Rep: OEB Doc: 13DS2 Rev: 0 ONTARIO ENERGY BOARD Volume: VOLUME 1 7 DECEMBER 2004 BEFORE: G. KAISER PRESIDING MEMBER AND VICE CHAIR G. DOMINY MEMBER C. SPOEL MEMBER 1 RP-2004-0203 2 IN THE MATTER OF a hearing held on Tuesday, 7 December 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 Applications by distributors under the Ontario Energy Board Act, 1998 for approval of Conservation and Demand Management Plans. 3 RP-2004-0203 4 7 DECEMBER 2004 5 HEARING HELD AT TORONTO, ONTARIO 6 APPEARANCES 7 MIKE LYLE Board Staff AL FOGWELL Board Staff ZORA CRNOJACKI Board Staff HELEN NEWLAND Coalition of Large Distributors JERRY FARRELL Coalition of Large Distributors MICHAEL JANIGAN VECC DAVID MacINTOSH Energy Probe MURRAY KLIPPENSTEIN Pollution Probe DAVID POCH Green Energy Coalition DAVE MATTHEWS Enbridge Gas Distribution NORM RYCKMAN Enbridge Gas Distribution JAMES SIDLOFSKY Brantford Power Inc. & Enwin Powerlines Ltd. JAY SHEPHERD School Energy Coalition BRIAN DINGWALL CME ROGER HIGGIN Ecoanalysis 8 TABLE OF CONTENTS 9 DECISION ON POLLUTION PROBE MOTION: [19] APPEARANCES: [30] PRELIMINARY MATTERS: [50] CLD PANEL 1 - DIRUSCIO, DESNOYERS, GURAN, ARMSTRONG, BUCKLER, LU, MCKENDRY: [158] EXAMINATION BY MS. NEWLAND: [167] CROSS-EXAMINATION BY MR. POCH: [267] CROSS-EXAMINATION BY MR. DINGWALL: [688] CROSS-EXAMINATION BY MR. JANIGAN: [807] CROSS-EXAMINATION BY MR. SHEPHERD: [1012] 10 EXHIBITS 11 EXHIBIT NO. A.3: POWERSTREAM APPLICATION UPDATED PRE-FILED EVIDENCE [140] EXHIBIT NO. A.8: CURRICULA VITAE OF CLD WITNESSES [147] EXHIBIT NO. A.9: PROGRAM RESPONSIBILITY TABLE [151] EXHIBIT NO. G.1.2: SUMMARY COMPILATION OF C&DM PROGRAMS AND BUDGETS FOR ED UTILITIES [815] EXHIBIT NO. G.1.3: THE LOW-INCOME ENERGY EFFICIENCY PROGRAM, PUBLISHED BY THE LOW-INCOME ENERGY NETWORK, WITH ERRATA [829] 12 UNDERTAKINGS 13 UNDERTAKING NO. H.1.1: TO PROVIDE HAMILTON HYDRO'S STRATEGY ON CONSERVATION, AS STATED ON THEIR CORPORATE WEBSITE [1048] 14 --- Upon commencing at 9:30 a.m. 15 MR. KAISER: Please be seated. 16 I can't seem to get the technology working here. 17 Mr. Lyle, before we proceed with today's application, the Board would like to rule on the motion that we heard yesterday. Is that acceptable? 18 MR. LYLE: Certainly, Mr. Chair. 19 DECISION ON POLLUTION PROBE MOTION: 20 MR. KAISER: Yesterday, the Board heard an application brought by Pollution Probe. This was a motion requesting the Board to establish lost revenue adjustment mechanisms and conservation incentive plans, with respect to the 2005 expenditures of the electric utilities regulated by this Board. 21 This is an important matter. The Board appreciates Pollution Probe's initiative in this regard. Conservation is a critical element of government strategy to minimize electricity costs. The Board notes that this motion is supported by the electric utilities, the CLD group and the EDA, as well as various other parties, including the Green Energy Coalition and the Canadian Energy Efficiency Alliance. 22 With respect to LRAM, the Board proposes to adopt what we call the "Farrell shuffle," which is to say that there will be an LRAM for 2005. It will be available to utilities, but it will be based upon the formula established by the 2006 EDR panel. That process, we note, is fairly advanced and we're confident no undue delay will result. 23 With respect to incentive plans, or SSM as it's described, the Board proposes to adopt the plan put forward by Pollution Probe. The 5 percent figure appears to be reasonable in the circumstances. There is also some precedent for it. In any event, it can be adjusted by the 2006 EDR panel if necessary on the basis of the fuller record that will be available to that panel. 24 A couple of points of clarification with respect to these two matters. The first is, as was agreed to by the parties, this is voluntary. Each utility will be expected to bring an application. Of course the Board welcomes group applications, as is evident here today. The Board welcomes this initiative. It's obviously in everyone's interest to minimize the regulatory burden. To the extent that applicants can form groups as they are today, that's very helpful. 25 One of the issues that came up was whether the Minister's approval would be required for such an application. As no application is before this Panel we don't propose to decide that question. We will leave that to the Panel that hears any applications that develop. And those applicants, of course, can be guided by their own counsel in that respect. 26 Another point of clarification; this ruling applies to 2005 expenditures only. It also applies only to customer-side expenditures; that is to say, if the expenditures are going in rate base the incentive mechanism would not apply. If expenditures go into rate base there is an incentive already there and a supplementary incentive is not necessary. 27 Finally to assist the parties, the Board has directed Staff to prepare filing guidelines. These will be general in nature but we believe they will be helpful. Those will be available to interested parties no later than Friday of next week. 28 That completes the Board's ruling with respect to the Pollution Probe motion. 29 May we have the appearances for the application today. 30 APPEARANCES: 31 MS. NEWLAND: Good morning, Mr. Chairman, Board members. I'm Helen Newland and I appear on behalf of the CLD utilities, the applicants in this case. Appearing with me is Mr. Farrell. 32 I have one preliminary matter, I don't know if you'd like me to identify it now. 33 MR. KAISER: Let's finish the appearances. 34 Are there any other parties appearing? Please proceed. 35 MS. NEWLAND: The preliminary matter that I have arises from the intervention of Schools Energy Coalition and from a letter from Mr. Poch, I'm sorry. 36 MR. LYLE: Mr. Chair, I believe there are a number of other appearances. 37 MR. KAISER: Sorry. May we have the appearances. 38 MR. POCH: David Poch on behalf of the Green Energy Coalition. 39 MR. JANIGAN: Michael Janigan on behalf of the Vulnerable Energy Consumers' Coalition. 40 MR. KLIPPENSTEIN: Murray Klippenstein for Pollution Probe. 41 MR. KAISER: Thank you. 42 MR. SIDLOFSKY: James Sidlofsky for Brantford Power Inc. 43 MR. SHEPHERD: Jay Shepherd for the School Energy Coalition. 44 MR. KAISER: Where is Mr. Shepherd? Oh, there he is. 45 MR. DINGWALL: Brian Dingwall for CME. 46 MR. MATTHEWS: Dave Matthews for Enbridge Gas Distribution and with me today is Mike Brophy. 47 MR. MacINTOSH: David MacIntosh for Energy Probe. 48 MR. KAISER: Thank you, Mr. MacIntosh. Anyone else? 49 Please proceed. 50 PRELIMINARY MATTERS: 51 MS. NEWLAND: Thank you. 52 As I was mentioning, I have one preliminary matter which arises from the intervention of School Energy Coalition and also from the letter of Mr. Poch, counsel for Green Energy Coalition dated December 3rd. The Schools' intervention sets outs five specific issues that it seeks to address in this proceeding at paragraph 6 of its intervention. These include two issues respecting rate implications, accounting and rate base treatment of the applicant's proposed expenditures in their C&DM plans. And these are, for your reference, issues and 6D and 6E from Schools intervention. 53 Now, issue 6D, at least the first part of it, appears to be raising the question of what is the total amount of required spending to comply with the utilities' commitment to reinvest in C&DM activities. And the second part of issue 6D relates, I believe, to cost-allocation issues, and issue 6E asks whether the expenditures in C&DM assets should be put to rate base. Mr. Poch refers to similar issues in his letter, although not quite as explicitly as in Schools' intervention. 54 We have quite a different view of the matters that have been raised by our applications, Mr. Chairman, and we would wish to speak to these at the appropriate time. 55 MR. KAISER: What are you asking of us at this point? 56 MS. NEWLAND: I'm just putting you on notice that I'm expecting that both Mr. Poch and Mr. Shepherd will make submissions on this. This is something we've discussed previously and I'm just putting on the record our concern with those issues. 57 MR. KAISER: Well, is the question whether these issues are relevant to this proceeding and whether we should hear evidence on them? 58 MS. NEWLAND: That's correct. 59 MR. KAISER: All right. Well, then I guess we have should have argument on it. 60 MR. POCH: Mr. Chairman, if it's suitable, I can lead off. 61 MR. KAISER: Yes. 62 MR. POCH: Our position is we don't need a determination at this time what the answer to some of these questions re, as a preliminary issue, that is, what is the amount and what the rules about capitalization, if any, should be and so on. I think these are properly matters that will spill out of this process at the end of the day, and all we seek is the opportunity to ask a few questions to understand how the utilities are, in fact, approaching this. 63 For example, are they -- is the 73 million equivalent to the MARR or the MBRR after tax, questions such as that. There is further the question: Are the utilities planning to fund this conservation plan from that payment or are they treating -- or are they expecting to be able to raise rates beyond the MARR in subsequent years to fund this plan? I think the examination in these matters would be very brief, but so that we have the factual basis to make an argument on what the proper outcome is. And I don't think that anybody's proposing that we get into any discussion of whether the 9.88 is right or wrong, so I'm not suggesting that we open up that question. I agree with counsel for the applicant that that's a settled matter. 64 I will have just a couple of questions as I'm sure my friends may, on terms of the -- depending on the answer to the first question as to what the -- how the budget is calculated, just how they've taken into account the tax implications. But I don't expect this to take much time in the hearing at all. It would be a matter we would prefer to leave to the end, to argue at that time. 65 MR. KAISER: Mr. Shepherd, do you have submissions? 66 MR. SHEPHERD: Yes, Mr. Chairman. 67 We have not, I don't think, raised the question in our Notice of Intervention, nor do we wish to raise the question of what the appropriate amount is that the utility is supposed to spend. I think the Minister's already decided that. It is the MARR, the increase-to-revenue requirement allowed for the third tranche. I don't think there's any dispute about that, and if there is, I'd like somebody to tell me. But I hope not, because that would extend this quite a ways. 68 But we do feel that it's important for this Board to understand what the rate implications are of this spending. In order to assess the plan, you need to know, I believe, who's paying, and how much they're paying, so that you can understand what -- the sort of cost-benefit analysis involved in this. A C&DM plan is, at its root, based at some sort of cost-benefit analysis. And we think that, without looking at the rate implications, you can't possibly determine that. How else would you assess the plan? 69 With respect to the second point that Ms. Newland has raised, the accounting and rate-base treatment, we think there are some live issues there. Our understanding is that the utilities, I think, believe - and maybe they're correct, I don't know - that utility-side expenditures go into rate base. So they're collected from the ratepayers in 2005 and then, again, they're collected from ratepayers in depreciation and rate of return, in subsequent years. That money is collected twice. 70 I think they also believe that O&M expenditures in years after 2005 are also to be included in their rates incrementally. So that, again, those amounts are collected in 2005 and, again, collected in 2006 and 2007. 71 And, if that is the case, it seems to us that it's important for the Board to understand that fact, because that, in essence, increases the cost of this plan to the ratepayers, and, therefore, increases the benefits you would want to see from this plan in order to approve it. 72 And finally, we think that the fact - which we expect is true, and we're just going to ask - but we think that the fact that the result of this may be that most of the 225 million, after tax, is paid to the shareholder in 2005 in dividends, may be a relevant fact for the Board, as opposed to it all being invested right away. If it's going to the shareholder in dividends, we think that the Board may be concerned about that, and that may be a fact you need to consider. And, therefore, we would think that we should, at least, get the facts on the table on those issues, and then the Board can determine, after submissions, at the end of the day, what its conclusion is on those issues. 73 Those are our submissions. 74 MR. KAISER: Thank you. 75 MR. POCH: Mr. Chairman, I should just add there was one other item that my friend for the applicants may wish to treat as a scope issue, which is -- we also view it as relevant to just have a -- at a very general level, just to get some information on the balance between the portfolio of programs, that is, which customer segments they're serving, and the allocation of these costs to customer segments. It may be -- because I know the applicant takes the position that they don't have any discretion about how they allocate the MARR, and that may be the case, so then we just want to look at how the spending compares to that allocation, if it indeed is fixed. I don't know if my friend takes objection to that, or not. 76 MR. KAISER: Any other submissions? 77 Yes, sir. 78 MR. JANIGAN: Mr. Chairman, I note on page 9, in paragraph 34, of the applicants' factum, or revised written evidence, it summarizes, I think, the issues that are in play in terms of any dispute as to whether or not evidence should be entertained by the Board. VECC suggests that the two bullet points in paragraph 34, that relate to the impact on 2005 distribution rates of approving C&DM plans, and the quantum of required reinvestment, are issues that naturally fall out of the ambit of this proceeding, and should remain in play and be subject to the appropriate testing in the context of this proceeding. So we would submit that those two bullet items that I have mentioned in paragraph 34 should be an issue in the context of this proceeding, simply because we think it's part and parcel of the Board's responsibilities in overseeing these plans, and the Board's responsibilities as part of its duties under the OEB Act. 79 Thank you. 80 MR. KAISER: Any other submissions? 81 Ms. Newland? 82 MS. NEWLAND: Thank you, sir. 83 Let me deal with the rate base issue, first. I can be brief, I hope, on this point. Our position is that this matter has been settled in the letter from the Minister of Energy on May 31st, 2004. And that letter is attached to our written evidence. The Minister states, and I quote, "Conservation assets should be included in rate base." That's -- I'm quoting from the second page, third paragraph of the Minister's letter. 84 This clear statement was not qualified in any way, and we rely on it. 85 We also rely, Mr. Chairman, on a Board document that was put on the Board's website, entitled "Conservation and Demand Management -- Frequently Asked Questions". And I refer to question and answer number 14. I don't propose to read it, but it states quite clearly, in my submission, that conservation assets shall be included in rate base. 86 As further support for our position, I would also take the Board to the preliminary guidelines that it issued on July 16th. Those are entitled "Preliminary Guidelines for C&DM Activities". There's a section in those guidelines entitled "Regulatory Treatment of C&DM Initiatives", and I refer to paragraphs 2.2.2 and 2.2.3. And, again, I don't intend to take you there, but these directives are consistent, I submit, with the concept of including capital assets in rate base, which is, after all, the normal and accepted practice. 87 So, Mr. Chairman, the bottom line on this issue, from our perspective, is that the rate base issue is a non-issue. The Minister and the Board have spoken. And that's the understanding, by the way, on which we prepared our application, so this answer to this question is absolutely fundamental to each of the C&DM plans of each of the applicants in this proceeding. If C&DM assets are not to be rate base, we will have to reconsider our plans and our applications in this proceeding. So we do need absolute clarity on this issue in this proceeding. 88 I'd like to turn, now, to the second issue raised by my friends. I have characterized the issue described in Mr. Shepherd's intervention, at 6D, as a question of what is the total addition to revenue as a result of the approval of the C&DM plans. I had characterized that as whether or not -- what was the appropriate quantum of required reinvestment. And I think Mr. Shepherd has made to clear that he's not raising that issue, so I'm not exactly sure what the issue is, because I believe that the quantum of reinvestment for C&DM has been made clear, again, in the Minister's letters, and also by the Board in its July 16th letter. 89 I would also point out that the Notices of Application for Oral Hearing that each of the six applicants were required to file, specify the total budget of the C&DM plan which is consistent with the third installment of MARR. So what I'm saying is that the notices that were published at the Board's direction actually spell out the exact dollar amount of required investment in the C&DM plans. 90 So it's never been any question in our mind, Mr. Chairman, that the reinvestment commitment required on the part of the utilities is an after-tax amount that equates to the third tranche of MARR. Nothing more, nothing less. We would actually be astounded to learn now, at this late date, that there is some other figure out there that the intervenors have in mind. We've developed our plans on the basis of our understanding of what the third tranche required reinvestment is. If we have misapprehended the required spending obligation we need to know that now, because again that would affect the context of our plan. 91 MR. KAISER: Mr. Shepherd, do you dispute what -- 92 MR. SHEPHERD: I'm taken aback, Mr. Chairman, I thought we were all agreed that the amount that had to be reinvested was MARR, M-A-R-R, which is a revenue requirement number and is a before-tax tax, as opposed to MBRR, the market-based rate of return, which is an after-tax number. I am flabergasted by Ms. Newland's statement. What it would suggest, Mr. Chairman, is that the amount collected in rates by Toronto Hydro is not 40 million but 60 million. I don't think that's the case. I think they're asking the Board to raise their rates by 40 million, but I think we need that clarified. 93 MR. KAISER: All right. Well, we understand the issue whether it's before tax or after tax. 94 MS. NEWLAND: Thank you, sir. 95 And one other issue is the recovery in rates in the cost allocation issue I'd like to respond to as well. We filed no information regarding the rate impact by class or otherwise in this proceeding, and that's for two reasons. The first is that the Board's filing requirements in its Procedural Order of October 5th don't require this information. And that's not surprising, in my submission, because this is a proceeding to determine if the programs comprising each of the C&DM plans are qualifying C&DM programs within the meaning and intent of the Minister's letter to thee Board's, the July 16th letter, and subsequent information bulletins, nothing more, nothing less. If the programs are legitimate programs, the plans must be approved. If they are not, they won't get approved. 96 The decision the Board has to make in this case does not involve, in my submission, balancing ratepayer impact against utility interests. The utilities are entitled to a fair return on their investment, that is the law. The Minister has said that the utilities are now in the position to apply to recover the third tranche of their fair return. Our entitlement to recover the third tranche, in my submission, is not in any way, shape, or form contingent on the rate impacts of such recovery on individual rate classes. 97 Perhaps I could also advise the Board that the applicants have not themselves determined the rate impact by class of the proposed C&DM expenditures in any detailed way. I understand that in order to do this, the applicants would require further guidance from the Board regarding the 2005 rates in the application of the rate handbook in order to derive those rates. I understand that guidance is in the works, but they haven't got it yet. 98 And Mr. Chairman, my final submission is if this issue is within scope, then we may have to reconstitute the witness panel, perhaps bring back another set of witnesses because I do not have financial and rate people with me today, because we weren't prepared to speak to those issues. 99 Those are my submissions, thank you. 100 MR. KAISER: Thank you. 101 Mr. Lyle, I think we're going to take a short break and consider this matter. I think it's best to get it resolved in order that the applicant can proceed with their case. Maybe 15 minutes, if that's okay. 102 MR. SHEPHERD: I'm sorry, Mr. Chairman, would you object if I replied to Ms. Newland's last comment? 103 MR. KAISER: No, go ahead. 104 MR. SHEPHERD: Thank you. I'll be brief. 105 Our concern is not whether the rate -- the allocation by class that is proposed by the various utilities is correct. We agree that's not in scope in this proceeding. Our concern is that they have developed a plan that is appropriate in light of who's paying for it. We want to be able to ask the witnesses, for example, the Toronto Hydro witness: Is it correct that the School Boards in Toronto are going to pay an extra million dollars next year for these plans? Because if that's true, then we think it's appropriate for us to ask about the programs. Are there programs here that will allow in a customer group to save that $1 million? If there aren't, we think that that's relevant to the Board, and I think that's true of every customer group. That's part of how you design a C&DM plan, is to make sure you spread it amongst the customers who are paying for it. 106 MR. KAISER: Mr. Shepherd, there are two issues it seems to me. The first is: Can you point the Board to anything in the Minister's direction with respect to this matter that suggests that recovery of the third tranche is dependent upon how that amount impacts any particular rate class? 107 MR. SHEPHERD: No. In fact, Mr. Chairman, I think what the Minister said in the May letter -- I can't remember what he said in the December letter, but I know in the May letter, what he said is: We're relying on the Board to look at the plans and make sure the plans are well designed and spend this money appropriately. We're not telling the LDCs how to do that, we're saying to the Board you supervise this. 108 So we think that the Board, which has a lot of experience in looking at DSM plans, should be looking at those plans in the context of that sort of test, who is benefitting and who is paying for it, which has been the case and is a normal part of designing a proper C&DM plan. 109 MR. KAISER: The other problem we have is Ms. Newland says that even if you're right, she doesn't have witnesses today that can answer that question. What are we suggesting, that we bring -- we ask her to bring some witnesses at a future date if, in fact, we decide that this is relevant? 110 MR. SHEPHERD: I think we would be happy to take undertakings to that effect. Most of us in this room actually know the answers to the questions, who's paying for what. I already know that the School Boards are paying an extra $1 million. It's just math, it's not that hard to calculate, and the figures are only relevant in a broad sense, they don't need to be very precise. So the question is not whether we can drill down to the nearest dollar, the question is whether the Board has a sufficient order of magnitude to assess the plans wisely. That's all. 111 MR. KAISER: Mr. Poch, is that acceptable to you? 112 MR. POCH: Yes, Mr. Chairman. My questions on this will be general. I will be looking for a general sense of how these -- who these programs are benefitting relative to where the money's coming from, and undertakings will certainly suffice in that regard. 113 MR. KAISER: Will that reply to all three issues if these witnesses can't answer, that will you just accept answers to be provided at a later date in writing? 114 MR. POCH: That would work for us, Mr. Chairman. 115 MR. KAISER: I just don't want us to be drilling witnesses if they're not prepared for the subject matter. 116 MR. SHEPHERD: That's fair. 117 MR. KAISER: We'll take 15 minutes, Mr. Lyle. 118 --- Recess taken at 10:00 a.m. 119 --- On resuming at 10:22 a.m. 120 MR. KAISER: Please be seated. 121 There are four preliminary issues that have been raised by the parties this morning, which the Board wishes to address at this time. 122 The first is whether the MARR amount, which is contained in the Notice of Application and Oral Hearing issued by this Board with respect to each of these applicants is before tax or after tax. 123 The Board believes it's clear that the amount is after tax. 124 The second issue is whether these MARR amounts should be included in rate base. This is a somewhat unusual procedure - everybody would agree with respect to that - and in this regard, given the nature of this proceeding, and the nature of this whole MARR program, it's important for the Board to try to determine what the government's intent is. 125 On this point it's clear that the government intended that conservation assets should be included in rate base. That's the last -- or the second last sentence, I should say, of the Minister's letter of March 31st -- May 31st. 126 The next issue was whether the Board should, in this proceeding, consider the rate impact. 127 We're dealing here with MARR expenditures. The rate increase and the cost allocation has already been determined by a prior panel. It's not an issue for this panel. 128 Finally, Mr. Shepherd raises an issue as to whether the -- whether we should be examining the relationship of the expenditures to the manner in which these funds have been raised, that is to say: If we had 3.5 million of MARR, and 10 percent of that came from Mr. Shepherd's client, would 10 percent of the MARR be going to benefit his client? 129 We believe that is a relevant issue, and it's an issue the Board will hear evidence on. 130 Mr. Lyle. 131 MR. LYLE: Mr. Chair, there's just a couple of preliminary matters, before we commence with swearing in the witnesses. One is that the Board Staff have prepared a draft exhibit list. I believe you have a copy of that, and that's been circulated to counsel. 132 MR. KAISER: Thank you. 133 MR. LYLE: And in addition, there's some updated evidence I received from PowerStream which - Mr. Farrell or Ms. Newland can correct me - but I believe it was filed yesterday. 134 MS. NEWLAND: That's correct, Mr. Lyle. We had one additional errata sheet that we neglected to file when we filed the original errata sheet, and that was filed yesterday. 135 MR. LYLE: That's the document, Ms. Newland, titled "Summary Information -- PowerStream"; is that correct? 136 MS. NEWLAND: Yes, that's correct. 137 MR. LYLE: Mr. Chair, we do have some copies for the Panel. 138 MS. NEWLAND: Mr. Lyle, I wonder if we could just include that in the exhibit number that was given to the PowerStream application, which I believe is A.3, and just have the application with all of the errata sheets with the same exhibit number. 139 MR. LYLE: Yes, Mr. Chair, we propose to mark that additional information under the Exhibit A.3, as prefiled evidence. 140 EXHIBIT NO. A.3: POWERSTREAM APPLICATION UPDATED PRE-FILED EVIDENCE 141 MR. KAISER: Thank you. 142 Mr. Farrell? 143 MR. FARRELL: Yes, Mr. Chairman, just a couple of housekeeping matters. In the exhibit list that was distributed, the first exhibit under the A series should actually be marked A.1, rather than A.2. There shouldn't be two A.2s. 144 MR. LYLE: Yes, Mr. Chair, that's a typographical error. 145 MR. FARRELL: And secondly, A.7 is referred to as generic evidence. The letter that filed the written evidence on behalf of all six applicants included two other documents. I think that, for ease of reference, it would be easier to give them a separate number. So the written evidence can remain A.7, and I'm suggesting that the curricula vitae of the witnesses be Exhibit A.8. 146 MR. KAISER: Thank you. 147 EXHIBIT NO. A.8: CURRICULA VITAE OF CLD WITNESSES 148 MR. FARRELL: And then there was a single sheet, called "Program Responsibility Table", that indicated on a program-by-program basis which of the witnesses was most familiar with each program. And just for ease of reference, I think, if we could have Exhibit A.9 for that document, it would facilitate the references during the course of the hearing. 149 MR. LYLE: Board Staff are content with that, Mr. Chair. 150 MR. KAISER: Thank you. 151 EXHIBIT NO. A.9: PROGRAM RESPONSIBILITY TABLE 152 MR. KAISER: Are you ready to proceed, Mr. Farrell? 153 MR. FARRELL: Ms. Newland will lead the panel, Mr. Chair. 154 MS. NEWLAND: Thank you, Mr. Chair. I'd like to -- 155 MR. LYLE: Perhaps the panel could be sworn. 156 MR. KAISER: Yes. 157 MR. FARRELL: I know the witnesses usually come to the swearer, but perhaps, given their number, it would be more convenient if the swearer could go to the witnesses. 158 CLD PANEL 1 - DIRUSCIO, DESNOYERS, GURAN, ARMSTRONG, BUCKLER, LU, MCKENDRY: 159 C.DIRUSCIO; Sworn. 160 R.DESNOYERS; Sworn. 161 P.GURAN; Sworn. 162 G.ARMSTRONG; Sworn. 163 C.BUCKLER; Sworn. 164 R.LU; Sworn. 165 D.MCKENDRY; Sworn. 166 MR. KAISER: Please proceed. 167 EXAMINATION BY MS. NEWLAND: 168 MS. NEWLAND: Thank you, sir. 169 I'd like to introduce the witnesses appearing on behalf of the applicants this morning. I will start at the far end by the window, Mr. Chairman. 170 Seating at the far end is Mr. David McKendry, who is Director of Marketing and Sales for Hydro Ottawa Limited. 171 Next to Mr. McKendry is Dr. Richard Lu, who is Chief Conservation Officer, Vice-president, Environment, Health and Safety, with Toronto Hydro Corporation. 172 Seated next to Mr. Lu is Mr. Chris Buckler. Mr. Buckler is Vice-president, Customer Service and Regulatory Affairs, Enersource Hydro Mississauga Inc. 173 George Armstrong is seated beside Mr. Buckler. Mr. Armstrong is Manager, Regulatory Affairs and Key Projects for Veridian Corporation. 174 Next to Mr. Armstrong is Mr. Patrick Guran, who is Manager of Metering for PowerStream Inc. 175 Next to Mr. Guran is Mr. Robert Desnoyers, who is President of Hamilton Community Energy. 176 And last, but not least, is Carmine DiRuscio who is Chief Conservation Officer for Enersource Hydro Mississauga Inc. 177 Mr. Chairman, Dr. Lu, Mr. Armstrong and Mr. Desnoyers are each employed by an affiliate rather than a related utility, but they nevertheless appear as witnesses for the related utility. And I will ask each of them to confirm their role as a utility representative during my examination-in-chief. 178 Gentlemen, are all your curriculum vitae accurate as filed? 179 MR. McKENDRY: Yes. 180 DR. LU: Yes. 181 MR. BUCKLER: Yes it is. 182 MR. ARMSTRONG: Yes, it is. 183 MR. GURAN: Yes. 184 MR. DESNOYERS: Yes, it is. 185 MR. DiRUSCIO: Yes. 186 MS. NEWLAND: Thank you. The questions get harder after this. 187 Mr. DiRuscio: Was Enersource's application prepared under your direction or control? 188 MR. DiRUSCIO: Yes it was. And so were the corrected pages that were filed yesterday. 189 MS. NEWLAND: Thank you. And is the application accurate to the best of your knowledge or belief? 190 MR. DiRUSCIO: Yes it is, with the filed corrections. 191 MS. NEWLAND: Mr. Desnoyers, I understand that you're appearing on behalf of Hamilton Hydro Inc. 192 MR. DESNOYERS: Yes I am. I have overall responsibilities even though I am employed by an affiliate. Hamilton Community Energy is involved in the development of renewable and alternative energy opportunities. 193 MS. NEWLAND: Thank you. Was Hamilton Hydro's application prepared under your direction and control? 194 MR. DESNOYERS: Yes, it was. 195 MS. NEWLAND: And is the application accurate to the best of your knowledge or belief? 196 MR. DESNOYERS: Yes, it is. 197 MS. NEWLAND: Thank you. 198 Mr. Guran, PowerStream's application prepared under your direction or control? 199 MR. GURAN: Yes, it was and the corrected pages that were filed both before and today are correct. 200 MS. NEWLAND: Thank you. As is the application? 201 MR. GURAN: Yes. 202 MS. NEWLAND: Thank you. 203 Mr. Armstrong, I understand that you are appearing on behalf of Veridian Connections Inc.; is that correct? 204 MR. ARMSTRONG: Yes, I am, and I should add that I have overall responsibility for the utilities' C&DM activities, even though I am employed by a parent corporation. 205 MS. NEWLAND: Was Veridian's application prepared under your direction or control? 206 MR. ARMSTRONG: Yes, it was, and so were the corrected pages that were filed yesterday. 207 MS. NEWLAND: And is the application accurate to the best of your knowledge or belief? 208 MR. ARMSTRONG: Yes, it is, with the filed corrections. 209 MS. NEWLAND: Thank you. 210 Dr. Lu, I understand that you're appearing on behalf of Toronto Hydro-Electric System Limited. 211 DR. LU: Yes, I am, as I have the overall responsibility for C&DM and also I am employed by the corporation. 212 MS. NEWLAND: Thank you. Was Toronto Hydro's application prepared under your direction or control? 213 DR. LU: It was. 214 MS. NEWLAND: And is the application accurate to the best of your knowledge or belief? 215 DR. LU: It is. 216 MS. NEWLAND: Thank you. 217 Mr. McKendry, was Hydro Ottawa's application prepared under your direction or control? 218 MR. McKENDRY: Yes it was, and so were the corrected pages that were filed yesterday. 219 MS. NEWLAND: And is the application accurate to the best of your knowledge or belief? 220 MR. McKENDRY: Yes, it is, with the filed corrections. 221 MS. NEWLAND: Thank you. 222 Gentlemen, was the written evidence of the Coalition of Large Distributors prepared under your joint direction and control? Mr. McKendry? 223 MR. McKENDRY: Yes. 224 DR. LU: Yes. 225 MR. ARMSTRONG: Yes. 226 MR. GURAN: Yes, it was. 227 MR. DESNOYERS: Yes, it was. 228 MR. DiRUSCIO: Yes. 229 MS. NEWLAND: Thank you. And is the written evidence accurate to the best of your belief and knowledge? 230 MR. McKENDRY: Yes. 231 DR. LU: Yes. 232 MR. ARMSTRONG: Yes. 233 MR. BUCKLER: Yes. 234 MR. GURAN: Yes. 235 MR. DESNOYERS: Yes, it is. 236 MR. DiRUSCIO: Yes. 237 MS. NEWLAND: Thank you. 238 Mr. Buckler, I understand that you will be the principal spokesperson for the written evidence. 239 MR. BUCKLER: Yes, I am, but the evidence, the written evidence does set out the position of all six utilities. 240 MS. NEWLAND: Thank you. 241 Mr. Chairman, Mr. Buckler will also chair or quarterback the witness panel. He will answer questions of a general nature on any of the C&DM plans, be it Enersource's programs or any of the other programs, because the C&DM plans of each utility were uniformly prepared. He will also take questions of a specific nature is counsel is unsure of who to ask and he will redirect them to one of his colleagues if he thinks they are better qualified to answer the questions. 242 And that brings me to a table that is entitled, "Program responsibilities," that was filed yesterday and was given Exhibit A.9. This table indicates the witnesses who can answer specific questions on the program-by-program basis at a greater level of detail for all six of the utilities. 243 There's one last area that I would like to ask the witnesses to address, Mr. Chairman, before I make them available for cross-examination. The C&DM plans of each of the utilities refers or alludes to demand-side management or DSM programs or initiatives that are sponsored by Enbridge Gas Distribution. Examples of the references are multi-choice program, the design advisory program, and the TAPS program, all in capital letters. In these cases there are no specific references -- in other cases there is no specific references to Enbridge, and in some cases there are specific references to developing programs in collaboration with Enbridge. 244 I would like to ask the witnesses, at Enbridge's request, to clarify the status of the utility -- each utility's relationship with Enbridge in this regard. I understand, Dr. Lu, that Toronto Hydro has probably the most advanced relationship so I'd ask you to address this issue first. 245 DR. LU: Yes, we have been in discussion with Enbridge for several months concerning a potential partnership to leveraging Enbridge's existing programs. We are now working on a non-disclosure agreement with Enbridge. 246 One of our C&DM objectives is really to explore all opportunities to leverage an existing infrastructure, such as Enbridge or others, to the mutual benefit of all stakeholders. This is particularly so where we can generate a timely and cost-effective response to the energy needs of the province. 247 MS. NEWLAND: Thank you. 248 Turning to you, Mr. DiRuscio, on behalf of the Enersource, what is the status of Enersource's relationship with Enbridge? 249 MR. DiRUSCIO: Enbridge has offered to explore partnering opportunities with us, but at this time we've not yet discussed a partnership in detail with them. We intend to investigate opportunities to partner with Enbridge, as outlined in our C&DM plan. We also have the same objective as Toronto Hydro. 250 MS. NEWLAND: Mr. Desnoyers, on behalf of Hamilton Hydro, what is your utilities's relationship with Enbridge? 251 MR. DESNOYERS: At this time it would be the same as Enersource's, and we also have the same C&DM objectives as Toronto Hydro. 252 MS. NEWLAND: Mr. McKendry, if I asked you the same question on behalf of Hydro Ottawa, what would be your response? 253 MR. McKENDRY: It is the same as Enersource. We also have the same C&DM objectives as Toronto Hydro. 254 MS. NEWLAND: And Mr. Guran, what is the status of PowerStreams' relationship? 255 MR. GURAN: It is also the same as Enersource. We also have the same C&DM objectives as Toronto Hydro. 256 MS. NEWLAND: Mr. Armstrong? 257 MR. ARMSTRONG: The status is the same as Enbridge and we also have the same objectives as Toronto Hydro. 258 MS. NEWLAND: Thank you, gentlemen. Just to clarify the record you're speaking on behalf of -- 259 MR. ARMSTRONG: The status is the same as Enersource. 260 MS. NEWLAND: Thank you. 261 Mr. Chairman, the witnesses are available for cross-examination. 262 MR. KAISER: Thank you, Ms. Newland. 263 I wonder, Mr. Shepherd, are you going to lead off? 264 MR. SHEPHERD: No, I think Mr. Poch is going to lead off. 265 MS. NEWLAND: Mr. Chairman, we've agreed that cross-examining counsel will move up and use this table. 266 MR. KAISER: Thank you, I appreciate that. 267 CROSS-EXAMINATION BY MR. POCH: 268 MR. POCH: Thank you, Mr. Chairman. 269 Panel, yesterday, we filed an exhibit which was our attempt to summarize the numbers updated as of Sunday. But there have been corrections that were filed, I gather yesterday, and I just wanted to make those amendments to our exhibit and make sure we agree what we're talking about. So I'd ask you to turn up Exhibit G.1. Does the panel still have copies of those from yesterday? 270 I may simply refer to the utility rather than keep track of all the names so please speak up if it's appropriate. So I understand the changes to be as follows and I'd just ask you to acknowledge them. We can just update this as we go. 271 On the first page there were no changes to the Veridian -- no updates to the Veridian numbers. 272 MR. ARMSTRONG: That's correct. 273 MR. POCH: And do the numbers as I've set them out there, approximately at least, represent the situation as it is? 274 MR. ARMSTRONG: Yes, they appear correct. 275 MR. POCH: Okay. And for Enersource, the three programs, electric avenue, social housing and leveraging of other programs, the change you've made is simply the original filing you made, the operating and capital numbers were reversed. 276 MR. DiRUSCIO: That's correct. 277 MR. POCH: So we should simply reverse those two columns for those three programs? 278 The impact of which would be to change the bottom line, by my calculation, the 2678 would change to 3063, the 5585 would change to 5200 and, therefore, the percentage capitalized would be 63 percent. Does that accord with your understanding? 279 MR. DiRUSCIO: Yes, it is. 280 MR. POCH: With respect to PowerStream, that same reversal of operation and capital would apply to four lines there, design advisory audit, audit retrofits, leverage EnerCan and design advisory; is that correct? 281 MR. GURAN: Yes, that's correct. 282 MR. POCH: And the bottom line would change for operating to 3526, for capital to 2874, and capital percent would be approximately 45 percent; is that correct? 283 MR. GURAN: Correct. 284 MR. POCH: And I believe that the only other change was on the final page, the -- with respect to Hydro Ottawa, the leveraging EnerCan line: Again the same reversal. Is that correct? 285 MR. McKENDRY: That's correct. 286 MR. POCH: And the bottom line would change to 4318 for operating, 4960 for capital, and approximately 53 percent for capitalized proportion. 287 MR. McKENDRY: Correct. 288 MR. POCH: Thank you. 289 And now, I'm just asked by your counsel, just to make sure we're on the same wavelength here -- for PowerStream, which is on the second page, can you just tell us if we've got the right numbers now for smart meter pilot? That's just the residential smart meter. 290 MR. GURAN: Their number is 183 and 676; is that correct? 291 MR. POCH: Alright. So the first number 142 should be 183. 292 MR. GURAN: 676, total 859. 293 MR. POCH: Alright. And that would change the bottom line just slightly, but we're in the same ballpark. 294 MR. GURAN: Yes. 295 MR. POCH: Fair enough. Thank you. 296 Let's start with the -- clarifying how you've calculated the gross amount of your budgets in each case. And, I imagine, Mr. Buckler, these questions will be largely for you, but I would invite any other panelists who have information that's relevant to speak up. 297 In the Veridian filing, which is Exhibit A.1, at page 3 of the body of the piece, under "Plan, Budget and Assumptions", we read that the Veridian's third MARR instalment is approximately 3.5 million, and then the words read "exclusive of any payments in lieu of taxes". So I just want to understand how that's been handled. Is the 3.5 the MARR before taking off the taxes to calculate the MBRR? Is that correct? Or is this the after-tax number? 298 MR. ARMSTRONG: I can respond to that, if you like. 299 MR. POCH: Please. 300 MR. ARMSTRONG: The $3.5 million represents our third tranche of market-adjusted rate of return. 301 MR. POCH: So that would be before tax? 302 MR. ARMSTRONG: That is before an adjustment for PILs; that's correct. 303 MR. POCH: Okay. Just in comparing that to your total plan spending, in the case of Veridian, the number is the same. So, in fact, you are planning to spend the full MARR before tax. You're not reducing your conservation budget to adjust for the tax take. 304 MR. ARMSTRONG: I think I'll try to clarify what the $3.5 million -- where it comes from. It's the third tranche of MARR. Our revenue requirement is going to be greater than that, because it's going to have to include an adjustment for the collection of PILs. 305 MR. POCH: Alright, so we've had some semantic difficulties here. 306 MR. ARMSTRONG: Yeah. 307 MR. POCH: I was treating the phase MARR as equivalent to the revenue requirement line, and MBRR as the amount that will -- that, if it were just equity being collected in rates, would flow to the utility after tax -- well, out of the utility after tax. So you've not equated MARR, the expression MARR with revenue requirements. 308 MR. BUCKLER: This is the after-tax amount. 309 MR. POCH: This is the after-tax amount. And in calculating this, in coming up with this budget of 3.5 million and -- let me stop right there, first of all, and ask: Is that situation uniform amongst all the utilities? 310 MR. BUCKLER: Yes, it is. 311 MR. POCH: I'll ask if there is any exceptions for people, please, to speak up. 312 So, in calculating the appropriate amounts for each utility - and let's stick with Veridian as an example - did you assume that the full amount of that revenue requirement would be treated as -- revenue requirement addition for MARR, would be treated as taxable at the -- whatever the marginal rate is, 35 percent, approximately, and that the budget for your plan here, today, then, is the full amount of your entitlement, less tax on all of it? Or, alternatively, did you first take into account whether the -- how the money was going to be spent? Was it going to be expensed, or was it going to be sent out of the utility and then brought back in as a capital investment? 313 MR. BUCKLER: That's not how we did it. 314 MR. POCH: Not the latter? 315 MR. BUCKLER: Neither of them. 316 MR. POCH: Okay. 317 MR. BUCKLER: What we did is we had a -- we were given to understand a certain amount of money had to be spent on conservation and demand-management programs. And we went out and tried to find the best conservation and demand-management programs, across all the different sectors of customers, that would deliver the maximum benefit in reducing system peak load. And we tried to have a balance between capital and operating expenses. And we didn't specifically look at the details of our budgets in regards to whether it was going to be capital and operating budget. That's how we arrived at the selection of the various programs that we have. 318 MR. POCH: I wasn't -- we'll come back to that how you've selected your portfolio. I wasn't asking that and I may have mis-spoke myself. What I was asking is: In determining the amount of the budget - not how you were going to spend that budget - but in determining how, in this case, you came up with the number 3.5 -- for simplicity, let's ask: What is the Veridian revenue requirement to fund MARR or MBRR before tax, approximately? 319 MR. BUCKLER: We don't know at this point in time. We haven't received our filing guidelines. If you're asking to ask us questions about rates, we're not prepared to discuss that today. We're here to talk about the programs. 320 MR. POCH: All right. This will lay bare my ignorance, I had assumed that the third tranche value -- I might have been calculating them in the opposite direction to the way you calculate them. You start with the intended after-tax outcome for the shareholders, and then you work backwards to figure out what the rate-revenue requirement is? 321 MR. BUCKLER: That's correct. 322 MR. POCH: So you haven't done that step, is what you're saying. 323 MR. BUCKLER: No, we haven't. The only steps we've undertaken -- that we've been through is the MARR calculations that were to done a few years ago, based on the 2002 model, I believe. 324 MR. POCH: And that was the 9.88 times. 325 MR. BUCKLER: And taxes didn't come into it at that time. We don't know what the tax treatment is going to be for 2005 rates. 326 MR. POCH: So let me ask you this. Let's see if we understand what the implications of the tax treatment are. 327 MS. NEWLAND: Mr. Poch, perhaps you could just help me: What is the relevance of this? 328 MR. POCH: Well, one of the issues that we'll be asking the Board to deal with is whether the portfolios represent a reasonable -- whether the -- those aspects of the portfolios that the proponents, the applicants, propose to capitalize are appropriately capitalized; and, secondly, whether the balance between -- on the portfolio between customer side, utility side, expense, and capitalized is a reasonable balance if we're getting bang for our buck here. 329 MS. NEWLAND: Mr. Chairman, I'd just like to respond. 330 The first purpose that Mr. Poch enunciated is really not in scope in this proceeding. How it will added to rate base, I guess, will be decided when the applicants decide to move and ask for it to be added to rate base. 331 MR. POCH: I'm sorry, maybe I wasn't clear. I wasn't asking about how it will be added to rate base, I'm just trying to understand what the implications are. 332 MR. KAISER: Mr. Poch, what's the tax issue have to do with the balance or the appropriate balance between operating and capital? 333 MR. POCH: Mr. Chairman, as I understand it, whether or not the amount is taxable determines how much is available for the programs. Now, I may have that backwards, it seems that the utilities are coming in the opposite direction. 334 MR. KAISER: No, I think what we said this morning, correct me if I am wrong, is the amount that appears in the notice to each of these applications, 3.5 in the case of Veridian, was an after-tax number; is that right? 335 MR. BUCKLER: That's correct. 336 MR. POCH: All right. Then I'll leave that and move on, Mr. Chairman. 337 While we're on page 3 of the Veridian filing, Exhibit A.1, in the second from last paragraph you note that: "The implementation of this plan will require redeployment of some existing personnel. Costs associated with the use of existing resources to implement this plan have been allocated to the individual programs and are provided for in the annual budget figures." 338 I took that to mean that the budget you've provided, which adds up to 3.5 million, includes some reallocation of existing resources that were already in the utility; correct? 339 MR. BUCKLER: That's correct. 340 MR. POCH: The concern that arises, and perhaps you can inform us on why this -- why this is or is not a concern from your perspective, is that suggests that some of this program is being paid for from existing revenues, that is, not from the third tranche. It's already in rates to the extent that you are reallocating existing resources. 341 MR. BUCKLER: Yes, I would concur with that. 342 MR. POCH: Can we get an indication from each utility, first of all, if you've approached this in the same fashion, you've included in your budgets here redirected resources and the extent of it. And I don't know if you can provide that today, or perhaps you can. 343 MR. BUCKLER: Yes, I can speak to that. Some of us have included more existing resources than others. The upper limit on that would be about 50 percent of the total amount of budget on the table here, and the range is somewhere between 5 and 15 percent. And the reason we included those existing amounts in these budgets, and it can be changed, it can be changed without too much difficulty, we can bring in outside resources. However, we felt that we could deliver these programs much more efficiently by some redeployment of our existing staff, we could take them off whatever they're doing now and redirect them to these activities. 344 We made this decision to do it that way prior to the FAQs being published on the Board's website, so we didn't have an exact definition of what would be incremental and what wouldn't be. I can say that all of the expenditures that -- or all the activity that is in our plans and programs is incremental in nature. However, as you pointed out and as we said in our various submissions, we are redeploying some existing staff. If we choose not to use existing staff and bring in outside consultants or hire additional outside people to do this work, it will probably result in some less efficiency of delivery of the programs, and maybe we can deliver less C&DM benefits than what we forecast here. However, you know, we have to -- we're hoping that we can include these non-incremental-type costs in our costing. 345 MR. POCH: Well, my intent here is not to suggest you shouldn't use -- you have skilled people and that's the best resource for it. I'm not going to be arguing that you shouldn't take advantage of those skills. What I am going to ask you though is, if you were to do so and you were still to -- and if we assumed that those people are, in effect, already funded in existing rates and you're going to spend all of the 3.5 in addition to that commitment that's already -- of those reallocated people that's already funded in rates, my assumption would be correct, would it, that you could then go deliver even more program? 346 MR. BUCKLER: Yeah, we would be essentially eating some of the costs ourselves out of the shareholder's money, but we would have to -- well, that's one way to look at it. The other way to look at it is that we would not be getting some of the things done now that we do today. 347 MR. POCH: Well, all right. You've said you're reallocating these staff. Are you saying that you're using some of the 3.5 million to pay for the job that that staff person would otherwise have done and you are contracting that out, or you're hiring new people to do that? Is that what's happening? 348 MR. BUCKLER: We're redirecting and in most cases -- now, if anyone wants to talk about what they're doing at their specific utility, please, speak up here, but I think in general what is happening is that we would not be doing some other activity. 349 MR. POCH: You're managing to target your efforts. 350 MR. BUCKLER: We might be putting off some other capital programs or not doing some operating. 351 MR. POCH: Okay. Thank you. 352 I am going to ask, and it doesn't need to be today, but I am going to ask that the number you've given us a range of 5 to 50 percent -- 353 MR. BUCKLER: 5 to 15. 354 MR. POCH: 15? I'm relieved. I just ask that that number can be filed for each utility. 355 MS. NEWLAND: So you're asking for where each utility falls within that range with respect to the amount of non-incremental spending. 356 MR. POCH: That's correct. Can we get an undertaking to that effect? 357 MR. BUCKLER: I'm not sure I understand the relevance of that because, as I say, that number is completely flexible. We can make it zero if we want to or we can make it anything. 358 MR. POCH: I just want to know what the number is you've assumed in drawing up your plan. I understand you can change that, and where we're going to go with that, unless your counsel objects, we'll leave that to argument. 359 MR. BUCKLER: We can't give you a hard number but we can give you a rough estimate. 360 MR. POCH: That would be helpful, the best estimate would be. 361 MR. KAISER: Can you give us a rough estimate now? 362 MR. BUCKLER: Well, it's somewhere between 5 and 15 percent. We can go across the -- 363 MR. KAISER: If we go down the line, can each of you estimate where it is? 364 MR. McKENDRY: Yes, Mr. Chairman, we would concur. It would be in the range of upwards to 15 percent. Certainly, from our perspective, we believe that the activity is all incremental, that the majority of spending, definitely, is incremental. However, we do plan to leverage our internal staff for knowledge transfer, project management and to embed the conservation culture within Hydro Ottawa. We believe that this is a prudent approach. As Chris had mentioned, the alternative, for example if it was determined that we couldn't include it, is that all -- include the fact that all C&DM is incremental, that we effectively wouldn't be able to use our own internal staff and we believe that we would be collectively shooting ourselves in the foot because we wouldn't be able to develop internal corporate knowledge, we wouldn't be internalizing the conservation culture. We would also appreciate the Board's clarity on the appropriateness of utilizing our staff, in our case up to 15 percent. 365 MR. KAISER: I don't think Mr. Poch is suggesting, nor are we, that you shouldn't be using internal staff. Mr. Poch wants to know is out of the 3.5 million, to use Veridian's example, how much of that expense is already being paid by the ratepayer in terms of the fact that the ratepayer is currently paying for existing staff? So if you can give us an estimate of where it is between 0 and 15 percent, in ballpark terms, that will satisfy Mr. Poch. We can argue about the relevance of this later. 366 MR. BUCKLER: I think Dave from Ottawa said that it's 15 percent. 367 MR. McKENDRY: I concur, for clarity, up to 15 percent, one five. 368 MS. NEWLAND: Dr. Lu. 369 DR. LU: Toronto Hydro concurs with Hydro Ottawa's statement in terms of our objective, and the part of using existing staff is up to 15 percent at Toronto Hydro. 370 MR. KAISER: Is that the case for the rest of you? 371 MR. GURAN: For PowerStream it would be the same. 372 MR. DESNOYERS: It would be the same for Hamilton as well. 373 MR. DiRUSCIO: Ours is a little bit less. Most of our costs are incremental and I would say we're probably at the lower end of that scale, 5 to 7 percent. 374 MR. KAISER: Thank you. That's sufficient, Mr. Poch? 375 MR. POCH: Yes, it is. Thank you, Mr. Chairman. 376 MS. NEWLAND: Do you have something to add, Mr. Armstrong? 377 MR. ARMSTRONG: Veridian's would be about 5 to 15 percent as well. It's hard to provide a more concise number at this point in time because we still have more additional work to do in terms of prioritizing investment needs and programming. 378 MR. LYLE: Mr. Chair, might now be an appropriate time to break? We indicated we would be breaking early today. 379 MR. KAISER: Yes, the Board has a matter that, unfortunately, we have to attend to right now. What we had proposed, with the indulgence of counsel, is that we're going to break now and come back at 12:30. So if we'll take an early lunch and that would accommodate the Board in another matter. Thank you. 380 --- Luncheon recess taken at 11:05 a.m. 381 --- On resuming at 12:40 p.m. 382 MR. KAISER: Please be seated. 383 Please proceed. 384 MR. LYLE: Mr. Chair, I just have one preliminary matter. It's been brought to my attention at the break that some of the people are having difficulty hearing, particularly with the witnesses' backs to many of the people at the hearing. So, possibly, if everybody can speak clearly and into the microphone, that would be appreciated. 385 MR. KAISER: Okay. 386 Mr. Poch. 387 MR. POCH: Thank you, sir. 388 Panel, in the Board's procedural order of October 5th, the panel -- the Board indicated it would like to see the filing of an estimate of the quantifiable benefits, for example, in kilowatts or kilowatt-hours, where they can already be identified. 389 And -- people -- I'm told that people, if they're not using a microphone, should not point them at the ceiling, you're better off to point them down. 390 Now it would appear you've not done so. And I've read your evidence, which indicates that there are a great many uncertainties still. But I'm wondering, is it not the case that we could have -- estimate some of those benefits, perhaps not today, perhaps not this week, but at some point. Even before we have avoided costs to put a value on the benefits, we could quantify the kilowatts or kilowatt-hour savings for a particular measure. For example, for every fridge you buy back, if the average vintage out there of old fridges is a certain vintage, whatever information you have, and you know what new fridges take, you could estimate the expected savings. Is that not fair? 391 MR. BUCKLER: Did you mean in advance of embarking on the programs, or after you've implemented the programs and monitoring the results? 392 MR. POCH: I mean as an estimate in advance. 393 MR. BUCKLER: As an estimate in advance, and you mentioned the fridge program: Would you like to talk about the fridge program? Rather than talking about -- in general, maybe it's better to focus on a particular program. 394 MR. POCH: By all means. Take it as an example, if you'd like. 395 MR. McKENDRY: Thank you. Speaking on the refrigerator buy-back program. Again, all of these pilots, as far as we're concerned -- all of these programs at this point in time we consider to be pilots. We're looking at opportunities to be able to learn in our own respective territories. 396 And, specifically, as it relates to the program refrigerator buy-back, this would be a program that's designed to facilitate the return of old, inefficient refrigerators. The so-called "beer fridges" in the basement of many homes use significant amounts of electricity. We're targeting customers with second refrigerators, who would be willing to give them up and have them de-commissioned. 397 At this point in time, we're working in concert with Toronto Hydro. We are also considering the Clear Air Foundation as a prospective delivery partner. 398 Again, although we -- there is further detail yet to be worked, we have provided some very high-level, preliminary, estimated numbers that we're not specifically committing to. But just by order of magnitude, we've estimated that the number of kilowatt savings that could potentially be generated through this buy-back program is approximately 6.3 million kilowatt-hours per year. This is calculated based on the fact that we've allocated, at this point in time, $1.2 million. And utilizing experience from other jurisdictions, we have come to this estimate of the 6.3 million kilowatt-hours. 399 MR. POCH: Now, I don't want to go through each and every program, but I assume that you have such estimates, and I -- understandably, ballpark estimates at this point. You don't know precisely what vintage people will ante up when they bring forward their fridges, and you don't know precisely what their program costs will be. But I assume there are those kinds of estimates for many of your programs, but not all. Is that fair? 400 MR. BUCKLER: I wouldn't use the word many. For some of our programs, probably the minority of them, we have some estimates of what the savings might be. 401 MR. POCH: In the coming weeks or months -- well first, let me ask: I understand that at least Toronto Hydro and Hydro One and Union Gas have been cooperating, and I believe Enbridge may be joining the party in developing some default, province-wide, avoided-cost values, both for electricity and gas savings. Is that -- Mr. Lu, I guess that's for you -- Dr. Lu. 402 DR. LU: That is correct. We have committed a study together with Union Gas, Hydro One at this moment to study the avoided-cost study. 403 MR. POCH: Now, my information is that you expect results -- you expect a product from that study roughly in January; is that fair? 404 DR. LU: The time line got delayed because of issues of company procedures, parties we are dealing with, confidential information, so the delivery date is not determined yet. 405 MR. POCH: But we're looking at early in the new year. 406 DR. LU: We would definitely hope so. But, as I said, the date is not designated. 407 MR. POCH: Once available, it will be provided in a form which is available to other utilities to use? 408 DR. LU: We will go through the normal ways of sharing information, as we intended to. 409 MR. POCH: Alright. And I assume that, once avoided costs are available, to the extent you can estimate the savings of a given measure, you're in a position -- and the costs of your delivery, you're in a position then to determine the cost-effectiveness of the particular measure or program. Is that fair? I shouldn't say "determine", perhaps, "estimate" would be a better verb. 410 MR. BUCKLER: I would say possibly not. We still may not be in a position to be able to estimate the effectiveness of these programs in advance, because we still wouldn't know what the take-up is. Just knowing the avoided cost wouldn't tell us what the take-up is, as you pointed out yourself. 411 MR. POCH: Yes. Other utilities, in the past - certainly the gas utilities, currently - do an initial screen at a measure level and make certain assumptions about what the overheads will -- not the overheads, the delivery costs for that measure will be. And so they, implicitly, make certain assumptions about the scale of the program. 412 MR. BUCKLER: Yes. 413 MR. POCH: And they obviously have to estimate, if they were doing a fridge buy-back, the kinds of estimations we've talking about. Is there any reason you couldn't do that kind of estimation? And I appreciate that there would also be -- have to be a free-rider estimation. 414 MS. NEWLAND: Mr. Poch, what is your question? 415 MR. POCH: Well, I understand that definitive values can never be known until a final evaluation takes place. But is there any reason, at some point - and I'm not asking for it today - but, at some point, early in your program life, you wouldn't be in a position to, at least, give some preliminary estimates of the net-cost effectiveness of delivery of particular measures? And that, presumably, the accuracy would improve over time. 416 MR. BUCKLER: Probably not. Due to the pilot nature of these programs, we wouldn't know until after the program was concluded what the uptake will be, and what the effectiveness will be. 417 MR. POCH: You're not the first utilities in the world that have done fridge buy-back programs, are you? 418 MR. BUCKLER: No, we're not. And we have selected programs from other jurisdictions that did well in those other jurisdictions. And that's why we selected those programs. But we don't know how they're going to do in this market. There's a lot of unknowns. 419 Let me just tell you one of the biggest unknowns is the price of energy. One of the best ways to effect conservation is to charge a high price for the commodity, and then consumers use less of it. That's a basic economic theory. And we don't know what the price of energy is going to be. The Ontario Energy Board right now is wrestling with the issue through the regulated price plan, to determine what the pricing of electricity is going to be. And not knowing that now, we cannot determine what -- you know, that's just one of the factors that make it difficult for us to know. 420 MR. POCH: That's certainly going to affect take-up, the rate of take-up. 421 MR. BUCKLER: That's correct. 422 MR. POCH: But when you have avoided -- the notion of avoided costs includes an estimate of the long-term costs or values of electricity savings. So you'll have that value at hand once you have an avoided-cost number; correct? 423 MR. BUCKLER: That will be one of the factors, yes. 424 MR. POCH: Now, again, I appreciate you can't be definitive, but you've just indicated to me that you've looked at other utilities and they've -- you've, presumably, seen some representative data of the kind of how cost-effective these efforts are elsewhere, and I'm not suggesting that we assume the numbers will be identical here, but isn't it true that as you begin to roll these programs out, certainly, and you've therefore settled more of the details, you'll -- you're going to be in a position to make some estimate of the range of cost-effectiveness you might expect for any given measure, at least enough to satisfy yourself that, you know, with certain likelihood they're going to be marginally cost-effective or highly cost-effective or what have you; isn't that fair? 425 MR. BUCKLER: One of the problems I have with your question is that it's so general in nature. You're talking about a lot of different programs here and many of the programs -- well, the programs are all different from each other and they have different ways of getting at the market. For example, the mass market program is advertising and awareness amongst a broad range of customers, and it may take several years to change the culture of the customers that we're appealing to. So no, initially you wouldn't know what the effect of that is. Other programs you might learn something up front very quickly, and if you weren't getting a good take-up, you might terminate that program. We might terminate that program. 426 So it would be better if you could pick out some specific programs and we talk to them a little more enlightened, in a more enlightened fashion about the details. 427 MR. KAISER: Let's use an example, your beer fridge program. 428 MR. BUCKLER: That's a good one. 429 MR. KAISER: Did you look at another jurisdiction? 430 MR. McKENDRY: Yes, one of the jurisdictions that we looked at was B.C. Hydro. 431 MR. KAISER: All right. And what was their take-up rate, what was their experience? 432 MR. McKENDRY: We understand that it was a successful program, and as a result, we included it in our particular activity. Again, we've identified it as a pilot program from the point of view that we don't have experience in this particular area. Locally, we are in the process of discussing with an organization, the Clean Air Foundation, in terms of supporting their pre-existing program here in the province. 433 I'd also like to just draw the fact that as we are, again, in a pilot-type situation, we have not defined specific targets that we're looking at. We've identified, internally, some things that we think we can direct at, however, it's our understanding for the case of this particular proceeding that third tranche application, things like a TRC test and what not are not required. And further, that actual results are not necessarily to be met for the purposes of this pilot. 434 MR. KAISER: I understand that, but I think where Mr. Poch is going is he's just trying to establish how much due diligence you did. Dr. Lu, can you help us? 435 DR. LU: If I may answer your question, Mr. Chairman. In the B.C. Hydro experience there are 16 percent of the customers operate a secondary fridge in their homes, and the research indicates that roughly 20 percent of those customers who have a second fridge would like to dispose of it. So 20 percent of the 16 percent, that's basically the up-take rate, the B.C. experience. 436 MR. KAISER: And I think another one of Mr. Poch's questions relates to we know that you're using best judgment at this point, but do you contemplate monitoring these programs as they move along and possibly in reporting to the Board? We know some of them may turn out to be more successful than others, but have you turned your mind to what kind of monitoring procedures you might pursue? 437 MR. BUCKLER: Yes, we have. We have given some consideration to that and we filed some forms with our written evidence that lay out exactly how we'll be monitoring these programs. 438 MR. McKENDRY: Exhibit A.7, I believe. 439 MR. KAISER: Do you contemplate that these reports, when and if you file them, would be available to other parties such as Mr. Poch's client? 440 MR. BUCKLER: We were anticipating that these forms would be used by ourselves in second-generation programs for C&DM, that in monitoring the results on these forms we could then select the programs that give us better results for implementation on a longer-term basis. We haven't been instructed to turn these forms in to the OEB. It is a requirement that we do monitor the programs, there hasn't been -- as far as I know there hasn't been any requirement that we distribute these forms. 441 MR. POCH: Rest assured we'll be asking for it. 442 MR. BUCKLER: The back of Exhibit A.7, at the back of Exhibit schedule A.7, right at the back of it there's a form. It's three pages long and it details the monitoring that we plan to do. 443 MR. POCH: Let me try coming at this another way. In that form, A.7, on page 3 of 3, there is a block there, G(c) which says, "attached is the cost-effectiveness calculation and documentation in accordance with OEB guidelines attached." You're, kind of, anticipating here that the OEB at some point may issue guidelines, as some of us are advocating, in the context of the 2006 EDR process that will create a template so that there's a basis for utilities to share information, for the Board to review and for people to compare. And so I'm delighted to see that you've made that assumption. 444 Would you agree that it would be appropriate to do that, to the extent feasible, on the first-generation programs because that one means by which you will form your judgment as to what to roll out in a second-generation program? 445 MR. BUCKLER: Well, if you're talking about quantifying the results, as I said before, we're not able to do that now. What we're going to do is monitor the programs and fill out these forms as we go along. 446 MR. POCH: I understand that. I understand your answer and I just want to make sure we agree that it will be to the extent you can get that information and analyze it before you move to a -- what you're calling a second-generation mode. That would be a good thing. 447 MR. BUCKLER: Yes. 448 MR. POCH: Yes. And you may be moving to a second-generation mode even a year from now, in some cases, as early results indicate that this program is going well and you want to roll it out further; is that fair? 449 MR. McKENDRY: Chris, if I may. 450 Actually, what we have looked at, this whole program, this third tranche MARR, is call it a first-generation of C&DM type of activities. We see it as a fenced pilot opportunity effectively to learn. I believe what you're referring to is we will take these learnings and apply it into a "second-generation" C&DM, the real deal, if you like, where all of the appropriate TRCs and planning and execution and whatnot will be fully explored and debated before this audience. Our understanding of what this is all about is basically the opportunity to learn, to gain local information so that we can make best judgment in terms of what's appropriate for the second generation. 451 MR. POCH: Don't get me wrong, we're not arguing against learning by doing, and I should have said this earlier, we certainly don't want to interfere with people having cold beer. I'm just thinking about the timing of that. The timing for when you move to a second-generation mode isn't necessarily post-2007 in all cases. You may be ready to conclude that for given programs you have enough information after a shorter period of time, perhaps six months, perhaps less, perhaps more, for any given measure or program, and you're in a position at that point do some initial evaluation and make some judgements as to extending or potentially expanding the program; is that fair? 452 MR. McKENDRY: Yes, I think certainly in terms of the first generation, again the whole concept is to learn. And certainly there may be some certain things that will come out of the gun early to say that we've learned. But our intent was always to utilize these learnings as we move into this second, very distinct second-generation type of opportunity. 453 MR. POCH: Right. With that understanding, you're going to learn by doing, you're going to learn as you go. But there is a certain amount of information out there already, such as the example we heard where you've looked at B.C. and seen that there are fridges, and presumably they also have information about what the average energy usage of those fridges are. You're going to be in an increasingly better position to do evaluation and to refine your estimates of how cost-effective these various measures and programs are. Is that fair in a -- as a general statement? 454 MR. BUCKLER: Yeah, that's correct. 455 MR. POCH: I take it you'll use a TRC-type analysis, once you have the available information to do that kind of analysis, that is, you'll look at all the costs and all the benefits that can be quantified? 456 MR. BUCKLER: In the preliminary guidelines that were issued by the OEB - and I believe they were draft - it specified that you use a TRC approach. And if the Board decides that that's what we should be using, then that's what we'll use. 457 MR. POCH: That's your working assumption. 458 MR. BUCKLER: I don't know if it's an assumption or not, but that's kind of the way it's going. 459 MR. POCH: Okay. As you learn, I take it - you may not have said this explicitly, but you've certainly said it implicitly - you are going to try to optimize the particular programs and optimize your overall portfolio by, potentially, dropping programs, changing programs, shifting your emphasis, perhaps, embarking on other programs that you've seen from your sister utilities are going well. Is that fair? 460 MR. BUCKLER: Yes. We're asking for a certain level of flexibility in how we roll these programs out, and how we adjust them as we go along. 461 MR. POCH: Can we have an assurance that, if you get a negative TRC result, that you have some confidence is a realistic estimate at that point, that you will not proceed? And I'm not talking about a general information program where you can't really -- it's very difficult to do a TRC analysis. I'm talking about a program where there's a particular measure that you're promoting, or an audit where you're dealing with specific customers, and you have some basis for evaluating what the result was. If you find at some point that the TRC is not coming out positive, will you be -- is it agreed that the expectation -- your expectation is you would either change that program, or cease providing that program, such that the money would be spent on something that is TRC-positive? 462 MS. NEWLAND: You're assuming, Mr. Poch, in your question, that TRC will be the test that is specified by the Board. 463 MR. POCH: Yes. TRC as the screening test ultimately agreed on. I think we -- let's just assume, for the sake of today's discussion, it's TRC, without deciding that. 464 MR. McKENDRY: If I may, I would suggest that, certainly, our intention is to evaluate all of the programs based on their cost-benefit analysis. And the programs that provide the biggest bang for the buck would be the ones that we would be focusing on. 465 MR. POCH: Okay. 466 MR. McKENDRY: It might be premature, at this particular stage, to discount the negative TRCs just for -- I just don't know what those programs might look like at this time. 467 MR. POCH: But that's your intent - I take it, the intent of all of you - that, as this moves along, you're going to try to get the biggest bang for the buck. You're going to try the maximize the TRC, or whatever measure we use. 468 MR. BUCKLER: To the extent possible. There was also a requirement that we try to have balanced spending across the different groups of customers. 469 MR. POCH: Terrific. That's a separate question I had, and I appreciate that response. 470 Is it the intention, by the way, to utilize the avoided costs as they may evolve, that are coming out of the Toronto Hydro and joint utility effort? Or are others producing their own avoided-cost values? 471 MR. BUCKLER: Well, I can't speak on behalf of all the utilities. But on behalf of Enersource, yeah, it's our -- we will probably use their avoided-cost, that they identify. 472 MR. POCH: Now, perhaps we can take an example -- PowerStream is probably a good example. I understand in Markham there is a transmission line proposed, that is attracting some attention. In a situation like that, where you've got a significant, identifiable, system-expansion distribution -- I guess that's transmission, so maybe it's not such a good example. Let's take another example. 473 If you've got a situation in any of your utilities where you've got identifiable distribution-system expansion, or transmission-system expansion - that's fair enough - and it's possible to defer or avoid that expansion, or change the scale of the expansion by way of conservation or demand management, will your utilities seek to add those local avoided costs to the provincial default of what it costs as they are -- become known? 474 MR. BUCKLER: I think it's premature to determine that now. Some of the utilities have more experience with the use and application of the TRC than other utilities, and I don't think this panel is prepared here to talk about a lot of the details on that. 475 MR. POCH: Without getting into a level of detail which, I appreciate, is getting pretty refined, would you agree in principle that, where there is -- where it can be identified that there can be -- that there are local savings possible, beyond those that are already included in the provincial what-it-costs analysis, it would be appropriate to have regard to those potential savings in determining the size and shape of your conservation portfolio? 476 MS. NEWLAND: Mr. Poch, I don't like to keep jumping in, but I'm just having a little trouble with your line of questions. Are you trying to understand what type of monitoring evaluation exercise the utilities will undertake in order to -- from -- in first generation PBR, in order to inform second generation? Are you going -- are you talking about something else? 477 MR. POCH: I'm talking about the former, including what the analysis of what it costs which will presumably be used to evaluate these programs, and any potential changes in these programs, or optimization of these programs. And I just want to be assured that, at least in principle - if not in practice, because of the uncertainties or complexities - at least, in principle, we're all on the same wavelength that, in determining the value, if a conservation effort is worthwhile, it's appropriate to look at all the avoided costs, including the local. 478 MS. NEWLAND: So you're asking them, will they screen on the basis of avoided costs. 479 MR. POCH: Yes, including local avoided costs, where known. 480 MR. BUCKLER: This panel has difficulty answering some of the questions around TRC. We have not used the TRC in the selection of these programs at all. It's been many years since I've worked with the TRC, and I don't know many of the aspects around it, and I've had to bone up on that information before I could answer these types of questions. And I've just checked with some of my fellow panel members here, and none of us feel knowledgeable enough about the TRC to be able to answer this question, really. 481 MR. McKENDRY: I think, if I may, Chris, just add to that. 482 Again, it's our understanding, for this first-generation learning opportunity, there is no prescribed TRC test that's required, nor is there any particular measurement to the level of success, as evidenced by the December the 1st FAQ that the OEB put forward. So we're looking at this total first tranche -- pardon me, third tranche, as a pilot for first-generation learning, without those -- 483 MR. POCH: I understand that, and let me suggest that you can leave it to your counsel to protect you on what's required and what's not. I'm just looking at what might be advisable. 484 You have indicated, in selecting this initial portfolio, one of the factors is what is likely to give some predictable results; is that right? That was in your preambles. 485 MR. BUCKLER: That's correct. 486 MR. POCH: I'm trying to understand what you meant by that. Can you expand a little? 487 MR. BUCKLER: Well, one of the requirements, as I recall, was that you were supposed to select programs where the results might be more predictable. However, as we pointed out earlier, we were not able to quantify the benefits of these programs. 488 MR. POCH: How, then, did you use that? You said you've used that as a guideline in picking your initial portfolio. Give me a sense of how you've used it. Not through quantification, at least, not through any consistent quantification, but how have you -- 489 MR. BUCKLER: Well, we looked at other jurisdictions, as I mentioned previously. And we saw what the results were in those other jurisdictions. And we tried to select programs that gave the best load reduction there, and we assumed that we would tend to get the best results for those programs here. In that sense, the predictability was taken into consideration. 490 MR. POCH: Okay. I can see that that would be a not unreasonable approach, when you're choosing between a range of possible programs you might take out to the -- say, for customer-side efficiency, as between fridge buy-backs and some other form of program approach. I assume though that when you get into distribution-side investments, loss reduction, that that's a much more utility-specific situation. You look at what your marginal engineering opportunities are, and what B.C. Hydro has done may only be of very general information, and it's going to be much more specific to the particular engineering opportunities you have in your particular -- each particular utility; is that fair? 491 MR. BUCKLER: Sorry, what was the question? 492 MR. POCH: Well, that you can probably take some general direction, general information from what B.C. Hydro did with fridges, but that on the utility side -- in selecting your utility-side approaches for loss reduction your picks are going to be much more a function of the particular physical make-up of your particular distribution systems, the age of your components, an engineering approach; is that fair? 493 MR. BUCKLER: Yeah, we think so. I'm going to refer this question over to Robert Desnoyers since you've specifically asked about distribution loss reduction. 494 MR. DESNOYERS: The distribution losses account for about 3 to 5 percent of electric energy generated and distributed before the customer. When each of the LDCs looked at this program, they looked at characteristics that were specific to their utilities in selecting from a menu of half a dozen or more typical initiatives. So I think your -- the answer to your question is, correct. Is that in selecting one or more of these initiatives within this broader program, utilities -- this is utility-specific. We couldn't look, for example, to B.C. and say that they're doing line loss reduction, it's working in B.C., it must work here in Ontario, for example. 495 MR. POCH: It may work here in some distribution utilities and not in others. 496 MR. DESNOYERS: That's correct. 497 MR. POCH: Now, you have -- one of you said, we'll get to this later, you said you're going to when -- in fact, when you go and implement, do that actual spending, you'll try to do it on a best bang for the buck basis, which I assume is how you've tried to run your utilities generally; is that fair? 498 MR. DESNOYERS: That's fair. 499 MR. POCH: But in advance it's probably a little more difficult to say what the bang for the buck will be on those programs as opposed to, say, the customer-efficiency programs. It would be -- you're not in a position to compare these right now. 500 MR. McKENDRY: Well, if I may, I could offer something on that. As we had indicated, on the network side of things that specifically -- you're right, there are certain learnings and every situation is different, but the next specific steps will to be to complete the engineering analysis and feasibility studies. Projects will be prioritized, selected and implemented based on the most attractive investment-to-results ratio. 501 MR. POCH: Yeah. I had read that, I referred to that a moment ago. But within that category of loss reduction you've got a range of opportunities. You're going to pick amongst them and refine your strategy as you go to get that best bang for the buck, in the colloquial phrase. But in your initial allocation now, in your portfolios between what you're going to spend on loss reduction and what you're going to spend on customer-side efficiency, for example, you're not in a position to have made that allocation based on numbers. 502 MR. BUCKLER: That's correct. 503 MR. POCH: All right. How did you make that allocation? 504 MR. BUCKLER: We tried to have a balanced approach amongst the various programs that we have here and amongst the various groups of customers that we have. 505 MR. POCH: Okay. So by balanced, am I correct in assuming you mean you felt you needed to pay attention to all of these areas inside the utility, outside the utility and so on. Fair, first of all? 506 MR. BUCKLER: Well, yeah. 507 MR. POCH: And try to cover a broad range of customer segments, I take it? 508 MR. BUCKLER: Yes. 509 MR. POCH: All right. Did you -- have you made any attempt to try to, first of all, ensure not complete, but fairly complete, coverage of your customer segments? That is, that you're not leaving any -- at least not intentionally leaving anybody out? 510 MR. BUCKLER: Anybody? 511 MR. POCH: Well, anybody is the wrong expression, you're absolutely right. Any customer base. 512 MR. BUCKLER: By and large, I think I know what you're getting at. The programs will -- there should be appeal for the vast majority of our customers. 513 MR. POCH: I'm going to come back to some of those points a little later, but let's move on for the moment. 514 I take it some of the these programs are joint programs, and by which I mean joint not with EnerCan but joint amongst some of the six you. And particularly I notice that for the mass market residential small consumer -- commercial programs; is that correct? Some of you will be cooperating in the delivery of these programs? 515 MR. BUCKLER: Yes, all of us will be, yes. 516 MR. POCH: Is that true for some of the programs or all of the programs? 517 MR. BUCKLER: Are you talking about the coal-branded, mass-market program? We're all participating in that one. 518 MR. POCH: Okay. So that one is a joint program. 519 MR. BUCKLER: Yes, that one is a joint program. 520 MR. POCH: Are any of the others joint programs? 521 MR. BUCKLER: They're all joint programs, but some of the individual utilities may not be participating. I can indicate the ones where we're all participating. 522 MR. POCH: No, that's fine, unless the Board would find that helpful. But I was just -- where utilities have indicated that they are delivering these programs in every case, these are going to be jointly managed? 523 MR. McKENDRY: Chris, if I may. 524 The answer is, yes. I think one of the real benefits of having the group of six of us together, I think this is one of the first times in a long time, if ever, where we've had this type of cooperation. And I can certainly evidence from Hydro Ottawa's perspective this has been a tremendous opportunity to learn and leverage each other. 525 We have established, as evidenced by the signature of our CEOs in our initial application, we've established a steering committee which represents the six organizations. The steering committee has put in place representatives, we have hired a project coordinator to help us work through this, and as we go through and experience we've strategically decided we're going to focus on various areas within this plan to leverage the respective strengths and representing our individual situations in our base franchise areas. Our plan is to work together on a regular basis where we'll be coming back to the table to share our learnings amongst each other so we can leverage further as we move into the second generation C&DM. 526 MR. POCH: I understand you've certainly worked together in planning these initiatives and you're certainly planning to share information, I was just wondering if you're actually delivering them in concert with one another. You're going to have a program manager for, you know - the fridge buy-backs is a bad example because it doesn't cover many of you - but for the utilities doing fridge buy-backs or for the utilities doing commercial audit, you're going to have amongst you, somewhere amongst you there will be a steering committee or a manager who will actually oversee that program in six utilities, or however many are participating. Is that the plan? 527 MR. BUCKLER: No, not at this time. It may evolve to that, but no, we haven't gotten that far. We have hired one coordinator amongst the six utilities to help bind us together and do group work for us, but each of us has our own individual utility person that's responsible for that particular utility. When we roll these programs out though, I think we that we will be rolling them out together. It's not just the planning of these programs, we also have planned to work together on the implementation of the programs. 528 MR. POCH: How have you -- to the extent you're sharing on these programs, how are you cost sharing them? How have you allocated for any given program that's being delivered by a number of you, take -- just pick one, -- well, let's take the mass market one as perhaps a good example of that. You're all participating and you're all -- I think you're all participating in it and it's an entirely cooperative effort. How have you determined -- you each have different amounts of money available from the third tranche, I understand that. Have you sought to spend a comparable proportion of your budget on these? I see there's some variation there. 529 Mr. Chairman, I'm looking at schedule 3 of -- this is A.7, schedule 3, page 1 of 4. This is the horizontal spreadsheet that shows all the programs and I just -- let's take one where there's more variation. If we look down on that first page, I see under "Residential Load Control Program", the column "Percent Spending of Total Budget": I take it that's the percent of that particular utility's total C&DM budget -- third tranche budget? 530 MR. BUCKLER: I believe that's the percent spending of the total budget for that utility. 531 MR. POCH: Right. So, how have you -- have you sought to -- or made any attempt to pursue these -- participate in these programs on some pro rata, proportionate basis? Or you were all free to allocate amongst the different programs as you saw fit? 532 MR. BUCKLER: I'm going to refer this question over to Carmine DiRuscio, who is our specialist on this particular program. 533 MR. POCH: Okay. 534 MR. DiRUSCIO: On the residential load program, in particular, when we initially designed these programs, as was mentioned earlier, we really approached this from a top-down approach, and saw that the residential load control is a program we all wanted to be involved in. The details of how -- what particular product we're going to use to do the controls -- the details of the particular product, or the program, have not been worked out. So, in answer to your question, we anticipate to work cooperatively with everybody in this coalition. We anticipate to try different things in our markets to see what products work better, and really gain as much learning from these programs as we possibly can in this first phase. 535 MR. BUCKLER: Maybe I could clarify, Mr. Poch, that most of these programs we're individually working on, and we're learning from, in each of our respective markets. And we're going to share information with each other, and learn from each other in rolling these programs out. But there's really only one program at this time that we look at rolling out, totally, jointly, and that's the co-brand mass-market program. Does that help? 536 MR. POCH: Okay. The initial design of these programs, though, the -- to the extent you've made any design decisions - you've made some certain working assumptions to prepare your budgets - in general, you've done that as a group through this mechanism you've described, the steering committee, and so on? Correct? 537 MR. BUCKLER: Not really. It was a top-down approach in the selection of the programs that we have here. We knew how much money we had to spend, because that was predetermined. So we had to find programs that totaled up to the amount that we have to spend. And, from there, some of us had experience in our different utilities with different types of programs, just because of our backgrounds. And some of us had particular knowledge of something that was going on in B.C., et cetera. So we all got together and we pooled that information, shared that information, and sort of prepared a menu of programs that we could select from. And then we sat down and selected from that menu for our own particular utilities. 538 MR. POCH: Right. But that menu you were selecting from, was a common menu. You all had the same general idea in mind of what you were going to do. When you said fridge buy-back program -- sure, you're going to learn and adjust as you go, but when you were each of you selecting from the menu, and deciding what it is you're going to do with your third tranche, you all had a common understanding you'd explained to each other, and come to a common understanding of what the - likely very rough - architecture of the piece is. Is that fair? 539 MR. BUCKLER: That's correct. 540 MR. POCH: Okay. That in mind, I'd like to turn to the question of the split between capital and operating. And let's, first of all, talk in very general terms about what is being capitalized, as opposed to being treated as an operating expense. I'll take it that you won't disagree that there's obviously some -- there's always going to be some judgment involved in this, like any accounting allocation decision. 541 MR. BUCKLER: I don't think the difference is between CAPEX and OPEX among the different utilities, because of the accounting treatment. I think that may result -- that may cause some of the variation, no doubt, but I think most of the variation will be because of different programs, different treatment of the programs. Some of them may be more capital-intensive, some of them may be more customer-education-oriented. 542 MR. POCH: Okay. That's exactly where I'm headed. I'm trying to understand why there is a variation. And it's because you anticipate the program being delivered in a different fashion. 543 MR. BUCKLER: That's correct. 544 MR. POCH: And if it's customer education, that's going to be an example of something that it will be expensed; is that right? 545 MR. BUCKLER: Yes. 546 MR. POCH: And if it's, you know, a transformer on your system, that's going to be hardware that's going to be capitalized? 547 MR. BUCKLER: That's correct. 548 MR. POCH: And if it's going to be helping a customer buy a more efficient air conditioner, what's that? 549 MR. BUCKLER: I think that's OPEX. 550 MR. POCH: And you'd agree that the rule that should apply here would be the ordinary rules you would use as an utility, that are both the regulatory rules, used and useful, and the generally-accepted accounting principles about when you capitalize an investment, and when you don't. Is that correct? 551 MR. BUCKLER: That's correct. 552 MR. POCH: Then let's take some examples, so we can get an understanding of this. If we turn to loss reduction -- and I'm going to stick with A.7, because that's probably the easiest place to see these things. And that would be A.7, page 3 of 4, second group from the bottom. I won't use the word tranche. Let's take some examples there, so we can try to understand what the difference is. Let's look at Ottawa Hydro, which shows a 20 percent operation expense and 80 percent capitalization, versus PowerStream, which is the opposite. 553 MR. BUCKLER: Sorry, could you back up again? Just so -- I'm on page 3 of 4. 554 MR. POCH: Page 3 of 4, under "Distributed Energy Load Displacement". 555 MR. BUCKLER: Yes. 556 MR. POCH: Actually, you know, I was going to do the example above. 557 Why don't we do distribution loss reduction. Let's move up a group there. And we can look at the difference between Veridian and Toronto Hydro -- which I see is missing on the left hand descriptor column, but you can see it as THC on the right hand column. And perhaps those gentlemen, or you, could help us. Veridian is showing 94 percent capitalization and Toronto Hydro is showing 24 percent capitalization. Quite a difference. I'd like to get a sense of what drives that. 558 MR. BUCKLER: Maybe we could start with Veridian, and they can explain their figures. Then we'll move over to Toronto. Is that okay? 559 MR. POCH: That's fine. 560 Mr. Chairman, just for the record, I am -- this particular page I'm on doesn't happen to have column headings, but I think if we go back to the first page, this is the -- I was looking at the percent within LDC column and then, for each utility, there is a yellow line and a white line, the yellow line being OPEX and the white line being CAPEX. So, we're going to start with Veridian. 561 MR. ARMSTRONG: So you're referring to the 94 percent CAPEX component? 562 MR. POCH: Yes. 563 MR. ARMSTRONG: Veridian's distribution-loss reduction initiatives that we pre-program plan are strictly power capacitor installation and load-flow studies. Both of those are very capital-intensive. Power pack compression factors are going to entail the installation of power pack compression bags on distribution networks -- 564 MR. POCH: You might want to slow down, especially when you're using technical terms. 565 MR. ARMSTRONG: -- are going to require the installation of power pack compression capacitors on the network, and load-flow studies are likely going to entail the establishment of new switching points, so we can optimize load flows on the system. Both of which are capital-intensive, so that CAPEX/OPEX split flows from what we have identified as being opportunities on our distribution network for reductions. 566 MR. POCH: So the studies would be the 6 percent, and the actual action you'll take, the installing new switches, what have you, will be the 94 percent. 567 MR. ARMSTRONG: That's correct. 568 MR. POCH: Can we hear from Toronto Hydro and understand how they're planning to get such a different number. 569 DR. LU: If I may start by clarifying what do we mean by OPEX and CAPEX. In the City of Toronto, there are many companies that have -- we see distributed generation facilities in place already. So what we meant by the utilities is that go to spend our operational budget to help them design and to persuade them to make them great connection, so that the expense is OPEX. 570 MR. POCH: Let me just stop you there, and I think you may be looking at the load displacement generation and we moved off that earlier. And I direct you to the group above that, the distribution loss reduction investments. And there you have 76 percent OPEX and 24 percent CAPEX, that's 960,000, I guess it is. 571 DR. LU: Let me find another sheet. 572 MR. DESNOYERS: Mr. Poch, when I was talking about the distribution loss reduction program, I mentioned that there was half a dozen or so initiatives that make up the program in its entirety. And within that, there were some programs that may not be as heavily weighted towards capital expenditures. For example, some of the system optimization studies that could be carried out. That, while he's looking for his back-up sheet, may explain some of the difference as compared to Veridian's who was installing fixed assets, in this case, load bank capacitors. 573 MR. POCH: Dr. Lu seems to indicate he's found the right sheet. 574 MR. KAISER: Isn't it the case, Mr. Poch, that we're comparing apples and oranges here. If you look at the programs here of the two utilities under that description, they're quite different. 575 MR. POCH: I've gathered that, sir. 576 MR. BUCKLER: They are different and that's what we're trying to explain. We're explaining that the Veridian program is very capital intensive and it involves actually buying equipment and installing it. 577 MR. POCH: And maybe that's good enough for my purposes today. These programs are going to be quite different -- 578 MR. BUCKLER: They are different programs, yes. 579 MR. POCH: What one utility's doing may not show up in the other utility at all, in some cases. 580 MR. BUCKLER: That's correct. But we're going to share the knowledge that we gain from this and the savings that we obtain, and Toronto Hydro may end up adopting the program that Veridian is testing here. 581 MR. POCH: Then just a few other examples I want to touch on for other reasons here. Under the heading "Program Support," which is on the last page of that same spreadsheet, which I thought would have always been expensed, we see a bit of a variation there amongst the utilities listed. Toronto Hydro, for example, is capitalizing 41 percent, Ottawa Hydro 20 percent. What program support is being capitalized? What's the nature of the program support that would be capitalized? 582 DR. LU: If I may start. In Toronto Hydro we are going to put about half a million dollars for the next three years to fulfil our reporting, monitoring and evaluation obligations under this plan. In it we propose $200,000 in the first year, which is 2004 and 2005, to develop a tracking mechanism software, IT stuff, so making sure everything is tracked according to the requirement. That's where the capitalization of $200,000 in 2005. 583 MR. POCH: Okay. 584 MR. McKENDRY: From Ottawa's point of view, overall program support is specifically the broad category of overall awareness. Some of the capital expense that we would potentially be considering there would be things like trade show booths, assets that we would generally retain in an effort to help educate the broad population. The other expenses, the operating expenses would be the Board's costs related to bill stuffers, web development, that sort of thing. 585 MR. POCH: All right. A few questions about some of the specific programs. I don't want to dig too deep on this, I appreciate they're very tentative at this point, but let's see where we can get. 586 Mass markets, first of all, range of ideas that are included in your pros, but no specific list of measures or programs or even program styles there. And I'm wondering, to what extent is this likely to be general information-type approach, advertising, that sort of thing, and to what extent is this going to be more targeted to go out and provide a coupon for particular, you know, for smart lightbulbs or a tag along with Enbridge and the EnerGuide for homes and maybe actually leverage that program a little. Can you give me a sense of what -- do you have any sense of what the mix is at this point that's anticipated? Between those two large categories, general information and more targeted measure-specific efforts. 587 MR. BUCKLER: I'm going to ask Robert Desnoyers to answer this question. 588 MR. DESNOYERS: Mr. Poch, as you pointed out, this program is, in fact, a compilation of a number of activities or initiatives. Activities that we believe will kick-start this conservation culture here in Ontario. At this point, we have not determined the split between those educational information-type programs versus giveaways, as you pointed out, the coupon giveaways or some of the other initiatives or activities that could fall within this power-wise or co-brand mass-market program. 589 MR. POCH: I take it I'd get a similar response from the group. That's representative of the situation for all the utilities? 590 MR. DESNOYERS: That's correct. 591 MR. POCH: All right, thank you. Turning to smart meters, this shows up in two categories, it's called smart meters pilot, you've used that heading to denote the residential side, and smart meters without the word pilot, I think, I guess just to distinguish it from your commercial/industrial sector. Is that correct? 592 MR. GURAN: Maybe I can answer that. In both cases, pilot projects for smart meters will be pilot projects, both in the commercial side and the residential side. Each will target separate classes of customers. 593 MR. POCH: You're aware that this was not one of the priorities listed in the Minister's letter. 594 MR. GURAN: We as a group -- 595 MS. NEWLAND: Which letter? The 16th? 596 MR. POCH: May 31st letter, I think, is probably -- I believe is where he gave the list. 597 MR. BUCKLER: Are you suggesting that smart metering is not an appropriate program for -- 598 MR. POCH: We may get to that, but let's answer one question at a time. The May 31st letter that's attached to A.7, the piece that was filed yesterday, it's schedule 2 to that piece. And on page 2, that's one place where the Minister's list appears. 599 Let me just make sure we agree. My read of that list is, that's not one of the ones that the Minister, at least, highlighted as being a priority, from the Minister's perspective. I'm not saying the government hasn't indicated that smart meters aren't a priority. 600 MR. McKENDRY: If I may just, from our perspective. Certainly, when we read the May 31st Minister's letter, we interpreted the words "smart control systems" as being smart meters, as well. Obviously, this is a key foundational building block for the province. We believe that there is a tremendous learning opportunity -- the ramp-up curve that we need to go through. At this point in time, there's just understanding the technologies - technologies that are available today didn't exist two years ago, as an example - the technologies, the back-room processes, the data collection, et cetera. 601 So when we saw smart control systems in this particular document, we understood that this would be the type of thing that would be appropriate from a smart meter point of view. And I would go forward to suggest that we understand, from the OEB's Frequently Asked Questions, on December 1st, that they've concurred that a component of an LDC's C&DM plan may include smart meters, for the reasons that we included in our plan. 602 MR. POCH: I had read "smart control systems" as being just that, control systems. And, obviously, it's -- we can all agree that the government has been very clear. There's a smart meters initiative, and the Board has a process underway to determine that. Can we all agree: You're all going to have to do smart meters, and it's going to be funded -- ultimately, it's going to be funded in rates in one fashion or another, and you don't -- 603 MR. BUCKLER: We don't know that. If you're asking us to say -- we will know that when the Minister makes his decision on what he's going to do with smart metering. 604 MR. POCH: I was catching myself there, realizing I'm lapsing into argument in any event, so there's not really a question there. 605 You've interpreted, in any event, that either the Minister's letter, or the Board's Frequently Asked Questions, wherever they may have arisen, as suggesting that you can do some smart meter pilots. 606 MR. BUCKLER: Yes, that's our interpretation. Yes. And I have to point out that it was a question that we have in our minds as we went along, whether smart metering was going to be allowed, or not. And, as David pointed out, in this letter here, it talks about smart control system -- well, it's hard to have a smart control system without having a smart meter: The two of them go hand in hand. 607 MR. POCH: You can appreciate that if the -- ultimately, you carry out the smart meter program at the level that the Minister has indicated he would like to see, that that would soak up all of this budget, easily, and then some. 608 MR. BUCKLER: That's correct. 609 MR. POCH: Alright. Is this smart meter piloting something that you're working on collectively, in its design and potential application? 610 MR. GURAN: I think the concept amongst all of us is the same. It's the enabling technologies that we're going to use that will work with a number of other programs. As has been pointed out, to run a demand-response program or a load-control program, we have to have smart meter pilot in place to assess the other programs. So we will be looking at smart meters as a group, with a number of pilots. We'll also give each of our organizations the experience to deal with the various communication systems that we're going to have to deal with in the back office -- sort of, infrastructure that has to be developed. And we'll share that information amongst ourselves . 611 MR. BUCKLER: The short answer to the question is, yes. We are working with each other. We have been working with each other for a while now. And each of us has been working with the Ontario Energy Board in their smart meter working -- various smart meter working groups. 612 MR. POCH: That being so, I'd like to understand -- you will have seen from Exhibit G.1, the very first thing we looked at today, that I have broken out there the amount of your budgets you are each spending, approximately, on meter programs. And they range from 12 to 43 percent of your overall third tranche spending. And that all of you are planning to do that. I'd like to understand, why that significant variation, first of all? Let's start with that. 613 MR. DESNOYERS: I could take that, if you like, Chris. 614 MR. BUCKLER: Sure. 615 MR. DESNOYERS: In the case of Hamilton's smart meter initiative, we have two programs -- two additional programs that the other utilities, at this point in time, chose not to select amongst their programs. One was the pre-paid meters and the other was to target a specific load: 300, excuse me, over 200 kilowatts and up to 3,000 kilowatts. So I think that would explain the variance there between Hamilton's and some of the other utilities. 616 MR. POCH: Can I ask Veridian, since it's another outlier there, are there additional components in Veridian's that aren't present in the other utilities'? 617 MR. ARMSTRONG: We're participating in a smart-meter pilot at the residential level to assess the competing technologies that are going to be available, and to ready ourselves for full-scale rollout of smart meters later on. 618 On the CI&I side, what we're proposing to do is to reduce the threshold for what's currently in our home metering, from 500 kilowatts down to 50 kilowatts, and to retrofit those customers with the new smart meters. And we think that's going to be a important contributor to the Minister's vision of rolling out smart metering quickly. And we think that, you know, those are the high-volume customers: We're sending price signals through to the customers that are going to have an impact on conservation and demand management. 619 MR. POCH: So you're getting out a bit ahead of the pack here, in terms of rolling out -- at least, in that group of customers. 620 MR. ARMSTRONG: That's correct. 621 MR. POCH: Okay. And can I understand the -- another difference, when we look at A.7, schedule 3, I see that -- if we look at -- under "Commercial/Industrial Markets, Smart Meters" -- this is on page 2 of 4. Let's take a look at the difference between Veridian and Toronto Hydro. I guess I understand Toronto Hydro's 100 percent capitalization. I was wondering why -- the assumption there, I take it, is that Toronto Hydro's paying for those meters. It's a pilot program. You're going to pay for them. 622 MR. BUCKLER: Sorry, Mr. Poch, can you let us catch up with you here? 623 MR. POCH: Yeah. 624 MR. BUCKLER: You're talking about schedule 3, page 2. 625 MR. POCH: Page 2, 2 of 4. 626 MR. BUCKLER: And which program? 627 MR. POCH: Smart Meters, C&I. 628 MR. BUCKLER: Yes. 629 MR. POCH: I was just looking at Veridian and Toronto Hydro, for contrast, there. And I just see Toronto Hydro's capitalizing 100 percent, Veridian 69 percent. And I just want to understand the approach you're taking. I take it that Toronto Hydro is saying, This is a pilot; we're going to pay for these meters; the utility is going to pay for these meters. 630 DR. LU: That is correct. 631 MR. POCH: Alright. And Veridian, is there -- can you advise why -- if you're doing anything different? And just judgment as to whether or not the cost of this is capital or operating, or what's the difference? 632 MR. ARMSTRONG: The -- I'll have to check the accuracy of that table but we do have a -- is it correct? 633 We are paying for the meters but there isn't an OPEX component for additional communications expense -- 634 MR. POCH: Okay. 635 MR. ARMSTRONG: -- as we extend the number of smart meters that we have in service. 636 MR. McKENDRY: If I may add to that, that was our understanding, as well, that there would be a corresponding customer-communications component that would be required in order to enact a strong smart-metering pilot. 637 MR. POCH: Gentlemen, I'm wondering if you'd agree there's some merit here, at least when you get to smart-meter pilots, in some heightened level of cooperation amongst the six of you, since you're already cooperating anyway. Would you agree? Veridian has told us they're going to try a number of approaches to try to evaluate what in the end is going to be the best way to go on smart meters. Have I interpreted that correctly, first of all? 638 MR. ARMSTRONG: That's right, on the residential side. 639 MR. POCH: Yeah. Would there not be some sense in, as a group, you cooperating and not running six pilots, if you can maybe run one coordinated effort? Which may well take place in different utilities and take different forms, because you're going to learn that way, but this is an area where we can -- if it's about getting information, as opposed to, you know, buying fridges, you don't need -- there's no benefit in duplication. 640 MR. GURAN: Maybe I can address that. As you can imagine, with smart metering, again, details are being worked out as the type of smart meter that's going to unroll eventually, sometime in February or March of next year with the exact details. The meter itself is only one part of the issue that we're dealing with. We're going to be dealing with three, four, possibly five different communications systems in that particular meter. We may be communicating through our power lines, we may be communicating through radio frequency, and satellites is another possibility, so there's a whole menu of communications that we're going to deal with. Once we communicate with the meter, how it enters our individual billing sills system we'll have to deal with. Is there going to be data warehouses where we store that information, are we going to do it in-house? Each utility is going to have to make business decisions on this whole system and evaluate it for future reference when they go full scale smart metering in the province. 641 MR. POCH: I certainly agree it's a complex issue and there are many possible variations of how you could implement it. And I'm suggesting to you that that's all the more reason to try to do a coordinated pilot where your information will be -- you won't duplicate effort, your information will -- different efforts will compliment and amplify the synergistic -- 642 MR. GURAN: I would agree with that from our perspective. Certainly our IT people, our information people, our billing information system people, secondary to the meters themselves will be cooperating on some of those issues. Certainly we will share that information amongst ourselves, where possible. 643 MR. DESNOYERS: If -- 644 MR. BUCKLER: I'd like to add a little bit to to that. I think the panel has, to some extent, discussed this issue. And I recall one of the points that was made amongst ourselves was that it would be a benefit if there were one single pilot across the whole province that all of us could benefit from, it would be most cost-effective to test the actual technology of the meter itself. But what we're going to be doing here at our different utilities is testing how the technology fits with the other systems that will interact with the smart metering. The communication system, how it will interact with our billing system, our settlement system and our other systems. And we have to -- that will be different at each you have our utilities. 645 And it's something similar to what we experienced at market opening, for example, when we had to build all new billing system for spot market prices. It was different in each utility, and that was demonstrated very graphically at the regulatory asset hearings. And what we're talking about here is very modest pilots, fairly modest pilots in the grander scheme of the expenditures that will eventually be made on smart metering, but it's to find out what's going to happen in each of our respective jurisdictions. 646 MR. POCH: Let's move on. I want to talk about distribution loss reduction and I'd like to start by reading you a snippet from the submissions that were filed earlier in this proceeding and referred to yesterday. I'll read it out loud, because I appreciate the witnesses won't have this in front of them. In Pollution Probe's materials for yesterday's motion there was some mention, by way of example, of loss reduction incentives and some people interpreted that as a request to the Board and responded on that point. 647 And EDA responded and I quote: 648 "It should be noted that after decades of investments in lower loss equipment, average line losses are relatively low today. Buying more efficient transformers or rebuilding infrastructure to reduce losses is relatively expensive and the payback can be long. There is a point at which the investment in these activities, especially on a large scale, does not produce the reasonable payback through line loss reductions. Over time, utilities have come to equilibrium on this cost-benefit relationship. New technologies and improved equipment can introduce new opportunities for loss reduction and an incentive scheme is needed to reward utilities to further reduce losses." 649 Well, leaving aside the need for an incentive scheme, I wanted to ask you about the notion of the utilities having come to equilibrium in this cost-benefit analysis. Is that, in fact, representative of your experience? 650 MR. McKENDRY: Chris, may I? 651 Just on the whole distribution loss area, just to help put things in perspective certainly from Hydro Ottawa's case, Hydro Ottawa's the second largest municipal local distribution company in the province, we have about 273,000 customers. We distribute about 8 billion kilowatt-hours per year. Distribution losses are a fact of the electricity business. Distribution losses are akin to leakage within the network. Power is lost for a variety of reasons, whether it's through connections or components, or simply the laws of physics. In Ottawa, our losses average, give or take, around the 3 percent range. If you took 8 billion kilowatt-hours and did the math of 3 percent losses, that works out to about 240 million kilowatt-hours of losses. That's a quarter of a billion kilowatt-hours of losses. We believe that that's a significant conservation opportunity, as that equates to enough power to power about 26,000 homes. 652 Obviously, we can't reclaim all of these losses, there are laws of physics and whatnot, but I would like to point out that there is currently no financial benefit to the LDCs to eliminate distribution losses. So this is not the type of thing that we are actively pursuing on a day-to-day basis. Losses are paid for by all customer classes on a pass-through basis. Our C&DM plan outlines potential areas to be investigated, prioritized and implemented to address this significant conservation opportunity. 653 All of these are designed to drive greater efficiencies within the grid. Again, what we would like to do, in terms of the next steps in our own networks, is complete our own engineering analysis and feasibility studies, understanding again this is not a focus today. Again, projects will be prioritized and selected based on the most attractive investments-to-results ratios. 654 We've identified in our plan a number of things that we would look at. I'd like to point out just two. On a voltage conversion perspective, voltage conversion activites can save up to 90 percent of the losses associated with a feeder because higher voltages and lower currents result in lower losses. In Ottawa, we've gone through an amalgamation of five companies since 2004. There's an opportunity to rationalize a whole significant suite of current kilovolts ranges. 655 The second one I'd like to just point out as we would like to have the opportunity to pursue is in voltage profile management. Voltage profile management would allow us to change the voltage profiles at the distribution station level that can result in a peak reduction at the controllable stations, and we believe that up to 3 percent peak reductions are possible. If you assume that our summer peak is 1400 megawatts, at a 3 percent reduction, that's a potential peak reduction of about 42 megawatts, or enough to power approximately 10,500 homes. 656 I simply paint that as backdrop, because even though there might be some experience elsewhere, certainly from an Ottawa point of view, we believe that there are opportunities that we are not incented to look at at this point. We believe that this is an appropriate and prudent way to spend some of this money because it does address all customer classes. 657 MR. POCH: Let me be clear, I'm not suggesting that it's not appropriate for utilities to be looking at this area. You know, if you save a kilowatt, you save a kilowatt. If you save a kilowatt-hour, you save a kilowatt-hour, wherever that lies. And we're not, in this process today, getting into a discussion of the lack of incentive that resulted from the rate freeze and the flow through. That's certainly a topic that is being discussed in the topic of 2006 EDR, and again, we're certainly with you that the utilities ought to have some basis to fund and pursue such things. 658 But loss reduction is something that, at least until rate freeze or at least until restructuring, was just a routine part of your business. Good engineering meant you looked at loss reduction where it was cost effective; is that fair? 659 MR. BUCKLER: That's correct. 660 MR. POCH: And so when I look at the comments from EDA, that's what those comments were referring to. You, but for this interruption of late in your ability to fund such efforts, or at least your growth inability to fund such efforts, this is not like the kind of customer conservation effort we're talking about where we're into a whole new ball game. 661 MR. McKENDRY: Yeah, I guess, specifically, what I'm referring to is the fact that -- yeah, and I guess just at a high level, it's the type of thing that might be done in the course of business, as things evolve, but we're certainly not, from an Ottawa point of view, doing this on a very proactive basis. The funds aren't there. Even the fact that we haven't had opportunity to have the third tranche MARR available to spend on such things has hampered us, even if we were going to consider it. So what we're simply saying is that, with these monies, we believe that this would be a appropriate thing to start to investigate further on a proactive basis. 662 MR. BUCKLER: George Armstrong would like to comment as well. 663 MR. POCH: Sure, go ahead. 664 MR. ARMSTRONG: I would just like to comment on the intention that all distributors were focusing on distribution system losses prior to 1999. And I think we were all, to varying degrees. But there were distributors, the predecessors of Veridian included, that were much more focused on servicing growth, for example, and perhaps didn't put the emphasis on loss treatment to the extent that others did. So there are more opportunities in some distributors' service areas than in others. 665 Also, prior to 1999, the municipal shareholders of electricity distributors were very debt-averse, so to invest a lot of capital in loss-reduction was an attractive investment for them. 666 MR. BUCKLER: I'd just like to add -- if you look at the losses at each of the utilities, the six utilities across the table here, the value of the losses do vary. So there is more opportunity in some utilities than there is in others. And I believe Richard Lu would like to say a little bit about Toronto Hydro. 667 DR. LU: If I may share the Toronto Hydro situation here. In Toronto Hydro, we have been working on reduction of load-distribution loss for many years, reflected by the high- efficiency transformers and the header-balancing activities. At this moment, most of our pole-mount and submersible transformers are already at 99.2 percent efficiency, and our station transformer efficiencies are at 80 percent. So, from that perspective, especially on the pole-mount and submersible transformers, there is no additional value to continue. But on the other hand, we may have other areas, such as the feeder-capacitor issues, among the list of menus -- from this point of view, there are areas that we may be able to do further work, which -- where we intend to use the C&DM money to further the exploration into those areas, to further reduce our distribution loss. 668 MR. POCH: And I take it that the actual efforts you'll make will have to -- the determination of that will have to wait until you've done some studies, and done some costing, and picked the winners, and evaluated how much of a winner they are. Is that fair? 669 MR. McKENDRY: Correct. 670 MR. POCH: Thank you. Just on the leveraging of programs, you've all -- or most of you have included mention of working with Enbridge, and working with EnerCan and others on leveraging, and this shows up in the C&I area. And I think one of you may have mentioned it in residential areas. Is there any reason you wouldn't want -- first of all, I should preface this by saying, the Minister specifically indicated that a priority would be - I believe the Board did, and the Minister, if memory serves - indicated that this was a valuable thing to do to try to leverage your programs; correct? 671 MR. BUCKLER: Yes, that's our understanding, yes. 672 MR. POCH: Can I take it that you would be -- while you haven't specifically identified any, you are quite amenable to that approach on the residential side, as well? 673 MR. BUCKLER: Yes, we are. 674 MR. POCH: Alright. So the one that I happen to be familiar with is the Centre Guide for Home Audit that I know Enbridge, for example, cooperates - and Toronto Hydro may have been cooperating on - with local community groups funded by EnerCan. Is that somehow captured in your menu, so it's not excluded, as an example? 675 MR. BUCKLER: Yes, we've asked for a certain degree of flexibility, as I mentioned earlier. As we roll out these programs, we may cut some and add others, or add amounts of money to different programs. The examples we gave in our write-ups were examples. We haven't made any decisions. You mentioned Enbridge, for example: We haven't necessarily decided to go with the Enbridge program yet, that's still to be negotiated. 676 The menu of other parties that want to work with us is growing. You've just mentioned another and we are certainly willing to look at that and adapt our programs. 677 MR. POCH: Thank you. Those are my questions. 678 Thank you, Mr. Chairman. 679 MR. KAISER: Thank you, Mr. Poch. 680 Mr. Lyle, I think we'll take the afternoon break at this point, and proceed when we come back with Mr. Shepherd. 681 MR. SHEPHERD: I think, Mr. Chairman, Mr. Dingwall would like to go next. 682 MR. KAISER: Alright. 683 MR. LYLE: Thank you, Mr. Chairman. 684 --- Recess taken at 2:05 p.m. 685 --- On resuming at 2:25 p.m. 686 MR. KAISER: Please be seated. 687 Mr. Dingwall? 688 CROSS-EXAMINATION BY MR. DINGWALL: 689 MR. DINGWALL: Thank you, Mr. Kaiser. 690 Good afternoon, panel. My name is Brian Dingwall. I'm here in the capacity of counsel to Canadian Manufacturers & Exporters Alliance. 691 I'm going to start off with some general questions, some of which will make reference to Exhibit A.7, and that's the only document I'll be referring to in the course of this discussion. 692 Now, momentously, this morning we heard the Board's decision with respect to the proposal of the voluntary shared-savings mechanism and lost-revenue adjustment mechanism. Have any of the applicants had the occasion to determine whether or not they might seek to make such an application in 2005? 693 MR. BUCKLER: What was your question, was have we had the occasion? I didn't catch the wording. 694 MR. DINGWALL: Do you know at this point in time whether you intend to make application for such relief? 695 MR. BUCKLER: In the case of Enersource, no, we have not made that determination. I think each of the utilities would have to speak on that. 696 DR. LU: We have not made the decision yet. 697 MR. McKENDRY: To be determined. 698 MR. GURAN: To be determined. 699 MR. DESNOYERS: We have not made a decision yet. 700 MR. ARMSTRONG: The same goes for Veridian. 701 MR. DINGWALL: Thank you, gentlemen. 702 Now, with respect to paragraphs 28 and 29 of A.7, it appears that one of the proposals that's being put forward by the applicants is that they have the ability to vary their plans of a magnitude of approximately 20 percent of the utilities' third tranche spending obligation. Is that correct? 703 MR. BUCKLER: That's correct. 704 MR. DINGWALL: And where did the figure 20 percent come from? 705 MR. BUCKLER: It was completely arbitrary. We discussed it amongst ourselves. Initially, we wanted full flexibility to be able to adjust our programs to any extent, and not have to come back to the Board. But, on seeing some of the questions that were brought forward from the intervenors, we discussed what kind of process we could have to tie things down, to give you some assurance that, you know, there wasn't too much flexibility. So the 20 percent was thought -- was, I guess, a balance between what we felt we could live with, not knowing exactly how the programs are going to run -- roll out, and how effective they're going to be, and the ability to -- and giving us the ability to adjust between programs, and adjust between CAPEX and OPEX. We felt that the 20 percent was sufficient. 706 MR. DINGWALL: Now, it seems quite clear that the regulatory sands that underpin the C&DM programs are continuing to shift: Do you identify a point in the future when there might be a sufficient level of specificity to not require such a significant variation? 707 MR. BUCKLER: Well, I guess it kind of depends on the program that we're talking about. As I was indicating in previous testimony, certain programs will take longer to evaluate, and know how effective they are, and others we will know sooner. And it's hard to give a general answer on that: It depends on the program. 708 MR. DINGWALL: Would one of the criteria which would relate to whether or not you continue with the program be what form of attribution of benefits there might be to that program? 709 MR. BUCKLER: Attribution of benefits, I don't quite know what you're talking about there. Do you mean allocation of the cost to particular classes of customers? Is that what you mean? 710 MR. DINGWALL: In looking at any particular program, there is an obligation, at this point, a somewhat less concrete obligation, for the applicants to put forward what the benefits of those programs are. It's conceivable that over the course of the next few months the method by which the regulator would allocate or determine some of those benefits for particular programs might become more clear. Is that something that might make you change your pursuit of a particular program? 711 MR. BUCKLER: Possibly, yes. 712 MR. DINGWALL: Now, in paragraph 33 of that document, the last part of the last sentence is that: "The Board will approve actual utilities C&DM expenditures in a future prudence proceeding, provided such expenditures have been incurred in accordance with the approved C&DM plan." Is it the applicants' contention that whether or not these programs work, your spending is prudent as long as the money is spent? 713 MR. BUCKLER: That's correct. 714 MR. DINGWALL: My next series of questions are going to be with some specific programs, and I'd be happy for the applicants to take initiative according to their own skills. 715 Now, in terms of co-branded mass-market programs, has there been much in the way of the determination of how these programs are to be administered and what they're to comprise? 716 MR. DESNOYERS: As I indicated earlier, this program is, in fact, a compilation of a number of initiatives. So at this time, we haven't determined exactly which activities or initiatives will be rolled out under this program. 717 MR. DINGWALL: Would it be fair to say that these programs are focused on load reduction, or would some of them be focused on load control? 718 MR. DESNOYERS: I think under this co-branded mass-market program we have initiatives and activities that will impact both the energy consumption as well as load. 719 MR. DINGWALL: Have the applicants given any thought as to how they would suggest measurement be made of the effectiveness of load control programs? 720 MR. DESNOYERS: Given that this program is made of up of a number of pilots at this time, no, we have not. The monitoring would be carried out, as indicated previously, using the form that we've submitted as part of our evidence, that table that's under A.7, which we will then report on the success of these programs or the failure after the program has been completed. 721 MR. DiRUSCIO: If I can add to that, with regard specifically to the load control programs our intention is to install smart meters on all customers that have these load control programs or participate in these programs so that we can measure the effectiveness of the control devices. 722 MR. BUCKLER: Could I just add, just to clarify, we specifically have programs that are called load control and they're identified as load control, and then we have other programs under our mass-market program that would save energy as well as reduce the peak demand. So I'm not sure which, in regard to which category of program you were raising your question and that's why you got two answers here. They weren't different answers, but two answers. 723 MR. DINGWALL: I appreciate the distinction, Mr. Buckler, and perhaps I could ask: Under the residential mass-market programs, what is anticipated in the context of load control? What's the goal that's being tried to be achieved under that? 724 MR. DESNOYERS: We have not set any targets with respect to load control under this program at this point. 725 MR. DINGWALL: Now, then, moving to the program that was discussed under the guise of residential load control program, I understand that the purpose of that program is to move loads from peak to offpeak; is that correct? 726 MR. DiRUSCIO: Not necessarily. It's primarily designed to cut load during tight supply days when demand is high and supply is low. So there are actually cutting load as opposed to shifting. 727 MR. DINGWALL: Would that be by placing devices which limit consumption on certain high-consumption appliances? 728 MR. DiRUSCIO: That's correct. 729 MR. DINGWALL: Now, previously when programs like that have been implemented prior to 1999, there was some form of credit for that participation in that type of program, was there not? 730 MR. DiRUSCIO: There may have been. I'm not sure of what specifically you're talking about but -- 731 MR. DINGWALL: For example, with respect to hot water heaters, there was -- in some utilities there was separate rates defined and set out for customers that have those hot water heater load limiters; is that correct? 732 MR. DiRUSCIO: I believe so, yes. 733 MR. DINGWALL: So in context of these programs, is it anticipated that you're going to be developing separate rates prior to implementing them? 734 MR. DiRUSCIO: Well, specifically with the load control program, I wouldn't necessarily say that we're developing a special rate. We're going to be testing a number of things with these programs. We're going to be looking at things like the participation rate, the take-up rate on these programs, and really trying to analyze as many aspects of in as we can. In some cases, we may provide incentives, in other cases we may not. The incentive of us controlling or helping the customer manage his bills may be sufficient for the customer to allow us to install the control devices. 735 MR. BUCKLER: I'd just like to add a little bit to that as well. As I was saying earlier, the take-up on these programs kind of depends on a lot of things and we don't know what the take-up is going to be in our specific market. One of the reasons for that was the design of the energy rate. For example, under the regulated price plan that energy rate may be a time-of-use rate, and if there is there will be an incentive rate in that rate for customers to shift load into the off-peak, provided that they have the control systems to be able to do that. So whether or not incentives are provided kind of depends on how that rate looks in the future. 736 MR. GURAN: I wonder if I could add one point too. You were talking about earlier enabling technologies that will be effective with some of our other programs. You can appreciate, and you talked earlier about the hot water tanks and load control, the technologies that are available to us are a lot more advanced than they were in the past. Hot water control tank may have had a timer on it that timed the tank to come on and off at predetermined times, completely in the control of the customer and not the utility. I think some of the things that we're going to explore is the option where customers have control and maybe the LDC has control of that device to turn it on or off during peak times. So it's enabling technologies and then moving on into other platforms as we move forward. 737 MR. DINGWALL: So would it be fair to say that there might be some time between the design of the RPP, whenever that's finalized, and the effectiveness or the methodologies behind some of these load control programs? 738 MR. BUCKLER: Yes. 739 MR. DINGWALL: And with respect to the smart meter initiative, would there be some tie between the rolling out of smart meters to the timing and effectiveness of these programs? 740 MR. GURAN: I would agree with that. 741 MR. BUCKLER: Yes. 742 MR. DINGWALL: So in terms of the residential load program for 2007 not really that much is going to happen, unless smart meters are rolled out more aggressively than under the existing time frame. 743 DR. LU: If I may. The effectiveness of the residential load control program really depends on two factors. I think the first one is the technology, the smart meter control devices and the back room operations. The second one is the ability for our customers to respond, awareness and convenience. And the third is really the economics in terms of the time-of-use rates. 744 Yes, we understand that things go one step at a time, however, we believe that having the infrastructure in place is very important, that's something we can do immediately. How effective it will be, ultimately, will depend on the economics. So where the Board is already working on time-of-rate type of considerations, et cetera, we believe that by the time the rate is available to us, or to the consumers, the infrastructure will be in place to facilitate the effectiveness of the program. 745 MR. DINGWALL: Moving on to the TAPS program. 746 Mr. Buckler, you looked as though you were going to speak for a moment. 747 MR. BUCKLER: No, some of the other panelists were indicating that they might want to say something in response to your last question, but I think the urge has passed. 748 MR. DINGWALL: Just looking at the TAPS program, as an example. I take it that this program presumes replacing existing lightbulbs, as an example, with more energy-efficient ones, and gaining a saving through that; is that correct? 749 DR. LU: Let me start to clarify a few things. In our program, the Toronto Hydro submission, we did use the TAPS capital as a title of the program. The indication of this is that we are willing and in the process of making a partnership with Enbridge. It does not mean that we will not partner with any other existing channels or mechanisms to reach broader perspective, in terms of customers. 750 We view the TAPS program, second, as a set of energy efficiency measures, including existing ones that Enbridge is delivering to the gas water heater residents. And what we merely want to do is add an electricity-efficiency component to it, such as adding the CFL bulbs, or even maybe expand to the electric water heater residences. So those are the things that we are in preliminary consideration, but none of them has been decided yet. 751 MR. DINGWALL: Have your considerations gotten to the point where you've addressed the allocation of benefits achieved by these programs between yourself and Enbridge? 752 DR. LU: No, we have not reached that one. But, in principle, we are definitely aware of those, I think, so-called cross-subsidization issues, et cetera. What we intend to do is really to harvest the incremental ones, due to the electricity aspect of the program. 753 MR. DINGWALL: One other criticism of programs that's come up in the past is that they don't necessarily capture those individuals who might have made the decision to undertake that conservative measure independent of the program. Have your discussions, or the design of your programs, gotten to the point where you've got any kind of road map as to how you might identify who would be there as a result of your program versus who would be there anyways? 754 DR. LU: No, we have not got to that detail. I think the principle here -- the objective is to increase the penetration and participation rate as much as we can. 755 MR. BUCKLER: I'd just like to ask -- I think the principle we're trying to apply is, we'll try to monitor incremental results, and compare that to the incremental expenditures that we make here. 756 MR. DINGWALL: In looking at the social housing programs that have been discussed in a number of the applications, are there already monies available in municipal budgets that would address these needs? 757 DR. LU: Toronto Hydro's menu has a social housing program for a few reasons. The first one is that it is a shareholder mandate, and also a provincial government's instruction, and also a broader community desire for us to get involved with a social housing program. So to answer your question, is there additional money -- is there existing money for the social housing program, the answer is yes. However, those monies are not focused on energy-efficiency components of that sector. And where the utilities get involved is really to utilize the capabilities and founding that we have, to focus on the energy-efficiency side of that similar sector. 758 MR. DINGWALL: Then, in following on your last statement, sir, is it your evidence at this time that these programs will focus on energy efficiency, rather than rate subsidy? 759 DR. LU: Right. We will be focusing on energy-efficiency measures in that sector. 760 MR. DINGWALL: Moving on to LED retrofit for traffic lights, which is another program that's put out there: Do all of the applicants own their traffic lights? 761 MR. DESNOYERS: The traffic lights in Hamilton are owned by the municipality. I can't speak for the other LDCs here. 762 MR. GURAN: In PowerStream's territory, the traffic lights are owned by the Region of York, by the Ministry, by the City of Vaughan. And so those three areas own traffic lights, so three separate -- 763 MR. BUCKLER: I believe in all the jurisdictions, the traffic lights -- the street lights are owned by the municipality. 764 DR. LU: In the City of Toronto, the street traffic lights are also owned by the municipality. 765 MR. McKENDRY: As in Ottawa. 766 MR. DINGWALL: Doesn't it seem as if it would make a lot of sense, if the shareholder were going to save a number of dollars by installing more efficient -- or retrofitting their traffic lights, that they should go and do so? 767 DR. LU: If I may. 768 MR. BUCKLER: Go ahead. 769 DR. LU: There are two barriers in the market for municipalities and the Ministry for Transportation to adopt the LED traffic signal lights. One of them is the cost. And the second is the awareness of this new technology. And we hope through this initiative that we could broaden awareness, and incent municipalities moving forward with those programs. 770 MR. BUCKLER: I think you could make the argument with any customer behind the meter program that, because they own the appliance, or whatever the consuming device is, that they would have their own economic incentive to invest in conservation measures. And I don't think street lights or traffic lights are any different than that. 771 What we're looking at here -- and I think some municipalities, and some customers, for that matter, do invest in conservation methods and opportunities. What we're looking at here is trying to get to the customers that don't do it. And some municipalities have already converted their street lights to -- or traffic lights to LED, and we're not targeting those municipalities. But we're going after the ones that haven't done anything, and providing incentives, and communication and information for them to do that. 772 MR. McKENDRY: If I may add to that, from Ottawa's perspective. There are approximately 1,000 traffic lights in the city of Ottawa. The city is currently installing new LED lights at new intersections, and they put forth a plan to the city requesting the necessary capital to start a retrofit program starting in 2007. 773 What we're looking to do, as we're incenting a variety of programs, is also look at this particular sector to incent, because, based on the high-level projections, there are significant savings that can be derived, to the tune of about 85 percent. But more -- almost more importantly, from our perspective, is -- we believe there's a tremendous public relations opportunity that we can facilitate through the city, through to every driver, basically, as a constant reminder as you're on the street. We would like to tie in that concept of energy conservation as part of changing the culture in the province. 774 MR. DESNOYERS: If I can add -- in Hamilton, the City of Hamilton is -- their capital program is constrained. And this is an initiative that they simply will not be able to get to without the C&DM dollars. So, as Chris articulated, what we did is looked at the LDCs -- or, excuse me, the municipalities that had not implemented this type of program previously, and targeted those, like Hamilton, Ottawa, Toronto. 775 DR. LU: If I could provide some specifics of the situation in the City of Toronto. In the City of Toronto, there are 1,920 traffic signal lights to be retrofitted with LED lights. The project has been proposed, listed, discussed several times before the city for funding. This project, at a cost of $17 million, was -- gave a payback of 8.6 years. You all heard, this morning, the city already saying they have $250 million of shortfall in terms of budget. So you can imagine, with that kind of pressure, where this project will be. 776 However, we also understand the provincial supply and the demand is at a critical moment. Maybe next year, we will not be in the demand and supply equation at this place. So we feel this is one of the programs that's a focused customer, and then have very well-defined, more or less, that we could induce the early adoption of the new technology, and deliver certain savings to the electricity industry. 777 MR. DINGWALL: I'm scared of looking down the row again in case someone else pops up. 778 With respect to C&I load control, would you agree that these programs involve load shifting rather than load reduction? 779 MR. DiRUSCIO: Perhaps I can answer that. On the C&I program these programs are designed to cut load not to shift load. 780 MR. DINGWALL: I note that one of the anticipated elements of that program is identifying customers who might be willing to have service interrupted; is that correct? 781 MR. DiRUSCIO: That's correct. 782 MR. DINGWALL: When you create an interruptible rate, you don't get a lot of volunteers. Are you anticipating creating some form of credit or some form of incentive that would, in addition to the existing rate structure, make such a customer want to be involved in something like that? 783 MR. DiRUSCIO: Again, I go back to my earlier answer with the residential program. We're going to be testing a number of things with this initiative and one of them may involve an incentive to the customer. And if that's what it takes to get the customer to voluntarily cut load and if that's going to be the initiative, then yes, the answer is yes. 784 DR. LU: If I may. For the commercial industrial institutional load control program we understand the flexibility of the interruption of the load or even shifting during the working hours is limited. And it is also our understanding that the customers are not necessarily looking for us for making money by doing energy efficiency measures. Our understanding is that they don't want to spend more money on energy and they don't want to spend more time on energy, so I think that's where the utility can play a key role, a facilitating roll for those commercial, industrial, institutional customers. That we can take this, on behalf of them, so they do not have to spend more money during -- in their bill and also save their time so they can focus on their line of business. 785 MR. McKENDRY: If I may follow on. Certainly, as we're getting more experience in this whole area we're aware of some very exciting technologies that are currently in the market that, effectively, can -- software tools, as an example, that can hook in with existing building automation systems that can take various signals, be it price, or consumption, or weather, and automatically turn load on or shut load off, automatically based on predescribed price signals. So we're very excited about exploring this technology because we believe it can have a tremendous operational benefit to the end customer as well as have dramatic load reduction opportunities from an overall utility perspective. 786 MR. DINGWALL: Wouldn't you have to work very closely with a commodity manager, whoever that might be, whether it's an agent or with the end-use customer, to really put something like that into place? 787 MR. McKENDRY: Yes, and we anticipate that that would be the case. Specifically with our larger customers, they're very engaged and interested in looking at these types of opportunities. 788 MR. DINGWALL: In looking at them, aren't there already service providers that are out there in industry undertaking these services? 789 MR. McKENDRY: There are a variety of engineering consultants and various technologies that are out there, just as there are CFL lights in stores. Again, I think with a we're looking to do is try to instill that conservation culture by effectively becoming the wind beneath the wings to guide and encourage the marketplace towards this energy conservation goal. 790 MR. DINGWALL: Ms. Newland has told me to move on before you actually sing that. 791 Now, with respect to distributed energy, I'm presuming that that means distributed generation. For distributed generation to come into play does there really need to be improvement to the net metering rules and requirements in the existing marketplace? 792 MR. DESNOYERS: That would certainly facilitate a customer contemplating distributed energy. Yes, that would be one enabler. 793 MR. GURAN: I think at this point in time, net metering is -- doesn't have an established criteria at this point in time at Measurement Canada which oversees the commodity of energy flowing either to the customer or back on to the distribution system. It still hasn't defined all of the rules and regulation regarding that and they're presently working on that right now. 794 MR. McKENDRY: I believe that there's opportunity to learn and experiment. For example, with some solar technology just to get a broad brush understanding of what is this stuff and how does it work in a real-life working environment, and that's the potential of a pilot opportunity. 795 MR. DINGWALL: Let me take a minute to, kind of, summarize what I believe I've just heard throughout the course of the last 45 minutes. It seems like there's a significant degree of flexibility being sought into whether or not you actually go ahead with these programs. It seems like there's a significant amount of policy infrastructure which needs to be in place to determine whether or not the programs will be effective, and that again would be another decision factor on whether or not you go ahead with these programs. And it seems like there are a number of external regulatory initiatives which underpin the implementation or the value of these programs, such as the regulated price plan and the smart meter initiative. 796 Given all of those factors, would it not be administratively more wise at this point in time to simply seek an annual approval and wait until the balance of the sands settle before committing dollars to programs that nobody knows whether or not they're going to fit within either the regulatory framework or even the operational framework of the marketplace? 797 MR. BUCKLER: Well, you've asked, you know, a hypothetical question about annual approval. That's the first time that concept has been raised to us. The only approvals that we have on the table before us here are either interim approval or a final approval and, yes, we are asking for flexibility in the roll out of our plans. And yes, we are asking for final approval and we need that final approval before we can start spending the money on these programs. We need the clarity of knowing where to spend these monies without a risk of spending it in the wrong place and having the monies disallowed later on. And I don't know if that answers your question or not, but that's the way we see it here right now. 798 MR. McKENDRY: If I may. Again, we've treated this whole thing, I guess, as a tremendous opportunity to learn. We're new to this. And the reality is, in electricity years, the amount of time that has been provided is not an extensive period of time to come up to speed and learn about all these new things. You mentioned we're looking for flexibility, yes, the answer is true, we are looking for flexibility. We do want to ensure that we're doing the right thing in a prudent fashion. 799 As far as policy and the external regulatory factors, we are well aware of them and we are simply looking to the extent possible to get a jump on what we know is coming down the pipe. So from our perspective, we would consider that the time frames that have been put forward, i.e., spending this money by September 30th, 2007, is an appropriate time frame in order to allow us to get started, to get the necessary pilot programs in place, so that decisions can be made in terms of the next steps in terms of the conservation culture in Ontario. 800 MR. DINGWALL: I don't know if your answer is going to change or be any different with this question, but in looking at the discussion that we had yesterday and the deferral that took place of the 2005 LRAM and SSM to the mechanisms that are to be put in place following the electricity distribution rates process. Coming into this you had three options, going back in October, and the time frame under which the 2006 EDR may not have been as clear at that point. 801 It's December 7th, today, and in another month and a half, the 2006 EDR process will be, hopefully -- would it materially hamper the rolling-out of these plans for 2006 and 2007, if you were provided only with an interim approval? 802 MR. BUCKLER: Well, it would hamper the implementation of the programs, yes, because we would not spend any money until we have the clarity that we're spending it in the right places. We need the final approval before we can commit funds. 803 MR. DINGWALL: Gentlemen, thank you very much. Those are my questions. 804 Mr. Chairman, I'm obliged to take my leave for another commitment, and I hope I will be able to do so with the minimum of disruption. 805 MR. KAISER: Thank you, Mr. Dingwall. 806 Mr. Janigan? 807 CROSS-EXAMINATION BY MR. JANIGAN: 808 MR. JANIGAN: Thank you, Mr. Chairman. 809 My name is Michael Janigan, I'm counsel for the Vulnerable Energy Consumers' Coalition. 810 I may note, at the start of my cross-examination, that our participation here today, and subsequently, has been informed by our ability to consult with and be assisted by the Low-Income Energy Network, which had earlier planned to be a participant in this proceeding, but has, instead, attempted to participate by briefing us extensively on the positions that they wish to advance. And, hopefully we'll be able to advance some of those in the context of this proceeding. 811 MR. KAISER: Thank you. 812 Mr. Janigan, did you wish to mark these two documents that have been circulated? 813 MR. JANIGAN: Yes, I would, Mr. Chairman. The first document I would like to mark is the document entitled "Summary Compilation of C&DM Programs and Budgets for ED Utilities". 814 MR. LYLE: We'll mark that as Exhibit G.1.2, Mr. Chair. 815 EXHIBIT NO. G.1.2: SUMMARY COMPILATION OF C&DM PROGRAMS AND BUDGETS FOR ED UTILITIES 816 MR. JANIGAN: And the second set of documents I'd like to have marked together, if that's possible. One of them is a report entitled "The Low-Income Energy Efficiency Program", which was a document published by the Low-Income Energy Network, and an errata to that particular document, that makes some small corrections to it, principally, the frontispiece which has been included. 817 MR. LYLE: Mr. Janigan, do we have the full document? 818 MR. JANIGAN: Pardon me? 819 MR. HIGGIN: Can I respond, Mr. Chair? That was sent to the Board secretary by courier, the 25 copies, on Friday. We assume that it is available, the full document. 820 MR. KAISER: Yes, do we have the full document available for distribution? 821 MS. NEWLAND: I can just add that Mr. Janigan sent it to us, as well, so our witnesses have the full document. We don't have the errata, and I believe they're just handing that out now -- Mr. Farrell is handing it out to the witnesses. 822 MR. KAISER: Yes, we have it, Mr. Lyle, it's -- the Board members have a copy. 823 MR. LYLE: Thank you, Mr. Chair, then we'll mark the errata document as Exhibit G.1.3. 824 MR. JANIGAN: And the full report will be marked as G.1.3, as well? 825 MR. LYLE: I'm not sure. Was the full report entered earlier? 826 MR. JANIGAN: It's been prefiled. 827 MR. KAISER: Okay. What number is it? 828 MR. LYLE: Perhaps, Mr. Chair, we'll mark the full document and the errata as G.1.3. 829 EXHIBIT NO. G.1.3: THE LOW-INCOME ENERGY EFFICIENCY PROGRAM, PUBLISHED BY THE LOW-INCOME ENERGY NETWORK, WITH ERRATA 830 MR. KAISER: Alright. Thank you. 831 MR. JANIGAN: Thank you. 832 Mr. Chairman, members of the Panel, I propose to separate my cross-examination into two parts. The first part contains two general issues, that are of interest to my clients as part of the residential customer class. The issues are the universality of the proposed programs, and, secondly, the cost-effectiveness of the programs for the residential sector, and overall, the cost per customer of the proposed programs. 833 The second part of my cross-examination will deal with the response of the applicants to the Minister's direction with respect to target programs for low-income customers. And I'm going to be using the two documents that were referenced earlier as part of that cross-examination. 834 Now, in terms of the first area, dealing with the universality of programs, I wonder if you could turn up Exhibit G.1.2. And this is a document which we attempted to put together over the last few days, and we acknowledge the assistance of the applicants in correcting some of this material. And we believe that, while there may still be some errors on -- with respect to some of the numbers there, it should not affect our cross-examination with respect to some of the broad areas that we intend to touch upon. 835 MR. FARRELL: Before Mr. Janigan starts, Mr. Chair, what the witnesses have is a document that we received by e-mail. And on the left-hand corner, here, on what the witnesses have, it says "Draft VECC Exhibit", whereas the handout says "VECC Exhibit". I'm assuming, Mr. Janigan, that the more recent handout replaces what you had earlier, and so I should be -- 836 MR. JANIGAN: That's correct. Your clients, generously, were able to correct our previous attempt at this exhibit, and the new document reflects that correction, and I believe has been gone over with -- 837 MR. FARRELL: I just wanted to make sure they were operating with the right piece of paper. 838 MS. NEWLAND: Mr. Janigan, could I just ask you, before you proceed with your cross-examination -- I understand the witnesses may have some comments about this table, and they may not be prepared to accept all of the data on this table. And it would just be helpful, I think, for the record to be clear on what they accept and what they don't -- or if you want to do it as you go along -- 839 MR. JANIGAN: I want to be clear. This is not being offered for the truth of all the elements of this particular table. I want to refer to certain elements, and to have your witnesses confirm or dispute different elements of that. 840 MS. NEWLAND: Thank you. 841 MR. JANIGAN: Now, I want to start first with the number of programs in the residential sector. And, I take it that this first page of this exhibit sets out the number of programs that are available to residential customers? Mr. Buckler, are you the main -- going to be the main -- 842 MR. BUCKLER: Yes. 843 MR. JANIGAN: -- individual here? 844 MR. BUCKLER: Yes, and your question is, is this -- it appears to be correct, yes. 845 MR. JANIGAN: Okay. Now, how many of these programs are offered by all of the six major utilities? 846 MR. BUCKLER: Well, just count them up. You mean from your exhibit? 847 MR. JANIGAN: Yes, that's right. On page 1, the residential and small commercial market. 848 MR. BUCKLER: According to the yeses you have checked off here, it looks like there's two of them. 849 MR. JANIGAN: Okay. And I believe the social housing program is almost there with the exception of Veridian; am I correct? 850 MR. BUCKLER: That's right. 851 MR. JANIGAN: Now, under this program design I would assume that customers in several of the six utilities cannot access programs that are available to customers in the neighbouring service areas; am I correct on that? 852 MR. BUCKLER: Can you ask that question again, please? 853 MR. JANIGAN: Well, because there are only three, well really only two programs that are across the board for the six utilities and one that's for five utilities, I assume that under the program design there are customers in several of the six utilities that cannot access programs that may be available to customers in the neighbouring utilities. 854 MR. BUCKLER: Yes, I think I -- I think what you're saying is that because we have not offered up these programs, all of these programs in each of our utilities, some customers in certain utilities may not have access to those programs. If that's what you're asking, yes. 855 MR. JANIGAN: And the reason that these programs have not been offered in the -- across the board is not because they've been screened out as not cost effective. 856 MR. BUCKLER: That's correct. 857 MR. JANIGAN: Why is there not an objective of providing customers with a core menu of well-designed, cost-effective, universal C&DM programs that have a proven track record? In other words, why isn't it an objective to have a core program offered across the board? 858 MR. BUCKLER: Well, the selection of the programs at each of the different utilities is -- there were no specific requirements, no prescribed requirements for selecting these programs that were given to us in the guidelines from the Ontario Energy Board. We were only given broad guidelines and we used some judgment in the selection of these programs. Paragraphs 23 and 24 of our written evidence specify exactly how we did select these programs, but perhaps I could be helpful by saying that many of these programs are pilot in nature, and so we're testing them out in the different markets to see how they go. And each of us has our menu of pilot programs that we're going to test out on behalf of the others, learn from it, share the information that we gather, and then roll them out on a broader basis later on. 859 Some of these programs may not work very well, for example, and it would be, therefore, a waste to roll them out everywhere, you know, knowing that they may not work. So we're testing them out on a smaller scale, and then if they do work we'll roll them out on a full scale. 860 MR. McKENDRY: If I may add, the co-brand and mass-market program is one that we have intentionally put forward to say that we are going to collectively work on this so that we can effectively, through the major urban centres that we represent, have consistency of application of this particular trial program. 861 MR. JANIGAN: Is ultimately the objective to have a core menu of programs? 862 MR. BUCKLER: Yes. At some point in the future, yes, we would like to have that, particularly for, you know, second-generation of conservation and demand management programs, if we ever get to a second generation later on. 863 MR. JANIGAN: Mr. Armstrong, I wonder if you can tell me why Veridian residential customers in your service territory can only access one program other than the mandated smart meter program? Is there no benefit in the other programs? 864 MR. ARMSTRONG: Well, we're the smallest partner of the six. We have limited resources to administer a broad range of programs so we focused our efforts on programs where we thought there are the greatest benefits. But we are going to be working with the others, and where there are successful programs that we want to adopt, we do have the provision in our evidence that we can reallocate funds to the successful programs. And that's what we intend to do. 865 MR. JANIGAN: So it's primarily a cost consideration? 866 MR. ARMSTRONG: It was primarily we wanted to focus our efforts on, you know, a core number of programs that we could effectively administer and we wanted to focus our efforts where we thought we could get the greatest benefit. We saw some great opportunities in our distribution system optimization, for example. 867 MR. JANIGAN: I'm just trying to link what you are telling me now to what you were telling me earlier. Presumably, the effort to focus was brought about for financial reasons; was it not. 868 MR. ARMSTRONG: Well, we have a limited budget, a limited spending envelope if that's what you mean. 869 MR. JANIGAN: Can you tell me, I note that you did not offer a social housing program. Is there no social housing in your area? 870 MR. ARMSTRONG: Yes, there is. 871 MR. JANIGAN: Can you tell me why that wasn't one of the programs that you focussed? 872 MR. ARMSTRONG: Well, there will be programs offered under the mass-market program that will be available to residents in social housing projects. We will be marketing those. So we have not excluded that group of customers. 873 MR. JANIGAN: Those group of customers would participate to the extent they are among the general population of residential customers. 874 MR. ARMSTRONG: That's right. 875 MR. JANIGAN: Now, if we turn to the commercial/industrial sector, on the customer side of the meter there are only two common or universal programs, of which one is the smart-meter program, excepting Enersource here; is that correct? 876 MR. BUCKLER: That's correct. 877 MR. JANIGAN: And once again, is it the intention that ultimately a core menu of proven programs on the customer side of the meter will make monitoring and reporting, in general, a regulatory oversight much more possible? 878 MR. BUCKLER: Sorry, I'm just -- could you ask that question again, please? 879 MR. JANIGAN: Would the same considerations apply with respect to providing a core menu of proven programs for the commercial/industrial sector that we discussed on the residential sector? 880 MR. BUCKLER: Yes. 881 MR. JANIGAN: Okay. And ultimately, the objective is to provide a common menu of programs. 882 MR. BUCKLER: The objective is to test out a number of different programs and eventually get to a menu, somewhere down the road, that we could use for second-generation programs. 883 MR. JANIGAN: Now, Mr. Dingwall asked you several questions with respect to the LED lights for traffic signals. And I don't want to repeat his questions, but just so that I understand the rationale behind this program, I believe you said, Mr. -- I think it was Mr. Buckler, but I'm not certain, that the main -- the two drivers for this program were costs and awareness. 884 DR. LU: That is correct. 885 MR. JANIGAN: Okay. And that one of the -- the program attempts to meet the barrier of costs that exists for some municipalities for installing these lights; is that correct? 886 MR. DESNOYERS: It certainly was the case in Hamilton, yes. 887 MR. JANIGAN: And there is some promotion of awareness among the users of the lights. I didn't get the awareness aspect of this equation. 888 MR. McKENDRY: If I may. Certainly, from the City of Ottawa's perspective, it's our intention to engage in discussions with them in terms of leveraging the whole conservation culture attitude by coming alongside the City, offering assistance to advance programs that are designed to give 85 percent energy consumption reductions that hopefully would help to offset the municipal costs that will impact positively all ratepayers in their area and look to tie, simply from a public relations perspective, the opportunity that every time you're on the street and seeing these lights, which also happen to be a little distinctive because they are brighter, maybe that will twig something in people's mind to say, Hey I can save 85 percent, or some significant number, if I start to look at lights in my own home. 889 MR. JANIGAN: So awareness number one, the City will be thrilled to have a partner? 890 MR. McKENDRY: Yes. 891 MR. JANIGAN: Number two, that people looking at the lights will -- might go home and do something in a conservation vein? 892 MR. McKENDRY: Hopefully. 893 MR. JANIGAN: Alright. Now for those cities that have invested in this technology before, presumably, they did it because it was a cost-effective step for them to take, was it not? 894 MR. McKENDRY: I believe so, yes. However, I can say from an Ottawa perspective, there is, as I mentioned previous, there is about a thousand lights, and for the new lights, yes, they are, indeed, engaging in this new type of technology. However, as with many municipalities, there's a struggle to meet the capital expense budget, and the opportunity that exists here is to advance the market. They're currently planning potentially putting forward the application for assistance for LED traffic lights in about the 2007 timeframe. We're looking, simply, to come alongside and help advance that, by a smaller sum of money. 895 MR. JANIGAN: In straight-ahead financial terms, essentially, the ratepayers of the electricity distribution utility are going to be paying extra rates to subsidize the city who is the shareholder of the distribution utility. Isn't that, essentially, how it's done? 896 MR. BUCKLER: I'm sorry, I'm not sure I understand that at all. 897 MR. JANIGAN: Well, number one is that these funds are coming from the additional return that's available through conservation programs. So, let's say, in Ottawa's case, Ottawa ratepayers will be paying additional rates to put traffic lights in for the city -- 898 MR. BUCKLER: No, I -- 899 MR. JANIGAN: -- who owns the distribution utility. 900 MR. BUCKLER: Well, you're drawing a connection between the rate increase and the expenditures on this program. 901 MR. JANIGAN: You wouldn't get the rate increase though, would you? 902 MR. BUCKLER: No, the rate increase has already been determined. It's been predetermined, and there was a -- 903 MR. McKENDRY: This is shareholder money. 904 MR. BUCKLER: -- and there was information given from the Board this morning that it is predetermined. And it was settled a couple of years ago when the -- during the MBRR, market-based rate-of-return hearings, so that rate increase is going to happen. 905 What we're looking at here is expenditures on conservation programs that will benefit all customers. 906 MR. JANIGAN: But if you didn't undertake these conservation programs you wouldn't be able to assess that increase. 907 MR. BUCKLER: No, I don't think that's the case. We -- 908 MR. JANIGAN: It's not conditional upon you -- 909 MR. BUCKLER: It is conditional upon us having the increase in 2005; however, it would have happened in 2006, regardless. 910 MR. JANIGAN: Okay. So in -- let me -- I'll ask another question. Are these expenditures on the LED traffic program going to be put in this capital expenditures of the utility? 911 MR. McKENDRY: It's not the intention at Hydro Ottawa, no. It's an incentive like incentives across the board. They would be considered an expense in OPEX. 912 DR. LU: In the case of Toronto Hydro, the total expense for this program for the next three years is 450,000; in other words, 150,000 a year on the OPEX, no capital involved. In other words, it's simply about persuading our municipalities, et cetera, Get on with it. 913 MR. JANIGAN: And that's the same for the -- 914 MR. DESNOYERS: The amount in Hamilton is also fully-expensed. 915 MR. JANIGAN: Now, with respect to the utility side of the meter, including distributed energy, am I correct that the six utilities are spending something in the neighbourhood of 30 to 50 percent of their total budget in this area? 916 MR. DESNOYERS: No. I believe we've indicated that the total spend on the network side, or distribution-system improvements, is 10 percent, collectively, 10 percent of the total of the 6 LDCs' spend. 917 DR. LU: If I may. 918 MR. JANIGAN: Sure. 919 DR. LU: If you are referring, specifically, to the distributed energy portfolio that 6 utilities intend -- 920 MR. JANIGAN: Yes. 921 DR. LU: -- the total expense for that is 19 percent of the total 72 million on the distributed energy. 922 MR. BUCKLER: I believe the previous figure that was offered by Robert Desnoyers, 10 percent, that was applied to distribution loss-reduction expenditures. 923 MR. DESNOYERS: That's correct, my mistake. 924 MR. JANIGAN: Okay. Now -- sorry, go ahead. 925 MR. BUCKLER: So, it's only 19 percent, and not the 30-some-odd percent that you quoted. 926 MR. JANIGAN: That I originally suggested. Okay. And that's a percentage that applies across the Board, is it? 927 MR. McKENDRY: That's the sum total. 928 MR. BUCKLER: That's the percentage of the total for all six utilities. 929 MR. JANIGAN: Okay. Now, I assume that the biggest beneficiaries of the expenditures on the load-displacement generation, and the standby generation, are the individual commercial and industrial customers. 930 MR. BUCKLER: Well, no, I would say that everybody benefits from load displacement. If you reduce the system peak, and you don't have to build new generation, and -- then everybody benefits from that. The transmission system benefits; the distribution system benefits; everybody benefits. 931 MR. JANIGAN: Well, I'm assured that there are benefits that flow to a number of different parts of the system, but the principal beneficiary, would you not agree, is the individual commercial and industrial customer? 932 DR. LU: If I may. I would not characterize the beneficiary that way. What we intend to do here is to simply mitigate the gap between the supply and demand so, by doing so -- that we reduce the demand, so the province will not go out there and buy expensive electricity at peak times. That benefits all the customers' interests. 933 MR. JANIGAN: Have you quantified the benefit to the distribution system in the overall utility, particularly in the case of non-dispatchable co-generation and standby generators? 934 MR. DESNOYERS: No we have not, at this time. 935 MR. JANIGAN: So, when we're talking about benefits, we have to do it in terms of general and notional terms, not in quantifiable terms; is that correct? 936 MR. BUCKLER: At this point, yes. 937 MR. JANIGAN: Okay. 938 MR. BUCKLER: But I should point out that this is one of the programs that the Minister suggested is an appropriate program to have on our menu of expenditures. 939 MR. JANIGAN: Now, I believe you indicated to Mr. Poch that you have done a cost-benefit analysis of some sort for some of these programs -- some or all of these programs. Am I correct on that? 940 MR. BUCKLER: Yeah, for some of them, we have, yes. 941 MR. JANIGAN: And would you be able to undertake to produce that analysis? 942 DR. LU: Let me try -- If I may. 943 We are currently in partnership with Union Gas, Hydro One, and Toronto Hydro, possibly with Enbridge, conducting a total resource or cost-of-benefit analysis, avoided the cost studies literature. We currently do not have any documentation or report on that particular item. We expect that the study will be completed sometime early next year, and we are willing to share it with our industry. 944 MR. JANIGAN: What kind of information or evidence can you put before the Board to show that these programs have a positive benefit-cost ratio to the utility and its customers? 945 MR. BUCKLER: The -- we have done a search, a data search. We've looked at certain papers that have come out in other jurisdictions. I have a listing here, somewhere, but -- BC Hydro, for example, we got some information from BC Hydro, some information from Energy Information Services Inc., national conservation programs, and the Toronto Clean Air Foundation, to help guide programs that we've selected here. 946 MR. DESNOYERS: If I may. We did not perform a TRC or detailed cost-benefit analysis on these programs. What we did is take -- took a balanced approach in how we would allocate the funds amongst the various market sectors. We took a top-down approach. We looked at other jurisdictions, what they were doing, what they were successful in. We believe that we've allocated the funding -- there's a balanced approach across all of the market sectors, the residential, the commercial/industrial, the distribution system and the shareholder itself. 947 MR. JANIGAN: The difficulty though, gentlemen, is at the end of the day the Board has to determine whether or not the assets that are going to be used are going to be used and useful for the provision of utility service. I take it that the evidence that you're putting before them is these are programs -- you've done what's called an environmental scan, you've looked at what's been done in other areas, you've chosen some that you think might fit, but you haven't done any quantifiable cost-benefit analysis to say that these things are definitely going to work. 948 MR. DESNOYERS: I think -- if I might, Chris. 949 We discussed that before we actually roll out these programs, before the implementation, that there will be some preliminary evaluation. Once we've completed our ongoing monitoring, shared those results amongst ourselves, those programs that are not performing will not be continued and certainly wouldn't be put forward as a second-generation C&DM program. 950 MR. JANIGAN: So what the Board is being asked to approve is a set of programs that may or may not work, they will be evaluated, and they may or may not be continued, but you want final approval on this whole process; correct? 951 MR. McKENDRY: If we look at the third tranche MARR that we have available to us as being shareholder's money, of which we've been asked to invest in a series of conservation initiatives that are designed to encourage the conservation culture in the province, we're new to this. We believe that this money is available to allow us to pilot and test and learn. We have determined who's going to do what, where, why, and when. We have not determined how all the hows at this particular point in time. We're looking forward to taking these monies to learn, to track our results, to share with each other, and then position for, should there be a second-generation or a go forward, then we will be in a position to address all of the issues related to costing and whatnot. 952 MR. DESNOYERS: If I may, if you refer to the Minister's letter of May 31st wherein he indicated that what he was looking for was a broad range of programs, programs that would reduce the customer demand and/or energy consumption, and that priority should be given to programs which would leverage existing programs, for example, Natural Resources Canada and the Federation of Canadian Municipalities. We believe that we've complied with that Board's filing requirements. That was the standard and we believe we've met it. 953 MR. JANIGAN: Gentlemen, I've been writing down or noting some of the comments you've made about the program. It's going to be a learning experience, a pilot program, it might not work very well, we may evaluate them, we may choose to discard them. I mean all of the language that you're using about the programs suggests that if approval is given it could be interim approval not final approval. Generally speaking, when somebody is learning how to do something they don't get the final certificate at the end of the day. When you go to learn how to drive a car you don't get your learner's permit and then the driver's licence as well that will automatically take affect. 954 MS. NEWLAND: Isn't that argument? Mr. Janigan, is there a question there? 955 MR. JANIGAN: I'd like them to respond to that. 956 MR. BUCKLER: Well, I'm not sure -- 957 MR. McKENDRY: If I may. Just as an example, in going to university sometimes grants are given and sometimes results are not expected when the grant is given. This is somewhat akin to a learning experience in that type of an environment. 958 MR. BUCKLER: We've been asked to spend this money by the Minister and spending the money is required in order for us to get a rate increase to acquire the money to make the expenditures. And at this time, we've done our homework, we've looked around at other jurisdictions, other programs that have worked very well in other jurisdictions, and it would only make sense that those programs that we've selected would work in this jurisdiction, in our municipalities. However, we don't know exactly what the uptake is going to be and how well they'll work so it's difficult for us to quantify the results at this time. 959 MR. JANIGAN: Okay. I wonder if we can turn to the Minister's letter now, and I'd like to look at part 2 of my cross-examination. The letter of May 31st, 2004, part 2, dealing with low-volume or low-income customers. And I would note on page 2 of this letter, let's start at the bottom of page 1, the Minister indicated: 960 "In order to expedite short-term actions, I fully expect you to require some assurance with respect to conservation proposals that will be considered for the purposes of cost recovery. In this regard, without limiting the range of innovative proposals that may be brought forward, I believe that reasonable new expenditures on the planning, delivery and evaluation of the following specific measures should be supported by the Board." 961 And it indicates on the fifth bullet down: "Programs and initiatives targeted to low-income and other hard-to-reach consumers." 962 Can I ask you how you have met or would propose to meet this particular objective? 963 DR. LU: If I may. In our submission, the Toronto Hydro program, we specifically included a program entitled "social housing program." That's where we intend to fulfil our obligations under the fifth bullet of the Minister's letter. 964 MR. JANIGAN: And I wonder if you could assist me by defining social housing and how the social housing program came to be included? 965 DR. LU: The definition of the social housing is really no different from the existing definitions used by the social agencies, the governments at different levels. How this program comes into this menu is really based on the desire of our community, the desire of our shareholders and the instruction as stated in the Minister's letter. 966 MR. JANIGAN: What consultation was there with social housing agencies in putting forward the program? 967 DR. LU: We have been in discussions with community groups such as the Low-Income Energy Network. We did not mention the names there, we've known each other for long time, we've been working on these programs for a long time. We are also working for the delivery agencies in Toronto who have been serving the social housing sectors. And that's basically discussions that we had. 968 MR. JANIGAN: Who were those agencies that you consulted? 969 DR. LU: Green Saver, for one, that's a delivery agency. We are also working with the Toronto Community Housing Corporation, discussions we had. We are also working with the City's Energy Efficiency Office, we had discussion, and not to exhaust the list but just to name a few. 970 MR. McKENDRY: And in Ottawa, EnviroCentre. 971 MR. DESNOYERS: And in Hamilton, Share the Warmth. 972 MR. JANIGAN: And would you agree that, although many low-income consumers live in social housing, a large proportion do not and are either renter or home-owners? In other words, not all low-income customers live in social housing. As a matter of fact, probably the majority of them don't. Would you agree with that? 973 DR. LU: If I may. In the residential sector the customers have a load below 50 kilowatts. We have two programs, one specifically to the social housing program and another one is the co-branded mass-market program. We intend with combination of both we take a targeted and also broad scope approach to reach as many customers as we can. 974 MR. JANIGAN: Well, as the Exhibit G.1.3 notes, the low-income energy efficiency program, this is a program which has been designed by the Low-Income Energy Network with the financial support of the Toronto Spirit Fund and the Province of Ontario. But principally, this comes about as a result of perceived informational and financial barriers to low-income customers participating in a general residential program. Would you agree with that? 975 DR. LU: There are a couple of factors, I think, in that sector, when energy efficiency is of a concern. I think there is a vicious cycle, where you have less income to pay for the bills, and more energy consumption will also increase the size of the bill. So, I think there is a financial difficulty to invest in more energy-efficient infrastructure, and also there is a general level of awareness that may -- could have a higher awareness of energy-efficiency impact to the financial aspect. 976 MR. JANIGAN: So, if you're going to target low-income consumers, you have to address first the financial barriers that you referred to -- many of them don't have the ability to invest in those kind of efficiency-related initiatives. And secondly, you have to raise their level -- general level of awareness of conservation measures? 977 DR. LU: In general, I would agree with the second part. The first part, overcome the financial barriers -- I think that's why all levels of government and social agencies are coming together, working together, to try and overcome that barrier. 978 MR. JANIGAN: Now, are you aware that the Ministry of Energy funded two studies for energy efficiency for low-income consumers, one of them the one you had before you today? There is another one entitled, as I understand, The Social Housing Study? 979 DR. LU: I do not have, in my possession, those reports. 980 MR. JANIGAN: Okay. I was wondering, effectively the -- you put a placeholder in -- into the program for the social housing program. Why didn't you include a placeholder for a low-income efficiency program, as well? One that would address the needs of the low-income consumers that weren't in social housing? 981 DR. LU: From a menu perspective, obviously, this is not an exhaustive list of the things that one could do. However, this is the list, to the best of our knowledge, that we could balance our approaches while covering different sectors of the customer base. So we view this space holder -- placeholder for the social housing program may well be for the energy-efficiency programs that you just mentioned. 982 MR. JANIGAN: So the social housing program may have a broader mandate? 983 DR. LU: From electricity energy-efficiency perspective, yes. 984 MR. DiRUSCIO: I'd like to add to that. If I may. I think in our programs we've offered a broad array of programs in the residential market, such as the mass-marketing, the load control, et cetera, that will address some of the low-income families and some of their needs. 985 MR. JANIGAN: But, you agree with me, only if you can overcome the financial and awareness barriers that we've referred to earlier. 986 MR. DiRUSCIO: Yes. 987 MR. JANIGAN: And that's the reason for targeting low-income programs; right? 988 MR. DiRUSCIO: That's one of the reasons, yes. 989 MR. JANIGAN: Now are you aware that Brantford Hydro has included a low-income energy-efficiency program in its portfolio? 990 DR. LU: Not to my knowledge. 991 MR. BUCKLER: No, we haven't had a chance to review the Brantford submission. 992 MR. JANIGAN: And I take it this report, Exhibit G.1.3, has not been reviewed except as it was provided by us recently. 993 MR. DESNOYERS: That's correct. Not in detail. 994 MR. BUCKLER: We just received a recently. I read it quickly and it looked like a good program, and it's one of the ones that we'll have to consider. It's one of the reasons we're asking for flexibility in our program selection. 995 MR. JANIGAN: Let me follow up on flexibility. Effectively - and I don't want to put words in your mouth - what you're saying is, Some of these programs that you've designed could be altered to fit the parameters of a low-income energy-efficiency program as they're implemented. Is that what you're saying? 996 MR. BUCKLER: That's what we're looking for, yes. 997 MR. JANIGAN: Thank you, Mr. Chairman, those are all my questions. 998 MR. KAISER: Thank you, sir. 999 MR. SHEPHERD: Mr. Chairman, I'll just take a second. 1000 MR. KAISER: Thank you. 1001 MS. NEWLAND: Mr. Chairman, just while Mr. Shepherd is taking his seat -- Mr. Farrell just pointed out to me that, when Mr. Janigan addressed the witnesses regarding their review of the low-income efficiency program study that he filed, he actually gave the exhibit number that was given to the errata sheet, and not the exhibit number that was given to the program. Just so that the record is clear -- 1002 MR. LYLE: Sorry, just let me clarify. Actually, I ended up giving the exhibit number to the entire document. 1003 MS. NEWLAND: Okay. Mr. Farrell is wrong? 1004 MR. LYLE: It does happen. 1005 MR. FARRELL: What, pray tell, then, is Exhibit F.3? 1006 MR. LYLE: You're correct, Mr. Farrell, you are correct in that we could not initially find Exhibit F.3. That was the reference to -- the original filing reference of that on the record. Now, as a reference to the entire document, would be Exhibit G.1.3. I'm happy to amend the record, if you like, so that G.1.3 will now return to the errata, and F.3 will be the original document, as filed. 1007 MR. KAISER: Is that acceptable, Mr. Farrell? I don't want to throw off your numbering. 1008 MR. FARRELL: I just wanted to be clear that I had -- that there was no question in the record as -- when Mr. Janigan referred to the entire study which the witnesses had before today, that they were referring to that. And I was concerned that, if it was referring only to the replacement pages, then there might be some confusion. So I don't care. Perhaps we should have G.1.3 to be the study as amended by Mr. Janigan's filing today, much as we did with the single number for the applications with the inserted pages. 1009 MR. KAISER: That's fine. I think that's the way it stands now, isn't it? Alright. 1010 MR. JANIGAN: Let the record show that Mr. Farrell's record is intact. 1011 MR. SHEPHERD: Mr. Chairman, we didn't expect to get to me today, so I'm discombobulated here. 1012 CROSS-EXAMINATION BY MR. SHEPHERD: 1013 MR. SHEPHERD: I guess, witnesses, I'd like to start with the process you went through to develop these plans. Some of you had strategies prior to this year to expand your demand management activities, right? 1014 MR. BUCKLER: Sorry? 1015 MR. SHEPHERD: Prior to today, prior to the plans that you're tabling, you already had strategies in place to expand your demand management activities, correct? 1016 MR. BUCKLER: Prior to today, yes. 1017 MR. SHEPHERD: Prior to six months ago. 1018 MR. BUCKLER: Well, I think -- I don't want to say that, in general. Some of the utilities were working more aggressively on this than others. 1019 MR. SHEPHERD: Okay. Well, I'll take a specific example. Toronto Hydro's 2003 annual report says that, in 2004, and I quote, -- sorry, that Toronto Hydro will, I quote, "Implement a demand-side management strategy." That's what the report says you'll do in 2004. So it's December. Number one, do you have a strategy; and number two, what steps have you taken to implement it? 1020 DR. LU: If I could clarify. At Toronto Hydro Corporation, we have a shareholder direction. In the shareholder direction, specifically mentioned, Toronto Hydro is to operate in a way that is environmentally-friendly, including energy-efficiency from a sustainable-development perspective, and so on and so on. It is from that shareholder direction we developed a total, overall corporate strategy, including a demand-side management strategy, and said three things. Basically, we want to do customer education; we want to enable the broad acceptance of DSM measures; we also want to enable the development of distributed generation. It is under that strategy in 2004 we have established a Green THC Toronto Hydro Corporation team to implement that strategy. What came out from that is a general awareness, for example, our net metering policy that is being reviewed. Also from there we included three initiatives, waste management initiatives and so on. So it's from that broad scope that we do have activities in the green Toronto Hydro Corporation team. 1021 MR. SHEPHERD: So there is a demand-side management strategy for Toronto Hydro already in place; right? 1022 DR. LU: At a high level, yes. 1023 MR. SHEPHERD: Can you undertake to table that strategy, Dr. Lu? It's a document. 1024 DR. LU: It's three lines. 1025 MR. SHEPHERD: It's not in a document? 1026 DR. LU: No, it's a three line deliberation of our thinking and of the shareholder direction; customer education, DSM enabling, you got the strategy. 1027 MR. SHEPHERD: Okay. Do any of the other utilities have a strategy, either in writing or not? 1028 MR. ARMSTRONG: Veridian does not. 1029 MR. BUCKLER: Enersource does not at this time. Our strategy is reflected in these plans that we've submitted. 1030 MR. McKENDRY: Same goes for Hydro Ottawa. 1031 MR. DESNOYERS: In Hamilton, Hamilton Utilities Corporation adopted energy conservation as its corporate social responsibility about a year and a half about ago. And out of that came the development of our powerWISE program, which is essentially an information educational portal to deliver messages to our customers. If you go to Hamilton Hydro's website and link on the powerWISE, you will be able to, for example, pull up an online calculator where a residential home can do some simple calculations and determine where the potential savings of implementing some initiatives within their home. That would be the extent of our C&DM within Hamilton. 1032 MR. SHEPHERD: Well, let my just stick with the strategy for a second. So did you have a written strategy when you adopted that? Did you have a written strategy? 1033 MR. DESNOYERS: We adopted energy conservation as our corporate social responsibility. So that would be the extent of our strategy. From that we developed the powerWISE. 1034 MR. SHEPHERD: But there's no document for me to go after here. There isn't one. 1035 MR. DESNOYERS: I suspect there is a document to indicate how they might roll out powerWISE, produce the website that we deliver these message about powerWISE to our customer base. 1036 MR. SHEPHERD: That a public -- is that available to the public? Can we see it? 1037 MR. DESNOYERS: I believe that's on our website under that powerWISE link. 1038 MR. SHEPHERD: Great. I wonder if you could undertake to file a copy of that. 1039 MS. NEWLAND: So you'd like us to just print it off the website. 1040 MR. SHEPHERD: Well, on the website it is not evidence and here it is. 1041 MR. DESNOYERS: Just so I'm clear, what you're asking for is the strategy on how we rolled out powerWISE? 1042 MR. KAISER: I think he's asking for a document outlining your strategy, and I think you've indicated that to the extent it exists it's on your website. 1043 MR. DESNOYERS: Yes. 1044 MR. KAISER: Is that right? 1045 MR. DESNOYERS: That's correct. 1046 MR. KAISER: So if you could print a copy and provide that to Mr. Shepherd he'll be happy. 1047 MR. LYLE: We'll mark that as Undertaking H.1.1. 1048 UNDERTAKING NO. H.1.1: TO PROVIDE HAMILTON HYDRO'S STRATEGY ON CONSERVATION, AS STATED ON THEIR CORPORATE WEBSITE 1049 MR. SHEPHERD: Just following up on that, I guess all of these plans have a powerWISE type of plan. They call it a co-branded mass-market program which says, for example, powerWISE. The intention is it to take the -- correct me if I am wrong, to take the experience of Hamilton on this website and, sort of, expand it to the be available for all six utilities; is that right? 1050 MR. BUCKLER: That's correct. 1051 MR. SHEPHERD: But the website is already there so you just need to link to it and it's done; right? 1052 MR. DESNOYERS: If I might add, the co-branded mass-market program, as I indicated earlier, is a compilation of a number of initiatives. And that came out of a session or several sessions amongst the six LDCs when we were putting together ideas and -- or programs, activities, initiatives, we realized that there was a common thread throughout these programs, in that what we wanted to do was to deliver it under a brand. PowerWISE brand, trademark, exists in Hamilton, so what the other LDCs will be sharing is that brand name, that powerWISE name. 1053 MR. SHEPHERD: You will be licencing it. 1054 MR. DESNOYERS: The programs themselves are not necessarily being delivered at this time in Hamilton. The powerWISE trademark will, in essence, be licenced to the other six -- the other five LDCs. 1055 MR. SHEPHERD: Will the other LDCs be paying Hamilton a fee for that? 1056 MR. DESNOYERS: There will be a nominal amount just to cover the cost that we put into developing, the cost in trademarking the powerWISE logo. 1057 MR. SHEPHERD: So it would be like a few hundred dollars. 1058 MR. DESNOYERS: That's correct. It's a nominal fee, but we will have a licence agreement in place. That was the intent. 1059 MR. SHEPHERD: That's fine. Your lawyers can do that, I'm only concerned with whether there's dollars flowing. 1060 Coming back to strategies, does anybody else have a strategy? No? 1061 Let me just focus or a second on Hydro Ottawa, we looked at your annual report as well. They're wonderful things. And your annual report says on page 14 as part of one of your goals, your corporate goals for 2004: "With the expertise and experience on our Energy Ottawa team we should expect to play a visible role in the community in effectively using the province's limited energy resource. We can achieve this by promoting the benefits of energy management." 1062 It goes on to talk about other things you can share as well. So just before I get to the strategy, who's Energy Ottawa? 1063 MR. McKENDRY: Energy Ottawa is an affiliate company of Hydro Ottawa Limited. 1064 MR. SHEPHERD: That's an unregulated affiliate. 1065 MR. McKENDRY: Correct. 1066 MR. SHEPHERD: Is some portion of the Hydro Ottawa plan, the dollars in your plan, being paid to Energy Ottawa? 1067 MR. McKENDRY: No, not directly. We would be treating Energy Ottawa as we would any other potential partner and treat them the same. 1068 MR. SHEPHERD: What does, "No, not directly," mean. That you might be paying them money, but only if they partner with you on a plan on one of the programs? 1069 MR. McKENDRY: We would treat them just as we would any other organization that operates in the marketplace. 1070 MR. SHEPHERD: Okay. Just before I leave that, are any of the other five utilities making payments to affiliates as part of their planned spending? 1071 DR. LU: Not at Toronto Hydro. Toronto Hydro would treat our affiliates the same as any other energy service companies in the market. 1072 MR. SHEPHERD: You won't be buying any services from them except at market rates? 1073 DR. LU: It will have to be from a fair market operation rule. 1074 MR. BUCKLER: For Enersource we had contemplated doing some of work through one of our affiliates at one time, but we've decided not to do that now on rolling this out. 1075 MR. ARMSTRONG: Veridian may be executing some of its smart meter implementation plan through an affiliate from which it buys meter services. 1076 MR. GURAN: PowerStream will not be working with any affiliate that we have. 1077 MR. DESNOYERS: Not in Hamilton. 1078 MR. SHEPHERD: So only Veridian will actually be doing this. Okay. 1079 So let me come back to the development of the plan. Each of your utilities was advised on December 19th last year that you would be given access to your third tranche if you spend an equivalent amount on C&DM; right? About a year ago. 1080 MR. BUCKLER: That's correct, that's the Minister's letter, yes. 1081 MR. SHEPHERD: And I guess, what immediate actions did you take as a result of that? What things did you do to start work on that a year ago? 1082 MR. BUCKLER: Well, I think it was different things in different utilities. I think speaking for Enersource, we started thinking about what -- how we might deliver these programs, whether it be through an affiliate or directly ourselves, and at that time we were looking at doing through affiliate. And we subsequently decided not to do it that way because it looked to be too complicated to keep track of the costs and whatnot. At that time, we were giving consideration to a lot of the questions, the framework questions around how these programs might be costed and delivered and policy type questions. You know, are expenditures going to be allowed in the rate base, and how much money is it that we have to spend? And some of those questions have only very recently been clarified for us, through procedural orders and decisions from the Board Panel. 1083 MR. SHEPHERD: Did you undertake any research into possible programs? 1084 MR. BUCKLER: I'm going to -- 1085 MR. SHEPHERD: I'm just asking about Enersource right now. 1086 MR. BUCKLER: I'd like to be able to answer on behalf of Enersource, if I could. Carmine, you were involved in some of this back at that time: Do you have anything to add to what I've said? 1087 MR. DiRUSCIO: Yes, I guess what we did was -- we weren't clear at the time, as Chris had mentioned, how we would undertake conservation programs, and what framework, how the money that we invested would be recovered, et cetera. But what we did do -- we did have a couple of initiatives that we tried to embark on, for example, the lightbulb exchange -- Christmas lightbulb exchange program which we did. We did a very small residential load-control pilot to test certain technologies, and communication gateways, but it was very limited. We didn't have a pre-determined plan that was laid out, and which we followed diligently, if that's what you're asking. 1088 MR. SHEPHERD: This is like in the spring, right, just to get your feet wet? 1089 MR. DiRUSCIO: Well, we did something in the spring and summer. We did one, most recently, for this Christmas holiday, our Christmas light exchange. We did one the year before. 1090 MR. SHEPHERD: Okay. But did you do any -- there are thousands of programs out there. 1091 MR. DiRUSCIO: Right. 1092 MR. SHEPHERD: I guess one of the things I want to know is did you look around and say, What are the programs out there that other utilities are doing all over North America, so that we can start to look at what things we would choose -- what would be right for us? 1093 MR. DiRUSCIO: We didn't do that kind of an analysis. We didn't start with that kind of analysis, because our direction wasn't clear at that point. 1094 MR. BUCKLER: I'd like to add that you have to remember that we didn't have any conservation resources within our utility. Those had all been disbanded, and they weren't there anymore. And so we didn't have any staff to be able to do this type of thing. Back in the spring, and last year, Carmine DiRuscio was actually working in our affiliate, in one of our affiliates, and he was giving consideration to these conservation programs, in general, but not a lot of detailed work. Because, frankly, you know, we didn't have any funds to invest in that type of activity until later on, when we got some guidelines -- we were allowed to spend $25,000 on research up front. There were questions about deferral accounts - would we get the money back? So we weren't interested in spending a lot of money in advance, without knowing how we were going to get it back. That's the environment we were living in. 1095 MR. SHEPHERD: Still on Enersource now, you did eventually do that kind of research, survey the field to see what type of programs are available; right? 1096 MR. BUCKLER: Yes. 1097 MR. SHEPHERD: And when did you do that? 1098 MR. BUCKLER: Carmine? 1099 MR. DiRUSCIO: Wait a minute, are you talking about market research to evaluate the different types of residential programs that could be offered in the marketplace? Is that what you're suggesting? 1100 MR. SHEPHERD: No, I'm not talking about market research in your market. I'm talking about getting a list of -- like a menu of programs available, from all over North America. Because lots of people -- you don't have to reinvent the wheel here, right? Lots of people do it. 1101 MR. DiRUSCIO: Well, wait a minute, now. When we decided to get on -- to offer conservation programs more aggressively, like what we're proposing right now, we selected the programs that we selected based on the guidance that we had, and the evidence that we've submitted, and based on the -- you know, the letter from the Minister. And, frankly, we used our top-down approach. We said, We have this much funds available for -- to administer for conservation. And based on our best judgment, based on our experience, we were able to implement programs that we felt were going to be the most cost-effective for the markets that we're serving. 1102 MR. SHEPHERD: I'm going to get back to that cost-effective question in a second -- but, I guess, I'm trying to understand - and I don't mean to beat this to death - I really don't understand what you're saying. 1103 If somebody told me I had to go out and spend $8.2 million on something, I would first go out and get a menu of the choices I had, and then I'd pick within those choices which were the ones that were the most appropriate ways for me to spend the money. You did something like that. 1104 MR. BUCKLER: Yes, eventually we did that. In the summer, we participated in a conference called "The Blue Summit", and we worked -- we started to collect information on different types of programs that were available. We contacted a number of other utilities -- not these utilities -- some of these utilities, but not all of them, to establish some kind of working-together arrangement to develop some programs, and -- but it was more recently that we started working with this full group of utilities, here, and we came up with a really good menu -- what we now perceive to be a pretty good menu of programs to select from. 1105 MR. SHEPHERD: That was in October, you say. 1106 MR. BUCKLER: No, it was -- 1107 MR. SHEPHERD: September. 1108 MR. BUCKLER: Was it October? Yes, it was October. 1109 MR. SHEPHERD: Mr. Buckler, this sounds an awful lot like evidence we heard in regulatory assets, that something is being done in a hurry, the rules aren't clear, and you can't really act until you know what the rules are; is that fair? 1110 MR. BUCKLER: Generally fair, yes. We didn't have clarity, and the rules were coming out as we were going along. We were asking a lot of questions, trying to find out how different costs were going to be treated. As I said, it was only very recently that those things were clarified. We still don't have full clarity on everything, though. 1111 MR. SHEPHERD: So May 31st, you got the Minister's letter, which adds some clarity, at least, but you still needed some rules. And what was it -- the July communication from the Board, that allowed you to really go ahead and start working on this in earnest? Is that fair? 1112 MR. BUCKLER: It helped. I wouldn't characterize it as working on it in earnest. I guess when the deferral account letter came out, establishing account 1565 to track costs today that could be applied in the future, that was a big help. 1113 MR. SHEPHERD: That was the October 5th, procedural order; is that right? 1114 DR. LU: No. Variance account was before that. Establishing a variance account was before that. 1115 MR. SHEPHERD: Alright. I wonder if I could turn, then, to Toronto Hydro. And, basically, I'm going to ask you the same questions, so we can just explain sort of how the process developed from your end, from December to the time you were actually seriously doing a plan. Just give us an idea. 1116 DR. LU: As you mentioned, in our annual report -- the 2003 annual report that mentioned some of the things we will be delivering in 2004. So it was the regulatory framework -- or the landscape became clearer and clearer -- obviously, it strengthened our belief that we are on the right track. And in 2004, while we are focusing on delivering the three strategies -- the strategies I just mentioned, the customer education, the DSM enabling and DG enabling, we also participated -- there was many, many conferences, working group discussions, visiting other utilities such as Milton Hydro. In other words, it was more of a networking, looking at what's available. 1117 MR. SHEPHERD: Can I just interrupt you for a second? This is all in the spring of this year? 1118 DR. LU: No. Over the year, 'til -- even to this day. From December, 2003, to November -- today is December, 2004. 1119 MR. SHEPHERD: Okay. Go on. 1120 DR. LU: So it is that kind of activities or interests generated by the Board activities, the Ministry's announcement, I guess, news announcement, et cetera, that we learned more and more. So, not specific, you know, industry contacts, participating in seminars and those kinds of things, gave us a broad sense of what kind of things we can do. Specifically, if you are asking for documentation, there is a publication by BC Hydro's PowerSmart programs that listed all the programs, detailed calculations, that gave us great help. There's also publications from Navigant, a variety of consulting companies. The one I have is this demand response program by -- if I may, just find the proper name for this, it's a publication called National Conservation Programs that's published by Energy Info Source Inc. entitled, "Demand response programs." It basically talks about in North America, among different utilities, what is being played out. 1121 MR. SHEPHERD: Now, Mr. Buckler made clear that Enersource didn't really want to spend any serious money until they knew what the rules of the game were. Were you in a similar situation? 1122 DR. LU: Spend money depends on how you look at it. 1123 MR. SHEPHERD: Yeah. 1124 DR. LU: Do I get paid from Toronto Hydro? Yes. Did I spend time looking at this? Yes. Did I spend money to hire consultants to do this? No. 1125 MR. SHEPHERD: So you're in a similar situation. Until the May 31st letter, until the July communication from the Board, you couldn't really do much in earnest. 1126 DR. LU: Do much in terms of having customers install some DR mechanisms? 1127 MR. SHEPHERD: You didn't set up a committee to develop your plan, you didn't hire a person to run your conservation activities; right? None of those things. 1128 DR. LU: We actually, as I mentioned, in 2004, one of the corporate strategies -- initiatives is called the Green THC, Green Toronto Hydro Corporation. We have an integrated team in place from different areas contributing to Green, working together. So it's those people that while we are implementing our 2004 corporate strategy, are also the kind of resources we look upon in terms of deliberating our thinking in this area. 1129 MR. SHEPHERD: So did you say to them in December or January, did you say to them, Team, we need a plan for C&DM in 2005? Go write one. 1130 DR. LU: Not particularly that way. Team, we need a plan for Green THC. 1131 MR. SHEPHERD: Okay. Briefly, let me talk to the other utilities. Hydro Ottawa, what about you? How did you deal with this? 1132 MR. McKENDRY: Well, certainly after the Minister's letter last December, it raised a lot of questions. I would characterize it at a high level that in Q1, Q2, a lot of clarity was lacking. Through this whole process, from our perspective, we needed to ensure that there is regulatory certainty about what is required before we take active steps and start to spend money. The May 31st letter from the Minister certainly helped to provide some guidelines. However, in June we had a meeting with Donna Cansfield from the Conservation Action Team and feedback from her was two. Basically number one, we need clarity, we need to understand the rules of engagement. Number two, we need consistency, consistency of application across the province. And it was at that point in time that we highlighted the concept of the larger utilities working together. 1133 Through June, we attended seminars to start to educate ourselves in concert with some of our colleagues. In August, we hired an energy conservation manager. In September, we participated in the smart metering working group. I'd also like, as a side bar, to indicate that at Hydro Ottawa we went into a labour disruption starting in September which certainly didn't help. On October 5th, the Procedural Order was now starting to got very, very helpful for us and we engaged in serious discussion with the panel that you see before you. 1134 And in November, amidst of all of this we held, what I would characterize to be an extraordinarily successful, first-ever key account conference where we brought together our 120 customers that generate -- that utilize about 35 percent of the power in the City of Ottawa. We had representatives from across the industry, including the Ministry, including the OEB, the IMO, the conservation action team, we had Hydro One, you know, et cetera, et cetera, right through. The whole concept was talking about the situation of supply and demand in the province and what we can respectively do about that. We had a concurrent trade show. 1135 So these are the types of activities that we put forward, but I'd like to overscore that, from our perspective, through this journey what we're looking for is the regulatory certainty, and that journey continues. 1136 MR. SHEPHERD: And I'm not going to go through the other three. Is it fair to say that these descriptions from Mr. Buckler or Dr. Lu and Mr. McKendry are similar to what happened with you, or was it different in your cases? 1137 MR. GURAN: I would have to agree with PowerStream. It's been very similar. And I don't want to go through all the details that they've gone through but needless to say, I've engaged with conferences and, in fact, I've seen Donna Cansfield so many times at these conferences but she may consider me a groupy at this point in time. So I have been engaging myself over the last year with those processes. 1138 From the other end of the perspective, I've also looked for champions within our own customer base, and I think that's very important to seek those people out within our customer base because those are the people that are actually going to do the work for us. They are the ones that are going to have to overcome the risk barrier of implementing new technologies and using our guidance to move that forward. So I've spent a lot of time in that area. 1139 MR. SHEPHERD: I want to come back to that, but let me just make sure that these gentlemen have a chance to respond as well. 1140 MR. DESNOYERS: In Hamilton we would largely agree with what's happened in the other LDCs, with the exception of the powerWISE program which was developed through that period of time. 1141 MR. ARMSTRONG: Our efforts were also very similar to Enersource. We did do some work on assessing opportunities in our distribution network starting in the spring, following the Minister's letter, looking for resources that we could reallocate to that. But beyond that, the work progressed through the year culminating in October. 1142 MR. SHEPHERD: Now, Mr. Guran, you talked about talking to your customers, and you're aware that Enbridge and Union go to a lot of trouble to talk to their customers about the conservation program before they implement it. Can any of the others talk about what contacts you've had with your customers? Hydro Ottawa had a conference of them; right? 1143 MR. McKENDRY: Yes, as indicated, very well received, excellent feedback all the way around. 1144 MR. SHEPHERD: And you incorporated that into your plan, that feedback into your plan. 1145 MR. McKENDRY: Absolutely. Yeah, as a matter of fact, some of the things that we have put forward were tested at that conference to ensure that we're on the money. We actually had opportunity, just to show you how this stuff works, many of our customers don't necessarily -- if I may. 1146 We talked about leveraging existing programs. One program that most people are probably familiar with is NRCan's Energy Innovators initiative. Significant money, significant benefits. To the extent that our even large customers know about this stuff? No. I had one particular customer at this conference who I asked them, they put in a very new building, a prominent building in the city. I said, That must be an inefficient building. They said, Well, you would be surprised. They said, We just put in some technology, because there's a lot of light that comes in, to have photo sensors that will automatically turn off lights when the sun is on. I said, Did you get any help with that? They said, No. I said, Come with me, talk to NRCan. They got talking and he found out that there were monies that were available that he wasn't aware of. 1147 That's the role that we can take in terms of proactive, focussed communication with our customers. There's organizations that have programs, we're an excellent channel to market. This is the type of thing that we can do to help advance the conservation culture in the province. 1148 MR. SHEPHERD: All right. What about the others? Did you engage in customers in consultations before developing these plans or while developing these plans? 1149 MR. BUCKLER: Well, on behalf of Enersource, no. I'd say we've done very little customer contact. We haven't had the funds to be able to invest in that yet, and we were reluctant to do that without knowing the rules of the game for making these expenditures and it's a lot mover clear now. We recognize there is a fair bit of research that has to be done. We do want to speak to our customer groups and the various parties that can help us deliver these programs. 1150 MR. SHEPHERD: And hence your emphasis, which I've heard a number of times, on the ability to change programs to allow it to evolve over the years; right? 1151 MR. BUCKLER: That's correct. Yes. 1152 MR. McKENDRY: If I may add, we're all still learning from each other. We had representatives from our utilities at our conference to look, and listen, and learn as to how we can better engage our customers. We're not there yet, we've got a long road to go, but I think we've got the capability of delivering. 1153 MR. SHEPHERD: What about Toronto Hydro, have you engaged your customers? 1154 DR. LU: Not specifically. 1155 MR. SHEPHERD: And PowerStream? 1156 MR. GURAN: As I pointed out, we have engaged our customers and the customers are also being engaged by the private sector out there as well. So they're asking us questions and so it's a two-way process. 1157 MR. SHEPHERD: Sorry, I got you mixed up because I was sitting behind you before, I meant Veridian. 1158 MR. ARMSTRONG: Sorry. No, we have not. 1159 MR. SHEPHERD: And Hamilton? 1160 MR. DESNOYERS: I would say limited or no consultation but regular contact through our powerWISE program. 1161 MR. SHEPHERD: Yeah, of course. And so given the evolving nature of your programs, is it your intentions to engage your customers over the course of the next several months as you're starting to roll these out to see what think about it? Can you talk about what plans you have to do that? 1162 DR. LU: If I may. It is our intention to implement the set of C&DM programs as soon as we receive the Board's final approval. And it is our anticipation that through the roll out of those programs that we can increase the penetration and participation rate of different customers in different classes into those programs. 1163 MR. SHEPHERD: So you have no specific plans to ask your customers what they think and to get feedback from them prior to the programs being rolled out? 1164 DR. LU: Not at this particular moment. 1165 MR. SHEPHERD: Thank you. Anybody else? 1166 MR. DiRUSCIO: On behalf of Enersource, I think we've got a seminar that we're in the process of planning, I believe it's for early February. With the anticipation that we get final approval, we'd like to started rolling out these programs and educating our customers on some of the availability of programs that they can start participating in. 1167 MR. SHEPHERD: Okay. Hamilton, do you have any plans there? 1168 MR. DESNOYERS: We have no specific plans at this time for the consultation with any of the customers. But many of the these programs will require stakeholder input or involvement. 1169 MR. SHEPHERD: Now, one of the reasons for the -- the substantial success of the Enbridge programs is that they, in fact, designed their programs in consultation with their customer groups, and with the environmental groups. Indeed, they have a whole range of stakeholders at the table. Have any of you given any thought to that sort of process, either jointly or individually? 1170 MR. BUCKLER: I have. On behalf of Enersource I have, and I think that's a good idea to do that. It's just a question -- we just haven't had time to do it yet. 1171 MR. SHEPHERD: Because you're trying to rush to get this done; right? I understand. 1172 MR. BUCKLER: Well, we -- we've only recently put these plans together in any detail and we've spent a lot of time preparing for this hearing, quite frankly, and I would have liked to have consulted with some of the stakeholder groups before having gotten to this hearing, we just didn't have the time to do that. 1173 MR. McKENDRY: Certainly from Hydro Ottawa's perspective once we received final approval, when that happens, yes, the opportunity then to fully engage with our customers is there. For example, again, I mentioned the NRCan program, one of the areas that I'm responsible for at Hydro Ottawa, is our key account relationships. Very simply, as late as yesterday, NRCan was -- we were communicating they were meeting with Donna Cansfield and wanted to indicate that we were, indeed, prepared to work with them. The answer was an emphatic, yes. 1174 What we need is the opportunity to sit with them, basically, to take out our list of here is our big customers, here are the people that are currently engaged with them, and anywhere that's not we need to engage those customers. Those are the just one example of the type of real, live customer activity that we plan. 1175 MR. SHEPHERD: Now, have any of the six utilities yet -- I know you're going to, but have you yet hired any conservation and demand management specialists, people who have expertise in the field that would work for you? 1176 MR. McKENDRY: Hydro Ottawa, yes. 1177 MR. SHEPHERD: When did you do that? 1178 MR. McKENDRY: August. 1179 MR. SHEPHERD: So that person was intimately involved in developing this plan? 1180 MR. McKENDRY: To a certain extent, yes. However, as I mentioned, we ran into a labour disruption and we did a redeployment during the labour disruption. 1181 MR. SHEPHERD: Okay. Anybody else? 1182 MR. DiRUSCIO: Yes. 1183 MR. BUCKLER: I don't know if you'd call him an expert or not, but certainly Carmine DiRuscio we just recently hired into our company who was working in our affiliate and we're now transferred into our LDC to administer these programs. 1184 MR. DiRUSCIO: In addition to that, and this may address part of your earlier question, we were engaged with other utilities throughout the province prior to joining this group as well and we had hired the services of Navigant to assist us in directing us. And we're looking to do that again, going forward. 1185 MR. SHEPHERD: Have any of the other utilities hired any expertise in C&DM? 1186 MR. DESNOYERS: I'd like to just add, in preparing this, our submission, all of us collectively engaged in the outside, the assistance of outside expertise to help us prepare this plan, Trilliun. 1187 MR. SHEPHERD: All right. Let me turn to the select -- the process you used for selection of the individual programs within your plans. And I'm actually looking at the Enersource plan, but I think they're all the same in this respect. You can tell me whether they are different. This says that the criteria you used to determine what programs you would select were: One, allocation of benefits, you want to spread them around throughout your customer base; two, predictability of results, you wanted to have results that were relatively certain; and three, the ability to leverage partnerships. Is that true of all of the utilities? That's correct; right? 1188 MR. BUCKLER: Yes. 1189 MR. McKENDRY: Yes. 1190 MR. SHEPHERD: So how did you select those three criteria? Where did those three criteria come from? 1191 MR. McKENDRY: I believe it was from our initial meetings where we got together to set the broad overarcing objectives and strategies that we were looking to work together, understanding that we have an order of magnitude difference between the sizes of MARR that we have available to us, from Veridian about 3.5 million up to Toronto with 40 million, different backgrounds in terms of the people involved, different characteristics of franchise areas that we represent. 1192 MR. SHEPHERD: I guess the reason why I'm wondering about this is that the striking thing about this lack of the biggest bang for the buck criteria. None of these are what's going to give us the most conservation, which are going to be the most effective. Why is that? 1193 MR. DiRUSCIO: Can you repeat that question? 1194 MR. SHEPHERD: Yes. You would think that one of the criteria is, What programs are going to save us the most kilowatt-hours? 1195 MR. ARMSTRONG: I think if you look above in the objective section, the third paragraph, it refers to the objective of the plan being to contribute to the emergence of conservation culture, and more specifically, to support the Minister's commitment to keep demand reduction and smart meter installations. These are strategies to achieve that objective, so I think you can definitely imply that our interest to get the biggest bang for the buck and achieve demand reductions with these dollars. 1196 MR. SHEPHERD: So did you select your programs on the basis that you wanted the programs that would deliver you the biggest bang for the buck? 1197 MR. BUCKLER: Yes, I think so. And why we didn't include that in the three things that we covered, I don't know. Maybe it was too obvious to include, that was on oversight, perhaps. 1198 MR. SHEPHERD: Just before we leave the criteria, one of the things you said here is that you wanted investments that offer more predictable results, but then in your testimony earlier you said we don't know what the benefits of most of these programs are. So I'm having some difficulty connecting the two concepts. If you don't know what the benefits are, then how are your results predictable? 1199 MR. BUCKLER: Well, no, we don't know who the results are going to be in our jurisdiction but we did look at the success of various programs in other jurisdictions and the predictability of those results in those jurisdictions and that helped to guide our selection. 1200 MR. SHEPHERD: Sorry. 1201 MR. BUCKLER: But we don't know what the results are going to be in our jurisdiction. 1202 MR. SHEPHERD: So you looked at the program like, I don't know, residential load control, let's say. This is just an example. And you said, let's look at who else has done that, what they expected to achieve and what they actually achieved. Is that what you did to determine how predictable the program was? 1203 MR. BUCKLER: No, I wouldn't say we did exactly that. No. 1204 MR. SHEPHERD: Well, did you instead look at it and say, How predictable are the benefits we're going to achieve from them? 1205 DR. LU: If I may. In particular to the residential load control program, right, our understanding is that the highest potential in the daytime for load control demand response, so that's why we chose the residential load control to start with. How effective will it be? As we mentioned, we will need quite a few factors, such as the cost for us to implement, the awareness or the ability for the people to respond, and the rate structure of those. But nonetheless, we have committed ourself to a small-scale pilot in conjunction with Hydro One to specifically look into the possibilities in this jurisdiction. 1206 MR. SHEPHERD: So this is what I don't understand. How did you apply the criteria of the program having predictable results to select residential load role? Because what you're saying is, this is a pilot project. You don't actually know what the results are, they are unpredictable by nature, that's why you want to do it; isn't that right? 1207 MR. DiRUSCIO: Perhaps I can answer that in this way and help clarify this. We have experience, or at least some experience, in some, or all, or a number of these programs based on our own inherent experience that exists among the group. What we don't know and why we can't predict the results is because the market's changed. The conditions have changed. Everything has changed that don't allow us to effectively tell you what those benefits are going to be. We know they work. We know that because we've done them, in many respects, we know that they're effective based on our own experience. What we can't tell you is how effective they're going to be in this new market. 1208 MR. McKENDRY: If I may add to that, I think this whole predictability thing, I think where we were coming from is when we are in a position to influence or actively control load and turn it off, that's predictable. You can turn it on or off. Other programs that are out there might not have such predictability. In other words, an advertising campaign that says, Hey, it's a good idea if you use less. To what extent can you take full credit for having load disappear? We don't really know. So I think what we were looking at is where we can have specific direct impacts, things like improvements on distribution losses in the network where we can actually turn off residential hot water tanks, et cetera, that provides predictable results. 1209 MR. GURAN: I would also like to add one point with that is that we have the opportunity now to eventually quantify some of our results. As we mentioned, we're tying in some of our programs with smart meter technologies so we will be able to see the results of our actions if we do load control. In the past a lot of these programs were -- we couldn't really predict -- you could possibly look at the results in the future and say maybe it happened, maybe it didn't. With the smart technology we're going to be allowed to be able to do that. I would think something like a flier that goes to your door, you blanket the whole area with fliers, what is your uptake with the fliers? You have to predict the uptake with that process. With the smart meter technology and load control we're going to be able to quantify the results a lot more than we've ever done in the past, and that's the part that we're going to test in this process. 1210 MR. SHEPHERD: And that's the monitoring side of the programs; right? You have to monitor them and monitor and smart meters will help you do that. 1211 MR. GURAN: That's part of the pilot project to actually do that. 1212 MR. SHEPHERD: Nobody else wants to add to that, okay. 1213 This raises the question of the quantification of benefits, and you'll recall your discussion with Mr. Poch earlier where you said you do have estimates of the benefits of some of these programs; right? 1214 DR. LU: In our jurisdictions based on other peoples' documentation, yes. 1215 MR. SHEPHERD: No, I actually think Mr. Buckler gave evidence on some of the programs, at least Enersource has actually estimated what they think the benefits will be; isn't that right? In fact, you gave a figure for one of them. 1216 MR. BUCKLER: Well, I don't know about quantification of benefits but yes, we did -- we are able to identify some of the benefits of the various programs. Some of them are quantifiable and others are not quantifiable. 1217 MR. SHEPHERD: Okay. So I wonder if I can ask all of you to file for the Board any quantification of benefits you have done for these programs that you're proposing by way of undertaking. I'm not asking you to do a new quantification benefit, but if you've done one, file it, please. 1218 DR. LU: If I may. Our understanding of the whole process here is third tranche C&DM plan and now you have a plan in front of you. Looking at the Board's Procedural Order in one of them, paragraph 25, indicated the ways for us to discharge our obligations. It does not include in it a quantification of end results. So because of that, if I may, when we have -- stood in front of this task what we did was a top-down approach. We looked at how much money we have, we looked at where the government wants us to go, and we looked at the balance of the programs. We also looked at the capabilities of what we have, and that's where you get this menu. 1219 How much will they deliver? As we mentioned, to give you that number we will need at least three things, the cost, the uptake and the predictable benefits. Among the three the only thing we have is the predictability, and it is from other jurisdictions. We dot not have it cost-specific to the Ontario market, we also do not have the uptake in our specific LDC areas. So for that, quantification is not part of the consideration, in terms of results, in this whole exercise. 1220 MR. SHEPHERD: Mr. Buckler said that you do have some quantifications done, at least Enersource does. I'm reading from the Procedural Order of the Board dated October 5th, 2004 where it says that you're required to file the anticipated program benefits, including quantifiable benefits where these can be identified, i.e., energy savings, kilowatt-hour or kilowatts. So I'm asking you to file what the Board told you to file. 1221 MS. NEWLAND: Mr. Shepherd, if I may, I think Dr. Lu answered the question. He said that quantification requires three factors; cost, uptake and predictable benefits. What Mr. Buckler, I believe, was referring to was we have data on predictable benefits. In other words, what did these measures achieve in other jurisdictions. We don't have the other -- as I understand the evidence of Mr. -- Dr. Lu and Mr. Buckler, we don't have the evidence on the other two factors. 1222 MR. SHEPHERD: My understanding of Mr. Buckler's evidence earlier was that you took a particular program, didn't you, and you said, We think the uptake is going to be 16 percent, we think that we'll get 20 percent of it and therefore, we're going to get X kilowatt-hours. 1223 MR. BUCKLER: No, we haven't. 1224 MR. SHEPHERD: The transcript will say that. 1225 DR. LU: In I may. That 16 percent and 20 percent is coming from the B.C. Hydro's refrigerator buy-back program. 1226 MR. KAISER: That's the way I understood that. You were referring, I think Dr. Lu, to the B.C. results in that case. 1227 MR. SHEPHERD: So you didn't to do a calculation for your -- 1228 DR. LU: Because we do not know the cost and uptake, so we referred to the other jurisdiction's report. 1229 MR. SHEPHERD: Am I correct in understanding that none of these six utilities have attempted to quantify any of the benefits of any of these programs? 1230 MR. ARMSTRONG: Veridian has attempted to quantify some of the potential savings on distribution system optimization at a very high level, but actual execution of the plans is going to be contingent on more comprehensive engineering studies. But we have got very high level provisions in terms of quantifiable benefits. 1231 MR. SHEPHERD: Those are the only ones you have? 1232 MR. ARMSTRONG: That's right. In terms of the smart meter installation, the quantifiable benefits will be the number of meters installed, and we have some provisions in terms of number of meters that could be deployed based on our budget data. 1233 MR. SHEPHERD: Has anybody else done any quantification of benefits? 1234 MR. DESNOYERS: In Hamilton we did not complete a TRC nor a cost-benefit analysis. 1235 MR. GURAN: In PowerStream, no, we haven't done anything like that. Until customer results are obtained, I don't think it's possible to -- for us to establish either kilowatt-hour savings or kilowatt-demand reduction, other than some of the studies in other jurisdictions. I think we consider it premature at this point it to do that. 1236 MR. BUCKLER: And at Enersource, no, we have not been able to quantify the results. 1237 DR. LU: Toronto Hydro did not do a TRC or cost-benefit analysis for any of the programs listed in the menu. 1238 MR. McKENDRY: We have not done TRC at this point in time. Again, we consider this to be shareholder money that we're putting forward into a series of pilots, of which we will have an opportunity to learn, and the resulting benefits will then allow further, second-generation opportunities should that make sense. 1239 MR. SHEPHERD: So do I take it then, Mr. McKendry, that because this is shareholder money that you're investing in pilot projects, that you're not actually seeking to achieve benefits like conservation savings benefits from these projects so much as learning that you can then apply to future programs; is that right? 1240 MR. McKENDRY: Both. We are very supportive of the government's directive in terms of using a finite resource wisely. We believe that we have a key role, as the Minister has stated, to be the agents of change in our respective franchise areas. We don't have as much as experience as we'd all like to have. This is simply an opportunity for us to start to learn, to gain experience so that we can share the information collectively among what represents 40 percent of the province right here, so that we can, as we move forward, understand the real impact that we can have into the future. 1241 MR. SHEPHERD: Okay. So let me -- sorry, go ahead, doctor. 1242 DR. LU: If I may add. In the process of the next three years by learning from LDC part our ratepayers in this province, or in our six areas, does benefit and we're also hoping to increase awareness of this conservation culture. 1243 MR. SHEPHERD: Okay. So a couple of the witnesses Mr. DiRuscio and Mr. McKendry said that you had not done TRC or cost-benefit analysis, but the question was: Have you attempted to quantify the benefits? Is the answer to that, no, you haven't? 1244 MR. McKENDRY: From our perspective, in terms of the overall program selection, we've looked at the experience in other locations and that has been a consideration in terms of putting together the menu that we've agreed to. 1245 MR. SHEPHERD: I'm sorry, I don't mean to be difficult, Mr. McKendry, but it was certainly a yes-no question. Have you attempted to quantify the benefits or not? 1246 MR. McKENDRY: To the extent possible. 1247 MR. BUCKLER: I think we've all tried to quantify the results. You've used the word "attempted" to quantify the results. I think we've all looked at whether we can quantify them or not and we haven't been able to quantify the results at this point. 1248 MR. KAISER: Can I just step in here. What the Board's procedural direction said, which Mr. Shepherd has referred to, I think you've answered the question we've been trying to get an answer for the last half an hour, if you were to include quantifiable benefits where they could be identified. And can I just take it from what you are just said that you could not identify them at this time? 1249 MR. BUCKLER: That's correct. 1250 MR. KAISER: Is that sufficient, Mr. Shepherd? 1251 MR. SHEPHERD: Thank you, yes. 1252 Then I guess what I want to ask is how did you select the programs if you didn't have any cost-benefit analysis? If you didn't have any sense of whether they were worth the money, how did you select which ones to use? Potentially you had thousands of programs that you could have chosen; right? There's lots of programs all over North America, and you said that one of your criteria, so obvious you didn't even include it, was to choose the programs with the biggest bang for the buck. So I guess what I don't understand is, if you didn't know what the benefits were, how did you make the choice? 1253 MR. BUCKLER: Well, I'll explain to you how we selected our programs. We used a top-down approach. We knew how much money we will to spend, in Enersource's case it was $8 million, so we selected expenditures by the various programs to total up to our spending obligation which was $8 million. There were no detailed requirements from the Board prescribing exactly how to select these programs, so there were only broad guidelines that were given to us. And we used our judgment to select the programs that we thought were best. 1254 Paragraphs 23 and 24 of our written evidence states how we did select the programs. We tried to have a balance of programs across all the different customer groups that are out there, that was in the guidelines. We tried to have a balance of programs between capital and operating expenditures, and we tried to have a balance of benefits for our customers and to obtain the best load reduction possible. We looked at programs delivered in other jurisdictions, as I said before, to determine those programs that are most beneficial and on the basis of a, kind of, subjective assessment of how they perform in our market. 1255 MR. SHEPHERD: So, for example, let's say one of your criteria is you want to do something for your residential customers, that's part of the balancing -- spreading out of the benefits. 1256 MR. BUCKLER: That's correct. 1257 MR. SHEPHERD: So you have a list of 500 programs that you could do for the residential customers and you picked six. And you picked those six on some subjective basis or on the basis of how successful they were elsewhere? I don't understand. 1258 MR. BUCKLER: A little bit of both. We looked at how they were performing in other jurisdictions and we figured this is a good program and it's probably something that our -- would be applicable in our utility. And the subjectivity comes into it, I suppose, because there were different criteria involved. So you have to balance the different criteria for the selection. We wanted to balance across our various customer groups, but at the same time we wanted to have the most beneficial programs. We wanted to reduce the total amount of load, the maximum amount of load possible, but that's a conflicting criteria to having a program in each jurisdiction, in each customer group. 1259 For example, to go to the extreme, you could have a group of customers, let's say it's residential, and perhaps there are no conservation programs that would benefit. I'm not saying that there aren't, but hypothetically, there might not be. So why would you want to invest money in that sector if you couldn't get any benefit? But nevertheless, we were required to spread our spending across the various customer groups, so these were conflicting criteria that we had to weigh and balance against each other. So that's where the subjectivity came into the selection of these programs. 1260 MR. SHEPHERD: Was part of your subjective judgment your, sort of, gut feel as to which programs would work in your particular area? If you have a particularly urban area, for example, Mississauga, programs that are rural, you would say, you don't have to do any analysis this is not going to work here even though it worked somewhere else; right? 1261 MR. BUCKLER: Yeah, that kind of thing, yeah. 1262 MR. SHEPHERD: Okay. So you talked about the top-down approach that you used to getting to this plan. And I take it that means that -- because the second point in this area is how did you get the budget if you didn't do a cost-benefit analysis. And I take it what you did is you said, How much should we spent on this program, without thought to what the benefits were -- whether that was overspending for the benefits or underspending or whatever. It was about what made sense for that program and for that customer class; is that right? 1263 MR. BUCKLER: I think so, yes. I think that's a yes to that question. It's a bit convoluted. 1264 MR. SHEPHERD: Let me ask it simpler: How did you choose the numbers in each of your plans? I don't want you to go through them specifically I just want you to tell me, in general, what's the process you used to figure out what's the budget for this program. 1265 MR. McKENDRY: I believe it was based on a professional judgment based on your individual franchise areas' knowledge. This whole thing, we have a suite of programs that were selected for our perspective plans, it was a result of each utility assigning key resources who considered a number of opportunities on their own franchise areas. This was followed by a collaborative review of these programs among the group of six supplemented by a review of programs offered in other jurisdictions for the final rationalization process among the group of six, based on the available funds and timing to implement. The resulting programs have been categorized into three areas including conservation demand management, distribution loss reduction and distributed energy. 1266 You have to understand that sometimes beauty is in the eye of the beholder. And when we're working together in this type of format we needed to come to a list, it couldn't be an exhaustive list, it had to be something that was manageable. Once the suite of selective programs was agreed to each utility used their professional opinion to select the specific programs and funding levels that they felt would be suitable for their respective franchise areas, given that an order of magnitude separates the largest to smallest funding envelopes, Toronto Hydro is 39.8 million through to Veridian with 3.5 million. Funding decisions were determined by the each of the LDCs respectively with consideration given to an appropriate balance between customer or distribution loss improvement opportunities and distributed energy opportunities. 1267 Finally, the LDCs have further recognized the value of working together sharing data, and learning from each other as the programs are implemented within our respective franchise areas. 1268 MR. SHEPHERD: Let me turn to one area that I can do in a couple of minutes, I think, and that is the -- your proposal for a 20 percent variance, if you like, in your program design. And I just want to understand that. It's 20 percent of your overall obligation; right? So for example, Dr. Lu, your obligation is 40 million so you want the ability to move 8 million out of the programs that you've got in your plan and into other things; is that right? 1269 DR. LU: Yeah, the understanding was in this menu of $40 million, right, we still need to meet our obligations of this 40 million spending. But given the uncertainties of different programs performance along the way in the next three years, there may be programs more effective in terms of delivering the peak demand reduction. We're asking for a reasonable 20/80 rule here to say if we could move the fund to more -- to programs which are more effective in terms of reducing the peak demand. That's what we determined. 1270 MR. SHEPHERD: Let's just be clear. Your evidence says that you have three ways that you want to be able to adjust the plan. I'm looking at paragraph 28 of your prefiled evidence; The discontinuance of programs that were initially selected for inclusion, that's number one; number two, the addition of new programs from the menu, which I'm going to come to a in a second; and three, reallocation of dollars among programs. So, Dr. Lu, you're talking about the third, right, reallocation among programs. 1271 DR. LU: The sum, the sum. For example, if the program was not in our menu, right, we add this program because it was successful in other LDCs. Obviously it would be will from zero to whatever the number will be, so that will be part of the 20 percent. 1272 MR. SHEPHERD: But all I'm asking is the question: Do I understand correctly 8 million is how much looseness you want in the plan and still have your final approval; right? 1273 DR. LU: Could be reallocated among the programs. 1274 MR. SHEPHERD: And that's cumulative. So you could get up to 7.9 and you don't have to ask anybody. What happens at 8 million? What are you proposing? 1275 DR. LU: We come back to the Board. 1276 MR. SHEPHERD: You'd have to come back to the Board and say, We've changed our plan it's too big a change for us to do. Okay. 1277 Now, do I understand correctly that when you talk about the addition of new programs from the menu of C&DM programs presented in this proceeding, you're not saying that if somebody comes up with a good idea in May you could spend money on that. You're saying if you didn't select a program but PowerStream did and it's working for them, then you can say, We want to do that instead of something else we're doing, or in addition to something else we're doing. 1278 MR. BUCKLER: That's right, yes. 1279 MR. SHEPHERD: So we can look at the programs in these six plans as a single menu and each of you can select from it. 1280 MR. BUCKLER: That's right. 1281 MR. SHEPHERD: That would be on the basis of the experience in the other jurisdiction; right? Because you've already deselected those programs, so presumably if you saw their experience was better than you expected, that's why you would change your mind; is that right? 1282 MR. BUCKLER: Yes. Yes. I wouldn't say that they were deselected, we just chose not to select them at this time because of the pilot nature and we were letting the other -- one of the other utilities run with it for now to see what the results are. 1283 MR. SHEPHERD: Well, that's an interesting point and maybe I can just ask about that. Are there programs here -- how should I put this? Between the six of you, have you decided, you try out this one, you try out this one, and even though we may think that both of them would be good for us, we want to wait and see what your results are first before we try it out on ourselves; is that right? 1284 DR. LU: I wouldn't say that's by design, no; that's not by design. But from a forward basis, while we are working together, we are committed to working together for the next three years on the C&DM plan. If we see some other programs that other people are doing, such as the electricity avenue, or if it turns out to be a very good conservation initiative then we will adapt. 1285 MR. BUCKLER: You might get different answers to that question at different utilities. 1286 MR. SHEPHERD: Okay. 1287 MR. DiRUSCIO: I can speak on behalf of Enersource for that. You know, my understanding with the group -- I mean we've already started to discuss the various technologies that may be applied in even load control, for example. And you know, we're going down the path now saying let's try these things, let's -- why don't you try that technology, we'll try this technology and we'll compare notes and see, effectively, what was the most effective way of controlling the load. 1288 MR. SHEPHERD: No point in everybody doing the same thing. 1289 MR. DiRUSCIO: That's it. 1290 MR. SHEPHERD: That's good. Mr. Chairman, I have about another half an hour and I'm turning to an area that might take 10 or 15 minutes. Would it be an appropriate time to break for the day? 1291 MR. KAISER: Yes. Are there other parties that will be examining this panel after Mr. Shepherd? 1292 MR. LYLE: I believe Mr. MacIntosh from Energy Probe may have a few questions. 1293 MR. MacINTOSH: We'll probably be quite short, Mr. Chair. 1294 MR. LYLE: And I should be about 15 minutes, Mr. Chair. 1295 MR. KAISER: All right. So what I suggest, Mr. Lyle, is we'll break now with the expectation that we'll finish this panel, sounds like in the first hour or so tomorrow. 1296 MR. LYLE: I would expect so, Mr. Chair. 1297 MR. KAISER: Then possibly we could proceed to argument first thing in the afternoon, say 1:00. Would that be acceptable? 1298 MR. LYLE: I have no concern with that, Mr. Chair. Perhaps the parties may want to address that. 1299 MS. NEWLAND: That's fine with us, Mr. Chairman. 1300 MR. POCH: Mr. Chairman, I'm wondering if I could ask an indulgence, and there may be other counsel in this position. Being from out of town counsel and being under some pressure to show up tonight at some point for the first night of Chanaukah with my kid, I could accommodate that schedule if the Board would grant me the indulgence of filing written argument. In the same time line I would provide it to Board counsel who could submit it for the record. 1301 MR. KAISER: That's fine, Mr. Poch. 1302 MR. POCH: Thank you, Mr. Chairman. 1303 MS. NEWLAND: Just a clarification, Mr. Poch. When would that be available? 1304 MR. POCH: Well, I would ask that it be made available to the Board and to the utility on the same schedule that other counsel are presenting oral argument. 1305 MS. NEWLAND: My only -- 1306 MR. KAISER: At 1:00 tomorrow. 1307 MR. POCH: Yes. 1308 MR. LYLE: So Ms. Newland, if I could anticipate your concern, I imagine I would be reading that into the record before you gave your reply argument. 1309 MS. NEWLAND: Thank you, Mr. Lyle. 1310 MR. LYLE: I believe we are convening tomorrow at 9:30, Mr. Chair. 1311 MR. KAISER: Yes, 9:00 or 9:30? 1312 MR. LYLE: I believe it's 9:30, Mr. Chair. 1313 MR. KAISER: 9:30. Is that acceptable Mr. Shepherd? Okay. We'll adjourn now until 9:30 tomorrow morning. Thank you. 1314 --- Whereupon the hearing adjourned at 5:00 p.m.