Rep: OEB Doc: 13BFP Rev: 0 ONTARIO ENERGY BOARD Volume: EDR ISSUES DAY VOLUME 2 2 NOVEMBER 2004 BEFORE: G. KAISER PRESIDING MEMBER AND VICE CHAIR P. SOMMERVILLE MEMBER C. CHAPLIN MEMBER 1 RP-2004-0188 2 IN THE MATTER OF a hearing held on Tuesday, 2 November 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 the preparation of a handbook for electricity distribution rate applications 3 RP-2004-0188 4 2 NOVEMBER 2004 5 HEARING HELD AT TORONTO, ONTARIO 6 APPEARANCES 7 JENNIFER LEA Board Counsel MIKE LYLE Board Staff MARTIN DAVIES Board Staff KEITH RITCHIE Board Staff MARY ANNE ALDRED Hydro One SUSAN FRANK Hydro One DAVID CURTIS Hydro One CARM ALTOMARE Hydro One MICHAEL ROGER Hydro One MARK RODGER Toronto Hydro, Aurora Hydro, Enwin Powerlines, Niagara Falls Hydro, Brantford Power JAMES SIDLOFSKY Toronto Hydro, Aurora Hydro, Enwin Powerlines, Niagara Falls Hydro, Brantford Power COLIN McLORG Toronto Hydro ANDY HOGGARTH Peterborough Utilities CAMERON McKENZIE Hamilton Hydro TOM ADAMS Energy Probe DAVID MacINTOSH Energy Probe DAVID POCH Green Energy Coalition RANDY AIKEN London Property Management Association JAY SHEPHERD School Energy Coalition DARRYL SEAL School Energy Coalition BRIAN WEBER Grimsby Power ELISABETH DeMARCO Rogers Cable, CCTA JULIE GIRVAN Consumers Council of Canada BILL HARPER VECC ROGER HIGGIN VECC IAIN CLINTON Newmarket Hydro DAVE WEIR Newmarket Hydro JUDY KWIK Power Workers' Union R STEPHENSON Power Workers' Union KEN SNELSON AMPCO ROGER WHITE ECMI MORRIS TUCCI EDA DENNIS O'LEARY Enbridge Gas Distribution DAVE MATTHEWS Enbridge Gas Distribution SHEILA HALLIDAY Canadian Energy Efficiency Alliance MURRAY KLIPPENSTEIN Pollution Probe JACK GIBBONS Pollution Probe MARGARET NANNINGA Kitchener-Wilmot Hydro ROBERT WARREN Consumers Council of Canada 8 TABLE OF CONTENTS 9 PRELIMINARY MATTERS: [15] REVENUE REQUIREMENT WORKING GROUP - ISSUE F: CONSERVATION AND DEMAND MANAGEMENT: [59] SUBMISSIONS BY MR. POCH: [60] SUBMISSIONS BY MR. WARREN: [142] SUBMISSIONS BY MR. POCH: [196] SUBMISSIONS BY MR. KLIPPENSTEIN: [211] SUBMISSIONS BY MR. HIGGIN: [222] SUBMISSIONS BY MR. SHEPHERD: [236] SUBMISSIONS BY MS. ALDRED: [247] SUBMISSIONS BY MR. SIDLOFSKY: [249] SUBMISSIONS BY MR. WHITE: [255] SUBMISSIONS BY MR. O'LEARY: [260] SUBMISSIONS BY MR. TUCCI: [269] SUBMISSIONS BY MS. HALLIDAY: [276] SUBMISSIONS BY MR. McLORG: [285] FURTHER SUBMISSIONS BY MR. WARREN: [293] SUBMISSIONS BY MS. FRANK: [317] FURTHER SUBMISSIONS BY MS. HALLIDAY: [327] FURTHER SUBMISSIONS BY MR. POCH: [332] FURTHER SUBMISSIONS BY MR. SIDLOFSKY: [344] FURTHER SUBMISSIONS BY MR. POCH: [378] FURTHER SUBMISSIONS BY MR. KLIPPENSTEIN: [407] FURTHER SUBMISSIONS BY MR. SHEPHERD: [412] SUBMISSIONS BY MR. MacINTOSH: [416] FURTHER SUBMISSIONS BY MS. HALLIDAY: [429] PROCEDURAL MATTERS: [443] RATE DESIGN AND COST ALLOCATION WORKING GROUP - ISSUE A: CLASS REVENUE REQUIREMENTS; CHAPTER 4: [459] SUBMISSIONS BY MS. NANNINGA: [460] DECISION RE VARIOUS ISSUES: [536] RATE DESIGN AND COST ALLOCATION WORKING GROUP - ISSUE A: CLASS REVENUE REQUIREMENTS; CHAPTER 4: [567] SUBMISSIONS BY MR. WHITE: [568] SUBMISSIONS BY MS. DeMARCO: [583] SUBMISSIONS BY MR. TUCCI: [635] SUBMISSIONS BY MR. SEAL: [644] SUBMISSIONS BY MR. SNELSON: [677] FURTHER SUBMISSIONS BY MR. WHITE: [754] FURTHER SUBMISSIONS BY MR. SNELSON: [768] FURTHER SUBMISSIONS BY MS. DeMARCO: [786] FURTHER SUBMISSIONS BY MR. WHITE: [799] SUBMISSIONS BY MS. FRANK: [813] SUBMISSIONS BY MR. HIGGIN: [820] SUBMISSIONS BY MR. WEBER: [840] RATE DESIGN AND COST ALLOCATION WORKING GROUP - ISSUE B: SPECIFIC SERVICE CHARGES (CHAPTER 6) AND SSS ADMINISTRATION CHARGE (CHAPTER 7.1): [882] SUBMISSIONS BY MR. WEIR: [883] SUBMISSIONS BY MR. WEBER: [912] SUBMISSIONS BY DIRECT ENERGY READ INTO THE RECORD BY MS. LEA: [920] RATE DESIGN AND COST ALLOCATION WORKING GROUP - ISSUE C: RATE DESIGN; OTHER CHAPTER 7 ISSUES: [934] SUBMISSIONS BY MR. WHITE: [935] SUBMISSIONS BY MR. SIDLOFSKY: [998] SUBMISSIONS BY MR. POCH: [1035] SUBMISSIONS BY MR. ROGER: [1040] SUBMISSIONS BY MR. MacINTOSH: [1047] FURTHER SUBMISSIONS BY MR. SIDLOFSKY: [1057] FURTHER SUBMISSIONS BY MR. WHITE: [1071] FURTHER SUBMISSIONS BY MR. ROGER: [1089] PROCEDURAL MATTERS: [1106] 10 EXHIBITS 11 EXHIBIT NO. 4: BOOK OF MATERIALS TO BE USED ON ISSUES DAY, DATED NOVEMBER 2, 2004, ON BEHALF OF ROGERS CABLE AND THE CCTA [599] EXHIBIT NO. 5: LETTER FROM AMPCO TO THE BOARD DATED JULY 13, 2004 [684] EXHIBIT NO. 6: COPY OF LETTER TO SIFTO IN RESPONSE TO THEIR REQUEST FOR CONTINUATION OF MOTION CHALLENGING THEIR DISTRIBUTION RATES, DATED MAY 9, 2003 [713] 12 UNDERTAKINGS 13 14 --- Upon commencing at 9:32 a.m. 15 PRELIMINARY MATTERS: 16 MR. KAISER: Please be seated. 17 Ms. Lea. 18 MS. LEA: Good morning, Mr. Chair, Members of the Panel. I understand the Panel had a couple of preliminary matters. Unfortunately, though, one of your preliminary matters was questions that you wanted to put to Mr. Adams and I don't see him here yet. I understand that he probably will be coming later in the day, so perhaps you need to put those questions off. 19 MR. KAISER: All right. 20 MS. LEA: I believe you may have intended to make some remarks about funding, and, in addition, I think Mr. Shepherd had his transcript correction that he wishes to put on the record. 21 MR. KAISER: Mr. Shepherd, do you want to proceed? 22 MR. SHEPHERD: Yes. Thank you, Mr. Chairman. I have two corrections I'd like to make. The first, I found the transcript reference it's 836 and 838. In that reference I suggested that the gas utilities, "routinely almost every year earned more than their allowed rate of return." 23 Mr. O'Leary has pointed out to me today that that's not quite accurate; that while it's true that they have, on average, earned more than their rate of return, it's not routine and it's not almost every year. And I think that's a fair correction. In my exuberance, I may have overstated the case. 24 The second correction is earlier, and I haven't found this reference, the impression was left that the rule for gas utilities is 50/50 sharing of capital gains, and if I left that impression, as I say, I haven't found the reference, that's not correct. The last couple of decisions in gas relating to land sales have been 50/50 sharing, but prior to that there were situations where 100 percent of gains went to the shareholder. Those are my corrections, sir. 25 MR. KAISER: Thank you. 26 MR. O'LEARY: Mr. Chair, if I may, my name is Dennis O'Leary and I'm here on behalf of Enbridge Gas Distribution Inc. this morning. And to my left is Mr. Dave Matthews, who is with the company. I'd simply like to thank you for allowing me to step in at this moment, and to thank Mr. Shepherd for his correction on the record, and to indicate, as I understand the Board has asked that in the event that parties believe they may be filing reply evidence, to indicate that there are areas where that may occur. And in respect of the two areas that Mr. Shepherd just alluded to, the company wishes to reserve the right to file reply evidence in respect to those two matters. 27 MR. KAISER: Thank you. 28 MS. LEA: I'm sorry, which two matters, sir? Can you go to the Issues Day schedule and tell me where you would be attempting to file evidence? 29 MR. O'LEARY: It's the tax treatment and disposition of assets. If you give me a moment, I'll try and locate the -- perhaps I can get back to you, Ms. Lea. 30 MS. LEA: I think it's probably the sharing of tax savings on disallowed expenses between shareholder and ratepayers. 31 MR. KAISER: Section E. 32 MR. O'LEARY: Yes, it's E.1 and 2. 33 MS. LEA: E.1, pass-through or true-up? 34 MR. O'LEARY: I believe that's correct. Yes, both. 35 MS. LEA: You understand, Mr. O'Leary, that the Board has not yet ruled that as to whether any evidence will be called on that matter yet. 36 MR. O'LEARY: It is if evidence is called. And if I misspoke myself, it is in the event that if evidence is filed that we feel that it is appropriate to respond to. That was all we were asking. 37 MS. LEA: Thank you. Was there another section? I'm sorry, perhaps not. 38 MR. KAISER: It was section 1 and 2. 39 MR. O'LEARY: That's it. 40 MS. LEA: Okay. Thank you. 41 MR. KAISER: As counsel has alluded to, there has been a question raised, as I understand it, with respect to costs. And the Board wishes to advise you that we will continue under the current arrangement with respect to costs until there's -- the matter can be spoken to further, if there are any changes. 42 Am I correct on that, Ms. Lea? They we will continue under the existing arrangement? 43 MS. LEA: My understanding, sir, was that yes, there was a funding letter issued sometime ago which set out the parameters for potential cost awards and asked folks to adhere to that. And I understand that the -- from what you said, sir, that the Panel wishes to continue that funding past Issues Day on that basis until any other decision is made. 44 However, I understand also that the Panel is contemplating seeking parties to file, and you may want to indicate a specific date for this, kind of an interim account, if I can put it that way. That is, how many hours, at what rate, have been used so far, so we can assess where we are in that, and also at the same time apply for funding going forward. 45 MR. KAISER: Yes, thank you. We would like the parties to file their claims to date and also to file claims for further funding by the 5th of November. 46 MS. LEA: That's this Friday. Thank you very much. 47 MR. KAISER: As I said, in the interim the Board's current practice and procedure will stay in place, current ruling. 48 Are there any submissions on the funding matter? 49 MR. SHEPHERD: Mr. Chairman, I'm having some difficulty hearing you. I wonder if it's possible for you to be closer to the mike. 50 MR. KAISER: Thank you. 51 MR. POCH: Mr. Chairman, just a note of advice on the question of the forward-funding applications by Friday, assuming that the Board's in a position to give its indication on the scope of evidence, we should be able to do that, failing which we may have some difficulty. 52 MR. KAISER: All right. 53 MS. LEA: So far, Mr. Poch, the Board Panel has rendered its decisions as we've been going along so -- 54 All right. Then I think that brings us to the last presentation of the revenue requirement and rate base group which is scheduled for this morning, unless, Mr. McLorg, there was anything else that needed to be done before that presentation? If not, I'll turn it over to you. 55 MR. McLORG: Thanks, Ms. Lea. I'm not aware of anything else that needed to be addressed. 56 MS. LEA: Thank you. 57 MR. McLORG: Good morning, Mr. Chair and Panel Members. The last subgroup for which you'll hear a presentation today is chaired by David Poch. David represents the Green Energy Coalition, as I'm sure you are aware, and David will present the report of the CDM subgroup. Thank you. 58 MR. KAISER: Mr. Poch. 59 REVENUE REQUIREMENT WORKING GROUP - ISSUE F: CONSERVATION AND DEMAND MANAGEMENT: 60 SUBMISSIONS BY MR. POCH: 61 MR. POCH: Mr. Chairman, let me start by joining, as others have, in thanking the dozen or so members of the subgroup who worked diligently, none of whom were tax lawyers, so it was a very pleasant experience. And the -- and to thank the executive, including leaders of the executive and Board Staff, who really made very serious efforts to make this a productive process. 62 Mr. Chairman, we have a number of issues that arose under the framework conservation and demand management, excuse me if I lapse into the acronym DSM which is the preexisting one, but the new acronym is C&DM. But before I launch into that, just a caveat, Consumers Council of Canada raised at the plenary this first scope question, which we'll get to when we scope questions about the appropriateness of C&DM in this process or in some other process, and in light of that I wasn't able to -- I never really recorded, or it wasn't really expressed what Consumers Council of Canada's position would be on the issues if they're in this hearing. So just a caveat, if I express things as having been resolved, it may be that that's not the case. And I have included in my slide presentation a list of the scope questions cross-referenced with the number as they appear on the Board Staff's agenda for today. I won't get into them as I go through this process as we'll be getting back to them. 63 The group dealt with conservation behind the customer's meter. There is also, of course, the potential for conservation on the utility side of the meter, and I'll just advise the Board later today you will be hearing from Mr. White under issue 7.2 where we look at incentives, the question of incentives for utilities to reduce line loss. There is, further, a matter that arose that was noted yesterday under issue -- section C, number 3, and that is the question of whether you can rate base and amortize capital investments, not a matter we dealt with. I suggested to the Board they may want to wait until you heard this presentation before you dealt with that. I think I should just say that, on its face, it would seem that the question of whether you allow the utilities to earn a return on capital investments for these sorts of things will be something you want to decide in the context of whether they're getting any other incentive for competing expensed investments and so on. So that's really all I'll say about that. 64 The fact that we didn't deal with the utility side of the meters was not any indication that we don't feel it's an important matter, it's just that the tasks were allocated to another group. We took our cue from the Minister's letter -- in part from the Minister's letter advising utilities and the Board of his desire that the third-tranche monies be spent starting right away on a broad range of items, and, from those, we plucked the ones that are behind the customer's meter, which I've listed here: Energy efficiency, in the ordinary way we speak of it, peaking -- peak reduction and peak-shifting measures, fuel-switching programs to another fuel, and any programs that might encourage self-generation. 65 There was agreement that it's really up to the utilities -- people are comfortable leaving it up to the individual utilities to determine which, if any, and what mix is appropriate in the circumstances that they -- the local circumstances they find themselves in. There was universal agreement that any of these programs, to be appropriate, should pass the total-resource-cost test-screen, which is, simply, if the Board Members are not familiar, the utility standard for how you count up all the benefits and all the costs associated with any given conservation measure, over the life of the measure, and discount them back to present value. 66 Hydro One has a scope issue, which they'll speak to later, about -- just concern that something may have fallen through the cracks, as I understand it, between what Mr. White's going to talk about and what I'm going to talk about here. I'll leave it to them on that. 67 The one unresolved issue arising here was whether, given that most conservation will reduce a utility's electricity volumes, there will be a rate-increasing effect -- tend to be a rate-increasing effect, splitting their fixed costs over fewer units of electricity while -- even though there may be a reduction in customer bills, certainly, for the participants, but overall for the system. And there may be an issue as to whether or not conservation should be -- utility conservation should be restricted to those programs that don't have that effect. And there may be a particular concern with respect to fuel-switching problems on the part of some parties. 68 The second issue was styled "Revenue Protection," or the phrase LRAM, an acronym for lost revenue adjustment mechanism. The group recognized that, once rates are set for a given period, any conservation that the utilities induce will reduce the utility's revenue, a disincentive for the utility. The proposal that we canvassed was a non-mandatory capability for a utility asking for a lost revenue adjustment mechanism to hold itself harmless from this effect, which is just a deferral account. 69 The one linkage to a matter I'll come to in a moment is that we did come to the point that we felt, to make this non-controversial - I shouldn't say non-controversial but easier to manage - that its clearance be based on the assumptions and inputs that have been preapproved. And I'll get to that process in a moment, when the Board gives its okay to the spending. 70 The Panel will be familiar with the fact that some utilities, in the context of the third-tranche monies, have been nervous about embarking on spending not knowing if they're going to recover, if that spending will qualify to satisfy the condition -- the Minister's condition. And the Board has instituted a form of preclearance, preapproval, although not approval, advice to the utilities that they may seek on the appropriateness of their proposed spending. And we're proposing to formalize that and streamline it, and I'll come back to that in a moment. 71 Unresolved is whether or not, indeed, an LRAM is needed. And we simply point out here that, in 2006, LRAM could deal with both the lost revenue from 2006 conservation activities, lowering sales in 2006, but also the persistence of the savings that were generated by 2005 activities, which are still lowering volumes in 2006 relative to the 2004 level that rates are, presumably, being set on in this process, except for utilities that do a forward filing. So that the LRAM would be with respect to -- potentially, with respect to the cumulative effect, not just the current effect. 72 There is, in addition, a scope issue which is listed with this -- which is with respect to the impact of 2005 activity on the utility's revenue in 2005, and whether that can be compensated in a forward rate year. That is a matter that we won't be arguing, because it is a matter for the December 6th motions. 73 The next item we looked at was, the LRAM is intended to remove a disincentive. The next item we looked at was the possibility of a positive incentive for utilities to engage in conservation. There was widespread support for a non-mandatory shareholder-incentive conservation. I use the word "widespread" here. This is one -- I think, probably, the one important area where we may need to hear from the Consumers Council. In fact, it was universal support, but I later on put in a question as to whether there remains an issue there because, in fairness to the Consumers Council, we haven't heard their position on this. Not to say that there was universal support on any particular mechanism, but on the idea of the positive incentive. 74 There was also agreement on the general design goals, that it should be an effective incentive, but not too rich; simple, if possible, while achieving those other goals. Again, this is really the -- what we're talking about here is the creation of a deferral account to track success; however, it is ultimately measured to enable a reward for same in a forward rate -- subsequent rate period. 75 And again, there was widespread agreement that we base any clearance -- ultimate clearance of that account on the preapproved inputs or assumptions. Now, obviously, in most cases, the assumption of -- you don't make an assumption about how many participants you're going to get. That is the variable that you're rewarding. And I'll get to some other exceptions in a moment. 76 We really developed two options and a variation here. One is to simply -- and let me preface this by saying, in the gas side, with respect to Enbridge, where we've had an SSM for several years, we -- annually, we go through a bargaining process where we look at how they're doing, and we set a -- we negotiate in the ADR, and, potentially, before the Board, we litigate a proposed target for them, volume target or TRC target. And they get a reward -- for current processes, they would get a reward. They share in the savings created for customers if they exceed that target. And then we also -- and we negotiate a budget. 77 There was widespread recognition that we can't engage in that kind of process with 90-odd utilities. It's just too cumbersome. So we're looking for a mechanism which is more automated, more formulaic, doesn't have the necessity of an agreed-upon target, at least in the initial years. 78 And two models. One is, simply, give them a percentage of the savings that they generate from the first dollar of savings they generate, and the proposed number there is 5 percent. Not a scientific number, this is a -- as my friend Mr. Rubin, for Energy Probe, says, It's Goldilocks; not too small, not too big, seems about right. And the issue here is having a big enough incentive to be effective. Again, it's big enough incentive to be effective, but not so large that they're creating windfalls. 79 The alternative, which I understand Mr. Rubin would like to present evidence on, Energy Probe would like to present evidence on, is, through some formulaic means, to generate a target or pivot point for the various utilities that would, presumably, bear some relationship to their size, or the cost-effectiveness of what they're proposing, and then they would get an incentive for exceeding that formulaic -- formula-driven pivot point. And in so doing, you wouldn't be -- you would avoid rewarding them for the very low-hanging fruit, and you would afford to give them a richer incentive at the margin without impoverishing customers. 80 And the third alternative is to start with a simplified straight line, the first version, and then once we have experience over some period of time so that we can calibrate that formula, move to the second mechanism. 81 The reservations with the second mechanism are, briefly, that it's very difficult to come up with an agreed-upon formula in the absence of any track record. 82 So the unresolved issues, the first I've spoken to, I leave it to my friends for CCC to speak to whether or not, indeed, the need for shareholder savings mechanism is an unresolved issue. But certainly which model and the level of incentive are matters that are live issues. There is certainly -- it's certainly been expressed that some parties would prefer to see more analysis done first, whether or not that can be satisfied in the evidentiary phase of this proceeding or not is an open question. 83 There is a minor issue as to whether or not, and really just a subissue in the design side, whether or not the utilities could clear these accounts at the -- in the immediate following rate period based on estimates and then have a true-up, further true-up subsequently once the final numbers are in or whether we should wait. Presumably, one thing that would influence -- there's work in doing interim clearance, but it makes it possible to perhaps offer not as rich an incentive because the money is more immediate. And there is, harking back to the first issue, some issue as to whether an SSM would apply to all the forms of conservation we enumerated at the outset or just a narrower subset. 84 Crossover issue, we simply note so it doesn't get lost, that for an SSM to work, it obviously must be outside of any ROE formula and cap, otherwise it's -- if it's just capped or clawed back, it has no effect. 85 The one scope issue is with respect to the 2005 activities, again a matter that we'll discuss on December 6th. 86 I've already referred to this, there was widespread agreement, universal agreement that to make -- to ease the Board's ultimate task, we would front load some of the work here and the utilities would be able to seek preapproval of the various assumptions and inputs they are using to select and screen programs. And once those have been preapproved they could rely on those and ultimately clear the deferral accounts with sums calculated on that basis. 87 The suggestion is that the Board be assisted in this task by an outside expert or auditor that would also, ultimately, perform the role of the final audit or spot audits of the participant accounts, if that's required. And later there's the suggestion, not universally-approved suggestion, but the suggestion by some that there be a multi-stakeholder advisory committee, a standing committee that works to advise the Board and the auditor, and in so doing adds some degree of transparency and accountability to the stakeholders. 88 In any event, the auditor and the committee would be in an advisory role to the Board to ease the Board Staff's and Board's workload. 89 The notion here is that the intent here is to streamline the process to allow utilities to ride on the coat tails of either the work that other utilities have done, when the Board has approved the -- for example, the largest set of assumptions is avoided costs. How much does conservation at night or conservation in peak save the system, ultimately. These, it's suggested, be the provincial avoided cost numbers. We know they are, in fact, -- we are informed that Hydro One, Toronto Hydro, and Union Gas are cooperating on developing a set of provincial numbers which should be available shortly. We would expect that they would be filed in support of one of the early applications the Board will receive from Toronto Hydro or Hydro One, and then once the Board has reviewed those and blessed them as reasonable, they would be available for all the utilities to rely upon, and you wouldn't need to do 90 sets of approvals. 90 There would simply be a mechanism, perhaps a web posting and mechanism for utilities to give notice to the Board that they are relying on these inputs for the following measures that have been approved for those other utilities and perhaps extending it to other measures. And then the Board, it would be a negative option, marketing here -- you would have presumed approval of your preapproved numbers, unless an exception is made by the Board. 91 Again, as with the -- as I've said before, these preapproved values would then be available to be used to clear the deferral accounts. Not to say that the preapproved numbers would necessarily be found to be perfect, undoubtedly we would learn as we go, and that experience and insight would be used to adjust these values for the forward-going periods, so we would not be extending any error into the future. 92 It should be noted that while the preapproval process would settle virtually all matters for prescriptive generic cookie-cutter programs typical in the residential sector, for large custom programs, projects for large commercial customers in particular, and industrial customers, there are many customer-specific inputs that wouldn't be amenable to this approach. So the utility would have to bear the risk of the Board accepting the assumptions they used at the end. The comfort that everyone took in this is that in those kind of projects utilities are cooperating with the customer and specific engineering studies are being done in any event, so there's very little risk involved for the utility there. 93 There is a scope issue, which we'll get to, which is simply whether this preapproval process lends itself to be embedded in the routine filing process that the Rate Handbook anticipates. That is, whether it's simultaneous or whether it should be in a separate stream. Our final recommendation, which I'll come to in a moment, is the creation of a C&DM handbook which would give the utilities the templates they need for this process. And given the intent of having utilities leverage their efforts based on the approvals that others have received, there's some argument that this should be on a separate time frame from the standard filing. It should proceed -- they should proceed at will. 94 There is a small, unresolved issue. In the situation you have custom projects in the industrial and commercial sector, even though many of the inputs will be specific to that customer and won't be amenable to preapproval, it's possible that there will be generic elements inside a custom project. They are using a particular technology. While its application, certain inputs, in terms of how often it's going to run, perhaps, will be specific to the customer. An aspect of the TRC calculation, how much energy this form of efficient motor saves over a standard one, for example, could be seen as assumptions that are generic, and once approved in one situation there is no reason why they wouldn't apply in other situations. And it's just unresolved whether utilities should be able to seek preapproval for the generic aspects of those custom projects or not. And one position is that they should not. Another position is if they can make the case that it's generic, apply for preapproval, and the Board and the Board's auditor and advisors will decide whether it's truly generic or not. 95 The fifth area we looked at was the question of budget and whether or not there be some guideline or cap from the Board or spending guideline to the utilities. The discussion here is there tends to be two camps. The one view is that if something is cost-effective under the TRC test, it is, by definition, saving the system, the province, money, and there's no reason we should curtail that. 96 The other view is that we have to be cognizant of rate impacts and the uncertainties in any screening exercise. It's a forecast, like any other, and there are -- every assumption has uncertainty around it. And it's prudent to limit the rate of spending that the utilities embark upon. 97 From the utility perspective, there's a concern that they are just getting into this. They're uncertain as to what level of activity the Board feels is appropriate. So there was consensus that there would be value in the Board indicating, in some fashion, an expected -- either cap or mean level of spending, obviously expressed in a fashion that takes into account the size of the utility. 98 There is not agreement whether there should, in fact, be a blanket approval for spending up to a particular cap, that the utilities can simply include in their Rate Handbook application, or whether it should be, simply, in the form of a soft guideline, part of the conservation handbook I spoke of a moment ago, simply as an indicator from the Board. And then -- and there are set out those two options as the first and the second. 99 And then some parties would go further, and would like to present evidence on what's an appropriate value that the Board should enunciate as a blanket approval or cap at this -- as part of this process, part of the Rate Handbook process, and there's a suggested value for that. 100 Again, mirroring the other items, there's a scope issue as to whether any spending guidelines should be applicable, in some sense, to pre-2006 spending, a matter for December 6th. The unresolved issue here is, simply, what is the preferred mechanism of blanket approval? Or simply a guideline and if -- whatever mechanism, should a particular level be settled on in this process? 101 There is a crossover issue we note here, simply so it doesn't get lost. There was some discussion in the plenary about rate mitigation overall, and what items should be exempt, if you will, or on a separate stream from the basket that's caught by any rate mitigation rule. And there was some discussion that it might be appropriate for C&DM to be exempt from that. But, I hasten to add, this was not a matter that the conservation subcommittee wrestled with, so I can't report to you that there's any consensus one way or the other on that. 102 The sixth item was a third variance account, this one for O&M expenses, the intent is to serve two goals here. One, that if a utility underspends its budgeted C&DM, that is, any C&DM budget that's approved in rates, included in rates, in advance, if it underspends, it not be able to pocket that. It returns that in a subsequent period to ratepayers, the rationale being that, unlike many utility activities, this is one that they could simply stop doing without the sky falling. They can't stop maintaining their lines; arguably, at some point it becomes too obvious. This one they could, and there ought to be no means for them to profit from so doing. 103 The other side of the coin is that, if the utility is doing well at conservation, if utilities -- if there's unexpected customer uptake of programs, it's felt to be very disruptive for a utility, part way through a rate year, to say, Whoops, we're running out of budget here; let's now start dishonoring those "$5 off your smart light bulb" coupons, let's withdraw those. And the notion is there should be some means for them to go over budget, and subsequently be able to seek to include that, any overage, in a subsequent rate period. 104 The notion there is that there should be some bracket around this, at least on the high side. They shouldn't be able to go wildly over without having to alert the Board to that effect, and explain, and seek prior approval of the impending overage. And we took our guidance from the gas side there, and simply said, You can go over 20 percent, and expect to be able to seek recovery -- clearance of that deferral account later; beyond that, you need prior approval. 105 But there is on overall unresolved issue whether we need such an account at all. 106 Finally, there are two areas that are put forward, not as Rate Handbook items, but simply to record, for the Board's benefit, the consensus that evolved over a great many items that were felt to be necessary context for how to make all this run smoothly. And the first notion -- the first list are subsumed under one notion, that is, that the Board consider the creation of a conservation and demand management handbook, a guideline, or set of guidelines - and I think it's been referred to as a looseleaf binder of guidelines - some flexible means for the Board to convey and inform the utilities and stakeholders of the evolving knowledge base, including the kinds of assumptions and programs that the Board may have prescreened for utilities that other utilities may then rely upon. 107 So this guideline would -- could include program examples that have met the Board's approval, screening templates, for example, a standard computer spreadsheet screening template for the TRC test, so that utilities are presenting that to the Board in a common, consistent fashion, to expedite matters, and so when utilities work from the others, there's not a translation problem. Obviously, common input assumptions, especially ones such as the provincially-applicable avoided costs. Other items: Potential deadlines, spending guidelines I've spoke to, any audit protocols that may exist, and any guidelines the Board may wish to impose on the utilities in terms of their program selection. We've seen some of that from the Board and the Minister already in the context of the third tranche, and this would be a way to formalize that on a forward-going basis. 108 The suggestion here is that the Board consider some needs to maintain a dialogue with stakeholders to assist the Board in the evolution of this handbook. 109 We actually went further and suggested some guidelines that the Board might want to consider: That portfolios be diversified and seek to address a range of market barriers, including market barriers faced by low-income customers. The concern here is that if the Board's -- if the portfolios are more diversified, there can be more customers participating; there's less concern over cross-subsidization from non-participants to participants. 110 And then the point about minimizing cross-subsidies between customer segments, this is really an allocation question -- cost-allocation question. Do you charge the costs of utility programs that are intended for the industrial sector to rates that apply there, or to all ratepayers? And the preference there is to try to allocate by rate -- by customer segment. 111 Some obvious ones: That the utilities would be encouraged to cooperate with one another, with the gas utilities and, ultimately, with the Ontario power authorities, the Conservation Bureau. 112 I should pause to say, throughout all the discussion, the subgroup was conscious of the fact that the Conservation Bureau is proposed in Bill 100. There was an assumption that that bill will pass, and that the Conservation Bureau will focus, certainly, at least, on market-transformation programs that are province-wide and, presumably, will be looking to the LDCs as local delivery agents for some of its programs -- or bidders to deliver, whatever mechanism they ultimately choose. 113 And the proposals we've made for shareholder-saving mechanisms, for example, are for those activities in the early years -- early year, perhaps, when the Conservation Bureau is not involved, and, subsequently, for programs that the Conservation Bureau is not the sponsor of. The assumption is, the Conservation Bureau can make its own deal with the utilities, and offer whatever sweeteners it feels are appropriate. If it wants the LDC's involvement, the Board's concern is it can be limited, at least for the moment; that it only needs to worry about incentives for programs that the Conservation Bureau is not involved in, or at least not the primary mover. 114 I pause to note here, there was language with respect to the acceptability of contracting out and the early draft of this -- the Board. 115 I should back up even one step further. What I'm presenting here is simply my slide slow, and it is a take on the document that has been filed with the Board and on the website, the longer document that the subcommittee produced and that the executive then edited in conformity with the plenary findings. Linked to that document, if you look on the website, there is a link to the even larger document, which has a more extensive discussion. 116 The early language spoke about contracting out and, really through sloppy writing, suggested there may be a preference for contracting out, be it to affiliates, other utilities, or private sector. There was no such intent that there be any preference for that, and rightfully, the Power Workers' ears perked up and pointed that out. 117 And just to note that it's been agreed that the executive will tweak the wording a little further to make it clear that this is not an expression, in any sense, of a preference for contracting out, simply that contracting be allowed where it's cost-effective and doesn't compromise customer service or safety constraints. So I think that we can safely assume that that is not a disputed issue, unless you hear otherwise. 118 Other guidelines, regard to avoiding lost opportunities. We listed a -- I won't go through these. They are a list of what the annual reporting requirements should be in detail and a further list of additional reporting requirements for those utilities that choose to participate in any shared-savings mechanism that the Board approves. 119 One minor matter. There is some concern about whether there -- we've asked for rate impacts for all utilities of the first year rate impacts and the cumulative effect of the portfolio on rates. Even though the primary screen is TRC, there is some awareness that the Board needs to ensure that rate impacts are not too serious in any given year, or cumulatively. And there is at least one party that would like to impose a further requirement, that rate-impact analysis be done for each conservation program, as opposed to for the whole portfolio. And my understanding is that would not an evidentiary matter, that would simply be a matter for argument. 120 I've already mentioned the concern about the language for contracting out. Again, I think the Board cannot assume that that is not an unresolved issue at this point, that this will be dealt with by the executive. 121 Later we'll get to this. Recorded is a scope issue as to what process this handbook should be developed. I should say this: That as far as the subgroup was concerned, we were ready to hand this off to the Board now and the Board can make an administrative decision as to how to manage that process. We're not proposing that it be further litigated in this process, or any other particular process. We leave it with the Board to consider whether it wishes to take the path we've suggested of ensconcing this in some form of a guideline, as a free-standing guideline, or embedded in the Rate Handbook, in which case the Board may wish to include it in this process, or some other administrative means of pursuing this, as the Board has that jurisdiction. 122 The final area, which I've already spoken to, is the suggestion of an auditor/advisor and potentially an advisory committee of stakeholders. Again, not a matter that needs to be decided for the utilities to file their 2006 rate applications under the Rate Handbook, not a Rate Handbook item. Simply, we're reporting taking this opportunity to report to you our suggestion of how the Board may wish to manage the workload that is involved here and facilitate ongoing stakeholder input. 123 There was agreement on the idea that a specialized auditor/advisor be employed by the Board, or contracted by the Board, to advise it and reduce its workload. There was diversity of opinion as to whether a multi-stakeholder committee should be struck or appointed by the Board. I simply recorded that there. And again, the same scope issue comes up, and the comments I made a moment ago about our Rate Handbook suggestions apply equally well here. And that's the show. 124 MR. KAISER: Thank you, Mr. Poch. 125 How did you wish to proceed, Ms. Lea? 126 MS. LEA: Thank you, sir. 127 Thank you, Mr. Poch, for the presentation. What I would suggest is that we begin dealing with the first two issues of scope, which I understand Mr. Warren, representing the Consumers Council of Canada, is going to speak to, and then we have any other remarks on those. Issue 3 under scope is fairly isolated, but 4, 5 and 6 -- 128 MR. POCH: 4, 5, and 7. 129 MS. LEA: 4, 5 and 7 look like they might be dealt with in one package as well. So if we could start with numbers 1 and 2, and I understand Mr. Warren is going to speak to those. 130 MR. POCH: Just before you proceed, if I may, just so we can prepare ourselves mentally, I was assuming that 4, 5 and 7 were simply not going to be debated today because the Board has issued a Procedural Order indicating the question of 2005 and the application matters of 2005 matters would be dealt with on December 6th. 131 MR. KAISER: I heard your position on that. Were there any comments on that matter, that those matters just identified be reserved to December 6th? 132 MR. KLIPPENSTEIN: Mr. Chairman, good morning. Murray Klippenstein for Pollution Probe. With respect to issues 4 and 5, Pollution Probe has sought some guidance from the Board about its concerns about 2005 SSMs and LRAMs. And I understand from the Procedural Order issued recently that the Board has set aside December 6th as a Motions Day to hear that particular issue; namely, whether it's advisable to move up, if you will, the possible implementation of SSMs and LRAMs into 2005 as well, and then presumably because of the short time frame, also some kind of expedited process to deal with that, and to have those heard December 6th, based upon a motion brought by Pollution Probe. 133 So on that basis, from our point of view, that doesn't need to be discussed today. So I guess it's possibly, sort of, a good news/bad news thing. The good news is maybe you can take it off your agenda today, but the bad news is it's coming back. 134 MR. KAISER: It will be coming back quickly. Any other comments? 135 MR. WARREN: Yes, Mr. Chairman. Let me introduce myself. My name is Robert Warren. I'm here appearing as counsel for the Consumers Council of Canada. I'm making submissions on two matters this morning, the first is whether DSM should be considered separately from the bulk of the Rate Handbook issues. 136 MR. KAISER: Before you go on with that, can I just conclude that with respect to reserving the items on December 6th, there are no further comments? That's acceptable to the parties. 137 MR. KLIPPENSTEIN: I should say, Mr. Chairman, about number 7, I'm not sure. Certainly 4 and 5, from our point of view, is not necessary for today. 138 MR. KAISER: I think 7 is a slightly different issue. Did you wish to address that, Mr. Poch? 139 MS. LEA: I think that Board Staff is also of the view that 7 may not fall into the December 6th Motions Day, that perhaps we will address it today. And even if the result of today is, yes, it belongs in December 6th, then I think we need to have that discussion. 140 MR. KAISER: All right. Well, we'll hear submissions on item 7 then. 141 Mr. Warren. 142 SUBMISSIONS BY MR. WARREN: 143 MR. WARREN: Yes, thank you, Mr. Chairman. 144 The two issues that I propose to address are numbers 1 and 2 on your list; firstly, whether DSM should be considered separately from the bulk of the Rate Handbook issues; and secondly, what is the necessary evidentiary basis, and in particular, whether or not the Board Staff should retain its own consultant. 145 Let me say, Mr. Chairman, that I have been asked to speak to these two issues not just on behalf of my client, but also on behalf of BOMA, AMPCO, VECC, and the London Property Management Association. There are, I gather, others who are in, to use Mr. Poch's somewhat illusory term, widespread agreement with my position, but I think that they will speak to that themselves. 146 On the first matter, Mr. Chairman, the question of whether DSM should be considered separately from the bulk of the Rate Handbook issues, I think it's important that we -- I be as precise in my use of language as possible. We are not asking that DSM be deferred to some later date. We are not asking that the issue be considered outside of this process. 147 What we are asking for is that it be treated as a discrete segment within this process. And the reason for that, as I'll get to in a moment, is that, historically, the complexity and the differences of opinion on DSM are such that DSM becomes the tail that wags the dog of the rest of the process, which we think would be a dangerous thing. But we are not, not asking that it be deferred. We are not asking that it be treated as a separate process, but as a discrete segment within this process. 148 The second issue, as I've said, is whether or not the Board Staff should retain an independent consultant and I'll speak to that issue separately in a moment. 149 I also think it's important to stress, in the somewhat Manichaean world of DSM, where there are good people, and then there is demonology, that these submissions are not about whether or not DSM is a good or a bad thing. These are not submissions on whether there should be incentives, about whether there should be an LRAM, whether there should be variance accounts, and so on and so forth. My understanding, from my discussions with various parties in the room, is that there is not consensus on those issues. 150 Individual parties in this room may say, We are prepared to consider an incentive; we are prepared to consider an LRAM; we are prepared to consider variance accounts; indeed, we may support an incentive; however, whether we support an incentive, or any particular form of incentive, is a function of, among other things, whether or not there is an LRAM, and how rich that LRAM is. So the notion that there is before you today widespread consensus on all of these complex interrelated issues is, I say, with great respect, fundamentally illusory. There is not consensus on these issues. 151 I should say, in passing, that my friend, Mr. Poch, has posited the notion that somehow my client, the CCC, is the sole outrider on these issues. Again, with respect, that's simply not the case. There is no broad consensus on these issues. 152 Let me turn, then, to the first question, that is, is there going to be a sufficient evidentiary base on which to resolve the issues in a way in which - I want to underscore the following words - in a way in which the public can understand. This is not, in our respectful submission -- that is, the DSM issues, these are not issues that should be resolved by a tiny coterie of like-minded enthusiasts. These are issues which should be decided in a public forum, on the basis of a survey of all of the available alternatives. 153 And what we are suggesting as a reasonable way to do that is to have Board Staff retain a consultant whose function it would be, among other things, to survey the universe to see what are the alternative approaches to the fulcrum issues that the Board has to decide, not to take a position on those, not to take an advocacy position, but simply to lay out the alternatives. 154 I have been involved in the DSM process, to my regret, now for more than a decade. And in that decade, beginning with EBO 169, I am not aware of there having been a full-scale canvass before this regulatory agency of the various options for implementing DSM. What has happened is that the DSM programs, on the gas side, have been cobbled together over many years, with the best intentions on the part of some people and with the profound desire on the part of others that they simply don't want to talk about it, because it's so complex, and, frankly, we all have to realize, because it has elements of a religious debate. 155 What is required before we embark on the widespread implementation of DSM in the electricity sector is this kind of canvass, widespread canvass, of what the options are. If the Board Staff doesn't do that, and lay that before the parties, it simply won't get done. What will happen is, you will get individual advocacy pieces that will support one particular view of the universe or another, and the public - and they are, I say with respect, the readers over our shoulders in this process - the public will not see what the universe of alternatives are. They will not see why the Board has opted for one alternative, or mix of alternatives, over the other, and at the end of the day will not understand why they are being asked to pay for what they're being asked to pay for. And that, in our respectful submission, can only be effectively accomplished by Board Staff retaining an independent expert. 156 In my respectful submission, I would find it surprising if anyone were to disagree with the idea that we should have before us the full range of options, that this is not a lis inter partes in which one person's evidence is better than another. We can have the evidence that Mr. Poch wishes to lead, that Mr. Gibbons wishes to lead, that, I gather, Energy Probe wishes to lead, it can be gathered to the mix. But it is added to a mix which has this base level of analysis of all of the available options. 157 Now, why Board Staff? Because Board Staff can do this more efficiently than any individual intervenor can. It has an RFP process which it can engage. It has already done that on a number of issues in this case. It has engaged experts or consultants in the Natural Gas Forum process. It can do it far more efficiently, and with no risk. 158 And I want to underscore the issue of risk. Because there is a risk to intervenors who might want to engage experts -- even a group of interveners, that they may not be able to recapture their costs. And I say -- I assume the Board can't give, shouldn't give, it would be inappropriate to give, blanket approval in advance for the costs of retaining an expert. That is inappropriate because the Board needs to retain control over the discretion of how much it is. But no one at this point can guess what it's going to cost, and no intervenor, individually or collectively, wants to take that risk. 159 So having Board Staff does -- takes that risk off the shoulders of the intervenors as the Board says, This is something which is appropriate for Board Staff to do. 160 And they can do it quickly. And doing it quickly and efficiently is important, because it allows there to be a discrete process which is run at or about the time of the rest of the process, so the crossover issues can easily be considered in the same -- roughly the same time frame. There isn't a discordance between one process and the other process. 161 Now, in our respectful submission, based on more than ten years of experience in the gas side with the two large natural gas utilities, is that DSM is like the elephant in the room. You've got to feed it lots of peanuts or it's going to crush everybody. And what happens is that, over the years, we have, collectively as intervenors in the process, avoided dealing with DSM as part of the main hearing process because we were fully confident that it would dominate the hearing process. In my respectful submission, it's always a risk for counsel to do this. I would find it difficult to find anybody who would disagree with the notion that DSM has been avoided because of this tail-wagging-the-dog phenomenon. And the result of that, Mr. Chairman, is that it's hived-off, dealt with discretely. 162 The problem with that is it wasn't dealt with discretely on the basis of a broad evidentiary basis. If it had been, it might have been more effective, because the problem on the gas side, in my respectful submission, is we've never looked at the universe of alternative. So what we propose in this case is two solutions. 163 First, that Board Staff retain an expert, a consultant, to survey the universe, particularly on the fulcrum issues in this case; whether there should be incentives, whether there should be an LRAM, and that sort of thing -- I'm sorry, whether there should be an incentive mechanism or an LRAM, and that it be treated discretely within the process. It could be treated before the rest of the hearing; it doesn't matter when. And the discrete process could consist simply of the Board setting aside X number of days on which this cluster of DSM issues would be dealt with. 164 To use the test which we use in the civil courts for injunctions, we look to the question of who's going to be prejudiced by this approach. None of the parties in this room is going to be prejudiced by this approach. Nobody should be afraid of having the full range of information before them. The ratepayers are not going to be prejudiced, because it won't, indeed, in my submission, the most important of our audiences will see what the options are understand, in a transparent process, why we prefer one option over another. And will the LDCs be prejudiced, and that's a very important consideration. If the timing is correct and it is done at or about the same time as the rest of the process, the LDCs will not be delayed to any substantial degree, even to any measurable degree, in getting their rate filing applications in order. 165 My final point is, we're not asking that Board Staff commission some academic piece on all of the available DSM options but simply what is the most appropriate approach in Ontario, particularly focussing on a number of the issues that Mr. Poch has said are before the Board for example, the incentives and LRAM. 166 Those are my submissions. Thank you very much, Mr. Chairman. 167 MR. KAISER: Thank you very much, Mr. Warren. Just so we have your position clear, when you make this request or suggestion that the Board retain a consultant, do you contemplate that that consultant will be put on the stand, will present evidence as to his proposed solution with respect to LRAM and incentive mechanisms? 168 MR. WARREN: Yes, that's what we're contemplating, Mr. Chairman. Produce a report in advantages and lead evidence on that. 169 MR. KAISER: And that other parties would present evidence as well? 170 MR. WARREN: I presume, in fairness, if they disagreed with that, sir, they could do that. 171 MR. KAISER: Ms. Lea. 172 MS. LEA: Thank you. 173 I wonder if -- I know that some of my other friends wish to speak to this issue. I wonder, though, if I could ask questions of Mr. Warren so that I have accurate notes of this. 174 MR. WARREN: Do I have the option of saying no, Ms. Lea? 175 MS. LEA: I not sure that you do, actually, Mr. Warren, but I'm being very courteous. You know me. 176 With respect to the first issue of separation of C&DM, and it was my wording of this issue on the issue's list by the way not yours, so if I've overstressed the separation part, you can correct it. Do I understand that, for example, if we were contemplating evidence filing dates and hearing dates, that CCC would say the following might be acceptable: That the DSM consultant, if we hire one, files maybe a week later and that responding evidence is a week later than the other responding evidence, and that DSM be, say, the second week of a two-week hearing. Is that the level of separation that you're proposing, in other words, that it's just -- 177 MR. WARREN: Yes, that's an acceptable level of separation. Ms. Lea -- sorry I've answered your question. 178 MS. LEA: I just -- I understand you not to be suggesting that we take this away, decide it in some other forum, and then try to reintegrate it into the process. That is not your proposal. 179 MR. WARREN: That is not our proposal. 180 MS. LEA: Okay. With respect to the second matter, it will, of course, be up to the Board to determine exactly what the retainer of this consultant is, if we choose to so retain a consultant. But I wanted your views, because I thought I heard some differences in what I first understood you to say and what you said at the end. 181 You are suggesting that this person survey other jurisdictions and identify alternatives, but you said at one point that you didn't think that person would take a position, that this person would canvas the options but not take a position. Later, however, I think you suggested that this person would provide evidence as to the appropriate approach in Ontario for certain things, such as SSM and LRAM. And as I say, it's up to us what he does, but do you have a recommendation that you wish to put forward in terms of what this person would -- 182 MR. WARREN: I apologize, Ms. Lea, I misspoke. I did not contemplate that the consultant retained by the Board Staff would take a position on what's appropriate. It would simply be focussing on what the issues are, as they have been scoped out here. What are the alternative approaches? It does not -- I'm not contemplating a detailed survey of every other jurisdiction of the world in which DSM exists, but simply what are the alternative approaches and what are the pros and cons of those approaches. If the expert feels sufficiently comfortable in adding, as a gloss to that, that the particular circumstances of Ontario might affect the way you look at those pros and cons, that's one thing, but not to take a sad advocacy position and make a recommendation that this particular approach should be taken as opposed to another approach. It's simply sketching out the alternatives, the universal alternatives. 183 MS. LEA: So it's more of an options paper than an advocacy paper. 184 MR. WARREN: Yes, that's correct. 185 MS. LEA: With respect to that as well, if I turn to the evidence list on the next page, on page 6 of the newish UGS list, I've heard you say that this expert should address number 2, LRAM use and design. 186 MR. WARREN: Yes. 187 MS. LEA: And also number 3, need for level of and design of SSM. 188 MR. WARREN: Yes. 189 MS. LEA: Okay. I wasn't sure if I heard you suggest that he should address whether or not number 6, the conservation expenses variance account, would be necessary and appropriate. I don't want to drill you down into details, but if you have more recommendations, let me have them. 190 MR. WARREN: Yes, for 5 and 6. 191 MS. LEA: Yes, for 5 and 6. Okay. And are there any other items to do with the architecture of a conservation program in Ontario, electricity distributors, that you believe we have not yet identified as part of the evidence here that you would recommend that we consider in this retainer, if such a retainer is visited. 192 MR. WARREN: May I just take a moment, Ms. Lea? 193 MS. LEA: Yes, thank you. 194 MR. WARREN: The four that we've identified, Ms. Lea, are the fundamental elements of the architecture that we can identify at this point. 195 MS. LEA: Thank you very much. Thank you, sir. I'm sorry to interrupt. I know my friends now have submissions as well. 196 SUBMISSIONS BY MR. POCH: 197 MR. POCH: Mr. Chairman, if I may. Thank you, Mr. Chairman. 198 Let me preface my comments by noting that the committee spent a considerable amount of time, hundreds, perhaps thousands of person-hours on these issues, as did the executive. There was a half-day meeting of the executive, CCC is represented on the executive, they chose not to participate in that discussion, I note. There was almost a half day in the plenary on these items. I've done my utmost, and I know Board Staff has done their utmost, to ensure that the presentations to you, this and the others, are reflective of any dissent or concern that was expressed. And people had every opportunity to ask that issues be put on this disputed or unresolved or scope issues. 199 So if Mr. Warren believes that I have misstated in any way, I take some offense at that. I think I've been very careful to indicate where there's agreement, for example, on the notion that there be an incentive but not on particular form level of it, and CCC has had every opportunity to make its position known. So I wish that noted for the record. 200 Now, unfortunately, not only did CCC not make its position known, but I had understood that CCC's notion today was to, as it were, bump this off into some other process. And I am, I guess, somewhat pleased to hear that that is not the proposal. So I can report that, from the perspective of my clients, we have no great disagreement with the proposal coming from the Consumers Council that the Board makes some effort to schedule, or accommodate, or expedite the conservation issues here. 201 I don't think there's any real issue here, Mr. Chairman, on that front. In fact, much of my prepared submissions were going to try to impress the Board with how urgent all this is and how, indeed, whatever the outcome of the December 6th motion, the 2005 panel, which I note, Mr. Chairman, you are also chairing, will benefit from an early consideration of the 2006 issues in terms of ensuring consistency and informing the decisions with respect to 2005. So all of which suggested some form of expedited process for DSM here, for C&DM. So I think I'm in agreement with Mr. Warren there. Indeed, I join him in that suggestion. 202 I have a disagreement with Mr. Warren's position with respect to the suggestion of Board Staff presenting an expert. Mr. Warren prefaced his suggestion on the motion that we need to foster public understanding and lay out the options in terms that the public can understand. Well, in an ideal world, that would be a nice thing to pursue. The reality is I don't think that anybody would suggest the public understands the intricacies of cost allocation or PILs or virtually any other topic that gets debated around here. This is a specialized Board with specialized expertise, and you have the benefit of intervenors, including the CCC, who have had some experience in these issues and have had lots of opportunity to get up to speed and have the option of obtaining expert assistants, and so I don't know that anything turns on this notion of enhancing public understanding. 203 I believe -- and I should say, Mr. Chairman, Mr. Warren also suggests there's never -- there hasn't been the big debate. Well, I just would point out, for the record, that there was a rather lengthy exercise in the last year on DSM and demand response, at which many of the groups before you today participated. And that went on for some months, and there was a lot of discussion of a number of issues about the framework for pursuing DSM. So there's been quite an airing already of many of these issues. 204 Having said that, I'm not in any way suggesting that we shouldn't have a proper debate on the matters that we've scoped out. My concern is that the bid here to have Board Staff hire an expert is really a bid to have -- by Consumers Council, and perhaps others, to have their position put forward with the cloak of the respectability of Board Staff, to leverage their resources with those of Board Staff, and -- while the rest of us who have a particular notion at hand must present our case and make do with -- under the funding regime, or with our own resources, as may be the case. 205 If there were no party to advocate before you positions, alternative positions, or opposition to any given proposal that my expert, or someone else's expert, may advocate, there might be good reason for Board Staff to step into the gap and flesh out the record for you, to facilitate the Board's understanding and make sure that the Board has all of the options before it. 206 That's not the case here. Mr. Warren recited to you his long history on the topic, and that's true for many people in the room. There are experienced people, well-versed in these matters. They can hire an expert, present their case, just as I am obliged to do. And I, frankly, don't see that there is any difference on this issue than any other novel matter that's coming up on the regulatory agenda. 207 So I, frankly, see no reason for it. I don't know why we want to give the issue special status in that sense. I think CCC should have to advocate its case, just like the rest of us. 208 Thank you, Mr. Chairman. 209 MR. KAISER: Thank you, Mr. Poch. 210 Mr. Klippenstein, do you have a submission on this? 211 SUBMISSIONS BY MR. KLIPPENSTEIN: 212 MR. KLIPPENSTEIN: Yes, thank you, Mr. Chairman. 213 I'd just like to pick up on one or two things that Mr. Warren mentioned, and maybe suggest that, looking backwards, the reality is that the Board as a whole and the parties as a whole have, indeed, spent a vast amount of time discussing and thinking about this, and have had a vast amount -- vast degree of opportunity of having input into it. 214 Mr. Warren said that, in the past, others -- I think he said others don't want to talk about it, the conservation or DSM issues, were the words I think he used. That may be true, but it isn't for lack of having had an opportunity to hear and discuss and input and influence and bring in evidence and argument. And that opportunity, certainly, in the last ten years that I've been involved in this, for Pollution Probe, has been extremely extensive, so I don't know if that's really something that is the crux of it right now. 215 When Mr. Warren said that this is -- the conservation issues are, sometimes, to some extent, the fruit of a tiny coterie of like-minded enthusiasts, I don't know how that fits with, again, the -- more than a decade, I think, of participation by Pollution Probe and other groups, and, certainly, the Consumers Council, and the extensive opportunities for input and discussion and argument and critique and presentation of alternatives and hiring of experts, and on and on. And so I think that that has brought us to the point we're at now, and that it's, essentially, not really necessary for the Board to hire an expert to look at the universe of alternatives. There's been enormous consideration of alternatives, and it's been batted around extensively. 216 And, certainly, if the Consumers Council wishes to obtain an expert, they've done it many times and very well. And perhaps it would be their option to either present their expert's universe of alternatives, or, perhaps, to critique specifically the things that seem to be of concern to the Consumers Council. What we haven't heard is, you know, samples of specific problems. That might be also useful. 217 The concerns that, certainly, Pollution Probe has raised, I think, seem to be very much a priority of the present government and its concern of focus on conservation. So I don't know if I'm part of a tiny coterie of like-minded enthusiasts, but it seems, for the moment, that the government also seems to have conservation as a priority. And so I think it's appropriate to not, at this point, take steps which would cause delay. I don't think that's my friend's intention, but there's been enough consideration through a process last year, a process this year, that if something is going to cause delay in implementing conservation, it's simply not the right time to inadvertently slide into significant delays. 218 So, essentially, I don't think a separate package for conservation is appropriate, if it, in fact, causes significant delays. If there's small adjustments needed, that's fine. 219 And, secondly, I would suggest that a separate expert hired by the Board Staff isn't necessary, and that Consumers Council's options for hiring an expert are certainly there if they wish it. 220 MR. KAISER: Thank you. 221 Any other parties wish to comment on this? 222 SUBMISSIONS BY MR. HIGGIN: 223 MR. HIGGIN: Yes, sir. Good morning, Mr. Chairman. My name is Roger Higgin, from ECS. I'm representing the Vulnerable Energy Consumers Coalition, VECC. 224 We're in substantial support of Mr. Warren's submissions for putting C&DM on a separate track, but leading to the same end point for the 2006 Rate Handbook. 225 I'd just like to add a few points as to why we think this is the best approach. 226 First of all, I think it's been said that the result of the C&DM process must be transparent and understandable by the public, and that includes my client group, which is low-income, fixed-income customers. 227 Secondly, the C&DM has been placed on a somewhat separate track by the Minister's letter on the 2005 C&DM. There are design and continuity issues between 2005 and 2006 that should be addressed. We'll come to that, I think, under issue 7. So our submission is that there's a framework needed for C&DM as soon as possible, and it should consider those issues that Mr. Poch has outlined, and which Mr. Warren and others have reiterated. 228 Finally, we're concerned that the specific interests of low- and fixed-income customers be lost unless a separate approach is taken, and what we would suggest is that a special task force under Board Staff auspices, with a consultant, consulting resources, would be the best approach, and one that we would support. 229 We agree that the goals of this would be twofold, and that is, to develop the framework -- as Ms. Lea has said, by "framework" we mean the architecture for C&DM, and, also, to develop the elements for a C&DM handbook. Those are the two objectives that we think would be addressed and need to be addressed. 230 So, in sum, Mr. Chairman, we agree not to send it back to the subgroup, but we do recommend that you consider putting it on a separate track with the end point being, as I said, to have a section for the Rate Handbook and a separate C&DM manual. 231 Finally, we should be informed by the fact that C&DM programs for electricity have been in place in other provinces for many years. Frameworks have been developed and have been approved and run in those provinces, and I cite B.C. and I cite Manitoba. Those things have gone on, so-called power-smart programs have gone on for many years, and we should be informed by the success and failure of those programs. 232 I also note that Quebec also now is embarking on a C&DM initiative for Hydro Quebec. So I think that's another reason why an independent expert will be able to look at the experience in those provinces and we can inform our process as a result. 233 Thank you, Mr. Chairman, those are my remarks. 234 MR. KAISER: Thank you, Mr. Higgin. 235 Mr. Shepherd. 236 SUBMISSIONS BY MR. SHEPHERD: 237 MR. SHEPHERD: Thank you, Mr. Chairman. 238 Although I don't agree with Mr. Klippenstein that DSM has been controlled by a tiny coterie coterie of like-minded enthusiasts, I do wish to recognize on the record Mr. Warren's eloquent in choosing the phrase. 239 Schools are very big on DSM, perhaps more so than most ratepayer groups, because we stand to benefit so much from good DSM programs. On these two points, I think we agree that a separate track for DSM is a good idea, just for practical purposes, although we want to emphasize it's only a good idea if there is delay. We agree with the environmental groups that we have to get on with this fast. 240 With respect to the Board expert, I take Mr. Poch's point that we all have the opportunity to make our case. Unfortunately, DSM in the past has seen a lot of experts who are either ideological or come from a very clear point of view, whether ideological or not. 241 And Schools thinks that in this particular case, and we wouldn't say this normally, but in this particular case, it may be useful for the Board to have a survey, a non-ideological, no-point-of-view survey of the options as the starting point for the evidence, to shorten the process and make it easier for you then to understand the point of view evidence that a number of intervenors will file, including the environmental groups, and perhaps including the Schools. It would just simplify things if you had a nice, independent review at the centre and then you have evidence outside of that that is saying, Look at it this way, look at it this way, look at it this way. 242 And therefore we support Mr. Warren's suggestion that the Board Staff retain an expert to do such a survey. Those are our submissions. 243 MR. KAISER: Mr. Shepherd, do you also agree with Mr. Higgins that we have two tracks but at the same station and the train gets there at the same time? 244 MR. SHEPHERD: I like his analogy, not as eloquent as Mr. Warren, but close. 245 MR. KAISER: Thank you. 246 Any other comments? Yes, ma'am. 247 SUBMISSIONS BY MS. ALDRED: 248 MS. ALDRED: Hydro One would like to support Mr. Warren's proposal that this particular issue be dealt with as a separate segment in the process. 249 SUBMISSIONS BY MR. SIDLOFSKY: 250 MR. SIDLOFSKY: Mr. Chair, my name's James Sidlofsky. I'm here this morning for Toronto Hydro and a coalition of LDCs, including Niagara Falls Hydro, Brantford Power, Aurora Hydro, and Enwin Power Lines. 251 It's probably not necessary for me to speak to the question of whether there should be the separate-track, same-station approach, because it does seem to me that there is some consensus on that, but I will add our clients support to that approach. Our clients are certainly interested in dealing with C&DM issues as soon as possible as well. They are the ones that would be expected to implement C&DM plans. 252 On the second issue of the independent consultant to be retained by Board Staff, or proposed to be retained by Board Staff, our clients would support that proposal by CCC. Certainly, if it assists in scoping issues here in determining what the priorities may be going forward, then I think that will certainly be helpful to all parties. We are also -- our clients are also pleased at the notion that this would be an independent consultant retained by Board Staff. As Mr. Shepherd and others have suggested, that's an important feature of this proposal so that we are looking at as non-ideological as possible an approach to options here. Thank you. 253 MR. KAISER: Thank you, Mr. Sidlofsky. 254 Yes, sir, Mr. White. 255 SUBMISSIONS BY MR. WHITE: 256 MR. WHITE: Yes, it's Roger White, the ECMI coalition of nine smaller- and medium-sized distributors. I would like to bring support to Mr. Warren's suggestion and the implementation strategy suggested by Ms. Lea to try and move this process forward so that the maximum amount of assurance of outcomes will be in the hands of LDCs as they make decisions for not only 2005, but 2006. 257 Those are my submissions. Thank you. 258 MR. KAISER: Thank you, sir. 259 Any other parties wishing to comment. Yes, sir, Mr. O'Leary. 260 SUBMISSIONS BY MR. O'LEARY: 261 MR. O'LEARY: Thank you, Mr. Chair. 262 Enbridge Gas Distribution Inc. will not make submissions in respect of the first issue, which is the separation. We're pleased that it will remain as part of this proceeding. 263 We do wish to speak briefly to the issue about the retainment of the proposed Board Staff consultant, and not to either support or oppose it, but other -- but to make submissions, perhaps, with regard to if the Board should approve the retainer, the breadth of that expert's retainer. Perhaps going back to the gas side and the history of the DSM programs that the Board has considered over the past ten years, it's probably fair to say that most of the parties that have participated in those proceedings, and particularly the most recent years, would accept the conclusion that the DSM programs that have been administered by Enbridge Gas Distribution Inc. and Union have been very successful. And that there has been a detailed review and consideration by the Board of all aspects of that at different times over the last several years. 264 Indeed, the parties have at different times agreed and supported the retainer of independent experts that have undertaken studies of different jurisdictions, and there has been information filed that has been brought to the various panels that have heard the rate cases about what is actually occurring in other jurisdictions. There is detailed evidence that is filed with each proceeding about each of the programs. I'm speaking only now in respect of Enbridge Gas Distribution. Union may do a similar type of filing, but certainly the ratepayers that participate in the Enbridge rate proceedings are given detailed information about each program and its impact on conservation activities. To suggest now that ratepayers are unaware, or do not understand what these programs do may be somewhat unfair to the efforts that have been made to make ratepayers aware of, and other intervenor groups aware of, in fact, the conservation effects of these programs. If ratepayers don't understand now, it's difficult to understand how the simple retainer of another expert is going to increase their knowledge. 265 So our concerns really are, sir, one of, will the retention of a Board-Staff retained consultant cause a delay. We understand that the directive of the province is towards additional conservation measures. It's in urgent need for that and we support a decision which would not in any way advance a delay of the implementation of the C&DM measures. 266 MR. KAISER: Thank you, Mr. O'Leary. 267 Any other parties wishing comment? 268 Mr. Tucci. 269 SUBMISSIONS BY MR. TUCCI: 270 MR. TUCCI: Morris Tucci, EDA. My only concern is, with respect to a conservation expert retained by Board Staff, is when they canvass other jurisdictions -- just as background, the EDA has done the survey of other jurisdictions already, we have an internal report. We've used it to try to develop a policy on DSM. We do look at other jurisdictions. When you do look at them you have to consider things like, are they private sector or public sector. Across Ontario a lot of the provinces are public-sector utilities and they don't require the same kind of incentives as private sector utilities do. 271 The other concern is that the government has already given us some direction about what who is going to do what, and some sense of what kind of programs we're going to do. When you look at other jurisdictions, they don't have the same kind of mandate, necessarily, to achieve a 5 percent target in a few years. That's another thing that colours things. 272 So I'm sort of questioning the usefulness of looking at other jurisdictions. We've found that it's better to try to think outside the box. And you can look at other jurisdictions, try to find something that's useful, but you pretty much have to invent your own model for Ontario, because we're so unique. And I think the work group tried to do that, and came up with a model that we thought was practical. 273 I was involved in that work group, and I realize it's not easy to come up with a lot of models that are workable. There are not that many alternatives out there. The alternatives are really varied by the circumstances. So that's just for your information. 274 MR. KAISER: Thank you, Mr. Tucci. 275 Any other parties wishing to speak? 276 SUBMISSIONS BY MS. HALLIDAY: 277 MS. HALLIDAY: Yes, sir. My name is Sheila Halliday, and I'm representing the Canadian Energy Efficiency Alliance. And we agree with Mr. Tucci. Our concerns are as follows: 278 First, that energy conservation management is an essential criteria of the government here and it must be implemented without delay. We are very concerned about the delay issues. 279 Secondly, that no process should, in fact, lead to any delay. And it seems as if we do have consensus on that, that it won't be a separate process, but will be within the scope of this proceeding. 280 We agree with Mr. Tucci that my client has, if fact, canvassed other jurisdictions in the past, and have found it to be of limited use. We're concerned that any, sort of, further hiring of a consultant reporting back would, in fact, not -- would exacerbate the problem rather than informing the problem. 281 We'd also like to be informed, if a consultant is retained, as to the scope of that retainer, because it seems to me as though there's two issues: Is the consultant going to be advising on the framework of the program, or the nature of the programs, and the efficiency of the programs, themselves? If it's on the framework of the programs, then we have concerns that we're going back to square one and that we should proceed on -- within the framework that has been developed through the working groups. If it's on the efficiency of the individual programs, then that can be done at some later date, as to whether a particular program is efficient or not. So those are our preliminary concerns. 282 Thank you. 283 MR. KAISER: Thank you, Ms. Halliday. 284 Any other comments? 285 SUBMISSIONS BY MR. McLORG: 286 MR. McLORG: Mr. Chair, I wonder if I might just make a comment or two on behalf of the working group executive. 287 And it just relates to the fact that there are quite a few crossover issues that relate to C&DM and its implementation by utilities that need to be dealt with by the executive, initially, and ultimately by the Board, in producing a revised Rate Handbook. 288 So I just want to flag for the Board's consideration the fact that we have a working group process in place right now. It may not be clear, unless the Board can give us guidance in this area, how the executive would go ahead in dealing with the issues that exist in other areas while the C&DM issues are in suspense, so to speak. 289 Thank you. 290 MR. KAISER: Thank you. 291 Any other comments? 292 Mr. Warren, any response? 293 FURTHER SUBMISSIONS BY MR. WARREN: 294 MR. WARREN: I have a response only on one issue, Mr. Chairman. 295 With the greatest of deference to my friend, Mr. O'Leary, who is understandably proud of what Enbridge does, there are disagreements in the room about whether or not Enbridge's program has been a success. But, more importantly, the issue of whether the gas models can be imported holus bolus as the framework for 84 different electricity LDCs is a matter which we have to resolve, and it's one of the important reasons why you need an independent expert who can comment on that. 296 I have every confidence, as opposed to Mr. Tucci or Ms. Halliday, that an expert can make the distinctions between different frameworks in different jurisdictions, and can maybe make the appropriate comparisons. The critical issue is that we are embarking on an entirely new enterprise, which is to try to have 84 different LDCs have DSM conservation programs. And in those circumstances, the past is not prologue. We have no model. We have to develop an appropriate model, and we have to consider those elements which are sui generis, we have to consider those elements which may be imported from the gas model, and it's only if we have the full range of evidence on that, that can only be obtained by an expert, that we need it. 297 Those are my reply comments. 298 MR. KAISER: Thank you, Mr. Warren. 299 Ms. Lea? 300 MS. LEA: Thank you, sir. 301 Although it is by now ten after 11:00, it was my fond hope, perhaps a vain one, that we could complete the discussion of the DSM issues before we took our morning break. I've asked the court reporter if she can continue for another ten minutes or so. Would it be acceptable that we try and get a little bit more done in this area? 302 MR. KAISER: Fine. We'll proceed. 303 MS. LEA: Thank you. 304 Just looking at the scope questions, I wonder if we could bundle together scope questions 4, 5, 8 and 9, and let me try and put on the record what I understand the situation to be. And if anyone disagrees with me, perhaps they can let me know. 305 Number 4 and 5, it appears that everyone agrees that is something to be discussed at the Motions Day on December 6th, so we need not discuss it now. 306 With respect to 8 and 9, although not everybody may agree on whether these various things -- I think everybody agrees that a handbook is necessary. There is not agreement on whether or not an auditor or an audit committee is necessary. I believe that everybody agrees that the place to discuss those things is not in this process, or at least that's how I understood the presentation to resolve. 307 So, if anyone who has a submission on those four issues could, perhaps, assist us with comments, and then we'll turn to the other issues which we haven't done, which are 3, 6 and -- 3 and 6 and 7. 308 MR. KAISER: Yes, ma'am. 309 MS. KWIK: Thank you. It's Judy Kwik. I'm with Elunchus Research Associates, here for the PWU, 310 I'd just like to make a comment. I'd like to set the record straight on the unresolved issue identified by Mr. Poch as language concerning contracting out. Yes, contracting out is an issue for my client, the PWU; however, from a regulatory perspective, the issue here that I will be proposing to the working group is cost efficiency while maintaining safety and service quality standards. And I will be seeking the appropriate wording to reflect this issue in the guidelines. 311 That's my comment. Thank you. 312 MS. LEA: 4, 5, 8 and 9, last call. 313 MR. POCH: Just a correction, Ms. Lea, your reference a moment ago to where there is consensus and not. I think -- my understanding is there's consensus that there is merit in having an auditor and that's fairly -- at least universally shared, as far as I'm aware. Where there is not consensus is with respect to whether there be an advisory group. But other than that, I think ... 314 MR. KAISER: Do we have any comments on that issue, the advisory group issue? 315 MS. LEA: Hearing no protest, then, could we please move to scope issue number 3. I believe that Ms. Frank from Hydro One is going to speak to this matter. 316 MR. KAISER: Ms. Frank. 317 SUBMISSIONS BY MS. FRANK: 318 MS. FRANK: Thank you, Mr. Chair. 319 The concern that Hydro One has is that the working group has proposed that only the customer-side programs be considered in this section of the handbook, and this is the section of the handbook that would deal with the funding of programs. Hydro One believes that there are programs on the utility side of the meter that increase the efficient use of energy and that also shift the peak, which are two criteria that are being used for the customer side. I believe they also apply to the utility side. 320 It may be that there's some confusion around what funding issues for customer-side work versus utility-side. The thinking may be that utility-side tends to be all capital funding and, therefore, the money can be recovered by putting the asset in rate base, and this just isn't the case. There are items, particularly billing-type costs, if we want to make changes to billing systems to handle time-of-use information or to handle the smart-meter information that we expect will come in, that are utility-side costs that should be funded as part of the conservation program. So we'd want the definition to be expanded to include that type of funding. 321 In addition, there are items that would create efficiency beyond the loss factors that are being considered in the later rate design areas. Things like phase balancing for the feeders, where indeed we've got too many customers on one feeder and we could move some to other feeders, that's an OM&A-type activity. Funding for that would result in conservation, and I believe should be covered here. 322 I think the definition of OM&A capital is something that should be raised as well. Are we talking about conservation being only current-period expenses or does it include capital work as well? On the customer side, load control devices are normally considered to be part of conservation, but they are capital. So I think we have confusion, again, as to what qualifies, and I think we need some clarity on that. 323 Hydro One's proposal would be the definition's being used for the 2005 MARR funding in the direction from the Board, which is pretty expansive, includes both utility side and customer side, OM&A and capital, is the appropriate definition to use going forward. 324 Thank you. That's our submission. 325 MR. KAISER: Thank you, Ms. Frank. 326 Any parties wishing to comment on Ms. Frank's submissions? Ms. Halliday. 327 FURTHER SUBMISSIONS BY MS. HALLIDAY: 328 MS. HALLIDAY: Yes, sir. The Alliance supports Ms. Frank's position. The Minister's letter, in fact, includes both sides of the meter programs and they should all be considered as both parts of the expenses. 329 MR. KAISER: Mr. Warren, does your client have any position? 330 MR. WARREN: No position, sir. 331 MR. KAISER: Mr. Poch. 332 FURTHER SUBMISSIONS BY MR. POCH: 333 MR. POCH: Mr. Chairman, just to point out that while, certainly, we agree that the Minister's intent and that it is in the public's interest that there be efforts on both sides of the meter, that we would be make the distinction between capital-funded and expensed items, in terms of the incentives to the utility and, therefore, an item to be kept in mind in any discussion from incentives. So I'm not sure if we're really in a scope issue here or really in a defining of what's the issue to be dealt with by evidence, should the Board choose to receive by evidence. That's really the point. 334 In terms of the other example, phase balancing, I would have thought that's a loss-reduction issue, and any mechanism that's proposed for minimizing loss reductions would incent that kind of activity. But I do agree with my friend, Ms. Frank, that there is -- nowhere have we adequately dealt with, in this process, thus far, whether the capital investments for utility side of the meter items, whether that meets any other incentives. 335 MR. KAISER: Thank you. 336 Any further comments? Ms. Lea. 337 MS. LEA: Thank you. 338 Let's turn, then, to scope item number 6. Mr. Chair and Panel Members, I should tell you that where Mark Rodger's name appears, that's an error. It's James Sidlofsky that's going to speak to it along with Mr. Poch. I don't know which of the two gentlemen wishes to begin. 339 MR. SIDLOFSKY: Sorry, I was going to throw it over to Mr. Poch because we have a fairly narrow issue that we'd like to address here. 340 MR. POCH: I think what's happened here is the language may not capture Mr. Sidlofsky's issue fully. I think I've already, in my presentation earlier, canvassed this question of whether a simultaneity, which I'm pronouncing incorrectly, of filing will be the case for conservation. You've already heard there's widespread agreement. This is an urgent matter and presumably there may be a need for some more flexibility in clarifying. I don't think it's a contentious issue, Mr. Chairman. 341 I think it's only here as a scope issue because the Board just needs to put its mind to whether or not filing requirements are entrenched in the Rate Handbook proper or whether they can be embedded in a conservation handbook or some other guideline, as is the working group's proposal. I'm not sure that you need to rule on this. Indeed, I don't think you need to hear any evidence on it. I think it will be an administrative decision for the Board in terms of how it wants to manage that process. 342 MR. KAISER: Thank you, sir. 343 Mr. Sidlofsky. 344 FURTHER SUBMISSIONS BY MR. SIDLOFSKY: 345 MR. SIDLOFSKY: Well, I'm glad Mr. Poch went first, because it let's me confirm that we do have a slightly different issue here. 346 One concern that our clients have is that I'm not sure how large the coterie is, but certainly there are many parties that will want our clients and the other LDCs in the province to invest significant amounts of money in conservation projects and other measures, and certainly the LDCs are prepared to do that. However, one concern that our clients do have is that while the Board's recent determinations with respect to interim and final approvals of conservation and demand management projects for 2005 are somewhat helpful in that they provide for processes of interim or final approvals, the concern is that even measures such as those may delay some form of hearing in some cases. 347 For example, in the case of an interim order or an interim approval from the Board, the Board would ultimately review the LDC's expenditures on their projects after the fact, but they won't avoid a hearing. In any case where an LDC seeks final approval for their proposal, effectively, the LDC will have moved into a hearing process at the initial stages where the LDC applies for -- for interim approval. That delays the hearing date or the hearing process, but ultimately the hearing will take place. 348 We would like to see the Board turn its mind to the establishment of a mechanism for obtaining stakeholder consent or stakeholder support for conservation and demand management initiatives. The concern on the part of, at least our clients, I suspect there may be other LDCs that would be concerned about this as well, is that at the end of the process or at the end of the day, LDCs, even having spent their money on C&DM projects, will be subject to intervenor involvement in hearings later in the day, or even intervenor involvement in hearings earlier on in the process. And by providing for some mechanism for what may amount to some form of settlement agreement at the outset, it will give LDCs more confidence in knowing that they can go forward without having to be as concerned with challenges to those expenditures at a later date. 349 This might not be the perfect scope issue to address this within, but we felt that this was the closest one that was here on the list of scope issues for C&DM. 350 MR. KAISER: You understand that under the current procedural order the LDCs can move for a final order and initially they don't have to move for an interim order. 351 MR. SIDLOFSKY: We do understand that, sir, yes. That effectively buys the hearing up front, and that is one way to do it. But there are two other options in the current procedural order, one is for the interim approval, the other is for the final approval later in the process as part of the 2005 third tranche filing. 352 We do understand that, but we would like the Board to consider some mechanism for obtaining consensus not only in the form of an interim approval by the Board but by having some input and support from other stakeholders to the process as early in the process as possible. 353 MR. KAISER: Thank you. 354 MR. SOMMERVILLE: Mr. Sidlofsky, what role does the proposed C&DM handbook play in the process that you're contemplating? 355 MR. SIDLOFSKY: Sir, I think it may have a role to play. I think right now the C&DM handbook is a little nebulous at this point, for obvious reasons. I think there may be a role -- there may be a role in the handbook to deal with this. At this point, we'd like to raise the concern with the Board, and if the Board determines that the mechanism to deal with this is by sending it back to the working group or sending it to whatever group may be dealing with a separate, if it turns out being a separate C&DM handbook, that may be the way to -- may be an appropriate way to approach it. 356 MR. SOMMERVILLE: I understood the C&DM, as some people contemplated the C&DM handbook, to provide some species of preapproval. Is that right, Mr. Poch? 357 MR. POCH: Yes, certainly the intention of the working group was that that would be where the preapprovals were recorded, as it were, so other utilities could avoid to go through a full process, could ride on the coattails, simply give notice that were relying. 358 The other point I make is the option process that we've just been hearing discussion of is in the context of the Board's Procedural Order for the third tranche spending, and of course it's an open question as to whether, 2006 forward, that is spending that's not funded by third-tranche monies, but spending funded by OM&A in rates, is going to fall under that same process. And we have -- the working group has proposed this preapproval process and explicitly suggested that the utilities not be at risk -- one preapproval is obtained under this process, they not be at risk, they not be attacked subsequently, as it were, when they go to clear their accounts. That's precisely to lower the temperature of that discussion that that is proposed. 359 Having said that, you'll recall that the one item that there was a differing opinion on was whether there is need for an advisory standing -- stakeholder advisory committee to work with the auditor, advise the auditor and advise the Board. And that could be a version of what Mr. Sidlofsky is asking for, some means by which stakeholders up front can register that they -- if they have some great problem with -- or assumption or proposal. But that was not one that obtained a consensus. 360 It is an option which my client supports. 361 MR. KAISER: Just to follow up on that. This preapproval process you are now contemplating for the handbook, this would be preapproval by the Board? 362 MR. POCH: Yes, it would be approval -- preapproval by the Board based -- presumably based on the recommendation of an expert advisor, or auditor, advisor wearing both hats, perhaps, and possibly with the advice of an advisory committee, a small advisory committee, of the stakeholders. 363 MR. KAISER: Would this be without a hearing? 364 MR. POCH: The notion was it would be -- well, I suppose any -- it being part of a rate application, it's always possible that anybody could seek a hearing. But our -- I think it's fair to say our working assumption would be it would be -- hopefully, by the time it's been batted about by an auditor expert and the applicant and any possible advisory committee, it would not require any kind of protracted hearing process, or, indeed, any hearing process. 365 MS. LEA: Thank you. 366 I think, given the hour, we better take a break now. 367 There are two matters remaining, then, I think, for us to discuss. One is scope issue number 7 and the other is the six proposals for evidence which -- can I ask parties to deal with these, not seriatim, as I'm sure Mr. Warren would express it, but all at once. So we'll come back and hear one submission from each person, if that's possible, please, on each of the six items of evidence. That should assist us in completing this matter shortly after the break. 368 Thank you, sir. I'd propose a break at this time. 369 MR. KAISER: Thank you. A 15-minute break. 370 MS. LEA: Thank you. 371 --- Recess taken at 11:26 a.m. 372 --- On resuming at 11:49 a.m. 373 MR. KAISER: Please be seated. 374 Ms. Lea. 375 MS. LEA: Thank you, sir. 376 I wonder, now, if we could turn to the last remaining scope issue in the conservation and demand management presentation, which is number 7, conservation budget post third tranche spending. 377 I understand some folks were talking about this over the break. Mr. Poch, did you want to introduce this issue? 378 FURTHER SUBMISSIONS BY MR. POCH: 379 MR. POCH: Yes, Mr. Chairman, I think there's probably a fair bit of division of opinion of what's intended here. Let me say this, the concern is not with respect to -- nobody's seeking a discussion of the third tranche spending in this process, that is, the Board giving the utilities any direction or guideline on how much they should spend, how fast. The Board has done that already through its other process and no one's suggesting we import that here. This is specifically with respect to post-third tranche spending, so utilities that might conceivably in 2005 go spend money on conservation or wish to spend money on conservation beyond that funded by the third tranche MBRR. And that may be particularly the case for utilities that don't have any third tranche monies still to come, non-profits, for example. 380 So the question was whether we should be discussing here if we're -- if we are discussing here the notion of a guideline from the Board as to what level of spending utilities ought to be considering, is there any reason to not have that guideline applicable to the 2005 year as well? That, of course, raises jurisdictional questions to the extent if you were, in any sense, making rates for 2005 by giving such a direction. I think it's -- arguably you are not merely giving a guideline, arguably you're not, but I would suggest that the jurisdiction issue is going to be virtually identical to the jurisdictional issues we might debate on December 6th. So it's probably not productive to debate that today. 381 I would suggest, Mr. Chairman, that if the Board chooses to hear evidence on the merits of any particular spending of -- of a spending limit and on any particular level, it will be the -- that discussion won't change at all if we contemplate that it might apply to 2005, other than the fact that -- well, indeed for 2005 or 2006. Presumably, in any spending limit pronouncement, the Board will do it in the context of the knowledge that the utilities are already spending money funded from the third tranche. 382 So, myself, I don't see that there's any -- it's really going to change the complexion of this hearing one way or another. Thank you, Mr. Chairman. 383 MR. KAISER: Thank you, Mr. Poch. 384 Any comments on that point? Sir. 385 MR. HIGGIN: Yes, sir. Roger Higgin on behalf of VECC. 386 Just to note that this 2006 process should have a mechanism to distinguish C&DM costs for programs initiated in 2005. There could be crossover issues if costs flow into 2006 and there needs to be a mechanism by which there can be a separation of those costs from costs that are related to programs initiated in 2006. The reason for that is there is, in essence, two buckets, there's the Minister's sanctioned third tranche and then there will be a new bucket for 2006 from which -- which is the O&M and other costs related to 2006 rates. 387 So that is an issue, that there should be a crossover identified and how that should be dealt with from a regulatory accounting point of view. Thank you. 388 MR. KAISER: Thank you, Mr. Higgin. 389 Any other comments? 390 MR. SIDLOFSKY: Sir, just one brief comment, sir. 391 Just following on what Mr. Poch mentioned, I'd just like to indicate that our clients are encouraged by his comments in terms of the separation between 2005 and 2006. I was discussing some of this morning's comments with our clients at the break, and there were some concerns expressed to me that, of course, as we all know, LDCs are being strongly encouraged now to file their plans and take steps to deal with C&DM projects right now for their third tranche expenditures. And there was some concern that there will be some overlap, I suppose, between this proceeding and those plans that are -- that you -- that LDCs are diligently working on right now to get in place as soon as possible. And it's helpful to know that that's not the intention of the working group, and it doesn't appear to be the intention of the Board. Thank you. 392 MR. KAISER: Thank you. 393 Ms. Lea. 394 MS. LEA: Thank you. 395 I wonder then if we could turn to the evidence questions under the conservation and demand management. There appear to be a number of parties that wish to speak to these. I have listed Mr. Poch, Mr. Shepherd, Mr. Klippenstein, also Tom Adam's name appears several times here but Mr. MacIntosh, David MacIntosh will be speaking to that. That's M-a-c-I-n-t-o-s-h. So I have those folks listed; there may be others. Perhaps we could hear from folk on all of the other issues on evidence, what they propose to call and the reasons for it. 396 MR. KAISER: Mr. Poch, do you want to start? 397 MR. POCH: Thank you, Mr. Chairman. 398 Yes, on the first issue, this was a matter where I put my name down on someone who proposed to potentially give evidence or lead evidence only if necessary in reply to the possibility that one of the ratepayer groups may wish to raise this issue of whether conservation preclude programs that would raise rates. Unless Ms. Lea informs me otherwise, at this point in time, I gather no one is, in fact, proposing to lead evidence in that regard, although I presume people may choose to argue that, and I'm content that it be dealt with as an argument issue. I don't believe it requires evidence. 399 MS. LEA: That's number 1, sir? 400 MR. POCH: Yes. With respect -- I think I can speak to numbers 2, 3 and 6 together. These are the three variance accounts or three mechanisms which entail variance accounts, LRAM, SSM and conservation expenditures variance account. It would be our desire to lead one witness who would speak to these items. I think you will have heard today, and Mr. Warren spoke to this, how these are interrelated matters and the existence or non-existence or level of one mechanism affects the design of another. So we would like to deal with these as a suite, and that would be our intention if the Board so chooses. 401 I think the merit of the Board hearing evidence on this has already been spoken to today. These are -- there is obviously judgment involved, both in the design of the incentive and in the level of any incentive, and we think it would be wise for the Board to have an airing of that issue in oral evidence. 402 Number 4. Again, this was a matter where you will recall in my presentation on behalf of the group in the preapproval section, this was the small matter of if you have a generic component inside a custom project that would otherwise not be getting preapproval, could a utility come forward and ask that the Board preapprove the assumptions with respect to the generic elements, and there was some dispute about that. Again, I haven't heard that anybody wishes to lead evidence on this, so I can withdraw my request for the right to do so. I'm content to deal with it in argument. I think it's a relatively minor matter. 403 So in addition to the variance accounts, we would seek the opportunity to lead evidence on this question of conservation spending guidelines simply to provide the Board with an evidentiary basis to select a value for that, if it so chooses. So again, the same witness we would lead on the incentive variance accounts, I would propose to have provide the Board with some evidence on what kind of guidelines are being used in other jurisdictions, in particular, jurisdictions that are leading jurisdictions in terms of conservation efforts. 404 MS. LEA: Mr. Poch's submissions have reminded me, as did my colleague, that number 4 should read, "Applicability of preapproval for generic elements of custom programs," not customer programs. 405 MR. KAISER: Thank you, Mr. Poch. 406 Mr. Klippenstein. 407 FURTHER SUBMISSIONS BY MR. KLIPPENSTEIN: 408 MR. KLIPPENSTEIN: Thank you, Mr. Chair. 409 I would just note that Pollution Probe, with respect to the items number 2 and 3 under the evidence heading, proposes to introduce evidence by Mr. Jack Gibbons on behalf of Pollution Probe for those two items, namely the use and design of an LRAM and the need for and level of and design of SSM. 410 MR. KAISER: Thank you. 411 Mr. Shepherd? 412 FURTHER SUBMISSIONS BY MR. SHEPHERD: 413 MR. SHEPHERD: Mr. Chairman, as we indicated earlier, the School Energy Coalition are big fans of DSM. Our indication of evidence here, however, is intended to be a placeholder. We're hopeful that the Board will order a Board Staff expert which reduces the need, I think, for us to retain an expert. But our plan, in any case, would be to file only reply evidence, based on the evidence that had been filed, to fill in any gaps that we perceived in the information before the Board. 414 MR. KAISER: Thank you, Mr. Shepherd. 415 Mr. MacIntosh? 416 SUBMISSIONS BY MR. MacINTOSH: 417 MR. MacINTOSH: Mr. Chair, Members of the Panel, my name is David MacIntosh, and I appear before you as a consultant to Energy Probe Research Foundation. 418 It had been our intention that Mr. Adams appear today for Energy Probe. You may have noted that he was slated to make submissions a number of times throughout the day. Unfortunately, we're unable to grace you with his presence, and instead I will endeavour to present Energy Probe's points to the Panel. 419 Although Energy Probe is listed under four separate items of evidence, all of which relate to financial flows associated with conservation and demand management, our intention is to present one consolidated piece of evidence. That would be for evidence items 2, 3, 5 and 6. 420 The subject of Energy Probe's proportioned evidence is to critique any proposals presented in the final report of the C&DM working group in the area of incentive mechanisms for utility-initiated activities, and to present Energy Probe's recommendations. 421 The scope of Energy Probe's evidence would be limited to C&DM activities on the consumer side of the meter. The witness Energy Probe proposes to bring is Mr. Norman Rubin. Mr. Rubin has many years of experience analyzing Ontario's gas DSM programs, and has testified before the Board on incentive mechanisms appropriate for gas DSM programs. 422 The Members of this Panel may be aware that Energy Probe is somewhat of a DSM skeptic. Since the days of EBO 169-3 in the early 1990s, Energy Probe has raised concerns about the economic limitations of utility-subsidized programs designed to encourage reduced consumption where the results of the programs can only be estimated by comparing actual consumption with estimates of what consumption would have been in the absence of the programs. 423 It is our submission that Energy Probe's skepticism with regard to some DSM programs makes us particularly well-suited to analyze these programs and to advise the Board on appropriate incentive mechanisms. 424 We are not wild-eyed idealists but conservationists, motivated to ferret out phony program results, inflated claims, and perverse incentives. 425 Those, Mr. Chair, are my submissions. 426 MR. KAISER: Thank you, Mr. MacIntosh. 427 Any other comments? 428 Ms. Halliday? 429 FURTHER SUBMISSIONS BY MS. HALLIDAY: 430 MS. HALLIDAY: Yes, thank you, Mr. Chair. 431 The Canadian Energy Efficiency Alliance would like to reserve the right to call evidence, if it's required. We propose that we will discuss with the other stakeholders the nature of the evidence that they are calling. And if there are any gaps, or we feel that it's necessary to supplement it, then we would like the opportunity to be able to do that, if necessary. 432 MR. KAISER: Thank you, Ms. Halliday. 433 Any other comments? 434 Ms. Lea? 435 MS. LEA: Thank you, sir. I had a question. I don't know whether Mr. Shepherd or someone else can assist me. I had noted that possibly a ratepayer group, unspecified, in addition to Schools might be seeking to call evidence, particularly on the first matter, whether programs that raise distribution rates should be considered by the Board. Does anyone have any information as to whether anyone proposes to call evidence on those matters? 436 MR. HIGGIN: Roger Higgen for VECC. 437 I've been silent on that issue simply because of two reasons: One is that it was within the proposed scope of the Board Staff consultant; and second, that in the event there is any need for further evidence, we would join with another party, or other parties, that we would expect to be within that scope. So that's the reason. We're not looking to separately provide any evidence. 438 MS. LEA: I haven't heard any other party, the plans to call evidence on issue number 1 and that's particularly why I was asking. 439 MR. HIGGIN: Well, as I said, we thought that was within the scope of the proposed study. Our position is clear that the ratepayer impact measure should be used in screening programs at a portfolio level, and that is, I think, the current proposal, as opposed to individual measure. 440 MS. LEA: Thank you. 441 MR. KAISER: Thank you. 442 Ms. Lea? 443 PROCEDURAL MATTERS: 444 MS. LEA: Thank you. I believe that completes our discussion of the conservation and demand management issues. Thank you all very much. Thanks to Mr. Poch. Thank you also to Mr. McLorg, who was acting as the chair of the executive group and introducing our speakers. 445 I wonder now if we could have a changing of the guard, please. We are going to hear from the rate design and conservation group. Mr. Cameron McKenzie, who is sitting to Mr. McLorg's left, will be acting as chair of that particular group and introducing our speakers. 446 MR. O'LEARY: Mr. Chair, Ms. Lea, just a question of procedure. In terms of -- before we leave the conservation and demand management area altogether, is it necessary for us to indicate that we wish to reserve our rights in terms of replying to any evidence which the Board allows in? Because if that is the case, we do wish to indicate that we may wish to file reply evidence to any of the evidence that is permitted in. 447 MS. LEA: Thank you for that information, Mr. O'Leary. It's helpful to us in our planning. 448 MR. TUCCI: If that's a requirement, then I'd like to reserve a spot for the EDA, too. 449 MS. LEA: Anybody else? Going once, going twice. 450 MR. SIDLOFSKY: Mr. Chair, Ms. Lea can sign us up for potential evidence as well. 451 MS. LEA: You're putting me off now. Not you particularly, sir. 452 MR. KAISER: Any other comments? 453 MS. ALDRED: Hydro One would also perhaps call evidence, depending what's filed. 454 MR. KAISER: Thank you. 455 Anyone else wish to reserve a position in the spotlight? Thank you. 456 Mr. McKenzie? 457 MR. McKENZIE: Mr. Chair, Board Members, just a quick minute to thank the subgroups for the work that's done in the chairs of each subgroup to get us to where we are today, as well as the Board Staff for their input into the process, and Jennifer, or Ms, Lea, for her leadership and guidance through this to get us to where we are today. All our thanks. 458 In the rate design group, we have three subgroup classifications. The first one is on class revenue requirements, and I'd like to introduce Margaret Nanninga from Kitchener-Wilmot Hydro. 459 RATE DESIGN AND COST ALLOCATION WORKING GROUP - ISSUE A: CLASS REVENUE REQUIREMENTS; CHAPTER 4: 460 SUBMISSIONS BY MS. NANNINGA: 461 MS. NANNINGA: Good afternoon, Mr. Chair, OEB Board Staff, Jennifer Lea, and Members of the Panel. 462 We discussed chapters 4 and 5 of the Electricity Rate Handbook. The first chapter, chapter 4, deals with customer classes and cost allocation. 463 The working group first discussed customer classes, and our discussion started with the cost-allocation study completion in 2007. You'll find that this is a common theme throughout. All the issues that were discussed for chapter 4 and 5, a lot of consensus issues hinge on the completion of this study. 464 We also discussed the possibility of creating subclasses for the unmetered scattered load. This is discussed further in a separate section of chapter 5. 465 There was also discussion as to creating a clear definition of what is considered less and greater than 50 kW for the classes in order to create standardization in the industry. We also discussed any types of rate impacts from any customer class changes that could occur, especially considering the cost-allocation study completion in 2008 could substantially impact rates and create customer swings. 466 So we had two main questions of scope, as far as customer classes go. First off, there were questions as to whether any changes should be made to customer classes before the 2007 cost-allocation study is completed and whether to create a separate, distinct unmetered class in 2006. 467 The general consensus within the group was to leave the classes as they are until 2007, due to the completion of the cost-allocation study. Although, any type of consensus was contingent on the completion of this study. 468 Our unresolved issues are, If it's within the scope, what changes should be made to any customer classes? How should the disparity of treatment of the classes re: the greater-than, less-than 50 kW classes be resolved, and should a separate class be created for the unmetered scattered load? Also, if it's within scope, what should the filing requirements be to support a proposed change in customer classes? 469 So the working group's path is that, if it's within scope, the group will continue to study the outstanding issues and evidence may be called on any unresolved issues within scope. 470 The next section was the cost-allocation section. The working group discussed, once again, that the 2007 cost-allocation study results couldn't be anticipated. We also discussed what was base revenue and how do you calculate it. It was generally agreed that taking out any adders, such as PILs, would have to be netted out so that the proportions could come back to the original 1999 RUD that was used. 471 We also discussed that the status quo has its problems and that some cost drivers may not be included in the class revenue requirements if the status quo was used going forward. We also discussed the utility industry in general and any differences amongst the utilities, keeping in mind any outliers, and again keeping in mind the financial impact to customers from any changes in the methodologies used. 472 Our main question of scope deals with the large-user disparity issues, the fixed charge to be charged to users between the different utilities. It will be discussed in more detail later. 473 So the general consensus of the group was that the cost-allocation study completion, once again, was crucial to any type of consensus within the group. We'd have to determine the revenue requirements based on the RUD methodology which was originally used, and that reduced lead time and simplicity were considered important for LDCs. 474 Our unresolved issues include: How should the status quo be defined for the purposes of establishing the current relative class revenue requirements to be used for the cost-allocation purposes? For example, with or without PILs, whether to use the 2001 RAM or the 2004 RAM, which are distinctly different. Precise definition of how to allocate to each class. This is also a crossover issue of whether harmonization within a class range is permitted at the LDC discretion for the 2006 rate application. 475 So the path is that, if it is within scope, evidence may be called on the large-user disparity issues, and all other issues will be discussed by the working group. 476 On to chapter 5. 477 The first issue was the fixed variable charges. There was discussion that the higher fixed charge creates the stability of income for the utilities and may lower the equity risk premium, but at the same time, on the contrary, higher volumetric charges may create an incentive for conservation and are better for utilities in high-growth areas. It was also discussed that the new bill format also hides the high-variable charges and, therefore, may not be an effective conservation tool. 478 We also discussed the gas industry and decisions that were made in that industry, as far as fixed and variable charges go. We question what part of the bill should be used to reflect the costs of regulatory assets in public policies, and again, the financial impact to customers. 479 Our main question of scope was whether any changes should be made to the fixed/variable split, apart from rate-impact mitigation, before the results of the 2007 cost-allocation study were available. The general consensus was not to change the fixed/variable split for 2006 and to use the RAM before the adders in RSVA and regulatory assets. And again, cost-allocation study completion in 2007 was crucial to any type of consensus within the group. 480 Our unresolved issues are: What is considered the status quo? There's the 2001 RAM and the 2004 RAM, and they are substantially different. 481 Also, what proportions of the fixed and variable rates are appropriate to retrieve costs of C&DM? Whether to used fixed or the variable rate. 482 The group will continue to study all the outstanding issues. 483 Unmetered scattered load. There is a great deal of discussion within the group that there is a great deal of inconsistency amongst the utilities in billing methodologies for the unmetered scattered-load customers. Some LDCs have subclasses for the unmetered scattered-load customers, while others charge by the connection. There were also questions as to what the costs to distributors were for keeping these customers connected. Although they don't have a meter, they also have to track them, and that would incur costs. So are the benefits not lost? 484 We discussed creating subclasses for the unmetered scattered-load customers. We would decrease the fixed charge to the unmetered scattered load within the general-service less-than-50 class, and the rest of the class would pick up any revenue short fall. We discussed billing the unmetered scattered-load customers such as like street lighting, only making adjustments for the differences between the two different types of customers. We discussed attaching meters to all of these customers, however, we thought it might not be too practical, and the idea of the rest of the general-service less-than-50 customers picking up the short fall of revenue would create a rate impact to the remaining customers in the class. 485 So the main questions were: Whether to deal with the inconsistencies in billing methodologies in 2006 rather than in 2007 and whether to create a separate and distinct rate category for these unmetered scattered-load customers, which is, of course, a crossover with the customer classes section in chapter 4. 486 The general consensus within the group was that any change in the policy has to hold the distributor harmless and not to change the existing distribution billing practices and wait until completion of the 2007 cost-allocation study. 487 Unresolved issues: If it's within the scope, what should the billing methodologies be for the unmetered scattered-load customers, and on what basis would the revenue requirements be reallocated among the classes? There's your crossover issues with customer classes, fixed variable and rate impact. 488 The working group path, if it's within the scope, it's expected that the working group is not going to be able to reach a consensus on this and evidence will be called. 489 Time-of-use distribution rates. For time-of-use distribution rates, there are actually two separate issues that the working group discussed. The first issue was the legacy time-of-use rates that existed under the Ontario Hydro regime. Second of all, we discussed time-differentiated distribution rates. 490 On the time-of-use legacy rates from the past regulator, we discussed what the past practices were leading up to the existing time-of-use rates. We reviewed them. We also discussed that we'd have to look at the revenue differential in the event that the time-of-use distribution rates were discontinued. 491 Now, as far as the time-differentiated distribution rate goes, we felt that there was insufficient cost data to design a time-differentiated distribution rate, and discussed that perhaps such a rate should be in conjunction with the implementation of smart meters, and of course the completion of the cost-allocation study. 492 There were questions as to whether a time-differentiated distribution rate would be an effective conservation tool because of the new bill format. There were differing opinions, of course, and it was felt that it could be a strong conservation tool because it could encourage load-shifting. 493 We also discussed whether distribution costs correlate with system peak, and there were strong arguments both ways. 494 So the questions of scope, there's two of them because there's two separate issues. The first question is: Should the LDCs be permitted and/or encouraged to eliminate the legacy time-of-use distribution rates for 2006? And, on the other hand, should the utilities be permitted and/or encouraged to offer new time-differentiated distribution rates in 2006? 495 The general consensus within the group was to leave it as is, or to harmonize within the class at the distributor discretion; and that any distributor who wants to harmonize their legacy time-of-use rates would have to apply to the Board and supply rate-impact analysis with their application. 496 The unresolved issues are the methodology to be used by the LDCs for harmonization, and if it's within scope, what time-differentiated distribution rates should be offered and what should be the methodology for calculating the rates. 497 If it is within the scope of this proceeding, evidence may be called. 498 Recovery of regulatory assets. 499 The working group discussed that a materiality threshold would have to be created for regulatory assets at which disposition would be triggered. And the methodology would be created in order to eventually eliminate all other regulatory assets on the balance sheet and leave only RSVA's remaining. 500 The question is, should the plan recovery of regulatory assets true-up of existing or new be part of the 2006 Rate Handbook. 501 The general consensus was that the methodology should be administratively simple, the original approved amount should be treated separately. Over- or underrecovered amounts should be easily identified, and the handbook should provide examples and a spreadsheet and an appendix so that there's standardization within the industry. 502 Unresolved issues are accounting entries; methodologies to use; should the over- or underrecovered amount be tracked as a separate regulatory account; where in the handbook will the treatment of regulatory assets be covered; and is this a crossover issue with the revenue requirement RSVA. The group will continue to study the issue. 503 Rate-impact mitigation. One of the big questions within the group was on what basis should rate-impact mitigation be applied; whether it should be applied to the total bill as a percentage of distribution, whether it should a percentage of the delivery portion of the new bill. Another thought was the total bill, net the cost of government initiatives. 504 We also discussed that the smaller the base, the worse it sounds. So if you have a larger base and you're using a percentage amount, it sounds better and makes the percentage smaller. 505 We also discussed whether rate-impact mitigation should exist at all and should be part of the Rate Handbook. But politically speaking, it's here to stay. 506 The working group assumed that the target of rate-impact mitigation, for the most part, was the residential customer. There was another question as to whether to use a dollar amount and a percentage together, or whether to use only one or the other. The original OEB strawman included both a percentage amount and a dollar amount. 507 We also discussed should the fixed variable rate changes be limited when applying rate-impact mitigation due to the wide range of fixed charges in the province by limiting the change of the rate gap. The gap may decrease, which would bring us more in line with the gas industry. 508 We also wondered what to do with any foregone revenues in the event that rate-impact mitigation is used. Do we put it into a deferral account and recover it in the next application, or whether it's just lost forever. We also discussed, because of the RPP, or regulated price plan - there's a working group currently going right now - we wondered whether there was enough information available to the working group in order to actually come up with a workable percentage at the current time. 509 There were no questions as to scope. 510 So the general consensus was that rate-impact mitigation had to remain part of the 2006 Handbook. And it was generally agreed that the final decision couldn't be too constraining, and must be easy to track and implemented for LDCs. 511 Unresolved issues are the filing requirements for applying for an exemption. There are some utilities that are going through ROE catch-up, and so on. They could apply for an exemption, but we don't have the filing requirements down just yet. 512 We need to come up with the base for comparison, whether to use the total bill, distribution only, electricity, and so on; whether to use a percent and dollar limit for the distribution rate; how to treat the foregone revenue; and how, and at what stage in rate-setting should rate mitigation be applied. Because there's so many different portions to the bill now when you've got your regulatory asset recovery, and so on, what is exempted for rate-impact mitigation. 513 The group will continue to work to reach a solution; however, we need -- we believe that we require resolution of some of the other handbook issues before we can come to any kind of consensus. We also considered the possibility of creating a new chapter for rate-impact mitigation rather than keeping it within chapter 5. This is a crossover, of course, with the 1999 financial losses. 514 Rate harmonization. The group discussed whether rate harmonization should be mandatory or voluntary, and what can the utility do in the event that they do not want to or cannot harmonize their rates. We also discussed the maximum change allowed when combined with rate-impact mitigation. 515 There were no questions of scope. 516 The general consensus was to leave the wording in the current handbook basically the same, only to change it to the impact -- maximum impact allowed to plus 5 rather than plus/minus 5 per class. 517 We agreed that harmonization should be revenue-neutral, and that rate impact from harmonization should be, in addition to the limits established by rate mitigation, unless the harmonization plan reduces the customer impact to below the rate-mitigation threshold. 518 Our unresolved issues are the effects on utility planning and harmonization roles, whether harmonization applies to all LDC charges or just the distribution portion, and the filing requirements for applying for an exemption. The group will continue to study the issue. 519 The next part was transformation ownership allowance. The group discussed, again, the cost-allocation study completion and that additional data on this issue would be available following completion of that study. 520 At this point, of course, we don't know whether the credits are too high or are too low, and we were afraid to make too many changes because it could create swings following the changes that would come with the 2007 cost-allocation study. 521 There were no questions of scope. 522 General consensus was to leave the transformation ownership allowance as it was for 2006, and again, the completion of the cost-allocation study was crucial to any type of consensus within the group. 523 And that's it all. Thank you. 524 MR. KAISER: Thank you. 525 Ms. Lea, how would you wish to proceed? 526 MS. LEA: Thank you, Ms. Nanninga. 527 Sir, it's approaching 12:30. I wasn't sure if you wanted to take a lunch break now. The alternative is, there are about six matters to be discussed under this topic. The first matter has some fairly substantial issues in it; it might be completed within half an hour. So I'm in your hands as to whether to break now or begin with the first set of issues. 528 [The Board confers] 529 MR. KAISER: I think we'll break now and come back at 2:00. 530 MS. LEA: At 2:00. Okay, thank you. 531 --- Luncheon recess taken at 12:30 p.m. 532 --- On resuming at 2:17 p.m. 533 MR. KAISER: Please be seated. 534 MS. LEA: Do pardon me, sir, I had to take care of a personal matter. 535 I have a few things that I can pass up to the Panel. It includes revised copies of the taxes presentation from yesterday and also a copy of the conservation and demand management presentation, which I understand also was revised from a copy you had. Thank you. 536 DECISION RE VARIOUS ISSUES: 537 MR. KAISER: At this time we'd like to provide you with the Board's decision with respect to some of the matters we discussed at the end of the day yesterday and this morning. We'll deal first with the distribution expenses, that's item number D on the Issues Day schedule. There were two scope issues that were addressed; the first, dealing with prescriptive accounting, and the second with ARC compliance. 538 With respect to scope issue 1, the Board appreciates the work that the Working Group has done on this issue in identifying gaps in the accounting treatment, and we recognize that these issues need to be addressed; however, the Board would prefer that the groups concentrate on the issues that need to be resolved for the 2006 Rate Handbook. As a result, we do not believe that the development of a more prescriptive accounting treatment for expenses in 2006 that needs to be done as part this process. The Board will, however, ask the Staff to note the issues that have been identified and propose a method to address them in the future. 539 Turning to scope issue 2, that's the issue of ARC compliance and the degree to which it needs to be determined as part of the 2006 rate-setting process. It appears from the discussion yesterday that there is a potential for resolution of this question. Accordingly, the Board directs that this matter go back to the working group in an attempt to resolve the issue in that forum. 540 Turning next to issue E, taxes and PILs. There were two evidentiary issues addressed in the submissions. The first related to the necessity of evidence regarding pass-throughs or true-ups. The Board has agreed that it will hear evidence on this issue of pass-through versus true-up in dealing with utility regulatory taxes. Board Staff will call a witness only in reply to the evidence called by other parties on this issue. That, we understand, will be Mr. Harper's witness. 541 Regarding issue number 2, the Board is prepared to hear evidence on the disposition of tax savings arising from expenses that are disallowed for regulatory purposes. The Board is not interested, however, in evidence that would expand beyond this narrow scope, for example, into issues that relate to corporate restructuring or for the purpose of tax planning. 542 Turning next to issue F, Comparators and Cohorts. The broad issue was defined in terms of scope, the extent to which the Board would use C&C in the 2006 rate process. The Board confirms its intention to use comparators and cohorts data exclusively as a screening tool and not as a mechanism for the direct setting of rates for 2006. 543 On the evidentiary issues, the first issue was a question as to the Board Staff witness. The Board confirms that it will be calling a witness on comparators and cohorts to deal with the issues that are described at transcript 949 to 952. 544 There were then two matters of evidence that Mr. Adams addressed on behalf of Energy Probe. The Board agrees that Mr. Adams may call a witness to testify on the two evidentiary issues outlined at transcripts 966 and 974. The Board also notes that Hydro One has reserved the right to call a reply witness. 545 Finally, if we can turn to issue G, Conservation and Demand Management. Dealing first with the submissions of Mr. Warren with respect to whether customer-side C&DM should be separated from the rest of the process and determined on a separate track. The Board has considered this question and notes that no party expressed any appetite for delay. Indeed, Mr. Warren outlined in his proposal, and it became clear, that he does not seek to segregate the consideration of C&DM in a manner that would cause delay in the preparation of the rates handbook. The Board believes that C&DM should remain in the 2006 EDR process. It also recognizes that there may be some timing differences that may arise in the treatment of this issue to accommodate evidence filed with respect to it, but always as an integral part of the Rate Handbook process. 546 Turning next then to scope issue 2, the question also raised by Mr. Warren is whether the Board Staff should retain and present evidence from a C&DM consultant. The Board considers it advisable to retain an expert to produce a survey of C&DM programs in other jurisdictions and to present alternatives for the realization of C&DM objectives. The expert would present options and pros and cons for various approaches, but would not advocate on behalf of any specific approach. The Staff expert will address evidence issues 1, 2, 3, 5, and 6. 547 Turning next to scope issue 3 raised by Susan Frank: Where in the 2006 EDR process does the utility-side conservation fit? The Board confirms that the utility-side conservation should be eligible for C&DM funding and it should be part of the Rate Handbook. 548 With respect to income, to scope issues 4, 5 and 7, it was agreed by the parties that these should be dealt with as part of the arguments on Motions Day, December 6th. 549 Turning next to scope issue 6. This was the question whether the filings for preapproval of conservation programs should be included with rate filings or as part of a separate filing? The Board's concluded this matter should form part of the C&DM handbook. 550 Regarding scope issues 8 and 9, the Board has concluded that these are not part of the 2006 EDR process, but the Board will hire a consultant to deal with these matters as part of a separate process. 551 Turning next to the evidence issues with respect to this topic, there are six issues that were outlined in the submissions before the Panel this morning. The Board accepts that evidence will be called on all six issues listed. In particular, we note that GEC will call evidence on issues 2, 3, 5 and 6. Pollution Probe has indicated it will be calling Mr. Gibbons on issues 2 and 3. Energy Probe has indicated it will be calling Mr. Rubin on issues 2, 3, 5 and 6. As indicated, the Board Staff will retain an expert to deal with issues 1, 2, 3, 5 and 6. 552 The Board notes that a number of parties have reserved the right to call reply evidence. The Board hopes that all parties will cooperate in that exercise to the maximum extent possible in order to avoid duplication. 553 There are some matters that were left over from the rate base issues. We will consider those in a subsequent decision as well as general issue 1, which you will recall we reserved on yesterday. 554 That completes the Board's ruling in this matter. 555 Ms. Lea. 556 MS. LEA: Thank you, sir. 557 I had just one comment with respect to the ruling. In the taxes and PILs section, I think it was indicated under evidence number 1 that the Board would hear evidence on the issues of a pass-through versus true-up approach in dealing with utility regulatory taxes, and then Mr. Harper's witness was referred to. As I understood the proposal, Mr. Shepherd and Mr. Harper, or at least Mr. Shepherd would sponsor a witness on this, perhaps with Mr. Harper. It would happen to be the same witness that was dealing with the issue that Mr. Harper dealt with the day before. Do I understand your decision correctly? 558 MR. KAISER: Yes. 559 MS. LEA: Thank you. 560 That takes us to the discussion of scope and evidence for class revenue requirements, chapters 4 and 5. And, as I indicated at the lunch break to the parties, if possible, perhaps, we can deal with these issues in some groupings. 561 Could we begin with scope issues 1, 2 and 3, and, at the same time, hear evidence on -- pardon me, hear argument on evidence issues 1 and 3. Now, I know that not everybody is speaking to every one of these, but they arise out of the same basic issue. 562 Ms. Nanninga, you introduced these questions of scope in your presentation. Do you wish to add any remarks at this time to the questions of scope, or evidence in scope 1, 2 and 3, or evidence 1 and 3? 563 MS. NANNINGA: No. Just to mention, the first scope question just deals with the importance of the cost-allocation study, and -- for going forward, for the working group. And the classes issues with the unmetered scattered load and general service less than 50, they are still being considered by the working group as well. That's about all I can say. 564 MS. LEA: Thank you. 565 I think we have Mr. White wishing to speak to scope issue number 2, and evidence 1 and 3, and Ms. DeMarco will speak to scope issue 3, evidence issue, perhaps both 1 and 3. And there may be others, as well. 566 MR. KAISER: Mr. White. 567 RATE DESIGN AND COST ALLOCATION WORKING GROUP - ISSUE A: CLASS REVENUE REQUIREMENTS; CHAPTER 4: 568 SUBMISSIONS BY MR. WHITE: 569 MR. WHITE: Thank you. 570 I have the pleasure of talking to the customer classification issue. I think it's fair to say that no one at this time suggests that customer classification falls out of the scope of the handbook, but the question is whether or not it should be considered at this time. It's ECMI's view that it is an urgent -- has an urgent need, and requires the attention of the Board as part of this process. 571 Bill 210 established customer primacy in the OEB's priorities. Stable rates and equitable treatment are priorities for customers. Within a class, rates should track costs, be simple, be equitable and be stable. The establishment of separate classes requires customers to have similar operating characteristics, be materially different from the remaining customers in the source class, and be similar from a cost-causality perspective. 572 With respect to the under-50/over-50 classifications, which were created as part of the unbundling process, in the OEB decision RP-2000-0069, when considering the price difference above and below 50 kilowatts, the decision stated, in part, that: 573 "The Board acknowledges this potential difficulty. In this regard, the Board will initiate a review of rate design for the general service class as soon as practical." 574 Customers have identified the inequity around the 50 kilowatt boundary which was created as part of the unbundling process, and have complained to LDCs. 575 With respect to scattered, unmetered loads, this class has also been introduced. It is not like the street-lighting class, which has a statutory basis as being put in place for the public good. Loads vary and require ongoing, costly monitoring. Loads are not homogenous. They have different operating characteristics and often have different supply facilities. They are not cost-based at this time, and similar small customers with meters are left behind with the creation of the scattered, unmetered class issue. 576 It's our position that the under-50 and over-50 classes should be recombined, and that scattered, unmetered loads should not be treated as a separate class. The disparity treatment between utilities is a symptom of the potential inequity created by the establishment of this class. 577 MS. LEA: Thank you, Mr. White. Can you indicate, then, whether you plan to call evidence on evidence issues number 1 and 3, or whether you're only seeking to call it in reply? 578 MR. WHITE: With respect to number -- I'm sorry, evidence issues -- 579 MS. LEA: 1 and 3. 580 MR. WHITE: Yes, and potentially in reply on 2. 581 MS. LEA: Thank you. 582 MR. KAISER: Ms. DeMarco? 583 SUBMISSIONS BY MS. DeMARCO: 584 MS. DeMARCO: Thank you, Mr. Chair. Elisabeth DeMarco, and I'm here on behalf of Rogers Cable and the Canadian Cable Television Association. 585 Just a few preliminary matters, if I might, in response to Ms. Nanninga's presentation. 586 If I could have you turn to the customer classes presentation at page 6. Noted as a general consensus there is to leave classes as are until the 2007 cost-allocation study is completed. If I could just note that that consensus was not reached, in accordance with my client's view. 587 And, similarly, in relation to the report of the consensus pertaining to unmetered, scattered loads -- and my pages are half numbered here, so I believe that it is page 27 of the presentation. The third bullet, again, reports to deferring to 2007 cost of service as general consensus, and I would like to note for the record that that certainly isn't consensus in relation to Rogers or the CCTA's views. 588 With those clarifications in mind, and the issue of the prominence of the cost-allocation study being paramount as a condition to determination of these issues, I wonder if I might analogize the decision that you're currently faced with to the decision that many Americans are faced with today, in the context of the federal election. Are we talking about four more years here? Because, certainly, we anticipated that we would have a cost-allocation study completed by 2003. And I understand my colleague, Mr. Snelson, will be speaking to the specific provisions of the Rate Handbook that contemplated completion and implementation of the cost-allocation study in 2003. We are now in 2004, and we don't have that cost-allocation study completed, and we continue to have numerous inequities and differences in rate classes associated with the lack of having that study completed. 589 So, with that as introduction, may I then move on to three main submissions that I will be making in relation to the issue of unmetered, scattered load. 590 The first submission that I will be making is that the current variability and inter-LDC inconsistencies in the rate and billing treatment of unmetered, scattered load, warrants immediate consideration and harmonization by the Board in order to both, first, remedy existing overpayments by the cable industry, and second, facilitate consistency in the treatment of unmetered, scattered load prior to, and for the purpose of, the cost-allocation study. 591 My second main submission is that the Board's procedural history with the cable industry on this unmetered, scattered load rates issue has created a legitimate expectation that these inequities would be addressed as early as possible, and, certainly, before 2007, some seven years after the process was undertaken. 592 Finally, our third submission is that the working group and the subgroup processes in this proceeding should be conducive to both hearing and addressing the issues of all participating stakeholders, and not dismissing issues that are distinct from those of the LDCs. 593 In summary, the basic question before the Board on these issues and inequities would be: If not now, then when? And if not here, then where will we have these issues addressed? 594 In support of these three main submissions, I would like to do three things. And the first would be to provide the Board with a brief overview of the variable and inconsistent ways in which unmetered scattered load is treated by the various LDCs and outline some of the resulting prejudices. Somewhat distinct from the presentation there are, in fact, three ways in which unmetered scattered load is treated for rate-making purposes by bearing LDCs. 595 The first way is that certain LDCs have created a unique rate structure or a subclass of the general service class specifically for unmetered scattered-load customers. The second way is that certain LDCs have treated unmetered scattered load as part of the general-service, less-than-50-kilowatt class, but charged the load as a single customer. And the third and most prejudicial way is that certain other LDCs have also lumped them in with the GS, less-than-50-kilowatt class, but charged each connection point as a specific customer. It is this third treatment that is particularly prejudicial to cable companies and members of the CCTA. 596 I am not certain if Ms. Lea has distributed materials to you that I have handed out supporting the submissions that I'll now be making. And there are a number of copies, unbound copies, at the back of the room for people sitting in the room and there are a number at the credenzas on the end of each row. 597 MR. KAISER: Ms. Lea, should we give this an exhibit number? 598 MS. LEA: Yes, let's give it an exhibit number for identification. It will be Exhibit 4, please. 599 EXHIBIT NO. 4: BOOK OF MATERIALS TO BE USED ON ISSUES DAY, DATED NOVEMBER 2, 2004, ON BEHALF OF ROGERS CABLE AND THE CCTA 600 MS. DeMARCO: All right, then. If I can ask you to turn to tab 4, on the second and third pages, to quantify that this -- the impacts of this rate treatment are not insignificant to members of the cable industry. The letter generally deals with many of the long-standing issues that Rogers and members of the CCTA have encountered in relation to being lumped in and inconsistently treated between LDCs or among LDCs. 601 They've quantified the actual impact of those, what they consider overpayments, in relation to that classification. The first estimate found on page 3 is that annually, Rogers is paying as much as $1.3 million for services, like metering, that it does not receive. Calculated out between the 2000 application or first implementation date of the Rate Handbook and the 2006 date contemplated in this proceeding, that's a total of 6.5 million. Certainly, the impacts are not, in our submission, inconsequential and do warrant very immediate and prompt action to remedy the outgoing and outstanding inequities associated with the classification. 602 Secondly, it's our submission that many of these inter-LDC discrepancies should benefit from the Board's policy direction on how unmetered scattered load should be treated prior to the cost-allocation study. Certainly, certainty in that regard would be beneficial to the accuracy and consistency of the data within the cost-allocation study itself as opposed to widely varying treatment and trying to reconcile some methodology to incorporate those factors into the cost-allocation study. 603 In the absence of redress, it is our submission that there is significant cross-subsidization of the metered loads within the class by the unmetered scattered loads. As a result, we submit on this first issue that the Board should act promptly to deal with this issue in the context of this proceeding. 604 If I can now move to on to my second main submission, which is in relation to the procedural history associated with this issue between the cable industry and the Ontario Energy Board. If I can ask you to turn to tab 1 of the materials. You'll note that Rogers first brought this issue of the quantitative and volumetric challenges, as well as the classification challenges associated with the rate treatment of Rogers as unmetered scattered load as part of the GS categorization, they brought that to the Board in July of 2000. Specifically, the letter outlines some of the prejudice and concerns that Rogers has in relation to that issue and requests to be -- requests intervenor status in the context of the 2000-0069 proceeding that the Board had initiated in response to the first round of PBR following the Minister's directive. 605 If I can ask you now to turn to tab 2 of the materials. Following that request, the Board responded to Rogers indicating that it heard the issues, but the particular issues raised by Rogers relating to unmetered scattered load are likely to be addressed in future proceedings that focus on second generation PBR. It's our submission that this is that proceeding and, as a result, these issues should be considered here. 606 If I can then draw the Board to the attention of a provision that Mr. White excerpted, specifically from the 2000-0069 decision. And I apologize I do not have a copy of the decision in my materials, but given that it was raised I thought I would incorporate the entire reference for your convenience into the transcript. It's the decision with reasons associated with the 2000-0069 decision of the Board, dated September 29th, 2000. On page 19, at paragraph 3.5.7, the paragraph indicates that: 607 "Some parties brought to the Board's attention that a major rate impact might arise following the initial setting of rates for customers in the general-service rate class who currently fall in the under-50-kilowatt category for billing purposes and who may cross, even marginally, the 50-kilowatt threshold. 608 "The Board acknowledges this potential difficulty, and in this regard will initiate a review of the rate design for general-service class as soon as practical." 609 It goes on to talk about crossover issues and dealing with categorization following that. It's our submission, again, that now in 2004, four years after this rate decision, the time has come to consider these issues and to address the potential inequities and associated costs that are being borne by certain customers that have been lumped within a class that does not particularly apply to them. 610 If I can now move on to my third submission, and that is that the process undertaken in the current rate proceeding is conducive to resolution of these issues and should be used to be inclusive and determinative of outstanding multi-LDC issues. Specifically, the issues that Rogers and the Canadian Cable Television Association are bringing forward are reflective of the entire LDC population and are not specific to one particular LDC. Harmonization is warranted to ensure we've got consistency going into that cost-allocation study. 611 And I note with interest that there seems to have been a divergence from what was discussed and contemplated in the context of the subgroup pertaining to chapter 4 and 5 and the ultimate working group. And if I could then tie back into my initial clarifications, I want to ensure that there was not subgroup consensus on the issues pertaining to delaying and deferring the issue of unmetered, scattered load to a time following the completion and implementation of the cost-allocation study. 612 At tab 4 -- sorry, at tab 3 of my materials, the membership of those two groups, number 1, the executive group, and number 2, the subgroup on chapter 4 and 5, is set out. And I'd like to note, just for the record, that the executive membership is comprised predominantly -- 11 out of 13 members come from the LDC community. And it's also noteworthy that neither AMPCO, nor Rogers, nor the CCTA are members in that executive group, and we are the two significant stakeholders that have issues surrounding these outlying and unique and disparate rate treatment. 613 So in that regard, I understand that my colleague, Mr. Snelson, will be making submissions pertaining to delays historically associated with achieving the cost-allocation study. It's our submission, at this point, to indicate to you that we strongly believe that these issues must be dealt with promptly in the context of this proceeding, and therefore a number of workable solutions to provide an interim solution prior to completion and implementation of the cost-allocation study at some point on or after 2007. 614 Those are our submissions pertaining to the scoping issues. 615 MR. KAISER: Thank you, Ms. DeMarco. 616 Mr. Snelson? 617 MS. LEA: One moment, please, sir. 618 I wonder, Ms. DeMarco, would you be prepared to speak to what evidence you plan to call at this time, so that we can understand your entire submission in context? 619 If that's all right, sir? 620 MR. KAISER: Yes. 621 MS. LEA: And I'm not sure whether Mr. Snelson is speaking on this issue or number 4. 622 MR. SNELSON: I intend to speak on issue number 4. 623 MS. LEA: Thank you. 624 MS. DeMARCO: There are a number of issues pertaining to the potential evidence that Rogers, at its own cost, is willing to bring forward in the context of these issues, should they fall within the scope and should they be determined by the Board to be properly the scope of this proceeding. 625 And that would include, first and foremost, evidence and calculations about the disparate treatment and variance associated with the rates charged to unmetered, scattered load, and to support Rogers' calculations that there is a nearly 1,000 percent difference among LDCs associated with the rates being charged to the same type of customer. 626 The second would be evidence -- generally, evidence to support consistent treatment of unmetered, scattered load classes immediately. And that would include, but not be limited to, further evidence among and pertaining to variance between the LDCs, the associated rate impact, data on volumetric consumption estimates that are used by LDCs for the variable portion of the charges. And from the LDCs, in addition to from Rogers, we would understand that data would be collaborated upon to itemize the services assumed or included in charges to unmetered, scattered load. For example, we understand that metering is charged for in unmetered, scattered load. 627 Broadly, Rogers would be happy to provide this industry engineering and supplier information and the empirical data associated with these specific data points regarding volumetric consumption data and the current estimates and the load class, to assist the Board in its decision. 628 In that regard, I should indicate that Rogers is not a funded member of this proceeding. 629 MS. LEA: So, Ms. DeMarco, then, you have addressed -- made your submissions with respect to scope issues 2, 3 and 6? 630 MS. DeMARCO: Yes. We would comment in reply, specifically, I believe, to anything that comes up in the context of 6. I understand Mr. White to have spoken, only, to number 2. 631 MS. LEA: Thank you. 632 MS. DeMARCO: And, similarly, should Ms. Nanninga raise any issues in relation to the issues we have raised, we would ask the Board's indulgence to reply. 633 MR. KAISER: Are there any other parties that wish to comment on issue number 3? 634 Yes, sir. 635 SUBMISSIONS BY MR. TUCCI: 636 MR. TUCCI: Morris Tucci, EDA. 637 I'm sorry I didn't identify myself as a potential commenter on this at the stakeholder session. I didn't attend the last day. I had a conflict with another hearing, so I couldn't attend. 638 I just wanted to raise a concern that Rogers has indicated that they are -- there's an urgency to this issue because they feel they're being harmed. If that's the reason why we're pushing this issue forward, rather than addressing it in what I believe is the right time, when we do the cost allocation, and we can do all the allocations at the same time, I raise the question whether their assumptions are correct. Because they've indicated utilities have different practices. We agree that there's different practices between utilities. Whether -- what's the right way of allocating costs to these, we haven't addressed yet. 639 Rogers is making an assumption about how we're going to resolve this issue, and assuming that, in the end, they would be better off having made a decision. I'm not so sure that, in the end, they would be better off. We may come up with a different allocation methodology, or different way of charging these scattered loads, that may end up, when you apply it across all the utilities, to make them actually worse off financially. I haven't seen any evidence that they would be, immediately, better off under every scenario and under every option. I don't mind us talking about the options, but I -- to implement them before we get into the cost allocation, reducing or increasing the rates to them leads to a change in the general-service class allocation, and we have to address that, too. 640 That's all my comments. It's just identifying the problems of trying to address this now, and some of the assumptions behind Rogers' claims. 641 MR. KAISER: Thank you Mr. Tucci. 642 Any other parties wish to comment? 643 Yes, sir. 644 SUBMISSIONS BY MR. SEAL: 645 MR. SEAL: Mr. Chair, Panel. My name is Darryl Seal. I'm representing the School Energy Coalition. As you may have been able to tell over the last couple of days, Mr. Shepherd hasn't been feeling the best, and had to apologize for leaving early today. So I'm here in his stead, for this afternoon. 646 With respect to the issues of cost allocation, Schools are very concerned with this issue and the implications on rates for schools. As an example, we have been very active in both the regulatory assets hearings, and in gas distribution rate hearings, in the areas of cost allocation and rate design. 647 Notwithstanding that interest of ours, we recognize also that the depth and breadth of issues that are in this current 2006 EDR process, and with a background understanding that cost allocation will be dealt with for the 2007 process, we, in general, have agreed during the subgroup meetings with the consensus on most of these issues. 648 It's Schools' view, and I think one of some of the other ratepayers groups, as well, that on the particular scope issues that we're dealing with here, 2 and 3 - and I would add, probably, 4, 5 and 8, and my comments will apply to those, as well - we do see a general problem with piecemeal-type changes in cost allocation. Central to that issue is the idea that when you make changes to the allocation within one group, you are affecting other groups. The dollars that get shifted must get shifted to some other group. And we have a problem. In our view, you can only do that properly having a proper cost-allocation study in front of you. 649 So it is our view that, in the absence of that full cost-allocation study, cost-allocation changes, rate-class changes, such as are envisioned in these scope issues, should be outside of the scope CHT 650 In terms of the evidence, we have been listed beside a number of them. I would say our name is beside those, generally, as a placeholder. We expect that we would only be filing evidence if these issues are in scope, and in reply to any other evidence that may be filed on these particular issues. Our evidence would likely demonstrate that allocation without proper cost data is an inappropriate allocation. 651 Those are my submissions. 652 MR. KAISER: Thank you, Mr. Seal. 653 Any others wish to comment? 654 MS. LEA: Thank you. 655 Just one comment, sir, on Ms. DeMarco's concerns about process. The subject group has always been open, and I see that Rogers has availed of itself of, at least, being in one subgroup. And membership in the executive is open from Issues Day as well, as Mr. Snelson is aware. He's been invited to join, I'm sorry, I can't remember which executive, either, both, whatever, as are you, of course. So if you have a concern about the make-up of the executive, step forward. We'd welcome you. 656 MS. DeMARCO: Thank you so much, Mr. Chair. 657 If I could just note that it's integral to all stakeholders to not only have the opportunity to participate but to see their participation reflected in their reported consensus or lack thereof in the context of any reports or documents that come out of the executive working group. 658 MS. LEA: I think that that may have been partly my fault, Ms. DeMarco. When we began looking at these report, I think Ms. Nanninga's was the first one. And as a consequence, we said to ourselves, Okay, well, is it 100 percent unanimity, is it sort of there, is it majority, is it proposed? And we got a little confused. So I don't think that you want to turn to Ms. Nanninga, but turn to me to blame me, if consensus doesn't appear to reflect your views. At least it was included as an unresolved issue and on the scope. 659 That, I think, is everything on scope issues 1, 2 -- 660 MR. SOMMERVILLE: I have a question. 661 MS. LEA: I'm sorry. 662 MR. SOMMERVILLE: Mr. Tucci, it's a little concerning to hear that we're talking about a diversity of treatment for like loads, and you've acknowledged that there's a very marked diversity in the treatment of these situations. 663 MR. TUCCI: There were no specific guidelines on the treatment of these. The utilities had discretion and they have interpreted things differently based on their understanding. I think the different approaches just show the different emphasis they have in understanding the cost. Some believe one approach tracks costs better and others have thought, well, these are similar to some other loads, let's treat them that way. 664 MR. SOMMERVILLE: Right. So when Ms. DeMarco says there's mark inconsistency, she's telling it pretty well the way it is. 665 MR. TUCCI: She's correct. Yes. 666 MR. SOMMERVILLE: She referred to interim solutions or interim approaches to this subject matter. Has that been the subject of discussion in the working group? 667 MS. NANNINGA: Yes, it was. We came up with a few different options, dealing with them like street lighting or reducing the fixed rate up to a certain amount, but there was never any consensus within the group. And there is the concern of rate-impact mitigation to anybody else within the class in the event that you created a subclass and so on. 668 MR. SOMMERVILLE: I can understand those concerns, but I guess my interest is in the depths of those discussions with respect to some kind of accommodation. We have a recognition that the same context is being handled markedly differently in different situations, in different -- everything is the same except the jurisdiction, the franchise is different. That seems to me to argue, in some respect, for some kind of interim solution that may put a little water in the wine or for everybody, but that may allow the situation to move forward. 669 MS. NANNINGA: We did recognize the billing inconsistencies amongst all the LDCs and we did talk. We did discuss three different alternatives on how to deal with the unmetered scattered load, but as it all fell out at the end, it was leave it as it is until we have proof that it should be billed some other way consistently amongst all LDCs. 670 MR. SOMMERVILLE: A question arising, Ms. DeMarco. 671 MS. DeMARCO: If I might address the Board, that's the specific process issue where the concerns between the distinctions of matters discussed between the subgroup and the executive group might arise. And I understand from Ms. Lea's comments that that might be remedied by participation, specifically, on the executive group. 672 MR. KAISER: Thank you. 673 Ms. Lea. 674 MS. LEA: Thank you. 675 I think that takes us, then, to scope issue number 4. I believe that is an issue that Mr. Snelson and others are interested in. And I would ask parties also to address evidence issue number 2, which is the evidence related to that issue of scope. Thank you, sir. 676 MR. KAISER: Mr. Snelson. 677 SUBMISSIONS BY MR. SNELSON: 678 MR. SNELSON: Yes, my name is Ken Snelson. I represent AMPCO. You're probably quite familiar with AMPCO as an organization of large industrial users, all of whom use more than 5 megawatts of electricity. And in a rough, approximate terms, about a third of AMPCO members are connected through transmission and are not interested in distribution rates. About a third are connected through the Hydro One low-voltage system and are affected by that rate, and about one-third are municipal -- well, customers of former municipal utilities that are now LDCs. 679 The issue is with respect to the disparity in the charges made to large users for essentially the same service and whether that disparity should be addressed in 2006. First of all, to give you a sense of how big that disparity is, I would refer you to a letter that AMPCO sent to the Board on July 13th, 2004. I don't know whether you have copies in front of you, I have given copies to Ms. Lea for your use. 680 MS. LEA: That was the July letter, sir? 681 MR. SNELSON: July 13th. 682 MS. LEA: Do you have the extra copies there? Thank you. 683 If you could provide them for the Panel, please, and for identification, we'll label this as Exhibit 5. 684 EXHIBIT NO. 5: LETTER FROM AMPCO TO THE BOARD DATED JULY 13, 2004 685 MR. SNELSON: This was AMPCO's response to the Board's June 16th letter indicating that the cost allocation would be outside of scope for this hearing on 2006 distribution rates, and indicating that it would be addressing cost allocation as part of rate applications for 2007 distribution rates. And AMPCO expressed strong disagreement with that deferral. 686 Attached to that letter is a table which shows the distribution rates for all the utilities that we could find that have large users, not all the utilities have large users, and we calculated from the fixed and variable part of the rate the total bill, which is shown in the third column from the right, the total bill for distribution service for a 10-megawatt customer. All customers on these rates have to be more than 5 megawatts, some will be a bit bigger, some will be a lot bigger. And the disparity is quite striking. If you note that Peterborough has a large-user bill of $1,470 a month, and at the other end of the spectrum, Oakville, I believe, has a bill of $32,000 a month. So these are huge disparities. 687 Also, if you turn back to the second page of the letter where that data is summarized in the top paragraph, I believe in that top paragraph I missed Peterborough and indicated Kingston as the lowest at 1,983. Then the second paragraph discusses Hydro One's rates. Hydro One's rates in the table were those that were proposed to the Board, which were 12 cents per kilowatt, per month. In actual fact, the Board approved a rate of 56 cents per kilowatt, per month, for the low-voltage customers of Hydro One who receive, almost essentially, the same service as the large users of the LDCs. And by the way, AMPCO supported the increase of the low voltage rate from 12 cents to 56 cents as being more in line with cost allocation. 688 Anyway, the Hydro One rate for the same service is $5,600 per kilowatt, per month, and that rate is based on cost allocation. Hydro One did a cost-allocation study to establish that rate. 689 That leads me to my second point, which is that we have no reason to believe that the variation in charges for the same service between difference large users is based on costs. And I'll take you a little bit through the history of how those large-user rates came to be put into place, and I think will you see how the RUD model that was used to do it had very significant and substantial problems for the large-user class. 690 The RUD model attempted to unbundle Ontario Hydro's previous bundled rates -- sorry, attempted to unbundle the bundled rates of the utilities, which were set under regulation of the previous Hydro One -- Ontario Hydro regulation of municipal electric utilities. The process they used -- and I'm reading just a section from their Rate Handbook, which says: 691 "The share of these local costs --" 692 This is addressing the costs that the municipal utility could add to the wholesale power rate to determine its large-user rate. 693 "The share of these local costs that should be assessed to the large-use class can vary among utilities, depending on the facilities that are required to provide service. Initially, some cost-of-service studies were undertaken to determine the appropriate share of local costs chargeable to large-use customers. These initial studies indicated that local costs were consistently less than 5 percent of the cost of power chargeable to the large-use class. Accordingly, local costs of up to 3 percent of the cost of power, based on the utility's best judgment of its costs, are allowed without financial justification in the large-user rate calculation. Utilities seeking a higher cost level must provide a financial evaluation." 694 I can give you a reference to the Board's files for that, if you wish to check that. It's attached to HR 24, Interrogatory 2.5.9. So that's -- HR 24 was one of the Ontario Hydro rate hearings. 695 So Ontario Hydro regulated the LDCs, and allowed them to add up to 3 percent for local costs to the rate without financial justification. And that's how the rates were set prior to 1999. 696 Also, prior to 1999, the Board, in response to requests from Ontario Hydro, changed the demand-energy split between the -- for the rate to municipal utilities. They lowered the peak-demand charge and they raised the charges for peak -- for energy during on-peak times. But corresponding changes were not made to the large-user rates within the municipal utilities. The result of this was that municipal utilities made a substantial profit on selling peak megawatts to their large-use customers, and they made a loss on selling kilowatt hours during peak hours to large-use customers. This resulted in the difference between what the utility paid for the cost of power and what the LDC paid, being very sensitive to the load factor of the large-use customer. And the difference could swing from being a positive to a negative number, with different load characteristics of the large-user. 697 So when you came to the RUD model to unbundle it, this has led to very inconsistent results. And that, I believe, is the basic cause of the inconsistency. So that -- and one additional cause that would affect some LDCs is that some large users were on special rates, and the RUD model did not account properly for the way in which special rates were handled. So the problems with the misallocation started with the unbundling process, and have been in place since then. 698 Now, there seems to be general agreement that the best way to settle this issue is through cost allocation. And you've heard today that the working group is insistent that cost allocation for 2007 rates is very important, and we certainly support that -- that it should be for 2007, if not before. 699 The problem is that our experience has been that the date for cost allocation is a moveable feast. It has been moving off into the distance. At the time that the Rate Handbook came out, in March 2000, the Rate Handbook said that second generation PBR would be implemented in 2003 -- sorry, it expected the revisions to the handbook would be implemented in 2003, to facilitate the implementation of second generation PBR. 700 "In order to revise the Rate Handbook, the Board will initiate an interim review of the PBR mechanism beginning in 2002." 701 That is in the introduction to the Rate Handbook. 702 And then section 1.4, which is cost-allocation studies, says: 703 "Cost allocation factors have not been revisited since the 1980s. Prior to the implementation of second generation PBR, the Board will require utilities to develop cost-allocation studies that reflect, 1, the new structure of the industry; 2, current load profiles of various rate groups; and 3, a review of the method of allocating distribution costs to rate classes." 704 So, at the time that the Rate Handbook -- original Rate Handbook was issued, it was expected that -- it was the Board's direction that PBR -- the cost-allocation studies be done in time for PBR to be carried out in 2003. And that is from the Rate Handbook. 705 So, with that date, any problems with the RUD model would have persisted for two to three years. 706 Now, I was a member of the cost allocation working group in 2003. By that time, the target was to have cost-allocation studies in place for 2005. With that target, then, the incorrect allocations would persist for up to four years. 707 Now, with the Board's letter of June 16th - which we submitted, which I think we gave an exhibit number to, Exhibit 5, then - the date has now moved off to 2007. So the discrepancies that were a part of the rate unbundling are now going to exist for six years. 708 We're also talking about rebasing of rates for 2008. And I am pleased to hear that the intention is to do the cost-allocation studies a year earlier than that, but I worry that people will find it convenient to push them off yet another year, to 2008. 709 One of Parkinson's laws, not the one that's most often quoted, but one of the Parkinson's laws, is that delay is the deadliest form of denial. And I believe that we are in the situation where important decisions are being, effectively, denied by being delayed on a continuing basis. 710 Now, there are some specific companies that have been trying to challenge their distribution rates ever since the rate unbundling came in as being far in excess of any reasonable cost allocation, and that, in their cases, the R&D -- the RUD model did not work or was wrongly applied. 711 One specific case is that of Sifto, which brought a motion in front of the Board. And this motion was denied because of the government's introduction of the bill - I think it's two years ago - that effectively prevented the Board from reviewing its rate decisions without leave of the government. Sifto wrote to the government asking the motion to be continued, and they received a reply dated May 9th, 2003. And I believe we have copies of that letter for you. 712 MS. LEA: Yes, thank you. Exhibit 6. 713 EXHIBIT NO. 6: COPY OF LETTER TO SIFTO IN RESPONSE TO THEIR REQUEST FOR CONTINUATION OF MOTION CHALLENGING THEIR DISTRIBUTION RATES, DATED MAY 9, 2003 714 MR. SNELSON: This letter denies approval for Sifto to continue its motion in front of this Board. And I direct your attention to the third and fourth paragraphs. And part way through the third paragraph, I will start reading: 715 "In view of Bill 210, the Board revised its sequencing of activities, and, for 2003, is focussing on cost allocation, among other issues, including the allocation of costs among different classes. The intent is to address these issues at the working group level in 2003. This would then be followed by a Board proceeding sometime prior to the application for new rates, the recommendations from which would be implemented following the end of the rate cap." 716 The next paragraph says: 717 "Given the time line that has been established for the development of PBR II, it would be premature for me to give Sifto Canada approval for leave to seek rehearing and commencement of rehearing before the Board at this time." 718 So the denial of the rehearing issue was on the basis that cost allocation was underway and would be implemented, presumably, in a relatively short order. 719 The Board itself, in other decisions, has deferred cost-allocation matters to the cost-allocation process before this Board. And a particular example is the Board's proceeding RP-2003-0189, which was a proceeding by Enwin to create a new customer class for certain large, industrial customers with dedicated transformation facilities. And there were differences of opinion with respect to whether the proposed rates were consistent with cost allocation, and the differences were large. 720 Again, reading from that order: 721 "Ford and GM's path A solution included estimates of annual revenue requirement to serve the three transformer station customer class of 2.45 million rather than the 4.55 million." 722 The 4.55 million were the charges by the proposed by Enwin. 723 The Board continued on in its decision saying: 724 "These estimates lack sufficient depth and detailed analysis to convince us that path A represented a reasonable alternative." 725 And then in the next page says: 726 "The Board notes," this is the important part, "The Board notes that when a full cost-allocation study is done for Enwin as part of the Board's plan, any misallocation of costs will be addressed." 727 So there are differences of the order of a million or $2 million in cost allocation for just two or three customers that have been put off, and they keep getting put off. 728 So my submission is that we're really no closer to cost allocation now than we were in the year 2000 when we first brought the Rate Handbook out. We're still three years away from having cost-allocation studies in place. This is not an inconsequential issue. There are individual impacts on companies in the order of hundreds of thousands of dollars per year. 729 Now, you have to say, Well, what can we do for the 2006 rates? What is practicable, given the situation that we're in today? And we're not asking the Board to carry out and to insist that full cost-allocation studies are carried out for the 2006 rates. We understand and appreciate the Board has already ruled that as being out of scope. 730 What we are asking for in this process is 3 different areas of redress. The first is that we need to have some information to enable us to identify the problem areas. The second is that we need to institute some measures that prevent the situation getting worse. And the third is that we need to start a process of identifying the most outstanding inopportune and appropriate rates and start a process of providing some relief. 731 Now, just to expand a little on those. If this is accepted as an issue by the Board, as we say, we'll be seeking these types of relief. The first one is that the Board Staff should prepare a report. 732 Is my microphone working? 733 MS. LEA: I think you have to back away from it a little. It switches off as you -- 734 MR. SNELSON: Okay. 735 The Board Staff should prepare a report of comparative rates and comparative monthly bills, similar to the report that was previously prepared by Ontario Hydro when Ontario Hydro was the regulator of the distribution of rates. And I would say that in addition to the information that is included in that report, it would probably be important to also have billing loads by customer class and distribution revenue by customer class, so that average customer class revenues can be determined. 736 MS. LEA: Sorry, was that billing loads? 737 MR. SNELSON: Yes. 738 MS. LEA: By customer class and -- 739 MR. SNELSON: And distribution revenue by customer class. 740 MS. LEA: Thank you. 741 MR. SNELSON: This is the most efficient way in which people can see the discrepancies that exist in rates between utilities. This would be a benefit to all customer classes, not just to the large user class. It would assist the process generally. Without that, then an intervenor who aims to acquire that kind of information has many hours to spend in the file room of the Ontario Energy Board, of the Board here to look through the rate filings of many different utilities and assemble that kind of information. 742 The second category of relief that we would be looking for is to avoid allocating new costs on the basis of distribution revenue. If the current distribution revenue is not reflective of cost, then to allocate new costs on the basis of the current distribution revenues merely magnifies the misallocation problems that already exist. And the examples of new costs that should not be allocated on the basis of distribution revenue requirement are transition costs. 743 Now, that is being addressed in the current regulatory asset recovery proceeding and that is AMPCO's position in that hearing. But other categories of new cost that may arise through this period will be costs for smart meters, costs of conservation and demand management. It should be possible to allocate those costs between customer classes according to an allocator that is reflective of the of the way in which those costs were incurred, rather than just splurging them over all customer classes according to distribution revenue requirement. 744 The third type of relief we would be looking for is a process to identify outliers. Then outlying utilities that fall in the outlier category would have the option of reducing their rate so that they no longer were an outlier, or providing financial information to justify that higher rate. 745 Now, the financial information that may be required would have to be sufficient to justify the Board that there's a reasonable cost basis for a higher rate. It does not need to be a full cost-allocation study of the whole utility. It could be as simple as identifying the facilities that are used. 746 So, for instance, in the Sifto case, Sifto is supplied by 9 kilometres of 27.6 kV line and pays $250,000 a year, approximately, in distribution costs. If Sifto were a customer of Hydro One with the specific line allocated to it of 9 kilometres, it would pay about $50,000 a year. There are broad cost bases of looking at these kind of costs and saying, Are they in the reasonable range or are they not. 747 For the -- even if one decides to support it through a cost-allocation study, it can be far smaller than the cost-allocation study that is being contemplated for 2007 for all customer classes. You can do a cost-allocation study that says, This is the cost that is allocated to the large user class, this is the cost that is allocated to all remaining classes, and that can be done with load data that we currently have. You do not need the data from the load study to do that cost allocation, because all of that data about peak loads is available from currently collected metered data. 748 An example of how that kind of study could be done, and this is the most complicated kind of study that might be required, is the initial cost allocation that Hydro One did for its low-voltage system, in which it separated costs for the low-voltage system from all other customer classes before going into the detailed cost allocation of its residential-, commercial-, and general-service classes. 749 So, in summary, there is a wide disparity in large-user rates. There is no reason to believe that this disparity reflects cost differences. There's agreement that cost allocation is the right way to fix the problem, but cost allocation has been perpetually delayed. There are companies that are significantly affected, and have been denied redress, because cost allocation is underway. And I believe that we can put forward some practical proposals as to how this can be addressed in 2006. 750 And, perhaps, moving on -- in a sense, I have addressed the evidence issues to some degree. Specifically, if this issue is accepted as being within scope, we would want to bring evidence to support the submissions that I've made today, and to bring forward practical solution proposals as to how the issue could be addressed for 2006 rates. 751 MR. KAISER: Thank you, Mr. Snelson. 752 Are there any comments on this submission? 753 Yes, sir. Mr. White? 754 FURTHER SUBMISSIONS BY MR. WHITE: 755 MR. WHITE: Yes. 756 I have -- I would like to start off my comments on a conciliatory note, and say that I accept Mr. Snelson's comments that the RUD process was less than perfect. What the Board needs to understand is, the context that many LDCs found themselves in was a loss situation with respect to large-use customers, rather than an abundance of cash, if it were. 757 Mr. Snelson reports to Hydro One as a key example of low rates and low costs. If the Board Members are going to compare rates between LDCs, they need to ensure that they're comparing them on the same basis. Hydro One's LV rate is a voltage-sensitive rate, and doesn't include transformation. As most large users in the province own their own transformer stations, utilities who bill on the basis of utilization-voltage rates will give that customer a 60 cent per kilowatt transformation allowance. Thus the 56 cents would move to $1.16. 758 In addition, for Hydro One, the losses applicable to LV customers associated with the commodity that are applied -- associated with the distribution system are in the order of 2.8 percent. And please, I don't know whether it's 2.7 or 2.9; I don't have that good a memory. But for many LDCs, they faced a zero percent loss on the commodity associated with the delivery to their large users, so that there was a commodity mark-up for distribution system losses in the Hydro One allocation process. 759 What Mr. Snelson is suggesting is a direct cost-allocation method for determining the cost that should be applied to large users. I, like Mr. Snelson, only, over a longer period of time, have participated in the cost allocation working group, and it is unclear at this time whether the allocator for distribution system costs would be non-coincident demand, direct allocation, or some other allocation system, and the resultant rates which would flow from that allocation system are unclear to me at this time. 760 I think it is, in conclusion, premature to move on large-user rates, to try and remedy a problem which we cannot begin to quantify at this time. 761 Those are my submissions. 762 MR. KAISER: Thank you, Mr. White. 763 Any other submissions on this point? 764 Ms. Lea. 765 MS. LEA: Thank you. That takes us, then, to -- 766 MR. SNELSON: Excuse me. May I reply just to one small point? 767 MR. KAISER: Go ahead, Mr. Snelson. 768 FURTHER SUBMISSIONS BY MR. SNELSON: 769 MR. SNELSON: That is that he referred to the transformation allowance. And I would take you to Exhibit 5, which was the letter that we submitted. 770 MR. KAISER: Yes. 771 MR. SNELSON: And the table at the back of that letter. And you will see that there is a column called "Transformation Credit". 772 MR. KAISER: Yes. 773 MR. SNELSON: And I had specifically, in preparing this table, removed the transformation charge and allowed for the transformation credit to accept the fact -- to accept the point that most large users own their own transformation. And the total bill being compared is on the basis of customers who own their own transformation. 774 MR. KAISER: Yes, thank you. 775 MS. LEA: Thank you. 776 I think that the question of whether the transformation credit is in or out probably doesn't go directly to the issue of scope, but thank you very much. 777 Sir, if it's possible, so we move, then, to scope issue number 5, which deals with whether any changes should be made to the fixed-variable split. 778 Now, I notice that only Ms. Nanninga's name is here. I didn't know whether there was possibly a conservation group, or anyone else, that wanted to speak to this. 779 Ms. Nanninga, have you anything to add with respect to this scope issue at this time? 780 MS. NANNINGA: No, I think we just wanted guidance on it. 781 MS. LEA: Just wanted guidance on it, okay. 782 I do not know if there's anyone else that wishes to speak to it. 783 MR. KAISER: Thank you. 784 Does anyone else wish to speak to this issue? 785 MS. LEA: Go ahead, then. 786 FURTHER SUBMISSIONS BY MS. DeMARCO: 787 MS. DeMARCO: Thank you, Mr. Chair. 788 Just to note that, in addition to the significant inequities that Rogers faces in relation to the unmetered, scattered load treatment, there appears to be a very distinct split of the fixed and variable portions of the bill pertaining to unmetered, scattered load, as distinct from that split pertaining to other customers, in that we bear a significantly greater portion of the -- a 50/50 portion of the split, whereas others are more in the range of 70/30, 80/20. And that is one of the inconsistency issues that we want to address in the context of the broader issue of unmetered, scattered load, and the specific evidence we'd like to bring in relation to the actual support for the volumetric assumptions, and consumption assumptions, that are being used by the LDCs in widely different matters. 789 MR. KAISER: Thank you. 790 MR. POCH: Mr. Chairman. 791 MR. KAISER: Yes? 792 MR. POCH: Ms. Lea is quite correct that the fixed-variable split is traditionally an issue that environmental groups have been concerned about, because of the conservation signal that is, or is not, amplified. But we're in agreement that -- in the context of the Board's workload, we're content that that matter sit where it is for now, to be dealt with man na. 793 MR. KAISER: Thank you, Mr. Poch. 794 Ms. Lea? 795 MS. LEA: Thank you. That takes us to scope issues 7 and 8, and evidence issue 4. 796 Now, again, my understanding of this was more a question of guidance than it was a debate. I see Ms. Nanninga nodding. I note that on evidence issue 4, Mr. Seal has already indicated that his group would be calling evidence only in reply. I just query, then, whether there is anyone here who wishes to speak to scope issues 7 and 8, and proposes to call evidence on those issues? 797 MR. KAISER: Does anyone wish to speak to this issue? 798 Mr. White? 799 FURTHER SUBMISSIONS BY MR. WHITE: 800 MR. WHITE: I will keep my comments very brief and limited exclusively to the legacy time-of-use rates. 801 Some customers historically opted for optional time-of-use rates as their only access to a time-differentiated-commodity price. The remaining, or residual, time-differentiated rates for time-of-use customers are not, in fact, time-differentiated, because the customers face a spot market price. There are other customers facing the spot market price who did not opt for the previous time-of-use rate option, which was a premarket-opening initiative, and the justification for a price difference between those customer groups has fallen away. And, therefore, it is my view that as the work group suggested, elimination of this class at the discretion of the utility would be appropriate. 802 MR. KAISER: Thank you, sir. 803 MS. LEA: Thank you. 804 The only guidance I can offer, sir, as I understand these two issues, is that there are existing time-of-use classes in the current Rate Handbook. So I would recommend, having heard what people had to say about it, that we take back to the working group the question of what to do with the legacy time-of-use classes because they have to be addressed in some fashion. 805 The new time-differentiated distribution rates, I think the working group was not proposing to create new ones for 2006, and I haven't heard anybody suggest that they should be created. Is that the situation? 806 MS. NANNINGA: No. 807 MS. LEA: Okay. Thank you. 808 MR. KAISER: Thank you. 809 MS. LEA: That takes us, then, to scope issue number 9. I believe that Ms. Frank from Hydro One wants to speak to this. Ms. Nanninga, did you have anything to add with respect to scope issue number 9? 810 MS. NANNINGA: It was also a guidance issue. We were looking to find out where -- well, not so much where in the handbook, but should it be part of the handbook and where to go forward with it from here. 811 MR. KAISER: Thank you. 812 Ms. Frank. 813 SUBMISSIONS BY MS. FRANK: 814 MS. FRANK: The issue that Hydro One would like to raise is, indeed, what elements of regulatory assets are to be considered here. The original proposition was just over and under variances for amounts that had already been approved as part of the prudence reviews that are underway today. And there are further amounts, the ongoing amounts for 2004 which haven't received a prudence review and there is no time for that set, and then any new regulatory assets. And I always use an example of pension as a new deferral account or regulatory assets out there, and how will that get incorporated? 815 The suggestion for Hydro One would be that all of those regulatory assets would be included in the handbook. Naturally, it would need some type of a prudence assessment, possibly with the examination of other expense items for the regulatory assets. But the rate design would allow for recovery of all regulatory assets, not just the ones that are part of today's prudence reviews. 816 MR. KAISER: Thank you. 817 Any comments on this point? Ms. Lea. 818 MS. LEA: Thank you. 819 The last issue, then, is one to which Mr. Higgin wishes to speak, I believe, and that is the type, or whatever, of evidence on evidence issue 5, rate mitigation and rate implementation. Could you help us with that, sir. 820 SUBMISSIONS BY MR. HIGGIN: 821 MR. HIGGIN: Mr. Chairman, once again I'm Roger Higgin. I'm representing Vulnerable Energy Consumers Coalition. I'm making a short submission on issues 5.2 and 5.3 in Ms. Nanninga's presentation, so perhaps, to be helpful, whether you could find those slides and it will provide some context for what I have to say. That's on issues 5.2, which is rate mitigation, and 5.3, rate harmonization gets drawn in slightly into this discussion or this submission. 822 MS. CHAPLIN: Mr. Higgin, do you have a page number for that? 823 MR. HIGGIN: Unfortunately, I have my old copy here. So what it was on the very latest issue, I don't know. It's issue 5.2, rate-impact mitigation, that's the title of the slide. 824 MS. LEA: Looks like slide 42. 825 MR. HIGGIN: That's it. So those slides in the series, that right through to the one that ends, "following rate harmonization that ends with path." So those are the slides that I'm speaking to in terms of my submissions. 826 MR. KAISER: Thank you. 827 MR. HIGGIN: Thank you. 828 Now, I'm assuming, of course, that these issues are in scope. So then I will address what VECC suggests is an appropriate approach as background to why we believe evidence is required in this area. So first of all, there's no dispute that these are issues in scope. 829 Now, rate mitigation and rate-impact mitigation and rate implementation are two sides of the same coin. Rate-impact mitigation requires first that, as required by the Rate Handbook, utilities are required to file rate-impact analyses for each class of customer. That sounds very straightforward, but the first issue is that we need to have a standard template for that, and that template should address some of the issues that the working group has been dealing with. Should it be based on distribution rates only? Should it include the cost of power? Should it include other charges? And finally, how should it take account of rate harmonization? So that issue is when they file, what should be the template? 830 Secondly, we need to have a rate mitigation strategy based, again, on a clear set of guidelines as to what is and is not allowed. For example, will there be tinkering, as I call it, with the monthly customer charge, and if so, within what limits? 831 Thirdly, in the area of rate implementation, how are increases above guideline to be handled, e.g., a deferral account, or a phase-in period. Now, we all remember the Minister's directive and the rate mitigation that is still going on from the last EDR rate review. So to avoid confusion this time around, we suggest that there must be very clear guidelines established up front in the 2006 handbook. 832 To establish those guidelines we suggest generic, rate-impact analysis be done looking at total bill, with or without rate harmonization, distribution rates only, et cetera, the various permutations and combinations of what the rate impacts are driven by; and then setting guidelines for allowable increases and the approach to mitigation or rate implementation that would be used by the utilities. 833 So now, Mr. Chairman, we would rather have Board Staff do the work, having had, say, the working groups scope the issue. So they scoped the issue and then the Board Staff do the work. Why? 834 First, they have access to all the utility filings that will be required to prepare the analysis. 835 Secondly, they will also be in the best position to amend or update the guidelines prior to issuance, in order to reflect changes in other costs prior to the filing. For example, those costs that may flow from the rate -- regulated rate plan option. So there will be additional cost, that's yet unknown, once the RPP is defined. 836 So therefore, what we're trying to do is flag the need for a generic, rate-impact mitigation analysis. The objective is to inform the guidelines to be included in the 2006 Rate Handbook. If Board Staff are able to provide this, we would be very content. If not, we would plan to lead a group of ratepayers to retain a consultant and provide evidence in this area. 837 Thank you. Those are my submissions. 838 MR. KAISER: Thank you, Mr. Higgin. 839 Any comments on this submission? Yes, sir. 840 SUBMISSIONS BY MR. WEBER: 841 MR. WEBER: Brian Weber from Grimsby Power. 842 I would agree with the previous speaker as to some of the intent that he's trying to outline and define. It's my understanding, though, that in the rate submission that we place before the Board that there is a rate analysis, as far as the impacts for the various customers on the specific utilities involved. So I'm not sure if he's referencing specifics or from a more province-wide base. 843 I think one of the many major issues that we've been listening to here this afternoon is that there are a number of inequities that have been forced upon us or that were in the system, and primarily, it was because there was a snapshot in time. And that, in itself, created a number of problems in which a lot of people still today have difficulty in understanding. 844 As an example, low-voltage rates were mentioned. And when I remember the 2000 RUD model, the impacts on the customer was basically zero before the MBRR. So to me, those low-voltage rates were already in the system, were part of the costs that were being borne by the customers previously to that time frame, and yet here we are going to have to, at some point in time, go back to our customers to collect that charge, and Mr. Snelson's identified it as .56 a kilowatt. But there was a one-time fee that was not mentioned, and I don't have the actual number off the top of my head, but I think it was around $2.79 per kilowatt as a one-time fee. And how that's going to be dealt with -- I'm not sure whether the group in the area that Mr. White's been looking at... 845 But the essence of this is that we need some certainty from the Board as to what's the line of attack on all of these issues. And we need some certainty in the form of a GANT chart so that it can tell us, and in definitive time frames, as to what's going to take place so that we know, and can manage our business, and continue to keep the lights on. 846 So that's my submission. 847 MR. KAISER: Thank you, Mr. Weber. 848 Mr. Higgin, did you have any response to add? 849 MR. HIGGIN: Just a clarification, sir. 850 With respect to the fact -- my submissions were based on the fact that there will be a requirement in the Rate Handbook for a rate-impact analysis to be submitted by each utility. What I'm speaking about is, then, what guidelines should be applied as to what is a reasonable rate impact? And should those guidelines be based on total bill? On distribution only? Should they or should they not take into account any rate harmonization, et cetera. I just feel that we need that -- we, as customers, need that certainty with respect to what the Board's approach will be, and what -- the guidelines that will be applied to the utilities when they do submit their rate-impact analyses. 851 MR. KAISER: Thank you, sir. 852 Ms. Lea? 853 MS. LEA: Thank you, sir. 854 I had one question, Mr. Higgin. Are you recommending that these questions that you've just outlined not be continued to be discussed in the working group, but that Board Staff take them over and do them? 855 MR. HIGGIN: No, I'm suggesting that the first thing is to send them back to the working group, have them try to scope or get as much closure on the issues as possible. I still believe that one of the outcomes of that may be that a generic rate-impact-analysis study is required in order to inform the guidelines that will go into the Rate Handbook. 856 In that event, my first preference is that Board Staff do that generic rate-impact analysis. The second is that, by default, we feel we may need to provide evidence. 857 MS. LEA: Thank you. I understand. 858 MR. SIDLOFSKY: Mr. Chair, if I could just jump in for a moment, I'm sorry. 859 If Mr. Higgin and VECC, or some group of stakeholders in this, are intending to bring evidence at some point, in the event that the working group process doesn't close this matter, our clients may be interested in bringing evidence to reply to that as well. 860 MR. KAISER: Thank you. 861 MR. McLORG: Mr. Chair, if I may, on behalf of Toronto Hydro, again, just ask for a clarification perhaps of Mr. Higgin, or whoever the other proponents of this issue might be. 862 Rate mitigation can be spoken about in terms of the total allowed cost of service, as what used to be known as a kind of a phase-1 matter. And it can be spoken about in terms of cost allocation and rate design. And it's Toronto's understanding, in reading the first Rate Handbook, that the guidelines there dealt with rate impacts that would arise as a matter of rate design, particularly with respect to the level of the fixed charge versus the variable charge, and so on. We see that as a valid, but quite distinct matter in contrast to rate mitigation applied to the total allowed cost of service. 863 So the clarification that we would be seeking is whether the Board intends to adopt a rule with -- under the heading of "rate mitigation," that would apply to the total cost of service that would be found in the course of these applications, or whether the Board intends to limit its application of rate-mitigation rules to matters that would arise from rate design and cost allocation -- rate-harmonization types of impacts. 864 MR. KAISER: Thank you. 865 Mr. Higgin, did you wish to respond? 866 MR. HIGGIN: The perspective of customers is what matters is how much do the rates go up as a result of either event? Once the rate order is issued, then that's the customer impacts, what we are looking at, sir. So, therefore, it would be driven both by the cost, phase-1, which is the cost of service. And should there be any changes specific to a utility respecting rate design, changing the blocking structure, or other things in that case, or rate harmonization, all those would be encompassed within the scope of what we believe needs to be looked at in preparing the guidelines as to how to deal with that. 867 I think that, leaving aside customer perspectives, there are many other aspects of what will happen if we get it wrong in respect of rate-mitigation strategy. I just point that out, as last time that happened -- not only in this particular area of electric utilities, but also in the case of some gas utilities, in the past, all hell has broken loose, to pardon the phrase, sir. 868 Thank you. 869 MR. KAISER: Thank you, sir. 870 Ms. Lea, would this be a convenient time to take the afternoon break? 871 MS. LEA: Yes, thank you, sir. 872 MR. KAISER: I'm sorry, Mr. White. 873 MR. WHITE: I was just going to request a placeholder on that item, please, for ECMI possibly providing response evidence, should VECC file. 874 MR. KAISER: Thank you. Two placeholders have been registered. 875 We'll take a 15-minute break. 876 MS. LEA: Thank you. 877 --- Recess taken at 3:55 p.m. 878 --- On resuming at 4:15 p.m. 879 MR. KAISER: Please be seated. 880 MS. LEA: Mr. McKenzie, I think we have a new presenter. 881 MR. McKENZIE: Thank you. On specific service charges and the SSS administration charge, we have Dave Weir from Newmarket Hydro to go through the working group's presentation. 882 RATE DESIGN AND COST ALLOCATION WORKING GROUP - ISSUE B: SPECIFIC SERVICE CHARGES (CHAPTER 6) AND SSS ADMINISTRATION CHARGE (CHAPTER 7.1): 883 SUBMISSIONS BY MR. WEIR: 884 MR. WEIR: Thank you, Mr. McKenzie, and good afternoon, Mr. Chair and Panel representatives. 885 I'd also like to thank the subgroup that worked with me on these issues and the executive group as well. I'm going to be talking about specific service charges. 886 Just for a little bit of clarification, specific service charges are fixed dollar amounts that LDCs charge, or fixed percentages levied to customers for a specific repetitive service, or activity, or penalties. For example, a percentage would -- a fixed percentage would be a late payment-type penalty. A dollar amount might be for a collection visit or a fixed amount for that. 887 By way of history, the LDCs, when they unbundled their distribution rates with the original RUD model, they were requested to submit their existing service charges for approval. These were basically approved unchallenged. 888 Our group looked at two documents that formed the majority of the review. These were a discussion paper that was developed by the OEB along with input from the LDCs, and as well, we looked at the detailed list of approved rates as they stand today. And basically, those approved rates have stood since 2001. 889 From these, we determined a number of things. There should be no duplication of revenues between distribution rates and specific service charges. In other words, there's no double dipping. You receive your basic revenues from one or the other but not from both. 890 At present, there is very little consistency in the nomenclature used by the distributors for many of the specific service charges. We saw cases where there were 10 different descriptions for the same type of charge. There's very little consistency in the amounts charged by distributors for the specific service charges. The same charge varied in dollar amounts from LDC to LDC. Sometimes not by great amounts, it might be 50 cents difference, but there was a wide variety of what those charges were in dollars. 891 At present, there is a lack of consistency in the circumstances used by the distributors for the application of specific service charges. What this ultimately resulted in was a list of approved specific charges that totalled more than 200 at the end of the day, and they still exist today. 892 There were no questions of scope identified on this issue. 893 We had consensus reached in several areas. Specific service charges are an integral part of the distributor's approved schedule of rates for the distribution of electricity. Specific service charges are for activities that are over and above the distributor's standard level of service, as described in the Distribution System Code. The costs of providing the standard level of service are recovered in the regular distribution rates. 894 A standard set of specific service charges and corresponding rates or methodologies should be developed. Distributors should be allowed to make application for any unique, specific service charges, if adequately justified to the Board. And in some circumstances, the distributors should be allowed to waive the application of a specific service charges, provided that this is done in a consistent manner such that the practice does not become discriminatory. An example of that might be where it's little used in a specific utility, there's not a lot of activity for that type of charge in that activity. So we wouldn't want to force them to have a charge for something that they use very, very seldom. 895 Crossover issues. We need to work with the revenue requirement group just to ensure that there is no duplication of revenues between revenues received from specific service charges and the distribution rates. We also need to work with the comparators and cohorts group just to make sure that utilities are fairly similar in the inclusion of their revenues between utilities. 896 Unresolved issues. We're continuing on, Should all utilities be required to apply all specific service charges on a user-pay basis? What should the filing requirements be for specific service charges approval? Develop a predetermined and clearly defined nomenclature for the specific service charges, to the extent possible. Further discussion on direct- or fully-allocated costing. Develop predetermined fixed amounts for like, recoverable activities that can be selected by the distributor for approval. And develop a formula that distributors can use to apply for unique, specific service charges. 897 The subgroup has actually gone quite a bit further on some of these issues now, and work is continuing in those areas. And the recommended path is to keep these issues in the work group and further possible argument. 898 The standard supply service administration charge is the next issue. And what that is is the 25 cent charge, per month per SSS customer, that is now levied by the LDCs. It appears that the basis for the current charge was not fully detailed. I think, and I think our group thought, that it was really designed to cover the incremental costs for bringing in the retail settlement systems at the LDC level. Proper cost allocation may provide the necessary detail for a change in these rates. 899 The other issue that came up when we were discussing the SSS charge, we felt that you couldn't look at the SSS administration charge in isolation from the various retailer charges, because the SSS charge goes to one group of customers and the retail charges go to the retailers for all of the retailers' customers. So they cover like things, not necessarily the same things, but they definitely are -- need to be looked at in the same -- under the same umbrella. 900 There is a question of scope that was raised here: Should the SSS administration charge and the retailer service charges be reviewed or updated as part of the 2006 EDR process? 901 The consensus of the group or groups, we recommend that the SSS administration charge and the retailer service charges remain at their current levels, pending information from the regulated price plan process, and the regulatory assets process, and a cost-allocation study. 902 Thank you. That's the end of my presentation. 903 MR. KAISER: Thank you, Mr. Weir. 904 Any parties that wish to comment? 905 MS. LEA: Thank you, Mr. Weir. 906 MR. KAISER: Mr. Weber -- 907 MS. LEA: Mr. Weir, there is one scope issue that you identified. Did you have anything else to add with respect to the, Should the SSS administration charge and retailer service charges be reviewed as part of this process? 908 MR. WEIR: No, I don't at this time. 909 MS. LEA: Okay. Thank you. 910 I'm sorry, sir, I just wanted to make sure. 911 MR. KAISER: Mr. Weber. 912 SUBMISSIONS BY MR. WEBER: 913 MR. WEBER: Thank you, Mr. Chair. 914 We have a concern with the amount of snow-plowing that's actually taking place. While the rates charged to customers may appear to be revenue-neutral, there is, as Mr. Weir identified, some potential for the cost to vary between the customer classes and, therefore, the way it is collected. 915 There was a study that was done with 15 LDCs and it was either submitted to the Board or it was deferred because of Bill 210 and the timing of that, which basically froze the rates. From that study there was a minimum rate of somewhere to 75 cents to a maximum of 3 which -- $3 which goes back to Mr. McClorg's presentation yesterday dealing with comparators and cohorts, and how that data is actually there, and how each LDC may proportion some of those costs internally. 916 Our concern at this stage is that, because there is at least an identification that that number needs to be more -- and even if we took the lowest rate, which is 75 cents, it would be a move positively, that would, potentially, offset any rate-mitigation issues in a future year. Barring that, we -- I'm not sure what the committee's recommendation is, as to whether this -- if it does not proceed at this time, whether it would be going forward as part of the cost-allocation study. The Board has taken the opinion that it's user-pay, and if the costs are there and need to be borne by one particular unit, that -- and, conversely, the charges go in another direction, that's the way it should go. And that's my submission, sir. 917 MR. KAISER: Thank you, Mr. Weber. 918 Any other parties wish to comment? 919 MS. LEA: Yes, sir, Direct Energy sent a letter which they had asked me to read into the record. It's quite short. 920 SUBMISSIONS BY DIRECT ENERGY READ INTO THE RECORD BY MS. LEA: 921 MS. LEA: It is from Direct Energy Marketing Limited. It reads: 922 "During the stakeholder meeting held by the Board on October 25 and 26, 2004, the issue of the retailer service charges was raised for discussion for Issues Day to be held on November 1 and 2, 2004. The recommendation made by those present at the stakeholder meeting held last week was that the retailer service charges should be maintained at their current level for the 2006 electricity distribution rates. 923 Direct Energy agrees with the recommendation that the retailer service charges be held at the present level for the 2006 electricity distribution rates. The retailer service charges should be reviewed once there is sufficient analysis available to support that process." 924 And then they say: 925 "Thank you for the opportunity to provide comment on this issue." 926 Thank you. 927 MR. KAISER: Thank you. Do you wish to mark that? Or I suppose it's -- 928 MS. LEA: I think we've read it into the record, so we're all right. 929 I'm not aware of any matters that are to be dealt with, with respect to specific service charges and SSS administration charge. 930 Thank you very much, Mr. Weir. 931 Our last presentation. 932 MR. McKENZIE: Our next topic is rate design, and rate design is other chapter 7 issues. And they will be spoken to by Roger White, representing the ECMI coalition. 933 MR. KAISER: Mr. White? 934 RATE DESIGN AND COST ALLOCATION WORKING GROUP - ISSUE C: RATE DESIGN; OTHER CHAPTER 7 ISSUES: 935 SUBMISSIONS BY MR. WHITE: 936 MR. WHITE: Thank you very much, Mr. Chairman, and Board Members. 937 Before I start, I'd like to thank the committee, Board Staff, and all for their hard work in coming to what consensus our group was able to come to, and in particular, thank you to Ms. Lea for her efforts, in terms of keeping the process on track. 938 With respect to line losses, there was a recognition that the 1588 purchase power variance account had growing balances, either negative or positive, for some utilities, and that there was a need to produce an ongoing remedy for these. 939 There was no identified issue of scope indicating that it was within the scope of the Rate Handbook, and it was felt that it was appropriate to proceed, at least, these form of adjustments, as part of the EDR Handbook process. 940 We came up with a specific pair of trigger mechanisms which would deal with both an adjustment in the base loss factors, which are used by the utility for billing their customers, and a second trigger adjustment which would be used for clearing the purchase power variance account, if, sort of, dribs and drabs had accumulated over time. 941 The view was that, initially, losses should -- loss factors should be established -- actual loss factors should be established, starting in 2002, and moving to a five-year average, which is consistent with a gas industry average. Loss factors should be brought in line with actual losses, including those of large users and primary-metered accounts. 942 With respect to unresolved issues is -- depending upon what the Board's decision is with respect to part B on losses, which is the incentive question, there may be an influence in terms of how this loss factor is adjusted. 943 Under part B, the group considered a number of different options. The group discussed the fact that electric distributors have little direct control over their losses, because changes in losses generally result from new customer connections, or additions of load by customer, or loss of customers can also influence utility losses. 944 There is a question of scope as to whether the Board is interested in dealing with the question of providing an incentive for utilities to reduce line losses, and if they want to make that part of the current process. 945 One of the options considered was the use of the total-resource-cost test, with a couple of different variations on how that might be applied to fund initiatives by utilities to reduce system losses. Another alternative was to fix line losses for a five-year period, and, regardless of what the outcome or changes on the system were, the utility would be, sort of, bound to live with whatever wins or losses it realized in that period. 946 A third alternative was to adopt the natural gas model for a loss-reduction incentive, which is an asymmetrical model which, basically, uses a five-year rolling average loss factor, with any amounts where the utility underrecovers being recovered from customers, and, where it overrecovers, generally, perceived to be related to loss-reduction initiatives by the utility, those loss reductions would be kept by the distributor, by the shareholder. 947 The unresolved issue, or work continuing, is, what type of incentive should be put in place to reduce losses? The applicability of the gas model to electric LDC situations. Should line losses no longer be treated as a pass-through -- and, in fairness, there's some disagreement as to whether they were ever not treated as a pass-through, in either the current regulatory regime or the prior one. 948 And the other issue around incentives was the need to consider safety factors. And those have to do with the addition of capacitors on the system, which create some risk for linemen. 949 The path is evidence on the type of loss factor and incentive to be used, or, I guess, to incent loss reduction. There's a crossover with the C&DM group, and whether there should be a standard TRC test calculation, should that option be selected. 950 With respect to distributed generation, the group discussed whether transmission-charges benefit received by LDCs, resulting from small 1- and 2-megawatt nameplate, or larger, generators operating would -- whether that should be shared with the generators, or exclusively by the end-use customers of the LDC. 951 The transmission-system rate decision treats small embedded generation differently from larger embedded generation, as it relates to the billing for transmission services. 952 The question of scope is, does the sharing of potential transmission-charge savings attributable to distributed generation fall within the scope of the 2006 EDR Handbook? There was no consensus reached on this item. 953 The unresolved issues are: If it's within the scope, how should the potential transmission charge savings be shared? The path is, if it is within scope, back to the work group for discussion, possible argument. There is a crossover with the retail transmission rates. 954 With respect to standby charges, it is recognized that diversity in both method and level of standby charges exists not only across distributors, but in some cases within individual distributors. There is no question of scope as to whether this belongs as part of the EDR hard handbook. The consensus was that the proposed standardized method of calculating standby charges such that these standby charges would be strictly for load displacement generation. 955 The unresolved issue is the specific spreadsheet that would be used to determine what these standby charges would be, and the billing treatment for micro-generation which may, in fact, end up being dealt with by legislation or legislative initiatives. The recommended path is the work group will continue to work on this issue and prepare the necessary spreadsheets. 956 With respect to retail transmission rates, the issue is the level of the dollars accumulating in the RSVA accounts relating to both transmission rates and ongoing, low-voltage charges should they come ahead. The load data collected for the cost-allocation study in 2007 may provide the necessary basis on which to adjust retail transmission rates between the classes as a general going-forward type of issue. 957 The question of scope is, Should any adjustment in retail transmission rates be made in 2006 or should all such adjustments be deferred to 2007? The consensus reached within the group was to allow a change in the retail transmission rates to limit the expected annual change to 50 percent of the annual variance account amounts. In other words, reduce the overrecovery that's happening on an annual basis or, underrecovery that's happening on an annual basis, by half in preparation for the cost-allocation study, which would flow in 2007. 958 This change would be spread uniformly across all classes until the 2007 cost-allocation process is complete. 959 The unresolved issue or work continuing is the specific calculation for adjustment of these rates, in other words, again, a simplified spreadsheet to permit the adjustment. 960 Crossovers. It is possible that whatever adjustments are made in line losses and whatever happens on the LV charge front, that that may, in fact, influence transmission rates. 961 Recommended path is, if it's within the scope of the process, then leave it with the work group to determine the calculations. 962 LV charges is an interesting set of issues to be dealt with. The one is the treatment of the historic LV charges by Hydro One Networks Inc. and recovered by LDCs. The recovery of historic LV charges from distributors other than HONI, recovery of ongoing LV charges which may be established by HONI going forward or other distributors, and the development of ongoing -- the rate development for ongoing LV charges and related services. 963 For item number 1, the question of scope is whether the treatment of historic LV charges by Hydro One that may be recovered by LDCs, that may, in fact, be part of the 2006 EDR process, or it's possible that the pending decision on the current regulatory asset recovery period may overtake this particular item. 964 There are no identified issues for items numbered 2, 3 and 4, issues of scope. 965 The consensus for number 2 and 3, and 1, if it's not addressed by the regulatory assets hearing, is that LV be treated by distributors on the same basis as transmission and related charges for cost allocation and recovery purposes. 966 The unresolved issues and continuing work is the spreadsheet to deal with the specific calculations for ongoing LV charges including wheeling. The recommended path is to leave that work with the working group. 967 Demand determinants. Existing billing practices by LDCs may not be covered by the existing distribution Rate Handbook. In fact, the previous regulator used something called the standard application of rates to deal with these issues. So this is a clean-up issue. Poor power factor continues to contribute significantly to distribution system losses. 968 There are no questions of scope with respect to this issue. The consensus is to permit the existing billing practices, including billing on the basis of kW, or greater of kW or 90 percent of kVA, or where it's existing, 100 percent of kVA billing. The second consensus item was to permit kVA metering and billing by LDCs, providing it is done on a non-discriminatory basis. 969 And the third consensus item was to encourage utilities not to preclude kVA metering in the future. That is to say, that in many cases where kilowatt-hour metering or kilowatt-demand metering is installed in the field, if you are going to use kVA metering later on, it requires a second meter socket to track that information. And what we are trying to do here is to ensure that the utilities are encouraged to at least provide the space for that initiative going forward, because kVA losses are such a significant component of utility losses. 970 The crossover issues are with the revenue requirement to ensure that any incremental revenue that flowed from kVA billing would not result in an overrecovery in terms of the rate of return, and with the smart meter initiative, because it's unclear whether that metering will be capable of kVA billing. 971 The recommended path is that the work group draft this section of the distribution Rate Handbook. 972 With respect to the load transfer situations which happen part way through a month and may result in double charging of transmission rates, this seemed to be an item which landed on the group as part of the initial process with stakeholders. Transmission system charges, and potentially LV charges, associated with temporary load transfers were discussed. 973 The question of scope is, Should the question of load transfer double charging or the fact that there may be two delivery points involved, each one of which may attract more than, if you will, half the utility's normal delivered load, whether that should be addressed as part of the 2006 EDR process or should it be decided as part of a code proceeding, either the Transmission System Code, the Distribution System Code or the Retail Settlement Code? There was no consensus reached upon this issue. 974 If within the scope, how should load transfer double charging be addressed as the unresolved issue? The recommended path, if it is within the scope, is further discussion and likely argument. 975 Thank you very much. 976 MR. KAISER: Thank you, Mr. White. 977 Any comments? 978 MS. LEA: Thank you very much, Mr. White. I understand that you wish to speak to scope issue number 1, and is that related to evidence issue number 1, as well? 979 MR. WHITE: Yes. 980 MS. LEA: Okay. There may be others who wish to speak to this, as well, sir, I don't know, but I think Mr. White wants to begin with that. 981 MR. POCH: Mr. Chair, I wondering, before we begin on that scope issue... 982 It occurs to me that the earlier ruling that the Board made, that utility conservation is in, in response to Ms. Frank's scope issue under C&DM, may well, in a sense, capture this in any event. And then we can just deal with the evidence issue. 983 MR. KAISER: Ms. Lea? 984 MS. LEA: Yes, I don't think that line-loss reductions and power-factor correction initiatives are the only utility-side measures which Hydro One was contemplating, but I would agree that these two things are included within utility-side conservation, unless I'm incorrect about that. That's my understanding. Okay. 985 Mr. White were you going to argue that it was in, or that it was out, given the Board's ruling? 986 MR. WHITE: My view is that it is in, and ECMI coalition is prepared to provide evidence on this item. 987 MS. LEA: Can you tell us what sort of evidence you would be calling? 988 MR. WHITE: It would be written evidence, and available for cross-examination orally. 989 MS. LEA: And it would probably be yourself who would testify? 990 MR. WHITE: It would probably be myself who would testify. 991 MS. LEA: Thank you. 992 Turning then to number 2, I have a number of people that wish to speak to scope issue number 2. 993 Mr. White, do you want to introduce the issue? 994 MR. WHITE: The issue of whether retail-transmission charges benefit, if there is any -- whether that should fall to the customers of the LDC that the embedded generation happens to reside within, or whether there should be some mechanism to share the benefit created by that generation with the generator itself, again, sealed within the LDC's cost framework, if you will. In other words, it pays certain charges which are reduced because of embedded generation, and the question is whether that savings can be shared with the generator, or whether it has to be distributed amongst the other customers of the LDC. 995 MS. LEA: And the question we're asking the Board to rule on today is whether that question is within the scope of the 2006 EDR process? 996 MR. WHITE: Correct. 997 MR. KAISER: Mr. Sidlofsky, did you have a comment? 998 SUBMISSIONS BY MR. SIDLOFSKY: 999 MR. SIDLOFSKY: Sir, I'm happy to jump in. I'll just clarify one matter. I'm speaking here as chair of the distributed generation task force, which is a volunteer group formed in March of 2003. Just so my representation today is clear. 1000 The task force represents approximately 70 -- or includes approximately 70 industry participants, including consumers, generators, transmitters, distributors and retailers marketers, in the electricity and gas sectors, with an interest in furthering the establishment of policies that would create a supportive environment for the development of distributed generation projects. 1001 By distributed generation, we're -- or I'm referring to power and/or energy that's produced in close proximity to where it's consumed. And, typically, distributed generation projects are fairly small, they tend to be less than or equal to 10 megawatts. They're local, and they're connected to LDC distribution systems. 1002 The task force began its participation in this process in early September. In discussions between Board Staff members, and a number of members of the task force, it was suggested that this might be an appropriate forum in which to address some of our DG related issues. 1003 The Minister of Energy, as many will know, has been speaking of the benefits of the distributed generation for several months now, dating back to his major speech to the Empire Club of Canada on April 15th, 2004, in which he stated that: 1004 "Distributed generation, which is also attractive from a security perspective, holds significant promise for the environment as it suggests an electricity system that minimizes massive transmission networks and focuses resources only where they're absolutely necessary. Our desire is to help Ontarians unlock the potential for efficient electricity generation that is around them, and we will remove barriers, free up resources and bring new thinking and new ideas to the challenges that lie before us." 1005 Now, since that speech, the Minister wrote to LDCs of this year regarding deferral accounts for third-tranche conservation and demand-management initiatives. And he indicated that reasonable new expenditures on the planning, delivery and evaluation of certain specific measures should be supported by the OEB. Among those measures were distributor -- distributed energy options behind a customer's meter, such as tri-generation, co-generation, ground-source-heat pumps, solar wind and bio-mass systems. 1006 The OEB received representations on the merits of DG and its importance to demand-side management during the OEB's consultations on the Minister's directive on DSM and DR in the Ontario electricity sector. 1007 OEB Staff, in their staff discussion paper, did not comment on DG. The OEB, in its report to the Minister, dated March 1st, 2004, acknowledged the representations on distributed generation, but stated that debate on distributed generation as a demand resource is ongoing. 1008 While distributed generation reduces system losses and displaces system supply, it is, in effect, a source of supply. Distributed generation can function as a demand-response resource in emergency situations or high price periods. In both cases, it may not always be environmentally beneficial, because of the fuel used to generate the electricity. The Board will deal with these and other matters separately. 1009 To move on from the introduction to a brief description of what the task force is looking for in this proceeding, there are currently several barriers to the development of DG projects in Ontario. But what we focused on in the 2006 EDR process, and what we've addressed in Mr. White's subgroup, the section 7.2 subgroup, is the fact that under the current Ontario rate structure, embedded generation projects benefit transmission customers, including LDCs, through reductions in transmission charges. And I'm specifically referring to embedded generation projects, there, as slightly distinct from distributed generation projects: DG projects are simply a subgroup of embedded generation. The Board has defined embedded generation as generation that's located behind the meter -- behind a transmission customer's meter, or the meter that measures electricity withdrawn from the transmission system, and that's the regulated transmission system. 1010 The reason for the savings and transmission charges, in cases of embedded generation, is because of the Board's determination in Hydro One's transmission rate proceeding, RP-1999-0044, that there would be net billing for network charges for all embedded generation, and for line-connection charges for pre-November, 1998, embedded -- in cases of pre-November, 1998, embedded generation. 1011 Now, with a -- and, excuse me, there would also be a net billing for both network and line connection in the case of all generation facilities of up to 1 megawatt in that decision. 1012 With a non-LDC transmission customer, the customer can make its own arrangements with the generator that's embedded behind its meter for the sharing of transmission savings. The difficulty is that, when the facilities connected to an LDC's distribution system -- that is, I suppose you could call it merchant-distributed generation, so where the facility is connected directly to the LDC's distribution system, there's no way to share those savings, or to pass them on to the generator. 1013 The LDC is only permitted, under the Retail Settlement Code, to pay the market price for the commodity to the generator. 1014 The benefits that flow to the LDC -- because the LDC, like other transmission customers, does realize transmission-charge savings, those benefits are captured by the LDC's load customers in two ways. The first way is that embedded generation existing at the time of the design of the LDC's initial retail-transmission-service rates would have been taken into account in the design of those rates, and would have resulted in lower retail-transmission rates for the LDC's customers. Those, of course, are the rates that are charged by the LDC to recover its transmission costs. 1015 Now, the other way in which the LDC's customers obtain the benefit of those transmission charge savings is that embedded generation that didn't exist at the time of the design of the retail transmission rates, or that wasn't factored into the LDC's retail transmission service rates when they were calculated, will also reduce the LDC's transmission charges. Those savings will be tracked in the applicable retail settlement variance account and will be credited to the LDC customers when those accounts are cleared. 1016 Now, we have proposed in the working group to address this, what we suggest is an inequity, in a particular way. We proposed a two-step process to enable generators to recover the transmission savings that currently flow to others. And our approach would address the inequity that we consider to be existing right now while holding distributors harmless. 1017 And if I could just briefly describe the two-step process, it's as follows: The first step would be to adjust retail transmission service rates, so that while the LDC would continue to pay its transmission charges on a net basis in accordance with the OEB's transmission rates schedule, the retail transmission service rates to the LDC's customers would be calculated and collected, effectively, on a gross basis, as if all of the LDC's electricity requirements were being served from the transmission system. 1018 The second step would involve a transmission credit to distributed generation facilities reflecting the transmission benefits achieved by locating the generation unit in the LDC. 1019 In that way, the transmission cost savings that the LDC initially realizes and would never get to keep, and this is why the LDC distributors, we suggest, ought to be indifferent to this, this proposal, the savings are simply redirected from customers-at-large to the creators of those savings, which are the DG facilities. The credit would then be paid out to the generators by the LDC out of the excess balances in the RSVA accounts. 1020 Now, notwithstanding the province's support for DG and the fact that LDC's, including Hydro One Distribution, and I only mention that because Hydro One will be speaking to this momentarily, are being kept whole under this process, the task force's proposal was met from opposition from Hydro One at the working group level. We seem to differ on what constitutes fair treatment of distributed generation and what constitutes incentives or subsidies to generators. 1021 Now, if this is within the scope of this proceeding, the consensus proposal appears to be, and we would support this, to return this to the working group for further work on implementation. 1022 I would simply add a few comments on how we suggest that this is within the scope of this proceeding. The OEB has already advised that it would deal with various matters related to DG separately from the DSM process. This is a separate proceeding clearly, the 2006 EDR proceeding, and this provides us with an opportunity to do that. And I'll simply remind the Board that we have tried to focus our involvement in this proceeding on one issue that we feel is clearly within the scope of the 2006 EDR process. 1023 As I said, there are several barriers to distributor generation in the province. We are at not proposing to address all of those here, but we do feel that this is one that can be addressed by this Panel in the 2006 proceeding. 1024 Not only was distributor generation given a placeholder in the 2006 proceeding at the issues conference, but the retail transmission service rates were given a placeholder as well. And as Mr. White has indicated, there is a crossover issue here with retail transmission service rates, because our proposal would involve an adjustment to those rates. 1025 Section 11.3.2 of the current Rate Handbook, which deals with retail transmission service rates, provided that those rates would be examined at a later date. And this seems to be the time at which that examination is commencing. In effect, this proceeding is dealing with what would amount to distributor charges as opposed to simply distribution charges in the sense that retail transmission service rates are a pass-through. 1026 Thirdly, dealing with this aspect of the regulatory treatment of distributed generation now is timely for a number of reasons. That's aside from the fact that we submit that it's fair to generators who are currently seeing the savings that they realize flowing through to other parties. 1027 The province is actively seeking new generation. The Minister has encouraged the consideration and support of DG projects as a means of addressing distributors' conservation and demand management obligations. LDCs are not prejudiced by our proposal. 1028 The redirection the transmission savings to the parties that create them is consistent with the government's position that consumers should pay the true cost of their power and therefore, it's fair to customers. And finally, this corrects one inequity currently faced by distributed generation proposals when compared with other means of conservation and/or demand reduction. 1029 Finally, sir, if the Board is not prepared to address this DG issue in this proceeding, we'd appreciate a statement from the Board as to when this and other DG-related issues will be addressed. 1030 Those are my submissions at this point. I may have some reply comments in respect of Hydro One. 1031 MR. KAISER: Thank you, sir. 1032 Further comments? 1033 MR. POCH: Mr. Chairman, perhaps I should proceed. I have a hunch I'm in support of Mr. Sidlofsky. I'm sure Hydro One would like to speak in opposition, it might be appropriate for them to hear me first. 1034 MR. KAISER: That's fine. Go ahead, sir. 1035 SUBMISSIONS BY MR. POCH: 1036 MR. POCH: Just very briefly, we agree with what Mr. Sidlofsky has said. We certainly agree it is very timely. This matter has been kicking around for some time, and the Minister's speech to the Empire Club, I think, makes it clear that this is a priority for the government. 1037 Briefly, sir, the concern that arises when we have this debate is there might be -- this might create an incentive for distributed generation, generation to locate inside a distribution utility franchise area when it might be better -- might better serve the province if it were on the transmission system, because it is large and can be imagined better at that higher voltage and so on. And I would suggest, sir, by sending this back to the working group and then allowing it to come forward, if the working group doesn't resolve it, that's a matter that can be addressed specifically, be it by a cap at 10 megawatts, or at some level of voltage connection. There are any number of fixes that we can come up with to address that concern. I think it's very manageable and appropriate that we be given the opportunity to do that. 1038 Thank you, sir. Those are my submissions. 1039 MR. KAISER: Thank you, sir. 1040 SUBMISSIONS BY MR. ROGER: 1041 MR. ROGER: Thank you, Mr. Chairman. My name is Michael Roger. 1042 Hydro One believes that these issues are out of scope with respect to the 2006 EDR. First, a decision was already dealt with in RP-1999-0044, where it was determined that small generators, 1 megawatt and below, be billed for transmission charges on a net basis, and for large generators it would depend on the year the facility was in service. If, prior to 1998, transmission charges are on a net basis, and if in service after October 1998, network charges are on a net basis and transformation and connection charges are billed on a gross basis. 1043 Second, the proposed changes affect not only the EDR but also transmission. We think we cannot deal with it in isolation. Treating it in isolation would create inconsistent treatment for generators connected at the transmission level with generators connected at the distribution level, with respect to the payments of transmission charges. 1044 Thank you. 1045 MR. KAISER: Thank you, sir. 1046 Any other comments on this matter? Yes, sir. 1047 SUBMISSIONS BY MR. MacINTOSH: 1048 MR. MacINTOSH: Mr. Chair, Members of the Panel, David MacIntosh for Energy Probe. 1049 It is Energy Probe's submission on this matter that changing the allocation of transmission rate savings should be ruled outside of the scope of the 2006 EDR Handbook. The current approach to transmission cost allocation and rate design was determined in RP-1999-0044, the very first electricity proceeding heard by the Board in a public proceeding. 1050 That hearing was vigorously contested and litigated. Some of the litigants from that proceeding later changed their minds on the subject. For example, at the time, Hydro One indicated that it was not interested in the outcome of the cost allocation and rate design issues. However, it is likely that if reallocation of transmission discounts comes back on the table, the issue could again become hot. 1051 In the RP-1999-0044 decision, the Board decided to allocate transmission discounts arising from embedded generators to all the customers of the utility hosting the embedded generator. One of the main reasons for this allocation was to attempt to level the regulatory and transmission rate playing field between embedded and non-embedded generators. Every major element of the RP-1999-0044 decision was controversial. It is our submission that this decision has to be considered as a regulatory sweater. It just would not be wise to pull one thread out of that sweater. 1052 Notwithstanding Energy Probe's concerns with many elements of that decision, we do not believe that now is the right time to relitigate the issues. Appealing one small subsection of the decision, which is what the proponents of this particular scope question are proposing, cannot be done without unraveling larger issues. 1053 If the Board is going to consider reallocating transmission discounts, it is our submission that the Board review the wider question of whether transmission discounts are appropriate or whether there are alternative superior methods of providing the right incentives to distributed generation. We believe that there are better methods, but that would open up the issue of locational, marginal cost pricing, an issue we are not proposing to add to the already redoubtable scope of the 2006 handbook. 1054 Those, Mr. Chair, comprise our submissions. 1055 MR. KAISER: Thank you, Mr. MacIntosh. 1056 Any further comments? Any reply, Mr. Sidlofsky? 1057 FURTHER SUBMISSIONS BY MR. SIDLOFSKY: 1058 MR. SIDLOFSKY: I do, sir, if I could have the Board's indulgence. 1059 I find the references to RP-1999-0044 somewhat odd in that I agree with Mr. Roger that the Board did determine the treatment of net and gross billing for various embedded generation facilities in that proceeding. I think we agree. What wasn't resolved in that proceeding, and what we're trying to have the Board address at this time, is the results of net billing, the implications of net billing for LDCs. 1060 The Board did not address specifically what -- where the transmission savings should flow in its decision. It simply determined that there would be net billing for certain facilities and, depending on when those facilities were constructed and the size of those facilities, they would be billed -- excuse me, the transmission customers, behind whose meters those facilities existed, would be billed in certain ways. That's really not the issue here. 1061 The reason that's not the issue is because the only significance in those differences, net versus gross billing and depending on the size and age of the facility, is that the LDC, or any other transmission customer, will be realizing greater or lesser savings. In some cases, the transmission customer will only be receiving savings on network charges, in other cases, the savings will be realized on both network and line connection charges. That's the significance of the Board's decision in RP-1999-0044. 1062 Our position on this is that regardless of the source of the savings, that is, line connection or network charges, the fair approach here is to allow the benefits or the savings that are realized by distributed generation to flow to those customers. Distributor generators are at a disadvantage compared to other generators that are connected to distribution loads -- or connected, excuse me, in turn, to distribution customers because those distribution customers can make their own arrangements with the generators whose meters -- excuse me. Distribution customers can make their own arrangements with the generators that are behind their meters, assuming the ownership isn't identical. 1063 Distributed generation that's connected directly to distribution systems has no way of making those arrangements with an LDC. 1064 If Hydro One is concerned about transmission rates and loss of transmission revenues, frankly, sir, those revenues are at risk in any event. Because where, for example, a transmission connected industrial load customer has generation behind its meter, Hydro One will lose transmission revenues. That is going to happen. If a distribution customer decides to self-generate and installs generation, Hydro One will lose transmission revenues. In either event, that will happen. 1065 The inequity here is that there's no way for a generator that's connected to a distributor to be able to realize any of the savings that it's creating for the distribution customers. 1066 Those are my comments, sir. Thank you. 1067 MR. KAISER: Thank you, sir. 1068 Ms. Lea. 1069 MS. LEA: Thank you, Mr. Kaiser. 1070 I wonder if we could turn, then, to number 3. Mr. White, I see you listed as introducing the issue. I don't know if there's anyone else that wishes to speak it. The issue refers to adjustment to retail transmission rates, should it be this year or next year. 1071 FURTHER SUBMISSIONS BY MR. WHITE: 1072 MR. WHITE: The working group suggested a half measure in the interim, between now and 2007, so that rates start to move, on average, across the utility in the proper direction. 50 percent is to try and avoid possible price shock that might flow from proper cost allocations. 1073 MR. KAISER: Any comments on this issue? 1074 MS. LEA: So Mr. White, just to understand then, you're proposing that some adjustment to retail transmission rates is within the scope of this proceeding, but it will be reconsidered at the time of 2007? 1075 MR. WHITE: The cost-allocation process in 2007 will provide a specific way of allocating those costs between customer classes, which we do not now have. 1076 MS. LEA: But you're proposing that we do something within this proceeding? 1077 MR. WHITE: Yes, because some of the balances and the annual changes are in such a significant level as to have very little chance of a yo-yo effect on prices when it comes to customers. 1078 MS. LEA: Thank you. 1079 And number 4, the LV charges. 1080 MR. WHITE: Number 4 is clearly an issue that is alive. Many distributors supply other distributors through LV facilities and the recovery of those costs, both by the supplying utility and by the receiving utility from its customers, are an important consideration that should be part of this process. 1081 MS. LEA: And was it really a question of guidance that you were seeking from the Panel on whether the regulatory asset recovery hearing will address this matter or whether we need to address it here? 1082 MR. WHITE: The regulatory asset recovery item, it looks like will only address the recovery of charges from Hydro One, should it make a decision, as opposed to the broader question of LV charges that might apply from one LDC to another. 1083 MS. LEA: Thank you. 1084 MR. KAISER: Thank you. 1085 Any comments on this issue? Thank you. 1086 MS. LEA: The last issue, the question of load transfer double charging. If you could introduce that, please, and then I think we have comments from Hydro One. Thank you. 1087 MR. WHITE: I also have comments on this particular item. I think I'll let Hydro One take the lead on it, if it's okay, because they have taken an initiative with respect to LV feeders from the same transformer station through a filing. 1088 MR. KAISER: Mr. Roger. 1089 FURTHER SUBMISSIONS BY MR. ROGER: 1090 MR. ROGER: Thank you, Mr. Chairman. 1091 There are two aspects to this issue of aggregation of load for customers that are supplied from multiple feeders. One is, all the multiple feeders go to the same TSs, and there is an application in front of this Board to allow for aggregation of that. 1092 The issue that Hydro One feels it out of scope is the issue of aggregation of load for customers that are supplied from feeders from multiple TSs. The issue as was already dealt with in RP-1999-0044, and at that time, the EDA argued for aggregation of loads for customer supply for multiple TSs and the OEB ruled against it. And if this issue is within this scope, it would not only affect the EDR but also transmission and how the IMO bills for transmission to transmission-collected customers. And we feel we cannot deal with this in isolation just for distribution. 1093 Thank you. 1094 MR. KAISER: Thank you. 1095 MS. LEA: I just have one question, I'm sorry, sir. 1096 Mr. Roger, do you, by any chance, know what application number, if any, has yet been assigned -- that applies to your application. 1097 MR. ROGER: I don't know that, sorry. 1098 MS. LEA: Okay. Thanks. 1099 MR. KAISER: Mr. White. 1100 MR. WHITE: Aggregation, as proposed by Hydro One, is appropriate on the basis of cost causality, that is that Hydro One Distribution does not incur double costing or double charging when the feeders are from the same transformer station, and on that basis it should not double charge the embedded LDC. What Hydro One does not acknowledge is that if it is doing work on its own system and that action precipitates the required load transfer to avoid customer interruptions, that it should absorb those costs and redistribute it through the normal variance account process for reallocating transmission rates and charges that it incurs. This should be done in the same way that would be involved if Hydro One were avoiding the interruption to hundreds of its own customers because it was doing work on its subtransmission system. 1101 This item clearly falls within the scope of the distribution Rate Handbook, as Hydro One's own application currently before the Board, dated September 27th, is done under a distribution rate application. So it's our view that this should proceed forward at this time. 1102 MR. KAISER: Thank you. 1103 Any other comments on this issue? Ms. Lea. 1104 MS. LEA: Thank you. 1105 I'm not aware of any other issues that people are seeking to speak to before you on the Issues Day schedule. 1106 PROCEDURAL MATTERS: 1107 MR. KAISER: At this time we should probably address the schedule for tomorrow. The Board's view would be that come back at 3:00 in the afternoon and render the decision on the remaining matters. 1108 MS. LEA: Thank you, sir. As I understand it, the Board will reconvene to render an oral decision on outstanding matters. People don't have to be here, there will be transcripts provided or you can listen in on the Internet. Of course, you are all invited to be here and hear it live. Thank you very much. 1109 MR. KAISER: We will adjourn until 3:00 tomorrow. 1110 --- Whereupon the hearing adjourned at 5:20 p.m.