Rep: OEB Doc: 12RXC Rev: 0 ONTARIO ENERGY BOARD Volume: REVISION OF SETTLEMENT PROPOSAL 25 AUGUST 2003 BEFORE: R. BETTS PRESIDING MEMBER G. DOMINY MEMBER 1 RP-2003-0048 2 IN THE MATTER OF the Ontario Energy Board Act, 1998, S.O. 1998, c.15 (Sched. B); AND IN THE MATTER OF an Application by Enbridge Gas Distribution Inc. for an Order or Orders approving or fixing just and reasonable rates and other charges for the sale, distribution, transmission and storage of gas commencing October 1, 2003. 3 RP-2003-0048 4 25 AUGUST 2003 5 HEARING HELD AT TORONTO, ONTARIO 6 APPEARANCES 7 JENNIFER LEA Board Counsel COLIN SCHUCH Board Staff FRED CASS Enbridge Gas Distribution TANIA PERSAD Enbridge Gas Distribution TOM BRETT OASBO VINCENT DeROSE IGUA ROBERT WARREN CAC ROGER HIGGIN VECC JAY SHEPHERD OPSBA DAVID POCH GEC & CIELAP JACK GIBBONS Pollution Probe MALCOLM ROWAN CME MARK MATTSON Energy Probe JIM LAFORET Union Gas 8 TABLE OF CONTENTS 9 APPEARANCES: [26] PRELIMINARY MATTERS: [49] PRESENTATION OF PARTIAL SETTLEMENT AGREEMENT BY MR. CASS: [76] EGDI - PANEL 1: [90] DECISION: [208] FURTHER PRESENTATION OF PARTIAL SETTLEMENT AGREEMENT BY MR. CASS: [215] SUBMISSIONS BY MR. WARREN: [331] SUBMISSIONS BY MR. SHEPHERD: [345] REPLY BY MR. CASS: [353] EGDI - PANEL 1; Recalled [372] PROCEDURAL MATTERS: [396] 10 EXHIBITS 11 12 UNDERTAKINGS 13 14 --- Upon commencing at 9:00 a.m. 15 MR. BETTS: Good morning, everybody. Can you hear me at the back? The speakers are up. Mr. Pudge, our Assistant Secretary, is at the back just to see how things are going. We have certainly worked this morning at getting everything back up and on line. 16 When I came in this morning, we were on emergency power in here, and the speaker system wasn't working, but it looks like Mr. Pudge has got us back in order. 17 So welcome, everybody. 18 Mr. Pudge, are we still having problems with that door? Just by way of an announcement, if anybody hasn't heard it, there are door passes apparently hung on the back door to allow you to enter the security system. That's another one of the problems that is lagging from our power outage last week. The door is locked, so you'll have to use the pass against the little decoder on the wall to enter the facilities here. 19 Okay. The Board is sitting today in the matter of application RP-2003-0048 submitted by Enbridge Distribution Gas Inc. for an order or orders approving or fixing rates for the sale, distribution, transmission and storage of gas in their fiscal year 2004. 20 On June 26th, 2003, the Board convened to hear submissions on the list of issues to be considered in this application. During the period from August 5th to August 12th, 2003, parties met in an ADR setting in an effort to settle some or all of the issues in this application. 21 The Board was scheduled to sit on August 15th to receive the resulting settlement proposal, but the blackout which occurred on Thursday, August 14th, 2003, caused that day to be delayed. 22 The Board's consideration of the partial settlement agreement has been delayed until today, respecting the request of the Premier to maintain only essential service during the emergency conditions last week. 23 My name is Bob Betts. I am the Presiding Member in this hearing. Joining me on the panel is fellow Board Member, Mr. George Dominy. 24 May I have appearances, please. 25 Mr. Cass. 26 APPEARANCES: 27 MR. CASS: Thank you, Mr. Chairman. Good morning. 28 Fred Cass for Enbridge Gas Distribution, and with me as well is Tania Persad. 29 MR. BETTS: Thank you. 30 MR. BRETT: Good morning. My name is Tom Brett and I am here for the Ontario Association of School Business Officials. 31 MR. DeROSE: Good morning, Mr. Chairman. My name is Vincent DeRose, and I am here on behalf of the Industrial Gas Users Association. 32 MR. WARREN: Robert Warren for the Consumers' Association of Canada. 33 MS. LEA: Jennifer Lea for Board Staff. 34 MR. BETTS: Thank you, Ms. Lea. 35 MR. HIGGIN: Mr. Chairman, Roger Higgin, a consultant to the Vulnerable Energy Consumers Coalition, VECC, and I would like to enter an appearance on behalf of Michael Janigan who is unable to attend today. 36 MR. SHEPHERD: Jay Shepherd, the Ontario Public School Boards' Association. 37 MR. POCH: David Poch on behalf of Green Energy Coalition and the Canadian Institute for Environmental Law and Policy. 38 MR. GIBBONS: Jack Gibbons, Pollution Probe. 39 MR. BETTS: Mr. Gibbons, thank you. 40 MR. ROWAN: Malcolm Rowan, Canadian Manufacturers & Exporters. 41 MR. BETTS: Thank you, Mr. Rowan. 42 MR. MATTSON: Mark Mattson, counsel to Energy Probe, and the two consultants assisting me here, Mr. Adams and Mr. MacIntosh . 43 MR. BETTS: Thank you, Mr. Mattson. And that is everybody. 44 Just by way of an initial announcement, the Board finalized its decision on the DSM portion of the Enbridge application RP-2002-0133, and as far as I know, it was scheduled to be on the web site on Friday afternoon, and I do see some nods, so that indicates that it was received by some. 45 If anybody needs a hard copy and has not received one yet, if there isn't one at the back, the Board can make one available to you. 46 Before we begin, are there any preliminary matters for the Panel's consideration? 47 MR. CASS: I have a preliminary matter, Mr. Chairman, if no one else does. 48 MR. BETTS: Mr. Cass. 49 PRELIMINARY MATTERS: 50 MR. CASS: If I may, Mr. Chairman, I would like to briefly address the order that the Board made on Friday, that is, August 22nd. 51 First, as was done in the submissions by the company prior to this order, I would like to apologize on my behalf, as counsel for the company, and also on behalf of the company, for the failure to adequately explain the company's original efforts to comply with Procedural Order 2. That apology was contained in the company's submissions, and I just wanted to reiterate that this morning. 52 Second, a number of people have been working very diligently on the weekend to produce the numbers directed in the Board's order. There have been some difficulties. The work is continuing this morning. I just want to emphasize that it is not that the company has any intention of being difficult. These are difficulties with actual production of the numbers that are required. 53 My suggestion, if it is workable for others, is that because we have the noon deadline, because we have a DSM ADR that will continue today anyway, I wonder whether the Board might be able to reconvene at noon so we could then, if necessary, actually put witnesses on the stand to tell the Board where matters are in relation to compliance with the order. It may be that at that time there are no remaining difficulties, but at least explain to the Board what the status is at that time. 54 There is another related issue and that is the issue of confidentiality, and here I must confess I am a little bit out of my depth. I am not a securities lawyer. We have been trying to get securities law advice this morning on how to deal with the production of these numbers. 55 My best understanding at this time is that to provide the numbers as ordered would be to produce numbers that have never been publicly disclosed in that format, so the company is grappling with the securities law implications of that and what, if anything, needs to be done either to insure that the numbers are used only for the purpose of this hearing and nothing else or that the numbers are made available more broadly, which I think would be problematic. 56 So I am suggesting that is perhaps an additional thing that we might address at noon if we could reconvene at that time, and we will continue to grapple with the issue and see what the issue really is, if there is one, and what the solutions might be. 57 And just in that context, if I could make one more point, and I don't mean by this to reargue anything, but I am sure people are asking themselves, having seen what TransCanada PipeLines files, why is this such a big deal for the company. 58 And again, without any intention of rearguing, the company, as I understand it, simply is not set up to do a quarterly process the way TransCanada does, and here I am talking about utility results, utility returns and so on. 59 As was indicated in the submission that was filed with the Board, the company does the utility calculation on an annual basis, and it is not that it is impossible to do it quarterly, but in order to go through the usual securities law disclosure, one would have a process in place to get the numbers on a utility basis, to get board of directors' approval and to disseminate them widely by press release or other means, which is what I think TransCanada PipeLines does. 60 So it is not that it can't be done; it is just that the company is not set up to do things the way TransCanada does as far as a utility basis is concerned. The company has been doing that annually at year-end, is my understanding. 61 So it is not my intention to reargue, but just to try to help people understand what we are grappling with, and again make the suggestion that perhaps, if the Board is available, and others, we could reconvene at noon, put witnesses on the stand, if necessary, to talk about what has been done and if there are any remaining issues at that time, to talk about what they are. 62 Thank you, sir. 63 MR. BETTS: Any submissions from parties with respect to that submission? 64 MR. WARREN: Mr. Chairman, just on the issue of the timing of it, I spoke with Mr. Schuch this morning when we first arrived, and he indicated that he thought it was the Board's intention to proceed with the core rate-setting issues tomorrow morning. I distinguish that from the DSM issues, obviously, which have rate-making implications. 65 And I am wondering if Mr. Cass now has a sense of the likelihood that the financial information won't be available until later today, which obviously impinges on the time we have available to absorb it and prepare cross-examination on it. 66 And I guess the second issue is if it wouldn't be available until later today - and I don't mean by these observations any criticism of EGDI at all; it is obviously a difficult task to assemble it - if that might have some effect on the Board's schedule, for example, having core issues dealt with, for example, on Wednesday as opposed to Tuesday. 67 Does the Board have that flexibility? 68 MR. CASS: Just by way of clarification for the Board's benefit and Mr. Warren's as well, Mr. Chairman, if I may, my understanding is that there will certainly be information, and I think considerable information, available at noon. It is just a question of whether it would totally comply with the Board's expectations and others' expectations. 69 And that's where, again, if the difficulties persist, there may be some explanation needed. But I didn't mean to suggest that we can't or that the company can't have information by noon. My understanding is that there will be considerable information by noon. 70 MR. BETTS: So I think probably that we'll reserve final judgment on all of these questions until noon. We will reconvene, as has been requested, at noon, and Mr. Dominy and I and Staff are available throughout the day. We may be in and out, by the sound of it, of the room occasionally, but we will look forward to that update at noon. And certainly whatever is available, even if it comes in in stages or phases, I am sure would be helpful to intervenors to get what they can get as early as possible. 71 I know it is in all of our interests to try and expedite this process, but undoubtedly, and I know all of you agree with this, the Board's primary objective is to end this process with just and reasonable rates, and we have to take as much time as is required to reach that end. But on the other hand, we will work with all of you in trying to move this process as quickly and as effectively as we can. 72 So we'll continue with the plans to hear the partial settlement agreement this morning. We'll see where that takes us. We will certainly plan on getting together at, we'll say, 12 o'clock noon. We'll set that time and get an update and ideally receive whatever information is available. And I will remind the applicant, and I know you are fully aware of it, probably more than any other applicant, that the Board does have a way of handling confidential information; and that because it is considered confidential by the applicant doesn't necessarily mean that it should not be worked at in terms of production. So I'll just leave that with you. 73 Are there any other preliminary matters to deal with at this time? 74 Then I think at this point we would like to receive the partial settlement agreement. If possible, perhaps the applicant can present it to us. I appreciate that there are portions in there that you can not speak to, but perhaps you can outline them for us. And I will invite any parties that would like to speak to those to clarify their position with respect to those items. But if you could give us the broad overview, I think that would be very helpful, both for us and the record. 75 Mr. Cass. 76 PRESENTATION OF PARTIAL SETTLEMENT AGREEMENT BY MR. CASS: 77 MR. CASS: Yes, thank you, sir. 78 If it meets with the Board's approval, I would propose to go through the settlement proposal briefly, but not actually in the order that the issues appear, and I'll explain why. 79 As the Board would know from having received the document, there is a complete settlement on a number of issues, and I should clarify that in this context, the complete settlement, of course, means not necessarily that everybody attending the settlement conference agreed to a settlement, but all those who took a position agreed to a settlement. 80 So in that context, and I will come back to that later, there is a complete settlement on issues 1.1, 2, 3, 4 and 6. There is a partial settlement on issues 1, largely speaking, without getting into the separate sub-issues, and 7. I think the partial settlement of issue 1 at large and issue 7 is interrelated. 81 Then issue 5 there has simply been a deferral because at the time of the settlement conference, parties were awaiting the Board's 2003 DSM decision, which is now available. 82 I propose to leave aside issue 1 as I describe the settlement proposal because there is not a complete settlement on all of issue 1, simply on issue 1.1. So what I would propose to do is go through issues 2.6 and then come back to 1 and 7 in respect of which there is this interrelated partial settlement. 83 Issue 2, if I could turn to that, was the issue pertaining to forecast 2003 year-end deferral account balances and disposition. The forecast year-end balances, including interest, as the Board would have seen, amounts to a credit of $34.9 million. The proposal, with which all parties taking a position have agreed, is that the credit be cleared as a one-time adjustment concurrent with the implementation of 2004 rates. 84 And I should explain, perhaps I should have done this at the outset, that the settlement proposal, for example, talks about expectations with respect to the PGVA. We do have a witness panel here. If there are detailed questions about subjects like that, there is a witness panel I did not introduce. Perhaps at the end of the presentation of the settlement proposal by me, I might introduce the witness panel in case the Board has more detailed questions on subjects like the one that I just referred to. 85 MR. BETTS: Mr. Cass, perhaps if it is not a problem, you could introduce the panel now, just in case a question pops up that we would like to have addressed at that time. So let's do that, and then we'll know who we are talking to, although I see a lot of familiar faces there. 86 MR. CASS: Certainly, sir, that will probably be more efficient, and I should have raised it at the outset, I apologize. 87 MR. BETTS: And do you feel as though they should be sworn in as well? 88 MR. CASS: I would think that would be appropriate because they are here as witnesses. The panel, if I may just introduce them before they come forward to be sworn, are Robert Bourke, Don Small, Pascale Duguay, Malini Giridhar, and Tom Ladanyi. 89 MR. BETTS: Welcome. And then we will swear the panel in. 90 EGDI - PANEL 1: 91 R.BOURKE; Sworn. 92 D.SMALL; Sworn. 93 P.DUGUAY; Sworn. 94 M.GIRIDHAR; Sworn. 95 T.LADANYI; Sworn. 96 MR. BETTS: Thank you. The panel has been sworn in. 97 MR. CASS: Thank you, sir. 98 Just before matters are thrown over to the Board for any questions that there may be to put to the witness panel, perhaps I should just explain one other element of issue 2, or I should say the complete settlement of issue 2. That arises from the concluding paragraph of the description of the complete settlement. 99 There is an agreement that parties will have the right to ask questions and seek direction from the Board on the issue that's described here about the attribution of load balancing costs. I just thought that a little more clarity might be useful in terms of when those questions would be asked and that direction would be sought. 100 I think the intent is that it would be a matter addressed in the QRAM application, and I think the only reason it didn't specifically refer to the QRAM application is there was a thought that the QRAM might end up being split into a typical QRAM and also a review of gas costs, transportation and storage evidence. 101 So it is my understanding that it is not an expectation that that would be addressed in the hearing this week. It is something that parties have agreed that they can address in the QRAM application, and specifically, in such portion of the QRAM application that deals with gas costs, transportation and storage evidence. 102 The concluding words do say "as part of this case." I think that was merely intended to mean an application that will be under the continuing docket number of this case, but not to imply that it would be done this week. 103 MR. BETTS: Thank you. I think we would have asked that question had you not offered the answer in advance. 104 Proceed at this point, and we may come back to this. 105 MR. CASS: Thank you, sir. 106 Issue number 3 in the settlement proposal is the proposed 2004 variance and deferral accounts. 107 The company had proposed a group of gas supply related accounts as well as a group of non-gas supply related accounts for the test year. The company's proposal for these accounts is listed in each of the two instances. 108 The complete settlement is an agreement on the company's proposal with four exceptions that are described. Without going into detail and repeating the wording of each of the four exceptions, there is an exception in respect of the 2004 market restructuring deferral account that had been proposed by the company because there was agreement that, going back to a previous form of account, which was a customer communication plan deferral account, and establishing such an account for 2004 would be a more appropriate approach than to have the account proposed by the company. 109 So that was the first exception. 110 The second exception related to the company's proposal for a 2004 manufactured gas plant deferral account. Again, I won't read it, but the reason an exception was needed was because, of course, the 2003 manufactured gas plant deferral account was a subject of argument before the Board and a decision on that is under consideration by the Board. So some exception was needed there. 111 The 2004 municipal tax variance account that the company had proposed, the company determined that it was able to withdraw that request as long as it was understood, as stated here, that the company could reapply for such an account in a future rate case should circumstances change so as to warrant that request. 112 And then the final exception is the DSM-related accounts that were deferred in accordance with the deferral of issue 5. And all of that, again, was a complete settlement. 113 MR. DOMINY: I have a couple of minor questions related to the 2 and 3, and really it was 2 that I was dealing with. 114 In 2, it talks about the total forecast year-end balances, including interest, amount to a credit of 34.9 million, and it gives me tab A, schedule 6 -- A, tab 6, schedule 4, and I was trying to find how I would find that number, 34.9 million, because I had looked at the tab A-4, and it shows an entry which is -- maybe it does come out. 115 I apologize, I have got an update which hadn't been filed in my book when I was checking this. As I understand it, if I took it to tab A.6.4, it is column 5 minus column 6; is that correct? 116 MR. BOURKE: The additive sum, correct. 117 MR. DOMINY: When I got the information I looked at it, and I was looking at the previous filing and I couldn't reconcile it. Thank you. 118 That was one. The second one is straightforward, and that is when you talked about questions about the PGVA, Mr. Cass, or questions we might have about it, I am assuming that that last paragraph deals with probably the issue that is most outstanding as to how the allocation of the load balancing costs was arranged in that QRAM application and the opportunity for parties to examine that allocation? 119 MR. CASS: Correct, yes. 120 MR. DOMINY: So it dates back to the last QRAM application; is that correct? 121 MS. DUGUAY: Yes. 122 MR. DOMINY: Thank you. Then I understand it. Thank you. 123 MR. BETTS: Mr. Cass, please proceed with 4. 124 MR. CASS: Thank you, sir. 125 Issue 4, of course, related to revisions to rate 6 required by the 2003 settlement proposal. The Board may recall that under issue 12.7 of the settlement proposal from the previous case, there had been a complete settlement upon which the company had undertaken to establish a stakeholder process to review rate 6. 126 And part of that complete settlement was specifically indicated to be that the company's findings were to be filed in this case. So there was something arising out of the complete settlement in the 2003 case that was specifically to be addressed in this case, and that's what happened in relation to issue 4. 127 Rate 6 was examined, as the company undertook to do, and as indicated under issue 4 of the settlement proposal in this case, the result of this examination was an indication that the seasonal rate differential in rate 6 was too high. Another result was that rate 6 was restructured, as described here, but given the determination or the finding that there was a seasonal rate differential in rate 6 that was too high, the second element of the complete settlement was to have a similar examination of the seasonal rate differential to be made in other rate classes. 128 So that's what the Board sees here as the complete settlement of issue 4: First, the restructuring of rate 6; second, because the review of rate 6 showed this seasonal rate differential as being too high, the agreement that the company will look at the other rate classes to determine whether there is a similar issue there about the seasonal rate differential. 129 MR. DOMINY: I just want to check. It is schedule A.7.4 and not A.7.9? 130 MS. LEA: Yes, that's what we understand, too. At the top of page 14. 131 MR. CASS: I see where you are referring, Ms. Lea, and perhaps I'll let Ms. Duguay confirm that on the record. It appears it was perhaps a typo. 132 MS. DUGUAY: That is indeed schedule 4 rather than schedule 9. 133 MR. BETTS: Thank you. 134 MS. DUGUAY: Thank you. 135 MR. BETTS: One question, and the question is a simple one. Will this affect the other rate classes, or is the change within class 6? 136 MR. CASS: For the purposes of the current case, my understanding is it will not affect the other rate classes. It is only within rate 6. In respect of other rate classes, it is simply the commitment to do the examination to see whether there is any similar issue about the seasonal rate differential. 137 MS. DUGUAY: That is correct. 138 MR. BETTS: Thank you. 139 Please proceed, then, Mr. Cass. 140 MR. CASS: Thank you. 141 Issue 5 I don't think I need to say much about. I have already indicated that this issue was deferred in light of the pending decision from the Board on DSM for the 2003 case. 142 Issue 6 is also a complete settlement. The background to this issue, as the Board may recall, is that in its 2001-32 decision, paragraph 4.6.4, the Board had directed the company to file a study in two formats. This was the study to determine the costs of managing direct-purchase gas and system gas. The company's direction was that the fully allocated cost study be provided in the format proposed by the company, and also in a format proposed by CEED. Again, that was issue -- or, sorry, paragraph 4.6.4 of the decision in respect of fiscal 2002 rates. 143 What the parties have agreed to in this case, by way of a complete settlement, is to establish the parameters for the two studies that will then proceed and be filed in the 2005 case. This should ensure that when the studies are done and filed and reviewed in the 2005 case, that there will be no issue then about the parameters. They will be established, agreed to, and if the Board accepts the settlement proposal, then become part of the outcome of this case. 144 So those parameters, described as terms of reference, for the fully allocated cost studies are set out in detail at appendix B to the settlement proposal, and then the complete settlement that I have just referred to is described under issue 6. 145 MR. BETTS: Mr. Cass, the meeting that's proposed here, was it your intention or the applicant's intention to include Board Staff? 146 MR. CASS: Yes. 147 MR. BETTS: Thank you. I think that the Board would benefit from that. 148 Thank you. Please proceed. 149 MR. CASS: That, then, sort of brings me to issue 7, and as I said at the outset, issue 7 probably should be addressed in conjunction with issue 1. So I will go back now to issue 1. 150 There is a complete settlement, as I said, on issue 1.1 in relation to the inflation forecast, but perhaps if I could skip to the partial settlement first. I will not go into detail describing the partial settlement because, of course, it is not before the Board for acceptance today, as I understand it. It will go to hearing, and it will be addressed in the hearing. But just to give some overall context to the settlement proposal document, I'll just try to allude to what the partial settlement is all about. 151 It appears under issue 1.2, although more broadly speaking, it, perhaps, largely addresses issue 1, except for the inflation forecast that is under sub-issue 1.1. And under the partial settlement, some parties, but not all, have agreed to the company's proposal to establish 2004 distribution rates by applying a rate index of 1.8 percent, which is 90 percent of the forecast 2004 inflation of 2 percent. And the parties to this partial settlement considered it appropriate to have a mechanism around 2003 rates to which the rate index was going to be applied so that there would be an adjustment. If, in 2003, the company were to earn more than a band above -- I shouldn't call it a "band" because it is only in one direction, but more than a specified above the Board-approved rate of return. So there is a detailed explanation of how that adjustment would work. 152 The outcome of that is that the partial settlement would envisage interim rates which would become final when the information is available for this adjustment -- the application of the adjustment mechanism to be fully determined and, again, that is all set out in detail. And the purpose of the adjustment mechanism being to have some method of adjusting 2004 rates if, in 2003, the company's earnings exceed the Board-approved level by more than a specified amount. 153 So then it is in that context that one needs to look at 1.1 and 1.3. There are no words under issue 1.3. I think the best way I could explain the reason for that is, again, 1.2 is really a partial settlement of issue 1, broadly, and for those who were parties to the partial settlement, I don't think there was a need for additional words under 1.3. And more broadly, I don't think there was an agreement, a complete agreement on words for 1.3, so the words are simply missing. But I don't think it is a gap in the settlement proposal, because it really falls under how parties have either agreed or not agreed to deal more broadly with issue 1. 154 Issue 1.1 there is a complete settlement on. Obviously the parties who were not part of the partial settlement would have some difficulty agreeing with the inflation forecast, but they were able to say that they took no position, so it was on that basis that there was a complete settlement on the inflation forecast of 2.0 percent. 155 So those who were not party to the partial settlement really were not in a position to say they were going to agree to an inflation forecast when they were not agreeing to the adjustment mechanism, but they are not taking a position on the 2.0 percent, and in that way a complete settlement of issue 1.1 was achieved. 156 MR. BETTS: All right. Thank you. 157 MR. DOMINY: This question may be a bit confused or convoluted, so please bear with me. I was trying to work out what the partial settlement process of setting final rates was if - and this is a big "if" - if the Board were to follow the plans set out by the partial settlement. 158 As I understand it, would the Board be approving an interim rate to be made after a final rate after the adjustments had been calculated, and where does the adjustments related to gas commodity costs related distribution rates fit into that schedule? I am having difficulty in trying to understand how the different pieces fit together to the end document, which is a final rate order. 159 If someone could help me with that, that might be of assistance. I don't know whether Board Staff could put it more clearly as to the concern. 160 MR. BETTS: We do appreciate, too, that this is to be discussed in detail during the hearing, but I think Mr. Dominy is looking just to gather an understanding of the partial -- or the proposal that has been -- 161 MR. DOMINY: Or the timetable that is sort of being contemplated. That's all I was trying to understand. 162 MR. CASS: I was going to tackle the first part, Mr. Dominy, but the second part I am wary that I would be getting out of my depth. So I am wondering if Ms. Duguay could address all of your question, and I am sure she could do it in a much better fashion than I can. 163 MS. DUGUAY: I think the manner in which the company envisaged this to work was that the finalization, if you will, of our 2004 distribution rates would be predicated upon the ratepayer safeguards that are currently included in the partial settlement proposal. 164 However, your question as it relates to the delivery-related outcome of our quarterly rate adjustment mechanism, that would be dealt with through our QRAM application. 165 So I don't view this as being any different, if you will, than what happened in fiscal 2003; whereas, we finalized our rates effective May 1st or we implemented them May 1st, but as a result of subsequent QRAM, the situation was a little different in July of 2003 because we didn't hit the preset threshold. 166 But if we would have hit the preset threshold, there would have been an adjustment to the delivery charges that are applicable to all customers. 167 So I view this as being sort of dealing, through this application, for costs that are, if you will, O&M related and dealing with the level of the unaccounted-for gas, losses on our storage system and so on through the QRAM. 168 MR. DOMINY: And with regard to the -- I mean, basically, there is going to be a delay before you have the information to finalize the ratepayer adjustment and also the findings of the 0133 account if there are any changes. 169 And that is some time possibly after a Board decision on the rates for 2004 based on what we hear at this hearing, so is that an interim rate then to become a final adjustment later? Is that what you are applying for? 170 MR. CASS: That is the way the partial settlement is framed, Mr. Dominy, yes. 171 MR. DOMINY: Thank you. Is there any clarification required on that from Board Staff? Do they need to help me understand it? 172 MS. LEA: Thank you, Mr. Dominy. 173 I think, Mr. Cass, what we will need to understand by the end of the hearing process, and not necessarily today because I take your point about not wanting to make submissions on something that is only a partial settlement, we will need to have a full understanding of what the implementation schedule is. 174 There is a whole bunch of different things that have to occur over time, things that have to be filed. We need a full understanding of that, and it would be of assistance if that could either be written down or provided in a very straightforward manner in oral submissions. 175 As you have indicated, because this is a partial settlement, we don't have to have that full understanding today, but we do understand, at least, that you are proposing an interim rate to be followed by adjustments, and then a finalization of rates? 176 MR. CASS: Correct. 177 MS. LEA: And that final adjustment might not be implemented until early calendar year 2004, it's possible? 178 MR. CASS: I think that's correct, Ms. Lea. I should say adjustment, if any. 179 MS. LEA: If any, yes, indeed. 180 MR. CASS: If no adjustment is needed, the interim rates, subject of course to the usual QRAM process, but the interim rates may simply become final rates. 181 MS. LEA: One moment. 182 If that is acceptable, Mr. Betts and Mr. Dominy, that's what we would propose, that we get this understanding through the hearing process as well. 183 MR. DOMINY: That's helpful. 184 MR. BETTS: And one other item, just to clarify with respect to that, is that I have heard that there would be an application for that adjustment. Am I correct that there would not be -- this is somewhat formulaic, and there is a difference between simply applying a formula and then saying, this is the rate adjustment, or applying for a rate adjustment based on the formula. 185 And the matter would be brought back to the Board for its consideration? 186 MR. CASS: Yes, sir, there will be a filing. I think that is -- I am just trying to quickly get the reference, but I think that's subparagraph 5, describing the partial settlement where it is indicated: The company will file with the Board as soon as possible a request for approval of the rate adjustment, or declaring through a deferral account... 187 And so on. 188 MR. BETTS: Thank you. 189 Just for clarification on 1.1, which was a complete settlement, and I probably direct this to Mr. Warren, who is one of the parties that did not agree to 1.2, but with respect to 1.1, and everybody is agreed on this inflation factor, I don't want to read more into it than I should, and I don't want to read any less into it than I should. 190 Am I seeing here that there is no dispute that 2.0 percent is a reasonable number that can be used for an inflation forecast? Is that the position of all parties? But -- and the "but" is that for at least two parties, they are not necessarily convinced that this is a factor that should be used as an adjustment at all? 191 MR. WARREN: Yes, that's fair, sir. 192 MR. BETTS: Okay. 193 And everybody else in the room agrees with my assessment of that? Thank you. 194 Okay, thank you. Mr. Cass, was there anything else you wanted to address? I appreciate we haven't got to 7 yet. Is there anything you would like -- and again, you indicated that it was tied to 1. 195 Is there anything you would like to add about 7 for the record? 196 MR. CASS: I was merely going to reiterate in relation to issue 7, sir, that it is tied to issue 1.1, and because of the obvious interrelationship between 7 and 1.2, the partial settlement of 1.2 similarly leads to a partial settlement of issue 7 by the same group. 197 Those who were unable to agree to issue 1.2 obviously would not be in a position to agree to the implementation of any rate changes. 198 So the two are interrelated and there is a partial settlement consisting of the same group. 199 MR. BETTS: Okay, thank you. 200 Are there any comments or submissions from any other parties? I am not looking for -- particularly those that are not in agreement with any issues, is there anything that needs to be added at this time? Certainly we are going to give this a full review through the hearing process. 201 Then, thank you. It seems as though that has been a very adequate review for the Board's purposes. 202 At this point, we will recess and reconvene at 12 o'clock, and the Board should be in a position to state its decision with respect to the proposal before us now and we will be able to receive an update on the issue of production of evidence as well. 203 I believe after a short break it may be an opportune time for parties to get together, and perhaps it is in the other room, and begin to talk about the other unsettled matter, which is issue number 5, DSM. 204 Are there any comments at this point that the Board should be aware of? Then we will recess now and reconvene in this room at 12 o'clock noon. Thank you, all. 205 --- Recess taken at 10:00 a.m. 206 --- On resuming at 12:05 p.m. 207 MR. BETTS: Thank you, everybody, and welcome back. I assume some of you have been in the other room in an ADR process on DSM. 208 DECISION: 209 MR. BETTS: The Board has reached a decision on the settlement agreement, and before we render that, are there any preliminary matters for our consideration? 210 Then the Board has had the opportunity to review the settlement proposal presented in this case and the evidence cited in support of the settled issues since its filing on August 13th, 2003. 211 The Board appreciates the time and effort contributed by all parties to the proposal. The quality of the document reflects the hard work that went into its creation. The Board also thanks Mr. Cass and the witnesses this morning for presentation and clarification of certain aspects of the proposal. The Board accepts the proposed settlements on the completed settled issues, which are issue 1.1 and issues 2, 3, 4, and 6, along with the evidence cited to support those proposals as being sufficient for the Board to make findings on those issues. The Board finds the proposals on these completely settled issues to form an acceptable basis for setting just and reasonable rates for the 2004 fiscal year as far as those issues go. 212 The Board will consider the proposals put forward in the settlement agreement on issues 1.2, 1.3 and 7, which the Board understands are linked, during the course of the hearing in this proceeding. The Board looks forward to a report from the parties with respect to deferred issue number 5. 213 Are there any questions with respect to that decision? There being none, there were a couple of other things that we were hoping to cover in this 12 o'clock sitting. One was an update on providing the information required by the Board, and, Mr. Cass, can you bring us up to date on that? 214 MR. CASS: Yes, I can. Thank you, Mr. Chairman. 215 FURTHER PRESENTATION OF PARTIAL SETTLEMENT AGREEMENT BY MR. CASS: 216 MR. CASS: We do have a filing to make at this time in response to the order made on Friday. Perhaps it would be best if we pass it around first and parties at least have a few minutes to get a sense of what is here and then I will come back to the subject and attempt to assist the Board with some more comments. 217 MR. BETTS: Thank you. Am I correct in assuming, then, that this is the first occasion that anybody will have seen those documents? 218 MR. WARREN: Yes. 219 MR. CASS: I think that's correct, sir, yes. 220 MR. BETTS: Okay. 221 MS. LEA: Mr. Cass, as the Board and parties will be looking at this document, should we give it an exhibit number at this time, or did you assign one already? 222 MR. CASS: It has an exhibit number -- 223 MS. LEA: Oh, thank you very much. 224 MR. CASS: -- in the upper right corner. 225 MS. LEA: Is it your intention that the Board Panel receive the material at this time? 226 MR. CASS: Yes. 227 MS. LEA: Thank you. 228 MR. BETTS: I think it was your intention to allow us all to have an opportunity to browse through this, and we will take that opportunity now. 229 MR. CASS: Thank you, sir. 230 MR. BETTS: For those that are listening in, there will be some silence for awhile. 231 MR. CASS: Mr. Chairman, just for clarity, I will be attempting to do my best to explain what everyone is looking at. I just thought people might want a few minutes to get their bearings as to what the pages are before I embark on an explanation. But before anybody gets too focussed on any individual numbers, I will be attempting an explanation. 232 MR. BETTS: Okay, thank you, I appreciate that, and I'll read a little bit quicker. I think I can do that under those circumstances. Thanks. 233 I think in terms of a quick scan, the Board Panel is ready. 234 Is everyone else comfortable and ready to hear the explanation? Then please proceed with a little more detail, Mr. Cass. 235 MR. CASS: Thank you, sir. There is a narrative that proceeds the numerical schedules. I won't repeat what is in there. I hope it is self-explanatory. Instead -- 236 MR. BETTS: May I just interrupt and make sure I understand. There is nothing in this -- first of all, I think we should identify this as being Exhibit A, tab 10, schedule 6, and there is nothing of a confidential nature in this filing? 237 MR. CASS: That's part of what I need to address, sir, and as I go through the numbers, that's one of the reasons I am speaking up. 238 MR. BETTS: Okay. Thank you. Then please proceed. 239 MS. LEA: There are actually three schedules, Mr. Chairman, schedule 6, 7, and 8. Schedule 7 appears to be 2002 and schedule 8, 2003. 240 MR. BETTS: Thank you. And I didn't spot that initially. Please proceed. Sorry for the interruption. 241 MR. CASS: So I won't deal with the narrative. It should be self-explanatory. Instead, I would attempt to describe the numbers, the numerical schedules that have been provided. So first, there is a set of schedules relating to the year ended September 30th, 2002. They begin at Exhibit A, tab 10, schedule 7, and there are six pages. 242 I believe that the six pages reflect the format directed by the Board in its order on Friday. I don't think too much more needs to be said about 2002. As we had indicated to Ms. Lea, there was actually even some difficulty producing the 2002 numbers over the weekend because of servers being down, but that difficulty has been overcome and the numbers are as you see them. 243 If I could just comment on the first page of the year ended September 30th, 2002 numbers, so that would be Exhibit A, tab 10, schedule 7, page 1 of 6. 244 On line 32, one can see the return on equity, so to speak, and looking across to column E is the actual return. 245 So what one is seeing there is the impact on return of what was a warm-weather year, and then looking across to the normalized number, still at line 32, column G, one can see there the impact on the normalized return of the mitigation efforts that occurred in that warm-weather year. 246 I think that's been explained in the 2003 case. But what I would do, then, is go to the similar set of schedules for the next year, that being the fiscal 2003 year, ending September 30th, 2003, also at page 1, and attempt to explain in a little more detail what is presented here. 247 So in column C of -- 248 MR. WARREN: Sorry, what page are you on, Mr. Cass? 249 MR. CASS: Tab 10, schedule 8, page 1. 250 So in column C, you see presented what would be described as nine-month actual figures, and here I would come back to what has been said in utilities submissions and also I said earlier this morning, which is that results on a utility basis are not done by the company quarterly. They are done on an annual basis at year-end. 251 So in order to make a presentation, as is shown in column C for actual results at the end of nine months, it was necessary to assemble the best possible information, but it clearly has not had the benefit of any sort of comprehensive review. 252 And it was indicated to me that in areas like shared asset elimination, non-utility elimination, interest on security deposits and service charge revenues, what was done was to incorporate previously approved levels to come up with that actual utility presentation at the end of nine months. 253 Oh, and I see that there is a typo Ms. Harris pointed out actually. It should have said "2003-06-30" at the top of column C. 254 Now, column D presents a projected balance to year-end, and what this is is attempting to add to columns -- or to have an additive to column C, which would be the remaining three-month period of the year, and it has been done in accordance with the methodology previously utilized in the development of quarterly financial monitoring reports for the ERO. 255 Now, under that methodology, what the company would do was use its most recently filed-before-the-Board information for the period, in this case, it is a three-month period, but back in the time when there were ERO filings, whatever the period would be, the company would use for the forward period information taken from the most recent filed information before the Board. So that is what has been done in the projection that appears in column D. 256 And the most recent information of that character comes from the 2003 ADR settlement proposal. There has been no attempt to validate a continuous flow of data from the nine-month actual over to the three-month forward period, and this is part of the difficulty that the company has been attempting to explain in making this presentation, is that in going from that actual period to a forward-looking period, there is a discontinuous flow of capital budget and customer additions, volumes, sales and T-service volumes, unit rates and so on. 257 And that type of thing is not something -- the type of review necessary to deal with that is not something that the company does other than at year-end. 258 So then column E obviously is the result of adding C, the nine-month actual as best it could be assembled, to column D, the projection for the next three months. 259 Column F is the normalizing and other adjustments, so this is a normalization using the degree-day variance at the actuals date, so that's June 30th, 2003. 260 Now, at this point it might be useful for me to stop my description of the individual columns and then drop down to line 32 as I did in the case of the presentation for the previous year, and I won't actually read return figures into the record. 261 So in column E, in contrast to what one saw in the previous year, this was a cold-weather year, so looking there, you see in the actual year-end projection the effect of a cold-weather year on return. But then skipping over two columns, going past the normalizing adjustment that I described, over to column G, one sees the projected normalized return for the 2003 year. This is where, line 32, column G, this is a number that would not be known to anyone in the investment community. My understanding is that, at least parts of the investment community, at least investment analysts, are very interested in normalized numbers, but that number would be unknown to investors. So this is where a confidentiality issue arises. 262 And then the other point to be made about this number at the bottom of line G is in relation to its reliability, which also comes back to why the company would not normally publicly disclose a number like that and why there would be a concern about it coming into the hands of uninformed recipients. 263 So just as an example -- well, perhaps I shouldn't put it that way, describing it as an example, but there is, I am told, a variance that flows through to that number at the bottom of column G, and what this is is it is a nine-month and three-month variance that relates to the accrual/deferral of unbilled volumes. 264 The amount of deferral at June 30th is $10 million different than the amount of draw-down in the projected balance to year-end. 265 So if one were to look at line 3 less cost of gas across to column D, projected balance to year end, as matters now stand, there is a $10 million variance in that number as opposed to using the methodology that was used for ERO presentations. 266 This is one of the faults inherent in that methodology that was used for the quarterly financial reports. That methodology did not include a selective review of individual line items; it was simply a projected data appended to actual data. 267 So this $10 million variance would, in fact, increase the number at line 32 below -- or at the bottom of column G by 59 basis points. 268 Again, this is just by way of explaining the difficulty in using these numbers and in releasing them publicly. 269 Now, another thing that can be seen, if one looks down line G, is the O&M number that appears there. Again, this is the O&M number that would flow out of the methodology that was used for ERO filings. 270 Just to give the Board and parties an idea of the impact of using that number for the projection and to come to a total 2003 O&M number, if instead one were to use the number from the 2003 ADR settlement of $280.9 million, the effect would be to increase line 32, the number at the bottom there under column G, by 38 basis points. 271 Now, just to give an additional indication of the impact or sensitivity of that number, that number at line 9 of column G, you'll see, is in the order of $5 million over -- $5 to $6 million over the ADR settlement number. If one were to assume a variance in the other direction of a similar amount under the ADR 2003 settlement proposal number for O&M, so that would be in the order of $275 million for O&M, the impact on that line item 32 at the bottom would be an additional 35 basis points. So 38 basis points to go to 280.9; an additional 35 if it were to vary as much below 280.9 as this presentation shows it varying above 280.9. 272 So that's all just to try to give the parties an understanding of the numbers and some of the difficulties with the numbers. But with that explanation, I hope that there would then be some understanding of the concern about getting out into the public record the figure that appears at line 32 in the bottom of column G. I have attempted to describe how that number can vary and the concern about investors potentially making investment decisions on the basis of such a number. 273 I suppose, to some extent, we are in the Board's hands. One of the ideas that we debated amongst ourselves just before coming into the hearing room would be instead of going through a formal process, as in the past case of having parties sign a confidentiality undertaking and so on, perhaps there would just be a way that the parties that receive this information in this hearing might just confirm on the record that they will not trade on the information and will not pass it on to others; and with that confirmation, then perhaps we could proceed. And to the extent that there are questions about this information as the hearing proceeds, perhaps it might be necessary to go in camera at that time. 274 That's my attempted explanation at what's been provided and at some of the issues or concerns that lie behind these numbers. 275 MR. BETTS: Before I invite submissions from people that are present and those that have received this, just for clarification, am I correct that there is only one number on here that is of concern to the company, and that's the one on -- or are there more than one? 276 Perhaps be explicit for me as to which numbers or pages or schedules, whatever it is, that you would want to treat in a confidential way and be as -- I'd like to have this as much as possible on the public record, so give me your answer based on that. 277 MR. CASS: Yes. Might I have a minute, sir? 278 MR. BETTS: Yes. 279 MR. CASS: I don't know the answer to the question. 280 [Mr. Cass confers with EGDI representatives] 281 MR. CASS: Mr. Chairman, what I can say is none of this format in page 1 of schedule 8 has ever been presented in this fashion to the investment community, and people could presumably, even if a bottom line was dropped off, could do their own calculations. What I'm just not sure, if that applies to all six pages of schedule 8 at this point or only to certain of the pages. 282 MR. BETTS: Take some time to figure that out. I think that I have to -- the Board has to understand what it is you are asking us to ask parties to consider. 283 MS. LEA: It appears at page 5 also of schedule 8. 284 MR. BETTS: And please take your time. Don't feel pressed to give a quick answer. I would like it to be the accurate answer. 285 [Mr. Cass confers with EGDI representatives] 286 MR. BETTS: I am just going to go off air for a minute, and we'll come back shortly. 287 [Hearing went off air] 288 MR. BETTS: Thank you. We are back on the air now. Mr. Cass, can you answer that question for us? 289 MR. CASS: Yes, and I think I'll have to do it on a page-by-page basis. 290 Going back to page 1, and the columns that I was speaking about earlier -- 291 MR. BETTS: And we are talking about schedule 8? 292 MR. CASS: I'm sorry, yes, I am talking schedule 8 of tab 10, page 1, I'm sorry. In column C, the actual utility figures that are shown there have not been publicly disclosed. They do underlie corporate results for the nine-month period that have been publicly disclosed, so there is not a real concern about disclosure of those. Going beyond that, though, columns D to G, and then also H, because it is the variance, there would be a concern on the company's part about public disclosure of the numbers in each of those columns. So it is really just everything but column C, the actual utility results, and column H, the 133 OEB-approved. The rest there would be a confidentiality concern. 293 MR. BETTS: And Mr. Cass, anything beyond page 1 of 6? 294 MR. CASS: Yes, I'll go to each page one at a time. 295 MR. BETTS: I think maybe, if you wouldn't mind, let's go through the whole group and then we'll come back and deal with them. 296 MR. CASS: Yes. Page 2, really the only -- and this applies to more than one page as we go forward here, but on page 2 of schedule 8, really the only column where there is not a confidentiality issue is, just trying to read the printing, column E, the 133 OEB-approved. The rest there would be a concern. 297 MR. BETTS: And I think obviously we can take that the column A and B are okay in all cases; is that correct? 298 MR. CASS: They're only descriptive columns, I think that's correct, yes. 299 MR. BETTS: Thank you. 300 MR. CASS: But C and D here, for example, as well as the variance in E, they have the projections that give rise to the issue that I have been attempting to describe. 301 Then on to page 3, it is the same situation. Again, it is a different column letter, it is column F, but on page 3, it is really only column F that would not be subject to the concerns that I am describing, the 133 Board-approved. 302 MR. BETTS: Okay. And page 4? 303 MR. CASS: Yes, on page 3 -- I'm sorry, Mr. Chairman, I thought I had it, but obviously I was ahead of myself. 304 MR. BETTS: That's okay. And I appreciate that we are getting this quite quickly and spontaneously, so don't be embarrassed about having to clarify those items. 305 MR. CASS: Page 3, Mr. Chairman, coming back and correcting what I said, C, D -- columns C, D, and F would not be subject to the concerns I have described. 306 MR. BETTS: Thank you. And page 4? 307 MR. CASS: And page 4, Mr. Chairman, if I could stick to saying the columns where there is not an issue or a concern, it would be column C, D -- and I want to make sure I am reading the letters correctly -- I and J -- oh, "I" and J there would not be an issue or a concern on page 4 of schedule 8, C, D, I and J. 308 MR. BETTS: Thank you. 309 MR. CASS: Page 5, Mr. Chairman, again, other than the descriptive A and B columns, it is just column E, the 133 ADR settlement proposal, where there would not be a concern. 310 And then if memory serves, page 6 is very similar to page 1 in terms of the column headings -- I'm sorry... 311 MS. LEA: It might be okay, that one. 312 MR. CASS: Oh, okay. On page 6, I misspoke myself one more time. 313 On page 6, the columns where there would not be a concern would be F and J. 314 MS. LEA: Can I ask you, Mr. Cass, back on page 1, whether column H is also okay? It looks like it falls into the group that is all right. 315 MR. CASS: I had intended to say, and if I didn't, I apologize, I had intended to say the areas where there would be a concern would be D to G and I, so that left C, H and the descriptive columns. 316 MS. LEA: Thank you. Perhaps I just didn't write it down. 317 MR. CASS: I have made enough mistakes to be sure that that was probably another one on my part, I'm sorry. 318 MR. BETTS: Okay. 319 MR. CASS: And of course, all of 7 is not in issue, all of schedule 7 is not in issue at all in terms of the concern that I have raised. 320 MR. BETTS: Now, again, on -- 321 MR. DOMINY: On schedule 5, is C okay? 322 MR. BETTS: That is actually page 6 of 6 of schedule 8. 323 MR. CASS: And can we have a moment, Mr. Chairman, please? 324 MR. BETTS: Yes. 325 MR. CASS: Thank you. 326 I can confirm, Mr. Chairman, in addition to those that I already referred to on page 6 of schedule 8 there would not be a concern about the information in column C and D being on the public record. 327 So altogether, it would be C, D, F, H and J where there would be no concern about public record disclosure on page 6 of schedule 8. 328 MR. BETTS: Okay. I am going to ask, first of all, that all the parties that have a copy of this, is there any confusion in your minds? Does everybody understand what had been designated by the applicant to be of concern to them and those that are not of concern to them as far as the public record? Is everybody clear? 329 Okay. Thank you, and that has answered my question. I think at this point I would like to hear from the parties who may be asked to take some affirmative action with respect to these documents their position on what they have heard from the applicant. 330 Any submissions? Mr. Warren. 331 SUBMISSIONS BY MR. WARREN: 332 MR. WARREN: Yes, sir. I am going to make three submissions with respect to the issue of confidentiality, but I am going to preface them by saying that I don't -- my client doesn't hold these positions with any degree of religious fervour, so these submissions are really more in the nature of sort of friend-of-the-court submissions on this issue. 333 The first and the overriding submission, Mr. Chairman, is that we have to remember that what we are engaged in in this process is the setting of rates, the setting of rates, the prices that consumers will pay for distribution services. 334 And to the extent it's humanly possible, the public has to understand not just the process that we go through but the basis upon which we make our decisions. And if there is a hole in that process, or a cloud in the process, that makes it far more difficult for people to understand, particularly in circumstances where we are not engaged in a full cost-of-service review, but we are dealing with a significant new departure, which is this formulaic approach. 335 So in my respectful submission, the overwhelming bias of the tribunal should be that all of the information relevant to the decision making should be on the public record, unless there are clear dangers, clear and present dangers, to use the cliche from another sector, about the disclosure of this information. That is the first thing. 336 The second consideration is whether or not there is any law or policy in the securities field that would preclude the disclosure of this information with the requisite warnings. 337 Now, in the submissions which I delivered last week, and I don't intend to reiterate them, I delivered to the Board a national policy statement 51-201, I think I have got the number right; if I am wrong, Mr. Cass will correct me. But I submitted that to the Board in support of the proposition that there is no policy of the Ontario Securities Commission which precludes the disclosure of forecast information, the context being the danger not just to the uninitiated, to the casual reader of financial information, but to the sophisticated reader of information. 338 In other words, it is a policy which is designed to protect the public from relying on misleading, inaccurate, incomplete, whatever, financial information. 339 And what that policy statement says is that there is no reason that -- that you can disclose financial forecast information as long as you have got the requisite warnings on it that this information is subject to the following, if you wish, fragility, and that you should not rely on it. 340 The third submission, Mr. Chairman, is, in conclusion, the issue is, is there a significant risk either to Enbridge Gas Distribution or to the public from the disclosure of this information, and in my respectful submission, a risk which overrides, if you wish, this concern about the public having access to this information about how rates are set. I say, with respect, there is not. 341 My final point, sir, is a matter of historical reference, that in the past, it is my understanding that this kind of forecast information was routinely disclosed in rate applications, and if that's the case, perhaps we could hear from Mr. Cass at the moment why this information would be different from information which was routinely disclosed, forecast information in the past. 342 I put all of those submissions in support of the proposition that, in our view, this information should be disclosed to the public record, but as I indicated at the beginning, this is not a matter of religious fervour on behalf of my client. 343 If the Board decides it should be kept confidential, we certainly understand. 344 MR. BETTS: Are there any further submissions on this? Mr. Shepherd. 345 SUBMISSIONS BY MR. SHEPHERD: 346 MR. SHEPHERD: Mr. Chairman, in our submissions on the request last week, we went to some trouble to talk about the question of how limiting forecasts affects prospective watchmaking, and I am not going to reiterate those submissions again today. 347 My feeling is that we have not yet heard anything from the company which presents a compelling case that the public shouldn't have this information, and every time they try to limit the extent to which information is made public, that hurts this process and it should be strongly resisted. 348 In particular, my friend, Mr. Warren, has talked about the policy statement, the securities policy statement dealing with forecasts. I do understand Mr. Cass's argument on forecasts to be that if they give this information to the Board and the intervenors other than on a confidential basis, then they have an obligation under securities law to make it widely available, press release it or something like that, and that creates some problems for them. It seems to me that that would create problems with any forecast information that they provide, and if their position is, we can only provide forecast information that has gone through some sort of rigorous testing internally at the company, board of directors' approval, etc., then I think they are raising a fundamental question about how this process works, because that's not how it has happened in the past. 349 And therefore, our view is that this information should not be confidential unless they demonstrate with a lot more evidence than we have seen to date that there is some obligation preventing them from providing it on the public record. 350 Those are our submissions. 351 MR. BETTS: Further submission? There appear to be none. 352 Mr. Cass, your reply. 353 REPLY BY MR. CASS: 354 MR. CASS: Thank you, sir. Perhaps I should say first that I don't think I disagree in principle with Mr. Warren's first proposition that the bias should be towards endeavoring to have information on the public record. I don't think that is a position that the company disagrees with. But I think the company is attempting to put in front of the Board and parties what it perceives to be a very legitimate concern in the circumstances, and I fear that I haven't done a very good job of explaining what the concern is. 355 I will not re-argue what was previously said in submissions, but I will try, again, to explain the nature of the concern. I think it is important to understand as a starting point that the information we are talking about is information calculated under a methodology that, at the best of times, was only filed with the ERO in confidence. And that's going back, as I recall, to September 2001. And even for the purposes of a filing with the ERO in confidence, the company has had concerns about this information because there did not seem to be sufficient assurance that it couldn't be -- it would never fall into the hands of some other person. 356 So in my submission, it is important to understand that that's what we are talking about to begin with, a type of filing that was done on a confidential basis with the ERO. 357 If you think back to the letter that the company filed in its evidence in response to Procedural Order 2, it described some of the concerns that the company had with this information and about its potential to be misleading to uninformed users. The concern is that putting into the public record information that the company itself has those sorts of reliability issues with is very different from what Mr. Warren is talking about when he says that, under national policy statement 51-201, forecast disclosure can be made with the appropriate caveats. 358 We are talking about a sort of information that the Board will understand from having read that letter to Mr. Pugh that forms part of the evidence, that the company has concerns with with respect to its reliability. Those concerns are the very reason the filings with the ERO have stopped and there has not yet been a resolution of what the ERO filing process will be on an ongoing basis in the future. 359 So in my submission, we are talking about a very different type of information than one would talk about when one says, Well, sure, companies can make forecast disclosure with the appropriate caveats under the securities law. 360 To the extent that the company has, in the past, publicly disclosed in a rate case information of this nature, it's been information that's gone through an appropriate process of being assembled, checked, reviewed and approved by the board of directors. The traditional filings with the ERO did not go through that process, even in the time when they did occur. This information has been put together in a very short time frame, presumably even less time than would have been spent in the past on those ERO filings. It has not gone through the process that would give the company confidence in the information. That is why the company believes that this is somewhat different than just making a general statement that, yes, forecast information can be provided with appropriate caveats. 361 Yes, TransCanada PipeLines, as I said earlier today, makes disclosure, but they have the process in place to do it on a quarterly basis and to be sure that it's done to meet all requirements. It is energy regulators' requirements and security requirements. That process is not in place for Enbridge Gas Distribution, and it certainly was not in place for putting together this -- I am trying to think of the right words to use to describe this assembly of information without being too derogatory, but this hastily assembled information that appears in the exhibit that's been presented to the Board. 362 MR. BETTS: Mr. Cass, just a couple of questions. First of all, what would it take for the company to be able to provide the same information on the basis that would follow a process and they would be comfortable to have it published publicly? 363 MR. CASS: My understanding, sir, is that that's what the company has been doing on a utility basis at year-end. 364 MR. BETTS: That didn't quite answer my question. What I needed to know was how long it would take the company to get comfortable with the process of providing forecast information? 365 MR. CASS: Might I consult with Mr. Bourke, sir? I'm sorry. 366 MR. BETTS: Sure. 367 MR. CASS: Might I just clarify, sir, are you asking for the company to get processes in place so that it will be in a position to do this on a recurring quarterly basis, or simply to have something of the nature that we are now looking at on a reliable basis? 368 MR. BETTS: If they are two different answers, then I would like to hear both of them. 369 [Mr. Cass confers with Mr. Bourke] 370 MR. CASS: Mr. Chairman, would it be helpful if I asked Mr. Bourke to take the stand and respond directly to the Board's questions, rather than doing it through me? 371 MR. BETTS: That would be fine, and Mr. Bourke has been sworn in. Thank you, and welcome back to that seat. 372 EGDI - PANEL 1; Recalled 373 R.BOURKE; Previously sworn. 374 MR. BOURKE: Thank you. 375 I will give approximations for numbers of weeks. I am going to guess that the process could happen within a three- to four-week time frame in order to assemble information based on nine-month starting points with a forecast to the end of the year for all of the required information, which would include capital expenditures, customer additions, volumes forecasts, revenues and gas costs beyond that, to do it properly, at which point we would need to either convene or become an element of a board of directors meeting for approval of the information prior to its disclosure. 376 I think, on a rough basis, five to six weeks. 377 MR. BETTS: And again, with respect to the two questions, one, that process to resolve the question at hand today, which is to deliver information for this hearing, is the timing for that any different than the process, if it were established on an ongoing basis, is it still that same five to six-week period? 378 MR. BOURKE: If we had taken into consideration a determination of information on, let's say, a quarterly basis, we would be able to plan for it such that the necessary people who would provide capital expenditure, O&M budget type of information would be on-side with a regular schedule and we would be able to probably work it backwards from board of director presentations such that we could probably reduce the timetable. 379 But that would presuppose that it had been a part of our normal scheduled routine. 380 MR. BETTS: Okay. Thank you. 381 And perhaps before Mr. Bourke leaves, I'll ask another question of you, Mr. Cass, and you may want to pass it on to him, but you have indicated a concern from the company's point of view on the reliability of these numbers. 382 Will the company take that position with respect to any arguments that the parties put forward using those numbers then? 383 MR. CASS: Reliability Mr. Bourke can address better than I can. The company's position -- 384 MR. BETTS: Well, let me ask about the reliability, then, and we'll see. 385 Is there any way you can quantify, Mr. Bourke, your feelings on how reliable this information is, even with a variance factor? 386 MR. BOURKE: I followed the process that was developed in the early '90s in which I believe it was the -- somebody reported to the ERO or the deputy ERO at that time, had requested a type of filing to condense a number of individual accounts that were provided on a large report, a 60-page report, as I recall, such that it was assembled into an information package that would provide on a four, five or six-page basis an order of magnitude and directional signal for the company's return on a mid-year basis, at which point it was developed to be done internally within my regulatory accounting department with limited, if any, involvement from anybody else. They had other jobs, other things to do. 387 It was filed confidentiality, and it was -- the term that Mr. Cass steered away from was "smashed together", which is how I likened the appending of a projected period with an actual period. There becomes a certain consequence if an operating department has determined that they have had to mitigate expenses, and that mitigation activity is reflective in their nine-month results. But because of the way we assembled information in regulatory accounting, the three-month budget related to that department did not reflect that mitigated activity, and that becomes the disjointed problem that we have with the way this process worked. 388 Again, I refer to the fact that it was done on a quick basis. It was supposed to be a limited -- actually, confidential, not limited distribution, confidential report, with no board of director approval. It never left our department. 389 So my feeling is that in these days of disclosure of information that I would not want to place my continued employment on its validity. 390 MR. BETTS: Did you ever have the opportunity to review those submissions with respect to the actual results? 391 MR. BOURKE: I must admit to paying them little consequence once they were behind us. At year-end, our activities were directed to producing a final year result, an ROE. All of the calculations, the complete review to ensure non-utility eliminations and all the other activities that my department does were, in fact, done to a deadline for year-end. So probably by the time I had my year-end information available, I can't recall ever going back and checking for variances from the quarterly information filed. 392 MR. BETTS: Okay, thank you. 393 That's useful. I think it will help the Board and parties, I guess, assess how valuable this information is; apart from everything else, that will be important in assessing where we go from here. 394 Are there any further submissions for the Board's consideration from anybody? 395 The Board Panel shares the concerns of the parties in terms of the reliability of this information, and as such, I think rather than making it part of the public record and questioning its reliability, we are prepared to deal with it in confidence. 396 PROCEDURAL MATTERS: 397 MR. BETTS: The next question that I must put to the intervenors in this process, or any parties that have now received a copy of this, Mr. Cass outlined a proposed method of handling this. Does everyone recall what that is? If so, could I hear submissions on that. 398 MR. WARREN: I think Mr. Cass just wanted our undertaking not to disclose it to anyone else. I am prepared, on behalf of my client, to give that undertaking, Mr. Chairman, as long as I can share it with my consultant, Ms. Girvan, so that we can understand it. But certainly on behalf of my client, I am prepared not to disclose it to anyone else, given that the time frame of this, it won't be shown to our client. Just to my client's representative, Ms. Girvan. 399 MR. BETTS: Perhaps what I'll do then is just go around the room to all the parties and have you state for the record your position. 400 Mr. Brett? 401 MR. BRETT: Yes, Mr. Chairman, I am prepared to abide by it and give the same assurance that I won't disclose it to any other party. 402 MR. BETTS: Mr. DeRose? 403 MR. DeROSE: Mr. Chairman, yes, I will provide the same undertaking on behalf of our client. The only question I would ask, and perhaps Mr. Cass could just agree, that there is a possibility that Mr. Thompson may have to take a look at these numbers. If that's the case, I would ask permission in advance that he file a letter with Mr. Cass and provide such an undertaking? 404 MR. CASS: Certainly, Mr. Chairman. 405 MR. BETTS: That could be the understanding for any other parties that want to sign on for that. 406 Mr. Higgin? 407 MR. HIGGIN: I will have to talk to Mr. Janigan, but just to say that in the process, in confidential process in RP-133, we were parties to that, did sign the confidentiality agreements and I would not anticipate any problem. So subject to me confirming with you, I think that VECC would be able to agree to confidentiality. 408 MR. BETTS: Certainly at this point, can I take it that you personally agree? 409 MR. HIGGIN: I personally agree, yes. 410 MR. BETTS: Okay, thank you. 411 Mr. Shepherd? 412 MR. SHEPHERD: Mr. Chairman, on behalf of my client, we are happy to give that undertaking. 413 MR. BETTS: I'm sorry, that you -- 414 MR. SHEPHERD: We are happy to give that undertaking. 415 MR. BETTS: You are happy to do that. 416 Mr. Rowan? 417 MR. ROWAN: On behalf of my client, we will give that undertaking as well, sir. We would be discussing it with Mr. Adams. 418 MR. BETTS: Thank you. 419 MR. MacINTOSH: Energy Probe undertakes to treat this information as outlined by Mr. Cass strictly confidential, but -- 420 MR. BETTS: We have to get your name for the record. 421 MR. MacINTOSH: David MacIntosh. 422 MR. BETTS: You were introduced by Mr. Mattson earlier. Thank you, Mr. MacIntosh. 423 MR. MacINTOSH: And would be also discussed with Mark Mattson, our counsel. 424 MR. BETTS: Thank you. 425 Are there any other parties other than company employees that have received this information? 426 MR. LAFORET: Yes, Mr. Chairman. My name is Jim Laforet. I represent Union Gas, and I am in receipt of the information, and do agree to the non-disclosure 427 MS. LEA: Could you spell your name for the record, please, sir? 428 MR. LAFORET: Yes, it's Laforet, L-a-f-o-r-e-t. 429 MR. BETTS: Thank you. And obviously Board Staff and the Panel are forced to deal with everything in confidence, so we are covered here. 430 Based on the submissions of the party and the request of the applicants, I think the Board finds that process to be very workable. We will have to be cautious now. There is a document in our hands that is now sensitive, so can I suggest that all the parties, rather than asking for new copies to be made, just mark theirs confidential and that perhaps the applicant can reissue the specific schedule with the words "confidential" stamped on them so that there is no problems in the Board's handling of it. 431 Does that deal with this matter fully? I think one thing I haven't asked is the parties' feelings in terms of the acceptability of this information. There has been some question about reliability. 432 There was a concern, Mr. Warren, that this information was not available based on what you have seen. Are you satisfied to go ahead from here? 433 MR. WARREN: I am satisfied, sir. I have an issue with respect to time, which I can raise separately, but I am satisfied that Enbridge has made a good effort -- made its best effort to comply with your order and that's what we asked for, sir. 434 MR. BETTS: Thank you. 435 Mr. Shepherd, yes. 436 MR. SHEPHERD: Mr. Chairman, with respect to the substance of the information, I do have one question that I just don't understand, and that is in paragraph 11. This is on page 3 of schedule 6, and the last line says, "The information in column D," which is the projection, "is the results from the company's ADR settlement files." And I guess I don't understand what that means and so I don't know whether that information is reliable because I don't know what that means. 437 MR. BETTS: Could we have clarification? 438 MR. BOURKE: Yes. The narrative was intending to explain the process of appending three months with nine months. 439 MR. BETTS: And that was paragraph 11. 440 MR. BOURKE: Paragraph 11 on page 3? 441 MR. BETTS: Yes. 442 MR. BOURKE: As you recall, the O&M - I'll use O&M as an example - we had filed at $305 million, and when we relocated the service charges, we would have had $314 million, at which point, for the last quarter for our projected result, we had to apportion the $280.9 million of O&M that was the approved amount in the ADR settlement on a monthly basis. I didn't have any other way of trying to assemble a third quarter projected balance. 443 So from information that had come out of the ADR monthly budget, based on some of that information that had been prorated, we took the final three months as being the amount that I put into that column for the projected balance to the end of the year. That was the most recently filed information before the Board, which was what I had available to me on Saturday to assemble that information. 444 MR. BETTS: Did that clarify that question, Mr. Shepherd? 445 MR. SHEPHERD: Yeah, this sounds like you are saying you just took fourth quarter budget and put it in there based on what was settled in O133? 446 MR. BOURKE: Correct. 447 MR. SHEPHERD: Okay. I get it. Thank you very much, Mr. Chairman. 448 MR. BETTS: Thank you. I did indicate that the applicant should revise that schedule and mark it as "confidential". I think just on the outside possibility it should get into the wrong hands, I would encourage you to add those qualifiers that are normally found on forecast information so that if a party were to read them, they would see what the company's position is with respect to those numbers. So I would like that added to the bottom, and that would make me more comfortable as well. 449 Well, I think we have dealt with that, and that means that we now have all of the evidence I believe we need to proceed with these issues. 450 Mr. Cass, have you any feeling at this point as to how the proceeding will unfold from here? I am assuming we will be together tomorrow morning to begin this process. 451 MR. CASS: That was my assumption as well, sir, that we would embark on a hearing of the core issues in the case. I take it we are awaiting the end of the day today for the outcome on DSM so that we would embark tomorrow on other issues. I perhaps shouldn't have called them "core issues", but issues other than DSM pending what we find out at the end of the day today on DSM. 452 MR. BETTS: And your plan, at least initially, would be to bring forward a witness panel? 453 MR. CASS: That's correct. 454 MR. BETTS: And present the issues from -- or bring forward information on direct examination of those panels? 455 MR. CASS: I think there will be a brief examination-in-chief. In part, there would be a need in the context of the hearing to have some explanation of the partial settlement, but I expect it to be brief. 456 MR. BETTS: Okay. And ideally, the Board will be able to hear tomorrow how progress has unfolded with respect to DSM and we'll see how that all fits together as well. 457 If I could, I'll pass on just a bit of a caveat for all the parties. It may work out that oral arguments are best or satisfactory at the very least in this hearing, so just keep that in mind as we are going through it. The Board has not taken a position on that at this point, but if you could, and we will certainly ask for submissions on that prior to making such a decision. 458 Mr. Dominy was just wondering, Mr. Warren, as a result of you being the primary representative from parties that disagree to some portion of this, do you have any comments on the schedule that was presented there? 459 MR. WARREN: The difficulty we face, Mr. Chairman, is that Ms. Girvan and Dr. Higgin have to return to the DSM discussions this afternoon, so that the earliest I am going to get to them and talk to them in any detail about this information is this evening, if that's possible. And what I was going to propose as a compromise is if the Board would consider beginning sitting tomorrow at, say, noon or 1 o'clock and then proceeding through to 5 o'clock, which would give us almost an entire sitting day. 460 I have told Ms. Lea, and I'll repeat for the Board, I don't anticipate being, at the absolute outside, two hours in cross-examination, and Mr. Janigan told me if I am that length, he is going to be a lot shorter than that. So from the intervenors' point of view, I obviously can't speak for Ms. Lea about this, but from the intervenors' point of view, we could certainly get the cross-examination done tomorrow, even according to that truncated schedule. 461 But the difficulty I have is in light of the obligations on the DSM, I can't really speak to people until this evening about it, so that is the problem I face. I would ask that the Board give some consideration to either a noon or 1 o'clock start tomorrow so I can talk to people about that. 462 MR. BETTS: Any submissions with respect to that request? 463 MR. CASS: We have no objection to that proposal, Mr. Chairman. 464 MR. BETTS: The Board Panel finds that as a very acceptable solution to this, and appreciating that intervenors are dealing with this on as short a time frame as the applicant was and had to develop the information. 465 I would tell everybody as well, the Board Panel is prepared to sit later than 5 o'clock at least tomorrow, so if that becomes necessary, that is an option as well. 466 Yes, the court reporter, we'll have to make sure that there is someone available to do that and we have had a nod there as well. Thank you. 467 Would 12:30 be a reasonable time to start? It would give people a little time for lunch as well. 468 MR. WARREN: That's fine for me, sir. 469 MR. BETTS: Then we will recess at this point and reconvene tomorrow morning at -- no, that will be tomorrow afternoon at 12:30 p.m., and we will begin hearing evidence on these issues. 470 Thank you all, and we will see you tomorrow. 471 --- Whereupon the hearing adjourned at 1:20 p.m.