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


VOLUME:     Technical Conference

DATE:       May 16, 2006

BEFORE:     Kristi Sebalj          Board Counsel

            Ron Man                Board Staff

            Rudra Mukherji         Board Staff
                                                EB-2005-0551


                  THE ONTARIO ENERGY BOARD


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

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


          Hearing held at 130 Dundas Street West,
                3rd Floor, Toronto, Ontario,
                 on Tuesday, May 16, 2006,
                   commencing at 8:30 a.m.


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

B E F O R E:

KRISTI SEBALJ            BOARD COUNSEL

RON MAN                  BOARD STAFF

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



DONNA CAMPBELL               Board Hearing Team
PASCALE DUGUAY
LAURIE KLEIN
FRED HASSAN

GORDON CAMERON               Union Gas Limited
MIKE PACKER
CONNIE BURNS

PAT MORAN                    APPrO

DAVID BROWN                  Sithe Global Power,
                             TransCanada Energy, Portland
                             Energy Centre

DAVID STEVENS                Enbridge Gas Distribution
DAVE CHARLESON

RANDY AIKEN                  London Property Management
                             Association and Wholesale
                             Gas Purchasers Group

JAMES WIGHTMAN               Vulnerable Energy Consumers
                             Coalition

NOLA RUZYCKI                 Ontario Energy Savings

GREG OLSEN                   Ontario Power Generation

BRIAN TROICUK                BP Canada

PAT KEYS                     TransCanada PipeLines

PETER THOMPSON               IGUA and AMPCO

GIA DEJULIO                  Ontario Power Authority
          I N D E X      O F     P R O C E E D I N G S


Description                                              Page No.

--- Upon commencing at 8:30 a.m.                             1

Appearances                                                  2

Procedural Matters                                           4

Union Gas Limited - Panel 1;                                 7
M. Packer, C. Shorts, L. Passmore
     Opening Statement by Ms. Passmore                       8
     Cross-examination by Board Hearing Team                 9
     Cross-examination by Mr. Brown                          20
     Cross-examination by Mr. Moran                          39

--- Recess taken at 10:05 a.m.                               53
--- On resuming at 10:25 a.m.                                53

Procedural Matters                                           53

     Cross-examination by Mr. Wightman                       54
     Cross-examination by Mr. Thompson                       59
     Cross-examination by Mr. Man                            72

TCPL – Panel 1;                                              74
C. Frew, T. Stringer, P. Exall, S. Emond
     Opening Statement by Mr. Frew                           75
     Cross-examination by Ms. Campbell                       76
     Cross-examination by Mr. Charleson                      88
     Cross-examination by Mr. Brown                          108

--- Luncheon recess taken at 12:41 p.m.                      125
--- On resuming at 1:50 p.m.                                 125

     Cross-examination   by    Mr.   Cameron                 126
     Cross-examination   by    Mr.   Moran                   161
     Cross-examination   by    Mr.   Thompson                166
     Cross-examination   by    Mr.   Man                     174

--- Recess taken at 3:27 p.m.                                176
--- On resuming at 3:45 p.m.                                 176
      I N D E X   O F   P R O C E E D I N G S (Cont‟d)

TCPL – Panel 2;                                          177
C. Frew, Dr. Stephen J. Gaske;
     Cross-examination by Ms. Campbell                   178

APPrO – Panel 1;                                         185
D. Cramer, B. Kelly, J. Rosenkranz, J. Wolnik,
R. Cary, M. Nolan;
     Examination by Mr. Moran                            185
     Cross-examination by Ms. Campbell                   201

--- Whereupon the hearing adjourned at 5:40 p.m.         238
                      E X H I B I T S


Description                                       Page No.

EXHIBIT NO. 2: QUESTIONS FROM THE BOARD HEARING       184
TEAM TO UNION GAS LIMITED WITH RESPECT TO ISSUE
III, THE M12 PREMIUM
                  U N D E R T A K I N G S


Description                                          Page No.


UNION UNDERTAKING NO. 25: FOR UNION GAS LIMITED TO       12
FILE THE AMENDED T1 TARIFF

UNION UNDERTAKING NO. 26: TO PROVIDE AVERAGE VOLUME      24
INCORPORATED INTO SYSTEM DESIGN, TO PRESENT AVERAGED
VOLUME AS A PERCENTAGE

UNION UNDERTAKING NO. 27: TO PROVIDE WHERE, IN THE       37
INTERRUPTIBILITY RANKING ORDER, INTERRUPTIBLE
DELIVERABILITY SERVICE UNDER T1 WOULD STAND

UNION UNDERTAKING NO. 28: TO PROVIDE SIDE-BY-SIDE       39
COMPARISON ILLUSTRATING THE SIMILARITIES AND
DIFFERENCES BETWEEN THE EXISTING T1 SERVICE AND THE
NEW OPTIONS THAT YOU'RE PROPOSING IN YOUR SUPPLEMENTARY
EVIDENCE REGARDING THE NON-OBLIGATED DCQ FOR A CUSTOMER
SITUATED EAST OF DAWN, AND THEN SECONDLY COULD YOU DO
THE COMPARISON FOR A CUSTOMER SITUATED WEST OF DAWN

UNION UNDERTAKING NO. 29: TO PRODUCE UNION EVIDENCE      65
IN RESPONSE TO BOARD DIRECTIVE IN CASE IN WHICH CORAL
SOUGHT MODIFICATIONS TO T1

TCPL UNDERTAKING NO. 1: TO ADVISE WHETHER TCPL WOULD     117
BE ABLE TO SERVICE CUSTOMERS WITHOUT BUILDING NEW
FACILITIES USING THE ASSUMPTIONS ON TABLE 3.2

TCPL UNDERTAKING NO. 2:   TO PROVIDE FTSN CAPACITY       160
PARKWAY TO GTA WEST

TCPL UNDERTAKING NO. 3: TO PROVIDE CAPABILITY            161
BETWEEN PARKWAY AND VICTORIA SQUARE FOR SNB

TCPL UNDERTAKING NO. 4:   TO PRODUCE ALLOCATION          180
PROCEDURES SUMMARIES
                                                                       1



 1        Tuesday, May 16, 2006
 2        --- Upon commencing at 8:30 a.m.
 3        MS. SEBALJ:     Good morning, everyone.
 4        Good morning, everyone.      Am I on?   Can you hear me?
 5   Hello?    I need more volume.   My little meek voice.
 6            Good morning.   My name is Kristi Sebalj.   I am legal
 7   counsel for the Board support team.     I am joined by Ron Man
 8   and Rudra Mukherji, who are part of the Board support team
 9   as well.
10        Welcome, and thank you very much for coming.       As with
11   previous Technical Conferences, the Board's support team
12   rose to argue the Board proceedings.     I'll act as a bit of
13   an organizer for your day.      This is the -- technically the
14   second Technical Conference and the fourth day of Technical
15   Conferences to take place as part of a natural gas
16   electricity interface review proceeding, docket number
17   EB-2005-0551.     I will briefly set out the history and the
18   context for the record, and speak about scheduling for a
19   moment.
20        Sorry, in a moment.
21        First I would ask that all parties please register
22   your appearances.    It gets more complicated with every
23   Technical Conference, so here are your instructions for
24   today.
25            If you could please register your appearance, and
26   then speak to whether or not you have questions for the
27   panels that are on for today.     Those panels are, beginning
28   with the Union panel, which is supplemental evidence on
                                                                      2



 1   issue number 1.    The second panel is TransCanada PipeLines
 2   on Issues 1 and 4.    The third would be gas-fired generators
 3   represented by APPrO, the APPrO evidence on issue number 1,
 4   and then other gas consume groups, which is IGUA and AMPCO,
 5   on issues number 1 and 4.
 6        So if you could please register your appearance for
 7   the record, and then let us know, and we will scramble to
 8   write this down, whether you have any questions for those
 9   panels, beginning with Ms. Campbell, please.
10        APPEARANCES:

11        MS. CAMPBELL:    Donna Campbell for the hearing team,
12   and I'm accompanied by Pascale Duguay, Fred Hassan, and
13   Laurie Klein.   I have questions for the first three or four
14   panels; I don't have questions for IGUA and AMPCO.
15        MS. SEBALJ:     Thank you.
16        Mr. Cameron, do you want to --
17        MR. CAMERON:     I'm Gordon Cameron for Union Gas, and
18   I'm here with Mike Packer and Connie Burns and we will have
19   questions for each of the panels today.
20        MS. SEBALJ:     Thank you.   Mr. Brown.
21        MR. BROWN:    David Brown for Sithe Global Power,
22   TransCanada Energy, and Portland Energy Centre.     We'll have
23   some questions for Union, TCPL, and for IGUA and AMPCO.
24        MS. SEBALJ:     Thank you.
25        MR. MORAN:    Pat Moran for APPrO, and I will have
26   questions for all of panels, including a couple of
27   questions in direct for the APPrO panel.
28        MS. SEBALJ:     Thanks.
                                                                         3



 1           MR. STEVENS:    David Stevens for Enbridge Gas
 2   Distribution.       We will have questions for TCPL, APPrO, and
 3   IGUA.
 4           MS. SEBALJ:    Thank you.   Mr. Aiken.
 5           MR. AIKEN:    Randy Aiken for the London Property
 6   Management Association and Wholesale Gas Purchasers Group.
 7   I don't expect to have any questions for any of the panels.
 8           MS. SEBALJ:    Thank you.
 9           MR. WIGHTMAN:    James Wightman for the Vulnerable
10   Energy Consumers Coalition, I have some very brief
11   questions for the Union panel and very brief for APPrO.
12           MS. SEBALJ:    Thank you.
13           MS. RUZYCKI:    Nola Ruzycki with Ontario Energy
14   Savings.    I don't anticipate having any questions.
15           MS. SEBALJ:    Thank you.   Sorry, if you could please
16   maybe stand and project, so that our court reporter can
17   hear you.
18           MR. OLSEN:    Greg Olsen, Ontario Power Generation, no
19   questions.
20           MS. SEBALJ:    Thank you.
21           MR. TROICUK:    Brian Troicuk, BP Canada, no questions.
22           MS. SEBALJ:    Thank you.
23           MR. KEYS:     Pat Keys, TransCanada PipeLines Limited, no
24   questions for any of the other panels today.       Thank you.
25           MS. SEBALJ:    Thanks.
26           MR. THOMPSON:    Peter Thompson for IGUA and AMPCO.     I
27   suspect I'll have questions for the other panels.
28           MS. SEBALJ:    Thank you, Mr. Thompson.
                                                                    4



 1   Is there anyone else in the back of the room that I can't
 2   see that wants to register an appearance?   Great.   Thanks.
 3        PROCEDURAL MATTERS:

 4        MS. SEBALJ:    Thank
 5        In terms of the background for this Technical
 6   Conference, the Board's Procedural Order No. 2 contemplated
 7   a Technical Conference to provide participants with the
 8   opportunity to present their evidence relating to Issues 2,
 9   3, and 4, and to obtain further clarification of the
10   evidence on these issues filed by other participants.
11        This was originally scheduled for May 18th and 19th,
12   as you know, but further clarification in procedural order
13   number 5 indicated that parties could also file evidence on
14   issue number 1, if they wished.
15        Finally, procedure order number 6 provided more detail
16   on a tentative agenda for this Technical Conference and
17   expanded the Technical Conference by two more days,
18   including today, the 16th, and tomorrow the 17th.
19        Evidence was filed by participants who chose to so
20   file on or before May 1st, 2006.   I note that Union also
21   filed supplemental evidence on issue number 1 on May 1st,
22   and that Procedural Order No. 6 provided time for all
23   participants to obtain clarification on this supplemental
24   evidence.
25        I will not go through the entire background of the
26   NGEIR proceeding.   As you know, it began as a result of the
27   notice of proceeding on December 29th, and the complete
28   record of that is on the transcript from the first
                                                                    5



 1   Technical Conference.
 2        The purpose of this Technical Conference is to provide
 3   all participants with the opportunity to obtain further
 4   clarification of the evidence by other participants other
 5   than Union and Enbridge, except, of course, for the Union
 6   supplemental evidence.
 7        The Board support team intends top follow the agenda
 8   provided, with a few exceptions that I'm sure most of you
 9   are aware of, as appendix A to Procedural Order No. 6 as
10   closely as possible.
11        Having said that, we all know that agendas are a bit
12   like budgets.    The minute you write them down you know
13   they're wrong.    So I would ask that you all please be
14   mindful of the time, and be as efficient as possible during
15   this proceeding.
16        Today's agenda includes an opportunity for
17   participants to ask clarifying questions of Union on the
18   supplemental evidence on issue number 1 filed May 1st.
19   Following this, TransCanada Pipelines, APPrO, and then IGUA
20   and AMPCO will present their evidence and witnesses will be
21   available to answer clarifying questions on Issues I and 4.
22         For the record, Issue 1 is rates for gas-fired
23   generators and other qualified customers, and Issue 4 is
24   Enbridge rates for large-volume customers, the Rate 300
25   series.
26         Now, I understand that yesterday evening, a letter
27   was filed with respect to the M12 premium or issue number 3
28   in this proceeding.     I would like to defer any discussion
                                                                   6



 1   about that settlement until after the morning break to give
 2   some parties an opportunity to chat about it, but what I
 3   would ask is that, on the morning break, if you could
 4   indicate to me if you're a participant in this proceeding,
 5   whether you have any additional questions relating to that
 6   issue so that we can determine to what extent panels and
 7   witnesses need to be put forward on that issue.
 8        And again, we'll reach some conclusions and I'll
 9   provide more clarification after the break.
10        Tomorrow, of course, will be dependent on the schedule
11   for -- the schedule for tomorrow will be dependent on what
12   comes out of that discussion.
13        But I am informed that the Board hearing team's expert
14   can be made available first thing tomorrow morning so I
15   would ask that you consider the potential for bumping up
16   the schedule, if that ends up being the case.
17        I will are remind all parties, all participants, if
18   you're unable to provide a complete and satisfactory answer
19   to any questions raised during this proceeding, the
20   participant asking the question may seek an undertaking by
21   the participant presenting its evidence to provide a
22   written response to such question by way of undertaking.
23         Undertakings are required to be filed with the Board.
24   the Board support team and all participants on or before
25   May 24th.
26         If there are any disputes, obviously, we don't have a
27   panel here today nor will we have during the week, so I
28   would ask that objections be made on the record, and the
                                                                      7



 1   responses expressed on record, and we can defer to the
 2   panel.
 3        Finally, this proceeding is being recorded.       It will
 4   become part of the public record.    I would ask that you'd
 5   please speak clearly and loudly so that the court reporter
 6   can record everything, in particular when you're speaking
 7   from the back.
 8        In terms of the order of events for each of the panels
 9   that are presented today, we'll start with the Board
10   hearing team, followed by the order of appearances.
11        Are there any questions or concerns or have I left
12   anything out that people want to bring to my attention?
13        I think that's it.
14        My understanding, Mr. Cameron, is that there is an
15   introduction that you would like to make, and then we'll
16   proceed.
17        MR. CAMERON:    Thank you.   Good morning, all.    This
18   panel is before you to speak to Union's supplemental
19   evidence.   On the immediate left is Mr. Mike Packer --
20   sorry, Mr. Chris Shorts, the manager of Ontario markets.
21   In the middle is Ms. Libby Parsons – Passmore -- I'm
22   going to get my reading glass on next -- the manager of
23   product and process development.    And on the right Mark
24   Kitchen, manager of rates and pricing.
25        UNION GAS LIMITED – PANEL 1:
26        MIKE PACKER;
27        CHRIS SHORTS;
28        LIBBY PASSMORE:
                                                                      8



 1        MR. CAMERON:    And Ms. Passmore has a very brief
 2   opening statement that she'd like to make this morning.
 3        OPENING STATEMENT BY MS. PASSMORE:

 4        MS. PASSMORE:   Union Gas has -- is that clear?     Union
 5   Gas has prepared and submitted supplemental evidence in
 6   response to a specific request received from a potential
 7   new in-franchise power generator customer.    This request
 8   was received in writing following in the week following the
 9   NGEIR Technical Conference held on April 5th and April 6th.
10         As stated in the evidence, the requester was for
11   Union to address the needs of a power generator located at
12   the east end of the Don Parkway system.   Notably, Union was
13   asked to consider a service option to accommodate a
14   non-obligated DCQ that would address concerns about cost
15   associated with daily delivery obligations.
16         As such, Union has outlined a service in the
17   supplemental evidence that will enable non-obligated
18   deliveries for customers at the east end of the Don Parkway
19   system.
20         While developing this service response, Union
21   revisited the storage needs of customers who will operate
22   with non-obligated deliveries.
23         The aggregate excess methodology of storage
24   allocation recognizes the differences between seasonal load
25   profiles, annual supply requirements, and subsequent, flat
26   daily delivery obligations.
27         For customers who do not commit to a daily delivery
28   obligation, the aggregate excess allocation methodology no
                                                                     9



 1   longer applies.    These customers don't have from additional
 2   traditional seasonal annual load-balancing
 3   requirements.    Union is currently evaluating how to provide
 4   an appropriate storage service for these customers.     Our
 5   intent is to meet with current and future customers in the
 6   upcoming weeks to discuss proposals.
 7         The APPRO NGEIR evidence received on May 1st reflects
 8   the first time Union has been presented with a consensus
 9   proposal for additional service enhancements for in-
10   franchise generators.   Union recognizes that the market is
11   changing rapidly, and we will continue to work with
12   generators to better understand and respond to their
13   evolving needs.
14        Thank you.
15        CROSS-EXAMINATION BY BOARD HEARING TEAM:

16        MS. CAMPBELL:    It's question time.   Okay.   So this
17   will -- what I'm really going to be asking you about is
18   found on pages 5 and 8 of the supplementary evidence, so
19   we're all at the same place.   Exhibit B, tab 3,
20   supplementary evidence. And what I'm going to focus on are
21   pages 5 and 8.
22        The first series of questions are fairly general.
23        The first question is if you could clarify how an
24   existing customer would qualify for the proposed changes to
25   the T1 terms and conditions of service.
26        MR. SHORTS:    Essentially it was designed for the very
27   largest customer, so essentially we looked at the T1 rate
28   re-design proposal and looked at the break point for the
                                                                    10



 1   top lot.   So it would basically be customers who were new
 2   and had a new load of about 1.1 million metres cubed per
 3   day of firm contracted demand. or if it was new load from
 4   an already existing customer that equalled that same
 5   amount.
 6        MS. CAMPBELL:     Would the proposed customers'
 7   alternatives apply to an existing customer's incremental
 8   load or to the new total load?      So existing plus
 9   incremental?
10        MR. SHORTS:   They would have to have an incremental
11   requirement of at least equal to that 1.1 million meters
12   cubed of firm a day.
13        MS. CAMPBELL:     Thank you.   Are these alternatives
14   applicable to new large customers east of Don,
15   only, or are they available to a customer regardless of
16   their location along the Don Parkway system?
17        MR. SHORTS:   Well, essentially this was designed
18   because of the request for a customer who was essentially
19   east of Don near the extreme east end of our Don to
20   Parkway transmission system.    But we had already basically
21   had come up with a non-obligated DCQ for those customers in
22   the Sarnia area west of Don.     So it essentially, then,
23   gives the options for both of those customer groups now.
24        MS. CAMPBELL:     It's been pointed out that I skipped
25   Something, so I'm going back.
26        You gave me answer that told me it was applicable --
27   when I asked you the first series of questions, that this
28   is applicable to incremental loads only?
                                                                     11



 1        MR. SHORTS:     Yes, that's correct.
 2        MS. CAMPBELL:    And the question is why.
 3        MR. SHORTS:     Because the existing loads are basically
 4   under the current methodology, so it would just be for the
 5   existing loads.    From an obligated DCQ standpoint, we're
 6   already planning and counting on those obligated deliveries
 7   from those existing customers to serve the existing needs.
 8        MS. CAMPBELL:    Thank you.   On page 4 -- actually, I
 9   said I was going to deal with pages 5 to 8, but I'm lying.
10   On page 4, lines 8 to 10, Union states:
11             "The sheer size of the potential new T1
12             demands in combination to the relatively low
13             load factors is not reflected in Union‟s
14             contracting practices and system operations
15             for customers east of Don."
16   And the question S why is Union proposing to amend the
17   terms and conditions of the T1 service rather than develop
18   a new semibundled storage and transportation rate for power
19   generators?
20        MR. SHORTS:     Well, essentially the T1 service is
21   already a semibundled or semiunbundled rate, and therefore
22   we felt that just be making some of these slight
23   alterations to it it would be applicable for those
24   customers as well.
25        MS. CAMPBELL:    Has Union filed an amended T1 tariff to
26   reflect the proposed changes?
27        MR. KITCHEN:    No, we have not.
28        MS. CAMPBELL:    When would it be filed?
                                                                    12



 1        MR. KITCHEN:    The amendment to the tariff would only
 2   be necessary to reflect differences in fuel.     We could
 3   undertake to file that within the week.
 4        MS. CAMPBELL:    All right.   So within the week?
 5        MR. KITCHEN:    Yes.
 6        MS. CAMPBELL:    Thank you very much.    I'll take that as
 7   an undertaking.    Sorry.
 8        MS. SEBALJ:    In terms of undertakings, just so that
 9   people are aware, for the purposes of the Technical
10   Conference, we're going stay with a sort of a party initial
11   followed by an undertaking number, and then for the hearing
12   we will use the Board's sort of more traditional
13   nomenclature for exhibits and undertakings.
14        So I believe we're on Union -- and we're going to
15   continue along the lines, so as not to get confused, I
16   believe we're on Union number 25, and that is to file the
17   --
18        MS. CAMPBELL:    The amended T1 tariff.
19        MS. SEBALJ:    Thank you.   File the amended T1 tariff.
20        UNION UNDERTAKING NO. 25:     FOR UNION GAS LIMITED TO
21        FILE THE AMENDED T1 TARIFF

22        MS. CAMPBELL:    Has Union consulted with customers
23   regarding the proposed amended terms and conditions of the
24   T1 service, the proposed amended?
25        MR. SHORTS:    We did have some conversations with some
26   of the proponents, as well as existing customers who we
27   felt might be impacted by this new proposal or supplemental
28   changes.   So we did have some discussions.    Given they were
                                                                      13



 1   very quick, because we didn't receive the request until
 2   April 11 and then turned it around and formulated the
 3   changes for effective from May 1st.    So I believe we spoke
 4   to about six or seven of the potential power generators as
 5   well as some of the existing ones also.
 6        MS. CAMPBELL:    Okay.   And what was the feedback in
 7   response to what you were proposing?
 8        MR. SHORTS:   It's pretty hard, I think, you know, to
 9   go through and find out exactly what they were feeling.      It
10   seemed to be generally accepted.    We didn't see any major
11   pushback at the time.   Granted, they really didn't have
12   much time to contemplate it while we were speaking with
13   them, so we expect to hear some more issues or questions as
14   time goes on.
15        MS. CAMPBELL:    Now I'd like to move to the actual
16   customer alternatives, option 1.     That's page 5.   And what
17   I'm starting off with there's a statement under option 1,
18   this is lines 13 to 14:
19             “Customers would deliver a daily obligated
20              supply at Parkway equal to 100 percent of
21              their firm CD in contrast to their excising
22              obligated DCQ."
23   What would be the advance advantages of increasing daily
24   service at Parkway?
25        MR. SHORTS:   Union would require the customer to
26   deliver at Parkway to serve a firm load at that full daily
27   requirement.    So that's we would require those volumes to
28   be delivered at Parkway.
                                                                     14



 1        It assumes a customer who is located at or near the
 2   east end of the Dawn to Parkway transmission system.
 3        MS. CAMPBELL:   Oh, so that's why the phrase “east of
 4   Dawn” constantly appears?
 5        MR. SHORTS:   I'm sorry?
 6        MS. CAMPBELL:   Is that why the phrase “east of Dawn”
 7   appears?
 8        MR. SHORTS:   Yes.
 9        MS. CAMPBELL:   So that's why.    All right.   Given the
10   existing structure of the CES contract, could this create
11   further risk exposure for the power customer to the basis
12   differential from Dawn to Parkway?
13        MR. SHORTS:   I guess it's not much different than the
14   similar customer who would essentially be located in the
15   Enbridge franchise area.    They would still potentially have
16   an option to deliver either a landed supply at Parkway or
17   to contract from Dawn and move that gas.    So it really
18   comes down to the generator's own risk perspective.
19        MS. CAMPBELL:   Would this proposal have an impact on
20   the customer's banked gas account?
21        MR. SHORTS:   Under a T1, there's not technically a
22   banked gas account because a banked gas account is for a
23   bundled customer, but for a T1, they would actually have a
24   specific amount of storage capacity.
25        MS. CAMPBELL:   Would this create a greater reliance on
26   Dawn's storage for balancing?
27        MR. SHORTS:   Not necessarily.    A customer could follow
28   the similar process they do today with an obligated DCQ.
                                                                      15



 1   On days they didn't require that volume, in other words, on
 2   days they weren't consuming, they could request Union for
 3   an authorization to not deliver that obligated DCQ, and if
 4   Union could accommodate it, we would authorize that
 5   obligated DCQ not to have to show up that day.
 6        MS. CAMPBELL:    But the discretion resides with Union.
 7        MR. SHORTS:   That's correct.
 8        MS. CAMPBELL:    I understand.    How does this proposal
 9   avoid the need for Union to construct incremental Dawn to
10   Parkway transmission capacity?
11        MR. SHORTS:   Well, we would be relying on those
12   volumes being delivered to us at the extreme east end of
13   the system at Parkway.    So therefore we would not have to
14   ourselves build any M12 or Dawn to Parkway transmission
15   capacity.   That volume would offset the need to do it.
16        MS. CAMPBELL:    Option 2.    Is this option equivalent to
17   option 1 but with deliveries at Dawn instead of Parkway?
18        MR. SHORTS:   You essentially get to a similar
19   endpoint.   Basically, a customer who wants to buy their gas
20   at Dawn has that option to the obligated DCQ if they have a
21   Parkway obligation.   They could fulfill that Parkway
22   obligation by contracting for M12 capacity.      So it is
23   essentially very similar.   It's just another way of
24   actually facilitating the movement of volumes from Dawn to
25   Parkway way.
26        MS. CAMPBELL:    Thank you.   Option 3.   Could customers
27   who do not want to commit to daily deliveries contract for
28   transportation and storage pursuant to an unbundled rate?
                                                                     16



 1        MR. SHORTS:     Customers have access to the unbundled
 2   rates if they so choose, yes.
 3        MS. CAMPBELL:     Could this option also be available at
 4   Dawn if integrated with the services of upstream pipeline
 5   service providers?
 6        MR. SHORTS:     If the customer -- where is the customer
 7   located again?   Just for clarity's sake?   Is that a
 8   customer east of Dawn or at Dawn or west of Dawn or?
 9        MS. CAMPBELL:     Yes, it's east of Dawn.
10        MR. SHORTS:     For the customer east of Dawn we would
11   require that volume to be delivered at Parkway.
12        MS. CAMPBELL:     Now, on page 6, the middle of the page,
13   starting at line 10, Union indicates that:
14             "Under options 2 and 4, the customer would be
15             required to assign the right to use the M12
16             Dawn-Parkway transmission capacity to Union."
17        Do T1 customers currently hold title to the capacity
18   on M12?
19        MR. SHORTS:     If a customer so choose -- if a customer
20   was a T1 customer and wanted to deliver their obligated DCQ
21   at Parkway, and currently was utilizing Union M12 to
22   facilitate that, then they would basically be controlling
23   that M12 capacity, it would be in their name.    A customer
24   who wanted this alternative would essentially need
25   to assign that capacity to Union so that we could continue
26   to manage it on that non -- or no-notice requirement for
27   the consumption basis.
28        MS. CAMPBELL:     Why would customers have to assign
                                                                   17



 1   their capacity if they use option 2 or 4?
 2        MR. SHORTS:   If they were to use option 2 or 4, and
 3   the customer didn't assign the capacity, the customer could
 4   essentially be taking that gas or using that capacity to
 5   serve downstream markets at the same time they were taking
 6   their full contracted CD, and because of that Union would
 7   not have enough M12 capacity to serve that firm requirement
 8   on such a day.
 9        MS. CAMPBELL:   What would be the advantage to T1
10   customers in doing so, that's assigning under option 2 an
11   and 4.
12        MR. SHORTS:   It predominantly gives them the ability
13   for that no-notice consumption benefit of the T1 that most
14   of the customers have seen as being very valuable.
15        MS. CAMPBELL:   Are there alternative methods of
16   effecting these options without requirement the shipper to
17   assign their M12 capacity?
18        MR. SHORTS:   Essentially, the other alternatives we've
19   listed would do a similar -- have a similar outcome.     I
20   mean, essentially what we were attempting to do was to give
21   the customer the benefit of a non-obligated DCQ at Dawn,
22   essentially, and still maintaining that ability to take as
23   much as they required at their plant at the east end on a
24   given day.
25        MS. CAMPBELL:   Page 7, at line 8 and 9.   This has to
26   do with allocation, now.   We're moving on to allocation of
27   storage to new large power customers.
28        Page 7, lines 8 and 9,Union says:
                                                                       18



 1                "For customers who do not want to commit to
 2                daily deliveries, the aggregate excess
 3                allocation methodology will not apply.     These
 4                customers would have no seasonal or annual
 5                balancing requirement."
 6           Firstly, is this statement applicable to T1 customers
 7   only?
 8           MR. SHORTS:   Yes.   They're the only ones essentially
 9   that get an aggregate excess calculation of methodology.
10   It would also apply to the U7 customers if we had any
11   currently.
12           MS. CAMPBELL:   Ah, yes.   U7.   The lonely tariff.
13           Is Union proposing any changes to the amount of basic
14   storage space for infranchise unbundled service customers?
15           MS. PASSMORE:   It would be tied back to that
16   obligation of the DCQ, all right?        So essentially the U7
17   service now the equivalent of the DCQ for the U7 is the
18   22-day call-back, all right.       So there's the two pieces of
19   it.
20           So if the U7 customer did not want the 22-day call-
21   back, they essentially wanted a quote, unquote, non-
22   obligated delivery, 365 days of the year, what they are
23   saying to us as well is, they have no seasonal or annual
24   load-balancing requirements.       Therefore, the aggregate
25   excess would not make sense, in that instance.
26           MS. CAMPBELL:   Can you explain why customers who don't
27   want to commit to daily deliveries don't have seasonal or
28   load-balancing requirements?
                                                                   19



 1        MR. SHORTS:    Well, essentially for the power customers
 2   we have been discussing with them for a while what their
 3   load factors are going to look like, both daily and monthly
 4   and seasonally.    And what you find is that in most cases,
 5   those customers are predominantly trying to look at match
 6   that daily requirement, in other words, match the Dawn
 7   daily index price with what they're consuming for that day.
 8   And essentially there seems to be pretty much solid
 9   agreement that it's not the traditional type of fill it
10   throughout the summer and withdraw it over the winter type
11   of storage.   That is essentially underpinned by the
12   aggregate excess methodology and why we required an
13   obligated DCQ as well.
14        MS. CAMPBELL:    Thank you.   If customers who do not
15   want to obligate their deliveries have balancing
16   requirements, how will Union meet their storage needs?
17        MR. SHORTS:    That is what we're working on, and we
18   hope to have some discussions and have a meeting and
19   hopefully provide alternatives over the next couple of
20   weeks.
21        MS. CAMPBELL:    Do you anticipate having that ready
22   prior to the hearing?
23        MR. SHORTS:     That's our goal.
24        MS. PASSMORE:     Yes.
25        MS. CAMPBELL:    And you'll share it with us.
26        MS. PASSMORE:    Yes.
27        MR. SHORTS:    Absolutely.
28        MS. CAMPBELL:    I don't know whether I'd call that an
                                                                        20



 1   undertaking or not.    Perhaps it's in such an inchoate form
 2   that it can't really be an undertaking.      So we'll just call
 3   it a promise, but I'll follow up with you.
 4         Okay.   My final question.    This is page 7, lines 16 to
 5   18.   Union indicated that it's currently evaluating
 6   options to provide a storage service -- hang on.
 7          My brain is indicating that I need to speak to it.
 8   So if you'll just hang on for a second.
 9          It turns out I'm satisfied.     So I'm finished.    Thank
10   you very much.
11         MR. SHORTS:   You're welcome.
12         MS. SEBALJ:   Thank you, Ms. Campbell.    I believe
13   Mr. Brown is next on the roster.
14         MS. SEBALJ:   I wanted to indicate as well, while we're
15   doing the transition, that there are -- I sort of made an
16   oblique with reference to the M12 issue.     And there are
17   letters that effect a settlement, essentially, among the
18   parties that are located at this back table behind Mr.
19   Cameron, if anyone didn't get a copy of that by e-mail
20   yesterday.    And this is under the auspices of Union's 2007
21   rate hearing, as opposed to under this proceeding.        But you
22   may want to have a look at that and determine whether you
23   have any questions in relation to that issue in this
24   proceeding.
25         CROSS-EXAMINATION BY MR. BROWN:

26         MR. BROWN:    Good morning.   As you're aware, I act
27   for the Sithe Global TransCanada Energy and the Portlands
28   Energy Centre.     First question, just to follow up from one
                                                                    21



 1   that Board Counsel asked of you with respect to when your
 2   proposal with respect to storage allocation methodology for
 3   these new kinds of T1 customers would be ready.    Perhaps I
 4   could be a bit more formal and ask you to undertake to have
 5   that proposal ready for discussion prior to the means
 6   commencement of the settlement conference, which I think is
 7   May 29th.   And to the extent that you need the co-operation
 8   of people on -- so the other so the other side of the table
 9   to talk with you, certainly that co-operation will be
10   forthcoming from my clients, and    I suspect the other
11   generators as well.
12         MR. SHORTS:     That is certainly our goal so we will do
13   our best, with everybody's help, to try and get an
14   alternative provided by the time the settlement conference
15   starts.
16        MR. BROWN:   Thank you very much.
17        On pages 2, 3, and 4 of your evidence, you go and
18   describe how there are some different operating
19   characteristics of generators that are located more towards
20   the east end of your system.     And you indicated in your
21   evidence, and you indicated this morning, that the
22   supplementary evidence was prompted by a request from a
23   potential generator client on April the 11th.
24         My question was, were you aware prior to that April
25   11th letter of some of the difficulties that generators
26   were articulating about the DCQ obligation at Parkway, if
27   they were situated east of Dawn, or did this come as news
28   to you.
                                                                      22



 1        MR. SHORTS:    No.   I mean, it was something that we had
 2   been discussing for some time.     But really our focus,
 3   because throughout of all of our consultation process, all
 4   of the focus and the suggestions from the generator crew
 5   were from basically looking at the exfranchise market.      So
 6   certainly that's where our focus was.
 7         We didn't get those particular suggestions during the
 8   consultative process at the various meetings we ran up
 9   until we got the official request.    And it was good we got
10   it so we were able to turn that around in a couple of weeks
11   and provide the answer I think the generator was looking
12   for, or at least in response to it.
13        MR. BROWN:    If you could ask you to turn to page 3 of
14   your supplemental evidence.    It's line 19 on the printout
15   that I have.   You indicate in your evidence that:
16                "For existing T1 customers the difference
17                between the obligated DCQ and the contract
18                demand is incorporated into Union's design."
19        I was wondering whether I could ask you to provide the
20   following undertaking with respect to your existing T1
21   customers.
22         Could you indicate on average for T1 customers what
23   the average volume is that you incorporate into system
24   design, and if you could indicate that in two fashions:
25   first, as an absolute volume for all T1 customers, and then
26   secondly, as a percentage of the aggregate contract demand
27   of all T1 customers.
28        MR. KITCHEN:   I'm not really sure I understand your
                                                                    23



 1   second point.    To make sure I understand your first point,
 2   though, you want to know the absolute volume of T1
 3   customers?
 4        MR. BROWN:    That's right; what the average volume is
 5   that you incorporate into the system design.    Because, as
 6   your evidence -- or at least as I read your evidence as
 7   indicating that the difference between the obligated DCQ
 8   and the contract demand is incorporated into your system
 9   design, so what we're asking you to do for all of your
10   existing T1 customers on an average basis is to indicate
11   the amount that you incorporate into the system design as
12   an absolute volume.    That would be the first point.
13        MR. KITCHEN:     So that would be the average volume.
14        MR. BROWN:    The average volume incorporated into the
15   system design.
16        MR. KITCHEN:     For T1 rate class.
17        MR. BROWN:    That's right, as an absolute number, would
18   be the first point.
19        MR. KITCHEN:     Yes.
20        MR. BROWN:    And then the second is to present that
21   average volume incorporated into system design as a
22   percentage of the aggregate contract demand of all T1
23   customers.
24         So I think one would just sum all the contract demand
25   of your T1 customers, take the absolute volume, and then
26   you come up with a percentage.
27        MR. KITCHEN:     I'm assuming you would like firm
28   transport?
                                                                       24



 1           MR. BROWN:    Yes.   Yeah.
 2           MR. KITCHEN:   Okay.    Yeah, we can undertake to provide
 3   that.
 4           MR. BROWN:    Thank you very much.
 5           MS. SEBALJ:    That's undertaking number 26, on the
 6   assumption that the previous didn't quite make it to
 7   undertaking status.
 8           MR. BROWN:    It was a best-efforts indication, which is
 9   accepted, thankfully.
10           UNION UNDERTAKING NO. 26:     TO PROVIDE AVERAGE VOLUME
11           INCORPORATED INTO SYSTEM DESIGN, TO PRESENT AVERAGED
12           VOLUME AS A PERCENTAGE

13           MR. BROWN:    Now, apart from these numbers could you
14   perhaps describe in a bit more detail how Union actually
15   incorporates or takes into account this difference as part
16   of your system design; that is, does it influence your
17   decision on how to build facilities, and how has that
18   influences your decisions in the past?
19           MR. SHORTS:    I'll take a stab at that.   Essentially,
20   we look at two factors.        One is the firm factor demand,
21   which is the firm obligation of Union to redeliver
22   volumes to the facility for a consumption basis.        The
23   second is the volume that the customer's delivering to us
24   on an obligated basis.       We would essentially look at those
25   two numbers, the difference between what they're delivering
26   on an average basis and what they would require on a firm
27   basis would drive Union to have to make some system design
28   to handle that difference.        It may be contracting or
                                                                   25



 1   building incremental M12 capacity.   It could be buying
 2   incremental supplies for, for example, a winter-peaking
 3   service at Parkway as well could also be an alternative
 4   that Union ay look at from time to time.
 5        MR. BROWN:    And historically could you indicate what
 6   the primary impact is?   Does the difference primarily
 7   impact your decisions to build?    Has that been the
 8   historical experience of Union?
 9        MR. SHORTS:    I think it's also a timing function.
10   Essentially, if we know -- if we have enough notice that a
11   load is going to increase, for example, at the east end of
12   the system, we would more than likely build.    If it was a
13   short-term requirement and we didn't have enough notice,
14   for example, to build incremental M12 capacity, then we may
15   actually have to use a short-term bridge which might be
16   incremental supplies or a winter peaking service.      But
17   certainly our intention would be to be able to facilitate
18   that by building the incremental facilities required.
19        MR. BROWN:    And the cost of those incremental
20   facilities, how are they allocated in your rates?
21        MR. KITCHEN:    Dawn-Trafalgar capacity is allocated
22   based on the commodity kilometres weighted for design day
23   demand.
24        MR. BROWN:    Could I take you to page 5, please, and
25   this is where you begin to outline the four options that
26   you're offering as an alternative to the obligated DCQ.
27        Going through each one of them.    Firstly, the first
28   option.   You talk about the delivery of a daily obligated
                                                                    26



 1   supply at Parkway equal to 100 percent of the customer's
 2   firm contract demand.
 3        Could you explain what you mean by the term "daily
 4   obligated supply"?
 5        MR. SHORTS:     It would be the same obligated DCQ that
 6   we see today.   So, rather than that obligated DCQ just
 7   being equal to the average day, it needs to equal the firm
 8   peak day.
 9        MR. BROWN:    From a customer -- perhaps you could
10   explain, then, from a customer's perspective, what's the
11   advantage of option 1 over the status quo?
12        MR. SHORTS:     Essentially, that would be -- our feeling
13   is that that would be required to not put the incremental
14   costs for such a large customer on the remaining shippers.
15        MR. BROWN:    A related question.   Given the
16   proposal that you have or that you're making in your
17   supplemental evidence, is the existing methodology, then,
18   for T1 customers off the table, that is to say, is
19   is your supplemental evidence that you've propose here a
20   complete replacements of the existing T1 methodology for
21   power generators at the east end of your system?
22        MR. SHORTS:     It is for large customers in excess of
23   that 1.1 million metres cubed firm contracted demand.
24        MR. BROWN:    Now, do T1 customers have the cost of some
25   of the Dawn to Parkway facilities included in their rates?
26   I think perhaps you've already touched upon this,
27   Mr. Kitchen, but --
28        MR. KITCHEN:     Yes, within the T1 firm transportation
                                                                    27



 1   rate, there is a small amount of Dawn-Trafalgar costs
 2   included.   The vast majority of the costs, however, are
 3   distribution related and other transmission related which
 4   is really being dealt with within the re-design of T1.
 5        MR. BROWN:    And if under your option 1 a T1 customer
 6   provides Union 100 percent of its capacity, would you see
 7   the situation unfolding, then, that the generator would be
 8   subsidizing to some degree other T1 customers?
 9        MR. KITCHEN:     There was there would be a very small
10   subsidization.    Once you're into that last block, given
11   the composition of the class, there's not a very, very
12   large contribution towards Dawn-Trafalgar facilities.
13        MR. BROWN:    Do you have any sense as to the magnitude
14   of that contribution?
15        MR. KITCHEN:     No, I do not.
16        MR. BROWN:    In terms of your option number 2, which
17   was to commit to M12 Dawn to Parkway capacity, you refer, I
18   think, on page 6 of your evidence, that:
19               "Under this alternative, the customer would
20               be required to assign the right to use the
21               M12 Dawn-to-Parkway transmission capacity to
22               Union to allow Union to manage the firm
23               redeliveries to the plant on a no-notice
24               basis."
25        Would this assignment be a 365-day-of-the-year
26   assignment?   Or would the assignment only occur on the days
27   that the generator is running?
28        MR. SHORTS:      It would essentially be a 365-day
                                                                      28



 1   assignment.
 2        MR. BROWN:    Would the assignment be of all of the M12
 3   capacity, that is, 100 percent of the contract demand?      Or
 4   some lesser amount that Union would need to manage the
 5   generation load.
 6        MR. SHORTS:    We would require that 100 percent,
 7   because that would be the amount we would potentially
 8   require on an ongoing basis to ensure that we could meet
 9   the firm obligation of Union to redeliver up to the level
10   of their firm contract demand.
11        MR. BROWN:    Now, under option number 1, you‟re
12   positing an obligation to deliver percent of the firm
13   contract demand at Parkway.    Under option number 2, you
14   talk about taking up M12 capacity for 100 percent of the
15   firm contract demand.
16        Could you explain operationally, from a customer's
17   perspective and from your perspective, how option 1 or how
18   option 2 differs from option 1?
19        MS. PASSMORE:    For option number 2, what the customer
20   has done is given himself the flexibility to acquire his
21   gas supply at Dawn, all right.    So he still has that
22   obligated DCQ at Parkway, but by purchasing the M12, he's
23   now enabled himself to supply at Dawn.
24        And what he also retains is now, by retaining the
25   obligation, all right, we're not -- there's not the need
26   for Union Gas to be able to manage that pipe on his behalf,
27   all right.    So what he's also done is given the days that
28   he's not going to burn, that when he can request to suspend
                                                                      29



 1   that Parkway gas arriving, and he still has the full
 2   control over that M12 capacity to use, to move gas
 3   downstream.
 4        MR. BROWN:    He can make the request to suspend under
 5   the terms of his M12 contract?
 6        MS. PASSMORE:   Under the terms of his T1 contract.
 7        MR. BROWN:    Sorry, under the terms of his T1 contract.
 8        MS. PASSMORE:   That's correct.
 9        MR. BROWN:    All right.   So the essential difference
10   between delivery at Parkway and delivery at Dawn?      Is that
11   the way that you see it, between 1 and 2, that is delivery
12   --
13        MS. PASSMORE:    For 1 and 2, you're both still
14   obligated at Parkway but you're enabling yourself to supply
15   your gas at Dawn, in number 2.
16        MR. BROWN:    If I could turn then to your third option.
17   You're saying:
18             “Customers could elect to deliver they're DCQ
19             at Parkway on the days/hours on which their plant
20             is consuming gas."
21        First of all, what do you mean by “the hours that
22   their plant is consuming gas”?    And perhaps you could build
23   on that and describe operationally word how this would
24   actually run.
25        MR. SHORTS:   Essentially, what it envisions is the
26   ability of a customer to match what they're delivering to
27   Union at Parkway versus what they're consuming at their
28   facility, that is located close to Parkway, in the same
                                                                    30



 1   fashion.
 2        So basically, if a plant was expected or required to
 3   consume 4,000 gJs one hour, then this option would say, if
 4   you can deliver the 4,000 gJs per hour to Union at Parkway,
 5   then that's the other way to fulfill that obligation or
 6   that ability to serve.
 7        MR. BROWN:    In terms of nomination windows that would
 8   be associated with this option, what assumptions are you
 9   making with regards to the number of nomination windows
10   that would be available to the customer?
11        MR. SHORTS:   Basically, assuming that a customer could
12   be using the FT-SN TransCanada scenario, and nominating
13   potentially on FT-SN whatever they would require to deliver
14   to Union.
15        MR. BROWN:    On a 15-minute basis?
16        MR. SHORTS:   If that was, if that was case.
17        MR. BROWN:    So if I'm a customer that's located
18   towards to the east end of your system, I want to take
19   option 3, you would accommodate for me, essentially,
20   15-minute nominations or modified nominations, however you
21   want to describe that, that 15-minute time slot.    But you
22   would expect communications by me on a 15 minute by 15
23   minute basis, with respect to the quantities that I wanted
24   to consume over the balance of the day?
25        MR. SHORTS:   Essentially we would be looking at what
26   the customer was consuming at the plant, and then looking
27   at what we were physically receiving and confirm from
28   TransCanada, and making sure that those did match the time
                                                                    31



 1   requirements, whether it's every 15 minutes or every hour,
 2   depending on how that was working.
 3        MR. BROWN:    But I would have the flexibility to
 4   communicate that information to you, essentially, on a 15
 5   minute by 15 minute basis, and you would confirm that with
 6   TransCanada?
 7        MR. SHORTS:   It may be through us or just strictly
 8   through TransCanada, yes, but --
 9        MR. BROWN:    Perhaps you could indicate, then, the
10   basis upon which you're able to make that flexibility
11   available at the east end of your system for a customer
12   near Parkway, versus your more general proposal of 10
13   nomination windows during course of the day?
14        I'm not looking a gift horse in the mouth.     The
15   enhanced flexibility is definitely, you know, something
16   positive from the customer's perspective.   But how do you
17   reconcile that with your larger proposal to have 10
18   nomination windows on FT-SN?    Or, sorry, F24-T.
19        MR. SHORTS:    Basically, it was designed to try and
20   accommodate if a customer wanted to contract for FT-SN.
21   That's predominantly why it was there.
22        MR. BROWN:    So would this flexibility be available to
23   any T1 customer that was contracting for TCPL‟s FT-SN even
24   if they weren't located immediately in the Parkway area?
25        MR. SHORTS:   I'm not sure how the FT-SN could apply
26   anywhere to the embedded generators.   That's something
27   we'd have to look into.   We haven't looked at that.
28        MR. BROWN:    In terms of the terms and conditions that
                                                                      32



 1   would apply to this modified T1 proposal, you've undertaken
 2   to file a rate tariff within a week, but could you give us
 3   any idea now as to whether you contemplate the need to make
 4   any material changes to the terms and conditions of service
 5   for a customer who would elect this non-obligated DCQ
 6   option?
 7        MR. SHORTS:   There wouldn't be many changes to the
 8   actual rate schedule.   The terms and conditions are
 9   predominantly handled within the contracts.    But from the
10   rate schedule perspective, as Mr. Kitchen had mentioned,
11   there may be some minor changes required for the rate
12   schedule but not major rend additions or revisions.
13        MR. BROWN:    Let me rephrase the question.    Whether the
14   condition would appear in a contract or whether the
15   condition would appear in your rate schedule, do you
16   contemplate that you would be asking customers to agree to
17   materially different terms or conditions in order to take
18   advantage of this non-obligated DCQ service?       And, if so,
19   what would those be?
20        MR. SHORTS:    Well, definitely the non-obligated DCQ
21   has required contract changes to the terms and conditions
22   of the contracts for even those customers who were going to
23   be located in the Sarnia area west of Dawn.    So we've
24   already asked sort of those customers west of Dawn to
25   accommodate those changes.
26        MR. BROWN:    Could you give me an indication, then, of
27   what those changes are?
28        MR. SHORTS:   It's essentially the obligated DCQ number
                                                                    33



 1   is much different than it is in the standard contract,
 2   which is zero.
 3        MR. BROWN:    Any other change?
 4        MR. SHORTS:     I'd have to check, but I can't think of
 5   any off the top of my head.    It's quite a fairly
 6   straightforward change.    It's essentially just providing an
 7   obligate -- a non-obligated DCQ.
 8        MR. BROWN:    If a GTS west generator, and I gather
 9   that's the source of the request that came to you, if at
10   GTS west generator situates its plant in close proximity to
11   your Dawn-Trafalgar system, and if you were to
12   construct a dedicated lateral to serve that plant and the
13   generator chose one of these non-obligated DCQ options,
14   would the generator be entitled to any of the integrated
15   system benefits on your system?    And if so, what would
16   those benefits be?
17        MR. SHORTS:     Customer being served off of a
18   Dawn-Trafalgar system would be part of the integrated
19   system, as a T1, and would receive all the benefits that
20   the other T1 customers would receive.
21        MR. BROWN:    And perhaps you could give me a shopping
22   list of those?
23        MR. SHORTS:     The no-notice consumption.   The what I
24   will call the hourly imbalance.    It's hard to put that one
25   in words.   In other words, not necessarily having the
26   requirement to match the deliveries to the consumption on
27   an hourly basis.   That's part of the T1 benefit.
28        You can contract for firm or interruptible.      Obviously
                                                                   34



 1   there would be a modified -- in those cases for a
 2   non-obligated customer, there would be a modified storage
 3   allocation.   But you would still have essentially the
 4   same -- it would just be the numbers that are different.
 5   The actual operation of the storage doesn't necessarily
 6   change.
 7        MR. BROWN:    On the balancing side, if you have a
 8   customer toward the east end of the system, and the
 9   customer's looking at this non-obligated DCQ T1 service,
10   what advantages would you describe to the customer for
11   taking this kind of service and the balancing that's
12   inherent in the T1 service versus contracting with
13   TransCanada for the balancing service that TransCanada has
14   put on the table in its evidence and then simply
15   contracting for transportation capacity from you?
16        MR. SHORTS:    I think it continues to be the big -- the
17   big advantage is the no-notice.    Whether it be on the
18   consumption or the storage injections and withdrawals, it's
19   basically just an allocation.   So it's certainly much less
20   administratively -- it's much more administratively easier
21   for those customers and gives them the access to the Dawn
22   nonobligated -- the ability to try and match on a daily
23   basis their consumption and their deliveries.
24        MR. BROWN:    If a generator were to situate its plant
25   upstream of Parkway, you know, closer to the London area or
26   what-not, such that there was less than a 1 to 1
27   relationship of Dawn-Parkway capacity needed to service the
28   customer and the contract demand at the plant, would you
                                                                   35



 1   recognize this situation in offering this service?
 2        MR. SHORTS:   It‟s something we haven't contemplated so
 3   far because we've concentrated on the west GTA and those
 4   customers at the extreme east end.   It would definitely be
 5   something we would have to look at, whether or not there
 6   would be any change in the requirement to go to the full
 7   100 percent CD.
 8        MR. BROWN:    Just a few questions on the storage
 9   allocation -- the methodology part of your evidence.
10        You've indicated in your evidence or you've suggested
11   that the customers who would find service to be of some
12   advantage would have no seasonal or annual balancing
13   requirement.
14        Could you please explain why in Union's views such
15   customers would not have an annual, seasonal, or daily
16   balancing requirement because of the delivery option that
17   they've chosen.
18        MR. SHORTS:   I think for these large customers, these
19   large power customers essentially are looking at, as I
20   mentioned before, that non-traditional type of storage.
21   They're really looking to try and manage those daily and
22   hourly swings, and not necessarily the seasonal type
23   swings.
24        They're predominantly going to try and match, as best
25   they can, the consumption and the deliveries to us each and
26   every day.
27        So that's why it's not the traditional type of what
28   I'll call bundled or semibundled customer that Union's
                                                                    36



 1   dealt with for the last, you know, 20 years or so, since
 2   dereg.    Sorry, since deregulation.
 3        MR. BROWN:    Just a brief question on your existing T1
 4   tariff.    I believe your existing T1 tariffs indicate that
 5   there is firm storage deliverability at 1.2 percent, and
 6   then there is interruptible deliverability above that
 7   level.    Is that correct?
 8        MR. KITCHEN:    The rate schedule has the -- I'm looking
 9   at it now.    It has the annual firm injection withdrawal
10   rates, then it has incremental firm injection withdrawal
11   rates then it has interruptible firm injection rates.
12        MR. BROWN:    And are those all at 1.2 percent or are
13   the interruptible ones at a higher deliverability rate?
14        MR. SHORTS:    Well, essentially the policy has been
15   for the firm injection withdrawal rate to be limited to the
16   1.2 percent at cost to this point, and to the interruptible
17   is above that if a customer so wanted to choose or contract
18   for interruptible deliverability.
19        MR. BROWN:    And what level of interruptible
20   deliverability is available under T1?
21        MR. SHORTS:    I guess it depends on how much the
22   customer wants to be interrupted.
23        MR. BROWN:    Okay.     Well, what would the maximum amount
24   of deliverability be as a practical matter that could be
25   offered to a customer on an interruptible basis under the
26   T1 rate?
27        MR. SHORTS:    I guess we've never really looked at it
28   from that standpoint, but we would have to -- I would think
                                                                    37



 1   that a number in excess of -- or less than 10 percent would
 2   probably be something that Union would look at.    Again,
 3   we'd have to check it and try to find out how many days of
 4   interruption, obviously, would be likely to be -- would
 5   come out of a 10 percent, say, interruptible storage
 6   deliverability number.
 7        MR. BROWN:    In terms of the priority of
 8   interruptibility with respect to these deliverability
 9   rates, where do they rank in the overall scheme of
10   interruptibility under Union's policy?    And if it's not
11   something you can answer at this particular moment, perhaps
12   you could undertake to advise of where, in the
13   interruptibility ranking order, interruptible
14   deliverability service under T1 would stand.
15        MS. PASSMORE:   We'll do an undertaking on that simply
16   because I don't want to say it off the top of my head.
17        MR. BROWN:    Thank you very much.
18        MS. SEBALJ:    That's Union Undertaking number 27.
19        UNION UNDERTAKING NO. 27:    TO PROVIDE WHERE, IN THE
20        INTERRUPTIBILITY RANKING ORDER, INTERRUPTIBLE
21        DELIVERABILITY SERVICE UNDER T1 WOULD STAND

22        MR. BROWN:    And finally, with respect to these
23   interruptible deliverability rates, how are they
24   negotiated?   That is, what is the range of rate that you
25   negotiate and how are the rates set?
26        MR. SHORTS:    The interruptible delivery rate is not a
27   negotiated rate.   It's on the rate schedule as the rate.
28        MR. BROWN:    So what you see is what you get in terms
                                                                       38



 1   of the --
 2           MR. SHORTS:    That's correct, yes.
 3           MR. BROWN:    Regardless of the level of deliverability?
 4           MR. SHORTS:    That's correct, yes.
 5           MR. BROWN:    Could I ask, by way of my final question,
 6   for an undertaking from Union.      Could you please do a
 7   side-by-side comparison illustrating the similarities and
 8   differences between the existing T1 service and the new
 9   options that you're proposing in your supplementary
10   evidence regarding the non-obligated DCQ.
11           And could I ask you to do that comparison, firstly,
12   for a customer situated east of Dawn, and then secondly
13   could you do the comparison for a customer situated west
14   of Dawn.
15           And I understand that, in essence, you already have
16   that in place for those customers.      Is that something that
17   you could provide by way of undertaking?
18           MR. SHORTS:    We're just struggling a little bit trying
19   to figure out the differences.       Because for the most part
20   the differences themselves from the benefits perspective
21   are still there; it's just the matter of the amount that is
22   there but --
23           MR. BROWN:    Well, I guess from a customer's
24   perspective your offering something new.      It would be very
25   helpful if you could just have on one page a chart that
26   says:    If you sign up for T1 under current terms and
27   conditions, here are the benefits and the services that you
28   get.    Here's what we're proposing with respect to the
                                                                     39



 1   modified T1, and then the customer's able to make a very
 2   quick comparison.    The differences may be small but it
 3   would be a very helpful presentation of your service
 4   offering.
 5        MR. KITCHEN:    And this would largely be a qualitative
 6   benefits?
 7        MR. BROWN:     Yeah.
 8        MR. SHORTS:     Yeah, again, I don't think you're going
 9   to find much in the way of differences but that's something
10   that we can do.
11        MR. BROWN:     Yeah.   Thank you very much.
12        MS. SEBALJ:    That's undertaking number 28.
13        MR. BROWN:     Thank you, panel.    Those are my questions.
14        UNION UNDERTAKING NO. 28:        TO PROVIDE SIDE-BY-SIDE
15        COMPARISON ILLUSTRATING THE SIMILARITIES AND
16        DIFFERENCES BETWEEN THE EXISTING T1 SERVICE AND THE
17        NEW OPTIONS THAT YOU'RE PROPOSING IN YOUR
18        SUPPLEMENTARY EVIDENCE REGARDING THE NON-OBLIGATED DCQ
19        FOR A CUSTOMER SITUATED EAST OF DAWN, AND THEN
20        SECONDLY COULD YOU DO THE COMPARISON FOR A CUSTOMER
21        SITUATED WEST OF DAWN

22        MS. SEBALJ:    Thank you, Mr. Brown.
23        Mr. Moran, you do have question?
24        CROSS-EXAMINATION BY MR. MORAN:

25        MR. MORAN:     Morning, panel.    I'd like to start at page
26   3 of 8 of your supplementary evidence.
27        At line 16, you indicate:
28               "A new T1 customer served by the Dawn-Parkway
                                                                     40



 1             transmission system under existing contracting
 2             practices is required to deliver to Union's
 3             system a daily obligated volume equal to 1/365th
 4             of their total annual forecasted demand."
 5        Could you please indicate what you mean by “existing
 6   contracting practices”?
 7        MR. SHORTS:     It's basically the rules that we had
 8   applied up until the point at which we filed the
 9   supplement evidence.
10        MR. MORAN:    The rules that -- I'm sorry?
11        MR. SHORTS:     The rules and procedures we followed in
12   calculating the obligated DCQ up to the point of when we
13   filed the supplemental evidence.
14        MR. MORAN:    Okay.   And where would I find those rules?
15        MR. SHORTS:     Essentially -- it's been our traditional
16   way of calculating the obligated DCQ since deregulation
17   took place in '86.
18        MR. MORAN:    And when it comes to understanding what
19   those existing contracting practices or traditional
20   approaches or whatever, can I find those describes on your
21   website somewhere, for example?
22        MR. SHORTS:     I believe you could.   They would also
23   have the contracts on the website, the T1 contracts, the
24   standard ones.
25        MR. MORAN:    All right.   Okay.   And so when I look at
26   the website and look at the contracts that will be on your
27   website, I assume there will be some blanks in those
28   contracts, and when it comes in to filling in those blanks,
                                                                        41



 1   how will I understand the rules that apply to filling in
 2   those blanks?
 3           MS. PASSMORE:   Under the policy section out on our
 4   website, there's a section that refers to setting and
 5   adjusting DCQs and it actually does lay out that
 6   methodology.
 7           MR. MORAN:    All right.   And the requirement as it's
 8   described at line 16, is that applied uniformly to all
 9   existing T1 customers?
10           MR. SHORTS:   That would apply to all the T1 customers
11   served at the east end, off of the Dawn to Parkway system.
12   There are some anomalies back through customers who were
13   served by firm service tendered off of TransCanada, which
14   is a Dawn delivery during the -- I want to say mid- to late
15   „90s.    But other than that, basically, all the east
16   customers who are east of Dawn would have an obligated DCQ
17   at Parkway.
18           MR. MORAN:    So this would be applied uniformly, then,
19   to all customers served by the Dawn-to-Parkway transmission
20   system?
21           MR. SHORTS:   Yes.    Well, let me rephrase that.
22   Basically anyone who's east of Dawn -- that's the way that
23   it supplies today.
24           MR. MORAN:    Okay.   And when it comes to determining
25   what the customer's total annual forecasted demand, how do
26   you go about doing that?
27           MR. SHORTS:   We work with the customer.    The customer
28   provides the estimated -- in the contract I believe we call
                                                                      42



 1   it the estimated annual volume and that's what essentially
 2   determines the number that we divide by 365 to determine
 3   the obligated DCQ.
 4        MR. MORAN:    Okay.    Under the U7 rate schedule, do the
 5   customers have an obligated DCQ?
 6        MS. PASSMORE:    Instead, as I'd mentioned prior,
 7   instead of the obligated DCQ, one of the benefits of the
 8   unbundled service is that you have the 22-day call-back,
 9   which enables Union to call that DCQ back to Parkway up to
10   22 days in a year, to manage peak day situations.
11        MR. MORAN:     And finally on this point, does the
12   obligated DCQ requirement apply to new T1 customers located
13   west of Dawn?
14        MR. SHORTS:     Yes.   You would have an obligated DCQ but
15   you might not necessarily have it at Parkway.
16        Sorry if that wasn't clear earlier.
17        MR. MORAN:    Turning then to page 4 of 8.   At line 20
18   you indicate:
19             "Absent any change to the existing terms and
20             conditions, the impact of rolling these
21             incremental costs in with the existing system
22             costs could create a significant cost burden
23             for all existing customers."
24        Have you done any analysis to quantify what this
25   potential cost burden would be?
26        MR. KITCHEN:    Actually, if you just flip the page to
27   page 5, we indicated that there would be $1.5 million to
28   $2 million impact.    You have a couple of those customers at
                                                                     43



 1   the east end of Dawn, and you would double the entire
 2   Dawn-Trafalgar costs included in the T1 rate.
 3        MR. MORAN:    Was that a cost analysis or a rate
 4   analysis?
 5        MR. KITCHEN:    It was essentially looking at the
 6   shortfall times the proposed M12 total.
 7        MR. MORAN:    It's a rate analysis, in other words.
 8        MR. KITCHEN:    Right.
 9        MR. MORAN:    Right.    Have you done any analysis to
10   understand what -- or to quantify the cost burden
11   associated with this?
12        MS. PASSMORE:    Yes.
13        MR. KITCHEN:    It would be the same.   You could
14   potentially double the costs currently recovered from T1
15   customers.   So, 3 to 4 million dollars.
16        MR. MORAN:    Does the size of this potential cost
17   burden depend on where the new load is located on the Dawn
18   to Parkway transmission system?
19        MR. KITCHEN:    The proposal is premised on a
20   customer located at the extreme east end of the system.
21        MR. MORAN:    All right.   So when we understand the rate
22   analysis that gives rise to the $1.5 to 2 million per year
23   that you indicated, it's really confined to the far east
24   end locations; right?
25        MR. SHORTS:    Yes, and it's just related to those Dawn
26   to Parkway transmission costs.     It doesn't bring in any of
27   the other costs that would be required to build the
28   facilities to actually connect the facility to the
                                                                    44



 1   Dawn-Trafalgar.
 2        MR. MORAN:    Now, I wonder if you could explain how
 3   requiring a customer to deliver an obligated DCQ to Union
 4   at Parkway on days when the customer has no consumption,
 5   how does that affect Union's need for capacity on the Dawn
 6   to Parkway transmission system to serve that customer?
 7        MS. PASSMORE:     Well, the fact is, is that T1 service
 8   is no-notice, so there's no -- because it's not a nominated
 9   service and it is the no-notice service.     We have no way of
10   knowing when that generator will start to burn.    So that
11   capacity has to be there for them 24 hours a day.
12        MR. MORAN:    Okay.   Now, on page 5 at line 6, you
13   indicate that you're amending the terms and conditions of
14   T1 service for new large firm T1 customers and for existing
15   customers with new firm incremental loads of greater than
16   1,126,964 cubic metres per day served by the Dawn to
17   Parkway transmission system.
18         You were asked a couple of questions by Board Counsel
19   on this matter.    I have one follow-up on that.
20         You indicated that this new service only applies to
21   an incremental load that's greater than 1. -- the 1.1
22   million mark; right?
23        MR. SHORTS:    Yes, that's correct.
24        MR. MORAN:    And then in terms of the access to that
25   service, would that customer be able to access that service
26   for its entire volume or just for that 1.1 or larger
27   incremental volume?
28        MR. SHORTS:    Just for the incremental.
                                                                    45



 1        MR. MORAN:    Right.   Now, you also indicate that:
 2              "Customers could deliver a daily obligated
 3              supply at Parkway equal to 100 percent of
 4              their firm CD."
 5   Under option 2.    If a customer's delivering a daily
 6   obligated supply equal to 100 percent of the customer's
 7   firm CD on days when consumption is zero, will the customer
 8   have sufficient firm deliverability under its T1 storage
 9   service to inject all of this gas into its storage account?
10        MR. SHORTS:    It would depend on what the customer was
11   willing to contract for, but it would probably be unlikely
12   in those scenarios, and on those days the customer would
13   probably want to request an authorization notice to reduce
14   that volume, would be the practical matter of what the
15   customer would probably likely do on those days.
16        MR. MORAN:    So is that the only way the customer would
17   avoid having an imbalance on the system that day, then?
18        MR. SHORTS:    Well, essentially, because it's a
19   no-notice service and it's allocated at the end of the day,
20   it would just be a matter of what the cost was.     The
21   storage -- the amount would actually be -- if they weren't
22   using it, would be injected into storage, they could also
23   request for an authorized overrun on their injection
24   capabilities that day, or if they didn't, they would be
25   potentially open to unauthorized overrun charges if they
26   did not request it ahead of time.
27        MR. MORAN:    If the customer's firm CD is equal to its
28   peak daily consumption and the customer's always required
                                                                    46



 1   to deliver 100 percent of its firm CD to Union Gas, when
 2   would gas be withdrawn from the customer's T1 storage
 3   account?
 4        MR. SHORTS:    On a day when a customer requested that
 5   their DCQ be less than what they were delivering that day?
 6        We have many instances with customers today who have
 7   obligated DCQs that request frequent changes to the level
 8   of that obligated DCQ.   So it wouldn't be anything
 9   different than what we see today.
10        MR. MORAN:    All right.   Now, with respect to option 2,
11   is transportation service on the Dawn-to-Parkway
12   transmission system only provided under rate schedule M12,
13   or is that also available under Sun Bright C1.
14        MR. KITCHEN:    Dawn-Parkway transportation can also be
15   contracted under C1.
16        MR. MORAN:    And if the customer is able to schedule
17   deliveries under the Dawn-Parkway delivery service to match
18   its hourly consumption so that no notice service is not
19   required, would Union Gas still insist on taking assignment
20   of the customer's transportation capacity under option 2?
21        MR. SHORTS:    Are you basically saying under a U7?
22   Because the U7 would be required to nominate, and it would
23   hard to find a situation where a U7 customer would probably
24   want to actually assign the M12 capacity.
25        The extreme -- the main benefit of the U7 was to be
26   able to handle and control that M12 capacity.    So even
27   though it's a possibility, as Ms. Passmore had mentioned
28   before, it's probably unlikely if we had a U7 customer that
                                                                      47



 1   they would actually want to assign it to Union.      They would
 2   probably still want to maintain control of the M12.
 3          MR. MORAN:    So the assignment to Union for option 2
 4   only applies to the T1 customer?
 5          MR. SHORTS:   No, it could.   It could also apply to a
 6   U7 customer.   We're just struggling with a situation where
 7   that would make sense for a U7 customer.
 8          MR. MORAN:    Moving to the third option, then.   Is
 9   Union proposing that the customer would be required to
10   balance deliveries and receipts every hour or every 15
11   minutes based on the TransCanada service?
12          MR. SHORTS:   Basically, that was an alternative that
13   we decided to include that would give that customer the
14   option or the flexibility to, if they wanted to match the
15   increments they were consuming with the incrementing they
16   were delivering, then that would be an alternative that
17   we would look at as well.      So if they were consuming 4 or
18   5,000 gJs in an hour, then we would be looking to them to
19   deliver that same amount in an hour to us at Parkway off of
20   TransCanada.
21          MR. MORAN:    Okay.   So just so I understand it, Union
22   would be requiring hourly balancing or 15-minute balancing
23   you should that --
24          MR. SHORTS:   Under that alternative, if the customer
25   so chose it, that would be an alternative, yes.
26          MR. MORAN:    That would be an alternative within the
27   alternative?   Sorry, I'm just trying to follow what you
28   say.
                                                                     48



 1        MR. SHORTS:     No, if the customer chose to say, I don't
 2   want to an obligated DCQ, I do not want a contract for M12,
 3   then they could contract in this fashion where they
 4   would basically match on an hourly or 15-increment basis
 5   what they were consuming with what they were delivering to
 6   Union at Parkway.    So that would be the requirement.
 7        MR. MORAN:     That would be a requirement.
 8        MR. SHORTS:     Yes.
 9        MR. MORAN:     Okay.   Thank you.
10        Why does Union Gas assume that the gas would have to
11   be delivered to Parkway by TransCanada Pipeline?
12        MR. SHORTS:     Well, we were assuming in this scenario
13   that if it wasn't being delivered by TransCanada, then it
14   would already be covered in the other scenarios where they
15   were essentially using M12, whether through themselves or
16   through a marketer or other third-party supplier that had
17   the M12.
18        MR. MORAN:     All right.   So option 3 as it‟s set out
19   doesn't envisage use of M12 or C1?
20        MR. SHORTS:     No.
21        MR. MORAN:     Union Gas only accepts nominations for
22   Deliveries to Union Gas under the T1 rate schedule
23   following the minimum Naze B [sic] standards.
24         How would a customer be able to nominate delivers
25   from TCPL on hourly or 15-minute increments under this
26   option?
27         MR. SHORTS:     Obviously that would require incremental
28   nominations or notification.     Whether it would actually be
                                                                    49



 1   a true nomination is obviously up for discussion, but --
 2        MR. MORAN:    Well, let's discuss it, then.
 3        What's the proposal?
 4        MR. SHORTS:   Basically, it's however the customer
 5   would be able to confirm that volume at Parkway, on
 6   TransCanada in this scenario, then we would accept that
 7   change as well on the Union system.
 8        MR. MORAN:    All right.   So, for the purposes of this
 9   option, you would be prepared to match the upstream
10   flexibility that's represented by the TransCanada service?
11        MR. SHORTS:   Yes, if it was applicable, yes.
12        MR. MORAN:    Right.   And if you can do it for T1
13   customer, is there anything stopping you from doing it for
14   any customer, regardless of which option they pick?       Or
15   what service they use?
16        MR. SHORTS:   This option is strictly for the large
17   Parkway T1 customers.
18        MR. MORAN:    All right.   You're not able to say whether
19   that flexibility can be offered to other kinds of
20   customers, then?
21        MR. SHORTS:    We haven't envisioned that yet.
22        MR. MORAN:    All right.   So that would be something
23   else that you would need to look at?
24        MR. SHORTS:   That would be something we'd have to
25   look at; yes.
26        MR. MORAN:    If a new power plant is directly connected
27   to the Dawn-to-Parkway transmission facilities, the power
28   customer pays Union Gas directly for all interconnection
                                                                    50



 1   costs and the customer contracts for M12 or C1 services and
 2   matches hourly deliveries to Union Gas at Dawn to match the
 3   customer's hourly consumption.
 4        What would be the purpose of requiring the customer to
 5   contract for additional T1 or U7 service?
 6        MR. SHORTS:   You're still taking infranchise service.
 7   So it would still require an infranchise distribution rate
 8   to get the gas to the plant.
 9        MR. MORAN:    Right.   So the guiding principle is the
10   fact that you're an infranchise customer under that
11   scenario.
12        MR. SHORTS:   An infranchise customer, yes.
13        MR. MORAN:    All right.
14        MR. MORAN:    Now, on page 6, at line 16, you indicate
15   that these alternatives, the four options we've been
16   discussing, allow new customers east of Dawn to use T1
17   service without imposing a significant cost burden on other
18   customers, and they also provide the service flexibility
19   being requested by the new power customers for a
20   non-obligated DCQ.
21        Is Union Gas aware of power generator concerns about
22   the cost of delivering gas to Union on days when they're
23   not operating their facilities?
24        MR. SHORTS:   Yes, that was the whole idea about being
25   able to offer a non-obligated DCQ alternative.
26        MR. MORAN:    All right.   So when we look at the first
27   option, which increases the obligated DCQ to 100 percent of
28   the contract demand, does this alleviate the problem or
                                                                         51



 1   make it worse?
 2           MR. SHORTS:   You have to remember the top block isn't
 3   just necessarily designed for power generators.        There
 4   may be other customers as well that don't have that same
 5   issue.
 6           That's why we would expect probably power customers
 7   would not want to opts for the first alternative.
 8           MR. MORAN:    Right.
 9           MR. SHORTS:   But it may be for other customers who are
10   large but not necessarily power.
11           MR. MORAN:    Okay.    On page 7, at line 2, you indicate
12   that:
13                "The aggregate excess methodology applies to
14                customers who commit to a daily delivery
15                obligation."
16           Does the aggregate excess methodology currently apply
17   to U7 customers?
18           MS. PASSMORE:   Yes, it does, but as I had said before,
19   the 22-day call-back is equivalent of an obligated DCQ in
20   the unbundled service.
21           MR. MORAN:    Beginning at line 8 you've indicated that:
22                "For customers who do not want to commit to daily
23                deliveries, i.e., no obligated DCQ, the aggregate
24                excess allocation methodology will not apply."
25            Does this mean that if a T1 customer has an
26   obligated DCQ of zero, that Union Gas won't offer that
27   customer any T1 storage service?
28           MR. SHORTS:   No.     We will just not offer the
                                                                      52



 1   traditional aggregate excess calculation methodology for
 2   determining the amount of space the customer needs.
 3        MR. MORAN:    So you still will offer T1 storage
 4   service?
 5        MR. SHORTS:    Yes.    I mean, there's still T1 storage
 6   service to customers.      It's just a matter of what that
 7   level should be.   And as I had mentioned, most of the
 8   conversations we've had, the consensus seems to be it's a
 9   deliverability -- because power customers certainly are
10   seeking more deliverability.      Space doesn't seem to be the
11   issue; it's really the deliverability.      So that's where
12   we're going to be concentrating our efforts over the next
13   couple of weeks to try and come up with some alternatives.
14        MR. MORAN:    The new terms of service that you're
15   proposing in your evidence, does it also apply to new T1
16   customers located west of Dawn for whom you've already
17   offered to waive the obligated DCQ requirement?
18        MR. SHORTS:    No, those customers west of Dawn already
19   have a non-obligated option.
20        MR. MORAN:    And you indicate, again, on page 7 that:
21              "Union is currently evaluating options to provide
22              a storage service to power generators who wish to
23              avoid daily delivery obligations and will bring
24              these forward in due course for Board approval."
25        I take it, given that we're in a proceeding that's
26   looking at those issues, you're talking about bringing it
27   forward in this proceeding?
28        MR. SHORTS:    Yes, that's the intent.
                                                                      53



 1        MR. MORAN:    All right.     And I think you indicated over
 2   the next couple of weeks you're working on something that
 3   you're going to bring forward?
 4        MR. SHORTS:   We certainly want to meet with the
 5   interested parties over the next two weeks so that we can
 6   get some, hopefully, a consensus view on what at least a
 7   couple of alternatives might look like, going into the
 8   settlement conference.
 9        MR. MORAN:    Right.     Thank you very much.
10        MS. SEBALJ:   Thank you, Mr. Moran.
11        I think we have our -- we're right on time for a our
12   scheduled morning break, following which Mr. Wightman,
13   Mr. Thompson, and then -- Ms. Young, did you have any
14   questions for Union?    No?
15        MS. YOUNG:    No, I don't.
16        MS. SEBALJ:   Thanks.      So let's take a break.   If we
17   can come back at about 20 after 10, please.
18   Thanks.
19        Sorry, the panel is requesting that we keep going.
20   Does anyone have any aversion?
21        THE REPORTER:     Sorry, I do need a short break.
22        MS. SEBALJ:   The court reporter does.      I should have
23   asked the reporter.
24        --- Recess taken at 10:05 a.m.
25        --- On resuming at 10:25 a.m.
26        PROCEDURAL MATTERS:

27        MS. SEBALJ:   Could I ask people to find their seats.
28        Just before we start with Mr. Wightman's questions of
                                                                      54



 1   the Union panel, I wanted to provide, hopefully, some
 2   clarity around the letter with respect to NGEIR issue
 3   number 3, the M12 premium issue.     The Union panel will be
 4   available for questions tomorrow on this issue.       The only
 5   question I have for everyone in the room is whether anyone
 6   in the room other than the Board hearing team, who I've
 7   heard from, have any questions for the TransCanada
 8   Pipelines panel on their evidence that was provided on
 9   issue number 3.
10        Is there any party in the room that has any questions
11   on that?
12        Okay.     Thank you.
13        What we may do is allow the Board hearing team, then,
14   to ask their questions on that issue.       Patrick, is your
15   expert available today?
16        MR. MORAN:    Anytime today.
17        MS. SEBALJ:    Okay.    So what we'll do is allow the
18   Board hearing team to ask their questions on that issue at
19   the same time as your panel is up today.       Is that
20   appropriate?
21        MR. MORAN:    Immediately following our panel.
22        MS. SEBALJ:    Great.    And that way tomorrow morning
23   will be compressed significantly, because we'll just have a
24   few parties who have questions of the Union panel on that
25   issue.
26        All right.    Whenever you're ready.     Mr. Wightman.
27        CROSS-EXAMINATION BY MR. WIGHTMAN:

28        MR. WIGHTMAN:    Okay.    Thank you.   I've just got a
                                                                     55



 1   couple of things I'd like to clarify, and that's it.
 2         On page 5 of 8 of the supplementals where you
 3   identify I think additional Dawn Parkway capacity cost,
 4   the impact of the [inaudible] 500-megawatt generator with
 5   the 50-percent load factor, and just to clarify, that 1.5
 6   to 2 million right now impact would only be on other M12
 7   customers, or would that be on all rate classes?
 8        MR. KITCHEN:    I think the point we were trying to make
 9   is that there is a significant cost.    To the extent that we
10   have to build for those facilities, or build to meet that
11   demand, there could be, in fact, on other rate classes.
12        MR. WIGHTMAN:    Okay.   And just generally, if you have
13   to build some new capacity or incur some costs in any way
14   to provide new services to customers or to new types of
15   customers, and there are actually adverse impacts on other
16   rate classes, then you could say generally that those other
17   rate classes must be subsidizing because you're not getting
18   the incremental recovery from those that caused the costs
19   to be incurred.    Would you agree with that?
20        MR. KITCHEN:    Well, in setting rates the costs are
21   allocated to rate classes and rates are set.    It's not a
22   perfect world.    So to the extent that there is an
23   underrecovery from a rate class or an overrecovery from one
24   rate class, it is possible there are some cross-subsidizes
25   between rate classes.    We try to minimize those by also
26   recognizing the fact there are also increased demands in a
27   rate class, so T1 would also bear the brunt of the
28   increase.
                                                                      56



 1          MR. WIGHTMAN:   Okay.   Thanks for that.   Now, just
 2   looking at these customer alternatives that you have, the
 3   four alternatives, where the fourth one is any combination
 4   of the first three, you go through that, and I'll get back
 5   to them in a second, but on the very last page, or the
 6   second-last, at the bottom of page 7, your conclusion, you
 7   say:   "By incorporating these proposing changes ...," et
 8   cetera.
 9          You will be ensuring that "the existing customer base
10   is not exposed to significant additional costs."      And it
11   goes on.
12           And could you first of all define what you take or
13   give me some idea of what significant additional costs are,
14   and tell me if you're talking about other rate classes too.
15   And then, thirdly, tell me which one of those first three
16   alternatives would or should visit costs on any other rate
17   classes.    I didn't see that there were any builds.    Maybe
18   there was a builds implicit in your three alternatives.
19          MR. KITCHEN:    I think what we're trying to do -- by
20   setting out the four options what we're doing is we're
21   preventing other rate classes from being impacted, ensuring
22   that the customer located at the east end actually bears
23   the cost.
24           You got a few questions there, Mr. Wightman.    But in
25   terms of the level of significant costs, I think I've said
26   that if you have two customers locating at the east end
27   with these load profiles, you could double costs
28   that are currently allocated to T1.
                                                                         57



 1            So, right now, there's approximately two and a half
 2   million in total, most recovered from the first block in
 3   our proposal.    And so you could see as much as 5 million.
 4   That's doubling the cost is significant, from my point of
 5   view.
 6           MR. WIGHTMAN:   Okay.    Thank you.
 7           Just two more questions.      One S currently do all rate
 8   class currently make some sort of contribution to the
 9   system?
10           MR. KITCHEN:    When you say "the system," you're
11   talking about Dawn to Parkway?
12           MR. WIGHTMAN:   Well, or to overall of Union's costs.
13   Do you have any rate class right now where you do not
14   recover some overheads or some sort of in addition to
15   incremental costs?
16           MR. KITCHEN:    Yes, our costs are based on a fully
17   allocated --
18           MR. WIGHTMAN:   And so everybody pays a little bit more
19   than just the additional it would cost to serve that cost.
20           MR. KITCHEN:    Yes.   Yes.   There are no incremental
21   tolls.
22           MR. WIGHTMAN:   And then lastly there's a proposal
23   that's come up that Union should eliminate obligated DCQ
24   for all customers.
25            Do you have any idea or would you be able to find out
26   what sort of costs that would entail if you eliminated the
27   obligated DCQ for all customers and what sort of impacts it
28   would have on different rate classes?
                                                                      58



 1         MR. KITCHEN:    I can't say off the top of my head what
 2   it would cost to eliminate all of the Parkway obligation
 3   for all customers.    I know that a number of years ago we
 4   looked at it and the cost was substantial.     I think, if my
 5   memory serves, it was in excess of $200 million of
 6   additional Dawn-Trafalgar capacity.
 7         And I don't know what the impact would be on
 8   individual rate classes, but given that level of cost it
 9   would be large.
10         MR. WIGHTMAN:   You may not be able to do this.    Do you
11   think you would be able to find where that was and provide
12   it?   I don't know if I'm going to ask you to redo it;
13   you've said it's pretty big, but --
14          And it would be an old estimate, too.    It would
15   probably be low.
16         MS. PASSMORE:   In our EBRO, in the 1999 filing, we put
17   in a number of $260 million if we were to get rid of all
18   obligated deliveries on the system.
19         MR. WIGHTMAN:   And it would probably be more now, is
20   that a safe bet, directionally?
21         MR. KITCHEN:    It's hard to say, because I'm not sure
22   what the level of east-end obligation but that underpinned
23   the 260 relative to today, so there may be some offsets.
24   You may have higher costs of construction, but you could
25   have a lower obligation that you're replacing.    Net, it may
26   be the same.   Net it may be a bit smaller.    I don't know.
27         MR. WIGHTMAN:   Thank you.   That's good enough.   Thank
28   you very much.
                                                                     59



 1        MS. SEBALJ:    Thank you.   Mr. Thompson.     No?
 2        CROSS-EXAMINATION BY MR. THOMPSON:

 3        MR. THOMPSON:    Thank you.    Panel, I'd like to just
 4   find out where we are with rate T1.      Currently, as I
 5   understand it, it's two subclasses.      Is that right?
 6        MR. KITCHEN:    I'm not sure what you're referring to
 7   when you say subclasses.
 8        MR. THOMPSON:     Well, it's divided into two.
 9   There's a small and then a large T1, is that right, or is
10   it all one rate?     I thought we were going from 2 to 4 under
11   your original proposals.
12        MR. KITCHEN:    Yes, we were.
13        MR. THOMPSON:    All right, so it's two now.
14        MR. KITCHEN:    That's correct.
15        MR. THOMPSON:    Okay.   And your company has just come
16   through a two 2007 rate case.      It's settled.   And those
17   existing T1 rates in that case are the two subsets, am I
18   correct?
19        MR. KITCHEN:    It's the two declining block rate
20   structure which was in the 2007 rate case.       In this process
21   we're looking at a four-step block rate structure.
22        MR. THOMPSON:    And so you got the four-step block in
23   this proceeding, and are you asking that it be approved for
24   2007 rates in this proceeding?
25        MR. KITCHEN:    Yes, we are.
26        MR. THOMPSON:    All right.    And, now, you've designed
27   this thing again; you've had another review and it sounds
28   to me like you have come up with some proposals for the
                                                                     60



 1   first -- the largest block.     Am I right?
 2        MS. PASSMORE:     That's correct.
 3        MR. KITCHEN:     Yes
 4        MR. THOMPSON:     Just help me with where we are on the
 5   T1 rate design.    Do we still have four blocks?
 6        MR. SHORTS:     In this proposal we still have four
 7   blocks and that is why we chose, at least the break point
 8   for these changes to be applicable to the largest block of
 9   the new proposal.
10        MR. THOMPSON:     So the new proposal is specific to the
11   largest block.
12        MR. SHORTS:     Yes, that's correct.
13        MR. THOMPSON:     All right.   And does it have any dollar
14   impact from what was shown initially, in terms of what the
15   charges are to that block?
16        MR. KITCHEN:     We have two people looking at each
17   other.    No.   It wouldn't impact the rates proposed in this
18   proceeding.
19            Really what we're talking about here is how a
20   customer meets or doesn't meet its delivery obligation.
21        MR. THOMPSON:     And can you just, in 25 words or less,
22   tell me what your original proposal was, in terms of
23   eligibility for the large block, and what it is now?
24        MR. SHORTS:     The eligibility in the large block
25   doesn't change.    It's still based upon the firm contracted
26   demand being at that level of 1.1 million cubic metres.
27        MR. THOMPSON:     All right.   Eligibility doesn't change.
28   The rate you're proposing doesn't change.
                                                                      61



 1          MR. SHORTS:   That's correct.
 2          MR. THOMPSON:   What changes?
 3          MR. SHORTS:   What changes is the customer's --
 4   essentially the customer's alternatives change, and the
 5   customer has an alternative that would require them in one
 6   instance to contract for incremental M12 over what the old
 7   policy would have had them contract for.     It's really
 8   centred around the obligation.      In other words, the change
 9   in the level of the obligation, moving from the load factor
10   adjusted level to 100 percent of their firm contracted
11   demand.
12          MR. THOMPSON:   All right.   Well, let me try it this
13   way.   You filed, as part of -- and it's in your material
14   here, it's an undertaking which you gave to Mr. Brown.
15   It's Exhibit B, tab 1, Undertaking 13, where you filed a T1
16   contract and schedules and terms and conditions that apply
17   to that contract.
18          MR. SHORTS:   Those are the standard ones off of our
19   web, yes.
20          MR. THOMPSON:   And I was wondering if you could
21   just help me by running through this and tell me what
22   changes under this proposal that you've now advanced for
23   the largest block.     Is that something that could be done by
24   undertaking?   Like, is there a shopping list of terms and
25   conditions that are actually going to change?
26          MR. SHORTS:   It's essentially related to the obligated
27   DCQ and the non-obligated DCQ, are where the predominant
28   changes are.
                                                                        62



 1           MR. THOMPSON:    And just refresh my memory in terms of
 2   that commitment.      Is that what we used to call the Parkway
 3   commitment?
 4           MR. SHORTS:   Well, it's been expanded because there
 5   are customers who are obligated to deliver at other
 6   portions of the system, not just at Parkway but --
 7           MR. THOMPSON:    Right.
 8           MR. SHORTS:     -- for the most part it started off as
 9   the Parkway obligation or the Parkway commitment, which, at
10   one time, had the delivery commitment credit related to it,
11   yes.
12           MR. THOMPSON:    Right.   So there are some T1s out there
13   now that have the, quotes Parkway commitment, still do,
14   they?
15           MR. SHORTS:     Oh, yes, a vast majority of the T1
16   customers would have a Parkway-obligated DCQ.
17           MR. THOMPSON:    Right.   And some have an obligated DCQ
18   somewhere else?
19           MR. SHORTS:   Yes.
20           MR. THOMPSON:    Are there those that don't have any
21   obligated DCQ yet?
22           MR. SHORTS:   As I mentioned some of those power
23   Customers have chosen to have some part non-obligated DCQ.
24   There are some smaller customers that have a non-obligated
25   that are also west of Dawn so --
26           MR. THOMPSON:    All right.   And what are the criteria
27   that apply to enable a particular customer to qualify for a
28   non-obligated DCQ.
                                                                      63



 1        MS. PASSMORE:    Would you repeat that, please?
 2        MR. THOMPSON:    What are the criteria that the company
 3   applies to determine whether a particular customer
 4   qualifies for a non-obligated DCQ?
 5        MR. SHORTS:    Essentially the customer would have to
 6   be -- a new customer?     Newer incremental customer or a load
 7   to the system.   That's the main criteria.   And then it
 8   would depend on the location the customer is at, as well as
 9   their size.   That would all depend on whether or not they
10   could oblige themselves of a non-obligated DCQ.
11        MR. THOMPSON:    So this design, rate design that you're
12   proposing distinguishes between new and existing customers,
13   is that one of its features?
14        MS. PASSMORE:    Yes, it is.
15        MR. KITCHEN:    The rate design doesn't distinguish
16   between new and existing, the policy on obligation for DCQ
17   at Parkway is changing.
18        MR. THOMPSON:    How does that reconcile with the
19   requirement that your rates not be unduly discriminatory?
20   Has that been given any thought?
21        MR. SHORTS:    That was one of the reasons we wanted to
22   put forth this proposal, was to not put these incremental
23   charges on existing customers to raise their rates
24   dramatically.
25        MR. THOMPSON:    Okay.   So it's the incremental tolling
26   for new customers; is that a way to describe it?
27        MR. KITCHEN:    No, it's not incremental tolling.     The
28   customer -- let's say, for example, a customer that takes
                                                                      64



 1   option 2, which is where they would contract for M12
 2   capacity to Parkway, they will pay the posted M12 rate, and
 3   they will also pay the posted T1 rate.     What the M12 rate
 4   does, it gets them to Parkway, which is where we need them
 5   to be.   And it doesn't impact other customers.
 6        MR. THOMPSON:   And the guiding principle, then, is no
 7   adverse impacts on existing customers?     That's what you're
 8   implying?
 9        MR. KITCHEN:    Well, the guiding principle is that we
10   felt that given the size of these load profile customers,
11   that there would be an impact that wasn't appropriate
12   and that the customers that seek this non-obligated
13   delivery should pay for those costs.
14        MR. THOMPSON:   You also, just again on the big picture
15   here, in terms of impacts of this, you had provided a
16   response to Ms. Young as undertaking 17 in this same
17   exhibit that I was referring to, and it was showing that on
18   the smaller subclass of T1, the impact of your proposal
19   originally was a 71 percent increase.     Does that change
20   under your revision to the original proposal?
21        MR. KITCHEN:    No.
22        MR. THOMPSON:   So these impacts still hold?
23        MR. KITCHEN:    Yes.
24        MR. THOMPSON:   Thank you.     Now, I just wondered about
25   these T1 rate reviews.      Your initial evidence was based on
26   a T1 rate review, was it not, prompted by the GEC decision
27   in part?
28        MR. KITCHEN:    That's correct.
                                                                        65



 1           MR. THOMPSON:   Right.    And there was, before that,
 2   there was a case which Coral was seeking some relief with
 3   respect to T1, and did you conduct a review at that time as
 4   well?
 5           MR. KITCHEN:    Yes.
 6           MR. THOMPSON:   And my recollection is you filed some
 7   evidence in response to the directive that came out of that
 8   decision in which Coral had raised its issue.        Could you
 9   undertake to file that on this record, please?
10           MR. KITCHEN:    Yes.
11           MR. THOMPSON:    Thank you.
12           MS. SEBALJ:    I believe that's Undertaking number
13   29.   Can I just be clear on what exactly it is?       It's
14   Coral evidence in --
15           MR. THOMPSON:   No, no.     It's Union's evidence in
16   response to a directive that the Board made, as I recall
17   it, in a case in which Coral was seeking some modifications
18   to T1, and Union then subsequently filed some evidence with
19   the Board about that.
20           UNION UNDERTAKING NO. 29:      TO PRODUCE UNION EVIDENCE
21           IN RESPONSE TO BOARD DIRECTIVE IN CASE IN WHICH CORAL
22           SOUGHT MODIFICATIONS TO T1

23           MS. SEBALJ:    Thank you.
24           MR. THOMPSON:   You may have the docket number,
25   Mr. Kitchen.
26           MR. KITCHEN:    It was in the 0063 case, our 2004 rate
27   case that we received the directive.
28           MR. THOMPSON:   Thank you.
                                                                     66



 1        MS. SEBALJ:     Thank you.
 2        MR. THOMPSON:     Mr. Wightman asked you a question about
 3   the guiding principle and what it means.    And you've
 4   mentioned this principle in a couple of places in your
 5   evidence.   I'm looking at page 2 of 8, Exhibit A, tab 3,
 6   page 2 of 8, in item 2:
 7                 “New services will not negatively impact the
 8                 service to existing customers where negative
 9                 impact is defined as either additional
10                 significant financial burden to other
11                 customers or a reduction in the overall
12                 system capability and reliability."
13        He asked you about the use of the word "significant"
14   somewhere else in your testimony.    Can you help me with
15   putting some meat on those bones, where you talk about an
16   "additional significant financial burden on other
17   customers"?    Do you have a percentage impact in mind when
18   you use that phrase?
19        MR. KITCHEN:    Well, I think when I answered Mr.
20   Wightman's question, I indicated that if you had two
21   customers, large customers, located at the east end.     With
22   the load profile that we've described in the evidence, you
23   could potentially double the costs that would be allocated
24   to the T1 rate class.    If right now we have approximately
25   2.5 million, you would have 5 million.    That is the
26   doubling that we're uncomfortable with.
27        And again, going back to the principle that these
28   customers are -- we've given the customer the flexibility
                                                                       67



 1   to have a non-obligated Parkway obligation, and the price
 2   of that is the M12 transport.
 3           MR. THOMPSON:   I'm just trying to understand
 4   that.    So are you saying if it doesn't double the impact on
 5   existing customers is not significant?
 6           MR. KITCHEN:    I would say, I think that if your -- in
 7   terms of what we would consider significant, if the load
 8   profile was similar to that of the existing class, or they
 9   were similar size, we wouldn't have the concern.
10           MR. SHORTS:    You also have to look at the upper limit,
11   that 1.1 million meters cubed.        Even that point, that
12   limit, is less than half of what, probably, a 500 megawatt
13   power plant would be seeking.        So, these are extremely
14   large loads we are referring to.
15           MR. THOMPSON:   Right.   No, I understand that.   All
16   right.    Let's leave it there.
17           You've described to one of the questioners that this
18   service is a no-notice service.        You don't know when the
19   customers start to take gas?         I thought that was the phrase
20   that somebody used.
21           MR. SHORTS:    The T1 does not have a requirement that a
22   customer nominate consumption on an ongoing basis.        If they
23   contract for firm service under T1, they have firm all day
24   embedded within that service.
25           MR. THOMPSON:   All right.    So how do you monitor the
26   risk of drafting?       In other words, how do you know -- what
27   sort of time requirements are there that, if one of these
28   customers starts to take gas, how long does it take you to
                                                                   68



 1   check whether the gas has been delivered?
 2        MR. SHORTS:   We actually -- we will monitor those
 3   customers, large customers on a real-time basis in our
 4   control room.   So we would know, essentially, when the
 5   customer was ramping up or ramping down their actual
 6   consumption.
 7        But from the contractual perspective, our system would
 8   have to be ready, essentially, to redeliver that firm
 9   volume to the customer at all times.
10        MR. THOMPSON:   Right.   But what I'm more concerned
11   about is when the customer doesn't live up to its
12   obligation to get the volume to you.   There's a time limit
13   on what the customer has to do to get that volume to you,
14   as I understood your evidence this morning.   Am I right?
15        MR. SHORTS:   Well, essentially if you look at -- I
16   want to get back to, say, the first two alternatives.
17        MR. THOMPSON:   Right.
18        MR. SHORTS:   Those are predominantly driven by a
19   customer who wants to have M12 or provide an obligated DCQ
20   to Union.   Union is expecting that customer to deliver and
21   live up to those obligations as a requirement for Union to
22   provide the firm redelivery service to the customer.
23        MR. THOMPSON:   I understand that.   I'm concerned about
24   the risk of drafting, and how you avoid that risk for your
25   other customers.   So you have your contractual arrangements
26   with these people that they have to give you a lot of gas
27   within a certain limited period of time, as I understood it
28   -- an hour or something like this?   Fifteen minutes?
                                                                      69



 1        MR. SHORTS:    I think you're making -- that's
 2   alternative number 3, where a customer is being -- the
 3   customer wants to not have an obligated DCQ, does not want
 4   to contract with Union for the M12 and subsequently the
 5   non-obligated T1.    What they want to do in that situation
 6   is try and match with Union at the east end the deliveries
 7   they're receiving from TransCanada on an hourly basis.      And
 8   just to be clear, we spoke about nominations earlier.
 9   Realistically, what we're looking at in that scenario is
10   it's totally dependent on the customer, and essentially
11   TransCanada to deliver and reschedule volumes to us at
12   Parkway.
13        And why we are not looking to offer infranchise or the
14   rest of the services on, say, a 24-hour or 96 basis is,
15   Union can't reschedule or, you know, redo its system in
16   that time period.
17        So essentially, we're expecting all of that
18   rescheduling to be done on TransCanada's side of the meter.
19   And we're just there picking the volumes as the
20   customer wants to consume them.
21        So, yes, we would be monitoring in that situation.      A
22   customer delivering to us.     And we would have to get
23   notification from TransCanada that those volumes were
24   actually showing up.
25        MR. THOMPSON:     And if you didn't get that
26   notification, no service?
27        MR. SHORT:     Well, I guess we haven't contemplated
28   putting the flow control valve on, but it's something we
                                                                   70



 1   might have to look at.
 2        MR. THOMPSON:   Well, if I took you through each of
 3   these alternatives that you've described here and ask you
 4   to briefly tell me how the risk of drafting the system by
 5   these very large customers is avoided, could you do that by
 6   way of undertaking, or do it here today?
 7        MR. SHORTS:   Well, essentially in the first scenarios
 8   the risks of drafting are not there because the customer is
 9   obligated, in number 1, to deliver us up to his contracted
10   demand each and every day.
11        MR. THOMPSON:   And suppose he doesn't, no service?
12   You don't get it, you don't deliver anything.   Is that
13   right?
14        MR. SHORTS:   Our obligation to redeliver is
15   subsequently related to their obligation to deliver to us.
16        MR. THOMPSON:   All right.   Thank you.
17        MR. SHORTS:   And then for scenario number 2, the
18   customer who has assigned their M12 capacity to Union,
19   Union then controls the amount to move those volumes from
20   Dawn to Parkway.
21        MR. THOMPSON:   Right.   And so if you don't get the gas
22   at Dawn, you don't carry anything, is that the --
23        MR. SHORTS:   Well, essentially he's made a withdrawal
24   out of storage, at that situation.
25        MR. THOMPSON:   Right.
26        MR. SHORTS:   It may be authorized, it may be
27   unauthorized.   It really is going to come down what the
28   cost is going to be to that customer for those volumes that
                                                                    71



 1   we had to redeliver to him.
 2        MR. THOMPSON:    Right.   Or he could just be drafting
 3   the system.   Is that --
 4        MR. SHORTS:   Essentially, as an integrated system, I
 5   mean, we have supplies coming in.      This would be a
 6   non-obligated basis.    Assuming it's non-obligated we would
 7   not be assuming, in a worst-case scenario, the customer
 8   would be delivering anything.      So the system would be
 9   designed as if the customer was delivering nothing and we
10   were delivering the full volume down to Parkway.
11        MR. THOMPSON:    All right.    So is the drafting risk
12   avoided or not avoided?
13        MR. SHORTS:   Yes.
14        MR. THOMPSON:    All right.    And the other two?
15        MR. SHORTS:     Sorry, in number 1 we spoke about how the
16   drafting risk is --
17        MR. THOMPSON:    No, number 3 and 4, are they any
18   different?
19        MR. SHORTS:   Well, 3 is basically relying on the
20   volume from TransCanada to eliminate the need for that
21   drafting.    And that's where I mention where we may have to
22   in that situation install a flow control valve if we didn't
23   get a confirmation from TransCanada that those volumes were
24   actually showing up at Parkway.
25        MR. THOMPSON:    And number 4?
26        MR. SHORTS:   Well, 4 is just a combination of the
27   above, so -- depending on how much of each you took, it
28   would relate to how much that would be there, that drafting
                                                                     72



 1   potential.
 2        MR. THOMPSON:    Thank you.
 3        Now, does this service pose any threat to increasing
 4   curtailment of interruptible customers, this new service
 5   you've designed?
 6        MR. SHORTS:    By having the customer essentially
 7   deliver the full firm CD as either an obligated DCQ or as a
 8   contract for the full M12, it shouldn't have a negative
 9   impact on that.
10        MR. THOMPSON:     Your use of the word "shouldn't" makes
11   me wonder.
12        MR. SHORTS:    No, we don't expect it to.
13        MR. THOMPSON:    All right.   And what about your ability
14   to provide the balancing service in the north, I forget
15   what that's called.    Is it --
16        MR. SHORTS:    CBS?
17        MR. THOMPSON:    CBS?
18        MR. SHORTS:    This has no impact on the northern
19   customers.
20        MR. THOMPSON:    So that that will be business as usual?
21        MR. SHORTS:    That's correct.
22        MR. THOMPSON:    Thank you.   Those are my questions.
23        MS. SEBALJ:    Thank you, Mr. Thompson.
24        Were there any other participants that had any
25   questions for this panel?
26        I'm sorry.    We do have a question for this panel.
27        CROSS-EXAMINATION BY MR. MAN:

28        MR. MAN:     Just a quick question.   Does any part of
                                                                       73



 1   your evidence related to Issue 1 need to be updated as a
 2   result of your settlement agreement?
 3           MR. KITCHEN:    We're in the process of doing the -- of
 4   incorporating the settlement agreement into a rates package
 5   given that the '07 rates were settled or the financial
 6   issues were settled there would be impacts on the T1
 7   re-design.
 8           MR. MAN:   So how would you propose to provide that to
 9   the NGEIR proceeding?
10           MR. KITCHEN:    I suppose that once we've completed the
11   package, that we could undertake to update the evidence
12   that was filed.
13           MR. MAN:   Do you have an estimated timing on that?
14           MR. KITCHEN:    I‟m trying to get the package done this
15   week but it's difficult for me to say that it would ready
16   by the filing deadline for undertakings.       I'm assuming that
17   we could do it but it maybe be a challenge.
18           MR. MAN:   But you undertake to do it?
19           MS. SEBALJ:    Why don't we just have you update on
20   that.
21           MR. KITCHEN:    It's difficult for me to sit here and
22   give you a firm date because I haven't talked to my people
23   in Chatham who are working on it right now, but I'll
24   provide you with an update if that's possible.
25           MS. SEBALJ:    Thank you.   Thank you, Mr. Cameron.
26   Thank you, panel.      I think we're through this portion of
27   the day.
28           I'd like to do a quick switch, if we can, without a
                                                                      74



 1   break, just to move things along as quickly as possible.
 2        TCPL – PANEL 1:
 3        CRAIG FREW;
 4        TIM STRINGER;
 5        PETER EXALL;
 6        STEVE EMOND:

 7        MS. SEBALJ:     Sorry.   Whenever you're ready, Mr. Keys.
 8   Did you have any introduction or presentation?
 9        MR. KEY:     Yes.
10        MS. SEBALJ:     Apologies.
11        MR. KEY:     Thank you, Ms. Sebalj.   Of course
12   TransCanada Pipeline Limited's panel is here to speak to
13   its evidence filed on issue number 1, which is new services
14   for gas-fired generators.     I'd like to start by introducing
15   the TransCanada panel to the room.
16         Seated second from left, from the room's left, is
17   Mr. Craig Frew.    Mr. Frew is the vice president of gas
18   transmission east with TransCanada.     And Mr. Frew will be
19   the chair of TransCanada's panel and he'll be available to
20   response to questions on policy matters.
21         Seated to Mr. Frew's immediate right is Mr. Tim
22   Stringer.   Mr. Stringer is a sales and marketing
23   representative with gas transmission east.      And Mr.
24   Stringer is available to answer any questions about the
25   power generation markets in Ontario in the context of gas
26   transmission services.
27         Seated on Mr. Frew's left is Mr. Peter Exall.       His
28   position is business analyst in the eastern pricing group
                                                                    75



 1   with TransCanada.   And Mr. Exall will respond to questions
 2   about the service, particular service attributes of
 3   TransCanada's proposed new short notice services.
 4         And sitting on the far end of the panel, next to
 5   Mr. Exall, is Mr. Steve Emond.    Mr. Emond is the director
 6   of customer service, and he's available to speak to
 7   TransCanada's evidence in relation to serving the
 8   Ontario market and customer service matters.
 9        Before the panel responds to questions, Mr. Frew has
10   some brief opening remarks he would like to make.
11        MS. SEBALJ:    Thank you.
12        OPENING STATEMENT BY MR. FREW:

13        MR. FREW:   Thank you.   Good morning.   TransCanada is
14   pleased to be able to participate in this Natural Gas
15   Electricity Interface Review.    TransCanada plays a
16   significant role in meeting the gas demand in Ontario and
17   we deliver 1.3 -- some 1.3 billion gigajoules into Ontario,
18   approximately 3.6 gigajoules per day on average.
19         Our purpose for participating in this review is to
20   communicate the role, our role, in delivering gas into
21   Ontario, and to help interested parties understand our
22   existing services, how we serve the Ontario market, and our
23   proposed short-notice services and their ability to
24   accommodate the power markets, power generation markets.
25         We also would like to acknowledge the Board's
26   priority of ensuring the adequacy of natural gas
27   infrastructure to meet the demands of natural gas-fired
28   generation.   And we're cognizant of the need for
                                                                    76



 1   transmission services such as ourselves to provide new
 2   services in meeting this new, growing market.
 3        In this regard we have applied a collaborative effort
 4   over the last 18 months, working with industry
 5   stakeholders, including power generators the IESO, the LDCs
 6   and existing mainline shippers to evaluate the need for new
 7   market or new development services for power generation.
 8        Our current services such as our FT are not really
 9   ideally suited to handle the large loads.    The hourly flows
10   it can very significantly change on short notice.
11        We expect the power generators to require greater
12   flexibility and certainty of service, and our proposed firm
13   transportation short notice or FT-SN and short-notice
14   balancing service or SNB, we believe will meet the
15   requirements of most of the gas-fired electric generators
16   and there are three components to what they'll be ensured.
17   They'll be ensured a firm access to service throughout the
18   day, provide more frequent nomination windows than is
19   currently available, and meet balancing needs of power
20   generators in a cost-based fashion.
21         In this regard, TransCanada has filed with the
22   National Energy Board on May the 1st, an application for
23   approval of the FT-SN and SNB services, and with that we're
24   available to answer any questions that you may have.
25        MS. SEBALJ:   Thank you Mr. Frew.    I turn it over the
26   you now, Ms. Campbell.
27        CROSS-EXAMINATION BY MS. CAMPBELL:

28        MS. CAMPBELL:   Thank you.   My first question is going
                                                                      77



 1   to deal with more frequent nomination windows.
 2           TCPL proposed nomination windows up to every 15
 3   minutes as part of the FT-SN service.      And my first
 4   question is:    Can the windows be used if the Ontario LDCs
 5   don't have the systems and procedures in place to accept
 6   them?
 7           MR. EXALL:   Yes, we believe the services can be used.
 8   That's part of the SNB proposal that we have a mechanism
 9   for the shipper to utilize the enhanced flexibility in the
10   FT-SN service by utilizing the SNB service on the
11   TransCanada system.
12           In the event that the Ontario LDCs are unable to
13   accommodate those windows, that is an option, and the
14   option is always available to the shipper regardless of
15   that availability on interconnected pipelines.
16           MS. CAMPBELL:   So there's no need for any co-
17   ordination between Union and Enbridge and TCPL in order for
18   the additional nomination windows to work?
19           MR. EXALL:   Actually there is a requirement for
20   alignment there on the delivery side, with the LDC involved
21   -- there is a requirement for them to confirm the volume
22   changes -- the quantity changes, sorry, with FT-SN
23   nominations.
24           MS. CAMPBELL:   Have you discussed with Union or
25   Enbridge, or both of them, what will be required to
26   co-ordinate it?
27           MR. EXALL:   Yes, we have had conversations with both
28   LDCs regarding the accommodation of that frequency of
                                                                       78



 1   windows.
 2        MS. CAMPBELL:     So I guess my question is what's the
 3   status of the co-ordination?        Is it just in the initial
 4   stages, or how far has it proceeded?
 5        MR. EXALL:     We've had numerous discussions on the
 6   topic, but I think I'd have to fall back on the evidence of
 7   the interconnecting service providers to illustrate that we
 8   haven't reached a perfect alignment on all of the topics
 9   that we've outlined.
10         I think we're always open for further discussion on
11   those topics.
12        MS. CAMPBELL:     When is the earliest time that the
13   nominations proposed by TCPL could effectively be used by
14   Ontario shippers?
15        MR. FREW:    Are you asking when we think the service
16   would be approved by the NEB -- is that what you're really
17   asking?
18        MS. CAMPBELL:     Yes.
19        MR. FREW:    Well, we would hope that the NEB would move
20   fairly quickly to address the application, and that could
21   mean within the few weeks they would post their deadline or
22   their schedule for reviewing the application.       And we're
23   hopeful that this service, if approved by the NEB, would be
24   sometime between now and the end of the year.
25        MS. CAMPBELL:     So, sometime in 2006?
26        MR. FREW:    Yes.
27        MS. CAMPBELL:     Thank you.    What would TCPL require by
28   way of infrastructure from the LDCs and the wholesalers to
                                                                      79



 1   enable SNB?
 2          MR. EXALL:    SNB is offered on the main line system,
 3   and therefore would require no facilities infrastructure
 4   from interconnecting service providers.
 5          MS. CAMPBELL:    My next question is flow control.
 6   Always a hot topic.
 7          On page 10 of the evidence that you pre-filed, you
 8   stated that TCPL would require that FT-SN service delivery
 9   locations have flow control valves that can be remotely
10   operated by TCPL's gas control.
11          MR. EXALL:    Yes.
12          MS. CAMPBELL:    The question is, at what flow above the
13   contract quantity would flow control be activated?
14          MR. FREW:    We haven't specified exactly how we would
15   operate those flow control mechanisms at this point.        My
16   expectation would be that you would very seldom ever use
17   the flow control unless the plant taking the gas was
18   significantly overrunning its requests for the particular
19   day.
20          MS. CAMPBELL:    What would significant overrunning be?
21          MR. FREW:    I would guess it would be somewhere over 20
22   or 25 percent of their maximum nomination.
23          MS. CAMPBELL:    Okay.   Twenty to 25 over the maximum
24   nomination.
25          MR. FREW:    Right.
26          MS. CAMPBELL:    How much advance notice would be
27   provided to shippers, and how would you give it to them?
28          MR. FREW:    On the use of the flow control?
                                                                   80



 1        MS. CAMPBELL:   Yes, on the activation of the flow
 2   control.
 3        MR. FREW:   Again, I suspect what would happen is that
 4   we would be in contact with the plant operator and inform
 5   them that if they didn't change their flow within a very
 6   short period of time, probably within 15 or 20 minutes,
 7   that we would be enacting the mechanism.
 8        MS. CAMPBELL:   All right.   And so my question was, how
 9   would you be communicating that, and the answer is an irate
10   phone call, basically?
11        MR. FREW:   Well, yeah.   You would start with a phone
12   call, and then you would follow up with the actual control
13   on the valve.
14        MS. CAMPBELL:   Okay.
15        MR. FREW:   Now, we would be monitoring our system at
16   all times to make sure that we wouldn't enforce the flow
17   control unless we felt that there was the potential for
18   there to be a problem on our own system.   But you would
19   start to learn the behaviour of the power plant and each
20   one would probably be a little bit different.   And we would
21   probably respond differently if there was a history of not
22   responding to the irate phone call.
23        MS. CAMPBELL:   Would it only be the badly behaved
24   plant that gets notified or is it everybody, all the LDCs
25   who have been notified of the activation of the flow
26   control?
27        MR. FREW:   Well, our proposal has -- FT-SN is only
28   available for discrete locations.
                                                                    81



 1        MS. CAMPBELL:   Of course.   Thank you.
 2        MR. FREW:    So it's not really informing the LDC, it's
 3   just informing the plant.
 4        MS. CAMPBELL:   Thank you.   Will all TransCanada
 5   shippers who are located in Enbridge's franchise be able to
 6   contract for FT-SN and SNB?
 7        MR. EXALL:   Yes, the service is available to any
 8   shipper who wishes to contract for service.
 9        MS. CAMPBELL:   If the flow control valves were owned
10   and operated by Union and Enbridge, would that allow
11   customers embedded in the utilities‟ distribution
12   system to gain access to the new services?
13        MR. FREW:    Not the way we filed it.   If it's owned and
14   controlled by someone else, that's not what we've applied
15   for with the National Energy Board.   That's not to say that
16   we wouldn't consider a mechanism of dealing with either
17   Union or Enbridge or anyone else for that matter, that if
18   we could comfort ourselves that essentially we could have
19   control.
20         I think we could probably figure out how we could
21   make that work.    But I would suspect that if it was
22   embedded into one of the distribution systems, they would
23   have the similar concern that we would have, and that is,
24   that you would need that mechanism to ensure the integrity
25   of the system in the event that the power market wasn't
26   balancing its supply and its take on an ongoing basis.
27        MS. CAMPBELL:   On page 10, TCPL describes the SNB
28   service and mentions that:
                                                                      82



 1                “The availability of SNB will enhance the
 2                flexibility provided to FT-SN shippers by
 3                providing access to an alternative source of
 4                supply or market and by enabling effective
 5                nominations at up to 15-minute intervals."
 6           Now, my first question is, could you just clarify for
 7   me what you mean by "alternative sources of supply or
 8   market"?
 9           MR. EXALL:    The SNB account would act as a mechanism
10   for the shipper to deliver quantities of gas into -- so you
11   can think of that as an alternative market, or withdraw
12   quantities of gas out of as a form of supply to feed their
13   power plant, as an example.
14           MS. CAMPBELL:    And could you describe the means by
15   which the SNB service would be provided?
16           MR. EXALL:    The SNB services would be provided using a
17   main line compression and line pack, and potentially in the
18   other contractual obligations that TransCanada feels it
19   must enter into in order to provide that service.
20           MS. DUGUAY:   What could those be?
21           MR. EXALL:    There could be a transportation service or
22   balancing service on an interconnecting service provider
23   that might help facilitate the SNB service on the main line
24   side.    It's all very situational, depends on the request,
25   the location, and would require an economic analysis to
26   determine the best, lowest cost option to provide the SNB
27   service.
28           MS. DUGUAY:   Could that include storage from Union
                                                                       83



 1   Gas?
 2          MR. EXALL:   Yes, I think it could.
 3          MS. CAMPBELL:   Thank you.
 4          MR. FREW:    Just to clarify, we'd be looking at the
 5   lowest-cost way of providing that service, and if that
 6   meant contracting for storage on an adjoining pipe, that
 7   would be one way of doing it.
 8          MS. CAMPBELL:   Thank you.   Is the contracted quantity
 9   on FT-SN a maximum hourly entitlement fixed for the
10   duration of the contract?
11          MR. EXALL:   The contract quantity on the FT-SN
12   contract is actually a daily quantity.       And the maximum
13   hourly entitlement would be 5 percent of that daily
14   contract quantity in an hour, and, yes, that maximum
15   entitlement is fixed for that FT-SN contract.
16          MS. CAMPBELL:   Are the demand charges applicable to
17   the maximum hourly flow entitle for the duration of the
18   contract?
19          MR. EXALL:   The demand and commodity portions would be
20   attributable back to the daily quantities.
21          MS. CAMPBELL:   And would all shippers in the same
22   delivery area pay the same toll for the same service
23   period?
24          MR. EXALL:   Shippers to the same delivery area pay the
25   same toll for the same service period --
26          MS. CAMPBELL:   Yes.
27          MR. EXALL:    -- was the question?    Yes, but I feel we
28   should point out that the request for FT-SN service would
                                                                    84



 1   be to distinct separate distributor delivery areas so it
 2   would be rare to have multiple if the season services to
 3   the same delivery areas.    But in the example that you
 4   provided, yes, if the receipt and delivery points were
 5   exactly the same, same distance involved, then they would
 6   have the same toll for the same amount.
 7        MR. FREW:    The toll is discrete to the delivery point.
 8        MS. CAMPBELL:     Thank you.
 9        MR. FREW:    So that if it came from any single receipt
10   location to that discrete delivery point, that would be a
11   discrete toll.    But it would be the same.   And we use the
12   same mechanism for calculating that as we do with all of
13   our other services.    It's a point-to-point tolling
14   methodology.
15        MR. HASSAN:   Mr. Frew, would they all be reset at the
16   same time, all of the tolls for these two services?       So you
17   have year 1, you go by, and you determine the totals for
18   all the different delivery points set them in place for a
19   period of time, do those tolls stay in place for that
20   duration of time and then when you recalculate, get more
21   requests, and recalculate, is there a new toll established?
22        MR. EXALL:    I can answer that.   Yes, as tolls change
23   year over year, the FT-SN toll will change along with all
24   of the other tolls on the system.    So similar to when the
25   FT toll changes from one year to the next, the FT-SN tolls
26   will change as well.
27        MR. FREW:    Just again for clarification, when we have
28   a toll, when we revise our tolls or have a rate hearing,
                                                                       85



 1   all of our tolls are updated at the same time.
 2           MR. HASSAN:    Thank you.
 3           MS. CAMPBELL:    At page 10, lines 22 to 24, TCPL states
 4   that:
 5                "It will utilize mainline compression and line
 6                pack to provide the flexibility as part of its
 7                response to the market need for variable
 8                consumption on short notice."
 9           And the question is, at what elected FT-SN and SNB
10   level would TCPL be required to build new capacity?
11           MR. EXALL:    That is actually quite dependent on where
12   we're at in terms of contract levels at any point in time.
13   So there's no hard and fast number that we can give.       It
14   depends on the aggregate amount requested for SNB and FT-SN
15   service, and it's also dependent on the current contract
16   levels in those areas.
17            So as an example, we may have a few hundred thousand
18   gJs of excess capacity between two points or in a segment
19   of the system.        That might change tomorrow if we have new
20   FT contracts signed up by other shippers.
21           MR. FREW:    And again, we're in an environment today
22   where our contract profile is almost in continuous change.
23   The average term of our contracts on our system has gone
24   from -- it used to be long-term, being ten plus years to,
25   it's probably less than two years.       And users of our system
26   can provide us with six months' notice prior to the end of
27   their contract term that they wish to renew the contract or
28   not.
                                                                   86



 1        And this year we just went through this renewal notice
 2   period.   It ends at the end of April, typically, on a year
 3   when it's the November 1st contract coming up.
 4        And there was over 3 billion cubic feet a day that was
 5   up for renewal at that period of time.    So that's a very
 6   significant portion of our overall capacity is now on an
 7   almost rolling basis.
 8        So, depending on whether people renew or they return
 9   capacity, that would make capacity available for other
10   classes of service or new shippers or not.
11        So it's a very fluid thing going forward.
12        MS. CAMPBELL:   Thank you.   And my last question.   EGD,
13   which is Enbridge, indicated in its evidence that if the
14   FT-SN proposal were point to point, this would prevent it
15   from offering any form of load-balancing.
16        Did TCPL consider any other options that would allow
17   power generators to pick and choose between services and
18   service levels from TCPL, Union, and Enbridge?
19        MR. EXALL:   Yes, we did examine those conditions.    And
20   the FT-SN service provides the flexibility to the shipper
21   to be able to nominate to match almost exactly their
22   consumption to their supply.   And therefore there should be
23   little if any need to load balance at the delivery point.
24        So the first point we would like to consider and make
25   clear is that we view it as a minimum -- minimal need for
26   load-balancing at the delivery point.
27         In addition to that, we feel that there are options
28   for other service providers, such as Enbridge, to provide
                                                                   87



 1   load-balancing.    They can provide load-balancing on if
 2   supply-side out of Dawn.   They have the option to contract
 3   for an FT-SN service straight to the same delivery point
 4   and area, to which the power plant exists, to offer up
 5   other supply-side load-balancing options.
 6        So we think there are those options available.
 7        MS. DUGUAY:   One last question.   With regard to the
 8   proposed FT-SN and short-notice balancing, do you have an
 9   indication as to how much you could offer, say, as of
10   November of 2007, with existing facilities?
11        MR. FREW:    It's a difficult question to answer, but
12   briefly, I think we've done some analysis on our system to
13   determine where we think SNB would be readily available and
14   where it would not.   And there's probably not a lot of
15   capacity or at least it would be quite a -- well, there's
16   probably not a lot of capacity at Parkway for such a
17   service, but if the -- as a receipt point.    But if the
18   receipt point was Empress or North Bay or something like
19   that, because the path for the gas coming through our
20   system uses the whole pipeline system it means it
21   effectively has the capability to use the line pack along
22   that long path.
23        So the SNB is actually more a function of the distance
24   between the receipt and delivery points, the longer it is
25   the more capability there is to provide the service, and
26   the shorter it is, obviously, the less capability that we
27   have to provide that service.
28        So if it was a long-haul SNB contract, we could
                                                                      88



 1   probably provide affirm and sufficient SNB.     If it was a
 2   very short haul, I think we would be challenged to provide
 3   this service for 2007.
 4        MS. DUGUAY:    Thank you.
 5        MS. CAMPBELL:    Thank you.   Those are my questions.
 6        MS. SEBALJ:    Thank you.   I believe Enbridge has
 7   switched with Union so they're up next.
 8        MR. SOMMERVILLE:    Can't remember the guy's name.
 9        MR. STEVENS:    Good morning, panel.   My name's David
10   Stevens.   I'm here on behalf of Enbridge Gas Distribution.
11   With me are David Charleson and Melanie Giradar.
12        Mr. Charleson will be asking most of the questions
13   this morning.
14        CROSS-EXAMINATION BY MR. CHARLESON:

15        MR. CHARLESON:    I just have a couple of quick follow-
16   up questions to some of the responses that you gave to the
17   Board staff.
18        The first, you talked about there being a discrete
19   toll to each delivery area.      Now, would that also apply to
20   if the FT-SN shipper was on a long-haul contract?
21        MR. EXALL:    They would realize the FT-based
22   Long-haul zonal toll, so they would still pay the 110
23   percent of the FT toll, but they would use the zonal toll
24   to determine the base.
25        MR. STEVENS:    So for clarify, when you were talking
26   about discrete tolls you were referring more to a short-
27   haul service; correct?
28         You also indicated that you had done some analysis on
                                                                          89



 1   where SNB would be available.          And we were just wondering
 2   if you would be able to file that analysis.
 3           MR. EXALL:    I believe the analysis that we've done is
 4   included in the evidence that we've provided, the three
 5   examples.    That's the extent of the simulations that we've
 6   been able to run.
 7           MR. CHARLESON:      Okay.    Thanks.
 8           MR. FREW:    And I think it would give you kind of the
 9   bookends of the capabilities and the costs.
10           MR. STEVENS:    In your discussion with Board Counsel,
11   I believe you were talking more about availability as
12   opposed to cost.       Does the pre-filed evidence speak to
13   that?
14           You spoke about availability in 2007 of SNB service
15   without having to construct any extra facilities.           Is all
16   the analysis you've done about that included in the pre-
17   filed evidence?
18           MR. FREW:    There isn't really any specific analysis on
19   that, because then you would have to presume what your
20   contracting profile looks like in the long term.           So, no,
21   it's not -- we have indicated, though, that we would build
22   for a long-term service if it was requested.            That would
23   probably take at least two years.
24           MR. STEVENS:    I see.      Okay.   I just understood you
25   to say previously that you'd done analysis as to where
26   SNB would be readily available in 2007?
27           MR. FREW:    Yes.   It appears to be readily available on
28   a long-haul basis.
                                                                      90



 1        MR. STEVENS:    Okay.    Thank you.
 2        MR. CHARLESON:      We've tried to structure our questions
 3   or kind of work through the evidence.      It may jump around a
 4   little bit, but we‟ll take that path.
 5         Starting in your introduction on page 3, at lines 11
 6   and 12, you indicate that the services that are being
 7   identified are a complement or an alternative to any
 8   services proposed by Union and Enbridge.     And I guess the
 9   question we have, are there any of the proposed Enbridge
10   services where TransCanada would see either proposals as an
11   alternative?
12        MR. EXALL:    Sorry, just for clarity, what page was
13   that on?
14        MR. CHARLESON:      In your introduction, page 3.
15        MR. FREW:    So I mean, this is a generic statement
16   suggesting that we feel that because of the frequency of
17   the nomination windows that we will be able to match up
18   from a nomination perspective with the services on
19   connecting upstream and downstream pipes, including
20   Enbridge or Union.
21        MR. CHARLESON:      So that would be complementary in
22   nature?
23        MR. FREW:    Yes.
24        MR. CHARLESON:      So, I guess you've included the words
25   "an alternative" to any of the services proposed by Union
26   and Enbridge.    Are there any of the Enbridge services that
27   TransCanada views these proposals as being an alternative
28   as opposed to complementary?
                                                                     91



 1        MR. FREW:    I think the intent there is to suggest that
 2   we're open if someone wishes to tie directly to us versus
 3   tie directly to the distribution system.   That's an issue
 4   that really isn't being addressed at this hearing.     And
 5   we're just open for business from whoever comes to us,
 6   whether it is Enbridge or someone else directly.
 7        MR. CHARLESON:    Are there any scenarios where
 8   TransCanada's proposal isn't a complement or alternative to
 9   the proposed Enbridge services?   Are there any scenarios,
10   say, within the Enbridge system, that you would see where
11   these services don't complement or provide an alternative
12   to Enbridge customers?
13        MR. EXALL:   I think, as Mr. Frew had pointed out, in
14   the example where a plant or an end-user is directly
15   connected to the main line, the shipper is then looking for
16   an alternative service, a service provided by TransCanada
17   Directly, and not looking for one from another service
18   provider.
19        MR. STEVENS:   But what about situations where, then,
20   the customer is not connected to the main line?
21        MR. FREW:    Well, I think there's a situation where
22   it‟s not complementary to the services downstream.     That's
23   the way we always try to design, one that's complementary
24   to some service either upstream or downstream.
25        MR. CHARLESON:    Perhaps you could clarify how they're
26   complementary to the services for an embedded power
27   generator.
28        MR. FREW:    I'm not sure if I understand the question,
                                                                    92



 1   but someone would need to contract at a delivery point off
 2   of our system that, I guess if it's embedded it would be
 3   inside a distributor area.     And I would consider that to be
 4   complementary because we would be delivering gas to
 5   distributor, who delivered gas to the embedded power plant.
 6        MR. CHARLESON:    Okay.   We can move on from there, I
 7   guess.   Does TransCanada acknowledge that Enbridge faces
 8   delivery flexibility limits based on these proposals?
 9        MR. EXALL:    I'm not sure if we understand the
10   question.
11        Could you please repeat it?
12        MR. CHARLESON:    Would you acknowledge that
13   Enbridge faces delivery flexibility limits, so limits to
14   the amount of flexibility that we have in terms of
15   deliveries we can make for customers under these proposals?
16        MR. EXALL:    I'm not sure how providing an FT-SN
17   service to an end-user limits Enbridge's ability to make
18   deliveries within their franchise area at all.
19        MR. FREW:    I think we acknowledge that the
20   distributors have may have limitations in their capability
21   to deliver the service that we're capable of delivering to
22   the distributor.
23        MR. CHARLESON:    Now, in your introduction, looking at
24   page 3 and page 4, you talk about how TransCanada is not
25   regulated by the Board, and you're not seeking any relief
26   from the Board in this proceeding related to TransCanada's
27   proposed new services.
28        You're providing evidence to assist the Board and
                                                                     93



 1   other parties to better understand all of the service
 2   choices that may be available.
 3        Now, does TransCanada see any role for the Board in
 4   this case to comment on or deal with their perceived
 5   strengths or shortcomings in TransCanada's proposed
 6   services?
 7        MR. FREW:   We're open to suggestions from anyone.
 8        MR. STEVENS:     What do you see as the role of the
 9   Board opposite the service offerings that you're providing
10   in this proceeding?     You've provided a large amount of
11   evidence for informational purposes, apparently, but what
12   do you see as the role of the Ontario Energy Board in this
13   proceeding as it relates to your evidence?
14        MR. FREW:   Well, there's a couple.    One is, it is
15   informational.   If the Board felt it was appropriate, they
16   could probably support our application in front of the
17   National Energy Board.
18        MR. CHARLESON:     How does TransCanada believe that the
19   Board in this proceeding, which may try to approve new
20   rates and service offerings, should deal with the issues
21   about Enbridge's service offerings are complementary with
22   the TransCanada services that have not yet been considered
23   or approved by the NEB?    Basically, how would you suggest
24   the Board deal with the issue that we've got, say, two
25   separate regulatory proceedings going on that are
26   potentially on different time lines?    How should the OEB
27   address that issue?
28        MR. FREW:   I'm not sure if -- I mean, if they can.
                                                                     94



 1   You know, we aren't sure at this point in time exactly when
 2   the service would be implemented or exactly what it would
 3   look like.    We would hope that it would be pretty much what
 4   we filed.    But one can't be guaranteed of that.
 5        MR. STEVENS:    And if we understand correctly from
 6   what you said earlier, Mr. Frew, you don't expect to have
 7   any guidance or decision from the National Energy Board
 8   before this proceeding is finished in the middle of July?
 9        MR. FREW:    I would be very surprised if we have a
10   final judgment from the NEB by the end of July.
11        MR. CHARLESON:    Okay.   Moving into your evidence on
12   issue -- for Issue I, and I'm looking at, on page 6.       In
13   lines 7-14, you talk about the flow-rate nominations.
14        Now, within this paragraph there's several references
15   that are made to information and sufficient information.
16        Is this the key consideration, that TransCanada sees
17   being necessary to be able to meet the needs of power
18   generators, having information on what the generators are
19   planning on doing with regards to operating and providing
20   supply for their operations?
21        MR. EXALL:    I would say it's one of the key
22   considerations but not the sole consideration.
23        MR. CHARLESON:    And what would the other
24   considerations be, then?
25        MR. EXALL:    We'd be very interested, really, to expand
26   on the control that we have in that area.    So, for example,
27   having flow control in the area to ensure we can prevent
28   overtakes off of the system.    Other attributes that are of
                                                                   95



 1   key consideration would be the increased frequency of
 2   nomination windows, the certainty of service, the
 3   reservation of capacity that's inherent in FT-SN.    Those
 4   are all considerations.
 5        MR. CHARLESON:   Okay.   A little further down that page
 6   you have a discussion about the hourly flow limit based on
 7   daily contract quantity.
 8        Now, FT-SN is to be nominated on an hourly flow basis.
 9   What is the degree of tolerance -- and I think you talked a
10   little bit earlier on about the degree of tolerance that
11   you saw.
12        But -- and I think you indicated that they could have
13   up to, say, potentially a 25 percent variance in terms of
14   the flow rate to their nomination.   I just want this --
15        MR. FREW:   I'd like to make it clear, we would always
16   reserve the right to restrict exactly to what the
17   nomination maximum provides under the contract.   But what I
18   was saying is it would probably be a little more flexible
19   than that, depending on the history and our capability to
20   deliver.
21        So we would take the two into consideration.   If we
22   had the capability to deliver more, we would probably make
23   it available.
24        MR. CHARLESON:   Are there implications for the FT-SN
25   shipper if they consistently exceed their flow-rate
26   nominations?
27        MR. FREW:   Well, what would happen is that, at the end
28   of the day, they would -- we would review their balance,
                                                                    96



 1   and there could be penalties.   Yes.
 2        MR. CHARLESON:   Okay.   On page 8, looking at lines 10
 3   and 11, your evidence indicates that:
 4             “This approach does not provide TransCanada with
 5             any information as to the exact location where
 6             the change in consumption may occur."
 7        And this is more of a discussion around the issues of
 8   the service being to a delivery area.
 9        What alternatives have been considered by TransCanada
10   to help them know the exact location where a change in
11   consumption may occur?
12        MR. EXALL:   We looked at providing service to broader
13   delivery areas but really couldn't get past the fact that
14   the contractual entitlement for services to a broad
15   delivery area provide the ability for -- to a shipper to
16   deliver to any one of the meters in the broad area, and we
17   simply can't get past that when we're determining that.    We
18   require the more exact information to know where the load
19   is required in any particular point -- at any particular
20   point, sorry.
21        MR. CHARLESON:   Is there a reason why TransCanada
22   wouldn't be able to get that information, again, going back
23   to the word information, about the location just from the
24   identity to have the customer making the nomination and
25   knowing who the nomination's coming from, and what they've
26   contracted the capacity for?
27        MR. EXALL:   Again, the contractual entitlement to that
28   shipper would be to any of the meters in the area.    So
                                                                      97



 1   TransCanada may expect that shipper A, who has contracted
 2   for a service to a broad delivery area, generally flows to
 3   meter number 1.    But they have the contractual right to
 4   flow to meters 2 through 30 at any time they choose.
 5        MR. CHARLESON:      Looking at page 9, at lines 1 and 2,
 6   you talk about:
 7                "Customers of FT-SN service would contract a
 8                specific location that is distinct from any
 9                other meter and distinct from any other
10                existing delivery area."
11        Which I think we already talked about a bit.      Does
12   TCPL have any short notice service proposal for any power
13   generators that can't meet this criteria?
14        MR. EXALL:    No.   We are struggling to understand why a
15   power generator would not be able to meet this criteria.
16        MR. CHARLESON:      Perhaps with that response, you could
17   explain how an embedded generator would have any way of
18   accessing or using the reserved upstream capacity in the
19   more frequent nomination windows?
20        MR. EXALL:    I think one example of that would be for
21   the FT-SN contract to deliver to a separate meter in which
22   only FT-SN flows through that meter.      And deliveries are
23   then made by the, perhaps, in an example, the local
24   distribution company to the plant.      So that you could still
25   satisfy the criteria of FT-SN and satisfy an embedded
26   generator.
27        MR. CHARLESON:      Looking at page 10, at lines 8-10.
28   You indicate that:
                                                                       98



 1                "TransCanada cannot deliver FT-SN service to
 2                a meter station or delivery area with other
 3                types of mainline services."
 4        Does this mean that service such as FT, STS, IT, STFT,
 5   Diversions, and any other discretionary services cannot be
 6   used to support supply to or away from these facilities,
 7   recognizing those service would have to be done within the
 8   standard NAESB nomination windows.
 9        MR. EXALL:    Yes, that's correct.
10        MR. CHARLESON:    So in that case, how would a generator
11   supply the facility if it temporarily needed more supply
12   than they had contracted for under FT-SN?       Would they have
13   to increase their FT-SN contract?
14        MR. EXALL:    Yes.    That's one option.
15   We believe that in terms of how we filed the service that
16   would with be the option available to the shipper.
17        MR. CHARLESON:       Does that mean there's no other
18   options available?
19        MR. EXALL:    They could not utilize existing services
20   to deliver to that separate meter; that's correct.
21        MR. CHARLESON:    So would they be able to contract for
22   this on a temporary basis, or would it be a firm,
23   permanent, FT-SN commitment?
24        MR. EXALL:    The FT-SN contract is for a minimum one-
25   year term.
26        MR. CHARLESON:    Now, earlier on, in response to one of
27   the Board questions, you talked about Enbridge having some
28   options for load balancing.       One of them would be to
                                                                       99



 1   contract for FT-SN.       What efficiency would you see the
 2   Enbridge Gas Distribution or the power generator customer
 3   receiving from having, basically, Enbridge Gas Distribution
 4   hold a duplicative FT-SN contract?
 5           MR. EXALL:    It wouldn't necessarily have to be
 6   duplicative.    It could be taking an assignment of the FT-SN
 7   contract from the shipper to Enbridge, for example.
 8           MR. FREW:    If somebody wanted to, they could just ask
 9   for FT-service.       We'd put in a new meter and you could
10   connect downstream of that other service if you really
11   wanted to figure out a novel way to get additional gas.
12   It's not exactly what we had imagined, but there's always
13   that capability to do that.
14           MR. CHARLESON:    Now, looking again at page 10, and
15   this is with the discussion around the control valves, has
16   there been any reaction to this part of the proposed
17   service from potential customers?
18           MR. STRINGER:    They understand the requirement for the
19   flow control on the TransCanada system, and again, we've
20   said that, you know, we would look at it on situation-by-
21   situation basis to determine when we would have to
22   implement the flow control.      And as Mr. Frew alluded, they
23   would get a phone call.      So it's not like -- there would be
24   no communication and we would shut them off.       So they
25   understand the requirement as to why TransCanada needs
26   that.
27           MR. CHARLESON:    Does that mean that they see that as
28   an acceptable requirement?
                                                                  100



 1        MR. STRINGER:    I would say so.
 2        MS. SEBALJ:    Can I just ask all panel members to
 3   project a bit more?    Mr. Frew, in particular, I don't think
 4   people are hearing you in the back of the room.
 5        MR. FREW:   Okay.
 6        MS. SEBALJ:    It's the pre-lunch low blood sugar.
 7        MR. CHARLESON:     I'm going to jump briefly into
 8   Appendix "I," or 1, on page 6.    You have table 2.1.
 9         So this is your table that's a comparison of the FT-
10   SN and FT service attributes.
11        MR. FREW:   I think we're there right now.
12        MR. CHARLESON:     I'm looking specifically at the
13   last two items in this table, which talk about comparing
14   the services where there's a separate distributor delivery
15   area required for each meter station and where there's a
16   flow control required at the point of delivery.
17         And under the FT, can you please explain what
18   circumstance under an FT contract would warrant a separate
19   distribution delivery area for each meter station and flow
20   control valves to be required at the point of delivery?
21        MR. MONDROW:     I would think in situations where
22   TransCanada felt that the market could put the system at
23   risk if, for example, it overtook its nominations or there
24   were significant swings in takes at that location.
25         I think in those circumstances TransCanada would look
26   at separating out the delivery area in order to know better
27   what flows would come at that location.    And potentially
28   consider flow control.
                                                                    101



 1           MR. CHARLESON:   Are there any such instances today?
 2           MR. MONDROW:   Not to date.    There are a number of
 3   locations where TransCanada does control flow by
 4   compression, so particularly large export delivery points.
 5   But to date we do not have -- my understanding is not
 6   specific flow control valving.
 7           MR. CHARLESON:   Still in that appendix, looking at
 8   page 16, and at lines 4 and 5.        This talks about:
 9                 "Any customer with a variable load profile,
10                 including industrial customers or
11                 distributors, may find value in the ability
12                 to access service on a firm basis and vary
13                 its consumption with the day as required."
14   And I think earlier on in one of your responses, Peter, you
15   indicated that the service is available to all customers.
16            Now, would these customers or distributors have to be
17   on a dedicated lateral and have flow control valves?
18           MR. EXALL:   Those are requirements of the FT-SN
19   service, that you would have a separate, distinct delivery
20   area and flow control valve.
21           MR. CHARLESON:   So if it was a distributor, they would
22   have to have a dedicated lateral to create the separate
23   delivery area and the flow control valve on that?
24           MR. EXALL:   I believe that's true.    A dedicated
25   lateral, I'm always a little nervous about trying to delve
26   into the engineering world, but, yes, I believe that's
27   true.
28           MR. CHARLESON:   Do you want to undertake to be able to
                                                                      102



 1   consult with somebody to confirm that?
 2        MR. FREW:    I think yes is probably an appropriate
 3   answer.
 4        MR. CHARLESON:     Okay.    Jumping back to kind of the
 5   Issue I evidence.    Still on page 10 but looking at lines 22
 6   to 24.    And this is, now we're going to talk a little bit
 7   about the SNB service.
 8        MR. FREW:    That was issue one, page 10?
 9        MR. CHARLESON:     Yes.    Issue I, page 10.   And it is,
10   "What is the SNB service"?
11            In lines 22-24 you state that:
12                "TransCanada will utilize main line
13                compression and line pack to provide the
14                flexibility as part of its response to the
15                market need for variable consumption on short
16                notice."
17   How might the use of the existing compression and line pack
18   affect existing shippers and the services they use?       Is
19   there the potential for higher fuel costs?      Reduced
20   flexibility?    Reduced discretionary revenue?
21        MR. EXALL:     It should not impact firm shippers.     Firm
22   shippers are entitled to their contractual obligations;
23   they nominate on a timely window; they get their service.
24        In terms of impacting other discretionary services,
25   yes, it would impact, has the potential to impact
26   discretionary services, and in much the same way that
27   signing up for other firm services impacts the excess
28   capacity on the system and therefore impacts the ability
                                                                      103



 1   to sell capacity for discretionary services.
 2           MR. CHARLESON:    Now, if you're using your existing
 3   compression capabilities and line pack, can that not also
 4   have an impact on fuel ratios?
 5           MR. EXALL:   No different than other firm services that
 6   utilize compression and line pack to meet delivery
 7   obligations.
 8           MR. FREW:    We don't plan on operating the system any
 9   differently.    We don't -- so we expect the fuel to be the
10   same.    And we use the same design criteria for the firm
11   as short-notice service as we do for firm FT service.          So
12   it's the same criteria that's used, and it's just treated
13   as a firm contract, just like any other firm contract.         So
14   it has the same impact.
15           MR. CHARLESON:    How often does the SNB account have to
16   be balanced?
17           MR. EXALL:   The SNB account acts as a tolerance
18   band such that the shipper can Deposit gas into the account
19   or withdrawal of gas out of it and leave the account at a
20   particular balance for as long as they need to.
21           So it's, I guess one way to consider that is that it's
22   in balance.    As long as a shipper is within their tolerance
23   band, it's always in balance, and TransCanada would not
24   authorize any transactions that would allow the shipper to
25   operate outside of that balance.
26           MR. CHARLESON:    So a positive or negative balance
27   could be maintained in perpetuity.
28           MR. EXALL:   Until the end of the contract.
                                                                      104



 1        MR. FREW:     We'd fully expect a shipper to use the
 2   positive and the negative in the service on a daily basis
 3   if he wanted to, but there's no requirement that they come
 4   back to a zero balance, for instance, at the end of a day.
 5        MR. CHARLESON:     Would there be any seasonal or other
 6   limitations on the availability of the SNB service?       Like
 7   times of the year where the customer isn't permitted to
 8   pack or draft the system because of system constraints?
 9        MR. EXALL:     No, it's a firm service available
10   year-around.
11        MR. CHARLESON:     At item 5.1 in the proposed tariff for
12   the SNB service, and this is part of your NEB application,
13   there's a reference to TransCanada curtailing the contract
14   quantity.   What are the circumstances where that could
15   occur?
16        MR. EXALL:     Sorry, could I have the reference again?
17        MR. CHARLESON:      So it's item 5.1 from the tariff for
18   the SNB service.
19        MR. STEPHENSON:     Which is appendix 6, I believe.
20        MR. FREW:     Is this titled “Demand.”
21        MR. CHARLESON:     Yes, demand charge adjustments.    Yes.
22        MR. EXALL:     And I'm sorry, your question.
23        MR. CHARLESON:     The paragraph starts off:
24               "If, during any day, TransCanada curtails the
25               contract quantity for any reason."
26        And I guess we'd like to understand what are the
27   circumstances where that could occur.
28        MR. EXALL:     That pertains to force majeure.
                                                                     105



 1        MR. STEPHENSON:    Sorry, just the way it reads it talks
 2   about curtailing for any reason related to operations,
 3   including force majeure.   But that's meant only to relate
 4   to force majeure?
 5        MR. FREW:   It's a nice clause, isn't it.   It says
 6   anything, but it's likely only in the event of a force
 7   majeure.
 8        MR. EDMOND:    I think there may be occasions of
 9   maintenance that might get into that.   Now, TransCanada
10   designs its system to meet its firm obligations in any
11   event, but I think that clause is open to an occasion where
12   there might be a maintenance situation.   Now, typically,
13   that would be driven by force majeure, but I guess not
14   exclusively.
15        MR. CHARLESON:    In appendix 1A at page 21, there's a
16   discussion around Lennox and the Lennox facility.      I just
17   have a couple of clarifying questions on Lennox.    Does
18   TransCanada have a flow control valve on the Lennox
19   facility?
20        MR. EDMOND:    No, we do not.
21        MR. CHARLESON:    Can TransCanada confirm that Lennox
22   does not have a point-specific service but makes its
23   deliveries to the broader Union EDA instead?
24        MR. EDMOND:    That's correct.
25        MR. CHARLESON:    Looking at your -- in the NEB
26   application, appendix 1, at page 16 correct this, on page
27   16, in question 19 the question posed is:   “Could FT-SN
28   serve other needs beside gas-fired generation?”
                                                                    106



 1       What is TransCanada's forecast or estimate of how many
 2   customers in Ontario will use FT-SN separated between power
 3   generation customers and other customers?
 4        MR. STRINGER:     At this time, we would expect, in the
 5   immediate future, it would only be the gas-fired generators
 6   that would contract for the service, initially, and we
 7   would expect up to, perhaps, 500 gJs per day.
 8        MR. CHARLESON:      From how many customers, about?
 9        MR. STRINGER:     I would say up to five, potentially.
10        MR. CHARLESON:      Over what time frame do you expect to
11   see them coming on line?
12        MR. STRINGER:     I would expect between 2007 and 2010.
13        MR. FREW:    You know, you asked if there was other
14   customers.    It could be used by other customers but it is a
15   premium-type service.      It's a higher-cost service than FT.
16   And as a result we would expect that most customers would
17   opt for FT unless they had very unique requirements, like
18   to power people that have very high load and required
19   intra-day guaranteed service.
20        MR. CHARLESON:      Or require the flexibility to be able
21   to balance a system?
22        MR. FREW:    Yes.
23        MR. CHARLESON:      Sorry, I'm just making sure that I've
24   covered it.
25        In order to understand the functioning of the FT-SN
26   and the SNB services, we have a scenario that we would
27   like you to comment on.
28        So in this scenario we have a 500 megawatt generation
                                                                    107



 1   customer in the GTA that subscribes to TransCanada's
 2   proposed FT-SN and SNB services.     But they have no other
 3   load-balancing or storage services upstream of the
 4   distribution system.
 5        It's Friday at 6 p.m.    The customer is not planned to
 6   run but is dispatched and has to run over the next 48
 7   hours.
 8            Can you explain how FT-SN and SNB can provide gas
 9   delivery and load-balancing to the generation customer
10   without additional supply nominated out of storage?
11        MR. EXALL:    The shipper could nominate for supply out
12   of the SNB contract quantity.     It could use that mechanism
13   to feed the plant for such time until it can nominate for
14   additional display from an interconnecting service
15   provider.
16        MR. CHARLESON:    And typically are those types of
17   nominations or that supply able to be acquired over a
18   weekend?
19        MR. EXALL:    It could be.   And I think, as the market
20   develops for these types of services, there will be a
21   greater number of market participants who would make
22   themselves available for access.
23        MR. FREW:    I think in your scenario you more or less
24   assumed that it would have to come from storage, and I'm
25   not sure that it would have to come from storage.
26        MR. CHARLESON:    I guess under our scenario, we're just
27   not clear in terms of what other alternatives customers
28   have today for acquiring supply after, say, 6 p.m. on a
                                                                   108



 1   Friday.
 2        MR. FREW:     So FT-SN could come from Empress, it could
 3   come from North Bay, it could come from a number of other
 4   locations other than a storage field.
 5        MR. CHARLESON:     Those are our questions.
 6        MS. SEBALJ:    Thank you.
 7        I think, Mr. Cameron, did you want to start and go
 8   until 2:30?
 9        MS. CAMPBELL:    Are there some others who have
10   questions for this panel?
11        MS. SEBALJ:    Yes, there are.   Mr. Brown, Mr. Moran,
12   and Mr. Thompson.
13        MR. CAMERON:    Well, if one of those has 20 minutes or
14   fewer of questions, it might make more sense for them to go
15   now, because I have more than that and I would impinge on
16   the lunch break.
17        MS. SEBALJ:    Do any of the others have time estimates?
18        MR. BROWN:     I'll try.
19        MS. SEBALJ:    Thank you, Mr. Brown.
20        I know I'm seeming like a bit of a taskmaster, but I
21   just fear the 7 p.m. scenario, so if we can press as much
22   as we can that would be helpful.
23        CROSS-EXAMINATION BY MR. BROWN:

24        MR. BROWN:     Good morning, panel -- or good afternoon.
25   My name's David Brown.    I act as counsel to a group of
26   generators, Sithe Global Power Goreway, Sithe Global Power
27   Southdown, The Portlands Energy Centre, and TransCanada
28   Energy.   With me on my left is Mr. John Wolnik, a gas
                                                                   109



 1   consultant, and with me on my right is Mr. Jason Stacey,
 2   another gas consultant.
 3         Could I take you, please, to section 2.1, question 9.
 4         Sorry.     It's Issue I, page 4 of 12.   Question 9
 5   you've labelled:    "The Key Attributes of the FT-SN
 6   Service."   Item number 3 is it the flow rate nominations.
 7        Could I ask you, please, to just describe in a bit
 8   more detail what you mean by that particular attribute.
 9        MR. EXALL:    Flow rate nominations would come in the
10   form of an hourly flow rate to TransCanada, and that would
11   convey the information to TransCanada of what the hourly
12   flow consumption would be of the end-user.
13        MR. BROWN:    So -- sorry, go ahead.
14        MR. EXALL:    Two things to note as well.    It is
15   different than what we do today.      Today we deal with daily
16   quantity nominations.    And the other thing to note would be
17   that the hourly flow nomination is actually effective for
18   that next 15-minute period.       So it would be an hourly flow
19   over the next 15-minute period.
20       MR. BROWN:     Put another way, every 15 minutes, what
21   sort of information do I have to provide you about my flow?
22        MR. EXALL:    The shipper is not obligated to nominate
23   for every 15-minute period.       If they submitted --
24        MR. BROWN:    But if I do?
25        MR. EXALL:    If you do, you would submit a new hourly
26   flow rate nomination at that 15-minute window for the
27   subsequent 15-minute period.
28         So you have the ability or the option to nominate
                                                                  110



 1   every 15 minutes if you so choose.
 2         But, for example, if you were to nominate at hour 1
 3   for 4,000 gJs per hour, that nomination would stay in place
 4   until such time that the nomination is changed by the
 5   shipper.
 6        MR. BROWN:   If that's my obligation to provide you
 7   with information; is there additional information you would
 8   like me to provide you if I do change my nomination?
 9        MR. EXALL:   I think as long as you're supplying -- or
10   as long as the shipper is supplying the hourly flow
11   information, that provides ample information to
12   TransCanada.
13         To the extent that the shipper is able to provide an
14   outlook as to the expected consumption throughout the day,
15   that's always helpful to any service provider.    But it's
16   not a binding outlook by any means.    The shipper still has
17   the opportunity to nominate at any 15-minute interval.
18        MR. BROWN:   I don't know how many of you have read the
19   evidence that's been filed by APPrO.   I take it some of you
20   have read it?
21        [Nods]
22        Yes?   Thank you.   Not a best-seller, I guess.
23        [Laughter]
24        MR. EXALL:   We looked at your slides.   They were
25   pretty good.
26        MR. BROWN:   You will see from the APPrO evidence that
27   the gas-fired generators have come together and they've
28   made a number of proposals.
                                                                 111



 1         The fifth -- proposal number 5, which can be found on
 2   page 25 of their evidence, indicates that:
 3             "The generators would like to see volumes
 4             scheduled at variable rates or to have the
 5             ability to shape the nomination profile
 6             rather than have prorated deliveries
 7             throughout the balance of the day."
 8        Do you folks consider that your FT-SN/SNB proposals
 9   achieve that desired result on the part of the generators?
10        MR. EXALL:   We do.
11        MR. BROWN:   And could you explain how you see that
12   being achieved?
13        MR. EXALL:   The shipper can nominate to match their
14   supply with their consumption, as I mentioned earlier,
15   almost exactly.   They can tweak their nomination in any
16   15-minute period to match their requirement as it changes
17   throughout the day.   This is a vast improvement to
18   nominating on a daily-quantity basis and being forced to
19   take a more uniform flow.
20        MR. BROWN:   There was some discussion that you had
21   earlier this morning about the distinct delivery points or
22   separate delivery areas.    You've noted in your evidence
23   that some of the new generation may be situated in
24   Enbridge's CDA.   My first question is:   Is your FT-SN/SNB
25   service restricted to potential generators in
26   that geographic area, or is it available across your main
27   line system?
28        MR. EXALL:   It's available across the main line
                                                                   112



 1   system.
 2        MR. BROWN:   A number of questions were put to you
 3   about generators that are embedded within a distributor's
 4   system.   Let me perhaps give you a hypothetical and ask you
 5   a question based on it.
 6         If I could ask you to assume that a local
 7   distribution company has a connect with your transmission
 8   system.   It then has its own distribution pipe flowing down
 9   off of that.   And then partway down that pipe a
10   generator taps in.   It's lateral to the plant facility.     So
11   it taps in partway down the distributor's system.    Not a
12   direct connect to your system.
13         Given that kind of hypothetical configuration, under
14   what circumstances do you see the FT-SN or SNB services
15   being made available to that generator?
16        MR. EXALL:   I think the services could be made
17   available to the generator in that example.    They would
18   still have to conform to the criteria outlined for the FT-
19   SN and SNB services, including the requirement for a flow
20   control and separate distributor delivery area.
21         There may be some other co-operation or collaboration
22   required between TransCanada and the LDC in that example.
23   Still to be determined.
24        MR. BROWN:   Well, let me take you to your first.      You
25   said there would have to be the separate delivery area or
26   the delivery point, and the control valve.    Physically
27   could you map out or describe how that would happen, where
28   the distributor, for example, has his connect to
                                                                    113



 1   TransCanada.   What kind of facilities would you have to put
 2   in there so that there's an appropriate delivery point or
 3   control valve?    Or were you thinking of putting them
 4   elsewhere?
 5        MR. EXALL:     You could have a separate meter attached
 6   off of the main line serving to connect to the local
 7   distribution company's line.    That would satisfy the
 8   requirement for a separate meter.    And flow control could
 9   be at that meter.
10        MR. BROWN:     Are there any other facilities that you
11   would anticipate being required in order to achieve those
12   eligibility criteria, or would that do the trick?
13        MR. EXALL:     I think in that example that would be
14   sufficient.
15        MR. BROWN:     You also mentioned that there would have
16   to be some co-operation between yourselves and the LDC to
17   make this work.    Could you be a bit more specific?   What
18   sort of co-operation do you see being required?
19        MR. EXALL:     I think I was really referring to other
20   options that might differ from that that would require some
21   further discussion and collaboration.    There may be other
22   options that we haven't fully examined or have still to
23   consider.
24        MR. BROWN:     But, from what you've just given me by way
25   of your evidence, that's your best thoughts today on how
26   this could work for a generator so situated?
27        MR. EXALL:     Yes.
28        MR. BROWN:     if I could turn you to appendix
                                                                      114



 1   1.    I guess this is probably part of your NEB evidence.
 2   Tables 2.2 and 2.3.    Yeah.   They're found own page 18 of
 3   31.   There was some discussion at this point about costing
 4   of the FT-SN service.
 5         At an earlier point in your evidence, page 10 of 12
 6   of, I think it was, Issue I.     You described the FT-SN
 7   service as a cost-based service.     Then when you take a look
 8   at tables 2.2 and 2.3 in the context of this 10 percent
 9   premium, the suggestion seems to be that the cost base is
10   really an opportunity cost-based derivation of the premium.
11         Is that a fair way of reading your evidence, that it's
12   really the costs are the opportunity as revenue foregone?
13         MR. EXALL:   For the 10 percent premium, that's
14   correct.   The base toll is cost-based on the facility side
15   used to provide service.
16         MR. BROWN:   Then in terms of the 10 percent premium,
17   if you take a look at table 2.3, you give some historical
18   information on the discretionary revenue evaluation.       You
19   see the range, the highest is 9.4 percent.     I think your
20   premium proposal is 10 percent.
21         Can you tell me how you get to the 10 percent when the
22   numbers on this chart historically are significantly lower
23   than that?
24         MR. EXALL:   Yes, we chose to select 10 percent as a
25   suitable premium to encompass even the highest point within
26   the last five years.
27         We did that in the interests of stability.    We opted
28   to select a set premium rather than trying to be exact down
                                                                   115



 1   to decimal points in terms of percentages or re-evaluate
 2   that total.
 3        MR. BROWN:     Could I ask you a question about title
 4   transfers.    I'm going to ask you to hop back a bit to
 5   appendix 1A, page 7 of 31.     Right down at the bottom, under
 6   your question 7, there's a description of title transfers.
 7        Could you explain to me two things:      One, if you could
 8   sort of walk me through practically how you envisage title
 9   transfers working; and secondly, what requirements would I
10   as a shipper have to meet in order to be able to engage in
11   a title transfer?
12        MR. EMOND:     I'll start answering that question with
13   existing services.     So all existing shippers on the
14   TransCanada system have the ability to transfer title of
15   gas at any location on the system.       It‟s a free-of-charge
16   service, it's just done via nomination from their account
17   at each particular location.     So it's fairly flexible at
18   every nomination window, and free of charge.
19        Now, are you going into how FT-SN title transfers
20   would work?
21        MR. BROWN:     Yeah, how would it would work under the
22   FT-SN.
23        MR. EMOND:     Okay.
24        MR. EXALL:     TransCanada could accommodate title
25   transfers between FT-SN shippers on those nomination
26   windows, on the FT-SN nomination windows.
27        MR. BROWN:     So the 15 minutes.
28        MR. EXALL:     Correct.   Between FT-SN shippers.
                                                                  116



 1        MR. BROWN:    So not with a non-FT-SN shipper.
 2        MR. EXALL:    Not on a nomination windows basis, no,
 3   because there's no opportunity to accommodate to a change
 4   in the title transfer quantity if the nomination windows
 5   don't align.    So, for example, if a change occurred on the
 6   FT-SN nomination on window number 85, that won't translate
 7   back to one of the conventional four windows, and you
 8   result in an imbalance on the system.
 9        MR. BROWN:    So if you want to do it with a non-FT-SN,
10   you're back to the standard nomination windows?
11        MR. EXALL:    Correct.   If you were to, for example, opt
12   to divert your FT-SN contract to a different point, you
13   could facilitate a title transfer from another party on a
14   NAESB window at the time that you nominate your diversion.
15        MR. BROWN:    If I could ask you to go to the section on
16   your proposed SNB service, appendix 1 of the written
17   evidence, page 29 of 31, it's the place at question 40,
18   you've provided three illustrations of SNB toll
19   calculations.
20        I have a few questions about these examples.
21   Focussing on table 3.2, you have there an example where the
22   shipper, the potential customer, will be in the PCDA.
23   You're going to be using existing facilities.    And I guess
24   the first question that I have of you is that, if a shipper
25   with the characteristics that you've assumed in this
26   particular example were to come to you today and say:
27   Sounds like a great service.    I'd like to sign up, would
28   you be able to serve that customer without building any new
                                                                     117



 1   facilities?
 2          MR. FREW:    We may have to check the answer to that one
 3   with our design people to see if we can actually do this
 4   one today.
 5          MR. BROWN:    If you could, because from the heading of
 6   the table, it sort of leaves a suggestion that you might be
 7   able to do it with existing facilities.        If you could
 8   undertake to go back and check with them that you could do
 9   it without, in fact, constructing no facilities, I'd
10   appreciate that.
11          MR. FREW:    Okay.
12          MS. SEBALJ:    I'm just waiting -- did you have a --
13          MR. KEAY:    Just for clarity, which delivery area are
14   you looking for, Mr. Brown?
15          MR. BROWN:    Just using the assumptions built into the
16   table on 3.2.
17          MR. KEAY:    So that's the hypothetical?
18          MR. FREW:    Yeah, this one says Parkway delivery to a
19   hypothetical PCDA near the Greater Toronto Area.
20          MR. BROWN:    Let's say west Toronto.
21          MR. FREW:    I think that's probably close enough.
22          MR. BROWN:    Well, somewhere in the
23   Mississauga-Brampton-Milton area.
24          MR. FREW:    So we'll undertake to get that answer for
25   you.
26          MS. SEBALJ:    That's TCPL Undertaking number
27   1.
28          TCPL UNDERTAKING NO. 1:    TO ADVISE WHETHER TCPL WOULD
                                                                  118



 1        BE ABLE TO SERVICE CUSTOMERS WITHOUT BUILDING NEW
 2        FACILITIES USING THE ASSUMPTIONS ON TABLE 3.2

 3        MR. BROWN:   And I think, Mr. Stringer, you gave some
 4   estimate of your forecast of the number of shippers that
 5   might be interested over the next period of time in the
 6   FT-SN and SNB service.
 7        If, let's say, over the course of the next year, you
 8   receive several requests, three requests within a short
 9   period of time, for that service, and we're talking, let's
10   say, you know, a 500 megawatt generator for each request,
11   how do you propose to handle evaluating those requests and
12   ascertaining how you're going to meet those requests?
13        MR. STRINGER:   Well, each of the service-requesting
14   parties would enter into an open season.   And we would have
15   contact with those parties as we got closer to the date.
16   But it would depend on, ultimately, where the gas was being
17   sourced, where it would be being delivered to.   And then
18   ultimately we'd have to look at whether or not we could
19   serve those customers with existing or whether or not we'd
20   have to actually build facilities to serve them.
21        MR. BROWN:   And do you know how much service you can
22   provide today without expanding your facilities?   Or is
23   that very location-dependent?
24        MR. STRINGER:   It would be location-specific, and
25   again, it would depend ultimately on where the gas was
26   being sourced on to our system.   So, whether it was
27   Empress, Parkway, you know, an export point.   We would have
28   to look at it based on that contract path, and then look at
                                                                     119



 1   the ultimate facility impact.
 2        MR. BROWN:    And your rule of thumb, as I heard your
 3   evidence today, more flexibility if it's sourced at
 4   Empress, less flexibility if it's sourced at Parkway.
 5        MR. FREW:    That's correct.     You're talking now
 6   specifically of the      -- of SNB?
 7        MR. BROWN:    Mm-hm.
 8        MR. FREW:    Yes.   And if somebody had an FT-SN contract
 9   from Empress, and we found we could supply that contract
10   today, they could have the SNB service from
11   Empress today.    But if it's at a different location – the
12   closer it is to the -- the closer the receipt point is to
13   the delivery point in the eastern end of the system, the
14   less likely it would be that we could do it today.
15        MR. BROWN:    If I could go back to table 3.2, I
16   just had some very precise questions.      On table 3.2, second
17   line from the bottom, you've listed the GNA charge that
18   would form part of your toll calculation.      You've listed it
19   on a cents per gJ per day basis.
20         If this service, in fact, really is only used for a
21   few hours, is that the right basis for calculating this
22   charge?   Or perhaps you could explain your rationale for
23   selecting that unit charge, for the charge.
24        MR. EXALL:    Sure.    We calculate a demand charge toll
25   because the service is reserved for the shipper to use at
26   any time.   Those facilities are deemed for use by the SNB
27   shipper, and therefore they must pay a demand charge toll
28   every day of the year, similar to a demand charge toll paid
                                                                 120



 1   by an FT shipper, for example.
 2        MR. BROWN:    You've presented, I guess, three different
 3   examples of toll calculations for the SNB service, and when
 4   you look at the bottom line of each example, there are
 5   quite material differences in the toll that result.
 6        In light of that fact, could you explain how an open
 7   season would actually work when you've got such potentially
 8   significant variability in the end result toll?
 9        MR. EXALL:    So, for SNB service, the way we've
10   proposed to adjust our transportation access procedure, a
11   great deal of time is required to analyze the system and
12   determine the facilities required to accommodate SNB
13   service.    So in the event a shipper applies for SNB
14   service, we would give ourselves a 10-day evaluation period
15   for an existing capacity open season.    That would provide
16   us the time to evaluate the SNB proposal.
17        Part of that evaluation is determining the impact to
18   available capacity based on the SNB request.    So, for
19   example, if an SNB request came in for 10,000 gJs that may
20   have a different effect to available -- on available
21   capacity.    It may affect 5,000 gJs worth of available
22   capacity or 20,000 gJs.    So part of the evaluation also
23   involves determining that amount of impact on available
24   capacity.
25        We'll factor that into our evaluation to determine
26   which bids are successful.    So, as an example, for FT
27   service we would evaluate based on term times toll, and for
28   an SNB bid, we would adjust the term times toll calculation
                                                                   121



 1   based on the impact to available capacity so that it's
 2   normalized and they're on the same basis in terms of
 3   evaluation.
 4        MR. BROWN:   If I could take you to, in appendix 1, I
 5   think, to --
 6        Just as a follow-up to that given the potential range
 7   on the tolls, would you contemplate permitting shippers to
 8   make non-binding bids so they can see what the result of
 9   your analysis is and the resulting toll before they
10   actually commit themselves to it?   It's sort of a chicken
11   and egg, I guess, kind of thing.
12        MR. EXALL:   I think in an existing capacity open
13   season example, the shipper always has the option to not
14   execute the contract.
15        MR. BROWN:   Fair enough.
16        MR. FREW:    I think you have to put in a fee, though,
17   to get into the open season, and you probably would lose
18   that if you don't take the contract.
19        MR. BROWN:   Right.   Still in appendix 1, and I'm
20   almost done.   If I could ask you to go back to page 6 of
21   31, table 2.1, where you have a comparison of the FTSN and
22   FT service attributes.
23        The sixth row down, "Firm Transportation Risk
24   Alleviation Mechanism."    You indicate it's available under
25   FT service.    It would not be available under FT-SN service.
26   Why would it not be available under FT-SN service?
27        MR. EXALL:   We consider it inappropriate to offer a
28   credit calculation or credit mechanism to shippers who
                                                                     122



 1   already have a reservation of capacity on the system.
 2           MR. BROWN:   In terms of the eligibility for the FT-SN
 3   service, will it be made available only to new customers or
 4   new load?    Or will existing customers have the opportunity
 5   to convert to FT-SN/SNB service if they so desire?
 6           MR. FREW:    We feel it‟s appropriate that there
 7   probably be an opportunity, maybe a one-time opportunity,
 8   to convert an FT contract to an FT-SN contract.
 9           MR. BROWN:   Is that a formal part of your proposal.
10           MR. EXALL:   It's not part of our formal application,
11   but I think that is the intent that Mr. Frew referred to.
12           MR. BROWN:   In the event that an existing customer is
13   given that election and elects to convert from an FT
14   contract to an FT-SN contract, do you anticipate that you
15   would have to make any changes in your contractual
16   arrangements with the local distributor in whose area that
17   generator customer is situated?      And, if so, what sort of
18   changes would you have to make?
19           MR. EXALL:   Yes.   As part of the criteria to be
20   eligible for FT-SN service, there is a requirement for a
21   separate distributor delivery area.      And there would be a
22   feed to amend contractual obligations to reflect that new
23   area.
24           MR. BROWN:   And are those alterations something that
25   you could impose unilaterally on the distributor, or would
26   the distributor's consent be required?
27           MR. FREW:    Well, I don't think we have any FT
28   contracts that go into distributor areas other than to the
                                                                      123



 1   interconnect with our system.      So I --
 2           MR. BROWN:    I'm sorry, I meant the distributor's
 3   delivery area on your system.      That's the CDA or the EDA.
 4           MR. FREW:    If you could give us a minute to see if we
 5   understand that one completely.
 6           I'm not sure we have a good answer for you.    We think
 7   that's a fairly legal question, in terms of we might need a
 8   legal evaluation as to -- you know, before responding to
 9   that.    Obviously if the distributor agreed with it, it
10   wouldn't require very much.      So it's something that we'll
11   -- we're not sure that we can answer that directly right
12   now.
13           MR. BROWN:    Well, perhaps I could ask you to give an
14   undertaking, and I'll just give you the hypothetical.
15           Since there's so much discussion about the Greater
16   Toronto Area, assume that there's a generator or you've got
17   some existing customer in the Greater Toronto Area with an
18   Enbridge's CDA.      You've got this one-time option to move
19   from an FT to an FT-SN contract.       The generator wants to do
20   that.
21           Under those circumstances, my question would be, would
22   you be able to -- what changes in your current arrangements
23   with Enbridge would you have to make in order to
24   accommodate that conversion request, and would Enbridge's
25   consent be required for those changes?
26           So if you could undertake to inquire into that and get
27   back, that would be great.
28           MR. KEYS:    Well, I think we're probably comfortable
                                                                      124



 1   with the first part of your undertaking.    What arrangements
 2   might be required for the embedded customer, I guess to
 3   make that election to change, you're talking about the
 4   customer holding the FT contract to the interconnect point
 5   between the LDC and TransCanada's system?
 6        MR. BROWN:    Yeah, the customer, yeah.
 7        MR. KEYS:    Right.
 8        MR. BROWN:    You've got a customer in the CDA.     Let's
 9   say it's a direct connect.    It's not embedded in the
10   traditional sense, it's a direct connect to TransCanada.
11        But it's within the franchise area of Enbridge.
12        It has an FT contract with TransCanada but would like
13   to elect to go to FT-SN.     It's within Enbridge's CDA.
14        My question simply is:    If they want to make that
15   election, would there be any changes required between you
16   folks and Enbridge in terms of your contractual
17   arrangements.    If the answer is no, that's great.    If the
18   answer is yes, what are they, you know, changes to
19   accommodate that customer's request?     And if changes are
20   required, would you be able to make those changes
21   unilaterally, or do you require Enbridge's consent?
22        MR. FREW:    I think that's definitely a legal question
23   that we need to take under --
24        MR. BROWN:    And perhaps if Mr. Keys needs more
25   clarification, we can talk off-line on that, in order to
26   shape it.
27        MR. KEYS:    Sure, perhaps that's appropriate, Mr.
28   Brown.
                                                                        125



 1           We'll try to accommodate you on an information basis
 2   to the extent we can.      But to the extent you're asking for
 3   a legal interpretation as to whether or not the LDC's
 4   consent is required to serve a customer in some way, I'm
 5   not sure if the panel is going to be able to help.
 6           MR. BROWN:    No, that's why I was asking for an
 7   undertaking which would get back to you.
 8           MR. KEYS:    Let's chat in the next break and we'll see
 9   if we can accommodate you.
10           MR. BROWN:    Thank you.   Thank you, panel.   Those are
11   my questions.
12           MS. SEBALJ:   I'm not registering this as an
13   undertaking at this point, and I'll wait until after the
14   break.
15           MR. BROWN:    Correct.
16           MS. SEBALJ:   Let's break for lunch.    If everyone could
17   please be back at a quarter to 2:00, so an hour, unless I
18   hear any arguments about anyone taking a shorter lunch or a
19   longer lunch, which often happens.
20           And then we'll resume with Mr. Moran right after
21   lunch.
22           --- Luncheon recess taken at 12:41 p.m.
23           --- On resuming at 1:50 p.m.
24           MS. SEBALJ:   If you don't mind, let's get started.
25   I know there are a number of participants that are still
26   wolfing down their lunches, but Mr. Brown has a little
27   follow-up from his examination of the panel, following
28   which
                                                                   126



 1   Mr. Cameron has offered to go next.
 2        MR. BROWN:    Panel, at the lunch break I had an
 3   opportunity to speak with counsel and with some of you to
 4   gain a clarification of the last question I posed.
 5        Just by way of refresher, I'd ask you to assume a
 6   power generator connected directly within the Enbridge CDA.
 7   And perhaps to be more concrete, if you had a plant such as
 8   the Goreway plant, which is directly connected to the TCPL
 9   line, it's within Enbridge's CDA, an existing FT customer,
10   my question to you was if that existing FT customer wanted
11   to elect to sign up for the FT-SN service, would you, TCPL,
12   have to make any change in your existing contractual
13   arrangements with Enbridge.
14        And I gather, as a result of the discussion that we
15   had, in TCPL's view you would not have to make any change
16   in your existing arrangements with Enbridge to accommodate
17   that service request by the customer; the customer would,
18   of course, have to be otherwise eligible for this service.
19   Have I got that correct?
20        MR. FREW:    Yes, that is correct.
21        MR. BROWN:    All right, well, thank you very much for
22   that clarification, and that concludes my questions.
23        MS. SEBALJ:    Thank you, Mr. Brown.
24        There are a number of things that I want to speak to
25   eventually on scheduling, but given that 50 percent of the
26   people aren't in the room, I'll wait for that until
27   Mr. Cameron's questions are complete, and then I'll
28   visit with you how we're going manage today's schedule.
                                                                     127



 1           CROSS-EXAMINATION BY MR. CAMERON:

 2           MS. CAMERON:   Thank you.    Now, gentlemen, the good
 3   news is we only go as long as the battery on my laptop
 4   lasts.    The bad news is we just came back from spicy Thai
 5   food so we're all breathing fire.
 6            I'd like to start by asking you if you could, and
 7   this is in part by way of background, if you could describe
 8   in a detailed way -- you might have seen in the Union
 9   evidence if you had a chance to review it -- the steps that
10   TransCanada's nominations group goes through at the timely
11   window to schedule the pipe.
12           MR. EMOND:   Would you like us to step through the
13   Union evidence of that or just describe it.
14           MR. CAMERON:   No, I meant that kind of evidence; in
15   other words, first we do this, then we do this, then we do
16   this.
17           MR. EMOND:   Well, I'll start off and ask Peter to help
18   me out along the way here.
19            So the first step would be a customer places a
20   nomination with TransCanada.        TransCanada would verify that
21   nomination as correct relative to a contract, so verify the
22   contract right to nominate.
23           We would then look at --
24           MR. CAMERON:   If I could just ask you to break it down
25   into slightly finer detail.     You would start with your
26   customer identification, and then you say the customer
27   makes a nomination.     What would the nomination stipulate?
28           MR. EMOND:   What would it look like?
                                                                       128



 1           MR. CAMERON:   Yes, what information would be in it?
 2           MR. EMOND:   So the nomination today would have a start
 3   time, a quantity, contract number.
 4           MR. CAMERON:   Receipt and delivery.
 5           MR. EMOND:   Receipt, delivery point.   End time.   And
 6   so, based on that nomination, we would compare that with
 7   their contractual entitlements, make sure it is acceptable
 8   under their contract.      The next step would be to check
 9   capacity, depending on the type of service.      We would go to
10   our volume planning group and run simulations to determine
11   what capacity there is in the system.      And we would
12   allocate capacity out to the nominations, based on service
13   priority, so firm first, then discretionary services.
14            Once that is done, then we would contact the
15   interconnecting operators and verify that they have the
16   corresponding nomination on either the upstream or the
17   downstream interconnection.
18            And provided that passes -- so, you know,
19   occasionally there will be mismatches between operators,
20   and those get resolved -- but providing it all matches,
21   then it ends up being scheduled.      We'd contact the shipper,
22   and typically we would just make that available via Web
23   reporting, that the shipper is confirmed that they can
24   flow.
25           And then the instructions, we would go into gas
26   control to set up the system to operate to meet those
27   flows.
28           MR. CAMERON:   Okay.   Let me just follow on one of the
                                                                    129



 1   points you made right at the end there in terms of posting
 2   the shipper notification to the Web.
 3            Which of the various steps you've described are
 4   automated and which are done by hand, for want of a better
 5   term?
 6           MR. EMOND:   The receipt of the nomination from
 7   Customers -- I think there still is an ability in our
 8   tariff for shippers to do that by fax, but I'd say, if not
 9   100 percent, very close to 100 percent is done via Web
10   entry.    So automated.
11           That comes into our system, and there's an automatic
12   check against our contracts to make sure that they're
13   entitled to nominate; that matches.
14           Typically there would be edit lists if they named a
15   wrong delivery point, for example.     That would come back as
16   an edit check.
17           If there are errors like that, that becomes a manual
18   process, where we would phone the shipper up and attempt to
19   work out what the problem is.
20           From there, automatically, the noms that are
21   accepted via the contract are automatically sent to the
22   volume planners, who then simulate the system.      And
23   that's an automated simulation, so the data feeds into the
24   simulator.    And they have a process that -- I'd say it's
25   50/50 manual and automated in allocating capacity to those
26   nominations.
27           And then it feeds the numbers resulting from that
28   feedback to the nominations group for posting on the Web.
                                                                   130



 1         And I believe the instructions to gas control from the
 2   volume planners would be a manual process; I'm not 100
 3   percent certain there, but I believe it's manual.
 4         MR. CAMERON:    Before we go to operationalization, the
 5   process you've just described, from receipt of all of your
 6   shipper nominations to notification of them for your timely
 7   window, how long on average does that take TransCanada.
 8         MR. EMOND:    For the timely window and the evening
 9   window, so the before-the-start-of-day windows, it takes
10   several hours, that whole process.
11         But when I say "several hours," the internal process
12   to evaluate, allocate capacity, I'm going to guess maybe
13   half an hour.   Half an hour, in that range.
14         Where the extra time comes in is when there are, I'll
15   call them errors, or nominations that aren't correct, or
16   confirmation with the interconnecting operators, maybe
17   they've got different numbers.    Now, I think that's where
18   the bulk of the time is spent, is in making sure all the
19   numbers line up with the interconnecting operators and all
20   the errors are dealt with.
21         But for the average nomination, it's fairly automated
22   and quick.
23         MR. CAMERON:    The air conditioning's just come on, so
24   we'll all have to try to speak up.
25         MS. SEBALJ:    Yes, can I ask you all to please speak
26   up.   The back of the room really can't hear you.
27         MR. CAMERON:    Now, once your nominations group
28   completes their process, what happens next to
                                                                      131



 1   operationalize for your timely window, again, that schedule
 2   of deliveries?
 3        MR. EMOND:     Well, I guess the final step from our side
 4   would be to communicate the instructions to gas control.
 5   In terms of the major interconnection points, what flow is
 6   anticipated through those locations.       And they would then
 7   set up the compression of the system to meet that
 8   requirement for flow.
 9        MR. CAMERON:    Okay.   And as I understand the evidence
10   that Union's filed, and I expect it to be the same for
11   TransCanada, the timely window is used by Union,
12   TransCanada, and other pipelines to set up the pipeline for
13   the next day, and then the subsequent windows are used to
14   modify that set-up.     Is that correct?
15        MR. EMOND:     Yes, I think that's a safe
16   characterization.
17        MR. CAMERON:    Now, is it true that at each of the
18   NAESB nomination windows, TransCanada is scheduling its
19   whole system for most services?
20        MR. EMOND:     I think as we explained in the evidence,
21   that TransCanada filed, that nominations that are approved
22   and authorized at the timely window are not bumped or
23   cannot be bumped at later windows.
24        So you do have the timely nominations in place, and
25   they act as sort of the base flow.
26        What happens at intra-day windows, then, are new
27   nominations that may be excess capacity that's still on the
28   system, or if there's a decreased nomination by one of the
                                                                     132



 1   original shippers at the timely window, then there would be
 2   more space available for an additional discretionary
 3   service later in the day.
 4        But I would say the bulk of the nominations are in for
 5   the day, and don't change.
 6        MR. CAMERON:    Okay.   Now, let's move to what you're
 7   calling the nominations for FT-SN.     Describe the steps that
 8   TransCanada would go through, let's say a shipper did 96
 9   nominations in a day.
10        What step would TransCanada go through for each of
11   those nominations?
12        MR. EMOND:   So, in essence, it's the same steps.     So
13   the same basic components of the process are there.    So the
14   shipper would nominate to TransCanada.    We would verify the
15   contract.    We would verify the impact on the capacity,
16   confirm with the interconnecting operator and send an
17   instruction to gas control to operate to that.
18         What is different, though, is our anticipation
19   is, that we would not have thousands of contracts, hundreds
20   of shippers, hundreds of line items, if you will, of
21   nominations.   Our expectation for FT-SN would be more in
22   the order, I think, as Mr. Stringer pointed out, maybe five
23   potential plants would be looking at this, at least
24   initially.   You may have a few more develop over the years,
25   but we're not looking at the same number of transactions or
26   contracts or parties.
27        But the same steps in the process are there.
28        MR. CAMERON:    And how does that part of it that you
                                                                   133



 1   described earlier about setting up your system for the
 2   timely window of your first NAESB nomination compare in
 3   terms of breadth of system affected with what you're
 4   expecting for your nominations for the FT-SN?
 5        MR. EMOND:    I guess in some respects it's not much
 6   different than an intra-day window, where you've got a base
 7   of flow that's there.    You've got some nominations that are
 8   changing.    And we would adjust our system to accommodate
 9   those.
10        In addition, we're always looking at what's going on
11   in the system.    You might have an outage or some other
12   operational upset.    So you may be adjusting the system at
13   other times as well.    But I guess it's a very similar
14   process.    It's just the number of changes are minor.
15        The other thing I should maybe point out is that the
16   capacity for FT-SN is always reserved, or is available for
17   that customer.    So it's not as though, when an FT-SN
18   nomination comes in on a 15-minute basis, that we're
19   bumping other customers or anything like that.    There is
20   capacity for it.
21        MR. CAMERON:    Now, for a generation plant near
22   Parkway, and you can use Sithe if it helps you actualize
23   the question, what operational adjustments would you expect
24   to make when that plant nominates on?    What facilities
25   would you expect to be affected by that nomination?
26        MR. EMOND:    So I guess the first question would be:
27   Where is their receipt point for -- where is their supply
28   coming on to the TransCanada system to serve that?
                                                                   134



 1       If it is Parkway, as the receipt point on the FT-SN
 2   contract, then our expectation is that we would confirm
 3   with Union the change at Parkway, and we would confirm with
 4   Enbridge the change at the delivery point.   And you would
 5   see both changes happen at the same time.
 6        MR. FREW:    Or if they had an SNB account, the purpose
 7   of the SNB account is, in fact, to bridge the difference
 8   between the gaps between the nominations upstream and
 9   downstream, so they could either put into their SNB account
10   or out of it to bridge the gap if the upstream or
11   downstream pipeline isn't capable of confirming with the
12   same time lines as we are.
13        MR. CAMERON:   And would you, bearing in mind what you
14   were saying earlier, I think to Mr. Brown, expect that SNB
15   account to be useful in a nomination when the gas is being
16   delivered at Parkway and the plant is the Sithe plant?
17        MR. FREW:    If they had signed up for SNB, it would be
18   designed to handle the specific receipt delivery points
19   that are in the FT-SN contract, yes.
20        MR. CAMERON:   And -- oh, I see.   So if Sithe wanted
21   this, you would have to do something you don't have now
22   between Parkway and its plant, to create SNB capacity.
23        MR. EMOND:   For SNB.   So in the scenario where Sithe
24   were to increase their nomination and their consumption,
25   but not nominate from Union at Parkway for that but rather
26   nominate out of SNB, where the gas would come from is
27   likely from the north, down the Barrie line.
28        MR. CAMERON:   Okay.
                                                                     135



 1          MR. EMOND:   Shifting line pack around.
 2          MR. CAMERON:   Right.   And would it be the Maple
 3   compressor then that would fire up to deal with that
 4   nomination up?
 5          MR. EMOND:   It may already be fired up.   It may have
 6   to change.   It really depends on the situation.    You may
 7   have other things going on on the system.     It's hard to
 8   say.   It's so situational.
 9          But overall, I think it's safe to say the gas would
10   come from the north, from the Barrie line, in that
11   situation.
12          MR. CAMERON:   Right.   But -- and the closest you would
13   be able to start pushing it, in the example I gave, is
14   Maple; is that correct?
15          MR. EMOND:   Well, that's the closest compressor.     So
16   it depends on the situation, what it's running at the time
17   when the nomination, maybe there‟s upstream compression
18   that you would adjust, rather than right at Maple.     It's
19   very situational.
20          MR. CAMERON:   What I think I'm trying to find out is
21   is it correct to say that the first molecular effect that
22   you would be able to effect at the Sithe plant would be as
23   a result of either the firing up or increasing in activity
24   of the Maple compressor?
25          MR. EMOND:   I would say the first step we would do is
26   to ensure that more gas is moved from the Barrie line
27   into west of Maple.    And whether that requires starting
28   up compression or increasing compression at Maple or using
                                                                   136



 1   upstream compression to help you move more gas through
 2   there.
 3        MR. CAMERON:     Okay.   I think I understand what you're
 4   saying.   So the molecules are going to have to start
 5   accelerating -- and I'm speaking in a layman's terms here
 6   -- probably west of Maple, and then through Maple in order
 7   to increase deliveries at Sithe; is that right?
 8        MR. EMOND:   I think that's safe, yeah.    The gas comes
 9   down from the north.
10        MR. CAMERON:     And how long does that take?
11        MR. EMOND:   When you ramp-up compression, it's quick,
12   it's instantaneous.    Assuming the compression is on.   Now,
13   when you're going from a cold start it takes longer, but
14   when compression is on, it's just a matter of adjusting the
15   level that it's running at, and that's very quick.
16        MR. CAMERON:     Yeah, the compression comes up quickly.
17   I'm talking about, when do those molecules that have had a
18   kick from the compressor start showing up at Sithe plant.
19        MR. FREW:    I think the important thing is, you know,
20   there's a combination of line pack use and compression.
21   And as soon as someone starts to draw, he's drawing at a
22   lower pressure than the pressure in the pipeline, so the
23   molecules go instantaneously.     Then you get a transient
24   that flows back through the system, and the system's in a
25   transient mode basically all the time but it just flows
26   back through the system, and the compressors adjust
27   depending on how they're set or by the set points their own
28   people have to keep the pressures on the system in line
                                                                       137



 1   with what they need and what they expect in order to flow
 2   the volumes that they're expecting for the next period of
 3   time.
 4           So it's an instantaneous response at the plant site,
 5   but again, you know, if the nomination was coming in up at
 6   Empress, you know, you transfer that nomination
 7   instantaneously to the delivery point, so it's an
 8   instantaneous --
 9       MR. CAMERON:       And that's a function of the line pack
10   and compression that you're going to keep constantly in
11   place for this customer as a result of its contracts?
12           MR. FREW:   We do that with any customer.    Like, an FT
13   shipper does the same thing.       Whenever we nominate under an
14   FT contract, exactly the same thing happens.
15           MR. CAMERON:   Okay.    Well, maybe this will help me.    I
16   had understood that you would, for your FT-SN volumes,
17   ensure that the full firm entitlement would be there
18   regardless of the nomination; correct?
19           MR. FREW:   That's correct.    What we do is we ensure
20   that we don't resell the capacity that's required to meet
21   his requirement throughout the day.       So it's guaranteed to
22   be available at any time.
23           MR. CAMERON:   Right.    You mentioned that for any FT
24   shipper, the result of their nomination is instantaneous.
25   But if they've all nominated at a certain level and don‟t
26   have a right to change it, they're in a different situation
27   than shippers who have the right to change their nomination
28   every 15 minutes; correct?        That is, you're going to have
                                                                     138



 1   to operate your system differently?
 2        MR. FREW:    Yes, the only to the extent that they can
 3   change it more often.    But the same impact -- the impact is
 4   the same.   There's a change in flow.
 5        MR. EMOND:    And an FT shipper can change their flow
 6   minute by minute as well, and they do.     From that respect,
 7   from a physical respect, there's no difference.
 8        MR. CAMERON:    Right.    How will shippers be doing
 9   their -- FTS and shippers be doing their nominations?        What
10   technology will they use.
11        MR. EMOND:    I think it's safe to say we haven't
12   precisely landed how that would happen.      Initial thinking
13   is that it would probably set up a webpage for them to
14   enter their nominations.
15        MR. CAMERON:    Okay.    And do you expect to be able to
16   make confirmations with Union and Enbridge every 15 minutes
17   with respect to these shippers when those systems are
18   involved in the transaction?
19        MR. EMOND:    Well, I think -- sorry.    I think whether
20   Union and Enbridge are prepared to manage or process
21   changes every 15 minutes is up to Union and Enbridge, not
22   up to TransCanada.    I think what we've proposed is that
23   we're prepared to offer changes every 15 minutes and
24   process them.     so if the utilities are there, that's
25   great.   If not, I guess it doesn't work.
26        MR. CAMERON:    Okay.    And have you anticipated any
27   additional O&M or capital costs required either to put the
28   labour effort or the technology in place to operate this
                                                                  139



 1   service?
 2        MR. EXALL:    Our expectation is that the costs would
 3   be minimal.   For example, if we had to hire one or two
 4   staff members to handle the additional nomination process,
 5   and we don't stream out or parse out any particular costs
 6   for service classes.
 7        MR. CAMERON:   And going back to the question of the
 8   willingness of Union and Enbridge to react to these
 9   15-minute nominations, the 96 per day, what discussions has
10   TransCanada had with them on that issue?
11        MR. EXALL:    As I had mentioned earlier, we've had
12   multiple discussions with various parties, including the
13   LDCs, around the feasibility and viability of accommodating
14   additional nomination windows up to the frequency of 96
15   windows per day.
16        MR. CAMERON:   Could we come to the issue that Mr.
17   Brown asked you some questions about, and then followed up
18   with a clarification after the lunch break.   And maybe we
19   should start with a definition.
20         What does TransCanada mean by an "embedded
21   generator"?   And it might not be your term, actually, but
22   how do you use that term when you do?
23        MR. EXALL:    I think we used the term "embedded
24   generator" to assume that the generator is some distance
25   away, and I can't give you a kilometre distance at this
26   point, but some material distance away from our main line,.
27   and deeply embedded in the distribution network of the
28   LDC's system.
                                                                     140



 1           MR. CAMERON:   Okay.   And by "deeply embedded," we mean
 2   something other than just a dedicated lateral off your
 3   line, which lateral is a piece of the LDC's system?
 4           MR. EXALL:   Yes, I think that's reasonable.
 5           MR. CAMERON:   Okay.   So we could be talking about a
 6   plant down on the shore of Lake Ontario in downtown Toronto
 7   and that would be about as embedded, I guess, as you
 8   could get?
 9           MR. EXALL:   I think that's a reasonable example as
10   well.
11           MR. CAMERON:   Now, I take it from your statement that
12   embedded generators can make use of FT-SN.       Well, let me
13   just ask you.    When you say "make use of," can you picture
14   that embedded generator on the shore of Lake Ontario and
15   downtown Toronto contracting for FT-SN?
16           MR. EXALL:   Yes, I can definitely picture that deeply
17   embedded power plant contracting for FT-SN.
18           MR. CAMERON:   Okay.   And where is its meter, its FT-SN
19   meter?
20           MR. EXALL:   That depends on the request, but as an
21   example, I think the meter could be located close to the
22   Victoria square meter, a point at which TransCanada
23   delivers to the Enbridge system.
24           MR. CAMERON:   Okay.   Now, just to take a slight
25   digression, suppose you ended up with five embedded
26   generators that were fed in large part or in part to the
27   Victoria square station.
28           How many meters would there be there?
                                                                    141



 1        MR. EXALL:    There are a couple of different ways to
 2   look at that.    In its simplest form, one could argue that
 3   there would with five meters in that example.     However, we
 4   think that that sort of scenario would be more the
 5   exception, the embedded planted would be more the exception
 6   rather than the rule.    We don't anticipate five deeply
 7   embedded plants, and in the event that that sort of
 8   structure was seen, there may be other options that the
 9   LDCs and other service providers can pursue in order to
10   meet that requirement.
11        MR. CAMERON:     Okay.   And in this example, and let's
12   just talk about two embedded generators if you think five
13   is an unrealistic number.     I'm trying to find out what
14   happens when you have more than one.
15            But for those one or two embedded generators, where
16   are the flow control valves?
17        MR. EXALL:    I think in our earlier example, we
18   suggested that the flow control valves could be at the
19   meter.    So, at that separate delivery meter.
20        MR. CAMERON:     After the gas goes through the meter and
21   flow control valve at Victoria Square, where does it go?
22        MR. EXALL:    It could flow on a line directly to the
23   power plant, or I suppose could connect back to the
24   distribution network.
25        MR. CAMERON:     Well, we're talking here about deeply
26   embedded power generation plants who are way down in the
27   tangle of the distribution grid.     So is the notion of a
28   line going directly from Victoria Square down to Lake
                                                                      142



 1   Ontario plausible, in your view?
 2           MR. EXALL:   Theoretically it could be a new line going
 3   the plant.    I don't believe there is an existing market
 4   there right now, so it would be up to Enbridge to determine
 5   the best way to feed that plant.
 6           MR. CAMERON:    Okay.    Well, let's stick with the
 7   scenario in which Enbridge is feeding its embedded
 8   generators off its grid.         So you would picture the gas
 9   leaving the TransCanada system at Victoria Square, going
10   through a meter, going through a flow control valve, and
11   then going into the grid; is that right?         Into the Enbridge
12   grid?
13           MR. EXALL:   In that particular example, the way that
14   you've laid it out, yes, that is one way that it could
15   work.
16           MR. CAMERON:    Well, let's start with one scenario
17   using that set-up.
18           Suppose you want to close the flow-control valve up at
19   Victoria Square.       What impact does that have on the ability
20   of the generator to take gas down on Lake Ontario.
21           MR. EXALL:   In the example where the meter connects
22   directly to the plant?
23           MR. CAMERON:    No.     We've got the control valve and the
24   meter up at the Victoria Square station.         And we've got the
25   plant down on Lake Ontario, at the other end of the
26   Enbridge grid.       And TransCanada wants to close -- no,
27   TransCanada does close the flow control valve.
28           What effect does that have on the plant down on Lake
                                                                   143



 1   Ontario to take gas?
 2        MR. EXALL:    That would be dependent on how else
 3   Enbridge is feeding that plant, but what the effect would
 4   be would be to restrict the FT-SN flows through that meter,
 5   and only that, at that meter.
 6        MR. CAMERON:    Is the answer it would have no effect on
 7   the ability of the plant?     That in itself, that your
 8   closing of the control valve would have no effect on the
 9   ability of the plant to take gas?
10        MR. EXALL:    In that particular example the way that
11   you've laid it out, I think that's correct.
12        MR. CAMERON:    What if, and I probably don't need to be
13   hypothetical about this but I will just to be careful, what
14   if Enbridge balances its distribution grid using Victoria
15   station and other takeoffs around Toronto?     Would you have
16   separate FT-SN meters at each of those other takeoffs?
17        MR. EXALL:    I'm sorry, I was trying to make sense of
18   the questions.    The air conditioning just turned off.
19   Could you just repeat that, please?
20        MR. CAMERON:    Right.   Well, let's say that the
21   molecules that are arriving down on the shore of Lake
22   Ontario don't, in fact, all necessarily come through
23   Victoria Square, that Enbridge receives gas at various
24   points around the city at various interconnections with
25   TransCanada, and it uses those interconnections to balance
26   its grid and ultimately, though no one will know where the
27   molecules came from, to feed the power station down on Lake
28   Ontario.
                                                                   144



 1        Would you have an FT-SN meter and flow-control valve
 2   at each of Enbridge's interconnections with the TransCanada
 3   system on that grid?
 4        MR. EXALL:   Not if they were not taking FT-SN service.
 5   We would not apply the same FT-SN restrictions on other
 6   points that were not being serviced by FT-SN service.
 7        MR. CAMERON:    Well, I guess that's the question.    When
 8   Enbridge receives gas at let's say at five points around
 9   Toronto and uses the gas it gets to service two power
10   generators embedded in its grid, which of those stations is
11   it using to service the generator.
12        MR. FREW:    What I think you're getting at, though, is,
13   Enbridge could do that any time they want.    They could
14   serve whatever market behind the meter stations on their
15   system through any sources any time they want.
16        So I'm not sure that we can really do anything or that
17   we would want to do anything.   It's not for us to decide
18   how Enbridge supplies that plant.
19        MR. CAMERON:    Fair enough.   Maybe I'll put the
20   question this way.
21        What point do those flow control valves and meters
22   serve, then?
23        MR. FREW:    Well, they are designed, in our cases, for
24   a direct connect or for, you know, a lateral to a specific
25   point.
26        MR. CAMERON:    That part I can wrap my head around, a
27   direct connect or a dedicated lateral.    And I can see – not
28   to say it's a good or a bad idea -- I can see how it would
                                                                    145



 1   work, that you would have your flow control valve and your
 2   meter there.
 3            What I still haven't been able to understand is the
 4   suggestion that this idea works for an embedded generator,
 5   or makes sense for an embedded generator, and for
 6   TransCanada serving them.
 7        MR. EXALL:    So I think in one of our earlier responses
 8   we pointed out that it could work.    The meter could connect
 9   to a line that does connect directly to the embedded power
10   plant and that would be up to Enbridge to determine the
11   best way that could be served.
12        And as we mentioned before as well, in the case where
13   we have other circumstances that maybe make that first
14   option more difficult to accommodate there may be other
15   solutions out there that we can move towards.
16        MR. FREW:    I suspect in your scenario, though, that
17   Enbridge probably would want a flow-control valve as well
18   on the embedded plant.
19        MR. CAMERON:     I'm going to come to that point in just
20   a second but --
21        MR. FREW:    And you could link the two together very
22   easily.
23        MR. CAMERON:     -- but if I could just come back to
24   Mr. Exall's point.    When you talk about a dedicated line
25   going from Victoria Square station to Toronto's waterfront,
26   that's really out of the embedded generator category,
27   right.    We're talking about either a direct connect to
28   TransCanada or a dedicated line.
                                                                    146



 1         The situation that I think, from Enbridge's questions
 2   and from these questions, you'll recognize is that we're
 3   having trouble seeing the point of all of this when you
 4   talk about the true sense of an embedded generator where
 5   you've got comingled molecules coming along the TransCanada
 6   line going through a strictly controlled meter
 7   and flow-control mechanism and then getting comingled into
 8   the grid again.   Indeed, from multiple feed points into the
 9   Enbridge grid.
10        So I hear what you say, that it's not -- that,
11   Mr. Frew, that you're your envisioning this was really with
12   respect to bypass and dedicated laterals.     But your
13   challenge is to explain to us how it makes sense in an
14   embedded generator situation.
15        MR. FREW:    So I think you may be getting hung up on
16   the flow control.    And so if we didn't use the flow
17   control, we still think the service would be a valuable
18   service.
19        MR. CAMERON:     Okay.   Well, maybe that takes us to the
20   point about collaboration with the LDCs.     And you mentioned
21   that in one of your answers, I think, to Mr. Brown.
22         What further involvement do you picture the LDCs
23   having with respect to embedded generators?      Is it that
24   they would also have flow-control valves?
25        MR. EXALL:     I think in the context of this forum, we
26   would hope that the LDCs work towards offering as flexible
27   a type of service as possible in order to align with those
28   services made available by interconnecting pipelines.
                                                                     147



 1          MR. CAMERON:   Okay.   Let's, if we could, then -- I
 2   don't know whether I'm hung up on the meter or the control
 3   valve, Mr. Frew, as you envision it, but if I could ask
 4   some control valve questions.     And you, I think, mostly
 5   answered this in your answers to earlier questioners.
 6          But as I understood it, and this was a question we
 7   hadn't been able to answer from a review of your evidence,
 8   when you used the flow-control valve, it will be set at the
 9   nomination level or it will be used to control gas to the
10   nomination level as opposed to the contract demand level.
11   Is that right?
12          MR. FREW:   No.   I don't think that would necessarily
13   be the case.   The purpose for the flow control is more to
14   control the system in the event that there is -- it's
15   starting to damage our capability to deliver for other
16   people.   And whether it‟s on our system or whether it's in
17   the embedded, you know, in the LDC's system, it's just to
18   ensure that the integrity of their remaining parts of the
19   system is held whole.
20          I've seen these flow controllers used in other
21   locations directly off pipelines, and typically what
22   happens is provided that the plant gives notice and
23   takes as it's requesting, you don't set the flow control at
24   all.   You just let the system operate and let the plant
25   take as is required.
26          It's only in the event that there's no notification or
27   that they haven't confirmed the upstream supply.     In that
28   sense, then you would set the flow control to make sure
                                                                     148



 1   that they couldn't harm the system that the gas is coming
 2   from.
 3           MR. CAMERON:   Right.
 4           MR. FREW:   So you're not really going to track, on a
 5   15-minute basis, the nomination, with the flow control
 6   valve.
 7           MR. CAMERON:   Well, that rather sounded what you would
 8   be doing when we had what I thought was a quite usefully
 9   illustrative phrase, the “irate phone call," that you
10   wouldn't just shut the plant down.      You would make an irate
11   phone call to them first and say, what do you think you're
12   doing?    You just nominated 2000 gJs and you're taking 5,
13   something like that?
14           And my question is, the thing that prompts that phone
15   call is a take above the nomination, is that right, as
16   opposed to a take above the contract demand?
17           MR. FREW:   So if I could, the intent of our service is
18   to ensure that there's no reason why the individual or the
19   plant doesn't give you a nomination, and then, if he's not
20   taking what he's expected, he could correct it on a very
21   short notice to ensure that he was in line. And we would
22   always maintain the right, obviously, to set the flow
23   control at whatever level we'd want it.      But I think from a
24   practical perspective you wouldn't be changing it very
25   often unless you expected a problem of some sort.
26           MR. CAMERON:   Right.   And what I'm trying to find out
27   is what it is a shipper does wrong this might prompt you to
28   need to use the flow control because you've got -- because
                                                                        149



 1   he's causing you some problems.       Is it that he would exceed
 2   his nomination, or exceed his contract demand?
 3           MR. EMOND:    If he exceeds his nomination.
 4           MR. CAMERON:    You mentioned earlier about getting gas
 5   supply confirmation to support the nominations.         Where and
 6   from whom are you expecting that information?         Would that
 7   be, for example, a call to Union or a communication to
 8   Union about what this customer has arranged on the Dawn to
 9   Parkway line?
10           MR. EXALL:    The confirmation would come from whoever
11   is aligning with those 96 or up to 96 nomination windows.
12   So, to the extent that Union agreed to provide a service
13   that would be available on 96 windows, yes, we would look
14   for confirmation from Union that the supply would be
15   showing up as nominated.
16           MR. CAMERON:    Do you know what your contract, your
17   FT-SN contract, would say about when you were entitled to
18   use the flow control valve?        Would it be, as Mr. Emond
19   says, when a customer exceeds its nomination?
20           MR. EXALL:    I don't believe there's a reference to the
21   use of flow control in the FT-SN contract.          I could review
22   that.    But off the top of my head I don't recall any
23   reference to that effect.
24           MR. CAMERON:    Okay.   You might not need to review it
25   at this stage.       If it's important we'll come back to it.
26           Let me see if I can do this without us opening a whole
27   bunch of binders.       But you had two pictures.    One was the
28   operation of the power plants in the Union EDA showing a
                                                                     150



 1   peak in July and August.   And then the other was the
 2   overall usage in the EDA, and there was a peak in the
 3   middle of that overall usage that looked an awful lot like
 4   the Lennox peak.    And I just wanted to find out, can we
 5   confirm that those have the same peak?
 6        If you want to look it up, it's figure A8 on page 25
 7   of 31 in appendix 1A. And it corresponds with figure A7 on
 8   23 of 31.
 9        MR. EMOND:    Yes, figure A7 shows the flows through the
10   Lennox meter, which comprises a portion of what's shown on
11   figure A8, which is the aggregate measurement into that
12   region.
13        MR. CAMERON:   Thanks.
14        Now, first of all, let me ask a question that I hope
15   you'll agree to, and that is that the success so far in
16   serving the Lennox plant in accordance with its needs is
17   due in some measure to the both formal and informal
18   communication between the OPG, TransCanada, and Union?
19        MR. EMOND:    Yes, I would agree that plays a role.    I
20   think we had listed out in our evidence a number of the
21   factors that contribute to Lennox being able to get supply
22   when it does in the summer, such as excess capability in
23   the system in that region, which means availability of
24   discretionary services to meet that plant.
25        MR. CAMERON:    All right.   And is it fair to say from
26   figure A8 there that Union can and has collectively used
27   many different services to serve Lennox?    It looks from
28   that figure that there is FT STS, FT diversions, IT, and
                                                                  151



 1   STS overruns in there.
 2        MR. EMOND:   I think that's a safe assumption, although
 3   the data presented is for all shippers into the Union EDA.
 4   Yeah, obviously Union is a large STS shipper into that
 5   region.
 6        MR. CAMERON:   Perhaps more to the point, Lennox is a
 7   very large customer in that area.    That's where I got us to
 8   agree that that peak in the Union EDA graph for July and
 9   August was the Lennox plant, and that's where you see all
10   those services coming into play, correct?
11        MR. EMOND:   Yes.   So, from figure A8, what you see are
12   a peak of STS overrun, Union Gas.    FT diversion, which
13   could be Union Gas or other FT shippers.    And the final
14   piece being STS, which is Union Gas again.
15        MR. CAMERON:   Right.   Union wasn't claiming credit for
16   the provision of the services but just identifying the fact
17   that a suite of services was used to serve Lennox so
18   successfully in the past.
19         And the question is, would that type of flexibility
20   be available for an LDC to serve a power plant that
21   contracts with TransCanada for FT-SN?
22        MR. EMOND:   FT-SN as proposed is the only service
23   that can flow through that particular meter to serve the
24   FT-SN customer.   So, in other words, it does not
25   contemplate that there can be other services at that meter.
26   Just FT-SN.   That's not to preclude other power plants from
27   not contracting for FT-SN, maybe using, as Lennox does,
28   depending on where they are in the system, using our
                                                                    152



 1   existing suite of services.
 2        MR. CAMERON:   Okay.
 3        MR. FREW:   One of the things that gets missed in this
 4   kind of analysis, though, is the difference between FT-SN
 5   and an FT contract, and that being the guarantee, of the
 6   intra-day capability to take gas.     And to change
 7   your nomination significantly intra-day to match, you know,
 8   a varying load as required by this new-fired -- this new
 9   gas-fired generator.     So there's a difference, and that's
10   why we've proposed it.    If people are comfortable, if the
11   power suppliers are comfortable having that
12   interruptibility on a daily basis, they can sign up for FT
13   service or any of the other service.       We're not saying they
14   can't sign up for any of those services.
15        MR. CAMERON:   Okay.    If you go to the very end of that
16   piece we're now looking at on page 31.
17        You say, and I think this is almost self-evident from
18   the material that precedes it, but, that your delivery area
19   approach -- this is right at the end, your delivery area
20   approach:
21               “... may also help to facilitate the
22               optimization of transportation service to the
23               various market segments of the Union EDA."
24        Is it fair to say that this delivery area approach
25   also contributes to the success of serving Lennox
26   within the Union EDA?
27        MR. FREW:   Yes.    I would say so.
28        MR. CAMERON:   And would an LDC have that flexibility
                                                                     153



 1   to serve a power plant in its franchise that contracts for
 2   FT-SN, that is, to use the delivery area approach?      I think
 3   from what Mr. Frew said the answer is no.      I just want to
 4   confirm that that's the case.
 5        MR. FREW:    Well, no.   I think the answer would be yes.
 6   I mean, if the LDC could figure out a way to package the
 7   services that we have together to supply power load, we,
 8   you know, that's fine.   It could do go ahead and do that.
 9        MR. EMOND:    But for FT-SN, you know, it must be a
10   Single service through a single location
11        MR. CAMERON:    Right, that's what I --
12        MR. EMOND:    And that's to represent the very different
13   nature of the FT-SN service, being multiple nomination
14   windows, reserve capacity.
15        MR. FREW:    This is a very important point.    The
16   reserve capacity is an extraordinarily important point that
17   this service has that the others don't.
18        MR. CAMERON:    I think it's the salient feature of it.
19        MR. FREW:    Yes.
20        MR. CAMERON:    But the power plant can't balance across
21   multiple delivery points and the LDC can't balance across
22   the power plant if the power plant's dedicated to FT-SN;
23   right?
24        MR. EMOND:    Yeah, I think that's right.    And just to
25   clarify the reason for the separate delivery point and
26   single type of service to that point is so that TransCanada
27   can know what the flows are going to be from the
28   nomination, and if necessary, to protect the system,
                                                                  154



 1   control the flows there.
 2        The difficulty we have in allowing that kind of
 3   service more broadly across a delivery area is when you get
 4   a nomination change, you don't know where precisely within
 5   the delivery area the load is changing.
 6        And so what is contemplated with FT-SN is that single
 7   delivery point, to help us identify where the load is
 8   changing, when it is, and if necessary protect the system
 9   with the flow control.
10        MR. FREW:    I'd just like to add one more comment, that
11   in total, if we see a lot of new load coming on our system,
12   we can more economically supply larger volumes, if we have
13   greater control on the individual points, and greater
14   understanding of how the gas is going to flow.     We are then
15   in a position to set our system up so that it can
16   comfortably move more volumes to greater -- greater volumes
17   to more locations on that particular day.
18        So it's a matter of, this is probably as we move
19   forward and the system gets tighter and tighter, and if we
20   get more and more FT or FT-SN contracts, we will be looking
21   for tighter and tighter control on all of the delivery
22   points to ensure that we're managing the system as
23   effectively and cost-effectively as we can.
24        MR. CAMERON:   Okay.   This morning you had a discussion
25   about two FT-SN shippers doing a title transfer.     Where
26   would that title transfer occur or be deemed to occur?
27        MR. EXALL:   If, for example, the receipt for the FT-SN
28   contracts was Parkway, then the title transfer would occur
                                                                     155



 1   at Parkway.
 2        MR. CAMERON:    Does that mean that title transfer has
 3   to occur at a single point to which both FT-SN shippers
 4   have as their delivery point?      Sorry, receipt point?
 5        MR. EXALL:     Well, actually, to date, title transfers
 6   occur at a point.    So if transfer of gas is to occur
 7   between one party or another, between one party to another,
 8   that occurs at a point.      So the gas must be there, and to
 9   transfer title from party A to party B as consistent with
10   current title transfers.
11        MR. CAMERON:    Right.    But isn't each FT-SN contract
12   going to be from a given receipt point to a specific
13   delivery point?
14        MR. EXALL:     Yes.
15        MR. CAMERON:    Okay.    And could these transfers occur
16   at every 15-minute window?
17        MR. EXALL:     Yes, between FT-SN shippers.
18        MR. CAMERON:    And under SBN service, can customers
19   exchange imbalances?
20        MR. EXALL:     No, under, just to clarify, SNB services.
21        MR. CAMERON:    Sorry, SNB.
22        MR. EXALL:     They could not exchange imbalances.
23        MR. CAMERON:    Will TransCanada be offering FT-SN
24   between St. Clair and Dawn?
25        MR. EXALL:     The evaluation of FTSN depends on,
26   Obviously, the receipt and delivery point.      So to the
27   extent that the delivery of the FTSN contract is to a point
28   near Dawn, yes, we would accommodate that.
                                                                     156



 1           But as Mr. Emond pointed out before, it would not flow
 2   through the same meter connecting to Dawn as we have today,
 3   because we cannot accommodate multiple services through
 4   that meter -- multiple services being FT-SN and existing
 5   services.
 6           MR. CAMERON:   So by this same token, I've got a list
 7   of them here but from what you're saying there couldn't be
 8   an FT-SN contract between Empress or Dawn and either the
 9   Union or Enbridge CDAs?
10           MR. EXALL:   Yes, there could be an FT-SN contract
11   between Empress or Dawn and a point within the Union CDA,
12   and we would set aside or clarify there that a point would
13   be -- or a delivery area would actually be cached out
14   separate from the Union CDA as the point of delivery for
15   FT-SN.
16           MR. CAMERON:   Okay.   I think we're saying the same
17   thing, that the delivery point couldn't simply be the
18   Enbridge CDA, it would have to be a specific point with a
19   meter and control valve within that CDA?
20           MR. EXALL:   Correct, for the reasons stated before by
21   Mr. Emond.
22           MR. CAMERON:   Could you have a receipt point at Dawn
23   and a delivery point at a meter in the Enbridge CDA?
24           MR. EXALL:   For FT-SN service, we have contemplated
25   that this service would be available anywhere on the main
26   line.    To the extent that services would be available out
27   of Dawn, we would have to examine what those requirements
28   would be to contract for a service out of Dawn, to be able
                                                                  157



 1   to offer FT-SN from Dawn to a point, for example, in the
 2   Enbridge CDA.
 3        MR. CAMERON:    Is the answer, We don't have to
 4   contemplate that now but we'd have to look at it if
 5   somebody asked for it?
 6        MR. EXALL:   Yes.
 7        MR. CAMERON:    If you don't provide FT-SN, if you take
 8   out what we've been calling embedded generators in the true
 9   sense, that is, generators deep in the LDC grid -- and
10   count just those that are either feeding directly off
11   TransCanada or on a dedicated lateral, what do you see as
12   your market for FTSN, let's say, over the next several
13   years?
14        MR. STRINGER:   Well, it will depend on how certainly
15   the coming GTA or the current GTA West RFP plays out.      May
16   have one or two and perhaps more generators, and depending
17   on the location of those generators, you know, if it's two
18   that are close to the mainland that could be served by a
19   direct lateral, then you could have two in there.
20        Certainly there's an existing generator underway that
21   could take advantage of FTSN by a direct connection.
22        MR. CAMERON:    So there's Sithe and a generator in the
23   GTA West?
24        MR. STRINGER:   Well, the results of the GTA West have
25   not been determined yet.
26        MR. CAMERON:    Let‟s say that they decide to put a
27   generator in the GTA West.   Your market for those not
28   embedded in an LDC would be Sithe and that generator; is
                                                                    158



 1   that right?
 2        MR. STRINGER:    If the generator chooses to go that
 3   route, and depending on the location of that generator's
 4   facility, yes.
 5        MR. CAMERON:     But that's it; right?
 6        MR. STRINGER:    As far as we know right now.   We'll see
 7   as the RPs progress and as the market evolves.
 8        MR. FREW:    That would be in the Greater Toronto area,
 9   but, you know, the service is anywhere available on our
10   system.    Could be in Manitoba, could be in Saskatchewan,
11   could be in Quebec.    It could be anywhere, for that matter.
12   And when we develop these services, we're looking at a very
13   long term and expecting to have this service in place and
14   available for a long period of time, as our existing
15   services are available.
16        MR. CAMERON:     And I'm talking about Ontario because
17   that is what we're doing here, and the NEB will be
18   interested in what else you can do in Manitoba and
19   whatnot.
20         If I can go on to another point, does TransCanada
21   have a forecast for SNB?
22        MR. EXALL:     No, I don't think we have a forecast for
23   SNB usage.
24        MR. CAMERON:     Without having to build facilities, do
25   you have an estimate of the capability in the GTA West area
26   you have for FTSN?
27        MR. STRINGER:    It would depend on -- and you're
28   speaking of FTSN.    It would depend on where the gas is
                                                                       159



 1   being sourced.      It would depend on the receipt point of the
 2   gas, how the gas is flowing into the GTA West.
 3           So depending on the contract profile at the time,
 4   whether gas is flowing over the northern part of our
 5   system or out of Parkway, for instance, that would change
 6   how much capacity.
 7           MR. CAMERON:   Let's assume Parkway.
 8           MR. FREW:   So it's a question of how much capacity we
 9   have for any contract, not just FTSN, because the capacity
10   for FTSN is exactly the same as the capacity for FT.         We
11   designed the system exactly the same.       So we just operate
12   them differently.
13           MR. CAMERON:   Sure.   But you know how much of your
14   system is contracted for FT and other services.      What now
15   do you have available that you could use for FTSN without
16   building new facilities?
17           MR. FREW:   Our answer is a bit of a non-answer right
18   now.    It depends on where it goes how much capacity you
19   have.    So you would have to say, tell me how much capacity
20   you would have individually for gas going from point A to
21   point B.    We could tell you that and then if you combined
22   that with something else it would change again, and if you
23   changed the location it would change again.
24           MR. CAMERON:   Fair enough.   I think my question
25   posited Parkway to GTA West, but we could say Victoria
26   Square if that made it easier.
27           MR. FREW:   Okay.   So we will have to go away and
28   undertake that we will find out how much capacity we would
                                                                    160



 1   have today, or when are you asking?
 2        MR. CAMERON:    Well, you were mentioning earlier that
 3   your FT contract profile isn't carved in stone.     But
 4   assuming you maintain, today, and assuming you maintain
 5   your current contract levels, what capacity will you have
 6   going forward?
 7        MR. FREW:   Okay.   We will undertake to get that
 8   information.
 9        MR. CAMERON:    Thanks.
10        MS. SEBALJ:    So that's TCPL number 2.   Just so that
11   I'm clear, it's provide the FTSN capacity for Parkway to
12   GTA West, assuming --
13        MR. CAMERON:    We can say Victoria station, just so
14   we're precise.
15        MS. SEBALJ:    Victoria Square, and that's assuming
16   today's contracting capacity for FT service?
17        MR. FREW:   Yes.
18        MR. CAMERON:    Thanks.
19        TCPL UNDERTAKING NO. 2:    TO PROVIDE FTSN CAPACITY
20        PARKWAY TO GTA WEST

21        MR. CAMERON:    And I'll ask the same question, and it
22   might be you'll have to give a similar undertaking, but
23   again, without having to build how much capability will you
24   have between Parkway and Victoria Square for SNB.    Did say
25   for gas sourced to Parkway?
26        MR. FREW:   I certainly assumed that's what you were
27   asking in any event.     And again, we don't have the answer
28   to that, but that's an undertaking, I guess.
                                                                         161



 1           MR. CAMERON:   Thank you.
 2           MS. SEBALJ:    So that's TCPL no. 3.
 3           TCPL UNDERTAKING NO. 3:     TO PROVIDE CAPABILITY
 4           BETWEEN PARKWAY AND VICTORIA SQUARE FOR SNB

 5           MR. CAMERON:   If a customer contracts for if SNB in
 6   the GTA West area, does it have an impact in any way on the
 7   amount of capacity available for either FT long haul to the
 8   CDA or short-haul to Parkway from points downstream?
 9           MR. EXALL:    It may, but that's similar to an FT
10   contract signed up in the area you spoke of.       That may
11   impact the available capacity for long haul or short haul
12   contracts in that area.
13           MR. CAMERON:   Thank you very much, gentlemen.      Those
14   are our questions.
15           MS. SEBALJ:    Thank you, Mr. Cameron.   Mr. Moran?
16           MR. CAMERON:   And I have 50 percent of my battery
17   left.
18           CROSS-EXAMINATION BY MR. MORAN:

19           MR. MORAN:    Good afternoon, panel.   My name is Pat
20   Moran, and I'm appearing on behalf of APPrO.       I just have a
21   couple of questions.
22            If you could turn up in your Issue I evidence page 2
23   of 12.    In answer 4 to question 4, you indicate that one of
24   the reasons for bringing forward your short notice services
25   is because current services such as firm transportation are
26   not ideally suited to meet large loads with hourly flows
27   that can vary significantly.
28           Is there anything that prevents TransCanada Pipeline
                                                                   162



 1   from offering additional nomination windows under its
 2   standard FT service?
 3         MR. EMOND:    No.   There's no constraint on offering
 4   more windows.      I think we would want to understand that
 5   there is sufficient demand from the industry, from
 6   shippers, for the extra windows to support if there were
 7   extra staffing requirements to support that.
 8         MR. MORAN:    All right.   And if the Ontario LDCs ended
 9   up offering hourly nomination windows, is that something
10   that TransCanada would be able to match, then, as an
11   upstream pipe?
12         MR. EMOND:    Yes, we could accommodate that.
13         MR. MORAN:    Okay.   If you could then turn to your
14   appendix 1, I think it is, at page 7 of 31.      I'm looking at
15   table 2.1, and -- I'm sorry, I said page 7, I meant page
16   6.   I'm looking at table 2.1.
17         MR. EXALL:    Just for clarification, that's appendix
18   1B; correct?
19         MR. MORAN:    At the top of my page, I have appendix 1,
20   short notice service, application, written evidence.      I
21   guess it's part of the attachment to your NEB application.
22         MR. EXALL:    Yeah.
23         MR. MORAN:    It's the table that compares FT-SN and FT
24   service attributes.
25         MR. EXALL:    Thank you, we have it.
26         MR. MORAN:    Okay.   Now, as I look at that list of
27   things that you have available under FT short notice, is it
28   fair to describe this as a bundled service, with a number
                                                                    163



 1   of components that are put together to create the service?
 2        MR. EXALL:    I would characterize it as a service with
 3   a number of attributes that make it distinct from FT.
 4        MR. MORAN:    All right.   And the first item that's on
 5   the list deals with the reservation of capacity, so that's
 6   a feature of your FT-SN service, right?
 7        MR. EXALL:    Yes, the reference is for intra-day
 8   reservation of capacity, and that is distinction for FT-SN
 9   service.   Whereas we do reserve capacity for FT shippers
10   for the day.
11        MR. MORAN:    For the day.   Now, given that you can do
12   intra-day reservation of capacity for purposes of your
13   FT-SN service, is there anything that stops TransCanada
14   Pipeline from providing a similar kind of intra-day
15   reservation of capacity for its standard FT service, if you
16   had additional nomination windows and so on.
17        MR. FREW:    That isn't our current practice, and that
18   would be a fairly significant change in our practice.
19         I think what you're suggesting is that we would then
20   become a bumping pipeline where IT doesn't really have any
21   guaranteed service during the day.    So that would be a
22   significant change to the way we currently operate.
23   Nothing stopping us from doing it but it's not something
24   that we would probably do.
25        MR. MORAN:    Thank you.   Union has proposed to
26   accommodate your short-notice service as an option for new
27   T1 customers who are going to use more than 1.1 million
28   cubic meters.    Do you agree that access to your
                                                                   164



 1   short-notice services should be limited to that option?
 2         MR. EXALL:    We have no such restriction on the
 3   offering of FT-SN service.
 4         MR. MORAN:    And do you agree that Union should impose
 5   that limitation on access to your service?      I may be wading
 6   into pipeline diplomacy here, I don't know, but --
 7         MR. FREW:    No, there's no diplomacy in pipelines.
 8         I'm not sure how they could impose that restriction on
 9   us.   They might be able to impose it on their own
10   customers.
11         MR. MORAN:    I'm talking about the restriction on
12   access to that service.    I mean, you bring it to Ontario,
13   but it then has to get to the customer within Ontario.      And
14   so far as, as far as I can tell, Union is simply proposing
15   to accommodate your service for the purposes of one
16   subcategory of T1 customers.    Do you have a problem with
17   that or would you like to see more flexibility on the part
18   of Union in order to accommodate more customers in getting
19   access to the service that you're proposing?
20         MR. FREW:    Well, maybe I didn't understand the
21   discussion this morning.    I didn't think that it would
22   restrict FT-SN to only those large customers.      And perhaps
23   I missed that.     Or are you suggesting that that's what --
24         MR. MORAN:    Run with that assumption.   What would your
25   position be?
26         MR. EXALL:    We don't believe we're in a position to
27   dictate to Union what service offerings they should make
28   available to their shippers.     We're providing the most
                                                                   165



 1   flexible service option that we can, and hope that other
 2   service providers would do the same.
 3           MR. MORAN:   All right.   If you were talking to the OEB
 4   instead of to Union, what would you ask them to do?
 5           MR. FREW:    Take our lead and be as flexible as
 6   possible.
 7           MR. MORAN:   I'll leave it at that.   Thank you.
 8           I don't know if you have a copy of APPrO's pre-filed
 9   evidence handy, but if you do, I'd like you to turn up page
10   38.
11           MR. EXALL:   Is that page 38 of 71?
12           MR. MORAN:   That's right.   On that page there's APPrO
13   proposal number 5.      And the first item there is:
14                “Utilities should allow customers to schedule
15                non-uniform hourly quantities for all
16                infranchise transportation services in both
17                infranchise and exfranchise storage and park
18                and loan services."
19           Would you agree that that's consistent with your
20   proposed short-notice service?
21           MR. EXALL:   Yes, our short-notice service provides the
22   opportunity to adjust the rate of flow.
23           MR. MORAN:   Right.   And then if you look at the second
24   item:
25                "Union Gas should add variable hourly
26                receipts and deliveries as an option to it's
27                C1, M12, and M16 transportation services."
28           I take it you wouldn't disagree with that proposition,
                                                                      166



 1   then?
 2           MR. EXALL:    I think as we mentioned before, and to
 3   echo Mr. Frew's sentiment, we're trying to offer the most
 4   flexible services that we can, and we hope that other
 5   service providers do the same.
 6           MR. MORAN:    Right.    Thank you.
 7           Now, does TransCanada Pipeline plan on making the
 8   FT-SN and SNB services available to export shippers?
 9           MR. EXALL:    It's not structured to do so at this time.
10   But if the market develops and there's an appetite for that
11   sort of requirement, then we would be happy to consider it.
12           MR. MORAN:    And under that scenario, how would flow
13   control work?
14           MR. EXALL:    I think there's an issue there, first, at
15   the export point of mixing services through the meter, as
16   we discussed earlier.         We may have to set up a separate
17   meter to accommodate deliveries for export, and in the case
18   of flow control technology, that could be handled through
19   compression or flow control valves.
20           MR. MORAN:    Okay.    Thank you.    Those are all my
21   questions.
22           MS. SEBALJ:     Thank you, Mr. Moran.
23           Mr. Thompson.
24           CROSS-EXAMINATION BY MR. THOMPSON:

25           MR. THOMPSON:    Well, this is going to be as tedious as
26   the last lot.    And let me begin.
27           Can you tell me how many --
28           MR. MORAN:    That means it's only going to be five
                                                                   167



 1   minutes.
 2        MR. THOMPSON:      -- how many gas-fired generators in
 3   Ontario are there in which TransCanada corporation has an
 4   interest?
 5        Does this need an undertaking?
 6        MR. FREW:   No, we currently continue have an interest
 7   in any that are currently operating.
 8        We do have, I think, a declared interest in the
 9   Portlands project.
10        MR. THOMPSON:   Okay.    None currently operating but you
11   have an interest in the Portlands Energy Centre?
12        MR. FREW:   Yes.
13        MR. THOMPSON:   All right.    Thank you.   Are any of the
14   entities with which you're planning to negotiate or even
15   negotiating now affiliates in terms of the services that
16   you've described in your testimony?
17        MR. FREW:   By affiliate, what do you mean by
18   "affiliate"?
19        TransCanada Energy certainly would be one of those,
20   and they are involved in Portlands.
21        MR. THOMPSON:   Right.    Anybody else?
22        MR. FREW:   I don't believe so.
23        MR. THOMPSON:   Thank you.    Now, just at a high level,
24   the services that you provide, you generally carry gas to
25   an LDC system, is that fair, and then the LDC carries it to
26   the plant?
27        MR. FREW:   Yes, or exports to other pipelines.
28        MR. THOMPSON:   Okay.    And does the proposal that
                                                                  168



 1   you're advancing envisage that the power generators will be
 2   the shippers on your system?
 3        MR. EXALL:    They could be, but there's no requirement
 4   for them to be.
 5        MR. THOMPSON:   What are the eligibility requirements
 6   for the services that you've described?
 7        MR. EXALL:    Eligibility would involve adhering to the
 8   criteria required to accommodate service, including the
 9   separate delivery area and flow control that we've talked
10   about at length today.    And the standard contracting
11   practices that TransCanada would follow, including posting
12   of credit, financial evaluation, those sorts of things,
13   very conventional and consistent with other services.
14        MR. THOMPSON:   So marketers would be eligible for the
15   FTSN and other service?
16        MR. EXALL:    Yes.
17        MR. THOMPSON:   Would LDCs?
18        MR. EXALL:    Yes.
19        MR. THOMPSON:    And power generators if they wanted to
20   ship themselves?
21        MR. EXALL:    Correct.
22        MR. THOMPSON:   Have you had any interest in the
23   service from LDCs?
24        MR. EXALL:    We have had some discussions with LDCs, as
25   we mentioned before, looking for ways that they could
26   utilize our new short-notice services.
27        MR. THOMPSON:   Have Enbridge and Union expressed an
28   interest in your services?
                                                                       169



 1           MR. EXALL:    An interest insofar as --
 2           MR. THOMPSON:    Favouring them as opposed to opposing
 3   them?
 4           [Laughter]
 5           MR. EXALL:    Those types of questions are probably best
 6   posed to Union and Enbridge.
 7           MR. THOMPSON:    Well, surely you know if they favour
 8   them or do not favour them?        Can they -- well, let me ask
 9   it this way.    There's been a lot of discussion about the
10   need for compatibility and alignment.        Questions of that
11   nature have been put to you by previous questioners.
12           MR. FREW:    Yes.   And there is no doubt there's,
13   because we're breaking new ground on this, concerns about
14   the ability for everyone to co-ordinate.
15           MR. THOMPSON:    Right.    And I took it from the
16   responses that somebody gave that alignment could be
17   better, or words to that effect, that the ideal alignment
18   doesn't exist yet.      Is that fair?
19           MR. FREW:    I'm not sure -- the intent of our service,
20   at least, the 96 windows, is to provide the link between
21   supply and the market without any restrictions in terms of
22   saying that we're not capable of responding in a timely
23   fashion.    So, if Union sticks with ten windows or Enbridge
24   sticks with four or they want to go to 7 or 24, we're in a
25   position to be able to match that up.
26           So I think from our perspective there isn't a problem.
27           MR. THOMPSON:    Okay.    If I asked you to list the
28   deficiencies in alignment between your proposal and the
                                                                     170



 1   proposals of each of Union and Enbridge, what would your
 2   answer be?    There are none, from your perspective?
 3           MR. FREW:   No, I think that the biggest difference is
 4   our requirement to have a discrete delivery point.     Other
 5   than that, I think we could satisfy everything that's
 6   required in their services.
 7           MR. THOMPSON:   Well, could you give me an undertaking
 8   to list the deficiencies in alignment between -- as you see
 9   them, TransCanada sees them, between your proposal and the
10   proposals of each of Union and Enbridge by way of an
11   undertaking, just so that we could get them lined up on a
12   piece of paper?
13           MR. KEYS:   Perhaps I understood Mr. Frew's earlier
14   question, but I heard him to say that from TransCanada‟s
15   perspective in the service its proposing there are no
16   misalignments, that it's able to accommodate the service
17   attributes that proposed short notice services from the
18   LDCs.    So, I'm not sure what you're looking for, Mr.
19   Thompson, in that respect.
20           MR. THOMPSON:   Well, he did mention the delivery point
21   problem, as I understood it.
22           MR. FREW:   And I think that's probably the only one.
23   I'm not sure that we're in a position to identify the
24   differences with Enbridge and Union.     Perhaps they could
25   identify the differences.
26           MR. THOMPSON:   Well, you can look at the market from
27   your perspective as a transporter.     I guess you can look at
28   the market from their perspective.     I thought perhaps you
                                                                     171



 1   folks could look at it from both perspectives and
 2   just help us with understanding what are the problems of
 3   getting this more appropriately aligned.
 4           MR. FREW:    Well, Mr. Exall will try and answer for you
 5   and see if you like it.
 6           [Laughter]
 7           MR. EXALL:   This sounds quite ominous but I'll do my
 8   best.
 9            Perhaps, absent any objections, or opposition from
10   other service providers such as the LDCs, we believe
11   our service offerings are robust enough to align
12   with whatever service offerings are made available by other
13   service providers.
14           MR. THOMPSON:   Right.   Thank you.
15           Now, turning just to some risks that my client is
16   concerned about, and the first one is the risk of drafting
17   the entire system that these large gas-fired generators
18   bring.    And could you tell me in 25 words or less how your
19   proposals avoid that risk from materializing?
20           MR. EXALL:    The presence of the flow control
21   technology would help us protect our ability to make
22   deliveries off of the main line and prevent overtakes by
23   the end-user.
24           MR. THOMPSON:   Thank you.   Now, in terms of the
25   proposals that you're tabling, just as an aside, these were
26   filed with the NEB, I believe, on May the 1st, an
27   application was filed?
28           MR. EXALL:   That's correct.
                                                                     172



 1        MR. THOMPSON:     Right, and is there still a tolls task
 2   force process that will be involved in scrutinizing these
 3   proposals; i.e., could they be settled at some point?
 4        MR. FREW:    Well, we weren't successful in doing that
 5   over the last year and a half, so we filed.
 6        MR. THOMPSON:     Okay.   So the prospect of settlement
 7   is -- the filing indicates settlement is pretty remote as a
 8   prospect?
 9        MR. FREW:    I'm not sure about that, but time was of
10   the essence, so we filed.
11        MR. THOMPSON:     Okay.   Thank you.
12        Okay.    Just again moving along on the impacts.    Will
13   these proposals have any impact on the existing firm
14   services you offer, either in terms of the tolls or in
15   terms of the quality of service.
16        MR. EXALL:    I think as I had mentioned before,
17   shippers that hold firm service contracts today will not be
18   affected by new FT-SN contracts coming on the system.
19   That's consistent with new FT shippers that sign up on to
20   the system.
21        So no existing firm shippers would not be impacted.
22        MR. THOMPSON:     Either from a toll perspective or a
23   quality of service perspective; is that right?
24        MR. EXALL:    From a quality of service perspective,
25   and, in fact, from a toll perspective, the addition of new
26   contracts on to the system using existing capacity serves
27   to reduce the tolls.
28        MR. THOMPSON:     All right.   Thank you.
                                                                   173



 1        Now, will the availability of these services have any
 2   impact on the interruptible services you currently offer?
 3        MR. EXALL:   It may, and as I'd mentioned earlier, when
 4   we have new FT or, say, STFT, or FTNR shippers signing on
 5   to the system, that too impacts the amount of unutilized
 6   capacity available for discretionary services.
 7        MR. THOMPSON:   So the trend will be down; if there's
 8   take-up on this service, the amount available for
 9   interruptible will be less, everything else being equal?
10        MR. EXALL:   It could be.    And as I said, consistent
11   with other new services signing on.
12        Perhaps to elaborate on that, it really depends on
13   where the short-notice contract is signed up as well.
14        MR. FREW:    So that depends on whether or not our
15   capacity's fully contracted.     If it's fully contracted
16   and these new services come on, then it wouldn't have any
17   impact.   If our system isn't fully contracted, then it does
18   reduce the IT that was available.
19        MR. THOMPSON:   Thanks.   One of the services that is of
20   concern to IGUA members is the STS service, which is used
21   by Union, for one, to provide a balancing service in the
22   northern -- their northern delivery area, and will the
23   availability of these new service you're proposing have any
24   impact on either the toll or the quality of STS service.
25        MR. EXALL:   As I had mentioned before in terms of
26   toll, if incremental contract is signed up using existing
27   capacity, that would serve to reduce all tolls on the
28   system.
                                                                      174



 1           In terms of available capacity, if the STS shipper,
 2   Union, in your example, nominates for service on the
 3   timely window, they'll still get their full service
 4   entitlement.
 5           MR. THOMPSON:    You mentioned in response to one
 6   questioner, if I understood it correctly, making these
 7   services available do not involve any additional cost.          Did
 8   I understand that correctly?       Maybe it was capital costs.
 9   But perhaps you could just describe for me the cost impacts
10   of making these services available.
11           MR. FREW:   I think it would be nominal, or very, very
12   small.    Again, there's a GNA charge that goes along with
13   any new contract.       So the question is whether or not the
14   additional GNA, on a unit basis, at least, is high or
15   below.    Although we see that a very nominal additional cost
16   for putting in place these new services.       So they may, in
17   fact, have a downward impact on our average GNA costs,
18   even.
19           MR. THOMPSON:    Thanks very much.   Those are my
20   questions.
21           MS. SEBALJ:   Thank you very much, Mr. Thompson.    I
22   believe those were all the questions for this panel.
23           Is there anyone out there that I'm missing on my list?
24   All right.
25           We have one question for the panel.
26           CROSS-EXAMINATION BY MR. MAN:

27           MR. MAN:    Regarding your SNB service, do you see that
28   as an alternative to storage service provided by an LDC?
                                                                        175



 1           MR. EXALL:    The intent of the SNB service is to
 2   facilitate short-notice requirements.          It's intended to be
 3   used to balance off-daily requirements and not supposed to
 4   be a seasonal alternative.
 5           MR. MAN:    Okay.   Thank you.
 6           MS. SEBALJ:    All right.   Thank you.    Thank you very
 7   much.
 8           Oh, wait, don't go.     Oh, yes.    You can go, but we have
 9   questions from the Board hearing team with respect to issue
10   number 3 for a different panel.          So maybe what I'll do, I'm
11   going to talk for a minute here.
12           So we'll do the switch during the break.
13           Mr. Keys, you have a different set of panellists for
14   the next issue or a differently constituted set of panel
15   lists?
16           MR. KEYS:    We do, yes.
17           MS. SEBALJ:    So what I'll suggest is that we, after
18   the break, the Board hearing team can ask those questions.
19   And then, can I get an idea of time from those parties that
20   are asking questions of IGUA and AMPCO?          So I have on my
21   list here Union, Mr. Cameron?
22           MR. CAMERON:    45 minutes.
23           MS. SEBALJ:    Mr. Brown?
24           MR. BROWN:    About ten minutes.
25           MS. SEBALJ:    Mr. Moran.
26           MR. MORAN:    10 to 15 minutes.
27           MS. SEBALJ:    Mr. Stevens.
28           MR. STEVENS:    15 to 20 minutes.
                                                                     176



 1        MS. SEBALJ:     Have I missed anyone on IGUA and AMPCO?
 2        Given that obviously the schedule is starting to get
 3   fairly compressed, Mr. Moran, I'm calculating about an hour
 4   and a half, which will put us, if we come back from the
 5   break-in 15 minutes, that will put us at a quarter to 4.
 6        MR. MORAN:     Subject to real-time variability.
 7        MS. SEBALJ:     Subject to real-time variability.    The
 8   question then becomes whether your panel is available
 9   tomorrow morning.    Tomorrow morning is wide open but I
10   understand that one of your panel members is not available.
11        MR. MORAN:     Yeah, we have a constraint for one
12   witness, who has to be out of here by 10:30.     And I suspect
13   that questioning will not be complete by 10:30.    But there
14   is a possibility for this particular witness that there may
15   not be a lot of questions, and we may be able to play that
16   one by ear.
17        MS. SEBALJ:     So let's chat about that a little on the
18   break, and let's take a break.    Can I please ask people to
19   be back by a quarter to 4:00.    Thanks.
20        --- Recess taken at 3:27 p.m.
21        --- On resuming at 3:45 p.m.
22        MS. SEBALJ: If I could get everyone to please start
23   taking your seats.    I actually wanted to make a quick
24   correction for the record.
25         We had not taken into account some undertakings of
26   Union's that were made following the Technical Conference,
27   the first Day of the first Technical Conference.    And so
28   Union undertakings number 22, 23, 24, and 25 of today
                                                                  177



 1   should be corrected to be Union undertakings 25, 26, 27,
 2   and 28.
 3        MS. SEBALJ:     Apologies.   More confusion.
 4        All right.    Mr. Keys, if you would like to go ahead
 5   and introduce this panel.
 6        Just for clarification for everyone, this is the TCPL
 7   panel on issue 3, which is the M12 premium.     And the reason
 8   we've shifted this around is to facilitate TCPL being able
 9   to dismiss this panel tomorrow, given that we only have
10   about ten minutes‟ worth of questions.
11        So I'll turn it over to you, Mr. Keys.
12        MR. KEYS:    Thank you.   I'll start again by introducing
13   the panel members.    From the floor's side on the left is
14   Mr. Craig Frew again, and as I said before, he's the vice
15   president, gas transmission east, with TransCanada
16   Pipelines.   He is the sole company witness there to
17   respond to questions about TransCanada's evidence on issue
18   3.
19        Seated beside Mr. Frew is Dr. J. Stephen Gaske.
20   Dr. Gaske is the president of Zinder Companies, Inc.
21   Dr. Gaske has prepared written testimony on TransCanada's
22   behalf in this proceeding that's related to Issue III
23   Dr. Gaske provided a copy of his curriculum vitae
24   as an attachment to his filed testimony.
25        And at this point I don't intend to review his
26   qualifications in any way.
27        TCPL – PANEL 2:
28        CRAIG FREW;
                                                                         178



 1           DR. STEPHEN J. GASKE:

 2           MS. SEBALJ:    Thank you.
 3           MR. KEYS:    So the panel is available immediately,
 4   Ms. Campbell, for your questions.
 5           CROSS-EXAMINATION BY MS. CAMPBELL:

 6           MS. CAMPBELL:    Thank you.    And this will be short.
 7   First of all, issue 3, in the evidence that you filed on
 8   issue 3, and if you could just go to page 7 of 13.            And
 9   what I'm looking at is question 12 at the bottom.
10           DR. GASKE:    You're talking to the TransCanada
11   evidence, not my evidence?
12           MS. CAMPBELL:       I'm not talking to you yet, Dr. Gaske,
13   but I am going to get to you.         I'm going to go to Mr. Frew
14   first.    So this is Issue III, page 7 of 13, but not
15   Dr. Gaske's report.
16           I'm specifically looking at the sentence that
17   says:
18                "TransCanada has reviewed the tariffs of
19                several major gas” -- sorry, “major Canadian
20                gas transportation pipelines and all have an
21                allocation or access procedure that's part of
22                their tariff and subject to approval by the
23                applicable regulator ..."
24   And then it talks about criteria in terms of contract.
25           I'm wondering whether TCPL could undertake to file the
26   tariffs that are reviewed and referred to in that
27   paragraph.
28           MR. FREW:    Yes.    We can do that.   We have that
                                                                   179



 1   information available.
 2        MR. KEYS:   For clarification, Ms. Campbell, those are
 3   listed in footnote 12 on page 8 of 13.       Are those specific
 4   tariffs that you're referring to as a first question?
 5        MS. CAMPBELL:    See, now you fooled me by putting it on
 6   a different page.
 7        MR. KEYS:   I believe all of those are publicly
 8   available tariffs through the particular pipeline companies
 9   through their individual company websites.      Are you looking
10   for TransCanada to provide extracts to have particular
11   portions of those pipeline companies' tariffs that deal
12   with capacity allocation -- the portions of those tariffs
13   that specifically deal with capacity allocation for long
14   term firm services?
15        MS. CAMPBELL:    Yes.
16        MR. KEYS:   The tariffs themselves, obviously, are
17   going to be fairly large.
18        MS. CAMPBELL:    That‟s our specific interest, is
19   captured in those sentences.
20        MR. FREW:   So that's the allocation procedures --
21        MS. CAMPBELL:    Yes.
22        MR. FREW:     -- for those pipelines.    And I think we had
23   those summarized so we can pull those out.
24        MS. CAMPBELL:     Great.
25        MR. FREW:   In a summary fashion, if that's acceptable
26   to you.
27        MS. SEBALJ:     Did you want the actual excerpts or
28   summaries of them?
                                                                     180



 1        MS. CAMPBELL:    You know what?     My chorus here has told
 2   me that I'll accept the summary.
 3        MR. FREW:     Excellent.
 4        MS. CAMPBELL:    Thank you.
 5        MS. SEBALJ:    So that's TCPL number 4.
 6        TCPL UNDERTAKING NO. 4:     TO PRODUCE ALLOCATION
 7        PROCEDURES SUMMARIES

 8        MS. CAMPBELL:    Yes.   Appendix 3A, that's you,
 9   Dr. Gaske.
10        Now, the first question actually has to do with the
11   reference that's at the bottom of page 4, as I said.      And
12   it actually starts at line 21.     The
13   sentence is:
14                "Because Union is the only pipeline in large
15                areas of Southern Ontario, some customers that
16                rely on this pipeline capacity for this
17                particular market may be under pressure to pay a
18                bid premium in order to ensure access to
19                capacity."
20        And my question, Dr. Gaske is -- and maybe -- I don't
21   know whether Mr. Frew might be better able to answer this,
22   but it is in Dr. Gaske's report so I'm directing it to him.
23        Dr. Gaske, are you aware of any product substitute
24   that would be comparable in terms of price availability and
25   quality to transmission on the Dawn to Parkway system?
26        DR. GASKE:    No.
27        MS. CAMPBELL:    Thank you.
28        MS. CAMPBELL:    Turning to page 5, Dr. Gaske, and I'm
                                                                    181



 1   looking specifically at question 8, which was:
 2                "Is an option an efficient method for
 3                allocating scarce capacity?"
 4        And your answer that I wish to ask you a question on
 5   is a sentence, the first sentence:
 6                "In the short run, an auction can be efficient
 7                for allocating short-term pipeline capacity,
 8                but as discussed hereafter an auction for long-
 9                term firm extension capacity can be inefficient
10                unless the pipeline faces strong competition."
11        I was wondering if you would be able to provide us
12   with examples of other pricing mechanisms, Dr. Gaske, that
13   could be efficiently used to allocate capacity during times
14   of capacity constraints in the short term.
15        DR. GASKE:    Well, there are obviously various kinds of
16   rationing.    And you can rank types of uses and things like
17   that, which, in fact, I've seen done on a massive scale
18   eight years ago.
19        There's also the possibility of reverse auctions, for
20   a short-term, on a short-term basis.
21        I think parties often swap or arrange with each other
22   when there's a real market for it on a short-term basis,
23   but if there's a flat-out shortage, an auction for short-
24   term capacity can be efficient.
25        MS. CAMPBELL:    On page 15 of your report, Dr. Gaske,
26   at lines 12-14, you state that:
27                “U.S. pipelines are also required to provide
28                 significant amounts of information concerning
                                                                     182



 1                the physical constraints and market
 2                conditions that might potentially affect the
 3                amount of capacity that's available in the
 4                open season."
 5        And my question is, would TCPL support the inclusion
 6   of similar information, including the time that such
 7   capacity is anticipated to become available, as a
 8   requirement in Union's open season documents?
 9        MR. FREW:   Would TCPL support the requirement?
10        MS. CAMPBELL:      Yes.
11        MR. FREW:   Yes.
12        MS. CAMPBELL:   You would?
13        MR. FREW:   That is something, in fact, that we do
14   ourselves when we have open seasons.       We list the capacity
15   available and indicate when we can build new capacity.
16        MS. CAMPBELL:   Right.       And when I look under Issue
17   III, and I look at the very end, which is page 12, there's
18   a list of what TransCanada requests the Board to direct
19   Union to do.   And there's reference to developing an
20   allocation procedure, which defines the criteria by which
21   Union will allocate long-term firm transportation.        It goes
22   on and on.   It talks about the allocation procedure being
23   approved by the Board.
24        I don't see that the information referred to in
25   Dr. Gaske's report is repeated in here as something that
26   TCPL would like to see.        Or perhaps I didn't read it as
27   carefully as I should have.       But I didn't see it.
28        MR. FREW:   So I think if you're referring to the same
                                                                   183



 1   material that you just referenced in Dr. Gaske's evidence,
 2   our request number 2 is, I think, intended to cover that.
 3        MS. CAMPBELL:   Is it?    So it is intended -- so that
 4   when you say:
 5             "A requirement that Union identified in its
 6             open season documents any anticipated
 7             capacity constraints."
 8        You include within that providing what Dr. Gaske's
 9   report calls "significant amounts of information concerning
10   the physical constraints and market conditions that might
11   potentially affect the amount of capacity that's
12   available"?
13        MR. FREW:   I think so.   I'm not sure if there's other
14   information intended by it -- by this comment, but I think
15   we're aligned at least between ourselves as to that's what
16   we would expect from TransCanada.
17        [Witness panel confer]
18        MR. FREW:   Okay.   So I'm not sure -- our thinking on
19   this would be that in the one, two, and three points that
20   we've asked for, that Union would identify under what
21   circumstances they would build if required, as well.
22        So I think, you know, just to be clear, that that's
23   something that we would be interested in knowing, if that's
24   not clear in this request already.
25        MS. CAMPBELL:   And did you envision this being a
26   Board-approved process?
27        MR. FREW:   Yes.
28        MS. CAMPBELL:   Those are my questions.   I said
                                                                   184



 1   they'd be short.   I know you're not used to lawyers being
 2   accurate about time, are you?      Caught you off-guard.
 3        The one other thing that I would like to do and would
 4   like to put on the record, and I've discussed this with
 5   Mr. Cameron, is that there were questions that were posed
 6   to Union concerning the M12 premium, and it was agreed
 7   between counsel that they would be answered by undertaking,
 8   by Union, and that any follow-up questions concerning the
 9   answers to those undertakings would also be dealt with in
10   writing.
11        MS. SEBALJ:   And those undertakings will be provided
12   by the 24th date to all parties as per the normal rules.
13        MS. CAMPBELL:    Yes.
14        MS. SEBALJ:   Thank you.
15        And thank you, panel, and Mr. Keys.     I don't think
16   that you should be moving, but we can just bring a new
17   panel up.
18        MS. CAMPBELL:    I'm just wondering whether we should
19   mark the questions that were given to --
20        MS. SEBALJ:   As an exhibit?
21        MS. CAMPBELL:    -- Union Gas as an exhibit.   Just so
22   there's a record of it.
23        MS. SEBALJ:   Okay.     That would I assume have an
24   exhibit number.    I believe that makes it Exhibit No. 2,
25   which are questions from the Board hearing team to Union
26   Gas Limited with respect to Issue III, the M12 premium.
27        EXHIBIT NO. 2:    QUESTIONS FROM THE BOARD HEARING TEAM
28        TO UNION GAS LIMITED WITH RESPECT TO ISSUE III, THE
                                                                  185



 1        M12 PREMIUM

 2        MS. SEBALJ:    But I'm going to have to just check to
 3   make sure that it is Exhibit 2.
 4        MS. CAMPBELL:     Thank you.
 5        MS. SEBALJ:    Thank you.
 6         I believe that the next on the roster is now, just to
 7   confuse everybody after our discussion before the break,
 8   we're actually going to go to APPrO.
 9        MS. CAMPBELL:     Okay.   I have to change my binder.
10        APPrO – PANEL 1:
11        DUANE CRAMER;
12        BRIAN KELLY;
13        JOHN ROSENKRANZ;
14        JOHN WOLNIK;
15        ROBERT CARY;
16        MICHAEL NOLAN:

17        MR. MORAN:    Thank you, let me just introduce the APPrO
18   witness panel, then.    On the furthest end from me is Duane
19   Cramer.   Next to him is Brian Kelly.    Next is John
20   Rosenkranz.   Next is John Wolnik.    And then there's Rob
21   Cary and Michael Nolan.    We have a few introductory
22   questions just to set the stage, and then we will leave it
23   to you for questions.
24        EXAMINATION BY MR. MORAN:

25        MR. MORAN:    Starting with you, Mr. Cramer, you're, as
26   I understand, the vice president for development for Sithe
27   Global Power.
28        MR. CRAMER:    Yes.
                                                                 186



 1        MR. MORAN:    And you're responsible for Ontario
 2   development activities.
 3        MR. CRAMER:   Yes.
 4        MR. MORAN:    And as a representative of gas-fired
 5   generators, how would you describe the challenges that are
 6   faced by a gas-fired generator in the electricity market
 7   here in Ontario?
 8        MR. CRAMER:   Well, I think, you know, we have
 9   identified since, I guess, beginning in about 2000, the
10   fact that there's significant mismatches between the
11   paradigm that the gas transportation industry operates in
12   versus the paradigm that the Ontario electricity market
13   operates in, in that the gas is largely scheduled
14   day-ahead, whereas the electricity market, as it currently
15   stands in Ontario, operates in real-time and presents
16   significant challenges for dispatchable gas-fired
17   generators that are being pursued in the province.
18        And Sithe has an 875 megawatt gas-fired project under
19   construction, another 800 megawatt project in advanced
20   development, and is looking at additional opportunities in
21   Ontario.   And this -- the subject of this proceeding is
22   very key to the success of those projects.
23        And we're very, I guess, keenly looking for a
24   successful outcome from this proceeding.
25        MR. MORAN:    Thank you, Mr. Cramer.
26        I'll turn now to you, Mr. Cary, as I understand it,
27   you're a consultant who is active in the electricity
28   market?
                                                                        187



 1           MR. CARY:    That's right.
 2           MR. MORAN:   And you're also a member of the board of
 3   directors of APPrO?
 4           MR. CARY:    That's right.
 5           MR. MORAN:   And Mr. Nolan, who's sitting next to you,
 6   Mr. Nolan, you're with Ontario Power Generation?
 7           MR. NOLAN:   That's correct.
 8           MR. MORAN:   And as I understand it, you're currently
 9   the manager of market operations in OPG's fossil and hydro
10   businesses?
11           MR. NOLAN:    That's correct.
12           MR. MORAN:   Right.   Now, Mr. Cary and Mr. Nolan,
13   you're here to address the power market issues and the role
14   of the day-ahead market and the use of fossil and
15   hydroelectric resources for reliability purposes in the
16   electricity market; is that correct?
17           MR. NOLAN:   Yes.
18           MR. MORAN:   Now, Mr. Cary, there's been several
19   references to the day-ahead market being developed by the
20   IESO.    From your perspective, will the day-ahead market
21   resolve the challenges that are faced by the gas-fired
22   generators?
23           MR. CARY:    In general, no.    The day-ahead market may
24   result in some greater price transparency in the day-ahead.
25   But it does absolutely nothing to mitigate the changes that
26   take place between the day-ahead and the real-time
27   operation of the system.
28           I'd be happy to just expand a little bit on those
                                                                   188



 1   contributing factors.
 2        MR. MORAN:    Yes, if you would.
 3        MR. CARY:    And in fact, in our evidence we identified
 4   four particular factors:    Forecast error, the addition of
 5   wind power, which is itself very variable, and which will
 6   impose a compensation requirement on gas-fired generation;
 7   the failures of import and export transactions that can
 8   happen right up until the last minute; and contingency
 9   events on the system.
10        Interestingly, the IESO effectively identified three
11   of those, excluding the contribution from wind and
12   hydroelectric generation forecasts.     They also identified a
13   couple of other factors that they see as adding variability
14   to the real-time operation of the system.
15        MR. MORAN:    Now, I wonder if you could just provide a
16   very brief overview of the analysis that is set out in the
17   APPrO evidence at pages 7 to 12 that addresses that
18   intraday volatility issue.
19        MR. CARY:    I'd be pleased to do that.
20        I guess our starting point is that reliability of the
21   electricity system requires that generation responds to the
22   needs of load in the system.    That load forecast varies.
23   As generators dependent on gas supply, we need the gas
24   supply to be sufficiently flexible to meet the demand
25   changes within the electricity system.    And this is on a
26   global basis, not from an individual generator perspective,
27   necessarily.    We're talking here about system reliability
28   requirements.    So it made sense to analyze and attempt to
                                                                  189



 1   quantify what we could of these.
 2        The first part of the quantification is looking at the
 3   load forecasts as they exist in the day-ahead, as they
 4   exist three hours ahead of dispatch, and as they actually
 5   transpire.
 6        These load forecasts in the day-ahead would be the
 7   same as the inputs to the IESO's day-ahead system.      So
 8   having a day-ahead market will not in any way mitigate
 9   these changes.
10        And I won't try and go through the results of those,
11   but we did the analysis over a three-year period of the
12   changes in demand that arise from day-ahead to three hours
13   ahead, and from three hours ahead to real-time, to give an
14   idea of how flexible the gas system needs to be to respond
15   to those electricity reliability needs.
16        In the following paragraphs, we identified some of the
17   other issues on a more qualitative basis.   It wasn't
18   possible to go back to hard information in our possession
19   to do quantitative analysis of all of these things.     So we
20   have identified them and tried to put a scale factor on the
21   wind issue.
22        Then we said there is a different perspective on
23   all of this, which is to look at it from a price
24   perspective, and our evidence, V, covers the analysis of
25   what an individual generator might see in its
26   day-ahead schedule, coming down to its three-hour ahead
27   schedule, coming down to the real-time schedule, and the
28   extent to which individual generator instructions will also
                                                                    190



 1   be subject to variation.
 2        MR. MORAN:     Thank you, Mr. Cary.   Turning to you,
 3   Mr. Nolan, I wonder if you could provide an overview of the
 4   role that's played by existing coal and hydroelectric
 5   resources for system reliability purposes.
 6        MR. NOLAN:     I think Mr. Care has already put it in a
 7   nutshell by indicating that coal and hydro contribute to
 8   reliability by being responsive to load.
 9        I view coal and hydro working on the bulk electricity
10   system as a partnership.
11        Hydro is the nimble partner and coal facilities are
12   the slow partner.    Coal-fired facilities provide
13   load-following service.     Hydro facilities provide peak
14   shaving.   They support coal resources in load-following,
15   and they provide operating reserve where or the lion's
16   share of operating reserve.
17        If coal-fired resources are retired, it's my opinion
18   that hydro facilities cannot continue to undertake this
19   reliability role alone.    Gas will have to play a
20   significant role contributing to reliability and replacing
21   the load-following capability of coal-fired facilities.
22        The reason for saying that Hydro cannot do more than
23   it's doing now is largely based on the fact that a
24   significant portion of Ontario's hydro capacity is largely
25   base load, and that's the facilities at Beck and Saunders
26   and Cornwall, and that the remaining capacity has seasonal
27   water variations, has a fixed point of maximum efficiency
28   on a unit by unit basis, and therefore is not designed to
                                                                   191



 1   be load-following.    And much of the hydro facilities that
 2   could contribute to maximizing reliability in Ontario are
 3   working under constraints imposed by water management
 4   agreements that the Ministry of Natural Resources requests
 5   that we, as proponents for river systems, subscribe to.
 6        MR. MORAN:   Thank you, Mr. Nolan.   I'd like to turn to
 7   you now, Mr. Kelly.   As I understand, you are the manager
 8   for eastern commercial operations for TransCanada Energy
 9   Limited.
10        MR. KELLY:   That's correct.
11        MR. MORAN:   And you've had a number of roles with
12   respect to TransCanada Pipelines and working for that
13   company?
14        MR. KELLY:   That's correct.
15        MR. MORAN:   All right.   APPrO has proposed a number of
16   new services in its evidence.   Again, from a generator's
17   perspective, how do those services meet the needs of
18   gas-fired generators?
19        MR. KELLY:   Well, as Mr. Cramer has already
20   articulated, the fundamental problem that gas-fired
21   generators are facing is a day-ahead gas market in a
22   real-time electricity market, and the need to respond in
23   real-time to dispatched signals in that electricity market.
24        The proposals that are presented in the APPrO
25   submission are all intended in some way, shape, or form to
26   help generators to manage that gap.   In particular, that
27   intra-day volatility that exists as a consequence of
28   responding to those -- the real-time market signals from
                                                                 192



 1   the electricity market.
 2        I think it's also important to note that the proposals
 3   that are going to be outlined for you today are not meant
 4   in any way, shape, or form as a criticism of the LDCs or
 5   TCPL, for that matter, for the past services that they've
 6   had in place.   What we're trying to do here, that the
 7   generators have set aside their competitive nature and sat
 8   down together to develop a consensus paper that will
 9   articulate what the needs are going to be.   We're not here
10   to talk about the past.   We're here to talk about
11   addressing the needs that generators are going to have
12   going forward, with two major principles guiding us as we
13   brought this paper forward.
14        One is to work with the LDCs to enhance the
15   reliability of the electricity system through the use of
16   gas-fired generation, and at the same time, to enhance the
17   efficiency in the gas market, not just for gas-fired
18   generators but for all gas users.
19        MR. MORAN:   Thank you, Mr. Kelly.   Now turning to you,
20   Mr. Rosencrantz, you've been retained as a consultant by
21   APPrO?
22        MR. ROSENKRANZ:   That's correct.
23        MR. MORAN:   And you've assisted APPrO in preparing the
24   evidence that's been filed with the Board in this matter.
25        MR. ROSENKRANZ:   That's correct.
26        MR. MORAN:   And previously you have experience with a
27   number of different companies on the gas supply side;
28   right?
                                                                   193



 1        MR. ROSENKRANZ:     Yes, a number of different
 2   experiences, yes.
 3        MR. MORAN:     Yes thank you, Mr. Rosenkranz.
 4   Mr. Wolnik, again, you are currently a consultant with
 5   Elenchus Research Associates?
 6        MR. WOLNIK:     That's correct.
 7        MR. MORAN:     And you have a very large number of years
 8   of experience working with Union Gas.
 9        MR. WOLNIK:     Thanks for noticing that.    Yes.
10        [Laughter]
11        MR. MORAN:     You're welcome, Mr. Wolnik.    Mr.
12   Rosenkranz, starting with you, then, what are the guiding
13   principles that are underpinning APPrO's proposals for new
14   services?
15        MR. ROSENKRANZ:     If we could refer to the slides we
16   provided to people.
17        Just so summarize quickly, I think that Mr. Kelly
18   touched on some of the key points of trying to gain
19   flexibility in order to increase the reliability on the
20   power market side.    I think it's important to note that we
21   are also looking at ways of dealing with the generation,
22   gas-fired generation loads that are coming to Ontario, and
23   finding the suite of services that are going to best allow
24   those loads to be accommodated with the least effect on the
25   gas system.
26        We think that our proposals actually enhance gas
27   system reliability.    They also are proposals that, taken
28   together, should enhance the operation of wholesale gas
                                                                   194



 1   market through Ontario and be of use to not just power
 2   generators but anyone who is operating in that particular
 3   -- in this particular market.
 4           Some of the principles that kind of guide us in terms
 5   of putting together these specific proposals, in addition
 6   to those already mentioned, we're looking for access to
 7   unbundled services for the generators who wish to contract
 8   for them, essentially, a choice between unbundled services
 9   and the ability to contract for the services that you need
10   but not be forced to contract for services that you don't
11   need.
12           And we're looking for, essentially, a robust,
13   competitive and transparent market, where a lot of what
14   we're looking for here are services that will enhance the
15   flow of information among the various market participants
16   and make the entire market work better.
17           So if I can summarize briefly the 11 proposals that
18   are discussed in our evidence, and I want to say that
19   these are not in any particular order of importance.    Some
20   of these are, to some extent, stand-alone, and others are
21   really measures that are best taken –- or have –- they‟re
22   best effective if they're implemented as a group.
23           We looked at, particularly, large generators and other
24   large customers being transmission-level customers of the
25   gas system, probably not your conventional distribution
26   customers and probably not using distribution mains, and we
27   think it makes sense for there to be transmission-level
28   services to reflect that.
                                                                 195



 1        We're looking at some large loads with specific needs,
 2   and we think that utilities should have the ability to –-
 3   that utilities should have the ability to negotiate
 4   service, both in terms of term of services and rates, where
 5   it makes sense to do so.
 6        We see that storage is important, and there's been
 7   some discussion already by other panels about the
 8   importance of storage and the fact that the needs for
 9   storage for power generators is different from the
10   traditional seasonal needs of other parties and some
11   discussion of what type of methodology of determining the
12   allocation of storage to generators makes sense.
13         The generators have put some -- quite a bit of effort
14   into thinking about that issue in terms of what makes sense
15   going forward, and Mr. Wolnik is going to outline a
16   specific proposal that we have.
17        We are looking for services in terms of hourly
18   nominations, nominations that include non-uniform hourly
19   rates to better match the actual usage of gas; we're
20   looking at the ability to use transportation services to
21   move gas around so that, if the gas that's already flowing
22   in the system can be redirected to other points or
23   end-users can get access to supplies from different points
24   and are less dependent on just the choice of gas coming in
25   and its going in or out of storage.   We feel that that type
26   of flexibility actually puts less strain on the local
27   facilities.
28        We see the need for reservation capacity, and we see
                                                                 196



 1   that being not just for specific services but for other
 2   service as well, and particularly for storage as well as
 3   transportation.     So we look at that as being something
 4   that's important to have available as an option, not being
 5   something that's part of every transportation service or
 6   every storage service but perhaps is something that is
 7   available where it's needed.
 8        We have particular concerns with things like the
 9   obligated DCQ issue, and we talked about the fact that that
10   may have served a particular service, but in today's
11   environment, particularly with the usage of the system by
12   the power generators, it causes some particular problems,
13   and we think that those should be recognized and
14   accommodated.
15        We're looking for additional types of flexibility and
16   we've listed several others, including in-storage title
17   transfers, being able to combine nominations for multiple
18   plants, more imbalance trading which is something that's
19   common on U.S. pipelines, may make sense as a way of
20   as a methodology.
21        We are also, then, looking at making the access to
22   services more predictable and transparent, and also the
23   pricing of market-based services available to the market in
24   some way, so that people understand when services are going
25   to be available.    They can plan ahead, particularly
26   generators who are planning ahead for commitments to large
27   capital investments to build a power plant, need to be able
28   to understand what those services are going to be, going
                                                                 197



 1   forward, what's going to be available, what those are going
 2   to cost.
 3        In terms of managing their supplies in a shorter term,
 4   understanding what service are out there, and where the
 5   market is for those types of service, thinking in terms of
 6   things like storage and balancing services or shorter-term
 7   services that might be offered.
 8        Finally, we are looking -- we think it's important
 9   that this process not just stop at this point in time, but
10   that there also be a follow-up to make sure that what comes
11   out of this proceeding is actually effective and is meeting
12   the needs of power generators so we've recommended that
13   there be a review at a specific time being something that
14   comes out of this proceeding.
15        MR. MORAN:    Thank you, Mr. Rosenkranz.
16        Mr. Wolnik, I wonder if you could then provide an
17   overview, then, of the storage proposal.
18        MR. WOLNIK:   Yes.   Thank you.
19        Part of what we did here is really to come up with a
20   storage proposal, really partially in response to some
21   concerns that had been expressed earlier in the Technical
22   Conference about some uncertainty about how to allocate
23   storage.
24        So we developed that, plus -- especially along the
25   lines of high deliverability storage.
26        So I'll just kind of work through the proposal,
27   assuming that people have copies.
28        Utilities should don't make a base level of storage
                                                                  198



 1   available to generators on a rolled-in basis.     That
 2   recognizes the generators' needs are different than
 3   typical, heat-sensitive and industrial customers and
 4   that the aggregate excess methodology currently used by
 5   utilities isn't appropriated for generators.
 6        Generators need access to high-deliverability storage
 7   services, to recognize -- we recognize as generators that
 8   high deliverability storage will cost more than typical
 9   base-load storage.
10        And that the additional cost related to this high
11   deliverability storage should be treated on an incremental
12   basis.
13        Existing generators, we believe, should be able to be
14   choose between the new methodology that we're proposing
15   here and continuing with the existing methodology that they
16   may already subscribe to.
17        Base-load storage services for generators should be
18   based on its operational needs to help ensure reliability
19   of the power system.
20        High-deliverability storage, we believe, is really
21   needed to cover two events:   Assuming that generators
22   purchase on the pre-dispatch signals from the day before,
23   there's two events that typically can occur throughout the
24   day that could require the need for high-deliverability
25   storage.   One of them is requiring to run longer than
26   necessary or longer than the pre-dispatch signal indicated.
27   And the other one is really having to shut down
28   sooner than expected.   So those are really the two events
                                                                   199



 1   that we think will drive the predominant needs for
 2   high-deliverability storage, in which this entire
 3   methodology is based on.
 4        What we've highlighted here is that for -- we've
 5   separated out the requirements for a combined-cycle plant
 6   versus a single-cycle plant because those needs are
 7   different.   Their operational needs are different.
 8        So we've highlighted that for a combined-cycle plant
 9   on a per-hundred megawatt of plant capacity, that for a
10   combined cycle plant, the space allocation or entitlement
11   should be 126,480 gigaJoules, and associated with that
12   would be 1.2 percent deliverability or 1,518 gJs a day.
13        And for a single-cycle plant of a hundred megawatts or
14   per hundred megawatts, the entitlement would be 177,360
15   gigaJoules and the related deliverability associated with
16   that would be 2,218 gJs a day.    And I'll show the
17   derivation shortly.
18        So we think that this base-load storage should be
19   allocated under the utility's current rolled-in cost
20   methodology, and that once this capacity was allocated,
21   additional deliverability could be purchased by the
22   generator itself on an incremental cost basis.
23        The next slide really illustrates the derivation of
24   how we get to those numbers.     And maybe what I can do is
25   just kind of run down combined cycle illustration first.
26   So we've assumed here that the typical run time for a
27   combined cycle plant is 16 hours, and maybe more, maybe
28   less, but again this is what we have based the entitlement
                                                                    200



 1   methodology on.   We've assumed an average rate of about
 2   7500 MMBTUs per kilowatt hour, or translating into gJs it
 3   would translate into 70 and 112 gJs per kilowatt hour.
 4   That then translates to an average hourly plant
 5   consumption of 791 gJs an hour.
 6        Assuming now that the generator purchased that hourly
 7   flow over the 16 hours -- I'm sorry, the 16 hours'
 8   requirement over the 24 hours, it would result in an
 9   average hourly flow of 527 gJs per hour.
10        If the generator had to run longer, it could then
11   nominate up to its full CD entitlement or of the 791, which
12   would require 264 gJs an hour in addition.   And if you
13   translated that, then, into a storage space entitlement by
14   multiplying that amount by 24 and dividing it by, in this
15   case we've assumed 10 percent deliverability, it would
16   result in a space requirement of 63,360 gJs.     Again, this
17   would be based on having the plant run longer.
18        If the plant had to shut down that is purchasing all
19   those volumes the 527 gJs an hour, it would have to do
20   something with that gas, and putting it into storage would
21   be the preferable option here.
22        So looking at the injection requirements in this case,
23   it would drive a space entitlement of 126,480 gJs.    So in
24   this case it's really the injection requirements that are
25   the controlling factor for space.
26        Now, then I've illustrated the deliverability
27   requirements.   We go through the same analysis for the
28   simple cycle facility, and in fact it's the withdrawal
                                                                     201



 1   requirements that really drive the space requirements -- in
 2   this case it's 177,360 gJs.      And again, the corresponding
 3   deliverability entitlement for this hundred megawatt
 4   facility of 2128 gJs.
 5        Over the page, we actually show an example here of the
 6   entitlement for a 500-megawatt combined-cycle generator.
 7   So in this case, the space allocation would be the 126,480
 8   times the 500 MW divided by the hundred, or it would result
 9   in about 600,000 gJs of space.      The deliverability would be
10   7,589.   Again, at the 1.2 percent deliverability, which is
11   the base load suggested by the utilities.
12        And then here we show the optional deliverability that
13   the generator could purchase at the incremental cost-base,
14   and in this case it would be the 10 percent, so it would be
15   an additional 8.8 percent deliverability, which would
16   result in an additional 55,651 gJs a day, for an aggregate
17   deliverability in this case, then, of 63,240 gJs a day.
18        MR. MORAN:    Thank you very much, Mr. Wolnik, and
19   panel.   The panel is now available for questions.
20        MS. SEBALJ:    Thank you.   I'll turn it over to you,
21   Ms. Campbell.
22        MS. CAMPBELL:     Thank you.   You look like a really
23   crowded last supper.
24        MR. MORAN:    There's no Judases up there, though.
25        CROSS-EXAMINATION BY MS. CAMPBELL:

26        MS. CAMPBELL:     You do, and I'll just leave who's who
27   to your own discretion.
28        The first thing that I wanted to ask about, there is
                                                                     202



 1   some mention both in the evidence that you've just
 2   given and in the filed evidence that this is a consensus of
 3   the needs of the gas generators -- page 58 of your evidence
 4   says it's a consensus proposal of the Ontario generator
 5   community.
 6          And my question is:    How many gas-fired generators
 7   were consulted, and is this a unanimous position, first of
 8   all?
 9          MR. KELLY:   I don't know If I'm at liberty to say who
10   all was involved in putting the proposal together, but
11   APPrO's membership represents, it includes, I would say,
12   about 95 percent of the generation in the province.        In
13   fact, one of the only generators who is not an APPrO member
14   is TransCanada Energy, and we wilfully participated because
15   we felt it was important that the consensus view be
16   represented to the LDCs.
17          MS. CAMPBELL:   It's the Hell's Angels in the
18   background.   It's very exciting for them too.
19          MR. KELLY:   They would not participate.
20          MS. CAMPBELL:   No.   What about the Banditos?   There
21   are only five of them left so you don't care.      Okay.
22   Sorry.   95 percent?
23          MR. KELLY:   APPrO, I believe, represents about 95
24   percent of the generation in the province.     As I indicated,
25   TransCanada Energy is probably one of the only developers
26   in the province that is actually not a member of APPrO, but
27   when invited to participate, we were pleased to join, in
28   large part because we felt it was important that the
                                                                   203



 1   generator community speak with one voice on this issue.
 2        MS. CAMPBELL:    How much capacity does this represent?
 3   95 percent?
 4        MR. KELLY:    I believe according to the --
 5        MS. CAMPBELL:    What are the statistics?   You have
 6   statistics somewhere.
 7        MR. KELLY:    I can repeat it verbatim for you, if you
 8   would like.
 9        MS. CAMPBELL:    Yes.
10        MR. KELLY:    On slide 14.
11        MS. CAMPBELL:    So that's where we go.   You don't have
12   to repeat the whole slide.
13        MR. KELLY:    Okay.
14        MS. CAMPBELL:    Let me find it first.
15        MR. KELLY:    APPrO's members -- okay.
16        MS. CAMPBELL:    Okay.   Thank you.
17        MR. KELLY:    APPrO's members currently produce over 95
18   percent of the electricity made in Ontario.
19        MS. CAMPBELL:    Oh, right.   So the only -- are you
20   saying there's only one company that doesn't support the
21   proposal?
22        MR. KELLY:    I haven't said there's any one company
23   that does not support the proposal.
24        MS. CAMPBELL:    No, I'm sorry, was its TransCanada
25   Energy?    You named someone who --
26        MR. KELLY:    I'm representing TransCanada Energy here
27   today.    TransCanada Energy is a developer in Ontario.     We
28   have a number of projects in development, with the one that
                                                                 204



 1   everyone is probably most familiar with is the Portlands
 2   Energy Centre, in partnership with Ontario Power
 3   Generation.
 4        TransCanada Energy, just for purposes of
 5   clarification, is not a member of APPrO, okay.
 6        MS. CAMPBELL:   Right.
 7        MR. KELLY:   However, when we were invited to
 8   participate with APPrO in the development of a submission
 9   for the NGEIR process, we were happy to participate in the
10   development of that paper because we believe that in this
11   particular case, on these issues, it was important that the
12   generator community speak with one voice.
13        MS. CAMPBELL:   All right.   So I guess the other way of
14   saying it:    Who didn't support -- aside from the Hell's
15   Angels, who didn't support it?
16        MR. KELLY:   To my knowledge, I cannot think of anyone,
17   any generator who has not participated or who does not
18   support the paper, sorry.
19        MS. CAMPBELL:   Thank you.
20        Now, moving on to your report.    Section 2.3, just
21   generally -- first a general -- it's really a general
22   question that comes out of section 2.3.
23        Section 2.3 describes the key operational
24   characteristics of dispatchable gas-fired generators.
25        TransAlta-Sarnia and Brighton Beach are plants
26   currently in operation.   Do you know if they are taking
27   service pursuant to Union's semibundled T1 rate or are they
28   contracting under an unbundled rate?
                                                                    205



 1        MR. ROSENKRANZ:     I believe based on the discussions
 2   we've had with the APPrO group, and TransAlta has been
 3   involved, that they are a T1 customer of Union Gas.
 4        MS. CAMPBELL:    And without disclosing any confidential
 5   information, do you know how they dealt with the balancing
 6   issues that have been identified in APPrO's report?
 7        MR. ROSENKRANZ:     It's difficult to speak for a company
 8   that's not here.    I will say that TransAlta is very
 9   interested in seeing specific enhancements to the Union
10   service as are outlined in our evidence.
11        MS. CAMPBELL:    Section 2.4 on page 19 of your report.
12   There's reference at the bottom of the first paragraph:
13               "The CES contract calculates financial payments
14               using a model that deems the facility to
15               operate when a certain relationship exist
16               between ..."
17   And I don't know how you pronounce this one.    HOEP?
18   Whatever.   “And the day-ahead prices for gas at Dawn.”
19        What's this certain relationship that's referred to?
20        MR. CARY:     Each CES contract specifies contract heat
21   rate and a contract O&M price.
22        If the price of Dawn is converted at that contract
23   heat rate to a cost of electricity production, and then the
24   contract O&M cost is added on to it, that is treated as a
25   total variable imputed cost of electricity production.
26        That is compared with pre-dispatch electricity pricing
27   and the HOEP to define the hours in which it is deemed to
28   be operating.
                                                                  206



 1        I'm happy to go into more detail if appropriate, but
 2   we tried just to summarize it at a high level in the paper.
 3        MS. CAMPBELL:     I don't think we can take that much
 4   more excitement today so I'm going to take it as a short
 5   answer.   Thank you.
 6        Next question, still on page 19, and this question
 7   relates to the sentence that follows the one I just
 8   referred to.   And that says:
 9              "Payments under the contract are independent
10              of the facility's actual operation but the
11              payment structure tends to reinforce the
12              incentive to be market-responsive."
13        I'm just wondering if you could explain how the
14   payment structure tends to reinforce the incentives to be
15   market-responsive.     How does that work?
16        MR. CARY:   Having gone through the calculation we
17   talked about, about your imputed operation under the
18   contract, there is then an imputed profit calculated on the
19   basis of pricing.
20        And in order to actually make a profit equivalent to
21   the imputed profit, then you need to operate in a highly
22   market-responsive manner.
23        So the objective is to make a profit that at least
24   matches the imputed profit.
25        MS. CAMPBELL:     I see.   Thank you.
26        Could changes be made to the CES contracts that would
27   mitigate the need for some of APPrO's proposed changes as
28   outlined in section 3.1 of your report?
                                                                    207



 1        MR. CARY:    Others may have other points on this, but
 2   my first response is that a lot of this is driven to
 3   fulfill reliability needs of the electric market as a
 4   whole, and is not specifically facility-related; that if
 5   you changed the contract structure, that basically provided
 6   incentive for generators not to be responsive, that would
 7   impair the reliability of the electricity system.
 8        I'm not sure if I've stated that clearly.     The
 9   electricity system needs generators to be responsive and
10   flexible, and building in contract and gas tariff
11   stickiness into that that provides the opposite incentive
12   would be a bad move for reliability of the electricity
13   system.
14        MS. CAMPBELL:     So what you're really saying is there
15   really couldn't be changes made?
16        MR. CARY:    Well, what I'm saying is, one might
17   envisage changes in the contracts theoretically, but those
18   changes would tend to jeopardize reliability of the
19   electricity system.
20        MS. CAMPBELL:     So theoretically, yes, but practically
21   speaking, no?
22        MR. CARY:    That's -- thank you for summarizing better
23   than I did.
24        MS. CAMPBELL:     Yes.    Okay.
25        Page 20.    No.   No.    We have one more.
26        MR. HASSAN:    Mr. Cary, would a change in the delivery
27   point understood contract, say, to Parkway reduce the need
28   for some of the changes that you've requested?    Rather than
                                                                      208



 1   being priced the CES or ACS contract being priced at Dawn,
 2   if it were priced at Parkway?
 3           MR. CARY:    It would not change the reliability drivers
 4   in the electricity system.      It might change the contract
 5   incentive pattern somewhat, and I'd need to think a lot
 6   more about that.      I don't have a quick answer to that one.
 7   But there is an underlying electricity system need for
 8   flexibility that is independent of the pricing point of the
 9   gas under the CES contract.
10           MR. HASSAN:   Okay.   Thank you.
11           MR. CRAMER:   If I could add just one point to that.
12   The practicality, for example, of sourcing gas for a 875
13   megawatt power plant at Parkway with the limited liquidity
14   there, I think that's just a non-starter, you know, under
15   today's market conditions.
16           I think the other thing that needs to be taken into
17   account, with respect to the structure of the CES contract
18   is, in addition to the reliability issues that Mr. Cary
19   raised, there's also -- there has been a lot of thought put
20   into how risks are allocated between electricity consumers
21   and the suppliers under contract in those agreements
22   that would also be affected if you started to revisit how
23   they were structured.
24           So it isn't just a question of:    How do you meet the
25   physical operating needs under those contracts.      There's
26   significant risk allocation issues that would come into
27   play.
28           MR. KELLY:    I think I would like to add one extra
                                                                    209



 1   point as well, and that's CES contract or no CES contract,
 2   the types of changes in the proposals that are being
 3   presented to you today are what gas-fired generation is
 4   going require in order to operate in this province going
 5   forward.
 6        MS. CAMPBELL:   Mr. Moran, I apologize.    Remember I
 7   said I wasn't going to ask you to do a calculation?
 8   Obviously I didn't remember my question as well as I
 9   thought I did.   I am going to ask you.    I apologize in
10   advance for having lied to you.
11        Page 20, which is section 2.5, and there is an example
12   that's provided on that page.     Actually, there's
13   an example that runs on to the next page.
14        And the question is:
15               “Could APPrO undertake to redo the example on
16               page 20 with EGD's proposed Rate 125 and the six
17               proposed additional firm nomination windows?”
18        MR. ROSENKRANZ:    I'm not sure which nomination windows
19   you're talking about.
20        MS. CAMPBELL:   The six firm Union.    The ones proposed
21   by Union.
22        MR. ROSENKRANZ:    So you're assuming --
23        MS. CAMPBELL:     Four NAESB, and six Union, together, so
24   the ten.
25        MR. ROSENKRANZ:    So you're saying that if someone is
26   in Enbridge territory, that sourcing gas from Dawn using
27   the F24-T service, any additional services?     TransCanada?
28        MS. CAMPBELL:   That's it.
                                                                    210



 1          MR. ROSENKRANZ:   I'm just trying to understand what
 2   assumptions should we make around TCPL flexibility?
 3          MS. DUGUAY:   Can you follow the same assumption that
 4   you've got here under your example for the existing Rate
 5   125?
 6          MR. KELLY:    If -- pardon me.   If the analysis that
 7   you're asking for, I think what we're going to have to do
 8   is distinguish where the generator is located.      Is he
 9   located in -- he or she located in such a way that they
10   have service on the Union system and service on the
11   Enbridge system and do not require service on the
12   TCPL system?
13          MS. DUGUAY:   That would be fine.   Is that something
14   you can do?
15          MR. ROSENKRANZ:   I'm not sure it's something we can
16   do.    We can certainly attempt to take this example and
17   rethink it with that one change of the availability of the
18   F24-T service on the Union side and make some assumption on
19   the --
20          MS. CAMPBELL:   Tell you what.   Let's cut right to the
21   chase here and stop the bleeding.
22          Why don't we talk about this off the record and we'll
23   nail down what it is that you need.
24          MR. ROSENKRANZ:   That would be very helpful.
25          MS. CAMPBELL:   So that we can move on to more
26   scintillating questions, okay?     So that's the way we'll
27   handle it, Mr. Moran, Mr. Brown.
28          MR. MORAN:    Yeah, that would be fine.
                                                                      211



 1        MS. CAMPBELL:     Excellent.   Now we're going to move to
 2   the actual proposal.    We're going to go to proposal number
 3   1, and specifically I'm going to be looking at pages 27-28.
 4   And it's really a confirmation.       Some questions just to
 5   confirm aspects of the proposal.
 6        We understand proposal number 1 to be twofold.       The
 7   first is that APPrO is proposing that customers that are
 8   served off transmission pressure distribution mains will
 9   pay for the costs of those facilities only; is that
10   correct?
11        MR. ROSENKRANZ:     As a general principle, that if the
12   end-user is served by a specific set of facilities, meaning
13   the transmission levels, facilities, and it's not using the
14   distribution-level facilities, we're asking that the rate
15   be established based on the cost of the transmission-level
16   facilities; correct
17        MS. CAMPBELL:     And this would apply to all customers?
18        MR. ROSENKRANZ:     Certainly.
19        MS. CAMPBELL:     All right.   And secondly, is APPrO
20   proposing that customers that have been granted a physical
21   bypass and do not require balancing from the utility be
22   able to qualify for transmission service pursuant to rate
23   M12 and/or C1?
24        MR. ROSENKRANZ:     I'm wrestling with that a bit.    I'm
25   not sure that that's a bypass.      You're saying that -- had
26   it been allowed to bypass which system?
27        MS. DUGUAY:   Let me go at it another way.     Can you
28   please clarify under proposal 1, it says here "in the case
                                                                    212



 1   of Union Gas a customer who covers the costs of any
 2   intra-connection facilities..."     Can you explain what you
 3   mean by that?
 4        MR. ROSENKRANZ:    Yes, I can help you with that one.
 5        MS. CAMPBELL:    Okay.   Perfect.
 6        MR. ROSENKRANZ:    And I think the problem was the
 7   particular word that was in your question that we hadn't
 8   anticipated being part of this particular proposal.
 9        The proposal, and there was some -- there was a
10   question of Union Gas this morning that was along the lines
11   of this proposal.    The question that is in the minds of
12   the generators is, if there's a perfectly good
13   transmission-level service available, and that
14   transmission-level service, be it M12, or C1, it sounds
15   like if we're looking at someone who's on the Dawn-Parkway
16   system located near that eastern end, the customer that
17   there was so much discussion about earlier today, and that
18   customer was able to connect to the Union Gas transmission
19   level services, and there were upgrades, enhancements to
20   the transmission-level service such that that party would
21   be able to balance the gas delivered to Union at Dawn with
22   the gas that's actually consumed at the point of receipt,
23   what would be the purpose of requiring that customer to
24   purchase a distribution-level service?
25        If the party was able to get the service that it
26   needed using those services that are available, we don't
27   see why there should be additional service required.
28        And one example that was used, certainly an example
                                                                   213



 1   would be -- and I think this is where your question
 2   originally came from -- it would be analogous to a bypass
 3   or a direct connection to a transmission system, a third-
 4   party transmission system such as TransCanada.
 5           It's also analogous, as we pointed out in our
 6   evidence, to some things that have been done in California
 7   of allowing parties to take gas at a more wholesale or
 8   transmission-level, and then not be responsible for other
 9   costs in the system.
10           So that's the specific circumstance that we have in
11   mind.    That was asked of Union earlier today and the answer
12   was not that it wasn't feasible, but that in their mind M12
13   and C1 are not services that can be used for that.
14           We question why that should not be an option that's
15   available to customers.
16           MS. DUGUAY:   Thank you.
17           MS. CAMPBELL:   Page 29.   Proposal number 2.   And
18   specifically the statement that:
19                "Utilities should be allowed to negotiate
20                rates for firm transportation in balancing
21                based on differences in service quality and
22                the customer's opportunity to bypass, as long
23                as the revenue from the customer exceeds the
24                incremental cost of providing this service."
25           And the questions we'd like you to clarify, which
26   balancing service this is applicable to.
27           MR. ROSENKRANZ:   The answer in this case is that this
28   refers to transportation and balancing as being two
                                                                   214



 1   interrelated parts of the overall service.   I think that it
 2   was meant to be, for example, in a situation where you had
 3   a direct connect or a dedicated lateral that the utility
 4   was constructed to provide service, that there may be some
 5   balancing tolerance built into that transportation service.
 6        So we did not have in mind a particular balancing
 7   service that should be part of this, but that the service
 8   package that would involve transportation, but recognizing
 9   that any transportation package also has to have some
10   balancing tolerance in it in order for it to be
11   practical needed to be something that could be addressed on
12   a case-by-case basis.
13        MS. DUGUAY:   So would that include storage?
14        MR. ROSENKRANZ:    The thought here was directly to the
15   issue of the service that's provided near the point of
16   consumption to get the gas from, say, a third-party
17   transporter or other transmission service to the end-user.
18   It wasn't -- this was not talking about storage services
19   being something that would be negotiated in this way.    We
20   have thought about the storage issue and have different
21   proposals related to how utilities provide storage.
22        MS. CAMPBELL:   On page 30 there's a reference to an
23   Alberta decision, the last paragraph, in which the EUB
24   determined that:
25             "A utility should have the opportunity to
26             implement innovative rates and services with
27             alternate suppliers and meet customer needs
28             within the context of postage stamp rates
                                                                    215



 1                and the criteria to be used include the
 2                requirement that the rate must exceed the
 3                long-run incremental cost-of-service and
 4                provide a contribution to the system."
 5           Can you tell me what you understand is meant by –
 6   excuse me, sorry -- can you define what's meant by
 7   incremental cost in your proposal?
 8           MR. ROSENKRANZ:   That I think the incremental cost
 9   concept is, if not identical, similar to what's intended
10   here.    I didn't go into a great detail of researching on
11   that particular order so I'm not going to put myself up
12   here as the expert in terms of everything that went on in
13   that particular case and what was meant by incremental
14   cost.
15           But certainly the basic concept that we're advancing
16   and that we're supporting is that new customers,
17   particularly new large customers that are brought in the
18   system, may have special needs.     But we're not looking for
19   services or creating a situation where existing customers
20   are in any way subsidizing the new customers coming on
21   line.
22           So incremental costs being in terms of long-run
23   incremental costs, plus something to contribute to the
24   system, is something that's been used in a lot of other
25   jurisdictions and something that we believe makes sense
26   here as a guideline for negotiating these types of
27   services.
28           MS. DUGUAY:   So you're proposal -- excuse me.
                                                                    216



 1         So your proposal would be to use a long-term
 2   incremental cost approach plus a contribution to the fixed
 3   costs that the utility would incur to provide service; is
 4   that right?
 5         MR. ROSENKRANZ:    I think another way of saying it
 6   would be to make certain that whatever rate is being paid
 7   by the party receiving a negotiating rate is at least
 8   covering the incremental costs so that there is not a
 9   subsidy going the other way.
10         MS. CAMPBELL:   APPrO's requesting that a known rate be
11   fixed for a specified period of time.    How long is APPrO
12   proposing that the negotiated rate would be in effect?
13         MR. KELLY:    The term of the negotiated rate would be
14   agreed upon between the two parties.    If the parties agree
15   on a 10-year term at that locate negotiated rate, that
16   would be the term; if it's 15, 20, whatever the case may
17   be.
18         MS. DUGUAY:   What term would be acceptable to APPrO
19   members?
20         MR. KELLY:    That would be up to the individual APPrO
21   member who is in negotiations with the LDC.
22         MR. CRAMER:   I think that the general point of this
23   concept is to recognize that each customer is number one,
24   very large -- generally speaking, large relative to the
25   typical utility customer and has very specific needs both
26   from a physical standpoint and from a commercial
27   standpoint.
28         And the overarching principle is to allow the LDCs to
                                                                 217



 1   have the flexibility so long as it doesn't cause harm to
 2   the other ratepayers, of working with us as new customers
 3   to satisfy our needs, you know, that we need to have
 4   satisfied in order for us to be able to participate viably
 5   in the electricity market.
 6        MS. DUGUAY:    And could you give us an indication as to
 7   what would be the minimal term that would be acceptable to
 8   power generators?
 9        MR. CRAMER:    It's going to be very dependent upon the
10   particular generator's perspective.   I mean, if a generator
11   is financing a project that has a 20-year contract with the
12   OPA, and has 20-year debt, ideally we'd be looking for a
13   20-year fixed-price contract.
14         I mean, but it depends on the particular risks that
15   the generator is prepared to undertake or has to cover off,
16   and it depends on the particular circumstances with respect
17   to the connection that's being looked at.   You know, are we
18   talking a significant portion of the total capital costs of
19   the project, when you incorporate the infrastructure that's
20   required to support it?   Or are we talking a very small
21   piece of the capital cost?
22        I think that the bottom line is, you know, we think it
23   makes sense for the LDCs to have the flexibility to
24   negotiate with large customers like us in a way that's
25   responsive to our needs but protects their existing
26   customers.
27        MS. DUGUAY:    Thank you.
28        MS. CAMPBELL:   Would this be consistent with the
                                                                 218



 1   introduction of incentive regulation starting in 2008?
 2        MR. ROSENKRANZ:     I think our answer is that it's
 3   independent of incentive rate-making or other rate-making
 4   regimes.   It would essentially be carving out this -- if
 5   there's an investment, and I think the classic case is,
 6   when there is a particular lateral facility, an
 7   interconnection facility, and that's what's required to
 8   provide the service, that can be added in and identified
 9   capital costs, that has easily identifiable carrying costs
10   over a long period of time.    There's no risk on either
11   side, that that can just be, essentially, carved out and
12   both parties can determine a rate that makes sense.
13        MS. CAMPBELL:     How much do the transportation costs of
14   the distribution system represent the overall cost of fuel?
15        MR. ROSENKRANZ:     Are you looking at what percentage of
16   the distribution cost of the total delivery cost of fuel to
17   the power plant?
18        MS. CAMPBELL:     Yes.
19        MR. ROSENKRANZ:     A percentage or -- are you referring
20   to the -- just the transportation tariff rate or all of the
21   various costs including penalty risks, the need to purchase
22   intra-day gas at a premium if you don't have the
23   flexibility you need on the transportation -- under the
24   transportation service?
25        I think that -- I'll take a crack at the answer, if my
26   fellow panel members will allow me, and feel free to jump
27   on me if I'm going the wrong way.
28        That it is a significant cost.     The important thing is
                                                                    219



 1   that it can be a very important cost on the margin if it
 2   gets out of line, in terms of affecting the competitiveness
 3   of a particular generator or the behaviour of that
 4   generator to bid into the marketplace, or the ability of
 5   that generator to get built, if that cost is not what it –-
 6   if it's higher than it needs to be or the structure of the
 7   services is such that it creates costs that are
 8   unnecessary.
 9           MS. DUGUAY:   So, looking strictly at the costs to use
10   the -- in Union's system, for example, using the
11   transmission system as well as the distribution system, how
12   much would that represent in terms of the overall cost of
13   fuel?    Setting aside any balancing penalties or anything
14   like that?    Strictly looking at those two components.
15           MR. ROSENKRANZ:   Okay.   We're a little at a loss
16   because it's relative to the cost of gas, there's going to
17   be a fuel component that moves with the cost of gas, and
18   it's all going to depend on the service, you know, what
19   you're looking for.
20           I'm not sure exactly what you're looking at.
21   Certainly we could -- probably anyone in the room could
22   give you the applicable tariff rate and calculate that for
23   the generator and compare that to the Dawn price, if that's
24   the sort of number that you're looking for.
25           I'm not saying we could all do it off the top of our
26   heads, but I'm saying we could produce that.
27           MS. DUGUAY:   Can you give us an order of magnitude?
28           MR. ROSENKRANZ:   Again, part of the problem with
                                                                 220



 1   giving you that is that there's going to be fixed
 2   components and variable components.   The fixed component
 3   can look relatively small, unless you're operating at a
 4   very low load factor, in which case it becomes very large.
 5        So could you give us some guidance in terms of what
 6   answer -- what you're trying to --
 7        MS. DUGUAY:   Well, if you were to look at the dollars
 8   regardless as to whether they are being paid as a demand
 9   charge or as a variable charge, if you were to look at how
10   much you would pay to use the transmission and distribution
11   system, how much does that represent in terms of your
12   overall costs, which would include your upstream
13   transportation, your commodity costs, and the costs of the
14   transmission and distribution systems?
15        MR. ROSENKRANZ:   You know, I think all that I'm going
16   to say is that it's a substantial and important cost.
17        MS. DUGUAY:   What does that mean?
18        MR. ROSENKRANZ:   It's a substantial and important cost
19   in determining how to operate a power plant.
20        MR. CRAMER:   If I could just add a point.    I think the
21   question has to be placed in the right context in that --
22   I mean, the total package, I mean, the total exposure that
23   a generator has to concern is not only the direct costs.    I
24   could buy a very cheap transportation service but if it's
25   very limited in flexibility, it's imposing significant
26   risk on the project.   So our focus, frankly, is not so much
27   on the absolute cost of M12 service, for example, or, you
28   know, Rate 125 service in this proceeding, such as it is
                                                                    221



 1   give us the tools that we need to manage these risks.      I
 2   mean, those risks far outweigh the direct costs of a Union
 3   transportation tariff or an Enbridge transportation tariff.
 4        And I think, you know, part of the reason we're
 5   wrestling with your question is it's just –- I mean, there
 6   are a thousand different permutations and combinations, as
 7   John said, with respect to how the plant's operating.
 8        If we're talking about peaker that's only operating 5
 9   percent of the year, the fixed cost of transportation to
10   assure delivery to that plant is going to be very
11   significant relative to the bottom line.   The other aspect
12   of these plants is if, say, a combined cycle plant that's
13   operating a significant number of hours a year, the money
14   that we make in terms of our bottom line is a small
15   difference between very large numbers.
16        So I mean, in terms of asking what it is as a
17   percentage of gas costs, you know, it's very small, but in
18   terms of what it means to our bottom line, it's very
19   significant.   What's more important, again, is not
20   necessarily that cost as much as what are the exposures
21   that we're taking on with respect to the limitations of
22   those services relative to the real-time operating regime
23   that we have to operate with them.
24        So, I mean, we'd be happy to answer your question, but
25   I think the question has to be a lot broader than you're
26   asking it.
27        MS. DUGUAY:   Or more specific.
28        MR. CRAMER:   Well, I guess, there's the risk of it
                                                                     222



 1   being specific and being out of context and not
 2   informative.
 3         So, I think, you know, that's the concern that we're
 4   having is in terms of getting to what's important with
 5   respect to this proceeding, how do we frame the question so
 6   that the response is useful?
 7         MS. CAMPBELL:    Sorry for the delay.   We're trying to
 8   find your slide 12.
 9         This relates to proposal 3, which is pages 31-32.      We
10   think we have an answer to it, but I'm going pose the
11   question, and if you have answered it in that slide, and we
12   think you might have, we'd like to have that form part of
13   the evidence.   And the question was really, how would APPrO
14   propose to establish the base level of storage space for
15   power generators.     We think these slides might have
16   indicated it, but we're not sure.
17         MR. WOLNIK:    I think that was the intent, was to
18   really come up with a fairly objective way of assigning
19   that storage space.     And that's exactly what those slides
20   do.   They really come up with a discrete amount of storage
21   for a combined cycle plant, for a simple cycle plant, in a
22   very concrete way.
23         MS. CAMPBELL:    Can I take it, then, that slides 11 and
24   12 represent APPrO's estimate of what the base level of
25   storage space for generators would be?
26         MR. ROSENKRANZ:    I think it goes a little further.
27   It's actually our recommendation of a formula that can be
28   used to establish in a fairly objective way what that
                                                                        223



 1   base allocation of rolled-in cost-based storage should be
 2   for generators.   We couldn't come up with one number that
 3   worked for every generator, but we felt like we could come
 4   up with something that made sense, came up with a
 5   reasonable and realistic starting point if we looked at it
 6   for combined cycle and single cycle, per hundred MW.         So
 7   it's not meant to be a -- it's not meant to be an example;
 8   it's meant to be a specific recommendation of actual
 9   numbers that would be used.
10        MS. CAMPBELL:     Okay.    So if that is actually what you
11   would like it to be, then perhaps we should make it an
12   exhibit and make it form part of the evidence. Or is it
13   your intention that it does form part of the evidence?
14        MR. MORAN:   Certainly I've already filed it with the
15   Board and given copies to all parties, so from my
16   perspective it's part of APPrO's pre-filed evidence.
17        MS. CAMPBELL:   All right.        I didn't appreciate you'd
18   filed it with the Board.       Okay.   Then it is part of the
19   evidence, and we have that.
20        My next question is if there was insufficient space
21   available to meet the needs of all infranchise customers,
22   including new gas-fired generators, how would APPrO propose
23   the Board to deal with the allocation of infranchise
24   storage space?
25        MR. ROSENKRANZ:    First of all, the starting point for
26   the APPrO, based on the evidence that we've seen, is that
27   there is not a shortage of storage space available to
28   customers within Ontario.       If you look at the storage
                                                                     224



 1   that's available at Dawn. there's a lot of storages that
 2   excess to the needs of infranchise customers today, and
 3   there is also evidence that there's additional storage
 4   capacity and deliverability that can be developed, and
 5   there's also evidence that there is storage available
 6   outside of Ontario that could be used by the utilities to
 7   provide services.
 8        Our starting point is that there is a need for storage
 9   services by customers of the utilities.    The utilities are
10   in the business of providing the services that are needed
11   by their customers; that's why they're in business.       And
12   that this is the recommendation in
13   terms of how that storage should be made available.
14        MS. CAMPBELL:   I still don't understand how you would
15   allocate.   What's your recommendation to the Board on how
16   they should allocate?
17        MR. ROSENKRANZ:     Our recommendation is that the
18   allocation that should be made available to a generator per
19   hundred MW of generating capacity is based on this formula.
20        I think that you started out with the premise that
21   there is a shortage of capacity, and how that has to be
22   divvied up.   We didn't --
23        MS. CAMPBELL:   Okay.    Let's just assume hypothetically
24   there is insufficient storage.    How would you tell, what
25   would you recommend the Board do to allocate that?
26        MR. ROSENKRANZ:     I think you're raising a
27   different issue that we did not feel needed to be addressed
28   and haven't addressed.    And the question that
                                                                   225



 1   we addressed is today infranchise customers that need
 2   storage have storage available to them.    Our concern was
 3   that the methodology or policy that's been used up to date
 4   based on the aggregate excess methodology didn't work.     We
 5   felt like we had to go further and say what would work?
 6   This is our proposal of what would work in terms of making
 7   available a base amount of storage capacity that fits the
 8   needs of the power generators better than the aggregate
 9   excess methodology that's been used to date.
10        MS. DUGUAY:    Maybe we can try it another way.
11        Let's say that there is constraint in terms of
12   providing high-deliverability service to infranchise
13   customers, including power generators, meaning that the
14   demand for that service would be in excess of the capacity
15   that is currently being available in the marketplace.
16        So, under that scenario, how would APPrO propose to
17   the Board to deal with that particular issue?
18        MR. WOLNIK:    Maybe a couple of things on that.   First
19   of all, I think the evidence on the record both by Enbridge
20   and Union is that there is a reasonable amount of high
21   deliverability storage available.    Enbridge has said they
22   could do 2 Bcf.    I think Union has said they could do at
23   least two, if I remember the transcript.    In addition to
24   that, I think both parties said they could both go out and
25   purchase certain products in the marketplace to supplement
26   that as well.
27        Beyond that, we really haven't considered it.      I think
28   what we've seen utilities can do is more than sufficient to
                                                                    226



 1   meet our needs.
 2        I guess maybe just one other thing to add to that and
 3   that is, I think that's part of why we really proposed
 4   incremental pricing here is because we're going to pay the
 5   direct costs of whatever those incremental costs are to
 6   deliver that high-deliverability storage.     If that price
 7   gets too high because of whatever those marginal services
 8   are aren't of value to the generators, we'll look for other
 9   solutions collectively.
10        MS. CAMPBELL:    Proposal number 4.   Pages 33 to 37,
11   APPrO states:
12             "Customers should have the ability to submit
13             nominations each hour, prior to enduring the
14             applicable gas day that would become
15             effective two hours later or at the start of
16             any later hour that the customer would
17             specify."
18        And our question is whether APPrO's prepared to pay
19   the costs of the hourly nomination windows.
20        MR. KELLY:   The extra nomination windows that are
21   being proposed by APPrO in its evidence would not simply be
22   available to APPrO members, to gas-fired generators.      They
23   would be available to all customers who want to avail
24   themselves of those additional nomination windows.     As to
25   the question of costs, I think it's unclear as to what the
26   actual additional cost of those nomination windows is going
27   to be.
28        MS. CAMPBELL:    So do I take it from your answer that
                                                                   227



 1   APPrO or the other customers who benefit from the hourly
 2   nominations would share the costs?   Is that what APPrO's
 3   saying?
 4        MR. KELLY:   Yes, that would be correct.
 5        MS. CAMPBELL:    Thank you.
 6        You describe -- and I'm just paraphrasing –-
 7   experience with multiple nomination windows in other
 8   jurisdictions.    Are there differences between the markets
 9   served in Ontario that have allowed the pipelines to
10   provide the additional nomination windows?
11        MR. KELLY:   I'm sorry.   Could you repeat your
12   question?
13        MS. CAMPBELL:    Are there differences between the
14   markets served, those other jurisdictions in Ontario, that
15   have permitted these pipelines to provide the additional
16   nomination windows?
17        MR. ROSENKRANZ:    If what you're saying is, will are
18   there specific features to have places where other --
19   additional nominations are available, that distinguish it
20   from the Ontario market, and may make it less transferable
21   to this market?
22        My response to that is that if anything T Ontario
23   market has a lot of features that make it easier to deal
24   with that issue in the Ontario market, having to do with
25   the existence of storage, which adds flexibility to the
26   system, large and sophisticated gas distribution companies
27   that have the capabilities to handle these types of things,
28   relatively small number of large transporters and connected
                                                                    228



 1   parties that would need to be co-ordinated with to make
 2   this work.    I think you have other jurisdictions where you
 3   have many more obstacles, I think, to adding nomination
 4   windows.
 5        I think it's also just important to kind of add on to
 6   the last question, in terms of the nomination windows –-
 7   for this really to work, it's really a system enhancement.
 8   It has to be something that's available to not just the
 9   generator or under certain services.       One of the things
10   that we're very concerned about is having an active vibrant
11   secondary market for gas and other services for that to be
12   of service to the generators, it's important that
13   it's not just the generators who have the additional
14   windows, it's all the other market participants who are
15   able to make gas show up at certain points so that we can
16   transact with them at certain parts of the day.       If they're
17   still on the four NAESB windows, it's much less valuable
18   for one set of customers to have additional nomination
19   windows.
20        MS. CAMPBELL:       Thank you.   You don't need to turn
21   thumb, but it's on page 58, and the comment concerning the
22   Union's proposal.
23        You state:
24                “There is a long gap between the 7 p.m.
25                evening cycle and the 10 a.m. nomination in
26                Union's proposed six additional nomination
27                windows."
28        What would be the minimum number and timing of the
                                                                  229



 1   additional nomination windows necessary to shorten the gap?
 2        MR. ROSENKRANZ:   The APPrO group spent a lot of time
 3   discussing this particular issue.    And there was not a
 4   consensus on finding discrete set of more limited
 5   nomination windows that met the -- what we saw as being the
 6   needs.
 7        So speaking on behalf of the APPrO, we do not have a
 8   consensus answer to that question.   Our consensus answer
 9   was that once you start adding windows, you very quickly
10   get to a point, we believe, where the incremental cost of
11   adding windows gets very small, if at all.   And that the
12   best way to provide the flexibility that people need, and
13   the best way to be able to match up with whatever
14   nomination windows interconnecting transporters have would
15   be to go straight to available every hour.   We were guided
16   by the information that's been provided by others such as
17   Union about the need for two hours to be able to be firm in
18   terms of changing of the flows.
19        We were looking for best efforts to do better than
20   that if they could do that.   We are also looking if there
21   might be certain circumstances it might take longer but we
22   think that the hourly schedule is much easier for everyone
23   to understand, should be easier to implement, and provides
24   the benefits that we're looking for.
25        MS. CAMPBELL: So in other words, all you can do is
26   agree that there's a long gap, you don't know how to fix
27   it, though.
28        MR. CRAMER:   Well, I think it's important to
                                                                  230



 1   understand that when you get into those off-peak hours is
 2   where a lot of variability is going to arise between
 3   generators just by virtue of the fact there‟s different
 4   technologies, different operating characteristics, where
 5   they're located, whether or not it's a purely dispatchable
 6   peaker or a partial co-gen facility.    I mean, there's a
 7   myriad of permutations and combinations that are going to
 8   particularly come to light during those off-peak hours, as
 9   each one of those ramps off or on at different times.
10         And the bottom line is in order to be able to
11   accomplish the objectives of the group as a whole, the best
12   thing to do is to focus on, you know, bringing those
13   nomination windows down to the hourly basis that we've
14   proposed which should be able to accommodate, in our view,
15   all those potential permutations and combinations, you
16   know, as best they can.
17         MS. CAMPBELL:   So the minimum number is 24?
18         MR. CRAMER:   I think that's the minimum number that we
19   could reach consensus on.   I mean, a particular generator
20   may be able to live with less, but it's going to be very
21   generator-specific, and we're trying to arrive at something
22   that is more useful as a -- in the -- this broader context.
23         MS. CAMPBELL:   Proposal number 5, which is pages 38 to
24   39.
25         Is APPrO proposing that receipt and delivery of gas
26   vary hourly, and are balanced every hour, for both
27   infranchise and exfranchise?
28         MR. ROSENKRANZ:   The proposal that APPrO is making is
                                                                   231



 1   that the ability to provide non-uniform rates of flow would
 2   add information to the service provider by allowing them to
 3   understand better how we're going to use the gas, and would
 4   give us the ability, under certain circumstances, and
 5   again, largely predicated on having a lot of the other
 6   things that are in our proposal to match up with this
 7   feature to come closer to meeting the daily balancing
 8   requirement that we see as being the target that is
 9   reasonable and the target that we need to hit under the
10   services that are available now.
11        So, as a starting point, we are not advocating hourly
12   balancing of receipts and deliveries on all services.    We
13   are looking at allowing, if the additional information is
14   there in terms of consumption, that it should be -- we
15   should have a mechanism to provide that information.     And
16   if we can provide non-uniform supplies of gas to the
17   company to both come closer to our actual consumption, and
18   to be in a situation where it's easier for us to adjust
19   late in the day and avoid the end-of-day imbalances that we
20   otherwise are subject to.
21       That's the reason why we have the example here of
22   looking at the need for both more nominations, nomination
23   windows, but also some sculpting of your supply to mitigate
24   those daily imbalance situations where you're running up
25   against this elapsed pro rata situation where your supply
26   was coming in on an average hourly basis even when you
27   weren't running, so that when you get to the end of the day
28   you've got gas that's on the system, or deemed to be on the
                                                                  232



 1   system, and there's nothing that you can do about it.
 2        So that's a long answer to a very simple question.
 3        MS. CAMPBELL:   Well, I can't say it any better than
 4   you did.
 5        With regard to proposal 5, what kind of fee structure
 6   does APPrO expect to see?
 7        MR. ROSENKRANZ:    I think what we're allowing for is
 8   that there should be -- if there are not costs, and in fact
 9   doing this is providing information and is adding to the
10   efficiency of the system and it's not creating additional
11   costs, there should not be additional costs.
12        The concept was brought up in a more specific subpart
13   of the proposal, where we were looking at point to point
14   services, where you may be   balancing one -- or providing
15   hourly at one end and not at the other end, so that there
16   is an implicit intra-day balance as part of the service
17   that may have an identifiable cost.   In that case what
18   we're saying is that if that situation arises -- we would
19   consider paying for that cost if that cost exists.
20        But that was not meant to apply to all situations
21   where we go to non-uniform rates of flow.   It was meant to
22   be a particular situation where there may be point-to-point
23   transportation, and that there could be a distinction in
24   that case between a balanced situation and an extremely
25   unbalanced situation.
26        MS. CAMPBELL:   I just have a follow-up clarification
27   question.   Would the concept here be akin to an FTSN,
28   whereby the power generators would reserve a certain level
                                                                   233



 1   of capacity that they may or may not use in a
 2   given day?
 3          MR. ROSENKRANZ:   That's not part of this proposal, but
 4   there's another proposal that is closer to the reserve --
 5   that addresses the reserve capacity issue.
 6          MS. DUGUAY:   Okay.
 7          MR. ROSENKRANZ:   And again, we recognized that some of
 8   these are interrelated, in terms of to get to the level of
 9   service and type of service flexibility we need you need to
10   have some of these -- you can't just pick one or two of
11   these.   Sometimes they interact with one another.
12          MS. DUGUAY:   I guess at the end of the day, the
13   hearing team is still unclear as to what underpins proposal
14   number 5.    Now, you gave a long answer. but at the end of
15   the day, I don't think it's clear in our mind as to what is
16   it that APPrO is proposing.
17          MR. WOLNIK:   Maybe one of the ways we can address
18   this, utilities have expressed some concern about packing
19   and drafting.    To the extent you nominate on a uniform
20   hourly basis throughout the day, you may be drafting or
21   packing the system depending on whether you're running or
22   not.
23          What we're suggesting here is that we would provide
24   information to the utility as to how we expect it to run
25   throughout the day, so that let's say at 10 can o'clock the
26   plant ramped up and it would run from 10 o'clock to 6
27   o'clock at night and then begin to ramp down.    So we would
28   actually provide a shaped profile throughout the day as to
                                                                    234



 1   how we expect it to run.
 2          We think that's helpful to the utilities because they
 3   know exactly when they're going to run.    They can take that
 4   into account as they set up their systems to accommodate
 5   those changes.   So we felt this was beneficial, reduced the
 6   chance of imbalance on the system, and made the system
 7   overall more effective.
 8          MR. ROSENKRANZ:   And then on the more concrete side,
 9   in terms of the services that are being provided by the
10   utilities, particularly as an example of a storage service,
11   if you're a generator and you're running during peak hours,
12   wouldn't it make more sense to be able to tell the storage
13   provider I want such and such gas taken out per day the
14   next day, but I want it during the hours that I'm going to
15   run?
16          MS. DUGUAY:   Okay, I see.
17          MR. ROSENKRANZ:   As opposed to just take it out on a
18   1/24 basis.   So those are the types of things that we're
19   looking for to get closer to balancing, primarily as a way
20   of meeting those daily balancing requirements.
21          I think what we're saying is we're not at a point
22   where we think that the market is ready to impose -- the
23   market is not there in a way that allows us to take on the
24   responsibility for hourly balancing at this point in time,
25   but that there are -- even before we get there, that there
26   are things that need to be done to recognize hourly
27   receipts and deliveries of gas, just to make us better able
28   to hit the daily balancing targets that we have.
                                                                      235



 1           MR. KELLY:    Let me just add maybe one point of
 2   clarification here, to maybe try and cut through some of
 3   this.
 4           MS. CAMPBELL:   That would be helpful.
 5           MR. KELLY:    This is all about balancing, okay.   As
 6   we've already stated, the challenge for a gas-fired
 7   generator is to match what he is consuming with what he is
 8   supplying.    That is where the challenge lies.
 9            The challenge is made that much more complex by the
10   fact that there are a limited number of opportunities for
11   the generator to reschedule on a firm basis with the
12   upstream pipelines how much gas he's actually planning to
13   consume.    That actually is -- that is the source of where
14   the balance comes from.
15            By providing the additional nomination windows that a
16   generator can schedule on a firm basis if he so chooses to
17   pay for firm rights to do so, we limit the need for
18   balancing.    The imbalance situation in the delivery area is
19   mitigated, okay?
20           That is the genesis of this need for additional
21   nomination windows.      That is where it comes from.
22           MS. CAMPBELL:   Thank you.
23           MR. KELLY:    You're welcome.
24           MS. SEBALJ:   By my Blackberry it's 5:35.   And unless
25   our court reporter has a lot more steam in her, which I
26   doubt, because we did start at 8:30 this morning, I think
27   we should think about calling it a day.      I have some
28   significant concerns about scheduling.
                                                                     236



 1           MS. CAMPBELL:   Yes.   We all do.
 2           MS. SEBALJ:   We do have a settlement conference
 3   starting on the 29th.      We have undertakings due on the
 4   24th.    And so we really have to operate within the four
 5   days we are being provided.
 6           Now, the good news is that tomorrow morning has been
 7   opened up as a result of our dealing with some of the M12
 8   premium issues today.      But I'm not convinced that the
 9   morning will deal with everything that needs to be done.
10           So can I just -- I guess the first point of canvass is
11   whether, Mr. Moran, your panel can remain available, and
12   Karin, whether you have any more steam in you?
13           THE REPORTER:   If I have a 15 minutes break I can go
14   for an hour or so.
15           MS. SEBALJ:   And panel, how are you feeling?
16           MR. MORAN:    I know that one of my panel has a
17   constraint at 6 o'clock.
18           MR. CRAMER:   I know that I could extend it probably to
19   6:30 but not much more than that.
20           MR. THOMPSON:   Why not call it a day.
21           MS. SEBALJ:   Yes, but on Friday before Victoria Day
22   weekend, when I keep you until 7:00, you really won't be
23   pleased.
24           MR. THOMPSON:   Oh dear.
25           MS. SEBALJ:   I have no choice.     Can I suggest that we
26   just go 'til 6:00 so for another 25 minutes, and that we
27   try and get as much of the Board hearing -- do you know
28   what?    Let's call it a day.
                                                                    237



 1        Mr. Thompson, you were right all alone.     Because by
 2   the time we have a break and sit down, it's going to be 6.
 3   So let's start tomorrow Bright and early with the Board
 4   hearing team.
 5        To the extent that you can have any discussions with
 6   Mr. Moran about what might be done by undertaking or
 7   otherwise, that would really be helpful.    And then, just
 8   before you start moving too far, I'd like to get an
 9   indication from people.     I have an indication on the IGUA
10   piece which should be less than an hour.
11        MR. THOMPSON:   I have to find a witness.
12        MS. SEBALJ:    Yes, first you need a witness.   But then
13   we should only be an hour.
14        APPrO, Mr. Cameron, you had said 45 minutes.     Is that
15   still --
16        MS. CAMPBELL:   Half an hour.   A lot of the issues are
17   being discussed.
18        MS. SEBALJ:    Mr. Brown -- Dave Stevens.
19        MR. STEVENS:    I imagine I'll be probably about 40
20   minutes.
21        MS. SEBALJ:    That's very specific.
22        Mr. Wightman?
23        MR. WIGHTMAN:    Less than five minutes.
24        MS. SEBALJ:    And Mr. Thompson?
25        MR. THOMPSON:   20 minutes.
26        MS. SEBALJ:    Okay.   We may be able to -- if I believe
27   any of you, which would just be a dumb thing to do we may
28   be able to do this tomorrow morning.
                                                        238



 1   So we'll see you at 8:30.   Thank you so much.
 2   --- Whereupon the hearing adjourned at 5:40 p.m.
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