Rep: OEB Doc: 12YPF Rev: 0 ONTARIO ENERGY BOARD Volume: PRESENTATION OF SETTLEMENT PROPOSAL 14 JUNE 2004 BEFORE: R. BETTS PRESIDING MEMBER P. NOWINA MEMBER P. SOMMERVILLE MEMBER 1 RP-2003-0203 2 IN THE MATTER OF a hearing held on Monday, 14 June 2004, in Toronto, Ontario; IN THE MATTER OF the Ontario Energy Board Act, 1998, S.O. 1998, c.15 (Schedule 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, 2004. 3 RP-2003-0203 4 14 JUNE 2004 5 HEARING HELD AT TORONTO, ONTARIO 6 APPEARANCES 7 JENNIFER LEA Board Counsel COLIN SCHUCH Board Staff JAMES WHITEMAN Board Staff FRED CASS Enbridge Gas Distribution Inc. DENNIS OLEARY Enbridge Gas Distribution Inc. ROBERT WARREN CAC & CCC MICHAEL JANIGAN VECC ROGER HIGGIN VECC PETER THOMPSON IGUA JAY SHEPHARD School Energy Coalition DAVID POCH Green Energy Coalition MELANIE AITKEN Direct Energy Marketing Limited ELISABETH DeMARCO CEED, OESC, Superior Energy Management, TransAlta Energy Corporation MALCOLM ROWAN CME MURRAY KLIPPENSTEIN Pollution Probe VALERIE YOUNG OAPPA, Casco, Maple Lodge Farms, Markham District Energy MURRAY ROSS TransCanada PipeLines 8 TABLE OF CONTENTS 9 APPEARANCES: [23] PRELIMINARY MATTERS: [54] PRESENTATION OF SETTLEMENT PROPOSAL BY MR. CASS: [96] ENBRIDGE GAS DISTRIBUTION INC. - SETTLEMENT PROPOSAL PANEL: [107] PROCEDURAL MATTERS: [423] 10 EXHIBITS 11 12 UNDERTAKINGS 13 14 --- Upon commencing at 10:00 a.m. 15 MR. BETTS: Thank you, everybody. Please be seated. 16 MR. CASS: My apologies, Mr. Chair. 17 MR. BETTS: That's okay. I hadn't officially started, Mr. Cass, so you're off the hook. I paused as I saw there were some vacancies here. 18 Good morning, everybody. The Board is sitting today in the matter of Application RP-2003-0203, submitted by Enbridge Gas Distribution Inc., for an order or orders approving or fixing rates for the sale, distribution, transmission and storage of gas in their fiscal year 2005. 19 First of all, can everybody hear me? Am I okay at the back there? Thank you very much. 20 The parties to this proceeding have just ended a settlement conference, and on June 10th, 2004, filed a settlement proposal reflecting the parties' positions. The purpose of today's hearing is for the Board to consider the settlement proposal and rule on its acceptability as we proceed to the first day of hearing currently scheduled for June 16th. 21 My name is Robert Betts. I will be the Presiding Member in this hearing. And joining me are fellow Board Members, Mr. Paul Sommerville and Ms. Pamela Nowina. 22 First, may I have appearances from the Applicant. 23 APPEARANCES: 24 MR. CASS: Fred Cass for Enbridge Gas Distribution. 25 MR. BETTS: Mr. Cass, thank you. 26 MR. O'LEARY: Dennis O'Leary for Enbridge Gas Distribution. 27 MR. BETTS: Thank you, Mr. O'Leary. 28 MR. WARREN: Robert Warren for the Consumers Association of Canada and the Consumers Council of Canada, and I've been asked, Mr. Chairman, to enter an appearance this morning for Mr. Janigan of the Vulnerable Energy Consumers Coalition. 29 MR. BETTS: Thank you, Mr. Warren. 30 MR. THOMPSON: Peter Thompson for the Industrial Gas Users Association. 31 MR. BETTS: Mr. Thompson. 32 MS. LEA: Jennifer Lea, Board Counsel. 33 MR. BETTS: Thank you, Ms. Lea. 34 For -- 35 MR. SHEPHARD: Jay Shephard for the School Energy Coalition. 36 MR. BETTS: Thank you, Mr. Shephard. 37 MR. POCH: David Poch for the Green Energy Coalition. 38 MR. BETTS: Mr. Poch. 39 MS. AITKEN: Melanie Aitken for Direct Energy. 40 MR. BETTS: Thank you, Ms. Aitken. 41 MR. ROWAN: Malcolm Rowan for Canadian Manufacturers and Exporters. Our counsel, Carol Street, is not here today but she will be here for the hearing. 42 MR. BETTS: Thank you, Mr. Rowan. 43 MS. DeMARCO: Elisabeth DeMarco for the Coalition for Efficient Energy Distribution, Ontario Energy Savings Corporation, Superior Energy Management and TransAlta Energy Corporation. 44 MR. BETTS: Thank you. 45 MR. HIGGIN: Good morning, Mr. Chairman. Roger Higgin, consultant to VECC. 46 MR. BETTS: Thank you, Mr. Higgin. 47 MR. KLIPPENSTEIN: Good morning, Mr. Chair, Members of the Panel, Murray Klippenstein appearing for Pollution Probe. 48 MR. BETTS: Mr. Klippenstein. 49 MS. YOUNG: Valerie Young for the Ontario Association of Physical Plant Administrators, Casco, Maple Lodge Farms and Markham District Energy. 50 MR. BETTS: Thank you, Ms. Young. 51 MR. ROSS: Murray Ross for TransCanada PipeLines. 52 MR. BETTS: Thank you, Mr. Ross. 53 Is that everybody? Thank you. 54 PRELIMINARY MATTERS: 55 MR. BETTS: Before we begin, are there any preliminary matters for the Panel's consideration, Mr. Cass? 56 MR. CASS: None that I'm aware of, Mr. Chair. 57 MR. BETTS: Ms. Lea? 58 MS. LEA: There is a motion that has been filed by Enbridge Consumers Gas. One matter we may wish to consider is when that motion can be heard, given the fairly late notice of it. I don't know, Mr. Chairman, whether you want to do that before or after you consider the agreement itself. 59 MR. BETTS: Thank you. 60 Perhaps I'll ask for preliminary matters from parties who are intervenors here and then we can consider the motion specifically. Are there any other preliminary matters, apart from the motion, Mr. Poch? 61 MR. POCH: No, Mr. Chairman. I was just going to comment that in terms of the order of proceeding today, the motion does impact on some matters in the settlement agreement. In my area of concern, DSM, for example, we have a 12-month incentive period built into the proposal. And if the motion or Enbridge's proposal would change the period of the rate year, I would just -- the Board would need to -- presumably want to know that in advance of cementing in place that incentive. 62 MR. BETTS: So I would interpret that to be your recommendation, to deal with the motion first. 63 MR. POCH: Well, either that the motion be dealt with first or that -- just that the Board have in mind that if it chooses to accept some of the settlement agreement, it may need to put a caveat on it that some matters may be need to be revisited and realigned if and when that matter is resolved. 64 MR. BETTS: Thank you. 65 Let me turn, then, our attention to the matter of the motion. It was received, I believe, in the Board offices on Friday afternoon. It didn't allow a lot of time for any of you or the Board to deal with it. 66 First of all, Mr. Cass, what was your -- what is your preference in terms of the timing of dealing with this motion? 67 MR. CASS: Mr. Chair, I can advise the Board that a letter has arrived from counsel for the School Energy Coalition indicating a desire to cross-examine on the affidavit filed in support of the motion. It would be our submission that we should proceed with that cross-examination as quickly as possible, perhaps even the first day of this hearing, that being Wednesday of this week, to get that cross-examination out of the way. It would also be our submission that it would be appropriate to try to argue the motion as quickly as possible after that cross-examination, even as early as Friday of this week, if that's possible. 68 MR. BETTS: How would you respond if I suggested that the Panel was prepared to deal with this today? 69 MR. CASS: I don't think I would have a problem with that, sir, but there is indication that at least one party, if not more, wants to cross-examine on the affidavit. 70 MR. BETTS: Can I have submissions from other parties. 71 Mr. Shephard. 72 MR. SHEPHARD: Mr. Chairman, we received notice of this at 7:20 on Friday night. I believe the normal practice is that we should have two clear days on a motion, which would mean that we shouldn't proceed with any aspect of it until Wednesday, is my view. We have asked Mr. Cass in our letter this morning if we could do the cross-examination two days anyway before the arguing of the motion so that we'd have an opportunity to consider the cross-examination, the evidence, on the record before making our arguments. So we agree with Mr. Cass that Wednesday and Friday is fine, or Thursday and Monday is also fine. 73 The other comment we would make is that it doesn't -- it's not clear to us that acceptance of the settlement proposal needs to be delayed to hear this motion. While it's understood that change in year-end issue affects a whole lot of other things, I think the settlement proposal is structured so that it can be accepted on its own merits for a 12-month test year and the Board can deal with the implications, if any, if and when it gets to the substantive issue of the year-end. 74 Those are our submissions. 75 MR. BETTS: Thank you, Mr. Shephard. 76 Any other submissions on that question? 77 MR. THOMPSON: Yes, Mr. Chair, I have some submissions. I'll move in here so that Mr. Sommerville doesn't have to keep peeking around the corner. 78 IGUA would strongly object to the motion being dealt with today. We agree that Ms. Hare has to be available for cross-examination. There are a number of aspects to this motion that I need to get some clear instructions on in terms of the grounds for the motion that the company relies upon, and as well as grounds for opposition to the motion. My expectation is that -- well, I know IGUA will be strongly opposed to the motion. I'm just not entirely clear on how far we're going to go with our opposition to it, such as, for example, the motion to adduce evidence from Mr. Todd. I suspect there may be a position there put forward by IGUA that Mr. Todd is disqualified on conflict of interest grounds from leading any evidence in these proceedings on behalf of the company. He's already a witness in these proceedings, taking a position adverse to the company's position. But I have to get clear instructions from my client with respect to that particular matter. And there are a number of other aspects of this motion that I need to review with Mr. Fournier. 79 So I would agree with the schedule that has been suggested, that we get the cross-examination of Ms. Hare out of the way as soon as possible, which would be Wednesday, I think, at the earliest, and then argue the matter as soon as possible thereafter. And I would agree Friday is probably the best time to schedule it for hearing. 80 Those are my submissions. 81 MR. BETTS: Thank you. Any further submissions on that specific question? 82 I'd like to just confer with my fellow Panel Members. 83 [The Board confers] 84 MR. BETTS: Thank you. The Panel, first of all, does not object to the proposed timing, but let me say something that might change your thinking a little bit, although I think it's manageable. The Board Panel has another commitment on Friday afternoon that will force us to conclude the proceeding by 2:00 on Friday afternoon, which would mean that to deal with this, it might be that Friday becomes basically a motion day to hear that matter and that matter alone. Does that change anybody's position on the Wednesday, Friday schedule? 85 MR. SHEPHARD: No, Mr. Chairman. We're capable of being very verbose but not that verbose. 86 MR. BETTS: And nobody would object to being forced going on with their other at 2:00 on Friday afternoon, I trust? Okay, then we'll agree to that proposal. We will hear from Ms. Hare on Wednesday and then we will receive final submissions and arguments on this motion on Friday. 87 Then we do agree we can proceed with the hearing of the settlement proposal and those other matters. Just perhaps before we do, one point, and I believe it was Mr. Shephard who brought this up, does anyone present, anyway, feel that, depending on the Board's decision on 13.1 and 13.2, that it would change their positions regarding the acceptability of the settlement proposal that they've already signed off on? 88 Ms. DeMarco, go ahead. 89 MS. DeMARCO: Thank you, Mr. Chair. While not necessarily changing the position of TransAlta Energy Corporation, it will certainly have an impact on the position of TransAlta in relation to the 14, 15 and 16 series of issues pertaining to the allocation of upstream transportation costs. 90 MR. BETTS: Mr. Poch? 91 MR. POCH: Mr. Chairman, the settlement agreement, the portion that we're signatory to, presumed a 12-month period, and then we left a further three-month period, stub period, as a matter we would visit, if necessary, depending on how the company chose to proceed. If the outcome of the motion was, as I'm interpreting the company's pitch, that in effect what you're doing now is embarking on a three-month fiscal year, followed by a new application for the next 12 months, that would require a revision, obviously, of the matter. I'm just interpreting my view of one take on what the company may be asking for here, and I'm not sure that is, indeed, what they're asking for. But I think it might not be -- I think it might be worthwhile for the Board to go through this, and as long as the Board is open to reopening matters if the situation changes, that's certainly acceptable to us. 92 MR. BETTS: I'm going to ask everybody, as we go through the settlement proposal, I'm going to ask Mr. Cass, who I believe will be presenting it to us, to go through it issue by issue, even those that have been agreed to by all parties. I don't mean a great deal of discussion. And I will ask for submissions from any parties present at the end of that. I'm hoping not to hear a lot of submission. I'm more than pleased to see no one's hands go up. But I would appreciate hearing from you if there are any concerns that arise based on the Board's potential decision on the motion. 93 Other than that, I'm going to assume that what it states in here in the settlement proposal as to parties' positions will remain unchanged. 94 Are there any further comments before we proceed? 95 Mr. Cass, I invite you to take us through the settlement proposal. 96 PRESENTATION OF SETTLEMENT PROPOSAL BY MR. CASS: 97 MR. CASS: Mr. Chair, what I propose to do is to address areas of the settlement proposal where there is some form of settlement, either a complete settlement or a partial settlement, and without departing in any way from the wording of the settlement proposal, to take the Board through what has occurred in those areas. I don't propose to address in any detail areas where there is no settlement. My concern there is if I attempt to do that, then it gets into statements of position and argument that are best left for the hearing. 98 Having said that, I think there are a few no-settlement issues where there is agreement on something. So when we come to those, perhaps it would be appropriate for me to explain that, although an issue is identified as no-settlement, that there is agreement on something related to the issue. 99 Also by way of just an introductory comment, we have some witnesses here available to assist with any questions that the Board may have about impacts of the settlement proposal and so on. I don't know whether the Board would like to have them come forward now or whether the Board would prefer to wait and address the issues or questions as they may arise. 100 MR. BETTS: Is it a single panel that might be involved with any -- 101 MR. CASS: Yes, sir, it's a single panel of four people. 102 [The Board confers] 103 MR. BETTS: Mr. Cass, I think it would be probably expedient, since they're sitting in the room anyway, we could invite them to take one of these seats up here and then they would be available to deal with any questions as they arise. So please introduce your panel for us and we'll have Ms. Nowina swear them in. 104 MR. CASS: Thank you, sir. 105 The members of the panel are Melanie Giridhar, Don Small, Mike Mees, and Kevin Culbert. If those people could come forward to be sworn, please. 106 The request has been made that each witness perhaps spell their name for the reporter as they are sworn. 107 ENBRIDGE GAS DISTRIBUTION INC. - SETTLEMENT PROPOSAL PANEL: 108 M.GIRIDHAR; Sworn. 109 K.CULBERT; Sworn. 110 M.MEES; Affirmed. 111 D.SMALL; Sworn. 112 MR. BETTS: Thank you. I didn't get the spelling of Mr. Culbert. 113 MR. CULBERT: Culbert, C-U-L-B-E-R-T. 114 MR. BETTS: Thank you. Please proceed, Mr. Cass. 115 MR. CASS: Mr. Chair, before I turn to the part of the settlement proposal that addresses specific issues, I believe there is one aspect of the preamble that I should bring to the Board's attention. This appears at the bottom of page 10 of the settlement proposal. 116 MR. BETTS: Thank you. 117 MR. CASS: I'm referring here to the discussion of confidentiality that appears on that page, and I will endeavour to explain, if I can, the status of confidentiality issues. 118 First of all, there is an exception to what I'm going to say, and that arises from the words within this paragraph, subject to issue 12.1. So if I could leave that exception aside and come back to it. Aside from what is said under issue 12.1, what the parties have agreed is that the requests for confidentiality that have been made and are summarized in the letter of April 26th, 2004, should be accepted, and what the parties propose to the Board is that if the Board agrees, rather than any separate ruling, that perhaps the Board's acceptance of this settlement proposal with this wording about confidentiality could, in fact, be the Board's ruling on confidentiality. Again, the exception to this is issue 12.1. But subject to that exception. And then, of course, the wording is very clear that any such ruling that would be implicit in the Board accepting the settlement proposal is without prejudice to the parties' position about confidentiality of any new documents or information or confidentiality in any future proceeding. That is the intent of what is stated here. 119 Issue 12.1 I will address when we come to it. But in the context of that issue, which is the deferred tax issue, some intervenors are opposing the request for confidentiality and believe there should be no confidentiality. I will address that when I come to it. And that is the exception to what I just said about what appears on page 10. 120 MR. BETTS: Thank you. 121 MR. CASS: So having said that, sir, I'll turn to the provisions of the agreement that address the individual issues. 122 The first issues upon which there is complete settlement are issues 1.1 and 1.2, which effectively work together from the settlement point of view. 123 As the Board will see, under issue 4.1, the company's proposal for the volume budget was based on using the company's proposed deBeaver trend methodology, giving a result of 3,743 degree days and a volume number that I won't read but is set out there. The previously used deBeaver method produced a different number of degree days, 3,836. The parties have agreed to resolve this on the basis of a degree-day forecast of 3,800 degree days, giving rise to the volume budget set out under issue 1.1. 124 The methodology itself was the subject of issue 1.2, so given what is set out at issue 1.1, the parties don't believe that the Board needs to address the methodology in this case, but all parties reserve their rights by way of indicating that this is without prejudice to positions they may take in the future on the methodology issue. 125 MR. BETTS: Thank you, Mr. Cass. 126 Are there any comments from any intervenors on this particular issue? And the Board -- Ms. Lea, do you have any questions? 127 MS. LEA: No, sir. 128 MR. BETTS: The Board Panel has no questions. Please proceed. 129 MR. CASS: Mr. Chair, issue 2.2 is another complete settlement and I think rather straightforward so I won't spend much time on this. The company had proposed a budget of revenue from other services of $10.355 million, and by agreement of all parties, the company will increase its revenue from other services budget to $10.9 million. 130 MS. LEA: Just to be clear on the record, that's issue 2.1? 131 MR. CASS: I'm sorry, yes. 132 MR. BETTS: Any comments from intervenors? 133 Ms. Lea, nothing else? 134 MS. LEA: No. 135 MR. BETTS: Please proceed. The Panel is satisfied with that. 136 MR. CASS: Again, issue 3.1 is a complete settlement and I think also relatively straightforward. This has to do with policies in relation to customer security deposits and disconnection. I believe there are really three aspects to the complete settlement. One, the company has agreed to consult with Board Staff on its policies in this area; two, it has been agreed that any changes resulting from the consultations will be circulated to intervenors in draft form; three, it has been agreed that any cost consequences will be brought forward in the 2006 case. 137 Issues 3.2 and 3.3 are components of the same issue and settled on the same basis. 138 MR. BETTS: Any comments from our intervenor group? The Board Panel has no questions on that, thank you. 139 MR. CASS: I don't propose to say anything about issues 4.1 and 4.2, Mr. Chair. These issues relate to transactional services and are unsettled and will be going to the hearing. 140 MR. BETTS: Thank you. Please proceed. 141 MR. CASS: Issue 5.1 is an example of what I referred to in my introductory comment, that being an issue described as no-settlement, but in fact, the parties have reached some agreement. In fact, the parties have agreed on all aspects of this issue except for a particular issue or particular aspect of the issue that is described in the settlement proposal. The aspect of the issue upon which the parties have not settled relates to a contract for storage from Union at negotiated rates rather than cost-based rates. 142 Again, because this is not settled, this aspect of the issue, I won't get into any more discussion of it. The point is simply that, although 5.1 is designated as no-settlement, there is actually agreement on everything but the specific issue described there. 143 MR. BETTS: Thank you. Please proceed. 144 MR. CASS: Issue 5.2 -- 145 MR. THOMPSON: Could I just make a comment on that issue? 146 MR. BETTS: Please do. In fact, I'm not going to ask for comments from intervenors, but I welcome them as interjections. So go ahead. 147 MR. THOMPSON: Thank you, sir. This is just an informational observation. This topic, I believe, is going to be first on the agenda on Wednesday after we deal with Ms. Hare, and my recollection is that the company undertook to provide a copy of the contract, I think, when it was executed. And I would just ask that the document be available on Wednesday, please, whether it's been executed or unexecuted, so we have a copy of the terms and conditions. Thank you very much. 148 MS. AITKEN: Melanie Aitken, hiding back here. I would echo that submission and perhaps request that we get it before Wednesday so we have an opportunity to review it in advance and properly cast our submission. 149 MR. BETTS: Thank you, Ms. Aitken. 150 MS. PERSAD: Mr. Chairman, it's Tania Persad with Enbridge Gas Distribution. I can just make a comment on the filing of that contract. We have filed it, but it will be -- it's this morning, so we will bring copies up for parties at the break. 151 MR. BETTS: Very good. Thank you very much. And I believe that will satisfy those concerns. 152 MS. AITKEN: I'm sorry, Mr. Chairman, Melanie Aitken again. I just wanted to confirm, there is a draft label on the evidence that's filed in connection with the contract, namely, Exhibit A.3, tab 2, schedule 5. I just wanted to confirm that that had been commuted into non-draft evidence, I suppose. At least the copy I have says draft. 153 MR. BETTS: Ms. Persad. 154 MS. PERSAD: I can respond to that as well. That will be part of the filing and it is not in draft form anymore. 155 MR. BETTS: Thank you. 156 MS. AITKEN: Thank you. 157 MR. BETTS: Please proceed. 158 MR. CASS: I think that brings me to issue 5.2, Mr. Chair. This again is an issue upon which there is no settlement. It will go to hearing and, accordingly, I don't propose to say anything more about it at this time. 159 MR. BETTS: Thank you. 160 MR. CASS: Issue 5.3 is a complete settlement. There is an exception to this settlement. The purpose of the exception is really just to recognize that the transactional services issues, those being 4.1 and 4.2, are not settled and will go to hearing. So to the extent that there's any potential for something to come out of issues 4.1 and 4.2 that could somehow affect issue 5.3, that's reflected in the wording. Otherwise, issue 5.3 is the subject of a complete settlement. 161 MR. BETTS: Thank you. 162 MS. AITKEN: I'm sorry, Melanie Aitken, hopefully, for the last time. I wanted to clarify that Direct Energy should have been reflected there as having taken no position for the reasons just canvassed by Mr. Cass. Just a clerical. It's just not in my version. 163 MR. BETTS: Thank you for clarifying that. 164 MS. DeMARCO: Thank you, Mr. Chairman. It's Lisa DeMarco at the back. Just an issue related to Mr. Cass' first submissions regarding confidentiality that pertains to the agreement on this issue. It's come to our attention that it may be a possibility that part of the record previously created in camera in the last proceeding, in RP-2002-0133 may be relevant to issues pertaining to this issue, which is now settled, but reflects the issues in relation to issues 4.1 and 4.2. As a result, I guess we look for some direction as to how that record, which is in camera, might be used and reflected in this proceeding not in camera. And to assist the Board in its determination on how that process might work, I understand that the two agreements in question are now filed on the record in this proceeding and those agreements are the EGD -- 165 [Technical difficulty] 166 MR. BETTS: We'll see if that helps? Is everybody okay? 167 MS. DeMARCO: I'm sorry. 168 MR. BETTS: It's not your fault. Please proceed. 169 MS. DeMARCO: I have that effect on people. The two agreements in question are EOS agreement with EGD and EGS assignment, which was assigned from the EI agreement with EGD as well, and they are now on the record. 170 MR. BETTS: Is it just those specific agreements that you would expect you would need to call on, or is there something else in the in-camera session that you would have to call on. 171 MS. DeMARCO: It's a portion of the transcript that may become relevant that was done in camera in the last proceeding. 172 MR. BETTS: Okay. We may have to wait and see what portion you're actually talking about and try and deal with that as it comes up. But I appreciate the heads up on that. 173 MS. DeMARCO: Thank you so much. 174 MR. BETTS: Thank you. 175 Any other comments? Mr. Sommerville. 176 MR. SOMMERVILLE: Just to ensure that we're all reading from the same documents. The settlement document that I'm looking at does include a reference to OESC as having taken no position. 177 MS. DeMARCO: Yes, this would be an issue on behalf of CEED, Mr. Sommerville. 178 MR. SOMMERVILLE: Pardon me? 179 MS. DeMARCO: This would be an issue on behalf of CEED. 180 MR. SOMMERVILLE: I understand, but Ms. Aiken raised the issue in her previous comment that OESC, her client, ought to be reflected as taking no position with respect to 5.3. 181 MS. AITKEN: I'm sorry, we represent DEML. 182 MR. SOMMERVILLE: I beg your pardon. My mistake. Thank you very much. 183 MR. BETTS: Thank you for that clarification. 184 Mr. Cass, I believe you can proceed whenever you're ready. 185 MR. CASS: Yes. I think there may just be some very small differences in the versions of the settlement proposal that people are looking at. I think that perhaps Ms. Aitken is looking at the June 10th version as opposed to the final June 11th version. 186 MR. BETTS: As we are looking at the -- 187 MS. LEA: Was there a June 11th version? 188 MR. BETTS: I guess we've got to make certain we're all looking or reading from the same hymn book, as they say. 189 MS. LEA: I'm not aware that another version was filed. Has another version been filed with the Board dated June 11th? 190 MR. BETTS: I believe, in fact, there was a version that was kind of in circulation this morning that we do not have here. We may just have to pause for a moment and gather those versions up. 191 Does everybody else present here have the June 11th version? 192 MS. LEA: Can we work from the June 10th version? 193 MR. BETTS: Is it possible for you, Mr. Cass, to point out any differences as they arise between the 10th and the 11th? Or the other alternative is to simply make certain that everybody gets a copy of the latest version. 194 Do you need time to think about that? 195 MR. CASS: Would it assist the Board and others if I were to point out that there were only four small changes between the two versions, and in fact to state what the changes were? 196 MR. BETTS: I think that would solve our problem. 197 MR. CASS: The changes were as follows: The first is the one that was just touched upon. Under issue 5.3, DEML was added to the list of parties that take no position. 198 MR. BETTS: Thank you. 199 MR. CASS: The second is under issue 11.1. On the June 10th version, that's page 36. And just a few lines above the heading "Gas Supply Related Deferral Accounts," there is a parenthetical reference to issue 1.5. That was, in fact, a typo and so the final version corrected that to 5.1. 200 MR. BETTS: Thank you. 201 MR. CASS: Then the next small change is issue 15.1, page 47 of the June 10th version. Opposite the word "approval," under issue 15.1, there are some parties identified and there was simply some wording added to clarify that they oppose the proposal. So the wording added after "Pollution Probe" was "which opposed the company's proposal." 202 MR. BETTS: Thank you, Mr. Cass. 203 MR. CASS: Then under issue 15.2 on the next page, there was an addition, again, opposite the word "approval" to those parties who are excepted from the approval. And the addition was to add CAC/CCC as the first in the list of those who are excepted. So that the words read "...except for CAC/CCC, GEC," and so on. 204 MR. BETTS: Thank you. I assume since I have heard nothing from anybody out there that those changes are acceptable? I think we can proceed, Mr. Cass. 205 MR. CASS: I think I'm coming next to issue 5.4, Mr. Chair, on which there is a complete settlement. The complete settlement reflects the understanding of the parties that guidance on these particular issues will or may arise from the Board's Natural Gas Policy Review. These issues, I should clarify, relate to the system gas fee and the direct purchase administration charge. Essentially, the agreement is to maintain the status quo; that is, to maintain those two charges at the 2004 level for the test year pending the Natural Gas Policy Review. The agreement also is to address and implement Board directions from the Natural Gas Policy Review in the 2006 case or the 2007 case if direction is not available for 2006. 206 MR. BETTS: Thank you. As I read this particular issue, there's the paragraph, the second, I guess, third paragraph on page 19 that says: "The parties understand that a policy review will be conducted in the context..." 207 I think the transcript will note that you indicated will or may. Is it fair to say that all parties are reading it that way, that it will or may be conducted? 208 MR. CASS: No, Mr. Chair. I apologize for any such gloss. The understanding is that it will be conducted. I had intended when I said "will or may," I had intended it in the context of what direction the Board gives coming out of the policy review, that there will or may be direction. And if I stated that incorrectly, I apologize. But the parties' understanding is that there will be the policy review in the Natural Gas Policy Review. 209 MR. BETTS: Please proceed, then, Mr. Cass. 210 MR. CASS: Mr. Chair, Issue 5.5 is another example of one of the issues I referred to, which is described as no-settlement but the parties have agreed on something. What the parties have agreed on is described there. I understand that Ms. DeMarco is in a position to explain to the Board the status of issue 5.5. 211 MS. DeMARCO: Thank you, Mr. Chair. 212 As written, I understand the settlement or lack of settlement on Issue 5.5 is reflective predominantly of concerns around procedure rather than substance, and should be read in conjunction with the Board's decision on the motion on issue 5.5 dated May 27th, 2004. As currently drafted, the settlement agreement sets out essentially the parties' agreement to be guided by the Board decision on the motion, but it is currently listed as no settlement to reflect the procedural protections set out in relation to Issue 5.5 in the motion decision; that is, the issue remains on the issues list with certain directions, guiding principles from the Board to the company specifically in relation to customer communications or any change in emphasis therein. So while we anticipate this not to be at issue in hearing, it is listed as no-settlement to maintain the procedural protections reflected in the Board's decision on the motion dated May 27th. 213 MR. BETTS: Are there any questions or comments from the parties on that position? 214 Ms. Lea? 215 MS. LEA: Thank you. Ms. DeMarco, or perhaps Mr. Thompson also can speak to this -- is there anybody here from Energy Probe today? Does anyone know whether Energy Probe and Mr. Thompson for IGUA can answer whether that evidence is to remain on the record and whether it's intended to call witnesses or what the status of that is? 216 MS. DeMARCO: I'm given to understand -- thank you, Mr. Chairman. I'm given to understand that Energy Probe intends to keep its evidence on the record but may revise it to reflect the narrowed issues that it pertains to. 217 MS. LEA: Which are now procedural? 218 MS. DeMARCO: I can't be certain, subject to check. 219 MR. THOMPSON: As far as I know, our evidence remains as filed. What impact it has on anybody I'll leave for the Board to determine. 220 MS. LEA: I think I understand -- 221 MR. THOMPSON: We don't pull anything. 222 MS. LEA: I think I understand your position, Mr. Thompson. Thank you. 223 Thank you, Mr. Chairman. 224 MR. BETTS: Thank you. 225 Are there any further submissions on that particular issue, or parties' positions? 226 I think you can proceed, Mr. Cass. 227 MR. CASS: Thank you, Mr. Chair. 228 Moving to issue 6.1, this also is the subject of a complete settlement. The parties have agreed to an ROE calculated in accordance with the Board's guidelines of 9.69 percent, subject to updating, also in accordance with the guidelines. 229 MR. BETTS: If there are no comments, I believe you can proceed, Mr. Cass. 230 MR. CASS: Issue 6.2 is, again, one that I won't dwell on, Mr. Chair. There is a complete settlement whereby the parties have agreed on the company's proposed cost of financing capital and cost of short-term debt for the test year. 231 MR. BETTS: Thank you. 232 MR. CASS: Issue 7.1 is an issue that perhaps should have a little more explanation, Mr. Chair. As I think the Board is aware, and I believe this remains the case, there are still efforts to settle the EnVision issue ongoing. As it now stands, EnVision is not settled. But I don't think people have completely given up hope. So issue 7.1 is settled on the basis of excluding EnVision, there being a capital budget for the test year of $243 million. The Board will see the words "subject to adjustment as a result of the Board's decision on issue .1." Issue .1 is EnVision, and what those words indicate is whatever happens with EnVision has some impact or could have some impact on the capital budget number of 243 million. 233 MR. BETTS: And without checking the record, I assume the 243.0 million is the amount that's left with EnVision removed? 234 MR. CASS: With EnVision excluded, that's correct. 235 MR. BETTS: And that is the difference between that and the 257.1? 236 MR. CASS: The difference reflects the exclusion of EnVision and also the settlement of the parties upon what is agreed to be an appropriate number for the test year. So there is some reduction from the 257.1 million by way of agreement that is not related to EnVision. 237 MR. BETTS: Thank you. Thank you. Please proceed. 238 MR. CASS: Issue 7.2 is also a complete settlement. There's agreement to the company's updated economic feasibility policies and procedures for system expansion. There's agreement to a change to the company's policies to require each individual project in the system expansion portfolio to meet a profitability index of 1.0. 239 MR. BETTS: Thank you. 240 MR. CASS: Issue 7.3 is also a complete settlement. The Board will recall that the property plan of the company to meet the long-term needs of Enbridge Gas Distribution was an issue in the 2003 case. There was an update report provided and all parties have agreed on the property plan set out in the company's update evidence. 241 MR. BETTS: Thank you. 242 MR. CASS: Issue 7.4 is a complete settlement because it is encompassed under issue 7.1, Mr. Chair. 243 Issue 7.5 is also a complete settlement. This relates to costs that were recorded in the EnTRAC non-vendor cost deferral account. It's been agreed that those costs be closed and allocated to rate classes in a similar manner to the vendor-related project costs. 244 MR. BETTS: Thank you. 245 MR. CASS: Issue 8.1 is the EnVision project, and I've already addressed that. It is not settled, but it's not completely without hope at this point that a settlement may be achieved. 246 MR. BETTS: Thank you. 247 MR. CASS: Under the 9 series of issues dealing with the O&M budget for the test year, the parties reached a complete settlement on an envelope basis. The settlement is for an envelope of $286.5 million in the area of O&M expenses to be spent as the company sees fit. The other aspect of the settlement is that the company has provided, in table 1, appendix A, a breakdown of the O&M expense envelope that is provided for the purposes of future O&M budget reviews. 248 MR. BETTS: Mr. Cass, I'm not sure we have that appendix. Is that possible because we have the June 10th version again? 249 MR. CASS: I think you may be right, sir. I think it was attached to the June 11th version. I have a June 10th version that does not have the attachment, so that may be the explanation. 250 MS. LEA: I have N.1, tab 1, appendix A, page 1 of 1 entitled "O&M Summary by Department"; is that the appendix? That appears in my June 10th version. 251 MR. CASS: Yes. 252 MR. BETTS: Thank you. We do have that. Thanks. Please proceed. 253 MR. CASS: That, Mr. Chair, deals with most of the 9 series of issues. There are just a couple of isolated comments or statements in the settlement proposal on other 9 series issues as one works one's way through the document. The next -- 254 MR. BETTS: Can I just interrupt for one moment. One question I did have, and it's probably clearly in the application record, but the 286.5 which was agreed upon, was that the original requested amount in the application? 255 MR. CASS: No, sir. 256 MR. BETTS: Or was there any change to that? 257 MR. CASS: That represents a reduction from the originally requested amount. 258 MR. BETTS: Okay, thank you. 259 MR. CASS: And it is exclusive of DSM, which is addressed elsewhere in the settlement proposal. 260 MR. BETTS: Please proceed. 261 MR. CASS: One of the O&M series of issues that has some additional wording is issue 9.7. This concerns the natural gas for vehicles program. It's a complete settlement, as is the case with all of O&M. In the case of the Natural Gas for Vehicles Program, it is agreed that there will be revenue imputation in the amount of $125,000 for the test year. 262 MR. BETTS: Thank you. 263 MR. CASS: The only other additional wording of any consequence in the O&M issues is found at issue 9.15. This simply reflects that the overall settlement on O&M is without prejudice to the company bringing forward a new corporate cost allocation methodology, if it were to see fit to do so, in the 2006 case. 264 MR. BETTS: Thank you. 265 MR. CASS: This brings me to the demand side management issues, Mr. Chair, and if I may, I'll turn these issues over to Mr. O'Leary for him to take the Board through DSM. 266 MR. BETTS: Thank you, Mr. O'Leary. 267 MR. O'LEARY: Thank you, Mr. Chair. 268 The DSM series of issues, I can advise, have been settled predominantly on a complete basis, but the wording "partial settlement" reflects that there is at least one issue outstanding. At issue 10.1, you'll see, sir, that there is at the very end of that issue an outstanding item and I will come to that in a moment. But for the next short description, there is a complete settlement in respect of the following matters: 269 There is agreement that the target volume of 76.9 million m3 and a budget of 14.8 million. And this is for the fiscal period of October 1st, 2004 through to September 30th, 2005. You will recall, sir, that in the fiscal 2004 case, the Board approved a budget of $600,000 for program development, and there is some concern that not all of that will be expanded during fiscal 2004. And all parties have agreed that if there is an unspent amount, that that be carried forward and recorded in the 2005 demand side management variance account. 270 There is agreement between all parties that of the budgeted amount of 14.8 million, that no less than 450,000 will be spent on low-income programs and 300,000 of a budgets on an efficient large boilers program with an associated volume target of 2.1 million m3. And the volumes in these two programs are included in the volume target of 76.9 million m3, and the volumes achieved from these programs may form part of the SSM incentive mechanism claim. 271 The company also agrees, and this is again a complete settlement amongst all parties, to spend no less than 300,000 of the budget on a high efficiency windows market transformation program, but that the budget amount will be excluded from the SSM pivot point and no actual values will be counted towards the SSM for this program. 272 There's also complete agreement that the savings allocation as between the company and its program partners for its 2005 programs will not change, but that is on a without-prejudice basis that parties may take a different view in a subsequent proceeding. 273 The parties have also agreed that the company will file a long-term strategic DSM plan on or before January 1st, 2005, and the plan will address, amongst other things, a lost opportunity markets, market transformation, low-income customers, incentive mechanisms and audit protocols. You will see there is definitions agreed to by the parties in respect of lost-opportunity markets. 274 All those matters, sir, are settled on a complete settlement basis. You will see at page 33 of the settlement proposal the one outstanding item, and that is that Pollution Probe proposes and looks for approval from the Board for a commercial, institutional and industrial large boiler transformation program and shareholder incentive prior to January 1st, 2005, and there are various parties that have indicated in the settlement proposal their position in respect of that, and that's represented in the following paragraph. But that is an issue, sir, that will go to the hearing. 275 Issue 10.2 deals with the incentive mechanism, and there is essentially a complete settlement with the exception of the one item relating to the proposal by Pollution Probe in respect of the Large Boiler Market Transformation Program. Parties agree, you'll see at the top of page 34, that the SSM lost revenue adjustment mechanism and DSMVA accounts and the methodologies be continued for fiscal 2005 on the terms previously approved and included in the decision of the Board in the RP-2003-0133 proceeding, which was the fiscal 2003 decision of the Board. Part of the total agreement on this is that the parties agree to a pilot targeted market transformation incentive for efficient windows, and the terms of that are set out in the second paragraph on page 34, specifically that the company will be eligible to claim an incentive of $300,000 if third-party evaluations confirm that after 12 months, the market share for Energy Star windows in the franchise area has increased 10 percentage points above the level at the start of the test year. 276 Further down the page, it indicates in the settlement proposal, you will see the one issue that will go to the hearing and that is the incentive mechanism which Pollution Probe proposes and associated with their commercial, institutional and large boiler market transformation program. And the next paragraph identifies those parties that are not in support of that. 277 Issue 10.3, sir, deals with the recovery of DSM and LRAM in 2002 and 2003, and there is a complete settlement. But you will note that the settlement proposal identifies that the audits are not yet available in respect of those years and that the clearing of those amounts will have to be dealt with in a subsequent proceeding. 278 Issue 10.4, the item is the recovery of the DSMVA in fiscal 2001 and 2002. There is a complete settlement to clear the amount recorded in the 2001 DSMVA of 1.786 million. In respect of 2002, that request was brought forward for clearance in a subsequent application once the audit has been completed and run its course through the consultative. 279 Subject to any questions, sir, that's the settlement proposal in respect of the DSM. 280 MR. BETTS: Thank you. I'll ask this question of others, but there is a motion before the Board, and perhaps, Mr. O'Leary, you could tell me, first of all, from the company's point of view, what effect the Board's decision might have on any one of these four subissues of 10. 281 MR. O'LEARY: Mr. Chair, the company sees the DSM issues that have been settled as stand-alone issues that have been settled and should not be affected by the decision that the Board is going to make in respect of the stub period or the fiscal year-end change. 282 MR. BETTS: Thank you. 283 Any comments from anyone else? Mr. Poch. 284 MR. POCH: Mr, Chairman, I think I addressed this earlier. I think on the plain reading of the settlement, it's been constructed for a particular 12 months, and if that's the company's position, then I think there won't be any issue, there won't be any problem whatever the resolution. There is the potential for a stub period for the DSM which we'll have to address in that eventuality. I think reading it now, given the company's position, that shouldn't be a problem. 285 I just would alert the Board to this: This is, as my friend has already indicated, basically a complete settlement with an added item that remains unsettled. Therefore, it would be open to the Board, and we hope the Board will indicate its acceptance of the bulk of this when it gives its opinion on this settlement agreement, in which case I have already spoken to my friends for the company and for Pollution Probe, they do not require the presence of Mr. Neme, who is the author of the evidence we filed, to attend to litigate that one added matter. Now, he does speak to that matter in very general terms. So if the Board does accept the DSM proposal, to the extent there is an agreement, and unless the Board wishes Mr. Neme here for its own purposes, I would propose not to call him. 286 MR. BETTS: Thank you. We will consider that in our deliberations, Mr. Poch. Thank you. 287 MR. POCH: Thank you. 288 MR. BETTS: Any other comments? 289 Mr. Thompson. 290 MR. THOMPSON: Yes, Mr. Chairman, I would just like to make a comment here, if I might, and it follows from what Mr. Poch said earlier today when he was discussing the motion. 291 I just wanted to put on the record that IGUA regards this settlement proposal as one that is for rates for 12 months ending September 30, 2005. And if you look in paragraph 8 of the affidavit of Ms. Hare with respect to the motion, and this is on page 4, the last sentence, this is the sentence that gave rise to Mr. Poch's earlier comment, I believe. There it's stated: 292 "The company proposes to file a new application later this year for a 12-month test period from January 1, 2005 to December 31, 2005." 293 My submission is this settlement proposal precludes the company from coming forward later with a test period that encompasses nine months that are covered by this settlement proposal. We are settling rates for the period ending September 30th, 2005, and we're not going to have some overlapping, as far as my client is concerned, test period presented to us later. And I can make that point on the motion, but I wanted to just flag it, because we see this as something the company cannot do in the context of this settlement proposal. 294 MR. BETTS: I appreciate that, Mr. Thompson. And I know that will be expanded upon when we consider the motion, but I'm really looking for that kind of initial comment at this stage because it might help us in dealing with the settlement proposal that's before us. 295 Mr. Shephard, did I see you -- 296 MR. SHEPHARD: Yes, Mr. Chairman. We agree with Mr. Thompson. It appears to us that we have -- the settlement proposal ends up being an order of the Board if the Board accepts it, but it gets to the Board because of a negotiated agreement between the parties. It is certainly our understanding that we negotiated an agreement for 12 months of rates. And if the -- and if the company issues to then later say, Well, no, we want to ignore nine months of those rates and do something different, I think that undermines the basis of that agreement and it would not -- no longer be a settlement agreement. And therefore, at some point, I think the company has to be put to their election whether they wish to resile from this agreement or not. 297 Those are our submissions. 298 MR. BETTS: Any further submissions on this particular issue? Excuse us for just a moment, please. 299 [The Board confers] 300 MR. BETTS: Mr. Sommerville, you had a question. 301 MR. SOMMERVILLE: Mr. Cass, the Board would like to get your response to the submission of Mr. Shephard and Mr. Thompson that it goes to the efficacy of the settlement agreement. Do you see it that way? 302 MR. CASS: No, Mr. Sommerville. The company has no intention of resiling, to use Mr. Shepherd's word, from the settlement proposal. If, at the motion, parties wish to argue that what the company is proposing cannot be done because of the settlement proposal, and whatever order the Board may have made by that time in respect of the settlement proposal, that's their option. 303 If the company were to make an application later this year encompassing a test year as described in that affidavit and parties wished to argue that the company can't make such an application in light of the settlement proposal in this case, that's their option. Those are things that those parties can argue on those instances, if they wish. But no, there is no intention to resile from the settlement proposal. 304 MR. BETTS: Thank you, Mr. Cass. 305 Thank you. Let us proceed, then, with 11. 306 MR. CASS: I think we've now come to issue 11.1, Mr. Chair. 307 MR. BETTS: How is everybody doing? Anybody need a break at this point? I'm seeing some nods of approval of that. And, Mr. Cass, I appreciate that you're not in total control of the time here. If I was asking you to guess when we might be able to complete the process as we seem to be into it now, when do you think that would be? Are we likely to be able to continue until lunch and then terminate at that point? 308 MR. CASS: I would certainly have thought so, Mr. Chair, yes. 309 MR. BETTS: I think what we'll do, then, if we can take a short break, let's aim to be back here at 11:30. And as we've established the rules in the past and my fellow Panel Members don't mind this, if you don't have time to finish your tea or coffee that you started, you're welcome to bring it back to the room with you. But we will try to make this a short break and plan to be back in roughly 16 or 17 minutes. Thank you. We'll recess. 310 --- Recess taken at 11:15 a.m. 311 --- On resuming at 11:34 a.m. 312 MR. BETTS: Thank you, everybody. Please be seated. 313 Before we begin or resume with issue 11, are there any preliminary matters? 314 Mr. Cass, please proceed. 315 MR. CASS: Thank you, sir. 316 I think we were just coming to the deferral and variance account issues before the break. Issue 11.1 deals with historic deferral and variance accounts. There is a complete settlement. I don't think there's a need for me to give the detail here. I think it's self-explanatory. There are cross-references for where some specific deferral or variance accounts are addressed in the settlement proposal. Perhaps the one thing that I should note is that there is the cross-reference to the 2004 Union Gas deferral account. The reason for that is to take into account here the issue about negotiated rates under the Union storage contract that I referred to when we were looking at issue 5.1. 317 MR. BETTS: Thank you. 318 MR. CASS: Issue 11.2 deals with the company's requests for deferral and variance accounts for fiscal 2005. The opening words of issue 11.2 describe a complete settlement in respect of a list of accounts that I won't read into the record. Then there is a reference to the 2005 class action suit deferral account. This is no settlement on this issue. However, this is another in the category of no-settlement issues where I indicated that the parties had agreed on something. What the parties did agree on can be seen at the bottom of page 38, for those who are looking at the June 10th version, and there the wording indicates that parties agree that recoverability in rates is a matter that is appropriate to be considered by the Board in a funded generic proceeding in which all stakeholders can participate. That's a matter of agreement. 319 Then the next sentence as well indicates the parties' agreement that direction from the Board is required at this time, and then failing direction from the Board, the parties have indicated the issue that needs to be addressed in the hearing. 320 MR. BETTS: Thank you. 321 MR. CASS: 11.3, issue 11.3, again, is a complete settlement. I don't think it requires a lot of explanation. Due to a delay in the Cityscape litigation, which is a manufactured gas plant's case, there is agreement that the company will withdraw its request for the 2005 manufactured gas plant variance account without prejudice to the rights of all parties in the future. 322 Issue 12.1 deals with deferred taxes and the notional utility account. There is no settlement on this issue, so again I don't propose any real comments on it. I merely note that this issue is the exception to the parties' general agreement about confidentiality that I described when we were looking at the preamble to this document, and that appears at the bottom of page 40 in the June 10th version of this document. The Board will see the words: 323 "It's the position of some intervenors that all documents pertaining to the deferred taxes claim should be treated as non-confidential." 324 That's why there is general agreement on confidentiality. 325 MR. BETTS: Mr. Cass, can you help me with the paragraph that was put in here, and it's on page 41 of my version, June 10th, "the company does not agree..." 326 Can you explain what your position is with respect primarily to the part, "or belong in some proposed --" hold on a second. Please go ahead. 327 MR. CASS: I think I can do that quite simply, Mr. Chair. That comment is in relation to the second paragraph under the no-settlement heading which begins with the words, "The intervenors contend that..." This paragraph, as the words indicate, set out the contentions of the intervenors, which the Board may or may not feel useful from a scoping point of view. The company's position is that contentions arguments do not belong in a settlement proposal, that a settlement proposal is for settlements. That's what the wording is intended to indicate: 328 MR. BETTS: But it doesn't change the company's position in terms of agreeing with the settlement? 329 MR. CASS: No. The wording is only in relation to issue 12.1, and there is no settlement on issue 12.1. 330 MR. BETTS: Okay. Thank you. Please proceed. 331 MR. CASS: Issue 13. -- 332 MR. THOMPSON: Can I make a comment here with respect to confidentiality that might be helpful. 333 MR. BETTS: Yes, Mr. Thompson. 334 MR. THOMPSON: What I'd like to suggest is that we deal with the confidentiality when the deferred taxes panel actually comes forward. The evidence listed with respect to deferred taxes is found at page 41 of the agreement, and you may recall that some parts of the prefiled evidence, at least I recall that some parts of the prefiled evidence were filed in confidence and then some parts of the interrogatory responses were filed in confidence. So it's with respect to what has been blacked out or what has not been filed that my client is one of those who takes the position that all of this information should be on the public record and available for cross-examination on the public record when we come to deal with this disputed issue. 335 I just wanted to say that so you'll know that there may be some issues of confidential information at that time. I can indicate by way of a high-level overview that my client takes the position that this claim is a substantial claim, it's for $18.4 million per year for two years, that's almost a $37 million claim, to recover costs from ratepayers, and such costs should be proved on the public record if they are to be recoverable from ratepayers. 336 The other aspect of this issue that the Board is aware of is that it's now completely historic, it arises as a result of events that occurred prior to May of 2002, so there's no forecast information or that kind of thing in any of the historic information that we feel should be on the public record. So I thought it might be helpful to be aware of where we're coming from on that topic. 337 MR. BETTS: Mr. Thompson, I believe the Board's procedures allow any party to provide information to the Board on a confidential basis, and it remains that way basically until someone objects to that kind of status. And I think at that point the Board then gets involved with a decision as to whether it should remain confidential or not. Is it your intention to -- how do you intend to bring forward to the Board the specifics of your concerns and I guess the specific documents that are involved? 338 MR. THOMPSON: Well, the specific -- well, I'm glad you raised that. I suppose what you're asking me to do is to deliver a document that makes this more specific and I will do so, so that when the topic comes up, you'll know what's been blacked out, what hasn't been blacked out, and what we say should be in. 339 MR. BETTS: I think that would be a good place to start for us. We would then be able to hear from the company if they object to those specifics being made part of the public record and the Board can take it from there. Thank you. 340 MR. THOMPSON: Thank you, sir. 341 MR. BETTS: And thanks for bringing that up. If any other parties are aware of similar problems, it would be worthwhile to deal with them all at once, if possible. 342 Mr. Cass. 343 MR. CASS: Thank you, sir. This then brings us to issue 13.1, which is the change in fiscal year-end. As the Board is aware, there is no settlement on this. This is also the subject of the motion that's been discussed this morning. So I don't propose to say anything more about it at this time. 344 MR. BETTS: Thank you. 345 MR. CASS: Issue 14.1 addresses a long series of cost-allocation matters, Mr. Chair. 346 In respect of one particular -- in respect of upstream transportation costs which are addressed here, it is the company's proposal to implement certain cost-allocation changes but to -- I shouldn't say just the company's proposal. It's the agreement that there will be a phase-in for the rate implementation of these changes. I will come to that under issue 15.4. At this point, I just wanted to highlight that cost implication would be implemented without delay; rate implementation would be the subject of the phase-in under 15.4, which I will address when we come to it. 347 Having said that, for the rest of the wording of 14.1, which is quite lengthy and quite specific, I would suggest that I not attempt to paraphrase this and indeed not read it into the record. Instead, I would suggest if there are any questions, Ms. Giridhar is here and I think can address specific questions on what is set out in issue 14.1. I think that would be much better than me trying to paraphrase it because I would make mistakes for sure. 348 MR. BETTS: Thank you. 349 The Board panel has no questions of the witnesses on this, so please proceed. 350 MR. CASS: All right. I'll just quickly touch on the other issues before I get to issue 15.4, which might require a little more explanation. 351 Issue 15.1 is a proposal by the company to remove seasonal differences for all of its rate classes except rate 135. There's a partial settlement there on this issue. The parties who are not agreeing with the partial settlement are indicated opposite the word "approval" where they are noted as exceptions. 352 MR. BETTS: I'm just going to make certain to -- I know there was a change there, but the three parties are Energy Probe, GEC, and Pollution Probe; is that correct? 353 MR. CASS: That's correct. 354 MR. BETTS: Please proceed. 355 MR. CASS: Similarly, issue 15.2 is the subject of a partial settlement. The proposal is for an increase in the monthly charge for rate-1 customers from $10 to $11.25. There is -- sorry. The parties who are not included in the partial settlement are, again, specified in the exception opposite the word "approval," and this is the case where you'll recall the reference to CAC and CCC was included in the June 11th version of the settlement proposal as one of those who are not included in the partial settlement. 356 MR. BETTS: Thank you. 357 MR. CASS: Rate 6, issue 15.3, there is a complete settlement that the rate-6 customer charge stay at its level for the test year -- stay at its fiscal 2004 level for the test year. 358 MR. BETTS: Thank you. 359 MR. CASS: Issue 15.4 addresses rate design implications of the upstream cost-allocation issue. All parties have agreed on the changes to the allocation subject to a phase-in that is described here under issue 15.4. It's described as a differential phase-in over four years which will be accomplished by limiting the increase for any particular rate class in each of the first three years to 9 percent, and then for any rate class in which there is still increase to be implemented, the rest will be implemented in the fourth year. 360 This phase-in applies to the impact of the changes to the cost-allocation methodology for upstream costs. It does not sweep in other cost changes that might occur during the phase-in period. The rate impacts of the phase-in are described at table 2, appendix B. There are other aspects to the settlement, including the company's agreement to consider changes to the 300, 305, 310, and 315 rate schedules. The Board will also see that there is a material-change-in-circumstances clause that, in the circumstances described there, would permit parties to apply to the Board or request changes to the phase-in. 361 MR. BETTS: Thank you. 362 MS. DeMARCO: Mr. Chair, Elisabeth DeMarco at the back of the room. Just to note as per your request, this is one of the issues that would be impacted by the motion before the Board now, and as I understand it, its specific impact would be to delay the commencement -- if the motion were to be granted, it would be delay the commencement of the phase-in by three months. 363 MR. BETTS: Mr. Cass, have you any response to that? 364 MR. CASS: I don't know why Ms. DeMarco is saying that the implication of the phase-in would be delayed by the granting of the motion. 365 MR. BETTS: Ms. DeMarco, can you clarify that? Or feel free to ask a question through me for clarification for yourself. 366 MS. DeMARCO: Thank you, Mr. Chair. I could be absolutely mistaken here. It was my understanding that based on what was before us, that the effect of the change in year-end would be to commence the actual process of phase-in as of January 1, 2000 and -- five, six, five. Subject to clarification. 367 MR. BETTS: Mr. Cass, can you clarify that? 368 MR. CASS: Can I suggest Ms. Giridhar address that? 369 MR. BETTS: That would be fine. Thank you. 370 MS. GIRIDHAR: That's not my understanding of the issues, Mr. Chair. The intent would be to start the phase-in as of October 1, 2004, which would be the commencement of the 2005 fiscal year. There was some discussion, I understand, in terms of, if the year-end change were to occur, there would be a three-month period, and the question then would be whether the next year of the phase-in would commence as of October 1, 2005 or whether it would synchronize with the 2006 fiscal year. And I had provided the opinion that we could do either, because we do have a QRAM mechanism that allows for a quarterly rate change, so it would be possible to implement the change such that phase-in occurs over 12-month period commencing October 1, 2004. So that was my view. 371 MR. BETTS: Ms. DeMarco, does that clarify the matter for you? 372 MS. DeMARCO: It does, thank you. 373 MR. BETTS: Thank you. 374 Please proceed. 375 MR. CASS: I don't think I need to say anything about issue 15.5, which is a complete settlement encompassed under issues 14.1 and 15.4. 376 Issue 15.6 is also a complete settlement for the company's proposal to change the calculation of the annual minimum bill in the ways described at issue 15.6. 377 MR. BETTS: Thank you. 378 MR. CASS: Similarly, issue 15.7 is for a complete settlement for what are described as minor changes to the Rate Handbook. They are set out there and I don't propose to read them into the record. 379 MR. BETTS: Thank you. 380 MR. CASS: Issue 15.8 relates to the direct purchase administration charge. This is a complete settlement and this was already alluded to when we discussed issue 5.4, that the company is retaining both the system gas allocation and the DPAC at the 2004 levels. 381 MR. BETTS: Thank you. 382 MR. CASS: Issue 5.9, there is a complete settlement on unauthorized overrun changes. Currently they are calculated as 150 percent of the highest daily price in a month. As a result of the agreement, they would be calculated at 150 percent of the average price on the actual day of curtailment, and also the penalty described here of 25 cents per cubic metre would be discontinued. That's a complete settlement. 383 MR. BETTS: Thank you. 384 MR. CASS: Issue 15.10 deals with the curtailment notice. There is a complete settlement on some changes to the format, the language, and additional detail of the fax confirmation of curtailment notice. 385 MR. BETTS: Please continue. 386 MR. CASS: There is a complete settlement on the issue relating to the review of the QRAM methodology. This is issue 15.11. Essentially, there are three aspects to this complete settlement. First, that in the first quarter of the year, the company will clear the PGVA balance arising from an inventory adjustment if the threshold is exceeded. Second, the company will notify all parties as soon as possible where a material over or undercollection from a prior year is to be included in the PGVA. Third, there was in the 2003 case some wording in the settlement proposal about flexibility that the company may exercise in the fourth quarter QRAM. This settlement proposal reiterates that the flexibility is to be exercised where the company can demonstrate that circumstances warrant a deviation. So those are the three aspects of the complete settlement on QRAM review. 387 MR. BETTS: Thank you. 388 MR. CASS: That completes the settlement proposal, I believe, Mr. Chair, other than the rate implementation wording which is very straightforward and I don't think I need to review with the Board. 389 MR. BETTS: Thank you, Mr. Cass. 390 Just perhaps a couple of -- I don't think they're questions, they may be more, in fact, comment from the Board Panel. It may invite some questions or comments from the intervenors. 391 Specifically, there are several mentions here to the Natural Gas Forum with respect to how funding might be established for the Natural Gas Forum and what matters might be included in there. This Panel is not in a position to determine either of those questions; one, the nature of any funding supporting that process, nor can it at this stage reasonably determine the subject matter. 392 That being said, does that change any party's position with respect to the acceptability of the settlement proposal? 393 Mr. Shephard. 394 MR. SHEPHARD: Mr. Chairman, the wording surrounding funding and access to those processes was one that was very important to my client. And our interpretation of the settlement agreement that is before you is the parties, as a group, are proposing that certain issues be deferred to a generic policy process of which the Natural Gas Policy Review may be one. And to that particular process, if it's appropriately inclusive and participatory, and if not, we're asking the Board to defer it to another process that does meet those criteria. 395 And we understand that the Board can't decide that today but can, as you do sometimes in decisions at the end of hearings, say, "We think this is more appropriate in a generic process." 396 MR. BETTS: Thank you. 397 MR. CASS: I might just point out, Mr. Chair, as perhaps I should have when we were going through the settlement proposal, that there is wording on this in the preamble that appears at the top of page 10, and that describes what the parties intend in connection with an appropriate alternative forum to the Natural Gas Policy Review. I didn't point that out as we were going through the document and perhaps I should have. 398 MR. BETTS: Actually, I -- thank you. I certainly was aware of that and I wanted to make certain what my understanding was. It does indicate -- the one sentence that caught my attention was that: 399 "The parties have agreed to these proposals on the assumption that the Natural Gas Policy Review will be a funded process in which all stakeholders have a full opportunity to participate." 400 There is some uncertainty at this point as to whether this Panel can, in any way, confirm or deny or reject that assumption, and the assumption may simply have to stand. And I'm trusting that it doesn't weaken the foundation of the settlement if that is the situation. 401 MR. CASS: Well, I think not, sir, because then the next sentence has what I might loosely call the fallback position, it starts with the words, "If this is not the case..." 402 So if what is described in the second sentence of the paragraph we're now referring to is not the case, then there is a position described that would take effect in those circumstances. 403 MR. BETTS: Thank you. 404 Any other submissions on that? 405 MS. DeMARCO: Thank you, Mr. Chair. Elisabeth DeMarco at the back of the room again, with apologies. To the second part of your question not related specifically to funding for the Natural Gas Forum but to the content of the Natural Gas Forum, just with some background information for the Panel in that where, in particular in relation to issue 5.4 and 5.5, the specific issues contemplate being heard in the context of the Natural Gas Policy Review, we have sought, through Board Staff, some confirmation that they would reasonably fit within the scope of purview in that hearing or in that forum. 406 MR. BETTS: Thank you. Any other submissions before we leave that point? 407 MR. THOMPSON: Mr. Chairman, I suggest that if you cannot approve a proposal that contemplates the referral of these issues to a funded process, that you say so when you accept the proposal so there will be no misunderstanding by parties with respect to this assumption as reflected in the document. 408 MR. BETTS: Could you repeat that so I understand it? 409 MR. THOMPSON: You're asked to approve and accept a settlement proposal. There's an assumption that's built into the settlement proposal, and I think what I hear you saying is you cannot at this stage either determine whether that assumption is reasonable or unreasonable, is really something beyond your scope of your mandate. I think if that's the situation, you should say so when you accept the proposal. 410 MR. BETTS: I think you've brought the matter to a head in that statement. The Board Panel would not want to jeopardize this proceeding going forward if there was an assumption of parties that, in us accepting this, that we can guarantee those things to have happened -- to happen. They are -- they may be beyond the control of this Panel to deal with. 411 We may just have to consider that in our deliberations and word things accordingly. But I would be interested in any further submissions on that. 412 MR. WARREN: Mr. Chairman, I'm wondering if the Board could do this: I'm wondering if the Board could, prior to making a decision to accept the settlement proposal, if it could receive submissions from all of the parties as to what they intend by the meaning of the word "funded" and why they believe that certain kinds of fundings and certain kinds of structures are important. 413 On the basis of those submissions, it might then be open to the Board to say, We have received these submissions and it is our view that we would recommend that it be funded in such a way, acknowledging implicitly or explicitly that it is beyond your jurisdiction to control that. But if, when the decision is ultimately made as to what form those processes would take and what the funding mechanism, if any, would be, if it had the benefit of our submissions as to what we believe is the appropriate forum and a recommendation or otherwise from the Board, that might be helpful, Mr. Chairman, rather than simply leaving it as opaque as, We can't make a recommendation, because there is then, an implicit conflict, if you wish, between what is the intention of the parties who signed the agreement and what the Board says. So I leave that possibility for your consideration, sir. 414 MR. BETTS: Mr. Shephard. 415 MR. SHEPHARD: Mr. Chairman, perhaps I could just add one other thing. The intervenors in this case were faced with a bit of a dilemma. These issues are currently before the Board, properly before the Board, and on the issues list in a funded process in which we have the opportunity to debate them fully. We also recognize that it's not the most efficient way of dealing with them. They are issues that affect others, including Union Gas, including, in some cases, others that are not before the Board here, and it's a bit of a waste of the Board's time to debate them fully here and then debate them again in the fall and debate them again next year. We've seen that in a number of other things. It's not wise. 416 On the other hand, if you're an intervenor that will not be able to participate if the Natural Gas Policy Review is not funded, then you're in a dilemma. Are you to just forget about these issues? That's not realistic for many intervenors. And so we tried to walk a fine line in the wording of the agreement to indicate to the Board that we're giving up the opportunity to debate them here only because we're expecting that we'll have the full opportunity to debate them elsewhere. 417 Frankly, our expectation was that the Board would say, We can't order that, which you clearly can't, but that you could recommend it and that in the event that it turned out that wasn't the case, we would then -- we would then come before the Board in the future at the time that decision is made and say to the Board, We lost this opportunity, we want it back. 418 Those are our submissions. 419 MR. BETTS: Thank you. We'll just pause for a moment while the Panel deliberates. 420 [The Board confers] 421 MR. BETTS: Thank you all very much. That has been helpful. I think we will simply accept the submissions that we received today and we will consider those in our deliberations and hopefully provide some clarification in our decision for all parties. 422 I have -- is there anything else anyone needs to bring forward on this? I do have some housekeeping items I'll advise people of. 423 PROCEDURAL MATTERS: 424 MR. THOMPSON: Mr. Chair, could I just add one point on the last topic you were discussing. From my client's perspective, I just wanted to emphasize that it's important that Enbridge agreed that these proposals would be referred to other processes on the assumption that they would be funded processes. It's not just intervenors, but it's intervenors and the utility, and I just wanted to emphasize that. 425 MR. BETTS: Thank you. And certainly the Board Panel has been considering it in that way. 426 Any final comments? 427 MR. WARREN: Mr. Chairman, I wonder if I could just interject, with apologies, on a personal note. I have an obligation for a court proceeding which unfortunately is coming to its head over the next two weeks, culminating in a motion to be argued on the 29th and 30th and it's going to make it pretty much impossible to participate as actively as I would like. 428 What you will find, I think, sir, when you see the case presented to you, is that among intervenor counsel, we have, in a rough kind of way, divided up responsibility for the major issues, and to me falls the responsibility principally for the EnVision issue which, if it's settled, makes me largely disappear from the proceeding. If it doesn't, then I will be shoehorned back in in some way. 429 But I wanted to indicate to the Board that I mean no disrespect to the Board or the process. It's simply unhappy timing that will keep me from participating as fully as I would like. Ms. Girvan will be here, she will be discussing issues with me regularly and also with other counsel so that the interests of our clients will not go wanting in the process, but I wanted the Board to be aware of that if I'm simply not here physically, it's because I can't be, sir. Thank you. 430 MR. BETTS: Thank you, Mr. Warren. 431 Mr. Shephard. 432 MR. SHEPHARD: Mr. Chairman, one other thing, and perhaps you were going to raise this but I'll just get it in anyway. We have not yet seen a proposed schedule for the intervenor panels -- sorry, for the company's panels, and obviously, because they are discrete issues, we have to prepare in a particular order and I'm wondering when we'll see a schedule. 433 MR. BETTS: Thank you. That was going to be one of my questions as well and you've phrased it as well as I could have. 434 So can we have a response to that? 435 MS. DUGUAY: Mr. Chair, my name is Pascale Duguay, I'm from Direct Energy. Unfortunately, our legal counsel had to leave. I just wanted to say with regard to the content, or the issues with regard to the content around the Natural Gas Policy Review Forum, that it is Direct Energy's position that in relation to issue 5.4, that our agreement to the settlement was predicated upon the fact that these issues would be heard within the context of that forum. So we agree with the position that Ms. DeMarco stated earlier on. 436 MR. BETTS: And for clarification, Ms. Duguay, that would -- that was -- your position was that it would be somehow considered in a generic proceeding, not necessarily the Natural Gas Forum but a generic proceeding? 437 MS. DUGUAY: Yes, that's correct. 438 MR. BETTS: Thanks, just for clarification. Thank you very much. 439 Mr. Cass, when will be know the schedule for appearances by witnesses? 440 MR. CASS: Mr. Chair, the difficulty with producing some sort of a complete schedule is the amount of uncertainty that we're now facing. There is uncertainty around EnVision; there is uncertainty around the change in year-end issue. What the company did do was issue its expectation as to the first three panels that would be brought forward and could be dealt with at the hearing. Those would be the first panel to address the issues identified in the settlement proposal about the storage contract with Union. The next panel to address the unsettled risk management issue; then following that, a panel to address transactional services, which is also unsettled. 441 It's always difficult for the company to put time frames on these because the length of the panels really depends mostly on cross-examination by other parties. But what the company had anticipated was Wednesday for the first subject, that is, the storage contract; Thursday for risk management, possibly carrying over to Friday; and then Monday and Tuesday for transactional services. 442 Now, in addition to that, we have Wednesday for cross-examination on the affidavit in relation to the motion and Friday for argument of the motion, so that may require some juggling even of those first three issues, but I think amongst all of those various topics, that is enough to keep us going for a while. And I would expect that on something like EnVision, we'll have more certainty fairly soon so that we can then work on getting a more complete schedule. 443 MR. POCH: Mr. Chairman, I might inquire of you through my friend. The letter which he refers to that was kindly sent to us indicating that a few days ago, also referred to rate design, which is one of the only remaining issues that I'm concerned with. I'm just wondering, I know they're not in a position to tell us what particular dates, but just in terms of sequence, if we can expect that to follow from the transactional services and be reached sometime next week, that would be helpful for me to know because I have a conflict the following week. 444 MR. BETTS: Thank you. 445 MR. CASS: I was just about to provide a little more information about scheduling after transactional services, but we're just checking, Mr. Chair. 446 MR. BETTS: Thank you. Take your time with that. It would be helpful. 447 MS. LEA: The letter indicates that rate design would follow risk management. The letter indicated that rate design would follow risk management and then transactional services would occur. I was wondering if I could clarify that, please. 448 MR. BETTS: It may be a little bit unfair to expect the scheduling to be organized under the pressure of a hearing, so what I'm going to ask is that you try to have that schedule established, to the best of your ability at this stage, and circulated perhaps this afternoon by the quickest possible methodology, whether it's e-mail or fax, to the participants. And we appreciate that that may change based on what's going on. But if you can take your best guess as to how that will work out, that would be great. And that will help everybody schedule themselves accordingly. And as much as possible, to take it towards the end of the hearing, and again on the condition that we accept that it may have to be modified as we actually experience the hearing process. 449 MR. CASS: We can do that, Mr. Chair. 450 Could I just add a couple of additional comments to what I already said about the schedule, just for clarity and to be -- at least on one of these points, to be sure we're all of the same understanding. 451 The dates that I have spoken of essentially would run out, I think, at least until the 22nd. I should point out that the reason the company was looking to schedule transactional services for the 21st and the 22nd has to do with availability of witnesses. It would really be important from the point of view of having the witnesses available to be able to do transactional services on the 21st and 22nd. 452 Now, the next point that I'm not sure everyone would be aware of is, it's our understanding that the next day, the 23rd, needs to be a day off for other reasons, and I thought perhaps I should just mention that to be sure there's no misunderstanding. 453 MR. BETTS: At this point I think we have to assume that that is -- actually, it's a scheduled meeting for the Board, if I remember correctly. I'm just trying to confirm that. Yes. And at this point we'll have to assume that we are not available on the 23rd, but that could possibly change as well. But at this point, establish the schedule as though we were not sitting on the 23rd. 454 MR. CASS: Okay. Then the only other point was that the company's planning was to proceed after that day off with EnVision, but that of course depends very much on what happens with the EnVision issue. But I just mention that while Mr. Warren is here because, of course, it's important to him and it would be important to other people as well. That was the planning that the company was looking to following the 23rd. And of course, it may well be that we already have more with the preceding issues than we can accomplish before the 23rd and some of that may carry over. I'm not sure. 455 MR. BETTS: I think I'm going to close off the comments on this at this point. I'd encourage anybody that does have some issues with scheduling to perhaps stick around for a few minutes after this and see if you can't, as a group, sort some of those things out initially, rather than waiting until the document gets circulated. But I'll leave that up to all of you, and as soon as you have something for the Board to work from, we'd appreciate it as well. 456 By way, again, of some housekeeping items, we're going to follow a format which will find us starting at 9:30 a.m. every morning. We will have a short break in the morning. We've followed this format before. We'll break for lunch at an appropriate time, probably in around the 1:00 range and take an hour and a quarter to an hour and a half. And then if things work out, there will be no coffee break in the afternoon, but we will break at 4:00. 457 We say that and hope everybody understands that the Board will be very flexible with respect to that schedule. We will try to accommodate any specific needs of your witnesses and your needs particularly. The Board is prepared to stay longer and sit longer or, if matters come up, we can deal with schedule changes. We will be using the time from 4:00 on to review as a Panel what has happened during the day and consider what will happen the next morning, so it will help us organize our process at this end. 458 The one item that I might -- I should mention at this point, too, is we do have a scheduling issue on Friday, June 18th - I mentioned this earlier - and the Board will have to break on that day at 2 p.m. Apart from that and June 23rd, that we've already spoken about, I'm unaware right now of any particular problems. 459 I believe with that then, we've concluded this part of the process. I would like to, on behalf of the Panel, congratulate all of you on the efforts you have put in over those days to bring to us a pretty tidy settlement proposal. We thank you for that. We know that there were some difficult matters within there that have been settled, or largely settled. That will aid the process as we go forward. And once again, we congratulate you and thank you all for your participation in doing that. 460 We will try to determine the best we can an appropriate result from that proposal and, again, advise you as soon as possible so that you can get on with your planning. The motion added a little complication to that, but it does add interest to the proceeding as well. 461 That being said, we will adjourn now and we'll reconvene on Wednesday morning at 9:30 a.m. 462 Thank you all. 463 --- Whereupon the hearing adjourned at 12:20 p.m.