techcon apr27 by nUg48Z6D

VIEWS: 5 PAGES: 197

									               ONTARIO
               ENERGY
                BOARD
FILE NO.:   EB-2005-0551


VOLUME:     Technical Conference

DATE:       April 27, 2006

BEFORE:     Kristi Sebalj          Board Counsel

            Ron Man                Board Staff

            Rudra Mukherji         Board Staff
                                                EB-2005-0551


                  THE ONTARIO ENERGY BOARD


IN THE MATTER OF the Ontario Energy Board Act, 1998,
S.O.1998, c.15, Schedule B;

AND IN THE MATTER OF a proceeding initiated by the
Ontario Energy Board to determine whether it should
order new rates for the provision of natural gas,
transmission, distribution and storage services to
gas-fired generators (and other qualified customers)
and whether the Board should refrain from regulating
the rates for storage of gas;


      Hearing held at the Best Western Primrose Hotel
                  Pearson Room, 2nd Floor,
           111 Carlton Street, Toronto, Ontario,
                on Thursday, April 27, 2006,
                   commencing at 8:30 a.m.


                    --------------------
                    Technical Conference
                    --------------------

B E F O R E:

KRISTI SEBALJ            BOARD COUNSEL

RON MAN                  BOARD STAFF

RUDRA MUKHERJI           BOARD STAFF
                  A P P E A R A N C E S



FRED CASS                     Enbridge Gas Distribution
DAVID STEVENS

DONNA CAMPBELL                Board Hearing Team
PASCALE DUGUAY
LAURIE KLEIN
FRED HASSAN

GIA DEJULIO                   Ontario Power Authority

MURRAY ROSS                   TransCanada PipeLines

GREG OLSEN                    OPG

VINCE DEROSE                  IGUA and AMPCO

MALCOLM ROWAN                 Canadian Manufacturers and
                              Exporters

PAT MORAN                     APPrO

DAVID BROWN                   Sithe, TransCanada Energy
JOHN WOLNIK                   and Portlands Energy
JASON STACEY
MARGARET DUZY

VAL YOUNG                     Aegent Energy Advisors

JAMES WIGHTMAN                Vulnerable Energy Consumers
                              Coalition

BILL KILLEEN                  ECNG

GEORGE KATSURAS               IESO

MALCOLM JACKSON               Low Income Energy Network
          I N D E X   O F   P R O C E E D I N G S


Description                                         Page No.

--- Upon commencing at 8:30 a.m.                        1
Appearances                                             2
Procedural Matters                                      4
Enbridge Gas Distribution - Panel 1; Resumed:           5
J. Sarnovsky, M. Giridhar, D. Charleson
     Cross-examination by Board Hearing Team            5

--- Recess taken at 9:33 a.m.                           36
--- On resuming at 9:51 a.m.                            36

     Cross-examination by Mr. Moran                     64

--- Recess taken at 11:14 a.m.                          85
--- On resuming at 11:15 a.m.                           85

     Cross-examination by Mr. DeRose                    86

--- Recess taken at 11:35 a.m.                          99
--- On resuming at 11:52 a.m.                           99

     Cross-examination by Mr. Brown                     99

--- Luncheon recess taken at 12:55 p.m.                 138
--- On resuming at 2:00 p.m.                            138

     Cross-examination by Mr.   Brown (Cont’d)          138
     Cross-examination by Ms.   Young                   153
     Cross-examination by Mr.   Wightman                163
     Cross-examination by Mr.   Stacey                  172
     Questions from the Board   Support Team            180

Procedural Matters                                      186

--- Whereupon hearing adjourned at 3:30 p.m.            187
                      E X H I B I T S


Description                                       Page No.

        NO EXHIBITS WERE ENTERED DURING THIS HEARING
                  U N D E R T A K I N G S


Description                                         Page No.

EGD UNDERTAKING NO. 12: TO ESTIMATE AND PROVIDE          14
THE COSTS OF THE NEW BUILD, IN PARTICULAR THE
RANGE OF POTENTIAL COSTS WITH A HIGH FIGURE AND
A LOW FIGURE

EGD UNDERTAKING NO. 13: USING AN EXAMPLE OF UNDER        16
RATE 100 THE FIRST TYPICAL, CALCULATE AND PROVIDE
THE COMPARISON WITH REGARD TO THE DISTRIBUTION
COMPONENTS OF THE RATES

EGD UNDERTAKING NO. 14: TO CALCULATE AND PROVIDE        17
THE RATE IMPACT ON RATE 100, 110, AND 115 CUSTOMERS,
ASSUMING THE MIGRATION STATED IN THE ENBRIDGE EVIDENCE,
AND PROVIDE ANY OTHER ASSUMPTIONS MADE IN THE COURSE OF
THIS CALCULATION

EGD UNDERTAKING NO. 15: TO FILE CERTAIN                21
INTERROGATORIES IN THE SITHE BYPASS DECISION RELEVANT
TO ENBRIDGE'S ANSWER WITH RESPECT TO DEFINING THE
BILLING CONTRACT DEMAND IN CONTRAST TO THE OPERATIONAL
CONTRACT DEMAND

EGD UNDERTAKING NO. 16: TO PROVIDE WHAT THE              31
TRANSMISSION PRESSURE COSTS WERE IN 2001, WHAT THEY
ARE IN 2006, AND THE ASSOCIATED VOLUMES

EGD UNDERTAKING NO. 17: TO PROVIDE    THE EVIDENCE        32
IN SUPPORT OF THE CALCULATION OF 12   PERCENT OF THE
VOLUME OF THE STORAGE BUILD PROGRAM   BEING 24,747 103M3;
TO PROVIDE DERIVATION OF 12 PERCENT   FIGURE

EGD UNDERTAKING NO. 18: TO RECONCILE ITEM 1.6 IN         42
COLUMN 1 OF EXHIBIT C, TAB 2, SCHEDULE 4, APPENDIX A,
WITH ITEM 5.4 IN COLUMN 2 OF EXHIBIT C, TAB 2,
SCHEDULE 4, APPENDIX B

EGD UNDERTAKING NO. 19: TO EXPLAIN THE DECLINING         44
USER RATES AS SHOWN IN LINE 10 OF EXHIBIT C,
SCHEDULE 3, TAB 1, PAGE 3
              U N D E R T A K I N G S (Cont’d)


Description                                       Page No.

EGD UNDERTAKING NO. 20: WITH REFERENCE TO               52
EXHIBIT C, TAB 3, SCHEDULE 1, PAGE 3, TO PROVIDE
THE DETAILED CALCULATIONS SUPPORTING THE DERIVATION
OF THE DELIVERABILITY DEMAND CHARGE, AND ANNUAL STORAGE
COSTS OF SPACE FOR EACH OF THE ALTERNATIVE BUILD
SCENARIOS STATED THEREIN

EGD UNDERTAKING NO. 21: TO FILE THE CALCULATIONS        53
BEHIND THE STORAGE RESERVATION CHARGE, USING A FACTOR
OF 10 FOR THE MAXIMUM SPACE AND DELIVERABILITY CHARGE

EGD UNDERTAKING NO. 22: WITH REFERENCE TO EXHIBIT C, 55
TAB 3, SCHEDULE 3, PAGE 1, TO PROVIDE THE DETAILED
CALCULATIONS SUPPORTING THE DERIVATION OF THE PROPOSED
STORAGE SPACE MINIMUM DEMAND CHARGE

EGD UNDERTAKING NO. 23: WITH REFERENCE TO EXHIBIT D,    59
TAB 2, SCHEDULE 1, APPENDIX B, TO RECONSTRUCT THE
TABLE WITH AN ALLOCATION OF EXTRA HIGH PRESSURE
MAIN COSTS IN DISTRIBUTION FACILITIES

EGD UNDERTAKING NO. 24: EXCLUDING INDIVIDUAL           75
RESIDENTIAL AND SMALL-BUSINESS CUSTOMERS, TO PROVIDE
THE NUMBER OF EXISTING CUSTOMERS THAT WOULD SUBSCRIBE
FOR RATE 125 IF THE MINIMUM VOLUME CUT-OFF WAS REDUCED
TO, (A), 300,000 M3; (B), 200,000 M3; AND (C), ZERO OR
NO MINIMUM REQUIREMENT; TAKING INTO ACCOUNT THE KINDS
OF ACTUAL PRESSURE NEEDS THAT EGD CUSTOMERS HAVE

EGD UNDERTAKING NO. 25: WITH REFERENCE TO RATE 316,     84
EXHIBIT C, TAB 3, SCHEDULE 1, PAGE 9, (A), TO PROVIDE
HOW OFTEN EGD ANTICIPATES THE SITUATION OF PERIODS WHEN
OPERATIONAL CONSIDERATIONS LIMIT EITHER INJECTION OR
WITHDRAWAL OCCURRING; (B), TO PROVIDE THE LENGTH OF
NOTICE PERIOD CONSIDERED PROPER NOTICE; AND, (C), TO
PROVIDE THE METHOD OF GIVING NOTICE

EGD UNDERTAKING NO. 26: TO PROVIDE AN ANSWER TO         88
QUESTION NO. 1 OF MR. THOMPSON’S TWO-PAGE LIST
OF QUESTIONS
              U N D E R T A K I N G S (Cont’d)


Description                                          Page No.

EGD UNDERTAKING NO. 27: TO PROVIDE AN ANSWER TO          89
QUESTION NO. 2 OF MR. THOMPSON’S TWO-PAGE LIST
OF QUESTIONS

EGD UNDERTAKING NO. 28: TO INDICATE HOW EGD              89
PROPOSES TO ALLOCATE ANY RENEW DEFICIENCY CREATED
BY THE MIGRATION OF EXISTING CUSTOMERS TO PROPOSED
RATES 125 AND 316 AMONGST ALL OF ITS EXISTING
RATE CLASSES

EGD UNDERTAKING NO. 29: TO SHOW ALLOCATION FACTORS      90
BEING APPLIED TO EACH OF THOSE ITEMS OF INCREMENTAL
COST AND, IN PARTICULAR, THE AMOUNT THEREOF WHICH WILL
BE ALLOCATED TO EACH OF THE RATE CLASSES, OTHER THAN
RATE 300 SERIES, IF THE ALLOCATION FACTORS EGD PROPOSES
ARE UTILIZED

EGD UNDERTAKING NO. 30: TO PROVIDE A DETAILED            90
DESCRIPTION, WITH SUPPORTING CALCULATIONS, OF THE
MANNER IN WHICH THE COMPANY HAS DETERMINED THAT
APPROXIMATELY 1,100 CUSTOMERS WILL BE BETTER OFF IF
THEY MIGRATE FROM EXISTING RATES TO THE COMPANY'S
PROPOSED UNBUNDLED RATES; TO PROVIDE A BREAKDOWN OF
CLASS/CLASSES THE 1,100 CUSTOMERS COME FROM

EGD UNDERTAKING NO. 31: TO PROVIDE ILLUSTRATIONS         92
FOR A SAMPLE OF TYPICAL INDUSTRIAL CUSTOMERS SERVED
UNDER RATES 110, 115, 145 AND 170, SHOWING FOR EACH
RATE AN EXAMPLE OF HOW THE PROPOSED UNBUNDLED RATES
OPERATE TO BENEFIT A PARTICULAR CUSTOMER IN EACH RATE
CLASS, AND AN EXAMPLE OF HOW THE PROPOSED UNBUNDLED
RATES WILL NOT PRODUCE THE BENEFIT FOR A PARTICULAR
CUSTOMER IN EACH RATE CLASS; PROVIDE THE SAME FOR        177
RATES 100 AND 135

EGD UNDERTAKING NO. 32: TO PROVIDE A COMPARISON OR     93
A CONTRAST COMPARISON OF THE SERVICE THAT UNION
CURRENTLY PROVIDES TO ITS EXISTING T-SERVICE CUSTOMERS
UNDER ITS EXISTING T1, TO THE SERVICES YOU PROPOSE TO
PROVIDE UNDER THE AUSPICES OF YOUR RATE 300 SERIES OF
UNDER BUNDLED RATES
              U N D E R T A K I N G S (Cont’d)


Description                                          Page No.

EGD UNDERTAKING NO. 33: WITH REFERENCE TO PAGE 2         118
OF PAGE 6, LAST SENTENCE IN THE NOMINATION SECTION,
TO DESCRIBE WHAT, IF ANY, CIRCUMSTANCES ARE
REFERENCED BY THE PHRASE "SYSTEM CONDITIONS"

EGD UNDERTAKING NO. 34: WITH REFERENCE TO PAGE 106      119
OF THE RATE 125 SCHEDULE, SECTION 3, “NOMINATIONS”,
FIRST SENTENCE, TO EXPLAIN WHAT IS MEANT BY ‘GROSS
COMMODITY DELIVERY’ AND IF THERE IS A MORE APPROPRIATE
TERM, GIVEN THE NOMENCLATURE IN THE TARIFF, TO INDICATE
WHAT THAT WOULD BE

EGD UNDERTAKING NO. 35: TO ADVISE WHETHER IT IS        122
EGD’S INTENTION THAT THE PROVISIONS OF THE RATE 125
TARIFF WILL PREVAIL OVER THE SPECIFIC PROVISIONS OF
THE CONTRACT WITH A RATE 125 CUSTOMER; TO ADVISE, IF
EGD HAS AN EXISTING CONTRACT WITH A RATE 125 CUSTOMER,
IF IT IS EGD’S INTENTION THAT THE TERMINATION PROVISIONS
OF THE TARIFF WILL PREVAIL OVER THE EXISTING TERMINATION
PROVISIONS IN THE CUSTOMER'S RATE 125 CONTRACT

EGD UNDERTAKING NO. 36: TO ADVISE THE COMPANY'S          127
POSITION ON WHAT IT WILL USE AS AN APPROPRIATE
NOTICE PERIOD TO ADVISE CUSTOMERS OF BEGINNING AND
END OF WINTER SEASON

EGD UNDERTAKING NO. 37: TO PROVIDE AN INDICATION         134
OF WHAT IS MEANT BY "OTHER" IN LINE 9.1 OF EXHIBIT C,
TAB 2, SCHEDULE 4, APPENDIX B

EGD UNDERTAKING NO. 38: TO PROVIDE AN ILLUSTRATIVE       135
EXAMPLE OF A CUSTOMER THAT IS INCURRING DAILY AND
CUMULATIVE IMBALANCE CHARGES, AND SHOW HOW THE DAILY
AND CUMULATIVE IMBALANCE CHARGES WOULD BE APPLIED TO
THEIR BALANCE OVER A THREE-MONTH PERIOD

EGD UNDERTAKING NO. 39: TO DESCRIBE THE CONDITIONS       145
THAT MIGHT TRIGGER INJECTION OR WITHDRAWAL, THAT IS,
WHEN OPERATIONAL CONSIDERATIONS WOULD LIMIT EITHER
INJECTION OR WITHDRAWAL
              U N D E R T A K I N G S (Cont’d)


Description                                         Page No.

EGD UNDERTAKING NO. 40: TO ADVISE WHETHER THE           148
COMPANY HAS FORMULATED ANY POSITION ON WHETHER
THERE WILL BEAUTOMATIC RENEWAL RIGHTS FOR CERTAIN
CONTRACTS

EGD UNDERTAKING NO. 41: WITH REFERENCE TO EXAMPLE ON 161
PAGE 160, LINE 23, TO CONFIRM UNDERSTANDING THAT
FIRST AMOUNT OF NOMINATION WOULD APPLY TO BALANCING
THE ACCOUNT; AND THE ABILITY TO NOMINATE TO A SECONDARY
DELIVERY POINT IS SUBJECT TO EGD’S ABILITY TO ACCEPT IT

EGD UNDERTAKING NO. 42: TO ADVISE HOW EGD ENVISIONS     163
A CUSTOMER BEING ABLE TO PLAN ITS OPERATIONS IF THE
RATCHETS ARE BEING CHANGED FROM TIME TO TIME

EGD UNDERTAKING NO. 43: TO CONFIRM THAT VOLUMES IN      176
A LOAD-BALANCING ACCOUNT CAN BE NOMINATED TO SUPPLY
AN AUTHORIZED DEMAND OVERRUN

EGD UNDERTAKING NO. 44: TO PROVIDE A TABLE              182
CONTAINING EACH OF THE FOUR RATES, INFORMATION ON
THE IMPLEMENTATION COSTS, PROPOSED IMPLEMENTATION
DATES, AND HOW EGD PROPOSES TO DERIVE THESE RATES

EGD UNDERTAKING NO. 45: TO PROVIDE A BLACKLINE OF       185
RATE 125 AGAINST THE ORIGINAL
                                                                       1



 1          Thursday, April 27, 2006
 2          --- Upon commencing at 8:30 a.m.
 3          MS. SEBALJ:   Good morning, everyone.   My name is
 4   Kristi Sebalj.   I am Board Counsel for this proceeding.
 5   I'm joined by Ron Man and Rudra Mukherji of the Board
 6   support team, the Board support team being the team that is
 7   advising the Decision Panel in this proceeding.     I will
 8   continue to clarify our roles as the proceeding moves
 9   along.
10          Thanks so much for coming this morning to what is our
11   third day of the Technical Conference in the NGEIR
12   proceeding.    This Technical Conference was added to the
13   schedule, as you know, by way of Procedural Order No. 5.
14          The purpose of the Technical Conference is to provide
15   all parties with an opportunity to ask questions of
16   Enbridge Gas Distribution with respect to additional
17   evidence that was filed on April 21st relating to rates for
18   gas-fired generators and other qualified customers.      This
19   was outlined in appendix A, it's Issue 1, of Procedural
20   Order No. 2; also it's with respect to evidence on
21   Enbridge's 300 series of rates.
22          Our role this morning, being Rudra, Ron, and my role,
23   is just to organize the proceedings and to act as MCs for
24   you.
25          I don't propose to go through the entire history of
26   the proceeding for the record; it is contained in the
27   transcript from the first Technical Conference.      And in the
28   interests of time, and knowing that we were quite delayed
                                                                          2



 1   on the last couple of days, I want to save some up-front
 2   time.
 3            What I will ask is that we register appearances at
 4   this time.    If you are going to be asking questions of the
 5   panel, would you please indicate that.         And if you do have
 6   a time estimate that is realistic, please share one.
 7           So I guess we'll start with Mr. Cass.
 8           APPEARANCES:

 9           MR. CASS:    Fred Cass for Enbridge Gas Distribution.
10           MS. CAMPBELL:    Donna Campbell for the hearing team.
11   I'm accompanied by Pascale Duguay, Laurie Klein, and Fred
12   Hassan.
13           And do you really want me to register an estimate of
14   how much time I'll be?       Because I will.   We're going to
15   multiply it by three.       I'm being conservative in saying an
16   hour to an hour and a quarter.
17           MS. SEBALJ:    Thank you.
18           MS. DeJULIO:    Good morning.    My name is Gia DeJulio,
19   representing the Ontario Power Authority.        I have no
20   questions for the panel at this point.
21           MS. SEBALJ:    Thank you.    Can I just ask, obviously at
22   the back, if you could maybe stand and project for the
23   court reporters.
24           MR. ROSS:    Murray Ross with TransCanada PipeLines.    If
25   I have any questions, it will be just one or two.
26           MS. SEBALJ:     Thank you.
27           MR. OLSEN:    Greg Olsen, OPG.   No questions.
28           MS. SEBALJ:    Thank you.
                                                                       3



 1        MR. DeROSE:    Vince DeRose, IGUA and AMPCO.   We do have
 2   questions.   We sent them out yesterday.    I don't anticipate
 3   them to be long, and many of them probably, I anticipate,
 4   being undertakings.    And so I don't anticipate being
 5   terribly long.    Probably 15 minutes, 20 minutes, maybe.
 6        MS. SEBALJ:    Thank you.
 7        MR. ROWAN:    Malcolm Rowan, Canadian Manufacturers &
 8   Exporters.   No questions.
 9        MS. SEBALJ:    Thank you.
10        MR. MORAN:    Pat Moran for APPrO.    It might be five or
11   ten minutes.
12        MS. SEBALJ:    Thank you.
13        Mr. Brown.
14        MR. BROWN:    David Brown for Sithe Goreway, Sithe
15   Southdown, Portlands Energy Centre, and TransCanada Energy.
16   I'll say an hour, but I suspect that will go down given the
17   people in front of me.
18        MS. SEBALJ:    Thank you.
19        MS. YOUNG:    Val Young, Aegent Energy Advisors.     We do
20   have questions.    I anticipate half an hour.
21        MS. SEBALJ:    Thank you.
22        MR. WIGHTMAN:     James Wightman on behalf of VECC.    A
23   few question, probably in the area of five or ten minutes.
24        MS. SEBALJ:    Thank you, Mr. Wightman.
25        MR. STACEY:    Jason Stacey.   I have a consulting
26   business in my name.    I may have a few questions on the
27   Rate 300 series.    I reviewed the IGUA questions and it may
28   be simply a few additions to those.
                                                                          4



 1        MS. SEBALJ:    Thank you, Mr. Stacey.
 2        MR. KILLEEN:     Bill Killeen with the ECNG.    I won't
 3   have any questions.
 4        MR. KATSURAS:     George Katsuras with the IESO.      No
 5   questions.
 6        MR. JACKSON:     Malcolm Jackson, FRC Canada, for the Low
 7   Energy Income Network, and I have no questions.
 8        MS. SEBALJ:    Thank you.   That's everybody today.
 9        I think we do have an attendance sheet, just to send
10   around so that we can make sure we got everybody.
11        PROCEDURAL MATTERS:

12        MS. SEBALJ:    I just wanted to go quickly over the
13   scope of today's Technical Conference.    Again, just to
14   reiterate, it is the evidence filed on April 21st by
15   Enbridge.
16        And, while I have your attention, I will mention -
17   because I know people will be leaving throughout the day -
18   I will mention that the next Technical Conference is now
19   scheduled for May 16th, 17th, 18th, and 19th.       That
20   Technical Conference is intended to provide all
21   participants with the opportunity to present their evidence
22   on all issues.   For today, I would ask that we be mindful
23   of the scope of questions permitted.
24        Second, if Enbridge is not in a position to answer any
25   question, Procedural Order No. 5 indicates that the
26   complete responses to any undertakings are to be filed with
27   the Board and delivered to all participants by May 8th.         If
28   there are any disputes, obviously the Panel is not here to
                                                                       5



 1   hear them, so I would ask that any objections be raised,
 2   responses be recorded, and then we can ask the panel for a
 3   determination.
 4           Finally, this proceeding is being recorded, obviously;
 5   it will become part of the public record.       I would ask you
 6   to speak clearly and loudly, particularly when you're not
 7   in front of a mike, to assist the court reporters.
 8            Although I believe the agenda that was attached to
 9   Procedural Order No. 5 indicated that we would speak to the
10   supplemental evidence first and the Rate 300 second, rather
11   than having parties come up twice, we thought it would be
12   more efficient to just do it all at once.
13            Are there any preliminary questions or concerns or
14   any issues that anyone would like to raise?
15           Hearing none, let's get started with the Board hearing
16   team.
17           ENBRIDGE GAS DISTRIBUTION - PANEL 1; RESUMED:
18           JODY SARNOVSKY
19           MALINI GIRIDHAR
20           DAVID CHARLESON
21           CROSS-EXAMINATION BY BOARD HEARING TEAM:

22           MS. CAMPBELL:    Thank you very much.   The first
23   question makes reference to Exhibit C, tab 1, schedule 1,
24   paragraph 40.
25           Specifically, the question I have is directed to the
26   second sentence in the paragraph, which says:
27                "As detailed earlier in the Company's evidence,
28                market-based rates provide a superior result than
                                                                   6



 1             cost-based rates for high-deliverability storage
 2             services which are part of a competitive market
 3             offering today in Ontario."
 4        Is it the intention of Enbridge to file as part of the
 5   proceeding a competitive analysis to support that statement
 6   that high-deliverability storage services are part of a
 7   competitive market offering today?
 8        MS. GIRIDHAR:   That sentence was based on the fact
 9   that today we use the Board-approved formula to allocate
10   storage, and the deliverability that's offered at cost-
11   based rates is the standard 1.2 percent deliverability.
12   And the methodology today is that anything above that is
13   subject to market-based rates.
14        So I didn't know that a competitive analysis was
15   necessary for that statement.
16        MS. CAMPBELL:   No, the statement is, high-
17   deliverability storage services are part of the competitive
18   market.   And the question was simply whether you're going
19   to be filing anything to support the statement.    And what
20   you have said to me, from my understanding, you're saying,
21   no, you won't be.
22        MS. GIRIDHAR:   The issue of storage competition will
23   be addressed in our May 1st filing.
24        MS. CAMPBELL:   All right.   Thank you very much.
25        The next question is:   How do market-based rates
26   allocate limited high value storage more efficiently than
27   cost-based rates?
28        MS. GIRIDHAR:   Well, if you've got a service that's
                                                                    7



 1   more valuable than what it costs to provide it, you can
 2   presume that it might invite over-subscription.
 3        Under market-based rates you have the ability to
 4   allocate that storage based on the highest value, so people
 5   who value it the most would obviously be able to get the
 6   service.    Under cost-based rates, if you've got over-
 7   subscription, you've got to have some kind of allocation
 8   methodology to award that storage to the people who want it
 9   And when you use allocation methodologies, then you've got
10   to come up with something, for example, by size or first
11   come, first serve, or reservation based on need.   To me all
12   of those are secondary measures to determine value to the
13   customer.
14         So that's the basis of the comment that market-based
15   rates provide for a more efficient allocation, because it's
16   based on who wants the service the most.
17        MS. CAMPBELL:    Is Enbridge proposing that high-
18   deliverability storage be awarded to the highest bidder
19   based on a combination of price and term?
20        MS. GIRIDHAR:    In term?
21        MS. CAMPBELL:    Price and term.
22        MR. CHARLESON:    It would be based on price, term,
23   deliverability; there are a number of variabilities that
24   would come into play in the open season that we discussed
25   at the previous Technical Conference.   And it will be a
26   combination of those factors, where we would look at, say,
27   the optimum value that could be obtained for the storage
28   that we were able to make available.
                                                                     8



 1        MS. CAMPBELL:    So would there be any other criteria
 2   that would be used aside from price and term, like need?
 3   Or is it strictly price and term?      Or variations thereof?
 4        MR. CHARLESON:    The other point that I indicated as
 5   well, the deliverability that the person's looking for, the
 6   space, the amount of space.
 7        But need, which in theory should be determined based
 8   on the price that they're willing to pay, again, as Malini
 9   indicated, by offering at market prices provides an
10   efficient outcome because people will bid in based on the
11   value that they attach to the storage that they need.
12        MS. CAMPBELL:    Did Enbridge give any consideration to
13   the fact that customers may have different risk profiles
14   and therefore a different ability to bid for this limited
15   service?
16        MR. CHARLESON:    Yes, we assume that different
17   customers will have different risk profiles, and that will
18   be what underpins what they're willing to bid for that
19   service.
20        MS. CAMPBELL:    Sorry.    I was distracted by the
21   placement of the microphone.
22        Would the market-based rates be fixed for the duration
23   of the contract?
24        MR. CHARLESON:    Yes, the contract would be established
25   based on the bid that they'd made or the market-based
26   pricing they were paying.      And our expectation is that
27   would be what's established for the term of the agreement
28   with the customer.
                                                                     9



 1        MS. CAMPBELL:    So the market-based rate would be
 2   fixed?
 3        MR. CHARLESON:    Yes.
 4        MS. CAMPBELL:    Thank you.   There's a reference –-
 5   sorry, I was about to skip something else, and I notice I
 6   skipped too far.
 7        How would Enbridge propose to award limited high-
 8   deliverability service if the Board determined that all
 9   storage should be cost-based?
10        MS. GIRIDHAR:    The company doesn't believe that that's
11   the appropriate way to allocate storage, but it would be up
12   to the Board to determine an allocation methodology.
13        MS. CAMPBELL:    So you don't have an allocation
14   methodology in mind should that ruling occur?
15        MS. GIRIDHAR:    No, because I'm not sure how you could
16   do it efficiently.
17        MS. CAMPBELL:    All right.   So Enbridge hasn't turned
18   its mind to that?
19        MS. GIRIDHAR:    No.
20        MS. CAMPBELL:    Thank you.   There's a reference in the
21   paragraph that I had you turn up initially.    If you slip
22   down towards the end of the paragraph, it says:
23             "Market based pricing also allows for sharing of
24             the benefits of high deliverability storage
25             between all customers while making no customers
26             worse off."
27        How does Enbridge propose to share the benefits of
28   market-based high-deliverability storage?
                                                                     10



 1        MS. GIRIDHAR:     In our earlier evidence, and I believe
 2   it's in the pricing piece -- sorry, I'm trying to find the
 3   reference here.
 4        It's Exhibit B, tab 4, schedule 1, page 8.
 5        MS. CAMPBELL:     I'm sorry, could you give me that
 6   reference again?
 7        MS. GIRIDHAR:     It's Exhibit B, tab 4, schedule 1, page
 8   8, paragraph 22.   The last few sentences of that paragraph
 9   state that:
10             "The Board has historically placed such premiums
11             in a deferral account pending disposition..."
12        Sorry, can't hear me?
13        The company submits that that could be an approach
14   that could be used in this instance.
15        MS. CAMPBELL:     So the sharing of the benefit is the
16   placing of the premium in a deferral account?
17        MS. GIRIDHAR:     And subsequent determination as to how
18   it should be shared.
19        MS. CAMPBELL:     My next question was going to be which
20   customer groups would be receiving the benefits and on what
21   basis that would be done.
22        MS. GIRIDHAR:     We don't have a proposal in this case
23   for how benefits should be shared.    The point we wanted to
24   make is that, theoretically and conceptually, market-based
25   rates allow for that sharing to happen should the Board
26   decide that it should.    And what we're suggesting here is a
27   process by which it can be achieved.
28        So we don't really have a proposal in this case as to
                                                                   11



 1   how the benefit should be shared.
 2        MS. CAMPBELL:    Will you be developing one?
 3        MR. CHARLESON:    A lot of the -- any proposal on this
 4   would also be dependent in terms of the outcome of the
 5   storage forbearance portion of this proceeding.     So I think
 6   we would look for direction from the Board in terms of what
 7   the future of the regulation of storage rates are before
 8   really turning attention to how the disposition of any
 9   market premiums should be addressed.
10        MS. CAMPBELL:    Moving along, Exhibit C, tab 1,
11   schedule 1, paragraph 41:
12        And the paragraph states that:
13             "If the Board disagrees with the Company's
14             position, and orders that cost based rates should
15             be used for high deliverability storage, then the
16             Company must address similar cost recovery issues
17             to the business process implementation cost
18             recovery issues described above."
19        And the question arising out of that is if Enbridge
20   has confirmed that it is prepared to offer high-
21   deliverability storage were the Board to find that a cost-
22   based service offering would be more appropriate.
23        MR. CHARLESON:    I think Enbridge has a proposal in
24   front of the Board in terms of the Rate 316 service.
25        In terms of whether the capital build that is being
26   proposed -- the company's evidence would proceed, I think
27   the company would have to make a determination if it was
28   willing to invest that capital if cost-based rates were all
                                                                   12



 1   that were available for that storage.
 2        So, while the service would be something that would be
 3   available, the actual capacity that may be available to
 4   underpin or support that service may be limited if the
 5   company determined that it wasn't in its best interest to
 6   invest its capital at the returns that cost-based rates
 7   would allow.
 8        MS. CAMPBELL:    So you haven't landed anywhere on that,
 9   is what you're saying?
10        MR. CHARLESON:    I think we would have -- we haven't
11   finalized any position on that, but we would have to
12   evaluate whether that's the best place for Enbridge to
13   invest its capital and the best return for Enbridge to
14   invest its capital in.
15        MS. DUGUAY:     I'm not sure if the mike is on.   I'd like
16   to ask specifically with regard to the proposed storage
17   build program, the 2 Bcf.    Were the Board to rule that
18   cost-based rates would be more appropriate for storage,
19   would the company be prepared to go ahead with the proposed
20   storage build?
21        MR. CHARLESON:    At this time we can't say with any
22   certainty whether we would or would not.
23        MS. DUGUAY:   I see.   Thank you.
24        MS. CAMPBELL:    Staying in the same area but moving on,
25   basically, to paragraphs 45 to 47, we understand that the
26   minimum rates for space and deliverability under Rate 316
27   are illustrative at this point since the minimum rates
28   would, under your proposal, be set based on the actual
                                                                   13



 1   costs of the storage build program.
 2        Did Enbridge conduct sensitivity analyses around the
 3   capital and operating costs associated with providing high-
 4   deliverability storage?
 5        MS. GIRIDHAR:    No, I received just the one set of
 6   costs that were filed.
 7        MS. CAMPBELL:    Would Enbridge undertake to provide a
 8   high/low comparison to assist potential customers in their
 9   feasibility and options assessments?
10        MR. CHARLESON:    Perhaps you could clarify what it is
11   that you are asking us to undertake to provide.
12        MS. CAMPBELL:    I'm going to have Ms. Duguay clarify
13   that one.
14        MS. DUGUAY:   Essentially, in terms of the capital
15   costs, based on the evidence as I recall it, they have been
16   identified at $26 million.    And I guess the question is,
17   given that this is an estimate, and by definition,
18   typically, an estimate is always not bang on in respect of
19   the actual costs, so we were wondering whether you could
20   provide a scenario, a high-and-low scenario, meaning $26
21   million plus or minus X, would fall within the reasonable
22   range for what Enbridge anticipates the actual cost to be.
23        MR. CHARLESON:    Yes, we can undertake to do that.
24        MS. DUGUAY:   Thank you.
25        MS. SEBALJ:   Let's mark that as EGD –- interesting.
26   I'm not sure how we should mark this, because we have
27   previous undertakings that have been answered.    I'm going
28   to continue to number them.
                                                                      14



 1        MR. CASS:   Do you want to carry on with the numbering?
 2        MS. SEBALJ:     Yes.
 3        MR. STEVENS:     I believe that would make it number 12.
 4        MS. SEBALJ:     Make it number 12?    Let's go with that.
 5        And I'll check on the break, but it's EGD No. 12,
 6   which I believe is a range of potential costs for the new
 7   build for storage, particularly a high figure and a low
 8   figure.
 9        Is that accurate, Ms. Duguay?     Is that an accurate
10   statement of the undertaking?
11        MS. DUGUAY:     I'm sorry, I was consulting with Ms.
12   Campbell.   Sorry.
13        MS. CAMPBELL:     I distracted her.    I apologize.
14        MS. DUGUAY:     I was not listening.    Please repeat.
15        MS. SEBALJ:     I can't repeat because I have no idea
16   what I said, but I think that I said that it's an estimate
17   of the costs of the new build, in particular the range of
18   potential costs with a high figure and a low figure?
19        MS. DUGUAY:     Yes, I think that would do it.
20        EGD UNDERTAKING NO. 12:     TO ESTIMATE AND PROVIDE THE
21        COSTS OF THE NEW BUILD, IN PARTICULAR THE RANGE OF
22        POTENTIAL COSTS WITH A HIGH FIGURE AND A LOW FIGURE

23        MS. CAMPBELL:     We're going to move on now to --
24   staying in Exhibit C, tab 1, schedule 1, we're going to be
25   talking briefly about customer migration.      And that's
26   paragraphs, actually, 49 to 59.    This probably centres on
27   paragraphs 49, 50, and 51.
28        The first question is:     Is the forecast customer
                                                                       15



 1   migration to unbundled rates based on lower distribution
 2   rates only, or does that number also factor in balancing
 3   costs?
 4           MS. GIRIDHAR:    That's based on lower distribution
 5   only.
 6           MS. CAMPBELL:    Thank you.
 7           The next question is to ask if Enbridge would
 8   undertake to provide a comparison between the distribution
 9   and balancing charges pursuant to Rates 100, 110, and 115,
10   and the proposed distribution and balancing charges under
11   Rates 300 and 315, assuming the same load profiles used in
12   the company's typicals.
13           MS. GIRIDHAR:    We could use the same load profiles.
14   My concern is, you've got to make some different
15   assumptions in how an unbundled customer would balance.
16           So we could tell you what the charges would look like,
17   but to tell you what the impact would be from those
18   balancing charges on the customer's bill, you have to make
19   specific assumptions on how the customer's going to
20   balance, and it would be difficult for us to figure that
21   out.
22           MR. CHARLESON:    I think in addition, when you look at
23   your Rate 100 customers, there is a very diverse group of
24   load profiles that can fall in there.      You have some very
25   heat-sensitive customers.       You have others that are more
26   industrial, that are very high-process load.
27           So you can have the full range of load factors in
28   there.    So I don't know if there's an indicative load
                                                                         16



 1   profile for those rates.
 2           MS. DUGUAY:    Could you provide the comparison -- for
 3   example, under Rate 100 you've got various typicals.        Pick
 4   just one, the first typical, and proceed with the
 5   comparison with regard to the distribution components of
 6   the rates?
 7           MS. GIRIDHAR:    Yes.
 8           MS. DUGUAY:    Okay.    Thank you.
 9           MS. SEBALJ:    We'll mark that as EGD Undertaking No.
10   13.   And I think it's on the record as Ms. Duguay spoke it.
11   Thanks.
12           EGD UNDERTAKING NO. 13:      USING AN EXAMPLE OF UNDER
13           RATE 100 THE FIRST TYPICAL, CALCULATE AND PROVIDE THE
14           COMPARISON WITH REGARD TO THE DISTRIBUTION COMPONENTS
15           OF THE RATES

16           MS. CAMPBELL:    Okay.    Moving on, the next question is
17   another calculation question for you.
18           Could you please quantify the rate impact on the
19   remaining customers in Rates 100, 110 and 115 respectively
20   stemming from the assumed migration to unbundled services?
21           MS. GIRIDHAR:    We could provide you with a high-level
22   analysis at this point because I think our position is that
23   this can truly only be determined as part of the 2007 rates
24   case.
25           So what we can undertake to do is to look at our 2006
26   Board-approved cost study that was approved as part of the
27   Rate Order, and make some assumptions on that basis.
28           MS. DUGUAY:    I think that would do it.    And to the
                                                                    17



 1   extent that you are making assumptions, if you can lay out
 2   what those are, that would be fine.
 3        MS. SEBALJ:   That's EGD No. 14, which, just so that I
 4   can understand, is the rate impact on the remaining 100-
 5   series, so 100, 110, and 115 customers, assuming the
 6   migration that Enbridge has stated in its evidence?    Is
 7   that correct?
 8        MS. DUGUAY:   That's correct.
 9        MS. SEBALJ:   And Enbridge states its assumptions.
10        EGD UNDERTAKING NO. 14:   TO CALCULATE AND PROVIDE THE
11        RATE IMPACT ON REMAINING 100-SERIES (100, 110, AND
12        115) CUSTOMERS, ASSUMING THE MIGRATION STATED IN THE
13        ENBRIDGE EVIDENCE, AND PROVIDE ANY OTHER ASSUMPTIONS
14        MADE IN THE COURSE OF THIS CALCULATION

15        MS. CAMPBELL:   If the migration is less than your
16   forecast, Enbridge indicated it would credit customers for
17   any over-recovery in bundled rates.    Would the affected
18   bundled rates also be reset going forward?
19        MS. GIRIDHAR:   Could you repeat the last sentence?
20        MS. CAMPBELL:   Would the affected bundled rates also
21   be reset going forward?
22        MS. GIRIDHAR:   No.   The company's proposal is that we
23   would set the bundled rates for the maximum level of
24   migration that we believe would occur.   And that's based
25   purely on a distribution basis.
26        In our opinion, that provides the best economic signal
27   as to where those bundled rates should really lie with
28   respect to the load profiles of the remaining customers.
                                                                    18



 1        To the extent that migration does not happen to the
 2   full extent - from the company's perspective it's
 3   economically unexplainable, but a possible outcome - so to
 4   the extent that happens, we would then have a one-time
 5   adjustment that would credit back.     And then it would be up
 6   to the Board to determine for how many years that variance
 7   account needs to be around.
 8         But to adjust rates for migration that does not
 9   happen is just going back to an iterative process, because
10   theoretically you've got to assume anybody that's better
11   off would move.    And that's going to be the final outcome.
12        What we're proposing is that it makes the most sense
13   to reflect that final outcome in our bundled rates
14   immediately.   And if you have a variance account and
15   customers are no worse off for the migration not having
16   happened...
17        MS. DUGUAY:    Okay.    So, just to make sure that we
18   understand, am I correct to assume that the variance
19   account would take place, for example, in 2007, and it
20   would be in place going forward as well, to the extent that
21   there is any difference between actual and forecast
22   migration to the unbundled Rate 300?
23        MS. GIRIDHAR:    I hesitate to confirm that because I
24   don't know what the Board's going to rule on deferral
25   accounts in general, and PPR and incentive ratemaking and
26   all of that.
27        MS. DUGUAY:    Right.
28        MS. GIRIDHAR:    But that could be an outcome, yes, that
                                                                      19



 1   that deferral account is...
 2        MS. DUGUAY:   Because that's what I understood you to
 3   say previously.
 4        MS. GIRIDHAR:    Yes.
 5        MS. DUGUAY:   Thank you.
 6        MS. CAMPBELL:    I'm just about to move on to Rate 125,
 7   which I understand is Exhibit C, tab 2, schedule 4.
 8        It turns out my reference is incorrect.    I thought it
 9   looked wrong.   It's Exhibit C, tab 2, schedule 3.   And I
10   have a series of questions around this.
11        Now, starting on page 1 of that schedule, for
12   dedicated services, you're proposing to use a billing
13   contract demand for the purpose of calculating the demand
14   charges payable to Enbridge.    My question is, firstly:    Is
15   this a new feature to the existing Rate 125?
16        MS. GIRIDHAR:    It's a clarification to an existing
17   feature.
18        In 2003, Rate 125 was modified to allow for an
19   authorized overrun feature that would be automatic for a
20   dedicated facility.   What that meant, in effect, was that,
21   in the case of a dedicated facility, the customer and the
22   company could usually agree to a contract demand for
23   billing purposes that may be something less than their
24   physical maximum but then allow for the use of authorized
25   overrun up to a specified amount in the contract.
26        So the rate was approved on that basis in 2003.       We
27   just thought it might be good to add a little more clarity
28   to that feature, and that's why that's been put in.
                                                                    20



 1          MS. CAMPBELL:   Okay.   So it's not in the original Rate
 2   125?
 3          MS. GIRIDHAR:   That sentence is not there.
 4          MS. CAMPBELL:   That sentence isn't there.
 5          MS. GIRIDHAR:   Yes.
 6          MS. CAMPBELL:   I didn't think so.
 7          Can you define the billing contract demand in contrast
 8   to the operational contract demand?
 9          MS. DUGUAY:   Or "physical contract command," as you
10   referred to it.
11          MS. GIRIDHAR:   In -- I forget the docket number, but
12   there was a bypass application by Sithe a couple of years
13   ago, and in that context there were interrogatories that
14   the company responded to, to Board Staff, actually, in
15   which it identified how the billing contract demand would
16   be set.
17          The idea there is -- and, in fact, I'll use a term
18   that the Board has subsequently used in the context of the
19   GC decision; it's about getting rates that are "robust
20   against bypass."
21           The context there is that the contract billing demand
22   would be set no lower than a level that would recover the
23   full costs of providing service to the customer.
24          MS. DUGUAY:   When you say the "full costs," the full
25   incremental costs?
26          MS. GIRIDHAR:   Full incremental costs.
27          MS. DUGUAY:   Or the fully allocated costs?
28          MS. GIRIDHAR:   Full incremental costs.
                                                                         21



 1           MS. DUGUAY:   I see.
 2           MS. CAMPBELL:   You made reference to interrogatories.
 3   Would the interrogatories assist us in understanding,
 4   because if so I would like to have them filed, if you don't
 5   mind?
 6           MS. GIRIDHAR:   Sure.
 7           MS. CAMPBELL:   All right.    Thank you.   So you have
 8   given an undertaking to file the interrogatories that you
 9   were referring to at the beginning of your answer that will
10   assist us in understanding the question -- sorry, assist in
11   understanding parts of your answer.
12           MS. GIRIDHAR:   Yes.
13           MS. CAMPBELL:   Thank you.
14           MS. SEBALJ:   I believe that's Undertaking EGD No. 15.
15   I need to understand, though.        I thought you referred to a
16   Board decision.       You're referring to Board interrogatories?
17           MS. GIRIDHAR:   I'm referring to interrogatories in the
18   Sithe bypass decision.
19           MS. SEBALJ:   Thanks.
20           EGD UNDERTAKING NO. 15:   TO FILE CERTAIN
21           INTERROGATORIES IN THE SITHE BYPASS DECISION RELEVANT
22           TO ENBRIDGE'S ANSWER WITH RESPECT TO DEFINING THE
23           BILLING CONTRACT DEMAND IN CONTRAST TO THE OPERATIONAL
24           CONTRACT DEMAND

25           MS. CAMPBELL:   Thank you.    Now, carrying on.   Was the
26   original demand charge based on the operation or billing
27   contract demand?
28           MS. GIRIDHAR:   What do you mean by the original --
                                                                     22



 1   there is only one demand charge, which is -- are you
 2   referring to...
 3         MS. DUGUAY:   Well, that means the existing Board-
 4   approved demand charge.       Like the unit rate --
 5         MS. GIRIDHAR:    Yes.
 6         MS. DUGUAY:     -- was it derived based on the billing
 7   demand -- billing contract demand, I'm sorry, or the
 8   physical contract demand?
 9         MS. GIRIDHAR:    Well, at this point, we don't have
10   customers on Rate 125, so it is based on the physical
11   contract demand assumptions.
12         MS. CAMPBELL:     And the final question in that series
13   is:   Is this approach consistent with the treatment of
14   other bundled customers served off dedicated lines?
15         MS. GIRIDHAR:    Our bundled rates don't have a
16   provision for recognizing a dedicated feature.
17         MS. DUGUAY:     So that means if you were to have a
18   bundled service customer off a dedicated line, you would
19   charge the customer based on their physical contract
20   demand; is that right?
21         MS. GIRIDHAR:    [Nodded]
22         MS. DUGUAY:   So just to sum up, this methodology
23   amounts to charge the customer their -- I'm sorry, to
24   charge the customer based on an incremental basis approach
25   as opposed to a fully allocated basis approach; is that
26   right?
27         MS. GIRIDHAR:    Right, with the contributions coming
28   from the authorized overrun charge to the extent that it
                                                                      23



 1   has been realized.
 2        MS. DUGUAY:     Right.   Okay.   So there wouldn't be any
 3   allocation of common costs based on the billing contract
 4   demand methodology.
 5        MS. GIRIDHAR:    If the customer consumed no more than
 6   the billing contract demand, then the company would recover
 7   its incremental costs.    To the extent that the authorized
 8   overrun feature is used, there is a contribution toward
 9   allocated costs.
10        MS. DUGUAY:     Thank you.
11        MS. CAMPBELL:    All right.      Moving on to Exhibit C, tab
12   2, schedule 1, page 7, there is an indication that the
13   service contemplated under Rate 125 is for a single
14   terminal location served using extra-high-pressure main.
15        Where is that reflected in the rate schedule?
16        MS. GIRIDHAR:    That's not reflected in the rate
17   schedule.   It's reflected from the costing of the rate.
18        MS. DUGUAY:     And would EGD be prepared to insert that
19   clause in terms of the applicability of the service?       Or
20   why is it that it's not in the applicability section of the
21   tariff?
22        MS. GIRIDHAR:    Our rates are not identified based on
23   which part of the system or which specific piece of pie the
24   customer takes service from.      It is definitely part of the
25   costing methodology that we've used for years and what has
26   been approved by the Board in the past.
27        So I don't think it's appropriate to have rates that
28   are specific to certain -- to the utilization of certain
                                                                      24



 1   sections of our distribution system.
 2           MS. DUGUAY:   Well, let me phrase the question another
 3   way.
 4            If a customer would be served off the transmission
 5   pressure system as opposed to the extra high pressure,
 6   would they be eligible to contract pursuant to Rate 125?
 7           MS. GIRIDHAR:   Subject to -- sorry, are you using the
 8   term "transmission" and "extra high pressure" to mean the
 9   same thing?
10           MS. DUGUAY:   Okay.    Well, you've got three sets of
11   cascading distribution facilities.
12           MS. GIRIDHAR:   Yes.
13           MS. DUGUAY:   If it's not the extra high pressure,
14   would the customer still be eligible to take service
15   pursuant to Rate 125?
16           MS. GIRIDHAR:   The applicability talks about a minimum
17   contract demand of 600,000 cubic metres.       The company's
18   expectation is that customers of that size would require
19   extra high pressure.
20           MS. DUGUAY:   Okay.
21           MS. GIRIDHAR:   So that's the basis on which it's been
22   costed.
23           MS. DUGUAY:   Thank you.
24           MS. SEBALJ:   Can I just ask whether your -- is your
25   mike on?
26           MS. GIRIDHAR:   I thought it was.
27           MS. SEBALJ:   I don't think we're hearing you quite as
28   well.
                                                                      25



 1        MR. CASS:    It just doesn't seem to be as clear as the
 2   other mikes.
 3        MS. SEBALJ:     Yes.   If you don't mind moving those
 4   around?
 5        MS. GIRIDHAR:    Is this better?
 6        MS. SEBALJ:     Yes.   Sorry about that.
 7        MS. CAMPBELL:    On page 2 of the proposed schedule for
 8   Rate 125, there's the authorized demand overrun, and it
 9   indicates that:
10              "An unauthorized demand overrun may establish a
11              new contract demand effective immediately."
12        The question is:       Under what circumstances would the
13   contract demand not change?
14        MS. GIRIDHAR:    That was with reference to the physical
15   capacity of the pipe.
16        So, if the customer exceeds their contract demand and
17   there is physical capacity in the pipe to accommodate that
18   excess, then it would automatically result in a higher CD
19   being established.    But if there was in fact a constraint
20   in that pipe such that we couldn't actually offer the
21   higher CD under all circumstances, then it would not be re-
22   established.
23        MS. CAMPBELL:    Another question.    Is the forecast
24   unaccounted-for gas percentage based on the overall system
25   average?
26        MS. GIRIDHAR:    Yes, it is.
27        MS. CAMPBELL:    I must confess that when I was trying
28   to read this I thought that there might have been some
                                                                     26



 1   conspiracy to make sure that those of us with rotten
 2   eyesight don't actually go all the way through.     But I
 3   thought that was uncharitable on my part.
 4        MS. GIRIDHAR:    We would never do that.
 5        MS. CAMPBELL:    And I'm sure you never would.   But
 6   instead you created what I would like to call a fabulously
 7   interesting, somewhat difficult, paragraph.     And I'd like
 8   to ask you some questions about that.
 9        And that's the one -- if I just find it.     We've
10   already been in it.    It's the unauthorized demand overrun
11   paragraph.    And I have some questions about the 120
12   percent.   I actually have questions about the entire
13   paragraph because I can't say that I understood it
14   completely, and I felt reassured when Pascale said she
15   didn't understand it either.
16        So I'm going to go through this with you.
17        And right now it says -- this is the part I'm going to
18   read to you and I'm going to ask you a question about:
19                "The proposed terms and conditions indicate that
20                an unauthorized demand overrun shall also be
21                subject to a charge equal to 120 percent of the
22                applicable monthly charge for 12 months of the
23                current contract term, including retroactively,
24                based on the terms of the service contract."
25        MS. GIRIDHAR:    Yes.
26        MS. CAMPBELL:    I'm going to go through it bit by bit,
27   but I'd love to at the end come up with some understanding
28   what this actually means.
                                                                     27



 1         First of all, where does 120 percent come from?     Why
 2   was that chosen?
 3        MS. GIRIDHAR:    120 percent was just chosen as an
 4   incentive to induce customers to contract appropriately in
 5   the first place.
 6        MS. CAMPBELL:    So you're looking for a number that was
 7   high enough?
 8        MS. GIRIDHAR:    A number that was higher than 100
 9   percent because 100 percent would mean that there are no
10   consequences to the customer not having contracted
11   appropriately.    So it's just a number we picked.
12        MS. CAMPBELL:    Okay.   Well, which charges does the 120
13   percent apply to?
14        MS. GIRIDHAR:    It's applied to the unauthorized
15   volume.    So to the extent that -- I'm sorry, looks like I
16   should have repeated that as well.
17         The unauthorized demand would -- the 120 percent
18   would apply for the new contract demand.    So essentially
19   you would go back and charge the customer an extra 20
20   percent for the portion that they had contracted for
21   before, and 120 percent that was unauthorized.
22        MS. CAMPBELL:    Oh, okay.
23        Could you just clarify the period to which the charge
24   applies?    I think you just gave it to me but I'm not
25   positive.
26        MS. GIRIDHAR:    It's a 12-month period where that would
27   apply so --
28        MS. CAMPBELL:    So that's where the 12-month -- okay.
                                                                       28



 1           MS. GIRIDHAR:   Yes.
 2           MS. DUGUAY:   So that's 12 months going forward; is
 3   that correct?
 4           MS. CAMPBELL:   12 months going back?      Or forward?
 5           MS. GIRIDHAR:   Yes.   It's a function of the contract
 6   year.    So if the unauthorized overrun happened in a one-
 7   year contract but in the middle of the year, then you would
 8   have to go retroactively so that you cover a 12-month
 9   period.    Okay?
10           But let's say you've got a three-year contract term
11   and it happens in the first year; you would apply that to a
12   12-month period, going forward.        That's what the language
13   is intended to cover off.        Because the contract term is
14   variable, and the point in time at which the unauthorized
15   overrun happened is also variable, so this covers both
16   eventualities so that you cover off a 12-month period.
17           MS. DUGUAY:   So let's take an example.      Let's say it's
18   a one-year contract.      The contract starts October 1st.
19           MS. GIRIDHAR:   Mm-hmm.
20           MS. DUGUAY:   And the unauthorized demand overrun
21   happens on March 1st.
22           MS. GIRIDHAR:   Right.
23           MS. DUGUAY:   So you would charge 120 percent of the
24   unauthorized volume times the demand charge in the tariff
25   from, in my example, October 1st through to March 1st, and
26   you would reset the new contract demand going forward; is
27   that correct?
28           MS. GIRIDHAR:   That is correct.    Yes.
                                                                     29



 1          MS. DUGUAY:   Okay.
 2          MS. CAMPBELL:   Is this proposal consistent with the
 3   treatment of unauthorized demand overruns for bundled
 4   service customers?
 5          MS. GIRIDHAR:   At this point, unauthorized demand
 6   overruns for bundled customers is charged at 100 percent so
 7   that the 20 percent is a feature that is only there in the
 8   unbundled rates.
 9          MS. DUGUAY:   And why is that?
10          MS. GIRIDHAR:   Well, it's timing.   We'd like to have
11   it apply to all customers.
12          MS. DUGUAY:   Okay.    I see.
13          MS. CAMPBELL:   Is this proposal of identical service
14   under -- I'm sorry.     Is this proposal consistent with Rate
15   300?
16          MS. GIRIDHAR:   Rate 300 has the same feature.   Yes, it
17   is.
18          MS. CAMPBELL:   It is?
19          MS. GIRIDHAR:   Yes.
20          MS. CAMPBELL:   Thank you.
21          The next reference is Exhibit C, tab 2, schedule 4,
22   page 2, paragraph 3, I believe, through to the middle of
23   the paragraph, talking about the delivery demand charge.
24               "This analysis indicates that the costs will
25               increase by 12 percent, but the Rate 125 rate has
26               only increased by 2 percent over this same time.
27               The Company is therefore proposing to increase
28               the 2001 rate by 12 percent."
                                                                     30



 1           Can you provide us with the documentation for the 12
 2   percent increase in costs?
 3           MS. GIRIDHAR:   Yes.
 4           MS. CAMPBELL:   Thank you.   Between 2001 and 2006, that
 5   time frame?
 6           MS. GIRIDHAR:   Yes.   Maybe it might help if I
 7   explained how that was arrived at.
 8           In 2001, when Rate 125 was developed, again, we didn't
 9   have a forecasted migration at that point in time, so we
10   took the cost of our transmission pressure network, divided
11   it by peak-day volumes, to come up with an average demand
12   charge for transmission pressure pipe.
13           When we did that same exercise using our 2006 Board-
14   approved costs, we had a 12 percent increase relative to
15   2001.
16           And in the intervening years, we still had no forecast
17   of customers coming on to Rate 125.       So Rate 125 was, in
18   fact, kept at its 2001 level.        The first time we had an
19   increase was in fact in 2006, where we increased it by the
20   average increase for all large-volume customers, which is 2
21   percent.
22           So essentially there was a catch-up that's required at
23   this point such that the rate recovers for the allocated
24   costs of the transmission pressure network.
25           So, in terms of the documentation, what I could
26   provide is what the transmission pressure costs were in
27   2001, what they are in 2006, and the associated volumes.
28           MS. DUGUAY:   That would be perfect.
                                                                    31



 1        MS. SEBALJ:   We'll mark that as EGD No. 16.
 2        EGD UNDERTAKING NO. 16:    TO PROVIDE WHAT THE
 3        TRANSMISSION PRESSURE COSTS WERE IN 2001, WHAT THEY
 4        ARE IN 2006, AND THE ASSOCIATED VOLUMES

 5        MS. CAMPBELL:   Okay.   Exhibit C, tab 2, schedule 4,
 6   page 4, paragraph 5.    There's reference in this paragraph
 7   to the -– well, the sentence reads:
 8             "The Company has assumed that it will utilize
 9             approximately 12 percent of the benefit from the
10             storage build program or .44 million in revenue
11             requirement to provide load balancing to Rate 125
12             customers."
13        Can you provide the calculation -- at the bottom it
14   says this translates -- we go through some text and it says
15   this translates into a volume of 24.7 million cubic metres.
16        Could you provide the calculations that support that
17   number?
18        MS. GIRIDHAR:   Yes.
19        MS. CAMPBELL:   Thank you.
20        MS. SEBALJ:   Can I just ask what paragraph you're
21   referring to?   I'm not on the right paragraph.
22        MS. CAMPBELL:   Exhibit C, tab 2, schedule 4, page 4,
23   paragraph 5 but on the other page.     And if you go down to
24   the bottom, you'll see the number that's referenced that
25   we've asked for these calculations.
26        MS. SEBALJ:   Thanks.   So that's EGD No. 17, which is
27   the evidence to back up the volume of 24,747 103m3 .
28        EGD UNDERTAKING NO. 17:      TO PROVIDE THE EVIDENCE IN
                                                                       32



 1           SUPPORT OF THE CALCULATION OF 12 PERCENT OF THE VOLUME
 2           OF THE STORAGE BUILD PROGRAM BEING 24,747 103M3; TO
 3           PROVIDE DERIVATION OF 12 PERCENT FIGURE

 4           MS. CAMPBELL:    And the other question that arises out
 5   of this paragraph is if you could explain how the 12
 6   percent utilization factor of the storage build program was
 7   derived.
 8           MS. GIRIDHAR:    These two sentences actually refer to
 9   different things.       The 12 percent of the storage build
10   refers to deliverability.       So what we took is 2 Bcf of
11   space, and 10 percent deliverability reflected 12 percent
12   of the overall 200 million deliverability that is yielded
13   by the storage build program.
14           So if you look at -- I'm sorry.    I should restate
15   this.     If you look at Rate 125, we've assumed 2,000 MWs of
16   power generation coming on line.       That would be 11.3
17   million 103m3's -- 11.3 million m3's in terms of contract
18   demand.
19           Okay, so we took the balancing service, which is going
20   to be 10 percent of 60 percent of the contract demand,
21   looked at what that was, the number of units, compared that
22   with the overall deliverability that the storage build
23   program was going to yield, and that constituted 12 percent
24   in terms of deliverability.
25           The 24 million that we see at the bottom of that
26   paragraph refers to cumulative imbalance; so that's the
27   amount of space that we think customers would use up
28   through the 125 balancing provision.
                                                                     33



 1        So one refers to how much we would balance on a daily
 2   basis, which is the 12 percent; and the 24 million refers
 3   to the amount of space that would be used on a cumulative
 4   basis over the year.
 5        MS. DUGUAY:   Would it be possible to file your
 6   calculation as part of this...
 7        MS. GIRIDHAR:     Yes.
 8        MS. DUGUAY:   Thank you.
 9        MS. GIRIDHAR:     Did you want an undertaking, then, to
10   include the derivation of the 12 percent as well as the 24
11   million?
12        MS. DUGUAY:   Yes, that would be useful.     Thank you.
13        MS. SEBALJ:   So we're making that part of EGD 17, so
14   the second piece being the derivation of the 12 percent.
15        MS. CAMPBELL:     Okay.   Carrying on and going over to
16   the next page, paragraph 8, there's a sentence in that
17   paragraph that states, sort of middle of the paragraph:
18              "If the customer does not have the ability to
19              alter their nominations throughout the gas day,
20              the existing load-balancing structure will not be
21              feasible."
22        Are the nominations referred to in addition to the
23   four NAESB windows?
24        MS. GIRIDHAR:     Yes.
25        MS. CAMPBELL:     Can you explain why the existing load-
26   balancing structure would not be feasible?
27        MS. GIRIDHAR:     I wonder whether the word "sufficient"
28   might have been a better term to use there than "feasible"
                                                                   34



 1        MS. CAMPBELL:   "Sufficient."
 2        MS. GIRIDHAR:   The idea there is that we landed on a
 3   10 percent balancing service on the grounds that a customer
 4   can manage almost all of their flows through the day except
 5   the last two hours before the end of the gas day.
 6         So each hour constitutes approximately 4 percent in
 7   terms of total contract demand.
 8         So 8 percent, you know, two hours is approximately 8
 9   percent.   So we came up with a 10 percent balancing service
10   on that basis.
11         But if a customer only has one firm ability to change
12   a nomination and not ten opportunities to change their
13   nomination, you would presume that a 10 percent balancing
14   service would not possibly suffice.
15         Also, from a costing perspective, then, for us, if
16   more balancing was required by the customer, we might then
17   need more dedicated upstream transport to be able to manage
18   that swing on our system.
19        So for all of those reasons I guess the word
20   "feasible" is a stronger term, but it was there to indicate
21   that it would not meet either the customer's needs or our
22   ability to balance a higher requirement.
23        MS. DUGUAY:   So does that mean, if the six additional
24   nomination windows do not materialize, that the service,
25   the limited load-balancing or default load-balancing
26   service, would not be offered in the way that it is
27   contemplated in the evidence before us; is that right?
28        MS. GIRIDHAR:   That is our expectation, because we
                                                                     35



 1   believe that it would then either not meet the needs of the
 2   forecast customers nor would it be something that we could
 3   provide with the assets we have identified.
 4        MS. DUGUAY:     Right.   So what would happen under that
 5   scenario?
 6        MR. CHARLESON:     Perhaps just to be clear as well,
 7   where you talked about the six, the additional nomination
 8   windows, it's also that those nomination windows have
 9   reservation capacity as well.     So it's not just the strict
10   addition of the nomination windows but also that with those
11   nomination windows the customer has reservation of their
12   transportation capacity so that they can increase
13   nominations on a firm basis.
14        Sorry, I just wanted to make sure we were clear.
15        MS. DUGUAY:     Right.   And is that the responsibility of
16   the customer, under the default load-balancing provision,
17   to contract -- to get the capacity on the Dawn-to-Parkway
18   pipeline?
19        MS. GIRIDHAR:    Yes.
20        MS. DUGUAY:     Yes.
21        MS. GIRIDHAR:    Failing that, the presumption is that
22   they would be unable to manage within the 10 percent
23   balancing service.
24        MS. SEBALJ:     Ms. Campbell, just before you start, I've
25   had a request from the court reporter that we do a little
26   bit of a shift, I believe so that they can probably face
27   our witness panel a little more.     Do you have a sort of a
28   series that you're going through, and is there a logical
                                                                       36



 1   break time for you?
 2        MS. CAMPBELL:    That would be completely appropriate.
 3   I can't think of a better time.      Thank you.
 4        MS. SEBALJ:     Let's do that, then, just for ten
 5   minutes.   If people could come back at a quarter to.
 6   Thanks.
 7        --- Recess taken at 9:33 a.m.
 8        --- On resuming at 9:51 a.m.
 9        MS. SEBALJ:     All right.   Let's resume.
10        MS. CAMPBELL:    Before we broke we had questions that
11   arose out of the statement at paragraph 8, that if the
12   customer doesn't have the ability to alter their
13   nominations throughout the gas day, the existing load-
14   balancing structure would not be -- and you said a better
15   word would be “sufficient”.       Does that statement also hold
16   true for Rate 316?
17        MS. GIRIDHAR:    With respect to the ability to nominate
18   out of 316?
19        MS. CAMPBELL:    Yes.
20        MS. GIRIDHAR:    Well, 316 is different in that it's a
21   high-deliverability storage service.       So, to the extent
22   that a customer has more nomination windows, they could
23   alter the amount of deliverability that's coming out of
24   storage.   But I don't think that it's as much a basic
25   feature of 316.
26        I mean, additional nomination windows are nice to have
27   on 316, but in terms of overall balancing, on Rate 125 we
28   think it's more critical.
                                                                         37



 1           MS. CAMPBELL:    Moving on.
 2           MS. DUGUAY:   Sorry.     I just have a follow-up question
 3   to one question I asked earlier with regard to capacity on
 4   M12.    And you indicated that the customer would, as I
 5   understood it, would have under the default load-balancing
 6   service to get capacity on M12.        Would that capacity be
 7   assigned by EGD or would the customer have to get that
 8   capacity directly from Union Gas?
 9           MR. CHARLESON:    The customer would have to hold some
10   form of transportation capacity.        That may be M12 capacity;
11   it could be a TCPL service, or a combination of services,
12   depending on how they're looking to deliver gas to the
13   franchise area.       But it would be the customer’s
14   responsibility to contract for transportation capacity that
15   it needs to make its deliveries to the franchise area.
16           MS. DUGUAY:   Okay.    So in the specific case of M12,
17   there wouldn't be an assignment by Enbridge?
18           MR. CHARLESON:    That's correct.
19           MS. DUGUAY:   Correct?    Thank you.
20           MS. CAMPBELL:    Okay.   Under Rate 125, there is a
21   catch-up that's directed -- it's 100 percent of the
22   commodity costs would be booked to the PGVA, and 50 percent
23   would go into the transaction services account.         The first
24   question is:    How are the commodity costs calculated?
25           MS. GIRIDHAR:    The commodity costs are calculated
26   based on a formula that's laid out in the Rate 125
27   schedule.    So, essentially -- well, maybe I can turn you to
28   that.
                                                                       38



 1        MS. CAMPBELL:   Yes.    That would be helpful.
 2        MS. GIRIDHAR:   It's a very geeky looking formula.
 3        MS. CAMPBELL:   It's a -- say that again?
 4        MS. GIRIDHAR:   It's a geeky looking formula.
 5        MS. CAMPBELL:   I knew that.   I knew that as soon as
 6   you told me that during lunch breaks you and Pascale used
 7   to do math problems, I knew that was going to come out.       I
 8   knew that.
 9        [Laughter]
10        MS. CAMPBELL:   It's okay.   I read Glamour; you did
11   math problems.
12        [Laughter]
13        MS. CAMPBELL:   Take us to the "geeky formula."
14        MS. GIRIDHAR:   It's Exhibit C, tab 2, schedule 3, page
15   3.
16        MS. CAMPBELL:   Okay.
17        You're right; it is geeky.
18        MS. GIRIDHAR:   It's item number 7.    And what you've
19   got there is a formula to calculate the 150 percent of the
20   price of gas.
21        Essentially, all it is, is it takes the highest price
22   on the day from the Gas Daily, which is a publication.
23        MS. CAMPBELL:   Yes.
24        MS. GIRIDHAR:   And that's quoted in U.S. dollars for
25   NN BTU XXX, and then the formula there allows you to
26   convert that into Canadian dollars per cubic metre.
27        But it is a published number that we would be using to
28   determine the commodity cost on that day.
                                                                      39



 1        MS. DUGUAY:    But that is a delivered price to either
 2   the Niagara or the Iroquois.
 3        MS. GIRIDHAR:    It is, actually.     So for CDA we would
 4   use the Niagara price, and then for EDA we could use an
 5   Iroquois price.    So they would approximate delivered prices
 6   into the franchise area.
 7        MS. DUGUAY:    So when you say "commodity," it's
 8   commodity and some transportation element?
 9        MS. GIRIDHAR:    That's right.   It's a delivered
10   commodity in the franchise.
11        MS. DUGUAY:    I see.   Thank you.
12        MS. CAMPBELL:    The next question is:     Is this proposal
13   consistent with the treatment of unauthorized overrun for
14   bundled service customers?
15        MS. GIRIDHAR:    Yes, it is.   Our bundled customers also
16   have unauthorized overrun features.       The unauthorized
17   supply overrun situation for bundled customers is virtually
18   identical.    The only difference is we use the average price
19   on the day as opposed to the highest price on the day.
20        MS. DUGUAY:    Sorry, just to clarify, this question was
21   in relation to booking some of the dollars in the
22   transactional services deferral account, just to make that
23   more clear.
24        MS. GIRIDHAR:    Well, that is a different feature.     The
25   idea here is that, with respect to unbundled service, the
26   whole idea of the cash-out feature is to induce customers
27   to behave appropriately.
28        So what we're saying here is that we have a limited
                                                                      40



 1   load-balancing feature that allows you to balance, within
 2   limits, at a very reasonable cost.   But if you go beyond
 3   those limits, you've got consequences on all customers,
 4   including bundled customers.
 5        So the idea there is actually to prevent customers
 6   from breaching what are the load-balancing provisions.      So
 7   in effect, if customers found that to be the right
 8   incentive, we would not be booking any revenues because
 9   they would not be overstepping their limits.
10        In terms of why the feature is there, in terms of how
11   we are proposing to split it out, we recognize that there
12   are two consequences when customers, unbundled customers,
13   don't behave within their defined parameters.
14        One is there's consequences for bundled customers,
15   because you may have to go and get gas on that day, because
16   you now have to load-balance to a higher extent than you
17   had forecast; and to the extent that our bundled customers
18   receive the price consequences of gas purchases through the
19   PVGA, crediting 100 percent back into the PGVA would
20   compensate them, theoretically, for the maximum cost that
21   they would incur.   You may not in fact incur that much of a
22   cost, but if you did, then that compensates them for the
23   maximum that they could incur.
24        Also, when customers breach their load-balancing
25   provisions, there is an impact because today the company
26   would be able to optimize assets in the marketplace through
27   its transactional services.
28        So, to the extent that a customer has now not
                                                                     41



 1   conformed to the load-balancing provisions and we had to do
 2   something different, then there is a possibility that
 3   transaction services revenues were lower than they could
 4   have been; because assets that would have otherwise been
 5   used in the market have now been used for these unbundled
 6   customers.    So that's the reasoning behind that statement.
 7        MS. DUGUAY:   And could those situations apply to
 8   bundled service customers as well?
 9        MS. GIRIDHAR:   I would actually propose to do this for
10   bundled customers as well.     So that could be a feature we
11   will bring forward in the 2007 rates case.
12        MS. DUGUAY:   And is this proposal consistent with the
13   treatment of Rate 300 customers?
14        MS. GIRIDHAR:   Yes.
15        MS. DUGUAY:   And I don't recall seeing that in the
16   evidence.    Can you point me to that, please?
17        MS. GIRIDHAR:   That might have been an oversight.
18   This was intended to apply for all cash-out situations for
19   unbundled customers, so it would apply for 125 and 300.
20        MS. DUGUAY:   Thank you.
21        MS. CAMPBELL:   Okay.   The next question takes us to
22   Exhibit C, tab 2, schedule 4, appendix 8.     A.   I'm sorry,
23   A.
24        And this is a question that you might want to
25   undertake to answer, is to reconcile item 1.6, column 1,
26   which is the Union fuel item.
27        MS. GIRIDHAR:   Mm-hmm.
28        MS. CAMPBELL:    And then go over the page to appendix
                                                                      42



 1   B, to item 5.4, column 2.
 2        MS. GIRIDHAR:   I'll undertake to reconcile that.
 3        MS. CAMPBELL:   Thank you.
 4        MS. SEBALJ:   That's EGD Undertaking No. 18, which is
 5   - here I go - to reconcile item 1.6 in column 1 of Exhibit
 6   C, tab 2, schedule 4, appendix A, with item 5.4 in column 2
 7   of Exhibit C, tab 2, schedule 4, of appendix B.
 8        MS. CAMPBELL:   Yes.    Very impressive.
 9        EGD UNDERTAKING NO. 18:     TO RECONCILE ITEM 1.6 IN
10        COLUMN 1 OF EXHIBIT C, TAB 2, SCHEDULE 4, APPENDIX A,
11        WITH ITEM 5.4 IN COLUMN 2 OF EXHIBIT C, TAB 2,
12        SCHEDULE 4, APPENDIX B

13        MS. CAMPBELL:   Okay.    The next question is:   Will the
14   take-up of the default load-balancing service under Rate
15   125 impact the rates charged for balancing services for
16   bundled service customers?
17        MS. GIRIDHAR:   We don't see them unpacking at this
18   point.   Having said that, this kind of goes back into the
19   major point we were trying to make in our overview section,
20   in C1.1, which is that really, when you're doing cost
21   allocation rate design, you're looking at allocating
22   revenue requirements and costs over all of your customers
23   at the single point in time.
24        At this point we have divorced the two, so we're
25   looking at Rate 125 in isolation to bundled customers.      So
26   to that extent it's an approximation exercise.
27        So let me just say that our proposal is to factor all
28   of these into our 2007 rates case.    So when that happens,
                                                                    43



 1   you would be seeing potentially some slight shifts.
 2        MS. CAMPBELL:   So we're going to move on to Rate 316.
 3        Exhibit C, tab 3, schedule 1, paragraph 9.    The first
 4   two sentences of that paragraph make reference to 10
 5   percent deliverability versus 5 percent.
 6        Can you explain the drivers of the economies of scale
 7   for the 10 percent deliverability versus 5 percent?     Again,
 8   that's Exhibit C, tab 3, schedule 1, page 4, paragraph 9.
 9        MS. GIRIDHAR:   I wouldn't be able to explain
10   operationally how these economies of scale arise, but I was
11   going off the table on the preceding page.
12        MS. CAMPBELL:   Okay.   So the preceding page, which is
13   Exhibit C, tab 3, schedule 1, page 3?
14        MS. GIRIDHAR:   3.
15        MS. CAMPBELL:   Thank you.
16        MS. GIRIDHAR:   If you look there, you will see that at
17   line number 10, which is where we have taken the
18   incremental revenue requirement associated with each of
19   these theoretical builds and divided it by the associated
20   deliverability, you come up with a demand charge, a monthly
21   demand charge with a 5 percent build, $84.98 for 103m3.     I'm
22   looking at the unratcheted 5 percent.    And then, if you
23   look at the unratcheted 10 percent, you've got a
24   deliverability demand charge of $75.
25        And you've got a similar situation with the ratcheted
26   service as well.   So the fact that you've got declining
27   unit rates as you expand the size of the program must
28   indicate economies of scale.
                                                                     44



 1          So that's what I'm going on.     I don't know what
 2   specific operational or engineering reasons give rise to
 3   it.    I couldn't talk to that.
 4          MS. DUGUAY:   The question, we saw the numbers but we
 5   were trying to understand why the numbers are the way they
 6   are.
 7          Could EGD undertake to provide an explanation?       I
 8   understand that the panel today may not be able to do so,
 9   but through an undertaking could you do that?
10          MS. GIRIDHAR:    Yes.
11          MS. DUGUAY:     Thank you.
12          MS. SEBALJ:   That's EGD No. 19, which is to explain
13   the declining user rates as shown in line 10 of Exhibit C,
14   tab 3 schedule 1, page 3.
15          EGD UNDERTAKING NO. 19:      TO EXPLAIN THE DECLINING USER
16          RATES AS SHOWN IN LINE 10 OF EXHIBIT C, SCHEDULE 3,
17          TAB 1, PAGE 3

18          MS. DUGUAY:   A follow-up question to that is that
19   under the company's proposal - I'm at Exhibit C, tab 3,
20   schedule 1, page 4, paragraph 9 - it says here that, and I
21   quote:
22               "Rather than offer three tiers of deliverability,
23               the Company believes that customers should be
24               able to choose any level of deliverability
25               between 1.2 percent and 10 percent."
26          So we saw, based on the table we were looking at
27   previously, that there were economies of scale in the 10
28   percent deliverability scenario versus the 5.
                                                                     45



 1           Could you please indicate within the range of 1.2 to
 2   10 whether -- we just don't understand if the relationship
 3   may start to occur starting at 5 through to 10, or does it
 4   reverse itself, or other deliverability scenarios?      Could
 5   we shed some light on that?
 6           MS. GIRIDHAR:   We'd have to undertake, but I guess I'm
 7   trying to arrive at why you think that would be information
 8   that would be pertinent, if you could just explain that to
 9   me.
10            Let me just explain where I'm coming from.   I guess
11   the underpinning assumption around how you would cost the
12   1, 5, and 10 percent deliverability appears to be that we
13   would take the cost of a 5 percent build and price on that
14   basis and we would take the cost of a 10 percent build and
15   price the 10 percent deliverability on that basis.
16           MS. DUGUAY:   Mm-hmm.
17           MS. GIRIDHAR:   But in fact each of these builds is
18   giving you a certain quantum of deliverability that you are
19   then making available to customers.
20           So to use the incremental cost of a build that is not
21   actually going to happen to price a 5 percent element out
22   of a 10 percent build, I guess I have difficulty with that.
23           In terms of the question of whether you build for 5
24   percent or 10 percent, certainly these exercises indicate
25   that a 10 percent build is better than a 5 percent build,
26   because you get additional deliverability at a lower unit
27   cost.
28           But as to whether that dictates that the tiering or
                                                                    46



 1   the offering of these services at cost should be driven by
 2   a theoretical incremental cost for a build size that's
 3   different from what's actually happened, I mean, I guess I
 4   have difficulty with pricing on that basis.
 5        So to the extent that a 7 percent deliverability build
 6   shows that the curve is even kinkier -- I mean, I guess I'm
 7   questioning.    Would you propose that the price of 7 percent
 8   deliverability on the basis of building a 7 percent
 9   deliverability option, I mean, I guess that's...
10        A 7 percent deliverability option -- not to argue, but
11   I guess I'm trying to understand what these scenarios
12   yield.
13        MS. DUGUAY:    Well, the 7 percent example was exactly
14   what I had in mind.   What happens then?   Are we seeing the
15   same trend?    Could there be an inflection point between the
16   5 and the 10?   And if the service -- for example, if the
17   Board were to rule that the service would be provided at
18   costs, what would that be?
19        MR. CHARLESON:    So are you suggesting that we would
20   have to build at, say, 2 percent, 3 percent, 4 percent, 6
21   percent, 7 percent, 8 percent, 9 percent, any other
22   percentages in between there?   What are the permutations
23   that you're looking for on this?
24        And again, I think the Board in its orders looked for
25   kind of the 1.2, the 5, and the 10.   So are we now
26   expanding on the scope of what the Board's looking to
27   examine?
28        MR. HASSAN:    I think we're following up on your
                                                                     47



 1   statement where you're saying:      "A continuum of offerings
 2   up to 10 percent is more appropriate," and what we're
 3   trying to understand is what that continuum of rates would
 4   be.
 5         So, if you're contemplating a continuum of rates, as
 6   indicated in that sentence that I just read, what would
 7   that continuum look like?      So at 2 percent what would the
 8   rate be?    At 3 percent?
 9         So, every percent increment up to 10 percent, does the
10   rate change?    Is that what you're contemplating in that
11   sentence?
12         MS. GIRIDHAR:   What they're suggesting is that, under
13   the scenario where you're looking at cost-based rates, if
14   we were to build a 10 percent deliverability option, that
15   means you've provided 200 million Mmcf into the market in
16   terms of deliverability.      And then customers have the
17   option of picking whatever combination of space and
18   deliverability they want, so that would result in different
19   levels of deliverability.
20         On a cost basis, then, if you're pricing based on
21   cost, then you would say, okay, the average cost of that
22   excess deliverability is whatever, and customers would then
23   be able to pick whatever level of deliverability they want
24   and pay under that specific scenario that average cost.
25         MS. DUGUAY:   Mm-hmm.
26         MS. GIRIDHAR:   So to determine what a 7 percent build
27   would yield as an average cost but then use that cost
28   within a 10 percent build, I guess, is what I'm trying to
                                                                    48



 1   understand.   Is that what you had in mind?
 2        MR. HASSAN:     We're trying to understand what you're
 3   proposing the continuum of rates would be.
 4        Let's assume the entire 2 Bcf and deliverability were
 5   taken up on a uniform distribution, for example.
 6        MS. GIRIDHAR:    Mm-hmm.
 7        MR. HASSAN:   It was all taken up but you had some
 8   customers at 2 percent, some at 3, right up to 10 percent.
 9        With your capital expenditure program as you've
10   described, how would you set the rates for those eight
11   customers who took a proportion from 2 percent up to 10
12   percent?
13        MS. GIRIDHAR:    Well, I think --
14        MR. HASSAN:   That's what we're trying to understand,
15   how you would propose to set the rates in a circumstance
16   like that.
17        MS. GIRIDHAR:    I think we're putting back --
18        MR. HASSAN:   You've got some customers that are
19   saying, Look, I'm happy with 2 percent; and some that are
20   happy with 5; and others that need and are prepared to
21   contract for 10.
22        How would you establish the rates under what you've
23   described in paragraph 9?
24        MS. GIRIDHAR:    I think we are back to why the company
25   prefers the market-based option because, under this
26   scenario, if you've built an additional amount of
27   deliverability over and above the standard deliverability,
28   and you've got 10 percent, then one way of doing it is to
                                                                    49



 1   say the average cost of offering deliverability in excess
 2   of 1.2 percent is whatever, $75, and if you take anything
 3   above 1.2 percent, that's what you're paying for the
 4   excess.
 5        That's what we meant by the continuum.    The continuum
 6   refers to the amount of deliverability you opt for, with a
 7   standard charge associated with it.
 8        The reality is that 5 percent deliverability is more
 9   valuable than 2 percent.   And overall, I mean, I think
10   these are some of the issues you have if you go down the
11   cost-based route.   And that's why the company's own
12   preference is that you've got limited deliverability here
13   that can be offered as high deliverability.
14        And to allocate that high deliverability between
15   customers you've got to come up with a formula.    And we
16   cannot figure out a way of doing this efficiently and
17   fairly, because what is there to prevent a customer -- from
18   all of them asking for 10 percent deliverability simply
19   because it's more valuable than 2 percent?    They can do
20   something with that excess deliverability.
21        And, in fact, I might just lead back into a question
22   you asked me earlier, where you asked if we have turned our
23   minds to an allocation methodology should the Board mandate
24   cost-based rates, and we said, no, we have not.
25        The reality is that we cannot recommend an allocation
26   methodology.   But we did think about all the issues with
27   having allocation methodologies for developing a high-
28   deliverability storage, and we could not find one that
                                                                   50



 1   would work, because essentially you're introducing 200
 2   million Mmcf of high deliverability into the marketplace.
 3        Our standard at 1.2 is, you know, maybe you've got --
 4   this is less than 10 percent of what we have in terms of
 5   deliverability into the market.    How do you spread such a
 6   constrained resource over all of your customers in a way
 7   that's meaningful?    I mean, you could have a lottery, or
 8   like an over-subscription in an IPO when only some
 9   customers get it, or you could have a pro rata share, in
10   which case nobody gets what they want.
11        And in that situation, if, in fact, this is more
12   valuable than the cost, what you would find is a secondary
13   market developing, an aggregation of those small pro rata
14   shares that don't meet any one person's needs.
15        So you eventually go to the highest bidder.     So the
16   secondary market would then achieve what the primary market
17   could have achieved in the first place.    That's why we
18   think market-based rates make more sense and they're the
19   only efficient outcome you can look at when you've got an
20   offering that's constrained and of value to everybody.
21        MS. DUGUAY:     So, based on your comments, Dave,
22   earlier, do I understand, with regard to this proposed
23   continuum, that this proposal would be applicable to a
24   market-based rate scenario, and, if it were a cost-based
25   scenario, would that proposal, the continuum between 1.2
26   percent and 10 percent, would that proposal hold under that
27   scenario?
28        MS. GIRIDHAR:    Under the cost-based scenario, what I
                                                                     51



 1   see happening is that you would establish, essentially, two
 2   tiers.   One would be the 1.2 percent tier, and then another
 3   tier for anything over 1.2 percent.
 4         And then you know that everybody's probably going to
 5   want higher deliverability.       You don't have enough; then
 6   you have to come up with an allocation methodology, which
 7   leads into the issues we just talked about.
 8         So the continuum really is not in terms of infinitely
 9   divisible rates, it's in terms of how much deliverability
10   you want.
11         And it wouldn't be limited to 1, 5, and 10 percent.
12   You could opt for 3.5 percent or 7 percent deliverability,
13   but it's the same average rate that would apply for
14   anything over 1.5.    But then you've got to figure out,
15   because it's constrained, how you are going to allocate
16   that between customers.
17         MS. DUGUAY:    Thank you.
18         MS. CAMPBELL:   You might want to take a bit of water
19   after all that talking.
20         MS. GIRIDHAR:   That speech.
21         [Laughter]
22         MS. CAMPBELL:   Yes, it was a good one.     We've captured
23   it.   I'm going to ask you to sign my copy once I get it.
24         All right.    Exhibit C, tab 3, schedule 1, page 3,
25   where we've already been.
26         I'm going to ask if you could provide the detailed
27   calculations supporting the derivation of the
28   deliverability demand charge and annual storage costs of
                                                                          52



 1   space for each of the alternative build scenarios.          Can
 2   you?
 3           MS. GIRIDHAR:    [Nodded].
 4           MS. CAMPBELL:    Thank you.
 5           MS. SEBALJ:   That's EGD No. 20.      I won't repeat it; I
 6   think it was quite well put, Ms. Campbell.
 7           MS. CAMPBELL:    Well, thank you so much.
 8           EGD UNDERTAKING NO. 20:      WITH REFERENCE TO EXHIBIT C,
 9           TAB 3, SCHEDULE 1, PAGE 3, TO PROVIDE THE DETAILED
10           CALCULATIONS SUPPORTING THE DERIVATION OF THE
11           DELIVERABILITY DEMAND CHARGE, AND ANNUAL STORAGE COSTS
12           OF SPACE FOR EACH OF THE ALTERNATIVE BUILD SCENARIOS
13           STATED THEREIN

14           MS. CAMPBELL:    Still at Exhibit C, tab 3, schedule 1,
15   we're on paragraph 14 (d).
16           We're going to ask if you could provide the rationale
17   for using a factor of 10 for the maximum space and
18   deliverability charge.
19           MS. GIRIDHAR:    Yes, we can do that.
20           MS. CAMPBELL:    So that's an undertaking --
21           MS. GIRIDHAR:    Yes.
22           MS. CAMPBELL:    -- or you're going to do it now?
23           MS. GIRIDHAR:    Well, let me try doing it now.
24           MS. CAMPBELL:    Okay.   Thank you.
25           MS. GIRIDHAR:    What we did is we looked at taking our
26   Rate 330, right now which is our exfranchise storage rate,
27   and that has a range of up to five times the cost-based
28   rate.    But that's essentially reflecting our standard
                                                                     53



 1   deliverability options today, 1.2 percent.
 2        And then I took the maximum that you come up with
 3   under that rate to see, if you assume the maximum but give
 4   a customer 10 percent deliverability, where are you
 5   relative to cost.    And it appeared to me that we were not
 6   significantly above cost.
 7        So, in a market-based option, where you don't want to
 8   limit the highest price that you could get for that service
 9   offering, it seemed that the five times would limit the
10   value, would limit the cost significantly toward just above
11   the value -- sorry, limit the value to the cost of the
12   offering.   So you wouldn't have enough of a range to
13   reflect the value of high-deliverability storage.
14        MS. DUGUAY:    Could you please file those calculations?
15        MS. GIRIDHAR:    Yes.
16        MS. DUGUAY:    Thank you.
17        MS. SEBALJ:     That's EGD No. 21, which as I understand
18   it is to file the calculations behind the storage
19   reservation charge.
20        MS. DUGUAY:    What would be behind using a factor of 10
21   for the maximum space and deliverability charge, just to be
22   clear.
23        MS. SEBALJ:     Thanks.
24        EGD UNDERTAKING NO. 21:     TO FILE THE CALCULATIONS
25        BEHIND THE STORAGE RESERVATION CHARGE, USING A FACTOR
26        OF 10 FOR THE MAXIMUM SPACE AND DELIVERABILITY CHARGE

27        MS. CAMPBELL:    Are you aware of what service providers
28   are charging for a similar service?     What other service
                                                                   54



 1   providers are charging for a similar service?
 2        MR. CHARLESON:    No, those prices would change daily,
 3   hourly, because we're talking about storage services that
 4   are traded actively in a competitive marketplace.   And so
 5   they will change based on what's happening with price and
 6   weather conditions and a whole host of other factors.
 7        MS. CAMPBELL:    Thank you.
 8        Exhibit C, tab 3, schedule 1, paragraph 14, part H. in
 9   that paragraph it states that:
10             "The provision that permits the Company to store
11             its own gas in the space contracted for by the
12             customer if it is not fully used is necessary to
13             offer a higher deliverability and to maintain the
14             system reliability."
15        Can you explain how Enbridge can rely on an uncertain
16   event to maintain system reliability?
17        MS. GIRIDHAR:    What we're referring to here is that,
18   typically at the start of the withdrawal season, you want
19   to make sure that all of your storage is full.   When you
20   offer an unbundled storage service, it's up to the customer
21   to inject sufficient quantities of gas into storage.
22        If at the end of the injection season a customer's
23   chosen not to fill up their quota of space, and if enough
24   customers did this, the company might have issues in
25   ensuring overall deliverability to the system.
26        So the company would want to reserve the right to be
27   able to fill up space in the interest of maintaining
28   overall system reliability and overall deliverability
                                                                         55



 1   levels, but it would do so in a way that does not constrain
 2   the customer from later on injecting gas if they wanted to.
 3   I think that's what that is about.
 4           MS. CAMPBELL:     Exhibit C, tab 3, schedule 3, page 1 -
 5   and this is probably an undertaking – we’re asking that you
 6   provide the detailed calculations supporting the derivation
 7   of the proposed storage space minimum demand charge.
 8           MS. GIRIDHAR:     Yes.
 9           MS. CAMPBELL:     Thank you.
10           MS. SEBALJ:   I believe that's EGD No. 21.
11           MR. CASS:   22.
12           MS. SEBALJ:   22?    22.
13           EGD UNDERTAKING NO. 22:      WITH REFERENCE TO EXHIBIT C,
14           TAB 3, SCHEDULE 3, PAGE 1, TO PROVIDE THE DETAILED
15           CALCULATIONS SUPPORTING THE DERIVATION OF THE PROPOSED
16           STORAGE SPACE MINIMUM DEMAND CHARGE

17           MS. CAMPBELL:     The next question, Exhibit D.   We're on
18   to Rate 300.    Rate 300.        Exhibit D, tab 2, schedule 1, page
19   4.
20           Can you explain the rationale for the factor of 1.2
21   used in the derivation of the unitized interruptible range
22   rate?
23           MS. GIRIDHAR:     This is a fairly common practice in
24   terms of deriving rates for interruptibility.
25           The idea is that when you offer interruptible service
26   the customer doesn't have reservation of space, but at the
27   same time the company would have an obligation to ensure
28   that there is enough recovery of costs from interruptible
                                                                   56



 1   customers to contribute to the system.
 2         So, at the very least, interruptible customers
 3   typically would pay at least a unitized version of the
 4   demand charges for firm service.
 5        And 120 percent, a factor of 1.2 is, in fact, a norm.
 6   We use it today in some of our interruptible rates storage,
 7   so we just use the same rate.
 8        MS. CAMPBELL:    Exhibit D, tab 2, schedule 1, page 8.
 9        And the question is if you could explain the rationale
10   of the 25 percent utilization factor in the derivation of
11   the cumulative load-balancing charges.    Why is the factor
12   required?
13        MS. GIRIDHAR:    It is required here because typically
14   space and deliverability charges are demand charges, so
15   they reflect the reservation of capacity.    And then it's up
16   to the customer whether to utilize that capacity or not.
17        In the case of Rate 300 and 125, the balancing
18   element, these are default services so we don't have demand
19   charges.    What we have are commodity charges.
20        But then to rely on a commodity charge to recover what
21   is essentially a fixed cost, you have to make assumptions
22   about how much of that commodity is going to be there as a
23   billing determinant so you can recover your costs.
24        So, in this instance, the customer has the choice to
25   use balancing to the extent that they want to.    We are
26   assuming that customers wouldn't always require a full 100
27   percent of what they're entitled to, that they would
28   require, say, 50 percent on average.
                                                                    57



 1        And then also, because it's a default service so the
 2   customer can't accurately predict whether they're going to
 3   be over or under on any particular day, we make the
 4   assumption that the balancing would be in opposite
 5   directions.   So if you were over one day, you would be
 6   under the next day.
 7        So the combination of those two assumptions would
 8   result in a 25 percent utilization factor, i.e., 50 percent
 9   of what you could balance in a day is what you would use on
10   average.
11       And the balancing is in opposite directions.     So if you
12   filled up 50 percent of your space on one day, the next
13   day, if the balancing was in the opposite direction, your
14   space would be closer down to zero, and then it will build
15   up the following day.
16        It's just a reasonable assumption to make in order to
17   ensure that there's recovery of costs.
18        The alternative would be to have a demand charge to
19   ensure recovery of costs.   But that's not under
20   consideration here, because this is a default balancing
21   service as required by the Board.   They've asked us to have
22   discrete unbundled services.
23        MS. DUGUAY:   Were those assumptions discussed
24   throughout your consultative process, or is that something
25   that the company put together as being a reasonable --
26   about being a reasonable expectation about the balancing
27   required for those customers?
28        MS. GIRIDHAR:    I don't believe they were discussed at
                                                                       58



 1   the consultatives.    But, again, to bear in mind that the
 2   company viewed the consultatives and its original filing as
 3   being conceptual in nature, and at this point we're
 4   actually being required to file rates, so there's obviously
 5   a little more granularity when you're talking rates as
 6   opposed to concepts.
 7        MS. DUGUAY:     Thank you.
 8        MS. CAMPBELL:     The next question is Exhibit D, tab 2,
 9   schedule 1, page 11.    There's a discussion of multi-
10   facility delivery and delivery area flexibility.      And the
11   question is, is the flexibility regarding multi-facility
12   deliveries under Rates 300 and 315 the same as for Rates
13   125 and 316 customers?
14        MS. GIRIDHAR:     Yes, it is.
15        MS. CAMPBELL:     Thank you.    The next question is
16   Exhibit D, tab 2, schedule 1, page 13.       It's at the bottom
17   of page 14.   And it's the statement:
18              "To the extent that customers find term
19              differentiation an attractive feature of gas
20              contracting, the market will offer such rates."
21        Could you specify the services to which this statement
22   applies?
23        MS. GIRIDHAR:     The term differentiation there refers
24   to competitive services.    So we believe that term-
25   differentiated delivery rates within a cost-of-service
26   environment are not feasible, but to the extent that they
27   want term differentiation for other elements upstream of
28   the company, that the marketplace would provide them.
                                                                      59



 1           MS. CAMPBELL:   Next, Exhibit D, tab 2, schedule 1,
 2   appendix B.    This is a request for an undertaking.   It's to
 3   reconstruct the table with an allocation of extra-high-
 4   pressure mains only in distribution facilities, that is,
 5   high pressure main costs only in distribution facilities.
 6           MS. GIRIDHAR:   For Rate 300?
 7           MS. CAMPBELL:   Yes.
 8           MS. GIRIDHAR:   That's not based on how it's been
 9   costed.    Are you trying to approximate Rate 125?
10           MS. DUGUAY:   Yes, that's correct.
11           MS. SEBALJ:   That's Undertaking EGD No. 23.
12           EGD UNDERTAKING NO. 23:   WITH REFERENCE TO EXHIBIT D,
13           TAB 2, SCHEDULE 1, APPENDIX B, TO RECONSTRUCT THE
14           TABLE WITH AN ALLOCATION OF EXTRA HIGH PRESSURE MAIN
15           COSTS IN DISTRIBUTION FACILITIES

16           MS. CAMPBELL:   And the final set of questions on Rate
17   315, Exhibit D, tab 3, schedule 1.
18           Is the storage service under Rate 315 a delivered
19   service?
20           MS. GIRIDHAR:   Yes, it is.
21           MS. CAMPBELL:   What's the rationale for it being a
22   delivered service while Rate 316 isn't?
23           MS. GIRIDHAR:   Under Rate 316, again, keeping in mind
24   that the target market is gas-fired power generation though
25   not exclusively gas-fired generation, the customer has an
26   obligation to bring their deliveries into the franchise
27   area.
28           Based on what we saw in terms of pricing conditions of
                                                                     60



 1   the original CES contract, they were all based off a Dawn
 2   price.   So the presumption is that if the customer were
 3   sourcing their gas deliveries at Dawn, they would need
 4   Union and associated TCPL transport to get their deliveries
 5   into the franchise area.
 6        And then, to the extent that they're using a
 7   combination of deliveries at Dawn and storage also at Dawn,
 8   that it would be more efficient for the customer to own all
 9   of the associated transport for getting gas from storage
10   and all of their sources, in fact, from Dawn; whereas Rate
11   315 is reflecting more the way customers, industrial
12   customers, on our system contract today, which is typically
13   FT transport into the franchise area and sized to be at 100
14   percent load factor.
15        So, essentially, for that to be a non-delivered
16   service, then they would have to have incremental transport
17   over and above what they're using to bring gas into their
18   delivery area, so that would not make economic sense for
19   those customers.
20        So it's really reflecting what we view to be the
21   contracting practices of customers under Rate 125 versus
22   Rate 300.
23        MS. DUGUAY:   Thank you.
24        MS. CAMPBELL:     Next question concerning Rate 315 is
25   that it's proposed to be available on two bases - a
26   nominated basis and a no-notice basis.     Can you provide an
27   example of how this would work?
28        MS. GIRIDHAR:     Essentially, to the extent a customer
                                                                     61



 1   wants to use their allocation of storage to meet demand at
 2   their terminal location, we expect most customers would
 3   actually go with the no-notice aspect.
 4        In other words, if the company would -- they would
 5   nominate gas coming into the franchise area, but then we
 6   would compare their consumption with what they had
 7   delivered; and to the extent that a proportion of the
 8   imbalance can be deemed to be coming from their 315
 9   account, we would deem it as being an injection or
10   withdrawal out of their 315 account.
11        The ability to nominate is also there for the
12   customer.   So, if they knew, for instance, that they needed
13   to clear gas out of their storage gas for whatever reason
14   and not have deliveries into the franchise area, they could
15   actually nominate the amount.     So, to the extent they know
16   with greater certainty as to how much gas they're needing
17   out of storage, that is available to them.
18        And secondly, they may also nominate for other reasons
19   to sell gas or do something else with it.    Therefore we
20   have both features in there.
21        But essentially, to the extent that the customer wants
22   that gas at their terminal location, we expect that it will
23   be a non-nominated or a no-notice service.
24        MS. CAMPBELL:   Thank you.   For this service the
25   company has identified $150 a month in incremental billing
26   costs for actually both Rates 315 and 316.
27        What are the drivers for the incremental billing
28   costs?
                                                                       62



 1           MS. GIRIDHAR:    It's based on a current arrangement
 2   with our billing service provider, which is the $150 per
 3   bill.
 4           So, to the extent that an additional bill is required
 5   for a customer who takes Rate 315 or 316, we would incur
 6   that cost from our service provider.       And that's being
 7   passed on to the customer.
 8           MS. CAMPBELL:    Have you asked them why it's $150?
 9           MS. GIRIDHAR:    Our service provider?
10           MS. CAMPBELL:    Yes.   Like, do we have an explanation
11   as to why it's the rate it is?       Aside from the fact they're
12   charging you that and you're passing it on, why is it $150?
13           MS. SARNOVSKY:    The biggest driver for the per-unit
14   cost on the bill is that these bills are produced manually,
15   so it's predominantly labour costs, and the time and the
16   calculation involved to calculate the rates and then
17   produce the bills.       So it is a labour cost primarily.
18           MS. CAMPBELL:    How does the estimate compare to
19   billing costs for unbundled large-volume users?
20           MS. DUGUAY:   Bundled.
21           MS. CAMPBELL:    Sorry, bundled large-volume users.
22           MS. SARNOVSKY:    It's the same.
23           MS. CAMPBELL:    It is the same.
24           MS. DUGUAY:   So does that mean that for bundled large-
25   volume users the billing process is also manual?
26           MS. SARNOVSKY:    We do have a large-volume billing
27   system, but the bills are manual predominantly.
28           MS. DUGUAY:   Thank you.
                                                                     63



 1        MS. CAMPBELL:     The final question is, or the final two
 2   questions, depending on how the first one gets answered:
 3   Is the storage space algorithm applicable to bundled
 4   service customers?
 5        MS. GIRIDHAR:     Yes, it is.
 6        MS. CAMPBELL:     What happens if a bundled service
 7   customer uses more space than the amount allotted based on
 8   the space algorithm?
 9        MS. GIRIDHAR:     A bundled customer?
10        MS. CAMPBELL:     Mm-hmm.
11        MS. GIRIDHAR:     Or an unbundled customer?
12        MS. CAMPBELL:     Bundled.
13        MS. GIRIDHAR:     Well, with bundled customers the
14   company is managing the space on behalf of the customer, so
15   I'm not sure how that situation would arise.
16        MS. DUGUAY:     But if a bundled service customer uses
17   more than the space algorithm, which is a possibility, I
18   guess, I guess the question is, how would you know that?
19   And how does it get capped, as it is for unbundled service
20   customers?
21        MS. GIRIDHAR:     The reality is that a bundled customer
22   is not making choices in terms of how much gas to actually
23   put in storage and how and when to withdraw or inject it.
24        The company is managing an aggregate amount of space
25   on behalf of all of its bundled customers.    So, really,
26   it's not looked at at an individual bundled customer level;
27   it's an aggregate.    And it reflects system diversity and
28   the diversity of loads of our bundled customers in how it's
                                                                     64



 1   utilized.
 2        So the company would manage to the aggregate storage
 3   allocation for its bundled customers.
 4        MS. DUGUAY:   Thank you.
 5        MS. CAMPBELL:    Thank you.   Those are my questions.
 6        MS. SEBALJ:     Thank you, Ms. Campbell.
 7        I think we are going to move on to Mr. Ross from TCPL.
 8        MR. ROSS:    I have no questions.
 9        MS. SEBALJ:   Mr. DeRose, for IGUA and AMPCO?
10        MR. DEROSE:   I'm happy to go next.    Mr. Moran is just
11   asking if he can jump the queue, and I don't object if you
12   don't.
13        MS. SEBALJ:   Sure.
14        Mr. Moran.
15        CROSS-EXAMINATION BY MR. MORAN:

16        MR. MORAN:    Good morning, panel.
17        I'd like to start with Rate 125, if I could, and maybe
18   if I can ask you to turn to Exhibit C, tab 2, schedule 3,
19   page 1.
20        This is the proposed tariff for Rate 125:     Extra-large
21   firm transportation service...
22        [Laughter]
23        In the very first paragraph on the applicability,
24   you've identified the minimum volume as 600,000 cubic
25   metres, and I wonder if you could explain why there's a
26   need to impose that minimum volume of 600,000 cubic metres.
27        MS. GIRIDHAR:    It's really a balancing act in terms of
28   cost allocation for all of your customer base, and
                                                                    65



 1   recognizing what kinds of customers would typically use
 2   what kinds of facilities, so let me explain a little
 3   further.
 4        Rate 125 has been costed on the basis of a subset of
 5   the company's distribution system:    You're taking only the
 6   extra high pressure and the transmission pressure main.
 7   Therefore you end up with a cost of approximately 9 cents
 8   per cubic metre when, in fact, a system average cost would
 9   be more like 22 cents per cubic metre.
10        So the reality is that you want to reflect this cost
11   only for customers who are likely to be using the system,
12   and therefore we have identified that 600,000 cubic metres
13   is a good threshold in terms of identifying how customers
14   are going to be served.
15        So you could serve a very large customer off the
16   distribution system, but presumably you would have to have
17   a very large low-pressure pipe to serve such a large volume
18   of gas.    So it makes a good threshold from a cost
19   perspective.
20        To remove that 600,000 cubic metre requirement would
21   mean one of two things.    One is that the rate therefore
22   cannot be at 9.2 cents; it would have to be closer to the
23   22 cents, which is the requirement under Rate 300.    And
24   then you would query whether you really need two rates or
25   should we just be charging system average to everybody.
26        Otherwise, if you relax that requirement, then over
27   time you might find that you would have to move anyway from
28   this level of the rate to a higher level.
                                                                      66



 1           And if you didn't do any of those two things, then you
 2   would be leaving cost impacts for other customers to bear;
 3   because in a sense you've got other customers that use the
 4   whole system coming on, but you have constrained the rate
 5   at 9 cents, then other customers at other rates would have
 6   to pick up the balance.
 7           So it's for both of those reasons.
 8           MR. MORAN:   Okay.   So, as I understand it, then, the
 9   primary consideration is the idea that a customer would
10   require the extra-high-pressure service?
11           MS. GIRIDHAR:   That's right.
12           MR. MORAN:   And on that basis you assumed a 600,000
13   cubic metre minimum volume to apply in this particular
14   rate.
15           If you had a customer who requires high pressure
16   service but doesn't need a minimum of 600,000 cubic metres,
17   for example, 300,000, why couldn't they, if they can
18   otherwise manage their gas supply, take advantage of Rate
19   125 assuming that they would be taking that extra-high-
20   pressure service?
21           MS. GIRIDHAR:   Well, as I mentioned, it's a bit of a
22   balancing act as to where you can have thresholds that meet
23   the majority of your needs.      So, if we go down that route,
24   we'll be going down either location-specific pricing or a
25   multiplicity of rates to serve different types of customers
26   in every, you know, possible combination of utilization.
27           So you do have to draw the line somewhere, and we
28   believe that 600,000 is a good threshold to use.
                                                                    67



 1        MR. MORAN:     Why don't you just draw the line on the
 2   basis that it’s the operating parameter of an extra-high-
 3   pressure service?    Would that not achieve the same result
 4   without excluding people who can take that service based on
 5   the volume they might use?
 6        MS. GIRIDHAR:     Well, I think the question to me, then,
 7   is every single customer would probably demand service of
 8   extra-high-pressure mains regardless of where they're
 9   located, and then how do you ensure non-discriminatory
10   service to customers?
11        MR. MORAN:     Certainly at my house I'm not going to
12   require extra-high-pressure service to heat my water or
13   heat my house, so I'm not sure that I quite understand the
14   question.
15        If somebody has a bona fide operating requirement,
16   like a generator, for high-pressure service, what
17   difference should it make, given that that's the kind of
18   service they need, what difference should it make with
19   respect to the volume they might require?
20        Generators come in many sizes but their operating
21   requirements in terms of pressure are very similar.     Why
22   shouldn't somebody who uses 300,000 cubic metres a year not
23   be able to take advantage of Rate 125 if they can be
24   serviced from your extra-high-pressure facilities?
25        MS. GIRIDHAR:     We have traditionally not gone down the
26   route of pressure-specific rates but use broader
27   characteristics to determine rate class applicability.       And
28   so we are operating within Board-approved guidelines for us
                                                                    68



 1   as of today.    And that was on the basis of Rate 125.
 2        So that would be a vastly different way of setting
 3   rates, if we now were to go down the route of identifying,
 4   basically, pressure purely as a rate determinant.
 5        MR. MORAN:     Let me come at it from a slightly
 6   different perspective, then, if I may.
 7        A new gas-fired generator, looking at Ontario and
 8   looking at the range of services that are available to me,
 9   am I not going to look at those services in the context of
10   my operational needs and then select the service that will
11   meet those needs?    I mean, that's what every customer does;
12   right?
13        MS. GIRIDHAR:    Yes.
14        MR. MORAN:     So, on that basis, if one of my needs is
15   extra-high-pressure service and I see that you offer that
16   service but I don't use 600,000 cubic metres, why should
17   that be a barrier to me in being able to take advantage of
18   that service?
19        MS. GIRIDHAR:    I don't believe you're saying that if a
20   300,000 cubic metre -- if you're a customer with a 300,000
21   cubic metre requirement, that you would not get the
22   pressure you require.    There may be other ways of providing
23   that customer with the required pressure.    And I'm sure
24   that's an operational issue for the company to consider.
25        From a costing perspective, I guess is really what
26   we're considering here, can we have enough rates to cover
27   off different kinds of customers?     And are we setting rates
28   based on the pressure needs of customers, or are we setting
                                                                       69



 1   rates based on the overall characteristics of the
 2   facilities customers use, is the question.
 3           MR. MORAN:   Well, there's two ways of meet the
 4   pressure needs of the customer; right?       Your system can
 5   meet that need, or you can say to the customer, I guess
 6   you're going to have to build some compression or we'll
 7   build you some compression.       There's a number of different
 8   ways.
 9           MS. GIRIDHAR:   Yes.
10           MR. MORAN:   But these are all going to impose
11   different kinds of costs, are they not?
12           MS. GIRIDHAR:   That's correct.
13           MR. MORAN:   So, at the end of the day, again, if
14   you've got a firm transportation service that otherwise
15   meets all the requirements of the generator, except for the
16   cut-off, the 600,000 cubic metre cut-off, is that not
17   starting to look like a bit of an arbitrary barrier to that
18   person getting access to that service?
19           MS. GIRIDHAR:   I think we're not talking about access
20   to service here, we're talking about access to service at a
21   particular cost that the customer wants to pay for it.         And
22   I think over there, that's why, again, the issue of
23   balancing the interests of all different customers comes
24   in.
25           MR. MORAN:   All right.   So if the concern is to avoid
26   discriminatory practices for customers, in effect, by
27   imposing a 600,000 cubic metre, are you not creating
28   discrimination between large and small generators who are
                                                                      70



 1   otherwise doing the same thing?
 2           MS. GIRIDHAR:   I believe at the previous Technical
 3   Conference I used the term "undue discrimination."      I mean,
 4   I think we have to have guidelines as to what constitutes
 5   discrimination and what does not.
 6           And I believe that if you take that to the ultimate,
 7   you're going to require not 10 or 15 rates to meet 1.7
 8   million customers but a multiple of that, several times
 9   that.
10           So it's a question of what are reasonable practices
11   when you've got joint facilities that meet a very large
12   number of customers at a reasonable cost.
13           MR. MORAN:   At a 600,000 cubic metre cut-off, how many
14   customers would you expect to migrate to Rate 125?
15           MS. GIRIDHAR:   I believe we have one existing customer
16   who would qualify.
17           MR. MORAN:   All right.   And if you had a cut-off at
18   300,000, how many would you expect could migrate to 125?
19           MS. GIRIDHAR:   I'd have to undertake to provide that.
20           MR. MORAN:   All right.   And if there was no minimum, I
21   guess you would have to undertake to do that.
22           It's fair to say you haven't actually canvassed the
23   customers to determine if that 600,000 is a suitable cut-
24   off, given the fact that they might otherwise be similar
25   customers?
26           MS. GIRIDHAR:   Well, the determination of the 600,000
27   minimum cut-off was actually made in the 2001 rates case,
28   and there's a fair bit of evidence in that case.
                                                                  71



 1        At the time we identified one customer that would, in
 2   fact, if I recall - don't hold me to it - I think we said
 3   that there would be a 10 percent impact on the existing
 4   rate class from the migration of this customer.
 5        Similarly, if we're not talking no limits but offering
 6   a rate that's a third of what it actually costs to provide
 7   service, I would contend that every single customer would
 8   want to be off an extra-high-pressure main and pay 9 cents
 9   instead of 22 to 30 cents.   And we have 1.8 million.
10        MR. MORAN:   So you would include your residential
11   customers in the folks who would be lining up for extra-
12   high-pressure service?
13        MS. GIRIDHAR:   Theoretically.   I mean, I think it's
14   reasonable to assume that economic behaviour would prompt
15   you to opt for the lowest price offering that's available.
16   And if that is what it was, and you had no restrictions,
17   then theoretically that would be the outcome.
18        MR. MORAN:   You're not suggesting you can deliver
19   extra-high-pressure service to my house, are you?
20        MS. GIRIDHAR:   I think you're making a distinction
21   here between what the service is and what the costing is
22   based on.
23        Costing is based on a very reasonable presumption that
24   very large customers probably do not use the low-pressure
25   distribution grid.   And I think I mentioned that a customer
26   who's smaller than 600,000 cubic metres is not necessarily
27   denied the pressure that they wanted.   There may be some
28   costs involved in providing that.
                                                                     72



 1        What we're talking about purely here is the ability to
 2   avoid system costs for a subset of customers.    And I would
 3   suggest that, if that is the criterion, that every single
 4   customer would want that.
 5        MR. MORAN:    All right.   In terms of an undertaking,
 6   then, can you provide me with the customers that you have
 7   that would qualify for this service if it was reduced to a
 8   minimum of 300,000; and, secondly, a minimum of...
 9        MS. GIRIDHAR:    Yes; the number of customers?
10        MR. MORAN:    Yes.   And secondly, a minimum of 200,000;
11   and finally, with no minimum.
12        But I don't want you to include in that undertaking
13   the residential and small users and so on.    I'd like you to
14   confine yourself to customers who realistically would
15   require extra-high-pressure service.     And my --
16        MS. GIRIDHAR:    How would we make that determination?
17        MR. MORAN:    Based on the extent of your knowledge of
18   your customers.    And if you've got limitations on that
19   knowledge, then just identify that in response to your
20   undertaking.
21        MR. CHARLESON:    Would it be best if we just --
22        MR. CASS:    I don't understand your exclusions of
23   people who would otherwise qualify in the scenario you've
24   described.    How can one arbitrarily agree to these
25   exclusions?
26        MR. MORAN:    On the assumption that there are
27   operational pressure needs to be met that can be met
28   through extra-high-pressure service as provided for under
                                                                       73



 1   Rate 125.    So, using that as your analytical tool, as it
 2   were, that's how I would like you to deal with the
 3   undertaking.
 4           Assume that the individual residential users and the
 5   small users, the small business users, are not going to
 6   ask.    Just assume that for the purpose of my undertaking.
 7           MR. CHARLESON:     So should we assume that all large-
 8   volume customers may have use for the extra-high pressure?
 9           MR. MORAN:   If you think that's true, then by all
10   means do so.
11           MR. CHARLESON:     So we're speculating no matter what,
12   so --
13           MR. MORAN:   And if you don't think that's true, and if
14   you don't have sufficient knowledge, then just answer on
15   that basis.    I'm fine with that.
16           MR. CASS:    Are you saying assume the rate was
17   rewritten to require the customer to take --
18           MR. MORAN:   No.
19           MR. CASS:    -- gas at high pressure?   No?
20           MR. MORAN:   I'm saying assume that you reduce the
21   minimum volume applicability requirement from 600,000 cubic
22   metres down to 300,000 cubic metres, part 1; reduce it to
23   200,000 cubic metres, part 2; and reduce it to no minimum
24   requirement, part 3.
25           MS. GIRIDHAR:    Well, we could provide that based on
26   what we said, a great deal of speculation.
27           MR. MORAN:   Right.   Now, in terms of migration, that's
28   a principle that's based on the idea that existing
                                                                    74



 1   customers looking at some new services that are created
 2   would move to that new service.
 3        MS. GIRIDHAR:   Yes.
 4        MR. MORAN:    And I guess the next question I have is:
 5   To what extent would you expect uptake of this service from
 6   new customers as you look forward?    Knowing that, for
 7   example, there is going to be more gas-fired generators
 8   coming into the arena as we go forward, and we already know
 9   who some of them are, and there's an expectation that there
10   will be more, how is that factored into your consideration
11   of the 600,000 cubic metre cut-off?
12        MS. GIRIDHAR:   I'm trying to recall something that I
13   might have mentioned at the previous Technical Conference.
14   I think we've identified two customers, two new customers,
15   on Rate 125 at this point, and perhaps a potential of up to
16   four, just speaking from memory.
17        MR. MORAN:    All right.   Thanks.
18        MS. SEBALJ:   Can I just -- I don't know if you were
19   anticipating an undertaking for that second part?
20        MR. MORAN:    No, Ms. Giridhar has referred me to some
21   previous answers that she gave.    That's fine.
22        MS. SEBALJ:   So can I just mark the previous one EGD
23   No. 24, or are we -- we're decided on that?       And do you
24   think I need to clarify?
25        It's to provide the number of existing customers that
26   would subscribe for Rate 125 if the minimum volume cut-off
27   was reduced to, (A), 300,000 m3; (B), 200,000 m3; and, (C)
28   zero, or no minimum requirement.
                                                                    75



 1        But what I need to clarify is, it's just that you're
 2   going to state your assumptions as to what customers would
 3   realistically --
 4        MR. MORAN:    If I can assist.   On the third part, given
 5   the position that every customer they serve would qualify
 6   if it was zero, I've asked them to apply some judgment to
 7   the undertaking response and take into account the kinds of
 8   actual pressure needs that their customers have, to the
 9   extent that they have knowledge of their own customers.
10        EGD UNDERTAKING NO. 24:     EXCLUDING INDIVIDUAL
11        RESIDENTIAL AND SMALL-BUSINESS CUSTOMERS, TO PROVIDE
12        THE NUMBER OF EXISTING CUSTOMERS THAT WOULD SUBSCRIBE
13        FOR RATE 125 IF THE MINIMUM VOLUME CUT-OFF WAS REDUCED
14        TO, (A), 300,000 M3; (B), 200,000 M3; AND (C), ZERO OR
15        NO MINIMUM REQUIREMENT; TAKING INTO ACCOUNT THE KINDS
16        OF ACTUAL PRESSURE NEEDS THAT EGD CUSTOMERS HAVE

17        MS. GIRIDHAR:    So, you're really -- again, just to
18   clarify, you're making a distinction between needing a
19   service and wanting a service, and you're explicitly
20   stating that extra-high-pressure main is a requirement for
21   a service for a particular group of customers.
22        MR. CASS:    That's what I said, and Mr. Moran disagreed
23   with that.
24        MR. MORAN:    That high-pressure gas service is part of
25   the needs of a particular customer; yes.
26        MS. GIRIDHAR:    But they're not prevented from it today
27   on any of the other rates.
28        MR. MORAN:    No.   I think we've agreed that a
                                                                     76



 1   particular customer who has high-pressure needs can have
 2   those needs met in other ways:     They can build their own
 3   compression or you can agree to build some compression, and
 4   so on.
 5        But, excluding those kinds of situations, to the
 6   extent you know you have customers that, based on your
 7   knowledge of their operations, have high-pressure needs, to
 8   what extent -- what are the numbers if there was no minimum
 9   requirement?
10        And I understand that there will be some softness
11   around those numbers because you may not know all of your
12   customers to that level of detail.      Do your best.
13            If you could go, then, to Exhibit C, tab 2, schedule
14   3, page 5.    So we're in the same rate tariff.
15            At the top of the page there's a definition, "Maximum
16   Contractual Imbalance," and it simply says:
17                "The maximum contractual imbalance shall be [less
18                than or equal to] 60 percent of the customer's
19                contract demand."
20        What's the purpose of the maximum contractual
21   imbalance in this tariff?    What role does it play?
22        MS. GIRIDHAR:    The maximum contractual imbalance
23   defines two things:    It defines how much balancing you can
24   get on a daily basis and it also defines how much
25   cumulative balancing you can have.
26        MR. MORAN:    All right.    And in terms of coming up with
27   the 60 percent, how did you go about developing that
28   number?
                                                                     77



 1           MS. GIRIDHAR:   The 60 percent seems to work well for
 2   two types of customers, really.     This is specifically for
 3   Rate 125.
 4           We were cognizant of the fact that you're looking at
 5   very large customers in those rate classes.     And if you are
 6   providing daily balancing, albeit limited daily balancing,
 7   you want to make sure that you can handle the swings that
 8   the customer might impose in addition to your existing
 9   loads with the assets that you have currently.
10            So on that basis we determined that something like 60
11   percent was a reasonable number to add onto our existing
12   base, considering the assets we have today and our customer
13   base.
14            With respect to Rate 300 as well, the 60 percent made
15   sense because what the 60 percent means is that a customer
16   is essentially bringing at least half -- or 40 to 50
17   percent of their daily balancing needs are met by their own
18   deliveries and we are providing the rest, is really what
19   this means.
20           And that's a pretty good indicator of how customers
21   are today.     For instance, our industrial loads have a load
22   factor of approximately 50 percent.     40 percent would cover
23   off some heat-sensitive customers but at a higher load
24   factor.    So it seemed to be a good number to go on, based
25   on how we load-balance today and also looking forward.
26           MR. MORAN:   And what did you do to determine if that
27   was a good number with respect to incoming large gas-fired
28   generators?
                                                                    78



 1        MS. GIRIDHAR:    The presumption here, again, is that,
 2   first of all, if the higher nomination windows and the
 3   reserve capacity services become available upstream of us,
 4   then 60 percent is, in fact, a fairly large chunk of gas.
 5   It covers how many, 14, hours out of 24?
 6        MR. CHARLESON:    [Nodded].
 7        MS. GIRIDHAR:    Okay?   Okay.   So even within the
 8   existing nomination windows, four NAESB windows, 60 percent
 9   is a good number to work with.
10        MR. MORAN:   Okay.    There's also a reference to "less
11   than or equal to."    How does that work?
12        MS. GIRIDHAR:    That reflects the company's desire to
13   have some amount of discretion in terms of assessing
14   whether an individual customer might be so large that 60
15   percent of contract command for that customer may be
16   something that they could not handle.
17         Again, here we have to focus on the fact that the
18   limited balance service is being offered on top of a
19   customer's own arrangements, because these are all
20   essentially bundled rates.    So the expectation is that the
21   customer's going to try their best to meet their load
22   requirements every day through their own supplies.
23         The limited balancing is really only intended to the
24   extent that customers can accurately forecast.     It's not
25   intended to be a backstopping service that can function if
26   the customer failed to do what was necessary to balance
27   their needs.
28        MR. MORAN:   Right.
                                                                    79



 1        MS. GIRIDHAR:   So, on that basis, then, you've got to
 2   take into account that for a very large customer, and
 3   you've got limited assets to do that balancing, then they
 4   could impact -- they could have cost consequences for all
 5   other customers, and reliability consequences for the whole
 6   system.
 7         And I think we address both of those in a fair bit of
 8   detail in our evidence.
 9        MR. MORAN:   Right.    So what it boils down to is, you
10   would be able to say to a large gas-fired generator,
11   because of how large you are, it's not going to be 60
12   percent, it might be 40 percent or 20 percent; right?
13        MS. GIRIDHAR:   Yes.
14        MR. MORAN:   All right.   Now, you indicated that the
15   MCI relates to the daily imbalance.    How does it tie into
16   the daily imbalance allowance?
17        MS. GIRIDHAR:   The way it's laid out, the customer's
18   daily imbalance could be up to the MCI, but there are some
19   restrictions.   So in the wintertime, if you're in a draft
20   position, there is a limitation that says that your draft
21   cannot exceed 10 percent of your MCI.     But if you have
22   delivered too much gas and you're packing the system, you
23   could pack up to 60 percent of MCI.
24        MR. MORAN:   All right.
25        MS. GIRIDHAR:   So, in other words, if you had gas
26   nominated for 24 hours but you didn't use it for 14 out of
27   those 24 hours, you would be covered off under the
28   balancing provisions under Rate 125.    All you would be
                                                                  80



 1   paying is essentially injection/withdrawal charges for the
 2   imbalance.
 3        MR. MORAN:   All right.
 4        MS. GIRIDHAR:   But on the other hand, if you had
 5   nominated no gas for the day, then really we can only
 6   balance you for up to a couple of hours, which is the 10
 7   percent.
 8        MR. MORAN:   Okay.    So, at a high level, then, the
 9   smaller your MCI is, the smaller your daily --
10        MS. GIRIDHAR:   That is correct.
11        MR. MORAN:   -- imbalance allowance is going to be.
12        MS. GIRIDHAR:   Yes.
13        MR. MORAN:   And if you had a generator who was looking
14   at its operation and was saying, We need a true 10 percent
15   daily imbalance allowance, how would you accommodate that
16   generator?   Would you allow them to have a higher MCI in
17   order to achieve a true 10 percent daily imbalance, or
18   would you say you can’t?
19        MS. GIRIDHAR:   Are you asking me if we'd go beyond the
20   60 percent to accommodate a customer?
21        MR. MORAN:   Well, against the context of the answer
22   that you gave, which is, for larger customers you might be
23   of the view that something less than 60 percent is
24   appropriate - and there is a direct relationship between
25   the size of the MCI and the size of your daily imbalance
26   allowance – if a generator wants to deal on the basis of
27   having a true 10 percent daily imbalance allowance, is
28   there a way to accommodate that generator?
                                                                       81



 1        MS. GIRIDHAR:     Well, obviously most things can be
 2   accommodated but at a higher cost.       So the assumptions
 3   behind the rates for Rate 125 did not include that kind of
 4   balancing.   But if that's what we hear from a customer,
 5   then we would have to re-design Rate 125 and allow for a
 6   higher level of dedicated assets to be able to provide that
 7   amount of balancing.
 8        So it's all a trade-off between cost and service
 9   levels.
10        MR. MORAN:   Right.      So the simple answer right now is
11   that Rate 125 wouldn't accommodate that request if the MCI
12   were the restricted factor.      Thanks.
13         Turning now to the load-balancing agreement charges,
14   as I understand it, these are charges that apply in
15   addition to tier 1 and tier 2 charges; right?
16        MS. GIRIDHAR:     In addition?   Oh, the LBAs?   Yes.
17        MR. MORAN:   Right.      And as I understand it, these
18   would apply when the daily imbalance is in the same
19   direction as the pipeline imbalance, in other words, making
20   the system issue worse?
21        MS. GIRIDHAR:     Yes.
22        MR. MORAN:   I wonder if you can help me understand the
23   scale of load-balancing agreement charges that a Rate 125
24   customer might expect to face.
25        MS. GIRIDHAR:     Are you asking me how much exposure
26   they would have to LBA charges?
27        MR. MORAN:   Well, first of all, if you could give me
28   kind of a ballpark estimate of the size of those charges.
                                                                    82



 1   I want to move to the exposure in a minute but let's talk
 2   about the size.
 3        MS. GIRIDHAR:   I don't have TCPL's tolls right here,
 4   but, again speaking from memory, they have a tiered LBA
 5   mechanism, so there's no charge up to 2 percent; between 2
 6   and 4 percent is, I think, 25 percent of the FT toll; and
 7   then it goes up.
 8        So obviously it's a function of what the overall
 9   imbalance is for the company because the customer may be
10   way out but, again, this is relying on system diversity.
11        So, to the extent that the company's LBA was, say, 4
12   percent, then the charge would be 25 percent of the FT toll
13   or CDA, and then that would be prorated again based on
14   whether that power generator was in the same direction as
15   the company in terms of their imbalance.
16        MR. MORAN:    All right.   With the load-balancing
17   agreements that you have with Union Gas and with TCPL, how
18   are those charges dealt with in the context of those
19   agreements?   You've made a reference to TCPL.
20        MS. GIRIDHAR:   In terms of how they're recovered from
21   customers or...?
22        MR. MORAN:    Yes.
23        MS. GIRIDHAR:   Today they are included into the PGVAN.
24   They would flow back to our bundled service customers.
25        MR. MORAN:    All right.   And then turning to the kind
26   of exposure, you know, what's your view with respect to the
27   kind of exposure that you might expect a Rate 125 generator
28   to face?
                                                                       83



 1        MS. GIRIDHAR:     There are tons of factors there that
 2   you have to take into account.
 3        MR. MORAN:     I understand.
 4        MS. GIRIDHAR:     So it's hard to offer a number.
 5        Typically we incur load-balancing charges on a few
 6   occasions in a year.    But when we do incur them, they tend
 7   to be sizeable.   And I don't know what else to say.
 8        MR. MORAN:     Okay.   Well, I mean, let's assume, then,
 9   for example, you have a generator who has regular tier 2
10   daily imbalances.    How does that play into the kind of
11   exposure that that generator would have for LBA charges?
12        MS. GIRIDHAR:     Well, first of all, if the generator is
13   regularly into tier 2 charges, then they would be cashing
14   out, presumably if it's a draft in the wintertime.       But of
15   course if they're packing and it's tier 2, then the LBA
16   exposure is unlikely to occur, because LBA charges in the
17   wintertime tend to be because we have drafted off TCPL.
18        So if you're assuming that a customer regularly drafts
19   in the wintertime on a tier 2, we would in fact be cashing
20   out anything over 10 percent.       So the imbalance wouldn't
21   count.
22        MR. MORAN:     All right.   So you would suggest that the
23   exposure would be less?
24        MS. GIRIDHAR:     Yes.
25        MR. MORAN:     Okay.   Finally, I'd like to turn to Rate
26   316, Exhibit C, tab 3, schedule 1, page 9.
27        At the top of page 9 there's a section entitled
28   "Nominated Storage Provision."       And the last two sentences
                                                                   84



 1   that start halfway down the paragraph:
 2             "Finally, there may be periods when operational
 3             considerations limit either injection or
 4             withdrawal.    With proper notice, the Company
 5             reserves the right to impose limits to ensure the
 6             storage system meets operating requirements."
 7        Let me starts with this question:    How often would you
 8   anticipate this kind of problem occurring?
 9        MR. CHARLESON:    That's probably something best that we
10   would undertake to respond to, because we want to talk with
11   our storage operations people who do that.
12        MR. MORAN:    That would be fine.
13        MS. SEBALJ:   I believe we're on EGD No. 25, which is
14   to provide an estimate of the number of occasions where
15   operational considerations would limit either injection or
16   withdrawal.
17        EGD UNDERTAKING NO. 25:    WITH REFERENCE TO RATE 316
18        EXHIBIT C, TAB 3, SCHEDULE 1, PAGE 9, (A), TO PROVIDE
19        HOW OFTEN EGD ANTICIPATES THE SITUATION OF PERIODS
20        WHEN OPERATIONAL CONSIDERATIONS LIMIT EITHER INJECTION
21        OR WITHDRAWAL OCCURRING; (B), TO PROVIDE THE LENGTH OF
22        NOTICE PERIOD CONSIDERED PROPER NOTICE; AND, (C), TO
23        PROVIDE THE METHOD OF GIVING NOTICE

24        MR. MORAN:    And then, with respect to the reference to
25   "proper notice," I'm just trying to get a better
26   understanding of what that means.   What kind of notice
27   period are you anticipating would be proper notice?
28        MS. GIRIDHAR:    That's, once again, something we have
                                                                        85



 1   to discuss with our operators.
 2           MR. MORAN:    All right.   We can simply add that to the
 3   same undertaking.
 4           Before we wrap up the undertaking, let me just finish
 5   this.    This may all end up in the undertaking.       That's
 6   probably the most efficient way to deal with it.
 7           How would you anticipate giving notice?      Would it be
 8   in advance of nominating deliveries at the timely window
 9   for the affected gas day, or would it be something more?
10           MR. CHARLESON:    Let's add that in.
11           MR. MORAN:    And I think that's about it.
12           MS. SEBALJ:    So EGD No. 25 now encompasses, A, the
13   number of occasions you anticipate there would be
14   operational considerations that limit either injection or
15   withdrawal.
16           MR. MORAN:    What constitutes --
17           MS. SEBALJ:    What constitutes proper notice.    And C,
18   how the notice would be delivered.
19           COURT REPORTER:    Mr. Moran, Ms. Sebalj, could we just
20   take a minute to switch?
21           MR. MORAN:    Well, I'm done now, so that gives you your
22   opportunity.
23           MS. SEBALJ:    Are you done?   Thanks, Mr. Moran.
24           So while we do the switch to Mr. DeRose, we'll do a
25   quick switch of court reporters, but don't leave.
26           --- Recess taken at 11:14 a.m.
27           --- On resuming at 11:15 a.m.
28           MS. SEBALJ:    Okay, we are ready to resume.
                                                                     86



 1        CROSS-EXAMINATION BY MR. DeROSE:

 2        MR. DeROSE:    Fine.   Good morning, panel.   My name is
 3   Vince DeRose.    I am here on behalf of AMPCO and IGUA.
 4        Panel, Mr. Thompson, on our behalf, sent a number of
 5   questions out yesterday.    I understand that you have copies
 6   of those.   It's a two-page list of questions.
 7        MS. GIRIDHAR:     Yes, we do.
 8        MR. DeROSE:    I have talked to your counsel and I
 9   understand a number of those questions have been identified
10   as most appropriately being answered through undertakings;
11   is that right?
12        MS. GIRIDHAR:     That's right.
13        MR. DeROSE:    With Board counsel's blessing, I would
14   propose we identify those upfront that are going to be
15   answered by undertakings, so that, in terms of the
16   transcript, we can identify them clearly and they will be
17   on one or two pages.
18        MS. SEBALJ:    Sure.
19        MR. DeROSE:    Perhaps the best method to do that, if
20   you could identify for me the numbers of the questions and
21   then I will put the questions on the public record and we
22   can assign each one an undertaking number.    Is that fine,
23   panel?
                                                                   87



 1        MR. CHARLESON:     Yes, that is fine.
 2        MR. DeROSE:   So which numbers would you like to answer
 3   by way of undertaking?
 4        MS. GIRIDHAR:    I am wondering if it is easier to say
 5   which we would be prepared to respond to.
 6        [Laughter]
 7        MR. DeROSE:   I am assuming that is the shorter answer.
 8        MS. GIRIDHAR:    We would be willing to respond to
 9   questions 3, 5 and 9.
10        MR. DeROSE:   Okay.    In that case, panel, let me ask
11   this global question.    I take it that there are no
12   objections to answering the other questions by way of
13   undertakings?
14        MS. GIRIDHAR:    That is correct.
15        MR. DeROSE:   So let me just put on to the record first
16   of all question number 1, which is as follows:
17             “In the paragraph located at Exhibit C, tab 1,
18             schedule 1, page 7, paragraph 26, you state in
19             your evidence that:     ‘Certain of the Company's
20             proposed rate offerings in this proceeding will
21             not actually be available and used until a later
22             time, perhaps in 2008.’     With respect to this
23             statement, would you please provide the following
24             information:”
25        And it is a four-point question that we are seeking.
26             “(A), all of the facts on which you rely to
27             support the conclusion that certain of your
28             offerings will not actually be available and used
                                                                  88



 1             until 2008; (B), the particular gas-fired
 2             generators in your franchise area which you
 3             envisage will use your offerings commencing in
 4             2008; (C), the particulars of your proposed rate
 5             offerings in this proceeding which will not be
 6             available until 2008 and those that will likely
 7             be available before that date; (D) the earliest
 8             date on which all of your proposed rate offerings
 9             in these proceedings will actually be available.”
10        Board counsel, if we could have an undertaking number
11   for that, I believe it is number 26, but I could be wrong.
12        MS. SEBALJ:   Yes.   EGD number 26.
13        EGD UNDERTAKING NO. 26:    TO PROVIDE AN ANSWER TO
14        QUESTION NO. 1 OF MR. THOMPSON’S TWO-PAGE LIST OF
15        QUESTIONS

16        MR. DeROSE:   I will then move to number 2.
17             “If you could please provide a table which will
18             show the following information for rates 125 and
19             for rate 316 separately:
20             (A), a list of the items of incremental capital
21             and operating costs which EGD says must be
22             considered before the level of charges for each
23             rate can be determined; (B), the allocation
24             factor which EGD proposes to apply to each of
25             these separate items of incremental cost
26             incurrence, and the extent to which any of the
27             incremental costs will be allocated to each rate
28             class, other than 125 and 316.”
                                                                    89



 1        I believe that would be undertaking number 27.
 2        MS. SEBALJ:   Correct.
 3        EGD UNDERTAKING NO. 27:    TO PROVIDE AN ANSWER TO
 4        QUESTION NO. 2 OF MR. THOMPSON’S TWO-PAGE LIST OF
 5        QUESTIONS

 6        MR. DeROSE:   Now, panel you indicated that you would
 7   like to -- I take it number 4 is also something that you
 8   would like an undertaking.    It seems to flow from question
 9   number 3.
10        MS. GIRIDHAR:    I think an undertaking would be
11   preferable.
12        MR. DeROSE:   In that case, the next undertaking would
13   be for the following:   To please indicate how EGD proposes
14   to allocate any renew deficiency created by the migration
15   of existing customers to proposed rates 125 and 316 amongst
16   all of its existing rate classes.    If that could be
17   Undertaking No. 28.
18        MS. SEBALJ:   Correct.
19        EGD UNDERTAKING NO. 28:    TO INDICATE HOW EGD PROPOSES
20        TO ALLOCATE ANY RENEW DEFICIENCY CREATED BY THE
21        MIGRATION OF EXISTING CUSTOMERS TO PROPOSED RATES 125
22        AND 316 AMONGST ALL OF ITS EXISTING RATE CLASSES

23        MR. DeROSE:   The next would be to show the allocation
24   factors being applied to each of those items of incremental
25   cost and, in particular, the amount thereof which will be
26   allocated to each of the rate classes, other than Rate 300
27   series, if the allocation factors EGD proposes are
28   utilized.   That is Undertaking No. 29.
                                                                  90



 1        EGD UNDERTAKING NO. 29:   TO SHOW ALLOCATION FACTORS
 2        BEING APPLIED TO EACH OF THOSE ITEMS OF INCREMENTAL
 3        COST AND, IN PARTICULAR, THE AMOUNT THEREOF WHICH WILL
 4        BE ALLOCATED TO EACH OF THE RATE CLASSES, OTHER THAN
 5        RATE 300 SERIES, IF THE ALLOCATION FACTORS EGD
 6        PROPOSES ARE UTILIZED

 7        MS. SEBALJ:   Yes.
 8        MR. DeROSE:   That's fine.   The next, panel, is Exhibit
 9   C, tab 1, schedule 1, page 13, paragraph 51.   You state
10   that the redesign of the company's unbundled rates is
11   estimated to provide benefits in the form of lower
12   distribution rates to approximately 1,100 customers, worth
13   approximately four million, collectively.
14        With respect to that statement, would you please
15   provide a detailed description, with supporting
16   calculations, of the manner in which the company has
17   determined that approximately 1,100 customers will be
18   better off if they migrate from existing rates to the
19   company's proposed unbundled rates.    That would be
20   Undertaking No. 30.
21        MS. SEBALJ:   30, correct.
22        EGD UNDERTAKING NO. 30:   TO PROVIDE A DETAILED
23        DESCRIPTION, WITH SUPPORTING CALCULATIONS, OF THE
24        MANNER IN WHICH THE COMPANY HAS DETERMINED THAT
25        APPROXIMATELY 1,100 CUSTOMERS WILL BE BETTER OFF IF
26        THEY MIGRATE FROM EXISTING RATES TO THE COMPANY'S
27        PROPOSED UNBUNDLED RATES; TO PROVIDE A BREAKDOWN OF
28        CLASS/CLASSES THE 1,100 CUSTOMERS COME FROM
                                                                    91



 1        MR. DeROSE:    Panel, just one clarification on that
 2   point.    You may be able to answer it now.   If not, if you
 3   could include that in Undertaking No. 30.
 4        Are you able to identify the rate classes where these
 5   1,100 customers would come from?
 6        MS. GIRIDHAR:    Yes.
 7        MR. DeROSE:    If you could please include that in the
 8   undertaking.
 9        The next undertaking is to provide illustrations --
10        MS. GIRIDHAR:    Sorry, if I may just clarify.   That
11   would be on a summary basis.    I wouldn't be going through
12   that --
13        MR. DeROSE:    That's fine.   I think we are more
14   interested in -- if you can provide general numbers, that
15   would be great.    What we are interested in -- my guess is
16   that those 1,100 customers would not be coming from every
17   single rate class, but would probably be coming from three
18   to five rate classes.    That is a guess.   We would just like
19   your information on that.
20        MS. GIRIDHAR:    Okay.
21        MR. DeROSE:    The next undertaking would be to provide
22   illustrations for a sample of typical industrial customers
23   served under rates 110, 115, 145 and 170, showing for each
24   rate an example of how the proposed unbundled rates operate
25   to benefit a particular customer in each rate class, and an
26   example of how the proposed unbundled rates will not
27   produce the benefit for a particular customer in each rate
28   class.
                                                                         92



 1           In that regard, in previous cases you provided
 2   examples where you make certain assumptions where you show
 3   which type of customer in a particular rate class would
 4   benefit and you would make certain assumptions.        For
 5   instance, in terms of load factor, that would be one of
 6   them.
 7           I think you understand what we are looking for.      Is
 8   that fair?
 9           MS. GIRIDHAR:   Yes, yes.    I'm actually thinking that
10   we have an undertaking for Board Staff that is somewhat
11   similar, but this is a little more exhaustive than that
12   one.    I guess we could always refer back, if we think it is
13   the better response.
14           MS. SEBALJ:   That's fine.
15           MR. DeROSE:   We have no problem with that.    I am not
16   looking for you to spin your wheels twice for no reason.
17   That would be undertaking 31.
18           MS. SEBALJ:   Yes.
19           EGD UNDERTAKING NO. 31:      TO PROVIDE ILLUSTRATIONS FOR
20           A SAMPLE OF TYPICAL INDUSTRIAL CUSTOMERS SERVED UNDER
21           RATES 110, 115, 145 AND 170, SHOWING FOR EACH RATE AN
22           EXAMPLE OF HOW THE PROPOSED UNBUNDLED RATES OPERATE TO
23           BENEFIT A PARTICULAR CUSTOMER IN EACH RATE CLASS, AND
24           AN EXAMPLE OF HOW THE PROPOSED UNBUNDLED RATES WILL
25           NOT PRODUCE THE BENEFIT FOR A PARTICULAR CUSTOMER IN
26           EACH RATE CLASS

27           MR. DeROSE:   The last undertaking is to provide a
28   comparison or a contrast comparison of the service that
                                                                      93



 1   Union currently provides to its existing T-service
 2   customers under its existing T1, to the services you
 3   propose to provide under the auspices of your Rate 300
 4   series of under bundled rates.
 5         MS. GIRIDHAR:    That would be based on our
 6   understanding of Union's T1.
 7         MR. DeROSE:     That's fair.   My understanding, just from
 8   the various consultatives, is that you do have an
 9   understanding of the T1 rate and that there have been some
10   discussions about making the rates look more like the T1.
11         MS. GIRIDHAR:    Yes.
12         MR. DeROSE:     So it is fair that you don't understand
13   the rates perfectly, but I think you understand them.
14         MS. GIRIDHAR:    Yes.   The caveat being, we are not
15   experts on T1s.
16         MR. DeROSE:   That's fair.     That would be Undertaking
17   31.
18         MS. SEBALJ:   No.   I believe that is undertaking 32.
19         MR. DeROSE:   I'm sorry, thank you.
20         EGD UNDERTAKING NO. 32:     TO PROVIDE A COMPARISON OR A
21         CONTRAST COMPARISON OF THE SERVICE THAT UNION
22         CURRENTLY PROVIDES TO ITS EXISTING T-SERVICE CUSTOMERS
23         UNDER ITS EXISTING T1, TO THE SERVICES YOU PROPOSE TO
24         PROVIDE UNDER THE AUSPICES OF YOUR RATE 300 SERIES OF
25         UNDER BUNDLED RATES

26         MR. DeROSE:   Thank you, panel.    Thank you, Board
27   Counsel.   I think it was a little bit painful to go through
28   that undertaking-by-undertaking, but it will save time.
                                                                     94



 1        Let me turn to what is identified in the questions
 2   that we gave you as question number 3.      I think Mr. Moran
 3   has actually already asked part of the question, which is,
 4   it relates to your anticipation of how many existing
 5   customers will migrate to rates 125 and 316.
 6        As I understand it, you told Mr. Moran that you
 7   currently anticipate one customer to migrate to 125; is
 8   that correct?
 9        MS. GIRIDHAR:     Yes.   I should clarify that when we
10   provided the impact of up to $4 million, we thought that
11   that one customer who could migrate might not migrate to
12   125 because we had some understanding that their loads have
13   recently declined.    But I am told they're actually back up
14   to where they used to be, so the likelihood of that
15   customer migrating to 125 is higher now.
16        So I can answer that question by saying, if that
17   customer migrated to 125 instead of Rate 300, there would
18   be an additional impact on margin of approximately $950,000
19   for that one customer, so close to a million dollars.      That
20   would take our total potential impact from 4 million up to
21   5 million.
22        MR. DeROSE:     When you say the "impact," is that the
23   revenue deficiency?
24        MS. GIRIDHAR:     Yes.
25        MR. DeROSE:     What about Rate 316?   Do you anticipate
26   any customers, other than that customer, migrating to 316?
27        MS. GIRIDHAR:     That's very difficult to say, because
28   it is a very different kind of service.
                                                                         95



 1           MR. DeROSE:   Okay.     So at this point you simply have
 2   no idea?
 3           MS. GIRIDHAR:    That's right.    We have no idea.
 4           MR. DeROSE:     Okay.   Let me turn to question number 5.
 5   Let me ask the question generically.
 6           Do you anticipate any incremental capital or operating
 7   costs being incurred over and above those related to your
 8   proposal of Rate 125 to 316 that you will have to incur in
 9   order to provide your proposed Rate 300 series?
10           MS. GIRIDHAR:    At this point we have identified rate
11   implementation for all of these rate classes within the
12   incremental costs.       So Rate 300 would receive an allocation
13   of the system, and process changes that are required to
14   handle unbundled rates.
15           MR. DeROSE:   Those would be the only incremental
16   capital and operating costs?
17           MS. GIRIDHAR:    Yes.    On the assumption that Rate 300
18   does not have a net increase –- sorry, new customers, at
19   this point we are looking at migration of existing
20   customers to Rate 300.
21           So we're not looking at the net addition of any
22   facilities to serve customers of Rate 300.        But, of course,
23   as growth happens and we have new customers joining the
24   system, there will be incremental costs associated with
25   that.
26           MR. DeROSE:   You aren't able to predict that because
27   you simply don't know who is going to come online?
28           MS. GIRIDHAR:    No.    That's right, that's right.
                                                                     96



 1        MR. DeROSE:   Thank you.
 2        Finally, we have question number 9, which I actually
 3   had expected to be answered in an undertaking simply
 4   because we were asking for a schedule.    But if you can
 5   provide the answer, then, let me just ask it this way.
 6        If you could provide a comparison of the manner in
 7   which industrial customers obtaining Ontario T-service,
 8   under Rates 10, 115, 145 and 170 manage their deliveries
 9   and consumptions, and compare those to the way that they
10   would need to do that if they migrated to Rate 300.       And
11   let me give you a little built of an explanation.
12        What we're looking for here is more of an explanation
13   for the operational changes.    So if you could explain on a
14   day-to-day basis how current customers in Rates 110, 115,
15   145 and 170 have to manage their deliveries and
16   consumptions currently, and compare that to the changes
17   that they would have to implement if they moved to the Rate
18   300 series.
19        MR. CHARLESON:   Okay.    Probably the best way of
20   approaching this is to first talk about how a bundled
21   customer currently operates today.
22        So when we look at the Rates 110, 115, 145 and 170, in
23   essence, the same operating costs are in place.    We don't
24   have to look at them each discretely.    In all of these
25   bundled rates the customer will estimate, on an annual
26   basis, what they see their total consumption being.
27   They will provide Enbridge Gas Distribution with that
28   estimate of their consumption and, based on that, a mean
                                                                   97



 1   daily volume will be established, which is simply taking
 2   that total annual consumption, divide it by 365 - assuming
 3   it is not a leap year - and they will make, then, 365 equal
 4   deliveries throughout the year.   So, from a delivery
 5   perspective, that is how that is determined and what they
 6   end up doing.
 7        From a consumption perspective, they just consume
 8   whatever they need to on any given day.    Then the company
 9   will do any load balancing for them on a day.   So any
10   variations between the deliveries they made on that day and
11   the consumption on that day is load-balanced by the
12   company.   Then any imbalances that occur between the
13   deliveries and the consumption are tracked through a banked
14   gas account.
15        So a banked gas account will be accumulated over the
16   course of the year, and the customer will have the
17   responsibility to bring that banked gas account back into
18   balance within a period of time after the end of the
19   contract year.
20        There is a specific tolerance that they have to be in
21   at the end of the contract term, so it is the equivalent of
22   20 days worth of deliveries.   They would have to be in
23   balance at the end of the contract year.    But then any
24   remaining imbalance they would have to bring back into
25   balance within 180 days.
26        So during the course of the contract year or during
27   that kind of cleanup period at the end, following the
28   contract, they would undertake additional load-balancing
                                                                   98



 1   transactions to either get rid of excess deliveries they
 2   have made because they consumed less than what they
 3   delivered, or to bring in more gas to make up for the
 4   shortfall of deliveries.
 5        The tools that they have available for doing that is,
 6   they can suspend their deliveries; they can bring in make-
 7   up deliveries, or they could do a title transfer between
 8   other parties, currently other parties within the Enbridge
 9   Gas Distribution system, where basically they're finding
10   another customer that, say, is over-delivered and they're
11   under-delivered, and they would just exchange their banked
12   gas account balances.   So that is the operation for a
13   bundled customer.
14        For an unbundled customer, they would be required to
15   estimate what their consumption is going to be on a daily
16   basis.   They would, then, nominate the deliveries that they
17   need to make for that day.    So it is -- it becomes a daily,
18   estimate your consumption, nominate your delivery and make
19   your delivery.   Within that day they still go ahead and
20   consume, as they believe they need to.   Then, if there are
21   any imbalances occurring within that day, they would be
22   subjected to whatever provisions were within the unbundled
23   service rate that they had.
24        So it is much more -- so if we are to look at it, say,
25   on a general perspective, in terms of consumption estimates
26   for existing bundled rates, it's an annual estimate of
27   consumption.   Under an unbundled rate, it is a daily
28   estimate of consumption.
                                                                        99



 1        In terms of the actual consumption itself, the
 2   customer just consumes the gas.      From a balancing
 3   perspective, the bundled customer has more of an annual
 4   balancing requirement between the deliveries and
 5   consumption; whereas for the unbundled customer it becomes
 6   a daily balance requirement.       So I hope that...
 7        MR. DeROSE:     That helps.    Thank you very much.
 8        Those are all of our questions, subject to the
 9   undertakings.    Thank you.
10        MS. SEBALJ:     Thank you, Mr. DeRose.    It looks like we
11   are on to Mr. Brown.
12        MR. CASS:     Excuse me, Kristi.    Did you have any plan
13   to take a break at any point in time?
14        MS. SEBALJ:     Is the panel exhausted?    I am just
15   looking at the sheet and thinking, Wow, we can be out of
16   here very quickly.    Sure, I am happy to do that.      Shall we
17   take a 15-minute break?       I just thought, because we took
18   the 9:30 break, I was pushing --
19        MR. BROWN:    And then put lunch back a bit?
20        MR. CASS:     Is that all right?
21        MS. SEBALJ:     Sure.    Let's take 15 minutes and come
22   back at five to.
23        --- Recess taken at 11:35 a.m.
24        --- On resuming at 11:52 a.m.
25        CROSS-EXAMINATION BY MR. BROWN:

26        MR. BROWN:    Good morning, panel.     I simply propose to
27   move through the evidence in a rather sequential way.       So
28   if I could, I will start with the overview, which is
                                                                    100



 1   Exhibit C, tab 1, schedule 1.
 2        If I could ask you to go with me to paragraph 40.     I
 3   think the Board Hearing Staff drew to your attention the
 4   sentence, about four lines down, where you talked about
 5   part of the competitive market offering today in Ontario in
 6   respect to the storage.    I have a few additional questions
 7   around that.
 8        You have indicated, in the previous Technical
 9   Conference and in your evidence, that you are going to have
10   to spend some 26-million-odd dollars to build new storage
11   facilities.
12        What minimum term is Enbridge looking for, from
13   customers, customers for storage contracts in respect of
14   that space?
15        MR. CHARLESON:   This is something that actually we are
16   just in the process of determining now as we prepare to
17   issue a non-binding open season, so we haven't landed on
18   that term yet.
19        MR. BROWN:   Can you give me a hint?
20        MR. CHARLESON:   Something at least 5 years, but
21   probably less than 50.    Maybe even less than 20.   My sense,
22   10 would definitely be -- I would see 10 as being the top
23   end, because that seems to be the benchmark for
24   underpinning new transportation infrastructure.      But we are
25   looking at whether something less than that can be -- can
26   fit within what we think is reasonable for kind of the
27   assurances around the capital investment.
28        MR. BROWN:   If you are indeed looking at something in
                                                                    101



 1   the five- to ten-year range - that is a long-term
 2   commitment from the customer - can you advise what other
 3   companies, to your knowledge, are out there in the
 4   competitive market, as you have described it, that offer
 5   high-deliverability services for that length of time for
 6   customers in Ontario?
 7        MR. CHARLESON:     Given that we haven't ourselves looked
 8   to acquire long-term high-deliverability storage, I don't
 9   have any particular knowledge of that, but I would expect,
10   when we look to the competitive aspects, that is something
11   that would have to be addressed in kind of the evidence
12   that is still to be brought forward in this proceeding.
13        MR. BROWN:   So it is your intention to deal with who
14   else is out there to provide comparable competitive
15   services to what you would be proposing in the evidence you
16   will file on May 1?
17        MR. CHARLESON:     I expect we will have to address the
18   competitive nature of the storage market; whether it is the
19   specific elements that you are looking for, that remains to
20   be seen.   We are still finalizing that evidence.
21        MR. BROWN:   Back to paragraph 40.   The second-to-last
22   sentence reads:
23              “Market-based pricing also allows for sharing of
24              the benefits of high-deliverability storage
25              between all customers, while making no customers
26              worse off.”
27        The question is, if market-based pricing results in
28   higher pricing for the generator as compared to cost-based
                                                                   102



 1   pricing, wouldn't that mean the generator is worse off?
 2        MS. GIRIDHAR:    I think the benefit there is in terms
 3   of the value of high deliverability and being able to have
 4   as much of it as the generator might require.   Because we
 5   have also talked about how, in the cost-based pricing
 6   allocation of that very -- presumably valuable resources in
 7   issue.
 8        So if the generator got one-tenth of what they
 9   actually want at cost, are they better off than being able
10   to get what they want at market?
11        MR. BROWN:   So you would see that as a benefit that
12   would accrue to a generator of market-based rates?
13        MS. GIRIDHAR:    That's right.
14        MR. BROWN:   Board Staff asked you a question this
15   morning about the company's position on cost-based rates
16   for high deliverability.
17        As I listened to your response, I formed the
18   impression that the company's position is that if the
19   Ontario Energy Board does not approve market-based rates
20   for high-deliverability storage service, then Enbridge
21   would have to reflect on whether it goes ahead and builds
22   those services at all.
23        Is that a correct impression that I walked away with
24   from listening to your evidence?
25        MR. CHARLESON:    Yes, it is.
26        MR. BROWN:   If the Board does approve cost-based rates
27   for high-deliverability storage, and if customer demand in
28   Ontario exists for that service, could you please explain
                                                                     103



 1   how Enbridge could decide not to build those new storage
 2   facilities, given Enbridge's obligation to serve customer
 3   needs?
 4          MR. CASS:    Well, Mr. Brown, I think you are getting
 5   into a bit of a legal issue there.     I am not totally sure
 6   it is even appropriate for a Technical Conference.      In any
 7   event, I am not aware of an obligation to serve that
 8   applies in respect of storage services.
 9          MR. BROWN:    So is that going to be the company's
10   position, then, in this proceeding, that it is under no
11   obligation to provide storage services even to infranchise
12   customers from the storage assets that it owns?
13          MR. CASS:    I think it is fair to say it would be the
14   company's position that it is not under an obligation, for
15   its investors, to commit capital to storage development,
16   yes.
17          MR. BROWN:    Panel, you have indicated quite clearly in
18   your evidence that the company thinks that an open season
19   would be the best way to make rate 316 services available
20   to customers.
21          I would like ask you a few questions on that.
22   Assuming that you have market-based rates approved,
23   assuming market-based rates, when would you see the timing
24   of that open season?
25          MR. CHARLESON:    At this time, what we are looking at
26   is conducting a non-binding open season, likely during May,
27   so that we can determine the level of interest in, say, a
28   market-based service.
                                                                  104



 1        The timing of an actual, say, binding open season
 2   would likely have to be tied to the timing of any decision
 3   from the Board related to how storage rates are to be
 4   regulated in Ontario.
 5        MR. BROWN:   Now, the impression I get from your
 6   evidence is that you view an open season using market-based
 7   rates to be the most efficient manner by which to allocate
 8   storage.
 9        Could you provide us with some details as to the
10   valuation scheme or the weighting scheme or ranking scheme
11   that Enbridge would use to assess bids that it receives for
12   high-deliverability storage services in an open season.
13        MR. CHARLESON:     Again, I think we responded to this in
14   the previous Technical Conference.    But the view would be,
15   we would look at the total value received from the
16   individual bids, but then you would also have to look at,
17   how do you optimize the value you are able to receive out
18   of the total assets you can make available.
19        So there may be a different combination of
20   deliverability and space that, in aggregate, provides the
21   optimal value for the investment that's being made in the
22   storage.   I don't think it is easy to say -- you can't just
23   say, Well, multiply this times this and then it kind of
24   cues everything up.   Because of the variety of parameters
25   that are involved, you need to really almost do some sort
26   of optimization, taking the value of each of the bids and
27   comparing that against the assets that you've got
28   available, and how do you maximize the total, say, value
                                                                  105



 1   that you get for that storage.
 2         MR. BROWN:   How are you going to communicate the
 3   details of that process to potential customers who wish to
 4   participate in the bidding season?    That is to say, what
 5   information are you going to give them about your ranking
 6   scheme so that they can therefore assess how they submit
 7   their bids?
 8         MR. CHARLESON:    In terms of the non-binding open
 9   season, I would see that as being less of a factor.    For
10   the non-binding open season, we'll be identifying the
11   different parameters that an individual would look to bid
12   on.
13         I think, based on what we see coming back from that
14   non-binding open season, it will be instructive for us in
15   terms of how we would look to value bids when we move
16   towards the binding open season.    So I would see that as
17   taking some of the lessons we would learn from the non-
18   binding and applying that to the information that we would
19   look to provide when we move to a binding open season.
20         MR. BROWN:   So is the answer, you don't really know at
21   this point in time what information you are going to
22   provide to customers?
23         MR. CHARLESON:    We know what information we will
24   provide, but we are not going -- we won't be providing
25   information on a non-binding open season in terms of how we
26   would rank the bids and how we would -- because there is no
27   awarding of capacity that arises from a non-binding open
28   season.
                                                                   106



 1        A non-binding season is a process that allows us to
 2   solicit market interest in the services and whether we
 3   perceive there to be enough interest to move ahead with
 4   further planning on constructing the facilities and to do a
 5   more formal binding open season.
 6        MR. BROWN:   Pausing there for a minute.   Assume that
 7   you do get an initial reaction sufficient to go to a
 8   binding open season; assume that you do conduct a binding
 9   open season.   Is it Enbridge's intention to post and make
10   public the prices that result from that binding open season
11   for storage deliverability so that folks in the market know
12   what those services and space might go for?
13        MR. CHARLESON:   We would have to look carefully at
14   that because there would be competitive information
15   included in closed bids.
16        We would have to look at what confidentiality may have
17   to be honoured because you are talking about bids that have
18   come in from different counter-parties in the marketplace.
19        Some of the people that bid in that open season may be
20   looking to do other things with that capacity, and
21   disclosing the rates may be viewed as being something that
22   is not good, from a competitive perspective.
23        MR. BROWN:   Could you explain to me how you can
24   actually reach an end state of competitive market for
25   storage in Ontario without the public disclosure of that
26   information by the various storage service providers?      How
27   can there be a market if nobody knows what the pricing is
28   in the market?
                                                                  107



 1        MR. CHARLESON:    I would say it is the same as any
 2   other market.   People are going to bid and pay what value
 3   they attach to something, and if that is -- if the value
 4   that they attach to it is sufficient to help them acquire
 5   that asset, then that is what it is worth to them.    Whether
 6   you have published something to say, Well, here is what
 7   other people perceive the value to be, I don't see how that
 8   really drives a competitive market.
 9        A competitive market is that you have options
10   available to you.    And where you can make a choice and you
11   will attach a value to those options and you are able to
12   get what you are looking for the value you attach to it,
13   then that is what works.
14        MR. BROWN:     Coming back to the non-binding open season
15   - and you may have answered this before so I apologize -
16   what is the minimum threshold of interest that Enbridge
17   would want to see before deciding to take the next step to
18   move to a binding open season?
19        MR. CHARLESON:    Well, we would look at -- again, we
20   talked in our evidence about the kind of floor -- say the
21   floor price or the floor value that we would need to see.
22   I believe there is an undertaking response that we provided
23   from the last Technical Conference that laid out how we
24   would determine what that floor would be.
25        The initial threshold that we would look at would be
26   bids in excess -- bids that could be met through what we
27   billed that would be in excess of what that floor price
28   would be.   That would be the starting point.
                                                                  108



 1        MR. BROWN:   So in terms of generators that are
 2   currently either in the construction phase or perhaps going
 3   close to the construction phase, if you had not yet
 4   conducted your non-binding open season, how do they deal
 5   with you to ascertain whether they can get some higher
 6   deliverability storage service?
 7        MR. CHARLESON:   Unfortunately, in terms of dealing
 8   with us, they would have to wait for us to go to the open
 9   season process.   Otherwise, they would have to pursue what
10   other alternatives are available in the market, at Dawn.
11        MR. BROWN:   Assume that the Board states that storage
12   deliverability should be offered on a cost-based basis.
13   Would you see running an open season for that?
14        MR. CHARLESON:   I suppose, yes, we would conduct an
15   open season to determine what the interest was in using
16   that asset.   Of course, the bigger question would come in,
17   how do you determine it afterwards and allocate based on
18   the interest that is expressed?
19        MR. BROWN:   As I understand your evidence today, at
20   this point in time the company has not been able to come up
21   with that kind of methodology?
22        MR. CHARLESON:   No.   My expectation would be if you
23   put out an open season for high-deliverability storage at
24   cost, there would be a very high level of interest because
25   you can turn around and sell it in the market.
26        MR. BROWN:   Right.    So I think your evidence is today,
27   in light of that, you have not been able to develop an
28   allocation methodology that you would consider to be fair?
                                                                  109



 1        MS. GIRIDHAR:    Yes.
 2        MR. BROWN:    If I could turn to Rate 125.   If you would
 3   go with me to the tariff sheet, which is Exhibit C, tab 2,
 4   schedule 3.    First, just to follow up on some questions Mr.
 5   Moran asked you.
 6        Exhibit C, tab 2, schedule 3, the Rate 125 tariff.
 7   First, Mr. Moran asked you some questions this morning
 8   regarding customers who take or need to take at a high
 9   pressure.   Just so I am clear, in order to qualify for a
10   Rate 125 service, must a customer be equipped to receive
11   gas at a minimum pressure level?
12        MS. GIRIDHAR:    No, that is not part of it.
13        MR. BROWN:    In terms of the distribution rates, you
14   have the demand charge of 9.2 odd cents per meter, or per
15   cubic meter.   When you filed your initial evidence a few
16   weeks back, I think the number that we saw in there was 8.5
17   cents per cubic meter per month.
18        MS. GIRIDHAR:    But the word "approximately" is there.
19        MR. BROWN:    That's true.   I thought perhaps 8.68, 8.4
20   might be approximate, but then I saw 9.2.
21        Could you explain to me why there is such a
22   significant difference between the demand charge in your
23   initial filing and the one that we see on this tariff
24   sheet?
25        MS. GIRIDHAR:    Again, the demand charge that we put
26   into the straw man was what I call a conceptual number and
27   it was closer to what we had asked for as an the increase
28   in 2006 which was approved by the Board.
                                                                    110



 1           So essentially - I think I laid this out earlier today
 2   - the level of Rate 125 was set in 2001, with the
 3   expectation that gas-fired generation would take off in the
 4   province of Ontario, but obviously we had no take-up since
 5   then.
 6           In the subsequent proceedings, so three of the
 7   subsequent proceedings, we did not adjust the level of the
 8   rate for the average increase in rates that we had for all
 9   other customers.     So as a result, the first time the rate
10   was increased was in 2006, and it went up by 2 percent,
11   which is the average distribution increase for other large-
12   volume customers.
13           So as part of the order to actually set rates at this
14   point in time, we took a more granular look at what the
15   level of the rates should be and we came to the conclusion
16   that it needed to be 9.2 cents as opposed to 8.34, which is
17   what we had in the 2006 rates.
18           I believe it is appropriate to do that because to not
19   reflect that at this point, when we have been asked to set
20   rates, or at this point when we have been told that this is
21   the forum in which to set rates, it would mean that we
22   would have left dollars on the table for other rate classes
23   to pick up.
24           MR. BROWN:   You explained this morning the 12 percent
25   increase since 2001.     As I understand it, the demand charge
26   for Rate 125 reflects your system transmission costs; is
27   that correct?
28           MS. GIRIDHAR:   That's correct.
                                                                   111



 1        MR. BROWN:   Now, in the case of a dedicated -- do I
 2   take it that the customer enters into a contract with you
 3   - this customer is directly connected to TCPL - and
 4   therefore can take advantage of the billing contract
 5   demand, mechanism of setting the contract demand.
 6        That billing contract demand is set in the contract in
 7   order to ensure that Enbridge is made whole for its costs
 8   of constructing and operating the dedicated line over its
 9   service life; correct?
10        MS. GIRIDHAR:   That is correct.
11        MR. BROWN:   A customer who has that kind of billing
12   contract demand, is it going to be exposed to the risk of
13   future increases in the demand charge under Rate 125?
14        MS. GIRIDHAR:   I wouldn't call it a risk.   Increases
15   in Rate 125 would be mandated either due to cost increases
16   for the company or whatever regulatory mechanism we have
17   for raising rates.
18        MR. BROWN:   So the answer is that, if your demand
19   charge under Rate 125 increases in the future, then a
20   customer who has an established in-contract demand will
21   have to pay that new rate
22        MS. GIRIDHAR:   That's correct.
23        MR. BROWN:   That new rate, however, I take it would
24   reflect an increase in your overall transmission costs;
25   correct?
26        MS. GIRIDHAR:   That is correct.
27        MR. BROWN:   If a customer has a dedicated line to TCPL
28   and its current billing demand plus at the current rate
                                                                  112



 1   makes Enbridge whole, that is, a PI of 1 over the life of
 2   the project, could you explain the rationale as to why that
 3   customer should be exposed to possible increases in
 4   transmission costs on the rest of the system when it
 5   doesn't get a benefit from those transmission services?
 6        MS. GIRIDHAR:   Well, when the billing contract demand
 7   is determined, it is a product of an exercise that is based
 8   on certain parameters, such as rate-of-return on capital,
 9   O&M costs, so on and so forth.   You make certain
10   assumptions as to what they are, and they usually are set
11   at a point in time and projected forward.
12        When we have rate increases every year, they're
13   intended to compensate the company under cost of service
14   for changes, such as increase in O&M costs, compensation
15   for inflation rate increases, changes in the cost of
16   capital, capital structure, all of these things.    So under
17   cost of service, it is entirely appropriate every customer
18   partake of that change in the cost of providing service,
19   because that is not tied to a specific piece of pipe.   It
20   is tied to the company providing delivery service to the
21   customer.
22        And that is why it is appropriate that the level of
23   Rate 125 should go up, whether it is a dedicated customer
24   or not, because cost of providing service in terms of
25   annual costs incurred, return on capital, all of these are
26   adjusted through the cost-of-service proceedings that we
27   have today.
28        MR. BROWN:   If those adjustments resulted in a PI for
                                                                   113



 1   the particular project of greater than 1, would you see a
 2   problem with that?
 3        MS. GIRIDHAR:   Well, the PI is set at a point in time
 4   where you are making the assessment as to what it takes to
 5   provide service to the customer.    In fact, we have those
 6   guidelines for everybody today when we make that
 7   assessment.   And to the extent that subsequent events prove
 8   that the PI should have been something other than 1 is
 9   neither here nor there, once the service has begun to be
10   provided to the customer.    But that is the basis of how you
11   attract customers today.    You make the best estimates you
12   can as to whether the customer is profitable or requires
13   contribution.   Based on those assumptions, you have a
14   decision to go forward or not and whether a contribution is
15   required.
16        To the extent that the benefit of hindsight some time
17   later proves the numbers should have been higher or lower
18   is not usually a factor.
19        MR. BROWN:   Well, what I am driving at is, my
20   understanding of the design or the purpose behind the Rate
21   125 rate is to try and offer a rate that would be robust
22   against bypass.   Is that a correct --
23        MS. GIRIDHAR:   That's correct.
24        MR. BROWN:   If a customer is prepared to take that
25   rate on the operating assumption that Enbridge will be made
26   whole but nothing more than 1.0, do you think it would be
27   reasonable to consider subsequent adjustments in the
28   customer's billing demand charge so the overall project PI
                                                                 114



 1   never exceeds 1, which was the basis upon which the
 2   customer decided to go with the rate rather than a bypass?
 3        MR. ISHERWOOD:    I think the “robustness against
 4   bypass” comments have to be taken in the context of several
 5   things.
 6        First of all, if the customer were to build their own
 7   pipe, their costs might change as well, in terms of the O&M
 8   costs they have to incur to maintain the pipe, and service,
 9   the cost of capital.   All of those factors are relevant for
10   the customer building their pipe as well.   So a PI of 1, at
11   a point in time, doesn't necessarily mean that nothing
12   changes if the customer were building their own pipe.
13   So to that extent I think they're analogies, whether the
14   customer builds their own pipe or takes it from the
15   company.
16        Secondly, the definition of robustness against bypass,
17   the intent is that there is absolutely no contribution from
18   the customer at all to the rest of the system.   And if that
19   is the definition of robustness against bypass, essentially
20   that means that the company can only serve what you might
21   define as losers in the sense that customers who impose a
22   subsidy on other customers, because technically any
23   customer who could do better than the system would leave.
24   So we would only have uneconomic customers on our system,
25   who would then have to be subsidized somehow, either by the
26   government or some other means.
27        So in the overall context of how gas -- a regulated
28   gas utility provides service to customers, you have to take
                                                                   115



 1   into account a fair basis for cost recovery of overall
 2   customers; that is the second factor.
 3        MR. BROWN:   In terms of the character of the service,
 4   am I correct that a customer can subscribe to Rate 125's
 5   distribution service, but that customer doesn't have to
 6   subscribe to the load-balancing service?
 7        MS. GIRIDHAR:   We call it a default load-balancing
 8   service in the sense that there is no requirement to
 9   actually subscribe to the service.   To the extent that the
10   customer is always able to balance within 2 percent, there
11   are no additional charges stemming from the balancing --
12        MR. BROWN:   Let me come at it a different way, because
13   I left the last Technical Conference with an impression
14   that if a customer subscribed to certain upstream services,
15   that it would not be able to -- it would not be eligible
16   for the Rate 125 load balancing that Enbridge was offering.
17        Perhaps just to clarify that particular point.    If a
18   customer subscribes to the TCPL proposed FTSN service, do I
19   understand that that customer would not be eligible for
20   Rate 125 load balancing?
21        MS. GIRIDHAR:   We built the rate on the assumption
22   that a compatible service would be available from TCPL, and
23   we haven't seen evidence from TCPL yet.    In the event that
24   it does not, we would have to modify the Rate 125 was laid
25   out to say that balancing provisions will not apply.
26        MR. BROWN:   Well, I don't want to rehash stuff, but
27   this is real important for some potential customers out
28   there.
                                                                     116



 1           The FTSN service people soon will be a point-to-point
 2   service.    And I thought in the last conference you
 3   indicated that if a customer was hooked up by a dedicated
 4   pipeline to TCPL, that perhaps that point would be the
 5   point, for TCPL purposes, and you would be prepared to live
 6   with that, but that customer would not be eligible to for
 7   Rate 125 load balancing.      Do I understand that correctly?
 8           MS. GIRIDHAR:   That's correct.
 9           MR. BROWN:   For that customer, if they are not
10   eligible for the Rate 125 load balancing, under your Rate
11   125 distribution service, what tolerance -- what balancing
12   tolerance would be available to that customer?      The
13   standard 2 percent would still be available to that
14   customer?    Or would it be some other amount?
15           MS. GIRIDHAR:   I believe, and I should correct if I
16   left the opposite impression at the last Technical
17   Conference, it would be zero, because we would have no
18   ability to balance the customer.       There would be no
19   provision where we could offer 2 percent.
20           MR. BROWN:   Then assume you have that kind of customer
21   and the load-balancing tolerance is zero.       Would the demand
22   charge for the distribution service to that customer be
23   reduced as a result?
24           MS. GIRIDHAR:   No.   There is no connection between
25   that.
26           MR. BROWN:   You built in all of the costs for
27   balancing into the daily balance and the cumulative
28   charges; is that what you're saying?
                                                                      117



 1           MS. GIRIDHAR:    That's correct.
 2           MR. BROWN:   Back to the tariff.   If we could, on page
 3   -- sorry, the section on nomination, on page 2 of page 6,
 4   the last sentence in the nomination section, you have the
 5   sentence:
 6                “When system conditions require delivery to a
 7                single terminal location only, nominations with
 8                different terminal locations may not be
 9                combined.”
10           Exactly what do you mean by that?
11           MR. CHARLESON:    That would be dealing with the issue
12   of, if it was a point-to-point service that is being used,
13   then you wouldn't be able to combine the terminal
14   locations.    In essence, the combining factor allows for a
15   combination within a delivery area, and if you move to
16   point-to-point, each point is, in a sense, a separate
17   delivery area, so there is nothing to combine with.
18           MR. BROWN:   So your reference then to system
19   conditions is actually a reference to point-to-point
20   service under TCPL's proposed FTSN service?
21           MS. GIRIDHAR:    That's correct.
22           MR. BROWN:   Was it intended to refer to any other
23   circumstance?
24           MS. GIRIDHAR:     I don't recall if there was anything
25   else.
26           MR. BROWN:   An OFO force majeure type of thing?
27           MS. GIRIDHAR:    We did identify, you could have an OFO
28   on a partial basis, like a portion of the distribution
                                                                    118



 1   system, so...
 2        I think we will undertake to get back to you on
 3        answering that.
 4             MR. BROWN:    Thank you.   As I understand it, the
 5        undertaking will be to describe what, if any,
 6        circumstances are referenced by the phrase "system
 7        conditions" in that last sentence under the nomination
 8        section of the 125 tariff.
 9        MS. SEBALJ:   I think that is EGD 33, yes.
10        EGD UNDERTAKING NO. 33:    WITH REFERENCE TO PAGE 2 OF
11        PAGE 6, LAST SENTENCE IN THE NOMINATION SECTION, TO
12        DESCRIBE WHAT, IF ANY, CIRCUMSTANCES ARE REFERENCED BY
13        THE PHRASE "SYSTEM CONDITIONS"

14        MR. BROWN:    Then if I could take you back to the first
15   sentence in the nomination section of the tariff.    It
16   reads:
17             “Customers shall nominate gas delivery daily
18             based on the gross commodity delivery required to
19             serve the customers' daily load.”
20        That phrase "gross commodity delivery", I don't see it
21   as a defined term in the tariff.     What does that refer to?
22   Or perhaps I missed something somewhere.
23        MS. GIRIDHAR:   We wondered if that word “gross” was
24   there, it might have been to include the UFG mentioned
25   there as well.
26        MR. BROWN:    If it is easiest to simply take an
27   undertaking, then somebody can come back with an
28   explanation; and if, on reflection, you think a better term
                                                                    119



 1   should be used there, perhaps you can explain what it would
 2   be.
 3         MS. GIRIDHAR:    Yes.
 4         MS. SEBALJ:    EGD No. 34.   And just because I was
 5   writing the last undertaking, we are talking about the
 6   gross commodity delivery under number 4, authorized demand
 7   overrun?
 8         MR. BROWN:    No.   We are on page 106 of the Rate 125
 9   schedule, section 3, nominations, first sentence, the
10   reference -- the undertaking is to explain what is meant by
11   gross commodity delivery and if there is a more appropriate
12   term, given the nomenclature in the tariff, to indicate
13   what that would be.
14         EGD UNDERTAKING NO. 34:      WITH REFERENCE TO PAGE 106 OF
15         THE RATE 125 SCHEDULE, SECTION 3, “NOMINATIONS”, FIRST
16         SENTENCE, TO EXPLAIN WHAT IS MEANT BY ‘GROSS COMMODITY
17         DELIVERY’ AND IF THERE IS A MORE APPROPRIATE TERM,
18         GIVEN THE NOMENCLATURE IN THE TARIFF, TO INDICATE WHAT
19         THAT WOULD BE

20         MS. SEBALJ:    Thanks.
21         MR. BROWN:    If I could take you to page 3 of the
22   tariff, please.     Under item 70, “Unauthorized Supply
23   Underrun,” where you have the equation, a number of lines
24   down, PE equals.     You use a conversion factor there of
25   0.03769, which I take it is gJs to cubic meters?
26         MS. GIRIDHAR:    Yes.
27         MR. BROWN:    Will this conversion factor stay constant
28   or will it change over time, if the heat content of the gas
                                                                  120



 1   from the TCPL system changes over time?   L&G, that kind of
 2   stuff.
 3        MS. GIRIDHAR:   I don't see why we wouldn't change it,
 4   but at this point, both the M and btu conversion as well as
 5   the gJ conversion is sort of laid out in the tariff.    I
 6   guess if there is a significant deviation, we could
 7   undertake to change that.
 8        MR. BROWN:   Then at the bottom of that page 3 of the
 9   tariff, there is a right-to-terminate service section.
10   First of all, what do you mean by "terminate service"?
11   Does it mean that you are going to suspend service to the
12   customer for a period of time?   Or does it signify that the
13   gas delivery contract that you have with the customer will
14   come to an end?
15        MS. GIRIDHAR:   I'm thinking it could be either
16   suspension of service, but it will also be subject to the
17   way the contract's laid out as to what constitutes a breach
18   of contract, so...
19        MR. BROWN:   Well, if it is a contract coming to an
20   end, that is pretty -- that's a very significant
21   consequence to the customer.   That is sort of game over.
22   Are you intending to -- first of all, I would like
23   confirmation from the company as to whether that, in fact,
24   is intended by this section.
25        If it is intended, what notice provisions do you
26   intend to give to the customer so that they know, if they
27   make a big boo-boo along the way, the consequence of not
28   remedying that boo-boo would be to have the contract come
                                                                  121



 1   to an end?
 2        MS. GIRIDHAR:   I believe the contract would describe
 3   the conditions that would constitute a breach of that
 4   contract.    But really what we are referring to here is the
 5   ability to receive service under this rate.
 6        So if you were to conclude that continuously breaching
 7   the requirements of the rate resulted in service not being
 8   available under this rate, there would be another rate the
 9   customer could take service under.   But this is to allow
10   for all of those possibilities.
11        MR. BROWN:   So it is not your intention to discontinue
12   any service to the customer but to switch the customer to a
13   rate you think would be more suitable to the customer's
14   needs?
15        MS. GIRIDHAR:   The intent here is to ensure, first of
16   all, that we can maintain system reliability.
17        I think the evidence talks about the consequences of
18   loss of system reliability and cost consequences for all
19   customers.   So part of that whole examination would be to
20   assess whether the customer is on an appropriate rate and
21   are there consequences to other customers from this
22   customer not living within the parameters of the rate.
23   That's why the provision is here.
24        MR. BROWN:   Is it your intention that the provisions
25   of the tariff are going to prevail over any specific
26   provisions of the contract with the customer?   This may be
27   more a question for Mr. Cass.   Perhaps you could -- that
28   requires some reflection.   Perhaps you could give me an
                                                                  122



 1   undertaking to advise whether it is your intention that the
 2   provisions of the Rate 125 tariff will prevail over the
 3   specific provisions of the contract with a Rate 125
 4   customer, if that could be part one of the undertaking.
 5        Part two of the undertaking could be:    If you have an
 6   existing contract with a Rate 125 customer, is it the
 7   company's intention that the termination provisions of the
 8   tariff will prevail over the existing termination
 9   provisions in the customer's Rate 125 contract.
10        EGD UNDERTAKING NO. 35:     TO ADVISE WHETHER IT IS EGD’S
11        INTENTION THAT THE PROVISIONS OF THE RATE 125 TARIFF
12        WILL PREVAIL OVER THE SPECIFIC PROVISIONS OF THE
13        CONTRACT WITH A RATE 125 CUSTOMER; TO ADVISE, IF EGD
14        HAS AN EXISTING CONTRACT WITH A RATE 125 CUSTOMER, IF
15        IT IS EGD’S INTENTION THAT THE TERMINATION PROVISIONS
16        OF THE TARIFF WILL PREVAIL OVER THE EXISTING
17        TERMINATION PROVISIONS IN THE CUSTOMER'S RATE 125
18        CONTRACT

19        MR. CASS:    I think it would be best to do that by way
20   of undertaking.
21        MS. SEBALJ:   EGD No. 35.
22        MR. BROWN:    Thanks.   I appreciate that.
23        While we are on page 3 of the Rate 125 tariff, if I
24   could ask you to go back up to the calculation of the cash-
25   out prices under the unauthorized supply underrun.    Your
26   factor PM, do you see that -–
27        MS. GIRIDHAR:   Mm-hmm.
28        MR. BROWN:    -- is the highest daily price.   You
                                                                   123



 1   indicated, I think in a response to Board Staff's questions
 2   this morning, that for bundled customers you would use the
 3   average daily price.
 4        Could you please explain why that difference exists.
 5   What is the rationale for the difference, and why should
 6   the Rate 125 customer not be charged at the average daily
 7   price?
 8        MS. GIRIDHAR:     Well, again, I think we want to go back
 9   to what they have described several times in the evidence
10   as to why we have cash-out provisions in these rates.
11   The cash-out provision is intended to ensure that customers
12   comply, that unbundled customers in this instance comply
13   with the provisions of the tariff and use their unbundled
14   tools, to the extent possible, to manage their daily
15   imbalances.    So cash-out provisions are really intended so
16   that customers don't end up being in cash-out situations;
17   that they in fact conform.
18        So from that perspective, it makes sense to use the
19   highest price of gas on a day as opposed to the average gas
20   of price on that day, because it is a greater inducement to
21   conform to provisions of the...
22        MR. BROWN:    So are you intending to move the pricing
23   mechanism for your other customers from average to high?
24        MS. GIRIDHAR:     Well, for bundled customers, there are
25   two instances where they can be in an unauthorized overrun
26   situation.    One is if they are curtailed, and they can
27   consume, or if they have -- if they have delivered any gas
28   at all.   Overall I still think that the highest price of
                                                                   124



 1   gas on the day is the one that is going to produce
 2   conformance; as to whether the bundled and unbundled
 3   provisions, that is something we would have to look at, in
 4   terms of system issues.
 5        MR. BROWN:     Could I ask you to go to page 5 of the
 6   tariff, please.   The first item is “Maximum Contractual
 7   Imbalance”.   You have indicated there will be less than or
 8   equal to 60 percent of the customer's contract demand.
 9   If the customer is served by a dedicated pipeline, is that
10   60 percent of the billing contract demand or 60 percent of
11   the customer's physical contract demand?
12        MS. GIRIDHAR:     It would be the billing contract.
13        MR. BROWN:     Why the lower rather than the higher?    If
14   it is a dedicated pipeline, what is the harm to the
15   company?
16        MS. GIRIDHAR:     Well, the issue for the company, again,
17   is that the billing contract demand is the factor that is
18   being used by the company for design purposes, in terms of
19   recovering rates.
20        The issue, from a balancing perspective again, is that
21   we want to ensure that the costs imposed by the customer on
22   the system are manageable in light of the assets that we
23   have in place to serve the customer.
24        So 60 percent of billing contract demand, first of
25   all, recognizes that the distribution rate has been applied
26   to a lower contract demand than the customer's maximum,
27   again recognizing the bypass competitive features of the
28   rate from a load-balancing perspective.     We want to ensure
                                                                   125



 1   the cost consequences to the company, in providing balance
 2   to the customer, are kept at a minimum; and again the
 3   billing contract demand, which is the lower of the two,
 4   provides that assurance.
 5         MR. BROWN:   I take it if the TCPL FTSN service comes
 6   in and requires point-to-point delivery, and a customer --
 7   an Enbridge customer is interconnected and dedicated and
 8   the TCPL line is recognized as a point, then all of this
 9   stuff goes out the window?
10         MS. GIRIDHAR:   It doesn't apply anyway.
11         MR. BROWN:   Right.    Further on, on page 5, under your
12   operational flow orders you talk, I believe it is here, you
13   talk about the winter season.
14         MS. GIRIDHAR:   Yes.
15         MR. BROWN:   I'm sorry.   You've got a specific heading:
16   “Winter and Summer Season”.
17         When one reads it, winter season is that season which
18   Enbridge states is the winter season.     So my first question
19   is:   Why is there not a specific start time and stop time
20   for the winter season?
21         MS. GIRIDHAR:   The issue here is with respect to the
22   balancing provisions under the Rate 125 because we have
23   identified that in the winter time there is a limited
24   ability to draft the system.     The customer may -- there is
25   a limited ability to draft the system in the wintertime,
26   but the customer may pack to the full extent of their MCI.
27   And we don't see this as being a date-specific issue,
28   because it is a function of the weather as to when drafting
                                                                        126



 1   becomes a problem for the company.      That is why the
 2   definition of winter is a little more loose than strictly
 3   amounts, because it is a function of when constraints are
 4   likely to happen for the company, and that is a function of
 5   weather.    It could vary.
 6        MR. BROWN:    So I take it, from what you are saying,
 7   that there would never be any not-before-start-date and
 8   there would never be any not-after-stop-date for the winter
 9   season?
10        MR. CHARLESON:       I think that can be specified.     The
11   intention here is to provide as much flexibility as
12   possible so that -- for the benefit of the customer.
13   We can specify dates as to, you know, the "not before" and
14   "not after."
15        MS. GIRIDHAR:       Not before October and not before July.
16   Sorry.    Just joking.
17        MR. BROWN:    But that drives me to the next point.       You
18   talk about providing notice to the customer of the
19   appropriate dates.
20        What period of notice are you thinking of in terms of
21   a reasonable period notice in advance of declaring a
22   particular date to be a start or the stop of the winter
23   season?    Is this a three-week thing, a one-month thing, a
24   two-month thing?
25        MS. GIRIDHAR:       We would have to get back to you.
26   Again, as I explained, the intent of the provision is to
27   provide flexibility.      But the appropriate notice period is
28   a function of what our operators think is appropriate.
                                                                    127



 1        MR. BROWN:    If you could undertake to get back to me
 2   with the company's position on what it will use as an
 3   appropriate notice period to advise customers of the
 4   beginning and end of the winter season.
 5        MR. CHARLESON:    We will do that.    I think, to maintain
 6   the flexibility, that would have to be a relatively short
 7   notice period, but we will undertake to provide more
 8   clarity on that.
 9        MR. BROWN:    Just on that point, what are the major
10   criteria that the company will apply to determine when the
11   winter starts and when the winter stops?     You have a list
12   of three to four key criteria.
13        MR. CHARLESON:    Yes.   We can provide that as part of
14   the other undertaking.
15        MR. BROWN:    That would be great.
16        MS. SEBALJ:    EGD No. 36.
17        EGD UNDERTAKING NO. 36:      TO ADVISE THE COMPANY'S
18        POSITION ON WHAT IT WILL USE AS AN APPROPRIATE NOTICE
19        PERIOD TO ADVISE CUSTOMERS OF BEGINNING AND END OF
20        WINTER SEASON

21        MR. BROWN:    On page 6 of the tariff -- and I, to some
22   degree, I apologize for going through this line-by-line,
23   but as I say, these are questions of interest to potential
24   customers.
25        The imbalance charges, you make reference to the
26   customer possibly being responsible for some LBA charges
27   that Enbridge incurs with, I guess, TCPL.
28        How can the customer be assured that its
                                                                   128



 1   responsibility for any of those LBA charges only relates to
 2   the activity of the customer that contributed to that
 3   imbalance?
 4        MS. GIRIDHAR:   Well, what we are proposing is that
 5   when we do have an incurrence of an LBA charge, that we
 6   would assess the total imbalance for the system and then
 7   assess the individual imbalance of customers in Rates 125
 8   and 300; so that would be the first part of the exercise.
 9        So, for example, if we have a situation where we have
10   a negative imbalance for the system but a positive
11   imbalance for a customer on Rate 125, then they would not
12   have contributed to the imbalance and there would be no
13   charges to them.   Similarly, if there is no imbalance at
14   all, again there would be no charge.
15        Only if their imbalance is in the same direction as
16   the company's, so let's say the company's overall imbalance
17   is, whatever, 300 units, and the responsibility of the
18   customer in Rate 125 is 50 units, then they would take a
19   pro rata share equivalent to 50 divided by 300.
20        MR. BROWN:    So a customer will not become exposed to
21   contributing to LBA charges unless that customer
22   contributes in some way.   So it is a matter of analysis at
23   the customer level, not the rate class level?
24        MS. GIRIDHAR:   That is correct.
25        MR. BROWN:    In terms of unauthorized demand overrun.
26   Sorry, I think I am going back a page or two.
27        You decided this morning to provide Board Staff a
28   resetting of the contract demand if there is unauthorized
                                                                     129



 1   demand overrun.
 2        My question to you is:    Is there a grace period or a
 3   number of forgiveness periods that are available to the
 4   customer so that the customer might be in a position of
 5   unauthorized demand overrun, but the CD won't be reset at
 6   that point in time and the retroactive charges won't be
 7   applied?   Is it five strikes then you're out?
 8        Can you explain to me what the company's approach to
 9   that issue is going to be?
10        MS. GIRIDHAR:    Our existing approach, I believe, is
11   one occurrence.    So the first occurrence does not result --
12   is that correct?
13        MS. SARNOVSKY:    That's correct.
14        MS. GIRIDHAR:    That's correct.
15        MR. BROWN:    You have one forgiveness period.    But if
16   it occurs a second time, then you're into the reset?
17        MS. GIRIDHAR:    Yes, that's right.
18        MR. BROWN:    Go back to the balancing charges.   I am on
19   page 5 of 6 of the Rate 125 tariff where you've got the
20   tier 1, tier 2 charges.
21        First, the tier 2 charges are about 20 percent higher
22   than the tier 1 charge.   Could you explain the rationale
23   for the difference between those, the quantum of those two
24   charges?
25        MS. GIRIDHAR:    The intent here, again, is, from a
26   rate-design perspective, to signal to the customer that
27   larger imbalances require more effort on the company's part
28   in terms of managing them.    So that is why anything over 10
                                                                    130



 1   percent has a higher tier attached to it.
 2        MR. BROWN:   So is the over 10 percent, then, a
 3   combination of recovering costs that would be incurred by
 4   the company to meet that imbalance, plus something else, or
 5   is it purely a cost-based calculation?
 6        MS. GIRIDHAR:     It is really a proxy, because I don't
 7   believe we've got that level of graduated information to
 8   say what 11 percent does, or 10 percent or more.
 9        The idea is that you want to signal to a customer that
10   they're better off staying within a 10 percent balancing
11   limit.   To the extent that they go over it, the company
12   would still balance them but there is an additional cost
13   attached to it.   So it is a proxy.   It is recognized there
14   is no cost incurred.
15        MR. BROWN:   It's a proxy for your storage extraction
16   and transportation costs?    Or are there other things?
17        MR. CHARLESON:     There could be a variety of ways you
18   would look at doing the load balancing.    It could be
19   storage, extraction or injection, depending on which way
20   the balance is going.    It could be spot purchases.   It
21   could be making use of some of our LBAs, or other -- just
22   any of the services.
23        We have a variety of tools that we use for balancing
24   the overall system, and those will depend on what is
25   happening with the rest of the system on the day.
26        So there is no, say, one or two specific items that we
27   would say, Well, this person is out of balance so we've got
28   to go and pull more gas out of storage.    It could be
                                                                  131



 1   whatever tool fits in the situation.
 2        MR. BROWN:   You just mentioned LBA in your answer.
 3   Part of the costs, then, that you are recovering under
 4   these tier 1 and tier 2 charges are LBA charges you were
 5   going to have to pay to TransCanada?
 6        MS. GIRIDHAR:   The LBA is over and above that, but I
 7   think the context was -- it was a tool available, like spot
 8   purchases and whatnot.   Again, if I may retrace the point
 9   that I made a few points before.
10        In terms of the pricing principles that we have
11   adopted for all of the unbundled rates, we do have a whole
12   section dedicated to that.   We very strongly suggest that
13   the appropriate price signals are a combination of cost
14   consequences to the company but also potential cost
15   consequences if certain behaviour does not happen.    So you
16   would find the way you structure cash-out provisions, or in
17   the balancing provisions, essentially we want to recognize
18   that these are unbundled rates and customers are expected
19   to do their own balancing.
20        The balancing provisions are only there because we
21   recognize that nobody can actually forecast to 100 percent
22   how much they are going to need to consume.   So they are
23   expected to be reasonable bounds within which the company
24   will be able to balance at a reasonable cost.
25        Some elements of the pricing may not be tied down
26   exactly to a certain cost consequence, but just to
27   recognize that there is a pricing signal that is required
28   there, because if everybody went up to the upper tier, then
                                                                 132



 1   we would have more issues in terms of helping balance.
 2   Those could include more spot purchases or more peaking
 3   supplies or other more expensive ways to balance than
 4   pulling gas out of storage.
 5        MR. BROWN:   When one looks at the tier 1 and tier 2
 6   charges that you have on this rate tariff, and go back to
 7   the initial straw man tariff that you filed a few weeks
 8   ago, there are increases between what you filed a few weeks
 9   ago and what we see today.
10        On tier 1, the difference between 0.5 cents a cubic
11   meter to 0.885; on tier 2, a very significant jump from 0.6
12   to 1.062 cents per cubic meter.
13        Could you please explain why there are significant
14   differences between the two filings?
15        MS. GIRIDHAR:   In the straw man -- it is a question of
16   where you recover costs, whether it is in the daily
17   balancing charge or in the cumulative balancing charge.
18   So in the straw man, the company had made -- or the straw
19   man was based on recovering injection withdrawal charges
20   and fuel charges through the daily balancing charge, and
21   all other charges, such as storage demand charges and
22   transportation demand charges, through the cumulative
23   charge.
24        But we believe it is more appropriate to recover a
25   unitized version of the transport demand charges in the
26   daily balancing charge because, in fact, that transport
27   demand is being used to balance the customer.
28        When it is part of the cumulative charge, we are also
                                                                     133



 1   providing customers the option of managing that imbalance
 2   by hydro transfer and a bunch of other means, but that does
 3   not mean that the transport is not being -- transport cost
 4   is not being incurred by the company.
 5           So if it is in the cumulative balance charge, the
 6   customer has the ability to avoid paying for those charges.
 7   But in fact the company has used M12 and other capacity to
 8   get the gas to the franchise area, so there is a better
 9   reflection of cost incurrence if a unitizied version of
10   those transport charges is in the daily balancing charge
11   than the cumulative.
12           MR. BROWN:   You have set out the detailed derivation
13   of that on appendix A, to Exhibit C, tab 2, schedule 4.
14   If I could just take you to those schedules for a second, I
15   am particularly interested in schedule B to Exhibit C, tab
16   2, schedule 4.
17           Let's start with appendix A.   If you go to line 2.2,
18   you've got TCPL, STS service charges.
19           MS. GIRIDHAR:   Mm-hmm.
20           MR. BROWN:   Under the "Daily Balance fee," is there
21   any amount of load-balancing charge included in that line
22   item?
23           MS. GIRIDHAR:   What we have there are the demand
24   charges for STS.
25           MR. BROWN:   Then when you go to the next page, which
26   is appendix B, if you go down to line 9.1, when you refer
27   to TransCanada, the designation as “STS and Other,” what
28   goes into the "Other"?      I can't recall at this point.
                                                                      134



 1        MS. GIRIDHAR:    If we could give an undertaking?
 2        MR. BROWN:    If you could.   Thank you.
 3        MS. GIRIDHAR:    Fine.
 4        MS. SEBALJ:    I'm really sorry, I keep doing it.     EGD
 5   No. 37 is to provide an indication of what is meant by
 6   "Other" in line 9.1 of Exhibit C, tab 2, schedule 4,
 7   appendix B.
 8        EGD UNDERTAKING NO. 37:    TO PROVIDE AN INDICATION OF
 9        WHAT IS MEANT BY "OTHER" IN LINE 9.1 OF EXHIBIT C, TAB
10        2, SCHEDULE 4, APPENDIX B

11        MR. BROWN:    A question on the cumulative imbalance
12   charge, which is shown on page 6 of 6 of the tariff.
13   You have indicated that it will be equal to roughly 1.9
14   cents per cubic meter per unit of imbalance.
15        When you take a look at appendix A from which you have
16   derived the stuff, you see that number on line 8.0 of
17   appendix A.    But the dollars that you have used or the
18   amounts that you have used on this appendix are, I take it,
19   annual amounts?
20        MS. GIRIDHAR:    Yes.
21        MR. BROWN:    Costs over the year.
22        Am I correct that, with the cumulative imbalance,
23   there is a point of time at the end of the month where the
24   customer actually has to bring its imbalance down to zero?
25        MS. GIRIDHAR:    That's correct.
26        MR. BROWN:    Does that have to occur at the end of
27   every month?
28        MS. GIRIDHAR:    Yes.
                                                                     135



 1           MR. BROWN:    Have you given any thought to -- well,
 2   perhaps what you can do, because I think there is some
 3   confusion as to how these charges would actually apply,
 4   could you undertake to put together a simple example of a
 5   customer who is going to incur daily and cumulative
 6   imbalance charges, and you can use whatever numbers you
 7   want.    But what I am interested in is, if you could show
 8   exactly how the daily and cumulative imbalance charges
 9   would be applied to whatever balance there is, let's say,
10   over a three-month period.
11           I use the three-month period because you would then
12   have two occasions where, at the end of the month, the
13   cumulative imbalance account would have to be reduced to
14   zero.
15           Could you give us an illustrative example of how that
16   would actually work in practice?
17           MS. GIRIDHAR:   Absolutely.
18           MR. BROWN:    If, in that example, you could assume that
19   over the course of each month the customer contributes some
20   amount to LBA charges that are incurred by Enbridge Gas, if
21   you could include that as a line in the illustration,
22   please.
23           MS. GIRIDHAR:   Okay.   Yes.
24           MS. SEBALJ:   That is EGD No. 38.
25           EGD UNDERTAKING NO. 38:    TO PROVIDE AN ILLUSTRATIVE
26           EXAMPLE OF A CUSTOMER THAT IS INCURRING DAILY AND
27           CUMULATIVE IMBALANCE CHARGES, AND SHOW HOW THE DAILY
28           AND CUMULATIVE IMBALANCE CHARGES WOULD BE APPLIED TO
                                                                     136



 1           THEIR BALANCE OVER A THREE-MONTH PERIOD

 2           MR. BROWN:   The cash-out penalties that you are
 3   proposing for Rate 125 are 150 percent or 50 percent,
 4   depending upon which way the imbalance goes.
 5           Rate 125 was introduced a number of years ago, back in
 6   2001.    You have come a long way in developing the rate.
 7   But one of the things that has happened over that similar
 8   period of time is that gas has gone from a fairly low
 9   price, in the 1 to $2 range, to prices that are
10   significantly higher than that, 7 to 12, depending upon
11   where you are.
12           If your cash-out provision is really going to be tied
13   to what the prevailing price of gas is, does the company
14   consider that kind of mechanism, that is, the amount of the
15   penalty will vary according to the prevailing price of gas,
16   as really to be too onerous on the customer?      Has the
17   company considered, in this high sort of gas price regime,
18   moving more towards a fixed cash-out amount rather than one
19   that is linked to the price of gas?
20           MS. GIRIDHAR:   The intent of the cash-out, again, is
21   to provide an incentive to customers to not draft the
22   system or arbitrage on gas prices.
23           So, really, I believe the driving factor has to be the
24   price of gas on that day, in terms of being able to limit
25   such behaviour.      It's a fixed amount that we have as
26   opposed to something that is linked to the price of gas.
27   There is always a possibility that the price of gas on that
28   day is going to be higher than whatever that fixed charge
                                                                     137



 1   is and then you be promoting the kind of behaviour you
 2   want.    So we see the price of gas as being more closely
 3   linked to being able to provide the kind of behaviour you
 4   want to incent than a fixed charge.
 5           But theoretically, yes, you could have a very large
 6   fixed charge instead of a cash-out provision that would
 7   theoretically exceed your highest foreseen commodity price.
 8   We just didn't go down that road.     I didn't know if that
 9   would be any more palatable.
10           MR. BROWN:   Have you taken a look at the penalty
11   provisions for unauthorized overrun under Union's T1
12   service?
13           Have you made any comparison as to whether you were
14   operating within the same kind of penalty paradigm that
15   Union is operating under?
16           MS. GIRIDHAR:   I think our penalty paradigms have to
17   operate in recognition of our operating circumstances.      Our
18   storage is not infranchise and we do have different
19   challenges than Union does in the context of its T1
20   service.
21           MR. BROWN:   One final question on Rate 125.   You have
22   indicated that the load-balancing services won't be
23   available until you do a storage build, as I understand it.
24   But you do have the distribution service as part of your
25   tariff.
26           Would the distribution services under Rate 125 be
27   available regardless of when you actually get around to
28   building the storage services?
                                                                     138



 1        MR. CHARLESON:    Yes, they would.
 2        MR. BROWN:    I would like to move to Rate 316, but I
 3   don't know whether this might be an appropriate time to
 4   break.
 5        MS. SEBALJ:     I was just thinking, there are probably
 6   some people getting a little hungry.      Why don't we take a
 7   break for an hour and five minutes and come back at about 2
 8   o'clock.
 9        --- Luncheon recess taken at 12:55 p.m.
10        --- On resuming at 2:00 p.m.
11        MS. SEBALJ:     I think everybody is ready to resume, so
12   I will turn it over to Mr. Brown.
13        CROSS-EXAMINATION BY MR. BROWN: [Cont’d]

14        MR. BROWN:    Thank you, panel.   Two follow-up questions
15   on Rate 125, then I will go to 316.
16        I asked a few questions this morning about what was in
17   the imbalance charge, tier 1 and tier 2 charges, and was
18   trying to get at whether any LBA balancing charges were
19   included in that, and you gave me your answer.
20        I would like to come at it a slightly different way.
21   Could you assume that a customer has some daily imbalance;
22   let's just assume it is two units and so it is within its 2
23   percent of its MCI, and that is the imbalance for that
24   particular day.    We understand your Rate 125 tariff, that
25   imbalance quantity will attract a charge at the tier 1
26   rate; correct?
27        MS. GIRIDHAR:    At 2 percent imbalance?
28        MR. BROWN:    Yes.
                                                                      139



 1           MS. GIRIDHAR:    Under 2 percent, attracts no fees.
 2           MR. BROWN:    Okay, sorry.   So it will attract a tier 2
 3   charge.
 4           If, on that same day, Enbridge incurs load-balancing
 5   charges from TransCanada - its system as a whole is off or
 6   has an imbalance which attracts load-balancing charges - is
 7   it possible that that customer's two units, which attracted
 8   tier 2 charge would also attract part of the load-balancing
 9   charges that Enbridge might have to pay to TransCanada?
10           MS. GIRIDHAR:    The two units would not have attracted
11   any balancing fees because that is within the 2 percent;
12   right?    Isn't that what you're saying?     But the LBA is...
13           The answer is, no, they wouldn't get a portion of the
14   LBAs.
15           MR. BROWN:    So the only time a customer would get a
16   portion of the LBA is if it -- well, under what conditions
17   would a customer pay tier 2 charges?       Let me rephrase it.
18           If a customer is paying tier 2 charges for a
19   particular day's imbalance, what level does that imbalance
20   have to reach before the customer might also be liable for
21   TransCanada load-balancing charges that are charged to
22   Enbridge?
23           MS. GIRIDHAR:    I think I should clarify one thing.     In
24   the example you just provided me, I presumed the two units
25   meant 2 percent and not the second tier.
26           The way the charges work is that, let's say your MCI
27   was 100 units.       If you had an imbalance of two units, then
28   0 to 2 percent of MCI attracts no charges, so the customer
                                                                  140



 1   would have no daily balancing fees.
 2        Let's say the company had an LBA because both were in
 3   a draft position so you had a 2 percent draft and the
 4   company was, say, 3 percent and therefore we had LBA
 5   charges, the customer would not get a LBA charge, because
 6   they were within the 2 percent tolerance.
 7        But the LBA charges, in general, I mean they're not
 8   necessarily linked, whether they are in tier 1 or tier 2.
 9   As long as you have an imbalance in the same direction as
10   the company and that imbalance exceeds 2 percent, then you
11   would attract LBA charges.
12        MR. BROWN:    So up to 2 percent, zero.   When you hit 2
13   percent, you're going to have tier 1.   Up to 10 percent,
14   you're going to have tier 2.    Over 10 percent -- I guess
15   the question I am trying to drive at is, if the customer is
16   actually paying tier 1 or 2 charges and is therefore
17   compensating Enbridge for various costs it incurs to
18   effectively balance things, why should it have to pay any
19   load-balancing charges that it's already paying Enbridge
20   under tier 1 and tier 2?
21        MS. GIRIDHAR:    Because on the day that Enbridge is
22   incurring LBA charges from TCPL, the costs of balancing
23   have exceeded the costs of injections and withdrawals and
24   other charges.    That's why.
25        When Enbridge is paying LBA charges, what that
26   indicates is that there hasn't been enough gas in the
27   franchise area using Enbridge's assets.   That is why it is
28   drawing on the pipeline to provide gas.   So to the extent
                                                                   141



 1   that this customer also compensated that imbalance, the
 2   customer would have to partake of the costs to Enbridge.
 3        MR. BROWN:    Do you see any element of double-dipping
 4   in that?
 5        MS. GIRIDHAR:    Absolutely not, because these are costs
 6   incurred by Enbridge over and above the cost of the storage
 7   operation.
 8        We need to remember here that the load-balancing
 9   service has been priced as a low-cost option.    There are no
10   dedicated transport assets identified.   We've only got
11   storage assets, and then existing transport assets.
12        If we are in an LBA situation, it is either because we
13   couldn't get enough gas out of storage using our existing
14   transport assets, which is why we're in a draft position on
15   TCPL, or that the amount of gas required was simply way
16   more than what we could have reasonably provided through
17   other sources.    So there were actual costs incurred by the
18   utility to balance all of its customers, so there is
19   absolutely no element of double-dipping when we levy charge
20   in LBA charges as well.
21        MR. BROWN:    The second question is on the cumulative
22   imbalance fee.    If you go to Exhibit C, tab 2, schedule 3,
23   which is the Rate 125 tariff, page 6, for that rate you've
24   got the cumulative imbalance fee at about 1.9 cents per
25   cubic meter of imbalance.
26        Then, if one goes ahead to the Rate 300 service,
27   Exhibit D, tab 2, schedule 2, page 6 of the tariff, the
28   cumulative imbalance fee for Rate 300 is significantly
                                                                   142



 1   less, 0.45 cents per cubic meter.
 2        Could you please explain why there is a difference
 3   between those two fee levels?
 4        MS. GIRIDHAR:    The reason there is a difference was
 5   that with Rate 300 we have assumed that our existing assets
 6   are sufficient to provide the LBA balancing service.
 7        With Rate 125, we assumed that we need dedicated
 8   incremental storage assets that provide 10 percent
 9   deliverability on an ungraduated basis in order to meet
10   balancing of 125.    Therefore, we have an allocation from
11   the $26 million bill back to Rate 125.    And that's why
12   you've got more costs in there.
13        MR. BROWN:     So it's the allocation of the incremental
14   costs --
15        MS. GIRIDHAR:    That's right.
16        MR. BROWN:     -- that accounts for the difference?
17        MS. GIRIDHAR:    That's right.
18        MR. BROWN:     Which prompts me to ask a second question.
19   On Exhibit C, tab 2, schedule 4 of your evidence, page 3 of
20   7, right up at the top, there is a sentence that the tier 1
21   daily balancing fee includes the cost of storage injection
22   and withdrawals from Tecumseh and Union Gas and the
23   associated fuel costs.
24        So if one is paying for those in the tier 1 charge,
25   why would the cost of those sort of services also be
26   included in the cumulative imbalance fee?
27        MS. GIRIDHAR:    The cumulative imbalance fee only has
28   storage demand charges in there now.    Let me find the
                                                                   143



 1   reference first, please.
 2        MR. BROWN:    Sure.   I think that is Exhibit A.
 3        MS. GIRIDHAR:     I thought it might help if I explained
 4   what are the kinds of storage costs we incurred.    So from
 5   the perspective of storage, you've got storage space demand
 6   charges.   You have storage deliverability demand charges.
 7   In addition, you have costs associated with injecting and
 8   withdrawing gas.
 9        So the way -- plus the balancing service also requires
10   transport assets, right, because you have to get gas from
11   storage into the franchise area.    So these costs are
12   recovered in one of these two elements, the daily balancing
13   charge or the cumulative imbalance charge.
14        The daily balancing charge has all variable costs in
15   there, so the cost of injecting or withdrawing gas,
16   transporting gas, on M12, the fuel costs as well as a
17   unitized demand charge for the transport.
18        The storage space and deliverability charges are
19   recovered from the cumulative imbalance charge.    So that is
20   how it is split.   There is no double-counting of any
21   element within those charges.    It is either here or there.
22        MR. BROWN:    Well, if I could move then to Rate 316 of
23   Exhibit C, tab 3, schedule 1, at page 5 of 11, paragraph
24   12, the last sentence of that paragraph states that:
25              “The use of a range rate for Rate 316 would
26              permit the use of market pricing.”
27        What view has Enbridge formed as to the appropriate
28   range for that rate?
                                                                   144



 1        MS. GIRIDHAR:    The minimum of Rate 316 is based on a
 2   fully allocated cost for storage space and deliverability
 3   associated with 1.2 percent, and the maximum is ten times
 4   the minimum.     So the intent is, if you want high
 5   deliverability, so something in excess of 1.2 percent, you
 6   have a range that goes from cost-based 1.2 percent demand
 7   charges to ten times that number.
 8        MR. BROWN:    I think you gave evidence this morning
 9   about how you arrived at the ten times --
10        MS. GIRIDHAR:    Yes.
11        MR. BROWN:     -- number.   Would this range change if
12   generators were contracting long-term for storage, that is,
13   in the neighbourhood of 10 to 20 years?     Or do you see this
14   rate range covering any length of contract?
15        MS. GIRIDHAR:    The range would cover any length of
16   contract.    Obviously where you land within each may be a
17   function of...
18        MR. BROWN:    Turning to Exhibit C, tab 3, schedule 1,
19   page 9 of 11.    This is in sub-clause F, the nominated
20   storage provision.
21        Mr. Moran asked you a question or two about the
22   periods when operational considerations might limit either
23   injection or withdrawal, and asked you to try to estimate
24   the number of occasions.     My questions are somewhat
25   different.
26        Firstly, could you describe the conditions that might
27   trigger these limitations, that is, when operational
28   considerations would limit either injection or withdrawal?
                                                                      145



 1           MR. CHARLESON:    I think that it’s best if we undertake
 2   to provide that response to you.
 3           MR. BROWN:    If you could do that, I would appreciate
 4   that.
 5           MS. SEBALJ:   I think that is -- I did it again.    I
 6   think that is EGD No. 39.
 7           EGD UNDERTAKING NO. 39:    TO DESCRIBE THE CONDITIONS
 8           THAT MIGHT TRIGGER INJECTION OR WITHDRAWAL, THAT IS,
 9           WHEN OPERATIONAL CONSIDERATIONS WOULD LIMIT EITHER
10           INJECTION OR WITHDRAWAL

11           MR. BROWN:    Just a follow-up to that question.   The
12   transcript from the second day of the previous technical
13   conference, I think at page 115, indicated that Enbridge
14   stated that the OFO mechanism would not apply to Rate 316.
15   Is not this limitation that you're referring to here
16   essentially the functional equivalent of a OFO?
17           MS. GIRIDHAR:    Presuming the response to the other
18   undertaking would cover this off, the conditions under
19   which...[inaudible].
20           MR. BROWN:    Perhaps at the end of the day you could
21   advise whether Enbridge sees the OFOs practically applying
22   to Rate 316 as well.
23           On the same page, page 9 of 11, under subclause C, the
24   unratcheted storage provision, you note that you will
25   charge up to 100 percent for the unratcheted service over
26   the ratcheted service.
27           If the Board approves a cost-based regime for storage
28   deliverability, will the demand charge under each level of
                                                                     146



 1   service be cost-based in the sense that the increment from
 2   one level of service to the other will be a reflection of
 3   incremental costs rather than something a bit more
 4   arbitrary?
 5        MS. GIRIDHAR:   I don't know if the Board would rule on
 6   cost base or what specific rules would come up.      If
 7   incremental costing is the basis for setting cost-based
 8   rates, then I would presume you would take the increment to
 9   provide unratcheted service over ratcheted, and add that.
10        MR. BROWN:    How would you see that analysis actually
11   being done?   How would you go about doing that?
12        MS. GIRIDHAR:   Well, the premium of up to 100 percent
13   over demand charges is, in fact, a notional reflection of
14   how it appears that costs would be incurred for ratcheted
15   service.
16        If you go back to Exhibit C, tab 3, schedule 1, if you
17   look at the capital costs of providing unratcheted service,
18   it's approximately $12 million.
19        MR. BROWN:    You are on page 3 of 11 here?
20        MS. GIRIDHAR:   Page 3 of 11.   I'm looking at the table
21   there, column 5.   The capital costs will provide 10 percent
22   deliverability, on a ratcheted basis is 12 million.       The
23   capital costs of providing 10 percent deliverability on an
24   unratcheted basis is approximately twice as much, 25
25   million.   So that was just a ballpark number.     It appears
26   that up to 100 percent would cover off incremental costs
27   for unratcheted services.
28        But, again, this is on the basis of the costs we have
                                                                    147



 1   derived here under, you know, you go with market-based
 2   rates, then obviously it is -- what the value of
 3   unratcheted service is would determine what the price is.
 4          MR. BROWN:   From your point of view, if you go with
 5   market-based rates, there wouldn't be any fee determined,
 6   pricing relationship between one level of service and the
 7   other?   Whatever the relationship is, is that which would
 8   fall out of the bidding process?
 9          MR. CHARLESON:   That's correct.   The market would
10   dictate what the ratio or what the difference between the
11   levels of service are, and the value for that.
12          MR. BROWN:   If I could take you back to page 9 of
13   Exhibit C, tab 3, schedule 1.     This time, subparagraph H,
14   the other provisions.     The last sentence it reads:
15               “This provision provides further that the
16               Company’s use of storage space does not reduce
17               the flexibility of the customer to inject or
18               withdraw from storage gas owned by the customer.”
19          I guess what I want to get at is, you seem to be
20   saying, am I correct, that if the customer is not using the
21   contracted-for storage space, Enbridge might use that
22   space; correct?
23          MS. GIRIDHAR:    That's the first sentence in there,
24   yes.
25          MR. BROWN:   Even under that circumstance, at no time
26   during the course of the year would a customer be prevented
27   from utilizing that storage space in accordance with the
28   contractual parameters?
                                                                  148



 1        MS. GIRIDHAR:    Yes.
 2        MR. BROWN:    And that is true not only on a day-to-day
 3   basis, but even on an intra-day basis?
 4        MS. GIRIDHAR:    To nomination units.
 5        MR. BROWN:    Strictly to nomination units.   Sub-clause
 6   (I), I am over on page 10 now, we've got the minimum term
 7   of the contract being for one year.
 8        Has the company formulated any position on whether
 9   there will be automatic renewal rights for these contracts?
10   And if you have not, perhaps you could undertake to
11   consider that point and advise whether there will be any
12   renewal rights for those sorts of contracts.
13        MR. CHARLESON:    We will undertake to consider that.
14        MR. BROWN:    Thank you.
15        MS. SEBALJ:   That's EGD No. 40.
16        EGD UNDERTAKING NO. 40:    TO ADVISE WHETHER THE COMPANY
17        HAS FORMULATED ANY POSITION ON WHETHER THERE WILL BE
18        AUTOMATIC RENEWAL RIGHTS FOR CERTAIN CONTRACTS

19        MR. BROWN:    If I could take you to the next page,
20   which is page 11 of 11 of Exhibit C, tab 3, schedule 1,
21   paragraph 13.   The first sentence, you state:
22             “Where Rate 316 is in place or when the bill
23             program is in place, implementation of Rate 316
24             will require contract terms running from one
25             spring until the next spring, as a minimum, to
26             properly manage injection and withdrawal.”
27        Could you please explain the rationale for the
28   commencement of a contract term being the spring rather
                                                                   149



 1   than some other time during the year?
 2        MR. CHARLESON:    This is really to do with how these
 3   storage contracts would factor into our overall storage
 4   operations.    In general, we operate our storage on a
 5   single-cycle basis, where your storage contracts would
 6   typically begin an injection cycle in the spring and then
 7   move through the withdrawals in the winter.
 8        By starting the contract in the spring, it allows for
 9   the contract to run through a full injection and withdrawal
10   cycle, recognizing that if someone has an unratcheted
11   service where they can be doing it at any point in time, it
12   may not be -- you may not see the same need, from a
13   customer perspective, in terms of folding the contract that
14   way and why can't they start it at any point in time.       But
15   we need to factor those contracts into our overall plan for
16   the use of our storage to meet all customer needs.       So that
17   is why we have to look at it more on, say, the traditional
18   or conventional single-cycle basis.
19        MR. BROWN:    Assume that I am a generator.   I have just
20   negotiated a contract with the Ontario Power Authority and
21   the bill provisions in that require me to commence
22   commercial operation in the fourth quarter of the year.      I
23   come to you.    I want to get some storage.   How do I
24   negotiate a contract with you that will have a quarter four
25   start rather than a spring start?
26        MR. CHARLESON:    I think we would obviously try to find
27   a way to work with the customer to accommodate that by
28   looking to see what opportunity there was to put some form
                                                                     150



 1   of temporary or short-term storage deal in place, whether
 2   it be an off-peak or peak storage contract that would work
 3   through the intervening period up until the time when you
 4   would be able to get more into the contract in the period
 5   we are looking at.
 6           Also, the customer would have other market
 7   alternatives available to them to bridge that short-term
 8   period, whether it is some short-term storage with other
 9   providers, some short-term transportation contracts, or
10   through using spot purchases.     Again, there are tools in
11   the marketplace that are alternatives to storage.     This, I
12   can see where the customer would have the preference
13   towards storage.     But for that intervening period, you
14   know, there are different options that could be explored.
15           We would look at what could be done from a short-term
16   contract perspective or more a TS type of transaction to
17   help to support that customer as well
18           MR. BROWN:   To your knowledge, what other storage
19   companies are there out there in the market that could
20   provide a generator with the sort of service you are
21   describing?
22           MR. CHARLESON:   I haven't gone to the market to look
23   for it, but I am sure if you approach the marketers that
24   hold storage capacity, they would be interested in putting
25   some form of deal together to try to help the customer
26   while also gaining some benefit from the contracts they
27   hold.
28           MR. BROWN:   Could I ask you to go to Exhibit C, tab 3,
                                                                      151



 1   schedule 3, page 1 of 2.       This is the tariff for the Rate
 2   316, the applicability section.       In the second paragraph,
 3   it reads:
 4               “A daily nomination for storage injection and
 5               withdrawal shall also be required.”
 6        You anticipated my question.       If you go to multiple
 7   nomination windows, the injections and withdrawals, will
 8   they reflect the additional nominations?
 9        MS. GIRIDHAR:     Yes, the sentence requires a
10   correction.
11        MR. BROWN:     Thank you.    On the same page, if you go
12   down to the fuel ratio, which is identified as item 4, 0.35
13   percent for the storage reservation charge.       Then further
14   down, actually two paragraphs down, there is the sentence:
15               “In addition, for each unit of injection or
16               withdrawal, there will be an applicable fuel
17               charge adjustment expressed as a percentage of
18               gas.”
19        Is it the intent of this tariff that the fuel will be
20   charged on either injections or withdrawals, or on both?
21        MS. GIRIDHAR:     Both.
22        MR. BROWN:     In light of that answer, since it will
23   apply on both, given that the storage will likely cycle a
24   number of times throughout the year, and in ways that are
25   often counter to other flows from storage, will Enbridge
26   consider waiving the fuel charge if it is counter to other
27   flows from storage?
28        MS. GIRIDHAR:     The fuel ratio of 0.35 percent is an
                                                                    152



 1   average for our operations, so it does take into account
 2   seasonal and counter-seasonal.     So I would expect that it
 3   would apply to every injection or withdrawal.
 4        MR. CHARLESON:     I guess just to add to that as well,
 5   when we are talking about a high-deliverability service,
 6   while it may be counter-seasonal or counter-flow to what is
 7   happening seasonally, for a higher deliverability we may
 8   still have to move gas around between pools to continue to
 9   be able to honour the parameters of the contract.    So even
10   though it may be what appears to be counter-seasonal flow
11   operation, there may still have to be some movement of gas
12   that is required.
13        MR. BROWN:     So even after you do the storage that you
14   have described in your earlier evidence, you would not be
15   looking to particular pools to provide the high
16   deliverability?
17        MR. CHARLESON:     It would be done through managing all
18   of our storage assets.
19        MR. BROWN:     If I could ask you to move on to Exhibit
20   C, tab 4, schedule 2, page 1 of 3, paragraph 2.
21        You are talking about infranchise movement of gas, and
22   in the second sentence -- this is part of the ETT service.
23   In the third sentence, you say:
24             “Bundled service customers will also be subject
25             to a charge that is equivalent to the absolute
26             difference between the NEB-approved TCPL eastern-
27             zone and south-west zone firm transportation
28             controls at 100 percent load factor.”
                                                                   153



 1        I understand that that toll difference right now is in
 2   the neighbourhood of 13.4 cents a gJ?
 3        MR. CHARLESON:    Approximately.
 4        MR. BROWN:    Yes.   The question I had is, in Enbridge's
 5   view, would Union's M12 service not be a better proxy for
 6   the value of inter-franchise movement of gas from the CDA
 7   to Dawn, in which case the charge is more in the
 8   neighbourhood of seven or eight cents a gJ?
 9        MR. CHARLESON:    No.   We believe that the use of the
10   TCPL toll is appropriate because also what we are looking
11   at -- because what you are looking at here is the
12   obligation for the customers of delivery to the CDA or EDA,
13   not Parkway or Kirkwall.     So there are costs associated
14   with moving the costs between those points.
15        Again, looking for something that is a reasonable
16   proxy for, say, the difference between the two points, say,
17   from a long-haul perspective, we felt that this toll
18   differential was the most appropriate to use.
19        MR. BROWN:    Thank you very much, panel.   Those are our
20   questions.
21        MS. SEBALJ:   Thank you, Mr. Brown.
22        I think next up is Ms. Young.
23        CROSS-EXAMINATION BY MS. YOUNG:

24        MS. YOUNG:    Good afternoon.   Val Young, Aagent Energy
25   Advisors.    The good news is that I have fewer questions
26   than I did when we started out this morning, and I haven't
27   added any, so I should be --
28        MR. CASS:    And the bad news is?
                                                                    154



 1        MS. YOUNG:    There isn't any bad news.
 2        So, first of all, I have a couple of questions with
 3   respect to the proposed rates for generators.      The first
 4   question, the reference is Exhibit C, tab 2, schedule 4,
 5   page 4.   It's towards the end of paragraph 5 that finishes
 6   on that page.    It is the sentence that reads:
 7                “These plants are assumed to require 5 percent
 8                daily balancing and operate for 146 days a year.”
 9        We were just wondering, what is the basis for the 5
10   percent, and the 146 days?
11        MS. GIRIDHAR:    The 5 percent is basically based on a
12   normal probability distribution.     So they're allowed up to
13   10 percent balancing.      Chances are on average they would be
14   using 5 percent, that they wouldn't use the full extent
15   every day.
16        MS. YOUNG:    Okay.
17        MS. GIRIDHAR:    146 days is the assumed number of days
18   that a power generator would be operating; that underpins
19   all of our...
20        MS. YOUNG:    Thank you.    Next question.   Same schedule,
21   but page 7, paragraph 12, very last one.     This may tie into
22   one of the undertakings that you gave to IGUA, but there it
23   says that the load-balancing feature of Rate 125 won't be
24   available until 2008.
25        How will load balancing be done under Rate 125 in
26   2007, then?
27        MS. GIRIDHAR:    We would expect to keep the existing
28   cash-out provisions of Rate 125, so the tolerance would
                                                                     155



 1   remain at 2 percent.
 2         MS. YOUNG:   Moving on to Rate 300.   The reference for
 3   the next question is Exhibit D, tab 2, schedule 1.    It
 4   concerns the derivation of the interruptible charges.      It
 5   starts on page 4 and finishes on page 5.
 6         The sentence that we would like some clarification on
 7   is, in fact, the last sentence in that paragraph.     It says:
 8              “The customer pays the applicable unitized demand
 9              charge on a daily basis based on the actual
10              service received each day.”
11         Can you just help with what you mean by that.
12   Specifically, when and how will customers know what they
13   are paying within the range?
14         MS. GIRIDHAR:    Oh, what they pay within the range, I
15   think, would be determined contractually.
16         What it would be applied to is the actual volume
17   consumed each day.    So that is what the actual amount
18   received refers to.    So it is volumetric charge and the
19   range is there to reflect some degree of negotiability for
20   this interruptible service.
21         MS. YOUNG:   Okay, thanks.   Same exhibit, but on page
22   7.   I think you have probably covered this one; I just want
23   to confirm it.
24         Towards the end of the paragraph, at the top of page
25   7, it says:
26              “The daily load balancing suspended an
27              operational flow order days, whether in summer or
28              winter.”
                                                                     156



 1           The question is:   Does that mean -- that doesn't mean
 2   all load balancing; it means in excess of the 10 percent
 3   threshold?    Is that...
 4           MS. GIRIDHAR:   Yes.   It is in the direction that is
 5   constrained for the company.      I'm sorry, let me...
 6           [Witness panel confers]
 7           MS. GIRIDHAR:   Sorry, I misunderstand your question.
 8   On a full day, everything beyond 2 percent is suspended.
 9           MS. YOUNG:   Beyond 2 percent?
10           MS. GIRIDHAR:   Yes.   In the direction that's a problem
11   for the company.     So, in other words, if it's the
12   wintertime and the “04 day” means they cannot draft the
13   system, you cannot draft more than 2 percent, but you could
14   pack.    So it is only suspended in the one direction, the
15   direction that is a problem for the company.
16           MS. YOUNG:   And the notice for that is the 24-hour
17   notice?
18           MS. GIRIDHAR:   That is correct.
19           MS. YOUNG:   Still in the same exhibit, but page 9.
20   It's the paragraph that is marked VIII, “Unauthorized
21   Demand Overrun.”     The first sentence reads that:
22                “The unauthorized demand overrun provision
23                applies when a customer exceeds the maximum
24                number hourly or daily contract demand.”
25           If I asked the question by way of an example, that
26   might be a bit more helpful.      If a customer has a CD of,
27   say, 100 units, and they have authorization for an
28   additional 10, does this sentence mean anything over the
                                                                  157



 1   100 or anything over the 110 is unauthorized?
 2        MS. GIRIDHAR:    It would be 110, because the assumption
 3   is that the unauthorized demand occurs in the day when
 4   nothing over the contract is authorized, I think is in the
 5   assumption in here.
 6        MS. YOUNG:   In the way it was written?
 7        MS. GIRIDHAR:    In the way it was written, yes.
 8        MS. YOUNG:   Thank you.    Still in the same exhibit but
 9   now page 17, paragraph 25.     Enbridge indicates that the
10   current goal for the company to implement the unbundled --
11   new unbundled rates is 2007, but not before the rates set
12   in the company's fiscal 2007 rate case become effective.
13        A couple of questions in this area with respect to
14   timing.   Does the company mean the 2007 effective date of
15   the rates flowing from the rate case, or the implementation
16   date, to the extent they are different?
17        I think about this past year, where the effective date
18   of the rates coming from the rate case was in fact January
19   1st, but they weren't implemented until April 1st.
20        MS. GIRIDHAR:    In effect, that would be the
21   implementation date, because I am trying to think how you
22   could backdate unbundled service to the start of the year.
23   You would have to make some presumptions gas should have
24   been delivered as opposed to how it was delivered.
25        MS. YOUNG:   If the implementation date arrives and the
26   systems that are required to accommodate the unbundled
27   services aren't ready, then that would result in a delay of
28   the implementation of the unbundled rates?
                                                                   158



 1        MS. SARNOVSKY:     Yes, that's correct.
 2        MS. YOUNG:   I knew I would have a question for you.
 3        (Laughter)
 4        MS. YOUNG:   So sorry.
 5        MS. SARNOVSKY:     Yes, that's correct.
 6        MS. YOUNG:   Thanks.    Is there the possibility that the
 7   implementation of the new Rate 300 series may not occur by
 8   October 1st, 2007?
 9        MS. SARNOVSKY:     I guess that is a possibility.   I
10   think when you are talking systems changes, you have to
11   look at everything that is going on in parallel with these
12   changes.
13        And by that I mean we are currently in the process of
14   making changes to support the OEB mandate in GDAR
15   requirements and it is the same system that would be
16   involved here, that would be involved in the GDAR.
17        So we are making some pretty invasive changes.      We
18   have a very aggressive timeline right now, February 1, '07.
19   A lot of the same things we would have to change as part of
20   this proceeding also need to be modified for GDAR as well.
21        So I mean you could integrate the two so that, from a
22   testing standpoint, you ensure that everything is
23   implemented correctly, which then would mean a change to
24   one of the dates, whether it is GDAR or whether this date
25   gets delayed further.
26        If we are talking just a handful of customers - and I
27   think at the last Technical Conference I said if there was
28   something less than ten customers or so, obviously we would
                                                                    159



 1   be looking to do this manually - but based on the rates
 2   that have been put forward, the migration assumed was about
 3   1,100 customers and that couldn't be done manually.
 4        MS. YOUNG:     Any sense, at this stage of the game, of
 5   the likelihood of implementation of the unbundled rates
 6   going past that October 1st date?     The significance of the
 7   October 1st, 2007 date being that is when the phase-in of
 8   the upstream cost-allocation issues from a previous rate
 9   case is finished.
10        MS. SARNOVSKY:     At this point we would be willing to
11   see how we can implement this.     If we did it for a subset
12   of customers only on a pilot basis, obviously that is
13   something we would consider.     So we would work with parties
14   to implement this sooner rather than later.
15        MS. YOUNG:     Thank you.   Another question on the
16   scheduling issue.    How is Enbridge planning to address the
17   second part of the Board's decision in the 2006 case on the
18   issue of the Rate 300 series?     That's the portion of the
19   decision where the Board directed the company to develop a
20   process whereby customers wishing to take up the redesigned
21   unbundled rates could transition to the new rates within a
22   more condensed time frame than is currently available or is
23   basically tied to their anniversary date.
24        [Witness panel confers]
25        MS. GIRIDHAR:    We've had some discussions on that
26   aspect of the proposed discussion.     A process to do that
27   would obviously be through early termination of the
28   existing bundled contract, thus allowing the customer to
                                                                      160



 1   move to an unbundled rate.      And certainly that is -- it is
 2   something that's been discussed but we don't have a formal
 3   approach to it, as yet.
 4           It's obviously a function of us being able to
 5   accommodate that administratively in all aspects, in terms
 6   of termination, new contract, having the implementation in
 7   place, all of these things that are not quantified at this
 8   point in time.
 9           MS. YOUNG:   Do you anticipate bringing forward that
10   formal process in this proceeding, or would you expect that
11   to be part of your 2007 rate filing?
12           MS. GIRIDHAR:   I think the 2007 proceeding is probably
13   when it would be...
14           MR. CASS:    I think that is right, Val, the 2007 rate
15   case.
16           MS. YOUNG:   Thanks.   I just wondered where to look for
17   it.
18           If we could go to Exhibit D, tab 3, schedule 1, page
19   4.    It is the section on nominated storage service.    It is
20   the first part of the third sentence in that paragraph:
21                “Storage service is not available for delivery to
22                secondary delivery points.”
23           Again, if I could just ask this question by way of an
24   example.    If you have a customer who withdraws 200 units
25   from storage, and, say, on any given day the customer meets
26   their consumption of 150 units by using 50 on the pipeline
27   and 100 from storage so that they're not using a full 200,
28   does this provision, under the nominated storage service,
                                                                     161



 1   mean that the customer, say, could not move gas to Dawn and
 2   sell it?
 3           MS. GIRIDHAR:    I recall some of our discussions on
 4   this.
 5           My understanding is that the first amount of
 6   nomination would apply to balancing the account.       My
 7   recollection is that the ability to nominate to a secondary
 8   delivery point is subject to our ability to accept it.         So
 9   there is some discussion of that exercise, is how I recall
10   it.   But I could undertake to --
11           MS. YOUNG:    I was just going to say, if you would like
12   to think about it and take it as an undertaking, that is
13   fine.
14           MS. SEBALJ:    I think we are at EGD No. 41.
15           EGD UNDERTAKING NO. 41:     WITH REFERENCE TO EXAMPLE ON
16           PAGE 160, LINE 23, TO CONFIRM UNDERSTANDING THAT
17           FIRST AMOUNT OF NOMINATION WOULD APPLY TO BALANCING
18           THE ACCOUNT; AND THE ABILITY TO NOMINATE TO A
19           SECONDARY DELIVERY POINT IS SUBJECT TO EGD’S ABILITY
20           TO ACCEPT IT

21           MS. SEBALJ:    Do you just want to leave it that way on
22   the record?    Or do you want to clarify the undertaking?
23           MS. YOUNG:    I think it can stay as is, as an example.
24           MS. SEBALJ:    All right.
25           MS. YOUNG:    At the end of that same paragraph, the
26   last sentence reads:
27                “Under certain conditions, the Company may
28                restrict deliveries and withdrawals based on
                                                                      162



 1                system operating requirements.”
 2           And we have had similar discussions earlier in the
 3   day.    Does this mean that if a customer has contracted for
 4   firm Rate 315 service and is paying for it, that they're
 5   really not receiving firm service?
 6           MS. GIRIDHAR:    Well, first of all, there are ratchets
 7   that would apply.       So the notion of firm storage is firm,
 8   but subject to ratchets.
 9           I think what this particular phrase is referring to is
10   the fact that if you cannot accept injections, say, in late
11   November as a system, then the customer may not be able to
12   inject gas, if the system could not handle an injection
13   passed a point in time.       I think those are normal aspects
14   of all storage operations.       Not unique to what we are
15   proposing.
16           MS. YOUNG:   Okay, thanks.   Last two questions.   The
17   reference is Exhibit D, tab 3, schedule 2.       In the last
18   paragraph under the "Applicability" section, it states
19   that:
20                “Injection and withdrawal are to be subject to
21                ratchets as determined by the Company and as
22                posted from time to time.”
23           Our question is, how does the company see a customer
24   being able to plan its operations if the ratchets are being
25   changed from time to time?
26           MR. CHARLESON:    Why don't we undertake to respond to
27   that?
28           MS. YOUNG:   Okay, thanks.
                                                                      163



 1         MS. SEBALJ:    That's EGD NO. 42.
 2         EGD UNDERTAKING NO. 42:     TO ADVISE HOW EGD ENVISIONS A
 3         CUSTOMER BEING ABLE TO PLAN ITS OPERATIONS IF THE
 4         RATCHETS ARE BEING CHANGED FROM TIME TO TIME

 5         MS. YOUNG:    My apologies.   Earlier in that same
 6   paragraph it says:
 7                “The maximum injection rate shall be based on the
 8                level of gas posted daily by Enbridge.”
 9         Does Rate 315 have a firm maximum injection rate?
10         MS. GIRIDHAR:   It would be subject to our system
11   injection.    It would be linked to the system injection
12   rate, the operation injection rate.       I don't know what it
13   is.
14         MS. YOUNG:    Those are our questions.    Thanks.
15         MS. SEBALJ:    Thank you.
16         I think next up is Mr. Wightman.
17         CROSS-EXAMINATION BY MR. WIGHTMAN:

18         MR. WIGHTMAN:   Thank you.    First, I would like to
19   refer you to Exhibit C, tab 1, schedule 1, page 11 of 16,
20   and the paragraph number 42.
21         Just starting with the second sentence, it reads:
22                “As set out earlier, based on pricing principles,
23                if only one group benefits from increased costs,
24                then that group would pay for the costs.”
25         It goes on to talk about the high deliverability in
26   the people taking Rate 316 covering those costs.       Is that a
27   pricing principle you subscribe to, that if you are causing
28   the costs -- you are getting benefits from increased costs,
                                                                    164



 1   that group should bear those costs?
 2        MS. GIRIDHAR:     Certainly.   Cost causality.
 3        MR. WIGHTMAN:     I don't know that you need to turn it
 4   up, but just going to your April 17th undertakings,
 5   specifically the first undertaking.     I believe you were
 6   asked to show the benefits to bundled and unbundled
 7   customers of these new enhanced services.
 8        I think most of the Xs are in the unbundled section,
 9   almost all of the benefits.      The odd -- I think there is
10   maybe four or five cases where there is some claim to
11   benefit for bundled.    But basically they are going to the
12   unbundled to those who take them.
13        Then, in Undertaking No. 2 from April 17th, you were
14   asked to allocate the costs based on the EnTrac allocation
15   methodology contract, which I think was 50 percent by
16   customer number, or 50 percent by volumes, then give a
17   comparison with the GDAR, which was 100 percent customer
18   numbers.
19        The results of that allocation in both cases and, of
20   course, the GDAR was worse if you were a rate 1 customer,
21   those costs are rate 1, most of them.     I think over 90
22   percent.   And in some cases none of the costs.
23        Now, is Enbridge advocating allocating the costs when
24   it rolls these things in and does its cost allocation
25   according to either the GDAR or the EnTrac methodology?
26        MS. GIRIDHAR:     No.   The company is proposing to
27   allocate system implementation costs to all large-volume
28   customers.
                                                                     165



 1           The idea there is that the definition of benefits --
 2   obviously, you could take different approaches as to what
 3   constitutes a benefit.
 4           What you see, Xs in Undertaking No. 1, are basically
 5   functionality related.     If you take a wider view of
 6   benefits and say a benefit exists if you have more choice,
 7   the introduction of unbundled rates of services provides
 8   choice to our large-volume customers.      Therefore, we have
 9   identified all large-volume customers as potential
10   beneficiaries of the system implementation costs.
11           We have a statement in there that actually says that
12   we don't see general service customers subscribing to these
13   unbundled rates, at least not at this point in time in the
14   way they are costed.     Therefore, we are not proposing to
15   allocate these costs.
16           MR. WIGHTMAN:   Then you would expect, when you go from
17   this sort of way to get the initial rate now, before you
18   actually even have a revenue requirement or a proposed one
19   for 2007, you would -- would you expect, and based on what
20   you have just said that you might, that actually,
21   everything else equal, the introduction of these new
22   services, with some overhead costs allocated to these new
23   services, would actually lower -- other things being equal
24   -- other rates, because now there is another group and some
25   new customers to share, but they're getting the benefits of
26   legal and the overhead and the billing systems that are in
27   place, would you expect the other rate classes rates to go
28   down?
                                                                  166



 1        MS. GIRIDHAR:     Well, this is one of the issues we
 2   mentioned in that whole overview section, that the
 3   introduction of new rates and services should be viewed in
 4   the context of an overall rates proceeding, and revenue
 5   requirement determination for all of the -- spread over all
 6   of our rate classes.
 7        So, yes, when we do a full-blown cost allocation
 8   exercise, you would expect to see some allocations going
 9   from existing customers to customers of the new services.
10        MR. WIGHTMAN:     So they won't be getting the overheads
11   for free?
12        MS. GIRIDHAR:     Yes.
13        MR. WIGHTMAN:     Okay.   I think I can get rid of a
14   couple of questions.    Just a quick question.
15        Does Enbridge Gas Distribution Incorporated have any
16   infranchised customers, distribution customers that say
17   they don't want to use storage provided by Enbridge, that
18   they would rather use storage somewhere else, then deliver?
19   Do you have any customers like that?
20        MS. GIRIDHAR:     I am not aware.
21        MR. CHARLESON:     None that we are aware of.
22        MR. WIGHTMAN:     None that I know either.   But you would
23   know more than I would.
24        And there is no rate class presently that pay only the
25   incremental costs; is that correct?
26        MS. GIRIDHAR:     That's true.
27        MR. WIGHTMAN:     Okay.   Now, in that tab 1, schedule 1,
28   it is paragraph 34, but that is where I think you first
                                                                     167



 1   mention a variance account, because of the uncertainties
 2   and take-up and costs, et cetera.
 3        Now, if the Board grants you that request, that will
 4   make pretty sure that ratepayers will pay exactly the costs
 5   and it will make pretty sure that Enbridge will recover the
 6   costs; correct?
 7        MS. GIRIDHAR:    That's correct.
 8        MR. WIGHTMAN:    Pretty certain.   Good enough maybe for
 9   an auditor looking at it to say, Yeah, that's a good
10   probability?
11        MS. GIRIDHAR:    I hope so.
12        MR. WIGHTMAN:    I would like you to comment on this.
13   What if somebody said, Well, this is a different kind of a
14   capital, if you have a variance account with it.    What
15   would be the arguments in favour of calling some of that
16   investment equity and earning a rate of return on it, on
17   the equity?
18        MS. GIRIDHAR:    Sorry, you have to repeat that.
19        MR. WIGHTMAN:    You could get 100 percent cost recovery
20   virtually guaranteed; I think you just agreed.    So what is
21   the argument for earning a return on equity on that at the
22   same time?    Where is the risk, is what I'm saying?    It is
23   almost like an operating kind of cost or whatever that you
24   forecast right on, and it is trued-up.
25        MS. GIRIDHAR:    I don't believe we are devoid of any
26   risks associated with those deferral accounts,
27   traditionally.    They still undergo the subject of prudence
28   reviews by the Board.    I don't believe that this particular
                                                                    168



 1   variance account alters, in any way, the risk profile of
 2   the company.    So I wouldn't single it out for any different
 3   treatment in terms of the...
 4           MR. WIGHTMAN:    I had a feeling you wouldn't agree with
 5   that.
 6           Now, this is -- just a couple of more questions.     When
 7   you do do the cost allocation and roll these new groups in,
 8   because if you didn't do that there would be some kind of a
 9   fudge as you would have to back them out and pretend they
10   didn't exist, it would be kind of unusual, wouldn't it?
11           So when you do that, you're going to get cost
12   allocated.    Do you expect the revenue-to-cost ratio, when
13   you set out your proposed rates, all to be close to 1.0 for
14   both of these services?      Do you have any idea?
15           I mean sometimes we've seen interruptible rates with
16   revenue of just over half.      People say, Well, it is
17   interruptible, whatever.
18           Do you expect that revenue recovery will come close to
19   the costs allocated?
20           MS. GIRIDHAR:    I'm not willing to offer an opinion
21   until I actually do a cost study on those costs.
22           MR. WIGHTMAN:    Fair enough.   In response to something
23   I think Mr. Brown said, that you confirmed, I believe, that
24   if the Board were to say, no, you get cost-based rates for
25   this only, that you may decide not to proceed with it, am I
26   correct in that?
27           MR. CHARLESON:    If you are talking specifically about
28   the storage build?
                                                                     169



 1        MR. WIGHTMAN:    Yes.
 2        MR. CHARLESON:    Yes, you are correct.
 3        MR. WIGHTMAN:    I was having trouble wondering why you
 4   would be willing to forego a return on equity when the
 5   shareholders got somewhere around a billion in equity and
 6   is happy with that same return on that.     Why wouldn't you
 7   just dump it, if you've got -- if that return is not good
 8   enough?   If it is good enough on a build in –
 9        MR. CHARLESON:    You are talking about incremental
10   capital investment, and Enbridge Inc. has a number of
11   different places where it can invest its capital.       Some of
12   those investments may return 15 percent return.        So why
13   would you sell your shareholders short in terms of a
14   return?
15        Whether it would be a pension fund or whatever, or a
16   little old lady that is a shareholder of Enbridge, you want
17   to maximize -- look at what you can do to maximize the
18   returns they receive.
19        MR. WIGHTMAN:    No.    But just in that, thinking of it
20   that way, why would they keep a billion dollars tied up in
21   getting an inferior return if they've got these other
22   superior returns that are just waiting to be exploited?
23        MR. CHARLESON:     I think that is a very broad question.
24   I'm going to stay away from it.
25        MR. WIGHTMAN:    Okay.   One last question.    In paragraph
26   35 you talk about an increase to the bundled and unbundled
27   customer charge of about $50 a month.
28        What do you say to somebody that says:        Unbundled
                                                                   170



 1   doesn't make sense to me, but now I am paying $50 more
 2   because other people get a choice that's good for them?
 3           MS. GIRIDHAR:   Well, I would view this as a choice
 4   being available to all customers.     Obviously if it made
 5   sense to everybody, then bundled rates would cease to exist
 6   at some point, which may still happen.
 7           MR. WIGHTMAN:   Do you foresee any possibility --
 8   especially as you go ahead, you seem to have quite a bit of
 9   initial interest to build it, but then for whatever reason
10   you don't have the take-up rates and customers leave the
11   new classes and they go back to bundled or other services
12   and therefore the rates, the recovery, the rates in these
13   go up, then everybody leaves.     Is there any possibility of
14   some stranded costs being foisted upon, sort of, uninvolved
15   other rate classes in the long run?
16           MS. GIRIDHAR:   As a result of the rate
17   implementations?    Or were you thinking of all of the
18   incremental assets?
19           MR. WIGHTMAN:   The capital costs and everything like
20   that.    You go ahead and build it, and something like that,
21   and people say, we thought it sounded good, because you
22   have admitted, or you said -- stated that there is a lot of
23   uncertainty.    You are not really sure.
24           So you go ahead.   You get your best guess, or you are
25   told by the Board to go ahead and you go ahead and spend
26   the money.    Is there a chance that, in the end, Rate 1
27   could end up covering costs of this because it didn't work
28   out as well as people thought it would?
                                                                   171



 1        MS. GIRIDHAR:     I think certainly overall the -- you
 2   see the constant threat around this piece of evidence that
 3   revenue recovery is an issue for the company.    With each of
 4   these proposals, we tried to structure them in a manner
 5   that is fair and equitable and results in the right kind of
 6   outcomes.
 7        So if you take each of these incremental capital costs
 8   in succession, so with the rate implementation we're
 9   proposing that all large-volume customers, bundled and
10   unbundled, partake of those costs.
11        So in that instance, if a customer chooses not to be
12   unbundled but bundled, they would still first be bearing a
13   part of those costs.    We don't see the likelihood of the
14   majority of these costs going back to Rate 1 as being a
15   likely outcome.
16        With respect to storage, again, I believe we have a
17   proposal in here that if the Board mandated cost-based
18   rates, we would want a variance account that would reflect
19   variations in costs from what's been projected at this
20   point.   The intent would be to then adjust rates to these
21   unbundled rate classes so that they will cover or they pay
22   for the incremental costs.    Again, there, we don't see a
23   high likelihood these costs would go back to Rate 1.
24        So overall, the point I think we want to make is that
25   there are a lot of uncertainties as to what the true extent
26   of these costs are going to be and what the take-up is
27   going to be, because you're looking at new markets and new
28   services.   But the company has made the effort to structure
                                                                   172



 1   its proposals in such a way that the outcomes result in the
 2   least amount of costs being shifted back to general service
 3   customers, and basically ensure revenue recovery, to the
 4   extent possible.
 5        MR. WIGHTMAN:    Thank you.   Those are my questions.
 6        MS. SEBALJ:   Thank you, Mr. Wightman.
 7        Mr. Stacey.
 8        CROSS-EXAMINATION BY MR. STACEY:

 9        MR. STACEY:   Hello again, panel.    I have a question I
10   overlooked with Mr. Brown, and then I have four questions
11   on the Rate 300.
12        Rate 315 is the no-notice-storage provision.     Did the
13   company consider a similar provision for the Rate 316
14   storage?
15        MS. GIRIDHAR:    I don't believe Rate 316 lends itself
16   to no-notice storage because the company -- it's an
17   unbundled storage service at Dawn and therefore there needs
18   to be a physical link to a franchise area, which is not
19   covered off.
20        MR. CHARLESON:    There has to be some form of
21   nomination associated with the 316 service, because there
22   has to be a party at the other end of that deal at Dawn.
23        MR. STACEY:   Is there any way a no-notice provision
24   could be accommodated?    Or is it --
25        MR. CHARLESON:    When the gas is moved to Dawn, what's
26   the no-notice service that is taking it away from Dawn?
27        MR. STACEY:   So that is where the customer would have
28   his own transportation?
                                                                   173



 1        MR. CHARLESON:   But it would have to be a no-notice
 2   transportation service.    I am not aware of any such
 3   service.
 4        MR. STACEY:   Okay.   The Rate 300 maximum contractual
 5   imbalance, at the December stakeholder meeting, it was
 6   indicated it could be 100 percent of the CD, and
 7   subsequently the company has revised it down to 60 percent.
 8   I was just wondering -- I was a bit surprised.
 9        I understood there was some concern on the MCI for the
10   Rate 1.5, but on the Rate 300 I was surprised at the
11   reduction to 60 percent.    What is the reason for that?
12        MS. GIRIDHAR:    The reason there is that, again, some
13   of these issues, once we were actually going from concept
14   to the developing rates, some conditions received more
15   discussion.
16        When you look at the way the system balances today or
17   how Enbridge balances on behalf of its customers, our
18   customers typically loop, customers do provide a mean daily
19   volume to the company, which if you look at the target
20   group of customers it would typically be customers with a
21   load factor of 50 percent or above, or maybe as low as 40
22   percent and above, which means at least 40 percent of their
23   requirements would be coming off pipeline and delivered by
24   the customer in the franchise area.    Therefore, 60 percent
25   of CDs seemed to be the right number in terms of the
26   profile of these customers.
27        We should also bear in mind if today the company's
28   assets are structured to provide 60 percent balancing, if
                                                                     174



 1   you were now to offer 100 percent of CD, you would really
 2   need to go out and get more storage and transport assets to
 3   do so.    We couldn't do it with the existing assets you
 4   have.    So 60 percent is the number.
 5           MR. STACEY:   So it wasn't to make it on the same basis
 6   as the Rate 125, 60 percent level?
 7           MS. GIRIDHAR:   No, no.
 8           MR. STACEY:   I am just going to turn to the Rate 300
 9   rate schedule.    That is Exhibit D, tab 2, schedule 2.
10           On page 2, under "Authorized Demand Overrun," in the
11   first paragraph, it says:
12                “The load-balancing provisions and/or no-notice
13                storage service provisions under Rate 315 cannot
14                be used for authorized demand overrun.”
15           MS. GIRIDHAR:   Mm-hmm.
16           MR. STACEY:   I wanted to ask why they could not be
17   used.
18           MS. GIRIDHAR:   Well, the reason is that our balancing
19   services are structured to meet what the company has
20   identified as being the maximum volume consumed in a day.
21           So it is tied back to the contracts and the contract
22   demands.    So if they want a level of authorization that
23   exceeds the contract, then the onus of providing additional
24   gas should be on the customer.     There should not be a
25   reliance on these other assets to cover them off for the
26   authorized overrun peaks.
27           MR. STACEY:   Well, if I had some volume of gas in my
28   load-balancing account, could I leave that out and use it
                                                                    175



 1   for this purpose?    Or you're saying I couldn't?
 2        MS. GIRIDHAR:    Well, you would have to nominate it.
 3   The problem here is that the balancing services are
 4   essentially no notice, so they're unscheduled.      But if
 5   you're in an authorized overrun situation, you know about
 6   it ahead of time, so you really should be nominating that
 7   quantity of gas.
 8        [Witness panel confers]
 9        MR. STACEY:    But if I have -- if I want to exceed my
10   contract demand, and I'm going to seek authorization from
11   Enbridge, but if I have, say, 60 percent of my CD in my
12   balancing account, could I not pull some of that gas out of
13   there for purposes of the request?
14        MS. GIRIDHAR:    It would have to be pulled out on a
15   nominated basis, not on a no-notice basis.     The no-notice
16   provision is subject to contract demands.
17        MR. STACEY:    But under the load-balancing provisions,
18   it is a load-balancing provision.     But if I nominate it, I
19   could potentially use it on an authorized basis?
20        MS. GIRIDHAR:    Subject to check.   I just wanted to
21   reconfirm that that is possible.     I do believe that is how
22   you would have to do it.      You couldn't rely on the no-
23   notice aspect of the balancing service.     You have to
24   specify that you wanted that gas to be used.
25        MR. STACEY:    Okay.   If you want to get back to me, I
26   don't know whether it would be an undertaking, if that is
27   not true, correct or whatever.
28        MS. GIRIDHAR:    Okay.
                                                                    176



 1          MR. STACEY:   Thank you.
 2          MS. SEBALJ:   That is EGD NO. 43.
 3          EGD UNDERTAKING NO. 43:     TO CONFIRM THAT VOLUMES IN A
 4          LOAD-BALANCING ACCOUNT CAN BE NOMINATED TO SUPPLY AN
 5          AUTHORIZED DEMAND OVERRUN

 6          MS. SEBALJ:   Just so that I am clear, Mr. Stacey, that
 7   is checking with respect to the ability to provide no-
 8   notice service under the Rate 300 schedule?       Or is it more
 9   specific than that?
10          MR. CHARLESON:   No.    It is confirming that volumes in
11   a load-balancing account can be nominated to supply an
12   authorized demand overrun.
13          MS. SEBALJ:   Is that correct?
14          MR. STACEY:   That's correct.
15          MS. SEBALJ:   Thanks.
16          MR. STACEY:   Now, Mr. DeRose's Undertaking 31, I was
17   just wondering if Rate 100 and Rate 135 could be added to
18   that request.
19          MS. GIRIDHAR:    100 and --
20          MR. STACEY:   Rate 135.    Is that okay?
21          MS. SEBALJ:   Sorry.    You're going to have to -- which
22   question are we talking about?
23          MR. STACEY:   This would be Enbridge Undertaking 31.
24          MR. CASS:   It was at question number 8, with reference
25   to Undertaking No. 31.
26          MS. SEBALJ:   We are adding to the list of rates, Rate
27   135.
28          MR. STACEY:   Rate 100 and Rate 135 to the list of
                                                                  177



 1   rates in the question.
 2        MS. SEBALJ:     That's acceptable?
 3        MS. GIRIDHAR:    Yes.
 4        [Note:   See Undertaking No. 31 – Rates 100 and 135
 5        added to list]

 6        MR. STACEY:   Again, the last question -- before I run
 7   off and do some rate modelling and compare the bundled
 8   services to the unbundled services for Rate 300, I was
 9   wondering if you could help me out.
10        You have some rate models.    I recall from some of your
11   rate proceedings you show typical customers, for example,
12   Rate 100 customers, a Rate 110 or 115 at a realistic load
13   factor, and you will run through the different rates,
14   current and proposed.
15        MS. GIRIDHAR:    Yes.
16        MR. STACEY:   I'm wondering whether you could help me
17   out with that type of analysis.
18        MS. GIRIDHAR:    I'm not sure if those models would
19   suffice here, because those models don't look at daily
20   consumptions, which is what you would need to compare
21   bundled service and unbundled service, you really need to
22   model 365 days of the year.
23        Our existing models look at monthly consumption, so I
24   am not sure they would assist in terms of this comparison.
25        MR. STACEY:   What if we assumed the unbundled rates or
26   service -- customers able to balance it perfectly, so that
27   there weren’t any load-balancing charges.
28        MS. GIRIDHAR:    The profiles would be available in our
                                                                 178



 1   rate handbook so we could provide those profiles to you.
 2   But we do view our rate models as being proprietary.
 3        MR. STACEY:     I'm wondering if you would punch out some
 4   of the results.    Like, for a Rate 100, Rate 110, 115, 135,
 5   145 and 170 for a typical customer in that class.
 6        What I would like to see is the current bundled rates
 7   and then I would like to move to the -- you mentioned in
 8   your evidence, by October 2007 the phase-in of the upstream
 9   cost-allocation changes will be complete and the T-service
10   credit would be eliminated by then.
11        So then I want to see -- that's when you expect the
12   potential migration to the unbundled rates.    So I would
13   like to see that done with those rates.
14        Then for each of those groups of customers, the
15   current bundled, or the current unbundled Rate 300, and
16   then with the proposed Rate 300 rates.
17        MS. GIRIDHAR:    I don't know that the current Rate 300
18   would be an appropriate factor to take into consideration.
19        I think essentially our response to Undertaking No. 31
20   would tell you what we believe are the factors that would
21   dictate migration.    We are looking at it purely from a
22   distribution perspective.
23        To take into account the phase-in of cost-allocation
24   changes is really looking at short-term, built-in biases
25   that exist today in terms of how we allocate upstream costs
26   and they are a tempting phenomenon.    The true comparator is
27   distribution rates and we have undertaken to provide that
28   undertaking response, so I believe that should be adequate.
                                                                 179



 1        MR. STACEY:   Will that give me the economic rate or
 2   rate basis between the --
 3        MS. GIRIDHAR:    -- between bundled and unbundled, yes.
 4        MR. STACEY:   Could you provide what that difference
 5   would be based on the projected bundled rates for October
 6   2007 as well?
 7        MS. GIRIDHAR:    We don't have a presumption as to what
 8   the distribution rates are going to be for bundled service
 9   as of October 2007.   That would be part of our 2007
10   proceeding.
11        So what we can offer you is what the economics would
12   be between our 2006 bundled distribution rates and the
13   proposed Rate 300, because the proposed Rate 300 has
14   actually been developed off our 2006 Board-approved costs,
15   so that would be the right comparator at this point.   We
16   don't have a proposal for rates for October 2007.   That
17   would be part of our 2007 rates case.
18        MR. STACEY:   Could you make the assumption or just
19   adjust the current rates for the -- for that, is it one or
20   two final phase-in of the upstream costs, so that we --
21   because as I -- I tend to agree with I think your evidence
22   that bundled customers would typically -- might wait until
23   October of 2006 to make the move.
24        MS. GIRIDHAR:    We have stripped-out -- maybe I should
25   explain this.
26        We have stripped out everything other than
27   distribution costs when we look at the comparison between
28   bundled and unbundled rates, because from our perspective,
                                                                   180



 1   a customer who pays lower distribution charges on unbundled
 2   rates is a likely candidate to move to unbundled rates.
 3        The phase-in impacts are all upstream on distribution
 4   rates. They don't affect distribution rates at all.    So I
 5   don't see them as being a factor in terms of determining
 6   migration or comparison between bundled and unbundled
 7   rates.
 8        When it comes to distribution rates, there is no
 9   reason to presume, at this point, that using projected 2007
10   numbers is going to yield anything different than 2006,
11   because I will have to bump up the unbundled and bundled
12   distribution rate by a percentage, which you know is
13   conjectural at this point.
14        So I think this does -- not to be argumentative, but I
15   do believe that the response to Undertaking No. 31 would
16   give you that information.
17        MR. STACEY:    Okay, thank you.   Thank you for your
18   clarification.    Sorry to -- it looks like I went down the
19   wrong path on that.    Thank you.   Those are my questions.
20        MS. SEBALJ:    Thanks, Mr. Stacey.   I see the court
21   reporter looking at me, but we actually are finished,
22   except for -- I think we are finished.
23        Is there anyone else that is intending to ask
24   questions that may not be on my list?     The Board support
25   team has a couple of questions, and then we can close.      Is
26   that all right?    I think, honestly, it will be less than
27   five minutes.
28        QUESTIONS FROM THE BOARD SUPPORT TEAM:
                                                                   181



 1          MS. SEBALJ:   I have a couple of what I think are
 2   clarifying questions.    I think you actually just answered
 3   my question in your last answer, which is clarifying the
 4   basis upon which these rates were derived.
 5          I am assuming it is on the 2006 rate case cost-
 6   allocation methodology?
 7          MS. GIRIDHAR:   That's correct.
 8          MS. SEBALJ:   Now, I wanted to ask, again, this is
 9   clarifying, it may be by way of undertaking, not because
10   you couldn't do it on the spot, but just because it is, you
11   know, I would like it to be sort of on one page.
12          This goes to -- it is sort of a continuation of Mr.
13   DeRose's -- one of the undertakings to Mr. DeRose and some
14   of the questions from Ms. Young.    But it would be helpful
15   if we could have what amounts to essentially a table with
16   each of the four rates, then with information on the
17   implementation costs in a column, and then the proposed
18   implementation dates in a column.
19          I say "proposed" because I understand from the
20   evidence that they're not necessarily certain.    I guess I
21   would phrase it as your preferred implementation date, if I
22   can.
23          MS. GIRIDHAR:   Okay.
24          MS. SEBALJ:   Then based on those implementation dates,
25   I guess working backward, whether it would be based on your
26   fiscal 2007 rate hearing, the allocation methodology, or
27   how you propose to derive those rates.
28          MS. GIRIDHAR:   Okay.
                                                                     182



 1          MS. SEBALJ:   Is that possible?   I think it is all in
 2   here; it is just a matter of putting it all in one place.
 3          MS. GIRIDHAR:   We can certainly try to do that.
 4          MS. SEBALJ:   So if we can mark that as EGD No. 44.
 5          EGD UNDERTAKING NO. 44:   TO PROVIDE A TABLE CONTAINING
 6          EACH OF THE FOUR RATES, INFORMATION ON THE
 7          IMPLEMENTATION COSTS, PROPOSED IMPLEMENTATION DATES,
 8          AND HOW EGD PROPOSES TO DERIVE THESE RATES

 9          MS. SEBALJ:   I think I am going to turn it over to Mr.
10   Man.
11          MR. MAN:   Good afternoon, panel.   I want to go back to
12   Rate 125, your rate schedule, Exhibit C, tab 2, schedule 3
13   and page 1.
14          In the second paragraph of your rate schedule, you
15   mentioned the character of service.
16          As I understand it you have two cases, one is what you
17   called non-dedicated service and the second case is
18   dedicated service.
19          Within this dedicated service you have something
20   called the building contract demand, which could be 100
21   percent or less than 100 percent of the contract demand.
22   That would allow you to maybe develop a rate that is
23   competitive with bypass.
24          MS. GIRIDHAR:   Yes.
25          MR. MAN:   Am I correct in that interpretation?
26          MS. GIRIDHAR:   Yes.
27          MR. MAN:   Is this a common practice in the industry,
28   to use building contract demand?
                                                                   183



 1        MS. GIRIDHAR:    This is a proposal precisely directed
 2   at providing rates that are robust against bypass for a
 3   group of customers that the Board has ruled as being
 4   amenable to bypass. So while it is not a common practice, I
 5   should mention that when Rate 125 was introduced in 2001,
 6   one of the purposes of Rate 125 was, in fact, to be used
 7   robust against bypass, but certainly in keeping with the
 8   objectives of Rate 125.
 9        MR. MAN:   So do you have a set methodology in setting
10   this building contract demand?    Or is it a negotiable item?
11        MS. GIRIDHAR:    The methodology was outlined in a
12   response to a Board Staff interrogatory in our Sithe bypass
13   application, and I believe I have undertaken to provide
14   that, so I believe that would explain the methodology.
15        MR. MAN:   Can you provide a copy of the service
16   contract as well?    Is that in that package?
17        MS. GIRIDHAR:    The service contract?
18        MR. MAN:   In your tariff schedule you mentioned
19   something called a service contract.    That would define the
20   billing contract method.
21        MS. GIRIDHAR:    The service contract would define a
22   physical quantity as billing contract demand.    I think what
23   we talked about here was the methodology to set the billing
24   contract demand that could be used for any dedicated --
25   situation.
26        MR. MAN:   That would be in that package?
27        MS. GIRIDHAR:    That would be in response to the Board
28   staff IR information.
                                                                    184



 1        MR. MAN:   So let me shift to the comparison between
 2   Rate 125 and Rate 300.    There is no specific reference.      I
 3   understand this morning you explained the rationale for
 4   having a different demand charge for these two rates.
 5        I believe this afternoon, when you answered Mr. Brown
 6   on the difference between the cumulative balancing charge
 7   between the two rates.     Are there any other differences in
 8   the other terms and conditions of these two rates that you
 9   can highlight to us?
10        MS. GIRIDHAR:     Rate 300 has a somewhat more liberal
11   balancing provision than Rate 125.    So, for instance,
12   because of the size of customers in Rate 125 and the
13   expected unpredictability of their load profile and its
14   implications for us, we have limited the ability to draft
15   in the winter time to ten percent of their MCI, while under
16   Rate 300, that there is no such limitation.     They could
17   draft up to their full MCA. Conversely in the summertime,
18   Rate 125, we may impose or limit the ability to pack to
19   approximately ten percent of MCI.    Under Rate 300, again,
20   they could pack until their MCI.
21        So the load-balancing provisions are slightly
22   different and they reflect the concern we have with certain
23   size of customers and their load profiles and their
24   implications for system reliability and the costing of --
25        MR. MAN:   Are there any conditions that are similar?
26        MS. GIRIDHAR:     I believe everything else is similar.
27        MR. MAN:   Okay, that clarifies my question.    Is it
28   possible for you to highlight the changes that you have
                                                                    185



 1   made to the existing rate schedules?      I am talking about
 2   Rate 125, which is existing, I believe.      Rate 300.   Is 315
 3   existing too?
 4        MS. GIRIDHAR:    Yes.
 5        MR. MAN:    But 316 is new; right?
 6        MS. GIRIDHAR:    That's right.
 7        MR. MAN:    So is it possible for you to undertake to
 8   highlight the changes to those rate schedules?
 9        MS. GIRIDHAR:    We could list sort of at a high level
10   what is different.
11        MR. MAN:    I understand in a regular rate case usually
12   you mark up the old rate schedule and highlight the
13   changes.    Am I incorrect in that?
14        MS. GIRIDHAR:    Well, the reason why I have some
15   difficulty is that Rate 300 and Rate 315 have essentially
16   been redesigned.    So I can't even think of what is common
17   between the two.
18        With respect to 125, we could certainly do that.
19        MR. MAN:    Okay.
20        MS. GIRIDHAR:    We could highlight the changes.
21        MR. MAN:    Those are my questions.    Thank you.
22        MS. SEBALJ:     So I guess in response to that last
23   question, can we mark that as EGD No. 45, to provide what
24   is essentially a blackline of Rate 125 against the
25   original.
26        MS. GIRIDHAR:    Yes.
27        EGD UNDERTAKING NO. 45:     TO PROVIDE A BLACKLINE OF
28        RATE 125 AGAINST THE ORIGINAL
                                                                   186



 1        MS. SEBALJ:   Thanks.   I believe, unless Mr. Cass you
 2   have anything to add, that we are ready to close.
 3        PROCEDURAL MATTERS:

 4        MR. CASS:    I just have one thing, Kristi, if I may, it
 5   is on the subject of undertakings.
 6        MS. SEBALJ:   Yes.
 7        MR. CASS:    Obviously, we have 33 undertakings today as
 8   opposed to the 12 from the previous day.    The company, of
 9   course, is going to do everything it can to answer them all
10   by the deadline.    I just wanted to say, because of the
11   number -- and I think the scope of some of them as well --
12   I hope if the company is not able to 100 percent meet the
13   deadline, that perhaps the Board and others will bear with
14   us on that.
15        MS. SEBALJ:   I will obviously mention that to the
16   panel.
17        What I would ask is that whatever is able to be
18   complete by -- what is the date, the 8th?
19        MR. CASS:    Yes, it is.
20        MS. SEBALJ:   By the 8th is filed, and we will expect
21   it shortly thereafter.
22        MR. CASS:    In the best of all worlds, it will be
23   everything on the 8th.    But just in case there is some
24   stragglers that come in late, people will understand there
25   is quite a bit of work to be done.
26        MS. SEBALJ:   Yes.   And we assume you have nothing to
27   do between now and May, other than this.
28        Thank you.    Did you have something to add, Mr. Stacey?
                                                                     187



 1          MR. STACEY:   I was just wondering, on your last
 2   undertaking 44, if the company could add Rate 100 and 135
 3   in that.   I think you mentioned you have the table for the
 4   four rates.
 5          MS. SEBALJ:   I may have not have been specific, I
 6   meant these four rates, obviously the 125, 315, 300 and
 7   316.
 8          MR. STACEY:   I'm sorry then.     These weren't the
 9   bundled rates?
10          MS. SEBALJ:   No.
11          MR. STACEY:   Sorry, sorry.
12          MS. SEBALJ:   All right.      Thanks very much for the long
13   day and thank you to everyone for coming.        And I suppose we
14   will hear from many of you on May 1st.        We are looking
15   forward to the volumes and volumes, but we will see
16   everyone on May 16th.      Thanks.
17          --- Whereupon hearing adjourned at 3:30 p.m.
18
19
20
21
22
23
24
25
26
27
28

								
To top