Rep: OEB Doc: 13DS4 Rev: 0 ONTARIO ENERGY BOARD Volume: VOLUME 3 10 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 Friday, 10 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 10 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 DON THORNE Milton Hydro JUDY SIMON Milton Hydro JAMES SIDLOFSKY Brantford Power Inc. TOM ADAMS Energy probe BRIAN DINGWALL CME ROGER HIGGIN VECC 8 TABLE OF CONTENTS 9 CLD DECISION: [24] APPEARANCES: [113] MILTON HYDRO PANEL 1 - THORNE, SIMON: [148] SUBMISSIONS BY MR. THORNE: [151] CROSS-EXAMINATION BY MR. DINGWALL: [209] CROSS-EXAMINATION BY MR. HIGGIN: [234] CROSS-EXAMINATION BY MR. LYLE: [244] QUESTIONS FROM THE BOARD: [270] CLOSING ARGUMENT BY MR. DINGWALL: [380] BRANTFORD POWER PANEL 1 - LOUCKS, SIMON: [392] EXAMINATION BY MR. SIDLOFSKY: [404] SUBMISSIONS BY MR. LOUCKS: [416] CROSS-EXAMINATION BY MR. ADAMS: [515] CROSS-EXAMINATION BY MR. DINGWALL: [587] CROSS-EXAMINATION BY MR. LYLE: [608] QUESTIONS FROM THE BOARD: [622] RE-EXAMINATION BY MR. SIDLOFSKY: [652] CLOSING ARGUMENT BY MR. SIDLOFSKY: [683] CLOSING ARGUMENT BY MR. THORNE: [706] FURTHER CLOSING ARGUMENT BY MR. DINGWALL: [721] CLOSING ARGUMENT BY MR. ADAMS: [730] SCHOOL'S WRITTEN SUBMISSIONS READ INTO THE RECORD BY MR. LYLE: [755] VECC'S WRITTEN SUBMISSIONS READ INTO THE RECORD BY MR. LYLE: [759] REPLY CLOSING ARGUMENT BY MR. SIDLOFSKY: [775] MILTON AND BRANTFORD DECISION: [802] 10 EXHIBITS 11 EXHIBIT NO. G.1.1: CV OF JUDY SIMON [159] EXHIBIT NO. G.1.2: UPDATED TABLE 1 OF MILTON HYDRO'S PREFILED EVIDENCE [171] EXHIBIT NO. G.1.3: CV OF JOHN LOUCKS [398] 12 UNDERTAKINGS 13 14 ---Upon commencing at 9:38 a.m. 15 MR. KAISER: Please be seated. 16 This morning, the Board is rendering its decision with respect to the application by six utilities for their third installment the of MARR. For this purpose, the Board has prepared an outline of the decision which has some schedules. Has that been distributed to the parties? 17 MS. CRNOJACKI: No, we haven't yet. 18 MR. KAISER: An outline of decision, I should say. 19 MR. LYLE: Mr. Chair, would you wish for this to be marked as an exhibit? 20 MR. KAISER: It can be. It will be put in the record. I don't know that it's necessary to make it an exhibit. It's really more for the convenience of the reporter. 21 MR. SIDLOFSKY: Mr. Chair, while Staff is handing that out, sir, I wonder if there's any way you could turn up the volume a little bit on your microphone. 22 MR. KAISER: Yes, certainly. 23 MR. SIDLOFSKY: Thank you. 24 CLD DECISION: 25 THE APPLICATION: 26 MR. KAISER: On November 4th, the Board received applications from six utilities applying for what we call their third installment of MARR, that being the market adjusted revenue requirement. That was a figure that derived from a rate case in January of 2000, when the market-based rate of return was established for these utilities, including a specific return on equity which happened to be 9.88 percent. 27 Those amounts are set out in each of the six applications. 28 In the case of Veridian, by way of an example, the notice of application states that it's 3.5 million, and notice of applications were issued by this Board with respect to all six utilities. 29 The applicants are Enersource Hydro Mississauga, Hamilton Hydro, Hydro Ottawa Limited, PowerStream Inc., Toronto Hydro Electric System Limited and Veridian Connections Inc. Those applicants have chosen to apply as a group known as the Coalition of Large Distributors or CLD. The amounts vary, depending on applicant, being 8.2 million in the case of Enersource, 5.2 for Hamilton, 9.3 for Hydro Ottawa, 6.4 for PowerStream, Toronto Hydro is 39.8, and Veridian is 3.5 million. 30 Collectively, the CLD utilities provide service to over 1.5 million customers or 40 percent of the Ontario total. The C&DM plans, which reflect the MARR amounts just referred to, total of over $70 million. 31 Before proceeding further, the Board would like to state that it's very helpful that these utilities chose to apply in the manner that they did, as a group. Not only does it save six separate hearings and combine them into one, but more importantly, as will be evident in these reasons, there's been a fair degree of coordination between these utilities. They have been able to weight different portfolios and, in effect, learn from their joint experience. This is something the Board will be commenting on in these reasons at greater length. 32 The reason we state this at the outset is that this is the first case that's been heard by this Board with respect to third tranche applications. So this decision necessarily represents something of a precedent. I would also like to mention, as was previously mentioned, that this Board has been very impressed by the conduct of these applicants. These applications were well prepared, the panel witnesses were well prepared, and the presentation was of great assistance to this Board in what, admittedly, is a difficult proceeding. So we thank the parties for that, and indeed we thank the intervenors for their responsible and helpful submissions with respect to this. 33 RELIEF REQUESTED: 34 Now, with that introduction, I want to turn to the relief requested, and I do that because the Applicant took some pains to state what it was requesting. And that is set out at paragraph 39 of the material, I'm referring to the written submissions, I think it's Exhibit A.9. Is that right, Mr. Lyle? 35 MR. LYLE: A.7, Mr. Chair. 36 MS. NEWLAND: A.7 of the written evidence, Mr. Kaiser, is the exhibit. 37 MR. KAISER: I'm going to read this into the record because it's something that was stressed by the applicant and I think we all need to understand what the applicant is requesting. The applicant clearly doesn't want any confusion on the point. It's been stated by the witnesses very clearly, that they are seeking here what is called a Final Order. 38 The Board issued a Procedural Guideline in this matter back on October 5th, and it offered applicants a range of opportunities. In fact, there were three. They could apply for an Interim Order, they could apply for a Final Order or they could apply for this MARR amount, which is part of their 2005/2006 rate applications. This Applicant has chosen to apply for a Final Order, and it's the first Applicant to come before the Board in this respect. 39 The reason the applicant, as they have stated in this proceeding, chose to apply for a Final Order was that they wanted regulatory certainty. The Board accepts that proposition. It's understandable that they don't want to incur expenditures of this order without some certainty that they can be recovered. Mr. O'Brien doesn't want to go back to his board of directors and say he blew $40 million on conservation plans and find that he can't recover them in rates. That's an understandable objective. So with that I'm going to read paragraph 39, and I'm sure counsel will correct me if I get it wrong. 40 They say that: "The CLD utilities are seeking a final order or orders of the Board granting the following relief: The approval of each CLD utility C&DM plan," we'll come to those in a minute. "A confirmation that each CLD utility's C&DM plan satisfies the Minister's condition of a financial commitment to reinvest in C&DM initiatives. A confirmation that each CLD utility position on future adjustments to its C&DM plan, which is set out in paragraph 39 is appropriate and acceptable and will not invalidate the approval of any CLD utility's C&DM plan in this proceeding. And a confirmation that each CLD utility's actual expenditures incurred in connection with the preparation of its application and its participation in this proceeding, including any intervenor or Board costs that are attributed to each CLD utility, will be credited to the required amount of C&DM expenditures for each CLD utility." 41 The Board, in this case, is granting relief as set out, and the order will go in that fashion, subject to certain conditions. 42 Now, in her reply argument, Ms. Newland was not happy with the notion of any conditions and suggested conditions would amount to an Interim Order, and that was unacceptable. The conditions that the Board intends to impose in this Order, however, relate to monitoring and reporting. I don't believe those requirements will in any way prejudice the recovery of these funds in accordance with the relief sought, provided, of course, the applicants follow the Board's instruction in that regard. 43 THE ISSUES: 44 Having said that, the Board considers it important to go through a number of issues that were raised in this proceeding by the intervenors and other parties. And even though we reject some of these concerns for reasons which will be expressed, it's important that we deal with them so that this order and this decision can be of guidance to other parties. 45 COST BENEFIT ANALYSES: 46 One of the first issues that was raised and perhaps the most dominant one was the lack of a cost benefit analysis. The witnesses were very forthright on this. They stated, We can't do it. And they stated the reason. The intervenors, for the most part, thought the cost-benefit analysis should be done at this stage. 47 Now, reference was had, in this regard, to the Procedural Order of the Board which dealt with this issue, because that Procedural Order of October 5th did set out the filing requirements. And with respect to this matter, paragraph C said that the filing requirements, for applications filed in respect to this matter, should include "the anticipated program benefits, including quantifiable benefits, where these can be identified." 48 It's common ground that there are no quantifiable benefits in these applications, and the applicants have stated that they didn't have sufficient data to do it. The Board accepts that proposition. The Board is convinced that an honest effort was made, and it would likely be spurious accuracy, at this point, to come up with numbers. 49 In the case of smart meters, by way of example - which is one of the C&DM plans that all six of these utilities are proposing, both for low-volume and high-volume customers - it would be impossible to measure the benefit of the smart-meter initiative without knowing the rates, particularly the peaking rates. Those are not in place. They haven't been set by the Board. So there is an understandable inability, at this point, to provide the Board with cost-benefit analysis that would be meaningful. 50 That's not to say we're going to forget about cost-benefit analysis; we'll come back to that in the reporting requirements. But, at this point, the Board is satisfied that the utility has conducted the necessary due diligence with respect to these plans. They have investigated plans from other jurisdictions, and the criteria that they adopted in coming forward with these plans, as set out in their application, is in some significant detail. 51 RATE BASE: 52 I turn, next, to the question of rate base. Objections were raised by different parties that these expenditures should not find their way into rate base. We have dealt with this previously. It was raised at the outset of this proceeding. The fact of the matter is that we are guided in this proceeding by the Minister's letter of May 31st, which is filed in this record. We're here to interpret government policy, not create it. And that document clearly states, in the second last sentence, that "conservation assets should be included in rate base." 53 TAX EFFECT: 54 Next, there was discussion as to the tax effect, namely, whether the MARR amounts that were set out in the notices of application were before or after tax. The Board has previously ruled that they are after-tax numbers. 55 INCREMENTAL EXPENSE: 56 The next issue that was dealt with could be called incremental expenses. And it related to the proposition that the utilities were leveraging some of their existing personnel - in other words, they were moving them from, if you like, their existing duties, or their old duties, to the new C&DM activities - and therefore, to claim those expenses as part of the C&DM expenses was, in some sense, double-counting or double-collecting. It was stated in evidence that the amount ranged anywhere from 5 to 15 percent, depending on the utility. 57 The Board doesn't accept that argument, for two reasons. First, it's useful to use existing assets and personnel and redeploy them where that makes sense; it's likely economic. But, moreover, if there is a rate adjustment to be had as a result of this, it can be dealt with in the rate applications that are forthcoming for 2005 and 2006. 58 CAPEX/OPEX RATIOS: 59 I'm going to turn, next, to capital expense and operating expense, and the relative ratios. The ratios are set out in Schedule C. This was the so-called crib sheet. The capital expenditures are also set out in schedule B, which is a detailed schedule of all of the programs for all of the utilities. 60 Argument was made by some of the intervenors that 50 percent or more of these expenditures ought to be in operating expense. Both the School Energy Coalition and the Green Energy Coalition took that position. The Board sees no logic to that particular rule. We suppose it's related to the concern that these expenditures shouldn't be finding their way into rate base at all, but as indicated, we ruled on that issue. The Minister's made that decision. The government's made that decision. It follows from that that we should not be unduly concerned about the allocation between operating expense and capital expense. Moreover, the Board's review of these programs suggests that, rather than follow artificial rules, the utilities have exercised their best judgment to see where they can get the maximum bang for the buck. 61 They have exercised prudent judgment in balancing these programs over different customer classes. Looking at schedule A, we notice there are three broad categories: (1) C&DM plans, (2) plans relating to distribution-loss reduction, and (3) plans relating to distributed energy. Within the C&DM plans, they have allocated resources between the residential and small business users below 50 kW and those who are using more than 50 kW, the commercial and large industrials. 62 That type of allocation is an allocation which the Minister directed, and a concern that the Minister has identified. In other words, should there be a balance of plans across the customer profile which necessarily results in judgements being made with respect to operating expense versus capital expense. Some of these plans, necessarily, will accrue larger capital expenses than others. But, in summary, we're satisfied that there is the right balance, and no artificial rule could be determined with any accuracy or any meaning. 63 PROGRAM MODIFICATIONS: 64 I'd like to turn, next, to what we call program modifications. This is set out in the applicants' material at paragraph 29 of the written submissions. Essentially, what the utility asked is that, without coming back to the Board, it be entitled to move resources between programs. To discontinue some programs, add other programs, increase the resources in some programs, and decrease it in others. And, provided that they don't move more than 20 percent of the total allocated budget they should be able to have that flexibility without Board intervention. 65 The Board accepts that proposition. It's important that they do that. And we're going to come to the reporting requirements and monitoring requirements at the end of these reasons, but it's important that this flexibility exist. 66 SMART METERS: 67 The next issue that was addressed by some of the intervenors was smart meters, and whether an investment in smart meters in these C&DM plans was appropriate. The argument here is that the government already has a very extensive initiative underway with respect to smart meters, and has directed this Board to come forward with a proposal that will allow the government to meet its installation objectives of, installing smart meters across this province. So the argument goes that, if this is underway in a separate initiative, why bring it into this plan? 68 The Board believes it is useful to include smart meters in these C&DM plans. These plans, as the parties have described, are pilot plans. They are starting tomorrow. When the smart-meter initiative will be finally resolved is hard so say. There's going to be a Board report. The government will have to make a decision. It may be sometime before that gets underway. It's important that these utilities, which, after all, are the largest utilities in the province, gain some immediate experience with respect to smart meters. That will benefit the smart meter program. 69 Now, having said that, the parties recognize, and the Board would stipulate, that, to the extent possible, these parties should not run out and buy smart meter hardware that is not going to meet the Board's recommendations with respect to the technical standards and requirements of that hardware. I believe it's fair to say that those standards will be forthcoming fairly soon and should not be any burden to this process. But as Dr. Lu stated, there's lots that can be done they buy the hardware. There are back office systems and a lot of software configuration that could be investigated and analyzed prior to the actual purchasing of the final hardware out there. 70 PROGRAM BALANCE: 71 Next, there's a question raised by the intervenors of, what I call, program balance. This is the issue raised by two of the coalitions, the School Energy Coalition and the Green Energy Coalition, that 50 percent or more of the initiatives ought to be in what's called customer-side initiatives. Again, the Board sees no evidence to base any hard and fast rule on. It goes back to the fundamental judgment that the utilities have exercised their discretion, and have exercised sound, due diligence in trying to meet the Minister's objectives as set out in the May 31st letter. That there should be some artificial rule as to the percentage of these programs that should be in customer-side or utility-side initiatives doesn't make much sense in the context of the current proceeding. 72 LOW INCOME PROGRAMS: 73 Finally, there was an issue raised, principally by VECC, about low-income initiatives. It was stated that not enough effort had been put in this direction. And in fact, VECC filed a report which is Exhibit G.1.3. Now, admittedly, this report is relatively new, I think the date is November 30th of this year, so the utilities didn't have the benefit of analyzing it. But the one comment this Board would make about the programs and the one adjustment we would urge you to make is to determine, having regard to this report, whether there's more that can be done in this area. And the reason for that is that this is specifically mentioned in the Minister's letter or guideline. We're not making this a part of the order, and we're not making it a condition of this order. We're urging you to look at that, and we're confident you will use your best judgment to see if modifications can be made in that area. 74 LED TRAFFIC LIGHTS: 75 Mr. Dominy has pointed out that in my enthusiasm I skipped over LED traffic lights. The issue here is that this wasn't an appropriate expenditure for C&DMplans because the municipalities, (and many of these utilities are of course owned by municipalities,) had another department that was quite capable of funding new traffic lights. There's some merit to that, but we also need to recognize, as has been stated by the parties, that these are pilot projects and we're trying to jump start, if you will, the initiatives. 76 The chief conservation officers of these utilities, in some cases reporting directly to the CEO, can help implement not only these third tranche expenditures but conservation initiatives within the utility generally. There's a new group. There's new thinking and the utilities clearly regard it as a new priority, and so they should. To the government it's a critical priority, and the government can only implement it through these utilities. The government can't mandate a new market. It has to work through these LDCs who have the relationships with the customers every day. 77 In that spirit it's important that the conservation departments, if I can use that term, within the utilities do whatever they can with the resources they have in third tranche monies to encourage this new technology. These LED traffic lights can result in substantial savings. Anything that can be done to promote this by these utilities within their own municipal organizations is to be encouraged. Clearly we wouldn't want to see 100 percent of the C&DM budgets in traffic lights, but there's nothing like being proposed. 78 If anything, we would encourage the utilities to do this. This is something that's in their own back yard. Down the hallway from their office there's some guy who's responsible for traffic lights. Try to do something within your own jurisdiction where you have complete operational control. This is one example. 79 REPORTING AND MONITORING: 80 I want to turn next to reporting and monitoring. The Board has given some consideration to this. We have an interesting situation here where these applicants seek final orders. I've described at some length why they're doing that and it's appropriate they do that. At the same time, we recognize that we don't have all the information we would like. It's just a fact of life. The one thing the Board can do to safeguard the C&DMplan is to make sure that the reporting and monitoring requirements are as complete and timely as can be. 81 Now, the applicants did address this, they filed in schedule 4 of their material a draft report or draft outline of a report. The Board's order in this matter is conditional upon the utilities filing quarterly reports. The form will be determined in discussion between Board Staff and the utilities. The terms will, at a minimum, require an evaluation of each of the programs that the utility is undertaking, and the progress with respect to that program. That is to say, the amount of money spent as opposed to budget amounts to date. The report should be signed by the chief conservation officer or his equivalent in each utility. It will be posted on the Board's website. No hearing or public review is contemplated with respect to the quarterly reports. 82 One of the things that the Board, however, would like to see in the quarterly reports is the report on a quarterly meeting between these utilities. It's likely not appropriate for the Board to micromanage this process, but the Board has been impressed with the cooperation between these utilities in preparing this application. We recognize that it's important that cooperation continue and utilities share their experience. We believe these utilities should, at a minimum, meet quarterly to compare their results. That may also be of assistance to each of them in preparing their quarterly report. 83 We then come to the annual report. This should be done on a calendar year and should be filed with the Board no later than March 31st of the following year. So the first one would be for the year 2005. This will contain all of the information that would be in the quarterly report, but in addition should attempt a cost-benefit analysis. The methodology with respect to that cost-benefit analysis should be determined in advance, and the Board suggests that a working group be formed with Board Staff and representatives of each of these utilities, with possible involvement from the intervenor community involved in this case. We don't want to face an argument a year from now as to what the methodology should be for this cost-benefit analysis. So in the interim we should work out the methodology, but a year from now, the Board would like to receive from each of these utilities a cost-benefit analysis on the initiatives that have been conducted up until that date. 84 Now, these expenditures, of course, go over a three-year time period. This is set out in the materials of the applicants. We would therefore contemplate that there would be three annual reports that relate to this. 85 The other difference between the annual report and the quarterly report is that we will hold a hearing with respect to the annual report. It will provide the Board with an opportunity in a public forum to question the applicants with respect to their first years of experience with respect to these programs. 86 MS. NEWLAND: A question of clarification, if I may, Mr. Chairman. 87 MR. KAISER: Yes. 88 MS. NEWLAND: You mention the first annual report would be due on March 31st, 2005. Did I hear you correctly? 89 MR. KAISER: No, 2006. The first year would be 2005; it would be due March 31st of the year following. 90 MS. NEWLAND: Thank you. 91 MR. KAISER: That completes the Board's reasons in this matter. We have been spoken to with respect to costs. The Applicant, in their relief requested, which I read into the record, has dealt with a matter of costs. The Board believes the intervenors have been very helpful, and behaved responsibly. So a cost order will go in the usual form to be paid by the applicants. No doubt, Ms. Newland has figured out by now how to divide these costs between the six utilities, but, if there is an issue in that regard, the Board can be spoken to. 92 [The Board confers] 93 MR. KAISER: One piece of guidance that Mr. Dominy has added. When the reports are made, quarterly or annually, if there are adjustments in the program, that is programs are discontinued or programs are added, or resources are moved, within the 20 percent rule, we would like to have a report with respect to those shifts in funds, if you will. 94 MS. NEWLAND: Mr. Kaiser, are you saying you'd like a report on, sort of, an ongoing basis, as we make adjustments? 95 MR. KAISER: No. There's two reports, the quarterly report and the annual report. But the -- any program shifts should be dealt with in those reports. 96 MS. NEWLAND: Thank you, sir. 97 MR. KAISER: Any other questions? 98 Mr. Dingwall? 99 MR. DINGWALL: Sir, in your decision, you mentioned that there would be a hearing in respect of the annual reports. 100 MR. KAISER: Yes. 101 MR. DINGWALL: In its final argument, CME requested some clarification as to what the parameters of prudential review would be in the annual -- in any hearing that might take place subsequent to a final order. And, I believe, in the submissions of the applicant and, certainly, in the cross-examination, they stated that their position would be that the question of prudential review would solely turn around whether the dollars were spent. So I'm wondering if there might be some clarification as to what the ambit of prudential review that would come about in respect of the hearings in respect of the annual reports would be. 102 MR. KAISER: Well, we have stated very clearly the relief that's granted. I think the relief that's granted answers that question. The applicant was very careful in defining that relief to, in effect, say, If we spend the money as we say we're going to spend it, the Board can't take it back, if I can use the vernacular. Now, with respect to the hearing I'm going to call it "review", as opposed to "hearing", because "hearing" leads to all kinds of connotations -- but the public review of the annual report, the Board will issue a Procedural Order. So we've got a year to worry about that. I'm not going to try to define the Procedural Order now that will set out the rules of that game. But I think the answer to your question is that in the relief has been granted in the fashion in which the applicant sought the order. Thank you. 103 Mr. Lyle, do we have some more candidates? 104 MR. LYLE: I just have one other point of clarification, Mr. Chair, if I could. When you were referencing the relief sought at paragraph 39 of Exhibit A.7, in clause C of that paragraph there's a reference to paragraph 29. I believe you inadvertently stated paragraph 39. 105 MR. KAISER: I think you're right. Thank you, Mr. Lyle. 106 MR. LYLE: Yes, Mr. Chair, the next applicant is Milton Hydro, and Mr. Thorne and Ms. Simon are here. They've requested -- if they could have a few moments of a break in order to change their presentation to reflect the Board's decision with respect to the six distributors already addressed. They are not represented by counsel, but do intend to make a brief presentation at the beginning of their hearing. 107 Perhaps also, Mr. Chairman, we could have appearances before we take the break. 108 MR. KAISER: Yes. Could we have the appearances, please, with respect to the applications that are before us today? 109 This is the Milton application, Mr. Lyle? 110 MR. LYLE: That's correct. 111 MS. NEWLAND: Mr. Kaiser, on behalf of the CLD applicants, we'd like to thank you, and we will be taking our leave now. We are not -- have not intervened in the Milton application. 112 MR. KAISER: Thank you very much. 113 APPEARANCES: 114 MR. DINGWALL: Sir, Brian Dingwall for CME, in respect to the Milton application. 115 MR. KAISER: Thank you, Mr. Dingwall. 116 MR. HIGGIN: Roger Higgin for VECC, for Milton and Brantford. 117 MR. KAISER: Thank you, Mr. Higgin. Why don't you move up to the front? 118 MR. ADAMS: Tom Adams on behalf of Energy Probe, for both Milton and Brantford. 119 MR. KAISER: Thank you, Mr. Adams. Will you move up as well? 120 MR. ADAMS: Yes. 121 MR. SIDLOFSKY: James Sidlofsky for Brantford Power. I will just be observing the Milton proceeding, but I will go on the record. 122 MR. KAISER: Thank you, sir. 123 MR. DINGWALL: I should clarify, sir, that I will be here for both Milton and Brantford. 124 MR. KAISER: Yes. Yes, I expect that. 125 Anyone else? You wanted an adjournment? 126 MR. LYLE: A short break, Mr. Chair, yes. 127 MR. KAISER: 15 minutes, is that sufficient? 128 MR. LYLE: I believe so, Mr. Chair. 129 MR. KAISER: You can have longer, if you wish. 130 MR. SIDLOFSKY: Just before we break, sir, I wonder if I could raise one procedural issue. I'm aware of a letter from the School Energy Coalition indicating that it intended to intervene in the Brantford proceeding. Schools isn't here today. I assume they are they're not going to be involved in the Brantford matter. I'm not sure if Energy Probe has filed a letter -- a Notice of Intervention or not in this proceeding, in the Brantford matter? 131 MR. KAISER: Mr. Lyle, do we know who the intervenors are in the Brantford matter? 132 MR. LYLE: We do have a letter from Energy Probe, dated December 4st, Mr. Chair, which indicates their indication to intervene in the Brantford matter, as well as the Milton matter. 133 MR. KAISER: Thank you. 134 MR. SIDLOFSKY: Sir, if it makes it any easier for my friends to take their leave - I'm not sure that it will - it's not that I don't enjoy seeing them regularly, but our client will likely be expected to pay for it. I have discussed briefly with Mr. Loucks, who is the Director of Operations for Brantford Power, and he will be the -- one of the panel members for the Brantford proceeding. And Brantford Power will certainly abide by the Board's directions as to, excuse me, as to monitoring and reporting. 135 There's one difference, I suppose, with the Brantford plan, and that is that Brantford intends to spend its money in 2005. They'd like to get started on their plan quickly, and they'd like to put their project in place. I'm not sure if that would change the Board's thoughts on quarterly and annual monitoring, but I'd like to think that maybe -- that that may be the only issue that may require some additional discussion in the context of the Brantford plan. 136 I'll raise that for the Board now. I'm not sure if the Board would have any thoughts on that, at this point. 137 MR. KAISER: No, not at this point. I think we'll hear your evidence first. 138 MR. SIDLOFSKY: Thank you, sir. 139 MR. KAISER: Thank you. 140 --- Recess taken at 10:15 a.m. 141 --- On resuming at 10:34 a.m. 142 MR. KAISER: Please be seated. 143 Mr. Lyle. 144 MR. LYLE: Thank you, Mr. Chair, just one preliminary matter with respect to argument for Milton and Brantford, proposing that perhaps we could combine the argument after we've heard both separate witness panels. 145 MR. KAISER: That's an excellent idea. 146 MR. LYLE: I believe Mr. Thorne and Ms. Simon have a presentation. Perhaps they should be sworn in before they commence their presentation. 147 MR. KAISER: Yes. 148 MILTON HYDRO PANEL 1 - THORNE, SIMON: 149 D.THORNE; Sworn. 150 J.SIMON; Affirmed. 151 SUBMISSIONS BY MR. THORNE: 152 MR. THORNE: Good morning, Mr. Chairman, and Board Panel. I'm Don Thorne, President of Milton Hydro, and I'm here today without legal counsel because I believe that approval of our plan should be a straightforward process. We also want to make sure that the dollars available for DSM in Milton go to DSM. 153 When I submitted my plan for final approval, I was expecting a written hearing based on the Board's Procedural Order of October 5th. That order indicates there would be a written hearing unless a party provides good reason why the matter should proceed by way of an oral hearing. If the party has provided such a reason, it has not been conveyed to us. To date, we have received only positive comments from ratepayers and no negative ones. As a result, I'm very surprised to find myself in this type of setting. 154 That said, however, I'm ready to be helpful to the Board in understanding Milton Hydro's plan and to respond to your questions and those of Board Staff and the intervenors in this proceeding. I'll do so with the assistance of Judy Simon, Milton Hydro's expert on DSM, and together we will form Milton Hydro's witness panel in this proceeding. 155 Would you like me to file Ms. Simon's resume with the Board? 156 MR. KAISER: Thank you, that would be helpful, Mr. Thorne. 157 Do you have a number for that, Mr. Lyle? 158 MR. LYLE: Yes, Mr. Chair, we'll mark that as G.1.1. 159 EXHIBIT NO. G.1.1: CV OF JUDY SIMON 160 MR. THORNE: Milton Hydro began work on a DSM plan in 2002 and was ready to file with the OEB a DSM plan for 2003 in the fall of 2002. To that end, we applied to the Minister of Energy for permission to do so, but the matter was with the Ministry of Energy staff and the government changed, and we did not receive a formal response to our request. 161 Milton Hydro has always been on the leading edge of DSM and therefore, being the leader, did not have an opportunity to collaborate to a significant degree with other LDCs. I've certainly found it lonely at the front. When we became aware that conservation and demand management issues were a priority of this government, we prepared the DSM plan that is before you now. This plan was submitted to the OEB initially as a background report to our request for a deferral account that we filed with the Board in June of 2004. 162 We received interim approval from the OEB for this DSM plan in October of 2004. 163 We believe we were the first LDC, or among the first, to submit such a plan and were among the only two LDCs that received interim approval from the Board as of October. Given that our plan has been posted on their web since the end of June, was widely circulated across the province and received favourable comments from Board Staff and others and received prompt interim approval, we decided to submit a plan for final approval by the Board, pursuant to the Board's Procedural Order of October 5th, 2004. 164 The interim approval we received reduced the budget for the plan based on the Board's calculation of our MARR. Since June, the regulatory environment for DSM has also changed, and we have gained experience with plan implementation. For all these reasons, we will be describing some refinements that we've made to Milton Hydro's plan. 165 I will begin a discussion of Milton Hydro's DSM plan by first providing the Board with some background about the Town of Milton, the development of our plan, the principles that guided plan development and the refinements to the plan given the change in our budget and the experience we've gained in implementing the plan since June of 2004. 166 The Town of Milton is one of the fastest growing communities in the country. Since incorporation, all of the -- and for the foreseeable future, all of Milton Hydro's return from rates has been invested in distribution infrastructure to support this growth in our community. In the absence of our new role in conservation and demand-side management, the incremental revenue from rates in moving to our full regulated return in March 2005 would have resulted in a proportionate increase in our share of the costs of new infrastructure, reducing contributed capital from developers and customers as required under the Distribution System Code. Instead, we are using the first year of our third tranche to provide our customers with knowledge and tools to take the initiative to reduce their own electricity consumption and electricity demand. 167 Milton Hydro has been taking this approach to its customers since market opening and before, as a matter of fact. Our DSM plan builds on this approach. Milton Hydro supports the government's initiatives in conservation and demand-side management and is pleased to redirect the first year of our third tranche resources to this end in our community. 168 As mentioned, in June of this year, Milton Hydro submitted to the Ontario Energy Board its 2004 DSM plan as background information and in support of its request for a deferral account. The plan included capital and operating expenditures estimated at $1.129 million, which was the forecasted incremental revenue from rates, excluding PILs, based on 2005 billing determinants. In October, the Board gave interim approval of our plan, subject to reducing the total expenditure to $761,000, which is the required amount, as we now understand it, based on the incremental revenue using our 1999 billing determinants upon which the current distribution rates were established. 169 As a result of this direction, Milton Hydro scaled down its initiatives to reflect this reduction in total required expenditures. I would like to file now with the Board an update of table 1 of the prefiled evidence on page 11 that reflects the update on the proposed expenditures and their timing. 170 MR. LYLE: Mr. Chair, we'll mark the updated table 1 as Exhibit G.1.2. 171 EXHIBIT NO. G.1.2: UPDATED TABLE 1 OF MILTON HYDRO'S PREFILED EVIDENCE 172 MR. THORNE: With regard to our guiding principles, fundamentally we believe that a significant change is required in the conservation ethic of consumers if we are to achieve a long-term supply-demand balance. Enabling technologies and programs in our plan and those that we have implemented over the last several years have that single goal in mind. The initiatives contained in our plan are intended to achieve behavioural change by directly engaging consumers in our community in making their energy use decisions. 173 We will now update our initiatives. To conform to the DSM budget now available to Milton Hydro we have revised the plan in the following manner: 174 One, the demand response program designed, formerly called the price response program designed, on page 3, item 2.1 of the DSM plan, includes a design of a meter retrofit program and a customer information program. With regard to the design of the meter retrofit program, the work proposed for the design of the meter retrofit program which includes ongoing evaluation of technologies and development of an implementation plan is described on page 4 of the plan. It will be carried out using Milton Hydro's existing resources. There will be no incremental cost to be covered by the DSM plan. 175 Customer information: As indicated in the plan, the customer information program will consist of an Internet-based customer tracking-of-consumption and analysis tool, customer help-line, customer notification system, and customer education to use these tools. 176 Milton Hydro has purchased an Internet-based customer tracking and analysis tool called "PowerView", which Milton Hydro customers can access by password. We will create a help-line for our customers who have inquiries about how to use the software. And, for monitoring and evaluation purposes, we will track the number and nature of inquiries received, and will use this information to make improvements to our service for 2006. 177 In addition, we have purchased a customer notification system that will notify customers who sign up when there are market-price alarms, based on their sensitivity, special price-triggers, IMO public appeals, warnings and power emergencies, and, for general public appeals, for example, related to smog events. Once notified, customers will be able to take steps to reduce electricity consumption resulting in savings to the participant, and system benefits to the electricity grant. For monitoring and evaluation purposes, we will track the number of program participants, the amount of load-reduction the customer achieves after the notification, for the duration of the notice period, by using our settlement software and associated analysis tools, and will calculate the total savings achieved from the program. 178 The customer education component of our customer information program consists of a series of workshops to introduce customers to the software tools, and to new DSM programs that they can participate in. Milton Hydro has just held two breakfast seminars in November of 2004, one for our commercial and industrial customers, and another for our institutional customers. A total of about 40 customers attended the workshop, and there was a tremendous interest in signing up for notification, the energy drill, the transitional-demand -- and the transitional-demand response programs, which I will just discuss shortly. 179 To monitor and evaluate the effectiveness of the seminars that we held, we conducted an entrance and exit survey. 180 The original budget for the demand-response program, as described in the plan as the price-response program, was $121,000. We have revised this budget downward, and it is now estimated at 76,000. 181 Next item is our aggregator-development program. Milton Hydro met all of the technical and non-technical requirements for the IMO's transitional demand-response program, and is currently, as we understand it, the only approved wholesale market participant and aggregator. Consumer participants, and their demand-response efforts associated with this program, may be quantified by customer-class and reported annually. 182 The benefits of this program are clear. Program participants will reduce their electricity costs when electricity is the most expensive, potentially impact the market price, as a whole, and to help to increase the stability of the electricity grid. Small reductions of this type yield big benefits, because of the exponential increase in market prices under tight supply conditions. 183 Participants will also contribute to the avoidance or improvement in smog conditions. To run this program effectively, there is a need for incremental settlement software for existing settlement system. There will also be maintenance costs for this program. The total budget for this program remains at the $35,000 estimate in the DSM plan. 184 The energy drill program. Participants at our November 2004 breakfast seminars have expressed enormous interest in the energy drill program. The Federation of Canadian Municipalities has given preliminary approval for partial funding for program development, which directed the Board's attention to page 6 of our plan where the energy drill program is discussed. 185 The pilots are being conducted in partnership with the Town of Milton, Halton Region, and the Halton District School Board. The plan for pilot buildings has been expanded to include an additional municipal and a regional government building, based on the interest expressed at the breakfast seminars, and the follow-up work we have done. 186 The pilots and customers participating in 2005, the resulting demand response by critical-event type, natural demand response, special programs like the transitional demand-response program, and the public appeals will be quantified. In addition to reductions during critical periods, it is also expected that, as a result of participating in this demand-response program, opportunities for long-term energy and demand reductions over the entire year will be identified and implemented. This also will be estimated and reported on. 187 Incremental costs for the program development and for the pilots are now estimated at $152,000. This represents an increase of $36,000 from the original budget estimate of $116,000, listed on page 7 of the plan. 188 Program development research: Page 7 and 8 of the plan describe the program-development research we will carry out in 2005. Milton Hydro will carry out this work using existing resources. Therefore, there will be no costs included in the DSM plan for this work. 189 Under partnership-building - and we're going to talk about some new programs: We modified the partnership-building program for 2005 in order to accommodate the new spending envelope for our DSM plan. We will no longer carry out a design charette program. Any general retailer consultations that we carry out in the net zero energy home pilot will be done with our internal resources. Similarly, any promotion of existing DSM programs, either those of the federal government, the Clean Air Foundation, or others, will be done using our existing resources. 190 We have added two additional programs to partnership-building, both of which will be done with existing resources. These are a fuel substitution program with Union Gas, and an air-conditioner EER -- that's energy-efficiency ratio-ratings pilot with EnerCan. 191 Under fuel substitution, Milton Hydro, in partnership with Union Gas, is developing a new program to encourage fuel-switching from electricity to natural gas. By partnering with Union Gas, we expect to deliver a clear and consistent message to consumers regarding the highest value uses of each energy resource. As part of this fuel-switching program, we hope to target low-income consumers living in social housing, as well as low-income homeowners and tenants responsible for paying their electricity bills. 192 The air-conditioner EER ratings: Milton Hydro has been supportive of Natural Resources Canada's efforts to get manufacturers to report EER as well as SEER ratings, to assist consumers in making their energy-efficiency decisions. EER is a measure of peak demand, if you don't know, and units with the same SEER rating - which is the seasonal energy efficiency rating - can have widely-varying EER ratings. EnerCan has approached Milton Hydro regarding our interest in a pilot program and demonstrating the value of high EER-rated equipment, and we intend to pursue this pilot with them. No financial contribution is expected to be necessary to participate in this pilot. 193 Our conservation asset program: Milton Hydro has updated the conservation asset program, found on page 9 of the plan, to include two components, a retrofit of small commercial/industrial customers less than 50 kilowatts, and a rural smart-metering pilot. 194 The retrofit of the small commercial/industrial customers, the less than 50 kilowatt: Smart meters will be installed only on customers whose meters are subject to re-verification in 2004, 2005, and 2006. This means that we intent to accelerate those that will come up in 2006 and replace them in 2005. Approximately $40,000 in costs will be avoided from this program, and these consumers will now have the access to, and the opportunity to, benefit from the -- from time-varying rates, potentially more options for retailers, and can participate in demand-response programs. 519 meter-installations will be retrofitted, with a total incremental cost estimated at $338,000. 195 With regard to the rural smart-metering pilot: It's recognized that smart-metering technologies that are anticipated to be implemented in high-density areas will not likely be as economic in low-density, rural areas. So the rural smart-metering pilot program will identify and pilot one or more technologies in Milton's rural areas. As you know, manual meter-reading in rural areas is more expensive than urban, and in our case is over four times the cost compared to our urban, and is less reliable and is a home security issue for customers. Rural residential customers tend to have the highest electricity consumption within the residential class, and it is expected that early adoption of smart metering for this customer group will provide the greatest benefit to the system and to participating customers through access to time-varying rates and other programs. 196 The incremental pilot program costs are estimated at $95,000. 197 We also had a distribution efficiency program in the plan, and Milton Hydro will not be including any network efficiency improvements in this plan. We are -- where our research identifies delivery system programs that will benefit customers, we will submit them to the OEB for approval. Any approved costs will be recovered through the normal rate-setting process. 198 With the conservation asset program that we have developed, Milton Hydro will now be able to provide smart meters to at least a group of all of its customer classes, including relevant subgroups, that is, residential urban and residential rural customer classes. This will enable Milton Hydro to analyze response from all customer groups as we implement our DSM portfolio. 199 Program planning, coordination and administration. The incremental cost of the program planning, coordination and administration continues to be estimated at $65,0000. 200 As we implement the plan, we will continue to need flexibility in expenditures. As a result, we are requesting that Milton Hydro be allowed to shift resources without returning to the Board for approval within the assets and within the O&M spending envelope of the plan as required to respond to changing conditions and to what we learn as we continue to implement the plan. 201 We'll file with the Board by March 2006 a report on the DSM plan for 2005 that documents and analyzes program results. We don't feel it's necessary to file quarterly reports because this is a one-year plan and our plan is more detailed. 202 Overall, the new plan addresses the change in budget specified by the Board in its interim approval and refines the plan based on what we have learned in the last six months through our ongoing work and our discussions with our customers and other stakeholders. 203 It's a portfolio program that addresses provincial priorities and that provides opportunities for all of our customers to act to reduce their energy bills, to enhance the reliability and the security of the electricity system, and to realize environmental and other benefits. 204 This completes my evidence in chief. 205 MR. KAISER: Thank you, Mr. Thorne. 206 Do you have anything to add, Ms. Simon? 207 MS. SIMON: No, sir. Thank you. 208 MR. KAISER: Mr. Dingwall. 209 CROSS-EXAMINATION BY MR. DINGWALL: 210 MR. DINGWALL: Mr. Thorne, I'm going to limit my questions to your conservation asset program and the smart meters that are subsumed within that. I take it that the only aspect of your smart metering program which is a pilot is in respect of rural meter reading; is that correct? 211 MR. THORNE: Yes, that's correct. 212 MR. DINGWALL: And in that pilot, are you assessing a number of different technologies? 213 MR. THORNE: Yes, that's the intent. 214 MR. DINGWALL: Which technologies would those be? 215 MR. THORNE: What, at this point in time, appears to be the technologies that are working is power line carrier is one, there's a wireless solution that looks promising, and you probably don't know this, but we've had a mandatory requirement for smart metering for all new residential development since the beginning of 2003 and the current -- the technology that we're using there is telephone-based. So there may be an opportunity to reallocate that technology out into the rural areas, and then whatever technology ends up being the preferred or most economic for high density urban, we'll implement that there. So there's a couple of things we're looking at here, but we're investigating all of this right now. 216 MR. DINGWALL: Mr. Thorne, you are habitually a fairly prominent person in context of many of the Board's initiatives in testing initiatives and new technologies and things like that; is that correct? 217 MR. THORNE: I think that's true, yes. 218 MR. DINGWALL: Do you see any value in other utilities mirroring or performing similar pilot programs to the one that you will be performing? 219 MR. THORNE: You mean in terms of the rural ones or -- 220 MR. DINGWALL: In terms of the rural ones, testing those technologies. 221 MR. THORNE: For sure. We plan on working with Hydro One because they have a -- as you know, Milton is -- we're about 150 square miles and probably -- well, even with our growth, we probably won't end up being much more than 20 percent high-density urban. So we have a very significant rural area with density similar to Hydro One, and we've been working actually quite closely with Hydro One in terms of where we go with this. 222 MR. DINGWALL: And habitually, do you share the results of your efforts with other LDCs? 223 MR. THORNE: To anyone who will listen. 224 MR. DINGWALL: Okay. With respect to your retrofit of small commercial/industrial meters, I take it from your comments what you are doing is you're advancing the schedule for the implementation of smart meters in your service territory; is that correct? 225 MR. THORNE: That's correct. 226 MR. DINGWALL: And the ones that you're implementing will be compliant with the Board-suggested guidelines with respect to technology and applications; is that correct? 227 MR. THORNE: Yes, they will. 228 MR. DINGWALL: Those are my questions, sir, and I'll only have a few brief comments in support in argument. 229 MR. KAISER: Thank you, Mr. Dingwall. 230 Mr. Adams. 231 MR. ADAMS: We have no questions. 232 MR. KAISER: Mr. Higgin. 233 MR. HIGGIN: Yes, I just have one question, Mr. Chairman. 234 CROSS-EXAMINATION BY MR. HIGGIN: 235 MR. HIGGIN: Mr. Thorne, I'm Roger Higgin, and I'm here from ECS consulting on behalf of the Vulnerable Energy Consumers' Coalition, and the counsel is not available today. 236 Could you just please turn up page 2 of your plan, then could you just outline your response to the Minister's direction about programs and initiatives targeted to low-income and hard-to-reach customers. And could you just outline what your response is to that component of the Minister's direction? 237 MR. THORNE: I mentioned earlier about our fuel substitution program that we're going to be working on with Union Gas. And as part of this fuel switching program we hope to target low-income consumers living in social housing as well as low-income home owners and tenants responsible for paying their electricity bills. So we're going to -- the plan is we're going to, sort of, find out where gas is available and we're going to prepare databases and find the relevant consumers in our joint territory, and then hopefully we'll be able to make use of other social services resources to identify specific consumers within those groups that fall into this category. And I guess once we've done that we can work on what resources we can gather to assist them. 238 MR. HIGGIN: Thank you. Just a follow-up on that. Is this going to start in 2005 or is this a future initiative where you're in the planning stage? 239 MR. THORNE: This is starting in 2005. In fact, I had a recent conversation with the folks in Union Gas. They've hired a person to work with one of our folks in terms of, at least, the data-analysis side of it, and so I expect we're going to get going early in the new year. 240 MR. HIGGIN: Thank you. Those are all my questions, Mr. Chair. 241 MR. KAISER: Thank you, Mr. Higgin. 242 Mr. Lyle. 243 MR. LYLE: Thank you, Mr. Chair. 244 CROSS-EXAMINATION BY MR. LYLE: 245 MR. LYLE: I turn you, panel, to Exhibit G.1.2, the revised table. 246 MR. THORNE: Yes. 247 MR. LYLE: And just looking at your budget figures for 2004, where are you, so far, in terms of spending those dollars in 2004? 248 MR. THORNE: We've spent -- with the exception of $10,000 or $20,000 on the energy drill program, we've expended everything in the 2004, so far. 249 MR. LYLE: And you're expecting some of the dollars related to the energy drill program will then be carried over into 2005? 250 MR. THORNE: We're actually going to start -- we're going to start one of the pilots between now and the end of the year. And so we may actually -- chances are we'll go through the whole. 251 MR. LYLE: Okay. Has all this spending in 2004 taken place after July 1, 2004? 252 MR. THORNE: Yes, that's correct. 253 MR. LYLE: Can you tell me, with this updated budget figure, what your capital expenditure and operating expenditure split is, now, on an overall basis? 254 MR. THORNE: I think it's approximately 57 or 58 percent. 255 MR. LYLE: So that's 58 percent capital, 42 percent operating. 256 MR. THORNE: Yes. 257 MR. LYLE: And this is a plan to spend your third tranche money in 2004/2005. Have you given any thought to what you would be doing in 2006, with respect to C&DM activities? 258 MR. THORNE: Basically, we're going to build on the existing plan. The energy drill program is a -- really we're piloting it right now, in this resource. We're hoping to roll it out later in 2005 and, if it's really successful, it will get rolled out throughout the whole community, maybe beyond. Our focus, initially, is going to be on the institutional sector, because we see those folks as leaders in the community, and, in terms of actually creating a change in the behaviors in the community, they're in a position to influence that greatly. 259 Clearly, we're going to have more seminars. Depending on what happens on this fuel-switching, with Union Gas, there may be some significant programs come out of that. The transitional demand-response program: It's not clear, certainly, from the IMO, whether this is going to be -- they call it transitional, but we believe that the role of aggregator is -- in terms of engaging the retail market, in demand-response activities, will be there. We're not clear whether distributors will continue to be an aggregator, but, certainly, the role will be there, and we believe that that's going to be -- a significant effort is going to be required to develop that sort of aggregator-capability. And, at least at this point in time, we see our role in that continuing out and expanding over time. 260 MR. LYLE: Can you tell me about that role as an aggregator? Is that, potentially, a profit-making business for the utility? 261 MR. THORNE: The way we have treated it in Milton is that we believe that all of the costs -- all of our costs associated with that, first of all, should be socialized in going rates, so we're not charging any of our retail customers directly, you know, a monthly charge or whatever. And we're, basically, just looking at that as a cost recovery, similar to our normal billing functions -- which is, essentially, what it is. The IMO, certainly, in terms of encouraging demand response across all customer classes -- they can't deal with every, you know, four-odd million, so the role of the aggregator is to sit between the customer and the IMO. We settle with the IMO and then, of course, we pass whatever we receive from them, whatever the programs are, we pass that through to customers. So to answer your question, we're just looking at it as a cost recovery. 262 MR. LYLE: Now, you talked in your presentation, about having flexibility to shift funds between different programs. 263 MR. THORNE: Yes. 264 MR. LYLE: And you heard the Board's decision with respect to the CLD utilities this morning -- 265 MR. THORNE: Yes. 266 MR. LYLE: -- where Board approval is not required so long as the shifting is not above 20 percent. Is that a level you can live with, whereby, if you shift beyond 20 percent, you would need approval of the Board? 267 MR. THORNE: It would seem to be reasonable. I'm not expecting there to be a lot of changes over the year, but I think we can live with that. 268 MR. LYLE: Thank you, Panel. 269 Mr. Chair, those are all my questions. 270 QUESTIONS FROM THE BOARD: 271 MR. KAISER: Mr. Thorne, you indicated, as I heard it, that since 2003, all new buildings require smart meters. 272 MR. THORNE: Correct. 273 MR. KAISER: How many have gone into place, to date? 274 MR. THORNE: We made it a requirement in terms of our residential subdivisions. It went into the subdivision agreements that were signed in January of 2003, and then after that. So we actually started to see those houses come on-stream around the end of last year and, to date, we have approximately 2,000 homes in the new subdivisions that have smart meters. 275 MR. KAISER: And those meters are paid for by whom? 276 MR. THORNE: The -- if you look at how development is done, under the Distribution System Code, distributors are responsible for funding up to what their rates will support, essentially. And, in Milton's case, with our distribution rates and the typical urban subdivision, we're currently funding approximately 50 percent of the capital costs associated with servicing those new developments. So, by making smart meters a new standard, we effectively increased, if you like, the required capital cost for the subdivisions - with the support of developers, by the way - and so, the net result is that -- becomes incremental. Since we're funding 50 percent right now, when we move to our third tranche, on average, it will probably go up to about 80 percent. But -- so the long answer to your question, or the short answer, is it would essentially be funded by the developers, at this point, the incremental cost. 277 MR. KAISER: So with respect to the existing 2,000, you've paid 50 percent, the developer has paid 50 percent, and he just includes it in the cost of the house. 278 MR. THORNE: Yes, or whatever the market will bear. 279 MR. KAISER: With respect to those 2,000, do you have any data? Do you have any ability to monitor these meters? Do you have any data or evidence as to their effectiveness? 280 MR. THORNE: At this point, they're not -- first of all, they're not on any kind of time-bearing rate-structure, and we're in a -- once you get into the mass market segment of implementing interval meters, what you'll find is the handling of all of that, it's fairly complex. And -- but we've made a really good -- I think -- we're working with our technology suppliers and software suppliers to develop all of the processes that one will need when the smart meters get rolled out throughout the province. So, we have some data. We're beginning to get some data on those residential customers, but we won't probably be able to see anything that will be of any real value for another year, would be my guess, in terms of our implementation. 281 The other thing we're doing, and I don't mean to go on here, but one of the things that has slowed things down from getting -- we offer web access to all of the interval data for all of our industrial/commercial customers because they all have -- all the ones above 50 kilowatt have interval meters. We put them in, well, they were all in by May of 2003. But what's delayed that in the residential sector is that we're working with the region of Halton to get the water also, we also want to display water on an hourly basis, and we've had -- anyway, we've had some difficulty in coordinating the water side so it's, sort of, slowed down our -- getting data on the electrical side. But certainly the intent is that customers in Milton will have access to their hourly data on the web, including their electricity and water. 282 MR. KAISER: Help me with the 2,000, those residential customers. 283 MR. THORNE: Yes. 284 MR. KAISER: When will they have access to data? 285 MR. THORNE: To data? 286 MR. KAISER: Yes, to the web access you just mentioned. 287 MR. THORNE: It is in the process. We have some customers that already have access, but it's probably about maybe 15 percent right now, or less than that. But they should have full web access by the first quarter of next year. 288 MR. KAISER: And when they get full access to web data in the first quarter, presumably, you would hope and we would hope that they could use this technology to conserve energy. 289 MR. THORNE: Right. 290 MR. KAISER: And what plans do you have to monitor that, to evaluate whether these meters have been effective in that regard? You can answer directly, Ms. Simon, you don't have to speak through Mr. Thorne. 291 MS. SIMON: Milton Hydro has been approached by NRCan to do a metering study similar to the one that NRCan is financing out west in Calgary. So Milton Hydro is in the process of preparing that application to NRCan. It will be -- the details haven't been worked out, but it will be looking at the affect that the smart meters have had on commercial and industrial customers, and Milton Hydro is also looking into the possibility of including the impact on residential customers once the regulated price plans takes into effect. So this study might be a multi-year study to look at the impact of meters on electricity consumption in Milton. 292 MR. THORNE: If I could just add, on the residential -- one of the software changes that we made become an aggregator for the IMO's TRP program was the calculation of a baseline. So there's rules. In order to determine what payment a customer gets for reducing their demand in that program, the IMO has set up a set of rules to calculate the baseline. So basically, what we're -- so what we're doing as well as displaying the customer - this will apply to any residential - as well as displaying the customer's actual load profile that they have access to will also show them their baseline. So that calculation, whether you agree with how the baseline is calculated or not, will give the customers immediately, sort of, the following day, a visual indication of what they did relative to what they would normally have done. 293 So if they were implemented, they're part of some kind of program, whether they participate in the energy drill and we're planning on expanding the energy drill to include residential customers. So if we give them price triggers, and I briefly read the Board's initial document on the regulated price plan and your deferral of critical peak pricing, the thought to defer that for a while. I think what you're going to find with Milton, with the programs we've laid out here, we're going to be able to give you some data on the effectiveness of setting a price trigger, you know, on critical events with residential customers. So you might find that helpful, sir. I don't know if I'm being very clear here. 294 MR. KAISER: Who is going to be setting te price trigger in that even, you? 295 MR. THORNE: Yes. Part of the plan, and we have it working now and it's actually part of the -- it's a fundamental part of being an aggregator is that we notify customers, in terms of the transitional demand response program, when there's a price trigger. And this may -- and it's based on, it's called the three-hour ahead pre-dispatch price. Whenever it hits $120 or above for an hour, it's an hourly thing, then the opportunity for customers to receive incremental dollar amounts for their reductions, that's -- it's on, the game is on. So those customers have to be notified. So what a notification system does is it basically takes input. 296 So we can get any kind of inputs, we take three-hour ahead pre-dispatch, we take five-minute price, this is all automatic from the IMO, and we take their power advisories and warnings, and we can also take -- the plan is to take in. We get regional notices on smog days and things, we take those in, and whatever else, water, and then we send those notices to customers that are part of the program, that have signed up for the notifications. 297 MR. KAISER: All right. This will apply to the 2,000 residents we were discussing? 298 MR. THORNE: To the extent that they want. 299 MR. KAISER: To the extent they sign up. 300 MR. THORNE: Sign up, yes. We're planning on including them in the program. Yes. 301 MR. KAISER: All right. So there's two things developing in your jurisdiction. You've got 2,000 residential customers that have smart meters, and there could be more, and as of the first quarter they're going to get data back on their usage via the Internet. It was via the Internet? 302 MR. THORNE: Yes. 303 MR. KAISER: And you will be able to measure whether that changes their consumption pattern; correct? 304 MR. THORNE: Yes, that or any programs that they participate in. 305 MR. KAISER: Just stay with me. And I take it you plan to evaluate whether there's any change in their consumption. 306 MR. THORNE: Absolutely. 307 MR. KAISER: And then second, you will have this possibility of sending them certain trigger point data, as you've described. 308 MR. THORNE: Right. 309 MR. KAISER: And determine what their response will be to that. 310 MR. THORNE: Yes. 311 MR. KAISER: That's contingent on their signing up, as I understand it. 312 MR. THORNE: That's correct. 313 MR. KAISER: Any idea how many will sign up? 314 MR. THORNE: Well, I don't have any experience right now with residential but I do with -- based on our seminars or breakfast meetings we had with our commercial/industrial and -- so in our seminar, we talked about all the elements of our plan, we talked about the notification system which you can have without doing anything else, we talked about power view, the web thing, we talked about the energy drill program. And 23 out of 26 said they wanted to participate in our demand-response initiative, and I don't know if there were specific ones here. 315 In terms of the various tools, out of 28: In terms of the notification procedure, 10 said that maybe they would want it and 18 said yes, none said no; energy drill, 6 said maybe, 21 said yes they wanted to participate; power view, 8 and 19. So very well received. So there's interest there. The only issue with residential customers is that, you know, they're not home all the time, and any realtime notification -- or close-to-realtime is, maybe, of less value. But, I think, you know, the critical peak-pricing -- you know, we could use that as a trigger, whenever it comes in, or, you know, potentially, some form of day-ahead market or -- that may come in, or 24-hour-ahead pre-dispatch prices and indicators might be some indicator. 316 MR. KAISER: You've got 2,000 of these residential meters now, and you're continuing these programs with these third tranche monies. How many will that give you, in the end? 317 MR. THORNE: On the residential side -- our new residential is approximately 1,800 to 2,000 homes a year, at this point. So the 2,000 I talked about was, basically, one year's growth, and another year we'll have another -- that's what we're expecting, on an ongoing basis. And this is just on the new. The residential rural we're just talking about a pilot -- we have about 3,000, or so, residential rural customers. 318 MR. KAISER: I'll come to the rural in a minute. Let me just finish with the residential. 319 MR. THORNE: Yes. 320 MR. KAISER: So, at the end of the third tranche program that you're proposing here -- 321 MR. THORNE: End of 2005 -- 322 MR. KAISER: -- you'd have what, 5,000, 6,000? 323 MR. THORNE: 4,000, to 5,000. 324 MR. KAISER: 4,000, to 5,000. What did the 2,000 cost you to place? What's your capital expense there? 325 MR. THORNE: 2,000? 326 MR. KAISER: Well, you've got 2,000 in place -- 327 MR. THORNE: Yes. 328 MR. KAISER: You've contributed -- 329 MR. THORNE: We're averaging, right now -- and remember we're dealing with low volumes and all that kind of stuff, it's telephone-based technology, which is not likely where things are going for high-density, but it's the best technology today. Our technology also does three utilities, we -- when I say three, I don't mean we have three meters, but it takes the data -- can potentially take the data from the water and the gas and the electricity. So, just as an aside, I haven't put any comments into the Board, but in high-density areas, I highly recommend you look at, not just electricity, but all three utilities and -- in your deliberations. 330 MR. KAISER: What is your technology, by the way? 331 MR. THORNE: The supplier is Naurtech, out of Quebec. We've used them since early '90s, because we had a residential time-of-use program back then. And it's been good technology, but it's not clear to me that, you know, that's where we're going in the future. But for now, it's been good and reliable. 332 MR. KAISER: For the balance of this program, to get -- 333 MR. THORNE: Sorry, your question was -- 334 MR. KAISER: -- are you going to stay with Naurtech? 335 MR. THORNE: Actually, we're -- we've put some questions to them, in terms of, if you like, a transition plan, and so that's a bit up in the air right now. But, certainly, they've been a very good company to work with. 336 MR. KAISER: Your system, I take it, is a two-way system? 337 MR. THORNE: No. Well, two-way -- how are you defining two-way? Whenever the meter -- it's called -- it's an inbound system. So that means that the meter phones the meter-reading company, or the utility, and when that phone contact is made you can change things. So it's two-way from that perspective. There's communication going on but, if you like, the meter-reading software, or whatever, does not have the ability to call the -- 338 MR. KAISER: So you can't turn off the -- 339 MR. THORNE: -- there's no controls -- 340 MR. KAISER: -- you don't have any control capabilities? 341 MR. THORNE: No. 342 MR. KAISER: Going forward, are you looking at two-way systems, or have you considered it? 343 MR. THORNE: Yeah, we have. I'm struggling with that, I suppose, like everybody else, in terms of what extent we put control into that, or whether that should be left to other systems that operate in parallel. I'm kind of warm to the in-home display idea, to the extent that it's economic to put technology in the meter that can broadcast, locally, you know, realtime, close-to-realtime electricity-use. But, certainly, my sense of it right now is that all of this stuff is up in the air, in terms of what's going to be available in the technology itself. 344 MR. KAISER: This financing program that you -- I take it there was some by-law that you passed that said that all new subdivisions had to have smart meters? 345 MR. THORNE: It was all done under Milton Hydro's authority as a distribution company, as a regulated monopoly, in compliance with the Distribution System Code, in terms of -- we can set whatever thresholds we want and -- 346 MR. KAISER: So it wasn't something that had to be approved by city council? 347 MR. THORNE: No, but it absolutely had the support of city council. As you know, the Town of Milton is an eco-type village, and this net-zero-energy home -- we heard on Monday night that the Town has agreed to partner with one of the developers in Milton to -- they're going to build at least one net-zero-energy home, and, of course, Milton Hydro will be a partner in that. So the town is very supportive and we've had no issues from developers. 348 MR. KAISER: So the developers didn't complain -- 349 MR. THORNE: No. 350 MR. KAISER: -- that they had to kick in 50 percent of the dollars? 351 MR. THORNE: No. 352 MR. KAISER: So why, in the new plan, are you bumping your contribution to 80 percent? 353 MR. THORNE: It's part of what is required under the Distribution System Code. We -- if you look at the formula for funding -- we are motivated -- obviously, as a distributor, a for-profit distributor, our business is getting return on rate base. But that aside, we are required under the Distribution System Code to fund infrastructure, new infrastructure. 354 MR. KAISER: I know, but you just told us that you were able, under the code, to get the developers to pay 50 percent. 355 MR. THORNE: No -- yeah, so they're paying 50 percent because we -- regardless of whether we make interval meters a standard, or not, our contribution is effectively fixed by our current rates. Is that clear? 356 MR. KAISER: You don't have rates for meters. 357 MR. THORNE: The distribution plan includes meters. Let's just say you have a subdivision, and the assets that we're talking about, that are subject to our contribution, if you like, or funding, are transformers, the poles, the wires, the meters, and so on. So, effectively, what we did is say, Well, we have a new standard now on meters. 358 MR. KAISER: I understand. 359 MR. THORNE: So, in that basket of assets, the -- say it's a million dollars. If our rates require us to support -- to provide half of that, half a million, then the developer pays the balance. That's the -- 360 MR. KAISER: So you're just saying, We've got more money now, and we can knock the developer's share down to 20 percent. 361 MR. THORNE: That's correct, yes. 362 MR. KAISER: All right. So, if you wanted, you could stay at 50 percent. 363 MR. THORNE: No. No. It's in the code. It is a formula. It's a net present-value formula, and it's based on revenue, the extent to which we can fund. 364 MR. KAISER: But the only thing that's changed is the revenue. The meters are the same meters. 365 MR. THORNE: Oh, absolutely. Yes. 366 MR. KAISER: Thank you, Mr. Thorne. 367 Anything further, Mr. Lyle? 368 MR. LYLE: No, Mr. Chair. Perhaps we can excuse Mr. Thorne as a witness. Ms. Simon, I believe, is going to be on the Brantford Hydro panel as well. 369 MR. KAISER: Mr. Dingwall. 370 MR. DINGWALL: I have a couple of brief comments in argument, and -- 371 MR. KAISER: We're going to deal with the argument of both in the afternoon. 372 MR. DINGWALL: Okay. I would like to alert the Board that I have a slight timing conflict related to an 11-year-old. 373 MR. KAISER: What time do you have to leave? 374 MR. DINGWALL: I should be leaving now, but I've talked to Mr. Sidlofsky, I don't need to be here for their presentation in-chief. I just have a couple of questions -- 375 MR. KAISER: Why don't you -- we don't want to hold up your schedule. Why don't you make your submissions now. 376 MR. LYLE: Mr. Chair, might we be breaking for lunch before argument, or are you intending to go -- 377 MR. KAISER: We might be, I'm just trying to accommodate Mr. Dingwall at this point. He needs to be -- so, why don't you make your submissions now and we'll -- 378 MR. DINGWALL: With respect to Milton, sir? 379 MR. KAISER: Yes. 380 CLOSING ARGUMENT BY MR. DINGWALL: 381 MR. DINGWALL: With respect to Milton, I think what we have here is an example of a utility that has its act together, significantly. The difference between what we'll -- what we see in this Milton application versus what we'll see in a number of other applications is that, with respect to the smart-meter initiative, Mr. Thorne is going significantly beyond the ambit of a pilot program, and is actually beginning the implementation of systems compliant with the initiative. And we support significantly that that take place, certainly -- not only in the time frame that Mr. Thorne is putting that forward for, but also under the recovery mechanism of C&DM costs. We think that that's wholly appropriate and should be encouraged. 382 One of the questions which Mr. Thorne's application will bring to context of the other applications which the Board should hear is what the ambit of pilot programs should be, what the information to be gathered from those programs should be, how that information should be shared, and then how many programs out of the 93 utilities should we have that either duplicate or mirror each other. Milton is, to a large extent, an industry leader in the way that it tests things. I think certainly the program that they've got with NRCan that Mr. Thorne's described indicates that much of what they'll be doing through the performance of their pilot will be demonstrative to the industry at large. And I think that that's something that the Board should take notice of in approving this request for final approval, subject to the monitoring conditions that it's applied to the other six previous applicants. 383 But in also doing so, I think the Board should begin to take stock of the number of pilot programs with respect to smart metering and other initiatives that are being put in place, what the work product of those programs is going to be, and how the information can be gathered separately to avoid duplication and to save costs. One of the lessons that we learned in the regulatory asset process is that if everyone does these things in isolation there will be a number of people reinventing the wheel. 384 Right now, we have someone who's inventing quite a good wheel, and I think that we should ensure that we gain all the value from that that we can. 385 Those are my submissions, sir. 386 MR. KAISER: Thank you, Mr. Dingwall. 387 Mr. Lyle, how do you wish to proceed? 388 MR. LYLE: Mr. Chair, perhaps if Mr. Thorne could be dismissed and the Brantford panel could be sworn in. I believe there's another gentleman to join Ms. Simon on the Brantford panel. 389 MR. SIDLOFSKY: Sir, if I could just ask your indulgence for a moment while I move myself up to the front. 390 MR. KAISER: Yes. 391 MR. LYLE: Perhaps the witness could be sworn, Mr. Chair. 392 BRANTFORD POWER PANEL 1 - LOUCKS, SIMON: 393 J.LOUCKS; Sworn. 394 J.SIMON; Previously affirmed. 395 MR. SIDLOFSKY: Sir, I have a number of copies of Mr. Loucks' CV, if I could pass those up. 396 MR. KAISER: Thank you. Can we give that a number, Mr. Lyle. 397 MR. LYLE: Yes, Mr. Chair, we'll mark that as Exhibit G.1.3. 398 EXHIBIT NO. G.1.3: CV OF JOHN LOUCKS 399 MR. SIDLOFSKY: And I have copies of Ms. Simon's CV. If you'd like copies for this proceeding, I could hand them up. 400 MR. KAISER: I believe we have one on the record. 401 MR. LYLE: Yes, Mr. Sidlofsky, we do have one on the record. 402 MR. SIDLOFSKY: Thank you. 403 Mr. Chair, I don't propose to take Mr. Loucks through his CV, but I would note that he is the Director of Engineering and Planning for Brantford Power. 404 EXAMINATION BY MR. SIDLOFSKY: 405 MR. SIDLOFSKY: Mr. Loucks, you were involved in the preparation of the Brantford Power conservation and demand management plan; is that correct? 406 MR. LOUCKS: That's correct. 407 MR. SIDLOFSKY: And Ms. Simon and IndEco, her consulting company, were under your supervision in this project; is that correct? 408 MR. LOUCKS: That's correct. 409 MR. SIDLOFSKY: Thank you. 410 Mr. Chair, during the break, we had the benefit of taking a look at some of the questions and answers we'd be going through in Mr. Loucks' testimony this morning in light of your decision on the Coalition of Large Distribution utilities. And I believe we've managed to shorten the evidence-in-chief fairly significantly, although I would note that this is the first opportunity that the Board will have had to consider the Brantford Power conservation and demand management plan. So what I'd like to propose at this point is that Mr. Loucks would take the Board through a presentation on the plan. I expect that will take about 20 minutes. I have a few questions that I'll follow up with him on after he takes you through the plan and then he would be available for cross-examination. 411 Ms. Simon may be participating in that presentation or in responding to some of the questions as well. 412 I don't propose to take Mr. Loucks through any issues that have been resolved as of this morning with the Board's decision on the large utilities. 413 MR. KAISER: Thank you, sir. 414 MR. SIDLOFSKY: Thank you. 415 Mr. Loucks if I could ask you to proceed, please. 416 SUBMISSIONS BY MR. LOUCKS: 417 MR. LOUCKS: Mr. Chairman, I would like to make a small correction to our plan. There is a typographic error on page 9, section 2.6 of the plan. The last line in section 2.6 should read, "Cost for these initiatives is estimated at $10,000 as outlined in the budget summary found in table 1." 418 Brantford Power's local distribution company serving the City of Brantford, Ontario. 419 MR. SIDLOFSKY: I'm sorry, Mr. Loucks. If I could just ask you to slow down for the benefit of the reporter. Thank you. 420 MR. LOUCKS: Sure. 421 On October 29th, 2004, Brantford Power filed with the Board our request for final approval of our 2004/2005 C&DM plan along with copies of the plan. My objective in this opening statement is to provide the Panel with a brief summary of the plan, the principles we use in selecting specific programs within the plan, programs we are proposing, and the potential benefits we anticipate from carrying out the plan. I will also address monitoring and evaluation, and some minor amendments to the plan we wish to propose at this time. 422 In summary, the plan sets out a portfolio of programs to realize benefits for Brantford Power customers by reducing energy use or demand. The plan draws on the recommendations that the Minister of Energy outlined in his letter to us of May 31st, 2004, outlining what he considers appropriate programs within a conservation and demand management program. 423 The portfolio includes types of programs that have been delivered in other jurisdictions, including here in Ontario, in other provinces, or in the United States. Where appropriate, these programs have been or will be adjusted to meet the specific needs of Brantford Power's customers. The programs are prudent programs that can be expected to be successful in Brantford. 424 As outlined in our plan, the programs in the portfolio fall within two groups; core programs and supplemental approximate programs. Core programs are programs we intend it to deliver, given the Board's approval of our application. Supplemental programs are programs that require us to undertake additional research or negotiation with program partners, the success of which is not completely certain at this point. Consequently, our request is for approval to draw from this menu of programs, subject to adhering to the total budget that has been allocated for our conservation and demand management program as determined by the value of our last one-third of MARR of $1.34 million. 425 We anticipate spending this initial C&DM budget by December 2005 realizing quick benefits for our customers, reducing the regulatory burden associated with filings related to third tranche C&DM, and allowing us to be ready for future distributor/CDM opportunities currently under discussion in the OEB's process on 2006 distribution rates. 426 Before moving on to principles that govern our C&DM plan, I would like to comment on the process we followed in putting the plan together. As you know, these plans emerge from an announcement by the Minister of Energy that LDCs ought to deliver DSM programs. This announcement represented a change in what had been evolving as the sole role of LDCs as wires companies. We engaged IndEco, a consulting firm with experience in DSM and OEB regulatory matters, to assist us in formulating a plan, and they worked under my direction. We continue to monitor statements of the Minister and the Board through the press, through Ministry and OEB websites, through our industry associations and through informal networks. 427 In formulating the plan, we had questions about the process or desires of the Minister or the Board, and we consulted with Board Staff or Ministerial staff. In designing programs, we consulted with local community associations and groups, and sought to involve them as partners in specific programs. For example, we are offering seminars in collaboration with Brantford Economic Development, low-income programs in collaboration with Share the Warmth, and other community groups that serve this constituency in Brantford, and have consulted with City of Brantford staff about institutional programs. 428 The plan itself has been reviewed and endorsed by Brantford Power's board of directors, which has representatives from business, city council and the third sector. Subsequent to filing the plan with the Ontario Energy Board, on 29th of October, we published a notice in Brantford Expositor, the local daily newspaper, about the plan, and posted it on our website. We also directly mailed a notice and a copy of the plan to a list provided by the OEB. We have received no comments or concerns from any of our customers about the plan. 429 Principles: In formulating our plan, we drew on five principles, which are outlined on pages 1 through 3 of our plan. These are, one, avoid lost opportunities, keep options open. An example of avoiding a lost opportunity in our plan is our program to replace general-service meters coming up for re-calibration with interval meters. Doing this means the cost of a change to interval meters can be reduced, since the labour to replace the meter is being incurred in any event, for other reasons. Therefore, only the cost of the meters is being included in the C&DM plan. 430 Our portfolio programs will help to position ourselves for future C&DM programs which will be possible once the Ontario Power Agencies Conservation Bureau is established, and the 2006 rate application is decided. So we want to avoid locking ourselves in, over the long term. 431 Two: A mix of conservation assets and customer programs. Approximately two-thirds of our budget is allocated to conservation assets. These investments will result in reduced electricity losses that ultimately benefit all our customers, while also contributing to our rate base. 432 Customer programs have been demonstrated to be successful in the natural gas industry in Ontario, in other jurisdictions, and in Ontario's electricity sector, and we believe the plan should include some of these programs that directly benefit participating customers. 433 Principle 3: We have C&DM programs that cover all sectors. To ensure a broad C&DM portfolio, we wanted to include a set of programs that offered something to every customer sector: Residential and small commercial customers, general-service customers and institutional customers. In establishing this principle, we do not mean to imply that resources will necessarily be applied equally to each of these sectors, or even in proportion to the relative electricity demand. Rather, we recognize that there are different barriers to these customers acting on their own, and different levels of need, and the programs are designed accordingly. 434 Principle 4: Build on existing programs and leverage funding. As a relatively small utility, initiating programs in a regulatory environment, where the future of C&DM programs is still being determined, and with limited resources to execute programs, we deemed it prudent to build on existing programs and avoid reinventing the wheel. We also have sought ways we might leverage some of our funding, including collaborating with other LDCs that are actively pursuing these possibilities. This is, again, in keeping with the Minister's advice, in his letter to us. 435 Principal 5: Provide experience that is helpful in moving forward. This final principle is designed to ensure that, through this initial C&DM experience, we develop expertise that will help -- be helpful for future C&DM initiatives and, in particular, to ensure we develop some experience with three program types: Customer energy-efficiency programs, customer load-management and demand-response programs, and distributed generation. 436 Now, for the programs. I don't wish to reiterate each program outlined in our plan, but do wish to highlight some of the larger programs identified. 437 Obviously, each program doesn't address all of the principles that I've mentioned, but the portfolio, as a whole, does. The largest expenditure - accounting for almost two-thirds of the total, $900,000 - is for distribution system improvements which are described in section 2.1, on page 4 of the plan. This expenditure is the incremental cost to an investment we would like to make to address some security-of-supply issues. Making these incremental investments now will be substantially cheaper than making them later and, based on engineering calculations, will realize savings that are economically attractive relative to new supply. We will document the engineering calculations of the savings associated with the installed equipment. 438 The next largest expenditure is for a low-income customer-retrofit program, described in section 2.5 of the plan, for which we have budgeted $100,000. This sector has traditionally been somewhat neglected by DSM programs in Ontario, and it was identified as an issue of particular interest by the Minister. 439 In collaboration with Share the Warmth, a nonprofit organization that offers financial assistance to low-income customers who have difficulty paying their utility bills, we intend to offer this program to low-income residents of Brantford. We expect the program to build on the work done by the Low-Income Energy Network, or LIEN, of which Share the Warmth is a member of the interim steering committee, on a detailed program designed for low-income homeowners and tenants that pay their electricity bills. And we also intend to see how we can provide a assistance to the social housing community in Brantford. 440 Such a program will help address the energy burden that low-income people face in Brantford, rather than dealing with the symptoms. In developing the program, we are also talking with other social service agencies active in our service area, and are seeking additional funds from a foundation which has expressed preliminary interest in supporting the project, subject to receipt of a formal application and appropriate approvals. 441 The Clean Air Partnership, a registered charity that delivers community-based strategies to reduce energy use, has expressed a general interest in partnering with LIEN on the communications aspects of low-income programs. We will explore this opportunity in Brantford. 442 We expect we can achieve a maximum energy savings, per household, in the range of 40 to 50 percent, depending on the dwelling. This engineering estimate of savings is based on what has been achieved by GreenSaver in Toronto community-housing-owned dwellings. We will document the number of participants in the pilot, the average level of expenditure per dwelling, and the estimated savings of the measures installed, based on engineering calculations, and include a qualitative assessment of the training provided to participants regarding the use and maintenance of the equipment installed. 443 Thirdly, we wish to reactivate a residential water-heating load-management system that Brantford Power operated prior to market opening and used briefly after the August 2003 blackout. This program is described in section 2.4 on pages 6 through 8 of the plan. 444 The graph on page 7 shows an example of a direct benefit of such a plan. Prior to 8:00 p.m. on August 18th, 19st and 20th, 2003, the days immediately following the blackout, the program was reducing demand by approximately 5 megawatts. The cost of this program is estimated at about $90,000, most of which will be paid to participants as an incentive for participating in the program. A small amount is required for upgrading software systems and staff training. 445 The main benefit of this program is to preserve this demand/response program as a future opportunity for Brantford Power to participate in any future demand/response programs. We will document the type of training provided, the number of trainees involved, the type of software purchased and its cost, and the number of customers that we have retained in this program as a result of providing the incentive. 446 Together these three programs result for 80 percent of our planned expenditures. The other programs include training and education activities for both general service and residential customers, and replacing general service meters coming up for recalibration with interval meters, consistent with the draft smart meter implementation plan that was just released, and a small allocation for planning, administration and monitoring, part of which has already been expended on engaging a consultant to assist in the preparation of the plan. 447 As mentioned previously, Brantford Power is offering a quarterly breakfast seminar series to its commercial and industrial customers in collaboration with the Canadian Energy Efficiency Alliance and City of Brantford economical development. Our first conservation power breakfast on December 8th set the stage for future seminars with a brief overview of Brantford Power's conservation plans and a featured speaker, Mr. Derek Cowbourne, VP of Operations at the IMO. The event was very well received with over 70 registrants, including representatives from our local school board. A second seminar has already been planned for March 2005 featuring a speaker from Natural Resources Canada. 448 We expect the third power breakfast will be a panel of representatives of customers active in DSM. We will prepare a brief summary of seminar we hold, documenting the number of attendees, topics covered and a qualitative assessment of its success. The estimated cost of this program is $20,000. 449 The provincial smart meter program is still under development and its details are as yet unknown. Given this, we do not feel an aggressive meter replacement program to be appropriate at this time. However, there are a number of commercial or industrial meters that are coming up for six-year recalibration, and we plan to replace these with interval meters. By doing this replacement, only the capital cost is incurred and the need to incur subsequent installation costs is avoided. The number of meters coming up for recalibration is about 70 in 2005. We will document the number of meters replaced and the cost of the installed new meters. The estimated cost of this program is $50,000. 450 Brantford Power will provide customer outreach to all of its customers by informing them of existing programs and information available to them on C&DM. This includes Natural Resources Canada's Energy Innovators and EnerGuide for houses programs, and the information available from the Ontario Ministry of Energy and the Niagara-Erie Public Alliance, also known as NEPA, and others. Our benefit to the customers is they are aware of our C&DM programs as well as those of others so that they can take advantage of all of the opportunities available and can obtain relevant information sources on C&DM. We will document the types of outreach that we carry out under this program. The estimated cost of this program is $10,000. 451 The other core program is an allocation of $25,000 for a technology and research program on a landfill gas recovery project in Brantford, as described in section 2.7, page 9 of the plan. We wish to discuss this program for two reasons. First, since the plan was developed, we are aware that the Board has issued a set of frequently asked questions that clarifies what is meant in its October 5th Procedural Order on development work, and these are activities that we have described in section 2.8 on program administration and planning. 452 Second, I wish to clarify some of the rationale and benefits of this program. Landfill gas recovery is a socially and environmentally valuable activity and an economic way of generating electricity. Landfill gas is primarily methane, a product of biological decomposition or biogas, which is a very powerful greenhouse gas, rated as having a global warming potential 15 times higher than carbon dioxide. 453 Further, if not removed from the landfill and recovered or flared, it creates a risk of explosion at the landfill. Flaring converts the methane to carbon dioxide, reducing the global warming potential, but does not capture the energy value of the gas. The energy value of the gas can be significant. In the recent competition for supply and renewable energy a number of landfill gas projects were among the winning projects, chosen for their economic competitiveness. Unfortunately, this landfill gas project in the City of Brantford has faced a number of institutional barriers and has not moved forward. 454 Our project is to investigate these institutional barriers to show how they can be overcome, while at the same time, giving Brantford Power experience with embedded generation, connection issues, and billing settlement. We anticipate that the project would have a generation capacity of about 3 to 4 megawatts of electricity. Co-generation is not feasible with this landfill gas project since there is not a significant heat load within the immediate vicinity of the landfill. There is, however, significant electrical load at other locations within the city. We will document the main findings of this feasibility study regarding the implications for Brantford Power. 455 The total budget for the core programs is $1,215,000. We will spend the remaining $125,000 of our third tranche from a menu of programs summarized in table 2, on page 16 of our C&DM plan. 456 Where applicable by program, we will calculate the number of participants in the program and the savings achieved based on engineering calculations and document this information. For outreach programs, we will document a qualitative assessment of the success and will record memberships and sponsorships. 457 On the supplemental program list are a selection of smaller projects, some of which are proposed to be offered in collaboration with the Clean Air Foundation, a nonprofit organization that has offered some of these programs such as the room air conditioner program, and the cool shops program in other parts of Ontario. 458 These programs would require suitable arrangements with CAF and participation of other Ontario utilities in these programs. Brief descriptions of these programs are presented in chapter 3 of our plan beginning on page 10. 459 The benefits or anticipated results of each program vary and are briefly summarized on page 15 and page 16 of the plan. Some programs are designed to yield direct energy savings including the largest program, distribution system improvements, and the low-income retrofit program. Others, such as the residential water heating load management system, are designed to realize measurable demand reduction at critical times. Still others provide information or tools to customers that will allow them to take action on their own to realize savings. 460 Overall, all these programs bring net benefits to customers. The third tranche was already approved and the Minister's decision merely means that the first year of the third tranche will be reinvested in programs that benefit customers. 461 Although the plan itself brings net benefits, we are concerned about the potential impact on our customers of the regulatory process we are engaged in today. When when we filed the plan on October 29th, we were expecting, based on the 5th of October Procedural Order, that we would be participating in a written hearing not an oral one. Further, we were somewhat surprised that our hearing has been scheduled at the same date and time as other LDCs being heard by this Panel, meaning that our ratepayers are paying for staff, experts and counsel to sit and wait for our turn. 462 In addition, we were instructed by Board Staff to send copies of our plan by registered mail to 21 provincial organizations who have never contacted us about conservation programs, generally, or our plan, specifically. Some of them have provided notice of their intention to intervene. 463 A few comments on monitoring and evaluation. We will want to ensure that we monitor and evaluate each program in the portfolio, and assess the benefits to our customers. And we are expecting to share the results of this monitoring and evaluation with the Board. The specific measures, like the benefits, will vary from program to program, as described earlier, and will be designed in more detail, as appropriate, as part of the detailed program design. 464 In each program, our goal is to identify specific quantitative measures of programs for monitoring and evaluation. Some of the evaluation will be based on engineering calculations, for example, distribution system improvements and the low-income customer-retrofit program, some on the number of installed pieces of equipment, such as the smart meter program, some on participation rates and participant feedback - examples are seminars for the general service customers - and some on direct measurement of reductions - an example would be events when water-heater loads are shed. The benefits of programs that will provide education and awareness, for example, technology and program research, customer outreach, memberships and sponsorships, will be assessed from a qualitative perspective. Where possible, quantitative indicators, such as the number of messages delivered, will also be considered. We will document the results of the monitoring and evaluation we carry out pursuant to the C&DM plan in a report to the Board. 465 We feel that this level of monitoring and evaluation is appropriate for this plan, given that the Board, as of yet, has not developed specific monitoring and evaluation protocols or criteria. At this time, we are not seeking a lost-revenue adjustment-mechanism or an incentive mechanism. 466 Thirdly, it's in the early days in the design and delivery of these programs in Ontario, and in Brantford, specifically, and there is no track record to draw upon to estimate the potential costs and benefits. Despite this limitation we have made best efforts to estimate costs and benefits through much of our plan. 467 Further, on monitoring and evaluation: We prefer to see as much money as possible go into programs. 468 And finally, on monitoring and evaluation: Our first year of delivering our DSM portfolio should be considered a pilot, or learning, year, where we are experimenting with some new programs that we have not been involved with before. We expect to learn a great deal from this experimentation, and expect our second generation programs will be even more successful. 469 A few comments on changes to the plan. We do not see the need for any significant change in the plan, at this time. I have already discussed that we do not now consider the land-fill gas evaluation to come under the technology and program research the Board referred to in the 5th of October Procedural Order. These R & D activities are what we discussed in section 2.8 on program administration and planning. 470 We anticipate that there may be some reductions to the costs and the benefits of some of the supplemental program, as we refine the anticipated number of participants and the scale of these programs. 471 Finally, on reflection, we have concluded that we need sufficient flexibility in making expenditures to address potential contingencies as we work on detailed program design and implementation. To that end, our portfolio will remain consistent with the principles, and we do not anticipate that we would reallocate resources from programs to assets or vice versa; however, we do request approval to reallocate resources across programs as they are refined and delivered, or as conditions change, or new opportunities arise, and to discontinue programs, should that become necessary, without going back to the Board for approval of any of these types of changes to the plan. 472 Thank you. 473 MR. SIDLOFSKY: Thank you, Mr. Loucks. I've just got a couple of questions to follow up with you on that. 474 Have you -- you would have heard - because I believe you were here for the large distributors' hearing - about the collaboration that took place among those distributors. And you certainly heard comments about that from the Board this morning. Have you worked with other organizations and LDCs in developing your plan and your projects? 475 MR. LOUCKS: Absolutely. Starting in the early part of the year, in early 2004, and accelerating throughout the summer, we participated in many industry association and other events that explored DSM, and how we might respond to the Minister's challenge. For example, we participated in the Canadian Energy Efficiency Alliance event in August. We also monitored the status of other LDC actions, and the Board's response to them. We also participated in discussions with the Niagara Area Public Power Alliance that I mentioned in my prepared evidence. That's the organization also known as NEPA, of which we are a member. It's a group of 11 utilities in our region of Ontario. We've talked a lot about how we would respond to the Minister. We continue to participate in discussions with NEPA, and we will be cooperating with that group. 476 In September, we engaged IndEco. In developing our plan, we began our work together on the 27th of September. We filed our plan on the 29th of October. In light of the Board's Procedural Order on the 5th of October, including it's setting up of deferral accounts, and interim approvals granted to some of the early plans submitted to the Board, we felt increased confidence that our plan was approvable. Since filing the plan, we have continued discussions with potential partners, and funding agencies, and we have actually started to implement some of the programs. 477 MR. SIDLOFSKY: Thank you, sir. Did you consult with the public in formulating the plan? 478 MR. LOUCKS: Not specifically. We have lots of knowledge with some of the programs in our portfolio. Our distribution system improvements program is something we have knowledge and experience with, for example. This is also true of our interval meters conversion program, and our residential water-heater load-management program. Most of the other programs involve partners with whom we have consulted, and, for the most part, are mature programs that have been refined based on experience in working with customers. 479 One exception is the low-income residential program, which is a new program. For this program, we did consult with multiple partners who service these customers today, and who understand their needs and concerns. We also were active participants in the Low-Income Energy Network workshop in November, and provided feedback to LIEN on their draft program design -- that's October. The workshop was actually in October. 480 Because of this participation in ongoing monitoring of LIEN work, we felt confident in including a low-income program for homeowners and tenants that we could model after the LIEN program, even though, at the time we submitted the plan, the LIEN program was only in draft form. Since reviewing the final LIEN report. We believe that our low-income program can build on and draw on -- draw from the LIEN program design, and can also extend to the social housing sector. 481 MR. SIDLOFSKY: How much of the budget allocated to the conservation and demand management plan was already budgeted for in your rates? Or is it all incremental? 482 MR. LOUCKS: It's all incremental, in our case. 483 MR. SIDLOFSKY: The total cost of the distribution system improvement project, I believe, you've estimated at $1.8 million; is that correct? 484 MR. LOUCKS: Yes, approximately. 485 MR. SIDLOFSKY: But you're only proposing to include $900,000 in your plan? 486 MR. LOUCKS: That's correct. 487 MR. SIDLOFSKY: Would the distribution system improvement work be performed in any event by Brantford Power, regardless of the conservation and demand management plan? 488 MR. LOUCKS: In reality, without the C&DM funds available to us, we would probably defer the whole project. We have a need to make some changes to the system in that area. In the absence of these funds, we would invest a maximum of half of the total, or about $900,000, in replacing some of the underground services in the area and moving meters outside from inside. This would increase the reliability of the system in that area, would simplify meter reading, and prepare us for smart meter reading or smart metering, but would not result in significant electricity savings. The incremental investment of an additional $900,000 for a total project cost of $1.8 million could change transformers and could change high-voltage cable. Those are the elements that actually lead to most of the reductions and is the only part of the project budget we've allocated to C&DM. We would not be able to and would not make this investment without C&DM initiative within the next three years. 489 If we ultimately did decide to make these changes later, for whatever reason, it would cost us much more than the $900,000 we are budgeting, and thus not acting now would represent a lost opportunity. 490 MR. SIDLOFSKY: You heard the Board's comments earlier on monitoring and reporting in the context of the large distribution utilities, and that is quarterly reports to the Board and an annual report that will be the subject of a hearing. Do you have any comments on that approach in the circumstances of the Brantford plan? 491 MR. LOUCKS: We'd obviously comply with whatever we were directed to do by the Board, but in our case, a relatively small amount of money relative to the six utilities, quarterly reporting is pretty onerous. We would prefer to do an annual report, if that's possible, and we would request that the Board consider that. But we'll, of course, comply with whatever we're directed to do. We'd prefer, as I said in my evidence, we prefer to keep as much money as possible going into the programs rather than the monitoring of the programs. 492 MR. SIDLOFSKY: And, sir, I believe at the break, the short break that we had earlier this morning, you had a conversation with Mr. Adams about the basis for the costs -- excuse me, the estimate of anticipated savings arising out of the distribution system improvements. 493 MR. LOUCKS: Yes, I did. 494 MR. SIDLOFSKY: Would you like to speak to that now or would you prefer that Mr. Adams ask his question of you in cross-examination? 495 MR. LOUCKS: I can try to explain it and if that's adequate then there may not need to be a need for cross-examination, if that's okay. 496 MR. SIDLOFSKY: If that's okay with Mr. Adams then maybe we can do that, please. 497 MR. LOUCKS: There are a number of estimates in the plan, but specifically the one on distribution loss reduction, it is an estimate, it's a rough estimate. We didn't consider all of the components that would improve efficiency, we only looked really at the primary cable. There is some additional reductions, actually, that will be on top of that. But in terms of strictly the reduction losses in the cable we looked at the number of kilowatt hours, we looked at a 30-year horizon of $900,000, a discount rate of 6 percent, the calculation sensitive to whatever interest rate is used, and we came up with a calculation of 7 cents per kilowatt hour saved over the 30 year life of the asset. That's the general sense of what was done with all of the estimates. It is sensitive to the discount rate that's used. 498 MR. SIDLOFSKY: Sir, those are my questions. 499 Mr. Loucks would certainly be able to answer questions in cross-examination. I understand that Mr. Dingwall will likely be back here at 1:00. I wonder if the Board would like to take its lunch now and deal with all the cross-examination afterwards? 500 MR. KAISER: Is that Mr. Lyle's understanding; is that correct? 501 MR. LYLE: Yes, Mr. Chair. 502 MR. KAISER: Mr. Dingwall's coming back at 1:00; is that correct? 503 MR. LYLE: I believe so, sir. He had said he would have to be tied up between 12:00 and 1:00. 504 MR. KAISER: Is that acceptable to the other parties? 505 MR. HIGGIN: Could I ask your dispensation to leave our argument with Mr. Lyle and ask that it be incorporated into the record so that -- I think this would be an efficient way to do that and, with your agreement, I will do that. 506 MR. KAISER: Certainly. Is that acceptable, Mr. Lyle? 507 MR. LYLE: Certainly, Mr. Chair. 508 I'm just wondering, to shorten things, does Energy Probe intend to question this witness? 509 MR. ADAMS: Yes, we have about 15 minutes of questions. 510 MR. LYLE: That's fine. 511 MR. KAISER: And you prefer to proceed now or -- 512 MR. ADAMS: I would be happy to proceed now, if it is convenient. 513 MR. KAISER: Whatever your convenience is. 514 MR. ADAMS: That would be fine. 515 CROSS-EXAMINATION BY MR. ADAMS: 516 MR. ADAMS: Just as a follow-up to the question in your evidence-in-chief with respect to the calculation and the benefits. You've applied a discount rate that's not reflective of your weighted average cost of capital in the calculation of benefits from the voltage upgrade of the distribution system improvement. Why did you do that? Why would you not use the weighted average cost of capital grossed up for PILs? 517 MR. LOUCKS: As I said in answering the question earlier, the calculation is sensitive to a discount rate. We could redo the calculation with whatever interest rate you could suggest, it would increase the cost somewhat if you use the higher rate. 518 MR. ADAMS: Would you accept, subject to check, that using a 12 percent weighted average cost of capital, inclusive of PILs, results in a cost per kilowatt hour saved, assuming you're saving the 900 megawatt hour saving estimate, at 12 cents per kilowatt hour? Does that sound like it's in the right range? 519 MR. LOUCKS: Could be. Without checking, I'm assuming it's a higher rate. A higher rate would mean a higher number. 520 MR. ADAMS: Let's just assume for a moment that -- let's work with a 12 percent weighted average cost of capital, and just bear with me for a moment. If it is true that it's a 12 cents per kilowatt hour saving on the 50 percent of the overall project that you're attributing to the conservation and demand-side management, would -- if it's true that it's a 12 cent per kilowatt hour cost per unit of savings, do you think that's justified? 521 MR. LOUCKS: As I explained, we're doing a certain amount of work -- we need to do a certain amount of work in the subdivision due to reliability concerns, so we don't want to miss this lost opportunity to deal with the entire project at this time. 522 MR. ADAMS: What's your cut-off point for the cost-effectiveness of the energy savings? Let me just put my question in some context for you. The results of the recent renewables RFP yielded a cost per kilowatt hour generated at 8 cents per kilowatt hour for base-load power. I mean, the savings that would be achieved here from your upgrade on the distribution system improvement would be a combination of base-load and peaking gains, but the -- do you have a hurdle rate at which the energy cost savings are just simply not worth pursuing? 523 MR. LOUCKS: We certainly saw a need to address this subdivision now rather than a few years from now. There is some reliability concerns. We thought this was an appropriate component of the plan at this time. We are certainly trying to assemble a group of programs that we could deal with next year. We believe all this conversion is a good program, the savings are spread across all of the customers in proportion to their size, so we thought it was a appropriate part of the mix. 524 The numbers in the plan are illustrative, I think, rather than necessarily concrete. We probably were conservative on the reduction in losses. We have only looked at the primary cabling. We didn't look at the transformers that we would be replacing, they will be more efficient. We didn't look at the secondary services that will be larger and more efficient, we didn't even look at the fact that -- or we won't have the need to step down the power from 27.6 to 4 KV level, another set of losses that aren't even in the number. I think the numbers are going to be illustrative rather than be -- 525 MR. ADAMS: Well, I want to compliment Brantford on providing us some estimates to the benefits, I think that's helped with the process. I'm not meaning to criticize the inclusion of these estimates, but the resulting cost per kilowatt hour saved is something that we wanted to see addressed. 526 Let me move on here. With respect to metering, if I understand correctly, you've got approximately 34,000 customers. 527 MR. LOUCKS: 35,000. 528 MR. ADAMS: 35. What portion of the total customer number are currently on the interval meters? 529 MR. LOUCKS: There's probably about 40 customers right now. 530 MR. ADAMS: All right. And what fraction of the load does that represent for you? 531 MR. LOUCKS: I don't have that number. 532 MR. ADAMS: Rough numbers, like it would be disproportionate. We're not talking about -- 533 MR. LOUCKS: It's the largest customers, so it would be disproportionate. 534 MR. ADAMS: Right. Now, when you were talking about the distribution system improvement, one of the elements of that plan that's not reflected in the DSM claim here is an intention to move meters outside. 535 MR. LOUCKS: Yes. Well, I look at these conversion projects as, sort of, a whole. There are a lot of different components to them. And typically when you're rebuilding an older subdivision we try to get the meters outside. With smart metering, and the likelihood we're going to be looking at probably radio rates likely in an urban utility like ours, getting the meters outside would make the meter reading possible without the need for a phone line. So we typically move them outside if we can. 536 MR. ADAMS: And in the old days when meter reading was done on foot, having the meter outside was considered good utility practice. Is that relevant now? 537 MR. LOUCKS: Yes, for a couple of reasons. The likelihood that it will be radio based is one, and the other thing is with a residential property the meter is used as a disconnecting means during an emergency like a fire. 538 MR. ADAMS: Right. Just two other areas just briefly. With respect to your water meter load-management investments here, would you agree with me that historically the purpose of the water heater load-management programs on behalf of the electric LDCs was often load retention? 539 MR. LOUCKS: That was probably an aspect of it, historically, I would think, when the water heater rental was within the public utility. Is that what you mean? 540 MR. ADAMS: Right. 541 MR. LOUCKS: That was an aspects of it. Also if you could lower your average cost of power you could benefit from it as well, lower demand. 542 MR. ADAMS: The utility could pass on -- 543 MR. LOUCKS: Pass on or retain. 544 MR. ADAMS: Pass on some of the benefits of a lower cost of power and thereby retain load for your overall electric volumes sold; right? 545 MR. LOUCKS: Yes. 546 MR. ADAMS: Now, do you think that's an appropriate purpose to be reflecting in DSM, in the modern world, where gas is going to be the fuel on the margin probably a large fraction of the time in Ontario? 547 MR. LOUCKS: I'm not sure if it is appropriate going forward. What this is is an existing system. The controllers are installed on approximately 3,000 tanks in the city and we can take advantage of those existing controllers for demand-reduction purposes. 548 MS. SIMON: I'd like to add something. I don't really understand your question, but I just wanted to point out in anticipation that this might have something to do with it. The Minister, in his letter on May 31st, made it clear that he would like to see programs that were continued on the opening of the electricity market, or those that were dormant, as something that should be part of the C&DM initiative, and that's what one of the rationales for preserving this load-management program. 549 MR. ADAMS: In terms of overall energy conservation, wouldn't it make more sense to switch these water heaters to gas instead of preserving them on electricity by providing a discount? 550 MR. LOUCKS: I don't have exact details on the population, but many of them are in properties where it wouldn't be practical to put in gas, they're in apartment buildings. The exact mix I wouldn't know. 551 MR. ADAMS: Have you looked at what the opportunities are? 552 MR. LOUCKS: Our number is controllers on existing tanks. 553 MR. ADAMS: Right. Is there any way to assess the fuel-switching potential before you start investing in the existing system? 554 MR. LOUCKS: I'm not sure what it would cost to set this system up from scratch, but as I said it's an existing system. It's a fairly small investment to keep the existing system going. 555 MR. ADAMS: But the discounts that you're hoping to pass on to the customers. 556 MR. LOUCKS: Yes. 557 MR. ADAMS: Which is, if I understand correctly, the lion's share of the overall program costs. 558 MR. LOUCKS: Yes. 559 MR. ADAMS: Are directly expensed to the utility under the formulation that you've provided here -- 560 MS. SIMON: I think one of the things that we'd like to point out is the $1.50 incentive to maintain the system is less than the cost for disassembling the system. If the system wasn't preserved, it would cost more than $1.50 per water heater to dismantle the system. So there is a benefit to preserving it from that perspective. 561 MR. ADAMS: Just one final area. I notice that one of the items that you have on your list that, for example, Milton doesn't have, is upgrading municipally-owned non-utility facilities, particularly in the area of signal lighting. Can you put your mind to the possibility of jointly funding this exercise with the municipality that would be directly benefitting from the utility's investment in this area? 562 MR. LOUCKS: It's -- it wasn't in the budget plans of the of the City of Brantford for next year when we spoke to them. These are additional lights that they wouldn't be undertaking without some help. 563 MR. ADAMS: But they're getting a free bee out of this; right? I mean the utility is upgrading facilities that the utility doesn't own. The benefit to the municipality comes in two forms, both reduced electricity consumption and also reduced frequency of maintenance, so there's benefits to the municipality. Is there any opportunity for joint funding? 564 MR. SIDLOFSKY: Sir, not to interrupt, Mr. Chair, but I had thought the Board had dealt with this in the context of the large distributors this morning and I'm not really sure that it's appropriate to go through this again in the Brantford context. I'm in your hands on that, though, sir. 565 MR. ADAMS: Mr. Chairman, my understanding of your ruling this morning was that the Board was encouraging the utilities to jump start this program. I don't remember you -- I'll have to review the transcript, but I don't remember you specifically ruling out joint funding with municipal beneficiaries. 566 MR. KAISER: No, we did not, you're quite correct. 567 MR. LOUCKS: This may help, actually. I've just been reminded that the City of Brantford has agreed to contribute the labour component. We've budgeted for the capital costs of the actual lights but not for the labour. 568 MR. ADAMS: Thank you. Those are my questions. 569 MR. KAISER: Thank you, sir. 570 MR. LYLE: Mr. Chair, would you wish me to proceed at this time? 571 MR. KAISER: Did you want to proceed ahead of Mr. -- 572 MR. LYLE: I'm in your hands, Mr. Chair. 573 MR. KAISER: Whatever suits you, Mr. Lyle. 574 MR. LYLE: Perhaps we could break for lunch, Mr. Chair. 575 MR. KAISER: All right. We'll take an hour. 576 MR. LYLE: Certainly, Mr. Chair. 577 MR. KAISER: Thank you. 578 --- Luncheon recess taken at 12:35 p.m. 579 --- On resuming at 1:35 p.m. 580 MR. KAISER: Please be seated. I guess we don't have our witnesses. 581 MR. SIDLOFSKY: I apologize for that, sir. If I could just have a moment, I'll track them down. Thank you. 582 MR. KAISER: Sure. 583 MR. SIDLOFSKY: I apologize to for that, sir. If nothing else, it proves I had no contact with them during the break. 584 MR. KAISER: Mr. Lyle, I guess we're at Mr. Dingwall. 585 MR. LYLE: Yes, Mr. Clair. 586 MR. KAISER: Please proceed, Mr. Dingwall. 587 CROSS-EXAMINATION BY MR. DINGWALL: 588 MR. DINGWALL: My questions relate to item 2.1 in your plan which is distribution system improvements. 589 I understand from having a review of the interim transcript that one-half of this total expenditure of 1.8 million is coming out of the general distribution budget; is that correct? 590 MR. LOUCKS: That's correct. 591 MR. DINGWALL: What is the total budget that you would have for distribution expenses in 2005? 592 MR. LOUCKS: Total budget for capital expenditures on the distribution system? 593 MR. DINGWALL: Would this be a combination of capital and O&M? 594 MR. LOUCKS: No, it's all capital. 595 MR. DINGWALL: It's all capital. So what would be the total budget for capital for 2005? 596 MR. LOUCKS: It's approximately 2.5 million plus the C&DM money, I think. I'd have to check that. I believe it's 3.5 including the C&DM monies, so around 2.5 without. 597 MR. DINGWALL: Is that amount consistent with the 204 budget for capital expenditures? 598 MR. LOUCKS: No, it's higher, higher by the C&DM money. Actually, by more than the C&DM money by a little bit. 599 MR. DINGWALL: Do you know what the anticipated rate of return is for Brantford for 2005? 600 MR. LOUCKS: No, not offhand. 601 MR. DINGWALL: Would you agree with me that if costs were shifted from your normal capital budget into this budget and the monies weren't spent out of the normal capital budget that that would make your shareholders' rate of return higher for 2005? 602 MR. LOUCKS: Sorry, I don't understand the question. Perhaps you could restate that. 603 MR. DINGWALL: I think I'll leave that one for argument. 604 Those are my questions. 605 MR. KAISER: Thank you, Mr. Dingwall. 606 Mr. Lyle. 607 MR. LYLE: Thank you, Mr. Chair. 608 CROSS-EXAMINATION BY MR. LYLE: 609 MR. LYLE: Panel, you mentioned this morning a landfill gas project that was experiencing some difficulty getting underway in Brantford, and you indicated that there were some institutional barriers to that project being built. Could you set out for me the institutional barriers that have been experienced? 610 MR. LOUCKS: I'm not sure I can give you an exhaustive list, but one that I'm aware of is that the municipalities are currently "all or nothing" for purposes of a fixed price, and what they would like to do is contract to buy the power from the generator. A small generator like that is normally an embedded retail generator, so the simple way to do the settlement is a contract for differences, which requires accounts that are on hourly pricing. So the municipality currently being "all or nothing" for purposes of a fixed price, that's a problem. That's one example. 611 MR. LYLE: Have there been any difficulties in obtaining approvals? 612 MR. LOUCKS: Well, we're not at the stage to look at approvals; approvals to put a portion of the city accounts on hourly pricing is at a dead end, as far as I know, currently. 613 MR. LYLE: Can you indicate to me, of the money in your C&DM plan how much will be going to capital expenditures and how much will be going to operating expenditures? 614 MR. LOUCKS: It's approximately two-thirds capital, one-third operating. 615 MR. LYLE: Thank you. And your plan indicates that you will complete C&DM spending related to the third tranche by the end of 2005. Have you given any thought to the C&DM activities you might continue with in 2006? 616 MR. LOUCKS: I've given some thought to it. We want to learn a lot during 2005 before we decide what we're going to do in 2006 and beyond. 617 MR. LYLE: But it is your intention, then, to carry on with C&DM activities in 2006; is that correct? 618 MR. LOUCKS: Absolutely. 619 MR. LYLE: Thank you. Those are my questions, Mr. Chair. 620 MR. KAISER: Thank you, Mr. Lyle. 621 Ms. Spoel. 622 QUESTIONS FROM THE BOARD: 623 MS. SPOEL: Mr. Loucks, I wouldn't mind going back to the table 1 of your core programs and the stated cost-benefits and results. And I'm not sure I understand the comment beside the distribution system improvements, the $900,000 item. It may just be the way it's worded, but it's not clear to me under your benefits anticipated results what the 7 cents per kilowatt hour refers to, whether that's the cost or the price of the energy that's likely to be saved or whether that's the cost of the improvements that you're making. Does that relate to the $900,000 or does that relate to the cost of energy? And it's not clear from this table, to me, which it is. 624 MR. LOUCKS: It's really the cost of saving the energy, I guess. 625 MS. SPOEL: So it's amount of money you spend to save that amount of energy? 626 MR. LOUCKS: Yes. It's the number kilowatt hours -- number the dollars divided by the number of kilowatt hours, discounted. 627 MS. SPOEL: So the 7 cents per kilowatt hour, I know Mr. Adams had some discussion about whether that was the appropriate figure, that, in effect, reflects the $900,000 cost. 628 MR. LOUCKS: My understanding was what we were talking about was the interest rate that we were talking about. 629 MS. SPOEL: Right. I'm a step behind that. I'm trying to understand what the 7 cents -- forget whether it's 7 cents, or 8 cents, or 12 cents, whatever the appropriate number is, what does the 7 cents per kilowatt hour refer to? Is that the cost per kilowatt hour of the programs or is that cost per kilowatt hour of the energy which you're likely to save. 630 MR. LOUCKS: The latter. 631 MS. SPOEL: The cost per kilowatt hour of the energy you're likely to save? 632 MR. LOUCKS: Yes. 633 MS. SPOEL: And do we have a cost per kilowatt hour of what the -- discounted cost of what the $900,000 worth of improvements are likely to be, or is that something you haven't calculated? 634 MR. LOUCKS: If I understand your question, I don't think we did that really. We looked at the cost of the project that we're attributing to C&DM. We looked at the savings in kilowatt hours over 30 years and did a discounted cash flow of the -- of those savings based on an interest rate of 6 percent. And if you put different interest rates in it, it will change the number, depending on what discount rate is used. 635 MS. SPOEL: Right. Thank you. 636 MR. KAISER: Mr. Adams, did you have anything arising out of that. I know this is your question? 637 MR. ADAMS: No. I can make submissions in final argument. 638 MR. LOUCKS: If I could add something. Just as we could use different interest rates - use a higher one would drive the number up - we probably can -- could increase the number of kilowatt-hours saved, too, which would drive the number the other way. 639 MS. SPOEL: Right, no, I understand. 640 MR. LOUCKS: It was just illustrative. It wasn't intended to be an extremely precise calculation. 641 MS. SPOEL: Right. I understood your evidence earlier in that regard, earlier. I just wasn't sure what -- thank you. 642 MR. KAISER: Just on that point, sir, in your previous testimony, you did say, of course, We haven't calculated all the savings, and you referred to additional savings. Do you have any ballpark idea of what additional savings there might be, if you had done the analysis completely? 643 MR. LOUCKS: No. 644 MR. KAISER: Mr. Lyle, we're ready to proceed to argument, I believe, if everybody else is. 645 MR. LYLE: Yes, Mr. Chair, perhaps the witnesses can be dismissed? 646 MR. KAISER: Thank you very much. 647 MR. SIDLOFSKY: Sir, might I just ask a couple of questions -- 648 MR. KAISER: Yes, sir. 649 MR. SIDLOFSKY: -- that follow up on the cross-examination? 650 MR. LYLE: I'm sorry. 651 MR. SIDLOFSKY: Thank you. 652 RE-EXAMINATION BY MR. SIDLOFSKY: 653 MR. SIDLOFSKY: Mr. Loucks, you got a couple of questions from Mr. Adams about the residential water-heating load-management system. You will recall those, I believe -- 654 MR. LOUCKS: Yes. 655 MR. SIDLOFSKY: -- from cross-examination. Is there any value to the control equipment for the -- in terms of controlling other loads in a residential property? 656 MR. LOUCKS: Yes. Yes, each one of the controllers is able to control a second device. 657 MR. SIDLOFSKY: And do you have any plans to make use of that functionality, at this point? 658 MR. LOUCKS: Not at this point. 659 MR. SIDLOFSKY: It's an option to you later; is that right? 660 MR. LOUCKS: Absolutely. 661 MR. SIDLOFSKY: And -- I'll apologize now, sir - I should have asked this in evidence-in-chief - it simply relates to the portion of your decision this morning about the 20 percent flexibility, or the flexibility in terms of changing programs up to 20 percent of the budget. So, if I might just ask one question about that of Mr. Loucks at this point? 662 MR. KAISER: Fine, go ahead. 663 MR. SIDLOFSKY: Mr. Loucks, you heard the Board's decision on the large six utilities. The Board has determined that it would allow for the changing of programs, or would allow for flexibility in the plan, provided that the changes don't exceed 20 percent of the overall budget. Are you comfortable with that, in terms of the Brantford plan? 664 MR. LOUCKS: Of course, we'll comply with what the Board directs, but I would prefer more flexibility than that, if possible. We have quite a range of programs, and some of the final costs are not known at this time, so -- one in particular I am worried about is the voltage conversion. If it happens to come in well under budget, for any reason, I would like as much flexibility as much as possible to move that money into other programs. It could potentially eat all of the 20 percent, if we came in well under budget on that conversion. If I have to keep it within voltage conversion, I'll do that, I guess. 665 The same -- some of the supplemental programs, it's fairly preliminary. Once we investigate some partnering and, perhaps, get some economies of scale, there could be a reduction in the costs of some of those programs. I'm a little worried that they may add up to more than 20 percent, possibly, so the more flexibility, the better. 666 MR. SIDLOFSKY: Would you feel more comfortable if the Board approved this menu of programs, and allowed you to shift among the supplemental ones? 667 MR. LOUCKS: Yes. 668 MR. SIDLOFSKY: Thank you. 669 Sorry, sir, those are my questions on that. 670 MR. KAISER: Thank you. 671 Mr. Lyle, is everyone ready to proceed to argument? 672 MR. LYLE: Yes, Mr. Chair. 673 Before we proceed to argument, I'd just like to mention that Green Energy Coalition has pre-filed its argument in writing, which is the same argument as it filed with respect to the coalition of large distributors. And we will -- that's already an exhibit, so we don't need to place that into the transcript. 674 I also will be reading into the record the submissions of VECC and Schools. 675 MR. KAISER: Thank you. 676 MR. LYLE: I don't know whether Mr. Sidlofsky or Mr. Thorne would like to proceed first? I'm not sure if Mr. Thorne has any submissions. 677 MS. SIMON: Are we excused? 678 MR. KAISER: Yes, thank you. 679 MR. THORNE: Let me ask the Board's indulgence to have Mr. -- Sidlofsky? Whatever, go first please. 680 MR. SIDLOFSKY: The guy sitting over here. 681 I'm happy to go ahead. 682 MR. KAISER: Thank you. 683 CLOSING ARGUMENT BY MR. SIDLOFSKY: 684 MR. SIDLOFSKY: Mr. Chairman, my comments will be very brief. I'll focus my comments on reply argument, if it's necessary, and I'll just take a couple of moments in my argument in-chief. 685 Brantford Power's conservation and demand management plan comprises $1.3 million in spending -- excuse me, $1.34 million in spending. Both its core programs, which are set out in table 1, at page 15 of the plan, and its supplemental -- excuse me, its core programs, which comprise $1,215,000 in spending, and its supplemental programs, set out at table 2, at page 16 of the plan, have been developed in accordance with certain guiding principles. 686 First, avoid lost opportunities and keep the utility's options open. Second, create a mix of conservation assets and customer programs. Third, create conservation and demand management programs that cover all sectors. Fourth, build on existing programs and leverage funding. And fifth, provide experience that is helpful in moving forward. 687 In his letter of May 31st, 2004, the Minister of Energy advised distributors that he expects them to pursue a broad range of programs that support the more efficient use of electricity in Ontario, including those that were discontinued on the opening of the electricity market, to reduce customers' overall energy demand and/or demand for purchased energy. The Minister also encouraged utilities to pursue partnerships with organizations such as Natural Resources Canada, and other agencies. 688 Brantford Power's guiding principles are consistent with the Minister's direction. Moreover, Brantford Power's proposed projects are consistent with the Minister's direction. For example, I would simply ask the Board to consider the mix of utility-side and customer-side programs that comprise the core programs for Brantford Power. For example, distribution system improvements represent programs on the utility-side; the low-income retrofit program including draft-proofing, insulation, lighting, retrofits and appliance upgrades, are clearly work on the customer-side. The reinstatement of the residential water-heating load-management system fits perfectly with the Minister's desire to see the reinstatement of programs discontinued at market-opening. And, as you've heard in Mr. Loucks' evidence, Brantford Power is go also seeking additional partnerships that would result in greater leverage of conservation opportunities. 689 In fact, with its low-income program, Brantford appears to be unique at this point in pursuing a low-income program and in partnering with -- in the advanced stage of its partnering with Share the Warmth. 690 The OEB, in its Procedural Order of October 5th, 2004, required distributors to file, first, descriptions of the proposed programs, identifying affected customer classes, and specific details of each program. Second, the total program budget, including the total amount and schedule of annual expenses for the 2004 to 2007 time period. And third, the anticipated program benefits, including quantifiable benefits, where these can be identified, as well as qualitative benefits. 691 Brantford Power has met all of the requirements of the Board's Procedural Order, including the provision of estimates of benefits from its various programs. Having met the requirements of the Minister's direction, and having met the requirements of the Board's Procedural Order, Brantford Power is seeking an order similar to that requested by the Coalition of Large Distribution Utilities approving Brantford Power's conservation and demand-management plan, confirming that Brantford Power's conservation and demand-management plan satisfies the Minister's condition of a "financial commitment to re-invest" in conservation and demand-management initiatives, and third, confirming that Brantford Power's actual expenditures incurred in preparing its application and participating in this proceeding, including any intervenor award costs assessed against Brantford Power, be credited to the amount to be spent by Brantford Power on conservation and demand-management expenditures. 692 Now, you'll note, sir, that I've left out one item and that has to do with the flexibility and the ability to shift between programs in Brantford Power's menu of programs. As you've heard from Mr. Loucks, Brantford Power's preference would be that the Board approve the menu of programs that Brantford Power has proposed in its plan and allow Brantford Power to shift among those programs as may be necessary or as opportunities may present themselves in the course of Brantford Power's C&DM work. 693 There are a couple of reasons why the Board should consider this in the context of Brantford Power. As you heard from Mr. Loucks, their key activity here or the -- at least the one that has the greatest cost to them would be the distribution system improvements. If there's a significant savings realized when those improvements are actually done, there may be an opportunity to shift to other programs, and that opportunity may, in fact, involve values in excess of 20 percent of their plan. 694 Which leads me to the second point, which is that with a total budget of only $1.34 million, it simply doesn't take a large shift for that change to amount to more than 20 percent of the total budget available to Brantford. It would be unfortunate if Brantford had to return to the Board frequently in order to change the projects that, I would suggest, are entirely reasonable and entirely acceptable and consistent with the Minister's direction and with the Board's directions in this matter. 695 At this point, sir, I think those are my submissions. I'll leave any other comments to reply argument. 696 MR. KAISER: Thank you, sir. 697 Mr. Thorne, did you wish to proceed? 698 MR. SIDLOFSKY: Sorry, I apologize. I'm reminded that there was one more item I was going to report on and that is the reporting requirement. 699 MR. KAISER: Yes. 700 MR. SIDLOFSKY: Thank you. You'll recall that Mr. Loucks was asked about the Board's determination that the large utilities would be required to report both quarterly and annually with the hearing to follow annually. Mr. Loucks' concern is with limiting the regulatory burned on Brantford Power. You'll note that Brantford Power's planning on spending its entire budget in 2005. Mr. Loucks, on behalf of Brantford Power, has suggested that an annual reporting requirement would be more appropriate for Brantford. 701 Again, in light of the size of Brantford's budget compared to those of the large utilities, I would suggest that it's reasonable to treat smaller utilities, not that Brantford is small compared to others, but certainly smaller than the large six that were previously before the Board, to allow some flexibility in terms of the reporting requirements for smaller utilities. 702 Brantford is certainly content to report on an annual basis if the Board were to determine that there would be some form of hearing process for them in order to review their 2005 spending. I believe that Brantford would certainly be prepared to abide by that. I would expect that that would -- I would hope that that would be a written hearing requirement rather than oral, but given that the money will be spent within the course of the year, I would suggest that it's reasonable to provide for a single, annual review of the Brantford Power plan. 703 Thank you, sir. 704 MR. KAISER: Thank you. 705 Mr. Thorne. 706 CLOSING ARGUMENT BY MR. THORNE: 707 MR. THORNE: Thank you, Mr. Chairman, and fellow panel members. I would like to begin by thanking you for giving me some latitude in regard to normal hearing procedures because I'm not represented by legal counsel. I appreciate the Board's support in this manner. 708 Milton Hydro is pleased to be a leader in conservation and demand management and be among the first to have prepared and submitted a plan and to have a plan approved by the Board recognizing that it was an interim approval. 709 The Board granted an interim approval because our plan is a prudent one. It addresses provincial priorities and invests our limited resource in innovative ways that we expect will lead to benefits for all our customers and would generate valuable information that would be useful to other LDCs. 710 In paragraph 24 of the October 5th Procedural Order, the Board states: "The Board may, in the alternative under option 1, issue an interim order which will have affect prior to the hearing for a final order. In this case the Board may set aside the findings in an interim order, but it will only do so if an eligible intervenor successfully argues that the approach taken in the interim order is inappropriate. However, in the absence of the findings changing as a result of a hearing, the Board will not change its position from that taken in an interim order." 711 Milton Hydro has an interim approval and now the Board has heard from intervenors, and I submit that there are no findings that the Board should make as a result of the evidence presented at this hearing to change the Board's position on our plan from the approval granted to Milton Hydro in the Board's interim approval. 712 The Board, therefore, should grant final approval to Milton Hydro's DSM plan. 713 With the refinements filed today, our 2004/2005 plan addresses the change in budgets specified by the Board in its interim approval and refines the plan based on what we have learned in the last six months through our ongoing work and our discussions with our customers and other stakeholders. It is a portfolio of programs that addresses provincial priorities and that provides opportunities for all of our customers to act to reduce their energy bills, to enhance their liability against and security of the electricity system, and to realize environmental and other benefits. 714 We do not feel that we need to do additional monitoring and evaluation on top of what we have included in our plan. The level of monitoring and evaluation we have proposed matches our specific programs and the level of expenditures. 715 To wrap up, the Board acted appropriately in granting interim approval to our plan and we have heard no compelling reason why the Board should reverse its prior decision. In fact, with the clarifications and refinements we have provided today in our evidence, the Board should feel increased confidence that our plan is reasonable and prudent, and ought to be granted final approval without conditions. 716 Thank you very much. 717 MR. KAISER: Thank you, Mr. Thorne. 718 Mr. Dingwall, were you going next? 719 MR. DINGWALL: Certainly, sir. I will only be speaking with respect to Brantford as I've had the opportunity previously of speaking in response to Milton's application. 720 MR. KAISER: Thank you. 721 FURTHER CLOSING ARGUMENT BY MR. DINGWALL: 722 MR. DINGWALL: The Brantford application is an interesting one, and in following along with one of the examples of Milton, one of the items that they're proposing, which is of significant interest, is the replacement of existing meters at the time that they're to be recalibrated in order to avoid significant costs and to begin the implementation of smart meters. It's the second time that we've heard about an initiative like this, and hearing it the second time makes it sound like it almost should be a standardized item that all applicants should be addressing because there are significant costs associated with the recalibration of meters. And if those meters are to be taken out of the service with the smart meter initiative, that would be a waste of money. So I think that example of Brantford and Milton is one that should be conveyed to other potential applicants as a best practice. 723 With respect to Brantford's distribution-system improvement plan, that raises a question which really is a question of how these programs are to be monitored. 724 2005 is a rather unique year in context of rate-making, in that it's the last year of the performance-based rate regime of the past. There's a cap on distribution expenses for 2005, and if utilities manage to save money on their distribution expenses, that goes to the shareholder. So, given that scenario, if there's a shift of money from existing distribution budgets as a result of the availability of new funds from the C&DM initiative, there's a potential that the initiative could be used to transfer funds from the budgets they should be in into this new form, and increase the rate of return for their shareholders. We don't think that that would be appropriate. The only time in which to assess whether or not that actually occurs, though, is upon the completion of the spending of the plans, and in context of a review of, not just the plans, and their operation, but also what the actual budgets were for that year, and what the rate of returns would have been for that year. This challenge appears to be unique to 2005. 725 Now, I think Brantford, to their credit, did indicate that, if they underspent this portion of their C&DM budget, they'd reallocate it. And it seems to me that, if there is an underspending, there should be a reallocation. That seems to be a fairly basic principle: It is an obligation that this money be spent on these activities. 726 So my main point with respect to Brantford isn't to criticize their program, but to highlight the questions that can come about in the scrutiny of the programs after the fact. 727 Those are my submissions, sir. 728 MR. KAISER: Thank you, Mr. Dingwall. 729 Mr. Adams? 730 CLOSING ARGUMENT BY MR. ADAMS: 731 MR. ADAMS: Mr. Chair, Panel. On behalf of Energy Probe, I have a few brief submissions. 732 With respect to the application of Milton, we wish to commend Mr. Thorne on his presentation. We understand from his presentation that the plan is essentially a one-year plan. At the completion of it in -- by March, 2006, we would like to have an opportunity to see the results, in terms of a cost-benefit analysis generated on the public record, and as it appears that Milton will have learning that will be beneficial to customers and other LDCs. So we support Milton's request, at this time, for a final order. 733 With respect to the application of Brantford, it is our understanding that it, also, speaks to, essentially, a one-year plan-horizon. Similar to our submission on Milton, we feel that it would be beneficial for customers to see cost-benefit analysis to be filed by March of 2006 for all programs that are undertaken by Brantford. 734 We wish to compliment Brantford for its efforts to present, to the best of its ability, both cost and benefit estimates, to help guide the review of their C&DM programs. 735 We note from reviewing the five guiding principles that were presented in evidence, and remarked upon in evidence -- in the argument in-chief by Mr. Sidlofsky, that none of the guiding principles include reference to cost-effectiveness. And we think that this is a deficiency that ought to be remedied, as we will move through our argument addressing a particular cost-effectiveness concern. But, in general, we recommend that, in the consideration of C&DM programs for the future, that cost-effectiveness -- we recommend that the Board consider recommending to the LDCs that they take into account cost-effectiveness criteria in selection of programs. 736 In our cross-examination of Brantford, we believe that we were able to point to a -- what we believe to be a significant weakness in their approach to cost-benefit analysis. Brantford's witness responded that the cost-benefit analysis on the distribution and system improvement proposal was incomplete. And our conclusion from that exchange is that the record in this proceeding is, as a result, incomplete. While Brantford is to be commended for attempting the analysis with a program, the Board is left with an incomplete record. 737 Now, with respect to the particular type of investment that's proposed, which is a technical upgrade in the capabilities of its distribution system, it's our submission that this is a type of conservation initiative which is suited for more accurate assessment of both costs and -- certainly, a more accurate assessment of benefits than is possible in many typical customer-side DSM initiatives. The improvements have a defined technical characteristic. The physical principles at play, in terms of reduced distribution-system losses, are subject to well-understood and recognized engineering principles. And the analysis of these matters is something within the core utility business for the LDCs. So we believe that, for utilities bringing forward proposals for distribution system improvements, it is reasonable to expect a higher standard of analysis than is presented here, in terms of both the completeness of the categories of benefits, and also with respect to the cost analysis applied in determining a cost-benefit ratio. 738 Energy Probe is generally in favour of an expeditious review, through this process, of the conservation and demand management applications, and is predisposed to recommending in favour of final approval; however, with respect, specifically, to the distribution-system improvements, we find ourselves unable to make that recommendation. 739 The distribution-system improvements proposed here represent approximately two-thirds of the overall plan. The evidence on the record that was pre-filed suggests that the cost per kilowatt-hour of savings is 7 cents per kilowatt-hour. We believe that this is an incomplete recognition of costs, both the benefits of the savings are under-represented, but, of equal importance, the analytical approach to discounting is -- does not apply the weighted-average cost of capital that the utility actually incurs. 740 In other rulings of this Board, on other matters with respect to utility costs, the weighted-average cost of capital has been applied in several of the calculations that are used for the calculation of accounts in the regulatory assets -- weighted-average cost of capital is adopted. We believe this is the approach that is accepted by the Board with respect to cost-benefit analysis by their regulated gas utilities, when they present programs for system upgrades of this type. And we think that's the appropriate approach to use here. 741 So, we feel that, specifically with regard to the distribution-system improvements, that we recommend that the Board reject the proposal and that Brantford be invited to bring back a more complete analysis for review in a paper process. And hopefully this process can be undertaken without any significant problems, assuming that there is a complete analysis provided. 742 With regard to the traffic light LED replacement program, we wish to compliment Brantford for arranging cost sharing for a portion of the costs and we think that the approach adopted where the municipality supplies the labour is an appropriate sharing. We recommend that the Board, in its ruling, encourage other LDCs that are undertaking programs of this kind to seek funding partners, particularly where there is an easily identified direct beneficiary from the program. This is not a broadly socialized -- in the instance of the traffic light, the benefits of the upgrade flow directly to an identifiable customer and that customer has, in our view, -- it's very reasonable to ask that customer to make a contribution to the overall costs. 743 With respect to the proposal from Brantford with regard to water heating related load management activities, we have a concern. As recognized in cross-examination it was historically the practice in Ontario that a discount demand service of the kind like load-managed water heating was arranged by utilities as a load-retention activity in an effort to maintain their volume of sales. Historically, there was a strong emphasis by the electric LDCs in many aspects of their customer relations to market the product and to inflate their volumes of sales. That was considered an objective. The legacy -- but we believe that this legacy approach is not appropriate in the current environment. 744 We observe that approximately 60 percent of the overall costs of this program are incentives to electric water heating customers. While we agree with the investment of some modest amount of funds to be able to maintain the capacity for ripple control or other forms of load management capability, and because we believe that there are potential benefits to arise from programs unrelated to water heating like, for example, air-conditioning where there is a captive market for electricity but it is a weather-sensitive market and contributes to the system peak, we -- so we support the continuation of the utility's capability of servicing these markets, or indeed, possibly in the future making this capability available to retailers on a cost-recovery basis. 745 We do not believe that it is appropriate to provide financial incentives for electric water heating. Instead, we recommend that the direction of -- the utility in this case and with other LDCs in Ontario move in the direction that Milton has identified, and that is encouraging fuel switching where it's possible. 746 We note from the evidence provided from cross-examination that Brantford has not undertaken a review of the potential for fuel switching in this end-use market. In the presentation that Milton provided, Milton's evidence was that they have undertaken an analysis that overmaps both the electric water heating market in the Milton service territory with the available gas grid. And we commend that approach to other utilities, and specifically recommend that the Board encourage Brantford to pursue such an analysis. 747 With respect to reporting requirements, Energy Probe has no need for quarterly reporting on behalf of small utilities. We believe that, for our purposes, annual reporting is sufficient in order to be able to undertake appropriate analysis after the fact. 748 The final area I would like to address is the matter of costs. On Wednesday, Energy Probe indicated that we would be providing our cost plea today for the applications that have come before the Board for final orders to date. 749 Energy Probe has the largest base of any non-profit organization in Canada who individually donates to have their energy interests represented. But without the prospect of an award of costs, our interventions in matters such as these that the Board has heard on C&DM would be limited. 750 We receive no donations from interested parties beyond individual consumers in these matters, and specifically we receive no donations from unions. Historically, we have received corporate and government donations, combined which do not exceed 1 percent of Energy Probe's revenues. We feel we've acted responsibility in this proceeding and trust that we've been of some assistance to the Board. We request that our award of 100 percent of our costs, reasonably incurred, be supported by the Board. 751 Those are our submissions. 752 MR. KAISER: Thank you, sir. 753 MR. LYLE: Mr. Lyle. 754 Ms. Crnojacki is going to hand out the submissions of VECC. I will start reading the submission of Schools. 755 SCHOOL'S WRITTEN SUBMISSIONS READ INTO THE RECORD BY MR. LYLE: 756 MR. LYLE: We have reviewed the applications of Brantford and Milton for C&DM approvals and have listened to their oral evidence. It is our view that these utilities should be congratulated for the work they have done on their applications, and therefore the Board should grant the final approval requested. We believe that the imposition of the same monitoring and reporting conditions that the Board applied to the CLD applications would be suitable for these two applications, as well and urge the Board to impose such conditions. 757 I will move then to the submissions of VECC, Mr. Chair. 758 MR. KAISER: Thank you. 759 VECC'S WRITTEN SUBMISSIONS READ INTO THE RECORD BY MR. LYLE: 760 MR. LYLE: VECC has reviewed the applicants' proposed C&DM programs and expenditures, and while recognizing there is a history of DSM with the applicants, it has some of the same concerns it expressed in its submissions regarding the applications by the Coalition of Large Utilities about the programs offered. That said, VECC supports the relief requested by the applicants in the form of final orders, but final orders with conditions. 761 The reason for adopting this position is the same as in the CLD proceeding. Our concern that any other option but approval with conditions will send less-than-positive signals to the remaining utilities configuring these programs and cause difficulties for the electricity consumers in Ontario that are facing very real increases in their bills next year from both distribution rate increases and the removal of Bill 210 price cap. 762 VECC specifically congratulates Brantford Power for leading the way on a low-income energy efficiency and social-housing program. Of course, we hope and expect others will follow their lead. 763 VECC also congratulates Milton Hydro for its initiatives to lead the way in residential smart metering pilot programs. 764 VECC urges Milton Hydro to respond more fully to the Minister's direction, with initiatives targeted at social housing and a low-income energy efficiency initiative, similar to that of Brantford Hydro and guided by the LIEEP report filed by VECC on behalf of LIEN in the RP-2004-0203 proceeding. 765 Proposed conditions of approval. VECC requests the Board to condition its orders resulting from the Board's decisions in this proceeding, and supports the following condition: The applicants report quarterly and annually on the progress of their C&DM and DR and DE programs, in a standard format agreed with the Board Staff. 766 Finally, to the issue of costs. VECC has been judged to be eligible for an award of costs, and requests an order of the Board allowing it to recover its legitimate costs in this proceeding. 767 All of which is respectfully submitted per Michael Janigan, counsel for VECC. 768 MR. KAISER: Thank you, Mr. Lyle. 769 Did you have any further submissions? 770 MR. LYLE: No, Mr. Chair. 771 MR. KAISER: We'll take a short break -- 772 Oh, I'm sorry, did you have any reply, Mr. Sidlofsky? 773 MR. SIDLOFSKY: Just a couple of comments, if I might, sir. 774 MR. KAISER: Yes. 775 REPLY CLOSING ARGUMENT BY MR. SIDLOFSKY: 776 MR. SIDLOFSKY: Perhaps I could begin with the distribution-system improvements that Brantford Power is proposing. And both Mr. Dingwall and Mr. Adams have commented on that, so I'm going to address my comments to both of them. 777 There are a couple of things that are clear from the proposed distribution-system improvement program. One is that, by all accounts, it would appear that savings will be -- that savings of electricity will result from these distribution-system improvements. There has been an estimate of 900,000 kilowatt-hours and it's -- it doesn't appear to me that there's anything in Mr. Adams' submission that would change the kilowatt-hour estimate of those savings. Mr. Adams was discussing the costs associated with the project, the value of the benefits that may be realized, but I think what we have to look at, at the end of the day, is that this project is anticipated to save 900,000 kilowatt-hours of electricity that wouldn't be available otherwise, that would be taken up in losses. 778 If anything, according to Mr. Loucks' evidence, the losses have been understated because the -- excuse me, the savings have been understated, because those savings don't take into account further transformation that is required from 27.6 down to 4 KV. It doesn't take into account secondary service, it only takes into account the primary service for the LDC. So it would appear, from the estimates of Brantford power, that 900,000 kilowatt-hours, which is significant in itself, may only be a starting point. 779 Secondly, Mr. Loucks' evidence was clear that the capital budget -- Brantford Power's capital budget for distribution-system improvements isn't being reduced as a result of the availability of conservation and demand management money. As Mr. Loucks mentioned in -- during cross-examination, in fact, Brantford Power's budget for distribution-system improvements, in their capital budget this year -- or in 2005, is, in fact, higher than 2004. There doesn't seem to be, from any evidence that's before the Board, any movement of funds out of what the utility would otherwise be needing to spend on distribution-system improvements. 780 One of the key features of the distribution-system improvement project is that Brantford Power has an opportunity, right now, to lever the improvements for a particular neighbourhood into conservation-related improvements that will benefit all the customers of Brantford Power. 781 On that basis, I would suggest that it's entirely reasonable for this project to be approved. 782 Brantford Power has, in my submission, acted responsibly in paying one-half of this overall $1.8 million cost out of its revenues. It's certainly acting responsibly in that sense. 783 And again, to its credit, Brantford Power has made an effort to estimate the benefits of this project. Once again, that's consistent with the Minister's direction. It's consistent with the Board's Procedural Order. And on those grounds, I would submit that it would be appropriate for the Board to approve that project, as a part of the Brantford Power menu of conservation and demand-management initiatives. 784 Mr. Adams also spoke to his concern that the guiding principles for Brantford Power don't refer to cost-effectiveness and that, in future, the Board should recommend that LDCs take cost-effectiveness criteria into account. I don't believe, from Mr. Adams' comments, that he's recommending any disallowance in terms of Brantford Power's plan, but I would note that, with new programs, or with pilot programs, programs that may not have been tested in this jurisdiction, it may simply not be possible to determine cost-effectiveness of a project at the outset. 785 You'll recall, sir, from the coalition of large distribution utilities' hearing, there was a great deal of discussion about how these projects are new. In that hearing, the applicants weren't in a position to provide estimates of -- cost-benefit analyses at the outset. Brantford Power has attempted to do a form of -- or provide some form of cost-benefit analysis, and they should be commended for that. This is not a shortcoming of Brantford Power's plan. But it simply may not be possible to go beyond what Brantford Power has already done in assessing the merits of projects that are new for a utility. 786 Sorry, if I could just have your indulgence for a moment, sir. 787 Sorry, I mentioned earlier, in my argument in-chief, that the reporting rules that are appropriate for the large utilities may not be entirely appropriate -- or, at least, may not be entirely necessary, for the smaller utilities dealing with much smaller budgets. There still have been some discussions, clearly, in the responding arguments from the intervenors, as to what the appropriate reporting methodology should be for a utility such as Milton or Brantford. Once again, sir, we would -- Brantford Power would submit that an annual report would be sufficient. That has actually, I note, received some support from certain intervenors in this proceeding. 788 If the Board is inclined to impose some more frequent reporting requirement, then I would suggest that the Board may wish to impose some sort of materiality threshold, whereby, if changes beyond a certain threshold are made in the plan, those should be reported at some frequency of less than -- sorry, of greater than one year. But I would stand on my earlier recommendation, that annual reporting would be sufficient for utilities of this size. 789 Finally, sir, Energy Probe has made some comments on its entitlement to costs. I note that a not-insignificant amount of -- or number of Mr. Adams' comments related to what the Board might do in the future for other LDCs. And I would simply suggest that it may not be entirely appropriate for Brantford to -- for Brantford Power to cover the entire cost of Mr. Adams' or Energy Probe's intervention if what Mr. Adams is pursuing is general principles that could be applicable to all of the LDC conservation and demand-management applications. 790 If I may just have a moment, sir, I do believe that those are -- sorry, just one final comment on water heater load management and Mr. Adams' comments on that. 791 Mr. Loucks' evidence was that the systems that are in place for the water heater load-management program can be used to control other appliances in the home. It seems, therefore, that there is some merit in maintaining units in residential properties where they're there now. The evidence was also that the incentive that's being paid now of approximately $1.50 is -- really amounts to an incentive to keep the units in the homes, because it would cost much more to take them out. This is not the incentive that was being paid before market opening of approximately $5 a unit per customer, so this is a modest incentive for customers to maintain systems in their home that may well be used for other conservation initiatives in the future. My suggestion, then, is that it's worthwhile to keep those. If it would cost the utility more to take them out, that's conceivably less money for other worthwhile purposes. 792 Thank you, sir. Those are my comments. 793 MR. KAISER: Thank you. 794 Mr. Thorne, did you have any response? 795 MR. THORNE: No, thank you. 796 MR. KAISER: Mr. Lyle. 797 MR. LYLE: I believe that completes argument, Mr. Chair. 798 MR. KAISER: Mr. Lyle, we're going to take 15 minutes. We'll come back and render our decision. 799 MR. LYLE: Thank you, Mr. Chair. 800 --- Recess taken at 2:37 p.m. 801 --- On resuming at 2:52 p.m. 802 MILTON AND BRANTFORD DECISION: 803 MR. KAISER: Please be seated. 804 The Board is going to issue its reasons and decision with respect to the applications by Milton Hydro and Brantford. We will do them separately. In both cases there is a schedule A, which will essentially be a detailed listing of the programs that each of the utilities have filed in support of their applications. Those will be in the transcript. 805 Before we proceed to the individual decisions, we wanted to say something briefly about the process, in general, because both applicants complain that we dragged them in here for an oral hearing, despite the fact that our Procedural Order suggested they might have a written hearing. We recognize that departure. We did it for a reason, and we think the reason was justified. 806 The CLD application which some of you heard, was the very first of these applications. All of those six utilities were relatively large. We wanted to have an opportunity to deal face-to-face with some of the smaller utilities, having in mind there may be different issues. In that respect, we also wanted to give the intervenors a chance to participate in a public process. So, in some sense, you two have been disadvantaged by being first. It wasn't that there was anything in these particular applications that were being singled out. We are using the decision of the CLD and, if I can call you the SLDs, as something of a precedent, that may act as guidance for others who may follow. 807 Having said that, it seemed to us that there were some general principles that resulted from this which were very useful. Hopefully, other utilities will take some guidance from them. We saw, and this was recognized by the intervenors, that there were some innovative things that these two smaller utilities were doing. 808 It was mentioned, by way of example, in the case of Brantford, that smart meters were going in in all cases, where there were meter replacement situations. 809 We saw, equally, in the case of Milton, that smart meters were being required in all new residential subdivisions and, in fact, there was a cost-sharing mechanism that had been developed with respect to those developers. That's an interesting concept that other utilities should look at. 810 There was also, in the case of Brantford, cost-sharing mechanism with respect to LED traffic lights. Those LED traffic lights, as we mentioned in the CLD decision have significant benefits. Here you have utilities who have traffic departments, often in the same municipalities. So we commend and compliment Brantford in terms of coming up with that cost-sharing, and we recommend that for other utilities who read this decision. 811 We notice, also, in the case of Brantford, as was recognized by one of the intervenors, that it's one of the leading utilities in terms of a low-income program, something was missing to a large degree in the CLD applications. 812 So there was some benefit. Although we appreciate the inconvenience of holding an oral hearing - but there was some benefit in going through these applications in a little more rigorous fashion. And we did that recognizing that these were the first applications for the smaller utilities. So we appreciate your assistance, even though we recognize it probably increased the cost to you. 813 Dealing, then, with Milton, if I can start there. 814 Milton Hydro Distribution Inc. filed an application on November 1st, 2004, with this Board for a Final Order approving its conservation and demand management plans. As Mr. Thorne pointed out, Milton was previously granted interim approval. That was back on October 19th. In fact, although Mr. Thorne is not a lawyer, he raised a very interesting legal argument. That is, having granted him interim approval, there was no evidence to set aside, as it were, that decision and he's probably right. Notwithstanding that brilliant legal manoeuvre, we're going to consider this application on the same basis as Brantford, and deal with all of the issues. 815 The Milton plan, as in the case of Brantford is essentially a one-year plan. The plan deals with a conservation assets program, a price-response program, an aggregator-development program, an energy deal program, a building partnership, and, of course, there is also a section dealing with monitoring and planning. 816 The details of the Milton plan is set out in schedule A of this decision. The total amount of the budget for the C&DM plan proposed by Milton, which equates with its third installment of MARR, is $761,632. 817 The relief sought by Milton is, of course, approval of the C&DM plan, and Mr. Sidlofsky, on behalf of Brantford, indicated that, insofar as the wording of the approval was required, he wanted the exact wording that was used in the CLD decision. And we accept that, and we will apply exactly the same wording with respect to Milton, as well. 818 The Milton plan, in the Board's judgment, meets the requirements set out in the Minister's directive. There's been detailed reference to the May 31st letter which is in the record. I don't propose to repeat it. 819 The Milton plan also meets the filing requirements set out by the Board's October 5th Procedural Order. In particular, the plan covers all necessary customer classes to the satisfaction of the Board. There's acceptable balance between customer-side and utility-side. And there is, as we said a moment ago, some innovative aspects to it. 820 The Milton situation is, perhaps, the most advanced situation. The evidence is that there's, to date, 2,000 residential smart meters installed. That's probably the greatest installation in the province. When this plan is completed, Mr. Thorne estimates that number will be closer to 5,000. 821 We have no evaluation of the benefits of those meters at this point, and they won't start receiving data until the first quarter of next year. But when they do, Milton should be in a position to start evaluating the benefits of this technology, and we encourage them to do that on a rigorous basis. I say that, not because we wish to burden Milton, but we wish to use Milton's leadership in another respect, and that is in collecting and evaluating data, so we get some hard data on the benefits of this technology. 822 We all believe in this technology in our little hearts, but data is important, and the Milton case will be the first case, I suspect, where real data will start to arrive on the scene. So we encourage Mr. Thorne to do that, and set up the necessary procedures. And we will set up procedures so that he knows we're watching over his shoulder. 823 The other piece of the Milton plan that's very interesting is the plan to retro-fit approximately one-third of the existing rural and residential customers with demands of less than 50 kilowatts. That's the first of the rural plans that we have seen in these proceedings, and we would encourage Mr. Thorne and Milton to cooperate with other utilities, particularly Hydro One, in these types of initiatives. 824 The Board believes, and this was evident in our decision with respect to the CLD, that the interchange of data, and information, between the utilities in this initiative is crucial. 825 As one of the intervenor said, we don't want people running off and doing things separate; that creates real problems. Not only is it wasteful, in duplicating assets, but it mitigates the learning process. There's clearly potential here for a rural project, if I can use that term, and we encourage you, Mr. Thorne, to talk to your good friends at Hydro One, and other candidates, to see if some can be brought into the rural club, as it were. Hydro One, I believe, has an application before this Board, and we'll be hearing that in the new year sometime. So there's still some opportunity to talk to your friends at Hydro One. 826 I want to turn, finally, to some of the procedural issues. We have heard and understand the arguments that small utilities are different. They are different, and regulatory burden is a different issue for them. Notwithstanding that, we believe the reporting requirement and monitoring requirement is crucial to this process. Accordingly, in the case of Milton, the application is approved, conditional upon Milton filing the quarterly and annual reports on the same basis as the CLD applicants in the case that we decided this morning. 827 I want to emphasize that we do not anticipate a public review of the quarterly reports nor are the reports time consuming. We see that as a very simplified document. We believe it's important that utilities identify the specific programs that they have underway, that they identify the success, and they identify the rate at which they're expending monies against the budget. We do not believe that this is an onerous burden. We also believe it's a useful discipline for the utilities themselves. We also believe, because these reports are going on the Board's website, that it's useful information for the other utilities. In fact, that dissemination of this information may be more important than anything else. 828 We then come to what we call program shifting, where the programs being approved in this instance change. As stated in the CLD decision, it's essential that utilities have some flexibility, but there have to be limits. We believe the 20 percent rule adopted in that proceeding applies here as well. 829 We do have some strange situations, which I'll come to when we get to Brantford, where one particular part of the program represents two-thirds of the entire budget. That's an unusual case, however, which we'll deal with when we deal with the Brantford decision. But we don't believe it warrants amending the overall rule. So we'll apply the same 20 percent rule, and in the quarterly reports not to mention the annual reports, we will expect notification of any shifts. 830 and if there are shifts that pass the 20 percent threshold, we will expect some kind of notice to the Board. 831 Now, we are not suggesting there will be another hearing; we expect notice to the Board, that's all. We expect notification when the utility has to move outside of the 20 percent limit. If the Board has a concern, it can deal with it, but we expect that in most cases. 832 I'll turn next to the Brantford case. 833 Brantford, unlike Milton, does not have an interim order so they can't avail themselves of this unique estoppel argument. Brantford filed an application on October 28th to this Board for a final order in accordance with the procedures outlined in the Board's Procedural Order of October 5th. The core elements of the proposed C&DM plan for Brantford is set out in the schedule 1, but they consist of the usual range of customer-side and utility-side programs, including distribution system improvements, smart meters for commercial/industrial customers, key account seminar series, residential water heater load management and a low-income customer retrofit program. 834 The total amount of the C&DM plan for Brantford Power is 1.34 million, which is equivalent to its third installment of MARR. And as described by the witnesses, Brantford has divided C&DM plans between core programs and a minor amount for supplemental programs that have not yet been defined. That procedure, incidentally, is not a bad procedure, and we appreciate Brantford for being very forthright and presenting certain programs with more concreteness than they could with respect to others. 835 in that connection, Brantford perhaps has been the leader in trying to estimate the actual costs and benefits of these programs. That, of course, has its downside, as we saw with the questioning by Mr. Adams, but we will deal with that issue later. 836 It is sufficient to say at this purpose that both of these applications were very well prepared and the case of Brantford, we appreciate the attempt to measure, to the extent possible, the cost and benefits of these programs. 837 As in the case of Milton, the Board believes that the Brantford Power projects were well chosen and in accordance with the criteria established in the Minister's directive of May 31st. The principles which are laid out in page 1 of the Brantford application are in accordance with the Minister's directives. We have indicated previously that the low-income project being proposed by Brantford is, in fact, one that should be recommended to other utilities. I'm referring there, of course, to the low-income customer refit program which is paragraph 2.5 of the Brantford application. 838 The Board would also like to deal with this issue of the distribution system upgrade. This is a project that would cost approximately 1.8 million, half of which is coming from third tranche monies. Over 30 years, the upgrade would apparently yield savings of 900,000 kilowatt-hours. 839 There's been a debate as to the discount rate. Of course, in order to evaluate these types of programs, you need to know what the cost of power is. It's complicated in this case because, theoretically, you'd have to know what the cost of power is throughout the 30-year period. But even if you take the cost of power as being 10 cents a kilowatt, you could do some estimates. 840 We are concerned about the imprecision of these estimates. Having said that, we realize, and this was raised by counsel for Brantford, that the big guys didn't even bother doing the estimates at all. So it's difficult to be critical. At the same time it's important, as we said with respect to monitoring, that we treat these calculations with as much seriousness as we can. So the point that Mr. Adams makes has some merit. 841 We're not inclined to reject this program at the present time. We do have a concern. That concern is increased by the fact that this represents two-thirds of the total of this particular program. So it's a big number in an otherwise small program. We recognize, as the witness stated, that they haven't estimated all of the savings. There may be savings greater than 900,000 kilowatt-hours. We would urge Brantford to re-examine this, and in the first quarterly report they can file a revised estimate. 842 Accordingly, we approve the Brantford application, subject to the quarterly and annual reporting requirements which we've have applied in the case of other utilities. With respect to this issue raised by Mr. Adams, regarding this distribution upgrade project, we believe a better job can and should be done with respect to the calculations. We don't believe it will be that onerous. It's an important step as we try and move towards the goal of a more accurately calculating the benefits of these projects. And of course for the annual report we will, in that case, have requested that cost-benefit analyses be provided. And we've indicated that the Board Staff will work with these utilities and the intervenors to develop the appropriate methodology. 843 I should add that that methodology process is underway, in any event, as part of the 2006 EDR proceeding. So by the time we get to the annual reporting in the case of these utilities, you should have a good handle on the methodology for the purpose of these cost-benefit analyses. 844 The only other issue I believe that's outstanding is costs. They have been spoken to by both of the intervenors here today. The Board appreciates the assistance by these intervenors and the cost award will go in the usual fashion. 845 Mr. Lyle, any comments? 846 MR. LYLE: No, Mr. Chair. 847 MR. KAISER: Thank you, gentlemen, we appreciate your attending. 848 --- Whereupon the hearing adjourned at 3:14 p.m.