Transcript_Generic_Volume+5+Wednesday_May+11+2016_20160511.DOC

1 ONTARIO ENERGY BOARD 10 11 12 13 EB-2016-0004 VOLUME: DATE: May 11, 2016 BEFORE: Ken Quesnelle Presiding Member and Vice Chair Cathy Spoel Member Paul Pastirik Member 14 FILE NO.: Ontario Energy Board 1 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 EB-2016-0004 THE ONTARIO ENERGY BOARD Ontario Energy Board Generic Proceeding on Natural Gas Expansion in Communities that are not served Oral Hearing held at 2300 Yonge Street, 25th Floor, Toronto, Ontario, on Wednesday, May 11, 2016, commencing at 9:02 a.m -VOLUME -BEFORE: KEN QUESNELLE Presiding Member and Vice Chair CATHY SPOEL Member PAUL PASTIRIK Member 2 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 A P P E A R A N C E S MICHAEL MILLAR Board Counsel KHALIL VIRANEY Board Staff THOMAS BRETT Building Owners and Managers Association Toronto (BOMA) LAURA BRAZIL MIKE RICHMOND Canadian Propane Association MICHAEL BUONAGURO JULIE GIRVAN Consumers Council of Canada (CCC) FRED CASS JOEL DENOMY Enbridge Gas Distribution Inc (EGDI) ROGER HIGGIN BRADY YAUCH Energy Probe Research Foundation KENT ELSON Environmental Defence Canada Inc GORDON KAISER KARIM KASSAM EPCOR Utilities Inc DWAYNE QUINN Federation of Rental-housing Providers of Ontario (FRPO) IAN MONDROW Industrial Gas Users' Association (IGUA) ELISABETH DeMARCO CAREY FERGUSON LARRY SAULT DON RICHARDSON JOHN CREIGHTON Anwaatin Inc., representing Aroland First Nation, Waaskiinaysay Ziibi, Animbiigoo Zaagiigan Anishinaabek, Bingwi Neyaashi Anishinaabek, Biinjitiwaabik Zaaging Anishinaabek, Red Rock Indian Band, and Whitesand First Nation), and MoCreebec ("Anwaatin") and GreenField Specialty Alcohols BILL ROSENFELD Northeast Midstream LP 2 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 A P P E A R A N C E S NICK MELCHIORRE Northwestern Ontario Associated Chambers of Commerce (NOACC) Northwestern Ontario Municipal Association (NOMA), and Common Voice Northwest JAY SHEPHERD MARTIN LUYMES Ontario Geothermal Association (OGA) JOANNA VINCE Ontario Sustainable Energy Association (OSEA) RICHARD KING SANDER DUNCANSON Parkland Fuels Corporation MARK RUBENSTEIN School Energy Coalition (SEC) JOHN VELLONE South Bruce municipalities (Municipality of Kincardine, the Municipality of Arran-Elderslie, and the Township of Huron-Kinloss) CHARLES KEIZER CHRIS RIPLEY CRAWFORD SMITH Union Gas Limited MICHAEL JANIGAN Vulnerable Energy Consumers' Coalition I N D E X O F P R O C E E D I N G S Description Page No - On commencing at 9:02 a.m PARKLAND FUELS CORPORATION - PANEL Examination-In-Chief by Mr Duncanson: Cross-Examination by Mr Ferguson: Cross-Examination by Mr Millar: Cross-Examination by Mr Cass: Cross-Examination by Mr Kaiser: 10 Cross-Examination by Mr Shepherd: Cross-Examination by Mr Janigan: Cross-Examination by Mr Buonaguro: 11 - Recess taken at 10:30 a.m 12 - On resuming at 10:51 a.m 13 ONTARIO GEOTHERMAL ASSOCIATION - PANEL 14 Examination-In-Chief by Mr Shepherd: 15 16 17 18 Cross-Examination Cross-Examination Cross-Examination Cross-Examination 19 - Luncheon recess taken at 12:00 p.m 20 - On resuming at 1:03 p.m 21 22 23 24 UNION GAS LIMITED - PANEL Continued Cross-Examination by Dr Higgin: Cross-Examination by Mr Millar: Cross-Examination by Mr Buonaguro: 25 - Recess taken at 2:36 p.m 26 - On resuming at 2:55 p.m 27 28 29 Cross-Examination by Ms DeMarco: Cross-Examination by Mr Elson: Cross-Examination by Mr Kaiser: 30 31 - Whereupon the hearing adjourned at 4:57 p.m by by by by Mr Ms Mr Mr Elson: Vince: Cass: Ferguson: 101 104 104 119 143 169 181 218 I N D E X Description O F P R O C E E D I N G S Page No 4 10 11 12 E X H I B I T S Description Page No EXHIBIT NO K5.1: CROSS-EXAMINATION COMPENDIUM OF VECC FOR PARKLAND PANEL EXHIBIT NO K5.2: DOCUMENT ENTITLED “A SIMPLIFIED SCHEMATIC OF GEOTHERMAL V NATURAL AS FOR HEATING/COOLING SYSTEMS” EXHIBIT NO K5.3: ONTARIO GEOTHERMAL ASSOCIATION WITNESS PANEL CVs EXHIBIT NO K5.4: CROSS-EXAMINATION COMPENDIUM OF ENVIRONMENTAL DEFENCE FOR ENBRIDGE PANEL EXHIBIT NO J5.5: PAGE OF THE COMPENDIUM 33 57 57 182 219 U N D E R T A K I N G S Description Page No 4 U N D E R T A K I N G S Description UNDERTAKING NO J5.7 to provide further details around this expansion that we've been discussing Page No 1 Wednesday, May 11, 2016 - On commencing at 9:02 a.m MR QUESNELLE: Okay Good morning, Mr King, Mr 4Duncanson We have a witness panel up first from Parkland this 6morning I don't believe there's any preliminary matters 7Mr Millar, anything that we need to discuss before we get 8started? No? Okay I just leave it to you to introduce 9your witnesses, and we'll have them affirmed whenever it is 10convenient for you 11 MR DUNCANSON: Thank you, Mr Chair So representing 12Parkland this morning we have three individuals 13the panel is Dr Jim Nieberding Closest to Next to him is Mr Kalyan 14Dasgupta, and next to him is Mr Gary Highfield, so if we 15could have them affirmed 16 MR QUESNELLE: 17 PARKLAND FUELS CORPORATION - PANEL 18 Jim Nieberding, Affirmed 19 Kalyan Dasgupta, Affirmed 20 Gary Highfield, Affirmed 21 MR PASTIRIK: 22 MR DUNCANSON: Thank you Thank you very much Thank you I've got a few questions 23for Dr Nieberding and Mr Dasgupta to start First of all, 24Mr Chair, I didn't propose to go through their 25qualifications this morning, just like previous panels in 26this hearing 27their evidence We have filed their qualifications as part of We would like to have them accepted as ASAP Reporting Services Inc (613) 564-2727 (416) 8618720 1Board's oversight of the collection of the advancement 232 2charges and whether or not service can be denied if there is or if there is a dispute on the advancement charge, those 4types of things I would see as part of the framework that we 5would be interested in exploring MR KEIZER: And that's fair game I don't know if it 7necessarily needs to be accusatory with respect to -8 MR QUESNELLE: MR KEIZER: No within the context of negotiations 10between the two parties 11 MR QUESNELLE: Understood Mr Kaiser for EPCOR, I 12think there are some questions to be asked, and certainly if 13you are having difficulty getting answers, we are here with 14our idea of what the framework needs and what we need, so I 15think that will be the filter in which we pass these 16through 17 MR KAISER: And I was meaning to explain to you, Mr 18Chairman, the process in which it was resolved You'll 19appreciate that if you can't get gas from the guy that 20supplies the gas, you've got a problem in terms of providing 21service in the new community 22 MR QUESNELLE: If we can that in another way, that 23would be helpful 24 MR KAISER: And I actually admit this is a compliment, 25you'll find this as a surprise, but we were able to work out 26an accommodation with Union that in the supply contract, 27which was facing a stalemate on this issue, the parties ASAP Reporting Services Inc (613) 564-2727 (416) 8618720 233 1agreed to insert a term in the contract that they disputed 2whether this was a valid charge, but both parties agreed 3that they would let the Energy Board determine whether this 4was a valid charge and they would both abide by the Board's 5decision And we appreciate that accommodation that Union made in 7that regard, because it did allow this project to proceed I raise this only in the sense that at some point 9you'll have argument on whether there are barriers to entry 10and what those might be 11 MR QUESNELLE: Well, on that specific point, Mr 12Kaiser, we'd be interested in having argument on the Board's 13authority or what the Board's authority should be 14 I don't think it is between two parties whether or not 15we are going to have the board Become the arbitrator of a 16dispute on contract, so I think that we need a framework 17that sees past that 18 MR KAISER: 19charge No, the question was: Is it a valid We have this charge in Port Elgin 20 MR QUESNELLE: 21 MR KAISER: All right 27 years ago or something, and now it's 22popping up, and one of the issues that you are facing, is 23this a valid charge, particularly in the context of natural 24gas expansion 25 MR QUESNELLE: Well, if through this experience there 26is a recognition that there is a weakness in the Board's 27stated authority on this, we would be interested in hearing ASAP Reporting Services Inc (613) 564-2727 (416) 8618720 1about that as part of this issue MR KEIZER: 234 We certainly could contemplate the legal 3jurisdiction within the context of argument The policy 4premise behind the advancement charge has already been laid 5out in Union's pre-filed evidence in this proceeding MR QUESNELLE: MR KAISER: All right Thank you Well, and we'll leave that to argument I 8was just trying to get some of the facts down, but coming 9back to Port Elgin, which is the one case that we've and 10I take it from what you've said, this is this particular 11problem of needing an advanced reinforcement charge has 12never arisen since Port Elgin 13 MR OKRUCKY: That's correct until very, very recently, 14and I would suggest that one of the primary reasons for that 15is that the number of expansion projects undertaken has 16dropped off dramatically 17 In the last ten years there has only been one, Red 18Lake There was not advancement required for Red Lake, but 19there was a significant amount of aid required to undertake 20that project 21 MR KAISER: Are you aware that Enbridge doesn't charge 22this charge? 23 MR OKRUCKY: I can't speak for Enbridge's practices I 24can tell you that the reason we've surfaced this as an issue 25is because the Board instructed us to begin doing this, and 26that was many, many years ago It hasn't cropped up very 27often, and we wanted clarity on whether we should be doing ASAP Reporting Services Inc (613) 564-2727 (416) 8618720 1it or not 235 MR KAISER: And you say the Board instructed you to 3this in the Port Elgin decision? MR OKRUCKY: Just bear with me for a second 5Board didn't instruct us to it in that decision No, the The 6Board instructed us to it in a prior decision, and this 7was the first opportunity the Port Elgin project was the 8first opportunity where it would have surfaced as a 9requirement 10 MR KAISER: 11 MR OKRUCKY: And where's the instruction? If I turn to our evidence that's where 12it is, our submission it was the I'm in Exhibit A, tab 131 for EB-2016-0004, page 9, page of 38, yeah, right at the 14top: 15 "The rationale for this is the Board decision for 16 the Wingham expansion project in 1995." 17 That was EBL 235, that decision, and in that order the 18Board indicated that in future facilities applications we 19need to file an estimate of the costs and any impact of 20those costs on the economics of the project 21 Following that decision the first opportunity where 22that requirement would have applied would have been the 23Wingham project 24 MR KAISER: Now, as I understand the facts in this 25case, initially you advised EPCOR that there was no excess 26capacity and there would be a reinforcement cost; is that 27correct? ASAP Reporting Services Inc (613) 564-2727 (416) 8618720 236 MR OKRUCKY: I don't know the specifics of the 2detailed dialogue back and forth Sorry MR KAISER: Am I right that you ultimately determined there was Well, you can confirm that 5excess capacity currently? MR OKRUCKY: That's correct, there is currently 7capacity to service the load that EPCOR had asked for The 8issue here is that we would have to advance future 9reinforcement within the three-year window that we have 10proposed as a reasonable window 11 MR KAISER: So to understand the nature of this 12charge, even if there is excess capacity and the new 13customer wants to use that at whatever your rate is, if you 14determine that that use of that just stopping there, 15you'd agree that it's in everyone's interest if there is 16excess capacity, somebody who wants to come along and use 17it, everyone benefits from that 18 MR OKRUCKY: 19 MR KAISER: I would agree with that, yes But if you determine that sometime in the 20next three years somebody else is going to come along and 21want additional capacity, a new customer, and today who 22you're facing today should pay the cost of adding that new 23capacity sometime in this three-year window 24 MR OKRUCKY: That I'm sorry, could you give that to me 25again? 26 MR KAISER: There is excess capacity, you allow the 27customer on, and you charge him the rate, but you determine ASAP Reporting Services Inc (613) 564-2727 (416) 8618720 237 1under this advanced reinforcement charge that there's likely 2to be a new customer come along sometime in the next three 3years that will need additional capacity MR OKRUCKY: MR KAISER: Okay And therefore you charge the new customer 6who is using the excess capacity the charge of this that the charge for adding capacity sometime in the future for 8this new customer MR OKRUCKY: Yes, what we're trying to prevent here is 10a situation where we can't add, let's say, a single 11individual customer on a system because a large customer has 12come on and taken up all our excess capacity, and a new 13customer comes in the next day, Joe Blow from Owen Sound 14calls and says, I want to connect to natural gas, you've got 15a main right beside me, the economics would look good, and 16our answer potentially could be, I'm sorry, we have no 17capacity left It is going to take us three years, in 18essence, from the time we initiate looking at reinforcement 19until we go through the Leave to Construct process and 20construct and have the capacity available 21 And we would be very concerned about being faced put 22in that situation where we can't attach one or two or a 23subdivision, a small group of customers, because the 24capacity in the system was completely exhausted by somebody 25connected yesterday 26 MR KAISER: And that's never happened since Port 27Elgin, that somebody came along and tapped out the capacity ASAP Reporting Services Inc (613) 564-2727 (416) 8618720 1on the line, until EPCOR came along? MR OKRUCKY: MR KAISER: 238 Not that I'm aware of, no In any event, when you make this 4determination that somebody is likely to come along in the 5next three years and need new capacity, you know for sure 6that there's a customer, or are you just guessing? MR OKRUCKY: We facilities business plans on a 8periodic basis for each of our systems, and in those 9facilities business plans we anticipate future growth 10requirements at a subsystem level based on primarily on 11recent or past historical growth of that system 12 So, if we've grown a system by, you know, 500 customers 13a year, and we don't see any significant changes in terms of 14the environment around us that would cause that to change, 15then we would forecast something similar to that going 16forward 17 We adjust those plans as we're building them, based on 18known factors For example, there may be a large 19subdivision being planned in one area of the system, and the 20growth might shift 21 But we those facilities business plans on a routine 22basis, in order to forecast what our longer-term system 23reinforcement needs would be 24 MR QUESNELLE: Could I ask a question at that point? 25Does Union dedicate with any kind of legal instrument on 26title when developers enter into subdivision agreements with 27municipalities, where perspective home builders actually ASAP Reporting Services Inc (613) 564-2727 (416) 8618720 1have the expectation to receive gas? MR OKRUCKY: MR QUESNELLE: 239 I'm sorry, can you just ask that -I'm just thinking, in a typical 4municipal situation where you have water and sewer 5infrastructure and what have you, when there is a 6subdivision entered into, it actually gets registered on 7title of land so that the prospective buyers have an 8expectation to receive the services that are included in 9that sub division, you ever have the scenario where gas 10is included in such a fashion that someone -11 MR OKRUCKY: Not that I'm aware of Often when a 12subdivision is being developed, the developer is in contact 13with us before they start selling lots about availability of 14gas and whether what the economics of extending gas to 15that area would be, and whether there is aid or not 16 So I would suggest there wouldn't be a lot of cases 17where a subdivision is being developed where the developer 18doesn't know we're already committed to installing natural 19gas, and the ramifications of that 20 MR QUESNELLE: So in a world where you've never had an 21EPCOR come along and say I'm going to deal with this 22community and I want gas, you've never had to worry about 23the to the extent that you've you're having it 24dedicated a full capacity of a line to a large customer such 25as that 26 MR OKRUCKY: 27other systems We have it happen periodically in For example, we reinforcement projects ASAP Reporting Services Inc (613) 564-2727 (416) 8618720 240 1periodically I'm not going to say every year, but every 2few years where there are leave to construct applications to 3reinforce this system or that system Those applications are a result of capacity being 5eaten up by one customer, or by a whole series of new 6subdivisions or new residential customers; it could be 7either of them MR QUESNELLE: So I would ask you to consider this 9goes to you, Mr Keizer, as far as from Union's perspective 10 as to whether or not, in if we are going to have new 11entrants in, is there a system that's required for 12dedication of resources that get locked down legally and in 13the I'm just thinking in the consideration of people are 14entering into legal engagements and investments in 15properties with the expectation of service, and if that 16isn't and if Union doesn't have a system or Enbridge 17doesn't have a system that can speak to that 18 If there is a shift in the landscape here that we're 19going to have potentially new entrants in, is that a 20consideration that should be made in this framework? 21 MR KEIZER: Yes, and I think within the context of 22this whole advancement charge issue, we would consider that 23in terms of what's the overall purpose as to why we've 24approached it, or Union has approached it in this current 25circumstance in this way, and obviously what impact it has 26on current ratepayers and future ratepayers 27 MR OKRUCKY: Thank you I could perhaps just add one ASAP Reporting Services Inc (613) 564-2727 (416) 8618720 1other comment just for some clarity 241 Prior to this Wingham decision, we considered the 3upstream reinforcement cost to shall common system costs, 4and we treated them as normalized reinforcement So it was 5the Board decision that caused us to take this approach with 6Wingham and say we need to get clarity on how to apply that 7now MR QUESNELLE: MR KAISER: Thank you In the Port Elgin case where, at least if 10we read the decision, there was a $6 million charge It was 11determined that this charge should apply and that was the 12amount and you are going to tell us whether they paid it 13 was the reinforcement necessary? Did somebody come along 14and use the excess well, let me ask this 15 Did you actually reinforce the system after you 16received the million bucks or not? 17 MR OKRUCKY: I know that we've done Owen Sound line 18reinforcement, but this was a long time ago I don't know 19what years 20 MR KAISER: I know it's a long time ago and it is 21unfortunate that you discovered this decision after such a 22long time But can you determine if, in fact, you spent 23you A charged them million, and B you spent the million? 24And if you didn't spend the million, did you give them the 256 million back? And is there excess capacity on that line? 26Just fill in the history, because the decision is very 27sketchy I'm not asking you to it now, but you can ASAP Reporting Services Inc (613) 564-2727 (416) 8618720 242 MR QUESNELLE: It is a question of 2mischaracterization, and I think we are at cross purposes 3What the $6 million where it fit into the economics of 4this So perhaps an undertaking that spells out how that 6$6 million was worked into the economics of the decision MR KEIZER: I think it's fair, Mr Chairman As I 8understand it, the million goes into the calculation and 9somehow it percolates out through the hamburger maker to 10give you whether you have an aid to construct or not 11 But you can't tease it out of the hamburger at the end 12of the day, so I mean it is something we have to 13characterize, and if we need to, we can by way of 14undertaking 15 MR QUESNELLE: I think so I’m just looking at the 16clock, Mr Kaiser, and we had hoped to stop at 5:00 today 17I’m not sure where you are and I’ve taken up some of your 18time, obviously 19 MR KAISER: This is a convenient time I can end up 20with this topic 21 I think you have my I think the details would let 22me ask you this: There is no tariff for this charge, is 23there? 24 MR OKRUCKY: 25for this 26 There is not a separate and unique tariff It is just embedded as a cost in the economics MR KAISER: Is it best to characterize it just one 27further question, Mr Chairman ASAP Reporting Services Inc (613) 564-2727 (416) 8618720 MR QUESNELLE: MR KAISER: 243 Sure It is sort of an aid to construct, but not 3for my project, for the next guy's project, but I get the 4pleasure of paying for it MR OKRUCKY: 6quite that way Is that more or less what it is? I'm not sure I would characterize it It is a recognition of the fact that 7because of this large project that's come along, ratepayers 8are going to have to pay for reinforcement earlier than they 9otherwise would have 10 And because of that, the carrying maybe that's the 11wrong the advancement charge, the cost of advancing that, 12the time value of advancing that reinforcement should be 13borne as part of the costs of that project 14 And I will note that this isn't something that applies 15to EPCOR This is how we would treat I mean, in our own 16estimates for the Kincardine project, we have an advancement 17cost embedded as well So it is consistent across the 18board, what we are saying we should be doing 19 MR KAISER: So you're saying if you were bidding on 20Kincardine, which you may have been I guess you were -21you would have this charge in your own cost 22 MR OKRUCKY: Yes, we would have an advancement charge 23in our costs 24 MR KAISER: 25 MR QUESNELLE: I can leave it there, Mr Chairman Is that sufficient? It is something 26that if we can get clarity on the record as to how this 27works, I think perhaps an undertaking -4 ASAP Reporting Services Inc (613) 564-2727 (416) 8618720 MR KITCHEN: MR MILLAR: 244 We’ll that Mr Chair, that undertaking is J5.7 I 3guess it is to provide further details around this expansion 4that we've been discussing MR KAISER: MR QUESNELLE: Advancement charge We can pick it up there tomorrow, Mr 7Kaiser MS SPOEL: I have a follow-up question and it's about 9who pays for things going forward 10 The Prince Edward County lateral I was referring to 11earlier, according to your website, recently MTO required 12the pipeline to be removed from the bridge and put 13underneath the Bay of Quinte 14 And at the time, according to the website, it was up- 15sized from a 6-inch pipe to an 8-inch pipe I'm assuming 16that you did that, because you’re doing the work anyway 17 But I assume that that cost is borne as part of the 18general system expansion reinforcement cost borne by the 19ratepayers as a whole, although that original project was 20uneconomic when it was done in the 1980s because it had to 21have a subsidy to get it built 22 MR KITCHEN: It will be included in distribution 23rates 24 MS SPOEL: 25 MR KITCHEN: 26 MS SPOEL: 27normal way For the system as a whole? For the yes We can go into rate base and be done the But presumably, there is now enough after 30 ASAP Reporting Services Inc (613) 564-2727 (416) 8618720 245 1years, there is sufficient volume going in that area of the 2province that in fact a larger pipeline is warranted MR KITCHEN: Correct, and also you are doing a river 4crossing versus a bridge; you don't want to the river 5crossing twice MS SPOEL: No, no, I understand that The website 7says it was you made it bigger because of demand MR KITCHEN: MS SPOEL: It would be demand-driven Increased demand, so if you could just I 10just want to know the answer to the question of -11 MR OKRUCKY: There was incremental demand that we were 12trying to satisfy There is, I believe, a First Nation 13that -14 MS SPOEL: They're on the other side 15 on the other side 16 MR KITCHEN: 17 MS SPOEL: 18 MR KITCHEN: 19 MS SPOEL: 20 MR KITCHEN: 21 MS SPOEL: 22 MR QUESNELLE: 23 MS DeMARCO: 24order? They are on the Tied together as one project Okay And we will we will deal with that -If you could just - as part of the undertaking - as part just - we will we will tell the story Thank you Okay With that, we'll Ms DeMarco? Can I just ask a procedural point of I'm looking at the schedule, and it appears as 25though VECC is on twice for Union, and so they wouldn't be 26of the within the nine parties left for Union; is that 27fair? ASAP Reporting Services Inc (613) 564-2727 (416) 8618720 246 MR QUESNELLE: Could be I yeah, we're kind of 2moving things on the fly, and it may be that they were 3entered twice, but I don't think there was any just an 4oversight MR MILLAR: I don't think VECC has gone yet, Mr 6Chair, but we can deal with this offline Maybe that's the 7easiest way we can speak with -8 MS DeMARCO: MR QUESNELLE: Thank you They haven't gone yet, but, no, there 10isn't intention that they go twice 11 Yes Until tomorrow morning we'll adjourn Thanks Thank you very 12much 13 - Whereupon the hearing adjourned at 4:57 p.m 14 ASAP Reporting Services Inc (613) 564-2727 (416) 8618720