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proceedings at hearing - the British Columbia Utilities Commission

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									   BRITISH COLUMBIA UTILITIES COMMISSION
  IN THE MATTER OF THE UTILITIES COMMISSION ACT
             S.B.C. 1996, CHAPTER 473

                           And


BC Hydro – 2008 Residential Inclining Block Application




                                            Vancouver, B.C.
                                              June 16, 2008




          PROCEEDINGS AT HEARING


BEFORE:


          A. C. Pullman,              Chairperson

          B. Milbourne,               Commissioner
          L. O'Hara,                  Commissioner



                       VOLUME 2


                   Allwest Reporting Ltd.
                       1125 Howe Street
                        Vancouver, B.C
                                   APPEARANCES


G.A. FULTON, Q.C.   Commission Counsel


J. CHRISTIAN        British Columbia Hydro and Power Authority
J. NYLAND
J. SOFIELD


J. QUAIL            B.C. Old Age Pensioners' Organization, Council Of Senior
L. WORTH            Citizens' Organizations, Federated Anti-Poverty Groups Of B.C.,
                    West End Seniors' Network (BCOAPO)


M. GHIKAS           Terasen Gas Inc (TGI), Terasen Gas (Vancouver Island) Inc.
                    (TGVI), and Terasen Gs (Whistler) Inc. (Collectively Terasen
                    Utilities)


M. LEYLAND          FortisBC Inc
D. SWANSON


P. COCHRANE         City of New Westminster
R. CARLE


R. B. WALLACE       Joint Industry Electricity Steering Committee (JIESC)


C. WEAFER           Commercial Energy Consumers of British Columbia et al (CEC)
D. CRAIG


A. KEMP             Rental Owners and Managers Society of B.C.


D. BURSEY           Corix Multi-Utility Services Inc.
I. WIGINGTON

W.J. ANDREWS        B.C. Sustainable Energy Association, Sierra Club of Canada,
                    British Columbia Chapter (BCSEA)


L. BERTSCH          Energy Solutions for Vancouver Island Society
BC Hydro - RIB
Volume 2, June 16, 2008                                               Page: 71


1                                                            CAARS

2                                                            VANCOUVER, B.C.

3                                                            June 16, 2008

4           (PROCEEDINGS RESUMED AT 9:32 A.M.)

5    THE CHAIRPERSON:         Please be seated.

6                         Good morning, ladies and gentlemen.                    My

7           name is Tony Pullman.            With me on the Panel today is

8           Commissioner Liisa O'Hara on my left, and Commissioner

9           Bob Milbourne on my right.

10                        First let me introduce the Commission Staff

11          in attendance today.           Lead Staff is Ms. Eileen Cheng.

12          Also in attendance from the Commissioner are Tony

13          Roberts and Staff Consultant George Isherwood.

14          Commission Counsel for this proceeding is Mr. Gordon

15          Fulton, Q.C., of the Boughton Law Corporation, and the

16          Hearing Officer today is Mr. Hal Bemister.

17                        British Columbia Hydro & Power Authority,

18          better known as B.C. Hydro, filed its residential

19          inclining block application on February the 26th, 2008.

20          B.C. Hydro seeks an order that: (1) approves its

21          residential inclining block rate structure effective

22          October 1st, 2008, whereby Rate Schedules 1101 and 1121

23          shall be amended and filed with the Commission on or

24          before September 30th, 2008, to reflect a Step 1

25          threshold of 1600 kilowatt hours per bi-monthly

26          billing period, a basic charge of 12.38 cents per day,

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1           a Step 1 rate of 6.28 cents per kilowatt hour, and a

2           Step 2 rate of 6.98 cents per kilowatt hour; (2)

3           approves new Rate Schedules 1151 and 1161 for those

4           customers on exempt residential service showing a

5           basic charge of 12.93 cents a day and a flat rate of

6           6.55 cents per kilowatt hour; and (3) that directs

7           B.C. Hydro on or before February the 28th, 2009 to file

8           Rate Schedules 1101, 1121, 1151 and 1161 that are to

9           be effective April 1st, 2009, reflecting the revenue

10          requirement then applicable to the fiscal year

11          beginning April 1st, 2009.

12                        On February the 28th the Commission issued

13          Order G-28-08, which established a procedural

14          conference to be held on April 28th, 2008, and which

15          was followed by Order No. G-31-08, which established a

16          regulatory timetable.            Pursuant to Order No. G-31-08,

17          the first round of information requests was issued by

18          the Commission on March 18, 2008, and by intervenors a

19          week later on March 25th, and B.C. Hydro's response to

20          this round of IRs was received on April 18th, 2008.

21                        Following the procedural conference, the

22          Commission issued Procedural Order No. G-76-08 dated

23          April 30th, 2008, which established that the

24          application would be heard in an oral public hearing

25          and which set out a revised regulatory timetable for

26          the oral public hearing process.                          A second round of

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1           information requests was issued by the Commission and

2           by intervenors on May the 5th, 2008.                      B.C. Hydro's

3           responses to this round of information requests were

4           received on May 20th and 22nd, 2008.

5                         The only intervenor to file evidence was

6           Energy Solutions for Vancouver Island, which filed its

7           evidence on May the 27th, 2008 in accordance with an

8           extension granted to it by the Commission on a latter

9           date, May 23rd, 2008.

10                        On May 29th, 2008 the Commission issued a

11          letter addressed to all parties seeking their views on

12          the need for a staff issues list and a panel issues

13          list in the present proceeding.                      Responses were

14          received from B.C. Hydro and from all intervenors

15          except one.    The intervenors' responses did not

16          demonstrate any consensus, and the Commission issued a

17          letter dated June 4th, 2008 to all parties stating that

18          after reviewing the submissions, the Commission Panel

19          found that there was no need for either a panel issue

20          -- final issues list, or a staff issues list, given

21          B.C. Hydro's submission that it was prepared to

22          respond to topics and issues raised in the application

23          and in information requests.

24                        June the 5th, 2008, the Commission Panel

25          issued its own information request to B.C. Hydro, with

26          an instruction that B.C. Hydro should use its best

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1           efforts to reply by June 12th, 2008.                       This prompted a

2           response from Mr. Christian, B.C. Hydro's counsel,

3           which expressed a concern that a number of the panel

4           IRs implied that the Commission is considering the

5           establishment of rate structures that are not merely

6           variations on what B.C. Hydro has proposed in its

7           application, but are radically different from anything

8           B.C. Hydro or any other intervenor has proposed.

9                                                 Proceeding Time 9:37 a.m. T01A

10                        The Commission responded ton June the 11th,

11          2008, to Mr. Christian, stating in part that the

12          Commission Panel confirms, as it did in its letter of

13          February the 28th to the BCOAPO, Exhibit B-3, BCUC

14          1.1.1, attachment 1, that all views remain open for

15          active consideration in the regulatory process.

16                        On June the 10th, the Commission issued

17          Exhibit A-14, which provided procedural information to

18          all parties from which you can see that following my

19          opening statement, Mr. Fulton will call the roll of

20          appearances, after which each party has the

21          opportunity to make an opening statement.

22                        So without further ado, I'll ask Mr. Fulton

23          to call the roll.

24   MR. FULTON:          Thank you, Mr. Chairman.                     Good morning,

25          Panel.

26                        British Columbia Hydro and Power Authority.

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1    MR. CHRISTIAN:            Good morning, Mr. Chairman, Commission

2           panel.        Jeff Christian for B.C. Hydro and Power

3           Authority.       With me today is Jennifer Nyland, N-Y-L-A-

4           N-D, temporary articling student with our firm, and

5           also next to me on my immediate right, Joanna Sofield,

6           Chief Regulatory Officer of B.C. Hydro.

7    MR. FULTON:            B.C. Old Age Pensioners' Organization et al.

8    MR. QUAIL:            Good morning, Mr. Chair and panel members.

9           Jim Quail appearing for BCOAPO et al, and with me is

10          Ms. Leigha Worth, also Mr. Bill Harper, our expert

11          consultant, or one of our expert consultants, is with

12          me.       And I'd also like to introduce, for panel members

13          who may not have met him yet, Mr. Eugene Kung.                           He

14          articled with our organization and we're keeping him

15          on, so he's now on full-time staff as a newly-called

16          lawyer, and is here to catch the spectacle, I suppose.

17   THE CHAIRPERSON:             Thank you, Mr. Quail.

18   MR. FULTON:            Terasen Utilities.

19   MR. GHIKAS:            Mr. Chairman, Commissioners, my name is Matt

20          Ghikas.        I'm acting on behalf of Terasen Gas Inc.,

21          Terasen Gas (Vancouver Island) Inc. and Terasen

22          (Whistler), known as the Terasen Utilities.

23   MR. FULTON:            FortisBC Inc.

24   MR. LEYLAND:            Good morning.             Michael Leyland and Dennis

25          Swanson, representing FortisBC.

26   THE CHAIRPERSON:             Sorry, how do you spell your name?

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1    MR. LEYLAND:           Leyland, L-E-Y-L-A-N-D.

2    THE CHAIRPERSON:            Thank you.

3    MR. FULTON:            City of New Westminster.

4    MS. COCHRANE:            Good morning, panel.                       Penny Cochrane,

5           Willis Energy Services, here representing the City of

6           New Westminster, to be joined by Rod Carle, general

7           manager of the electric utility at the New West --

8           City of New Westminster.

9    MR. FULTON:            Peace River Regional District.                       No response.

10                          Joint Industry Electricity Steering

11          Committee.

12   MR. WALLACE:           R. B. Wallace, appearing on behalf of the

13          Joint Industry Electricity Steering Committee.                                Thank

14          you.

15   THE CHAIRPERSON:            Mr. Wallace.

16   MR. FULTON:            Commercial Energy Consumers of British

17          Columbia.

18   MR. WEAFER:            Good morning, Mr. Chairman and members of

19          the panel.       Chris Weafer, appearing for the Commercial

20          Energy Consumers of British Columbia and assisted by

21          David Craig of Consolidated Management Consultants,

22          who consults for the Commercial Energy Consumers.

23          Thank you.

24   MR. FULTON:            Rental Owners and Managers Society of B.C.

25   MR. KEMP:            Good morning.         My name is Al Kemp, the CEO of

26          the Rental Owners and Managers Society of B.C.,

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1           representing B.C.'s residential landlords.

2    MR. FULTON:            Corix Multi-Utility Services Inc.

3    MR. BURSEY:            Good morning, Mr. Chairman, Commissioners.

4           My name is David Bursey, representing Corix Multi

5           Services Utilities Inc., and with me today is Mr. Ian

6           Wigington, who is assisting me.                          Thank you.

7    THE CHAIRPERSON:             Mr. Bursey.

8    MR. FULTON:            B.C. Sustainable Energy Association, Sierra

9           Club of Canada, B.C. chapter.

10   MR. ANDREWS:            Good morning, Mr. Chairman, members of the

11          panel.        William J. Andrews, representing B.C.

12          Sustainable Energy Association and the Sierra Club of

13          Canada, B.C. Chapter.

14   THE CHAIRPERSON:             Mr. Andrews.

15   MR. FULTON:            Energy Solutions Vancouver Island Society.

16                                                       Proceeding Time 9:42 a.m. T2

17   MR. BERTSCH:            Ludo Bertsch representing Energy Solutions

18          for Vancouver Island Society.                        Thank you.

19   THE CHAIRPERSON:             Mr. Bertsch.

20   MR. FULTON:            Is there anyone else here present this

21          morning whose name I have not called who intends to

22          appear and participate in these proceedings?

23                           No response, Mr. Chairman.                    That concludes

24          the appearances for this morning.

25   THE CHAIRPERSON:             Thank you, Mr. Fulton.                   There being no

26          further ado, can we start off with the opening

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1           statement?

2    MR. FULTON:          Yes, we can, Mr. Chairman, and I thought

3           what I would do, for the benefit of the Panel,

4           indicate who was making opening statements to the

5           Commission Panel this morning.                      And as I call the

6           names, that will be the order in which they make the

7           opening statements.           British Columbia Hydro, BCOAPO,

8           Terasen Utilities, JIESC, Commercial Energy Consumers

9           of B.C., Rental Owners and Managers Society of B.C.,

10          B.C. Sustainable Energy Association, and Energy

11          Solutions for Vancouver Island Society.                      And with that

12          introduction then, Mr. Chairman, I will turn the mike

13          over to Mr. Christian.

14   THE CHAIRPERSON:          Thank you, Mr. Fulton.

15   OPENING STATEMENT BY MR. CHRISTIAN:

16   MR. CHRISTIAN:         Thank you, Mr. Chairman.                   I only have the

17          briefest of opening comments to make.

18                        B.C. Hydro's application for a residential

19          inclining block rate for its residential customers was

20          filed on February 26, 2008.                   That's Exhibit B-1 in

21          this application.         The proposed residential inclining

22          block, what we'll be referring to as the RIB

23          throughout this proceeding, is a tariff structure that

24          is easy to understand; a suitable foundation for

25          further residential rate design; it satisfies the

26          eight rate design criteria accepted by this Commission

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1           as the appropriate basis upon which to consider rate

2           structures in the 2007 decision; and finally, but not

3           least, provides some new material level of

4           conservation and therefore furthers the goals of the

5           2007 Energy Plan.

6                         The evidence in support of those

7           propositions, of course, is in the application itself

8           and in the approximately 700 responses to information

9           requests that B.C. Hydro has filed since the inception

10          of this proceeding.

11                        To answer questions with respect to all

12          those issues, we'll be putting up one panel of

13          witnesses.    Beverly Van Ruyven is the executive vice-

14          president of customer care and conservation.                     She's

15          the senior policy witness on the panel.                   Ms. Bridgette

16          Zacharias, she's the director of customer care and

17          she'll be chairing the panel.                    Dr. Ren Orens, a

18          principal of Energy and Environmental Economics, a

19          consulting firm out of San Francisco that has been

20          retained by B.C. Hydro to assist in development of

21          this rate.    And finally Mr. Ken Tiedemann, manager of

22          Power Smart Evaluation.              Those witnesses would be

23          prepared to answer questions as stated in the letter

24          that I filed a few weeks ago now, I guess.                     The

25          Commission Panel is aware that there are some IR

26          responses that B.C. Hydro declined to respond to

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1           relating to issues that it feels are more properly the

2           subject of the long-term acquisition plan filing that

3           B.C. Hydro did just last week, on June 12th I believe

4           it was.        Whether or not any objections are taken to

5           the questions relating to that application in the

6           course of this proceeding remains to be seen,

7           depending on the question, of course.                         We're not just

8           stating it as a blanket rule we'll be jumping up to

9           talk about the LTAP one way or another.                         But just so

10          the Commission is aware that that is one area where we

11          have identified there have been some problems about

12          giving evidence in this proceeding.

13                           I just want to also bring to the Panel's

14          attention one legal issue that I know is going to

15          arise.        I'm not sure that it's going to necessarily

16          arise in the course of the oral phase of this hearing.

17          It'll certainly arise in the argument.                        The Panel is

18          aware that Mr. Quail on behalf of BCOAPO et al has put

19          on the record a recent decision from the Ontario Court

20          of Appeal regarding the establishment of Lifeline

21          rates in Ontario.            I understand that Mr. Quail will be

22          raising that issue, that jurisdictional issue

23          effectively in argument and intends to address it in

24          argument.       I would point out, though, there is no

25          proposal by any intervenor, of course, for any

26          particular Lifeline rate before the Commission at this

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1           time.

2                                                    Proceeding Time 9:47 a.m. T03

3                          With that, is the end of my opening

4           comments.      The only other thing I can add is that it

5           might be helpful for the Commission to know that we do

6           have some of the Commission Panel IRs prepared to

7           file, and we can do that before the witnesses are

8           seated or not, at the Commission's pleasure.                       So, I've

9           got a few ready to go, I'll have a few more later this

10          morning, and a couple other corrected IRs that are

11          also ready to be filed.                And again, I'm in your hands

12          as to when the appropriate timing for that would be.

13   THE CHAIRPERSON:           Why don't we wait until the end of

14          proceedings today, and you can put them all in?

15   MR. CHRISTIAN:          That sounds excellent.

16   THE CHAIRPERSON:           And we can read them overnight.

17   MR. CHRISTIAN:          Good.        Thank you.

18   THE CHAIRPERSON:           Thank you, Mr. Christian.

19   OPENING BY MR. QUAIL:

20   MR. QUAIL:           My friend, Mr. Christian, has pointed out the

21          RIB application was filed back in February.                       Since

22          that time a significant event took place, which in my

23          submission dramatically changes the picture, and that

24          was the introduction and enactment of Bill 15,

25          amending The Utilities Commission Act, which, in my

26          submission, changes the entire picture and the

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1           foundation for this application.                             Bill 15 being an

2           exceptionally prescriptive piece of legislative

3           intervention.

4                           Backing up a little bit, it will be our

5           position, we believe the evidence will confirm that

6           the conservation potential of the residential

7           inclining block rate is highly uncertain.                             I submit

8           that if we're going to do this for the sake of

9           conservation, we have to ask ourselves, "Is this in

10          fact one of our better options to achieve

11          conservation?"        Given that, for example, the RIB Step

12          2 exceeds its avoided cost in relation to DSM programs

13          in a newly-filed LTAP, that there may well be much

14          preferable ways, more economically efficient ways, of

15          achieving that objective, to the extent that the

16          purpose of this is conservation.

17                          I submit that the RIB is an optional

18          strategy, one might say, in terms of the Commission's

19          discretion.       And I say that, counterposed to the

20          implications of Section 64.04 of the newly-amended

21          Utilities Commission Act, which says that smart meters

22          are mandatory by 2012 with respect to the residential

23          sector.       The only real variable is the possibility

24          that there could be a Ministerial order that in some

25          way tweaks the scope of universality of that

26          installation.

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1                         I submit that the evidence will show that a

2           smart meter without a time of use tariff for it to

3           operate on is not a smart but is a dumb meter, and is

4           a waste of many hundreds of millions of dollars of

5           sunk cost.    The legislature -- and I say this in

6           anticipation of what I've seen in terms of the direct

7           testimony of Ms. Van Ruyven.                   The legislature has

8           characterized the smart meters as a strategy for

9           energy security and the environment.                      That's the name

10          of the part of the new -- the newly-enacted part of

11          the Act that it falls under, Part 3.1 of the amended

12          Utilities Commission Act.

13                        We submit that it makes far more sense for

14          the Commission and for B.C. Hydro to do the mandatory

15          business first, then see if there is a useful way to

16          add other rate strategies on top of it.                      That is, the

17          smart meters are coming, that's been enacted by the

18          legislature.    They require a time of use tariff to

19          make any sense whatsoever.                 B.C. Hydro, again, in

20          their opening direct testimony, has raised the

21          possibility that they might install close to a billion

22          dollars of meters, but make it optional to residents

23          whether or not in fact they want to use the tariff

24          that makes the things work.                  Regardless of that fact,

25          if anything underscores the uncertainty of what the

26          time of use tariff is going to look like -- but it's

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1           coming, in my submission.                It is coming.      And the

2           question of applying another strategy which has an

3           entirely different logic to it, if that's something

4           that makes sense, we say, wait and do the mandatory

5           business first, which is the foundation that's been

6           enacted by the legislature, then see if further

7           improvements can usefully be superimposed.                     But do not

8           first create the RIB so that becomes the foundation,

9           so to speak, for the time of use business.                     It's an

10          entirely backward way of going about the task.                       It is

11          irrational, and invites erroneous construction of

12          tariff structures.

13                                                 Proceeding Time 9:51 a.m. T04

14                        And just to expand on this perhaps somewhat

15          further, if we compare the Commission's decision, the

16          2007 rate design on the issue of flattening commercial

17          rates, where the Commission effectively said to B.C.

18          Hydro to go and consult more with customers, see if a

19          rate can be developed that meets its objectives in a

20          balanced way, we say that residential customers

21          deserve at least the same consideration.                    But in any

22          event, let's do the mandatory business first.                        Let's

23          deal with absorbing implications of Bill 15, and then

24          see whether there's icing that can be applied to the

25          cake of time of use, and not put the cake at the

26          bottom of the pan and try to drop a cake on top of it,

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1           to perhaps use that metaphor.

2                             We say that, if -- notwithstanding what I

3           submit is the clear logic of proceeding in that

4           fashion, but if the Commission decides to go ahead at

5           this juncture with the implementation of a residential

6           inclining block, we say that it needs to be structured

7           to avoid inflicting hardship on low-income and fixed-

8           income consumers, especially those with electric space

9           and water heating in their homes.                              The evidence

10          appears to suggest that most low-income customers will

11          be marginally better off for the implementation of the

12          RIB than if we continued under the flat rate.                                  That

13          is, marginally better off, but a minority -- and it's

14          a fairly large number of people, some 36,000 estimated

15          households, will be facing increases driven by the

16          RIB, and some of them very significant.

17                            What we are really concerned about in this

18          process is, to pick an example, the elderly couple

19          living on a fixed pension, living in an older house

20          that's electrically heated, and particularly in a

21          region that's exposed to significant winter weather.

22          We are very worried for what this is going to do to

23          them.         We're worried about what the prospect of the

24          increasing cost of household energy is going to do to

25          them anyway, and implementing the RIB significantly

26          compounds their problem.

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1                         If their problem is fixed, to be frank, a

2           lot of our difficulties, at least in terms of the

3           alarm bells that we would ring, those bells will stop

4           ringing, whether or not in fact the RIB is in fact in

5           principle, the ideal way to go at this point.                         We say

6           there's a really urgent problem that needs to be

7           addressed in any event.

8                         There's a number of -- and I should also

9           say that the evidence that's been filed shows very

10          significant rate impact for a proportion of customers

11          with electric heat, and B.C. Hydro has gone to the

12          extent of attempting to re-calibrate the whole concept

13          of rate shock.      To sort of move the goalposts so that

14          the way they design this structure somehow doesn't run

15          afoul of those goalposts.                 And we'll show, in the

16          course of the hearing, that the actual policy of the

17          Commission is nowhere close to what seems to be

18          projected by B.C. Hydro.                This was also, I note,

19          addressed in the Panel's Information Requests and

20          those were illuminating as well.

21                        So in terms of -- again, the scenario, we

22          say "Don't do this at all."                   If the determination is

23          to proceed, there's a number of options that could be

24          explored to at least ameliorate the impact, and

25          perhaps produce a more efficient rate.                     One would be

26          to go to a three-step rate structure, with the lower

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1           step 1, step 2 threshold, and a very high-priced step

2           3, aimed at gluttonous consumption.                        So we say if you

3           are -- if you're going to have a RIB, this would be a

4           preferable general way to design it.

5                         Another option would be to simply lower the

6           step threshold which, even within the stepped -- the

7           two-step rate structure, which we believe the record

8           will show actually produces more conservation

9           potential than the 1600 kilowatt-hour per billing

10          period proposal.        The evidence indicates there's a

11          higher conservation potential by dropping the step.

12          And it also reduces the amount of adverse impact on

13          people who rely on electricity to heat their homes,

14          and particularly again those in older single-family

15          housing, perhaps with a bunch of dependents, poorly-

16          insulated, who are facing a real thrashing under

17          what's been proposed by B.C. Hydro.

18                                                    Proceeding Time 9:56 a.m. T5

19                        Another option worthy of exploration, this

20          I note is another that has been touched on in the IRs,

21          is a seasonally differentiated rate structure.                           For

22          example, a higher Step 1, 2 threshold in the winter,

23          which would help to avoid as much Step 2 exposure for

24          people with electric heat.                  And again we're

25          particularly concerned about people with limited and

26          fixed incomes.

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1                          I also submit that, again going back to our

2           initial point, do the smart meters first.                            The smart

3           meters are in place, it appears to us there's a

4           possibility for some real fine-tuning of some of these

5           systems.      For example, the seasonal rate.                        A lot of

6           these things become possible if we have the technology

7           that can properly measure consumption in each

8           household.     So this would be another reason to wait

9           until after 2012 and we've adjusted Bill 15.

10                         Another option to look at would be a

11          differentiated heating rate, and again this is

12          something that seems to call for waiting for the smart

13          meters to come, to see whether they could be put to

14          good use for that kind of logic.                            Smart meters could

15          help facilitate identifying heating load and present

16          the possibility of a much better tuned and efficient

17          rate and more efficient price signal.                           And I'd also

18          point out there is a precedent for a heating load rate

19          in British Columbia's tariff, and that's the E-Plus

20          tariff.

21                         Finally, we say that another option to be

22          explored is looking at customer-specific base load

23          system similar to the transmission level customers.

24          And again, smart meters may well make this much more

25          feasible.

26                         There may be a number of anomalies that

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1           this gives rise to in the residential context, a lot

2           of extraneous factors that happen in people's lives

3           that could have a significant impact on their

4           consumption patterns.                  So it has its anomalies, but in

5           the balance might help to avoid even more anomalies

6           that flow from the one size fits all breaking point

7           between steps, as B.C. Hydro has proposed in their

8           application.

9                              Now, setting aside a lot of the

10          justification that's been presented for the RIB, and

11          the justification advanced by B.C. Hydro, we say that

12          if we are going to have a stepped rate, it has

13          potential to be used as a vehicle to provide lower

14          rates for poorer households.                         That is, part of the --

15          it could be part of the package of measures to protect

16          low income households from rising electricity costs

17          that are underway, even regardless of RIB.

18                             So we're saying, aside from this

19          application, electricity is going to cost more and

20          more and more in this province.                            The era of relatively

21          cheap electricity in B.C. is coming very rapidly to an

22          end.          The prospect is for several years of rate

23          increases well in excess of inflation.                           So whatever

24          the value RIB has as a tool for conservation, if it is

25          implemented it could be fashioned to do double duty to

26          provide a basis for rate relief for poorer households.

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1           And we say the way to do that would be to create a

2           tariff where all households at or below the Statistics

3           Canada low income cut-offs would be billed exclusively

4           at Step 1 for all of their consumption.                           And that

5           would mean that for those qualifying households, and

6           this is people basically below a very low threshold,

7           that it is a very low income poverty line, would have

8           their electricity rates basically geared to inflation

9           over the years.

10                           We also say that there needs to be

11          significant targeted low income DSM, with no or

12          minimal customer contribution.                         For example, the

13          utility comes and repairs the envelope for the elderly

14          couple that I described earlier that we're concerned

15          about.        It could be very cost-effective and efficient

16          measures taken that avoid this significant barrier to

17          low income people of participant expense or cost, up-

18          front costs of participating in Power Smart measures.

19                                                   Proceeding Time 10:00 a.m. T06

20                           And we say there could be other measures

21          taken dealing with bill management.                           One is an

22          amendment to the tariff to prohibit disconnections in

23          winter, and a review of the security deposit policy

24          and other bill management issues for low-income

25          consumers.

26                           So aside from the RIB, we say that an

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1           affordability crunch is coming very rapidly, and a

2           number of measures should be implemented to provide at

3           least some relief for those who are least able to deal

4           with it.

5                          Now, aside from everything else that I've

6           said, we say that there is no way that this can be

7           implemented on the target date of October 1st, 2008.

8           This is a radical shift in the residential electricity

9           tariff from the flat rate that's been in place for

10          many years now, and B.C. Hydro's own evidence confirms

11          that public understanding and acceptance is vital for

12          it to work.     However, B.C. Hydro, we think the

13          evidence will show, has no plan, no budget and no

14          timeline for public education and information, and we

15          will be comparing this in the course of the proceeding

16          with other tariff changes that have been implemented

17          by and under the auspices of the Commission, where

18          there has been a methodical process of public

19          education, with significant lead time.

20                         Even if we consider the most optimistic

21          possible timeline for the approval of the application,

22          at best we have days or weeks between that time and

23          October 1st.    And the notion that the customer base

24          would be educated, informed and ready to understand

25          what's happening, let alone respond intelligently to

26          the signals that are supposedly embedded in the rate,

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1           in our submission, is simply not a possibility, and

2           they are just off-target by a factor of at least a

3           year, in terms of their timeframe for bringing this

4           about.

5                            So those are our submissions.                     We expect to

6           be taking some time cross-examining the B.C. Hydro

7           panel.        A number of issues of significant concern to

8           our clients, obviously, this is home turf for our

9           clients like it is for nobody else in this proceeding,

10          and we look forward to a very interesting process.

11   THE CHAIRPERSON:             Thank you, Mr. Quail.

12   OPENING STATEMENT BY MR. GHIKAS:

13   MR. GHIKAS:            Mr. Chairman, Commissioners, the Terasen

14          Utilities support the residential inclining block rate

15          for B.C. Hydro and accordingly will not be filing --

16          or calling a panel in this proceeding.

17                           B.C. Hydro's residential customers

18          currently do not experience the full cost impact of

19          new electricity associated with increasing electricity

20          consumption.        Price signals are masked under the

21          current flat rate structure by the blending of new

22          resources with a large proportion of low-cost heritage

23          supply.       Among the learnings from B.C. Hydro's last

24          rate design application was that the residential class

25          of customers is the single largest contributor to the

26          winter peak on B.C. Hydro's system.                           That winter peak

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1           is driving system expansion on B.C. Hydro's system.

2           The Commission commented in that decision, at page

3           191, that the implications of growth and demand in the

4           residential class, including for space and water heat,

5           were -- "were among the reasons that led the

6           Commission panel to encourage and guide B.C. Hydro to

7           implement an inclining block residential rate so that

8           customers received the correct pricing signal in this

9           regard."

10                        I'll turn now to the preferred features of

11          the residential inclining block rate structure.                      The

12          Terasen Utilities believe, Mr. Chairman, that as a

13          general proposition the trailing block should reflect

14          the long-run marginal cost of new supply.                    It appears

15          to me that that was the logic that was inherent in the

16          strawman RIB rate design that was presented by the

17          Commission panel in the 2007 rate design decision.

18                                                 Proceeding Time 10:04 a.m. T7

19                        And B.C. Hydro has similarly acknowledged,

20          for instance, in BCOAPO IR 1.6.1 and BCUC 1.19.3, that

21          an efficient price signal should reflect the full

22          long-run original costs of new supply, since it will

23          encourage residential customers to make efficient

24          investments in energy efficiency.

25                        However, the Terasen Utilities also

26          recognize that designing specific features of the

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1           residential inclining block rate structure requires

2           some trade-offs.       With the legislative vacating of the

3           rate re-balancing orders in Bill 15, having a trailing

4           block that reflects the full long-run marginal cost of

5           new supply, and setting first block residually, would

6           mean that some customers will experience even lower

7           electricity bills, and the Terasen Utilities

8           acknowledge B.C. Hydro's concern that this sends the

9           wrong price signal to those customers.

10                        On the whole, Terasen Utilities believe

11          that the decisions B.C. Hydro has made in designing

12          the residential inclining block rate are supported by

13          a reasoned analysis and are appropriate at the present

14          time based on the data available.

15                        Potential refinements to B.C. Hydro's

16          residential rate structure can and should be

17          considered at a later date as we learn more about the

18          customer price response and the conservation benefits

19          yielded by the proposed rate structure.                   For instance,

20          the Terasen Utilities believe, as I said earlier, that

21          residential electricity rates should ultimately move

22          towards reflecting the full long-run marginal cost of

23          electricity.    The Terasen Utilities will also be

24          interested in whether additional rate design measures,

25          either modifications to the RIB or otherwise, can be

26          designed to encourage conservation by customers who do

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1           not typically see the Tier 2 rate because their

2           consumption falls below the Tier 2 threshold.

3                         The companies continue to be interested in

4           the role that space heating plays in contributing to a

5           winter system peak load, and how that should drive

6           residential rate design.                And the Terasen Utilities

7           continue to be interested in the role that connection

8           policies play in avoiding new residential space

9           heating load, as well as measures aimed at fuel

10          switching.    Companies may pursue those matters in

11          future applications.

12                        B.C. Hydro has also indicated that the

13          inclining block rate structure is an appropriate

14          initial measure to precede time of use rates, and

15          other more complex rate structures that would be

16          facilitated by the implementation of smart meters by

17          -- or by 2012.      With the 2012 date being mandated by

18          Bill 15 for installation of the smart meters, it will

19          be at least 2012 and probably longer, at least four

20          years, until the time of use rates are actually

21          brought into effect.            Time of use rates, in Terasen

22          Utilities' view, are not the proverbial silver bullet,

23          and backing away from residential inclining block rate

24          structures in anticipation of time of use rates being

25          implemented over four years from now, would represent

26          a foregone opportunity for energy efficiency and

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1           conservation.

2                          In sum, the Terasen Utilities support the

3           residential inclining block rate structure as an

4           immediate and appropriate response to the need for

5           conservation and energy efficiency and sending

6           appropriate price signals to B.C. Hydro's residential

7           customers and the marginal cost of electricity.

8                          Thank you, Mr. Chairman.

9    THE CHAIRPERSON:           Thank you, Mr. Ghikas.

10                                                 Proceeding Time 10:08 a.m. T08

11   OPENING STATEMENT BY MR. WALLACE:

12   MR. WALLACE:          Mr. Chairman, Commissioners.                       The Joint

13          Industry Electricity Steering Committee is

14          participating in this proceeding not out of concern

15          with the particulars of residential rates, but out of

16          concern for matters of principle.                           The RIB rate design

17          that has been presented clearly has some strengths,

18          but, in our submission, will be shown to have serious

19          weaknesses.      In our submission, your challenge will be

20          to preserve the strengths while reducing the problems.

21                         The Joint Industry Electricity Steering

22          Committee, I'll refer to it as JIESC; believes that

23          the proposed new rates must be fair and effective.                            By

24          "fair", we mean that customers generally will pay the

25          costs associated with the electrical service they

26          receive.      By "effective", we mean that the rate design

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1           has a reasonable possibility of generally achieving

2           the goals that have justified it.                         The JIESC is

3           concerned that if this Commission accepts unfair or

4           ineffective rates for one class, that those rates or

5           the arguments for those rates will be given

6           inappropriate credibility and will work their way into

7           the rates of others.

8                         In our submission, based on the evidence

9           filed in this case, the residential inclining block

10          rate appears not to be particularly fair or effective.

11          The filed evidence shows that RIB is unfair, in our

12          submission.    Those customers paying a simple one --

13          Step 1 rate or principally a Step 1 rate, because

14          there is a gradient, will only get rate increases up

15          to the rate of inflation.                All increases in B.C.

16          Hydro's cost of service in excess of inflation will

17          rest solely on the minority Step 2 rate customers,

18          something that, in our submission, given the absence

19          of a cost of service study supporting the rate, is not

20          fair, just or reasonable.

21                        The costs that will be visited on the Step

22          2 customers are not minor and they are not short-term.

23          In its current revenue requirement application, B.C.

24          Hydro is requesting increases equal to roughly three

25          times the rate of inflation.                   JIESC expects, based on

26          its projections of B.C. Hydro costs, that revenue

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1           requirements will continue to be -- will rise at a

2           rate two to three times the rate of inflation for the

3           next ten years.        The rate design you set has to be

4           flexible enough in order to account for that, and to

5           reasonably implement it.

6                          The JIESC submits that a fair allocation of

7           B.C. Hydro's costs in excess of inflation to Step 2

8           must be based on the cost of serving the customers

9           being asked to bear the costs.                       Unfortunately, the RIB

10          design is based solely on B.C. Hydro's desire to -- or

11          I should say principally, upon B.C. Hydro's desire to

12          design a rate that will create an inclining block rate

13          to encourage conservation, a worthwhile goal, but a

14          goal that we suggest can and must still be achieved

15          fairly.

16                         The JIESC is concerned that not only does

17          RIB appear unfair, it also appears on its face to not

18          be as effective as it could be.                        B.C. Hydro indicates,

19          in the information responses, that most if not all

20          customers can reduce use if given proper price

21          signals.      Yet in spite of that, B.C. Hydro is

22          presenting a rate where 50 percent of the customers on

23          that rate will never get a conservation signal, or for

24          that matter any indication of the fact that the cost

25          of electricity is rising much faster than the

26          inflation rate.        At most they will get a signal that

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1           electricity costs are going to go up at or near the

2           rate of inflation, and that is to say, rates are

3           generally going to stay constant in real terms.

4           That's for 50 percent of the customers.

5                         The next 25 percent of the customers will

6           get a Step 2 rate, and I quote Hydro, "sometimes".

7           Their signal will vary from weak and occasional, for

8           those taking electricity at the edge of the Step 2

9           rate, and taking it rarely, to a high signal and

10          frequent signal for those hitting Step 2 regularly.

11                                                 Proceeding Time 10:12 a.m. T9

12                        The final 25 percent will get a very strong

13          signal all of the time and very large increases, as

14          shown in the evidence.             In our submission, hitting a

15          minority of customers hard, while giving the majority

16          little or no signal, does not appear to be an

17          effective way to proceed.                In our submission, it

18          appears there is a better solution, segmenting the

19          residential class into its two main elements:

20          customers that use electricity for space and water

21          heating, and those that do not.                      And again there are

22          information responses addressed to that.

23                        Customers that use electricity for space

24          and water heating use considerably more electricity

25          per year and particularly in winter.                      In our

26          submission, that is not properly taken account of in

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1           B.C. Hydro's RIB proposal.                 These customers will face

2           increases that far exceed the Commission's 10 percent

3           rate shock proposal in the two years in question, and

4           that's when you combine it with the revenue

5           requirements and for many years to come, while other

6           customers don't -- will not even be paying the

7           increasing cost of providing service to them.

8                         It appears to JIESC that heating customers

9           should each -- or that heating and non-heating

10          customers should each have their own two-step rates

11          based on their own fully allocated cost of service and

12          through their own RIB rate.                  If this is done, we

13          suggest that Hydro will, one, recover its cost of

14          services from all customers based on the cost to serve

15          those customers, which is fairer; and second, will

16          reach many more customers with its second-tier rate,

17          and in our submission that would be more effective.

18                        B.C. Hydro in its responses says that it

19          does not have the information to segment the

20          residential class in the way proposed, and that

21          getting the information to do so would be expensive.

22          In our submission that expense is likely worth

23          incurring.    Clearly rates are becoming more

24          sophisticated, and if we are going to move away from a

25          situation where all residentials pay the same rate per

26          kilowatt hour, then we need to get more sophisticated

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1           in our rate class segmentation, ensuring that people

2           pay both a rate that properly reflects the cost of

3           serving them, and achieves conservation goals.

4                         The RIB that has been proposed has good

5           aspects to it, but in our submission, by choosing not

6           to segment the residential class B.C. Hydro chose

7           expediency and simplicity over fairness and

8           effectiveness.      In our submission that is wrong, and

9           we hope that in listening to the evidence in this

10          matter, you will recognize the problems and that you

11          will require B.C. Hydro to amend its proposal in a

12          manner that will be both more fair and more effective.

13                        Thank you.

14   THE CHAIRPERSON:          Thank you, Mr. Wallace.

15   OPENING STATEMENT BY MR. WEAFER:

16   MR. WEAFER:          Mr. Chairman and members of the Commission,

17          the CEC has been actively involved with B.C. Hydro and

18          its rate working group, electricity conservation and

19          efficiency consultation committee of B.C. Hydro and

20          has been involved with the process of rate design with

21          B.C. Hydro for several years.                     And so we come to this

22          proceeding, while this is a residential inclining

23          block rate application, the CEC believes that while

24          this may be Mr. Quail's home turf, everybody is

25          playing on the same field.                  And how the Commission

26          deals with a rate design proceeding for residential

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1           customers potentially affects all classes of

2           customers.    That's our primary reason for being here.

3                         With respect to support or lack thereof for

4           the application by B.C. Hydro, the CEC has not formed

5           a definitive conclusion on the point.                          We are

6           sensitive to concerns raised by Mr. Quail on behalf of

7           his clients.    We also support the comments of Mr.

8           Wallace with respect to the fairness in terms of how

9           B.C. Hydro has come up with establishing the Step 1

10          and Step 2 rates and the impacts on customers.

11                                               Proceeding Time 10:16 a.m. T10

12                        So, with respect to the proceeding, I'm

13          going to highlight to you the nine areas that we're

14          going to be involved in, in terms of our argument

15          and/or cross-examination, in terms of where we believe

16          B.C. Hydro may be able to strengthen what they've put

17          on the record to date.             And at the end of the

18          proceeding we'll determine our level of support or

19          lack thereof.

20                        One, the customer communication regarding

21          the RIB, its impact and potential mitigations.                             We

22          think B.C. Hydro can improve what it has proposed so

23          far over the course of this proceeding.

24                        Two, the ability to leverage non-rate

25          components from the rate design.                          We are concerned by

26          the carving off of demand-side management initiatives

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1           from the RIB application, while recognizing they --

2           the desire to separate them and keep this proceeding

3           more straightforward, there's a significant investment

4           involved in implementing the RIB and where incremental

5           steps can be taken to improve the effectiveness of the

6           rate filing they should be taken.

7                         With respect to level of both impacts and

8           potential fairness issues, these are highlighted in

9           CEC IR 1.7.1.    Mr. Wallace commented on them.                       They're

10          clearly going to be a significant part of this

11          proceeding in terms of the fairness of the bill

12          impacts resulting from the application.

13                        Four, the conservation effects, the value

14          of the savings and elasticity estimates.                     These are

15          summarized in BCUC IR 2.73.1, in terms of where the

16          opportunities are for customers to achieve the

17          conservation effects.            We don't believe those have

18          been fully fleshed out by B.C. Hydro and we intend to

19          flesh those out through cross-examination.

20                        Five, specific impacts of electric heating

21          on the B.C. Hydro peak load requirements.

22                        Six, alternative rate design options and

23          the appropriateness of the RIB choices.                    The concern

24          the CEC has here is while there is comments with

25          respect to the quality of the B.C. Hydro application,

26          the CEC did not see its role to be to come up with an

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1           alternative approach.            The challenge we have in

2           assessing the evidence before the Commission is, there

3           really isn't another alternative on the table.                        There

4           really -- except for the ESVI evidence.                    So we're

5           really struggling a bit with assisting the Commission

6           in what is a good alternative, in light of the fact

7           there isn't another alternative for us to cross-

8           examine on, but for the ESVI.                    It's a challenge for

9           B.C. Hydro.    It's a challenge for anybody who's

10          advocating an alternative as well.

11                        Seven, the specific DSM saving responses

12          and therefore the potential mitigation.

13                        Eight, the potential for revenue collection

14          over and under impacts on other customer classes.                        And

15          here, where the CEC has an interest, it is unclear to

16          us at this point as to what the impacts will be on

17          other customer groups if B.C. Hydro's forecasts of

18          conservation are inaccurate.                   And we will be pursuing

19          that with the B.C. Hydro panel in terms of how their

20          application, if inaccurate in terms of impact, will

21          impact other customer groups.                    As the Commission is

22          well aware, the commercial class already has a

23          significant concern with respect to cross-subsidy

24          between residential and commercial customers, and the

25          last thing we need is a RIB application result which

26          may, over time, accentuate that cross-subsidy.

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1                            So those will be the major issues pursued

2           by the CEC in the proceeding, Mr. Chairman.                             Thank you

3           very much.

4    THE CHAIRPERSON:             Thank you, Mr. Weafer.

5                                                    Proceeding Time 10:20 a.m. T11

6    OPENING STATEMENT BY MR. KEMP:

7    MR. KEMP:            Mr. Chairman and Commission members, as CEO of

8           the Rental Owners and Managers Society of B.C., I will

9           speak to you today on the effect that approval of the

10          RIB application would have on a critical B.C.

11          industry, the residential rental industry that

12          provides homes to approximately one-third of British

13          Columbians.

14                           Our industry has no army of analysts to

15          review thousands of pages of data.                            We have no legion

16          of lawyers to examine and cross-examine at this

17          hearing.        So perhaps my submission will be viewed as

18          naïve.        However, my concern is genuine and my

19          objective is sincere, to inform the Commission and

20          B.C. Hydro of what may well be an unintended impact of

21          the proposed conservation rates on the owners of

22          multi-unit rental buildings.

23                           We agree with the goals of the RIP rate.

24          However, the effort to achieve these goals must be

25          within the ability and the control of those who pay

26          the bills.       The residential rental industry is unique

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1           in two fundamental aspects.                     The person paying the

2           electricity bill is not the consumer, and increased

3           costs cannot be recovered through increased prices.

4                           Let me explain.               The owner of a multi-unit

5           building is B.C. Hydro's customer, but the tenants in

6           that building are B.C. Hydro's consumers.                             Therefore,

7           in this context the building owner is essentially a

8           re-seller of electricity.                   Any other re-sellers could

9           simply pass through their cost increases to their

10          customers by increasing their sale prices.                              Landlords

11          cannot.       Their sole source of revenue is the rents

12          they receive from their tenants.                             And through rent

13          controls, the B.C. government prevents landlords from

14          increasing their revenue to recover cost increases.

15          Rental building owners are prohibited from increasing

16          rents by more than 3.7 percent annually.

17                          Simply stated, B.C. Hydro's proposed RIB

18          rate will place rental building owners in an untenable

19          position.      The stated intent of RIB rates is to create

20          an incentive for customers to reduce electrical

21          consumption.      In my home I can act to do so.                          In my

22          apartment building I cannot.                      Nor can I realistically

23          influence my tenants, the actual consumers of the

24          electricity for which I pay, to reduce their

25          consumption.      The cost of electricity is invisible to

26          them because it is included in their rent.                              Neither

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1           can I use price increases, the foundation of the

2           incentive of RIB rate, for them to change their

3           consumption behaviour.

4                         So accepting that I cannot directly reduce

5           their consumption, can I absorb the higher RIB rate in

6           my 3.7 percent rent increase?                    That additional 3.7

7           percent must pay for the cost increases of property

8           taxes, insurance, waste disposal, recycling, and

9           labour, each of which has increased by at least five

10          percent in the past year.                I must already attempt to

11          absorb a 6.56 percent increase in B.C. Hydro rates.                    I

12          must already attempt to absorb an 11 percent increase

13          in Terasen Gas rates recently approved by the

14          Commission, on top of the 5 percent increase effective

15          January 1st this year.           And I must plan for an

16          exorbitant increase of 8.21 percent in B.C. Hydro's

17          rates effective next April.

18                        We can support the Commission approving

19          B.C. Hydro's application, where the RIB rate will

20          apply to those consumers who can act to reduce

21          consumption.    We cannot support its application to

22          consumers who cannot take that action.                    We must

23          protect the ability of rental building owners to cost-

24          effectively provide homes to their tenants, and

25          therefore we are respectfully seeking exemption of the

26          RIB rate from Class 1121, multi-unit buildings on

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1           single meters.      And I will provide the Commission with

2           a written submission in this regard tomorrow.

3                         Thank you.

4    THE CHAIRPERSON:          Thank you, Mr. Kemp.

5                                                 Proceeding Time 10:24 a.m. T12

6    THE CHAIRPERSON:          Mr. Andrews?

7    OPENING STATEMENT BY MR. ANDREWS:

8    MR. ANDREWS:         BCSEA and SCCBC are organizations with

9           members in British Columbia who are ratepayers of B.C.

10          Hydro in the residential ratepayer category.                       They

11          participate in these proceedings on this point in

12          particular as ratepayers, and also because of their

13          interest in the public interest in taking action

14          regarding climate change, reducing air pollution and

15          all of the environmental and social costs of excessive

16          use of energy, electricity in particular.

17                        Of course, BCSEA and SCCBC strongly support

18          conservation and efficiency measures where they are

19          cost-effective, and I want to note that although I

20          will often use the terms "conservation" and

21          "efficiency measures", unless I say otherwise I'm

22          implying cost-efficient conservation and efficiency

23          measures, because BCSEA and SCCBC have no interest in

24          seeing good conservation and efficiency measures being

25          displaced by bad ones, ones that are not cost-

26          effective.

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1                              In the 2007 rate design application, BCSEA

2           and SCCBC, and PVEA at the time, took the position

3           that Hydro's approach was correct at that time in the

4           sense of deferring a conservation-oriented rate design

5           structure, in that proceeding.                           And as a result, they

6           didn't participate actively when the Panel said that

7           they would be highly unlikely to receive PACA funding

8           on that -- on the basis of supporting that position.

9           The outcome of that was the Panel's decision, of

10          course, and the RIB application which is before us

11          now, and so in that sense the timing issue arises

12          again.          And so for BCSEA, the first major issue is

13          whether the time is right now.                           And in that respect,

14          BCSEA/SCCBC are very aware that delay in the

15          implementation of a RIB program has serious

16          opportunity costs in terms of lost conservation

17          opportunities.

18                             In terms of public awareness, the time is

19          now.          Public awareness is high.                    The legislature has

20          recently given its imprimatur to conservation measures

21          in general and to rate measures designed to promote

22          conservation specifically.                       Action on climate change

23          is in the news in all sorts of different ways.                               Now is

24          the time when customers are going to be receptive to

25          the message that there are things that they can do

26          that will reduce their exposure to Step 2, in a RIB

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1           design.

2                             BCSEA and SCCBC are aware of the argument

3           that the time of use rates that may come with the

4           smart meters should be done first, before a RIB rate.

5           BCSEA and SCCBC don't have a stated position on that.

6           They await the evidence.                    It's not clear, however, at

7           this point in time what exactly the harm would be to

8           moving ahead with a RIB application and then later

9           superimposing a TDOU rate on top of it.

10                                                    Proceeding Time 10:28 a.m. T13

11                            So the timing issue is, in some sense, the

12          major -- the largest issue.                       The next one is the

13          cluster of design issues.                     That is, issues that

14          involve -- and as a starting point, the premise -- I

15          don't think anybody has disagreed that the RIB should

16          be revenue-neutral to the residential customer class.

17          But there are four factors that go into the balancing,

18          which make this something other than a sort of win-

19          win/lose-lose type negotiation.                           There's a balancing

20          involved.

21                            One factor -- one is that a higher Step 2

22          intrinsically boosts the conservation impact of the

23          rate.         But factor two is that a lower Step 1, if it

24          goes too low, can send a negative price signal.                             But

25          of course, the lower Step 1 is, the higher potential

26          there is to make Step 2 higher.

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1                         A third factor is that rate shock, as a

2           term used -- as almost defined by some unacceptable

3           level of rate increase, is accepted by BCSEA and SCCBC

4           as something that is a realistic factor.                      That is,

5           there are potential conservation** rate designs that

6           would not be feasible, because of their impact on

7           rates, described as rate shock.                      Exactly how that gets

8           defined is for further discussion.

9                         And then the fourth of the factors that

10          need to be balanced is that, other things being equal,

11          as many customers as possible should be seeing the

12          Step 2 rate.    Or it may also be said, would see the

13          Step 2 rate if they didn't take conservation and

14          efficiency measures, given that overall consumption is

15          increasing.

16                        There's a third category of issues that

17          BCSEA/SCCBC see in this hearing, and they're what I'll

18          refer to as "differential impact issues".                      That is, a

19          differential impact of a RIB rate as it affects low-

20          income people versus higher-income people, regional

21          residents, commercial -- I mean, excuse me,

22          residential customers, that is, the effect is arguably

23          different on one region than another.                      And differences

24          in terms of heating type.

25                        The fundamental principle that we start

26          with is the postage-stamp principle, and the concept

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1           that electricity consumption is the basis for

2           determining equity.            That is, customers who consume

3           equity -- consume electricity in a like manner within

4           the customer class pay a like rate.                         That is the basis

5           against which any other proposals for measuring

6           fairness need to be compared.                      And I think though

7           we've -- SCCBC and BCSEA have heard a number of

8           criticisms of a lack of fairness, what remains to be

9           on the table, either in cross or in other evidence, is

10          a proposal that would replace equity based on

11          electricity consumption with something that can be

12          examined in its impact across the board, and not just

13          how it would benefit the allegedly-disadvantaged

14          component.

15                                                 Proceeding Time 10:32 a.m. T14

16                         And for example, the idea of segmenting by

17          heating type is attractive on some level, but it also

18          has to contend with the fact that people who don't

19          heat water and space electrically use some other type

20          of fuel.      In most cases that may be natural gas, the

21          price of which is rising at least as fast as the price

22          of electricity.        So that would obviously have to be

23          taken into account in examining that as an

24          alternative.

25                         So in conclusion, BCSEA and SCCBC are not

26          expressing a position on the application as such at

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1           this time.    They will await the evidence and the

2           arguments.    They are very attuned to the importance of

3           acting quickly, now that the RIB proposal has come

4           forward and that in their view, subject to whatever

5           contrary evidence emerges, it appears that the time is

6           right but they will await evidence and argument.

7                         Thank you.

8    THE CHAIRPERSON:         Thank you, Mr. Andrews.

9    OPENING STATEMENT BY MR. BERTSCH:

10   MR. BERTSCH:         Good morning, Commission Panel, B.C. Hydro.

11          My name is Ludo Bertsch representing ESVI, the Energy

12          Solutions for Vancouver Island.                      ESVI is a not-for-

13          profit society whose purpose is to pursue and promote

14          solutions for meeting Vancouver Island's energy needs.

15          We do this by supporting and promoting energy

16          conservation efforts on Vancouver Island.                      ESVI

17          encourages energy conferences and communicates with

18          various partners.

19                        One of our key interests is to concentrate

20          on maximizing demand-side management efficiency, but

21          demonstrating that it not only helps the environment

22          and conserve our limited resources, but also benefits

23          the economy.    By concentrating on solutions for

24          Vancouver Island, we hope to not only find that it

25          deals with our unique challenges of the Island but

26          also is applicable to other areas of the province.

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1           We've been intervenors in our conservation research

2           initiative, the residential time of use, the 2007-2008

3           RRA, and the IEP/LTAP, and I'm also a member of the

4           B.C. Hydro's rates working group.

5                           ESVI believes in that the least power is

6           the power we don't use.                 In order to achieve the

7           levels of savings that we need in the province, we not

8           only need to do programs aggressively but we must do

9           them wisely and provide education along the way.                              We

10          believe we have a huge task in front of us and it'll

11          take leadership and courage.                      We believe that rates as

12          a mechanism for conservation is a good thing if it's

13          done correctly.

14                          In these proceedings we have developed a

15          three-prong approach for involvement in the RIB

16          application, much like a three-legged chair.                            Our

17          first leg is to analyze and understand how the RIB

18          rates suggested by B.C. Hydro could affect Vancouver

19          Island.       After all, the Island will be the hardest hit

20          from an impact bill point of view.                           We must -- we

21          believe that it's important not only to look at the

22          test years in the application but also look into the

23          future.       After all, we're building a foundation for

24          hopefully a long-term conservation rate.                           We've

25          entered evidence to help us in this analysis.                               We also

26          believe that

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1                                                Proceeding Time 10:36 a.m. T15

2                         We also believe that Vancouver Island has

3           unique challenges, because of its limited on-island

4           generation, which of course, necessitates expensive

5           submarine cables.        But also, it's unique in the point

6           of view of the high use of electric heat for space and

7           water.

8                         Our second leg of the chair -- so, the

9           first one is to analyze, from a Vancouver Island point

10          of view, what the issues are and the ramifications of

11          the RIB rate.    The second leg of the chair is, we want

12          to take a look at how the RIB rate could be improved.

13          We've heard a little bit about this before from other

14          intervenors.    We're very interested in looking at what

15          the variations of the thresholds, and the response to

16          that will be.    We're also very interested in looking

17          at the seasonal rates or perhaps even electric-

18          specific rates.

19                        There's some improvements that can be made

20          through demand-side management, or Power Smart

21          programs, or linking them to those programs.                      We

22          realize some of these improvements might fit directly

23          into this application now.                 In other cases we

24          understand that there's information or studies that

25          are missing, and may need further work.                    In those

26          cases, we'll be looking for assurances that concrete

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1           commitments will be made to obtain that information,

2           and perform the studies in the future.                             This is so

3           that we will not be in the same position that we are

4           now.          That is, lacking the information that we so

5           desperately need.

6                              Our third leg will be our final submission.

7           We will hopefully get to the point where we can see a

8           possible RIB application, perhaps with changes or

9           modifications, that will not only deal with the issues

10          of Vancouver Island, but also for the benefit of B.C.

11          Hydro and the rest of the province.                             We believe that a

12          successful RIB rate can help with energy savings, but

13          we also need to give the public support -- we also

14          need to get the public support that rates are an

15          appropriate mechanism for conservation.                             And I think

16          if we do, in the next few days, our homework and with

17          an open view, that we can perhaps get a successful RIB

18          application that will do both of those things.

19                             Thank you very much.

20   THE CHAIRPERSON:               Thank you, Mr. Bertsch.                    Mr. Christian,

21          how long do you need to get your panel up?                              Ten or

22          fifteen minute break?

23   MR. CHRISTIAN:              Oh, thank you.                Probably ten will be fine

24          to get them up, but --

25   THE CHAIRPERSON:               We'll break for fifteen minutes, then.

26   (PROCEEDINGS ADJOURNED AT 10:40 A.M.)

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1    (PROCEEDINGS RESUMED AT 10:52 A.M.)                                              T16

2    THE CHAIRPERSON:         Please be seated.

3                         Before you begin, Mr. Christian, if it's

4           okay with everyone I'd like to sit till 4:30 today.

5    MR. CHRISTIAN:        That's fine with B.C. Hydro.

6    THE CHAIRPERSON:         Thank you.             If there are no other

7           matters, why don't you proceed.

8    MR. CHRISTIAN:        Thank you.            As I mentioned in my opening

9           comments, B.C. Hydro has one witness panel.                          I've

10          introduced them already to you.                      They're all here now.

11          I'm going to take the opportunity to have them adopt

12          their direct testimony.              And then Ms. Van Ruyven will

13          be delivering an opening statement, one that was

14          circulated on Friday morning.

15                        So if each of the witnesses could please

16          have before you Exhibit B-12.

17   THE CHAIRPERSON:         Do you want them affirmed first?

18   MR. CHRISTIAN:        Oh.      Thank you.

19                                             KENNETH H. TIEDEMANN, Affirmed:

20                                                                    REN ORANS, Affirmed:

21                                               BRIDGETTE ZACHARIAS, Affirmed:

22                                                 BEVERLY VAN RUYVEN, Affirmed:

23   MR. CHRISTIAN:        Thank you, Mr. Chairman.

24   THE CHAIRPERSON:         Please proceed.

25   EXAMINATION IN CHIEF BY MR. CHRISTIAN:

26   MR. CHRISTIAN:        Q:       If I could have the witnesses turn

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1           to Exhibit B-12, that's the letter filed over my name

2           on Friday.         After that is the direct testimony of each

3           of you.       I'll start with you, Ms. Van Ruyven.                         Do you

4           have your direct testimony before you?

5    MS. VAN RUYVEN:             A:        I do.

6    MR. CHRISTIAN:             Q:       Do you have any changes you'd like

7           to make to it?

8    MS. VAN RUYVEN:             A:        No, I don't.

9    MR. CHRISTIAN:             Q:       Do you adopt it for the purposes of

10          this proceeding?

11   MS. VAN RUYVEN:             A:        I do.

12   MR. CHRISTIAN:             Q:       Ms. Zacharias?

13   MS. ZACHARIAS:             A:     Yes.

14   MR. CHRISTIAN:             Q:       Do you have your direct testimony

15          before you?

16   MS. ZACHARIAS:             A:     Yes.

17   MR. CHRISTIAN:             Q:       Are there any changes you'd like to

18          make to it?

19   MS. ZACHARIAS:             A:     No.

20   MR. CHRISTIAN:             Q:       And do you adopt it for the purpose

21          of this proceeding?

22   MS. ZACHARIAS:             A:     Yes, I do.

23   MR. CHRISTIAN:             Q:       Dr. Orans, do you have your direct

24          testimony before you?

25   MR. ORANS:           A:     Yes, I do.

26   MR. CHRISTIAN:             Q:       Do you have any changes you'd like

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1           to make to it?

2    MR. ORANS:           A:    No, I do not.

3    MR. CHRISTIAN:            Q:       And do you adopt it for the purpose

4           of this proceeding?

5    MR. ORANS:           A:    Yes, I do.

6    MR. CHRISTIAN:            Q:       And finally Mr. Tiedemann, do you

7           have your direct testimony before you?

8    MR. TIEDEMANN:            A:       Yes, I do.

9    MR. CHRISTIAN:            Q:       And are there any changes you'd like

10          to make to it?

11   MR. TIEDEMANN:            A:       No, there are not.

12   MR. CHRISTIAN:            Q:       And do you adopt it for the purpose

13          of this proceeding?

14   MR. TIEDEMANN:            A:       Yes, I do.

15   MR. CHRISTIAN:            Q:       Thank you.             And Ms. Van Ruyven, you

16          have your copy of your opening statement before you?

17   MS. VAN RUYVEN:            A:        I do.

18   MR. CHRISTIAN:            Q:       And if you could read it into the

19          record, that would be -- much obliged.

20   MS. VAN RUYVEN:            A:        Yes, thank you.

21   MR. CHRISTIAN:            Q:       Thank you.

22   MS. VAN RUYVEN:            A:        Good morning, Commission Panel.             My

23          name is Beverly Van Ruyven and I am the executive

24          vice-president of customer care and conservation for

25          B.C. Hydro.        I'm pleased to be here today to testify

26          in support of B.C. Hydro's residential inclining

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1           block, the RIB, rate application.

2                             The fundamental driver of this application

3           is the 2007 Energy Plan, which reiterates and

4           underscores the provincial energy policy of meeting

5           future energy needs through a focus on conservation.

6           In particular, Policy Action Number 1 establishes for

7           B.C. Hydro an ambitious conservation target of

8           acquiring 50 percent of incremental electricity needs

9           by 2020 through conservation, and Policy Action Number

10          4 expressly endorses the development of new

11          conservation rate structures.

12                            B.C. Hydro's 2007 rate application -- rate

13          design application, was filed in early 2007, within

14          weeks of the 2007 Energy Plan.                          That application was

15          the subject of criticism by the Commission, by this

16          Commission Panel, for among other things its failure

17          to address through rate design the conservation

18          objectives of the 2007 Energy Plan.                            It is with this

19          background that I point to the RIB application and can

20          say that B.C. Hydro has made enormous strides in the

21          last year regarding the use of rate design, to help

22          achieve the conservative objectives of the 2007 Energy

23          Plan.         From the time B.C. Hydro first publicly spoke

24          about the prospect of the RIB application in the oral

25          phase of the hearing into the 2007 RDA, to the filing

26          date of this application, was a mere seven months.                           If

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1           implemented in the fall as B.C. Hydro hopes, the time

2           to develop and implement the rate will have been just

3           just over a year.        Of course, B.C. Hydro had the

4           benefit of a Commission order requiring a RIB

5           application to be filed before the end of March 2008

6           to assist in keeping it on course.

7                                                      Proceeding Time 11:02 T17

8                         The RIB application was not just developed

9           in a very timely manner.               B.C. Hydro could have taken

10          the easier, more expedient route and filed an

11          application based on the RIB structure that was found

12          to be in the public interest by the Commission in the

13          2007 RDA decision.         Instead it stepped back and

14          invested a significant amount of analysis and

15          consideration into the development of a RIB rate

16          structure that it believes will assist in achieving

17          the conservation objective of the 2007 Energy Plan,

18          and that will also stand its own as a rate structure

19          preferable to the existing flat rate structure.                        The

20          result is an application that we, at B.C. Hydro, are

21          rightly proud of.

22                        Nevertheless, one of the issues that has

23          arisen over the course of the hearing into the RIB

24          application is whether its timing is right.                      Mr.

25          Quail, on behalf of the B.C. Old Age Pensioner's

26          Association, and other organizations representing low

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1           and fixed income customers has already stated that the

2           RIB rate structure should be postponed to some future

3           time in light of the impending implementation of smart

4           meters.       His clients and other participants in this

5           process have also asked questions regarding the

6           interplay between this RIB application and issues that

7           are properly the subject of the recently filed LTAP

8           application, such as the trade-offs between

9           conservation rates, such as the RIB, and non-rate DSM,

10          and the relationship between conservation rates and

11          greenhouse gas emissions.

12                         Regarding the potential for delay for smart

13          meter related reasons, B.C. Hydro does not believe it

14          has any merit.       Implementation of smart meters is

15          lawfully required by the end of 2012 and B.C. Hydro

16          believes it will need all that time to get the meters

17          in place.     Any mandatory TOU rate based on smart

18          meters is therefore likely to take that long, and at

19          this stage, B.C. Hydro has not even determined one way

20          or another whether time of use rates should be

21          mandatory.     Further, it's not clear at this time

22          whether time of use rates can deliver the energy

23          conservation that B.C. Hydro believes can be delivered

24          from inclining block rate structures.                       Thus, B.C.

25          Hydro sees no inconsistency between moving forward on

26          the RIB now and the development of time of use rate in

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1           the next few years.          Indeed, B.C. Hydro sees the RIB

2           as a necessary first step along the path of

3           residential rate restructuring that will facilitate,

4           rather than hinder, the coming development of

5           residential time of use rates.

6                         The LTAP related issues present a different

7           type of problem because one can appreciate how

8           participants to this application may want to know how

9           inclining block rates compare to non-rate DSM and

10          whether rates that might encourage greenhouse gas

11          emissions run counter to government energy policy.

12          These are good, legitimate questions.                     The fundamental

13          problem, however, is not whether the question should

14          be asked, but whether answers to those questions are

15          required in this proceeding before the Commission can

16          be persuaded that the RIB ought to be approved.

17                        In B.C. Hydro's view, the answer is no.                      In

18          light of the 50 percent conservation by 2020 target in

19          the 2007 Energy Plan, time is of the essence.                         Waiting

20          for the resolution of these questions will cost at

21          least a year of incremental weight induced

22          conservation, delay the beginning of an important

23          dialogue with B.C. Hydro's residential customers and

24          is based on the flawed premise that there are

25          determinative correct answers to these questions.

26                        Conversely if this RIB proceeds now and the

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1           Commission forms the unlikely conclusion, after the

2           LTAP proceeding, that conservations rates are

3           unwarranted because of greenhouse gas related issues,

4           or because they are not as economic as non-rate DSM,

5           the RIB rate could be terminated.

6                         Related to the issue of timing is the issue

7           of scope.     Of course many IRs have been asked about

8           variations to the proposed RIB and such IRs raise

9           legitimate issues.          However, some IRs have been asked

10          that suggest that B.C. Hydro could, and perhaps

11          should, have embarked on a more fundamental

12          reconsideration of what the residential rate structure

13          might look like.          One example is a series of IRs

14          relating to rate structures based on an express

15          allocation of Heritage resources.                          I can assure the

16          Commission Panel that this application simply was not

17          going to get file if it was necessary to consider the

18          universe of all possible alternatives to an inclining

19          block rate structure.

20                                                Proceeding Time 11:02 a.m. T18

21                        The prospect of restructuring the

22          residential tariff on the basis of an express

23          allocation of the benefits of the heritage resources

24          alone would have resulted in many more development

25          months, as it necessarily would have required B.C.

26          Hydro's engagement with the provincial government

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1           throughout.

2                         The RIB application is what it is, a

3           quality analysis of a rate structure that B.C. Hydro

4           began evaluating only last summer, was directed to

5           develop by the Commission for a March, 2008 filing,

6           and was developed in the context of a simple RIB

7           proposal suggested by the Commission as a first step.

8           In these circumstances, B.C. Hydro makes no apologies

9           for the fact that the RIB application doesn't address

10          all the other possible ways in which the residential

11          tariff could have been restructured.

12                        Finally, I conclude these opening remarks

13          by observing that fundamentally there appear to be two

14          rate design issues at play.                  The first is whether B.C.

15          Hydro has appropriately balanced the conservation

16          objective with the resulting bill impacts.                      The second

17          is whether the proposed RIB rate unfairly

18          discriminates between segments of B.C. Hydro's

19          residential customer base.                 Of the two, the former is

20          a matter almost solely of judgment to be exercised

21          ultimately by the Commission.                    The latter issue is

22          also one of judgment, but has a significant factual

23          underpinning.

24                        With its end use information, B.C. Hydro

25          believes that there is no basis to conclude that any

26          customer segment is unfairly treated.                     It follows that

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1           the RIB can be expected to assist in achieving the

2           conservation goals of the 2007 Energy Plan in a manner

3           that conforms to accepted rate design principles.

4                           Thank you for your consideration of my

5           opening comments.

6    MR. CHRISTIAN:            The panel is available for cross-

7           examination.

8    THE CHAIRPERSON:            Thank you, Mr. Christian.

9    MR. FULTON:           While Mr. Quail approaches the cross-

10          examiner's microphone, Mr. Chairman, I wanted to note

11          that I had circulated an order of cross-examination

12          for the B.C. Hydro panel, and you and the Panel

13          members should have a copy of that order before you.

14          I've also circulated that order within the room, and

15          there is one addition to the order which changes the

16          order of cross-examiners.                   After Corix Multi-Utility

17          Services Inc. in position five, if you could add the

18          B.C. Sustainable Energy Association in the sixth

19          position, and then place Energy Solutions for

20          Vancouver Island Society in position seven.

21   THE CHAIRPERSON:            Thank you, Mr. Fulton.

22   CROSS-EXAMINATION BY MR. QUAIL:

23   MR. QUAIL:           Q:    Good morning, panel.                     I'd like to refer

24          you to the application, Exhibit B-1, Appendix F.

25          While you're looking at that, I'll say to the Panel,

26          it's my preference where I can to produce a handy

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1           digested collection of reference materials, but in

2           this case there's simply too many, and I'd simply be

3           photocopying a large part of the record, so -- if you

4           could turn to Appendix F, please.                               And specifically,

5           page 1 of 3.

6                           And there, footnote 1 says that

7                     "The rates working group is a subcommittee

8                     of the electricity and conservation

9                     efficiency advisory committee, EC&E.                          The

10                    RWG members in the organizations or

11                    constituents that they represent are

12                    included in the RWG terms of reference at

13                    attachment 1 of this appendix."

14          And then if you turn to page 2 of 3, the second series

15          of bullets, it says that:

16                    "RWG feedback at the December, 2007 and

17                    January, 2008 meetings included the

18                    following point.             Although B.C. Hydro needs

19                    to be sensitive to low-income customers, the

20                    role of providing financial assistance lies

21                    with government rather than with the

22                    utility."

23          So, do you have that?

24                          Now, you really don't need to turn to this

25          but, for the record, attachment 1, appendix 1 of

26          Appendix F, page 10 and 11, lists me as a member of

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1           the rates working group.                   Are you familiar with that?

2                                                    Proceeding Time 11:06 a.m. T19

3                            You can check if you want.                      I'm listed as

4           one of the members.

5                            So is B.C. Hydro saying that I am a member

6           of a subcommittee of B.C. Hydro's Electricity

7           Conservation and Efficiency Advisory Committee?

8    MS. ZACHARIAS:             A:      My understanding is that when the

9           rates working group was set up, participation was

10          invited from a number of constituents of the Energy

11          Conservation and Efficiency Group.                            Our understanding

12          as well is -- I'm not sure if BCOAPO has been

13          participating, which is why, on page 1 of 3, in

14          addition to speaking to the rates working group, we

15          specifically also outreached to BCOAPO in individual

16          meetings.

17   MR. QUAIL:            Q:    Yes, we had a couple of meetings, very

18          interesting meetings over the last few months, between

19          November and March in particular, that I'm sure we all

20          remember.       But I put it to you in fact I am not and my

21          clients are not represented on the rates working

22          group.        Do you accept that or --

23   MS. ZACHARIAS:             A:      I accept that you were not at those

24          rates working group meetings, yes.

25   MR. QUAIL:            Q:    Okay.        Has anyone at B.C. Hydro ever

26          asked me if I think that the role rests solely with

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1           government to look after B.C. Hydro's low income

2           customers?

3    MS. ZACHARIAS:            A:      I can't recall if we've ever asked

4           you that question directly.

5    MR. QUAIL:           Q:    If I suggest to you that you never have,

6           would you contradict that suggestion?

7    MS. ZACHARIAS:            A:      If your memory is better than I'm,

8           that's fine with me.

9    MR. QUAIL:           Q:    If the rates working group had opined

10          that the utility does have a role providing financial

11          assistance to low income customers through rates, what

12          would B.C. Hydro have done with that information?

13   MS. ZACHARIAS:            A:      We would have shared with the rates

14          working group that our position is that, under the

15          current legislation, that that is not our role.

16   MR. QUAIL:           Q:    Okay, but what you're saying is that it

17          is -- that's based, I take it, on B.C. Hydro's

18          understanding that as a matter of interpretation of

19          the Utilities Commission Act, that B.C. Hydro doesn't

20          have the legal capacity to make such provision, or

21          what do you mean?

22   MS. ZACHARIAS:            A:      I mean that under our current

23          understanding of the Utilities Commission Act, it is

24          neither the mandate of B.C. Hydro or the BCUC to have

25          discounted rates for low income customers.

26   MR. QUAIL:           Q:    I'll leave that to some fascinating

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1           debate at the conclusion of the proceedings.

2                           I'll now refer you to Exhibit B-3, which is

3           the first round of IR responses, BCOAPO 1.1.1.                             And

4           for the benefit of the Panel, if you've got the --

5           particularly the two volumes B-3 and B-7, that is, the

6           IR responses, the main body of those, and the

7           application, you'll have most -- you have pretty well

8           everything that I'll be referring to other, than some

9           extraneous materials I'll be circulating, so --

10   THE CHAIRPERSON:            Will you be moving forward so that I

11          won't -- we won't be sort of hopping between volumes?

12   MR. QUAIL:           I regret there will be a fair amount of

13          hopping between volumes.                  That's why I suggest if you

14          keep in particular B-3 and B-7 handy, the IR responses

15          handy, that'll at least minimize the amount of

16          twisting around and grabbing stuff.                          That'll cover off

17          about 90 percent of my references.

18   MR. QUAIL:           Q:   We're talking about 1.1.1.                     And the

19          first sentence says:

20                    "B.C. Hydro has not addressed the issue of a

21                    customer personal hardship or injury -- a

22                    customer's personal hardship or injury in

23                    developing its proposed RIB rate design for

24                    the following reasons:…"

25          And the second bullet,

26                    "Neither B.C. Hydro nor the BCUC have a

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1                     mandate to assist low-income British

2                     Columbians and those in financial hardship

3                     through rates."

4                                                   Proceeding Time 11:10 a.m. T20

5           So that seems to summarize the point you've just made

6           now.

7                           I put it to you that maintaining access to

8           essential household energy was not a rate design

9           factor that you took into account in this application.

10   MS. ZACHARIAS:            A:      That is correct.

11   MR. QUAIL:           Q:    And your focus has been on mitigation

12          strategies other than the rate design itself.

13   MS. ZACHARIAS:            A:      While designing the rate -- while in

14          designing the rate, the avoidance of hardship was not

15          a particular rate design criteria that we took into

16          account.       As we went along looking at different rate

17          options and looking at what the bill impacts were of

18          those different rate options and how they would affect

19          different customers, we did look specifically at how

20          the rate and the one we ultimately ended up proposing

21          would impact customers on lower income.

22                          When we were -- when we reached the

23          conclusion that approximately 85 percent of low-income

24          customers would be better off on the RIB rate than

25          having the flat -- having an average rate increase

26          applied on the flat rate structure, we then looked at

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1           those customers that would not be better off.                            And

2           it's for those customers that we then looked at what

3           additional activities B.C. Hydro could put in place

4           through customer support and DSM programs in order to

5           help mitigate those bill impacts.

6                           So while Mr. Quail is correct in saying

7           that our focus has been on the mitigation of bill

8           impacts through Power Smart programs, you have to

9           consider that in the larger context of how many

10          customers will be more impacted under the RIB than

11          not.

12   MR. QUAIL:           Q:    So your answer to my question is "Yes."

13   MS. ZACHARIAS:            A:      Yes, in that context.

14   MR. QUAIL:           Q:    I have a lot of questions for you.                         So,

15          anyway, just as it -- let you know that.                        There will

16          be -- and anticipating where we're going to go is not

17          going to shorten the process.

18   MS. ZACHARIAS:            A:      Right.         My point was, though, that

19          you had said that that was the only mitigation thing

20          that B.C. Hydro was doing, and I just wanted to be

21          clear that the RIB structure, in the way it's

22          structured, in effect provides mitigation for low-

23          income customers.

24   MR. QUAIL:           Q:    No, my question -- I don't want to

25          belabour this, but you know, in terms of

26          responsiveness to the questions you're asked, my

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1           question was, what I put to you was, the focus has

2           been on mitigation strategies other than the rate

3           design itself.          And I think your answer to that is

4           "Yes."

5    MS. ZACHARIAS:            A:      What I said is, subsequent to the

6           rate design our focus has been on bill mitigation

7           strategies.

8    MR. QUAIL:           Q:    I put it to you that the need to

9           mitigate the impact of electricity prices on poor

10          households is not something that arises only because

11          of the RIB application.

12   MS. ZACHARIAS:            A:      That's correct.                   As I think many

13          people stated in their opening addresses, we all

14          anticipate that the cost of electricity is going to be

15          rising in the future.

16   MR. QUAIL:           Q:    Now refer you, skipping ahead to BCUC --

17          I think it's ahead in the binder.                            It's in the same

18          book, Exhibit B-3, BCUC 1.18.3.                         That's 1.18.3.       And

19          refer you to page 2 of 2.                   Do you have it there?

20   MS. ZACHARIAS:            A:      Yes.

21   MR. QUAIL:           Q:    And the second paragraph tells us about

22          the low-income advisory group.

23                    "In addition, B.C. Hydro has established a

24                    low-income advisory group to both provide

25                    input into the further development and

26                    operationalization …"

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1           Maybe because it's Monday morning, that's a lot of

2           syllables for me to wrap my mouth around --

3                     "… B.C. Hydro's low-income strategy, and to

4                     provide outreach and distribution channels

5                     to improve low-income customer access to and

6                     participation in conservation programs and

7                     education.    The low-income advisory group

8                     includes participation from a cross-section

9                     of non-profit organizations supporting

10                    households of low earnings, senior citizens,

11                    First Nations, multi-cultural groups,

12                    renters and subsidized housing."

13                          Now, I've got a collection of a few

14          additional materials that I'll be putting to you, that

15          Mr. Bemister has kindly reproduced.

16                          That's C10-6, I'm advised.

17                                                        Proceeding Time 11:15 T21

18   HEARING OFFICER:              Marked C10-6.

19          (B.C. HYDRO RIB APPLICATION, "BCOAPO - ADDITIONAL

20          MATERIALS FOR CROSS-EXAMINATION",                            MARKED EXHIBIT C10-

21          6)

22   MR. CHRISTIAN:            So just for the record, we haven't had

23          any opportunity to look at these materials prior to

24          just receiving it at this moment.

25   MR. QUAIL:           A lot of them will be familiar materials.

26   MR. QUAIL:           Q:    And the document I'm making reference to

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1           in that -- there's a series of document stapled

2           together and they are numbered sequentially, so the

3           first one, for example, starts with 1-1 and 1-2 and so

4           on, first number being the document number and second

5           being the sequential page.

6                           And this is a draft terms of reference of

7           the low income advisory group, is that correct?

8    MS. ZACHARIAS:            A:      That's correct.

9    MR. QUAIL:           Q:    And this is a familiar document to you?

10          It's produced by B.C. Hydro, is it not?

11   MS. ZACHARIAS:            A:      Yes.

12   MR. QUAIL:           Q:    Okay.        Now, I'd like to refer you -- I'm

13          not going to read these through, you can just look

14          through them, but with reference to heading 2, which

15          states the objectives of the group, and 3 which is the

16          mandate, I would ask you, is there any role for this

17          group with respect to the design of residential rates?

18   MS. ZACHARIAS:            A:      No, there is not.

19   MR. QUAIL:           Q:    When did this group have its first

20          meeting?      Approximately is good enough.                   What time

21          frame are we looking at?                  How long has it been in

22          operation?

23   MS. ZACHARIAS:            A:      I believe the first meeting would

24          have been some place in February/March, and that was a

25          preliminary meeting with the representatives of the

26          organizations that we had invited to participate to

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1           get together and talk about the formation of the group

2           and what the terms of reference would be, what the

3           scope would be, their level of interest in

4           participating and so forth.                       How we could essentially

5           structure it to be effective for them as well as for

6           B.C. Hydro.

7                           And then the first official meeting of the

8           group would have been in May, and the next meeting is,

9           I believe, later this week.

10   MR. QUAIL:           Q:     So it's met twice and the third meeting

11          is pending, is that correct?

12   MS. ZACHARIAS:             A:       That's correct.

13   MR. QUAIL:           Q:     Now, B.C. Hydro says that it is

14          concerned about the circumstances of its low income

15          customers.         You've got a group composed of

16          representatives of various segments of that, but you

17          choose not to have any discussion with them about your

18          rate structure.           Can you explain why?

19   MS. ZACHARIAS:             A:       We have had discussions with them.

20          In the first meeting we outlined how the RIB rate was

21          structured, what the impacts were going to be on low

22          income people as far as we could determine from the

23          information that we had.                    But that first meeting -- so

24          the intent of working with the group is to help inform

25          us on how we can best implement the rate in order to

26          mitigate the impacts on those folks.

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1    MR. QUAIL:           Q:    Well, I asked if there was discussion;

2           what you've described is you told them.

3    MS. ZACHARIAS:            A:      Well, by that time the rate was

4           filed and so we were in the process of describing how

5           the rate worked, and as I said, what the impacts were,

6           and also we obviously had a conversation about some of

7           the other alternatives that we had looked at, and why

8           we ended up selecting the RIB as the one to propose.

9    MR. QUAIL:           Q:    And what feedback did you receive when

10          you told them?

11   MS. ZACHARIAS:            A:      The general feedback that we had was

12          that they wanted some time to understand what the

13          impacts were and to understand, in particular, our

14          assessment of the fact that 85 percent of low income

15          customers are better off on the RIB structure.                                Also

16          to understand the impacts on those customers that are

17          not, and have some time to work with us on the

18          implementation strategies that we had been discussing.

19          In particular, the distribution of the energy savings

20          kits which are the first things.                             One of our major

21          initiatives to help low income customers make changes

22          in their households in order to conserve electricity

23          and mitigate the impacts of the RIB rate, and rate

24          increases as general.

25                                                  Proceeding Time 11:19 a.m. T22

26   MR. QUAIL:           Q:   So since you've broached the subject,

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1           could -- just give a very brief description of what

2           the energy savings kit is.                    That's a program available

3           to people under the low income to qualify for this

4           kit, is that correct?

5    MS. ZACHARIAS:            A:      That is correct.

6    MR. QUAIL:           Q:    And it consists of a number of household

7           items which can be used to help conserve energy, is

8           that -- like this is, is that correct?

9    MS. ZACHARIAS:            A:      That is correct.

10   MR. QUAIL:           Q:    And could you list what items were

11          included in the kit?

12   MS. ZACHARIAS:            A:      Sure.        Just give me a second to --

13          so as a general statement, what the kit includes are

14          relatively easy to install measures that will improve

15          the efficiency of the home, and they include things

16          like compact fluorescent light bulbs; faucet aerators

17          that help to conserve hot water, which is important

18          when it's electrically heated; low flow shower heads;

19          water heater pipe wraps; caulking; draft proofing;

20          window film which helps improve the efficiency of

21          single pane windows; LED night light; fridge and

22          freezer thermometers, et cetera.                             So if all of those

23          things are installed, there's a potential for savings

24          of approximately 700 kilowatt hours a year, and on

25          average we think customers can certainly save at least

26          300 kilowatt hours a year by installing the items in

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1           those kits.

2    MR. QUAIL:           Q:    And I think you've told us that when you

3           describe the rate structure changes that were

4           happening, essentially the response you got is they

5           needed some time to wrap their head around it.                            Is

6           that a fair synopsis?

7    MS. ZACHARIAS:            A:      I would say that's fair.                They were

8           also generally, you know, supportive of the fact that

9           we were getting together as a group and we were asking

10          for their input and, frankly, their involvement in

11          helping us to reach low income customers to both

12          education them on the impacts of the RIB, and also be

13          distribution channels for the various programs that we

14          have and are going to be developing, both the energy

15          saving kits and also education.

16                          So subsequent to those meetings, we've had

17          discussions with a number of them around their ideas

18          of how we can leverage the relationships that they

19          have and the workings that they already do in various

20          sectors of the low income population, to ensure that

21          whatever programs we design will have -- we will have

22          maximized the access of low income customers.

23   MR. QUAIL:           Q:    I'm going to make a reference.                       What I'm

24          going to do is simply note it for the record and then

25          read the passage to save everybody flipping through

26          the materials.          The reference is Exhibit B-3, which is

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1           the first round of IR responses.                               BCUC IR 1.18.3 and

2           the third paragraph of page 1 reads as follows.                                 You

3           can turn to it if you like but it's simply to frame

4           something that's following.

5                     "In addition, B.C. Hydro has worked with

6                     Indeco Consulting to develop a low income

7                     customer strategy to help ensure that it

8                     understands the needs of low income

9                     customers and is providing the appropriate

10                    service to this customer segment.                         Indeco

11                    Consulting is a well-known Canadian

12                    consulting firm that has expertise in low

13                    income issues and has worked with public and

14                    private companies and government to develop

15                    strategies and programs for low income

16                    people."

17          So you received two reports in total from Indico

18          Consulting, is that correct?

19   MS. ZACHARIAS:              A:      That is correct.

20   MR. QUAIL:           Q:      And this was a collaborative project

21          between Indeco and B.C. Hydro?

22   MS. ZACHARIAS:              A:      I wouldn't say it was collaborative.

23          I would say that we asked them for their input in

24          terms of giving us an understanding of what other

25          utilities had done with respect to their low income

26          programs and their low income outreach, and we asked

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1           them to provide us with the range of options that

2           other utilities were undertaking.

3    MR. QUAIL:           Q:    So I had assumed that it was

4           collaborative just from the opening line of the

5           extract that I read, which says, "B.C. Hydro has

6           worked with Indeco Consulting".                         Is that not an

7           accurate statement, in your IR response?

8                                                   Proceeding Time 11:24 a.m. T23

9    MS. ZACHARIAS:            A:      Yes.       We've worked with them, and I

10          think what I've just describes indicates a definition

11          of "worked with them".                We engaged them, we hired

12          them, to give us their perspectives and an overview of

13          what others had done.

14   MR. QUAIL:           Q:    Now, the two reports are located, and

15          I'm going to be making extensive reference to these

16          two attachments, it's Exhibit B-7, which is the second

17          round of IR responses.                BCOAPO 2.25.1.           And there's

18          attachment 1 and attachment 2.                        You might want to have

19          those handy, because I'll be referring to them to some

20          extent.

21                          And these are the two reports from Indeco

22          that we just talked about, is that correct?                          I know

23          it's a tricky question, but perhaps, Ms. Van Ruyven,

24          you could -- these are the two reports from Indeco

25          that we just talked about, is that correct?

26   MS. ZACHARIAS:            A:      Yes, that's correct.

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1    MR. QUAIL:           Q:    And attachment 1 is dated February,

2           2008, while attachment 2 is dated July, 2007.                            Is that

3           right?

4    MS. ZACHARIAS:            A:      Yes, approximately.

5    MR. QUAIL:           Q:    It's a little confusing that they're

6           numbered in opposite from their temporal sequence.                           It

7           appears to me that the February, 2008 report, that's

8           attachment 1, appears to be a later version or draft

9           of the July, 2007 report.                   Is that correct?

10   MS. ZACHARIAS:            A:      Not exactly.               In the first report,

11          we asked them to give us a sense of what our strategy

12          -- once again, as I said, given what others -- what

13          approach they had taken to low-income customers.                           What

14          the overall approach that they would recommend to B.C.

15          Hydro, and so it's the overall strategic framework, if

16          you will, where they recommended putting emphasis on

17          proactive measures, primarily aimed at education and

18          conservation and efficiency, as a more sustainable way

19          of addressing low-income customer issues and

20          relatively, if you put most of your emphasis there,

21          the need to put emphasis in a reactive way when things

22          got -- when low-income people essentially got into

23          financial hardship would be relatively less, and that

24          that would be a more sustainable approach to take.

25                          With respect to the report that was the

26          date on which was written in February, they gave more

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1           specific program examples of what other utilities were

2           doing in each of those five categories of education,

3           energy efficiency, customer support, assistance and

4           relief.       So they were more at the -- as I said,

5           looking at a more specific program level and examples

6           of those.

7    MR. QUAIL:           Q:     Now, the second report, attachment 1, is

8           about double the size of the first one, and appears to

9           contain a lot of elaborations and expansions and

10          basically covered -- much of the material in the

11          earlier report is also contained in the later report.

12          Is that a correct observation?

13   MS. ZACHARIAS:             A:       So the overall premise that I just

14          stated, where you have the five kind of areas that you

15          focus in, if that's what you mean by saying that

16          there's that similarity, yes.

17   MR. QUAIL:           Q:     Okay.         Now, I'd like to refer you to

18          attachment 2, which is the July, 2007 report.                              And one

19          of the things that the reports both strive to do is to

20          provide a profile of B.C. Hydro's low-income

21          customers.         Is that right?

22                                                          Proceeding Time 11:28 T24

23   MS. ZACHARIAS:             A:       Do you want to direct me to a page?

24   MR. QUAIL:           Q:     Just -- well, I'd say, one of the things

25          that's general.           One of the -- part of the territory

26          these reports cover is describing who are your low

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1           income customers.           This is discussion that describes

2           them and describes different metrics, for example, of

3           poverty.

4                           We'll be going into them in more detail, I

5           just say as a general -- I didn't think this was a

6           very contentious questions.                       The reports talk about

7           your low income customers, is that right?

8    MS. ZACHARIAS:            A:      So to clarify, the reports were

9           giving us, as I said, an indication of how other

10          utilities approach the issue of low income customers.

11          So in just taking a quick flip of the things around

12          background, as an example, I think you can read that

13          from the perspective of Indeco was giving their

14          perspective of how other utilities have approached

15          defining low income, what the overall electricity

16          context is and so forth.

17                          As you can see you can see a comparison of

18          electricity prices in British Columbia to others that

19          shows -- you know, in Boston.

20   MR. QUAIL:           Q:    We'll be going through this, so you

21          don't need to -- I'll be taking you through a number

22          of areas of content.              So I would discourage you from

23          providing the detailed rundown of what's in the

24          reports, because we'll actually be doing a fair amount

25          of that in the course of this dialogue, okay?

26                          I refer you to page 11 of 28, as it's

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1           numbered, of the July report, which is attachment 2.

2           And see the heading there, "Definitions of Low

3           Income".          And the first paragraph says:

4                     "Despite this strong social safety net…"

5           That's describing the wondrous social safety net in

6           British Columbia,

7                     "…there are households across B.C. that are

8                     considered to be low income households.

9                     While there is no accepted definition of low

10                    income or the poverty line in Canada, there

11                    are a number of metrics that are used to

12                    define a low income household.                        These

13                    include:…

14          First bullet:

15                    "pretax, post transfer low income cutoff."

16          which is LICO, low income cut off.                              So that's the

17          Stats Canada, metric, is it not?

18   MS. ZACHARIAS:               A:      That's my understanding, yes.

19   MR. QUAIL:              Q:    "The market based measure; the core

20                        needs income threshold and the shelter cost

21                    to income ratio."

22          Next paragraph:

23                    "The pretax post transfer LICO is the most

24                    commonly accepted measurement of poverty

25                    lines in Canada."

26          So that's the advice to you from Indeco.                                Does B.C.

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1           Hydro take any exception to that information from

2           Indeco?

3    MS. ZACHARIAS:            A:      That it's the most commonly

4           accepted?

5    MR. QUAIL:           Q:    Yes.

6    MS. ZACHARIAS:            A:      No, that's our understanding.

7    MR. QUAIL:           Q:    "Virtually all of the statistics

8                     used by other national measures of poverty

9                     in Canada, like LICO, come from Statistic

10                    Canada's annual survey of incomes.

11                    Statistics Canada itself does not claim to

12                    measure poverty, rather it defines a set of

13                    income cut-offs below which people may be

14                    said to live in straitened circumstances.

15                        The difference between 'straitened

16                    circumstances' and 'poverty' is mute,

17                    however, and most social policy analysts,

18                    politicians, and editorial writers, treat

19                    the cutoffs as poverty lines."

20                          Now, the LICO consists of a grid that's

21          based on three variables.                   One is the size of the

22          family unit, the second is the pretax family income

23          and the third is the size of the community where the

24          household resides; do you agree with that?

25   MS. ZACHARIAS:            A:      That's my understanding, yes.

26   MR. QUAIL:           Q:    I'll now refer to attachment one, that

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1           is the February 2008 report, page 1047.                        And this, to

2           me appeared an example of elaboration in the later

3           report from the first.                 There is the table, Table 1,

4           shows low income cut-offs as of 2006 showing that

5           familiar grid, and I would note that for Vancouver,

6           the low income -- and in cities of half a million or

7           more, cut off ranges from $21-odd thousand for a

8           single person up to 56 thousand odd for a family unit

9           of seven or more, do you see that?

10   MS. ZACHARIAS:             A:      Yes.

11   MR. QUAIL:            Q:    So that basically -- somebody who either

12          conforms with those incomes or is below it, would be

13          said to be at or below the LICO cut offs, is that

14          right?        For Vancouver.

15   MS. ZACHARIAS:             A:      That's my understanding, yes.

16   MR. QUAIL:            Q:    Okay, and that is, according to the most

17          commonly used index of poverty in Canada, that group

18          would be generally described as poor.

19   MS. ZACHARIAS:             A:      Yes.

20   MR. QUAIL:            Q:    Okay, now I'd like to flip back to where

21          we were before, with attachment number 2, and the --

22          carrying on at page 11 of 28 as it's numbered at the

23          bottom, describes the market-based measure.                          And maybe

24          rather than reading it, I'll give everybody an

25          opportunity to read that paragraph which just goes to

26          the beginning of the next page.

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1                                                     Proceeding Time 11:33 a.m. T25

2                             Somebody has a cell phone, which I'd

3           appreciate if they would turn off.

4                             Have we got that?                 Just a couple of points.

5           So this is another metric that's sometimes used in

6           alternative to LICO, and it makes no effort to

7           distinguish on the basis of the size of the family

8           unit.         Is that right?

9    MS. ZACHARIAS:              A:      From this description, I see no

10          information to suggest how many people there seem to

11          be in this average family, no.

12   MR. QUAIL:             Q:   And it says that the market basket

13          threshold in Vancouver is $27,791.                             You see that

14          number?

15   MS. ZACHARIAS:              A:      Yes.

16   MR. QUAIL:             Q:    That approximately squares under the

17          LICO for 2006 with a family unit of two, in the city

18          of Vancouver.         Is that right?                  You can go back and

19          check if you want, but twenty-six thousand-odd is the

20          LICO, 27-7 is the market-based measure.                            Can we agree

21          on that?

22   MS. ZACHARIAS:              A:      I'm sure you're right.

23   MR. QUAIL:             Q:    Okay.        If we move on to the second

24          paragraph of page 12 of 28, of attachment 2, that's

25          the July, 2007 Indeco report, in the last paragraph

26          there is a discussion of the shelter cost to income

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1           ratio, or STIR, and I'll give everybody a moment to

2           look at that.        It's actually in the second-last

3           paragraph of page 12 of 28.

4                           And actually, I think I'm going to read a

5           bit of this into the record.                       So this is the one used

6           by the Canada Mortgage and Housing Corporation.                            About

7           halfway through it says:

8                     "Housing is considered affordable if the

9                     household's STIR is less than 30 percent.

10                    As a result, a household is considered to be

11                    a low-income household if shelter costs are

12                    30 percent or more of the total household

13                    income.   A STIR of between 30 and 50 percent

14                    indicates an affordability problem.

15                    Households paying over 50 percent of their

16                    income for shelter are considered to be

17                    high-need, or at imminent risk of

18                    homelessness."

19          Do you see that?

20   MS. ZACHARIAS:             A:      Yes, I see that.

21   MR. QUAIL:           Q:     And the final paragraph indicates that

22          the LICO identifies 17.8 percent of households in

23          British Columbia as low-income.                          Do you see that?

24   MS. ZACHARIAS:             A:      Yes.

25   MR. QUAIL:           Q:     While STIR, under that index, it would

26          be 22.9 percent.

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1    MS. ZACHARIAS:              A:      That's what it says.

2    MR. QUAIL:             Q:    Okay.        Now, flip over the page and

3           you'll see table 1 of attachment 2, which again is the

4           earlier -- the July report of Indeco.                          And we see a

5           comparison of LICO and STIR.                        Do you see that?

6    MS. ZACHARIAS:              A:      Yes.

7    MR. QUAIL:             Q:    Okay.        And this shows the derivation of

8           the 17.8 percent low-income households under LICO, and

9           the 22.9 for STIR.              Is that correct?

10   MS. ZACHARIAS:              A:      That's what it shows.

11   MR. QUAIL:             Q:    Okay.        Now, I'm afraid we've got to go

12          back to attachment 1, which is the February, 2008

13          version, or -- perhaps stand corrected, February, 2008

14          report, to page 9 of 47.                    Now, here we've got familiar

15          wording.        Under the heading of "Definitions of low

16          income", we went through that from the -- that, in the

17          earlier version, that of the earlier report, the July,

18          2007.         And here we see some familiar wording.                       It even

19          starts with the same:

20                    "Despite the strong social safety net, there

21                    are households across B.C. that are

22                    considered to be low-income households."

23          You see that.         However, it changes.

24                    "Therefore, the services and protections

25                    offered to low-income people through various

26                    provincial agencies as well as through non-

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1                     governmental organizations should be taken

2                     into consideration when implementing low-

3                     income programs and when developing

4                     partnerships."

5           On whose initiative did the analysis in this paragraph

6           change from the earlier version?

7                                                   Proceeding Time 11:38 a.m. T26

8    MS. ZACHARIAS:            A:      I don't know.

9    MR. QUAIL:           Q:    And just sort of as a general

10          observation, the later report, that's attachment 1,

11          only describes the LICO, low income cut offs, as a

12          measure of poverty, is that right?                           That's the very

13          next part of the definitions of low income, if you

14          want to check.

15   MS. ZACHARIAS:            A:      That's correct.

16   MR. QUAIL:           Q:    It doesn't describe the STIR or the

17          market-based measure or these other metrics, is that

18          right?

19   MS. ZACHARIAS:            A:      That is correct.

20   MR. QUAIL:           Q:    And can you tell us on whose initiative

21          the discussion of indices of poverty was restricted to

22          just LICO, between the first and second version?

23   MS. ZACHARIAS:            A:      So the answer to that question is I

24          don't know, but I don't know if you should interpret

25          that as a restriction.                As you've said, we filed both

26          of those reports.           The first one was taken from the

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1           perspective of looking at giving us guidance on

2           everything that was -- how various utilities were

3           looking at this issue.                The second report was going

4           into programs.          That's not to say that they don't

5           continue to be taken together.                        I would say if you

6           continue to put everything from one report into the

7           next report, by the second or third report it gets to

8           be hundreds of pages long.

9    MR. QUAIL:           Q:    Now, just -- we're about to look at a

10          different document but I'd just like you just to sort

11          of flag in your memory, if you can, the 17.8 percent

12          low income figure for B.C. reported in the Indeco

13          report according to LICOs, because we'll be coming

14          back to that.

15                          I would now refer you to Exhibit C-10.                     I'm

16          sorry you had to pull out another binder and we'll be

17          making some extensive reference to it.                       Exhibit C-10-

18          2.      These documents are also at -- you'll find them

19          also in the -- no, we'd best go to that source.

20          Reference, Exhibit C-10.2, attachment 2.                        C10-2 is the

21          first round of information requests that were

22          submitted by -- on behalf of our clients.

23   MS. ZACHARIAS:            A:      Did you want us to go to a specific

24          IR?

25   MR. QUAIL:           Q:    I'm sorry, I'm sorry, I would -- no.

26          I'm sorry, what I wanted you to look at is attachment

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1           4.      That was an error in my note here.

2    THE CHAIRPERSON:                 And which particular article are you

3           drawing our attention --

4    MR. QUAIL:              The article -- oh no, I'm -- just a moment.

5           Yes.          This is an article called "Improving Access to

6           British Columbia's Demand-Side Management Programs"

7           and it appears in a document in Exhibit C10-2 as

8           attachment 4.

9                                                        Proceeding Time 11:42 a.m. T27

10   MR. QUAIL:              Q:     Okay.         And this is the final version of

11          a study of Liz Kelly of Eaga Canada.                              Do you have that

12          before you?           And you understand that --

13   MR. CHRISTIAN:               Where does the document indicate that

14          this is by Liz Kelly?                    We're talking about the

15          document numbered pages 1 to 12, bottom right corner.

16          Because I don't see any indication on it that it's by

17          Liz Kelly, and so I'm concerned that we're --

18   MR. QUAIL:              Okay, if my friend is not prepared to accept

19          that stipulation, we can look first at Exhibit 3.

20   MR. CHRISTIAN:               Well, I wasn't arguing with the

21          stipulation.

22   MR. QUAIL:              Yes.

23   MR. CHRISTIAN:               I wanted to make sure I've got the right

24          document in front of me.

25   MR. QUAIL:              Q:     Yes.        The correct document is a document

26          marked "Confidential, Improving access to British

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1           Columbia's demand-side management programs."                         The

2           first heading is "Executive summary" and there are 12

3           pages indicated in the bottom right-hand corner.                           And

4           this is a study performed by Eaga Canada by Liz Kelly,

5           commissioned by the Ministry of Energy, Mines and

6           Petroleum Resources, and obtained from the Ministry

7           via a Freedom of Information process.

8                           And attachment 3 is also something you

9           should have handy, which is an earlier version dated

10          March, 2007, also obtained under Freedom of

11          Information.       And there's a clean copy of that that

12          doesn't have the watermarks saying "Confidential"

13          across it that we filed for convenience, which is

14          Exhibit C10-2-1.          And it will be much better for

15          everybody's eyes looking at that rather than

16          attachment 3.       It's a clean copy of the March, 2007

17          version.

18                          And you'll see there it has at the bottom

19          "Liz Kelly, Eaga Canada, on behalf of MEMPR, March,

20          2007".

21                          Now, I'm going to make reference to a

22          couple of documents, but I'll simply note them for the

23          record.       I doubt that they are contentious, because

24          they've been dealt with in the process of Information

25          Requests, but one of them is an e-mail dated March

26          30th, 2007, which is referenced as Exhibit C10-2,

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1           attachment 2.        And it indicates that Patrick Mathot, I

2           think I've pronounced it correct, M-A-T-H-O-T, was a

3           recipient of e-mail.

4    MS. ZACHARIAS:             A:      So, Pat Mathot has confirmed that he

5           received that e-mail.

6    MR. QUAIL:            Q:    Yes.       And what's his position in B.C.

7           Hydro?

8    MS. ZACHARIAS:             A:      I don't know his official title, but

9           he is responsible for the residential PowerSmart

10          program.

11   MR. QUAIL:            Q:    Okay.        And it's -- that e-mail has an

12          attachment which appears to be the March, 2007 of Ms.

13          Kelly's study.           And I take it that that's not

14          contentious.

15   MS. ZACHARIAS:             A:      That's what it appears to be, yes.

16   MR. QUAIL:            Q:    And I won't give you the reference, but

17          in an IR, B.C. Hydro has acknowledged that it received

18          the e-mail and that the March draft of Ms. Kelly's

19          study was attached at that time.

20   MS. ZACHARIAS:             A:      Yes, I believe that's what we said

21          in the IR.

22   MR. QUAIL:            Q:    Now, you may need to determine this, but

23          anyway, the e-mail itself, that's C10-2, attachment 2,

24          indicates recipients had an opportunity to comment to

25          Andrew, who appears to be Andrew Pape-Salmon of the

26          MEMPR.        Is that right?

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1    MS. ZACHARIAS:            A:      That is correct.

2    MR. QUAIL:           Q:    And do you know what his position is

3           with the Ministry?

4                                                   Proceeding Time 11:46 a.m. T28

5    MS. ZACHARIAS:            A:      No, we don't know what his title is.

6    MR. QUAIL:           Q:    Do you know what he does there?

7    MS. ZACHARIAS:            A:      He heads up a lot of the policy

8           development for the Ministry of Energy, Mines and

9           Petroleum Resources around energy efficiency.

10   MR. QUAIL:           Q:    Okay.        I'm going to give you another

11          reference but I don't think we need to turn to it.

12          I'll save everybody the shuffling.                           But for the

13          record, Exhibit B-3, BCOAPO 1.2.5, which indicates

14          that apparently B.C. Hydro did not make any comments

15          regarding the March 2007 draft, notwithstanding we

16          gave them an opportunity to do so.                           Is that correct?

17   MS. ZACHARIAS:            A:      That is correct.

18   MR. QUAIL:           Q:    I'll now refer you to Exhibit B-3, the

19          first round of IR responses, BCOAPO 1.2.3.                            No, we can

20          let that pass.

21                          Instead I'll have you turn again to

22          attachment 4.       That is the final undated draft of the

23          Liz Kelly report, attachment 4 to C-10.2.

24   MR. CHRISTIAN:            I'd just like to have it noted for the

25          record that I don't believe that the document we're

26          now referring to -- I'm pretty sure this is the 12-

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1           page document at the end of the this thing -- has been

2           established as being a document by Liz Kelly.                                I think

3           my friend has stated it, hasn't put it as a question

4           to my witnesses, and nor is it indicated on the face

5           of the document at least that it's the same document,

6           or a document authored by Ms. Kelly.

7    THE CHAIRPERSON:                It would be nice to know the document's

8           provenance, Mr. Quail.

9    MR. QUAIL:             Yes.     We could -- I'm thinking just of

10          efficiency of the process for something procedural

11          then.         Perhaps I could have a discussion with my

12          friend.         We can produce the record of the freedom of

13          information correspondence with the Ministry to

14          establish that.             Perhaps if we can just sort of hold

15          that issue off and it may be that following

16          discussions with my friend, this is something that

17          will not be contentious between the parties.

18   MR. CHRISTIAN:             Okay, and that suits me.                     The questioning

19          can go on the assumption that it is a document

20          authored by Liz Kelly, and then I'll confirm with my

21          friend later on whether we can actually admit that.

22   THE CHAIRPERSON:                Thank you.

23   MR. QUAIL:             It may require filing other material and it's

24          purely procedural --

25   THE CHAIRPERSON:                Just talk to Mr. Christian over lunch,

26          Mr. Quail.

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1    MR. QUAIL:           Yes, I shall do so.

2    MR. QUAIL:           Q:    Okay.        I'd referring you to page 1 of 12

3           and to in particular the last sentence of the first

4           paragraph:

5                     "It is also recognized that uptake on DSM

6                     programs by homeowners and renters with low

7                     incomes is close to zero."

8           Do you see that?

9    MS. ZACHARIAS:            A:      Yes, I see that sentence.

10   MR. QUAIL:           Q:    Does B.C. Hydro take issue with that

11          characterization?

12   MS. ZACHARIAS:            A:      We don't have information on the

13          income levels of our customers, so we can't know

14          definitively if that statement is true or not.                            But

15          considering that a number of our programs that are

16          directed to the residential marketplace from the past,

17          such as the refrigerator pickup program or the CFL

18          giveaway, has not been dependent upon customers'

19          income level, we have no reason to believe that this

20          would e true.

21   MR. QUAIL:           Q:    You're saying you have no information

22          that contradicts it because you simply don't know what

23          the income is of participants in your programs.

24   MS. ZACHARIAS:            A:      That's right.                We have said we don't

25          have information on income level, so we can't know

26          definitely whether or not this statement is true or

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1           not.          But if one of the sort of assumptions behind

2           this statement is that low income people have less

3           available income in order to make energy efficiency

4           improvements, that that is not necessarily the case,

5           because there's a number of programs that B.C. Hydro

6           has offered in the past that is not dependent upon the

7           income level that customers have or their ability to

8           invest in energy efficiency capital improvements.

9    MR. QUAIL:              Q:    But you have no evidence you can give us

10          about the participation rate among low income

11          customers in any of your programs, is that right?

12                                                           Proceeding Time 11:50 T29

13   MS. ZACHARIAS:               A:      Yes, and we've said on the record in

14          response to an IR that we do not have income

15          information on our customers, that we can't

16          definitively link customer participation along their

17          income level.

18   MR. QUAIL:              Q:    I'll take you to -- let's look at the

19          second paragraph of this document.

20                    "For most homeowners in British Columbia

21                    energy costs typically represent 5 percent

22                    of after tax income.                 Despite the provinces

23                    relatively low energy prices, though, around

24                    18 percent of homes in the province spend an

25                    average of 17 percent after-tax income on

26                    energy.     As a result, when compared to the

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1                     average, these homeowners have difficulty in

2                     making spending decisions to take advantage

3                     of DSM programs that will, in fact, reduce

4                     their longer-term energy costs.                    This

5                     discussion paper explores some of the

6                     reasons for this phenomenon, and the

7                     potential to enhance delivery of the

8                     provinces DSM programs so as to be more

9                     accessible by all British Columbia."

10          Do you take issue with anything contained in that

11          paragraph.

12   MS. ZACHARIAS:            A:      Well, there's a lot of statements in

13          that paragraph.         Do you want me to go through them one

14          by one?

15   MR. QUAIL:           Q:    Perhaps if you could just identify any

16          that you have contradictory evidence that would lead

17          you to say that is incorrect.

18   MS. ZACHARIAS:            A:      Well, the context of this paragraph

19          seems to be talking about energy costs.                         So to the

20          extent that B.C. Hydro does not have information on

21          the total energy costs of its customers from the

22          perspective of what they paying for natural gas or

23          propane or oil, we have no information to really be

24          able to understand whether or not those statements are

25          true or not.

26   MR. QUAIL:           Q:    I just want to go back.                   A light just

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1           went off, and I believe it was the image of a fridge

2           door opening and a light going on.                           Our

3           refrigerators.          One of the programs that you told us

4           is accessible to low-income people is your

5           refrigerator -- you know, you take away somebody's old

6           battered refrigerator.                That's obviously not available

7           to somebody who can't afford a new refrigerator, is

8           it?

9    MS. ZACHARIAS:            A:      It's targeted to people that have

10          two refrigerators, obviously, and by looking at

11          customers in our residential end-use study, there's

12          about 12 percent of low-income customers that do have

13          a second refrigerator.

14   MR. QUAIL:           Q:    Do you have any idea how many renters

15          are permitted to replace the refrigerator in a rented

16          premises?

17   MS. ZACHARIAS:            A:      No, I do not.

18   MR. QUAIL:           Q:    The whole concept of that as a

19          conservation measure is that people are encouraged to

20          replace inefficient old refrigerators with new

21          efficient refrigerators.                  I don't think that that's

22          rocket science.         Can you agree with that?

23   MS. ZACHARIAS:            A:      So the intent is that often when

24          people upgrade their refrigerators they, sometimes,

25          end up with two refrigerators, and they keep the older

26          refrigerator that is relatively more inefficient

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1           plugged in.        They don't appreciate how much

2           electricity that it's using.                       So it's really targeted

3           at people who have two refrigerators, one of which is

4           not energy efficient.                It's not so much targeted at

5           having people upgrade the refrigerator.                        There's other

6           programs that do that.

7    MR. QUAIL:           Q:    Okay, I don't intend to go on a long

8           exposition about refrigerators, and I'll close the

9           door on that one and the light can go out for the time

10          being.

11                          Back to the paragraph we just looked at.

12          It suggests that 18 percent of households spend an

13          average of 17 percent of their after-tax income on

14          energy.       We've already established that it says that.

15          Do you have any information that contradicts that

16          statement?

17   MS. ZACHARIAS:            A:       As I've said, because we have no

18          information on the total energy spend of our

19          customers, I can't agree or disagree with that

20          statement.

21   MR. QUAIL:           Q:    So assuming that the Commission is

22          curious about this question, you an tell us nothing

23          while we do have this document before us.                         Do you

24          agree with that?

25   MS. ZACHARIAS:            A:       I can't talk to the total energy

26          costs of customers.                I can talk to what they spend on

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1           electricity.

2    MR. QUAIL:           Q:    Okay, I asked you previously to sort of

3           bear in mind the 17.8 percent poverty rate in British

4           Columbia according to LICOs, and I'd like you to file

5           beside that, maybe in your mind, make a note of the 18

6           percent figure of households that spend an average of

7           17 percent of disposable income on energy.

8                           Now, obviously we are looking at two

9           different concepts.             One is poor households and the

10          other is energy poor households.                             I take you are

11          familiar with the concept of energy poverty?                             You're

12          familiar with that phrase?

13   MS. ZACHARIAS:            A:      I'm familiar with the phrase from

14          the perspective of reading these two articles.

15                                                  Proceeding Time 11:55 a.m. T30

16   MR. QUAIL:           Q:    Okay.        "Energy poverty" means -- meaning

17          people for whom the costs of household energy presents

18          a financial challenge, in terms of the straitened

19          circumstances of the family.                      Right?        That's what it

20          means.

21   MS. ZACHARIAS:            A:      I believe that's the definition

22          that's been used in these two papers.                           I don't know if

23          that's a widely accepted definition or not.

24   MR. QUAIL:           Q:    Now, presumably these aren't identical

25          groups.       There might be some poor households that

26          aren't energy-poor, and there might be some -- but I

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1           guess by definition if you're energy-poor, you're

2           poor.         So can we agree that this provides at least

3           some kind of an index of the size of the sub-group of

4           residential customers who may be especially vulnerable

5           to energy price increases?

6    MS. ZACHARIAS:              A:      So, which figure are you referring

7           to?

8    MR. QUAIL:             Q:    Well, I'm saying we've got 17.8 percent

9           is the -- according to LICO, is the incidence of

10          poverty -- the number of poor households in B.C.                               And

11          according to this information, about 18 percent, so

12          roughly the same, are energy-poor.                             They're poor and

13          are challenged by the cost of energy.                             So I'm just

14          suggesting that this might give us at least a rough

15          index of the size of the -- or the proportion of

16          residential customers or households who may be

17          especially vulnerable to increases in the cost of

18          household energy.             Can we agree on that?

19   MS. ZACHARIAS:              A:      Yes.

20   MR. QUAIL:             Q:    Okay.        I'd like you to pull out the

21          clean copy of the earlier Liz Kelly report, which is

22          Exhibit C10-2-1.            Do you have that before you?                      Page

23          3, in the bottom left-hand corner.                             Now, if you read

24          the -- I'd like to draw your attention to the second

25          paragraph.

26                    "Sections 6 and 7 of this paper briefly

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1                     explain "the energy burden" and the benefits

2                     that energy-efficient housing can bring

3                     towards the creation of affordable energy

4                     for all.    A baseline of scale of energy

5                     poverty within B.C. is established, by

6                     exploring in detail some typical indicators

7                     as follows…"

8           The first bullet:

9                     "Expenditure on energy - statistical

10                    analysis reveals that about 270,000 homes

11                    within B.C. are likely to be spending 10

12                    percent or more of their family income on

13                    energy.    This is the level accepted in many

14                    other jurisdictions as a measure of

15                    unreasonable energy costs and energy

16                    poverty.    The installation of cost-effective

17                    renewal and energy-efficient technologies

18                    can reduce the energy demand and costs for a

19                    home, even in a situation of rising energy

20                    prices.    Ensuring lower-income homes

21                    minimize energy use is one path to

22                    affordable energy."

23          The second bullet:

24                    "Health - Within the U.K., North America and

25                    Europe, there is growing recognition that

26                    poor-quality inefficient housing conditions

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1                     can have a negative impact on people's

2                     quality of life and health.                         One extreme

3                     impact of poorly-insulated, difficult to

4                     heat, inefficient homes, when combined with

5                     changes in temperature, is a marked

6                     fluctuation in seasonal mortality rates.

7                     Excess winter mortality (EWM) rates have

8                     long been studied in Canada.                        Cardiovascular

9                     diseases, flu and pneumonia have been

10                    identified as the main causes of EWM, and it

11                    is recognized that this phenomenon is

12                    seasonable, predictable, and therefore

13                    preventable.       The World Health Organization

14                    recommends intervention to improve thermal

15                    comfort and reduce energy consumption as a

16                    means of providing affordable energy

17                    necessary for families to heat their homes.

18                    Approximately 10,000 winter deaths occur in

19                    Canada each year; 16 percent of these are in

20                    B.C."

21          Utility disconnections, the third bullet.

22                    "The strong correlation between utility

23                    disconnections and homelessness has been

24                    proven.   Disconnections have been attributed

25                    as the second-biggest cause of homelessness

26                    behind rent or mortgage default.                         During

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1                     2005, over 50,000 gas and electricity

2                     disconnections occurred in B.C.                    Proactive

3                     energy efficiency programs targeted homes

4                     experiencing difficulties with affording the

5                     costs of energy can help to avoid the need

6                     for disconnections in the first place, along

7                     with all the associated costs of debt and

8                     debt recovery borne by the consumer and the

9                     utility companies."

10          Now, looking over that, are there any facts that are

11          stated in that extract that you have information that

12          you'd like to share with us that contradicts?

13                                                  Proceeding Time 12:00 p.m. T31

14   MS. ZACHARIAS:           A:       We have no information -- so, first

15          of all, both of these bullets are not footnoted.

16          There's no evidence provided to substantiate those

17          comments whatsoever.              Saying that utility

18          disconnections, for instance, the strong correlation

19          between utility disconnections and homelessness has

20          been proven, I don't know what context that's given

21          in.       I don't know what jurisdiction that's related to.

22          There's no information in the paper that helps us to

23          understand on what basis that point is made.

24                          Similar to the excess winter mortality, to

25          be talking about energy poverty, having thermal

26          comfort in the home and so forth, and then putting in

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1           the statement that 10,000 winter deaths occur in

2           Canada each year, 16 percent of these in British

3           Columbia, if the intent is to draw a linkage between

4           the two -- those two things in particular, I don't see

5           that link at all.           We all know that a number of deaths

6           occur for reasons in the winter not to do with thermal

7           comfort.      The fact that there is a high incidence of,

8           for instance, flus in the winter, and that contributes

9           to winter deaths, as well as other things that are

10          more predictable in the winter, can all be causes of

11          the reasons why there are more deaths in the winter.

12                          So, I don't see any data here in this paper

13          specifically to help me understand whether or not this

14          is factually accurate or not.

15   MR. QUAIL:           Q:    First of all, you -- this is a document

16          that was produced by the Ministry, for the Ministry,

17          commissioned Ms. Kelly of Eaga Consultants to produce

18          this document to assist it in its policy development.

19          Is that correct?

20   MS. ZACHARIAS:            A:      I don't know under what context Liz

21          Kelly did this work for the Ministry.

22   MR. QUAIL:           Q:    It was circulated -- this draft was

23          provided to B.C. Hydro with an opportunity to comment.

24          We've already established that.                         B.C. Hydro didn't

25          make any comment refuting any of this information that

26          was being provided to the Ministry, did it?

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1    MS. ZACHARIAS:            A:        We never refuted, but that should

2           not be -- we didn't comment at all.

3    MR. QUAIL:           Q:     Okay.         Flip ahead to page 9 -- sorry.

4           Yes.

5    THE CHAIRPERSON:              Mr. Quail, I'm in your hands, but we're

6           at the lunch hour.              My stomach is grumbling.                   So --

7    MR. QUAIL:           Yes.     A convenient -- I'll be at a convenient

8           spot to adjourn quite soon.

9    THE CHAIRPERSON:              Let's go there, then.

10   MR. QUAIL:           Q:     Okay.         If you would flip ahead to page

11          9.      Actually, maybe what I'll do is, I'll break off

12          here and say -- and I would like you to review this,

13          perhaps, over lunch.                And then I will ask you to

14          inform us of any evidence that you have you'd like to

15          share with us that contradicts any of the information

16          in this part.         Why don't we do it that way?                        We come

17          back with that response from you.                              Can I leave that

18          with you?

19   THE CHAIRPERSON:              Sorry, are you asking them to read the

20          entire -- what is section 4?

21   MR. QUAIL:           The section 4.              That might be -- to save --

22   THE CHAIRPERSON:              It would be better if they read it than

23          you read it into the record, I guess.

24   MR. QUAIL:           Much, much more useful.

25   THE CHAIRPERSON:              Let them do that over lunch, and we'll

26          break till 1:30.

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1    (PROCEEDINGS ADJOURNED AT 12:03 P.M.)

2      (PROCEEDINGS RESUMED AT 1:03 P.M.)                                                 T32

3    THE CHAIRPERSON:           Please be seated.

4                          Mr. Christian, you're on your feet.

5    MR. CHRISTIAN:          I am on my feet.                  I wanted to address the

6           issue that arose between myself and Mr. Quail this

7           morning session with respect to the attachment 4 to

8           BCOAPO IR No. 1.2.1.             And what we're prepared to say

9           is that attachment 4 to that information request was

10          delivered to the BCOAPO et al in response to the

11          letter which is attachment 1 to that information

12          request.

13   THE CHAIRPERSON:           Does that get you where you --

14   MR. QUAIL:           Probably.       That letter is the information --

15          I don't think anything turned on it.                        That's the

16          covering letter wrapping up the freedom of information

17          disclosure process.            And so we have agreement that

18          this was one of the documents that was bundled.                          If

19          there's any question about how one might describe

20          this, it's all to be found in Exhibit 1.                        I'll leave

21          it for people's reading pleasure some other time.

22   THE CHAIRPERSON:           Okay.        Please proceed then, Mr. Quail.

23   MR. QUAIL:           I've been asked by Mr. Bemister to simply

24          flag one issue for the record.                       That is that the

25          bundle of documents called BCOAPO Additional Materials

26          for Cross-Examination was numbered Exhibit C10-6.                         In

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1           terms of sequencing things, that omitted an e-mail

2           that I sent on Friday, June the 13th in response to Mr.

3           Bertch's inquiry.           Initially it looked like he was

4           going to apply for leave to file something.                         So that

5           one was left orphaned in terms of the exhibit

6           numbering system, and so I've been asked to indicate

7           for the record that it will be -- that e-mail message,

8           for the record, is C10-7.                   So we've tidied that one

9           up.

10   MR. QUAIL:           Q:    Well now, where we left off, panel, was

11          that I had drawn your attention to the section on the

12          energy burden, heading number 4, in the exhibit, that

13          is C10-2-1, the cleaned-up version of the March 2007

14          Liz Kelly report, and asked you if you could report to

15          us any of the statements of fact contained in there

16          where B.C. Hydro has contradictory evidence that you

17          would like to share with us.

18   MS. ZACHARIAS:            A:      Section 4 of the document titled

19          Affordable Energy, just to be clear since there's two

20          --

21   MR. QUAIL:           Q:    I thought this was clear enough.                     I had

22          referred you to, you can check the record, Exhibit

23          C10-2-1, page 9, heading 4, "What is the Energy

24          Burden?" and I spared everyone and the transcribers

25          stating any of the contents on the record, but since

26          we conveniently had a lunch break I left it to you to

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1           review it and see if -- my question is whether you

2           have identified any statements of fact in that section

3           for which you have contradictory evidence that you

4           would like to share with us.

5    MS. ZACHARIAS:             A:       So first of all, upon reviewing the

6           document again, the statement around the 18 percent of

7           homes in B.C. spending an average of 17 percent of

8           after tax income --

9    MR. QUAIL:           Q:     I don't think -- pardon me, that wasn't

10          my question.         There'll be an opportunity in re-

11          examination if my friend wants to review any of the

12          material we've covered.                   This is going to take a long

13          time without rehashing I've already asked you.

14                          My question is, if you could look at this

15          section on the energy burden.                         I apologize if you're

16          addressing something that specifically is contained in

17          that part.         If you're going back to something we were

18          talking about this morning, I would have to ask you

19          not to and instead answer my question which is, with

20          respect to that portion of the document, whether B.C.

21          Hydro has any evidence that contradict any of the

22          facts stated in that section that you would like to

23          share with us.

24   MS. ZACHARIAS:             A:       The reason why I started there is

25          because this is about what -- the section is entitled

26          "What is the Energy Burden?"                        And I think earlier this

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1           morning you talked about 18 percent of homes in B.C.

2           having an energy burden.                  So I just wanted to clarify

3           my understanding of what that information actually

4           drew from.

5    MR. QUAIL:           Q:    First of all, your characterization of

6           the questions I put to you, the transcript will speak

7           for itself and I don't believe that that's the way

8           that I phrased the issue.                   I don't want to spend all

9           the time in dialogue with you.                        You're here to answer

10          my questions.       What we had reviewed though, for the

11          record, is the fact that the document identifies that

12          a certain proportion of British Columbia households

13          spend an average of a certain proportion of their

14          income on energy.

15                          My question for you is, and perhaps -- I

16          hope I don't have to ask the Chair to direct you to

17          answer my question.             You've had an hour and a half to

18          look through this section.                    Can you identify any

19          statements of fact in here for which you have

20          contradictory evidence that you'd like to share with

21          us?

22   MS. ZACHARIAS:            A:      So in the first paragraph there is a

23          statement that says,

24                    "Not all Canadians may have the ability to

25                    reduce household energy consumption because

26                    of barriers to participation."

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1           So I think B.C. Hydro recognizes, agrees that there

2           are some barriers that exist with respect to the

3           ability for low income people to take conservation

4           action, particularly those related to capital

5           investments.    The statement is a little bit broad from

6           the perspective that there are other things that

7           customers can do in order to reduce the electricity

8           that does not depend upon capital investments.                        To the

9           extent that those exist, that they are behavioural in

10          nature, (a) they don't require capital investments,

11          and (b) they also don't require participation in

12          programs in order to achieve that.

13                        The next paragraph with respect to the term

14          "affordable energy" and conversely "energy poverty",

15          we have no information.              We're certainly -- in order

16          to confirm whether or not those are broadly accepted

17          statements or the definitions provided for them are

18          accepted amongst the community that would have

19          expertise in those areas.

20                        With respect to the middle of that

21          paragraph, a disproportionate energy burden is

22          experienced compared to the average home and families.

23          So that statement can be true if the amount of

24          electricity that is being used by a low income home is

25          the same as a home that's being used by a person who

26          has higher income.         So obviously I'm just stating the

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1           mathematical effect that it can be true if the

2           numerator and denominator change differently.

3                            With respect to the next paragraph, the

4           three main causal factors that create an energy burden

5           on a home, once again we think that while efficiency

6           energy costs, family income, those seem relatively

7           reasonable, the ones that are missing are that

8           consumption patterns and end uses are also main

9           drivers behind electricity consumption.                        And certainly

10          all of the information and analysis that B.C. Hydro

11          has done over the last number of years shows that even

12          when you have homes that are relatively in the same

13          size, same number of people in the homes, even

14          allowing for similar types of heating systems and so

15          forth, there can still be a wide variation in energy

16          usage.        That's one of the reasons why we believe it's

17          important to aim at behavioural changes and educate

18          people around how they're using electricity and what

19          their end uses are, the number of electronics and

20          appliances and so forth that are in the home can have

21          an impact on the amount of electricity being used.

22                                                     Proceeding Time 1:38 p.m. T33

23                           With respect to the middle part of that

24          paragraph, even small changes in any one of these

25          three factors can have a dramatic effect on a family's

26          ability to maintain the most basic standards of health

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1           and comfort in the home.                    We haven't been able to find

2           anything in this paper that helps us to know if that

3           statement is correct or incorrect.

4    MR. QUAIL:             Q:    No, my question -- again, I want to be

5           clear what my question is.                      And it will probably make

6           a much shorter answer than perhaps the trajectory you

7           were on.        Would be to identify and share with us any

8           evidence that you've got that contradicts anything in

9           that.         So, you're really -- I'm not asking you to go

10          out there and catalogue every item and say you've got

11          no information, or whatever.                        All I'm asking you to do

12          is identify and share with us any evidence that you

13          have that contradicts any of the statements of fact in

14          this section.         We could probably cut the length of

15          your answer to about a quarter if we follow that

16          route, so I'd ask you to do so.

17   MS. ZACHARIAS:              A:      I guess second-last statement in

18          that paragraph that says:

19                    "Added to this, the living patterns and day-

20                    to-day needs of vulnerable families can

21                    often be very different."

22          In analysis that we've done among our low-income

23          customers, using our residential end-use data, we see

24          -- there isn't a lot of difference in the variation of

25          their use of electricity compared to other types of

26          families, and there's also variation within the low-

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1           income population as well.                    So --

2    MR. QUAIL:           Q:      So you're saying that the living

3           patterns, for example, of poor people are different

4           from affluent people, or the day-to-day needs of poor

5           people are different from those of affluent people?

6           That's what the sentence says that you're purporting

7           to contradict.         You didn't -- the words of the

8           sentence are not what you're responding to in your

9           answer.       "Added to this, the living …" -- before

10          anybody gets to this, let me just read for the record

11          what the sentence says.

12                    "Added to this, the living patterns and day-

13                    to-day needs of vulnerable families can

14                    often be very different."

15          So, do you have evidence that that's incorrect?

16   MR. CHRISTIAN:            And I'd like to put my objection on the

17          record.       The words are on the page.                     They mean what

18          they mean, and my friend can't require the witness to

19          accept his interpretation of them and then comment on

20          it.       He asked, "What do you disagree with here?"

21   MR. QUAIL:           Yeah.

22   MR. CHRISTIAN:            And they're giving answers, and it's

23          improper for my friend to suggest that his

24          interpretation of these words are the only ones upon

25          which they may respond.                 These words are subject to

26          interpretation.         My friend has a meaning that he wants

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1           to ascribe to them, that's a matter for argument, not

2           for cross-examination in the way he's doing it.

3    MR. QUAIL:           Q:    I've read the actual text, and I ask if

4           you have any evidence that contradicts what those

5           words say.

6    MS. ZACHARIAS:            A:      I think our residential end-use data

7           would contradict this statement.

8    MR. QUAIL:           Q:    Well, we'll be looking at your end-use

9           data in due course, so I'll leave it at that.                              Could

10          you please identify any other evidence that you'd like

11          to share with us that contradicts any of the

12          statements of fact in the balance of this section?

13   MS. ZACHARIAS:            A:      So, looking at the rest of the

14          section, talks about other jurisdictions.                          We have no

15          information that would contradict that.

16   MR. QUAIL:           Q:    Okay.        Okay, now with reference to one

17          of your replies this morning, when we were looking at

18          health, and I asked you questions regarding the

19          contents of the paper in the summary section at the

20          beginning, about health impacts, and you suggested --

21          I believe your answer was to the effect that there was

22          no detail and nothing footnoted and so on.                           I'd just

23          like you to turn to page 19 of the same document,

24          under 6.2, and I'm just going to bring a couple of

25          sections of this to your attention and see if you have

26          any evidence you can share with us.                          Under 6.2,

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1           "Health", the second paragraph:

2                     "As shown in Table 8, produced by the West

3                     Midlands Public Health Observatory in the

4                     UK, even relatively minor reductions of

5                     indoor temperatures can cause dramatic

6                     negative impacts on a person's comfort and

7                     health with the most common effects being

8                     strokes and heart attacks."

9           And then table 8 shows various temperatures and the

10          effect of those temperatures.                       And there's a footnote

11          from that, footnote 18, indicating the source of that.

12          Do you have any information that contradicts that

13          evidence?

14                          Proceeding Time 1:43 p.m. T34

15   MS. ZACHARIAS:            A:      I don't.

16   MR. QUAIL:           Q:    Turning on to the next page, second full

17          paragraph:

18                    "The initial review for the World …"

19          WHO, you'll agree, is World Health Organization, it's

20          noted in the paragraph above.

21                    "The initial review for the WHO research …"

22          Which is footnoted there,

23                    "… concluded that "without housing

24                    interventions, the number of excess winter

25                    deaths will increase …"

26          We're at page 21.

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1                     "… will increase, as will the number of

2                     individuals suffering adverse health effects

3                     on health caused by low indoor temperatures.

4                     Housing interventions are suitable means to

5                     …"

6           And it has three things it's suitable for.                         Skipping

7           on to the second paragraph following that:

8                     "The first results from the WHO research

9                     state 'it is clear adequate housing

10                    standards with functional ventilation and

11                    heating systems, and with efficient thermal

12                    insulation protecting the dwelling from both

13                    cold and heat, represent one prevention

14                    measure to reduce the impact of temperature

15                    events on mortality.'"

16          Do you have any evidence that contradicts those

17          statements, or those sources?

18   MS. VAN RUYVEN:           A:        So, Mr. Quail, I think it's

19          important that I get on the record -- our hesitation

20          to answer some of these questions is, we don't --

21          we've not read these studies.                       We're not experts in

22          the United Kingdom's studies on energy poverty or the

23          burden of energy.           I think it's important that the

24          Commission Panel understands that this report was

25          written by a woman that was seconded for a very short

26          period of time to the Ministry of Energy, Mines and

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1           Petroleum Resources.                 Her job and role there was to

2           develop energy-efficiency standards for the building

3           codes.        She -- this was a self-directed advocacy piece

4           of work that she did that drew completely on her

5           experience in the UK.                  Government never at any time

6           directed B.C. Hydro to look at this and to try to make

7           apples-to-apples comparisons, and government -- this

8           is not government policy.

9                               So we did not actually spend a lot of time

10          on this document, based on the conversation we had

11          with government.             You can see that we did not provide

12          written comments.              It was very difficult for us to

13          compare all of these things, because they are drawn --

14          well, a hundred percent on a UK experience.                            So, we

15          have not spent a lot of time trying to refute what is

16          in here.        We haven't read the World Health

17          Organization studies.                  We are going at this low-income

18          program completely from a B.C. perspective, and we

19          will learn as we go, and work with the low-income

20          groups here in British Columbia who have a different

21          set of circumstances, quite frankly, than low income

22          in the United Kingdom.

23   MR. QUAIL:            Q:      Just -- I note that you said you'll be

24          learning as you go.                My suggestion to you, and I don't

25          mean to be unkind, is you've got a lot of learning to

26          do about low-income customers of B.C. Hydro, and

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1           energy poverty in this province.

2    MS. VAN RUYVEN:           A:        And that's exactly why we have

3           formed an advisory committee, because you are the

4           experts on how to deal with low income, and we're

5           looking for you to use your leadership and help us to

6           see the right way to do this going forward.                         And we

7           will learn as we go.

8    MR. QUAIL:           Q:   And you developed a free kit of items

9           for low-income households to improve the energy

10          efficiency of their homes, which is just launched in

11          the last few weeks, correct?

12   MS. VAN RUYVEN:           A:        We wanted something out in the

13          marketplace very quickly.                   This is not the end of our

14          low-income program by any means, but it was something

15          that we could do very quickly that had real actions

16          that low-income customers could take that could reduce

17          their energy bill immediately.                        That was our first

18          step in our low-income program.

19   MR. QUAIL:           Q:   And it's a free kit for low-income

20          households.

21   MS. VAN RUYVEN:           A:        It's a free kit.

22   MR. QUAIL:           Q:   That's in recognition that an upfront

23          cost is a barrier to participation, isn't it?

24   MS. VAN RUYVEN:           A:        Upfront capital costs are barriers

25          to almost all of our customers, and in particular low-

26          income.

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1    MR. QUAIL:           Q:    Yeah.         I suggest that some household

2           energy uses are essential in character.                               That is,

3           necessary for life, health, safety, reasonable

4           standard of comfort and participation in society.

5           Will you agree with that?

6    MS. VAN RUYVEN:            A:        Well, there are some people in this

7           world that live without electricity and they are still

8           able to meet their basic needs.                          We provide

9           electricity to our customers.                        How they use that

10          electricity to heat or meet basic needs is really

11          their call.        We're not making a judgment on our

12          customers' basic needs.                  Some customers would perhaps

13          have different basic needs than others.

14   MR. QUAIL:           Q:    If you'll respond to my questions, this

15          is going to be way more efficient.                            Okay?    My question

16          is just -- I thought was relatively simple concept, or

17          was something that we can all agree on, that there's

18          some household energy uses -- I'm not talking about

19          electricity, as opposed to burning wood or whatever

20          somebody might do.             There's some energy uses in the

21          household that are essential.                        You need them to stay

22          alive and healthy to participate in society.                              Wouldn't

23          you agree with that?

24   MS. VAN RUYVEN:            A:        On an energy perspective, yes.

25   MR. QUAIL:           Q:    For example, enough heat to keep your

26          home and health at -- for -- enough heat to keep your

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1           home at a healthy and comfortable level.

2    MS. VAN RUYVEN:           A:        Yes.

3    MR. QUAIL:           Q:   Enough energy to provide hot water for

4           cleaning.

5    MS. VAN RUYVEN:           A:        Yes, I would agree with that.

6    MR. QUAIL:           Q:   Yeah.         Energy to prepare meals with.

7    MS. VAN RUYVEN:           A:        If it's energy, yes, I would agree

8           with that.

9    MR. QUAIL:           Q:   Yeah.         Unless you live on nothing but

10          raw fruits and vegetables, which I understand is

11          supposed to be good for you.                      Energy for adequate

12          household lighting.

13   MS. VAN RUYVEN:           A:        Yes.

14   MR. QUAIL:           Q:   You can read a book when the sun is set.

15          You agree with that.              I'd suggest that there are other

16          household energy uses that are more discretionary, if

17          that's -- in the sense of non-essential.                        They're nice

18          to have for recreational or other purposes.                         They

19          might add a lot of comfort and enjoyment, but they

20          could be dispensed with, without placing people in

21          jeopardy.      Do you agree with that?

22                                                    Proceeding Time 1:49 p.m. T35

23   MS. VAN RUYVEN:           A:        Yes, I'd agree with that.

24   MR. QUAIL:           Q:   Maybe at the top of the list is hot tubs

25          and outdoor patio heaters and things like that.                          If

26          they all disappeared from the face of the earth,

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1           people might enjoy their leisure time a little less,

2           but nobody would be placed in jeopardy.                           Would you

3           agree with that?

4    MS. VAN RUYVEN:           A:        If you're talking about sort of

5           life and limb, then I would have to say a hot tub is

6           probably not going to put their life in jeopardy.

7    MR. QUAIL:           Q:   I'm sorry --

8    MS. VAN RUYVEN:           A:        Or doing without a hot tub.

9    MR. QUAIL:           Q:   People can manage quite well without a

10          hot tub and without a heater out on their patio, and

11          life will carry on and we wouldn't expected increased

12          admissions into emergency wards.

13   MS. VAN RUYVEN:           A:        I would have to agree with that.

14          But again, you know, it's not B.C. Hydro's role to

15          define basic needs or how customers use our

16          electricity at the end of the day.                           There may be

17          customers where a hot tub for recuperative purposes

18          might be pretty important to their quality of life.

19   MR. QUAIL:           Q:   Did I ask you whether B.C. Hydro should

20          be making those choices for people?

21   MS. VAN RUYVEN:           A:        No, but you're asking me to answer

22          questions about basic needs, and I'm saying it's a

23          difficult question to answer because you're asking me

24          to be the judge of basic needs.

25   MR. QUAIL:           Q:   Anyway, this will be a lot better if you

26          don't anticipate where I'm going, just answer my

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1           question.

2    MR. CHRISTIAN:            My friend just continuously suggests to

3           the witnesses that they're not answering his

4           questions, and at some point it becomes inappropriate

5           -- I think my friend is getting close.                       He may be

6           frustrated because he's not getting the answers he

7           wants, but his frustration is not an excuse to tell

8           the witnesses that they're not answering his questions

9           properly.      And, you know, I think I've heard it six

10          times now -- four times anyway since the break, and

11          frankly, he doesn't get a right to the answers he

12          wants to his questions, no matter how much he

13          complains.

14   MR. QUAIL:           Actually, I'm quite happy with the point B

15          we're getting to.           It's going through W, X, Y, Z

16          before we get there that's the issue.                        But anyway I'll

17          move on.

18   MR. QUAIL:           Q:    And I put it to you that there was a lot

19          of discretionaries -- I've used that concept.                            Not

20          judgmental, but we can manage without a lot of

21          discretionary or even luxury consumption of energy in

22          British Columbia, and of electricity in particular.

23   MS. VAN RUYVEN:            A:       Again you're putting B.C. Hydro in

24          a difficult position to judge what is luxury

25          consumption.       Consumption and end uses mean different

26          things to different customers, so it's very hard for

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1           me to say that there are a lot of luxury uses.                            What

2           is -- is a television a luxury?                         I don't know.

3    MR. QUAIL:           Q:    I suggest to you as a reasonable general

4           proposition that in the case of poor households,

5           especially those living in energy poverty, once

6           they've met the costs of essential household needs,

7           they have little or nothing left for discretionary

8           spending on luxuries and discretionary things.                            Agree

9           with that as almost a definition of being poor?

10   MS. VAN RUYVEN:            A:       I think I could agree with that.

11   MR. QUAIL:           Q:    So take the situation of a poor

12          household that has barely -- is barely able to make

13          its income stretch to cover basic needs, that is,

14          rent, food, clothing, essential household energy and

15          other basics.       That's what being poor means, you

16          understand that.

17                          If energy prices substantially, poor

18          households will be forced to cut back either on energy

19          use or on other basic necessities, given that

20          scenario.      Isn't that right?

21   MS. ZACHARIAS:            A:      I think as the costs of anything

22          rise, obviously that's going to put pressure on people

23          who have lower or fixed incomes.

24   MR. QUAIL:           Q:    Whether it's potatoes or bread or

25          electricity, rising prices are a serious problem when

26          you're living right on the edge financially because

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1           you're poor.

2    MS. ZACHARIAS:             A:       Yes.

3    MR. QUAIL:           Q:     And in the case of cutting back or

4           conserving energy, I mean you've developed this kit

5           and hopefully that'll be useful to people.                           But in

6           case of a family living in poverty, there is probably

7           not as much fat to trim before you're cutting below

8           what the family needs to be safe and reasonably

9           comfortable.

10   MS. ZACHARIAS:             A:       I don't know if that's an accurate

11          statement.         As I said earlier, when we've looked at

12          the residential end use survey for low income

13          customers, they have a variety of uses.                         They do have

14          televisions.         Some of them do have hot tubs.                    Some of

15          them have digital cable.                    Some of them have second

16          fridges.      So there is a range of energy usage among

17          our various customer segments, including low income

18          customers, that suggests to us that there are

19          opportunities to conserve that wouldn't necessarily

20          impact their qualify of life but would certainly help

21          them mitigate their bill impacts of any type of rate

22          increase.

23                                                          Proceeding Time 1:53 T36

24   MR. QUAIL:           Q:     On the other end of the spectrum we have

25          affluent households that are able to indulge in much

26          higher levels of energy consumption and are much less

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1           sensitive to changes in their Hydro bill, in terms of

2           their ability to meet their other needs.                         Do you agree

3           with that?

4    MS. ZACHARIAS:            A:       Well, I think you are equating, you

5           know, low income and low usage, and high income and

6           high usage.        One of the things that we've said in our

7           application and in the answering to the IRs is even if

8           that's generally true, it's not always true.                          So our

9           principle is that customers that have higher usage

10          have a higher ability to respond to price signals.

11   MR. QUAIL:           Q:    And if you were listening to what I said

12          in the opening that, in effect, what you are just

13          talking about now, which is the exception to the

14          general -- the general rule is if you've got a lower

15          income then you use less energy, but there's

16          exceptions to that, and that that's what our concern

17          is.       And so, for example, if you live in an old house

18          that has no insulation, has single glazed windows,

19          you're going to use an awful lot of energy in the

20          winter to keep it heated, whether you are rich or

21          poor.

22   MS. ZACHARIAS:            A:       Right.         And when we've looked at low

23          income households in particular, we find that about 21

24          percent of them are on electric heat and electric

25          water, and those customers, they use on about average

26          11,000 kilowatt hours, which is below the break point.

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1                           So while I'm sure there are some instances

2           that Mr. Quail has drawn out where there are some

3           customers in very poorly insulated homes that will be

4           using significant amounts of electricity, our data

5           suggests that there are relatively few, even for those

6           customers on electric heat and electric water.                                Their

7           average consumption is well beneath the break point.

8    MR. QUAIL:           Q:   Yes, we'll get to that.                        It might take

9           quite a while before we get to that.

10                          Can we agree, as a general principle, as a

11          matter of policy, given the government's energy plan

12          and given concerns about the environment, that it

13          would be highly desirable to discourage gluttonous

14          waste of energy?

15   MS. VAN RUYVEN:           A:        Well, the government's policy

16          directive is to pursue conservation, up to 50 of our

17          incremental needs going forward.                             Whether that's

18          people who are fairly energy efficient today being

19          more so or people that use more than the average

20          person reducing more.               It will be a combination of

21          everyone playing whatever part they can to reduce

22          consumption.

23   MR. QUAIL:           Q:   I put it to you that gluttony should be

24          a prime target for conservation.

25   MS. VAN RUYVEN:           A:        Well, again, it's difficult for

26          B.C. Hydro to define what gluttonous consumption is.

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1    MR. QUAIL:             Q:    All right.            I'd like you consider two

2           possible outcomes of a rate structure.                         The first

3           outcome would be the following scenario.                          It forces

4           low income pensioners to turn their thermostats down

5           to 16 Celsius in the winter, increasing the risk of

6           respiratory illness and other sources of mortality,

7           while hot-tubbers hardly feel the pinch.                          That's the

8           first scenario.

9                             The second scenario is an outcome that

10          buffers the pensioners from the impact of rising

11          energy bills and attaches a prices to the gluttony

12          that the hot-tubbers will notice.

13                            Can we agree that scenario two is a more

14          desirable outcome than scenario one?

15   MS. ZACHARIAS:              A:      No, we can't agree with that.

16   MR. QUAIL:             Q:    Okay.        Can we also agree that -- I won't

17          say "also".          Can we agree -- I didn't think that

18          would be that hard.               Can we agree that it will be a

19          good idea to price the living daylights out of

20          gluttonous waste of energy, however we might define

21          that?         Would you agree or disagree with that as a

22          proposition?

23   MS. ZACHARIAS:              A:      I think we would agree that we would

24          like to send a price signal for people that consume

25          more and not have it based on us having to judge what

26          is gluttonous or not.                 I can see that would be just

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1           fraught with complexities that I can't even imagine,

2           the electric utility in British Columbia having the

3           ultimate definition of what is gluttonous consumption

4           and what isn't.

5    MR. QUAIL:           Q:    I'm thinking of the house with the 300

6           amp service and electrically heated hot tub and the

7           electric swimming pool and the 2,000 electronic

8           gadgets that are always on standby, and maybe outdoor

9           heaters and enough light to light a movie set.                           You

10          know, there actually are people who live that way.

11          Don't you agree with me that that kind of consumption

12          of energy should be priced at a very high rate?

13   MS. ZACHARIAS:            A:      Well, on our RIB application that's

14          exactly how it is set up.                   People who use more

15          electricity and the scenario that you just painted,

16          I'm fairly sure that scenario would be over the

17          tipping point, and they would certainly be seeing step

18          2 most, if not all of the time, so they would actually

19          be paying more for their consumption overall.

20   MR. QUAIL:           Q:    How about a third step, aimed at that

21          level of consumption, that's priced way beyond its

22          marginal cost?          Maybe rent.             Do you have any opinion

23          on that?

24                                                    Proceeding Time 1:59 p.m. T37

25   MR. ORANS:           A:    B.C. Hydro has looked at, you know,

26          adding a third step to the options it's analyzed here.

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1           It's looked at seasonal variations.                               It's looked at a

2           whole range of thresholds also for the Step 1, and the

3           biggest problem that I saw with implementing a third

4           step was in fiscal year '09 and '10, the rate

5           difference between the rate for Step 1 and Step 2 is

6           very narrow.            I mean, we're sitting here kind of

7           transitioning to a higher Step 2 rate of -- we're

8           starting out at 6.15 and going to 6.8.                              So if you try

9           to implement the third step, it's got to fit in

10          between them.            So you really end up with too -- it

11          looks like too complex a rate for at least '09 and

12          '10.          We looked at it, looking at perhaps maybe a

13          transition, if you need it.

14                                So B.C. Hydro, for example, we're three

15          years down the road now, and we're facing substantial

16          increases in its RRA.                    Maybe a third step works to

17          mitigate billing impacts.                        Maybe it sends the right

18          signal, et cetera.                 So that is certainly an additional

19          step that you could add onto the two-step rate.

20   MR. QUAIL:              Q:      Yeah.        Leaping way ahead in terms of

21          where we're going to be going, but in fact if you were

22          designing a three-step rate, surely Step 1 would be

23          lower than a Step 2 rate.                        You'd recalibrate the whole

24          works to make rational space for the third step,

25          wouldn't you?

26   MR. ORANS:              A:      Well, you could.                  But then again, you've

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1           decreased the opportunity for other low-use customers.

2           Granted, there will be low-income customers in that

3           category as well, to take advantage of conservation

4           options.

5                            Back to your kind of gluttony question.                        So

6           I have two cases that I have worked on in the last two

7           years, implementing RIB rates in other jurisdictions.

8           One is in -- for the big island in Hawaii, and the

9           rates are -- as you know, their average rate is in

10          excess of 20 cents a kilowatt hour.                            So the problem

11          they were having is just as you say, they've got huge

12          homes.        If you fly into Hawaii, it's Lear jets all the

13          way through there.             So they've got these huge homes,

14          and then they also have low-income folks there too,

15          who live on the island.                  And we were -- and the

16          utility's facing huge cost increases for renewables,

17          and the price of fuel, et cetera.                             And so, they

18          implemented in that case a third tier rate.                              But they

19          had enough room in the rate increase to have the

20          third-tier rate substantially higher.

21                           One person who came to our workshop was

22          Michael Dell.        Michael Dell had a 50,000 square-foot

23          house.        He said he needed to air-condition the house

24          all the time, and wasn't going to respond to the

25          third-tier rate.           So in that kind of case, the utility

26          didn't care, Michael Dell didn't care, and the

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1           Commission didn't care.

2    MR. QUAIL:           Q:   Yeah.

3    MR. ORANS:           A:   I have another case in Wyoming.                            And

4           Wyoming is -- if you could characterize states as red

5           states or blue states, it doesn't have a lot of

6           conservation.       But --

7    THE CHAIRPERSON:            Sorry, it doesn't have what?                        I didn't

8           --

9    MR. ORANS:           A:   It doesn't -- they're not implementing a

10          lot of conservation.              They have rates with

11          traditionally declining block rate structures.                                It's

12          kind of interesting.              We did a survey several years

13          back on blue states or Democratic states, and

14          Republican and red states.                    And if you look, there's a

15          high correlation between the jurisdictions that are

16          spending substantial amounts in conservation and

17          inclining block rate structures.                             Those who aren't

18          spending a lot in conversation have low incremental

19          costs of new supply, tend to have either have flat

20          rates or declining block rate structure.

21                          So this case, the case in Wyoming, another

22          very famous person, Dick Cheney, has a house in

23          Wyoming, and he has two driveways that are

24          electrically heated.              So, although he didn't like the

25          proposed inclining block structure, he could see that

26          it was fair in that case.

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1                            We were looking at a two-step inclining

2           block structure, not a three-step there.

3    Maybe rent.           Do you have any opinion on that?

4                                                      Proceeding Time 2:03 p.m. T38

5                            Okay.      I'll now refer you to Exhibit B-3,

6           BCUC IR 1.18.3.          So the question asking is:

7                     "The [Rates Working Group] feedback to B.C.

8                     Hydro rate design issues included an item on

9                     the need of B.C. Hydro to be sensitive to

10                    low-income customers.                Please comment how

11                    this RIB application has taken the RWG

12                    feedback into consideration.                        If it is not,

13                    please explain why not."

14                           So the second paragraph begins with the

15          sentence:

16                    "B.C. Hydro is sensitive to the needs and

17                    often complex issues of low income

18                    customers."

19          It says below, there's some bullets, the lead-up line

20          to that says:

21                    "At this time, B.C. Hydro believes the

22                    strategy ought to be comprehensive and

23                    include the following

24                    •   customer education regarding energy usage

25                    and conservation;

26                    •   conservation programs for low income

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1                     customers;

2                     •   enhanced customer services support for

3                     low income customers;

4                     •   arrears management; and

5                     •   emergency relief."

6           Do you see that?           It's got a disconnect policy.

7    MS. ZACHARIAS:             A:      That's right.

8    MR. QUAIL:            Q:    While we're at it, can you explain what

9           disconnect policy changes you have in mind in order to

10          bring about this comprehensive strategy?

11   MS. ZACHARIAS:             A:      We don't have our plan finalized on

12          what the changes to our disconnect policy would be.

13          We're in the stages of taking a look at our policy,

14          also talking to other utilities across Canada to get a

15          sense of what their policies are, and also consulting

16          with the low income advisory group as to -- for them

17          to give us feedback in terms of how they feel the

18          disconnection policy is working with respect to the

19          constituents that they know about or the groups that

20          they work with.

21                           So we're at the stages of still kind of

22          doing a little bit of analysis before determining what

23          a change to our policy will make.

24   MR. QUAIL:            Q:    Okay.        You'll want to keep that IR in

25          front of you just for a moment, and turn to -- if you

26          turn to attachment 2, that is the initial, the July

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1           Indeco report, BCOAPO IR 2.25.1, attachment 2 at page

2           15.       Okay.      So about halfway down the page it says:

3                     "Low income programs, policies and services

4                     in place at B.C. Hydro and other

5                     jurisdictions to be categorized into five

6                     broad types.          These are education, energy

7                     efficiency, customer support, bill

8                     assistance, and emergency relief."

9                                Now, just comparing this list of documents

10          -- this list of bullets, rather,- between the IR

11          response describing what B.C. Hydro believes the

12          strategy ought to be and what the Indeco report

13          recommends, focusing particularly on bill assistance,

14          it appears that the only sub-type, I guess, of bill

15          assistance that found its way into 1.18.3 is arrears

16          management.

17   MS. ZACHARIAS:               A:       That's right.

18   MR. QUAIL:             Q:      And I suppose this disconnect policy

19          could conceivably be considered a bill assistance

20          issue, may or may not be.

21   MS. ZACHARIAS:               A:       Could be under emergency relief as

22          well.         I believe the bullets that we put in are 1.18.3

23          matches the first Indeco report.

24   MR. QUAIL:             Q:      Okay.        Well, the first Indeco report is

25          the one we're looking at.                       It's attachment 2.           That's

26          the first report.               Attachment 1 is --

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1    MS. ZACHARIAS:            A:      Yes, I see what you mean.

2    MR. QUAIL:           Q:    -- is the later report.

3    MS. ZACHARIAS:            A:      Okay.

4    MR. QUAIL:           Q:    Are you considering any bill assistance

5           initiatives that go beyond arrears management and

6           disconnection policy?

7    MS. ZACHARIAS:            A:      At this time we don't have a

8           definitive position on that.

9    MR. QUAIL:           Q:    Now let's turn to -- I note, just note

10          that one of the bullets there in your IR response is

11          conservation programs for low income customers.                          If we

12          could turn now to attachment 1, that's the later

13          Indeco report, the February 2008 report, and refer you

14          to .1.1 Program Principles, right at the beginning of

15          the document.       That is page 6 of 47.

16                                                    Proceeding Time 2:09 p.m. T39

17                          And I'd like you just to review these.                     I

18          won't read them into the record.

19                          Okay, and these are principles

20          specifically, as it says, for low-income groups.

21          Directing your attention to bullet 3:

22                    "B.C. Hydro programs are generally designed

23                    to be available to all customers.                  Low-

24                    income programs recognize the specific needs

25                    of this group of customers."

26          And I put it to you that one of those needs is the

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1           hurdle of up-front cost or participant cost.                          I think

2           we've sort of gone over that, but I just want to be

3           clear that that is one of the specific needs that the

4           Indeco report says needs to be recognized.

5    MS. ZACHARIAS:            A:      Yes, I think you could interpret

6           that, that for those conservation actions that require

7           capital, that that would be a barrier.

8    MR. QUAIL:           Q:    Yes.       Now I'll direct you to Exhibit

9           C10-2, attachment 4, which is the later version of the

10          reports -- again, there's Providence we discussed

11          earlier, originating from Ms. Kelly.                         Page two,

12          paragraph two.          It says:

13                    "Utility DSM program expenditures are

14                    typically passed on to consumers through

15                    rate increases.         For customers who are able

16                    to take part in programs, this additional

17                    cost can be more than offset by the benefits

18                    that improved energy efficiency can bring."

19          Sorry, you're still looking for that.

20   THE CHAIRPERSON:            What page are you on, Mr. Quail?

21   MR. QUAIL:           I'm sorry, I'm way ahead of things.                         It's

22          page 2 of 12.

23   THE CHAIRPERSON:            Yes.

24   MR. QUAIL:           It's numbered -- of the attachment 4 of the

25          document entitled "Improving access to British

26          Columbia's demand-side management programs".

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1    THE CHAIRPERSON:              And you're at what paragraph?

2    MR. QUAIL:           I'm at page 2 of 2.                   There's the heading 1,

3           "Background".

4    THE CHAIRPERSON:              Right.

5    MR. QUAIL:           Q:     It's got a table 1 on it, and it's the

6           paragraph directly below that.

7                     "Utility DSM program expenditures are

8                     typically passed on to consumers through

9                     rate increases.           For customers who are able

10                    to take part in programs, this additional

11                    cost can be more than offset by the benefits

12                    that improved energy efficiency can bring."

13          I assume that that's not a contentious general

14          statement.         And in fact we have the rate impact test

15          is --

16   MS. ZACHARIAS:             A:       Right.

17   MR. QUAIL:           Q:     -- one of the tools that's used for

18          evaluating DSM.           Do you agree with that, Ms.

19          Zacharias?

20   MS. ZACHARIAS:             A:       Right.

21   MR. QUAIL:           Q:     "However, for other customers,

22                    participation in energy efficiency upgrades

23                    is beyond their means, because the up-front

24                    capital required to invest is not

25                    available."

26          And you'd agree that there's programs that are not

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1           available to low-income people who have no extra money

2           once they've met their basic necessities.                         I take it

3           that's not a contentious general statement.

4    MS. ZACHARIAS:            A:      Sure, for -- as I said, for those

5           that require capital investments.

6    MR. QUAIL:           Q:    Yes.

7                     "Consequently, some of the historical

8                     opposition to DSM programs has come from

9                     advocacy groups representing the interests

10                    of low-income earners, arguing that this

11                    group is effectively excluded from

12                    participation due to affordability issues if

13                    they contribute to funding the programs."

14          So also you'd -- I assume you'd also agree with that

15          general statement.

16   MS. ZACHARIAS:            A:      I don't know if there's been

17          opposition to PowerSmart programs in the past from

18          low-income advisory groups within this province.                           I

19          guess the other -- well, this paragraph is true in

20          talking about the specific benefits.                         I mean, the

21          overall benefit of DSM, of course, is that to the

22          extent that it provides a lower-cost option to meet

23          our resource requirements going forward as a province,

24          it will mean smaller rate increases over the

25          foreseeable future.             So, to the extent that that

26          benefits everybody, including low-income customers,

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1           DSM in general also benefits low-income customers.

2                                               Proceeding Time 2:14 p.m. T40

3    MR. QUAIL:           Q:    But to the extent that there can be --

4           and again, this is analyzed in terms of the rate

5           impact as to DSM.           Everybody contributes to the rates

6           to the cost of programs.                  To the extent that there are

7           financial barriers to poorer customers participating,

8           in effect they are cross-subsidizing more affluent

9           customers who are able to participate to that extent.

10   MS. ZACHARIAS:            A:      If all of those things are true,

11          theoretically it's possible.                      But as I said earlier,

12          one of the two large programs that B.C. Hydro has done

13          for residential customers over the last five years has

14          been the refrigerator pick-up program and CFL program,

15          which has benefited, which doesn't depend on capital,

16          and you know, possibly has benefited low income

17          customers directly.

18   MR. QUAIL:           Q:    I'm not going to go back to

19          refrigerators.

20                          Now, one of the concerns that's raised in

21          much of the discussion about DSM initiatives is the

22          problem so called "free ridership".                          That is, if you

23          offer something at a discount, and the customer would

24          have bought it anyway or done it anyway, they are

25          getting the advantage of the discount but you actually

26          haven't achieved any incremental savings through

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1           energy conservation.              Is that not a bad synopsis of

2           the notion of free ridership?

3    MR. TIEDEMANN:            A:      I think it's perhaps just a little

4           bit simplistic.         The notion of free rider, indeed

5           refers to an agent who would have undertaken to

6           install the technology in the absence of an incentive.

7           So when we evaluate PowerSmart programs we undertake

8           research to understand the nature and size of those

9           free riders.       But it is certainly not the case that

10          everyone is a free rider as implied by the question.

11   MR. QUAIL:           Q:    No, I don't think that's what the

12          question implied.           The concept of free ridership is

13          you are paying for something that would have happened

14          spontaneously and so you are not actually achieving

15          incremental conservation through your --

16   MR. TIEDEMANN:            A:      So the notion of free rider is that

17          someone is receiving an incentive to undertake

18          something that they would have otherwise done.

19   MR. QUAIL:           Q:    Yes.         Now, if you place that concept in

20          the context of a poor household that is struggling to

21          meet all of its basic requirements out of its monthly

22          pension cheque or welfare benefits or low wage or

23          whatever the source of income might be, doesn't have

24          anything left once its paid for all those necessities,

25          I'd suggest to you that no issue of free ridership can

26          apply because by definition these are people who had

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1           no means to make investments absent the incentive or

2           the discount.       Would you agree with that?

3    MR. TIEDEMANN:            A:      We don't actually have comprehensive

4           information on the extent to which low income

5           customers perhaps -- defined in terms of the low

6           income cut off participate in our program, so I'm not

7           sure.

8    MR. QUAIL:           Q:    Suppose you had a program where B.C.

9           Hydro was going to come and retrofit somebody's house

10          for them.      If you do that for somebody who is

11          affluent, somebody who has got a house that is, you

12          know, leaking a lot of heat and so on, there's a real

13          risk that you're dealing with a free rider and you've

14          sunk a whole lot of money to fix up a house that

15          somebody had the means to do on their own and might

16          have done anyway.           Would you agree with that?

17   MR. TIEDEMANN:            A:      No.      The fact that they've had an

18          energy -- high energy consuming house that's

19          apparently leaky and they haven't undertaken

20          investments which would be cost effective, suggest

21          that there's some kind of barrier to undertaking those

22          investments and they could be multiple in nature.

23          They could be a lack of understanding of the nature of

24          the alternatives open to them.                        It could be that they

25          don't fully understand the nature of new technologies

26          and need additional information.                             It could be that by

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1           having participated in a -- or participating in a B.C.

2           Hydro program but getting a signal that we support the

3           quality of the work that will be done.                       So there could

4           be a number of barriers, a number of reasons they

5           don't undertake cost-effective investments.

6    MR. QUAIL:           Q:    Okay, but what I want to focus more on

7           is the poor household, which actually is much more

8           likely to live in an old house with no insulation and

9           single glazed windows and very energy inefficient and

10          struggling just to meet basic necessities.                          If B.C.

11          Hydro say, were to have a program where it would come

12          in and retrofit the house at B.C. Hydro's ratepayers'

13          expense, there's no issue there of free ridership

14          potentially undermining the benefit of that program,

15          is there?

16   MR. TIEDEMANN:            A:      I would expect the free ridership

17          rate to be relatively low.

18   MR. QUAIL:           Q:    Yes.       So what I'm suggesting is in

19          general, because of this phenomenon, there is a very

20          significant bang for the buck where you are targetting

21          programs, energy efficiency programs at poor

22          households who have no means of undertaking those

23          measures otherwise.

24   MR. ORANS:           A:    I think that that's a big leap.

25   MR. QUAIL:           Q:    Okay.

26   MR. ORANS:           A:    I think you got Mr. Tiedemann all the

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1           way to the point where he said that all other things

2           being equal it might be the case that free ridership

3           was less on low usage customers than high usage

4           customers, given that high usage customers have a

5           higher ability to respond anyway.

6    MR. QUAIL:           Q:   It was high income we're talking about.

7    MR. ORANS:           A:   Okay, high use; high income.                     But

8           that's not to say -- that doesn't necessarily imply

9           that programs targetted to low income customers are

10          more cost effective, all other things being equal,

11          than programs targetted to high income customers.

12   MR. QUAIL:           Q:   They had to be good programs, properly

13          designed and targetted and so on.

14   MR. ORANS:           A:   Yes.

15                                                    Proceeding Time 2:14 p.m. T41

16   MR. QUAIL:           Q:   I'll now refer you to Exhibit B-7,

17          BCOAPO 2.25, attachment 1, which is the February 2008

18          Indeco report.        Page 13 of 47.                  Heading 2.3 "B.C.

19          Hydro Programs":

20                    "Some of the components of the low income

21                    program that others offer and will be

22                    discussed in what follows already exist at

23                    B.C. Hydro in one form or another,

24                    including:…"

25          And the first bullet is "monthly equal billing

26          program".

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1                           Now, the concept of equal billing is to

2           smooth out seasonal fluctuations in customers' hydro

3           bills, is that correct?

4    MS. ZACHARIAS:             A:       That's true.

5    MR. QUAIL:           Q:     And I suggest that it's a very useful

6           tool in the hands of low income customers.                           Other

7           people might use it, but talk about low income

8           customers.         It's a very useful tool to help them keep

9           up with the utility bills, isn't that correct?

10   MS. ZACHARIAS:             A:       Yes.

11   MR. QUAIL:           Q:     So take the circumstances again of

12          seniors living on a modest fixed monthly pension

13          income.       So their financial challenge is to make the

14          pension stretch each month to cover all their

15          household and other expenses.                         Fluctuating expenses

16          can present a very serious problem in that context,

17          isn't that right?

18   MS. ZACHARIAS:             A:       I could see how that would be true.

19   MR. QUAIL:           Q:     A sudden emergency cost can create a

20          financial crisis for a household like that, is that

21          correct?

22   MS. ZACHARIAS:             A:       Possible.

23   MR. QUAIL:           Q:     So if you consider a retired couple

24          living in an old house in Revelstoke, and I'm just

25          going to give names to them.                        I'm going to call them

26          Walter and Elsie, okay?                   We're talking about poor old

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1           Walter and Elsie.            We're really worried about Walter

2           and Elsie and that's the main reason we're here.\

3                            Anyway, they live in a house that dates

4           from the 1930s.          It's poorly insulated, electrically

5           heated, and they live in the Revelstoke area and their

6           only source of income is government pensions and

7           Walter has a Canada Pension and small private pension.

8           That is the Old Age Pension, he has a small CPP and a

9           little private pension.                  And the government pensions

10          increase periodically to stay up with inflation,

11          right?        But let's just say Walter's pension, his

12          private sector pension from his old job is fixed and

13          deteriorates every year with the cost of living.                          The

14          pension -- the total income in the household is the

15          same in January as it is in July, isn't that right,

16          under that scenario?

17   MS. ZACHARIAS:             A:      Under that scenario.

18   MR. QUAIL:            Q:    But their electricity consumption is

19          going to be much higher in January than July even

20          under the current flat rate, is that right?

21   MS. ZACHARIAS:             A:      If they're on electric heat.

22   MR. QUAIL:            Q:    Yeah, that's what I said, yeah.

23   MS. ZACHARIAS:             A:      Yes.

24   MR. QUAIL:            Q:    This old leaky house that's got maybe

25          cardboard stuffed between the walls to try to insulate

26          it.       There's actually places that in the province.

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1           They have the ability to even out their hydro bills

2           using equal billing, so they have enough left over for

3           food throughout the year.                   That's why they use it,

4           isn't it?

5    MS. ZACHARIAS:            A:      I don't know why customers use equal

6           billing, but -- so, as you said earlier, the purpose

7           is to even out the payments of electricity throughout

8           the year.

9    MR. QUAIL:           Q:    I'm telling you that's what poor old

10          Walter and Elsie do.

11                          Under the RIB as it's proposed, they are

12          likely to face substantial exposure to Step 2 in the

13          winter heating season, given that scenario.                         Wouldn't

14          you agree?

15   MS. ZACHARIAS:            A:      Maybe you could help us determine

16          that by telling us what their usage is.

17   MR. QUAIL:           Q:    I'm not even going to try the arithmetic

18          on that.      The scenario though is, you've agreed that

19          there is a sub-group of the low income households who

20          are going to have significant exposure to Step 2,

21          would see a net increase because of the RIB.                         I don't

22          think that's contentious.                   You've said that in your

23          evidence, correct?

24   MS. ZACHARIAS:            A:      No, what we've said is that over 85

25          percent of customers are going to be paying less on

26          the RIB rate than they are on the flat rate.                         And

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1           frankly, up to about 96 percent of customers, low

2           income customers, their usage is under 19 - 20,000

3           kilowatt hours a year, where the net bill impacts from

4           the RIB will be between 40 and 80 dollars a year more.

5           And if they save 1,000 kilowatt hours, which we think

6           is possible, they have the ability to mitigate that

7           bill impact.       So to say that there's a substantial

8           number of low income customers that are going to be

9           hit, in your words, is not -- we don't think is

10          actually accurate.

11   MR. QUAIL:           Q:    But 80 bucks is a lot of money to Walter

12          and Elsie.

13   MS. ZACHARIAS:            A:      As I said, $80 -- I'm not suggesting

14          that $80 wouldn't be a lot of money.                         What I'm

15          suggesting is that in order to mitigate their bill,

16          they would have to save about 1,000 kilowatt hours,

17          which would be about five percent of their usage.                         And

18          if that home is as leaky and inefficient as you

19          suggested, there's opportunities for them to do so.

20   MR. QUAIL:           Q:    Would you agree with me that the

21          continuation of the equal billing plan is a very

22          important tool to those two seniors to be able to

23          continue to cover the costs of staying alive

24          throughout the seasonal fluctuations in their energy

25          costs?

26                                                    Proceeding Time 2:25 p.m. T42

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1    MS. ZACHARIAS:              A:      We can see equal payment being very

2           helpful for those customers that require that, yes.

3    MR. QUAIL:             Q:    Okay.        And equal billing helps to

4           prevent delinquent accounts and disconnections,

5           doesn't it?

6    MS. ZACHARIAS:              A:      Yes, it helps people make their

7           payments.

8    MR. QUAIL:             Q:    Yeah.        And that in turn helps to avoid

9           at least some potential instances of homelessness,

10          doesn't it?

11   MS. ZACHARIAS:              A:      I don't know.

12   MR. QUAIL:             Q:    Okay.        Now, B.C. Hydro has filed a

13          revenue requirements application before the Commission

14          for the current fiscal year, 2009, and also next year,

15          2010.         Is that right?

16   MS. ZACHARIAS:              A:      That's correct.

17   MR. QUAIL:             Q:    Seeking general rate increases across

18          the board for this year and next.

19   MS. ZACHARIAS:              A:      Yes.

20   MR. QUAIL:             Q:    For the current year, 6.56 percent.                  Is

21          that right?

22   MS. ZACHARIAS:              A:      That's correct.

23   MR. QUAIL:             Q:    And for next year, 8.21 percent.

24   MS. ZACHARIAS:              A:      That's correct.

25   MR. QUAIL:             Q:    And this compounds, according to my

26          arithmetic, which is always a hazardous thing, to 15.3

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1           percent as of April 1st, 2009, compared to March 31st,

2           2008.

3    MS. ZACHARIAS:             A:       That is correct.

4    MR. QUAIL:           Q:      Okay.        And the 6.56 percent increase

5           sought for fiscal '09 was approved by the Commission

6           on an interim basis effective April 1st, 2008.

7    MS. ZACHARIAS:             A:       Yes.

8    MR. QUAIL:           Q:      And the Commission Order in question is

9           G-40-08.      Is that correct?

10   MS. ZACHARIAS:             A:       I'll take your word for it.

11   MR. QUAIL:           Q:      And we'll be going after that hammer and

12          tongs in an NSP, and we'll see what's left of it.                           But

13          anyway, that's what's there on an interim basis.

14                             Now, I attended a workshop that was hosted,

15          I believe in this space, by B.C. Hydro not that many

16          weeks ago.         But prior to the application being filed,

17          the revenue requirement.                    Where the utility indicated

18          it was contemplating, at that time, a three-year test

19          period instead of the two-year period that was applied

20          for in the revenue requirement.                           Do you recall that?

21   MS. ZACHARIAS:             A:       I wasn't at that forum.

22   MR. QUAIL:           Q:      Was anybody here at that?

23   MS. VAN RUYVEN:              A:       No.

24   MR. QUAIL:           Q:      Perhaps, then, you could confirm with

25          your peers that there was a discussion to that effect

26          at that time.

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1    MR. CHRISTIAN:              If I can get some particulars, I don't

2           recall the workshop myself, but if I have a date, then

3           I can probably make some progress in that regard.

4    MR. QUAIL:             I'll give you that.                 It's okay.    I don't

5           think a great deal turns on it, so -- you know, in

6           terms of that particular bit of where we're going.

7           Q:            Now, I don't know if it could be said there's a

8           street in the world of energy regulation, but just

9           speaking sort of metaphorically, I'd like to tell you

10          what the word is on the street, so that you can

11          comment about year three.                     That is, fiscal 2011.

12                            Word on the street is that B.C. Hydro only

13          applied for two years for now because the projections

14          for fiscal 2011 are looking very ugly in terms of rate

15          impact.         Do you have any comment on that?

16   MS. VAN RUYVEN:              A:       I'm not the executive responsible

17          for the RRA, and I'm -- no other panel member,

18          including myself, I think, is able to answer that

19          question.         I just don't know the answer to that.

20   MR. QUAIL:             Q:    I'm going to have a series of questions

21          about prospects for B.C. Hydro's rates over the coming

22          period, beyond the two-year period of revenue

23          requirement, so I hope that there's someone here who

24          is able to answer those questions.

25                            I'd like to look at some of the general

26          factors driving B.C. Hydro's rates, to get a sense of

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1           what overall prospects might be.                               And I'm not going to

2           be delving into trying to determine what rates are

3           going to be in any particular future year.                                This is

4           much more a matter of sort of magnitude and direction

5           that I'm going to be discussing.                               And what I'd like

6           you to turn to is the second document in Exhibit C10-

7           6, the BCOAPO additional materials for cross-

8           examination.         This is another document that will be

9           very familiar to you.                 This is a small extract from a

10          very large document, the F'09-F'10 revenue

11          requirements, filed February, 2008.

12                            And what we've provided, starting at page

13          2-2, is the table of contents.                          And I'm just going to

14          be using that as a list of revenue cost drivers.

15          Okay?         And we're not -- the determination of the

16          revenue requirement is for another process altogether.

17          We're not -- that's not where I'm going.                               Okay?

18                                                      Proceeding Time 2:30 p.m. T43

19                            But just what are some of the things that

20          are going on here.              So if you look at 2.2 under --

21          there's one on -- item number 1.2.2 Outlook for 2009-

22          2010.         First one, 1.2.2.1 is Aging Assets.                         So is

23          aging assets a factor to drive rates up, down or

24          sideways?

25   MS. VAN RUYVEN:             A:        Aging assets is really about

26          reinvesting in our Heritage Assets in a very large

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1           capital campaign that we're undertaking to ensure that

2           those Heritage Assets continue to deliver reliable

3           electricity to our customers.                       So it's making it go

4           up.

5    MR. QUAIL:           Q:   Yes.        Will this issue be totally

6           resolved by the end of fiscal 2010, or will it

7           continue as a source of rate pressure?

8    MS. VAN RUYVEN:           A:        We anticipate that our capital

9           reinvestment is at least a ten-year program.

10   MR. QUAIL:           Q:   Yes.        And to the extent that you have

11          assets that have passed their best-before date, in

12          fact, one would imagine that they'll be even more out

13          of date in 2011 and updating will be all the more

14          urgent.

15   MS. VAN RUYVEN:           A:        We've pretty much identified those

16          assets over the next ten years that need minor to

17          major upgrading.          Some of our assets are upwards above

18          90 years old at this point in time.

19   MR. QUAIL:           Q:   1.2.2.2 in the table of contents,

20          Capacity Constraints.               This is another factor pushing

21          rates upward, isn't the direction?

22   MS. VAN RUYVEN:           A:        That's correct.

23   MR. QUAIL:           Q:   Will this factor be resolved by March

24          31st, 2010, or will it be a continuing source of rate

25          pressure?

26   MS. VAN RUYVEN:           A:        It's really driven by the

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1           additional capacity additions at Mica and Revelstoke,

2           which will really happen in the next years, not within

3           two.

4    MR. QUAIL:           Q:     Yes.        So this is an ongoing story.                     It

5           doesn't end with this, the current revenue requirement

6           application, is that right?

7    MS. VAN RUYVEN:             A:        No, I think it's fair to say, and

8           you'll see some of this in the LTAP, that we have some

9           cost pressures that are not just two-year cost

10          pressures.         They go beyond a two-year period.

11   MR. QUAIL:           Q:     Yes.        The next heading in the table of

12          contents is Labour Market Pressures.                               And I gather

13          that about 30 percent of your entire workforce will

14          retire over the next five years?                               That's drawn from

15          your revenue requirement?

16   MS. VAN RUYVEN:             A:        That sounds about correct.

17   MR. QUAIL:           Q:     So that's by about 2013.

18   MS. VAN RUYVEN:             A:        They could retire by then.

19   MR. QUAIL:           Q:     And presumably there would be more

20          retirements on an ongoing basis, 2014 and beyond.

21   MS. VAN RUYVEN:             A:        Yes, we are seeing the same

22          demographics of any other large organization in

23          British Columbia.

24   MR. QUAIL:           Q:     And this is pushing rates up, this

25          phenomenon, labour market pressures.

26   MS. VAN RUYVEN:             A:        Well, not having the RRA in front

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1           of me and not having read that particular section, I

2           can't say for sure if it's pushing it up or not.

3    MR. QUAIL:           Q:     I suggest that demographic and economic

4           factors are contributing to labour market pressures.

5    MS. VAN RUYVEN:             A:        I think it would be fair to say

6           that that's a distinct possibility.

7    MR. QUAIL:           Q:     And that isn't confined to your own

8           issues of retaining and replacing your workforce and

9           so on, but also contractor costs.                              It's one of the

10          things that's making it much more expensive to do just

11          about anything.

12   MS. VAN RUYVEN:             A:        Well, there's an economic boom in

13          British Columbia and it's first of all hard to find

14          resources.         And secondly, when you do, we are seeing

15          cost pressures both from the resources we're bringing

16          on permanently at Hydro, plus our whole contracting

17          pressures.

18   MR. QUAIL:           Q:     Yes, and that's one of the issues

19          addressed in the next heading in the table of

20          contents, High and Escalating Construction Costs, that

21          there are labour market pressures and also cost of

22          materials, commodities, everything is going up, right?

23   MS. VAN RUYVEN:             A:        That's correct.

24   MR. QUAIL:           Q:     And so there's been a number of

25          projects, like the Aberfeldie project, for example,

26          where the cost of completing the work is evidently

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1           going to be substantially more than what was projected

2           because of this upward pressure on the price of having

3           work done, is that right?

4    MS. VAN RUYVEN:           A:        I'm not sure of the specifics of

5           the Aberfeldie project.                 I'm not sure where those

6           costs will finally come in.

7    MR. QUAIL:           Q:   Sure.         But as a general phenomenon it's

8           getting more and more expensive to do just about

9           anything in this province.

10   MS. VAN RUYVEN:           A:        Yes, it is.

11   MR. QUAIL:           Q:   And are you able to assure us that this

12          will all be resolved by April 1st, 2010?

13   MS. VAN RUYVEN:           A:        Well, I believe I said this is

14          probably at least a ten-year reinvestment.

15   MR. QUAIL:           Q:   Yes.

16   MS. VAN RUYVEN:           A:        And I can't say where escalating

17          costs are going to go over the ten years, but we

18          continue to see them escalating, I believe, beyond a

19          two-year period.

20   MR. QUAIL:           Q:   Yes.        Next we have 1.2.2.5 in the table

21          of contents, B.C. Government Policy.                         Is there any

22          indication that the provincial government will abandon

23          its Energy Plan at the end of fiscal year 2010?

24                                              Proceeding Time 2:35 p.m. T44

25   MS. VAN RUYVEN:           A:        I think you'd have to ask the B.C.

26          government that question.

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1    MR. QUAIL:           Q:   So in other words, you don't have -- or

2           if you do, you aren't allowed to tell us, is that what

3           you're saying.

4    MS. VAN RUYVEN:           A:        I don't know the answer to that.

5    MR. QUAIL:           Q:   Yes.        No, I didn't imagine that you did.

6    MS. VAN RUYVEN:           A:        I don't know even know who the

7           government will be in 2010, so it's very hard for me

8           to answer.

9    MR. QUAIL:           Q:   That's a very good answer.

10                          But the current government's policy sets

11          targets way beyond 2010.

12   MS. VAN RUYVEN:           A:        That's correct.

13   MR. QUAIL:           Q:   Way beyond the two-year test period in

14          this revenue application.

15   MS. VAN RUYVEN:           A:        Yes.

16   MR. QUAIL:           Q:   And in fact, the initial target date for

17          self-sufficiency is well beyond the range of the

18          revenue requirement.

19   MS. VAN RUYVEN:           A:        It's 2016.

20   MR. QUAIL:           Q:   Yes.          And then there's a date for

21          insurance, so called, on top of that.                        What's the

22          target date for that?

23   MS. VAN RUYVEN:           A:        I believe it's 3,000 gigawatt hours

24          by 2020.

25   MR. QUAIL:           Q:   Yes.        And self-sufficiency is going to

26          -- achieving that is going to have rate implications,

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1           isn't it?

2    MS. VAN RUYVEN:           A:        Yes, it will.

3    MR. QUAIL:           Q:   I'd like to look at some other elements

4           of the B.C. governments policy and the likely

5           directional impact on your rates after the two-year

6           envelope covered by your revenue requirement.

7           Greenhouse gas policy.                Burning coal and dumping the

8           smoke in the atmosphere is a relatively cheap way of

9           making electricity, isn't it?

10   MS. VAN RUYVEN:           A:        But prohibited by the 2007 energy

11          plan.

12   MR. QUAIL:           Q:   Precisely.             It's a relatively cheap

13          source of both energy and capacity.

14   MS. VAN RUYVEN:           A:        In relation to -- you'd have to

15          compare it in relation to other resources.                         It

16          traditionally has factored into jurisdiction supply

17          stack, because it has been reasonably inexpensive from

18          a fuel cost perspective.                  I would think going into a

19          greenhouse gas constrained world that might not be the

20          case going forward.

21   MR. QUAIL:           Q:   Sequestering the carbon dioxide

22          emissions from coal generation on a commercially

23          viable level is technically difficult, if not

24          impossible, at this point, isn't that right?

25   MS. VAN RUYVEN:           A:        We are not aware of any

26          jurisdiction that has successfully built a coal-fired

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1           plant and fully sequestered the CO2.
2    MR. QUAIL:           Q:   And it's looking like a pretty expensive
3           technology if it can be achieved, am I right?
4    MS. VAN RUYVEN:           A:        Perhaps today.                  It could change in
5           ten years.
6    MR. QUAIL:           Q:   Let's hope so.                 Buying offsets for
7           emissions from natural gas fired thermal generators
8           will add to cost, won't it?
9    MS. VAN RUYVEN:           A:        Yes,       it will.
10   MR. QUAIL:           Q:   Requiring B.C. Hydro to rely on clean
11          and renewable resources -- I'm not suggesting these
12          are bad policies, just looking at the rate
13          implications.         Requiring B.C. Hydro to rely on clean
14          and renewable resources for 90 percent of its
15          incremental supply tends to eliminate many low cost
16          options and adds to rate pressure, isn't that right?
17   MS. VAN RUYVEN:           A:        No, I don't agree with that.
18   MR. QUAIL:           Q:   Okay.         The imposition of a carbon tax
19          will add to the cost of provincially sourced thermal
20          electricity, is that right?
21   MS. VAN RUYVEN:           A:        Yes, the carbon tax will add costs.
22   MR. QUAIL:           Q:   Implementing a cap and trade regime will
23          add to the cost of electricity?
24   MS. VAN RUYVEN:           A:        I think if it depends if you think
25          you have something to trade that has value and we
26          potentially may be a net beneficiary of a cap and

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1           trade system in the western grid.                            Knowing we have a

2           lot of clean renewable resources, it may be a benefit

3           to British Columbia, but until we know the rules and

4           how that marketplace is going to work, I don't think

5           we can definitively answer that question.

6    MR. QUAIL:           Q:   In general, avoiding or mitigating a

7           global climate crises will involve higher energy

8           prices, won't it?

9    MS. VAN RUYVEN:           A:        No, I don't agree with that.                    I

10          think if we are incredibly successful doing demand-

11          side management, using rate structures in particular,

12          which are very cost effective, that's a very low cost

13          way and I don't believe that clean renewable resources

14          going into the future are going to be more expensive,

15          necessarily than non-clean or thermal generation.

16                                                    Proceeding Time 2:38 p.m. T45

17   MR. QUAIL:           Q:   Well, let's hope you are right about

18          that.

19                          Now, self-sufficiency means that B.C. Hydro

20          would either prefer B.C.-based generation resources,

21          even if imported energy is available at a cheaper

22          market price.       Isn't that so?

23   MS. VAN RUYVEN:           A:        Self-sufficiency means we are

24          required to have based-in-B.C. resources to meet our

25          domestic needs in a critical water sequence.

26   MR. QUAIL:           Q:   Can you tell me what the approximate

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1           current spot price for electricity is at mid-C,

2           roughly?      Can anybody tell me that?

3    MS. VAN RUYVEN:           A:        Last time I looked, it was quite

4           high, like in the $80 or $90 range, but it may have

5           come down now with the freshet season.

6    MR. QUAIL:           Q:   Right, okay.               And what was the average

7           adjusted price for B.C.-generated electricity from the

8           2006 open Call after line losses?

9    MS. VAN RUYVEN:           A:        The reference price, the average

10          adjusted to the Lower Mainland, was 8.8 cents.

11   MR. QUAIL:           Q:   And do you expect the average price for

12          energy available under the pending clean Call to be

13          lower than that from the 2006 Call?

14   MS. VAN RUYVEN:           A:        I'm going to say "lower" in case

15          there's any IPPs in the audience.

16   MR. QUAIL:           Q:   Well, the IPP's costs are rising too,

17          aren't they?

18   MS. VAN RUYVEN:           A:        Yes.       But you've got to remember,

19          this clean Call is a Call that we're anticipating a

20          great deal of competition and some larger projects

21          that we hope have economies of scale.                            So I'm not

22          going to pre-suppose the outcome.                            We certainly hope

23          that the IPPs are going to be as competitive as

24          possible, and we'll be carefully watching those

25          prices.

26   MR. QUAIL:           Q:   Well, let's talk about it a bit.                          Do you

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1           recall our discussion during the last LTAP hearing

2           about the phenomenon of low-hanging fruit?                              That

3           phrase was raised by one of the Commissioners, and I

4           proceeded further in cross-examination.                            Were any of

5           you -- any of you recall that?                          The transcript --

6    MS. VAN RUYVEN:             A:        I don't recall that.

7    MR. QUAIL:           Q:     And I -- I'm not going to bother

8           producing the transcript, I'll content myself with

9           summarizing it, and my friend can take issue if he

10          thinks it's not a fair summary.                           Which was the effect

11          that, assuming an efficient market, the most cost-

12          effective sources of IPP power will tend to be

13          developed first, and that this creates a general trend

14          toward higher costs over time as the low-hanging fruit

15          gets culled.         That was the essence of the discussion.

16   MR. CHRISTIAN:            Since my friend invited me to comment,

17          I'm going to rise.              I'm going to only say that I can't

18          address the -- whether the accurate -- the

19          characterization is accurate or not.                            The witnesses

20          may or not be able to.

21   THE CHAIRPERSON:              One of the Panel can, actually.                         I mean

22          me.

23   MR. CHRISTIAN:            Oh, one of the panel.                       Maybe the question

24          should --

25   MR. QUAIL:           Yes.     And no doubt, Mr. Chairman, you'll

26          recall that discussion.

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1           Q:            And I put it to you that, following the outcome

2           of the 2006 Call in practice -- I mean, you said you

3           don't want any IPPs to hear this, but I don't think it

4           was a big secret.                They have an effective price floor

5           to bid from, don't they?                       They know that B.C. Hydro's

6           willing to pay at least the average F06 call price.

7           Sort of elementary.

8    MS. VAN RUYVEN:                A:        It's possible.                  But they also know

9           that there could be upwards of 200 projects bid into

10          this Call, and potentially we might award two or three

11          contracts.            So despite the fact they assume that B.C.

12          Hydro's going to at least take 8.8-cent energy, that

13          would be a very risky assumption to make, if I knew I

14          was going into a competitive process.

15   MR. QUAIL:              Q:     That's why we're going to be seeking a

16          strict limit on the proportion of bids that can be

17          accepted by B.C. Hydro, so there's some real

18          competition.            But aside from achieving something like

19          that, you understand that under Bill 15 this

20          Commission has no oversight over the contract prices

21          of agreements with IPPs that have been reached

22          pursuant to an approved Call?

23   MS. VAN RUYVEN:                A:        I'm sorry, could you repeat that?

24   MR. QUAIL:              Q:     Oh, yeah.            It's a long sentence to

25          repeat.          Because of Bill 15, this Commission has no

26          oversight over the contract price of any contracts,

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1           the bid price of any contract you enter into with an

2           IPP that is entered into pursuant to an approved Call?

3    MR. CHRISTIAN:             I think I just need to rise, because I

4           think the question very clearly asks for an

5           interpretation of a statute, and the witnesses aren't

6           here to give their legal opinions or evidence with

7           respect to the statute, particularly provisions that,

8           I think, clearly have no bearing on -- certainly no

9           direct bearing on the application before the

10          Commission.

11   THE CHAIRPERSON:             Well, let's face it, particularly, Mr.

12          Quail, as you're asking the witness to speculate on

13          the Commission's powers rather than B.C. Hydro's.

14   MR. QUAIL:            Well, okay.

15          Q:            Back on Tuesday, November 27th, 2007, B.C.

16          Hydro sponsored an information session on the clean

17          Call at the Renaissance Hotel in Vancouver.                          Was any

18          of you there?

19   MS. VAN RUYVEN:             A:       I was there for the first ten

20          minutes.

21   MR. QUAIL:            Q:    Okay, so you won't have witnessed what I

22          was going to suggest to you.                       There was an IPP

23          representative who spoke about the prospects for bid

24          prices in the pending clean Call, and I don't know if

25          you were there or not when a prominent IPP

26          representative rose to predict bids in the range of

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1           $110 a megawatt hour.               Were you present when that was

2           --

3    MS. VAN RUYVEN:           A:        I was not there.

4                                                   Proceeding Time 2:44 p.m. T46

5    MR. QUAIL:           Q:   Back to the '06 call.                     Those projects

6           come on steam by fiscal year 2011, is that right?

7    MS. VAN RUYVEN:           A:        That's what we're hoping.

8    MR. QUAIL:           Q:   In the proceedings to approve the

9           contract signed pursuant to the '06 call, the

10          projected rate impact of those contracts was estimated

11          at 8 percent from the then current B.C. Hydro revenue

12          requirement, is that right?

13   MS. VAN RUYVEN:           A:        That's correct.

14   MR. QUAIL:           Q:   So over and above business as usual, 8

15          percent, coming on stream 2011, right?

16   MS. VAN RUYVEN:           A:        That's correct.

17   MR. QUAIL:           Q:   That's year three of your revenue

18          requirement by the way, isn't it?

19                          Another gift of Bill 15 that we've talked

20          about already is smart meters throughout the

21          residential customer base by 2012 unless the Minister

22          orders otherwise.           I think that's straightforward

23          enough, I'm not asking for a -- I'll just sort of

24          state that as a premise.

25                          And there's a current pilot study underway,

26          is that right?

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1    MS. ZACHARIAS:             A:      That's correct.

2    MR. QUAIL:            Q:    And there's a working group overseeing

3           the pilot.

4    MS. ZACHARIAS:             A:      If you are referring to the CRI

5           advisory group, that's a group of stakeholders.                           I

6           don't know if I'd say that they are overseeing it, or

7           are you talking about the project team within B.C.

8           Hydro.

9    MR. QUAIL:            Q:    No, I'm talking about the advisory

10          group.        And what is the current cost estimate for

11          installing smart meters throughout the residential

12          customer base and the associated systems and so on, as

13          revealed to that advisory committee.

14   MR. CHRISTIAN:             And I object on the grounds of relevance.

15          I don't understand how the answer to that question

16          advances any issues in this proceeding.

17   MR. QUAIL:            The relevance is that it's $900 million and

18          this is going to be driving rates up starting in 2012

19          and we have an affordability crises that's ready to

20          hit people on the head in this province, and we're

21          looking for remedies.                So that's my response to my

22          friend's objection.

23   MR. CHRISTIAN:             If this is all on the theme of the cost

24          pressures and the general kind of caveat my friend

25          introduced this line of questioning within, I think

26          that's okay, to the extent that the witness can answer

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1           it.

2    MR. QUAIL:             Q:   Okay.

3    MS. VAN RUYVEN:             A:        Well, I can answer what we've put

4           publicly in our service plan.                         We've not landed on the

5           exact cost of smart metering because we haven't picked

6           a vendor and we haven't selected our technology, but

7           the range is 730 to 930 million dollars for the smart

8           metering initiative.

9    MR. QUAIL:             Q:   And I assume the impact of that will

10          start being felt on rates once they are all in in

11          2012.         Is that when you'd expect to start recovering

12          the investment on smart meters?

13   MS. VAN RUYVEN:             A:        Well, we'll be putting forward a

14          business case in smart metering before this Commission

15          to show them that our business case has a very healthy

16          net positive benefit for all British Columbia.

17   MR. QUAIL:             Q:   I'm sure.            For example, it will reduce

18          your meter reading.

19   MS. VAN RUYVEN:             A:        That's a big part of it, yes.

20   MR. QUAIL:             Q:   How much do you spend a year on meter

21          reading?

22   MS. VAN RUYVEN:             A:        I don't have those numbers off the

23          top of my head.

24   MR. QUAIL:             Q:   I take you can read an awful lot of

25          meter for 900 million bucks.                          Anyway, we'll save all

26          the debate about that for -- I don't know if there

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1           will be a hearing on that one or not.                          I don't know

2           whether -- again, that's another issue that's

3           jurisdictional in character.

4                           Back to the table of contents, 1.2.2.6 is

5           First Nations, and here the discussion in the

6           application is the cost of consultation and

7           accommodation, is that right?

8    MS. VAN RUYVEN:           A:        That's correct.                 So with any large

9           capital program and reinvesting in facilities and the

10          capacity additions at Mica and Revelstoke, and also

11          the transmission capital plan, because we do the

12          accommodation and consultation for First Nations on

13          behalf of BCTC, that is driving up costs.

14   MR. QUAIL:           Q:   Yes.        And the cost of future

15          accommodation is by definition totally unknown at this

16          point, right?

17   MS. VAN RUYVEN:           A:        That's correct.

18   MR. QUAIL:           Q:   And most First Nations territorial and

19          resource claims in British Columbia remain unresolved,

20          plugged up in the system, isn't that right?

21   MS. VAN RUYVEN:           A:        I'm not an expert on First Nations

22          but I would say that's a fair representation.

23   MR. QUAIL:           Q:   And some of those eventual resolutions

24          may involved cost to B.C. Hydro and its ratepayers,

25          isn't that right?

26   MS. VAN RUYVEN:           A:        That's right.

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1    MR. QUAIL:           Q:   And that's another factor that's likely

2           to continue for some time putting pressure on B.C.

3           Hydro's rates.

4    MS. VAN RUYVEN:           A:        I believe that's true.

5                                                     Proceeding Time 2:48 p.m. T47

6    MR. QUAIL:           Q:   And we can only guess what scale that's

7           going to be.       1.2.2.7 is economic and population

8           growth.       Population growth tends to dilute the per-

9           customer benefit of the Heritage assets, doesn't it?

10   MS. VAN RUYVEN:           A:        Yes, all new customers, by virtue

11          of taking some of our tariff, are taking some of that

12          Heritage contract as well, so the existing customers

13          end up getting less of it as we add new customers.

14   MR. QUAIL:           Q:   And that inexorably pushes rates up.

15   MS. VAN RUYVEN:           A:        That is another cost pressure.              You

16          have to find new supply or ways to meet that growing

17          demand.

18   MR. QUAIL:           Q:   Okay.         And this will also provide

19          ongoing pressure to meet peak demand, assuming --

20          aside from, you know, taking into account

21          conservations pressures, but the countervailing

22          pressure is the economic and population growth which

23          is always putting upward pressure on peak demand,

24          isn't that right?

25   MS. VAN RUYVEN:           A:        Yes, and that was kind of covered

26          in the capacity constraints section.

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1    MR. QUAIL:             Q:   This also tends to make self-sufficiency

2           a moving target, doesn't it?

3    MS. VAN RUYVEN:             A:        Well, we do load forecast

4           projections.         We know what our load is going to be in

5           2016.         We do the load forecast every year, so --

6    MR. QUAIL:             Q:   Yes.

7    MS. VAN RUYVEN:             A:        We'll have a pretty good idea if

8           we're successful in 2016.

9    MR. QUAIL:             Q:   Yes.        But it isn't over in 2016.                Self-

10          sufficiency is a continuing process, and in fact

11          there's this insurance policy that gets added over the

12          next four years after that, and it's -- at least

13          according to the policy of the existing government, is

14          a permanent program, is it not?

15   MS. VAN RUYVEN:             A:        Yes, and -- I mean, self-

16          sufficiency in and of itself isn't going to drive

17          rates up significantly more than they would have

18          otherwise been driven up by whatever choice you make

19          to serve increasing load.                     Load increases and

20          utilities have to spend money to find new resources.

21          Whether that's importing at $90 a kilowatt hour -- or

22          at 9 cents a kilowatt hour or whether it's building

23          new supply additions.

24   MR. QUAIL:             Q:   When will the VITR come on stream?

25   MS. VAN RUYVEN:             A:        VITR is due to be in service in

26          October of '08.

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1    MR. QUAIL:           Q:     And when will B.C. Hydro's ratepayers

2           have to start paying the capital cost of that?

3    MS. VAN RUYVEN:             A:        I'm not exactly sure how that flows

4           from BCTC's capital plan into our revenue

5           requirements.

6    MR. QUAIL:           Q:     Yes.

7    MS. VAN RUYVEN:             A:        I'm assuming it is in our RRA.

8    MR. QUAIL:           Q:     Transmission projects, and there's a

9           number of them in the stack, there's a central

10          Vancouver Island reinforcement, which is just the

11          hearing just underway now.                      These all add pressure to

12          B.C. Hydro's future revenue requirements as well,

13          don't they?

14   MS. VAN RUYVEN:             A:        That's correct.

15   MR. QUAIL:           Q:     If Site C is built, about what time

16          frame would you guess it would be coming into

17          operation?         I recognize it's a very hypothetical

18          question.

19   MS. VAN RUYVEN:             A:        I won't guess any time frame for

20          Site C.

21   MR. QUAIL:           Q:     Site C, if it happens, is going to cost

22          a lot of money, isn't it?

23   MS. VAN RUYVEN:             A:        Again, it's relative to, what other

24          the choices you have?                 Site C has very high up-front

25          capital costs, but it's an asset that lasts many, many

26          years.

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1    MR. QUAIL:           Q:   Yeah.

2    MS. VAN RUYVEN:           A:        That's really why we're enjoying

3           low-cost Heritage power, because of those large

4           facilities that we built many, many years ago.

5    MR. QUAIL:           Q:   And the costs will be met by ratepayers.

6           Correct?

7    MS. VAN RUYVEN:           A:        Yes.       That would be the appropriate

8           thing to do.

9    MR. QUAIL:           Q:   Meanwhile, the cost of doing just about

10          everything tends to rise over time, and the historical

11          upward trend in B.C. Hydro's cost of operations and

12          projects can be expected to continue, on top of all of

13          these particular categories.

14   MS. VAN RUYVEN:           A:        With the pressures we're facing,

15          and the list that you've taken me through here today,

16          yes, that is the case.

17   MR. QUAIL:           Q:   I put it to you, the days of cheap

18          electricity in B.C. are coming to an end, if they

19          haven't already.

20   MS. VAN RUYVEN:           A:        No, I would disagree with that.

21   MR. QUAIL:           Q:   Okay.

22   MS. VAN RUYVEN:           A:        Every other utility world-wide is

23          facing these exact same cost pressures.                       We have been

24          a low-cost jurisdiction.                  You can see that in some of

25          our evidence filed.             Our customers pay 6.56 cents a

26          kilowatt hour in the residential sector.                        That's

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1           amongst the lowest rates in the world.                       And as our

2           rates go up, everyone else's rates are going to go up

3           at the same pace and the same velocity as we're facing

4           in the next ten years.

5    MR. QUAIL:           Q:    So you're telling me that cheap

6           electricity is coming to an end everywhere.

7    MS. VAN RUYVEN:            A:       That's correct.

8    MR. QUAIL:           Q:    Okay.        And would you agree with me that,

9           as a result of this prospect, that a very serious

10          problem is looming for customers who rely on B.C.

11          Hydro for essential household energy who have lower

12          fixed incomes?

13                                                    Proceeding Time 2:53 p.m. T48

14   MS. VAN RUYVEN:            A:       Well, I believe the cost of

15          everything is rising.               You could see that, whether

16          it's car insurance that they pay, the food that they

17          have to buy, house insurance, rental.                        So it's all

18          relative to everything else they're having to pay, and

19          I do believe it will put pressure in this cost

20          escalating marketplace we are in, to low income

21          customers.

22   MR. QUAIL:           Q:    If a household's consumption stays on

23          Step 1 under your proposal, it would not see any real

24          increase in unit price of electricity, right?

25   MS. ZACHARIAS:            A:      That is correct.

26   MR. QUAIL:           Q:    I'd now like to direct you to Exhibit B-

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1           7.

2                           I don't know if this is an appropriate time

3           to take the mid-afternoon break and carry on.

4    THE CHAIRPERSON:            If you'd like, right, we will for --

5    MR. QUAIL:           Yeah, I'm sort of getting into another

6           subject matter.

7    THE CHAIRPERSON:            We'll break for 15 minutes.

8    (PROCEEDINGS ADJOURNED AT 2:54 P.M.)

9    (PROCEEDINGS RESUMED AT 3:10 P.M.)                                    T49

10   THE CHAIRPERSON:            Please be seated.

11                          Mr. Quail, before we begin, Mr. Fulton

12          rightly points out that we should set some hours for

13          tomorrow, as we didn't start till 9:30 this morning,

14          which was entirely my fault.                      Unless I hear any

15          strenuous objection from anyone, I propose we start at

16          8:30 tomorrow morning.                Is that all right with

17          everyone?      So be it.

18                          Please proceed, Mr. Quail.

19   MR. QUAIL:           Q:   Now, panel, we're going to move on to

20          some discussion of differential impacts of the RIB,

21          and I'd draw your attention to Exhibit B-7 which is

22          the second round of IR responses, response to BCUC

23          2.67.1.       That's 2.67.1 and it's attachment 1 to that.

24          So 2.67.1, attachment 1.

25                          Okay, and if you can turn to Table 5 which

26          is on -- it's numbered at the bottom, page 5 of 6 of

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1           that attachment.          Now, looking at that table, would

2           you agree with me that natural gas heated homes get

3           the largest decrease under RIB, and electric heated

4           homes get the largest increase according to that

5           chart?

6    MS. ZACHARIAS:            A:      It shows that electricity is 2.1

7           percent and natural gas is negative 3.9.

8    MR. QUAIL:           Q:    Yes.       And in the electric heat series,

9           if you look at the slice from December 2009 to January

10          2010, projects a 6.8 percent higher rate than would

11          obtain under the flat rate.                     Is that correct?

12   MS. ZACHARIAS:            A:      For those months, that is correct.

13   MR. QUAIL:           Q:    Okay.        Now I'd refer you in the same

14          exhibit, that's B-7, Terasen 1.2.3.                             You have another

15          table there.

16   MS. ZACHARIAS:            A:      Is that another IR?

17   MR. QUAIL:           Q:    That's Terasen 1. -- I'm sorry, that

18          must be in B-2.         That was 1.2.3.                      My note has B-7 but

19          -- yes, I'm sorry, it's in B-3.                         Sorry to have led you

20          astray there.       Terasen 1.2.3.

21   MS. ZACHARIAS:            A:      Yes, I see it.

22   MR. QUAIL:           Q:    Okay, how much of the load in kilowatt

23          hours, percentage of total annual load for these

24          typical dwellings and heating type have been priced at

25          Tier 2 rate and there's the table.                             Now, looking at

26          the table, just a few general observations, I'd like

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1           you to agree that I've got this right.

2                           By housing type, single family dwelling is

3           most affected, followed by mobile homes, ignoring

4           seasonal dwellings.

5    MS. ZACHARIAS:            A:      So those percentages are based upon

6           the percent of load in each of those steps, using as

7           the denominator the average for each of those dwelling

8           types.

9    MR. QUAIL:           Q:    Yes, so the proportion of the load that

10          will be billed on Tier 2.

11   MS. ZACHARIAS:            A:      That's true.               However, what I'm

12          pointing out is the number of kilowatt hours that

13          would be billed at Step 2 for mobile homes.                         It's not

14          necessarily comparable to the amount of -- the percent

15          of load in Step 2, if you compare it to a single

16          family dwelling, for instance.                        So the percentages are

17          not -- are one thing, but you also have -- in terms of

18          understanding what the impact is, you have to look at

19          the absolute number of kilowatt hours that would be

20          billed in Step 2 versus Step 1.

21                                                    Proceeding Time 3:15 p.m. T50

22                          As just a general statement, obviously you

23          can look at particularly the electric heat issue from

24          a lot of different ways, and as you'll also notice on

25          that chart, there's a number of apartments, town

26          homes, et cetera, that also use electric heat for

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1           heating.        And if you look at our customers overall,

2           you find out that for customers that have electric

3           heat and electric water, so the ones that are most

4           electricity-intensive, approximately 54 percent of

5           them are actually under the cut point of 14,500, and

6           about 45 percent are over that cut point.

7    MR. QUAIL:             Q:    According to the chart for a single-

8           family dwelling with electric heat, 55 percent of the

9           load would be billed on Tier 2.                           That's what the chart

10          says.         Isn't that right?

11   MS. ZACHARIAS:              A:      That's true.

12   MR. QUAIL:             Q:    And single-family dwelling without

13          electric heat would be only 34 percent of the load

14          billed to Tier 2.

15   MS. ZACHARIAS:              A:      That's what that chart says.

16   MR. QUAIL:             Q:    Mobile home with electric heat, which is

17          a very small minority of mobile homes, I understand,

18          and which this indicates as well, is 45 percent of the

19          load billed at Tier 2?

20   MS. ZACHARIAS:              A:      That's what that chart says.

21   MR. QUAIL:             Q:    Yeah.        And mobile homes without electric

22          heat, 30 percent billed at Tier 2.

23   MS. ZACHARIAS:              A:      That's true.

24   MR. QUAIL:             Q:    Mobile home's sort of a tin can out in a

25          field somewhere, with heat going --

26   MS. ZACHARIAS:              A:      I disagree with that

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1           characterization.

2    MR. QUAIL:            Q:    Okay.        That's very unfair.            I withdraw

3           it.

4                            Electrically heated apartment shows 19

5           percent, and a non-electric one, 9 percent.                          Is that

6           correct?

7    MS. ZACHARIAS:             A:      That's what the chart shows.

8    MR. QUAIL:            Q:    Okay.        Now, dwelling age.            This is found

9           in BCUC -- this will be in B-7, BCUC 2.75.1.

10   MS. ZACHARIAS:             A:      Did you say BCUC 2.75.1?

11   MR. QUAIL:            Q:    2.75.1.         Now, I believe this -- there's

12          Exhibit 2.3, and that's space heating and cooling

13          loads for existing residential units by dwelling type,

14          F2006.        I gather this is from the conservation

15          potential review?

16   MS. ZACHARIAS:             A:      Yes, that's a page from the

17          conservation potential review.                         There was a sub-

18          report, I guess, around fuel switching, and I believe

19          this page is from that.

20   MR. QUAIL:            Q:    Okay.        And it includes estimates that

21          show that while pre-1976 electric heated homes use

22          slightly more than post-1976 homes, in terms of the

23          construction dates for space heating, the difference

24          isn't that great.            Is that correct?

25   MS. ZACHARIAS:             A:      So you're looking at the first two

26          lines?

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1    MR. QUAIL:           Q:    That's right.               You've got the pre- and

2           post- -- yeah.

3    MS. ZACHARIAS:            A:      13,105 compared to 12,391?

4    MR. QUAIL:           Q:    Yes.

5    MS. ZACHARIAS:            A:      So, those are the numbers on those

6           lines.

7    MR. QUAIL:           Q:    Yes.       And have you got any analysis of

8           really old housing stock?                   Like, you want to go back

9           -- you only -- your dividing line is 1976.                         Do you

10          have any analysis of much older housing stock in the

11          province?

12   MS. ZACHARIAS:            A:      Just -- if you could just give me a

13          second.

14   MR. QUAIL:           Q:    I'd be happy to take an undertaking on

15          that.

16   MR. CHRISTIAN:            I'm not sure what the question is,

17          actually, if I can hear it again.

18   MR. QUAIL:           That is, if they could identify, or if they

19          can produce any analysis of the same information but

20          in relation to substantially older housing stock.                           I'm

21          just wondering what evidence you might have available

22          on space heating and cooling loads for old housing.

23   MR. CHRISTIAN:            So, before we agree to do an undertaking

24          or not --

25   MR. QUAIL:           See what's available.

26   MR. CHRISTIAN:            -- I'll see what I have.

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1    MR. QUAIL:           Yeah.

2    MS. ZACHARIAS:            A:      I'm just going to check to see, in

3           our REAA survey, what the kind of oldest category of

4           home we ask people for.                 Okay.

5    MR. QUAIL:           Q:      I'm happy to leave that with you.

6                                                                        Information Request

7    MR. QUAIL:           Q:      Would you agree that a lot will depend

8           on the energy efficiency of the individual home, as

9           well as what kind of applications there are in it?

10   MS. ZACHARIAS:            A:      Yes, I think we've said that the

11          drivers of energy consumption are a combination of how

12          the dwelling is constructed, if you will, the end uses

13          within that dwelling, and how people use them.

14                                                    Proceeding Time 3:20 p.m. T51

15   MR. QUAIL:           Q:      And modern building codes require

16          insulation standards, which really old houses are not

17          subject to unless they're retrofitted, is that right?

18   MR. TIEDEMANN:            A:      That's correct.

19   MR. QUAIL:           Q:      Similar story goes as far as the energy

20          efficiency of windows, that modern housing stock has

21          much more energy efficient windows that really old

22          houses don't have unless they've been retrofitted.

23   MR. TIEDEMANN:            A:      Different types of windows obviously

24          have different insulation properties.                           So that if one

25          has a vinyl window, double window or triple window,

26          it's thermally broken, maybe filled with argon gas,

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1           it's going to be more efficient than one of the older

2           aluminum slider type windows.

3    MR. QUAIL:           Q:    And an old wood frame house with little

4           or no insulation and single glazed windows is going to

5           leak heat into the atmosphere like a sieve.                         Is that a

6           fair observation?

7    MR. TIEDEMANN:            A:      There are a wide range of factors

8           that go into the energy consumption of a dwelling for

9           electric and space heating.                     So that the location of

10          the dwelling in terms of heating degree days and so

11          forth would be a critical factor too.

12   MR. QUAIL:           Q:    Retrofitting an old house in terms of

13          its insulation and windows for energy efficiency is

14          very -- a relatively expensive undertaking for a

15          homeowner to undertake, isn't that right?

16   MR. TIEDEMANN:            A:      Again it depends upon the context.

17          For example, if you have a dwelling where there's very

18          little attic insulation but it's easy to add it, it

19          can have a big effect on the energy use in that

20          dwelling.

21   MR. QUAIL:           Q:    On age of appliances, would you agree

22          with me the trend is towards more higher energy

23          efficiency of modern household appliances compared to

24          older ones?

25   MR. TIEDEMANN:            A:      It depends upon the appliance.

26          Certainly refrigerators have, other things equal being

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1           go -- have gotten more efficient over time, but with a

2           proliferation of other features such as, you know,

3           icemakers and cold water through the door features,

4           it's difficult to generalize.

5    MR. QUAIL:           Q:    A computer is a lot more energy

6           efficient now than it was in 1956 though, isn't it?

7    MR. TIEDEMANN:            A:      I believe that's correct.

8    MR. QUAIL:           Q:    Just flipping back to our 2.67.1, that

9           is Exhibit B-7, 2.67.1, Table 1.                             Do you agree with me

10          that one conclusion that can be drawn from this is

11          that the -- let people get it.                        The adverse rate

12          impact of moving from a flat rate to RIB tends to

13          increase with household income, and that moving to RIB

14          tends -- I think you've already said this, to be of

15          net benefit to low income households.                             This is

16          illustrated as a generalization in this table, isn't

17          that correct?

18   MS. ZACHARIAS:            A:      That's correct.

19   MR. QUAIL:           Q:    Just in terms of identifying some of the

20          reasons why this might be the case, might one be the

21          lower income customers are more likely to live in

22          apartments, secondary suites and so on, rather than in

23          detached single family dwellings?                             Is that one of the

24          reasons?

25   MS. ZACHARIAS:            A:      According to our information about

26          -- it's about equal.              About 40 percent of low income

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1           customers live in single detached or duplexes, and 40

2           percent live in apartments or condos.

3    MR. QUAIL:           Q:     How does that compare with affluent

4           customers?         What I'm saying, in terms of the relative

5           -- difference in the relative impact on low income

6           consumers and identifying some of the reasons for

7           that, would one of them be that low income households

8           are more likely to be renters and more likely to be in

9           apartments or in secondary basement suites?

10   MS. ZACHARIAS:             A:       Well, I don't know if that statement

11          in general is true, particularly as the housing stock

12          in British Columbia changes simply because of density

13          and higher costs in housing, period.                             You know,

14          there's people -- or wouldn't be classified as low

15          income according to LICO standards, that are living in

16          condos and townhomes and so forth.                             So I don't know if

17          you can make that statement generally.

18                          In terms of home ownership, while overall

19          about 57 percent of low income customers own their

20          home, when you look at those customers that are using

21          more electricity over the 14,500, we find about 78

22          percent of those low income customers actually own

23          their home.

24   MR. QUAIL:           Q:     Okay.         Can you identify the reason why

25          low income customers tend to be, in general, are net

26          beneficiaries of the proposed RIB structure?

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1                                                     Proceeding Time 3:24 p.m. T52

2    MS. ZACHARIAS:            A:      Because of the -- in general, their

3           average electricity consumption is lower than the

4           overall average.          So we estimate that their energy

5           consumption is approximately 8200, 8300 kilowatt hours

6           a year.

7    MR. QUAIL:           Q:    Might that be partly because they have

8           fewer appliances, less electronic equipment, and so

9           on?

10   MS. ZACHARIAS:            A:      I can't find the comparison between

11          percentage of appliance and electronic saturation of

12          low-income customers compared to the average.                             What we

13          do notice is that when we look at low-income customers

14          that are using less, compared to low-income customers

15          that are using more, those low-income customers that

16          are using more also do have higher incidences of those

17          appliances and electronic equipment that you were

18          referring to.

19   MR. QUAIL:           Q:    Bet they have teenage kids, too.                       I just

20          -- I would just wager that.                     I'd now bring your

21          attention to Exhibit B–7, BCOAPO 2.19.2.                         And table 2,

22          which is on page 2 of that response.                         That's 2.19.2,

23          table 2.      And this provides the average annual

24          consumption profile of low-income customers in fiscal

25          2007.

26   MS. ZACHARIAS:            A:      Yes.

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1    MR. QUAIL:           Q:     This indicates that 16,000 out of a

2           quarter of a million low-income accounts will see some

3           increase under the RIB, is that right?

4    MS. ZACHARIAS:            A:        16,000 customers --

5    MR. QUAIL:           Q:     I'm sorry.             36,000 customers out of

6           250,000.

7    MS. ZACHARIAS:            A:        So I expect that you're counting the

8           number of customers between -- over 14,500.

9    MR. QUAIL:           Q:     That's correct.

10   MS. ZACHARIAS:            A:        Counting all that up, that's

11          236,000.

12   MR. QUAIL:           Q:     You add it all up.                        Yeah, roughly.

13   MS. ZACHARIAS:            A:        Yes.

14   MR. QUAIL:           Q:     Okay.         And that's about 14.4 percent.

15   MS. ZACHARIAS:            A:        14.4 percent of low-income customers

16          overall?      Yes.

17   MR. QUAIL:           Q:     Okay.         Now, I see this 75,000 to 84,000,

18          999, 257 accounts.              What is that?

19   MS. ZACHARIAS:            A:        So, in our REAA study, which we --

20          just to give you some background on the REAA study,

21          and Mr. Tiedemann can answer any more detailed

22          questions, if you'd like.                     We send out an end-use

23          survey to approximately 4,000 and change customers,

24          and it's a quite -- because there's so many customers

25          that we survey, it's quite representative overall of

26          our customer market, we believe.

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1                             So, the number that's under the un-weighted

2           base size is the number of customers that responded to

3           that survey in that category.                         So you can see that we

4           had one customer that meets the LICO definition that's

5           in the category of using 75,000 to 85,000 kilowatt

6           hours per year.           So, if you project that out to the

7           customer base, based upon 255,000 low-income

8           customers, that would suggest that 0.1 percent of our

9           low-income customer base could be in that range, which

10          would then mean that that's 257 people.                            Now, that

11          projection is based upon that one person.

12   MR. QUAIL:             Q:    It's actually one person who has got an

13          astonishing amount of consumption.                             I wonder if they

14          have undeclared income from some illicit commerce

15          going on in that household?                       But I -- we have no way

16          of knowing.

17   MS. ZACHARIAS:              A:      I don't know, but we did look at

18          that particular survey, and they are using wood for

19          heating, so it's not the electric heat.

20   MR. QUAIL:             Q:    Okay.        Something else is going on there.

21          Okay.         And of course, even the ones who are a bit

22          better off under the RIB will see rate increases, even

23          in the first year of the program, because of the

24          impact of the revenue requirement.

25   MS. ZACHARIAS:              A:      Yes.       Under the RIB rate, no

26          customer will see their actual bill decrease over what

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1           it was the previous year.

2    MR. QUAIL:             Q:    In fact, B.C. Hydro is treating as sort

3           of a matter of principle that nobody should get a net

4           break in their electricity cost, even in the first

5           year.         It's actually only the first partial -- it's

6           the first heating season.                     Is that right?

7    MS. ZACHARIAS:              A:      We believe that it's important to

8           keep the cost of electricity stable for Step 1.                            That

9           would be a "Yes".

10   MR. QUAIL:             Q:    That's a funny "Yes" in response to my

11          question, but I'll -- I won't pursue it.

12   MS. ZACHARIAS:              A:      Well, you asked me, I think, if Step

13          1 was decreasing the cost and -- so the cost of

14          electricity in Step 1 --

15   MR. QUAIL:             Q:    Yes, okay.

16   MS. ZACHARIAS:              A:      -- after the RIB is implemented --

17   MR. QUAIL:             Q:    Yes, in the first --

18   MS. ZACHARIAS:              A:      -- will not be lower than the 6.15

19          it was when we put the application in.

20   MR. QUAIL:             Q:    Okay.        And the general picture is that

21          many customers receive a relatively small benefit in

22          terms of the bill impact under the RIB, and a smaller

23          number see a large -- a relatively larger increase.

24          Is that right?

25                                                      Proceeding Time 3:30 p.m. T53

26   MS. ZACHARIAS:              A:      I'm sorry, could you repeat the

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1           question?

2    MR. QUAIL:           Q:    I don't think I'll bother.                    I'll save

3           that for argument from the table.

4    MS. ZACHARIAS:            A:      Well, from --

5    MR. QUAIL:           Q:    No, it's okay.                It's just information

6           drawn from the table.

7                           If we look at regional differentials, I'd

8           refer you to Exhibit 7, BCUC 2.67.1, attachment 1,

9           Table 2, and that's on page 2 of 6.                          So in terms of

10          regions of the identified clusters there, only

11          Vancouver Island will on average receive larger bills

12          under RIB as a result of the implementation of the RIB

13          rate, is that right?

14   MS. ZACHARIAS:            A:      Yes.       In aggregate for all of the

15          various reasons that I'm sure we'll spend the next

16          four days talking about, Vancouver Island overall is

17          2.3 percent higher.

18   MR. QUAIL:           Q:    Well, primary reason or one of the

19          primary reason I put to you is the prevalence of

20          electric heat on Vancouver Island, isn't that right?

21   MS. ZACHARIAS:            A:      That's one of the reasons, but when

22          we've done additional analysis on that, there's

23          suggested there's a couple of additional ones, which

24          is that while more people on Vancouver Island do have

25          electric heat, there's also a large prevalence of

26          large homes that have electric heat on the Island.                            So

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1           it's not just the fact that it's electric.                              It's the

2           fact that it's electric heat in larger homes.

3    MR. QUAIL:           Q:    And natural gas was a relatively late

4           entrant into Vancouver, and the economics of

5           retrofitting an electrically heat home to use natural

6           gas, very difficult, isn't that right?

7    MS. ZACHARIAS:            A:      I don't have specific information on

8           that but I would expect that retrofitting a heating

9           system is costly.

10   MR. QUAIL:           Q:    And the Lower Mainland gets the largest

11          general benefit from the RIB, is that right?

12   MS. ZACHARIAS:            A:      Yes, and once again that's a

13          function of basically demographics in the sense of the

14          housing stock in the Lower Mainland, because of the

15          density here, there's more condos, more townhomes et

16          cetera.

17   MR. QUAIL:           Q:    Refer you now to Exhibit B-7, BCOAPO

18          2.10, and the response there confirms that -- the

19          reference is to a BCUC, a couple of BCUC IRs, and the

20          response confirmed that the studies cited in response

21          to BCUC IR 1.28.1 were the only published studies of

22          price response that are relied on for establishing a

23          plausible but conservative estimate of the

24          conservation induced by the RIB.                             So I'd like to take

25          a look at those four studies which you say are the

26          only ones that were looked at.

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1                           So first of all Exhibit B-3, BCUC 1.28.01,

2           attachment 1.       Do you have it there?                      This is the RAND

3           study, is that right?

4    MR. ORANS:           A:   Yes, it is.

5    MR. QUAIL:           Q:   And it was published in 2005, is that

6           correct?

7    MR. ORANS:           A:   Yes, I believe that's correct.

8    MR. QUAIL:           Q:   And it draws on data from 1977 to 2004.

9    MR. ORANS:           A:   Yes, a long-time series of data.

10   MR. QUAIL:           Q:   Yeah.         And the main purpose of it is to

11          look at differences in elasticity by region, is that

12          correct?

13   MR. ORANS:           A:   That's one purpose.                       It's also to assist

14          people in forecasting sales by region, yes.

15   MR. QUAIL:           Q:   Okay.

16
17                                                    Proceeding Time 3:34 p.m. T54

18   MR. QUAIL:           Q:   But it uses average electricity prices.

19          Is that correct?

20   MR. ORANS:           A:   It uses historical total cost of

21          electricity in each region by year.

22   MR. QUAIL:           Q:   Okay.         And the time period 1977 to 2004

23          was a period when electricity rates were generally

24          declining in real terms.                  Isn't that correct?

25   MR. ORANS:           A:   No.       That's not correct.                 In fact, the

26          history of electric utility rate–making -- the 1970s

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1           and early 1980s was the only period that I can

2           remember where there was substantial amount of

3           inflation in both fuel costs, financing costs, and

4           environmental concern, which drove up the costs of

5           energy.       That period was very much like the period

6           we're facing now.           The 1970s period, I would agree

7           with you that the latter -- the middle part of the

8           1980s and the 1990s were as you say, relatively flat.

9    MR. QUAIL:           Q:   Okay.         But it did also capture a period

10          of inflation, it's a given --

11   MR. ORANS:           A:   Yeah.         The beginning part of that period

12          had substantial amounts of inflation in it.

13   MR. QUAIL:           Q:   Refer you to page xii, Roman numeral 12,

14          which is the final page of this summary of attachment

15          1, the Rand study.            And reading the first two

16          paragraphs:

17                    "We also found that the relationship between

18                    demand and price is small.                    That is, demand

19                    is relatively inelastic to price.                   We also

20                    found that in the past 20 years, the

21                    relationship has not changed significantly.

22                    Analyses performed in the 1980s showed

23                    approximately the same results.                    These

24                    findings might imply that there are few

25                    options available to the consumer in

26                    response to changes in the price of energy,

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1                     and that the price does not respond much to

2                     changes in demand.             On the other hand,

3                     because prices were declining in real terms

4                     over most of the period we studied, the

5                     inelasticity of demand may be more of an

6                     artifact of the lack of price increases.

7                     However, we now may well be witnessing some

8                     changes in this area.                The past few years

9                     have seen some increases in energy prices,

10                    with some states facing increasing

11                    electricity prices and all states facing

12                    increasing natural gas prices.                      While it is

13                    difficult statistically to uncover specific

14                    changes and trends, there are signs that

15                    demand growth is slowed possibly due to a

16                    combination of increasing or flat prices and

17                    the economic slow-down of the past few

18                    years.   Although we cannot say specifically

19                    that the relationship between price and

20                    demand might shift in an increasing price

21                    environment, more analysis of recent trends

22                    may be warranted."

23          I see that you're familiar with that passage.

24   MR. ORANS:           A:    Yes.

25   MR. QUAIL:           Q:    At a regional level, short-run

26          elasticities cluster around minus 0.2.                           Is that right?

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1    MR. ORANS:           A:   Yes, overall.

2    MR. QUAIL:           Q:   Yes.        State-level elasticity varies from

3           minus 1 to plus .6, is that right?

4    MR. ORANS:           A:   Yes.        They had a substantial amount of

5           variation by region.

6    MR. QUAIL:           Q:   Elasticity, the estimate for Washington

7           State is minus .076, with a standard error of .061,

8           according to table D-10 on page 92, is that correct?

9    MR. ORANS:           A:   Yes, that's correct.

10   MR. QUAIL:           Q:   I'm glad you agreed with all of that,

11          and I didn't have to sort of do any further figuring

12          out.

13                          If I can refer you to Exhibit B-3, BCUC

14          Exhibit 1.28.01, attachment 2, that is the next of the

15          four studies.       It's entitled "Residential demand for

16          electricity under inverted block rates, evidence from

17          the controlled experiment."                     And this was from 1994,

18          is that correct?

19                                                  Proceeding Time 3:38 p.m. T55

20   MR. ORANS:           A:   I'm looking for the date.                    Yes, October

21          1994, that's correct.

22   MR. QUAIL:           Q:   And the information is drawn from the

23          State of Wisconsin, is that correct?

24   MR. ORANS:           A:   Yes, the data was from Wisconsin.

25   MR. QUAIL:           Q:   It included 350 households over a three-

26          year period in the early 1990s in the study, is that

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1           right?

2    MR. ORANS:           A:   Yes, I believe that's correct.

3    MR. QUAIL:           Q:   And the purpose was to investigate

4           methodological problems in estimating the demand

5           response under inclining block rates and to see if

6           there is empirical support for lifeline rates, that is

7           demand response is a function of rate design and

8           income level.

9                           I hope that question makes sense.

10   MR. ORANS:           A:   That was a long sentence with a lot in

11          it.

12   MR. QUAIL:           Q:   Yes.

13   MR. ORANS:           A:   I mean, the technical part of it was to

14          estimate price elasticity within an inclining block

15          rate structure.

16   MR. QUAIL:           Q:   Okay.         The rate designs and number of

17          customers in each rate in the control group were set

18          out in table 1 at page 423.                     Is that right?

19   MR. ORANS:           A:   Yes, that's correct.

20   MR. QUAIL:           Q:   Okay, and the elasticity is set out at

21          table 5 and 6 on page 425 and 426.                           Just flip ahead a

22          couple of pages.

23   MR. ORANS:           A:   Yes, with a summary of the same table on

24          page 427.

25   MR. QUAIL:           Q:   The summer elasticity in table 5 is very

26          small, is it not?

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1    MR. ORANS:           A:   Yes, it is.

2    MR. QUAIL:           Q:   Okay.         The winter elasticity table is

3           most negative for rate 150 which is a rate with a very

4           small Tier 1 consumption, a rate boundary of 250

5           kilowatt hours a month, and the least difference

6           between Tier 1 and Tier 2 prices.                            Is that right?

7    MR. ORANS:           A:   Yes.        Compared to the other options.

8           However, this difference is more than two to one, so

9           it is larger than the difference we have here.

10   MR. QUAIL:           Q:   Yes.        But this would seem to suggest,

11          would it not, that the B.C. Hydro design that leads to

12          the greater differences -- a design that produces

13          greater difference between Tier 1 and Tier 2 prices

14          could dampen the demand response in the longer term.

15   MR. ORANS:           A:   I'm not following the logic here.

16   MR. QUAIL:           Q:   It suggests that if you increase the

17          difference between the two tiers, that you could be

18          dampening the demand response.

19   MR. ORANS:           A:   No.       I mean, you're going to get more

20          demand response when you increase the difference.                             You

21          might not get proportionally the same amount.

22   MR. QUAIL:           Q:   Now, B.C. Hydro -- I'll give you a

23          reference here, is Exhibit B-3, BCOAPO 1.17.1.

24   MR. ORANS:           A:   Yes.

25   MR. QUAIL:           Q:   And refer you to the first paragraph.

26          The response says:

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1                     "In addition to Rice and White, household

2                     elasticity demand revisited review of

3                     economic studies 2005, 853 to 888 referenced

4                     in the response to our IR 1.14.2, the price

5                     elasticity estimates supported in table 1

6                     below support the assertion that higher

7                     usage customers with major electric end uses

8                     tend to be more price responsive than lower

9                     usage customers without such end uses."

10          So Hydro is suggesting that this study indicates that

11          large users are more responsive than small users.                          Am

12          I interpreting that correctly?

13                                                    Proceeding Time 3:42 p.m. T56

14   MR. ORANS:           A:   No, I think actually if I remember

15          correctly, the study you're referring to, the Rice and

16          White study?

17   MR. QUAIL:           Q:   Yes.

18   MR. ORANS:           A:   The Rice and White study actually was

19          very -- they noted that they were surprised that

20          actually they didn't find that result in there.                          So

21          they noted that was inconsistent with the literature

22          review, and that in their analysis they didn't find

23          that consistent relationship.                       And so in, I believe,

24          the body of this response is the other following

25          studies from the same source show that larger

26          customers with electric space heating and electric

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1           water heating tend to have larger price response in

2           this and more reaction to rates than smaller users,

3           all other things being equal.                       However, there's a

4           significant amount of variation from region to region

5           and study to study.

6    MR. QUAIL:           Q:   Now moving to attachment 3, the third of

7           the elasticity studies, that's Exhibit B-3, BCUC

8           1.28.01, attachment 3, has a very catchy title, "A

9           Framework for Regional Modelling and Impact Analysis,

10          an Analysis of the Demand for Electricity by Large

11          Municipalities in Ontario, Canada".                          If you could turn

12          to that, please.

13   MR. ORANS:           A:   I'm turning to it, if you can just give

14          me a second here.           Okay, I'm with you.

15   MR. QUAIL:           Q:   Okay, and the data includes sales to 16

16          municipalities, is that right?

17   MR. ORANS:           A:   From my memory, yes, I believe that's

18          correct.

19   MR. QUAIL:           Q:   I'll refer you just to look at -- I'm

20          not going to read it into the record -- page 370,

21          heading 5, "A Model of Elasticity Demand and Energy

22          Consumption".       If you could just look through --

23   MR. ORANS:           A:   Yes, I see the reference to the 15 --

24   MR. QUAIL:           Q:   -- the first and third paragraphs.

25   MR. ORANS:           A:   The 15 utilities, yes.

26   MR. QUAIL:           Q:   Okay, and there's no mention there of

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1           residential customers in the impact of the new

2           wholesale rate, is that correct?

3    MR. ORANS:           A:   They've got combined, mostly residential

4           but also some commercial customers on most of these.

5    MR. QUAIL:           Q:   Okay.         And again I'm not going to read

6           this, but at page 373, the first full paragraph,

7           suggest that this indicates that some price elasticity

8           results in the order of minus .096 for short run, and

9           .151 for the long run.

10   MR. ORANS:           A:   Yes, I have that highlighted as well.

11   MR. QUAIL:           Q:   Okay.         You and Mr. Fussell.            I was going

12          to say great minds think alike, but I don't claim to

13          be the other great mind.                  It's Mr. Fussell that has

14          done this analysis for us.

15                          Exhibit B-3, now attachment 4, that is BCUC

16          1.28.01, attachment 4, "Electricity Demand Estimates

17          Under Increasing Block Rates".                        Do you have that

18          before you?

19   MR. ORANS:           A:   Yes, the article by Stephen Henson.

20   MR. QUAIL:           Q:   And this article dates from 1984, is

21          that correct?

22   MR. ORANS:           A:   Yes, that's correct.

23   MR. QUAIL:           Q:   This is a study of different rate

24          structures drawn on data from the Bonneville Power

25          Authority, is that right?

26   MR. ORANS:           A:   Yes.

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1    MR. QUAIL:             Q:   The data is drawn from 1,077 households

2           in the BPA service area during 1979.

3    MR. ORANS:             A:   Yeah, subject to check that's

4           approximately right.

5    MR. QUAIL:             Q:   Page 152 shows the sample size and the

6           inclining block sample only includes 23 customers.

7           Agree with that?

8    MR. ORANS:             A:   Yes.

9    MR. QUAIL:             Q:   Results on page 153 show an elasticity

10          in the order of minus .28 for marginal price, the

11          marginal price for all rate forms.                             And the inclining

12          block has a large standard deviation range of plus or

13          minus .44, is that right?

14   MR. ORANS:             A:   Yeah, actually there's a range here, so

15          that number is correct.                   And then there's also a

16          smaller range using a different methodology with an

17          elasticity of minus .1136, with a standard error of

18          plus or minus .3583.

19   MR. QUAIL:             Q:   Thank you.

20   MR. ORANS:             A:   But your number is also on the other end

21          of the range.

22                                                      Proceeding Time 3:46 p.m. T57

23   MR. QUAIL:             Q:   Yes, and also the article indicates that

24          none of the elasticities with respect to the rate

25          structure premium are significantly different from

26          zero.         Is that right?

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1    MR. ORANS:             A:   Yeah.         They had a huge variation in what

2           they found, and they had a relatively small sample,

3           yes.

4    MR. QUAIL:             Q:   The rate structure premium which is

5           referred to in the study as "PREM" is the difference

6           between the bill that would result if the marginal

7           price were applied to all consumption, less the actual

8           bill.         Is that right?

9    MR. ORANS:             A:   Yes.

10   MR. QUAIL:             Q:   If an inclining block rate has a large

11          step between Tier 1 and Tier 2, then the PREM or

12          premium would be large, isn't that right?

13   MR. ORANS:             A:   Yes.

14   MR. QUAIL:             Q:   That's the definition?                    Having an

15          insignificant premium elasticity suggests to me that

16          all inclining block rate forms would perform more or

17          less equally well.              Is that a correct conclusion to

18          draw?

19   MR. ORANS:             A:   No, I think, once again, you know -- I

20          wouldn't use these results to make that generalization

21          across all inclining block rate structures.                            As you

22          said, it's a small sample with a large variation in

23          it.       My point of using the study is, it's a

24          jurisdiction that's a neighbouring jurisdiction.

25   MR. QUAIL:             Q:   Yes.

26   MR. ORANS:             A:   And it's a study of an inclining block

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1           rate structure.         So we don't have many of those.                    So,

2           I used this one, even though, as you point out,

3           there's a wide variation in results, because of a

4           small sample.

5    MR. QUAIL:           Q:   Yes.

6    MR. ORANS:           A:   But I wouldn't draw the conclusion that

7           the premium numbers mean any more than the actual last

8           number ranges too.            There's a broad range of results.

9    MR. QUAIL:           Q:   But this is one of the four studies that

10          you exclusively relied on.

11   MR. ORANS:           A:   Yeah.         I relied on it to show that

12          elasticity estimates in this range are found.                            This is

13          the middle -- reported middle of that range.                         It has a

14          broad variation as reported in other studies.                            But it

15          doesn't show elasticities that are substantially

16          larger than the range I used in my analysis.

17   MR. QUAIL:           Q:   And the conclusion of the study really

18          focuses on methodological pros and cons and ups and

19          downs and so on, is that correct?

20   MR. ORANS:           A:   Yes, it focuses both on results, but a

21          large part of the study also focuses on methodology.

22   MR. QUAIL:           Q:   Okay, now I'd like to look at the

23          expected conservation impact of the proposed RIB in

24          relation to DSM programs, and I would direct your

25          attention to the third document in Exhibit B -- where

26          were we, here?        This is our collection of additional

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1           documents.         B3-10-6.         Here it is.

2                           This is an extract from the 2007

3           conservation potential review.                          And if you would turn

4           to page 209 in the bottom corner, which is, in the top

5           right-hand corner 3-3.                  With the heading "Achievable

6           energy efficiency supply curves".

7                           So, this explains what is coming up in

8           terms of the next exhibit, is that correct?

9    MR. TIEDEMANN:             A:       That's correct.

10   MR. QUAIL:           Q:     Okay.         So I'd like you to flip ahead,

11          then, to pages 210 and 212, which appear here as 3-4

12          and 3-6 in the exhibit.                   So this shows the majority of

13          the potential DSM falls below a CCE of 6 cents per

14          kilowatt hour.           Is that right?

15   MR. TIEDEMANN:             A:       In terms of what's at the table,

16          that's correct.           Perhaps I could just mention in

17          passing something I'm sure the panel is well aware of.

18          There's really three concepts at play here.                             There's

19          the notion of technical efficiency, which refers to

20          those technologies which, in principle, would save

21          energy compared to the competitors.                            There's the

22          notion of economic efficiency, which looks at life-

23          cycle costs and attempts to determine which

24          technologies make sense in terms of the underlying

25          economics.         And the third concept is "achievable",

26          which takes into consideration the many barriers that

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1           Ms. Zacharias has talked about in terms of actually

2           achieving energy efficiency.

3    MR. QUAIL:           Q:    Okay, and CCE is defined at page 5 of

4           the document, which is 3-2 in the top corner.                                 There's

5           a glossary to the conservation potential review, and

6           I'll allow everybody -- I won't read that into the

7           record, except to the last sentence.                             It's:

8                     "Represents the cost of conserving 1

9                     kilowatt hour of electricity."

10                                                  Proceeding Time 3:52 p.m. T58

11   MR. TIEDEMANN:            A:      Yes, that's correct.

12   MR. QUAIL:           Q:    If B.C. Hydro were to offer a 3 cent per

13          kilowatt hour incentive, the utility should be able to

14          achieve a potential shown in the lower achievable

15          summary below the 5 to 6 cent CCE through DSM

16          programs.      Is that right?

17   MR. TIEDEMANN:            A:      That assumes that all the barriers

18          to increased energy efficiency are expeditiously dealt

19          with.

20   MR. QUAIL:           Q:    Okay.        And the result of offering a 3

21          cent incentive to get 300 gigawatt hours of energy is

22          the revenue loss to B.C. Hydro of 6.5 cents from the

23          rate, plus three cents from the incentive, so a total

24          of 9.5 cents per kilowatt hour.                              Is that right?

25   MR. TIEDEMANN:            A:      I'm not an expert on how cost

26          calculations are made, but at the very least one would

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1           have to consider the program costs too.

2    MR. QUAIL:              Q:    Okay.        That's true.                But looking just at

3           the cost of the incentive and the total avoided

4           consumption, the energy cost savings, using the DSM

5           evaluation estimate, would be somewhere around 8

6           cents.          Isn't that right?

7    MR. ORENS:              A:    I'm not following the calculation.                       Can

8           you take us through that one?

9    MR. QUAIL:              Q:    What would the cents per hour avoided

10          cost of the DSM be?                No.       I should have Mr. Fussell

11          ask the question.

12                             The avoided cost of the energy that is

13          conserved through the DSM.

14   MS. ZACHARIAS:               A:      You're asking for the avoided cost

15          of energy --

16   MR. QUAIL:              Q:    Okay.        Now I understand my question.                 So

17          we are conserving energy.                      What is -- the avoided cost

18          of the energy that is being conserved through DSM

19          measures is about 8 cents a kilowatt hour, is it not?

20   MS. ZACHARIAS:               A:      It's -- so when we value the energy

21          that avoid through DSM, we use the cost of avoided

22          energy, and we also look at the cost of avoided

23          capacity as well, to have the total benefit of the

24          DSM.          So to the extent that the reference price from

25          the last call of 8.8 cents delivered to the Lower

26          Mainland, that's the base starting point, if you will,

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1           of valuating the value of that avoided energy.

2                              And then there's other things added on.

3    COMMISSIONER PULLMAN:                    Well, I'm not sure there is.                   Is

4           it -- I mean 8.8 percent, as Mr. Reimer testified, is

5           I think the costs stripped of all its green attributes

6           delivered firm to the Lower Mainland.

7    MS. ZACHARIAS:               A:      Right.         I am just also referring to

8           the distribution losses within -- like as past the

9           Lower Mainland.

10   COMMISSIONER PULLMAN:                    Sorry, Mr. Quail.

11   MR. QUAIL:              That's quite all right.                        Thank you.

12   MR. QUAIL:              Q:    The revenue requirement impact or RIM

13          impact is 1.5 cents per kilowatt hour or 4.5 million

14          for 300 gigawatt hours in savings, is that right?

15   MS. ZACHARIAS:               A:      I don't know.                What are you

16          referring to?

17   MR. QUAIL:              Q:    I forget.           Mr. Fussell asked this one

18          too.          I'll come back to that.

19                                                       Proceeding Time 3:56 p.m. T59

20                             I put it to you there appear to be two ways

21          of achieving 300 gigawatt hours a year of savings, and

22          one would be to use the RIB to impose up to a 15

23          percent increase on some residential customers and

24          escalating from there on, and the other would be to

25          impose a 0.15 percent increase on all customers.

26   MR. ORANS:              A:    Mr. Quail --

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1    MR. QUAIL:             Q:   To pay for DSM measures.

2    MR. ORANS:             A:   I think if you go to your same exhibit,

3           3-5, and you look at your supply curve, that can be

4           used to shed some light on I think the same question

5           you're asking.          My own point of view is that efficient

6           pricing here results in some amount of conservation.

7           Some customers will conserve more, some customers will

8           conserve less.          You don't have to sort out who's a

9           gluttonous consumer and who should get a subsidy, et

10          cetera.

11                            So if B.C. Hydro moves towards efficient

12          pricing, it will induce between 200 and 500 gigawatt

13          hours, is this range of estimates we've provided in

14          this proceeding.            Those gigawatt hours are produced

15          from a total resource cost perspective at the bottom

16          end of this curve.              They're essentially almost zero

17          cost.         We're not asking to invest a bunch of money in

18          incentives or new programs especially for this rate.

19          So they are the lowest cost alternative, or lower than

20          CFLs, program T stats, standby losses, et cetera.                          So

21          they come in here beneath everything else.

22                            Now, as you point out, from a ratepayer

23          impact measure test, there are losses here in margin.

24          So rates can go up, but that doesn't mean the

25          participants' bills are going to go down.                          And if the

26          programs are spread among classes and a wide variety

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1           of customers, then that shouldn't be a distributional

2           issue as well.

3    MR. QUAIL:           Q:      Refer you to Exhibit B-3, BCSEA IR

4           1.17.1.       That's BCSEA 1.17.1.                     And the question is:

5                     "Does B.C. Hydro propose to take advantage

6                     of the effects of the proposed RIB rate in

7                     the optimal design of its Power Smart

8                     programs?      Please discuss."

9           The response is:

10                    "Yes.    The relationship between rates and

11                    non-rate DSM programs will be assessed

12                    during the 2008 LTAP proceeding."

13          And I note the characterization between rates and non-

14          rate DSM programs.               This suggests that rate design has

15          an impact on the design of DSM programs, is that

16          right?

17   MS. VAN RUYVEN:              A:        There is a link.                Using rates as a

18          tool to incent conservation will be a major part of us

19          achieving our long-term 20-year DSM plan, along with

20          codes and standards and along with programs.                              So those

21          are the three main pillars of the DSM plan, and that

22          will be contained, as you may have seen in our

23          recently filed LTAP, our 20-year plan is in that LTAP

24          filing.

25                                                       Proceeding Time 3:59 p.m. T60

26   MR. QUAIL:           Q:      Refer you to Exhibit B-3, BCOAPO IR

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1           1.9.3.           So, the question is,

2                     "Does B.C. Hydro agree that as a general

3                     proposition, if the RIB rate encourages

4                     customers to undertake more conservation

5                     measures on their own, the savings to be

6                     achieved through other DSM programs will be

7                     less?"

8           Sorry, I'll give everyone a chance to get there.

9                              The question is that if the RIB rate

10          encourages customers to undertake more conservation

11          measures on their own, the savings to be achieved

12          through other DSM programs will be less.                           And the

13          response to that was,

14                    "No.    The impact on DSM program energy

15                    savings as a result of introducing the RIB

16                    rate and other conservation rates may be a

17                    reduction or an increase.                      The impact on the

18                    savings achieved through non-rate DSM

19                    programs would be best addressed during the

20                    2008 LTAP proceeding."

21                             I'd note that we have the similar -- the

22          same phrase, "non-rate DSM programs", which appears to

23          acknowledge that the RIB is a rate DSM program.                             Do

24          you agree?

25   MR. CHRISTIAN:              Well, I think it's already been observed

26          that, on the record, that the new Energy Plan defines

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1           rates in a way -- or conservation rates in a way that

2           requires them at least in the energy planning context

3           to be considered as something that is comparable to

4           non-rate DSM.       It's a shorthand way of describing it.

5    MS. ZACHARIAS:            A:      I think to add to that, we were

6           describing rate and non-rate simply from the

7           perspective of what Ms. Van Ruyven said earlier.                              In

8           looking at the DSM plan, we're taking a three-step,

9           three-pillar approach, and considering that rates is

10          one of those pillars, we're just referring to it as

11          that part of the DSM plan.

12   MR. QUAIL:           Q:    I mean, the conceptual problem is that

13          we've sort of extracted one part of the DSM strategy,

14          which is the rate-based DSM measures, and isolated it

15          from the balance of your DSM strategy.                             And that's the

16          -- that's what we're trying to get at here, and in

17          terms of optimizing your overall approach towards

18          achieving conservation targets, whether in fact that

19          is the most intelligent way to plan this.

20   MR. ORANS:           A:    I think -- if the question goes, "How

21          can you decide how much conservation to get from the

22          RIB, or rate designs in general, when you don't have

23          the overall planning framework," I think the amount

24          you get is the efficient amount.                             So if you can induce

25          conservation and set prices that are lower than or

26          equal to, in some reasonable estimate of long run

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1           incremental cost of supply, and customers react to it,

2           whether they increase or decrease, that's

3           fundamentally an efficient response, and I think

4           that's part of almost every jurisdiction's long-term

5           plan, is to get the rates correct first and then fill

6           in the gap with other resources after that.

7    MR. QUAIL:           Q:    But in terms of conservation in British

8           Columbia, we're not chasing after the most optimal or

9           efficient target.           We have a stated target of 50

10          percent of all projected load growth.                        We have a sort

11          of a set target that we're working towards, and not

12          simply optimizing different components of strategies

13          for DSM.      Don't you agree with that?

14   MS. ZACHARIAS:            A:      Well, our general approach here has

15          been that we've taken the approach to design the RIB

16          rate based upon the eight recognized rate-design

17          criteria, of which efficient pricing is one of them.

18          And what we've said is, we're going to design this

19          rate according to those principles, according to

20          efficient pricing principles and through doing that,

21          in the type of cost environment that we have, it gives

22          us the ability to do that and to achieve conservation.

23          So that's the approach that we've taken, which is very

24          similar to what Dr. Orans has suggested, which is that

25          our approach has been to, within those rate design

26          principles, design a rate that's going to have

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1           efficient pricing and then, to the extent that that

2           gets us some way to our conservation goals, but maybe

3           not the whole amount, then the DSM programs and the

4           codes and standards come in on top of that in order to

5           achieve the overall goal.

6    MR. QUAIL:           Q:    But the response to the IR that I just

7           put to you has B.C. Hydro acknowledging that RIB will

8           have an impact on savings achieved through other DSM

9           strategies, but you're not sure if it's up or down.

10   MS. ZACHARIAS:            A:      So what that IR was referring to,

11          and there's another follow-up IR, it's BCOAPO 2.1.2,

12          that perhaps gives a little bit more detail with

13          respect to that.          The answer was based upon looking at

14          program by program, depending upon the assumptions

15          around participation rates and free riders and so

16          forth, how much of the savings that result from a

17          certain initiative would be ascribed to a rate-induced

18          change versus a program-induced change would either go

19          up or go down.          It doesn't talk about what the overall

20          impact would be on the DSM savings combined.

21                                                  Proceeding Time 4:05 p.m. T61

22   MR. QUAIL:           Q:    But a change in rate design such as RIB

23          will have an impact on the design of other DSM

24          strategies and at least will affect the evaluation of

25          DSM programs, won't it?

26   MS. ZACHARIAS:            A:      Generally speaking.               If the overall

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1           context is what rates are in the marketplace and how

2           that helps incent people to take action or does not,

3           that is one of the environmental considerations that

4           is taken into account when demand-side management

5           programs are being designed.

6    MR. QUAIL:           Q:    The whole point of the RIB is to change

7           the way consumers think about electricity use, isn't

8           that right?

9    MS. ZACHARIAS:            A:      It's to price electricity along the

10          principle, along the basis that those customers that

11          are using more electricity will pay a higher price,

12          and that will help them to make the decision to

13          conserve.

14   MR. QUAIL:           Q:    Yes.       So the point is to change people's

15          thinking and be more oriented towards conservation.

16          Is that the whole reason why we are doing this?                           It's

17          not just an elegant exercise in mathematics, it has a

18          particular function which is to change the way people

19          think about the use of electricity.

20   MS. ZACHARIAS:            A:      That's right.                And to reinforce what

21          Dr. Orans said earlier, though, we are -- by pricing

22          the RIB using efficient pricing principles, customers

23          will be in a better position to make those efficient

24          choices and we believe that that will result in

25          conservation.

26   MR. QUAIL:           Q:    Yes, we're not suggesting it wouldn't

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1           encourage any conservation.                     But if its purpose is to

2           change the way consumers think about electricity use,

3           it must have an impact on conservation program design,

4           which is supposed to encourage DSM in areas where

5           normal market forces don't.                     Isn't that right?

6    MS. ZACHARIAS:            A:      I think I already agreed with you at

7           the general level of that statement, which is that

8           changing the price will obviously change the

9           environment under which those programs are designed,

10          so there is a link there.

11   MR. QUAIL:           Q:    If RIB works, it will incent consumers

12          to undertake conservation on their own, won't it?

13   MS. ZACHARIAS:            A:      Well, partially, potentially.                 As

14          I've mentioned earlier there's a whole range of

15          conservation action that customers can take in order

16          to conserve including capital investments and

17          behavioural.       So without a more specific definition of

18          "on their own" its difficult for me to answer that

19          question.

20   MR. QUAIL:           Q:    I don't think it's that difficult a

21          concept.      There's a price signal that's conveyed to

22          them, and they respond to it by finding ways to reduce

23          their consumption, so they will come up with ways to

24          reduce their consumption of electricity.                        That's the

25          mechanism, is it not?

26   MS. ZACHARIAS:            A:      Right.         I'm agreeing with you.         I

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1           think people will -- one of the reasons why we want to

2           put an efficient price signal out there is to

3           encourage customers to, exactly what you said, think

4           about how they consuming electricity and think about

5           what type of actions they could take in order to

6           conserve.

7    MR. QUAIL:           Q:     And the point of non-rate DSM is to

8           encourage customers to conserve in areas where rate

9           mechanisms are not effective signals.                              Isn't that the

10          purpose of it.            Where there's obstacles --

11   MS. ZACHARIAS:             A:       Where rate mechanisms are not

12          effective?

13   MR. QUAIL:           Q:     That is where -- to encourage customers

14          to undertake conservation measures where price signals

15          are not particularly effective.                           That's why you do

16          DSM.

17   MS. VAN RUYVEN:             A:        Well, they are linked.                   You need

18          DSM programs to help to educate your customers to

19          maximize your rate design.                      You need codes and

20          standards.         You need all of that.                       I think it's

21          important to remind the Commission of why we are here

22          with this RIB rate filing today.                               It's because the

23          2007 Energy Plan said we should be using rates as a

24          conservation tool, amongst a mix of many, and the

25          Commission directed us to file an inclining block rate

26          prior to March.             So that's why we're here with this

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1           rate design application, and it's important to draw a

2           distinction between the rate design application and

3           what is in the LTAP.

4                             The LTAP is a twenty-year strategic plan

5           that will help customers -- or intervenors and

6           customers and the Commission understand how those

7           three are linked and that really is the appropriate

8           place to be having a discussion on how DSM programs

9           are linked to rates and codes and standards, how they

10          fit altogether in that twenty-year plan.

11                                                      Proceeding Time 4:09 p.m. T62

12   MR. QUAIL:             Q:   The question whether or not the RIB is

13          approved will have an impact on what you should be

14          doing in terms of non-rate DSM, isn't that right?

15   MS. VAN RUYVEN:             A:        No, I don't believe that's the

16          case.         I think the Commission needs to put their mind

17          to whether or not this RIB application will incent

18          some conservation which will flow into helping us

19          achieve our long-term plan.

20   MR. QUAIL:             Q:   When will the new or refined DSM

21          programs be included in the next LTAP you rolled out

22          to customers?

23   MS. VAN RUYVEN:             A:        I'm sorry, could you repeat that?

24   MR. QUAIL:             Q:   The LTAP, one of the subject matters of

25          the LTAP is DSM initiatives.                        When will these -- I

26          must confess we got this on Friday and I haven't had

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1           an opportunity to study it.                     When do you see the DSM

2           measures that are proposed as in the LTAP be rolled

3           out to customers?

4    MS. VAN RUYVEN:            A:       We are rolling a lot of them out

5           right now.

6    MR. QUAIL:           Q:    I'd like to discuss the 1600 kilowatt

7           Step 1 threshold.           I put it to you that the 1600

8           kilowatt hour first tier size in the proposed RIB as

9           per billing period, was not selected because it is

10          close to average use.               Is that correct?

11   MS. ZACHARIAS:            A:      It was not selected for that reason.

12   MR. QUAIL:           Q:    However, I put it to you that the 1600

13          figure does happen to approximate average customer

14          use.

15   MS. ZACHARIAS:            A:      It's actually a little bit below

16          average customer use.

17   MR. QUAIL:           Q:    And we can save going to a -- we can

18          save going to an IR reference.                        B.C. Hydro believes

19          the fact that it is, at least in the right

20          neighbourhood, will potentially foster customer

21          acceptance, is that right?                    I'll give you the

22          reference if we need it.

23   MS. ZACHARIAS:            A:      Yeah, I think what we -- in

24          communicating to customers about the RIB rate, the

25          fact that it's close to the average would be just one

26          of the ways that we would give them a -- explain what

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1           it is and give them a point of reference for it.

2    MR. QUAIL:              Q:    Is this because the view would be that

3           an average customer is not going to see the Tier 2

4           rate, and if they see it their usage -- for usage less

5           than 14,450 kilowatt hours per annum, the overall bill

6           will be lower?             The average customer --

7    MS. ZACHARIAS:               A:      Yes.

8    MR. QUAIL:              Q:    -- won't see Tier 2.

9    MS. ZACHARIAS:               A:      No, that's not true.              That --

10   MR. QUAIL:              Q:    Or if they do, the overall bill would be

11          lower.          That is, they would mix at Step 1 and Step 2.

12   MS. ZACHARIAS:               A:      So their overall bill, as I

13          mentioned earlier, nobody's overall bill will be

14          decreasing vis-à-vis what it was a year before.

15   MR. QUAIL:              Q:    No, that's a function of the revenue

16          requirement.          I'm talking about the operation of the

17          RIB.          The RIB will not produce a bill increase for the

18          average customer, will it?

19   MS. ZACHARIAS:               A:      For the average customer, if you

20          assume that the average customer is using 11,000

21          kilowatt hours a year, and the break point is 14,500,

22          the RIB rate on top of the RRA will not cause an

23          incremental increase.                  But as we've talked about

24          before in some of the IRs, customers don't necessarily

25          -- they will be looking at their one bill compared to

26          the previous year, and on that basis I made my

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1           previous comment which is that no customer, even those

2           customers in Step 1, will be seeing a lower bill,

3           assuming the same amount of usage one year to the

4           next.

5    MR. QUAIL:           Q:     I'll give you a reference but I don't

6           think we need to go to it, but for the record, B-7,

7           BCOAPO 2.14.1 where you responded that 1600 kilowatt

8           hours is about 10 percent less than the average bi-

9           monthly consumption figure for all residential

10          customers, including those with electric heating.                            Do

11          you recall that information in your response?

12   MS. ZACHARIAS:             A:       Yes, it's about 13 percent less than

13          11,000.

14   MR. QUAIL:           Q:     Okay.         When the reference is made to the

15          average use of 1600, that is an average for all

16          residential customers, that is, regardless of what

17          fuels they use for space or water heating, is that

18          right?

19                                                      Proceeding Time 4:14 p.m. T63

20   MS. ZACHARIAS:             A:       So the 11,000 kilowatt hours, which

21          is the average, is all of our residential kilowatt

22          hours divided by the number of customers.                          So that

23          includes single-family dwelling, common-use customers,

24          et cetera.         It's all in there.

25   MR. QUAIL:           Q:     Put it to you, for the actual individual

26          customer, I mean your average consumption might be an

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1           interesting statistic, but it has -- it doesn't mean

2           anything, it doesn't have any relationship to their

3           own consumption and their own bill, does it?

4    MS. ZACHARIAS:            A:      I'm sorry, what do you mean?

5    MR. QUAIL:           Q:    Most people -- if you're an actual

6           consumer, I mean, what determines whether you're a

7           winner or a loser under the RIB, it's going to be a

8           question of what kind of dwelling you live in, it will

9           depend on what fuel you use for heating and for

10          heating your water, it will depend on, you know, your

11          own consumption patterns and so on.                          The average might

12          be an interesting statistic, but I put it to you that

13          it has very little relevancy from the perspective of

14          the actual living breathing individual customer.

15   MS. ZACHARIAS:            A:      So.      There's many things that go

16          into determining how much a customer uses.                           And I also

17          said that our methodology of setting the threshold was

18          not determined by the average.                        So, I'm not sure how

19          to interpret your question as to whether or not that

20          has relevancy for the average -- for customers.

21   MR. QUAIL:           Q:    Okay, let me try and help, then.                       Why

22          would average use, which is calculated from the entire

23          customer class, be of any kind of convincing value to

24          demonstrate the reasonableness of the RIB and promote

25          its acceptability for customers who have space and

26          water heating using electricity, and use materially

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1           more?         Or conversely, for people that use natural gas

2           for space heating and use materially less?                           I put it

3           -- it's an interesting statistic, but it doesn't

4           actually relate to -- there's categories of winners

5           and losers that depend upon those factors.                           And the

6           average -- I just put it to you that the average

7           consumption is a total abstraction in relation to the

8           actual lives of your customers.

9    MR. CHRISTIAN:              I think I heard about three questions in

10          that response, and I just want to make sure the

11          witnesses take the time to think about which one

12          they're going to respond to, or to make it clear which

13          one they're responding to.

14   MR. QUAIL:             Q:    That's a fair objection.

15                            I'll leave that for argument, that's okay.

16   MS. ZACHARIAS:              A:      Well, Mr. Quail, if you refer to an

17          IR, BCOAPO 2.7.1, there's a listing of our customers

18          and how much consumption -- or how many customers are

19          in various consumption ranges.                          So, if you look at the

20          number of customers that are within a couple of

21          deviations, if you will, of that 10,000 to 11,000

22          figure, you'll see that it's not insignificant.                            It is

23          representative of -- and we can add this all up --

24          but, you know, the majority of our customers, if you

25          took that 11,000 as an average, and kind of looked at

26          it, a majority of our single-family dwelling customers

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1           are within that.          So I don't know if I would say that

2           it's irrelevant as a way of kind of just giving people

3           a point of reference as to how much electricity the

4           average residential customer in British Columbia uses.

5    MR. QUAIL:           Q:    And most people use less than the

6           average consumption.

7    MS. ZACHARIAS:            A:      There's a number of customers that

8           use less, yes.          And there is some customers that use

9           more.

10                                                  Proceeding Time 4:18 p.m. T64

11   MR. ORANS:           A:    Mr. Quail, also if you go to figure 1-2

12          in our application at page 1-7, that distribution,

13          which is just a histogram of the usage, it is pretty

14          telling.      If you look at it, starting at -- it shows,

15          you know, the percentage of customers in each of those

16          bands Ms. Zacharias just described, and if you look at

17          the percentages, over five percent are in the 2,000 to

18          3,000, 3,000 to 4,0000, 4,000 to 5,000.                       Those are

19          each 5 percent categories.                      All the way up until this

20          last one is 10 to 11 thousand per year.                       And then all

21          of a sudden the slope of this distribution starts

22          dropping off dramatically.                      So by the time you get up

23          to 15,000, now you are down to only three percent, and

24          then it drops off substantially after that.

25                          Then you've got this wide -- and then

26          you've got this big number at the very end which is

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1           the over 25,000 group.                They have submitted lots of

2           information.

3    MR. QUAIL:           Q:    I refer you to Exhibit B-3, BCUC IR

4           1.18.2.       And this morning we sort of thrashed around

5           the question of basic or essential household needs and

6           here's a question that the Commission staff put to you

7           addressing that issue:

8                     "In B.C. Hydro's view, does the bi-monthly

9                     step one threshold of 1,600 kilowatt hours

10                    have sufficient allowance for basic needs?"

11          Do you have it there?

12   MS. ZACHARIAS:            A:      Yes.

13   MR. QUAIL:           Q:    Response:

14                    "B.C. Hydro has not identified which

15                    specific energy uses could be considered to

16                    be basic needs.         However, considering that

17                    at a 9600 kilowatt hour, the annual step one

18                    threshold under the proposed RIB rate is

19                    close to the residential average of 11,046

20                    kilowatt hours, and that customer can

21                    consume up to 14,500 kilowatt hours annually

22                    before they pay more under the RIB rate than

23                    under the flat rate structure, B.C. Hydro

24                    believes that it is reasonable to conclude

25                    that most customers will be covered by the

26                    RIB rate for a reasonable definition of

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1                     basic needs electricity."

2           Just sort of probing into that a little bit.                         I don't

3           want to rehash what we went over this morning, but we

4           did identify that there are applications of energy in

5           the household that are much more essential than

6           others.        And I think it's well established that the

7           question one of the large factors determining who wins

8           and who loses under RIB is whether electricity is the

9           fuel one uses for heating, for example, and hot water,

10          which are two of those basic needs.

11   MS. ZACHARIAS:            A:      No, I think this morning actually I

12          suggested that that's not necessarily true generally.

13   MR. QUAIL:           Q:    That what's not true generally?

14   MS. ZACHARIAS:            A:      That the determination as to whether

15          or not you win or lose under the RIB is largely a

16          function of if you use electricity for heating.

17   MR. QUAIL:           Q:    I'm not going to thrash again through

18          the tables we went through earlier this afternoon and

19          I'll leave that for argument.

20   MS. ZACHARIAS:            A:      The determinant as to whether or not

21          you win or lose under the RIB is a function of how

22          much electricity you consume.

23   MR. QUAIL:           Q:    Yes.       That's right. I found something

24          else we can agree on.

25                          Section 3.2.1, and you don't need to turn

26          to it, of the application sets out the more specific

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1           criteria used to guide the choice of the 1,600

2           kilowatt hour threshold, and these criteria consist of

3           basic economic criteria which are in section 3.2.2 for

4           the record, and bill impact criteria, 3.2.3.                             And I

5           would refer you -- this is simply a confirmation, you

6           don't need to turn to it, Exhibit B-7, BCOAPO 2.21.1.

7           It says that:

8                     "A response suggests that if economically

9                     efficient conservation were the sole

10                    objective, then the step two rate would be

11                    as high as justified by marginal cost, and

12                    the step one threshold would be applicable

13                    to as many kilowatt hours as possible.

14                    Please confirm that both of these actions

15                    would tend to increase overall revenues

16                    collected and that trade-offs are also

17                    required if B.C. Hydro was to recover only

18                    the revenue requirement approved for the

19                    class overall response confirmed."

20                                                    Proceeding Time 4:23 p.m. T65

21                          So, basically we have this trade-off.                       We

22          want as many customers as possible seeing the Step 2

23          rate, but if you do that, you start over collecting

24          revenue.       That's the basic -- one of the basic

25          dilemmas of designing a stepped rate, isn't that

26          correct?

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1    MS. ZACHARIAS:             A:       That's correct.

2    MR. QUAIL:            Q:    And I'd refer you to the application,

3           Exhibit B-1, section 3.5.2, entitled "B.C. Hydro's

4           proposed RIB rate with a 1,000 kilowatt hour Step 1

5           threshold".         And I'll have you read that through,

6           rather than read it on the transcript.                           So that's

7           section 3.5.2 of the application.

8                            Have you got that in front of you?

9    MS. ZACHARIAS:             A:       Yes.

10   MR. QUAIL:            Q:    So this discusses the alternative of

11          1,000 kilowatt hour threshold per billing period, and

12          confirms the following:

13                    "1,000 kilowatt hour threshold meets the 10

14                    percent bill impact criterion and does so

15                    more readily than the 1600 threshold."

16          Is that correct?

17   MS. ZACHARIAS:             A:       I wouldn't say "more readily".                  The

18          threshold determines the threshold.                            The fact is, both

19          of them are under it.

20   MR. QUAIL:            Q:    Yes.        The use of 1,000 kilowatt hours

21          exposes more customers to the Tier 2 rate.                             Is that

22          right?        And you can look at table 3-4 if you need to,

23          but it seems like an obvious conclusion.

24   MS. ZACHARIAS:             A:       That's correct.

25   MR. QUAIL:            Q:    And it results in a somewhat lower Tier

26          2 rate.

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1    MS. ZACHARIAS:            A:      That is also correct.

2    MR. QUAIL:           Q:    And it mutes the bill impact test.                   That

3           is, some of the larger impacts that are disclosed in

4           your bill impact evidence.                    Isn't that correct?

5    MS. ZACHARIAS:            A:      Yes, I think I just said it met the

6           bill impact test.

7    MR. QUAIL:           Q:    Now, under your proposed RIB, Tier 2

8           will continue to pull farther ahead of Tier 1 as long

9           as your annual revenue increases are more than the

10          rate of inflation.            Is that right?

11   MS. ZACHARIAS:            A:      You're asking if the differential

12          between Step 1 and Step 2 will increase?

13   MR. QUAIL:           Q:    Yes.

14   MS. ZACHARIAS:            A:      Under that scenario, yes it will.

15   MR. QUAIL:           Q:    Any circumstance where the revenue

16          requirement is greater than the rate of inflation.

17   MS. ZACHARIAS:            A:      That is correct.

18   THE CHAIRPERSON:            Well, would -- you and Mr. Wallace both

19          confused me by referring to inflation.                       When you do

20          so, are you referring to headline or core inflation,

21          CPI --

22   MR. QUAIL:           It is inflation as used -- as the index used

23          for the purposes of establishing the rate of

24          escalation of the Tier 1 rate, which is CPI.

25   THE CHAIRPERSON:            Okay.

26   MR. QUAIL:           Q:    Correct?          Yes.

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1    MS. ZACHARIAS:            A:        Right.

2    MR. QUAIL:           Q:     A very interesting debate going on about

3           core inflation, and that's an important issue.

4    THE CHAIRPERSON:              Oh, absolutely, yes.

5    MR. QUAIL:           Q:     Yes.

6    MS. ZACHARIAS:            A:        I think there's a --

7    THE CHAIRPERSON:              Of great interest.

8    MR. QUAIL:           Yes.     Yes.

9    THE CHAIRPERSON:              To pensioners like me.

10   MR. QUAIL:           Yes.

11   THE CHAIRPERSON:              Sorry.

12   MR. QUAIL:           And to some of us who, you know, may not be,

13          we hope, that long away from -- okay.

14   MS. ZACHARIAS:            A:        I think the other thing, though,

15          that we said in this application is that we're viewing

16          this proposal as a first step and every year, as part

17          of the process of coming back and filing with the

18          Commission what the rates would be for that year, if

19          we saw, given the various revenue requirement

20          application increases that could be evolving, if it at

21          that point in time didn't seem that this type of rate

22          structure would continue to make sense, that the bill

23          impacts would get out of -- beyond what we felt was

24          reasonable, or that any other part of the rate

25          structure didn't have that balance between all the

26          rate design criteria, that we would recommend changes.

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1                           So, this should very much be seen as a

2           first step, and along the road to using rates in the

3           future to encourage energy-efficient choices and

4           conservation.

5    MR. QUAIL:           Q:   Or it might be terminated in a few

6           months, according to your direct testimony.                          There's

7           Ms. Van Ruyven's testimony.                     She testified that, if

8           this RIB proceeds now and the Commission forms the

9           unlikely conclusion after the LTAP proceeding the

10          conservation rates are unwarranted because of GHG-

11          related issues, I want to underscore this, or because

12          they are not as economic as non-rate DSM, the RIB rate

13          could be terminated.              So, sort of this flag being run

14          up the flagpole that you've designed in a, what, four

15          months between November and March, and maybe it will

16          fly, maybe we won't, maybe we'll figure it out as we

17          go.       Is that a fair characterization of the game that

18          we're in?

19   MS. ZACHARIAS:            A:      No, I think that's a completely

20          unfair characterization, actually.

21   MR. QUAIL:           Q:    Okay.        And the scenario, though, is that

22          unless there's some kind of radical restructuring over

23          once again before very long, Step 2 is pulling ahead

24          of Step 1 by every time that your revenue requirement

25          exceeds inflation, Step 1 sees no real increase at all

26          -- again, relative to the CPI index.                         The entire real

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1           cost of the increases to your revenue requirement are

2           all visited in Step 2.

3    MS. ZACHARIAS:            A:      Yes.

4    MR. QUAIL:           Q:    And we see these diverging lines

5           happening very rapidly.                 And how long do you think

6           that can be -- that's a whole lot of questions.                                I

7           anticipate my friend's objection.                            It's late.      It

8           feels like it's been a long day, Mr. Chairman.

9    MS. ZACHARIAS:            A:      I think --

10   MR. QUAIL:           Q:    Normally I'm more succinct, and I hope

11          I'm a little more succinct than this.

12   MS. ZACHARIAS:            A:      I think what we've said in the

13          application, and through the various scenarios that we

14          did model, some of which included higher revenue

15          requirement application increases, that we demonstrate

16          that this rate has a very high potential of being

17          workable and effective for the next few years, and

18          that it does -- that Step 2, while it's allowed to

19          increase, as Mr. Quail has characterized, that the

20          upper bound of that increase would be no higher than

21          what we believe a ceiling of the marginal cost of

22          long-run supply would be.

23                          So, from that perspective, there's a bit of

24          certainty around, from a principal perspective, at

25          least, that the rate wouldn't get higher than that

26          signal, in order to meet the requirement of the

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1           efficient pricing signal.

2    MR. QUAIL:           Mr. Chair, I note the hour.                      I also note that

3           my questions are getting more convoluted, so I propose

4           that this is a good time for me to adjourn this cross-

5           examination till tomorrow morning.

6    THE CHAIRPERSON:           Thank you, Mr. Quail.

7                          Mr. Christian, do you have some --

8    MR. CHRISTIAN:          I do.        I have some reading material.

9    THE CHAIRPERSON:           Good.

10   MR. CHRISTIAN:          We may start with a little bundle that

11          was put together this morning.                       It's got responses to

12          Commission panel IRs 1.71 through and including 1.74.

13          In addition, because it was a bundle of a few things

14          we wanted to get filed today, it also includes revised

15          responses to BCUC staff IRs 2.78.1, 2.78.4 and 2.78.5.

16          I don't think I need to go to the BCUC's panel IRs, of

17          course, they're self-explanatory.                           With respect to the

18          revisions, the first one we made was to be a little

19          more precise in some numbers we'd given, and the

20          second two were modified to reflect -- or to be a

21          little more clear on what type of seasonal assumptions

22          would be made with respect to seasonal pricing options

23          we'd given in an IR response.                      This would be Exhibit

24          B-15.

25   THE HEARING OFFICER:               Exhibit B-15.

26          (BUNDLE OF IR RESPONSES MARKED AS EXHIBIT B-15)

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1    MR. CHRISTIAN:            The next one I have, a response to --

2           just one IR, even though you can see it's rather

3           thick.        This would be a response to BCUC panel IR

4           1.4.1.        This was a question with respect to the policy

5           basis for Hydro, or the allocation of Heritage

6           benefits, and so there's an explanation here that's

7           about two pages long, but to add the context, the

8           actual heritage report from the Commission of October

9           17th, 2003, is attached.                 Exhibit B-16.

10   THE HEARING OFFICER:                 Exhibit B-16.

11          (RESPONSE TO BCUC IR 1.4.1 WITH ATTACHED "BCUC…REPORT

12          AND RECOMMENDATIONS, OCTOBER 17, 2003", MARKED EXHIBIT

13          B-16)

14   MR. CHRISTIAN:            And then lastly I've got a third little

15          packet here, which I believe will be Exhibit B-17.

16          This includes a number of other responses to

17          Commission panel IRs that we've been able to finalize

18          at this point in time.                 The IR responses are to

19          Commission panel IR 1.4.2, 1.4.3, 1.4.4, 1.4.5, 1.5.1,

20          1.5.2 -- in fact, I'll spare us here, I think to the

21          end of the 1.5 series, all the way to 1.5.9.                          And so

22          by -- that's B-17.

23   THE HEARING OFFICER:                 B-17.

24          (BUNDLE OF INFORMATION RESPONSES, MARKED EXHIBIT B-17)

25   MR. CHRISTIAN:            And I believe that leaves only one set of

26          Information Request responses outstanding.                          That would

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1           be the 1.8 series, and we're hopeful to be able to

2           file that in the morning.

3    THE CHAIRPERSON:         Thank you very much.

4    MR. CHRISTIAN:        My pleasure.

5    THE CHAIRPERSON:         Any further business?                   No.

6                         We're adjourned until 8:30 tomorrow

7           morning.

8    (PROCEEDINGS ADJOURNED AT 4:33 P.M.)

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