opportunity to increase its client base by taking this territory, that it will be able to lower its per-client distribution and service costs; is that accurate? 467 MR. LAMARCHE: Yes. 468 MR. LEVAC: The average -- the average cost. 469 MR. ENGELBERG: Would you agree with me that if Hydro One increased its client base that its costs per customer would also be lowered? 470 MR. LEVAC: Yes. But at a lower level, because -- 471 MS. LEA: I'm sorry, sir, could you move a little closer to the microphone. I can't hear you. 472 MR. LEVAC: Yes, but probably the reduction in the average cost would be a lot lower, because they have about 1,400 customers. So the average cost will be a lot lower if you add probably over six, seven, eight million customer, so, or -- 473 MR. ENGELBERG: No. 474 MR. LEVAC: Lower than that, so -- 475 MR. ENGELBERG: Not quite that many, but there's -- 476 MR. LEVAC: One million? 477 MR. ENGELBERG: But it's to the benefit of any LDC, is it not, to get growth in its service territory, particularly with subdivision people, urban-class customers? 478 MR. LEVAC: Yes. 479 MR. ENGELBERG: Yes? 480 There was some evidence in chief to the effect that Embrun, Hydro Embrun has the physical capacity to serve this area if it is awarded this territory; is that correct? 481 MR. LAMARCHE: Yes. 482 MR. ENGELBERG: Would you disagree with me if I put to you the materials from Hydro One's submission that the Hydro One system was also planned to serve this area and is also able to serve this area and has the capacity to serve this area? 483 MR. LAMARCHE: I'd refer to Mr. Wood. 484 MR. WOOD: It basically comes down to, Hydro One has one substation, Embrun DS, and one feeder that is adjacent to this section of land. And Embrun Hydro has one substation, Embrun DS, and two feeders adjacent to it. That's basically what it comes down to. Either company can handle the capacity. 485 MR. ENGELBERG: Would it be fair to say then also, Mr. Wood, that if Hydro One is allowed to keep these customers in its service territory, that its assets in the area will be utilised to a greater degree than they are now? 486 MR. WOOD: That doesn't really mean anything, because if you put more load on a station, of course you're using your assets to a greater degree. I don't understand the question. 487 MR. ENGELBERG: Well, I think you did. I think you answered it. 488 Now, I just want to get clear, the other 120 lots that are talked about in the remainder of the application, are they totally within the Hydro One service territory, or do some of them cross the boundary? 489 MR. WOOD: No, they're all Hydro One. 490 MR. ENGELBERG: So all the growth to the east will be Hydro One's? 491 MR. WOOD: With the existing boundaries; that's correct. 492 MR. ENGELBERG: Mr. Patenaude, I believe you mentioned that you have electrical safety authority approvals for lots, for some of the lots. 493 MR. LAMARCHE: I mentioned that. 494 MR. ENGELBERG: You did? 495 MR. LAMARCHE: We received a connection authorisation from -- 496 MR. ENGELBERG: Are those lots on the Hydro One side or on the Hydro Embrun side? 497 MR. PATENAUDE: There's on the Embrun Hydro side. 498 MR. ENGELBERG: There's no problems with getting the ESA approvals; there's no issue about that in this hearing, is there? 499 MR. PATENAUDE: No. 500 MR. ENGELBERG: Regardless of which side of the boundary the lots are on? 501 MR. PATENAUDE: No, I don't think there would be an issue. 502 MR. ENGELBERG: Mr. Patenaude, has Hydro One staff done anything to delay the development of your new subdivision on the 52 lots on its side? 503 MR. PATENAUDE: No, not at all. We're ready to go. We're ready to put the hydro in there. 504 MR. ENGELBERG: And as far as you know, Hydro One is also ready to go? 505 MR. PATENAUDE: I don't think they're ready to go. They didn't give me an estimate yet. They didn't to do the economical study, evaluation. We didn't get the design back, the final design. So there's a lot of stuff that has to be done. 506 MR. ENGELBERG: Isn't it correct that there's some more information that needs to be provided by your company? 507 MR. PATENAUDE: Not to my knowledge. 508 MR. ENGELBERG: Well, how long ago did you decide that you wanted the 52 lots on the Hydro One side to be served by Hydro Embrun? 509 MR. PATENAUDE: We started talking about that last September, I think, in the fall, when we started to apply for the -- for the -- when we applied for the subdivision at that time. 510 MR. ENGELBERG: So isn't it fair to say that you didn't actively pursue discussions with Hydro One after that point because you concentrated your efforts on getting the lots serviced by Hydro Embrun? 511 MR. PATENAUDE: No. We contacted the Board here to see what would happen in this case, and we were waiting to hear from the Board. And in March, where we had my electrical engineer contacting the Board and all of this and it was taking longer than we expected, so we told both parties to prepare some designs, and we'd have to see what happened at the end of the day, after this meeting, which we didn't know we were going to get. 512 MR. ENGELBERG: And is it your position that Hydro One owes you an answer that you haven't been given? 513 MR. PATENAUDE: Yeah. Well, they owe me -- they're working on it. Just like I say, we should get it soon but we don't have it. 514 MR. ENGELBERG: And -- 515 MR. PATENAUDE: There's delays due to the first -- they did a preliminary design, and there was some change that had to be brought to those designs, and then they were looking for the original -- for that -- because when we had the meeting, they left with the design and the change that need to be done, and then they said they need the one that was sent to us, like, by mail. So we had to take that design and sign it. I thought that was all done at the meeting, but that was not good enough. We had to find the other paper, the first one that was supposed to be not the right one, but they need that one before they change the other one. So we sent it back to them. 516 MR. LAMARCHE: Because we applied to the Board on November 12, and from there we do all the procedure to proceed with the notice of application. I contact Mr. Rychman maybe two times a month, to see what will be the next step, and at that time Mr. Rychman told me we'll receive a Procedural Order to process, and you'll receive an objection from Hydro One, a submission. But all those submissions fall down with the combined proceeding, because at that time Mr. Rychman told me that the November 12 application, he told me that it's going to take four to five months to get an answer from the Board, if it's approved or not. And during all that process, the combined proceeding -- 517 MR. ENGELBERG: I understand that all that was going on. I just want to be sure that you're not saying that Hydro One isn't ready, willing and able to connect the 52 lots, are you? 518 MR. PATENAUDE: No, I'm not saying that at all. I'm just saying that in this case here, because we have to build the temporary lines, and because they don't have access to this 52 lots as such, they have access to the property, but they have to put some temporary line, so that's why we much prefer to go to Embrun. 519 And cost-wise too, for us, there's big savings to be done in Embrun Hydro. So like I said, just because we need an extra switch cabinet, it's going to cost about $10,000 because we're going to need two now. The next time we do some design, it's going to cost so much per meter. Here we have an estimate per meter, and that was done -- this subdivision was done two years ago, and they charged $3 per meter for primary cable route, just to do the design. And that -- I'll get all that from Embrun Hydro for free, because of the economic evaluation. 520 So it's a matter of time frame, accessibility, and money-wise too. 521 MR. ENGELBERG: Well the time frame, we've just agreed, is okay with either one of the two utilities. 522 MR. PATENAUDE: It depends how fast Hydro One moves from here, because they both start at the same time from the design. Embrun Hydro is ready to go now, where Ontario Hydro is not ready to go. 523 MR. ENGELBERG: I thought you said a minute ago -- 524 MR. PATENAUDE: They're working on it. We're waiting for the design but we don't have it. We don't have all the papers. We don't have the estimate, we don't have all this stuff. 525 MR. ENGELBERG: And you say you've provided them with everything that they -- 526 MR. PATENAUDE: We had a meeting and we provided them with that about -- 527 MR. ENGELBERG: When was that meeting? 528 MR. PATENAUDE: We had a meeting in the office about a month ago, three weeks ago. 529 MR. LAMARCHE: Three weeks ago. 530 MR. ENGELBERG: We can ask about that when we have the Hydro One people on the stand. 531 Mr. Wood, I just wanted to ask you a couple of questions. First of all, you said you were 25 years with Hydro One. I think you meant Ontario Hydro; right? 532 MR. WOOD: It was Ontario Hydro when I was with them. Yes, that's correct. 533 MR. ENGELBERG: Right. Now, you mentioned something about the fact that Hydro Embrun would be coming in one end and going out the other, whereas Hydro One abuts the subdivision on the east side and would be coming in from the east; is that correct? 534 MR. WOOD: Yeah. What I was getting at was the two-way feed versus the one-way feed, just for security. 535 MR. ENGELBERG: Are you saying by that that the Hydro One supply to the subdivision would not be reliable? 536 MR. WOOD: Not as reliable as a two-way feed. Never is. Can't be done. 537 MR. ENGELBERG: And would it be your position, then, that Hydro One not only should not serve the 52 lots but should not serve any of the subdivision of the area in blue, the additional 120 lots? 538 MR. WOOD: Oh, it's my understanding that this hearing is about the 52 lots, because that's what's urgent, and I think the rest would be left to a later date to discuss. 539 MR. ENGELBERG: Right. But since the issue of reliability has been raised, and since the application that has been filed is for the entire subdivision, would it be your position on the issue of reliability -- would you advise against having Hydro One supply the other 120 lots as well? 540 MR. WOOD: I'd have to look. I've seen a design for these 52. I haven't seen any design for the other 120, so I wouldn't feel comfortable commenting on something I'm not familiar with. 541 MR. ENGELBERG: Okay. Are you familiar, Mr. Wood, with the assets that Hydro One has in the service territory? 542 MR. WOOD: Yes. I was a supervising technician in the Winchester area for awhile, so I'm very familiar with the area around there. 543 MR. ENGELBERG: So that's how you knew how far away Winchester was; right? 544 MR. WOOD: I lived there, too. 545 MR. ENGELBERG: Okay. And you agreed with me a few minutes ago, I believe, that those assets would be used to a greater degree if Hydro One could supply these 52 lots? 546 MR. WOOD: Well, the same as our assets, that Embrun's would be used to a greater degree. 547 MR. ENGELBERG: Right. Thank you, Mr. Wood. 548 Mr. Levac, I just have one question for you. If you could look at Embrun's documents at tab 10, which is A.4.3, tab 10. If you would look at the second page of appendix E, it says -- well, all of them say it. It refers to a thousand kilowatt hours. 549 MR. LEVAC: Yes. 550 MR. ENGELBERG: If you go down to the line -- the second line from the bottom on the left that talks about wholesale rate. 551 MR. LEVAC: Yes. 552 MR. ENGELBERG: What is $0.0062? 553 MR. LEVAC: That's the -- the rate that is charged for the wholesale rate per 1,000 kilowatt hours. 554 MR. ENGELBERG: You're talking about the commodity charge? 555 MR. LEVAC: No. 556 MR. LAMARCHE: No, wholesale. It's a market -- 557 MS. LEA: The what? 558 MR. LAMARCHE: The 62 cents, it's the market's wholesale. IMO -- IMO charge. 559 MR. ENGELBERG: For power? 560 MR. LAMARCHE: No. For wholesale. There's no commodity charge on that bill -- on that page. 561 MR. ENGELBERG: So when you say for wholesale -- 562 MR. LAMARCHE: It's the IMO charge. 563 MR. ENGELBERG: For wholesale what? Like an uplift charge or -- 564 MR. LAMARCHE: Yes. Yes. Or an administrative charge by the IMO. 565 MR. ENGELBERG: Okay. Thank you. So there's no commodity charge included anywhere in this chart? 566 MR. LAMARCHE: No. 567 MR. ENGELBERG: Mr. Patenaude, I believe you said that -- I wrote down your quote, because I was impressed with it, "We're afraid we're going to run out of lots." 568 Is that correct? 569 MR. PATENAUDE: For this year? That's correct. 570 MR. ENGELBERG: Do you have any reason to believe that you're going to be unable to sell the lots on the Hydro One side? 571 MR. PATENAUDE: I already sold 13, and I sold three of -- I have three customers there that are supposed to take possession there, like, early September. And I also have Woodfield Homes, about 13 lots that they're supposed to start to build the first week of June. 572 MR. ENGELBERG: When did you receive the economic study from the Co-op, from Hydro Embrun? 573 MR. PATENAUDE: We received it only yesterday. 574 MR. ENGELBERG: Just one moment. I want to see if I have anything further. 575 I just have one further question. In the document that's on the long page that was filed in this book. 576 MR. SOMMERVILLE: C.4.1, I believe. 577 MR. ENGELBERG: Yes. Sorry. I didn't remember the number. 578 MS. LEA: Yes. 579 MR. SOMMERVILLE: Thank you. 580 MR. ENGELBERG: On the third page, the last page of that, there's a number in parenthesis at the bottom that says "$24,591," and I was unclear as to what that was. Is that for expansion and connection, or what is included in that amount? 581 MR. LEVAC: That's the amount that Mr. Patenaude has to pay. 582 MS. LEA: Sorry. Where are we looking? 583 MR. ENGELBERG: Oh, I'm sorry, Ms. Lea. 584 MS. LEA: Just the page. 585 MR. ENGELBERG: The third page of those long pages. 586 MS. LEA: Okay. Thanks. 587 MR. LEVAC: It says beside it, "Capital Contribution Required from Customer." That's the amount, then, Mr. Patenaude has to pay for -- 588 MR. ENGELBERG: Has to pay to Hydro Embrun? 589 MR. LEVAC: Yes. That's part -- that's his -- that's his part of the capital contribution for the expansion of the subdivision. 590 MR. ENGELBERG: And that includes the connection cost as well? 591 MR. LEVAC: No. 592 MR. ENGELBERG: No? 593 MR. LAMARCHE: No. 594 MR. ENGELBERG: That's just the construction work? 595 MR. LAMARCHE: It's the -- if you can have a look on page 1. 596 MR. ENGELBERG: Page 1 of those long pages? 597 MR. LEVAC: No. Page 2 of the short pages. 598 MR. ENGELBERG: Okay. 599 MR. LEVAC: Number 7. 600 MR. LAMARCHE: Number 7. The cost to build the distribution line, it's $42,000; the transformer, $24,000; and the secondary, it's $7,000. But the connection fees are not included. 601 MR. SOMMERVILLE: I'm sorry. I couldn't hear that last bit, Mr. Lamarche. 602 MR. LAMARCHE: Pardon me? 603 MR. SOMMERVILLE: I couldn't hear the last part of your answer. 604 MR. LAMARCHE: The connection are not included. 605 MR. ENGELBERG: All right. And the number that we get to there at the bottom, $74,194, how does that relate to the $24,000 figure we looked at earlier on the long page? 606 MR. LEVAC: The way the economic evaluation is done is they're trying to do an estimate of the future revenue of the Embrun distribution company, how much they're going to get of revenue in future from that new subdivision. And if there's some costs above that present value of those revenues, it has to be paid by the subdivider. 607 MR. ENGELBERG: Okay. So in other words, 25,000, roughly, is the developer's contribution towards the $74,000 charges? 608 MR. LEVAC: That's it. 609 MR. ENGELBERG: And do those numbers include the construction based on the 52 lots on the Hydro One side of the border or the 38 lots on the Embrun side of the border? 610 MR. LEVAC: I think that's only for the 52 lots -- 611 MR. PATENAUDE: No, the 38. 612 MR. LEVAC: No, that's 52 lots in the -- in the Networks. 613 MR. PATENAUDE: Networks end. 614 MR. LEVAC: Yeah. But if you go on the first page, number 1, you see that in year 1, there's going to be 26 lots added, and year 2, 26. So it's a total of 52 lots. 615 MR. ENGELBERG: There's nothing included, is there, for construction into other phases of the subdivision in Hydro One's territory? 616 MR. LEVAC: I'll have to ask him. 617 MR. LAMARCHE: No. No. It's just for that phase. 618 MR. ENGELBERG: And you're applying for the other lots in the fall, at the fall here; right? 619 MR. PATENAUDE: The 38 lots? 620 MR. ENGELBERG: No, the other 120 lots. 621 MR. PATENAUDE: Well, I'll apply only for 38. We don't -- I'm not big enough to go over 120 lots. It's too much money to tie up. 622 MR. ENGELBERG: No, but the 120 lots over and above the 52 that you're applying for today, you're applying for in September of this year? 623 MR. PATENAUDE: I will apply for 38 of the 120. 624 MR. ENGELBERG: Today? 625 MR. PATENAUDE: Not today. Like as in June. 626 MS. LEA: I think Mr. Patenaude is talking about his application for building permits and so on, and you're asking him a question with regard to the application of the applicant with regards to the other -- 627 MR. ENGELBERG: Well, that's why I addressed the question to Mr. Lamarche, not to Mr. Patenaude. 628 MS. LEA: I think that's where the confusion is -- 629 MR. ENGELBERG: Can you help me here. You intend to -- 630 MS. LEA: I think Mr. Martel can probably help you, actually -- 631 MR. MARTEL: Well, certainly that the balance will be at the September hearings. 632 MR. ENGELBERG: And we have no estimate yet of the costs for a further expansion into Hydro One territory? 633 MR. MARTEL: That's correct. 634 MR. ENGELBERG: I have no further questions. 635 MR. LAMARCHE: Okay. 636 MR. SOMMERVILLE: Power Workers' Union. 637 MR. LOKAN: No cross-examination. 638 MR. SOMMERVILLE: Wirebury Connections? 639 MR. MATTHEWS: Just one question, if I may. 640 CROSS-EXAMINATION BY MR. MATTHEWS: 641 MR. MATTHEWS: Do you have an estimate from Hydro One on the contribution requirement for those 52 lots? I'm just asking if a contribution estimate has come from Hydro One for the 52 lots. 642 MR. PATENAUDE: No, we did not get that yet. The only thing we got from them in writing was for the connection fee, which is, as I said this morning, the connection fee will be -- that's what they supplied to my engineer -- will be $237.54 for the connection, compared to $53 with Embrun. 643 MR. MATTHEWS: Thank you. 644 MR. SOMMERVILLE: Ms. Lea. 645 MS. LEA: Thank you. 646 CROSS-EXAMINATION BY MS. LEA: 647 MS. LEA: Mr. Patenaude, just to follow up on that question from Mr. Matthews. Is that per house, per connection? 648 MR. PATENAUDE: Per house, yes. 649 MS. LEA: Okay. So for each of the utilities, the amount you gave us were per house? 650 MR. PATENAUDE: Per house, and that's -- their price here is based on the after the economical evaluation. Otherwise it would be 600-and-some dollars. 651 MS. LEA: Whose are you referring to there? 652 MR. PATENAUDE: Hydro One. 653 MS. LEA: Okay. So you don't have an economic evaluation yet, though, from Hydro One to determine the capital contribution? 654 MR. PATENAUDE: Not for the whole thing, just for the connections. I asked a specific question. I wanted to know what the difference was, so we had something to compare. 655 MS. LEA: Okay, thank you. Mr. Martel, perhaps you could assist us here a little bit. I understand you are seeking from the Board today a service -- an amendment to the licence of Embrun with respect to the description of the service area. In order for the Board to grant your request, it would have to have a proper description of what service area you are seeking today to have added to that licence. I'm not suggesting it has to be a formal metes and bounds description, but it has to be a description that's sufficient so everyone reading the licence can understand what is being considered. I don't know whether you're ready, or one of your clients is ready to provide that. Examples could be a street description, a street address, or -- but in some way, you will need to describe precisely what it is that you're asking the Board to change in the licence of your client. 656 MR. MARTEL: I think we can -- I think we can do that. 657 MS. LEA: Good, thank you. Is it in the evidence yet, or is that something you'll provide? 658 MR. MARTEL: I think if we go to tab 7 of our application, we have the plan of the subdivision itself. 659 MS. LEA: Yes. 660 MR. MARTEL: In my opinion, we can use that as the -- 661 MS. LEA: Which phrasing would you use, sir? Where on the piece of paper? 662 MR. MARTEL: I think we could refer to the Centenaire Street, la Prairie Street, which comprises all the 52 lots, and block 91. 663 MS. LEA: Mr. Patenaude, you wanted to say something about that. 664 MR. PATENAUDE: Well, we have a registered plan at the Registry office which would be 50M dash -- I'm not sure of the number. But with that usually it's exactly that. The end plan would be the right reference. 665 MS. LEA: Yes. I do see, sir, on the upper right -- the upper right-hand corner of the piece of paper that's in tab 7, a description, "Part of Blocks 32 and 33, Registered Plan 50M-233 and Parts of Lots 8 and 9, Concession 8." 666 MR. MARTEL: At the top right corner you have an unfilled section, it's plan 50M dash something, this plan, at the time this documentation was put together, the registered plan has not been registered yet. Now it has been. We could provide you with that number, but that would be, that registered plan number would provide -- would cover the 38 lots and the 52 lots. So to answer your question, I think if we refer to the application by way of a street name, it will be more precise. 667 MS. LEA: Thank you. If you could provide us with that description before the end of the day, that would be helpful, so the Board can consider that. 668 MR. MARTEL: Okay. 669 MS. LEA: Thank you. I don't know whether this would be a question for Mr. Wood or Mr. Lamarche. When I look at the tab 7 which has the plan of the lots, the line dividing the two service areas runs right down the middle of some of these lots, and I understand from the evidence that lots 34 through 38 are counted as part of Hydro Embrun's territory. Is the reason for that because they front on a street which is inside Hydro Embrun's territory? 670 MR. WOOD: I've never heard it definite, but that was my assumption as well. Whatever street you front, that's who serves it. 671 MS. LEA: Is that your understanding too, Mr. Lamarche? 672 MR. LAMARCHE: Yes. 673 MS. LEA: Thank you. There were also some questions from Hydro One with respect to the phases of the development, Mr. Patenaude. You indicated that all of phases 4, 5, and 6 would be contained in the purple rectangle that we see at tab 9; is that correct? 674 MR. PATENAUDE: Yes, it is. 675 MS. LEA: Mr. Wood referred to a subdivision, I think, that was going to be built or is built south of that purple rectangle. We can see the match of tab 7 and tab 9 by looking at Rue Alain, which is at the very bottom of tab 7, and is also labeled at tab 9. And I understood, Mr. Wood, you to say that the line which would run down Centenaire Street would continue south into a portion of the map at tab 9 which is immediately to the east of Rue Alain; am I understanding you? 676 MR. WOOD: Yes. Rue Alain, I imagine, will eventually connect to that new street. 677 MS. LEA: So do I understand, then, that there's a subdivision planned south to the purple area in tab 9, but that's not what Mr. Patenaude is referred to in his phases. 678 MR. WOOD: No. It's a totally different developer. 679 MS. LEA: Okay, thank you. 680 Mr. Patenaude, you indicated that you had already sold some lots. Which lots are they, sir? 681 MR. PATENAUDE: If you look on tab 8 -- 7, tab 7, lot 55 to 67. And the other one that I sold -- those I sold to Woodfield Homes. And the one I got sold to my clients are 70, 71, 77. 682 MS. LEA: Thank you. Mr. Lamarche, you were asked a couple of times about the subdivisions which exist in Embrun which are served in part by your utility, the Cooperative, and in part by Hydro One. Is there any confusion among customers about who they should call if their hydro goes off, in an emergency? Do you ever receive calls from customers that actually belong to Hydro One with respect to an emergency call? 683 MR. LAMARCHE: No, no. The only call we receive from those customers concern building inquiries. 684 MS. LEA: So there's no confusion about who should be -- 685 MR. LAMARCHE: Sometimes, not obvious, we have some call. I have no problem. We give the 800 number to the customer and they call Hydro One. 686 MS. LEA: So you have a few calls of that nature? 687 MR. LAMARCHE: Yes. 688 MS. LEA: Gentlemen - I'd like both Mr. Lamarche and Mr. Wood to consider this - you heard earlier today that the Board, one of the things the Board will be considering today is the possibility of an interim solution, that is, some kind of attachment which would allow this development to proceed and have service but that could be reconsidered and possibly reversed as a result of the main proceeding. 689 With respect to these 52 lots that are before us today, do you see an interim solution that is practical or possible with respect to these lots? 690 MR. WOOD: Not offhand, because, like, if it was definite we were just going to feed our 38 and not the 52, then you'd only run one-phase loops into there and pick up these additional lots. If we want to try to go to an interim, that means we'd have to have three phase up that street, plus an extra switchback to be able to tie in. So it wouldn't be practical or cost efficient to try to set something up that way. It would be just wasting a lot of money that might be for nothing. 691 MS. LEA: What if the Board decided that it was not going to grant your request for a licence-area amendment today, but that in the interim Hydro One would serve the 52 lots; do you have any comment on that possible outcome? 692 MR. WOOD: It's basically the same answer. We've got to know how many cables to take up Frontenac Street. Are we eventually going to need three phase or and a one-phase loop up there. The problem is how to 693 MS. LEA: What about the connection assets? If one utility connected the 52 lots, and then the Board decided that the other utility should in the end have the service territory, would that cause problems? 694 MR. WOOD: I'm trying to get my head around this one. 695 You're saying if Hydro connected the 52, and then sometime this fall or something that the Board decided Embrun Hydro should have it? 696 Yeah, we'd have existing lawns and stuff. We'd have to go in and start digging up everybody's front yard to get the cables up there to supply it. It would be a heck of a mess -- 697 MS. LEA: Or could you acquire the assets from the other utility, sir? 698 MR. WOOD: No, but -- yeah, we'd have to do that, which would be a lot more expensive than us putting them in ourselves, but we'd have to get a feed to it. That's the big problem, not the assets just in that section. It's the feed -- we have to dig the whole way up Frontenac Boulevard, and all -- everybody's new lawn would be in by then, and it would be all built. 699 MS. LEA: All righty. Thank you. One moment, please. 700 I'm sorry if this is already clear to everyone else: The 120 lots, which are being planned in the purple area that we see in tab 9 but are not the subject of today's consideration, does anybody know the timing for the requirement for electrical service for those phases? Yes? 701 MR. PATENAUDE: We hope, because it takes time for the council to get the approval and all this stuff, eh, so we'd like to be in the ground, like, with the fourth phase by -- by the fall, okay. So we'd probably need, like, the hydro in there by -- before Christmas, sort of. That's what we're aiming for. Now -- 702 MS. LEA: Okay. And is the fourth phase abutting or adjoining to this phase of the development, sir, or is it farther east? 703 MR. PATENAUDE: No, it's right beside, so it's going to bring it up almost like square, let's say, with this one here. 704 MR. LAMARCHE: To the 54 -- number 54. 705 MR. PATENAUDE: Yeah, like, you see there's going to be a loop here. If you look at lot 39 -- 706 MS. LEA: Yes. 707 MR. PATENAUDE: Okay. Right behind lot 9, actually, in the Embrun sector, this street is going to go in there and loop around. And that little dotted line you see in the back, that's a ravine, eh? 708 MS. LEA: I see. 709 MR. PATENAUDE: So we're going to be going with a street in there following the same pattern as lot 39 to 52. So there's going to be lots -- lots just backing to that, and -- 710 MS. LEA: You're going to be filling up the rest of lot 8 on the plan there? 711 MR. PATENAUDE: Exactly. 712 MS. LEA: And that's phase 4? 713 MR. PATENAUDE: Yeah. 714 MS. LEA: Thank you very much, gentlemen. Those are my questions. One moment, sir. The Board may have questions. 715 MR. SOMMERVILLE: Yes. I'm just thinking. Thank you. 716 QUESTIONS FROM THE BOARD: 717 MR. SOMMERVILLE: Mr. Wood, as you've heard, the Board's preference is to provide for a way for matters to proceed as necessary for the subdivision but to not permanently, if we can avoid that, change the situation for either Hydro One or Embrun. We want to deal with that permanent change in the proceeding to happen in September. 718 So I want to get a very clear picture about what is in your view required today in order to allow the subdivision to proceed. What is it that is actually required from a technical construction point of view in order to make this work, and how urgent is that requirement, according to your understanding? 719 MR. WOOD: Well, it's urgent from when I drove through that subdivision a couple days ago, and basements are being built. That's what gives you the urgency, and the fact there's nothing in the ground right now to supply these houses. 720 The problem with trying to come up with something interim is the initial -- you've got to start at point 1, and you need to know what's going on at point 10 to do it right at point 1. So do you put one phase up that street, or do you put three? If you put three, and then you don't need to feed any further, you've wasted all that money. In you put one, you can't feed it, so it's almost a go/no-go. I can't figure out a good interim solution. 721 Like, I've looked at that, and I just can't see anything that can work well without somebody wasting some money somewhere, either us or Hydro One or -- but in the end, there's only one ratepayer. 722 MR. SOMMERVILLE: Thank you, Mr. Wood. Those are my questions. 723 Any arising from mine? 724 MR. MARTEL: None. 725 MR. SOMMERVILLE: You have an -- 726 Mr. Patenaude? 727 MR. PATENAUDE: Yeah, I wanted to -- like, he mentioned that we have some foundation in, but we have a lot more than that. We have some houses that are drywalled and being framed right now there. 728 MR. SOMMERVILLE: Mr. Martel, you have an opportunity for redirect examination, should you choose to avail yourself. 729 MR. MARTEL: Yes, I know. I don't have any questions. 730 MR. SOMMERVILLE: Thank you. 731 The witnesses are excused. Thank you very much for your application to our task. Thank you. 732 We'll take our break now and recommence at 1:30. Do you intend to call evidence, Mr. Engelberg? 733 MR. ENGELBERG: Yes, I do. 734 MR. SOMMERVILLE: Does any other party intend to call evidence? 735 MR. LOKAN: Not from the Power Workers'. 736 MR. SOMMERVILLE: Thank you. So our course of proceeding this afternoon will be the Hydro evidence will go in starting at 1:30. If there is any rebuttal evidence, we'll receive that, and then we will move directly to argument. 737 Thank you very much. We'll stand adjourned until 1:30. 738 --- Luncheon recess taken at 12:20 p.m. 739 --- On resuming at 1:35 p.m. 740 MR. SOMMERVILLE: Please be seated. Thank you. Mr. Engelberg? 741 MR. ENGELBERG: Thank you. I understand there's no need to have the witnesses sworn again; is that correct? 742 MR. SOMMERVILLE: This is a distinct proceeding, and I think it's probably appropriate. Thank you. 743 MR. ENGELBERG: That's fine. 744 MR. SOMMERVILLE: The question, Mr. Martel, relates to the fact that these witnesses testified yesterday. 745 HYDRO ONE NETWORKS - PANEL 1; STEVENS, KLOOSTRA, GEE: 746 R.STEVENS; Sworn. 747 W.KLOOSTRA; Sworn. 748 R.GEE; Sworn. 749 MS. LEA: On that note, we'll number the resumes for these witnesses for the purposes of this hearing as well, C.4.2, please. 750 EXHIBIT NO. C.4.2: HYDRO ONE NETWORKS - PANEL 1 CURRICULUM VITAE 751 MR. SOMMERVILLE: The resumes haven't changed since yesterday? 752 MS. LEA: I hope not. 753 MR. SOMMERVILLE: Just a small attempt at humour. 754 EXAMINATION BY MR. ENGELBERG: 755 MR. ENGELBERG: If you would, please, for the record, starting with Mr. Stevens, introduce yourself and say how long you've been at the company and what your capacity is. 756 MR. STEVENS: Sure. I'm Rick Stevens. I'm director of development strategy in our corporate development group. Been in the industry for about 20 years, most of it with Ontario Hydro and now Hydro One. 757 Past areas of responsibility: Financial planning, rate-setting, including wholesale and retail rates. Recently participated heavily in the acquisition of the 88 utilities -- actually, 89 utilities, and did all the rate filings for those for the unbundled rates. And I've also advised or worked with the OEB on the development of the simplified unbundling model that was used in phase 1 of the performance-based regulation. 758 MR. ENGELBERG: Thank you. 759 Mr. Kloostra? 760 MR. KLOOSTRA: Walter Kloostra. I've been with the company for 21 years, Ontario Hydro and Hydro One. During that time, I've worked in areas such as distribution operations management, as well as distribution engineering. Currently, I'm manager, network distribution strategies, and I support regulatory matters and rate functionalization matters as they relate to the distribution system. 761 MR. ENGELBERG: Thank you. 762 And, Mr. Gee? 763 MR. GEE: My name is Raymond Gee. I have been with Ontario Hydro and currently Hydro One for 20 years; 17 of those years have been with the distribution part of the business. I am the manager of work management and deployment and our lines and forestry field operations. I'm responsible for business planning, work programming, resourcing the work, field engineering, and design. 764 MR. ENGELBERG: Thank you. 765 Now, gentlemen, you understand that we're here because a developer has stated that he needs a connection for a subdivision on an urgent basis. 766 MR. KLOOSTRA: Yes. 767 MR. ENGELBERG: Does Hydro One agree that the new subdivision requires connection promptly? 768 MR. KLOOSTRA: Yes. 769 MR. ENGELBERG: Is Hydro One ready, willing, and able to connect the customer, the subdivision, promptly? 770 MR. KLOOSTRA: Yes, we are. 771 MR. ENGELBERG: Has Hydro One delayed the developer in any way? 772 MR. KLOOSTRA: It is our belief that we haven't. 773 MR. ENGELBERG: Mr. Patenaude said in his cross-examination that he is waiting to hear from Hydro One regarding one of the matters relating to connection. Are you familiar with that? 774 MR. GEE: I'm familiar with the status of this particular subdivision. As of Thursday, May 8th, the status was that the final design had been sent to the developer's consulting engineer, and we were waiting for him to sign back acceptance and final approval of the subdivision. Once that's back, we'll be able to finalize our pricing. 775 MR. ENGELBERG: To your knowledge, has that document been returned to Hydro One by the developer? 776 MR. GEE: Not that I know of. My last status was of last Thursday. 777 MR. ENGELBERG: I understand from what we've heard this morning and from the materials that have been filed that phase 3, what the developer calls "phase 3" has 90 lots, and the next phases will have a total of 120 lots. Is that your understanding, Mr. Gee? 778 MR. GEE: I believe that his current phase 2 has 90 lots; his phase 3 will have 120 lots. Is that what you said? 779 MR. ENGELBERG: Well, I think he called the present one "phase 3" rather than "phase 2," but we needn't get hung up on it. 780 MR. GEE: Okay. 781 MR. ENGELBERG: Of the 90 that are being built right now, how many are on the Hydro Embrun side and how many on Hydro One? 782 MR. GEE: Fifty-two of the lots are in Hydro's service territory, Hydro One's service territory, and 38 are in Embrun's service territory. 783 MR. ENGELBERG: And of the 120 lots that are coming up, how many are on each side? 784 MR. GEE: All 120 are in Hydro One's service territory. 785 MR. ENGELBERG: The materials that were filed by Hydro Embrun said that Hydro One is far from this subdivision; is that correct? 786 MR. KLOOSTRA: No. We have three-phase line abutting the proposed amendment application. 787 MR. ENGELBERG: So you're right there? 788 MR. KLOOSTRA: Yes. 789 MR. ENGELBERG: What would Hydro One build in order to connect these 52 lots that are being built on right now? I'm talking about the 52 lots in the Hydro One side. 790 MR. GEE: If I may go to the map. To give a little bearing to this drawing, the shaded-in area in the beige is the Embrun service territory. The yellow is the full amendment area, including the current 90 subdivision -- 90 lots in the subdivision, plus the additional 120. 791 We currently have a three-phase line on the road right adjacent to the full area, the other side, hundred and twenty. 792 If I may, I've attempted to blow up what is actually in Embrun's -- Embrun's evidence. It is A.4, tab 1. And about four pages in, I think, you'll see the very first diagram has this, and I've attempted to blow it up rather than try to describe it here, and hopefully, people will be able to see it. 793 MR. ENGELBERG: For the aid of the Board, that's the document that we looked at earlier today. It's a letter of November 12th, 2002, from Embrun to Mr. Pudge of the Board at A.4, tab 1, and it has attached to it the pages with the all-capital letters. And the map appears third page from the end. Well, no, it isn't. It's five pages from the end. 794 MR. SOMMERVILLE: We have it. 795 MR. GEE: To put a little bearing to the bigger diagram, this road here is the road that we indicated we had our three-phase line on. 796 Inhere, these pieces, you'll see the lot numbers. These were the subdivisions that we've been talking about mostly this morning, the 90 lots, with 52 in our service territory and 38 in Embrun's. This particular piece shows the subdivision of the future 120 lots, and I think it's very valuable to talk about the full serving of this in its end state. 797 The 52 lots that Ontario Hydro -- Hydro One has to serve is this point. The ideal permanent solution that we will have here is we will come off our three-phase line on this roadway, and we will bring in multiple circuits down through the subdivision. We will loop around, provide a loop feed to that cul-de-sac. We will come down to this part, which is now adjacent to the lots being developed, the 52 lots, and we will be able to install a looped feed through the subdivision, through the 52 lots, and around and provide -- provide the service, including a two-circuit supply, looped feed, and for reliability purposes, an underground subdivision. 798 The complexity at this point is the developer has chosen to develop his subdivision from this point forward. We will need to get supply in from the back end forward. That is not an uncommon scenario. That happens all the time. Developers do not choose to develop their property in a way that helps the distribution planning. They want to sell lots ongoing, so we deal with this all the time. It's not a big deal, and it's a very routine practice. 799 An interesting point that was made this morning is if this subdivision is almost sold out, and they are ready in the next few weeks to expand the next subdivision, we do not need this full subdivision serviced at this point. All we need to know is that this road, have its exact location and elevation, and we can put a permanent line down. 800 Not having that scenario, this is not a big scenario. We will build an overhead line of 2 or 300 feet from this road down to here, and then make our underground connection and service the subdivision. 801 As the subdivision is established, and the road is, we will go ahead and proceed with our normal servicing, our normal supply, and just remove that temporary line. 802 MR. ENGELBERG: Mr. Gee, is it your understanding that the lots that we're talking about connecting immediately are the numbered lots on that plan? 803 MR. GEE: Yes, that's correct. If I understood properly, I didn't catch all the lots to be connected, but the ones down here were sold, they were in the Hydro One service territory and were sold, and they were at this point right here, I believe. I don't remember the numbers. 804 MR. ENGELBERG: And all the lots just to the north of it and just to the east of it, they're in the part that I believe Mr. Patenaude said that he hopes to start selling in the fall? 805 MR. GEE: Yes, that's correct. I believe even in June some time is a date I may have heard. 806 MR. ENGELBERG: Now, something was said in the evidence this morning about a connection fee of approximately $238. Can any of you tell us about that? 807 MR. GEE: Yes, I can. In the evidence that Embrun filed, I believe it is tab 12. 808 MR. ENGELBERG: That's tab 12 after A.4.3? 809 MR. GEE: Yes, that's correct. There is a copy of an e-mail that we sent to the developer's consulting engineer early on to provide him some information on the cost of connections. And you'll see what we provide the developers two options. One is in case we'll do the full installation connection for them, and that is the fee that was quoted earlier this morning. We provide another option to builders, because very often they are building a house, they have equipment and have resources and material on site, and/or have a contractor of their choice, people they are familiar with dealing with. In that case, they can have those people do the work and our connection fee is only $23 in that case. 810 MR. ENGELBERG: Is that in the nature of what we call contestable work? 811 MR. GEE: Yes, that's correct. 812 MR. ENGELBERG: Anybody can do that? 813 MR. GEE: Anybody can do that work. We provide a bid, and if -- so as to expedite service if they wish. 814 MR. ENGELBERG: Thank you. 815 We heard a little bit this morning about the facilities that the two LDCs have in the area. Can you tell me how many stations Hydro Embrun has? 816 MR. KLOOSTRA: We understand, and I think it's shown on our map, so I'll just take an opportunity to show you on the map. We understand, and we were talking with Embrun actually before we proceeded after lunch, and I think that's correct. Embrun has an MS somewhere in this area here. 817 MS. LEA: A what, sorry? 818 MR. KLOOSTRA: This is just illustrative. 819 MS. LEA: A what, sir? 820 MR. KLOOSTRA: Embrun has a municipal transformer station in this shaded area, somewhere in this vicinity. 821 MS. LEA: Thank you. 822 MR. KLOOSTRA: Hydro One has stations adjacent to there known as Embrun DS, St. Onge DS, and we have a station right here as well that does support this area as well as elsewhere. In fact, this station, Embrun, has one feeder abutting the service territory and would be used to service this development, and it could be switched to another feeder that comes out of Embrun should this feeder go down. 823 We have two feeders in this vicinity here that envelope Embrun and serve across, and then we have a 27.6 kV feeder that comes out of the DS in this area, shown in the green, that actually serves their commercial/light industrial area. 824 Our capacity in this area is quite substantial. It was designed to facilitate growth in and around Embrun. And upon the building of Embrun municipal station, some of this capacity is underutilised. 825 I believe Mr. Wood mentioned this morning that in fact Embrun recently maintained their station. Typically when utility companies do that, they're required to take their station off-line, or turn the power off. And in fact when they did that, they asked Ontario Hydro -- Hydro One to provide service to all of Embrun. And we have enough capacity to do that because our capacity has been stranded by the construction of their facilities. 826 MR. ENGELBERG: In light of the fact that you stated that it's your belief that Hydro Embrun has only one station, what happens when Hydro Embrun loses supply to their one station, or, for example, when they don't lose supply but they want to do routine maintenance? 827 MR. GEE: As I understand it, they do not have backup supply capacity. If they were to lose the station they don't have a backup supply, the customers would be without power. I do understand that during routine planned maintenance, they have approached us and we've provided them the capacity and backup to take their customer -- take their station out of service for maintenance. 828 MR. ENGELBERG: How does Hydro One deliver the supply when the town -- when the Embrun community needs power? 829 MR. GEE: I'm not sure of the exact arrangements. I think from Mr. Kloostra's comments we have a capacity at both St Onge and Embrun DS. And because we had formerly supplied the full area before the ation we have established ties in through the town. 830 MR. ENGELBERG: Mr. Kloostra, you stated the assets that Hydro One has in the area. Would you say that those assets now are fully utilised? 831 MR. KLOOSTRA: No, they're not. As we can all appreciate, there's some history around the formation of Embrun. Clearly when LDCs plan their facilities, they plan their facilities for the service territories that they serve. And indeed, Hydro One, at the time, planned for service territory completely surrounding Embrun, as well as serving some of the customers in the village. 832 We heard this morning that there were some minutes brought forward around a period in time when we were experiencing some difficulties with serving all growth in the region. And I believe the suggestion was that they build a station to relieve some of that growth within their service territory, to take some of the pressure off of our assets. 833 So indeed we have assets there to serve the customers that are served there, as well as the growth in our service territory in that area. And should some of that service territory be removed from Hydro One at this point, our assets would continue to be underutilised, and more fully underutilised. 834 MR. ENGELBERG: Does Hydro One have facilities that it needs right now, the supply facilities in the area, to serve the 52 lots? I'm not talking about what it's going to build down the road, but do you need to build any capacity in order to serve the 52 lots? 835 MR. KLOOSTRA: No, we do not. 836 MR. ENGELBERG: Will Hydro One need to build anything in order to serve the other 120 lots of the subdivision? 837 MR. KLOOSTRA: No, we won't. 838 MR. ENGELBERG: What effect, if any, would there be on Hydro One's system and its assets and its ratepayers if those assets are underutilised? 839 MR. STEVENS: First, I think we've demonstrated we do have capacity. You know, our sheer ability to pick up those 1,400 customers demonstrates that. We do plan, we do plan on an area basis. One of the parameters when we plan is our license territory or our service territory. 840 So if we are not able to use that excess capacity by connecting new customers in the area we would expect, then that is really an opportunity cost to our customers. It really means we have assets sitting in our rate base today that will be pro-rated over existing -- collected over existing customers rather than the continual addition of customers that we would normally expect would be using that capacity over the future. 841 One additional point that I think is worth recognising is this is not an uncommon situation. We do roughly about 18,000 connections in any given year. About 80 percent of those would be in subdivisions, and I would fathom a guess that about half of that would be in areas that surround municipalities not unlike Embrun. So to lose that kind of load on a continual basis, and if this were -- I know this is not supposed to set a precedent, but if this were to set a precedent, it would have a sweeping impact on our existing customers and no doubt would put upward pressure on rates. 842 MR. ENGELBERG: Are you saying that Hydro One likes to serve subdivisions like this? 843 MR. STEVENS: Well, our typical density is around 10 customers per kilometre. Obviously the density here is substantially above that. We have postage-stamp rates right now, and I'd like to make a comment on rates about, kind of, the unfairness or apples-to-oranges type comparison that's been made in the past. But adding subdivisions like this does actually lower our average cost to serve, and it would be to the benefit of our existing customers. 844 MR. ENGELBERG: Well, Mr. Lamarche said this morning that it would be a benefit to Hydro Embrun to be able to take these customers. Would it be a benefit to Hydro One to take the customers? 845 MR. STEVENS: Absolutely. I mean, this is one isolated case. But just going back to my previous point, if you multiply that by -- you know, or prorate that across the 18,000 connections that we do, many of those in urban fringe areas, as we call them, the benefit is substantial. And that happens year over year over year. That's 18,000 per year that we do. 846 MR. ENGELBERG: It's exactly the same principle as for Hydro Embrun, isn't it? If you get new growth in customers, it's good for your other ratepayers? 847 MR. STEVENS: Well, I think that -- I think there's actually two factors for us: One is, you know, our overhead costs. You're recovering over a larger base, but also because we tend to be more rural density, we're actually lowering -- or sorry, increasing our density by adding this type of customer; whereas, it's more uniform for them. 848 MR. ENGELBERG: Now, Hydro One's submission talks about rates being transitional. Can you explain what's meant by that. 849 MR. STEVENS: Yeah, a couple things. I mentioned, when I was just talking about myself, that I participate on the OEB task force. 850 When we did the original OEB rate unbundling exercise, it was fully realized that we wanted to maintain at least two principles: One, we wanted to keep it fairly simple, recognizing at the time there was well over a hundred LDCs that would be submitting rate applications. 851 The other thing is given that there wasn't cost-of-service data available, we wanted to minimize the bad outcomes. So what that really means is we want to unbundle rates, and we didn't want to initially shift costs around. 852 Now, I understand, after the evidence presented this morning, that is probably not that big an issue with Embrun, but it is for us. I can give you an example. We've acquired, as I mentioned earlier, 88 utilities that have been integrated with Hydro One Networks, plus we also acquired Hydro One, Brampton. There were earlier rate comparisons done, and they were comparing to our rural rates. 853 Well, the fact of the matter is, right in the same township, we acquired Russell, and our rates for Russell are almost identical to Embrun. We also acquired Clarence-Rockland just to the north, and the rate -- the service charge there is about half what it is in Russell, as it is in North Glengarry. 854 So when we integrate those customers into the Hydro One Networks system for rate-setting purposes, the answer may not be the same as what it is today when you just look at the face value of the rates. 855 MR. ENGELBERG: When you say the same township, are you talking about the same township that Embrun is in? 856 MR. STEVENS: That's correct. We acquired the former municipal utility of Russell police village. I may not be getting that exactly right, but that's what I understand. 857 Just further on the transitional issue, we also have low-voltage lines, as we call them, or, I think, 44,000 volts into that area, that we as a result of Bill 210 are not recovering for right now. 858 So when those costs eventually, hopefully, actually flow through to embedded distributors like Embrun, they will have to then in turn pass that cost on to their customers. And I believe the impact for Embrun would be somewhere around 10 percent. I haven't done an exact calculation, but that just gives you a bit of an order of magnitude. 859 MR. ENGELBERG: All right. I believe you said earlier that Hydro One's area completely surrounds the Hydro Embrun territory; is that correct? 860 MR. KLOOSTRA: That's correct. 861 MR. ENGELBERG: Can you tell us how customers access service in that area surrounding Embrun, whether that be for maintenance, outages, or to speak with someone about a bill? What kind of facilities does Hydro One make available for those things? 862 MR. GEE: In that area, we have a service centre in Winchester, which is about 27 kilometres away. We talked a little about that earlier. We also have a subcentre in Rockland, just to the north, and we staff all the core services ourself with full-time regular staff, well-trained. We do our own connections. We have our own staff to handle trouble calls, cable locates, disconnects, our meter-reading in the area are all handled by our own fully trained, full-time staff. 863 Customers access us through a call centre that is available 24 hours a day, seven days a week, has a customer system which has a history and record of the customer, also of the premises, because the two don't always match. Customers move around. We know about both. 864 The call centre is linked into an outage management system that, based on calls that come in for trouble calls, can automatically project and locate, predict, where a trouble call problem will be. Calls are dispatched to the Winchester office, and if needed, directly to crews in the area who can respond to the trouble calls in the area. 865 Work such as connections, cable locates, other such services are done from the Winchester service center. 866 MR. ENGELBERG: Are the services bilingual? 867 MR. GEE: Yes, they are. 868 MR. ENGELBERG: All right. I don't have any further questions on the main application for these witnesses, but since the Board is interested in interim solutions, I can ask some questions now as to whether there is an interim solution that Hydro One would be able to provide. 869 MR. GEE: Sure. 870 MR. ENGELBERG: Would you be able to help us with that? 871 MR. GEE: Yes, I think I can. 872 To us, we believe there's a reasonable interim solution here that could work quite well. It would involve Embrun serving their 38 lots initially, us serving our 52 lots based on whichever route into the first part of the subdivision we talked about earlier, however that was to develop. 873 Embrun raised some concerns about, knowing the future size, enable to -- whether they need the three-phase or single-phase. And if their decision is they need three-phase, that could be reasonably handled by putting in conduit, pipe into the ground. So while you're digging the trench, you lay the one cable, the one phase that is needed for sure. You then put in conduit for the other two phases. That's a very common utility practice. You use it very often when you cross roads. If you open up a road, you put in as many conduits as you can -- roads, only if you open it. 874 At a later time, if it's needed, the future phases could be pulled through those conduits relatively easily. They could be tapped into the first transformer in our subdivision, and we would simply disconnect at the other end. 875 If we were going to serve in that direction, if that was the final case, there would need to be an asset transfer that would have to be arranged and deal with the final solution. 876 MR. ENGELBERG: We heard this morning something to the effect there would have to be a switch box built, and that would be wasted. Can you comment on that? 877 MR. GEE: Yeah, that would be one possible solution is to put in a switching unit. I wouldn't recommend that, because as the developer indicated, that's a rather costly item; let's not case it. So I believe the -- pre-using conduit and pulling in the cables as needed would be a much preferable solution and is a common practice we use all the time. 878 So we think we could have that kind of arrangement. We could both serve and settle our own customers, and then the decision in the combined hearing, based on the principles, could be done, and an asset transfer agreed to after the fact. 879 MR. ENGELBERG: For those of us who aren't technical, does using the conduit as you've said mean that we don't need the switch box? 880 MR. GEE: I'm sorry. Yes, that is correct. You do not need it. 881 MR. ENGELBERG: Now, what if the other lots that you mentioned start being built upon in June or during the summer, as we discussed. And by "the other lots," I'm referring to the other 120 over and above the 38 that are being done right now on the Embrun side and the 52 being done on the Hydro One side. 882 MR. GEE: Because our service plan is such that we have to come into the far end first and work backwards towards our line, we could continue with us servicing those lots as needed, not inconvenience the developer at all. Hopefully, he's as successful as he has been in selling his lots. 883 And then when the combined hearing is actually heard, it would just be part of any asset transfer that is agreed to at a later date. 884 MR. ENGELBERG: All right. 885 I have no further questions. 886 MR. SOMMERVILLE: Mr. Martel? 887 CROSS-EXAMINATION BY MR. MARTEL: 888 MR. MARTEL: Mr. Gee, you have indicated that the -- when you were over on the other side of the chart that there could be an underground line from St. Thomas being put underground and servicing the critical area of the subdivision that we're talking about here. 889 Are you saying that you will do that or could do that, and if so, at what cost? 890 MR. GEE: From this point here -- 891 MR. MARTEL: Yes. 892 MR. GEE: -- to put the underground line in? 893 MR. MARTEL: That's correct. 894 MR. GEE: If we had that subdivision plan. What we need to be able to do this is we need certainty where that road is going to be and what its elevation is if we're going to bury a cable. We wouldn't want later to be coming in installing anything that would impact that. So if we could -- and having to do any construction that might impact and dig up that cable. 895 Once the plan is registered and surveyed, you know that. So if that's available, in the discussion this morning that perhaps in June they'd be able to open up the next part of the subdivision, if that happens, and I'm not sure of the exact plans, but if it was and we can get confirmation of where that road is, we would be able to install permanent supply, which is the ideal scenario. Having said that, there is also no problem with a temporary supply and that's quite common. 896 MR. MARTEL: And what would be the cost of doing that, assuming that -- and there's a lot of assumptions here, that the development would be fairly -- might be this summer, and Mr. Patenaude would be able to establish right away where the road is. Those are the two assumptions that are only assumptions. But assuming that this was the case, what would be the cost, and who would pay for it? 897 MR. GEE: This would be part of the -- I'm sorry, perhaps I wasn't clear on this. This supply line coming in would be part of the permanent, ongoing requirements to supply the subdivision. It is nothing different than they would require. So he would be paying to have facilities installed that he would, in fact, require as he develops his subdivision. 898 So the assumption we're making is if he proceeds with registering this plan, he's obviously going to want service, and this is just part of the natural service of that subdivision. 899 MR. MARTEL: Now, let's assume -- also assume for a moment that this will not occur because either the coming on-line of the next subdivision does not occur as fast as anticipated, for many reasons. 900 MR. GEE: Yeah. 901 MR. MARTEL: What would be -- what is the cost of servicing this subdivision by way of the over-ground -- above-ground, sorry, lines? 902 MR. GEE: In this case, if we do not get this road established to this point, we would install an overhead line of, I don't know the exact distance, 2 or 300 metres and that cost would be about $30,000. When and if the future subdivision did go, that line would be taken down and all the materials would be reusable. So there would be an investment of labour. And again that's the natural supply option to be done in a developments that has chosen to develop in this particular sequence. 903 MR. MARTEL: And who pays for that line? 904 MR. GEE: At this point there's no cost to the developer on that line, on the premises that the full development is coming based on his plans. 905 MR. MARTEL: Is that normal procedure for Hydro One, not to charge the customer for a cost of a line? 906 MR. GEE: Having said that, the developer is being charged, will be charged for the whole expansion into there. So from an economic evaluation point of view, there is the total revenue in the subdivision and the cost would be there, and there will be a capital contribution. So the developer, it's all rolled in as part of that cost and ongoing, and the temporary service for the potential development is not included. 907 MR. MARTEL: So you're looking at the whole area itself as far as cost is concerned. 908 MR. GEE: Yes. We're planning and making evaluations based on the total potential load here. 909 MR. MARTEL: You've indicated that one possible solution in the eyes of Hydro One would be the installation of underground lines or -- 910 MR. GEE: Conduit. 911 MR. MARTEL: -- conduit. 912 MR. GEE: Yes. 913 MR. MARTEL: What would be the cost of that? 914 MR. GEE: The cost would be a couple hundred dollars. I haven't measured the exact distance here, but your opening up the trench, you're doing the digging and you're doing the backfilling to put in one cable. The cost of conduit is very, very inexpensive. So in total we're talking a few hundred dollars. 915 MR. MARTEL: You compared that -- laying conduit inside a subdivision, you compared that to crossing a road; am I correct in that? 916 MR. GEE: I was trying to make the reference that conduit is a very common practice. If a utility, any utility, ends up having to cross a road and gets a road-cut permit, while they do so, they will put in as many conduits as they can get in because the municipality does not like you coming back and cut again. So we will at the bottom of the pole have a number open conduits capped with pull ropes in them. 917 MR. MARTEL: And you're saying that it's fairly easy afterwards to bring in as many lines as you can. 918 MR. GEE: Absolutely. As many conduits as you have, you can bring in. The other advantage of the conduit, to be honest, is if there was any problem with a primary cable eventually, rather than have to dig up and locate the primary and, as Mr. Woods indicated do some damage to lines, you could pull in a new primary in that conduit quite easily without having to have that kind of problem. 919 MR. MARTEL: What was the design cost that Hydro One was charging to Mr. Patenaude in this Frontenac subdivision? 920 MR. GEE: In this subdivision, by the time we got involved -- we were not contacted about this subdivision from the developer. We were made aware of it through the submission, and at that point it was mid February. We made a point of calling the developer and making a meeting with him. At that time he already had design done. Based on that we did not charge for this design. What we did do is spend some time reviewing it, see if it met our requirements and make any suggestions that would be appropriate. 921 Our approach there was that, knowing that there was no certainty on how the hearing would go, we were trying to be sure that he would be prepared to service his lots, however this decision might go. So we did not charge him for a design because he had it completed already. 922 MR. MARTEL: What would be the normal design cost for the developer? 923 MR. GEE: Our normal design cost is $3.50 a meter for a subdivision. 924 MR. MARTEL: I don't think I have any more questions. 925 MR. SOMMERVILLE: Thank you, Mr. Martel. 926 Mr. Lokan. 927 MR. LOKAN: No questions. 928 MR. SOMMERVILLE: Any questions, sir? 929 MR. MATTHEWS: For Wirebury Connections? 930 MR. SOMMERVILLE: Yes. 931 MR. MATTHEWS: I have a few, if I may. 932 CROSS-EXAMINATION BY MR. MATTHEWS: 933 MR. MATTHEWS: The contribution that we heard talked about earlier, has Hydro One developed a contribution calculation for this. 934 MR. GEE: No. We have not completed our calculations yet. We are waiting for the design to be signed back. We have started some of our preliminary calculations but cannot finish it until we have a final accepted design, obviously. 935 MR. MATTHEWS: And I wonder if you could comment on whether it's better for you to serve all of the 90 lots in your interim solution. 936 MR. GEE: Are you asking if it would be better if we served the Embrun lots? 937 MR. MATTHEWS: Correct. 938 MR. GEE: I believe that that is probably the type of decision that should go in the combined hearing. I think the arguments that both utilities are making around the benefits of growth are valid, and I think the issues of issues day, including customer preference, effects on all customers, rates hearings are really needed to make that decision. I believe from Hydro One's viewpoint, we could serve those lots and it would be advantageous to our customers. 939 MR. MATTHEWS: But rather than getting into the issues that are before the combined proceeding I'm wondering if there's an economic benefit or an operational benefit for one party to serve all those lots versus two. 940 MR. GEE: I don't believe there's anything significant there. I think a split service in a subdivision is not a problem at all. I think it happens -- there's a precedent in Embrun, and there's boundaries all over the province where there are boundaries between LDCs. It is not a problem at all in my mind. 941 MR. MATTHEWS: So the bigger issue is the economies of scale that accrue to your customers. 942 MR. GEE: Yes, that's correct. 943 MR. MATTHEWS: There was a question raised about the rates and the potential harmonization of rates going forward, and that the rates in Russell were on parity with those of Embrun. What is the expected direction of the rates once they're harmonized, those rates you referred to in Russell? Would they go up or would they down? 944 MR. STEVENS: It's difficult to say at this point in time. We're actually preparing for a 2006 rate filing, and not only are we looking at the integration of the 88 utilities that we've acquired within Hydro One Networks, we're also taking a look at, kind of, some of the regional rate disparity. If you look from north to south, the costs vary quite significantly. So we're going to take a look at that as part of our assessment, so at this point in time, I wouldn't want to speculate where the rates of Russell might go. 945 MR. MATTHEWS: Well, maybe I can ask the question this way: How do the rates in Russell compare to your average current rate? 946 MR. STEVENS: It's pretty close to the analysis that was showing in this package. It's a lot lower than our R1 rate, which is our -- which is a rural rate. And our R1 customers, the average density is somewhere around 30 customers per kilometre; whereas, a typical urban is about 70 customers per kilometre. 947 So even though -- I mean, you can do the comparison, but I don't think it's an apples-to-apples comparison. 948 MR. MATTHEWS: I understand. With regards to this temporary service, the 30,000 that was mentioned, you said that would not be charged to Embrun. Who would pay for that? 949 MR. GEE: The 30,000 is -- the 30,000 is part of the overall economic evaluation for the whole subdivision. And in our going forward, we're expecting the future development, and there won't that be full cost. We're expecting to reclaim all the material in that case. 950 So the costs of that, along with the capital contribution, is in there, and we have that based on the future revenues of the second phase as it opens up. 951 MR. MATTHEWS: So you have the salvage value from the used poles, but you'd still have the labour to put them in and take them out? 952 MR. GEE: Yes. We would have the installation and removal labour; that's correct. 953 MR. MATTHEWS: Thank you. 954 Those are all my questions. 955 MR. SOMMERVILLE: Thank you. 956 Ms. Lea? 957 MS. LEA: Thank you. 958 CROSS-EXAMINATION BY MS. LEA: 959 MS. LEA: I don't remember which of you gentlemen discussed the connection charge, but I think someone made the point that Hydro One's connection charge is quite different, depending on whether the developer does the work or Hydro One does the work; is that correct? 960 MR. GEE: That's correct. 961 MS. LEA: When Embrun was talking about its $53 connection charge, I believe it was, do you know whether that's with the utility doing the work or the customer doing the work? 962 MR. GEE: I do not know. 963 MS. LEA: All right. So we don't know which of the two costs for Hydro One that that $53 should be compared to? 964 MR. GEE: No, I do not. 965 MS. LEA: And we didn't have that question from Hydro One to Embrun this morning. 966 MR. GEE: No, we didn't. 967 MS. LEA: I need to understand, Mr. Gee, very clearly what Hydro One's plan would be under a couple of scenarios. 968 If the Board decided today that it would make a final decision in favour of Hydro One, that is, it would not make an interim decision but a final decision that the boundary would remain the same, what would your plan be for serving this subdivision to deal with the immediate 52 lots that you would have to deal with? 969 MR. GEE: Based on what we heard this morning, I think we would have an immediate discussion with the developer based on his pending plans for the next phase. If he was in a position where he was, in fact, going to open up that phase very soon and could establish that road, we would have a discussion of whether the timing of such would be -- we could do a -- the permanent installation. 970 If that did not work for him time-wise, we would go back to our original servicing plan, which would be a temporary overhead line through the future phase. 971 MS. LEA: Okay. So it's really a question of whether you can get the information about the road as opposed to the nature of the decision that the Board -- 972 MR. GEE: Absolutely. What changed this morning was the idea that perhaps that phase was opening up very soon. That's our preferred solution. Ever since the beginning, knowing where the roads are in that subdivision allow you to come through. If that's not the case, we can deal with it. We deal with it all the time. 973 MS. LEA: Okay. Now, have you done any costing for that option; that is, going -- providing service to these 52 lots through an underground service, which anticipates the building of the others? 974 MR. GEE: No, we haven't. I would say that in trying to make sure we did catch up here and make sure the developer would be able to proceed, which way the Board might decide, we heard he wasn't ready, and we quickly went to our temporary pole solution. 975 MS. LEA: Now, if the Board were to render an interim decision in favour of Hydro One, that is, that it did not on an interim basis change the licence of Embrun, but it might do that on a permanent basis, what would be your plan for servicing this immediate need? 976 MR. GEE: It would be exactly the same, in my view. We would have a discussion with the developer about his timing and what he might register. We would then make either -- depending on the information provided -- through either one of those two cases the permanent underground supply or the temporary overhead line and connect up the subdivision. 977 MS. LEA: So you would be willing to make the investment to install the underground line, despite the fact that you don't know whether you're going to be able to eventually serve this development? 978 MR. GEE: I made that based on the assumption the interim decision would include an asset transfer, so perhaps I wasn't clear -- 979 MS. LEA: Yes, you need to be fairly detailed -- 980 MR. GEE: I'm sorry. I -- if the interim solution was that each party would serve their own, with the combined hearing decided who would eventually have it, we would go ahead and install what would be required for the subdivision. And then there would be an asset transfer to the other utility, and the underground line would be required to serve the subdivision by Embrun at some point. 981 MS. LEA: Okay. So you're saying that -- 982 MR. GEE: That line would be needed. The line coming through is going to be needed by either utility to service eventually. 983 MS. LEA: All right. So I think that what you said earlier is the way I understand it, that the decision whether to use overhead or underground service is not dependent on the type of decision the Board makes? 984 MR. GEE: No, not at all. It really depends on the developer's ability and timing and what he would like to do. 985 MS. LEA: Okay. In order to provide that service, Mr. Patenaude indicated this morning that for -- as he understood your proposal to be at that time, it was for overhead line, so I think that's what he was speaking to, that you would need an easement through an area which -- which -- between your lines, which are the eastern boundary of the proposed amendment area, and the 52 lots that presently need service, which are about in the middle of that amendment area. 986 Can you comment on the requirement for an easement? 987 MR. GEE: I'm not familiar with the exact field location, so perhaps I'll just show on the drawing and look at what may be happening here. 988 If this property is, in fact, owned by the developer today, it would be my view that we could build this line down on his current property. It would be the back lot of future houses. But once he starts to build houses, he'll have a road in, and the line will come out; right? 989 If he does not own this property, we would need to have an easement across it. I'm not sure if he owns it. What may be the case is we might have him propose to try to walk down this lot line. If you're walking down the lot line, you're starting to get onto the adjacent property owner, and I don't know why we would have made the decision. Again, there might have been a field reason. I would have built it totally on the developer's property, so it's self-contained on the lots he own, and tear it down. And I don't know if there was a reason why we weren't doing that. 990 MS. LEA: What about the difficulties during construction mentioned by Mr. Patenaude? 991 MR. GEE: I don't see that as a factor at all. If we have that at the -- either on the lot line or the back of the lot, it's going to be away from -- it's going to be away from the road construction and road activities, so it's not going to be in the vicinity. 992 And construction near overhead lines is a common scenario. It happens all the time, and there are real precautions that have to happen, but they are very routine. 993 MS. LEA: If you determined that you could provide underground service to the 52 lots that require service, you've indicated that that line would be eventually needed for the subdivision anyway and would be included in the economic evaluation of the project as a whole; am I correct? 994 MR. GEE: That's correct. 995 MS. LEA: But when would the customer, Mr. Patenaude, have to pay you for that line? Would he have to give you a capital contribution before you brought it to the 52 houses, or would it be a part of the capital contribution in this next phase? 996 MR. GEE: I should probably clarify this point. 997 In our application of the Distribution System Code, our current policy, we charge the developer for the expansion cost. So the developer will pay for the expansion cost of getting the new facilities into the subdivision, along with any underground differential for transformers. We charge the builders, the home-owners as they connect the connection cost and system reinforcement cost. 998 So the developer is only charging for the capital contribution cost, and it will not necessarily be contingent on those other factors. 999 MS. LEA: Right. My question was: If you are going to build an underground service to service the 52 lots, just the 52 right now, because that's where we're at, when does he have to give you the money for that? 1000 MR. GEE: I'm sorry. Yes. When we install, he would have to pay for it. That's correct. 1001 MS. LEA: Okay. So he has to pay for it up front. 1002 MR. GEE: Exactly. Yes. 1003 MS. LEA: And then I presume he'd be credited for that if and when he builds the rest of it, and the line is in use then. 1004 MR. GEE: In our case, we -- he would -- we have given him credit for the lots being filled up at this point, so we are going to charge the builders at that point. So he will not be charged the -- there will be no rebate or cost. His costs would be the same in both scenarios. He has to build the line and pay for it, and then as the subdivision fills in, the builders will pay the remaining costs. 1005 MS. LEA: No, I think I understood that. It was merely a question of when, sir, whether he needed to pay it before he got his 52 lots, power to those from Hydro One, or whether he needed to pay it -- 1006 MR. GEE: Yes. He has to pay it at the time. Sorry. 1007 MS. LEA: Up front? 1008 MR. GEE: Yes. Sorry. 1009 MS. LEA: That's fine. Maybe I'm getting a bit mixed up. So Mr. Patenaude would pay that up front, and then is there some rebating that would occur, even though it's the same customer attaching later, or is it a different -- 1010 MR. GEE: No, there's no rebating. 1011 MS. LEA: There's no rebating? 1012 MR. GEE: In a subdivision, the presumption is that the lots will fill up and sell. 1013 MS. LEA: All right. So it's not a series of unforecasted -- 1014 MR. GEE: That's correct. 1015 MS. LEA: Okay. I understand. 1016 Thank you very much, gentlemen. Thank you. Those are my questions. 1017 MR. SOMMERVILLE: Redirect, Mr. Martel? 1018 Oh, I beg your pardon. You're in cross-examination. You want to raise something, sir? 1019 MR. MARTEL: There was one question that I'd like to ask. 1020 MR. SOMMERVILLE: Mr. Engelberg, do you have any objection? 1021 MR. ENGELBERG: No. 1022 MR. SOMMERVILLE: Mr. Martel? 1023 FURTHER CROSS-EXAMINATION BY MR. MARTEL: 1024 MR. MARTEL: What is the present policy of Hydro One with respect to providing developers with economic evaluation studies? 1025 MR. GEE: Our present policy is that the developer will pay for the expansion, and the economic evaluation affects the customers and builders coming in. 1026 So we actually split up the economic model between the developer and the future customers and the builders. 1027 MR. MARTEL: And I'm not sure that I got you. Which part of the cost of servicing the subdivision is paid by Hydro One? Does Hydro One pay any cost? 1028 MR. GEE: The economic evaluation that you're talking about is done as a whole, and then we split the costs and benefits between builders and customers, typically builders, in the developer piece. 1029 So the developer pays for the expansion but does not have to pay for any system reinforcement costs. We do not ask the developer to pay those costs. We hold those off for the people who actually build and add load to the system. 1030 MR. MARTEL: Have you had a chance to look at the economic evaluation study that Embrun Hydro did for Mr. Patenaude? 1031 MR. GEE: I saw it very briefly this morning. 1032 MR. MARTEL: Just so that I'm able to follow your answer, in this economic evaluation study, Mr. Patenaude's contribution to the cost of servicing the 52 lots would be, if Embrun Hydro was to do it, $24,591, and the Embrun Cooperative cost, 44,424. 1033 Would there be such a split if -- mind you, maybe in a different portion -- if Hydro One was to do it? 1034 MR. GEE: I'm sorry. Can you repeat the question. 1035 MR. MARTEL: In the Cooperative's economic evaluation study, Mr. Patenaude would end up paying roughly $24,500, and the Cooperative would pay roughly $44,500. 1036 If Hydro One was to do that study, what would be the split of the costs between Mr. Patenaude and Hydro One? 1037 MR. GEE: Yes, I understand. 1038 There would be a split in costs. We would supply our basic service, which would include basic transformation up to 30 meters of secondary service and -- meter and the layout for connection. 1039 I don't have the exact dollar values, I suppose, as we haven't finished the pricing, but there would be a split where we would pay for the basic connection, and the developer would pay for the incremental costs above that. 1040 MR. MARTEL: Thank you. 1041 QUESTIONS FROM THE BOARD: 1042 MS. SPOEL: I have a question, Mr. Stevens, regarding rates, and I guess as a member of the Board, I probably should know the answer to this question, but I don't, so I'm going to ask you. 1043 You referred to the utilities acquired by Hydro One Networks, such as the former police village of Russell, as having rates that were comparable to the Embrun rates, presumably because it's an -- it's an urban -- or a built-up area, if you want to call it that, an urban area. 1044 I assume, therefore, that if you had a subdivision that was being built within -- or contiguous to the village of -- the former village of Russell, that you -- that Hydro One Networks would be charging an urban type of rate to the homeowners, the eventual homeowners in those subdivisions. But that in this case, because it's in what you would class or have classified as -- and when I say "you," I'm not -- has been classified, if you want, as rural area, that despite the fact that this is a subdivision and is an urban type of development, that these customers still have to pay the rural rate as if they were at a density of approximately eight per -- is it eight per kilometre; is that correct? Have I understood that correctly? 1045 MR. STEVENS: Yeah, I believe you have understood it correctly. 1046 Based on what I know today, they would fall within our R1 class, which is a residential customer with average density greater than 15 customers per kilometre and a contiguous pocket of a hundred customers. But it does illustrate the point that we've got an issue to deal with. We've now got a base of urban customers of about 240,000. 1047 What I was trying to make the point, and this is around the rates being transitional, is we have an exercise to go through between now and then to get that formula right, and that's what we're going to be undertaking through a cost-of-service study. 1048 So post 2006 is where I really can't answer that question. Today you're perfectly correct. 1049 MS. SPOEL: Thank you. 1050 MR. SOMMERVILLE: Mr. Gee, I just wanted to be clear about what Hydro One would be prepared to do in the absence of a firm plan of subdivision for the further 120 lots. And let me indicate what my understanding is, and perhaps you can correct me if I'm wrong. 1051 My understanding is that you would run a line from St. Thomas Road, an overhead line across -- either along the back of the lots that are described in the drawing there or over that property to the 52 lots that lie within your territory that are the subject matter of this proceeding, and that you would provide that. That would be at a cost of about $30,000. 1052 And how would the financing of that $30,000 be handled? Who would pay for that, first off? 1053 MR. GEE: With the view that we will get all the customers in our service territory, including the future 120 lots that are planned -- 1054 MR. SOMMERVILLE: Well, let's leave that assumption aside for the moment. Let's just deal with the 52 that are there right now. 1055 MR. GEE: Okay. In either case, that overhead -- the overhead line is not a temporary facility related to an interim decision here. The temporary line is temporary in nature because of the phasing of the development, how it's going. So to some extent, that line is required in either case for the servicing. 1056 As the -- as the future phase developed, and the permanent line was in place, it very well could be that that line -- an interim decision where we served our own territory, that line, in fact, could be torn down and would be replaced by the permanent line by the time the combined hearings were finished. 1057 MR. SOMMERVILLE: And who would pay for that $30,000 expense -- 1058 MR. GEE: It would then be a part of the overall servicing and assets that were needed to service the subdivision. 1059 MR. SOMMERVILLE: So it would be buried in the overall economic reevaluation -- 1060 MR. GEE: Exactly. Exactly. 1061 MR. SOMMERVILLE: What if nothing else happens with respect to the lots? What if the 120 -- or Mr. Patenaude chooses to build in another area before he chooses to build in this area, and the 120 don't materialize? 1062 What happens if that -- this pocket remains the area of development? 1063 MR. GEE: In the scenario where the future development never happens, the line coming in can act as a permanent supply for the subdivision. It won't affect the quality of supply of what's there, but you have a line that was built with expected load growth that will not be materialized and will be an under-utilized facility, but will be there for when and if -- rather than being temporary as in a few months, it would be temporary as in a few years or when future development comes. 1064 So it would be like any other line that is not fully utilized. 1065 MR. SOMMERVILLE: So you would be spending the $30,000 now, and you would be making that expenditure on the basis of speculation that at some point this area is going to fill in, and you're going to get the rest of the business? 1066 MR. GEE: I wouldn't use the word "speculation" myself. I would use as a part of future system planning in the area, knowing there's undeveloped land and potential growth. 1067 MR. SOMMERVILLE: I don't know whether that speaks to your experience or mine, but thank you very much. I appreciate your answer. 1068 MS. LEA: Mr. Chairman, I have one question arising out of yours, if possible. 1069 FURTHER CROSS-EXAMINATION BY MS. LEA: 1070 MS. LEA: Would you seek a load guarantee from the customer before you built that line? 1071 MR. GEE: In the case of subdivision developments, that hasn't been our practice. 1072 In a normal line extension, such as a business park of 10 or 20 megs that somebody might be trying to build in a part of the province, we would look for a load guarantee, because a load is uncertain. 1073 Our past practice with subdivisions -- our history with subdivisions is they do fill up, and you do get the load. We do not have many subdivisions that don't fill. So we don't ask for a load guarantee in those cases, and it's really because of the nature of subdivisions as per a more speculative load. 1074 MS. LEA: Okay. So do I take it, then, that your answer is no? 1075 MR. GEE: That's correct. 1076 MS. LEA: Thank you. 1077 MR. SOMMERVILLE: I believe there's another question arising. 1078 MR. MATTHEWS: Mr. Chair, if I may. I know I'm out of order here. 1079 FURTHER CROSS-EXAMINATION BY MR. MATTHEWS: 1080 MR. MATTHEWS: I'm just wondering about, looking at this from afar from our perspective and the perspective of customer choice, and I'm looking specifically at the Electricity Act with regards to the obligation to connect. In reading that very carefully, I'm seeing that: 1081 "The distributor shall connect a building to its distribution system if (1), the building lies along its lines; and (2), if the owner/occupant or other person in charge of the building requests the connection in writing." 1082 And I'd just like to ask if the developer has requested a connection from Ontario Hydro -- or from Hydro One, I should say? 1083 MR. GEE: When we met with the developer at the end of February, he asked us to proceed with the review of his design and a pricing for the subdivision. I am not sure that's characterized as an offer to connect, but he has asked us to do those things. 1084 I'm sorry. I should be more -- our offer to connect for a subdivision is our subdivision agreement. And our subdivision agreement will be supplied when the pricing is done. It's a timing of process here, perhaps. 1085 MR. MATTHEWS: Maybe I can ask one follow-up question, then: Does Hydro One believe that the customer should decide which distributor they should -- can go with? 1086 MR. GEE: I believe the customer preference is one of the issues for issue day and the -- that it's going to be heard in the combined hearing, and this hearing is a little more regarded to urgency. 1087 MR. MATTHEWS: Thank you. 1088 MR. SOMMERVILLE: Thank you. 1089 Do you have any redirect, Mr. Engelberg? 1090 MR. ENGELBERG: I have no redirect. Thank you, Mr. Chairman. 1091 MR. SOMMERVILLE: The witnesses are excused. Thank you very much. 1092 Mr. Martel, you have the opportunity to call rebuttal evidence, and let me indicate that the Board is interested in Mr. Patenaude's reaction to the -- one of the difficulties we have here is that the proposals emerge and change to some extent during the course of the proceeding, and it would be very helpful to the Board to know Mr. Patenaude's response to the proposal as it stands. 1093 MR. MARTEL: I think Mr. Patenaude probably cannot wait to come back. 1094 MR. SOMMERVILLE: Mr. Patenaude, you are still under oath. 1095 COOPERATIVE EMBRUN HYDRO INC. - PANEL 1 - RECALLED: 1096 R.PATENAUDE; Previously sworn. 1097 EXAMINATION BY MR. MARTEL: 1098 MR. MARTEL: Mr. Patenaude, you've heard what has been said since you testified, and I think what the Board and what I would like you to indicate is, first of all, the -- your knowledge of the timing of the next phases of your subdivisions and what outside forces can affect the timing of those developments. 1099 MR. PATENAUDE: There's a couple of issues here, that they're talking about that road connecting to St. Thomas Road, the street, which will not happen, this one, because we're not -- this one we're talking about phase 5 and 6. 1100 The 38 lots that we're talking about is lower down to the west, so -- and -- so that's the one issue, first of all, because, like, there's only a limited lots available for Embrun right now, because of the infrastructure. So once I have these 38 lots, we may be stopped for -- it's hard to say when. 1101 We don't -- we don't decide that as a municipality, like, with the infrastructure and everything. There's got to be some studies made up and everything. 1102 So that could take two years, and it could take five years before they grant more lots for the region, for Embrun village. So those, phase 5 and 6 could take five years, but it could take more; we don't know. 1103 So and the other issue here is building a line, first of all, on a proposed street is something that will never happen in my subdivision. I'm not -- I'm not rich enough to do this kind of work, to work like that, because you'd have to dig your services under the line, cross those live lines every time you want to go to the lots for your -- with your underground services, sewer, storm, and all this. I don't work that way. So that's impossible. That's not going to happen. 1104 The only solution right now is the overhead line. That's the only solution. And I'm afraid that if it's thrown in with the economical evaluation, one way or the other, I end up paying for it. 1105 It's not going to be a direct cost, but it's got to be worked out in the evaluation -- the economical evaluation, and it's just going to bring the price -- it's going to work out at the end, but instead of costing me 24,000, it may cost me 54,000. 1106 That's the difference. 1107 MR. MARTEL: And what do you think of the idea of installing conduit in the -- 1108 MR. PATENAUDE: Again, when you do something like that, there's costs related to it. It's not much cheaper to install a conduit than to install a wire. 1109 You've got to put all those pipes in right down from the one corner of the street. You've got to go all along the side of the one street, and that's a lot of work; it's a lot of labour; it's a lot of pipes in the ground that I will pay for. 1110 And that's not -- we're not talking a thousand dollars here. We're talking money. 1111 MR. MARTEL: I don't have any more questions. 1112 MR. SOMMERVILLE: Mr. Engelberg? 1113 MR. ENGELBERG: I just have one question. 1114 CROSS-EXAMINATION BY MR. ENGELBERG: 1115 MR. ENGELBERG: When you gave your answer to Mr. Martel's first question, you were talking about phases 5 and 6. What about phase 4? This morning you were talking about phase 4. 1116 MR. PATENAUDE: That's the 38 lots I'm talking about that is more to the west, and it's -- it's actually in about even line -- like, if you had the map here, I could show you, or I could show you -- I think we already outlined it and gave it to -- it's not there. 1117 That paper that I gave you there this morning is the outline. Oh, yeah, that's right. We've got it right here. 1118 This is my phase 3 here in dark. This is the phase 4 here. That stops about even with this, so -- and that's the one he's talking about, the road, the future road. And that's where the power line is going to be, like, if it's overhead. 1119 So this part here, that's part 5 and 6. 1120 This is part 4 here, which has got to be worked out within the phase 3. 1121 MR. ENGELBERG: Mr. Patenaude, is phase 4 the part that you said in your evidence this morning that you hoped to build this summer? 1122 MR. PATENAUDE: That's the one we would hope to build -- we don't hope to build this summer. We hope to apply for it in June, and depending on the time -- again, that's out of my control, how quick they will allow me these lots. 1123 And hopefully, myself, I'm aiming for -- to have some serviced lots there by the middle of the winter, let's say. 1124 But like I say, again, I have no assurance of that, because I'm not the one that decides where the allocation of the lot will go, because there's other developers in town, and the Township has only so many lots to give. 1125 So that's why I want to apply, like, early enough, so I can try to get those 38. But they may very well decide to give it to somebody else or say, No, this guy needs them more than you and whatnot. 1126 MR. ENGELBERG: And just to be clear, those 38 lots are over and above the 52 plus 38 that you're building now? 1127 MR. PATENAUDE: Yeah, you're right. 1128 MR. ENGELBERG: Thank you. 1129 No further questions. 1130 MR. SOMMERVILLE: Mr. Lokan? 1131 MR. LOKAN: No questions. 1132 CROSS-EXAMINATION BY MS. LEA: 1133 MS. LEA: One question. 1134 Sir, do you own the land for phases 5 and 6 yet? 1135 MR. PATENAUDE: Yes, I do. 1136 MS. LEA: Thank you. 1137 QUESTIONS FROM THE BOARD: 1138 MS. SPOEL: I was going to ask Mr. Patenaude in terms of when you talk about the servicing issues, you're talking about the availability of water and sewer service and issues of that nature for the village as a whole? 1139 MR. PATENAUDE: Mm-hm. 1140 MS. SPOEL: Thank you. 1141 MR. SOMMERVILLE: Mr. Patenaude, your concern about the proposal that Hydro has just made of an overhead line that runs to the 52 lots that are at issue in this proceeding, could you restate that to me, please? 1142 MR. PATENAUDE: The overhead line? 1143 MR. SOMMERVILLE: Yes. 1144 MR. PATENAUDE: They said there was no cost, but they would build it in the cost of the 30,000, they would build -- they would build it in and do the economical evaluation, and it would be kind of wrapped up in there. So at the end it doesn't matter if it's paid now or if it's wrapped up into the economic evaluation, I will end up paying for it. 1145 If it's not now, it's going to be at the end of the project, when they come up -- 1146 MR. SOMMERVILLE: You don't expect to not have to pay for the creation of power servicing to these properties, do you? 1147 MR. PATENAUDE: That's what I'm saying. We end up paying 30,000 there for temporary line that I don't need if I go with Embrun. That's why my preference is to stay with Embrun, because the power is already at the lot line, is already there when we start. Where the other one we have to build a 30,000 line for temporary that we don't need if we go the other way. 1148 It's not a preference of being with Hydro One or Embrun, that doesn't matter to me. At the end, like, it's how much it's going to cost me. That's my concern. If it costs me $50,000 more to go with Hydro One, I don't want to go with them I want to go with Embrun. Because the lines are already there and we -- like, all we have to do is continue. It's a simple procedure. 1149 Where otherwise it gets a lot more complicated. We need temporary line, and it may be there ten years, we don't know. The easement I was talking about is not on this property here, because the power right now is here. They have to come up here with a pole, and cross -- the power is across the road, so they have to come up here with a line and then they leave it anchored in the field on the east side of St. Thomas, and that's the easement we're concerned about. 1150 So there's more -- there's a lot involved it's all normal procedure, it's all procedure that takes time. You don't get an easement over night. It was very clear when we had the meeting, the site meeting, they said we'd to come up here and we'd have to find a way to get an easement from the people there, which I know is not going to be simple. So this is a concern. 1151 MR. SOMMERVILLE: Thank you, Mr. Patenaude. 1152 I believe that concludes the evidentiary portion, unless any other party has witnesses to call. 1153 Mr. Patenaude, you're excused. Thank you very much. 1154 MR. PATENAUDE: Thank you. 1155 MR. SOMMERVILLE: We will take 15 minutes and reconvene for argument. Is that satisfactory to the parties? 1156 MR. MARTEL: Yes. 1157 MR. SOMMERVILLE: We'll start with you, Mr. Martel, at 3:05. We'll stand adjourned until then. Thank you. 1158 --- Recess taken at 2:50 p.m. 1159 --- On resuming at 3:10 p.m. 1160 MR. SOMMERVILLE: Please be seated. 1161 Mr. Martel. 1162 MR. MARTEL: yes. 1163 SUBMISSIONS BY MR. MARTEL: 1164 MR. MARTEL: the Embrun co-op is unique in its structure in Ontario. It is the only electrical cooperative in Ontario owned by its members. Each member is allowed one vote, and each member has the benefit of receiving a patronage return each year in accordance with the decision of its board of directors and the annual meeting approved by the members. 1165 The Embrun Co-op's right of return on equity is 7.85 versus 9.88 for Hydro One, and the rate of -- and the rate of -- charge of electricity by the Embrun Co-op is substantially lower than those of Hydro One, and even lower if one takes into account the patronage return that the Co-op gives to its members. 1166 The technical design of the whole subdivision can be more appropriately done by the Embrun Co-op because it surrounds the subdivision to the west and to the south and therefore can provide two feeders and a loop for added security at no additional cost to the developer. 1167 The Embrun Co-op has completed and presented to Mr. Patenaude's engineer its design of the subdivision; the Embrun Co-op has completed its economic evaluation study of the subdivision and has presented it to Mr. Patenaude, who is very happy with it and has approved it. The Embrun substation can easily handle the 90 more customers that the Frontenac subdivision will entail. In addition, the 90 more customers to Embrun Co-op clients will allow the Co-op to lower its operating costs proportionately even lower than Hydro One. 1168 Mr. Patenaude has requested that the Embrun Co-op apply to the Board for a critical in-service requirement because he can wait no longer. The foundations are in the ground at the moment; sales of contract have been entered into; electrical work must start by next week. 1169 Asking the developer to anticipate where a future road might be within the next week or so is not practically feasible. Any asset transfer between the co-op and the Cooperative is not, at this point in time, contemplated by the Embrun Co-op. 1170 Mr. Patenaude is not willing to pay now for an underground line that he does not need right now. The economic evaluation study meted used -- required to be used means that Mr. Patenaude will pay the entire cost of the overhead wire. 1171 The time frame with respect to the future phases of the subdivisions are undetermined at this point in time. Mr. Patenaude has indicated that he would not work with an underground line being installed before all the other services are put in the ground and before the houses are built. 1172 Mr. Patenaude has indicated that he has dealt with the Embrun Co-op on two previous subdivisions and is very satisfied with the cost and the services of the Co-op. Certainty and rapidity of service is extremely important to Mr. Patenaude. Mr. Patenaude is at a competitive disadvantage if he cannot offer the opportunity to his potential customers a chance to become a member of an electrical cooperative, a very unique concept in Ontario, with the possibility of becoming a member of the Co-op, with lower electrical rates, and a patronage return on top of that. 1173 Those would be all my submissions, Mr. Chairman. 1174 MR. SOMMERVILLE: Thank you, Mr. Martel. 1175 Mr. Engelberg. 1176 SUBMISSIONS BY MR. ENGELBERG: 1177 MR. ENGELBERG: Thank you, Mr. Chairman. 1178 We're here today to determine who will connect the 52 houses in phase 1 of a subdivision, and an additional 120 houses in phase 2, although I now understand that that 120 decision will be put off until somewhat later. 1179 The 52 lots, 38 -- plus 38 on Hydro Embrun's side, make a total of 90 lots, but the 52 lots that we're hearing about today are totally within Hydro One's service territory. And we've heard today that there may be another 38 that will be built shortly, probably even or possibly even before the fall of this year. 1180 We've heard also that Hydro Embrun's service territory is part of the township of Russell, and that Hydro One serves the entire remainder of the township; that Hydro One completely surrounds Hydro Embrun's service territory; and that Hydro One serves approximately three times as many customers as Hydro Embrun. 1181 We've also heard that this would be at least the third subdivision in the Embrun area that straddles the boundary between the two LDCs, and that in the other two the situation is exactly what one would expect it to be: Hydro Embrun delivers electricity to the houses on its side of the boundary, and Hydro One delivers electricity to all the houses in the same division that are on its side of the boundary. 1182 We've heard that customers know whom to call in those subdivisions because they know who they get their bill from; they know who to call when there's a problem. We also heard that there are boundaries all over the province, in all kinds of matters, that result in different costs and different charges on each side of those boundaries; whether they happen to run down the middle of subdivisions or elsewhere. 1183 In this particular subdivision that we're dealing with today, Hydro Embrun's facilities border the west side of the subdivision; Hydro One's facilities border the east side of the subdivision, so both LDCs are there at the subdivision. 1184 Hydro Embrun's submission speaks of the convenience of having an office in town from nine to five, but Hydro One has a 24/7 call centre. Hydro Embrun's office closes; Hydro One's call centre never closes. Hydro Embrun uses contractors; Hydro One uses its own employees. Probably many of the customers have no use for being able to discuss their bills after hours, but probably many of them do. 1185 I submit that we haven't really heard any definitive evidence here today as to whether service is better or worse depending on which LDC services the subdivision. 1186 What we have heard about at length is the matter of ongoing distribution rates which happen to be cheaper right now if the customers connect to Hydro Embrun than if the customers connect to Hydro One, the licensed supplier. We've heard that the present rates of the LDCs are transitional on all LDCs and therefore don't reflect the true cost of service. And I would submit that patronage return is not on the issues list. 1187 I also submit that we've heard no definitive evidence that one of these two LDCs has lower construction costs for this subdivision, including the lots on the Hydro One side, than the other LDC does. If Hydro One hasn't come up with numbers as firm as Hydro Embrun has, it's for the very reason that the developer himself has not provided the information to Hydro One that Hydro One is waiting for. We heard that in evidence this morning. 1188 We also heard that the developer notified and came to Hydro One around February of this year, despite being aware last fall of the subdivision and the building schedule, and that he wanted electrical service. 1189 I would also submit that Mr. Patenaude knew where the lots were. He knew that not only the 52 lots but all the other lots that will abut the 52 - the 38 plus the remaining approximately 82 - were within Hydro One's service territory; Hydro One was the supplier. I also submit that he knew that Hydro One was on the west end. He knew what would need to be done. He knew that Hydro One would be coming in from the west and that Hydro Embrun would need to come in from the east. 1190 On the matter of facilities that have been built, we've heard that the Hydro Embrun system can handle the subdivision's 38 homes that are on its side of the boundary, plus the 52 on Hydro One's side. Well, the Hydro One system can also handle all of those homes. The difference between the two is that when Hydro One designed, planned, and built its system, it was supposed to look to the future. It was entitled to plan to the future; it was entitled to design for the future and to look to the future of customer growth inside its service territory, including subdivisions exactly like this one. These subdivisions were supposed to be at the edge of areas like Embrun, and Hydro One built and planned for that. 1191 Hydro Embrun may have the capacity and the facility to serve it, but when they designed and planned and built their facilities, the scheme of regulation and planning in the province was, and is such that they were not supposed to look to the future of customer growth and planning and design outside their service area. Hydro One was supposed to; just as Hydro Embrun is supposed to plan for the future to serve areas within its service territory and Hydro One is not supposed to design its system for that. 1192 So what I'm getting to here is that tearing these 52 homes out of the Hydro One service territory will result in underuse of Hydro One facilities. We heard that in evidence several times; that there is underuse, that the underuse would increase. And if these homes remained in Hydro One territory, along with the adjacent properties, Hydro One's assets would be used to a greater degree and more efficiently. Just as if any other utility is able to get new customers, it is able to use its facilities more efficiently as well. 1193 The evidence that we heard at the beginning of the morning from Hydro Embrun about how it would be good for them and their members to get additional homes is, in my submission, exactly the same for Hydro One. It would be good for Hydro One and for its ratepayers to be allowed to get the continued growth in its service territory that's occurring here on the edge of Hydro Embrun and all over the province. 1194 What we're looking at here as far as an issue is the question that's raised by the possibility of tearing these lots out of Hydro One's territory, and the question is: Should Hydro One, and perhaps other LDCs, stop building and planning their systems for growth at the edges of their territory? Should they begin to expect that all the customers that are growing at the edge of their territory inside their territory will be lost? Should they not build for these customers on the expectation that the customers will always be going in an application to another LDC who can also serve them? Wherever there's a boundary in the province, it's always going to be possible, in my submission, for the LDC across the boundary to serve customers inside the incumbent's territory. 1195 We heard from Mr. Stevens that Hydro One provides about 18,000 new connections a year, all over the province; 80 percent of them, he said, were in subdivisions, of which half are just like the one in Embrun. They are subdivisions at the edge of an existing, less rural area and higher density area. If every one of these, or if one of these, or if everywhere it's possible for the customers to be taken out of the territory and awarded to the incumbent, there will be no end to it. 1196 For example, if Hydro Embrun is allowed to be able to take these 52 homes, the next time we'll be met with the fact that, well, now they're even further east and why shouldn't they be able to go for the other 38, and then why shouldn't they able to go for the other 82. 1197 I also wonder, based on the number of these that are occurring around the province, will there be many more of these? If there are 18,000 connections, there are many of them that may qualify for being required to be connected critically. And, in my submission, what the Board should make sure of is that applications for critical connection are used to determine an award of territory if and when the incumbent utility is unable to serve the new growth in the subdivision as promptly as the developer needs it to be served. 1198 Finally, to just go back to a point that I made a few minutes ago. If not moving all of these lots out of the Hydro One territory will result in an underuse or an undercapacity of Hydro Embrun's facilities, in my submission, the Board should ignore that fact. 1199 Those are my submissions. 1200 MR. SOMMERVILLE: Thank you, Mr. Engelberg. 1201 Mr. Lokan. 1202 SUBMISSIONS BY MR. LOKAN: 1203 MR. LOKAN: Thank you. The Power Workers' Union, first of all, adopts the submissions of Hydro One, and I'll have a few additional comments. 1204 As the Board has noted, the primary goal with these expedited hearings is to tread lightly, and I think that should be kept in mind. 1205 You have a possible interim solution to evaluate, and if that is rejected for any reason, you have the question of what final order to make. On the interim solution - I'm not going to go into the specifics of it - it will be for the Board to judge whether it's feasible or not. I would say that even if there are some disadvantages to the interim solution, some degree of disadvantage should be tolerated in order to preserve the integrity of the combined proceedings where the main policy issues will be worked out; that there should be a bias in favour of interim solutions where they work, even if imperfect. 1206 If the Board finds it necessary to make a final order, the considerations that the Board has before it today, I think, could be grouped into three kinds; we've heard about service issues, we've heard about pricing or financial issues, and we've heard about technical issues. 1207 On the service issues, I would submit that the evidence is mixed. There's no particular advantage to either side serving. There are many advantages to Hydro One because of its 24/7, large-scale and sophisticated operation that easily counterbalance anything that the applicants brought up. 1208 On the financial issues, if we're talking about the capital costs of putting in the connection, the information that you have before you, it's difficult to make a comparison because there was much more information on the one side than on the other, I would submit to you that that's because the developer chose to go to go to Embrun Hydro and not to advance its discussions with Hydro One very far, and so that imbalance in information should not count against Hydro One. It is, after all, within Hydro One's territory. So no particular conclusions to be drawn on the capital side. 1209 On the long-term rates issues, those are precisely the sorts of issues that get you drawn into the combined proceeding. There are many and substantive policy issues about whether an LDC that's urban should be allowed to cherry-pick in this particular way, where the rate structures are coming up or down. All of that is better left to the fall and therefore pricing financial issues should not be considered today. 1210 That leaves the third area of technical issues. Again, I won't go into those, but will just make a couple of comments on onus. 1211 Again, it is, to some extent, difficult to judge because you haven't got the picture of the entire subdivision before you. In a way, it's misleading and artificial to take out only these 52 homes, when we know that most likely we'll be looking to a further 120. 1212 In any event, the applicant has the onus of persuading you that there should be an amendment. If the applicant's technical case has persuaded you that their proposal for technical reasons is better, it's their hurdle; that's a persuasion that they must make in this proceeding. If they haven't, I would say you should stay with the status quo and preserve the territorial integrity of the licenses for the reasons that were given by counsel for Hydro One, in particular the planning around service areas, those kinds of considerations. 1213 If you are persuaded by technical considerations that Embrun Hydro is the better proposal, I would suggest that the interim -- the expedited hearing order that you make be confined to those considerations in the reasons, in much the same way that you did with Veridian Hydro the other day in order to avoid treading too heavily on the policy issues. 1214 And those are my submissions. 1215 MR. SOMMERVILLE: Thank you, Mr. Lokan. 1216 I believe the representative for Wirebury is -- are you standing in his place, sir? 1217 UNIDENTIFIED SPEAKER: Yes. We have no submissions in this case. 1218 MR. SOMMERVILLE: Thank you. 1219 Mr. Martel, you have a right to reply. 1220 REPLY SUBMISSIONS BY MR. MARTEL: 1221 MR. MARTEL: I think that when we're down to the wire, so to speak, as in this case, the desire of the customer, which is Mr. Patenaude and the 52 future home-owners, should prevail. If there is to be any bias, I think it should be in favour of Mr. Patenaude, who is the customer. 1222 These critical in-service hearings are not intended to set precedent; I think everybody understands that. And we also understand that the coming hearings will be those who will set the rules by which the future development and growth of the embedded LDCs will occur in the province within the coming years. 1223 MR. SOMMERVILLE: Thank you. 1224 The Board will retire for 15 minutes to determine if we can arrive at a decision and deliver a decision today, or if, on the other hand, we have to defer our decision for more consideration. So we will reconvene at 3:45, and hopefully we'll have an indication at that time. Thank you. 1225 --- Recess taken at 3:30 p.m. 1226 --- On resuming at 3:53 p.m. 1227 DECISION: 1228 MR. SOMMERVILLE: The Board has been able to arrive at a decision and we will deliver it now. 1229 The Board was greatly assisted today by the clarification of the application, so it became clear that the matter at issue today involved 52 units, as described in the materials filed by the applicant, that formed part of phase 3 of a subdivision development undertaken by Mr. Patenaude. 1230 There was a consensus among the parties that provision of electricity to the 52 units in question was an immediate requirement and therefore the first element of the criteria for this hearing has been met, and that is that there is an urgency to the matter that requires us to make a determination. 1231 It also occurs to us that because of the nature of the need at this point, that the solution or the approach to be taken to be authorised by the Board cannot be an interim solution per se, but must be a final determination with respect to these 52 units. 1232 I want to identify very clearly some of the very serious concerns that the Board has with respect to this application, and the great difficulty that the Board has had in coming to the conclusion that it has. 1233 One of the great disappointments in this case is the difficulty that the Board has in assessing the evolving proposals, and that's not a matter of criticism to Hydro One in this case. If it is a criticism, Mr. Patenaude, it may be one of you; that in adopting and progressing with your subdivision, it would have been appropriate for you to contact Hydro One much earlier in this process to ensure that Hydro One had a reasonable opportunity and a timely opportunity to provide you with the kind of proposals and input that would have put you in a better position to make a decision, and certainly would have put us in a better position to assess the requirement. 1234 It should always be the case that where a change in service area is contemplated, that the competing interest get a reasonable opportunity, a timely opportunity, comprehensive, encyclopedic opportunity to make proposals relevant to the objective. 1235 In making our determination, the question of cooperative membership, the issues -- there's no clear evidence with respect to reliability issues as between Hydro One and Hydro Embrun. There's no clear disparity between the competing interest with respect to the capacity or ability to serve or service customers in any way, shape or form. There's no convincing evidence on that point at all. 1236 The matter that turned the Board to the approach that it has decided upon really has to do with the very narrow, technical circumstance that commends itself and which has led us to grant to Hydro Embrun the right to serve the 52 units. The simple geography of their resources in order to deal with this specific, pressing circumstance leads us to make the order that we will make in this case. 1237 I want to emphasise that this decision should not be regarded as having a precedential value of any kind; not simply with respect to the combined proceeding or the development of principles associated with that combined proceeding, but also with respect to the remainder of the Hydro territory that is subject to Mr. Patenaude's further subdivision plans. This decision ought not to be seen as creating any momentum toward the disposition of the remaining area that is part of the original application. 1238 The Board listened with great interest to a number of issues that were raised by the parties, and inevitably some of those issues, Mr. Lokan indicated, Mr. Engelberg indicated, go to some very fundamental matters related to service area amendments, the obligation to serve, and any number of other issues that arise in this subject matter; the issue of rates. And our decision was not, in any manner, coloured by the disparity in rates in this case. As I've indicated, it was the technical elegance, for want of a better word, of the solution processed by Embrun that turned us to that solution. 1239 An order giving effect to this decision will be issued in due course. 1240 Are there any issues arising from the decision? 1241 MR. ENGELBERG: The only thing I can think of, Mr. Chairman, is that Hydro One would like an opportunity to review the amended description of the area that is sought to be obtained today. 1242 MR. SOMMERVILLE: Indeed. I purposely, Mr. Engelberg, did not have a stab at the technical definition of the 52 units. We do want that to be as precise as possible. Mr. Martel very graciously, I think, has indicated he will assist in that. 1243 May I say the Board is very grateful for the assistance of counsel. Mr. Martel, your materials were excellent and assisted us greatly. And, Mr. Engelberg, Mr. Lokan, we very much appreciate your very constructive attitude with respect to the matter. 1244 I hope everyone has a safe trip home. Thank you. 1245 --- Whereupon the hearing adjourned at 4:00 p.m.