1073 1 MANITOBA CLEAN ENVIRONMENT COMMISSION 2 3 VERBATIM TRANSCRIPT 4 Volume 5 5 6 Including List of Participants 7 8 9 10 Hearing 11 12 Wuskwatim Generation and Transmission Project 13 14 Presiding: 15 Gerard Lecuyer, Chair 16 Kathi Kinew 17 Harvey Nepinak 18 Robert Mayer 19 Terry Sargeant 20 21 Tuesday, March 9, 2004 22 Radisson Hotel 23 288 Portage Avenue 24 Winnipeg, Manitoba 25 1074 1 LIST OF PARTICIPANTS 2 3 Clean Environment Commission: 4 Gerard Lecuyer Chairman 5 Terry Sargeant Member 6 Harvey Nepinak Member 7 Kathi Avery Kinew Member 8 Doug Abra Counsel to Commission 9 Rory Grewar Staff 10 CEC Advisors: 11 Mel Falk 12 Dave Farlinger 13 Jack Scriven 14 Jim Sandison 15 Jean McClellan 16 Brent McLean 17 Kyla Gibson 18 19 Nisichawayasihk Cree Nation: 20 Chief Jerry Primrose 21 Elvis Thomas 22 Campbell MacInnes 23 Ms. Matthews Lemieux 24 25 1075 1 LIST OF PARTICIPANTS 2 3 Manitoba Conservation: 4 Larry Strachan 5 6 Manitoba Hydro/NCN: 7 Ed Wojczynski 8 Ken Adams 9 Carolyn Wray 10 Ron Mazur 11 Lloyd Kuczek 12 Cam Osler 13 Stuart Davies 14 David Hicks 15 George Rempel 16 David Cormie 17 Alex Flemming 18 19 Community Association of South Indian Lake: 20 Leslie Dysart 21 Merrell-Ann Phare 22 23 CAC/MSOS: 24 Byron Williams 25 Bill Harper 1076 1 2 LIST OF PARTICIPANTS 3 4 Canadian Nature Federation: 5 Eamon Murphy 6 Gaile Whelan Enns 7 8 Time to Respect Earth's Ecosystems/Resource Conservation Man: 9 Peter Miller 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 1077 1 2 INDEX OF EXHIBITS 3 4 Number Page 5 6 MH-NCN 1004: Approximate Calculation of IRR 7 for 250 MW of wind 1083 8 9 MH-NCN 1005: Response to undertaking from 10 transcript page 789, volume 3 11 fixed three blade turbines vs. 12 Kaplan turbine 1089 13 14 CAC/MSOS-1004: CAC/MSOS simplified 15 illustrative example of DSM 16 program portfolio design 1109 17 18 CNF 1000: Interconnections generation 19 queue 1285 20 21 22 23 24 25 1078 1 2 3 4 INDEX OF UNDERTAKINGS 5 6 UNDERTAKING NO. PAGE 7 8 MH-27: Provide an order of magnitude in 9 terms of the overall cost of the project, what 10 percentage do the contracting opportunities 11 represent 1144 12 MH-28: Referring to the restricted 13 tendering process, provide the percentage of the 14 overall cost that they may represent 15 MH-29: Advise re confusion in public 16 communications about open house of 17 January 28 and 29, 2003 1149 18 MH-30: Advise re consultations 19 undertaken, at what stage there was information 20 for Winnipeggers, and advise nature of three day 21 workshop in July 2003 1261 22 MH-31: Identify appropriate 23 responses re Manitoba Hydro's 24 climate change policy 1262 25 1079 1 2 3 INDEX OF UNDERTAKINGS 4 5 UNDERTAKING NO. PAGE 6 7 MH-32: Advise if implementing 8 DSM program had any impact in terms 9 of planning 1294 10 MH-33: Further provide, if 11 possible, status of the study and 12 if there is anything more to add 1326 13 14 15 16 17 18 19 20 21 22 23 24 25 1080 1 2 TUESDAY, MARCH 9, 2004 3 Upon commencing at 9:05 a.m. 4 5 THE CHAIRMAN: Ladies and gentlemen, welcome 6 on this beautiful morning. With Mother Nature being 7 at work clearing the snow, putting water in the 8 reservoirs, getting us ready and hoping that we're 9 all going to be out of here by the time the birds 10 start chirping and that things start going green, we 11 will continue, in the meantime enlightening 12 ourselves, hopefully. And we will continue with Mr. 13 Williams and Mr. Harper. 14 MR. WOJCZYNSKI: Mr. Chair? 15 THE CHAIRMAN: Yes, Mr. Wojczynski. 16 MR. WOJCZYNSKI: We have a few undertakings 17 and we thought it might be a good time to do those 18 before the cross continued, if that would be 19 acceptable to you. I might add, by the way, Mr. 20 Chair, that last night when I was out by the river, I 21 heard the merlin falcons and the chickadees already 22 so I'm afraid we'd better hurry up. 23 THE CHAIRMAN: I agree. 24 MR. WOJCZYNSKI: Before we get started, with 25 your permission, we would like to have our external 1081 1 expert on wind sworn in. His name is Alex Fleming, 2 President of demand-side management. His CV was 3 circulated previously. And we understand that Mr. 4 Williams was going to do some cross on DSM this 5 morning and we thought it might be useful to have Mr. 6 Fleming join us at this time. We originally were 7 just going to have him when TREE/RCM were going to 8 cross us. They specifically wanted to have our 9 experts. But now that we're going to do a cross on 10 DSM, at least some cross with CAC, we thought it 11 would be useful at this time rather than later in the 12 day with your permission. 13 MR. GREWAR: Sir, could you state your name 14 for the record. 15 MR. FLEMING: It's Alex Fleming. 16 MR. GREWAR: Mr. Fleming, are you aware that 17 it is an offence in Manitoba to knowingly mislead 18 this Commission? 19 MR. FLEMING: Yes, I am. 20 MR. GREWAR: Do you promise to tell only the 21 truth in proceedings before this Commission? 22 MR. FLEMING: Yes, I do. 23 MR. GREWAR: Thank you, sir. 24 MR. WOJCZYNSKI: And then we have a few 25 undertakings that are pertinent to this morning. And 1082 1 Mr. Ken Adams has one, I have one and Mr. Cormie has 2 one. 3 MR. ADAMS: Undertaking number 11 from last 4 Wednesday's transcript, pages 574, 75. We undertook 5 to advise of the status of the negotiations between 6 Manitoba Hydro and the Federal Government regarding 7 the funding responsibility for Northern Diesel 8 Service. 9 I can advise that Manitoba Hydro and 10 representatives of the Federal Government have a 11 meeting scheduled for Friday this week which is the 12 12th of March. And I can also advise that we are in 13 discussions with individual communities to set up 14 meetings with them. The dates of those meetings are 15 a little less -- a little more flexible because they 16 tend to be at the convenience of the communities and 17 are likely to be later in the spring. 18 MR. WOJCZYNSKI: The second undertaking is one 19 that I don't actually have the transcript page number 20 because I didn't have the transcript until just a few 21 moments ago. It was from late yesterday. We had 22 been requested by CAC for an approximate calculation 23 of the IRR for 250 megawatts of wind, consistent with 24 how we did the 450. And we have a sheet which we 25 could distribute and speak to. I believe that was 1083 1 one of the intents of this morning and that Mr. 2 Williams was asking us to do and I believe the 3 Commission also wanted that. 4 Do you want me to wait for that to be 5 distributed? Is that appropriate? 6 THE CHAIRMAN: Yes. 7 MR. WOJCZYNSKI: I assume that we are going to 8 enter this as an exhibit. 9 MR. GREWAR: Mr. Chairman, this would be 10 entered as Exhibit MH-NCN 1004. 11 (EXHIBIT MH/NCN 1004: Approximate Calculation of 12 IRR for 250 MW of Wind) 13 14 MR. GREWAR: There are also copies at the 15 side, Mr. Chairman. I thought they had already been 16 placed there. My apologies. 17 MR. WOJCZYNSKI: We thought, Mr. Chair, that 18 it might be useful for me to go through this very 19 briefly. And I think actually it probably -- there 20 was a lot of detail and a lot of confusion on this 21 whole issue of wind costs and the various, when we 22 did analyses and all the various parameters. This 23 actually I think may be useful to help clarify where 24 our best information is today. So this is probably a 25 useful exercise if you would like me to do that now. 1084 1 THE CHAIRMAN: I will ask Mr. Williams to 2 indicate whether he wants this at this time or not. 3 MR. WILLIAMS: I think it would probably be 4 very helpful, Mr. Chair. 5 THE CHAIRMAN: All right. 6 MR. WOJCZYNSKI: Thank you. So what we have 7 here is four columns. The second column is the 8 information for the 450 megawatt wind addition, 9 further to the 250 we were already assuming in the 10 Manitoba Hydro plan. And this is what we talked 11 about in our rebuttle, we talked about the last four 12 days. That's the 450 megawatt wind addition which 13 gives us 700 megawatts in total. And that's the 450 14 megawatts of wind that has an IRR of 6.1. 15 So all we try to do is list the various 16 assumptions that we have talked about already and 17 they are all summarized here. And I'll go through 18 those very briefly right away. 19 The third column is the new calculation we've 20 done with all our updated information. Now, not 21 exactly what was in the original submission but it's 22 taking all the most recent information and all the 23 updates and consistent with how we had done the 450 24 megawatts, what does the 250 megawatts of wind look 25 like right now? 1085 1 And then the fourth column in the last one is 2 saying given the 6.1 IRR for the 450 megawatts of 3 wind, what are the differences and approximate 4 indication and approximate estimate of the 5 differences in the IRR between the 450 and the 250? 6 And then once we add all those up, you will get the 7 new IRR for the 250 megawatts of wind. 8 So just running through it very briefly, the 9 capacity, as we said, is the 450 for the larger one, 10 250 for the smaller one. They both have a capacity 11 factor, a best guess of 35 per cent. We're using an 12 inservice date of 2009 for it all coming in that 13 year. In both cases, we use a power resource plan 14 that has no additional new Hydro in the sequence at 15 all. 16 As per requested yesterday, they both have the 17 supply side efficiency enhancements already and the 18 current DSM plan in already. And we used an O&M cost 19 for both, that's approximately 1.3. So there's no 20 change between those. 21 The capital cost is actually, in retrospect I 22 should have put down here, we've got a total capital 23 cost for the large wind of 1,560 and for the small 24 wind of 1,440. And it's broken into two components. 25 I see now that I should have explained that the first 1086 1 component under capital cost is generation. And the 2 one below that is transmission. So if you look under 3 the 450 mega wind, it says 1,350. That's only for 4 the generation component, not transmission. 5 And you will see that the small wind has a 6 slightly higher capital cost because we are assuming 7 there that you get some economies of scale when you 8 go to a much bigger project. And you see that about 9 a 2 and a half, 3 per cent lower capital cost for the 10 bigger -- for the bigger project means a difference 11 of an IRR .6. So the larger project is slightly 12 benefitted by that. 13 On the other hand, if you're going to go up to 14 700 megawatts of wind, we're now going to have to 15 have major transmissions additions around 200 or so 16 kilometres of 230 kV transmission, brand new 17 transmission that wouldn't have been required with a 18 smaller amount of wind. So that increases the 19 capital costs on the transmission side for the bigger 20 wind. And so the smaller wind would have a higher 21 IRR of 1.2. So those are the capital cost ones. 22 The WPPI is the federal incentive. We had 23 said that the 450 megawatts in all likelihood would 24 not be eligible for the federal incentive. We had 25 assumed in our original submission that the smaller 1087 1 wind would be eligible. It may or may not be, 2 particularly out to 2009. Or maybe some of the 250 3 would be and some of it wouldn't be. But in our 4 analysis here, we've assumed for the time being that 5 the smaller project will get the WPPI which helps the 6 IRR something like .8. 7 The wind integration, because we've got a 8 smaller wind in the first place, the 250, we thought 9 that the integration costs would be lower, as low as 10 2 cents perhaps. We think it would probably be 11 somewhat higher but not as high as the 2.6 for the 12 large wind projects. So we assume for the time being 13 the 2 cents here which would mean its IRR would be 14 higher by 1.4. 15 And the production costing, if you've got a 16 smaller amount of wind, the production costing on our 17 system meaning what we'd do with our reservoirs and 18 the tie lines and all that would be very small 19 impact, less than .1. We just use .1 here. 20 So when you add all those up, the large wind 21 would have a 6.1 IRR and the small wind would have a 22 9 per cent IRR if you do assume all of it gets the 23 WPPI. We think that's probably a bit of an 24 overestimate of the IRR. We have been optimistic for 25 the wind for the reasons I've just said. But 9 is 1088 1 probably a good ballpark number if you assume the 2 WPPI is there. If you assume the WPPI isn't there, 3 it drops to 8.2. 4 So I hope that explains the difference between 5 the two and also gives you some better idea of the 6 kind of assumptions we're using overall for our 7 latest information on the wind. 8 THE CHAIRMAN: Thank you. 9 MR. WOJCZYNSKI: I will add there was a 10 question from the Commission as to in addition to 11 this, could we provide the levelized costs. We are 12 still scrambling on that to have something we could 13 provide and our intent is to have hopefully something 14 later on this morning that we could indicate what the 15 levelized costs would be for the same 250 megawatt 16 wind. So sometime this morning we hope to have that. 17 There is a third undertaking Mr. Cormie will 18 deal with. 19 MR. CORMIE: This is in response to day 3, 20 undertaking number 18. Manitoba Hydro committed to 21 providing documentation with regard to a comparison 22 of the three types of turbine designs, the various 23 types of turbines designed and the use of Kaplan 24 turbines. We have compiled a summary table from the 25 report documenting the energy capabilities and the 1089 1 associated water level changes for several 2 alternative plant configurations at Wuskwatim that 3 were assessed as part of our screening studies 4 undertaken back in 1998 and 1999. 5 The full report has been given to Mr. Grewar. 6 And it should be noted that in the table, the 7 run-of-the-river mode is actually referred to as 8 base-loaded and it's distinguished from the shaping 9 and peaking mode of operations. The Kaplan turbine 10 was investigated and all three modes of operated, 11 base-loaded, run-of-the-river peaking and shaping. 12 Thank you. 13 THE CHAIRMAN: Thank you. 14 MR. WOJCZYNSKI: Mr. Chair, we also have 15 another undertaking from Ms. Lyn Wray to complete 16 this morning. 17 MR. GREWAR: If we could just enter this as an 18 exhibit for now just to keep some consistency and 19 order. This would be, as explained, response to 20 undertaking from transcript to page 789, volume 3, 21 and we would list it as MH-NCN 1005. 22 23 (EXHIBIT MH/NCN 1005: Response to Undertkaing 24 from transcript 789, volume 3, fixed three 25 blade turbines vs the kaplan turbine) 1090 1 2 THE CHAIRMAN: Ms. Wray? 3 MS. WRAY: Thank you, Mr. Chair. This is in 4 response to undertaking 15 on the transcript. And it 5 related to questions as to where the loans that are 6 being made by Manitoba Hydro to NCN are recorded in 7 the Manitoba Hydro financial statements. 8 Manitoba Hydro's loan to NCN is recorded under 9 the line "Current and other assets" on the balance 10 sheet. I think I had said accounts receivable before 11 but it's "Current and other assets." Interest income 12 on the NCN loans is netted in finance expense. There 13 is also an IRR response which details the loan 14 balances and that's CEC MH NCN round 2 NFAAT 18-A. 15 And just for clarity, and I may have put this on the 16 record already, but our Manitoba Hydro 67 per cent 17 share of cumulative earnings from the partnership are 18 reflected in retained earnings on the electric 19 operations balance sheet. NCN's portion of net 20 income is deducted from electric operations net 21 income and the line "Other revenue" as I believe I 22 indicated earlier. And NCN's minority interest on 23 the electric balance sheet is reported between the 24 liabilities and equity section as NCN investment in 25 the Wuskwatim project. 1091 1 There is one other undertaking, undertaking 13 2 in which Dr. Kinew had asked where we recorded 3 charges that would be made by the NEB for hearings 4 that Manitoba undertakes on export sales. They are 5 recorded under water rentals and assessments. And 6 they don't necessarily relate to the costs for our 7 particular applications but rather our pro rata share 8 cost recovery from all electric utilities exporting 9 to the U.S. and appearing before the NEB. 10 THE CHAIRMAN: Thank you, Ms. Wray. I just 11 want to clarify, Mr. Wojczynski, the figures in the 12 document you provided with the approximate 13 calculations and assumptions regarding a 250 14 megawatts or a small wind generation system versus a 15 larger one would make taking into account that there 16 would be the federal incentive or that there wouldn't 17 be making a net difference of .8 IRR? 18 MR. WOJCZYNSKI: Yes, sir. 19 THE CHAIRMAN: Thank you. Any further 20 comments in regards to the documents that we just 21 tabled from the panel? Mr. Williams. 22 MR. WILLIAMS: Yes. Thank you, Mr. Chair. 23 And good morning to you and to members of the Panel. 24 Again, with me to my right in a lovely lavender shirt 25 is Mr. Harper. I'm going to speak to him about that. 1092 1 And in a much more CAC/MSOS-ish colour back in the 2 audience is Mr. Chuck Cruden. So he's here as well 3 on behalf of the Society of Seniors. So I welcome 4 him. 5 Mr. Wojczynski, I thank you for the response 6 to the interrogatory. I can assure you Mr. Higgin 7 will be very happy as well. And I have a few more 8 questions about wind and I may integrate a bit in 9 terms of your response to my questions. And where 10 I'd like to start is just comparing the uncertainties 11 of wind development versus Wuskwatim, kind of the 12 relative uncertainties. I guess a starting point, 13 would it be fair to say that the uncertainties 14 surrounding the capital costs related to wind are 15 greater than the uncertainties related to the capital 16 costs related to Wuskwatim? 17 MR. WOJCZYNSKI: Yes. 18 MR. WILLIAMS: And that's because while we 19 expect wind capital costs to go down, we can't be as 20 certain of how far or how fast they will go down, 21 correct? 22 MR. WOJCZYNSKI: Yes. 23 MR. WILLIAMS: We do know that they will have 24 to come down significantly before wind is 25 economically viable; is that correct? 1093 1 MR. WOJCZYNSKI: They would have to come down 2 16 to 19 per cent to get the kind of -- to get the 3 IRRs we have down here. And 6 per cent I wouldn't 4 think of as being economic. It still has some 5 profit. 9 per cent or 8.2, it probably would be 6 considered -- it would be considered as profitable I 7 would say and economic. 8 MR. WILLIAMS: In terms of other -- the 9 relative uncertainties again between Wuskwatim and 10 wind, I take it you would agree that in terms of the 11 level of output, there is more uncertainty associated 12 with the potential level of output from wind versus 13 the potential output from Wuskwatim. Would that be 14 fair? 15 MR. WOJCZYNSKI: Yes. There is two elements 16 to that. One is the overall average energy and one 17 is what we call the dependable energy. And at this 18 point, there is probably as or greater uncertainty in 19 the amount of wind we're going to have for such 20 facilities, particularly if you get to larger 21 amounts. Presumably over time, as we and others have 22 more wind monitoring results in many years and many 23 more locations, we'll have a better handle on that. 24 But at this time, that's certainly the case. 25 MR. WILLIAMS: And that compares to what we 1094 1 discussed yesterday which is the many years of 2 history that you have in terms of water flows 3 relating to the overall system and the Burntwood as 4 well? 5 MR. WOJCZYNSKI: Yes, and the very detailed 6 design information, yes. 7 MR. WILLIAMS: And in terms of transmission 8 costs, would you agree with me that the uncertainty 9 relating to transmission costs in terms of wind 10 sites, at least until they are selected, would be 11 greater than the uncertainty related to transmission 12 costs related to Wuskwatim? 13 MR. WOJCZYNSKI: Yes. 14 MR. WILLIAMS: And you touched upon it in your 15 undertaking response of this morning in terms of WPPI 16 or WPPI, I'm not sure. I start to blush whenever I 17 say WPPI I have to say. But I guess in terms of the 18 level of federal subsidy, in the small wind context, 19 there is some uncertainty with regard to the federal 20 subsidy and that's a timing issue; is that right? 21 MR. WOJCZYNSKI: It's more than a timing 22 issue. I'll try and be really brief. The current 23 program has a cap of 1,000 megawatts. There's been a 24 lot -- and it's phasing out. We've got a couple more 25 years for new projects to be able to be applicable 1095 1 for it. There's been a lot of lobbying to have that 2 extended and have the megawatt amount extended. The 3 Federal Government has been very reluctant to do that 4 so far. We would not be surprised to see some 5 extension of it and some increase in the cap because 6 right now there's many thousand megawatts more 7 applicants than there are -- than the 1,000 8 megawatts. But even if it's extended and -- if it's 9 not extended, then the full 250 definitely will not 10 be eligible for the WPPI in my opinion. 11 But there's a significant likelihood there 12 will be some extension and some expansion and then a 13 good portion of the 250 would be. But even in such 14 an extension case, it's unlikely that the 450 15 megawatts or a large portion of the 450 would be 16 eligible. 17 MR. WILLIAMS: So in terms of wind, there's 18 uncertainty in terms of the federal subsidy and 19 obviously Wuskwatim does not rely on one. So that 20 would be a difference in terms of uncertainties? 21 MR. WOJCZYNSKI: Absolutely. 22 MR. WILLIAMS: Okay. In terms of 23 uncertainties with regard to export prices, would it 24 be fair to say that it's basically a wash in terms of 25 uncertainty for Wuskwatim and for wind? 1096 1 MR. WOJCZYNSKI: In terms of the export prices 2 per se, it's a wash. I hesitate a little bit because 3 the wind integration firming and shaping cost, but 4 you're probably going to be talking about that really 5 so I'll wait. 6 MR. WILLIAMS: It's next on my list. But 7 there is, and you mentioned it specifically with 8 regard to small wind in particular, but there are 9 uncertainties relating to firming and shaping with 10 regard to wind that would not exist to the same 11 degree with regard to Wuskwatim; is that correct? 12 MR. WOJCZYNSKI: Absolutely. 13 MR. WILLIAMS: And I guess the one other level 14 of uncertainty that we may get into a bit later today 15 is that in terms of Wuskwatim, there is some level of 16 uncertainty in terms of the actual business and 17 partnership arrangements. And would the same hold 18 true for wind? 19 MR. WOJCZYNSKI: I don't view there being much 20 risk and uncertainty in terms of the partnership side 21 with NCN on Wuskwatim, nothing significant. And on 22 the wind side, I don't know that there's really 23 significant uncertainties there in terms of 24 arrangements. Will there be people who want to 25 develop wind and sell to us at the export prices that 1097 1 are available, that there's a lot of uncertainty. 2 But in terms of the partnership kind of arrangements, 3 as Mr. Adams had indicated, the Shell partnership is 4 not doing that well right now. But we could be 5 looking at independence, totally independent from us 6 doing it. And we would utilize the same NUG 7 approach, non utility generation approach we've been 8 using with Sequoia. 9 But there's at least as much uncertainty on 10 the wind side as there would be on the Wuskwatim 11 partnership side. But neither case is significant. 12 MR. WILLIAMS: We may get into that a bit 13 later but I didn't want to kind of sidetrack us at 14 this point in time. 15 MR. WOJCZYNSKI: I might want to add, too, you 16 mentioned the export price uncertainty. 17 MR. WILLIAMS: Yes. 18 MR. WOJCZYNSKI: And I may have given the 19 impression in my discussion in response to your 20 questions yesterday, sir, that we may have given an 21 impression that profitability is at risk from 22 uncertainty in political decisions in our export 23 markets; for instance, Bush not ratifying Kyoto. So 24 if I had given that impression, I just wanted to 25 clarify that that is not the case and there's sort of 1098 1 three reasons for that. 2 The first is that the export estimates that we 3 are using already assume that the U.S.A. particularly 4 in the world more generally never ratified Kyoto as 5 it stands. That's already built into our forecast. 6 And the forecast assumed there will be a gradual 7 implementation of greenhouse gas management in the 8 United States and the world around us but not in the 9 Kyoto time frame or framework. 10 And as a matter of fact, I don't believe I've 11 said this at all on the record yet and I realize it's 12 probably useful to clarify, that we had talked a bit 13 about the Bush Administration relaxing the 14 environmental regulations on coal generation. But 15 that is already built into our forecast. This isn't 16 some new factor that's going to be harmful to us. 17 For instance, and the best example is if you 18 go to the Global Insights Report, the amount of 19 existing coal generation assumed to be extended in 20 life and actually expanded in capacity without 21 significant environmental additional costs because of 22 a decision by the Bush Administration to relax the 23 EPA requirements under the Clean Air Act. But that's 24 already built into our forecasts. 25 So the second point is if the U.S.A., after 1099 1 this upcoming election, did, with a new 2 administration, ratify Kyoto or something very 3 similar to it, the export rates would likely be much 4 higher than anything we've included in our forecasts, 5 even higher than our forecast of the high. So that 6 would be like a bonus. So it's not that there's a 7 risk that they won't do something, actually be a 8 bonus way above what we've already assumed. 9 The last point here is if there's no societal 10 or political will to increase environmental 11 stringency at all over the next 10 to 15 years which 12 I think most of us would consider highly unlikely, if 13 that did happen, the reference case would apply and 14 the advancement IRR for Wuskwatim would still be in 15 the order of 9 and a half per cent which we consider 16 to be very attractive and very profitable. 17 So I just didn't want there to be a 18 misimpression. Thank you. 19 MR. WILLIAMS: Thanks. Back to wind. We have 20 talked about some uncertainties in terms of just kind 21 of a general comparison wind versus Wuskwatim. Have 22 I missed anything? Are there any other ones that 23 when we're kind of looking at the relative 24 uncertainties that you'd like to share? 25 MR. WOJCZYNSKI: I think we've said enough on 1100 1 that. We could get into more details but it's 2 probably not useful. 3 MR. WILLIAMS: Just in terms of Hydro's 4 analysis of wind, my sense is that your perspective 5 is that wind comes with any kind of your core 6 business mandate as a source of new generation but it 7 also presents a number of challenges and 8 uncertainties. Would that be fair? 9 MR. WOJCZYNSKI: Yes. 10 MR. WILLIAMS: And would it also be fair to 11 say that these challenges and uncertainties are 12 fairly significant? 13 MR. WOJCZYNSKI: Yes. 14 MR. WILLIAMS: Would you say that these 15 challenges and uncertainties are more significant 16 than for Wuskwatim? 17 MR. WOJCZYNSKI: Yes. 18 MR. WILLIAMS: Thank you. I am going to turn 19 to DSM and -- 20 MR. MAYER: Before you do that, I just had one 21 question here. I think Mr. Williams said that you 22 perceived wind is to be within your core business. I 23 thought I heard you say earlier when answering 24 questions about the steam turbine and where you 25 considered the risk there, I wasn't sure you 1101 1 mentioned that is to be within your core business 2 area. I see Manitoba Hydro as being Hydro. I 3 thought that was the core. I am wondering how it is 4 you could consider wind or thermal to be sort of 5 within your core business area? 6 MR. ADAMS: Maybe I can respond to that, Mr. 7 Mayer. Our core business is to supply electricity to 8 the customers with all the other qualifications that 9 go with it. How we produce it is a means to an end, 10 not the end in itself. And so we consider the supply 11 of electricity from any source to be part of our core 12 business. So whether it's from steam, gas turbines, 13 Hydro, wind, solar energy, geothermal heat, DSM and 14 so on, we consider that all to be part of our core 15 business. 16 MR. MAYER: Would nuclear be included in that 17 list? 18 MR. ADAMS: Absolutely. I mean if we were to 19 consider that nuclear was an appropriate path to 20 follow, we would consider it. And don't get me 21 wrong, where a lot of the energy we are buying from 22 other areas is at least in part generated by nuclear. 23 But what we do say is that 97 per cent of the 24 energy we actually produce comes from Hydro. Clearly 25 we have a lot more experience building and operating 1102 1 Hydro plants than we do thermal stations. Although 2 we've been in the thermal business for 40 something 3 years. 4 MR. MAYER: Thank you, sir. 5 THE CHAIRMAN: May I ask another question. 6 Mr. Wojczynski, you've indicated that in these 7 calculations and assumptions that you've made, you 8 took for granted that there would not be any 9 relaxation. In fact, there may be an expansion in 10 the greenhouse emission in the United States for the 11 next foreseeable future. 12 Do these assumptions also include additional 13 benefits from greenhouse gas emissions, the sale of 14 the opportunities there to the United States? 15 MR. WOJCZYNSKI: Yes. We assume that our 16 benefits and our export price from reducing 17 greenhouse gases is directly tied to whether or not 18 there is a greenhouse gas management in the States. 19 So our reference case has no benefit whatsoever in 20 the price for reducing greenhouse gases. Our three 21 environmental premium scenarios have a price benefit 22 built into them but in the earlier years, there's a 23 low probability attached to that. And in none of the 24 cases, even the high case, does the price benefit for 25 greenhouse gas management equal to what it would have 1103 1 been if the United States had ratified Kyoto. 2 So there is some price benefit in 3 environmental premium scenarios but it's lower than 4 would have been with Kyoto. 5 THE CHAIRMAN: Okay. 6 MR. WILLIAMS: Mr. Kuczek and Mr. Fleming and 7 for the benefit of the panel and perhaps Mr. Grewar, 8 we're going to move into the area of DSM. And we 9 have come up with a very last exhibit for this 10 proceeding, I'm hoping anyways, at least this 11 cross-examination. And we've shared that with Mr. 12 Kuczek and Mr. Fleming and the Hydro panel. And my 13 understanding is that Hydro and NCN don't have any 14 objections to us sharing it with the Commission. 15 I think there's some copies on the back table 16 there. So unless there's any comment by Hydro or 17 NCN, we'd like to ask Mr. Grewar to distribute that 18 exhibit. 19 MR. GREWAR: Mr. Williams, is it the Exhibit 20 CAC/MSOS New DSM Potential versus Current Programs or 21 is it the simplified illustrative example of DSM 22 Program portfolio? 23 MR. WILLIAMS: Yes. I apologize for that, Mr. 24 Grewar. We're referring to the document CAC/MSOS 25 Simplified Illustrative Example of DSM Program 1104 1 Portfolio Design. 2 MR. GREWAR: Thank you. 3 MR. WILLIAMS: Now, before anyone spends too 4 much time looking at that, I'm going to ask you to 5 tear your eyes away from it for just a second or two 6 and pay some attention to me. And, Mr. Kuczek and 7 Mr. Fleming, what I'd like to do is, we'll get to 8 that in a few minutes, but what I'd like to do is 9 because I was left a little uncertain on Wednesday on 10 how DSM works. So what I'd like to do is do kind of 11 a high level overview of DSM and then come back to 12 specific elements of it afterwards. Is that 13 satisfactory? You're nodding your head so I take it 14 that's fine. 15 MR. KUCZEK: Yes. 16 MR. WILLIAMS: Now, my understanding is that 17 basically, and I'm referring here for the reference, 18 if you're looking for reference, to CEC first round 19 interrogatory 21(a). I don't think it's necessary to 20 refer to it but if you wish it. Do you have that, 21 Mr. Kuczek? 22 MR. KUCZEK: The number was what again? 23 MR. WILLIAMS: 21(a). 24 MR. KUCZEK: Yes. 25 MR. WILLIAMS: Now my understanding is 1105 1 basically Hydro's DSM, under its planning process, 2 energy efficient opportunities are identified through 3 various channels including industry and other market 4 contacts; is that correct? 5 MR. KUCZEK: Correct. 6 MR. WILLIAMS: And then these are generally 7 assessed for their economic attractiveness using two 8 levels of evaluation, a high level assessment and a 9 more detailed assessment; is that right? 10 MR. KUCZEK: Yes. 11 MR. WILLIAMS: And we'll get into this in a 12 bit more detail in a few minutes but the high level 13 assessment involves comparing the expected benefits 14 to the incremental capital costs associated with the 15 energy efficient measure; is that right? 16 MR. KUCZEK: Yes, in general. It's more of a 17 screening test, if anything. 18 MR. WILLIAMS: And would that be the kind of 19 analysis that's performed in the DSM market potential 20 study or something similar to that? 21 MR. FLEMING: I don't think it would be fair 22 to say a cursory DSM potential study. We've looked 23 at the market in detail and the technologies in some 24 detail. Although overall, it's a high level view of 25 the marketplace, a high level view of residential, 1106 1 industrial and commercial energy consumption. 2 MR. WILLIAMS: Okay. Thank you very much, Mr. 3 Fleming. Mr. Kuczek, what I'm going to concentrate 4 now on is the Hydro process and then we'll get back 5 to the market opportunities potential. 6 After Hydro does a high level screening, 7 basically, those opportunities which pass the high 8 level assessment, Hydro then undertakes a more 9 detailed assessment; is that right? 10 MR. KUCZEK: Yes. 11 MR. WILLIAMS: And that involves developing 12 program concepts and designs, focus on transforming 13 the marketplace; is that fair? 14 MR. KUCZEK: Yes. 15 MR. WILLIAMS: And that it also involves 16 estimating projected energy savings and projected 17 costs associated with promoting the product, correct? 18 MR. KUCZEK: Yes. We do that with a high 19 level assessment as well. It's just more detail with 20 the second level. 21 MR. WILLIAMS: Fair enough. And these revised 22 costs and benefits are then added to the benefit cost 23 analysis to determine the cost benefit of the 24 initiative; is that right? 25 MR. KUCZEK: Yes. 1107 1 MR. WILLIAMS: And the primary tool for that 2 is something that is known as total resource, the 3 total resource cost test or TRC? 4 MR. KUCZEK: Yes. 5 MR. WILLIAMS: And generally, to be 6 acceptable, opportunities must pass the total 7 resource cost test of about one? 8 MR. KUCZEK: They must pass one, yes. 9 MR. WILLIAMS: And at this more detailed 10 analysis, opportunities are also assessed using 11 something called the rate impact measure test or RIM; 12 is that right? 13 MR. KUCZEK: Yes. 14 MR. WILLIAMS: And generally, opportunities 15 aren't pursued unless they have a RIM of 0.8; is that 16 correct? 17 MR. KUCZEK: We don't have a set criteria for 18 passing RIM. We look at each individual program on 19 its own and with the objective of having an overall 20 program that has a RIM of 1. But it's not a set 21 criteria. 22 MR. WILLIAMS: And that's helpful. And just 23 so I understand this, what you do is essentially 24 programs for opportunities that pass the total 25 resource cost test are aggregated to form DSM 1108 1 resource options; is that right? 2 MR. KUCZEK: Yes. 3 MR. WILLIAMS: And then they are evaluated 4 against other potential resource options, correct? 5 MR. KUCZEK: Yes, by Mr. Wojczynski's group. 6 MR. WILLIAMS: Now, Mr. Fleming, I guess it's 7 your turn for a couple minutes anyways. 8 In your DSM market potential study, there's 9 reference to something that's called the economic 10 potential forecast. Do you recall that? 11 MR. FLEMING: Yes, I do. 12 MR. WILLIAMS: And as I understand it, the 13 economic potential forecast is a level of electricity 14 consumption that would occur if all equipment and 15 building envelopes were upgraded to the level that is 16 cost effective from Manitoba Hydro's perspective; is 17 that right? 18 MR. FLEMING: That's correct. 19 MR. WILLIAMS: And you use a technology or you 20 use a test there which is known as the cost of 21 conserved energy or CCE; is that right? 22 MR. FLEMING: Yes, we do. 23 MR. WILLIAMS: And what that is is the 24 annualized incremental capital and O&M cost of an 25 upgrade measure divided by the annual savings 1109 1 achieved; is that right? 2 MR. FLEMING: Precisely actually. 3 MR. WILLIAMS: What a surprise. Now, those 4 are pretty big words so what I'd like to do is turn 5 you to the illustrative CAC/MSOS simplified 6 illustrative example of DSM program portfolio design. 7 And I guess the first question is if it's simplified, 8 why is the title so long? 9 MR. MAYER: Should that be CCE, not CEC? 10 MR. WILLIAMS: And I'm not sure it was a 11 Freudian slip but the title is wrong. It should say 12 TRC RIM and CCE, Mr. Grewar, rather than CEC. 13 MR. GREWAR: And perhaps at this time, Mr. 14 Chairman, we'll just quickly enter it as 15 CAC/MSOS-1004 with correction. 16 17 (EXHIBIT CAC/MSOS-1004: CAC/MSOS simplified 18 illustrative example of DSM program portfolio 19 design) 20 21 MR. WILLIAMS: And basically, Mr. Fleming, 22 what I'd like you to concentrate on is the cost of 23 the first kind of table which, in the top left-hand 24 corner, is the heading Cost of Conserved Energy CCE. 25 Do you see that? 1110 1 MR. FLEMING: Yes, do I. 2 MR. WILLIAMS: And you can see what we're 3 doing here is essentially a scenario looking at the 4 CCE for commercial Low E windows; do you see that, 5 sir? 6 MR. FLEMING: Yes, I do. 7 MR. WILLIAMS: And what we are assuming is -- 8 remember those big words that we used before such as 9 annualized incremental capital and O&M costs. And in 10 this case, we are assuming away the O&M costs and 11 we're only focusing on the capital costs; is that 12 right? 13 MR. FLEMING: Yes. 14 MR. WILLIAMS: And what that capital cost 15 under CCE in the extreme left being the total of 16 $5,000, what that represents is the cost of 17 installing these types of windows in one home, 18 correct? Or sorry, in one commercial business? 19 MR. FLEMING: Yeah, I'm not entirely sure of 20 the -- 21 MR. WILLIAMS: I wonder if -- 22 MR. FLEMING: These are someone's numbers. 23 MR. WILLIAMS: Yeah. 24 MR. FLEMING: But I am assuming that this is 25 the capital cost for a certain amount of window. 1111 1 MR. WILLIAMS: Yes, into one business. 2 MR. KUCZEK: And you're referring to 3 incremental costs I guess? 4 MR. WILLIAMS: That's correct as well, Mr. 5 Kuczek. And so that's what that figure is intended 6 to represent. And if you go over one column, you'll 7 see life year being 25 years. So that's the 8 estimated life of this technology. And again, we're 9 just using this as a hypothetical, we're not 10 suggesting that these are the actual data. Do you 11 understand that, Mr. Fleming? 12 MR. FLEMING: Absolutely. 13 MR. WILLIAMS: And the next column over is the 14 assumption in terms of savings per year. And for 15 this commercial business, it would be -- the energy 16 saved would be 4,000 kilowatt hours. Do you 17 understand that, sir? Do you see that, sir? 18 MR. FLEMING: In this context, sure. 19 MR. WILLIAMS: Now, the next heading is (D) 20 which is utility avoided cost rate. And that's 21 represented by 6 cents per kilowatt hour. Do you see 22 that, Mr. Fleming? 23 MR. FLEMING: Yes, I do. 24 MR. WILLIAMS: Now, if I understand the 25 utility avoided cost, the figure that you try and use 1112 1 it for is to represent the value of the kilowatt 2 saved to Manitoba Hydro. Would that be fair? 3 MR. FLEMING: In this case, 6 cents would 4 be -- we don't use avoided cost. We try to put a 5 value on electricity. And in the study, it was 6.15 6 cents per kilowatt hour. And we were to use that 7 value of electricity as a means to screen 8 technologies, whether technologies could bring 9 electricity to the system at that value for that 10 price. 11 MR. WILLIAMS: And the value of electricity, 12 and we can certainly change the heading, that would 13 be fine. 14 MR. FLEMING: Sure. 15 MR. WILLIAMS: The value of electricity is 16 basically the opportunity costs that Hydro could get 17 from exporting this power to the United States more 18 or less. 19 MR. KUCZEK: It's a combination of a number of 20 factors. And Mr. Wojczynski can actually talk to all 21 of them. But they are primarily the export value and 22 avoided cost of generation. 23 And, Mr. Wojczynski, I'm not sure if you want 24 to add anything to that. 25 MR. WOJCZYNSKI: I'm not sure that we need to 1113 1 at this time. The 6.15 cents before was our estimate 2 of the benefits from additional energy available. 3 And the primary impact is on the export market, 4 additional export benefits, but it also includes any 5 modifications and import costs and thermal costs. So 6 it's an overall evaluation, primarily driven by the 7 exports. 8 And we determine that in the same fashion as 9 when we look at Wuskwatim or wind, we use the same 10 kind of basic methodology and the same kind of 11 assumptions. 12 MR. WILLIAMS: Okay. So we'll change that 13 title to "Value" rather than "Avoided Costs." And 14 the next column over is titled "Annualized Costs." 15 And you can see that that's simply calculated by 16 taking the capital cost of $5,000 and dividing it by 17 the life year of 25 to yield the figure of $200. Is 18 that correct, Mr. Fleming? 19 MR. FLEMING: Yes. 20 MR. WILLIAMS: And of course, that's a very 21 simplified calculation. It doesn't take into account 22 the time value of money in this simplified example. 23 It's for illustrative purposes. Do you understand 24 that? 25 MR. FLEMING: Yes, I do. 1114 1 MR. WILLIAMS: So from the annualized costs, 2 we move over one column to what is called the Cost of 3 Conserved Energy. And that's calculated by taking 4 the savings to this business per year of 4,000 5 kilowatt hours. Oh, excuse me. That's taken by -- 6 that's done by taking the annualized cost which we 7 calculated to be $200 and dividing that by the 8 savings per year for this business of 4,000 kilowatt 9 hours; is that correct, sir? 10 MR. FLEMING: Yes, I'm following you. 11 MR. WILLIAMS: And that leaves you with a cost 12 of conserved energy of five cents per kilowatt hour, 13 correct? 14 MR. FLEMING: Yes, using this formula for cost 15 of conserved energy. 16 MR. WILLIAMS: And if I were just to eyeball 17 this table at this time, and if I was to compare the 18 cost of conserved energy being five cents per 19 kilowatt hour versus the value of that electricity 20 being 6 cents per kilowatt hour, that would suggest 21 to me, just on a kind of eyeball basis, that this had 22 the potential to be an economic DSM opportunity. 23 Would that be fair? 24 MR. FLEMING: Using the numbers you've 25 presented here and the formula for CCE, yes. 1115 1 MR. WILLIAMS: Okay. And I don't think I need 2 to go into the CCE ratio. And that's fairly 3 self-evident from the table. I guess the other thing 4 that would be considered would be the number of 5 potential participants and here we've simply assumed 6 the number of 1,000. Do you see that, Mr. Fleming? 7 MR. FLEMING: Yes, I do. 8 MR. WILLIAMS: And if you wanted to find out 9 the economic potential kilowatt hours per year, you 10 would take the savings per year for that one 11 individual commercial premise and times it by the 12 estimated number of participants. And that would 13 yield 4 million kilowatt hours per year. Is that 14 right? 15 MR. FLEMING: Yes. 16 MR. WILLIAMS: Okay. And recognizing that 17 that's a simplified approach, but is that a 18 relatively fair representation of your calculation, 19 sir? 20 MR. FLEMING: Well, it's not a fair 21 representation of windows as a measure. It's not a 22 fair representation of the cost of conserved energy 23 because it's not discounted over a 25 year life. If 24 it were a compact fluorescent with a one year life, I 25 could live with your formula for cost of conserved 1116 1 energy, but this is a 25 year investment in energy 2 efficiency. 3 So under these values, I'd have to assume that 4 you -- under the proper discounting, for that 5 particular scenario, you wouldn't have a, under our 6 understanding of the market and pricing in Manitoba, 7 you would not have a window that would be cost 8 effective to replace. 9 MR. WILLIAMS: And thank you for that, Mr. 10 Fleming. And again, we're not trying to get into the 11 kind of relative merits of fluorescent or whatever 12 you just referred to. But what we're trying to do is 13 to get a sense of kind of, a simplified sense of how 14 the calculation is undertaken. And this is fairly 15 representative of that calculation. Leaving out the, 16 taking your caveat regarding the discounting and the 17 assumptions; is that fair? 18 MR. FLEMING: Okay. 19 MR. WILLIAMS: Did you say yes? 20 MR. FLEMING: Yes. 21 MR. WILLIAMS: And I'm not sure whether this 22 goes to Mr. Fleming or Mr. Kuczek. But once Hydro, 23 or excuse me, I'm again referring to the DSM market 24 potential study. Once you have the economic 25 potential forecast, an important thing to consider 1117 1 next is rather than the economic potential is 2 actually the achievable potential; is that correct? 3 MR. KUCZEK: Yes. 4 MR. WILLIAMS: And as I understand it, what 5 achievable potential recognizes is that in many 6 instances, it's difficult to persuade all customers 7 to purchase and install all the energy efficient 8 technologies that meet the criteria defined by the 9 economic potential forecast. Would that be fair? 10 MR. KUCZEK: Yes. 11 MR. WILLIAMS: And just to give you some 12 examples. Customer decisions to implement energy 13 efficient measures could be constrained by factors 14 such as the higher first cost of efficient products 15 or the need to recover investment costs in a short 16 period of time; is that right? 17 MR. KUCZEK: Yes. 18 MR. WILLIAMS: Some other factors might be in 19 a case of a landlord/tenant situation where the 20 incentives are split between the landlord and 21 tenants. So it doesn't make sense individually but 22 it might make sense globally. Would that be fair? 23 MR. KUCZEK: Yes, usually with landlords and 24 tenants it doesn't make sense because the landlord 25 pays the capital costs and the tenant pays the 1118 1 operating costs. 2 MR. WILLIAMS: And a couple of other reasons 3 that might constrain the customer decisions to 4 implement energy efficient measures could be a lack 5 of product performance information or lack of product 6 availability; is that right? 7 MR. KUCZEK: Yes. 8 MR. WILLIAMS: And I guess the final one of 9 importance to my clients might be just a lack of 10 access to capital in the sense that it might not be 11 affordable for low income people to make that 12 up-front investment. Would that be correct? 13 MR. KUCZEK: Yes. 14 MR. WILLIAMS: Thank you. Now, also in the 15 DSM market potential study, there's a reference to 16 upper achievable potential. And my understanding is 17 that under that scenario, there's an assumption that 18 Manitoba market conditions become more supportive of 19 energy efficient initiatives; is that right? 20 MR. KUCZEK: Yes. 21 MR. WILLIAMS: And some of the assumptions in 22 this scenario, one is that the ratification of the 23 Kyoto protocol leads to new Federal Government 24 initiatives that increase customer energy efficiency 25 awareness and motivation; is that right? 1119 1 MR. KUCZEK: Yes. 2 MR. WILLIAMS: And these conditions also 3 provide additional opportunities to leverage 4 PowerSmart programs through partnering with other 5 organizations such as the Federal Government. Would 6 that be fair? That's the assumption? 7 MR. KUCZEK: In general, yeah. 8 MR. WILLIAMS: Okay. Just so I understand 9 this. The results of the DSM market potential study 10 and the estimate of achievable potential, they are 11 supportive of the conflict of PowerSmart work but 12 achievable potential is not synonymous with either 13 the setting of specific PowerSmart targets or with 14 program design; is that right? 15 MR. KUCZEK: Say that again? I'm sorry. 16 MR. WILLIAMS: Yeah, that was tremendously 17 articulate. What I'm trying to say is just because 18 it's in the DSM market potential, there's certainly 19 that -- you suggest that there's an opportunity there 20 but that doesn't mean you have a program designed to 21 realize upon that potential or even that at the end 22 of the day that it will be realized upon; is that 23 correct? 24 MR. KUCZEK: That's correct. The next step is 25 actually do the detailed program designs and then 1120 1 following that, do the screening against other 2 options. 3 MR. WILLIAMS: And you guys are just being so 4 helpful with segues today. That's number 2. So I'd 5 just like to, going back to the exhibit, go to the 6 second heading which is Total Resource Cost. And I 7 guess this goes to you, Mr. Kuczek. 8 And again, you understand that we're not 9 trying to show the total resource cost of a 10 commercial Low E window, we're just trying to get a 11 sense of some of the inputs into the calculation. Do 12 you understand that, sir? 13 MR. KUCZEK: Yes, I do. 14 MR. WILLIAMS: And if I were to compare the 15 CCE calculation to the total resource cost 16 calculation, I would see that the capital costs, the 17 life year and the savings years are the same in both 18 tables; is that correct? 19 MR. KUCZEK: Yes. 20 MR. WILLIAMS: And as well, the next column 21 which was formally known as Utility Avoided Cost Rate 22 but which we're now calling Value of Electricity is 23 also the same in both examples, correct? 24 MR. KUCZEK: Yes. 25 MR. WILLIAMS: So what you can see we've done 1121 1 here is the next column titled Utility Program Costs 2 or (D), we have assumed a program cost of $1,000. Do 3 you see that, sir? 4 MR. KUCZEK: Yes. 5 MR. WILLIAMS: And what that refers to in 6 terms of programs costs at the total resource cost 7 level, it doesn't involve any incentives you might 8 offer to participants to participate in the program. 9 These are the costs of designing and administering 10 the program; is that right, sir? 11 MR. KUCZEK: Yes, and promotion and a few 12 other things, yes. 13 MR. WILLIAMS: And column (E) is the figure 14 that we have assumed for participant costs. Now 15 ordinarily, one would expect that if the capital cost 16 was 5,000, one would expect that to be $5,000. Is 17 that right, Mr. Kuczek? 18 MR. KUCZEK: Yes. 19 MR. WILLIAMS: But in this case, we have 20 assumed for reasons that escape me a net cost after 21 federal $1,500 incentives. Do you see that? 22 MR. KUCZEK: That's being optimistic. 23 MR. WILLIAMS: And again, just to perform the 24 calculation, the TRC looks at the benefits versus the 25 cost; is that right? 1122 1 MR. KUCZEK: Yes. 2 MR. WILLIAMS: So in terms of this kind of 3 calculation, at the top of the calculation, on the 4 benefits -- or excuse me. At the top of the 5 calculation, the first thing we will put in would be 6 the life year of 25 years; is that right? 7 MR. KUCZEK: Yes. 8 MR. WILLIAMS: And we will multiply that by 9 the savings per year of 4,000 kilowatt hours? 10 MR. KUCZEK: Yes. 11 MR. WILLIAMS: And then we'll multiply that by 12 the value of electricity being 6 cents per kilowatt 13 hour; is that correct, sir? 14 MR. KUCZEK: Yes. 15 MR. WILLIAMS: At the bottom, we will add the 16 utility program cost being 1,000 plus a participant 17 cost being $3,500; is that right, sir? 18 MR. KUCZEK: Yes. 19 MR. WILLIAMS: And would you accept, subject 20 to check, that that calculation would be 1.33? 21 MR. KUCZEK: Yes. 22 MR. WILLIAMS: And when you look at that, 23 again when you see a figure of that, that suggests 24 that certainly that this is a project that you might 25 want to consider -- a product that you might want to 1123 1 consider including in your DSM portfolio at that 2 level of analysis? 3 MR. KUCZEK: Yes. 4 MR. WILLIAMS: Now, the federal incentives 5 were included here. Just one second. Would you 6 accept, subject to check, that if we took the federal 7 incentives out, the ratio would be 1.0? 8 MR. KUCZEK: That would look correct, yes. 9 MR. WILLIAMS: And at that level, would that 10 still be a project that the corporation would 11 consider? It's not a trick. I'm just trying to find 12 out. 13 MR. KUCZEK: I was just making sure the 1.000, 14 how that would impact, whether we would look at it or 15 not. But we would still look at it and look at it in 16 a little more detailed and see if it made sense for 17 us in our overall PowerSmart package. 18 MR. WILLIAMS: And if I'm right, if we go 19 along, we see under "Participants per year," and 20 that's I guess assumed to be 250. And presumably, we 21 talked about kind of economic versus achievable. And 22 presumably the 250 would be based upon the 23 corporation's estimate of what the participation rate 24 in the program would be, giving consideration to some 25 of the limiting factors that we spoke of previously; 1124 1 is that right? 2 MR. KUCZEK: Yes. 3 MR. WILLIAMS: And so if you wanted to find 4 the total savings per year for the program, you would 5 multiply the savings per year by the number of 6 participants and that would again give you the 7 result? 8 MR. KUCZEK: Yes. 9 MR. WILLIAMS: Now, I'm going to try and set 10 you up for another one of those clever segues that 11 your team has been so helpful on today. 12 When we look at DSM resource options, we know 13 that they result in lower average customer bills when 14 Manitoba Hydro's revenue requirements are spread over 15 lower energy sales; is that right? 16 MR. KUCZEK: Say that again? I'm sorry. 17 MR. WILLIAMS: When we look at DSM, we know 18 that, you know, economically viable options result in 19 lower average customer bills when Hydro's revenue 20 requirements are spread over lower energy sales; is 21 that right? 22 MR. KUCZEK: Yes. 23 MR. WILLIAMS: Let me try this another way 24 just to make it a little less complicated. DSM does 25 that, it may make the lower average bill and it also, 1125 1 you will agree with me, it also benefits people who 2 participate in the program in the sense that they are 3 paying lower actual bills as well, correct? 4 MR. KUCZEK: Yes. 5 MR. WILLIAMS: But the other part of the 6 analysis that Hydro wishes to conduct is to be 7 confident that there's not a negative impact on other 8 consumers who don't, who aren't able to or choose not 9 to participate in DSM; is that right? 10 MR. KUCZEK: Yes. 11 MR. WILLIAMS: And that's why you do the RIM 12 calculation; is that correct? 13 MR. KUCZEK: Yeah. We do it on a total 14 program basis. And you are correct, it's an 15 indication of the impact to our rates both magnitude 16 and directions and our concern is to non-participants 17 or the impact to non-participants. 18 MR. WILLIAMS: Yes, thank you for that. And 19 that wasn't kind of as graceful as the last segue but 20 maybe we can turn to the rate impact measure now 21 which is the third table on this exhibit. And when 22 we compare the rate impact measure to the analysis to 23 the total resource costs analysis, we can see that 24 the first five columns being capital costs, life 25 year, savings years, value of electricity and utility 1126 1 program cost are the same between the two programs; 2 is that right? 3 MR. KUCZEK: Yes. 4 MR. WILLIAMS: It's when we get to the sixth 5 column being incentive that we see a difference 6 between the two calculations; is that right? Is that 7 right, Mr. Kuczek? 8 MR. KUCZEK: The sixth column is different, 9 yes. 10 MR. WILLIAMS: And the incentive in this 11 scenario is in order to induce customers to take up 12 its program? 13 MR. KUCZEK: It's one of your programming 14 tools that you can use to try to change the behaviour 15 of consumers. And it's to address the capital cost 16 barrier. 17 MR. WILLIAMS: Now, the next column is 18 something called Lost Revenue Rate. And rather than 19 me trying to explain that, I wonder if you can try 20 and explain that to me? 21 MR. KUCZEK: I'm not sure exactly how this is 22 calculated but it's the calculation of our lost 23 revenue to do with energy not being consumed with 24 consumers by the consumers. 25 MR. WILLIAMS: So because DSM lowers the 1127 1 overall consumption, there is a cost to the 2 corporation in the sense that they are not charging 3 for that electricity; is that correct? 4 MR. KUCZEK: They are not selling the energy 5 to that consumer so there's lost revenue there, yes. 6 MR. WILLIAMS: So that's why you wish to 7 include that in the calculation? 8 MR. KUCZEK: Correct. 9 MR. WILLIAMS: So again, and thank you for 10 that, Mr. Kuczek, in doing the calculation at the, 11 going to the seventh column being RIM Benefit Cost, 12 the top part of this calculation is the benefits. 13 And that would include the life year multiplied by 14 the savings per year multiplied by the value of 15 electricity being column C; is that right? 16 MR. KUCZEK: Yes. 17 MR. WILLIAMS: And the calculation at the 18 bottom being the costs would include the utility 19 program costs being column (D), the incentive being 20 column (E). Those are added together. And they are 21 added with the product of the life year times the 22 savings year times the lost revenue rate; is that 23 right? 24 MR. KUCZEK: That's right. 25 MR. WILLIAMS: I'm amazed. Thank you. And 1128 1 that leaves a RIM of 1.13 which is certainly 2 something that would be, again for illustrative 3 purposes, definitely worthy of consideration within 4 the Hydro portfolio? 5 MR. KUCZEK: Yes. 6 MR. WILLIAMS: Thank you, Mr. Kuczek. I want 7 to try and put this together in terms of DSM. My 8 understanding is that you try and create a portfolio 9 of DSM programs such that the overall total resource 10 cost is greater than one for the portfolio overall; 11 is that right, sir? 12 MR. KUCZEK: Each individual program has to 13 pass the TRC of one as well. 14 MR. WILLIAMS: Okay. And you also want the 15 overall RIM to be one; is that correct? 16 MR. KUCZEK: Our preference is to have it 17 around one for the reasons we talked about before, 18 the impacts to non-participating customers. 19 MR. WILLIAMS: And just to elaborate on that 20 slightly. That doesn't mean that every program 21 within the portfolio has to have a RIM of one; is 22 that right? 23 MR. KUCZEK: That's correct. 24 MR. WILLIAMS: Some can have more, some can 25 have less provided that generally you are around the 1129 1 one? 2 MR. KUCZEK: That's our objective, yes. 3 MR. WILLIAMS: Going back to the DSM market 4 potential study, my understanding is that when I look 5 at that document, that's not a calculation of TRC or 6 RIM for individual programs. It's not down to that 7 level, is that right, Mr. Fleming or Mr. Kuczek, 8 whoever? 9 MR. KUCZEK: You're right. 10 MR. WILLIAMS: And so the process that 11 Manitoba Hydro is in right now is to take the results 12 from the DSM market potential study and perform 13 analysis on it in terms of TRC and RIM; is that 14 correct? 15 MR. KUCZEK: Yes, the more detailed program 16 designs. 17 MR. WILLIAMS: And until you have completed 18 the more detailed program design, Hydro doesn't 19 commit to these additional programs; is that right? 20 MR. KUCZEK: Not quite I guess. If, in the 21 process, we had a program that we thought was 22 beneficial to pursue, we would pursue it in parallel 23 with this process. So in general, you are correct 24 but there are exceptions. 25 MR. WILLIAMS: Now, if I was looking for kind 1130 1 of the Bible of the Manitoba Hydro PowerSmart or DSM 2 program, would that be the PowerSmart Resource 3 Options document, Mr. Kuczek? 4 MR. KUCZEK: I struggle in my mind with it 5 being the Bible, but I guess you could think of it 6 that way. 7 MR. WILLIAMS: Rather than the Bible, it's 8 kind of the core document currently for Manitoba 9 Hydro? 10 MR. KUCZEK: Yes. In general that's true. In 11 this particular case, our current PowerSmart plan is 12 the 2001 plan so it's a little outdated. But it is 13 the plan that we're working with and subject to 14 pursuing some other programs that we think are 15 beneficial in the meantime or in parallel to 16 developing the modified plan. 17 MR. WILLIAMS: And so the modified plan or you 18 are in the process of reviewing the 2001 plan and 19 elaborate on it; is that right? 20 MR. KUCZEK: Yes. 21 MR. WILLIAMS: And that review is not complete 22 yet? 23 MR. KUCZEK: That's correct. 24 MR. WILLIAMS: And when do you expect that to 25 be completed? 1131 1 MR. KUCZEK: It depends when these hearings 2 are done. We normally would be attempting to 3 complete them by the spring, actually about now, this 4 time of the year. This year, it will likely be 5 closer to the end of the summer. 6 MR. MAYER: I take it you don't have to worry 7 about the GRA. 8 MR. KUCZEK: Well, we're not sure if I'm 9 involved in that yet. 10 MR. WOJCZYNSKI: But I would add that some of 11 the people who would be evaluating the DSM program 12 are involved in the GRA. I'm referring to inside of 13 Hydro. 14 MR. WILLIAMS: Just so I'm clear, Mr. Kuczek, 15 you said that you would normally review the plan in 16 the spring. Would that be the 2001 plan? Like is 17 that normally reviewed on an annual basis? 18 MR. KUCZEK: Normally that's reviewed on an 19 annual basis. 20 MR. WILLIAMS: What I don't understand then is 21 why the plan is only at 2001 rather than at 2003 or 22 2004? 23 MR. KUCZEK: In 2002, we made a decision not 24 to put our efforts to revising that plan but to do 25 two things. One was to pursue the market potential 1132 1 study which is a comprehensive study that took a fair 2 amount of resources on our part. The same resources 3 that would be used to design the programs or revise 4 the PowerSmart plan. And the other component was in 5 parallel with that, we instructed our program 6 designers to look at the programs and to see if there 7 was any modifications on new programs that we should 8 be pursuing regardless of us updating our plan. And 9 we didn't do that and we did have a few 10 modifications, a new program design as well as a 11 revision to an existing program. 12 MR. FLEMING: I just wanted to add as well in 13 the interim because we were involved in the study 14 that was undertaken initially in 2001 but there was 15 the sale of the former Winnipeg Hydro to Manitoba 16 Hydro and that had a profound effect on the 17 conservation potential because we were bringing in 18 essentially the core of Winnipeg's commercial 19 facility and floor space into our models. So we were 20 somewhat behind in getting the new sales data which 21 went into the new models so that we have essentially 22 the new testament of conservation potential based on 23 that new service territory. We didn't want to miss 24 that opportunity. 25 MR. WILLIAMS: You mentioned it referenced a 1133 1 few modifications. Is your expectation that the 2 outcome of the kind of the melding of the DSM market 3 potential study and the updating of the power 4 resource plan will be a substantial expansion of the 5 program, Mr. Kuczek? 6 MR. KUCZEK: Well, until I see the results of 7 the program designs, it's difficult for me to 8 speculate on what the results are going to be. But I 9 do expect our targets to go up. 10 MR. WILLIAMS: Would your expectation been 11 that they will go up materially? 12 MR. KUCZEK: It's most likely they are going 13 to go up in the range of 1.5 to maybe 2 times. 14 MR. WILLIAMS: Mr. Kuczek, just a few more 15 questions. I thank you for your patience. I want to 16 get -- when we look at DSM, I did this with wind and 17 I just want to do it with DSM to a certain degree in 18 terms of when we look at it compared to other 19 options, can we agree that at least based upon 20 levelized cost analysis, DSM makes very good economic 21 sense for Manitoba Hydro? 22 MR. KUCZEK: The DSM options that make 23 economic sense do make economic sense, yes. I'm 24 sorry, I didn't mean anything by that. But I had to 25 qualify that because there are some DSM options that 1134 1 are not economic. 2 MR. WILLIAMS: You're getting pretty good at 3 this witness thing, Mr. Kuczek. 4 The programs that are within the plan as well 5 as the programs that are potentially within the plan 6 based upon your expectations of expansion, they make 7 very good economic sense compared to other 8 alternatives that Manitoba Hydro is considering; is 9 that correct? 10 MR. KUCZEK: Yes. 11 MR. WILLIAMS: And another advantage of DSM is 12 that it can be brought in fairly quickly once you've 13 considered a program in the sense that you are 14 looking at a year or two rather than nine or ten 15 years; is that right? 16 MR. KUCZEK: Again, I have to qualify that. 17 You can achieve some savings fairly quick but it is a 18 long-term plan and it takes a long period of time to 19 actually achieve the total savings that we're 20 targeting for. For example, the market potential 21 study talks about a 15 year plan. So you can't 22 achieve everything overnight. 23 MR. WILLIAMS: That's a good point, thank you. 24 And obviously from my client's perspective, an 25 advantage of DSM is that if it's properly and 1135 1 rigorously implemented and applied, it results in 2 lower average bills and also lower bills for 3 customers who take advantage of the program; is that 4 right? 5 MR. KUCZEK: Yes. 6 MR. WILLIAMS: And I guess another advantage 7 or a strength of DSM is that it's scaleable in the 8 sense that you can bring it in in small increments; 9 is that right? 10 MR. KUCZEK: Yes. 11 MR. WILLIAMS: It's not lumpy? 12 MR. KUCZEK: Clearly not, no. 13 MR. WILLIAMS: And again, DSM, when we look at 14 "environmental friendliness" it certainly ranks right 15 up there, in Hydro's view, with other alternatives 16 such as wind or hydroelectricity; is that fair? 17 MR. KUCZEK: I don't compare them to the 18 alternatives, Mr. Wojczynski does, but I believe 19 that's correct. 20 MR. WOJCZYNSKI: Yes, that's correct, Mr. 21 Williams, that we would consider the DSM to be, from 22 an environmental point of view, as attractive or even 23 more attractive than wind or Hydro. 24 MR. WILLIAMS: And when we're trying to get a 25 sense of Hydro's priorities, and this is probably to 1136 1 you, Mr. Wojczynski or Mr. Adams, would it be fair to 2 say that based upon its economics, its environmental 3 friendliness and its flexibility, DSM should be right 4 near the top? 5 MR. ADAMS: I think it's fair to say that not 6 only should it be near the top, it is near the top. 7 MR. WILLIAMS: So in your view, it's at the 8 top in terms of Hydro's priorities? 9 MR. ADAMS: Subject to the qualifications that 10 Mr. Kuczek put on it that it has to be economic. 11 MR. WOJCZYNSKI: You will note that on day one 12 when we talked about our four main resource options 13 we are pursuing, DSM was the first one we always 14 talked about. And we said that was part of our 15 diverse and environmentally attractive portfolio. 16 MR. WILLIAMS: Thank you, Mr. Fleming, Kuczek 17 Wojczynski and Adams. We're onto a new topic which 18 is -- 19 THE CHAIRMAN: Well, before you do, Mr. 20 Williams, can I ask a question as a neophyte and 21 maybe for the record. You have gone through a highly 22 detailed scenario here and you've had sort of a 23 love-in tete-a-tete here both sides. Can I get a 24 feeling or a sense of what are the general 25 understandings, in layman's terms, or conclusions 1137 1 that you've drawn from this? And I think you were 2 touching on these at the end but now what are the 3 things that you think you have agreed or you've heard 4 in general terms? And I would like to see whether 5 you still are in a love-in scenario. 6 MR. WILLIAMS: Well, Mr. Lecuyer or Mr. 7 Chairman, excuse me, I tend not to testify during 8 these hearings, but I'll -- 9 THE CHAIRMAN: Just to clarify whether I 10 understood. 11 MR. WILLIAMS: I'll try and give you an answer 12 to both. I think when my clients are in agreement 13 with Hydro is that DSM makes good economic sense and 14 also good environmental sense. We are also in 15 agreement with them that there is tremendous 16 unrealized potential. 17 Where I think, and you'll find it in our 18 expert evidence and you know, I don't have 19 instructions from my clients on this so you will hear 20 me a little hesitant on this point, but I think my 21 client's position is likely to be though that this 22 should be more faster. And that recognizing some of 23 the delays, whether it's the City of Winnipeg issue 24 or others, there has not been enough done especially 25 when you can compare the effort put into Wuskwatim 1138 1 compared to the effort put into DSM. So that would 2 be I suspect at the end of the day my client's 3 position. Mr. Cruden may instruct me otherwise. 4 Where my clients don't have a position yet 5 relates to the next issue which is the issues 6 presented by TREE. So that's I think where my 7 clients are coming from, Mr. Lecuyer or Mr. Chairman. 8 THE CHAIRMAN: Thank you. Ms. Avery Kinew has 9 a question. 10 MS. AVERY KINEW: Mr. Williams, I appreciate 11 all the effort you put into this simplified 12 illustrative example and I just wondered, we were 13 talking all of us because we were confused why did 14 you change the number of participants for the CCE? 15 If you used the 250 consistently for all three, you 16 would have ended up with the same amount, a 17 $1,000,000 saving. 18 MR. WILLIAMS: Ms. Avery Kinew, if I 19 understand your question, you're asking why the 20 scenario was changed from 1,000 participants in the 21 CCE example to the TRC example of 250 and the RIM 22 example of 250 in terms of participants. And I guess 23 that was done for two reasons. One is the discussion 24 we went over with the Hydro panel in just market or 25 the realities are that for a variety of factors, 1139 1 people -- not everyone takes up these programs. And 2 I think that's Hydro's perspective. 3 And I think Mr. Harper may, and you may hear 4 evidence on that, but in his experience with Ontario 5 Hydro as well, that would be his sense as well that 6 the take rate, when you translate kind of from the 7 blue sky kind of CCE into the -- 8 MS. AVERY KINEW: I understand achievable 9 potential. I don't understand why you changed the 10 numbers of participants. 11 MR. WILLIAMS: Because there aren't going to 12 be as many participants because then people are just 13 not going to involve themselves in the program. 14 MS. AVERY KINEW: That's not an answer. We're 15 trying to understand these three different measures 16 that Hydro uses. And yesterday, you asked Hydro to 17 compare 450 to 250 using all. Why didn't you use the 18 same? 19 MR. WILLIAMS: Because I don't think that 20 would have -- you're asking why didn't we do an 21 apples to apples comparison and I guess -- 22 MS. AVERY KINEW: You would have ended up with 23 still a million dollars saving for each one. 24 MR. WILLIAMS: Yes, but I don't think that 25 would have been a fair comparison, Dr. Avery Kinew, 1140 1 because sometimes treating people the same is 2 treating them differently. We don't think -- 3 MS. AVERY KINEW: It doesn't help, sorry. I'm 4 just trying to understand. I don't understand. 5 MR. WILLIAMS: And my last crack at this is 6 under the CCE, that's a total number of commercial 7 buildings. Under the next two, it's just our 8 estimate of how many would participate. I'll 9 certainly accept that's the difference between them. 10 MR. KUCZEK: I'll try to explain and hopefully 11 not give anybody a headache this time. The first 12 calculation is just to calculate the economic 13 potential. So you include the number of 14 participants, the total number of participants and 15 that's what I referred to as the ideal case. 16 When you do your detailed program design and 17 you use the test, the TRCs and the RIM tests, you 18 actually estimate how many people will participate in 19 the program and you need to do that because you have 20 to estimate -- you need to know what the savings are 21 going to be. And so that's why you use a number like 22 250, or whatever the number is. But it's certainly 23 not the number that you use in the economic potential 24 calculations. 25 MS. AVERY KINEW: I appreciate that, Mr. 1141 1 Kuczek. Thank you very much. 2 MR. MAYER: If for the top line on the CCE, 3 instead of participant we put potential participant, 4 we'd understand what we're talking about? 5 MR. KUCZEK: Yes. 6 MR. MAYER: Thank you. 7 MR. KUCZEK: The other thing I would add is 8 the term "economic potential" is really somewhat 9 deceiving because its economic potential with the 10 caveat that you're not taking all costs into account. 11 It throws people off that term. It's generally used 12 in the industry but it does throw a lot of people off 13 that aren't familiar with the different calculations 14 involved. 15 THE CHAIRMAN: Thank you. Is there further 16 comments or questions on this? If not, maybe we will 17 take at this point -- Mr. Williams, you are moving 18 onto another subject? 19 MR. WILLIAMS: I leave it to you, Mr. 20 Chairman. I have two areas. I don't think they will 21 be -- it won't be done in ten minutes but it might be 22 done in half an hour. 23 THE CHAIRMAN: We shall take a break at this 24 time. We reconvene at quarter to. 25 1142 1 (PROCEEDINGS RECESSED AT 10:32 A.M. and 2 RECONVENED AT 10:50 A.M.) 3 4 THE CHAIRMAN: Ladies and gentlemen, all 5 right. We shall get back to work here. Thank you. 6 You may continue, Mr. Williams. 7 MR. WILLIAMS: Thank you, Mr. Chair. For the 8 reference of the Panel and Hydro and people 9 observing, I have a few questions of clarification or 10 hopefully clarification with regard to the 11 contracting opportunities during the construction 12 period for qualifying NCN businesses. And the page 13 number in -- what I'm going to be referring to is the 14 Summary of Understanding between Hydro and NCN dated 15 October 2003, and in particular page 12 which I 16 understand for the record appears in the appendix to 17 the first round information requests in response to 18 CEC 10A. So I'm just turning to page 12 of the 19 Statement of Understanding. 20 And I'm not sure exactly who I'm going to be 21 addressing this to on the Hydro panel but it looks to 22 be the right side of the table from my side. So, Mr. 23 Adams and Mr. Wojczynski, my understanding that in 24 terms that Hydro will be acting as general partner or 25 as contractor in terms of this project, but it will 1143 1 be -- it will subcontract work to other contractors 2 and that there will be contracting opportunities 3 during the construction period for qualifying NCN 4 businesses; is that right? 5 MR. ADAMS: Yes. 6 MR. WILLIAMS: And I note that referring to 7 the second paragraph under the heading "Business 8 Opportunities During Construction," and that 9 paragraph starts, 10 "The parties intended to identify 11 contract packages in the PDA for which 12 qualifying NCN businesses will have 13 the first option." 14 And I'm wondering if those packages have been 15 identified yet? 16 MR. ADAMS: Probably the majority of them 17 have. I'm not suggesting that all of them have and 18 as the project unfolds, there will probably be more 19 opportunities, yes. 20 MR. WILLIAMS: Could you give us a sense of 21 the elements of these packages, what they may 22 include, what kind of functions? 23 MR. ADAMS: A wide variety of functions. And 24 I don't want to get into a lot of detail because we 25 are negotiating. But certainly, construction of the 1144 1 access road, development of the camp sites, catering, 2 security, access control, snow clearing, snow 3 removal, possibly some of the direct construction 4 activities. 5 MR. WILLIAMS: Thank you, Mr. Adams. And 6 that's sufficient detail. Can you give us an order 7 of, and perhaps you had covered this with Mr. Abra, 8 but an order of magnitude in terms of the overall 9 cost of the project, what percentage do these and 10 I'm -- do the contracting opportunities represent? 11 MR. ADAMS: I am not in a position to give 12 you. It's not a big percentage. 13 MR. WILLIAMS: Less than five per cent? 14 MR. ADAMS: I would expect so but I can check 15 and get back. 16 MR. WILLIAMS: If you'd undertake to do that. 17 18 (UNDERTAKING MH-27: Provide an order of magnitude in 19 terms of the overall cost of the project, what 20 percentage do the contracting opportunities 21 represent) 22 23 MR. ADAMS: Now, I'd like to expand that. 24 These are opportunities. We still have to negotiate 25 an acceptable contract. And if we fail to negotiate 1145 1 an acceptable contract then they will go up for bid. 2 I don't count on failure but there is no guarantees. 3 MR. WILLIAMS: Right. And I just wanted to 4 move into that. My understanding is that qualified 5 NCN businesses will have the first option of direct 6 negotiation with Hydro in terms of these packages. 7 And so for these packages specifically, there won't 8 be tenders. You'll enter into a negotiation process. 9 And if it's satisfactory from Hydro's perspective or 10 the contractor's perspective, then it will be 11 proceeded with. 12 MR. ADAMS: In the first instance, there would 13 not be public tenders. And assuming we can come to 14 an agreement that we're both satisfied, then there 15 wouldn't be. 16 MR. WILLIAMS: And now in terms of 17 determining, just going down to the third paragraph 18 here, it indicates that Hydro will enter into 19 contracts with businesses provided that Hydro's 20 determined costs are reasonable. Can you give us 21 some sense of how Hydro is going to determine whether 22 or not costs are reasonable? 23 MR. ADAMS: Every time we create a work 24 package and a project of this nature will have what 25 we call work packages or contracts, probably several 1146 1 thousand, we do what we call an engineer's estimate 2 and put it against it. So reasonable is somewhat 3 elastic but we expect when we negotiate these 4 contracts that the price will be within the more or 5 less the normal range of error that we experience in 6 those sorts of estimates. 7 MR. WILLIAMS: And is there -- 8 MR. ADAMS: It will tend to be on the higher 9 side or else you wouldn't need to have a special 10 program. 11 MR. WILLIAMS: And just so I'm clear. You 12 mentioned the normal range of error. Is that 13 specific to each package? 14 MR. ADAMS: Yes. 15 MR. WILLIAMS: Is there some kind of sense of 16 the magnitude of that normal range of error that you 17 can give me? 18 MR. ADAMS: I'd prefer not to for commercial 19 reasons. 20 MR. WILLIAMS: Okay. That's fine, Mr. Adams. 21 MR. ADAMS: I should point out as I think in 22 discussion with Mr. Abra, our original estimate and 23 all our continuing estimates are always based on the 24 expectation that a significant amount of the 25 subcontract work and all the employment activities 1147 1 will be in accordance with these preference programs. 2 So it's not an additional cost, it's part of the 3 cost. 4 MR. WILLIAMS: And I appreciate that, Mr. 5 Adams, and we did want to confirm that. 6 Now, going down in that paragraph, there is 7 also reference to the fact, and I'm referring to the 8 fourth and fifth line, that Hydro may consider 9 further work packages in order to increase the number 10 of contracts to be made available through direct 11 negotiation or restricted tendering process. And I'm 12 wondering if you can elaborate on that in terms of 13 the restricted tendering process? 14 MR. ADAMS: A restricted tendering process is 15 where we invite specific contractors or suppliers to 16 bid. In those cases, it wouldn't only be Aboriginal 17 businesses in the north or in some cases it may 18 expand to non-Aboriginal. But it would not be an 19 open tender, it would be an invitation. 20 MR. WILLIAMS: Now, the packages that these 21 organizations would bid for in terms of the 22 restricted tendering process, would those be packages 23 over and above the ones contemplated for the direct 24 negotiations? Would they be different I guess is 25 what I'm asking? 1148 1 MR. ADAMS: Again, in the first instance, yes. 2 But if the direct negotiations are not successful, 3 then we could go to restricted tendering as the next 4 round. 5 MR. WILLIAMS: Just moving on another 6 sentence, you note that or the Statement of 7 Understanding notes that in any direct negotiation, 8 Hydro will reserve the right to reject any proposal 9 or bids that do not fall within the guidelines 10 established by Hydro under its Northern Purchase 11 Policy. And I wonder if you can elaborate a little 12 bit on the Northern Purchase Policy? 13 MR. ADAMS: We have an internal northern 14 policy that creates preferences both in terms of 15 process and in price for northern suppliers. And so 16 as long as the price we finally negotiate fits within 17 that range, then we're comfortable with it. 18 MR. WILLIAMS: And are you aware whether the 19 northern purchasing policy is on the record in this 20 proceeding? 21 MR. ADAMS: I don't know. I can undertake to 22 find out. I don't think it is. And even if it is, 23 I'm not prepared to put the numbers on the record. 24 When I say the numbers, we have very specific 25 guidelines to our engineers that says if it's more 1149 1 than "X" per cent -- or rather, if it's less than "X" 2 per cent you can sign the deal. If it's more, you 3 can't. And I'd just as soon the world didn't know 4 what "X" per cent was. 5 MR. WILLIAMS: On behalf of my clients, I 6 think it's probably the same attitude, Mr. Adams. 7 Again, just referring to the restricted 8 tendering process. Would you also be able to 9 undertake to provide us with the percentage of the 10 overall cost that they may represent? 11 MR. ADAMS: Yes. 12 (UNDERTAKING MH-28: Referring to the restricted 13 tendering process, provide the percentage of the 14 overall cost that they may represent) 15 16 MR. WILLIAMS: Now, you've indicated that 17 these were included in your original estimates for 18 the project. The follow-up question naturally to 19 that is were these estimates reviewed by your 20 external consultants? 21 MR. ADAMS: They were part of the overall 22 project estimate that was reviewed by the external 23 consultants, yes. 24 MR. WILLIAMS: Okay. Thank you. Mr. Chair, 25 for the once in my life, I've actually overestimated 1150 1 the time I'm going to take. And so I think that, I 2 know that those conclude the questions of my clients 3 in respect of this Panel and I thank them for the 4 cooperation and the Board for their indulgence. 5 Thank you. 6 THE CHAIRMAN: Thank you, Mr. Williams. Next 7 to proceed with questions, if they have any, will be 8 the Manitoba Wildlands Canadian Nature Federation. 9 MR. MURPHY: Thank you, Mr. Chair. If I can 10 have a moment, Ms. Whelan Enns will be joining me at 11 the able and the two of us will be asking questions. 12 I will be asking some questions and she will also be 13 asking some questions of the Panel. 14 THE CHAIRMAN: Thank you. While we wait, you 15 are free to talk you know. Mr. Murphy, Ms. Whelan 16 Enns, you may proceed. 17 MR. MURPHY: Thank you, Mr. Chair. We have 18 several areas of questions that we intend to pursue 19 with the panel. And we will try in the hour we have 20 before lunch to get through at least one of those. 21 And that we can then try to advise, when we return 22 from lunch, approximately how long we'll be. 23 THE CHAIRMAN: Okay. I have stated the names 24 but maybe you want to state your names for the 25 record. 1151 1 MR. MURPHY: My name is Eamon, E-A-M-O-N, last 2 name Murphy, legal counsel for Manitoba Wildlands 3 Canadian Nature Federation. 4 MS. WHELAN ENNS: Good morning, I'm Gaile 5 Whelan Enns, the Director of Manitoba Wildlands and 6 the Canadian Nature Federation representative in 7 Manitoba. 8 THE CHAIRMAN: Thank you. 9 MR. MURPHY: We'd like to start off with the 10 subject of exports. The first question is in 11 relation to the Wuskwatim projects, it's our 12 understanding that Hydro stated that Hydro power 13 displaces natural gas in export markets. That's a 14 correct understanding that we've got? 15 MR. WOJCZYNSKI: We said natural gas and/or 16 coal, a combination of the two. That's the vast 17 majority of what we'd be displacing. That's what we 18 said, yes. 19 MR. MURPHY: Now, we understand that there are 20 two gas turbines that Manitoba Hydro operates, one in 21 Brandon and one in Selkirk. And we're wondering if 22 the Wuskwatim projects will displace the use of those 23 turbines or how that will relate to those two 24 turbines? 25 MR. WOJCZYNSKI: There will be a very small 1152 1 impact on the use of those turbines and it's plus or 2 minus the normal uncertainty in the range of how much 3 we'd operate them depending on the overall flows. 4 But Wuskwatim will not have a material impact on the 5 operation of those turbines. We will use those 6 turbines in the same manner with or without 7 Wuskwatim. 8 MR. MURPHY: So you intend on continuing to 9 use the two gas turbines? 10 MR. WOJCZYNSKI: In the same manner as we are 11 without it, yes. 12 MR. MURPHY: Okay. In relation to exports to 13 the U.S., could you tell us the geographic locations 14 that Hydro is currently exporting energy to? 15 MR. CORMIE: Most of the electricity is 16 exported into Minnesota with a lesser proportion 17 going into North Dakota, Wisconsin. Those are the 18 main areas. 19 MR. MURPHY: And we understand that Hydro has 20 plans to expand the market into new locations in the 21 U.S.; is that correct? 22 MR. CORMIE: As the transmission system 23 capability grows, we will be able to reach into new 24 markets and we expect with time, we will be able to 25 find additional customers in those markets. 1153 1 MR. MURPHY: When you say you hope to find 2 additional customers, do you have a sense of where 3 the market will be or where you're going to be 4 planning to expand in terms of the U.S. market? 5 MR. CORMIE: Well, it depends on which 6 transmission line constraints are relieved through 7 the construction of new transmission. We would 8 prefer to go to the place, to the markets that have 9 the highest potential, the highest values which are 10 generally to the east. 11 MR. MURPHY: And by to the east, do you mean 12 within Canada or within the U.S.? 13 MR. CORMIE: Yeah, correct, both in Canada and 14 in the U.S. For example, if we were to build a new 15 interconnection to Ontario, the Ontario market can be 16 as lucrative as the U.S. market. 17 MR. MURPHY: And I understand that the 18 east/west grid would assist in helping to get energy 19 through to Ontario; is that correct? 20 MR. ADAMS: If and when an east/west grid is 21 ever built, yes, it certainly would help get energy 22 into Southern Ontario. 23 MR. MURPHY: And I'm just trying to understand 24 where the energy from Wuskwatim would end up going. 25 If in fact it is going to go to Ontario, is it going 1154 1 to be sent to Ontario via the east/west grid? 2 MR. CORMIE: The existing interconnection to 3 Ontario is fully capable of handling the output from 4 Wuskwatim. So we don't need to increase our 5 interconnected capability with Ontario in order to 6 handle the Wuskwatim output. And neither do we have 7 to to the United States. The interconnection 8 capability is sufficient that we can get the energy 9 into either market. It's more of a question of where 10 the highest value will be. 11 MR. WOJCZYNSKI: As a matter of fact, none of 12 the analyses that we've presented assume or are 13 contingent on the east/west grid to Ontario being 14 expanded. That will be a sensitivity above and 15 beyond the analysis we have presented and would 16 increase the overall attractiveness of Wuskwatim 17 rather than decrease it. 18 MR. MURPHY: I understand that Hydro has spent 19 funding in pursuing new markets for Wuskwatim; is 20 that correct? 21 MR. WOJCZYNSKI: Wuskwatim. 22 MR. MURPHY: And you've spent money in 23 pursuing those markets for Wuskwatim? 24 MR. CORMIE: As part of our normal interaction 25 with our customers, we have discussed with many of 1155 1 them that if the Wuskwatim project is approved, we 2 will have additional energy and capacity for sale but 3 there hasn't been any incremental costs. This is 4 just part of our normal customer relationships. 5 MR. MURPHY: Now, the Hydro currently exports 6 energy to Saskatchewan and Ontario in terms of the 7 provinces within Canada; is that correct? 8 MR. CORMIE: Yes, we do. It's a very small 9 percentage. 10 MR. MURPHY: Are there any other provinces at 11 present? 12 MR. CORMIE: Well, in the context of this 13 year, Manitoba Hydro has not been an exporter, we've 14 been a purchaser. So in the recent context, we've 15 been a buyer. Historically, we have sold into 16 Alberta, British Columbia, Ontario as well as the 17 U.S. 18 MR. MURPHY: In terms of export to the 19 provinces, how much energy is typically exported? I 20 know you just said this year you've been a buyer but 21 what would a typical year look like? 22 MR. CORMIE: Our contract with Ontario expired 23 last October. So up to October of last year, our 24 exports to Canadian customers would have been less 25 than 10, about 10 per cent. I expect that now that 1156 1 the Ontario sale has been completed, that less than 2 2 or 3 per cent of our electricity will go into 3 Canadian markets. 4 MR. MURPHY: In terms of the future in 5 exporting to the provinces, where is Hydro looking at 6 going? 7 MR. CORMIE: We're looking both to the west to 8 Saskatchewan and east into Ontario. 9 MR. MURPHY: In terms of energy from 10 Wuskwatim, how will you be exporting this energy to 11 those provinces? 12 MR. CORMIE: With regard to transmission or -- 13 MR. MURPHY: Yes, with regards to 14 transmission? 15 MR. CORMIE: Well, depending upon should we 16 conclude a sale arrangement may or may not require 17 new transmission facilities. Our discussions with 18 Ontario to date have assumed that we would require 19 the construction of new transmission to meet their 20 needs. But that doesn't mean that we may not enter 21 into a much smaller sale over the existing 22 interconnection. 23 With Saskatchewan, again, the same thing. We 24 have an interconnected capability now that will be 25 utilized and if the sale was of such magnitude that 1157 1 new transmission would be required, it would have to 2 be constructed. 3 MR. MURPHY: So I take it that obviously Hydro 4 will be going for the most bang for its buck that it 5 could. In other words, you'd be seeking the best 6 possible contract with either Saskatchewan or 7 Ontario. I mean the best possible scenario is to try 8 to get the most power exported as possible. Would 9 that be correct? 10 MR. CORMIE: That's correct. 11 MR. MURPHY: And so to do that, if I 12 understand your answers correctly, you would need 13 additional transmission capability. 14 MR. CORMIE: With Wuskwatim into Ontario, 15 that's true. We have very little firm capability 16 into Saskatchewan. So there would have to be some 17 upgrades to the transmission system for a firm sale 18 into Saskatchewan. 19 MR. MURPHY: And would that be through the 20 Rall's Island station? 21 MR. CORMIE: Well, there are several 22 transmission lines. I think there's four. There's 23 three interconnections to Saskatchewan, three 24 transmission lines. 25 MR. MURPHY: Through The Pas? 1158 1 MR. CORMIE: Including the one through The 2 Pas, yes. 3 MR. MURPHY: Okay. And so I take it in order 4 to fully take advantage of Wuskwatim in terms of the 5 power that might be exported to Saskatchewan, you 6 would need to use these interconnection stations than 7 one such as Rall's Island? 8 MR. CORMIE: Yes, yes. 9 MR. MURPHY: Okay. Thank you. 10 MR. WOJCZYNSKI: I'd like to supplement that, 11 a statement that our analysis of Wuskwatim, all the 12 analyses he presented with the exception of one 13 sensitivity of the tie line sensitivity. But aside 14 from that one, it seems all the current tie line 15 limits that we have on our system. So all the 16 economics assume the current limits on our 17 transmission don't assume any enhancements. And as a 18 matter of fact, overall, our economic assessments 19 have used a fairly conservative assessment of what 20 our transmission ratings would be. So if anything, 21 those ratings are more likely to increase than 22 decrease. Thank you. 23 MR. MAZUR: Mr. Chair, I'd like to also add 24 something to that. The interconnections to any of 25 the provinces, whether it's Saskatchewan, the U.S. or 1159 1 Ontario is an interface and power flows on all 2 interconnections. One cannot direct power through 3 The Pas into Saskatchewan alone. It's an interface 4 and there would be requirements to ensure that power 5 can flow across that interface. 6 MR. MURPHY: Thank you. And I think I 7 understand that. I'm just trying to determine what 8 the best case scenario would be if Hydro in fact had 9 an opportunity to export a sizeable amount of energy 10 to Saskatchewan would in fact it need to be using the 11 various interconnections stations. And I understand 12 those to be Rall's Island, Lake Herblet as well as 13 Thompson. And I think we had our answer. 14 MR. MAZUR: Again, the interconnections are 15 not Herblet. Rall's Island is one interconnection 16 point. Vermillion is the second and Reston is the 17 third across, going from north to south. 18 MR. MURPHY: But you're not suggesting that in 19 order to take full advantage of the potential 20 Saskatchewan market, the transmission segments 21 wouldn't be enhanced in order to do that? 22 MR. MAZUR: I think depending on the nature of 23 the contract, there may be some enhancement needed 24 but it depends really on the nature of the contract. 25 Some of the capacity to Saskatchewan right now is 1160 1 reserved for -- we have a fourth interconnection with 2 Ontario. It's really to generation at the Island 3 Falls Generating Station and there's a wheeling 4 through Manitoba and, you know, most of the firm 5 capacity that's available is taken up by that 6 transaction. 7 MR. MURPHY: All right. And I'm just trying 8 to understand, we're just trying to understand of 9 course part of the justification for Wuskwatim. And 10 it's our understanding that of course if there is an 11 opportunity within Saskatchewan to take advantage of 12 the power that Wuskwatim will bring on line, then in 13 fact, you will need these enhancements in terms of 14 the transmission lines. And I think that's what you 15 agreed to; is that right? 16 MR. CORMIE: Well, Mr. Mazur indicated 17 depending on the nature of the contract and the 18 magnitude, there may have to be some enhancements or 19 we may be able to export it to Saskatchewan with the 20 existing facilities. 21 MR. WOJCZYNSKI: But I repeat what I said. 22 The analysis assumes the existing facilities, not 23 enhancements. 24 MR. MURPHY: I'd like to ask you if the 25 Wuskwatim generation station when it's completed, or 1161 1 if it's completed, will be in competition with other 2 Canadian public utilities that are currently 3 exporting energy to the U.S. market, whether you have 4 undertaken to determine that? 5 MR. CORMIE: We believe that in our region, we 6 are not competing with other Canadian utilities for 7 market share. 8 MR. MURPHY: And what about competition with 9 other Canadian utilities in terms of the energy 10 produced within the provinces, within Saskatchewan, 11 within Ontario? 12 MR. CORMIE: Our discussions with Saskatchewan 13 have been based on the same basis that we have 14 discussed with U.S. customers is that they are 15 considering a purchase for Manitoba as an alternative 16 to constructing their own facilities. So we're not 17 really competing with Sask Power, we are offering 18 them an alternative. And the same in Ontario, 19 Ontario is considering Manitoba as a supply 20 alternative to their own resource options. 21 MR. MURPHY: So in Ontario, there may be 22 competition with some of the utilities there in terms 23 of the market for Wuskwatim energy? 24 MR. CORMIE: Given that we have yet to know 25 who our customer is there, we don't really know who 1162 1 our -- who the utilities are. We don't know what the 2 entity is. We've had discussions with the Ontario 3 government, with Hydro 1, but we haven't identified a 4 customer with end-use load obligation. And until we 5 do that, we don't know what that scenario looks like. 6 But we know that Ontario is facing supply shortages, 7 that their options are natural gas. And regardless 8 of whether -- which entity we'd be negotiating with, 9 those would be their options. 10 MR. MURPHY: And the natural gas option that 11 you talked about, I take it that's a public utility? 12 MR. CORMIE: It may be, it may not be. We're 13 not sure yet. 14 MR. MURPHY: So you haven't undertaken that 15 determination yet? 16 MR. ADAMS: I don't think -- I don't think you 17 can say there is that determination. The Ontario 18 market is in a considerable state of flux or 19 confusion, depending on how charitable you want to 20 be. The current situation is that it's a competitive 21 market and you have to bid in on a basically an 22 hourly or less basis. 23 The Ontario government has announced an 24 intention to create an entity without putting a lot 25 of flesh on it which we'll be in a position to enter 1163 1 into long-term contracts with a variety of people 2 including non utility generators, probably not OBG, 3 external suppliers such as us and Hydro Quebec, new 4 wind farms, new nuclear units and so on. And have 5 announced an intention to create legislation this 6 spring that would enable that to happen. Until it 7 happens, it's pretty hard for us to talk turkey with 8 anybody. 9 But as Mr. Cormie said, our expectation is 10 Ontario is going to need something like 20,000 11 megawatts of new generation over the next 20 years. 12 We're pretty sure that we can, even on the existing 13 transmission lines, we'll be in a good position to 14 market into that area regardless of the competition. 15 MR. MURPHY: And if I understood Mr. Cormie's 16 evidence earlier, there isn't at present a contract 17 with Ontario; is that right? 18 MR. CORMIE: We had two contracts, a 200 19 megawatt sale agreement that expired at the end of 20 October. We have an additional ongoing relationship 21 with them for a small amount of energy from the 22 Winnipeg River as a result of the Lake St. Joseph 23 diversion agreement. That contract goes on in 24 perpetuity. 25 MR. MURPHY: But that wouldn't be affected by 1164 1 Wuskwatim I take it? 2 MR. CORMIE: No, it's not affected by 3 Wuskwatim. 4 MR. MURPHY: And a moment ago, you had 5 mentioned in terms of competition with other Canadian 6 public utilities exporting energy to the U.S. market, 7 I understand in terms of the U.S. market, I think you 8 talked about sort of a market area. And that was 9 what you had spoken to earlier. That was Minnesota, 10 Wisconsin, North Dakota; is that right? 11 MR. CORMIE: Yes. 12 MR. MURPHY: Okay. 13 MR. CORMIE: The other Canadian utilities that 14 are major exporters are B.C. Hydro and Quebec Hydro. 15 And B.C. Hydro sells into the Pacific northwest which 16 is not connected to our market except through some 17 very small DC transmission links. And Quebec sells 18 into the northeast U.S. market. And again, that's 19 not -- they are connected but they are economically 20 not connected. 21 MR. MURPHY: In the U.S. market that you just 22 mentioned that Manitoba Hydro is looking at, will 23 Wuskwatim be in competition with any U.S. public 24 utilities in the region that you're looking at? 25 MR. CORMIE: We are assuming that when we, in 1165 1 our discussions with our customers, our customers are 2 considering other alternatives besides building their 3 own facilities, maybe contracting or purchasing from 4 other suppliers. I haven't had those conversations 5 but we know what the alternatives are. And Wuskwatim 6 is competing with the alternatives, not necessarily 7 with the entities. 8 MR. CORMIE: It's pretty clear to us that 9 we're not competing with other Hydro utilities in the 10 MAPP region for market share. 11 MR. MURPHY: Does Hydro have a plan to deal 12 with the possibility that export prices for energy 13 could fall in the future in terms of Wuskwatim coming 14 on line? 15 MR. WOJCZYNSKI: We have done a range of 16 scenarios in our analysis of Wuskwatim. And the most 17 likely case is that there will be a significant 18 increase over time of the export price. We did 19 assess the possibility that that will not happen and 20 that the long term price will, if anything, be a bit 21 less. And that the opportunity market will only see 22 a very small amount of escalation. And so we've done 23 that as a sensitivity and Wuskwatim will still be 24 economic under that scenario. So we have assessed 25 that. 1166 1 MR. MURPHY: And what if Hydro is wrong about 2 the expected increase in export price or release 3 price which will be fairly constant? What if in fact 4 it goes the opposite way, what are we looking at? 5 MR. WOJCZYNSKI: You're not talking about 6 Hydro being wrong there, you're talking about every 7 credible forecaster in North America being wrong. 8 And even at our low forecast which is extraordinarily 9 low and you could look at it in equivalent gas basis, 10 I could get that number out for you. But even with 11 incredibly low gas prices, lower than anybody is 12 thinking or looking at, Wuskwatim would still be 13 profitable. $1.25 for NM BTU gas which I don't think 14 any credible forecaster thinks would be around for 15 any kind of sustained basis. So even at that level, 16 Wuskwatim must still be economic. 17 And I remind you that we're talking about 18 natural gas prices into the future that are going to 19 be more in the 4 or $5.00 range. And the price 20 today, looking out one year, is in the order of 21 $6.00. So we don't view a natural gas price of $1.25 22 as being something that anyone credibly think would 23 happen on a sustained basis. As I said, even then, 24 Wuskwatim would still be profitable. 25 MR. MURPHY: Let's look at the scenario that, 1167 1 for example, in Minnesota. There is a lot of 2 alternative energy being produced and the market, 3 there's a glut of power or energy available on the 4 market. That certainly would have an effect on the 5 export price if I understand that correctly? 6 MR. WOJCZYNSKI: If there was to be a -- we 7 expect in our forecast and in our overall thinking 8 that there will be an increase in our export market 9 of other forms of energy, alternative forms of 10 energy, wind being the one we can more simply be 11 talking about. We already expect that will happen. 12 We also expect that there will be vast amounts of 13 natural gas and coal going in in spite of that. Even 14 if the DSM and wind was put into place on the export 15 markets to a much greater degree than any of the 16 credible forecasters think, we would still have large 17 amounts of natural gas and coal generation in place 18 that we would be able to offset. 19 There will be, as I have said in the testimony 20 in the past few days, and I suspect you weren't there 21 on Monday when I explained this, but as in any 22 commodity market, there's some ups and downs and 23 that's always normal. So if there's a sudden surge 24 of alternative energy happening and that's combined 25 with other things, we may see a surplus in the 1168 1 market. But that will, just like any other commodity 2 market, correct itself and we would (A) not see a 3 huge drop in the price and (B) we would see the 4 market correct itself and come back to the central 5 forecast. So we don't view that as a big risk at 6 all. 7 And the fact of the matter is that what 8 Wuskwatim will be competing with is the coal and 9 natural gas generation that will be going in in 10 addition to and regardless of whether the alternative 11 energy comes in much faster. 12 MR. MURPHY: Can I take it within all of what 13 you've just said, you are assuming that there's going 14 to be an increase in consumption of energy, 15 particularly in the U.S.? 16 MR. WOJCZYNSKI: All the credible forecasters 17 have assumed and have projected there will be 18 increases in consumption. But even if there wasn't 19 going to be increases in consumption, you've got a 20 vast amount of generation that's in place right now 21 and they are also going to have to be retirements. 22 It's not just load growth, we're also talking about 23 the fact that there's a huge quantity of aging coal 24 and natural gas generation that is going to require 25 replacement in one form or another. 1169 1 MR. MURPHY: What I'm interested in is a 2 decrease in consumption. Whether in fact there is 3 decrease in consumption by things such as demand-side 4 management and in combining that with let's say a 5 glut of energy on the market in the U.S. I'm just 6 wondering what Hydro's contingency plan is to deal 7 with that? I mean we're talking about justification 8 for the Wuskwatim project, right? And we're 9 interested in what's the contingency plan. Where do 10 we go if we've got in fact a decrease because of 11 things like DSM and we have a glut of energy on the 12 market in the U.S.? 13 MR. WOJCZYNSKI: There would still be a market 14 for power. There would still be a wholesale market 15 for power as I was indicating. So the contingency 16 plan is the plan that we're already utilizing and we 17 will continue to export and we will still get the 18 displacement costs for coal and natural gas. As I 19 said, there's such a large quantity of coal and 20 natural gas in the United States in terms of 21 generation, even if there was a decline in demand, we 22 would still have a market to sell into. And 23 secondly, none of the credible forecasters anticipate 24 that there will be a decline in the forecast. 25 MR. MURPHY: And I'm not thinking of just coal 1170 1 and Hydro, I'm thinking of other sources of energy, 2 of course wind, and as I've said DSM, you know in 3 terms of reducing the need. So it's not just coal 4 and gas I should say that we're interested in and we 5 don't think that that's the only source of the energy 6 certainly in the U.S. So we're just trying to get a 7 better understanding of what happens. 8 I mean if we go ahead with Wuskwatim and we're 9 faced with a scenario where that market isn't there 10 like it's being predicted, then what do we do? And 11 that's the difficulty we're having with that. 12 MR. ADAMS: We look at contingency plans for 13 all the credible events or processes that we can 14 think of. We really don't think it's credible that 15 there will be a reduced demand for electricity in the 16 mid-west area where we're talking about. As Mr. 17 Wojczynski says, every reliable responsible 18 forecaster that we've dealt with forecasts an 19 increase. 20 In respect of our ability to export, with 21 Wuskwatim, it doesn't even start to replace the 22 forecast increase in load in Manitoba. Now, I 23 appreciate that there is uncertainty in our forecast. 24 But if you look at the charts that we put into the 25 various parts of the filings, our average energy 1171 1 exports over the next ten years continue to decrease. 2 And even when Wuskwatim comes in service, it doesn't 3 bring it up to the levels that we've been exporting 4 in the last two or three years and would have been 5 exporting this year had there been water in the 6 system. 7 MR. CORMIE: Mr. Murphy, further to this 8 discussion, Manitoba Hydro doesn't intend to wait 9 until Wuskwatim goes into service before we begin 10 marketing the export contracts. We are active in 11 discussions with our customers today. And as I 12 indicated previously, there is a parallel process 13 going on. And we have customers who are interested 14 in discussing purchasing the output from Wuskwatim 15 and considering it as an alternative to building, 16 making decisions to build new coal and natural 17 gas-fired generating stations. And they are making 18 those decisions now. 19 So the risk is that you indicate that there 20 won't be a market is much less than that because we 21 know what our customers are looking for, we know what 22 their alternatives are. And we're not waiting for 23 the plan to come on line before we enter into those 24 discussions. 25 MR. MURPHY: Thank you. Will Wuskwatim be 1172 1 competing with alternative energy plants in the U.S. 2 power market? Can you speak to that, please? 3 MR. WOJCZYNSKI: Wuskwatim will not be 4 competing with alternative energy in the markets, no. 5 MR. MURPHY: Surely, though, if there is 6 alternative energy available on the market in the 7 U.S., that will affect the amount of power that's 8 produced which in turn, if we understand this 9 correctly, affects pricing. The amount of power on 10 the market affects the price as we understand it; is 11 that correct? 12 MR. WOJCZYNSKI: The market price is set by 13 what the alternatives are. Even if you have much 14 larger amounts of wind and DSM in place in our 15 market, we will still have large amounts of coal and 16 natural gas in the operational mode. So you can look 17 at two kinds of situations. You've already got 18 facilities in place. Let's just use wind and 19 Wuskwatim as the two examples. Wind in the export 20 market, Wuskwatim in Manitoba. 21 Once those two facilities are in place, the 22 incremental cost of operating wind or Wuskwatim is 23 very low. And they do not compete against each 24 other. Instead what you have, you have got lots of 25 coal and lots of natural gas generation. They have 1173 1 high incremental operating costs. That's the nature 2 of them. They have fuel costs and other costs that 3 are incremental. 4 And so if you have the wind and you have the 5 Hydro, they don't compete against each other. They 6 both act to compete or displace the coal and the 7 natural gas. So they are not competing in that case. 8 Then you can look at the other circumstance 9 and that's saying, ah yes, but what about before you 10 put those facilities in place when you're making 11 decisions about what facilities to put in place and 12 that's a broader question. That's the broad 13 question. 14 And so when you're looking at new resources to 15 the wind development in the United States and other 16 markets but right now we're talking about our export 17 market is to a dominant degree dependent on various 18 forms of subsidies and incentives tiffs for that to 19 happen and including programs like renewable 20 portfolio standard programs. These are coming into 21 place with or without the hydraulic resource. And so 22 in effect, they are coming in through some form of 23 mandate. And so Wuskwatim isn't competing against 24 those. 25 All of our analyses and what all our 1174 1 forecasters look at is the fact that there will be 2 lots of coal and natural gas in spite of all the 3 market mandates. And what we will do is influence 4 the amount of coal or natural gas that's put in place 5 or retired. 6 All the credible forecasters conclude that the 7 large majority of new generation will be coal and gas 8 regardless of what happens in the alternative energy 9 market. So we're not counting on competing against 10 those. 11 And to go further on that, as Mr. Cormie 12 already indicated, on March 3rd, and just gave some 13 indication of again, that we are in our negotiations 14 the alternatives that our potential customers are 15 looking at are coal or natural gas. And so that's 16 already what is apparent. 17 You can look at what we've done historically 18 though, not just what we're doing today. The NSP 500 19 contract, as I mentioned previously a couple days 20 ago, the price there was directly linked to the fact 21 that NSP decided not to build a 500 megawatt or 800 22 megawatt coal plant. Instead they purchased from us. 23 The benefits of that are still there today because 24 there's one less coal plant built immediately south 25 of us. Again, as I said that's exactly what Mr. 1175 1 Cormie has indicated is happening today in our 2 negotiations down there. 3 And the next point is that the market price, 4 and this is true from any forecaster who looks at 5 this, the market price is being set by the coal and 6 the gas generation. And wind, DSM and Hydro all see 7 the same market price. So we again are not competing 8 against each other, we are competing against that 9 coal and gas. 10 I can go on to more detail if you want but 11 that's the summary of our explanation there. 12 MR. MURPHY: Let me just ask you a couple of 13 questions based on what you have just said. In terms 14 of I think you set out in your first point that in 15 terms of wind in export markets and Wuskwatim in 16 Manitoba, you don't foresee those being in 17 competition with one another. I'm just curious, 18 both of those would be considered renewable sources 19 of energy, right? 20 MR. WOJCZYNSKI: Yes, they are. 21 MR. MURPHY: Okay. Now, you referred to -- 22 MR. WOJCZYNSKI: I'm glad that you've affirmed 23 that for us as well, thank you. 24 MR. MURPHY: I'm actually asking for your view 25 on that. I'm not suggesting that we're going to take 1176 1 that position. In terms of the NSP contract you just 2 referred to, my understanding is that there was some 3 desire to obtain Hydro power as opposed to coal and 4 natural gas. 5 Now, if wind and Hydro energy in your view are 6 both renewable and you have somebody that wants to 7 contract with you that is looking for what they view 8 as renewable energy in the same way that Manitoba 9 Hydro does, surely, surely you're going to be looking 10 at competition from other sources such as wind. If 11 somebody is looking to move away from sources of 12 energy such as coal, such as natural gas, surely wind 13 and other alternative sources of energy, are 14 competition from Hydro based on what you have just 15 told us? 16 MR. WOJCZYNSKI: No. There is a difficulty 17 with your underlying premise. The difficulty with 18 the premise that you put forward is that the reason 19 we were able to sell to NSP for instance, the 500 20 megawatt sale, or that we are able to make sales in 21 today's market is that someone saying, oh, I'm never 22 going to build coal because I want to have a 23 renewable portfolio. 24 The main factor that we are basing our export 25 price forecast on is that we are not counting on 1177 1 having a mandate requiring our customers to buy a 2 renewable resource or to buy a particular kind of 3 resource. Our forecasts are based on us displacing 4 coal and natural gas on a price basis. 5 If there were to be mandates that required 6 renewable energy and we were then going to be 7 accessing that as a special part of the market, we 8 would have a price premium above and beyond what our 9 market prices are already built on. So the forecasts 10 that we've utilized are using Hydro competing against 11 other resources on a price basis rather than Hydro 12 being part of any mandate. 13 MR. MURPHY: And I appreciate your comments 14 about mandate. I'm just interested in, and I think I 15 have your answer about whether you think that Hydro 16 will be competing with any alternative energy plants 17 and your answer is no, it won't? 18 MR. WOJCZYNSKI: Not to any significant or 19 material degree. 20 MR. MURPHY: Sorry, that's a bit of a 21 different answer than I just heard. So you will 22 agree then there is some competition with alternative 23 energy plants. I mean you just said not to any 24 significant degree. But what I heard previously from 25 you is a flat out no. 1178 1 MR. WOJCZYNSKI: That the vast majority of any 2 impact is if you have a system of a 30,000 megawatts, 3 for example, I'm just taking that number as sort of a 4 MAPP kind of number. That's not the exact number. 5 And you're talking about 200 megawatts more or less 6 than any impact in the general sense is very 7 minuscule when you're looking at the total supply. 8 But in terms of head-on competition that we wouldn't 9 be. 10 The other aspect that is I think we're 11 forgetting in this conversation is that the wind 12 resources particularly need some firming and shaping 13 resources and the hydraulic resources generally are 14 the most suited to providing that. But we haven't 15 included that in any way in our discussions here. 16 MR. MURPHY: That's fine. I'm just trying to 17 get some clarity on what your position is in terms of 18 Wuskwatim's competition with alternative energy 19 sources. And if I understand you correctly, there 20 will be some competition, it's just not that it will 21 be, in your view, substantive competition? 22 MR. WOJCZYNSKI: It will be insignificant and 23 immaterial. Maybe an example to help illustrate what 24 I was referring to. If you're looking at MAPP and 25 you're looking forward or actually let's say 1179 1 historical, there's not even any uncertainty. In the 2 year 2002 in the MAPP region, which is south of us, 3 and we're talking 35,000 megawatts. I said 30,000, 4 so it's 35,000 megawatts. Of that, 63 per cent of 5 that is coal, 12 per cent is natural gas, 8 per cent 6 is nuclear and 7 per cent is oil. And there's a 7 large amount of load growth happening down there as 8 we speak where there is new gas and coal being added. 9 So that's what I was referring to earlier, 10 that there is a lot of fossil fuel waiting to be 11 displaced. Thank you. 12 MR. MURPHY: And so your intent with Wuskwatim 13 is to try to displace some of these sources of energy 14 that you've just indicated in hoping that alternative 15 energies won't be a significant competition. Those 16 are two of the premises that you are going on? 17 MR. WOJCZYNSKI: I wouldn't characterize it 18 the way you did. We hoped that there will be lots of 19 alternative energy built and found to be economic. 20 But we fully expect and all the forecasters who are 21 expert in the area fully expect that that will not be 22 in any way a competitive threat to the hydraulic 23 resource being able to be exported. 24 MR. MURPHY: There's a few questions that Ms. 25 Whelan Enns has on this subject. 1180 1 MS. WHELAN ENNS: I'd like to qualify the way 2 I introduced myself. The Canadian Nature Federation 3 has a variety of national programs. I represent them 4 in Manitoba primarily in the establishment of 5 protected areas, national parks, parks, and Crown 6 land designations. That leads us then to our 7 participation here in respect to Crown lands in 8 Northern Manitoba. 9 We had a concern in our work with materials 10 that had been filed in respect to proportional 11 revenue from Wuskwatim, and this is specific to the 12 generation station. We would like to know, and it's 13 not essential at this moment, but we'd like to be 14 provided with and so the panel also has, an 15 indication of the export sales from Wuskwatim over 16 its first 10 years, 15 years and 25 years in 17 operation with parallel information based on a 18 one-third equity in the generation station by NCN. 19 MR. WOJCZYNSKI: Could you repeat that 20 question? It's not clear what you're asking for, 21 sorry. 22 MS. WHELAN ENNS: Fair enough. We're asking 23 about the revenues from export sales from the power 24 from Wuskwatim in its first 10 years, 15 years and 25 25 years of operation showing them the revenue to NCN in 1181 1 respect to a one-third equity in the dam. 2 MR. WOJCZYNSKI: The revenues to NCN are 3 already on the record as the revenue from the 4 partnership. The export revenues don't go directly 5 to NCN, they go to the partnership. The partnership 6 then has its own financial statements and 7 arrangements that have been discussed previously and 8 are on the record. And then there's dividends paid 9 to NCN from the partnership. 10 MS. WRAY: That reference is CAC/MSOS NFAAT 11 S-11. That was the supplemental filing. And there 12 are partnership statements there. So if you simply 13 take 33 per cent of the dividends shown at the bottom 14 of the statements, that will give you NCN's share. 15 MS. WHELAN ENNS: Thank you. I would like to 16 ask some questions about NAFTA in respect to the 17 Wuskwatim projects. And there's a tendency in our 18 office to actually add the letter "s" because our 19 interest and analysis has a great deal to do with the 20 transmission system also. These questions are fairly 21 basic and they are ones that have been posed and this 22 is for the information of the panel. 23 Manitoba Hydro has conducted once a month 24 briefing sessions not consultations with members of 25 the environmental community in Manitoba since October 1182 1 or November 1999 when we started. Those sessions 2 decreased in frequency as we all became a little busy 3 with Wuskwatim but there's a long stretch of time 4 where we've been in the room and asked certain 5 questions. 6 To get back to NAFTA, we are very interested 7 in what Manitoba Hydro's policy is in respect to the 8 three year averaging floor in respect to export of 9 energy under NAFTA. 10 We've been asking the question a variety of 11 ways for some time and I think it's fairly important 12 to have a context and some information in that 13 respect. I'm not a lawyer or an expert on NAFTA but 14 it would be helpful to know whether, for instance, 15 this three year averaging floor applies to all of 16 Manitoba Hydro's exports of energy out of the country 17 or whether it applies by contract and what your 18 policy is as utility. 19 We have of course, and this is just to 20 acknowledge, we have heard of course that the 21 domestic need is first. So I am not asking a 22 question about that. 23 MR. WOJCZYNSKI: Can we get a clarification on 24 the question just to see if I understand your 25 question? I believe what you're asking is under 1183 1 NAFTA, there's a provision whereby generically on the 2 energy export side, and it's a two-way street but 3 it's really Canada exporting to the U.S. so 4 effectively it's a one-way street. Whether there's a 5 prohibition from one country unilaterally reducing 6 the exports of energy to another because let's say 7 the Canadian government decrees that it's needed for 8 Canadian use or some such scenario and there's a 9 prohibition against that. And if I understand your 10 question right, you're asking what implications that 11 has for export of Wuskwatim power; is that correct? 12 MS. WHELEN ENNS: Certainly I'm asking it in 13 respect to Wuskwatim, export of the energy from 14 Wuskwatim. I'm also asking, if you will, a public 15 policy question together with it and that is I'd 16 really like to know what Manitoba Hydro's approach is 17 in its operations to this floor. 18 Again, I'm not a lawyer or an expert in these 19 matters but my understanding is that you can't export 20 less. 21 MR. ADAMS: Your understanding is incorrect. 22 We have advice both from the Federal Government 23 within the province, from lawyers expert in trade 24 areas. The NAFTA applies to government, it doesn't 25 apply to Manitoba Hydro. All of our exports are 1184 1 under contract. When the contract is finished, there 2 is no obligation to continue although usually we will 3 try to renegotiate. 4 Most of our contracts have a clause in it, as 5 Mr. Cormie was saying I think it was yesterday or the 6 day before, that in the event of shortage in 7 Manitoba, we're entitled to curtail deliveries to the 8 customer in the U.S. and use the energy for Manitoba 9 consumption. 10 MS. WHELAN ENNS: Thank you. This is an early 11 question because it's an example of one that's been 12 asked for two or three years where it hasn't been 13 answered previously. So I appreciate hearing about 14 it. I'm glad that clause is also there. 15 THE CHAIRMAN: Can I interject? I also ask, 16 Mr. Adams, whether that's the same, I don't know if I 17 should call it a policy? Does it work the same way 18 let's say for gas for instance? 19 MR. ADAMS: As I understand, and I'm not 20 expert in the export of gas, but the same principle 21 would apply. If it's a private company exporting gas 22 under a contract, then the contract applies. And 23 once the contract is expired, the customer has no 24 continuing right. As I understand it, and again, my 25 lawyer is sitting there nodding their heads, but the 1185 1 NAFTA applies to the Federal Government or perhaps 2 the Provincial Government imposing sort of an overlay 3 over the contract and says now we're running short of 4 energy, therefore you can't live up to the terms of 5 that contract, we will restrict it. And that's where 6 the long-term averaging fits in. 7 So it's not applicable to us or the gas 8 company in that sense as I understand it. What it is 9 applicable to is the government imposing 10 restrictions, whether it's a Federal Government or a 11 Provincial Government. 12 THE CHAIRMAN: Thank you. 13 MS. WHELAN ENNS: Would it be fair to say, and 14 I quite accept what you're saying, Mr. Adams, that it 15 has not been tested yet, that there has not yet been 16 an instance? 17 MR. ADAMS: I am not aware of any instance 18 where either electricity or gas has been tested under 19 NAFTA. 20 MS. WHELAN ENNS: I'd like to ask a question 21 again in the area of the export contracts with 22 customers and then again in relation to export 23 customers for the energy from Wuskwatim. 24 We have heard statements in respect to 25 emissions displacement. I would like to know then 1186 1 whether export contracts and then specifically export 2 contracts as they would be structured for Wuskwatim 3 energy have any guarantees written in them that there 4 will then be GHG emissions displacement. And I've 5 been asking this one for two or three years. So what 6 I'm getting at is, is there anything at all in these 7 export contracts that assures us that the energy will 8 not be used to dramatically increase GHGs? 9 MR. WOJCZYNSKI: I don't recall if you were in 10 the room when we had an extensive exploration of that 11 topic the other day but the export contracts 12 generally would not have a specific clause that says 13 that by exporting this, we guarantee there will be 14 greenhouse gas reductions. That would not be any 15 kind of normal contractual arrangement at all. 16 However, we are absolutely confident that the export 17 of Hydro power has and will reduce greenhouse gases. 18 And as we explored with and during the CASIL 19 cross-examination yesterday, there are standard 20 forecasting approaches that are used that provide 21 that solid indication and you cannot trace a 22 particular kilowatt hour going from one station, say 23 Wuskwatim, where it goes through the transmission and 24 what customer that kilowatt hour goes to in the sense 25 of the electrons from that. But you can look at what 1187 1 the overall impact in terms of system operations and 2 system planning on our neighbouring systems will be 3 with and without having Wuskwatim in place. And from 4 that, it's clear that there will be greenhouse gas 5 reductions. 6 The discussion we had a few moments ago just 7 now where it's clear that our hydroelectric exports 8 have caused coal plants not to be built and are now 9 causing, assuming that our negotiations are 10 successful, that will result in new coal plants or 11 perhaps new gas plants not being built. And once 12 those aren't built, they don't produce the greenhouse 13 gases. 14 So that is the kind of situation we're looking 15 at and we are confident that that is the outcome. 16 Thank you. 17 MS. WHELAN ENNS: Thank you. Accepting what 18 we've been told this morning in respect to the market 19 and the need for energy from Manitoba Hydro in the 20 U.S. including then the energy from Wuskwatim, we are 21 clearly getting a message there's lots of customers 22 and that the market is good for Manitoba Hydro. 23 On that basis, we're curious whether then 24 Manitoba Hydro, in choosing who to enter into a 25 contract with in terms of the export of energy, takes 1188 1 a look at the environmental policies and climate 2 change policies of your customers. 3 Again, I'm posing a question about the future 4 and the potential amount of customers and how the 5 energy will be used. I hear the information on 6 plants not being built but I'm very interested in the 7 environmental policies and standards of the potential 8 export customers in the U.S. and where the energy 9 goes and whether there's any policy or approach on 10 this topic in Manitoba Hydro's choice of customers. 11 MR. WOJCZYNSKI: It would be highly unusual to 12 try and do anything like that. And probably it will 13 be unacceptable in a commercial arrangement. But 14 there is no need for us to do that, to give ourselves 15 the assurance that environmental benefits are 16 accruing from our exports because, as I said, we 17 already are confident we'll be displacing fossil 18 fuel usage and so we don't need to have any kind of 19 contractual guarantee. And when we're exporting to 20 someone, how they use it is they use it to meet their 21 whole entire load. And they thus use less of other 22 generation and so the benefit is already there. And 23 there are other environmental policies and what they 24 do are immaterial to the benefits happening from 25 Wuskwatim. 1189 1 MS. WHELAN ENNS: Thank you. 2 THE CHAIRMAN: I was just going to ask, Ms. 3 Whelan Enns, whether that particular area of 4 questioning was going to take another five, 10 or 5 more minutes in which case I would call a break but 6 if it's just a very short period, we'll let it go on 7 and then reconvene. 8 MS. WHELAN ENNS: I would like to ask, a bit 9 of a shift, but one more question? 10 THE CHAIRMAN: Okay. 11 MS. WHELAN ENNS: Thanks. It has been hard to 12 understand from the public participant point of view 13 why the Wuskwatim projects include three segments of 14 transmission line and what they are for. And whether 15 Wuskwatim in fact could function with the first one 16 only, okay? So it's fairly simple. Why does the 17 Wuskwatim projects proposal include the three 18 segments of transmission line and what are they then 19 for? 20 MR. MAZUR: I think we've responded in several 21 interrogatories and I can refer you to them but I'll 22 try and give you an overview answer. 23 In integrating Wuskwatim into our transmission 24 system, we have to be conscious of how the system has 25 operated prior to Wuskwatim. And in doing so, we 1190 1 have to look at a range of road conditions, a range 2 of generation patterns and we have to meet certain 3 regional criteria that apply to the bulk transmission 4 system. Those criteria require us to observe 5 applicable loading and voltage limits under all 6 conditions during outages with certain lines out of 7 service. 8 So essentially, our studies indicate that 9 those segments are required to first provide capacity 10 for Wuskwatim, to provide backup capacity during 11 outages and to provide operating flexibility and meet 12 the reliability requirements of our regional 13 criteria. 14 I think in a nutshell, I can dig up the 15 references to where we've dealt with that on both the 16 round one and round two interrogatories. 17 MS. WHELAN ENNS: Thank you, Mr. Mazur. You 18 are correct to be pointing out that there has been 19 back and forth in the interrogatories on this 20 subject. I would like to know, and I am closing for 21 the moment, I would like to know whether it's the 22 testimony from Manitoba Hydro that there are, at this 23 time, no discussions and no intentions for other 24 projects to be connected then to this combined set of 25 projects and transmission lines for Wuskwatim? 1191 1 MR. WOJCZYNSKI: You're referring to 2 generation projects? 3 MS. WHELAN ENNS: Either. Either transmission 4 or generation. Are there any discussions, plans, 5 projects on the drawing board of any kind that would 6 in fact be connected to the Wuskwatim projects? 7 MR. WOJCZYNSKI: Yeah. The transmission 8 network has one integrated system but we have no 9 specific plans to connect any new generation 10 particularly to that transmission aside from the fact 11 that the whole transmission system is used for 12 anything that is put on. But there is no new 13 generation that specifically plan to be connected to 14 those at this time. 15 MS. WHELAN ENNS: Thank you. Is the same true 16 for transmission? 17 MR. MAZUR: Can you explain your question a 18 little further, please? 19 MS. WHELAN ENNS: Certainly. I'll skip the 20 front end of it but the question is then whether 21 there's anything under planning, discussion, 22 contracting, negotiation in transmission system 23 elements that would be connected, for instance, at 24 Little Herblet Lake or at Rall's Island or at the 25 station at Thompson? 1192 1 MR. MAZUR: I'm still not sure I get the gist 2 of your question. In our planning process in order 3 to accommodate load growth, we are always assessing 4 the power system. Is there anything at Herblet Lake 5 that is going to be required? We have a project at 6 Herblet Lake right now that we're looking at load 7 serving into the Sheridan area and making some 8 enhancements which will be done long before Wuskwatim 9 for example. We have on record a Bipole-III line 10 that is in our IFF which has no relation to 11 Wuskwatim. 12 So in the context of plans to provide load 13 growth, I think we also have an interrogatory which 14 describes our plans and I can get the reference for 15 you if you wish. 16 MS. WHELAN ENNS: Thank you, Mr. Mazur. I'm 17 going to take then this as an indication from 18 Manitoba Hydro that the answer is no on both 19 generation and transmission? 20 MR. MAZUR: I think I'm trying to clarify that 21 there's a number of transmission projects going and 22 if you refer to the interrogatory and I'll dig it up 23 if you give me a moment, you'll see what our present 24 plans are in the IFF. 25 MR. WOJCZYNSKI: And I'd like to generalize 1193 1 that qualification to include the one I had that once 2 you build new transmission, it becomes part of the 3 overall system. And so then it enhances the overall 4 reliability of supply to all the loads including 5 domestic loads in the area, domestic loads in 6 Southern Manitoba and our exports. But the specific 7 question we were answering aside from that is like do 8 we have a new generating station that we've got next 9 door that we're going to plunk onto that line and do 10 we have a plan to do that? And the answer to that is 11 no. 12 MR. MAZUR: Mr. Chairman, the interrogatory 13 CNF EIS-1 future projects 268-A provides a complete 14 description of all our future transmission plans. 15 MS. WHELAN ENNS: Thank you. We are trying to 16 keep up and we have not prepared cross-examination 17 questions on EIS at this time. And certainly, 18 content moves between the JNFAAT and EIS. Thank you. 19 THE CHAIRMAN: Thank you. At this point, I'll 20 call a break for lunch. We'll reconvene just after 21 one, let's say at five after one, around there, or 22 ten after one. 23 24 25 (HEARING RECESSED AT 12:10 AND 1194 1 RECONVENED AT 1:10 P.M.) 2 3 THE CHAIRMAN: I think we can 4 continue. 5 MR. MURPHY: We may have lost some 6 people to the afternoon siesta. 7 THE CHAIRMAN: As we begin, Ms. Kinew 8 wanted to -- 9 MR. WOJCZYNSKI: We had some 10 undertakings that we had been asked to provide, 11 and whenever it is convenient for you, sir. 12 THE CHAIRMAN: Yes. 13 MR. WOJCZYNSKI: One is that we were 14 asked late yesterday, I am afraid I don't have the 15 page number, at the end of the day, the very end 16 of the day, we were asked initially by CAC for the 17 level for the IRR calculation for the 18 250 megawatts of wind. And we provided that first 19 thing this morning. 20 And the second thing that we were 21 asked for, subsequent to that one, was the 22 Commission asked for the levelized cost on a 23 comparable basis. And so we have done an 24 approximation of that. And I had earlier 25 indicated what they were for the 450 megawatts of 1195 1 wind, but for the 250 megawatts of wind, with all 2 of the assumptions that we talked about this 3 morning, with the WPPI it would be 6.7 cents per 4 kilowatt hour, and without WPPI, 7.1. So that 5 chart we presented on day one could have those 6 numbers in it, and it would be all of the same 7 consistent assumptions as to what we talked about 8 this morning. 9 And the only small comment that I 10 would make is that -- that was undertaking 11 Manitoba Hydro 26, page 10, 1067. The only other 12 comment, just for clarity, is that it is important 13 to recall that the levelized costs do not include 14 the system integration costs. That is in addition 15 to any of these numbers. That has not been 16 included. That is included in the IRR 17 calculation. 18 THE CHAIRMAN: Okay. 19 MR. WOJCZYNSKI: Thank you. 20 THE CHAIRMAN: You were finished with 21 that? 22 MR. WOJCZYNSKI: Yes, sorry, we are 23 finished. Thank you. 24 THE CHAIRMAN: Ms. Kathi Kinew. 25 MS. AVERY KINEW: Thank you, 1196 1 Mr. Chairman. I don't know, Mr. Adams or 2 Mr. Wojcznski, you have answered some questions 3 just before lunch about the AC line. With respect 4 to the DC line, you have explained that there is a 5 Bipole III in the works, it will be a 500 kV line. 6 I was wondering if you could explain the potential 7 routes, and if Hydro is contemplating or 8 evaluating another 500 kV line in the future? 9 You did mention earlier in the hearing 10 about maybe three different routes for Bipole III. 11 Perhaps it would be good if you could use the map? 12 MR. ADAMS: We have in our capital 13 plan a project to add a third DC line from roughly 14 the Gillam area to roughly the Winnipeg area. The 15 route selection process is part of the 16 Environmental Impact Assessment. In transmission 17 lang, we call it a site selection and 18 environmental assessment process. So we don't 19 finalize the route until we have completed the 20 environmental assessment, in large part, because 21 the best way to deal with the environmental 22 impacts of a transmission line is to avoid them. 23 Having said that, our preference for 24 the route of the Bipole III transmission line is 25 clearly to come down the east side of Lake 1197 1 Winnipeg, because it is shorter, therefore 2 cheaper. It is shorter and therefore the losses, 3 the energy losses are less, so it is more 4 efficient. It is more economic to come down the 5 east side. And we are also convinced that the 6 environmental aspects of coming down the east are 7 not significantly different from the environmental 8 aspects of going anywhere else. But the route has 9 not yet been selected. 10 The third -- sorry, I missed a very 11 significant point -- security. We need a 12 significant geographical space between the two 13 existing lines and the new one to be satisfied 14 that any significant weather or other event is not 15 going to take them all down at once. So the route 16 selection process is in process. 17 The probability is, were we to develop 18 every generating station site available in 19 Northern Manitoba, we wouldn't need a fourth DC 20 line at some point, certainly not within the 21 foreseeable future, and it has certainly not 22 reached a state of being called a plan. Again, 23 the route for that would be part of the decision 24 making process at that time. It is conceivable 25 that it could be on the same right-of-way as 1198 1 Bipole III. It is conceivable that it could be on 2 an entirely different right-of-way within 3 Manitoba. It is conceivable that it could be on a 4 right-of-way that goes down to Ontario somewhere. 5 But the more generation we put in the North, the 6 more outlet transmission we are going to need, and 7 the existing transmission has reached the limit of 8 its ability. 9 I should point out though that those 10 projects are completely independent of anything 11 that we are considering with respect to Wuskwatim. 12 MS. AVERY KINEW: But you might have 13 done some studies -- I know you have done it for 14 Bipole III, but would you have done any for this 15 future long term? 16 MR. ADAMS: Studies is probably 17 gilding it a little bit. Certainly, our planners 18 would have looked at it, they would have done the 19 technical types of calculations, but we don't do 20 detailed studies until we start to get serious 21 about building the things. 22 MS. AVERY KINEW: Yes. When do you 23 think you would be going for an environmental 24 assessment on Bipole III? 25 MR. ADAMS: At the rate things are 1199 1 going, this is an educated guess and no more than 2 that, I would say probably about two years. 3 MS. AVERY KINEW: Thank you. I have 4 one more question going back to wind. You have 5 said on a couple of occasions that it doesn't seem 6 that a deal is going to be reached with Shell. 7 Does that mean that you would still keep the six 8 or seven test sites, they would become Hydro 9 sites, or what? 10 MR. ADAMS: Okay. To clarify, the 11 seven sites are Hydro sites, they are not joint 12 venture sites. Shell had several sites of its 13 own, and we are not too sure exactly what they are 14 going to do with them, but presumably they are 15 going to try to recoup their investment somehow. 16 MS. AVERY KINEW: So you have no right 17 to those sites, those are theirs, whatever -- you 18 might be interested in expanding -- 19 MR. ADAMS: We are always interested 20 in expanding. 21 MS. AVERY KINEW: So you might develop 22 any of these sites that they are already into? 23 You might be willing -- 24 MR. ADAMS: The point of the wind 25 monitoring is to get -- 1200 1 MS. AVERY KINEW: Up-to-date modern 2 data. 3 MR. ADAMS: -- good wind information. 4 In some cases it may prove that the site is very 5 good, in which case we would certainly consider 6 developing there. In some cases it may prove that 7 the site is not very good, in which case we 8 wouldn't be interested in developing there. 9 So, you know, the fact that we have a 10 wind tower doesn't mean that we have a plan to 11 develop a wind farm there or in the area, but it 12 is a prerequisite to get the information before 13 you can make those kinds of decisions. 14 MS. AVERY KINEW: Kind of like mining. 15 I appreciate it. 16 MR. MAYER: Just one follow-up, if I 17 may? On the question of Bipole IV, we know that 18 you need Bipole III before you can build Gull, and 19 Gull and Conawapa are both in your plans, as is 20 Bipole III, so I am assuming you don't need Bipole 21 IV for Conawapa. Am I correct in that assumption? 22 MR. ADAMS: No, because we would not 23 build Conawapa -- let me rephrase that. We don't 24 need Bipole IV to get Gull and Conawapa energy to 25 Southern Manitoba. 1201 1 MR. MAYER: But you might to get 2 Conawapa to Ontario? 3 MR. ADAMS: We need a transmission 4 line to get energy from the Manitoba system into 5 Ontario. That transmission line could come from 6 the south, it could come from the north. If it 7 came from the north, I don't know whether we would 8 call it Bipole IV, but it would be an HVDC line 9 probably to Thunder Bay or to Sudbury. 10 MR. MAYER: And then the only other 11 significant development, or projected development 12 that I see on my favorite map -- and I continue to 13 thank Ms. Wray for providing it to me about a year 14 or so ago -- is the Gillam Island Generating 15 Station which shows 1,000 megawatts. Would we 16 have had to -- I take it you would need, by the 17 time, if you ever put that in one service, you 18 would certainly then need another line south, 19 would you? 20 MR. ADAMS: Sorry, I missed the 21 question? 22 MR. MAYER: Gillam Island, as I 23 understand it, is the only other significant 24 planned one on the Lower Nelson. 25 MR. ADAMS: Yes. 1202 1 MR. MAYER: Would you require an extra 2 line for that, or you would have to build it -- if 3 you built it, you would presumably have some 4 contracts with Ontario, so I am assuming that 5 would somehow combine with your export of Conawapa 6 to Ontario. It wouldn't need a fifth line is 7 where I am getting at? 8 MR. ADAMS: There is several 9 dimensions to that question. One is a question of 10 timing. If we built it in the foreseeable future, 11 before I am pushing up daisies anyway, it would be 12 because we have a major export contract with 13 somebody, not necessarily Ontario? So, you know, 14 the transmission and the generation and the export 15 contracts all tend to get a little bit woven 16 together. Absolutely, by the time we had enough 17 generation contracts anywhere that we had to build 18 Gillam Island, or if there was sufficient load in 19 Manitoba that we needed Gillam Island, we would 20 certainly be into at least Bipole IV and possibly 21 Bipole V, or equivalent transmission, no matter 22 where it went to. 23 MR. MAYER: Thank you, sir. 24 THE CHAIRMAN: All right. We will get 25 back to Manitoba Wildlands and Canadian Nature 1203 1 Federation. 2 MS. WHELAN ENNS: Gaile Whalen Enns 3 speaking. I appreciate the questions from the 4 panel. I wanted to say, though, and I guess I 5 frame it as a question, the information that I 6 have heard in, the information that I have heard 7 then in the sessions that I was referring to with 8 Manitoba Hydro included the assertion that there 9 would be no further sharing of transmission 10 corridors for future generation projects in 11 Manitoba, and that the greatest likelihood then is 12 transmission corridor for each generation project. 13 That is not quite the answer, so I appreciate the 14 questions from the panel. Am I correct then in 15 taking the information from just now as an update, 16 an improvement on my assumptions from things that 17 I have heard from Manitoba Hydro? 18 MR. ADAMS: I can't comment on what 19 you might have heard before. I wasn't there. 20 MR. MAYER: Can I try the question a 21 little more directly? Is there a policy of 22 Manitoba Hydro not to share transmission 23 right-of-ways with future lines? 24 MR. ADAMS: No. 25 MR. MAYER: Because some of us on this 1204 1 panel have some concerns about that possibility, 2 even with the lines south from Wuskwatim. You 3 have no policy in that regard. I recognize your 4 security concerns in respect to Bipole. I take it 5 that you don't have as much similar concern with 6 respect to your 250 kV lines? 7 MR. ADAMS: We have similar concerns, 8 but they are not to the same extent. So we will 9 use existing transmission right-of-ways where it 10 is appropriate. We will prefer to have not used 11 the same right-of-way where it is not appropriate. 12 And the definition of appropriate encompasses a 13 whole variety of issues, including basically 14 energy density on the transmission line, and the 15 risks -- on the transmission right-of-way and the 16 risks to the system. 17 MS. WHELAN ENNS: Thank you. I wanted 18 to resume with a question that is also about AC 19 and DC lines, but not specific to what the panel 20 was requesting of you. I would appreciate hearing 21 what the pattern and amount of energy loss is 22 depending on -- and I am sure it depends on the 23 season and things that you are more knowledgeable 24 on than I am -- in respect to the different grades 25 or kinds of transmission systems in the Province. 1205 1 I have again heard numbers as high as 10, 15, as 2 much as 25 percent, depending on the 3 circumstances, and the line, and the system. 4 MR. MAZUR: Just to clarify, are you 5 talking about existing transmission systems? 6 MS. WHELAN ENNS: Yes. 7 MR. MAZUR: Again, it varies with the 8 generation schedule at any given time. If you are 9 referring to on the DC lines, typically the losses 10 at maximum loading will be somewhere in the order 11 of 10 percent. I think that has been stated. In 12 terms of AC lines, because it is a network, it 13 will depend on a specific generation pattern. So, 14 I think it was said to get some power to the 15 border, we are talking an additional 4 percent. 16 But again, that depends on where the generation is 17 that you are trying to schedule. 18 MS. WHELAN ENNS: Thank you. The 19 question relates to a couple of things later on in 20 terms of loss of energy and conservation of 21 energy. Thank you. 22 It is apparent that Manitoba Hydro has 23 conducted studies that explicitly identify new 24 renewables, or alternative energy sources. Are 25 the reports public? 1206 1 MR. WOJCZYNSKI: Sorry, could you 2 repeat the question? I don't think that I quite 3 caught that. 4 MS. WHELAN ENNS: We have heard 5 reference to studies that Manitoba Hydro has 6 conducted in respect to new renewable or 7 alternative energy sources, in terms of the export 8 markets, and I have just a simple question; are 9 those studies public? 10 MR. WOJCZYNSKI: The studies that we 11 have are the ones that were submitted in the 12 original filing and in the interrogatories. For 13 instance, we provided in the attachments to the 14 NFAAT submission a technology update that did a 15 summary of those, and had a discussion on those. 16 And the actual submission itself, meaning the 17 chapter 4, had a high level discussion with a 18 broad screening with, for instance, that levelized 19 cost table particularly, and then the appendices 20 detailed that. And then we use a vast amount of 21 industry information to create those technology 22 updates. That itself is available and it is in 23 the submission, so it is public. 24 MS. WHELAN ENNS: Then your studies in 25 this respect are public and they are all in the 1207 1 Wuskwatim filing. Are there other studies? 2 MR. WOJCZYNSKI: I guess it depends on 3 how you define studies. We have all kinds of work 4 sheets and people extracting information from all 5 kinds of other studies. And we are, for example, 6 we are members of a Canadian sort of research 7 consortium on, with other entities in Canada, on 8 various forms of energy, alternative energy if you 9 want to refer to that, or competing forms of 10 energy, or different forms of energy, different 11 options. And we are actively involved with other 12 organizations like EPRI, the Electric Power 13 Research Institute, so we have all of their 14 reports and access to them. So we use all of 15 that. So I am not sure that all of those are 16 public. Some of the reports that we end up buying 17 are proprietary and not public. So we have a full 18 range of information. And the reports per se, 19 where we have done a report that is a formal 20 report, that we have provided, at least the recent 21 ones. We have all kinds of other information that 22 is, as I said, either in work sheet form or from 23 other people. 24 MS. WHELAN ENNS: Thank you. In 25 response to an interrogatory CNF/MH/NCN 1-JNFAAT 1208 1 XP 342c, Manitoba Hydro listed the information 2 sources for attachment 5 called Outlook for the 3 Northern American Electric Industry. The response 4 did not show what policies or information were 5 used. 6 MR. WOJCZYNSKI: Could you please 7 repeat the reference? 8 MS. WHELAN ENNS: 342c. 9 MR. WOJCZYNSKI: Round 1? 10 MS. WHELAN ENNS: Yes. 11 MR. WOJCZYNSKI: Thank you. 12 MS. WHELAN ENNS: The next part of the 13 question is specific then to policies or 14 information from the U.S. Department of Energy, to 15 compile the same attachment. 16 MR. WOJCZYNSKI: So I have the 17 reference, and now I have sort of the background. 18 And now I believe there was a question there and I 19 have lost it in the train of looking for things, 20 so I apologize. 21 MS. WHELAN ENNS: Which is 22 understandable. It is essentially the same 23 question in respect to attachment 5, and which 24 policies and information then from each of the 25 agencies cited, so the U.S. Department of Energy, 1209 1 the U.S. Environmental Protection Agency, the 2 Federal Energy Regulatory Commission, and the 3 Natural Resources Canada and the National Energy 4 Board in Canada are all cited. There is no 5 context in terms of which of their policies or 6 information base you used. 7 MR. WOJCZYNSKI: We use a wide variety 8 of various pieces of information from these 9 organizations and other organizations. And we 10 reference a few particulars, the EIA economic 11 outlook. So it would not be practical and 12 feasible for us to dig through all of our files 13 and dig out every single article that we utilized, 14 or where people took a piece of information off 15 the web, or they attended a conference, or 16 whatever. I am not sure if I am answering your 17 question. In terms of policies, I am not sure 18 that we were utilizing policies when developing 19 attachment 5. We were doing an overview of where 20 the industry is going, and we utilized, for 21 example, and we referenced right in here the MAPP, 22 and we utilized, for instance, their outlooks, and 23 we used NERC information. The DOE has the energy 24 information administration which we just mentioned 25 here, or used the outlook. So I am not quite sure 1210 1 what further you are looking for at this point. 2 MS. WHELAN ENNS: The rationale for 3 the question is that from the public interest 4 point of view, it is clear that you relied on 5 information from a variety of mostly then U.S. 6 entities, but it is not feasible to know what you 7 used and/or what the policies of those Federal and 8 other regulatory agencies in the U.S. are in 9 respect to the electrical industry in North 10 America. Is there a list then of the documents 11 and reports that you relied on, and can we have 12 the list? 13 MR. WOJCZYNSKI: No, there is no such 14 list. Everybody who works in this kind of area, 15 as part of their ongoing work, continually updates 16 their education and their information sources, and 17 we don't in any way try to formalize that. That 18 would be contrary to people staying current and 19 being on top of it. We continually access reports 20 as they come out, and continually find information 21 as we can. And we in no way try and do that in a 22 structured formalized manner. That would slow 23 down the process of acquiring the information and 24 would prevent us from, in a quick and efficient 25 manner, taking the pulse of what is going on in 1211 1 the industry. So we don't do any kind of 2 formalized listing of all of the reports that we 3 use, no. 4 MS. WHELAN ENNS: Thank you. Our 5 assumption would be that you, in your analysis, 6 would be looking on a comparative basis in terms 7 of the information and the regulatory and policy 8 basis for each of these agencies' 9 responsibilities, so the question has to do with 10 the ability of the public to understand. And I 11 understand your description of what you do on an 12 ongoing basis, and then how you built attachment 13 5, which is the outlook for the North American 14 electrical industry. There is essentially then no 15 way for us to know the basis of attachment 5? 16 MR. ADAMS: Mr. Chairman, I disagree. 17 I think the attachment 5 and all of the 18 interrogatories responding to it very clearly show 19 the basis which we use and the process we use to 20 come to these conclusions. 21 MR. MURPHY: Eamon Murphy here. Just 22 before we leave the area of exports, I have one 23 further question. I previously asked you, 24 Mr. Wojcznski, about the possibilities of 25 Wuskwatim competing with alternative energies or 1212 1 other energy market, energies in the U.S. market. 2 And I would like to refer briefly to an exhibit 3 that was filed yesterday by CASIL, and Ms. Phare 4 has graciously lent me her copy. It is entitled 5 "Environmental Challenges and Opportunities of the 6 Evolving North American Electricity Market." My 7 first question is whether Manitoba Hydro utilized 8 this document in assessing whether Wuskwatim would 9 be competing with alternative energy sources in 10 the U.S. markets that you are looking at? 11 MR. WOJCZYNSKI: Has Manitoba Hydro 12 considered whether our -- 13 MR. MURPHY: Utilized this document, 14 the document that is now entered as -- 15 MR. WOJCZYNSKI: That particular 16 document? The staff of Manitoba Hydro have that 17 document, and it is part of the general 18 understanding of the industry, it is one of the 19 thousands of inputs we used to have a general 20 understanding of the industry. So we would have 21 used that as part of our general understanding and 22 background, realizing there is many different 23 perspectives. 24 MR. MURPHY: I just want to ask you 25 about some of the numbers that are in here. I had 1213 1 asked you previously about your view of whether 2 Wuskwatim would be competing with alternative 3 energies. Now in MAPP 8 of this document, it is 4 at page 14, it suggests that in the -- 5 MR. WOJCZYNSKI: Sorry, we don't have 6 copies of that here. We certainly have copies 7 back at Manitoba Hydro. Is it going to be useful 8 for us to see the figure that you are referring 9 to, or is that not necessary? 10 MR. MURPHY: I don't think so. I can 11 circulate it afterwards. There is three figures 12 that I am going to give to you here. It is an 13 area of northwest central U.S. that is referred 14 to, which encompasses, if my geography is correct, 15 North Dakota, Minnesota, and South Dakota. What 16 it says is the prediction for new electricity 17 generating capacity in the U.S. from 1999 to the 18 year 2007 includes 22 percent wind, 29 percent 19 coal and 49 percent natural gas. 20 Now, when I was asking you questions 21 previously, the wind numbers were not nearly that 22 high that we were discussing. Based on those 23 numbers, is it still your position that Wuskwatim 24 would have an insignificant competitive challenge 25 to the wind energy that is going to be developed? 1214 1 MR. WOJCZYNSKI: Absolutely, yes. And 2 I think the numbers that you just quoted are 3 consistent with what I said earlier this morning, 4 that even if there was a higher percentage of the 5 alternative energy coming in, higher than most of 6 the forecasters are coming up with, that there 7 would still be large amounts, and dominant 8 amounts, or the majority of the new supply would 9 still be coming from fossil fuels. And the 10 numbers that you just quoted say the same thing, 11 that by far new fossil fuel generation coming on 12 line, even in that forecast, is much higher than 13 for say wind. 14 I note that the load growth in the 15 MAPP area -- and this is the most recent kind of 16 forecast -- is 3,460 GWh per year. And that is 17 from MAPP itself. And you take a look at the size 18 of Wuskwatim, that is 1,520 GWh. So just one 19 year's load growth in MAPP more than doubles, is 20 equal to more than double the total output from 21 Wuskwatim on the average, and that doesn't even 22 account for the fact that Manitoba has load growth 23 that takes up about one-fifth, on the average, of 24 energy output from Wuskwatim. So we expect to see 25 our exports, even with Wuskwatim, in the long term 1215 1 declining into the MAPP pool. So we don't view us 2 as being in any significant competition with wind 3 or DSM. 4 MR. MURPHY: Even at the numbers that 5 are suggested by this study? 6 MR. WOJCZYNSKI: Yes. 7 MR. MURPHY: I would like to ask you 8 some questions about wind. Ms. Avery Kinew had 9 asked you about seven wind monitoring stations, 10 and I believe these are located in southwestern 11 Manitoba; is that correct? 12 MR. ADAMS: They are in the 13 southwestern quadrant of Manitoba. Most people 14 wouldn't necessarily say that some of the northern 15 ones were in southwestern Manitoba. 16 MR. MURPHY: And what is the megawatt 17 capability that the seven locations have? Have 18 you assessed that? 19 MR. ADAMS: We are still in the 20 process of assessing it. 21 MR. MURPHY: Have wind measurements 22 been taken and then compiled for these seven 23 monitoring stations? 24 MR. ADAMS: For nine months, yes, we 25 are still continuing to do it. 1216 1 MR. MURPHY: And what have these 2 measurements revealed? Have you done any analysis 3 of that? 4 MR. ADAMS: Nine months is an 5 inadequate amount of time to do a thorough 6 analysis of the wind regime. 7 MR. MURPHY: And will the information 8 be made available to the public participants? 9 MR. ADAMS: Sorry? 10 MR. MURPHY: Will the information be 11 made available to the public participants in terms 12 of what the wind measurements are at these 13 stations? 14 MR. ADAMS: That is not our current 15 plan. The wind information is commercially 16 sensitive information that, were it to become 17 available to competitors, then we would be out of 18 business. 19 MR. MURPHY: And your position is that 20 all of the information that you gleaned from these 21 stations would be commercially sensitive? 22 MR. ADAMS: The detailed information 23 is commercially sensitive. We will certainly be 24 looking at it over the next six months or so, and 25 determining what can be made available. 1217 1 I might add that nothing we have seen 2 to date has changed our opinion as to the sort of 3 capacity factors and other issues that we've 4 originally anticipated. 5 MR. MURPHY: Thank you. That may 6 be -- I guess my question goes to whether the 7 public and the public participants can make that 8 assessment, and at this point we can't because we 9 don't have that information. You understand that? 10 MR. ADAMS: I understand that, but as 11 I said, we consider the wind information that we 12 have to be commercially sensitive information. 13 MR. MURPHY: Certainly, it would 14 assist in looking at the alternatives to Wuskwatim 15 for at least the public participants to have a 16 sense of what that data is showing or suggesting? 17 MR. MAYER: If I might interject here 18 for a moment? Hydro told us, and have told us a 19 number of times throughout this hearing, and maybe 20 you missed it, but what they have discovered is 21 basically -- strange as it may seem to some of us 22 who suggested that we could replace our diesel 23 generators in the four diesel communities with 24 wind -- that the best wind power is very close to 25 the border. Now, I don't know how much more has 1218 1 to be said. They told us where their best 2 capacity and capability was. And the studies that 3 they have done with the other stations, they also 4 told us, as you just heard, hasn't changed their 5 opinion of that. So, basically, what we are 6 talking about, if there is going to be any 7 significant wind development, from what we have 8 heard earlier, it is generally going to be 9 somewhere close to the U.S. border. 10 MR. MURPHY: Thank you, Mr. Mayer. 11 And perhaps I didn't phrase my question correctly 12 or understandably. I am not so concerned about 13 where the location is, as much as what the 14 information is that is resulting from the wind 15 monitoring. 16 I appreciate that Hydro is saying that 17 they don't believe it has changed their view. It 18 is just that, in order to test the information, we 19 are suggesting that it needs to be made available 20 to the public so the public and the participants 21 can also test that. At this point, we have been 22 told it is commercially sensitive. And I am not 23 so concerned with the locations as what the data 24 is telling us, or them. 25 MR. MAYER: Well, the locations are 1219 1 public. 2 MR. MURPHY: Yes. And it is more the 3 data, so we can actually test the assumptions or 4 the belief that Manitoba Hydro puts forward in 5 terms of whether it is a viable alternative. That 6 is what we are trying to test here. 7 MR. WOJCZYNSKI: If I might comment on 8 that. In terms of the public and the participants 9 needing information to engage in a bona fide 10 process, we agree there needs to be sufficient 11 information for that to happen. With all due 12 respect, our position on this would be that 13 taking -- that the detailed data from individual 14 wind monitoring stations are not required for that 15 kind of assessment in the comparison to Wuskwatim, 16 and are indicating that we are confident that the 17 35 percent kind of capacity factor would be the 18 best that, give or take a few percentage points 19 either way, would be the best that could likely be 20 expected. And as Mr. Adams just indicated, we 21 have seen nothing from anything that has happened 22 which would change that. So I think the 23 information is available for this Commission, this 24 process, and for the participants. 25 MR. MURPHY: And we have noted that 1220 1 you use the 35 percent in the document that was 2 handed out on the first day of the hearing, the 3 social net benefits of Wuskwatim versus wind 4 development. And we do have some questions about 5 that in terms of the percentages. And we are 6 going to get to that in a moment. 7 The question about the document, 8 social net benefits document that was handed out 9 on the first day, is this the only document or 10 analysis that Hydro has done that compares the 11 potential wind generation to the potential Hydro 12 generation capacity of Wuskwatim? 13 MR. WOJCZYNSKI: We presented other 14 information that was in the rebuttal, and we 15 talked about it extensively the first day. I 16 don't believe either of you were there, so perhaps 17 you missed that, but we did discuss it quite 18 extensively on Monday, and there was another 19 discussion of it yesterday, and we provided -- 20 there was an extensive discussion yesterday and 21 then we provided further information this morning. 22 So there is more than the social benefit cost 23 report. There were three kinds of analyses that 24 have been provided to this process. One was the 25 levelized cost kind of analysis that, as we 1221 1 indicated on day one, that you need to do 2 something more complex than that. So we did a 3 sequence system evaluation for a 2009 in-service 4 date on a comparable basis to what we did do 5 actually in the original submission. The original 6 submission contained an evaluation of wind where 7 we got an IRR of 7 and a half percent. Then we, 8 in part of the natural process in the review 9 process here, we did, in response to interest and 10 questions we did more work. And so -- plus we had 11 more information, so then we did a detailed system 12 comparison. And that is what we presented in the 13 rebuttal and on day one. So there is at least 14 those three kinds of analyses, plus what was in 15 the original submission. 16 MR. MURPHY: Thank you. And I guess I 17 misstated the question. I am looking for 18 specifically a document or study of the sort that 19 you had handed out on the first day. And that is 20 what I am, that is what I am referring to in terms 21 of a study? 22 MR. WOJCZYNSKI: The documentation 23 were the sheets that we handed out -- there was 24 the rebuttal, there was also exhibit 1000 -- I 25 can't remember if is 1003 or 1004 that provides 1222 1 the details of capital costs, O&M, the levelized 2 costs calculation, IRR calculations, the system 3 SPLASH evaluations. And those are on the record, 4 and that is sort of the numerical backdrop to it. 5 And plus I provided an explanation on the record, 6 sir. 7 MR. MURPHY: Thank you. We understand 8 that there has been some discussion about the 9 negotiations and the financial statements between 10 Hydro and Shell in respect of the MOU that has 11 been referenced. And we understand that the 12 financial statements and the negotiations can't be 13 revealed because of the confidentiality. We are 14 interested in whether you can walk us through a 15 summary or an overview of the MOU, to try and 16 understand, again, the wind potential that we are 17 looking at in terms of alternatives? We are not 18 looking for specific financial information, or in 19 terms -- or specific business negotiation 20 information. 21 MR. ADAMS: As I have said on two 22 occasions in front of this hearing, the joint 23 venture with Shell is to all intents and purposes 24 moot, because Shell has indicated to us that they 25 no longer want to proceed with it. I am not in a 1223 1 position to speak to Shell's motives. I can go 2 through the MOU, if you want, but the essence of 3 it was that we agreed to jointly pursue wind 4 opportunities in Manitoba for a limited period of 5 time, where we felt they were mutually economic. 6 And at this point we have come to the conclusion 7 that there aren't any. 8 We are also looking at specific export 9 opportunities and, again, they have not 10 materialized. And so the MOU is to all intents 11 and purposes redundant. 12 MR. MURPHY: Has Manitoba Hydro 13 completed any wind mapping studies in the 14 Province? 15 MR. ADAMS: Almost -- we have 16 preliminary wind maps in the office. We haven't 17 finalized them in any way yet. Of course, they 18 still need proofing to some degree. 19 MR. MURPHY: Is there any intention of 20 releasing those to the public? 21 MR. ADAMS: It is not our present 22 plan, at least not on a detailed level. We 23 probably would be quite prepared to roll them up 24 to a point where they don't offer any competitive 25 advantage to our competitors. 1224 1 MR. MURPHY: So at this point there 2 would be nothing that has been released to the 3 Department of Energy Science and Technology by 4 Manitoba Hydro? 5 MR. ADAMS: Yes, or no depending -- 6 MR. MURPHY: I think I understand. 7 Continuing with wind, has Manitoba 8 Hydro conducted any studies to determine the total 9 number of megawatts in potential wind available in 10 Manitoba? 11 MR. WOJCZYNSKI: The first stage in 12 doing that is to collect the wind data that is 13 being collected. 14 MR. MURPHY: That is the mapping? 15 MR. WOJCZYNSKI: That is the mapping 16 information, but more importantly, the wind 17 monitoring stations are more important, so we are 18 in the middle of doing that. And based on that, 19 we fully -- our projection is that there will be 20 only a relatively small area that would have wind 21 sufficiently high that would be even remotely 22 possible for it being economically developed in 23 the foreseeable future. So we don't have an exact 24 megawatt amount, but we do know that there would 25 be only a limited region or a limited area that 1225 1 would be likely economic. 2 MR. MURPHY: And when you say likely 3 economic, I take it that is from Manitoba Hydro's 4 perspective of being an economic -- 5 MR. WOJCZYNSKI: From the perspective 6 of having enough benefits to be able to pay for 7 the costs. 8 MR. MURPHY: Again, is that from 9 Manitoba Hydro's perspective? 10 MR. WOJCZYNSKI: It could be from 11 Manitoba Hydro's perspective, or any other 12 developer's perspective, or from a societal 13 perspective. 14 MR. MURPHY: I am curious, are you 15 speaking for other developers on that issue as 16 well? 17 MR. WOJCZYNSKI: We are speaking about 18 our knowledge of how the other developers evaluate 19 and the kind of information that they would need, 20 and what their likely conclusions would be. So, 21 yes. I am not purporting to represent them here. 22 What I am speaking on is our understanding of 23 their situation, so I am not formally representing 24 them, no, but I am speaking about their likely 25 conclusions. 1226 1 MR. MURPHY: Under interrogatory 2 CNF/MH/NCN 1-JNFAAT wind, 349a, you responded that 3 the total potential available capacity -- that is 4 megawatts, in energy, megawatt hours -- of wind in 5 Manitoba were not considered in setting the 6 proposed 250-megawatt wind capacity -- 7 MR. WOJCZYNSKI: That's correct. 8 MR. MURPHY: -- development goal. I 9 am just wondering, did Manitoba Hydro set that 10 250-megawatt wind capacity goal, or was that set 11 by the Province? 12 MR. WOJCZYNSKI: That 5 percent isn't 13 really a goal. What we were trying to do with 14 that is come up with a preliminary number as to 15 what we were confident could be integrated into 16 our system with relatively modest costs. If you 17 are talking about the goal or the plan of how much 18 wind would be going in, the 250-megawatt number, 19 actually if you take a look at what is typically 20 done in the industry, what is done is you take the 21 amount of peak wind and divide it by the peak load 22 in the system. And so in Manitoba Hydro's case, 23 or in Manitoba's case, the 250 megawatts that we 24 were looking at would be actually 6 percent of our 25 future domestic load, at least in a few years from 1227 1 now. So those numbers are very similar, but they 2 are not precisely the same thing, and there is 3 different ways of measuring that. That was -- so 4 there is really two separate numbers in there, but 5 they are similar. 6 MR. MURPHY: So I am again just 7 curious, was this number developed by Hydro, or 8 was it a number that the Province had? 9 MR. WOJCZYNSKI: Both are numbers from 10 Manitoba Hydro. 11 MR. MURPHY: Mr. Adams, you had 12 referred to, you are about nine months into the 13 wind monitoring data. At what point are you going 14 to be confident in the data that you are going to 15 have in order to start assessing that data? How 16 many more months are you looking at? 17 MR. ADAMS: What we said before is we 18 need about 12 months of data, and then a period of 19 time to evaluate that data in the context of, 20 whatever it is, 100 years of wind recorded at 21 other locations. And I honestly don't know if 22 that is going to take three months or six months, 23 but certainly within nine months we should be in a 24 pretty good position to understand, or have an 25 understanding of the wind resources to the extent 1228 1 that we are prepared to start making commitments. 2 MR. MURPHY: I would like to refer you 3 to Hydro's response to another interrogatory, it 4 is CNF/MH/NCN 1-JNFAAT, this is wind 532a. 5 Now, Hydro stated that they received 6 requests for interconnection for up to 1,200 7 megawatts of wind generation located at over a 8 dozen sites. There was a reference to a website, 9 an Oasis website from the Manitoba Hydro site. 10 Now, there is a listing on the link that is 11 provided to the Oasis website of 27 systems that 12 are awaiting interconnection. So is it only 12 of 13 those 27 that are related to wind? 14 MR. WOJCZYNSKI: Mr. Mazur will answer 15 that. 16 MR. MAZUR: Sorry, can you repeat the 17 last part of that question? I was looking for the 18 reference. 19 MR. MURPHY: Yes. Manitoba Hydro's 20 answer was that there was about a dozen sites 21 waiting for interconnection of up to 22 1200 megawatts of wind generation. Now, the 23 reference provided to the Oasis website lists 27 24 interconnections. So we are trying to understand 25 if, of those 27, there is only 12 that relate to 1229 1 wind, or if all 27 of those relate to wind? If 2 you could help us out with those, please? 3 MR. MAZUR: What page on that 4 interrogatory are you referring to specifically? 5 MR. MURPHY: 352a. 6 MR. MAZUR: Line number, or something 7 to help me - 8 MR. MURPHY: Just one moment, I will 9 find you a line number. 10 MR. MAZUR: Yes, I think I have got 11 it. The reference says Manitoba Hydro has 12 received requests for interconnection of up to 13 1200 megawatts of wind generation located over a 14 dozen potential sites. And the specific question 15 was, where do you see the 27 -- 16 MR. MURPHY: Perhaps I could pass out 17 what is the link that Hydro has provided here, if 18 that would be helpful, everybody could have a 19 sense of the 27 sites. 20 MR. MAZUR: If everybody has the 21 reference I should explain that Manitoba Hydro has 22 an open access interconnection tariff for 23 generation, that in that tariff there is a 24 requirement to study interconnection requests and 25 or upgrades of interconnection of generation on a 1230 1 first come, first serve basis. What the list that 2 you have handed out represents is a portion of the 3 interconnection queue of the requests that we 4 have. The tariff obligates us to interconnect any 5 request to the system. It doesn't obligate us to 6 provide transmission service work, that is a 7 separate request under our transmission tariff 8 service provision. 9 Not all of those 27 sites are wind 10 sites. There is only 12 that are wind sites. Our 11 standards of conduct don't permit us to 12 differentiate as to any company names, but some of 13 the wind sites on there are included in the 12 of 14 those 27, if that helps. 15 MR. MURPHY: And is it then from these 16 wind generation sites it is expected that about 17 1200 megawatts of power will come into the system? 18 MR. MAZUR: I can further explain that 19 many of these requests are requests for 25, 50, 20 75, 100, and the developers requesting 21 interconnection don't at this point even know what 22 the level might be. So it is a request to 23 evaluate what transmission perhaps might be needed 24 for varying levels. So 1200 is a maximum that 25 these requests total up to approximately, and it 1231 1 could end up being half of that or some of them 2 may withdraw, as was mentioned several times 3 today. Wind monitoring is being done, and the way 4 the system works, if you want to get in line for 5 connection and connection studies that are done 6 sequentially in most cases, then you put a request 7 in for several different options, and you get them 8 studying in that order. The consequence of being 9 in order is transmission costs are allocated in 10 the order of a request. And this is all 11 documented in our tariff. So it is important for 12 some of the developers to get their requests in. 13 They may withdraw some of them. 14 In fact, in the midwest independent 15 operators system, since a year ago there has been 16 about 30 percent of the requests have fallen off 17 the queue, and that is a generally known 18 statistic. Again, they are not all wind, there 19 are some other developments as well. 20 MR. MURPHY: And this list of 27, is 21 that the full queue as we know it right now? 22 MR. MAZUR: I guess it was the full 23 queue -- I don't know if it is the full queue. 24 You have only listed 27 here. I guess subject to 25 check, I would say it looks fairly close to the 1232 1 full queue as of December 12. 2 MR. MURPHY: You mentioned studies 3 being undertaken with respect to these different 4 systems. Do you expect them to be provided once 5 these studies are completed? 6 MR. MAZUR: Once the study is 7 completed the process is there is an 8 interconnection evaluation study. That determines 9 that the -- that is an assessment of the 10 transmission system and the requirements that may 11 be needed as far as improvements to interconnect 12 the wind, or at least it identifies the issues. 13 At that point the requester has an option to 14 proceed or withdraw. If he decides to proceed, we 15 do a detailed study which now identifies the 16 detailed facilities required and the costs. And 17 again at that point he may wish to withdraw or he 18 may wish to proceed and sign an interconnection 19 and operating agreement. And so I can't predict 20 at any point whether all of these will go ahead or 21 any of them will go ahead. 22 MR. MURPHY: These are just examples 23 of at least areas of where other individuals or 24 companies have developed some wind power, I take 25 it? 1233 1 MR. MAZUR: These are -- 2 MR. ADAMS: Maybe I could answer that 3 one. Adams, for the benefit of the Commission. 4 Under the open access tariff process our 5 transmission people are not allowed to share 6 commercial information with our generation people. 7 So we have this Chinese wall that we have erected 8 between the marketing types, Mr. Cormie, and the 9 transmission types in the guise of Mr. Mazur. And 10 Mr. Mazur is not at liberty to identify who the 11 proponent is in each of these cases. However, we 12 can. And I can tell you that a significant number 13 of these locations are studies that are being done 14 on Manitoba Hydro's behalf. Obviously all of the 15 generating, the Hydro generating stations. But 16 the Minnedosa, Boissevain, Cedar Lake, Grandview, 17 Lake Manitoba Narrows and Letellier studies are 18 being done at our request. 19 MR. MURPHY: When the studies are 20 complete do you expect to share that information 21 with the public? 22 MR. MAZUR: Can I respond to that? In 23 the process of our tariff, once the 24 interconnection customer approves the study it is 25 posted on the Oasis where you got this very list. 1234 1 So the studies that are approved, again without 2 the customer's name, are there so other people can 3 get an idea of what the issues on the transmission 4 system are. And that is a requirement of our 5 tariff as well. 6 MR. MAYER: I'm assuming this is the 7 same tariff that the Manitoba Court of Appeal is 8 going to tell us whether we can get it from you or 9 not? I meant if the Public Utility Board could 10 get it from you or not. 11 MR. ADAMS: Anybody who wants can see 12 the tariff. It is a public document. 13 MR. MAYER: Okay. 14 MS. WHELAN ENNS: In a somewhat 15 predictable vein then and in point of previous 16 questions, also referring to this 352a 17 interrogatory that we have been referring to, has 18 the Manitoba Government directed Manitoba Hydro in 19 respect to its activities for the planning of wind 20 generation in Manitoba? 21 MR. ADAMS: We have had no direction 22 from the Manitoba Government. 23 MS. WHELAN ENNS: Do you share, and I 24 respect what I'm hearing about the Chinese wall, 25 so it is not a question about that, what is the 1235 1 form then of exchange of information and technical 2 discussions between Energy Science and Technology 3 and Manitoba Hydro regarding wind potential and 4 wind generation? 5 MR. ADAMS: We have ongoing discussion 6 with various members in that department. And we 7 are very careful with the information that we 8 share publicly, and will continue to be very 9 careful. Because in the end we are in a business 10 where Manitoba Hydro has no monopoly, and so 11 anybody who is prepared to invest the funds and 12 the exploration activities and monitoring 13 activities and build a wind farm is entitled to do 14 it. And we have spent upwards of a half million 15 dollars to date in assembling information, and our 16 intent is that we benefit from that and our 17 customers benefit from it, and not some 18 entrepreneur somewhere. 19 MS. WHELAN ENNS: Thank you. The St. 20 Leon project which was licenced this spring after 21 a two week public review, to round it off is a 22 100 megawatts, with the costs, again in terms of 23 what the public knows, of between $150 million and 24 $200 million. So I would appreciate knowing what 25 it would cost Manitoba Hydro to develop in wind 1236 1 generation 200 megawatts, that is an equivalent 2 amount of generation as the Wuskwatim project? 3 MR. WOJCZYNSKI: We actually did that 4 in the undertaking this morning. And I think if I 5 heard you right, I think you just mentioned 6 200 megawatts of wind. I know you weren't in the 7 room when we discussed this the other day, but 8 actually an equivalent amount of wind to Wuskwatim 9 is 450 megawatts. 10 MS. WHELAN ENNS: Because of the 40 11 percent -- 12 MR. WOJCZYNSKI: The 35 percent 13 capacity factor, but that is slightly offset by 14 the fact that the losses to get Wuskwatim from the 15 north to the south are higher, so once you take 16 all of that together, you would need around a 17 450-megawatt wind generation, southern Manitoba, 18 to roughly equal the 200 megawatt Wuskwatim. And 19 that was the information that was provided this 20 morning in the -- not just this morning, but over 21 the course of the week. And the other point is 22 that that 450 is incremental to what we are 23 planning to do anyway, what is in our current 24 plan, so that would bring it up to 700 megawatts. 25 MS. WHELAN ENNS: I would assume from 1237 1 what you have just told us that the question that 2 I asked in terms of comparative cost was also 3 answered this morning? 4 MR. WOJCZYNSKI: This morning and in 5 the rebuttal, which was it seems like a million 6 years ago now, I believe that was a week and a 7 half ago. And in the material that was filed, 8 exhibit 1003 or 1004 that was filed earlier. 9 MS. WHELAN ENNS: Thank you. One 10 remaining question then on wind. In the half 11 million dollars of in-house work and preparation 12 in terms of wind projects that you are 13 undertaking, has Manitoba Hydro begun to identify 14 the elements in environmental standards and EIS 15 work for a wind project? 16 MR. WOJCZYNSKI: We have initiated 17 preliminary environmental assessment information 18 for us to be able to have better information on 19 the specifics, including specific sites. So we 20 have initiated that process, but we are certainly 21 nowhere near to having that complete. It is just 22 the beginning of that, given that we have not even 23 yet completely confirmed what would be the most 24 attractive site, but we have some pretty good 25 ideas, so we are starting that work. 1238 1 MS. WHELAN ENNS: Thank you. And 2 again perhaps from the public interest point of 3 view, there is a distinction then between starting 4 on the assessment elements and the EIS standards 5 that we are all looking for in terms of wind 6 projects in Manitoba, but thank you. 7 MR. MURPHY: Could somebody help me 8 out with the definition of a low impact hydro 9 resource? 10 MR. WOJCZYNSKI: Low impact hydro is 11 hydro which relative to other supply sources would 12 have relatively low impacts. There is many 13 different definitions one could use for low impact 14 hydro, and that is one possible definition. 15 MR. MURPHY: Is that the one that 16 Manitoba Hydro would rely upon? 17 MR. WOJCZYNSKI: That is one aspect of 18 a definition. We look -- yes, it is a description 19 of the project rather than a definition per se. 20 MR. MURPHY: Are there specific 21 factors -- what I'm interested in is whether Hydro 22 has specific factors or details in setting out 23 what a low impact hydro resource is? 24 MR. WOJCZYNSKI: We look at the 25 full -- whenever we would be trying to describe 1239 1 let's say hydro or Wuskwatim as low impact, we 2 would be considering the full range kind of 3 impacts, whether they are biophysical in terms of 4 the environment to aquatic, terrestrial, and 5 whether we are talking about socio-economic 6 impacts, so we would be considering the full 7 range. 8 MR. MURPHY: Is there a certain number 9 of megawatts that you would be looking at in terms 10 of the project? 11 MR. WOJCZYNSKI: That is a very good 12 question and I'm glad you asked that, because that 13 has been a fallacy in the public realm and in some 14 people's minds that because something is smaller 15 means that it is better. That is categorically 16 not a rule that is worth following, because you 17 look -- you can talk about hydro, you can talk 18 about other projects, but you are asking us in the 19 context of hydro, you can have a small project 20 that has on a per kilowatt basis a relatively 21 large impact, or you could have a large project 22 which has small impacts. So the size is not a 23 very good determinator of whether or not there are 24 significant impacts. More appropriate is to do a 25 detailed assessment of what all of the possible 1240 1 impacts are, and then look at that. And so we 2 certainly didn't use the size. 3 MR. MURPHY: So that wouldn't be a 4 factor in your view? 5 MR. WOJCZYNSKI: No. 6 MR. MURPHY: On the first day of 7 testimony, Mr. Wojczynski, I believe you stated 8 that all alternative options to Wuskwatim were 9 considered, is that correct? Do you recall that? 10 MR. WOJCZYNSKI: Yes. 11 MR. MURPHY: Now looking through the 12 main volumes that were filed in respect of the, 13 and this is on the JNFAAT, we could only find, and 14 this is just in the main volumes, 41 pages of 15 material relating to needs and alternatives. Now 16 I understood as well on the first day, Mr. Osler 17 saying that for the public's purposes really what 18 they need to look to are the main volumes in terms 19 of the information that they need to know. So, we 20 looked at it, we have seen 41 pages worth of needs 21 and alternatives and we have some concerns about 22 that. We have some concerns that Hydro hasn't 23 looked at needs and alternatives as thoroughly as 24 it has other areas. And this is I think backed up 25 by some of what we have heard over the course of 1241 1 the testimony. And I just want to ask you if you 2 can confirm this. What we have heard you say is 3 Hydro doesn't think that wind generation is a 4 viable alternative to Wuskwatim; is that correct? 5 MR. WOJCZYNSKI: First of all I want 6 to comment I am absolutely stunned and 7 flabbergasted by the statement that there is only 8 41 pages of material on the need for alternatives. 9 There is a vast volume of information that we have 10 provided, and you can go into the need for an 11 alternatives report itself, and there is much more 12 than 41 pages. When you are dealing with the need 13 for alternatives you have to have the relevant 14 information when you are doing a comparison, that 15 is clearly part of it. And the main submissions 16 include the attachments, for instance, that 17 technology update that we provided. So I have to 18 take great exception to when you said that we have 19 little information available in need for 20 alternatives. The other part that I would have to 21 include in that, and as I indicated on day one, 22 the EIS itself fundamentally is part and parcel of 23 the comparison of alternatives because it in 24 itself through the 18 volumes provides very 25 detailed and exhaustive information on the 1242 1 Wuskwatim impacts per se. So it would be 2 unnecessary and actually contrary being useful, it 3 would be more confusing for us to try and redo 4 something like that in the need for alternatives. 5 So clearly the logical and rational thing to do is 6 to draw on the vast amount of EIS material in 7 talking about the Wuskwatim impacts. So I can't 8 really proceed with answering your question until 9 I have dealt with the inference in your question. 10 I could go on to your question now if you want. 11 MR. MURPHY: I just wanted to clarify 12 then, are you saying that needs for alternatives 13 show up both in the justification need for 14 alternatives and the EIS? 15 MR. WOJCZYNSKI: No, that is not what 16 I was saying. What I was saying was that the need 17 for alternatives draws upon and relies on the vast 18 amount of information on Wuskwatim impacts that is 19 in the EIS. So, it is not that the EIS is the 20 need for alternatives, it is that the need for 21 alternatives draws upon it and relies upon it. 22 MR. MURPHY: I'm just trying to 23 understand having read the transcript of Mr. 24 Osler's comments about what the public really 25 needs to look at in terms of summaries and then 1243 1 what has been provided in those volumes, that is 2 where my reference to the 41 pages comes out. And 3 you may be flabbergasted by that, we were too, but 4 that is where my reference comes from. 5 MR. WOJCZYNSKI: If you go back into 6 the transcript and look at it, and if I'm wrong I 7 will be glad to be corrected, but Mr. Osler, and I 8 don't believe that you were here on day one, 9 because it was a long and large transcript, Mr. 10 Osler was presenting the EIS. So when Mr. Osler 11 is referring to what you should use and not use, 12 and if I'm wrong, please correct me, but my 13 recollection is that Mr. Osler was referring to 14 the EIS itself and the need for alternatives 15 itself is an integral document that has various 16 chapters that deal with the various aspects for 17 the need for alternative. And as I said, for 18 instance, the appendices and the technology 19 evaluation are fundamental to the need for 20 alternatives. 21 MR. MURPHY: Thank you. And I believe 22 I understand that. And I have, just for your 23 information because you made a few references to 24 it, you are correct I wasn't here on day one nor 25 day two or three. But I have had the benefit of 1244 1 the transcripts as well as briefings. 2 MR. WOJCZYNSKI: So was I correct on 3 Mr. Osler talking about the EIS? I retract that, 4 I'm sorry. I apologize for that. I think I'm 5 getting a bit too excited here, I should calm down 6 and I will do that. My apologies. 7 MR. MURPHY: You have been on the 8 stand for almost five days now, so that is 9 understandable. 10 MR. WOJCZYNSKI: Thank you for that. 11 MR. MURPHY: Just a couple of 12 questions. I'm just trying to get to the core. I 13 think what we have heard certainly over the course 14 of the testimony that you have given is that 15 really the push is that Wuskwatim is, in Hydro's 16 view it is a profitable venture, and that is the 17 primary push behind it. And we are just trying to 18 understand it in the context of the other 19 alternatives, so when we hear you say wind 20 generation isn't a viable alternative, we 21 understand that to be in an economic context. 22 When you say we don't think thermal options are a 23 viable alternative, again we understand that to be 24 in the economic context, is that correct? 25 MR. WOJCZYNSKI: The economics are the 1245 1 starting point, but our analysis and consideration 2 is quite broad. As you will recall my 3 introductory comment to my presentation was that 4 one could summarize the overall justification for 5 Wuskwatim is that it is a profitable project that 6 brings benefits to all Manitobans, and in the same 7 sentence, that it is a clean renewable energy 8 project with less environmental impact than the 9 energy sources that displace it. So, that one 10 sentence encapsulated our overall emphasis, and it 11 was multifaceted and not just dealing with the 12 economics, but certainly the economics are the 13 starting point and a big driver, yes. 14 MS. WHELAN ENNS: Would you tell us 15 whether the materials that you have filed for this 16 review -- at the end of April, 2003, in respect to 17 the JNFAAT 2 were the same material that Manitoba 18 Hydro had been preparing for the PUB hearings? 19 MR. WOJCZYNSKI: As we indicated in 20 the interrogatory, I believe it was a CNF one, I 21 don't need to reference it, but the material that 22 we were preparing when we thought we were going to 23 have a need for alternatives in front of the PUB 24 is essentially the same material except we -- it 25 was only in draft. We never had anything complete 1246 1 and we were still working on it. So we then 2 revised the draft material and it resulted in the 3 document that we have now. 4 MS. WHELAN ENNS: Thank you. 5 MR. MAYER: The stuff the PUB gets is 6 never as pretty as this. 7 MR. WOJCZYNSKI: If there would have 8 been a capital PUB, it would have been as pretty. 9 MS. WHELAN ENNS: It might even be 10 suggested that the PUB does receive considerably 11 more material at the beginning of a PUB hearing, 12 it could be suggested. We heard Manitoba Hydro 13 indicate that the decision has been made to build 14 Conawapa. 15 MR. WOJCZYNSKI: Sorry, that is not 16 accurate. We have made no decision to build 17 Conawapa. What we did was we are reinitiating the 18 studies and we have provided the preliminary 19 notification under the agreements that we have, 20 but we have absolutely made no decision to 21 construct Conawapa. We haven't even made a 22 decision to file for an environmental licence yet. 23 That would be another stage that we would consider 24 at a later date. 25 MS. WHELAN ENNS: Thank you. I take 1247 1 the correction. Has the feasibility study that 2 the Premier of Ontario and the Premier of Manitoba 3 put into place when they signed their MOU in June 4 a year ago, been filed? And does Manitoba 5 Hydro -- this is a feasibility study in respect to 6 Conawapa -- does Manitoba Hydro have access to 7 that study? It was due November, end of November. 8 MR. ADAMS: The feasibility study that 9 you are referring to is a joint study being 10 conducted by Manitoba Hydro and Manitoba 11 Government and the Ontario Government, obviously 12 therefore we have access to it. Except that it 13 isn't complete yet and therefore it is not in a 14 position to be filed with anybody. 15 MS. WHELAN ENNS: So it is not 16 complete? 17 MR. ADAMS: It is not complete. 18 MS. WHELAN ENNS: Thank you. Has the 19 communication with the affected First Nation and 20 communities in respect to the stage on Conawapa 21 that I was being corrected on, has it been filed 22 as evidence? 23 MR. WOJCZYNSKI: No, there has been no 24 filing of anything like that, and we don't see 25 that as being particularly pertinent to the 1248 1 Wuskwatim review, so we didn't see any need to 2 file it. 3 MS. WHELAN ENNS: Thank you. Could we 4 hear Manitoba Hydro's definition of a virtual dam? 5 MR. KUCZEK: We use the phrase virtual 6 dam in the PowerSmart area when we are 7 establishing DSM targets. It is just a general 8 term for a generating station that wouldn't be 9 built otherwise by achieving those conservation 10 measures. 11 MS. WHELAN ENNS: I believe we had an 12 announcement probably made by the Energy Science 13 and Technology Ministers of our sort of first 14 virtual dam in the province, was it spring last 15 year? 16 MR. KUCZEK: I'm not sure of that 17 announcement, but it is not the first in that 18 sense, because it is incremental, the DSM savings 19 that we achieve year by year. When we eventually 20 get to maybe a milestone of 200 megawatts, that 21 might have been what was referred to as a dam per 22 se, but a dam could be various sizes. 23 MS. WHELAN ENNS: I believe that 24 particular announcement was 260 megawatts. How 25 many virtual dams of 250 megawatts does your 1249 1 assessment tell you are available from DSM and 2 other measures in the Manitoba Hydro system? 3 MR. KUCZEK: I could speak to the DSM 4 numbers, and from the work that we have done so 5 far, and this isn't our new targets, but the 6 achievable potential that we have been talking 7 about has identified an estimated 184 megawatts by 8 the year 2017/18. 9 MS. WHELAN ENNS: If we were allowed 10 to be general and round some numbers, that is four 11 such virtual dams? Did you say 1000? 12 MR. KUCZEK: I said 184 megawatts and 13 the number that you quoted before was 200 14 something. 15 MS. WHELAN ENNS: So how many years 16 did it take us to arrive at that first one and 17 would it really take us that long to get to that 18 next stage? 19 MR. KUCZEK: The first number that you 20 quoted was approximately, we will use approximate 21 numbers, 250 megawatts. I think we have been 22 measuring DSM savings since 1991, and so from 1991 23 to 2000 -- okay, the 200, I think it is 24 241 megawatts. But we should, I should clarify 25 that that does include our curtailable rate 1250 1 program as well, which is approximately 2 100 megawatts. So if you take 100 megawatts off 3 that, you are down to 141 megawatts. But that has 4 been achieved since 1991 to 2001 approximately, so 5 about ten years. Now we are going forward and we 6 are talking about 184 megawatts additional from 7 now, going forward that is about 15 years. 8 MS. WHELAN ENNS: So, it is pretty 9 much the same pace, rate, pattern? Over the 10 next -- 11 MR. KUCZEK: Approximately, but I 12 think we are looking at increasing that number 13 somewhat. 14 MS. WHELAN ENNS: This power is then 15 available in the grid. Is it in any way an 16 ingredient in export plans? 17 MR. KUCZEK: It is not available in 18 the grid per se. We use the term virtual dam just 19 so that people could try to visualize these 20 savings. They are really just reduced energy use 21 within the province. So there is not energy that 22 is actually generated per se that is available in 23 the export market. What has actually happened is 24 there is energy available to be exported in the 25 market because we are not using that energy in 1251 1 Manitoba. 2 MS. WHELAN ENNS: It is not 3 specifically that energy, but thank you. There is 4 the difference I guess between then the annual 5 load reduction and the peak demand in terms of -- 6 I'm looking here at what I'm told you have in your 7 chapter 4, page 16 of DSM progress to date. Those 8 appear to be numbers from 2001, 2002. So my 9 question would be whether you have compiled any 10 data and have updates on those numbers? 11 MR. KUCZEK: We have some estimates 12 but they are not verified at this point, we are 13 still working on those. 14 MS. WHELAN ENNS: Here is another 15 general public interest question. Is there any 16 effect on Manitoba Hydro's revenues from the 17 240 -- sorry, I was 20 off, 240 megawatts that 18 were identified in the virtual dam announcement, 19 and the future figure of 184 megawatts that you 20 are aiming to increase? 21 MR. KUCZEK: The impact on our 22 revenues is from two sources. One is the lost 23 revenue that we would have realized from our 24 domestic sales, and the positive impact is the 25 increased export sales realized from the energy. 1252 1 MS. WHELAN ENNS: That trade. 2 MR. KUCZEK: Yes. 3 MS. WHELAN ENNS: I am looking at a 4 question that I think I will be told has already 5 been asked, if I may. Is there a Manitoba Hydro 6 forecast study, and this goes to our earlier 7 questions on wind, forecast study in hand, 8 specific to the DSM situation, policies and 9 projections in Minnesota? Do you know what 10 Minnesota is intending in aiming to do in demand 11 side management? 12 MR. KUCZEK: We are monitoring what is 13 going on in DSM in other jurisdictions, but we 14 don't monitor it precisely in Minnesota. So we 15 don't know the numbers there. 16 MR. WOJCZYNSKI: If I can add to that? 17 Mr. Kuczek was answering from the point of view of 18 doing our own DSM planning. But on the other hand 19 when the export forecasts are prepared, the 20 consultants who do that, for example, have more 21 specific information about the U.S. including what 22 the likely load growths will be in the future 23 including the impacts of the DSM project, so they 24 would specifically include that information. So 25 our company, like any company is divided into 1253 1 areas, and so our export forecasting area with the 2 consultants would be having some specific numbers 3 built into their work as opposed to our own DSM 4 people. 5 MS. WHELAN ENNS: Thank you. There is 6 a shift going on here to public policy. 7 MR. MURPHY: Earlier in testimony, 8 Hydro said that they expect that the project is 9 going to be of benefit to the northern communities 10 and specifically Aboriginal people. And we have 11 heard from Councillor Thomas about whether they 12 have held their own community referendum. What we 13 are wondering is whether Hydro would agree to 14 holding a NFA wide referendum to determine whether 15 the proposed project would be supported? 16 MR. ADAMS: I don't think that is a 17 relevant question to ask this panel. I think that 18 is a political answer that is best left with the 19 politicians. 20 MR. MURPHY: But in order to gauge 21 Hydro's contention that this is going to be a 22 benefit particularly to the Aboriginal peoples of 23 Northern Manitoba, isn't it worth knowing whether 24 there is support for that from the Aboriginal 25 peoples of Northern Manitoba? 1254 1 MR. ADAMS: Manitoba Hydro is 2 extensively engaged in consultations and 3 discussions and other interaction with Aboriginal 4 people throughout the north. One has to be very 5 careful using the term Aboriginal people as a 6 generic sense. I have forgotten the numbers, 7 77,000 individuals, they have probably got 77,000 8 individual opinions. But we work extensively with 9 the leadership in the communities. Clearly the 10 leadership of our partner in the Nisichawayasihk 11 believes it is beneficial. We are consulting with 12 organizations such as MKO and working with them to 13 create training programs. We have similar 14 initiatives underway with Tataskweyak Cree Nation, 15 York Factory, Fox Lake, War Lake, and other 16 smaller ones. So we have a pretty good way of 17 keeping a pulse, a finger on the pulse of the 18 Aboriginal community in the north. 19 We do discuss these things with the 20 political representatives of the northern 21 communities. So while it is impossible for us to 22 say absolutely that this or that project will 23 benefit everybody, I think we have come to a very 24 well researched and soundly based conclusion that 25 in the way that we plan to develop Wuskwatim, it 1255 1 will be beneficial to the Aboriginals in the 2 north. 3 MR. MURPHY: And I appreciate that you 4 have engaged in various meetings and discussions, 5 et cetera. I'm just wondering as part of the 6 consultations with the various communities whether 7 there has been community votes, let's say 8 community by community on the support for the 9 project, and I'm interested -- 10 THE CHAIRMAN: Could I interrupt, 11 please? I think that the question -- there are 12 two different types of questions there. One 13 having to do with consultation, which I think are 14 appropriate questions and I think Mr. Adams has 15 answered the question in regards to actually 16 organizing the province-wide opinion poll which 17 falls within the realm of the Government of 18 Manitoba. And I think that is quite correct. 19 MR. MURPHY: I thank you, 20 Mr. Chairman. We weren't asking about a province 21 wide poll or referendum, we were interested in the 22 support that was garnered from the Aboriginal 23 communities of the north. But thank you for your 24 comments. I think we have our answer on that. I 25 will move on to another question. 1256 1 MS. AVERY KINEW: I think Mr. Adams 2 was also saying to be careful about the word 3 Aboriginal, there is a difference between First 4 Nations and other Aboriginal people. Thank you. 5 MR. MURPHY: In November 2003 Hydro 6 responded to interrogatory CNF/MH/NCN 1, JNFAAT, 7 this is on public policy, PUB-POL-368a, and the 8 response was that so far no money has been spent 9 on Wuskwatim. And we would just like to get some 10 clarity on that. Is that in respect of 11 construction of Wuskwatim? Does this include, or 12 does that include any information or monies on the 13 environmental studies associated with the project? 14 We are just trying to understand -- 15 MR. WOJCZYNSKI: The issue there is 16 the question was related to public money, and so 17 we have not received any public money to do that, 18 to do anything on Wuskwatim. 19 MR. MURPHY: Okay. Thank you. So the 20 answer wasn't in relationship to no monies at all, 21 it was just in relation to no public monies. 22 MR. WOJCZYNSKI: Yes, sir. 23 MR. MAYER: If you are interested in 24 how much money was actually spent, we had a 25 significant discussion earlier in these 1257 1 proceedings about the sunk costs. We invite you 2 to read that. 3 MR. MURPHY: I know there has been a 4 lot of riveting cross-examination on that subject. 5 I was just interested in some clarity on that one 6 question. Thank you, Mr. Mayer. 7 MS. WHELAN ENNS: Just a couple of 8 questions in respect to the public consultations 9 in regards to these projects. The specification 10 then means that this does not refer to Nelson 11 House First Nations community consultations or 12 Northern Flood Agreement or Aboriginal community 13 or First Nations community consultations. I would 14 like to know whether the management at Manitoba 15 Hydro is aware that there was an enclosure put in 16 Hydro bills -- this is of course, a touch before 17 the acquisition of Winnipeg power -- but there was 18 an enclosure in all other Hydro bills in the 19 province stating that there had been a Wuskwatim 20 open house in Winnipeg. This enclosure was in the 21 bills in mid or spring 2002. 22 MR. WOJCZYNSKI: You are asking were 23 we aware? 24 MS. WHELAN ENNS: That your enclosure 25 at that point in time in Hydro bills throughout 1258 1 the province indicated that there had been an open 2 house regarding Wuskwatim in Winnipeg. 3 MR. WOJCZYNSKI: I recall something 4 like that happened. I don't remember the details 5 but I recall generally something like that 6 happened. 7 MS. WHELAN ENNS: That open house was 8 when? 9 MR. WOJCZYNSKI: I would have to get 10 the details for that, and the EIS panel is more 11 familiar with the consultations. I'm not sure 12 what you want to ask in this area, but it may be 13 more appropriate to wait for the environmental 14 panel to deal with that because the consultations 15 were done more under the auspices of the people 16 that are part of that panel, although there will 17 be people from this panel there. 18 MS. WHELAN ENNS: Fair answer. In our 19 technical work we have been taking the view, of 20 course, that consultations are relevant in both 21 regards, both reviews, and also then they are in 22 our interrogatories in both places. The point of 23 my questions then is that the open house did not 24 happen until the 28th and 29th of January in 2003. 25 MR. WOJCZYNSKI: I recall there was 1259 1 some confusion in the public communications that 2 had gone out, and I can't remember the details of 3 that, but, again, it might be better to wait for 4 the other panel, or we can take an undertaking to 5 give an explanation. But you are right, I have a 6 recollection that something happened, whether 7 there was a miscommunication in various arms in 8 the company, and that the timing, or that there 9 was a misunderstanding, but I can't remember the 10 details of that. If you would like, we could give 11 you an undertaking on that? 12 MS. WHELAN ENNS: Certainly. 13 14 (UNDERTAKING MH-29: Advise re confusion in public 15 communications about open house of January 28 and 16 29, 2003) 17 18 MS. WHELAN ENNS: And if we could add 19 to the undertaking, and I take your point in terms 20 of the EIS panel, I think it would be helpful to 21 have a fairly thorough -- and I know there has 22 been presentations so I'm not faulting that -- but 23 walking through the stages of consultation, and at 24 what point they actually occurred in Winnipeg, I 25 think is fairly important. And what the utility 1260 1 was communicating was happening is fairly 2 important. So let's call that the undertaking? 3 MR. WOJCZYNSKI: So, you are 4 looking -- is that the same undertaking or a 5 second undertaking? 6 MS. WHELAN ENNS: Connected. 7 MR. WOJCZYNSKI: I think what we are 8 talking about is that during the environmental 9 panel that we have a discussion of how the 10 consultations were undertaken, and at what stage, 11 and include some specific reference to what 12 happened in Winnipeg; is that fair? 13 MS. WHELAN ENNS: Yes. And if we were 14 to identify a couple of questions then for that 15 panel, at what stage in the consultations was 16 there information for Winnipegers, in the time 17 line and in the sequence in terms of your five 18 stages of consultation? We also would perhaps be 19 inclined then to ask then questions about the 20 nature of the three day -- or was it two day -- 21 workshop in July of 2003 and its part in your 22 consultation plan? 23 MR. WOJCZYNSKI: Sure. We will be 24 glad to take that as an undertaking -- it was 25 three days -- but, yes, we would be glad to do 1261 1 that as an undertaking. Thank you. 2 3 (UNDERTAKING MH-30: Advise re consultations 4 undertaken, at what stage there was information 5 for Winnipeggers, and advise nature of three day 6 workshop in July 2003) 7 8 MS. WHELAN ENNS: We are again in CNF 9 interrogatory JNFAAT 371d. Your answer then 10 states that Robert Brennan, the president and CEO, 11 in consultation with your executive committee of 12 the utility is ultimately responsible for Manitoba 13 Hydro's compliance with climate change policies, 14 that is Manitoba's climate change policies, the 15 Kyoto Protocol, and then the climate change policy 16 at Manitoba Hydro. Is that correct? 17 MR. ADAMS: Yes, it is. 18 MS. WHELAN ENNS: Could you provide us 19 all with a copy of Manitoba Hydro's climate change 20 policy? 21 MR. ADAMS: We've provided all of the 22 material that we have on the policy. I can't 23 refer to it offhand, but, again, it is an 24 undertaking that we can do and refer you to the 25 appropriate responses. 1262 1 2 (UNDERTAKING # MH-31: Identify appropriate 3 responses re Manitoba Hydro's climate change 4 policy) 5 6 MS. WHELAN ENNS: So you are 7 referring to contents in the filings to date. 8 Does Manitoba Hydro have a specific 9 current role in arriving at an energy plan for the 10 Province of Manitoba? 11 MR. ADAMS: Manitoba is involved in 12 discussions and advice to the Government in 13 developing the Province's energy plan, yes, in 14 areas where we have competence. 15 MS. WHELAN ENNS: Does Manitoba Hydro 16 support having a transparent, and publicly 17 available, and understandable inventory of carbon 18 stocks and GHGs for the Province? 19 MR. ADAMS: Manitoba Hydro supports a 20 policy of making its own carbon stocks and carbon 21 issues transparent. Anything beyond that is 22 Provincial policy and has got nothing to do with 23 us. 24 MS. WHELAN ENNS: Does Manitoba Hydro 25 support having a public reporting of the budget or 1263 1 allocation in respect to carbon and GHGs for your 2 developments, both generation station and 3 transmission lines? 4 MR. ADAMS: Could you repeat the 5 question please? 6 MS. WHELAN ENNS: They are sort of 7 connected, I will try again. Does Manitoba Hydro 8 support having, again based on having an inventory 9 of your projects, taking your point, do you in 10 fact support having a budget or allocation 11 reporting system that is transparent, in regards 12 to carbon stocks and GHGs for any of your 13 operations or developments, including transmission 14 systems? 15 MR. ADAMS: I think I already answered 16 that. 17 MS. WHELAN ENNS: The first question 18 was whether or not you support having an 19 inventory. The second question then is about 20 whether or not the inventory moves to a budgeting 21 and allocation process, and information in respect 22 to your operations and projects that would also be 23 transparent? So I think it is yes? And I 24 appreciate your answer. 25 MR. ADAMS: That is an awful long 1264 1 question for a short answer. 2 Manitoba Hydro is prepared to make 3 public, and it does already through the VCR 4 program which we discussed extensively yesterday, 5 all of its carbon related initiatives. I'm not 6 too sure that we want to get to allocating budgets 7 between transmission lines and generating 8 stations, because we tend to treat it all as a 9 global impact rather than as a specific impact. 10 But in so far as we are able to make the numbers 11 public and live with the consequences, absolutely. 12 MS. WHELAN ENNS: Then does Manitoba 13 Hydro support and aim for, in its resource 14 planning and development planning, a no net gain 15 in emissions policy and a no net loss in carbon 16 policy? 17 MR. ADAMS: Manitoba Hydro's target is 18 to be 6 percent below its 1990 levels by the Kyoto 19 time frame. 20 MS. WHELAN ENNS: Would you then apply 21 this kind of objective specifically on a project 22 by project basis? 23 THE WITNESS: No, we apply it on a 24 system basis. 25 MS. WHELAN ENNS: In your earlier 1265 1 answer you made reference to taking a project like 2 we are reviewing, that is a generation station 3 with a transmission system, that is part of the 4 proposal, and reviewing and assessing and 5 providing then these numbers as a whole for the 6 projects together. Did I hear you correctly? 7 MR. ADAMS: We are prepared to do it 8 for our whole system. So what we count is the 9 carbon emissions that we do on a project basis -- 10 on a system wide basis, and compare that with what 11 the emissions were in 1990 and other years. 12 MS. WHELAN ENNS: Would Manitoba Hydro 13 move to doing this on a project basis? 14 MR. ADAMS: No. Climate change is a 15 global issue, not a project issue, and it makes 16 much more sense from our perspective to do it at a 17 system level. 18 MS. WHELAN ENNS: Would you inform us 19 then how the public, or affected communities, or 20 other energy developers in the Province, or 21 regulators, would know what your assessment is of 22 the impact from a significant transmission 23 project? 24 MR. ADAMS: We will share that 25 information through the EIS. But remember, over 1266 1 actually all of that we have a commitment that 2 says that by 2008, 2012 budget period, the Kyoto 3 budget period, Manitoba Hydro's emissions will be 4 6 percent below their emissions in 1990, on a 5 system wide basis. 6 MS. WHELAN ENNS: Does Manitoba Hydro, 7 in your own internal planning and policy 8 discussions, consider the need for Manitobans to 9 have a greater understanding of climate change and 10 the benefits that might come from transparent 11 information in regards to project-by-project or 12 region-by-region impacts? 13 MR. ADAMS: Again, we don't think that 14 project-by-project is an appropriate approach, but 15 I think maybe Mr. Kuczek can respond to the 16 activities that we are involved in, in 17 communicating the issues of climate change to 18 Manitobans as a whole. 19 MR. KUCZEK: I believe it was in 2001, 20 the Climate Change Connection was formed in 21 Manitoba. We are one of three funding partners to 22 that organization. It is a public education and 23 outreach organization. We participated with that 24 organization on workshops throughout Manitoba to 25 try to educate customers on climate change issues, 1267 1 as well as means of accomplishing emission 2 reductions through reduced energy use, or 3 efficient use I should say. 4 MS. WHELAN ENNS: Has there been any 5 determination by Manitoba Hydro as to which of the 6 recommendations of Manitoba's -- Manitoba and 7 Climate Change, Investing in Our Future, this is 8 commonly referred to as the Axworthy task force 9 report -- are supported by the utility? 10 MR. WOJCZYNSKI: I reference you to 11 CNF/NFAAT climate change 381b, and we were 12 responding to CNF's question on that issue at the 13 time. And so we could go through that, if you 14 like, but in that answer we summarized our actions 15 in support of the recommendations of the Axworthy 16 task force, and gave some indication of impacts. 17 And this is, there is a lot of this information 18 that is similar to what is in the VCR report that 19 we filed, although this is now specific to the 20 Axworthy report. And I might add that we 21 participated in the Axworthy process in terms of 22 appearing at their hearings and are generally 23 supportive of the recommendations. But if you 24 like, we could go through 381b, if that is what 25 you wanted to do? 1268 1 MS. WHELAN ENNS: I don't believe that 2 we need to go through it. We have had aspects of 3 an answer on this. The intention today was to in 4 fact ask a sequence of questions together, for the 5 panel, and it goes of course to the larger 6 pattern, the consistent pattern in our review work 7 and in the interrogatories, in terms of Manitoba 8 Hydro as a public utility, and the relationship 9 then in the utility's operation's own policies and 10 developments to public policy in the Province? 11 MR. WOJCZYNSKI: Perhaps I could just 12 briefly summarize, rather than go through the 13 whole thing then, and see if this suffices, and if 14 not, you can let us know. 15 Generally, we are supportive of the 16 task force recommendations. We are quite 17 cognizant and appreciative of the fact that the 18 task force, after hearing from Manitobans and 19 looking into the issue themselves, that they 20 concluded that Manitoba's low impact renewable 21 hydro resource is an option and a positive role 22 for reducing global greenhouse gases. And where 23 some of the recommendations of the task force 24 don't apply to Manitoba Hydro, others do. And I 25 won't try to summarize everything that is in here, 1269 1 but we, in our strategic planning, we think about 2 greenhouse gases. We consider when we are doing 3 major new projects, and the generation ones are 4 the obvious ones, we certainly explicitly think 5 about the greenhouse gases that are going to be 6 involved, both for what we reduce on the export 7 side, but also we voluntarily had prepared a 8 greenhouse gas emissions analysis of Wuskwatim and 9 its alternatives, which was the Pembina Institute 10 report that I believe you would be familiar with. 11 If you go on to the other Axworthy 12 recommendations, they refer to energy efficiency 13 program incentives. We had and are continuing to 14 have extensive discussion here about DSM, so I 15 don't think I need to repeat that in here. We are 16 talking about working with the Federal Government 17 to provide clean alternatives to sustainable power 18 to remote off grid Northern communities. We had a 19 discussion the other day about the diesel 20 communities and what Manitoba Hydro did back in 21 1992, I believe it was. But anyways, in the early 22 '90s, we did on our own a study for the diesel 23 communities, rather than just expanding the diesel 24 in those communities, we did our own study and 25 said, well, are there other alternatives? We 1270 1 looked at central supply, we looked at other 2 things, and we concluded that there were things 3 that could be done, but that the communities 4 themselves needed to be involved in that process. 5 And we were talking with those communities, we 6 provided them a report, provided the Federal 7 Government, and we supported actively and 8 financially the communities when assessing 9 alternate means of electricity supply to those 10 communities. 11 And now they have taken the lead and 12 we are quite pleased with what they have done. 13 Again, we are still supporting -- where they 14 looked at mini hydro, they looked at wind and mini 15 hydro, and concluded that mini hydro was the way 16 to go. Anyways, that is underway. 17 Changing the approach to purchasing 18 from energy producers -- the reference in the 19 Axworthy report is, purchasing at the equivalent 20 cost of production is a barrier. I think in our 21 view there was a bit of a misunderstanding 22 perhaps, but our NUG policy actually is -- and we 23 talked about this at some length the other day -- 24 does provide, not just on a production basis, but 25 on effectively a flow through of the market value, 1271 1 or the export value. 2 To the degree that we have an 3 influence in other areas of climate change, we are 4 working in them. We are working with the 5 Provincial Government, supporting them, and 6 looking at climate change reduction mechanisms. 7 And the most recent example of that is the Chicago 8 climate exchange, where we are one of the first 9 entities to join and support that, and actually be 10 purchasers in the first options. Mr. Cormie could 11 speak on that if you would like. We were 12 instrumental, or one of the instrumental 13 organizations in getting that off the ground and 14 supporting that. 15 Now that we have amalgamated with 16 Winnipeg Hydro, we are dealing with recommendation 17 8 to try and do something about the energy 18 efficiency in the Winnipeg Hydro area. 19 Number 9, assure Aboriginal peoples 20 partnership in energy projects in an equitable, 21 inclusive and timely manner. We are certainly 22 doing that. We talked about that. 23 Sponsor research to address climate 24 change impacts on reservoirs and water levels -- 25 we have had various interrogatories that deal with 1272 1 that, and we are continuing to do new work on both 2 what are the emissions from our reservoirs, and we 3 know they are very, very low, but exactly how low 4 they are and how do they vary. 5 And then secondly, we are also looking 6 at climate change impacts on our system, and we 7 are doing a lot of work on that. If you want we 8 can go through that, but I expect -- 9 MS. WHELAN ENNS: I think -- 10 MR. WOJCZYNSKI: Is that satisfactory? 11 MS. WHELAN ENNS: Just for the record, 12 I indicated that we probably didn't need to go 13 through that. I have three questions left in this 14 section. I'm anticipating -- the Chair has been 15 looking at his watch. 16 THE CHAIRMAN: Yes. 17 MR. WOJCZYNSKI: I am sorry, I 18 misunderstood then. I thought that is what you 19 wanted. Sorry. 20 MS. WHELAN ENNS: Thank you. Are 21 there any specific recommendations then of the 22 task force that Manitoba Hydro does not support? 23 MR. WOJCZYNSKI: The only one that I 24 can think of right now is where it said change the 25 NUG approach away from production. And as I said, 1273 1 I think that was a misunderstanding, and that we 2 have already done that, and we are doing the flow 3 through. So I don't know, it is not a 4 disagreement with their intent, it was just that 5 it was already being done. 6 MR. ADAMS: I might expand upon that. 7 As Mr. Wojczynski said at the outset, several of 8 Mr. Axworthy's task group recommendations were 9 specifically directed at Manitoba Hydro, and we 10 have responded to those. I'm not too sure that 11 right now we are in a position to say we have an 12 opinion or not have an opinion on many of the 13 recommendations, which really don't affect us as a 14 company, or we can not effect as a company, except 15 that we all happen to live in the province. 16 MS. WHELAN ENNS: I think that is a 17 valid observation. I think those that have 18 relevance in terms of regulatory matters and 19 licencing would perhaps be a bit of a crossover, 20 but, again, I don't have any questions specific to 21 that, and thank you. 22 Are there any Manitoba or Canada 23 climate change policies, legislation, or 24 regulations, which Manitoba Hydro considers itself 25 to be bound by? 1274 1 MR. ADAMS: Sorry? 2 MS. WHELAN ENNS: I'm being helped 3 here. Counsel is telling me that is pretty wide. 4 Certainly, we are in the room reviewing a new 5 combined generation and transmission project. 6 Let's keep that context then. 7 It would be then policies, 8 regulations, or legislation regarding climate 9 change, National or Provincial, that Manitoba 10 Hydro is bound by? 11 MR. ADAMS: As of today, I'm not aware 12 of any Federal or Provincial legislation or 13 regulations pertaining to climate change. There 14 is a Federal intent that if the Kyoto Protocol 15 ever comes into place, then Canada will presumably 16 enact legislation and the appropriate regulation 17 to go with it, and we will be bound by that. 18 In the interim, we are assuming that 19 there will be mechanisms in place to allow trading 20 of things like carbon credits, that the objective 21 is to reduce carbon emissions. So we have set our 22 own policy of essentially meeting the Kyoto 23 targets internally. 24 The Province, again, to my knowledge 25 has no regulations or legislation. There are 1275 1 emissions reporting requirements, and obviously if 2 there is a requirement we will stick by it. And 3 we are working with various groups in the Province 4 as they evolve, from the Provincial perspective, 5 and we expect to be a significant part of that. I 6 don't know -- 7 MS. WHELAN ENNS: That is fine, thank 8 you very much. 9 And one last question then, in this 10 sequence of questions, I think it is straight 11 forward, and that is; does Manitoba Hydro agree 12 with all of the net benefit figures in Kyoto and 13 beyond, which is a Manitoba Government report? 14 Many of the sections in this report specifically 15 refer to net benefits in relation to hydro 16 development, so that would be the context of the 17 question? 18 MR. ADAMS: I'm not too sure it is for 19 us to specifically agree or disagree with the 20 Government, but in principle, we agree with what 21 was in that report. I think it was three years 22 ago, so it took me a few minutes -- 23 MS. WHELAN ENNS: September 2002 -- 24 the advance report was June 2002, and then this 25 product went to the Canadian Council, Ministers of 1276 1 the Environment when it was held in Manitoba in 2 September of 2002. 3 MR. ADAMS: So to the extent that 4 things may have changed since then, the world 5 continues to revolve, and we are comfortable with 6 it. 7 MS. WHELAN ENNS: Thank you. 8 THE CHAIRMAN: At this point I gather 9 you have completed the questions that you intended 10 to ask? 11 MS. WHELAN ENNS: This section. 12 THE CHAIRMAN: On this section, all 13 right. We will adjourn. We will take a break. 14 15 (HEARING RECESSED AT 3:15 P.M AND 16 RECONVENED AT 3:25 P.M.) 17 18 19 THE CHAIRMAN: Ladies and gentlemen, 20 we would like to get going again, time is going 21 by. 22 MR. WOJCZYNSKI: Mr. Chair, there was 23 one undertaking on the newspaper -- pardon me, on 24 the bill insert, and I don't have the specific 25 dates, but as I was indicating earlier, I knew 1277 1 something had happened. I just got some 2 clarification over the break that there had been a 3 miscommunication in the company. Our bill insert 4 incorrectly gave when something was going to 5 happen, and it happened later on, and there was a 6 mix up, and it was a Manitoba Hydro mix up, and so 7 the bill insert had some inaccurate information, 8 and we regret that happened. Certainly, it was 9 not deliberate by any means. So, we had our plans 10 to do something in a certain time frame, and plans 11 changed, and the internal communication didn't 12 keep up. 13 So, we apologize to the public and to 14 anybody else who found that disconcerting. 15 Mistakes do happen and we regret that happening. 16 I am not sure if there is anything 17 else that is required. I don't know if that 18 suffices? 19 There were also questions about our 20 consultations and when we did what in Winnipeg, 21 and that we could do with the EIS panel, when we 22 had what meetings in Winnipeg. In terms of the 23 insert, that was the case there. As I said, I 24 don't know, does that satisfy your question? And 25 we will do the other stuff later as well? 1278 1 MRS. WHELAN ENNS: Yes, thank you very 2 much. The subsequent double open house, if you 3 will, where the first night was Nelson House, 4 First Nation, and if I may make the comment, my 5 Cree is lousy, I would really embarrass myself, so 6 I am going to have to work on the name Nelson 7 House First Nation. But we did subsequently have 8 an evening that was the environmental community 9 and organizations, and scientific community, 10 Manitoba Hydro, and Nelson House First Nation, 11 open house on 28th of January 2003, and then the 12 following evening was a public open house, and I 13 think it went well. Thank you. 14 In answer to the question from the 15 Chair before we broke, we have very few questions 16 left. I basically have gone through to identify 17 what can be part of the EIS questions. So, we 18 should probably move pretty quick, 15 or 20 19 minutes. 20 THE CHAIRMAN: Proceed. 21 MRS. WHELAN ENNS: I appreciate that 22 Manitoba Hydro is hearing a certain amount of 23 repetition in concerns from us. We are in the 24 hearing, and not everyone has read everything, 25 including, it is not feasible for the panel 1279 1 themselves to have gone through all of the 2 materials. That's part of then the obvious 3 reasoning in terms of what we are prioritizing. 4 That's a little bit of preamble on the fact that 5 this might be considered repetition also. 6 Does Manitoba Hydro have a definition 7 of the precautionary principle? 8 MR. WOJCZYNSKI: We don't have a 9 definition per se, but we do think about it and 10 are certainly aware generally, and in our planning 11 generally apply it in a broad sense. But we don't 12 have an official formal policy that this is the 13 precautionary principle and that's how you should 14 apply it. 15 MRS. WHELAN ENNS: Thank you. Is 16 Manitoba Hydro aware that the responsible agency 17 under the Canadian Environmental Assessment Act 18 for this review is bound by both public policy and 19 their own legislation -- this is Fisheries and 20 Oceans federally -- in respect to the 21 precautionary principle? 22 MR. WOJCZYNSKI: We are aware that any 23 responsible authority is bound by the various laws 24 and regulations, and CEAA being a part of that, 25 and that the precautionary principle is part of 1280 1 the overall federal picture there. 2 MRS. WHELAN ENNS: Thank you. Were 3 the precautionary principle of standard, for 4 instance, in the Environmental Impact Standard 5 Guidelines or the JNFAAT referenced for this 6 review, we could find ourselves with a different 7 scope and/or with other studies, or different 8 approaches and review being undertaken. Some of 9 those might take more time, imagine, given the 10 year we have had all had. 11 The obvious question then is whether 12 Manitoba Hydro has given consideration to the fact 13 that the precautionary principle might in fact 14 cause things to take longer? 15 MR. WOJCZYNSKI: I don't know if we 16 are in a position to comment on that, how much 17 longer it would have taken or what the differences 18 would have been. 19 The only comment -- well, I can make 20 two comments right now I suppose. One is that it 21 is probably more of an EIS issue than NFAAT, 22 generally speaking more so. And secondly, we 23 think that proceeding with Wuskwatim actually is 24 consistent with the precautionary principle 25 overall. 1281 1 MRS. WHELAN ENNS: Thank you. In the 2 response to interrogatory -- this is round one, on 3 methods, 384b -- there is an indication that 4 Manitoba Hydro has undertaken studies on the 5 ongoing and accumulating harms associated with 6 Hydro development in Manitoba. 7 MR. WOJCZYNSKI: Sorry, that was 384b? 8 MRS. WHELAN ENNS: 384b. 9 MR. WOJCZYNSKI: I was looking at 10 383b, sorry. 11 We have literally thousands of studies 12 on our existing system. 13 MRS. WHELAN ENNS: I believe that what 14 I have in front of me is a reference to your 15 answer being in terms of, in direct relation to 16 the current proposal, which is a future 17 development. 18 MR. WOJCZYNSKI: Yes, and we are -- I 19 assume here we are talking more EIS than NFAAT, 20 but, yes. 21 MRS. WHELAN ENNS: Again a predictable 22 query, how much of the thousands of studies or a 23 summary of them is available to the public or 24 affected communities? 25 MR. WOJCZYNSKI: I am not in a good 1282 1 position to answer that. I think we probably 2 should leave that to the EIS panel who are more 3 familiar with that material. I know a large 4 amount is certainly publicly available, but what 5 documents may or may not be, and where are they 6 all, I don't have that at my fingertips. I would 7 rather we deferred to the EIS panel on that. 8 MRS. WHELAN ENNS: Thank you. 9 Manitoba Hydro recently added a document called 10 "The Social Net Benefits of Wuskwatim Versus Wind 11 Development" to the work products and reports as 12 part of this review. I believe I received it on 13 Thursday or Friday of last week. What we would 14 like to ask is to be able to pose questions in 15 relation to that document when we are doing the 16 EIS questions? 17 MR. WOJCZYNSKI: I am sorry, we issued 18 it as part of the rebuttal on Friday, 19 February 27th. I think we are talking about 20 that document? 21 MRS. WHELAN ENNS: Yes. 22 MR. WOJCZYNSKI: Okay. I have that, 23 yes. 24 MRS. WHELAN ENNS: And it is a simple 25 question. In terms of being right up against the 1283 1 start of hearings, in terms of everybody's 2 workload, we would like to return to that when we 3 are dealing with the EIS panel? 4 MR. WOJCZYNSKI: I am sorry, I was 5 somewhat distracted there, I apologize. Could you 6 please repeat the question? 7 MRS. WHELAN ENNS: Just a comment on 8 it being something that arrived just before the 9 hearings began, where the public participants have 10 not been able to finish their look at it, and a 11 query whether we in fact can pose a few questions 12 on it when we have the next -- 13 MR. WOJCZYNSKI: I think, if you want, 14 we could have Marv Shaffer, the person intimately 15 involved in this preparation, available tomorrow 16 afternoon or tomorrow evening. I don't know that 17 we can make him available in the EIS. It wasn't 18 part of the EIS submission. 19 MRS. WHELAN ENNS: So you would prefer 20 tomorrow afternoon or tomorrow evening? 21 MR. WOJCZYNSKI: Yes, please. 22 MRS. WHELAN ENNS: Thank you. 23 Otherwise, just to repeat what I said, I had a 24 fairly good look over questions we had identified 25 and the majority of them in fact do relate or can 1284 1 also relate to the EIS panel. So that is the end 2 of questions for me. 3 MR. MURPHY: Yes, Mr. Chair, I have no 4 further questions either. I just wanted to speak 5 to perhaps procedural matters. I am wondering if 6 we can enter into exhibit the interconnections 7 generation queue, a one-page document that was 8 provided earlier this afternoon? 9 MR. GREWAR: Is it not already part of 10 the full documentation? So I don't know that it 11 needs to be entered separately. 12 MR. MURPHY: I think it was just 13 referenced separately. It was a link that was 14 provided to a website, and I am not sure that it 15 was in previously. But, if it is, then that is 16 sufficient for us. 17 MR. WOJCZYNSKI: Is that the 18 transmission study queue that we are talking 19 about? I don't have the document in front of me 20 so I am not clear -- 21 THE CHAIRMAN: The transmission 22 interconnection generation queue. 23 MR. WOJCZYNSKI: Yes, that hasn't been 24 on the record so far, Mr. Grewar. I believe CNF 25 is correct in that, that is something new they 1285 1 just put forward. 2 MR. GREWAR: That is fine. We would 3 enter it as CNF exhibit 1000. 4 THE CHAIRMAN: Thank you, Mr. Grewar. 5 6 (EXHIBIT CNF 1000: Interconnections 7 generation queue) 8 9 MR. WOJCZYNSKI: Just for the record, 10 I think we made this clear earlier, but that is 11 publicly available on the website, but it hasn't 12 been on the record in this procedure. 13 THE CHAIRMAN: Thank you, Ms. Whelan 14 Enns and Mr. Murphy. 15 MR. WOJCZYNSKI: Mr. Chair, we have 16 one more undertaking, if this is a good time? 17 THE CHAIRMAN: Yes. 18 MR. WOJCZYNSKI: There had been a 19 question on page 983 of the transcripts, 20 undertaking Manitoba Hydro 23, and we were asked 21 to advise whether the LCG Consultants forecast of 22 gas prices is higher than others. 23 What we can indicate is the LCG gas 24 price forecast was made up of a blend of EPRI, 25 Department of Energy, and DRI-WEFA, the Global 1286 1 Insights, the people we talked about earlier, 2 prices in the medium term, that is out something 3 like 12 years. They had a simple escalation of 4 2.3 percent after that due to the supply/demand 5 shortfall after 2020. This is in terms of gas. 6 The increasing natural gas price forecast is based 7 on LCG's understanding of the market from their 8 work with EPRI, the Electric Power Research 9 Institute, relating to upward pressure on natural 10 gas prices in the future. LCG used the EPRI 11 report, gas supply outlook gage well head of 12 deliverability now and in the future, it was a 13 February 2002 report, which does not specifically 14 provide a natural gas forecast, but rather a view 15 of the gas supply in the future. The report 16 compared several estimates of recoverable natural 17 gas results in the U.S. The comparison indicates 18 that there are significant reserves available. 19 However, EPRI states that the estimates are not 20 directly comparable as they do not necessarily 21 count the same type of gas reserves. EPRI also 22 states that although it may be technically 23 feasible to recover the resource, it may not be 24 economically feasible. The EPRI report concludes 25 there is uncertainty that the new source of supply 1287 1 can be provided in time to supply the market 2 demand. 3 There is even, for your information, 4 this morning in The Globe, Petro Canada announced 5 they are going to go further afield to other 6 countries in the world because they are having 7 trouble keeping the reserves up. This is 8 consistent with the kind of thing LCG has said and 9 consistent with what we talked about the other 10 day, that natural gas prices are going higher and 11 higher. Thank you. 12 THE CHAIRMAN: Thank you. We will 13 continue now with TREE, Time to Respect the Earth, 14 and Resource Conservation Manitoba. I believe you 15 are Mr. Miller? 16 MR. MILLER: That's correct. 17 THE CHAIRMAN: Welcome. You may 18 proceed to introduce yourself, and with your 19 questions. 20 MR. MILLER: Thank you very much. 21 Yes, I am Peter Miller, representing 22 TREE in this intervention, Time to Respect Earth's 23 Ecosystems, who are partnering with Resource 24 Conservation Manitoba in this intervention. 25 Our technical expert will be Mr. Ralph 1288 1 Torrie. He is in the hotel working hard at 2 various projects that relate to this proceeding, 3 and he will be in. I have some less numerical 4 questions to pose, more policy program-orientated 5 questions, which may take us part of the way 6 there. 7 My first question, I think, is for 8 Mr. Adams. A number of references have been made 9 to consultations with the environmental 10 participants which help to shape your approach. I 11 am wondering if you could give examples of where 12 the consultations with the environmental 13 participants may have shaped your approach? You 14 have done that with the NCN, but I am wondering if 15 there would be any particular aspects of this that 16 you would identify as stemming from those 17 consultations? 18 MR. ADAMS: It is always difficult to 19 attribute a specific action, or change in action 20 to a specific event. There is no doubt that after 21 many years of consultation with many, many groups, 22 we have tended to see things from many different 23 perspectives, and modify our view of the world in 24 light of many of those perspectives. 25 I think a good example is the attempt 1289 1 to try to do a joint approach to determining DSM 2 opportunities. Clearly, the modification of the 3 design of the generating station at Wuskwatim was 4 heavily influenced by Nisichawayasihk, but also 5 reflecting the sorts of things we are hearing from 6 other participants -- or not participants at the 7 time, but consultees. 8 Quite a few of our mitigation 9 practices have been shaped by feedback that we 10 have got, and a good example is the forest 11 enhancement program that we have. I could go on, 12 but, I mean, the whole concept to sustainable 13 development and in response to climate change has 14 been in part shaped by things that we hear from 15 the outside communities. 16 MR. MILLER: Thank you. This will be 17 kind of blended in with what you have heard from 18 many, many quarters, except for the DSM, which 19 would be a particular invitation to environmental 20 participants. 21 MR. ADAMS: Yes. 22 MR. MILLER: Thank you. Councillor 23 Thomas, I have a question for you. In this 24 rebuttal of TREE/RCM's position, you and Manitoba 25 Hydro mention plans to develop, in partnership 1290 1 with NCN, a community energy efficiency plan for 2 local residents, as well as a training action plan 3 for housing authority personnel, and the later, 4 the action plan, will train housing authority 5 personnel to establish local expertise and energy 6 efficient construction, efficient use of energy, 7 and proper care and maintenance of heating and 8 ventilation systems, and have an educational 9 component to the students as well. 10 Can you describe how this program came 11 about? 12 MR. KUCZEK: Mr. Miller, I can maybe 13 add some context to that because I am involved in 14 that, or my people are involved in that. We have 15 had requests for various market sectors that would 16 like customized advice in terms of energy 17 efficiency. NCN is one of those customers. And 18 it is not just NCN, we are looking at a few other 19 First Nation groups, and we are piloting this 20 program with NCN. We are also talking to 21 Pukatawagan, it is another First Nation 22 organization. And we are also talking to the 23 diesel communities. 24 It is at the early stages of program 25 design right now. What we are planning to do 1291 1 there is consult with the First Nation people, the 2 elders, and the councillors, and some other 3 people, to seek advice how best to achieve this in 4 the communities. 5 MR. MILLER: Okay. Thank you. It is 6 in the very early planning stages at this point? 7 MR. KUCZEK: That's correct. 8 MR. MILLER: Did this arise, and 9 perhaps Councillor Thomas can answer this, was 10 there some specific request in the course of your 11 negotiations or discussions with Hydro where this 12 was an identified need in your community? 13 MR. THOMAS: We have -- when we 14 started being involved in discussions and 15 negotiations, we look at ways to see if we can 16 improve the existing circumstances in regard to 17 the use of energy in our community. We focus on 18 housing, we focus on whether or not there is 19 demand side efficiencies that can be looked at. 20 And these are some things that are being put 21 forward by our people as areas of concern. And we 22 put it forward to Hydro, and this is the result 23 where they are developing some programming to 24 address those areas of concern. 25 MR. MILLER: Thank you. Would you 1292 1 characterize this as arising from the Wuskwatim 2 development or is this more of an independent 3 theme? 4 MR. THOMAS: This has been a concern 5 of our community for quite some time, and has been 6 around prior to the discussions around Wuskwatim, 7 but certainly Wuskwatim has impacted on those 8 concerns. And as a result, you have activity 9 occurring now designed to address those areas of 10 concern. 11 MR. MILLER: Right. Thank you. 12 Mr. Kuczek, I believe you said that 13 you are thinking of piloting it with Nelson, 14 perhaps because you have a more extensive working 15 relationship with them. 16 MR. KUCZEK: As well as Pukatawagan. 17 MR. MILLER: Pukatawagan as well. 18 MR. KUCZEK: And four diesel 19 communities. 20 MR. MILLER: Okay. That was going to 21 be another follow-up of mine. You may recall at 22 the 2002 rate update hearings, the question was 23 raised as to whether in the diesel communities in 24 particular, where you have extremely high costs -- 25 and perhaps someone can give a figure of the cost 1293 1 per kilowatt hour of electricity there? 2 MR. MAYER: 79 cents. 3 MR. MILLER: 79 cents? You have been 4 listening to this recently, I gather. That is 5 accurate I assume. 6 Surely, you're not looking at 6 cents, 7 you are looking at a much higher threshold in 8 those communities as to the payback. Have you 9 already begun this in the diesel communities? I 10 think, if I can recall the 2002 hearing, the 11 question was put, do you have any specialized 12 program, other than the bill stuffers that are 13 available to any customer, targeted at the DSM and 14 the diesel communities, and the answer was no, I 15 believe, at that time. I am just wondering if you 16 could give an update as to the degree of progress 17 and when the progress may have occurred in 18 reaching your current circumstance? 19 MR. KUCZEK: A significant portion of 20 the progress occurred last fall/winter. This is 21 where the manager of retail sales was asked to 22 come up with a plan. So, he did that up to 23 Christmas and we have been discussing it since. 24 It is really on paper right now, and I think a few 25 discussions have gone with the communities, 1294 1 various people in the communities. 2 MR. MILLER: I am wondering if your 3 department was aware that a similar proposal came 4 forward from the environmental consultations, 5 perhaps in the fall of '99 or early 2000? We had 6 some members from Hollow Water there, and they, 7 like many folks, were expressing concern about the 8 price of hydro-electricity, and were suggesting 9 initially that maybe they should get a better deal 10 and we discussed instead of subsidizing rates, 11 implementing a DSM program. 12 I believe there were folks in your 13 department who thought that was a good idea. I am 14 just wondering if that had any impact in terms of 15 your planning at the time? We are talking about 16 three or four years ago? 17 MR. KUCZEK: It is difficult for me to 18 say whether they had an impact. I wasn't involved 19 at that point. 20 MR. MILLER: Would there be anyone 21 else from your department who might have that 22 information? 23 MR. KUCZEK: I could find out. Nobody 24 back here does. 25 1295 1 (UNDERTAKING MH-32: Advise if implementing DSM 2 program had any impact in terms of planning) 3 4 MR. MILLER: Would it be fair to say 5 that the relationship being established through 6 the Wuskwatim process has been a catalyst to 7 acting on these concerns, which I am sure you have 8 heard on many occasions? 9 MR. KUCZEK: Not really, no. We have 10 been concerned about the First Nations communities 11 and other customer segments as well for a number 12 of years. We have been discussing First Nation 13 communities and how we can help with energy 14 efficient programs for at least three years, maybe 15 four years. So, it wasn't really a catalyst to 16 move it forward, I would suggest. 17 MR. MILLER: Has it in any other 18 instance gotten beyond the discussion stage? I 19 take it that it is still at the discussion stage 20 with Nisichawayasihk? 21 MR. KUCZEK: It is at the discussion 22 stage. It is more consultation stage at this 23 point. We really would like to get advice from 24 the communities on what would work best. We did 25 have an initiative, and I can't think of the 1296 1 communities, but the -- just one second. When we 2 put in a land line to the north central region, we 3 had an initiative there where we actually hired a 4 First Nation person to lead an initiative, energy 5 efficiency initiative in those communities, to try 6 to promote energy efficiency. 7 So, we did have some success there and 8 some experience, but we didn't think that model 9 was the best model, so we are looking for 10 alternatives that would work better. 11 MR. MILLER: So, in the various 12 instances you have cited, it has piggybacked on 13 some kind of either generation or transmission 14 development, rather than being an independent 15 initiative, say, taken by your department? 16 MR. KUCZEK: I don't think it has to 17 be piggybacked on the generating station 18 initiative. I think it is really more coming up 19 with a program and taking into consideration the 20 culture and the nature of the people involved. 21 You're really dealing with human behaviour here 22 and trying to firm and shape it, if I want to 23 steal Mr. Wojczynski's terms here. 24 MR. MILLER: Would it be fair to say 25 that this process has accelerated in the last 1297 1 year? 2 MR. KUCZEK: What I would say is our 3 entire DSM initiative has accelerating since '91. 4 If you read the rebuttal that we submitted in 5 response to your submission, you can see from 2001 6 until 2004 there has been a significant amount of 7 activity in various areas and customer segment 8 groups. First Nations is just one of those. 9 MR. MILLER: Thank you. 10 MS. AVERY KINEW: Mr. Miller, I think 11 there is some urgency with which Manitoba Hydro 12 must have been addressing this with the diesel 13 communities. 14 MR. KUCZEK: That's correct. 15 MS. AVERY KINEW: There was an 16 undertaking during the Public Utilities Board that 17 you would ensure that most, if not all the 18 customer class, was under 2000 kilowatts per 19 month. 20 MR. KUCZEK: That is correct. With 21 the diesel communities that was accelerated with 22 the PUB order. 23 MS. AVERY KINEW: Thank you. 24 MR. MILLER: I am going to move to a 25 different topic here, and it has to do with the 1298 1 augmented flow in the Churchill diversion. I 2 realize that the impact aspects are part of the 3 EIS, but there are certain descriptive and policy 4 and licensing aspects to this. I wonder if 5 someone could give a brief characterization of 6 what the augmented flow is -- if I have the right 7 name for it -- how long it has been in existence, 8 what type of license it receives? 9 MR. CORMIE: The augmented flow 10 program is an application that Manitoba Hydro 11 makes annually and has done so annually for at 12 least 15 years to expand the range of levels on 13 Southern Indian lake and the Notigi forebay, and 14 allows for increased something from the Notigi 15 control structure, and also changes the 16 limitations at Thompson from a flow limitation to 17 a stage limitation at the seaplane base and at the 18 pumphouse. 19 The intent and the purpose of these 20 additional capabilities is to allow for increased 21 water flows from the Churchill River into the 22 Nelson River watershed. On average, we estimate 23 that that is approximately 3500 cubic feet per 24 second, or approximately 10 percent more water on 25 average over the limits set in the interim 1299 1 license. 2 The project went into service in the 3 summer of 1976, and outflows from Southern Indian 4 Lake and diversion flows were gradually increased 5 in a staged manner. The project was operated 6 under the interim license up to 1979, at which 7 time it was identified that additional flows could 8 be diverted without exceeding the levels along the 9 diversion route that the previous flows were 10 designed to protect. 11 From 1979 through approximately 1984, 12 various test programs were undertaken to determine 13 which levels and flows best allowed for efficient 14 operation of the diversion. 15 In 1983, on a semi-annual basis, the 16 application was made to the Director of Water 17 Resources for seasonal changes to the interim 18 license. That was converted into an annual 19 request in the summer of 1986. 20 MR. WOJCZYNSKI: I could add a small 21 comment to that. One could view this perhaps 22 almost as a supply side measure, supply side 23 efficiency measure, in the sense that we get more 24 energy from existing facilities, that is without 25 building new facilities, albeit we will be 1300 1 operating them somewhat differently, so one could 2 view it in that context if one wanted to. 3 MR. MILLER: Was there any kind of 4 formal environmental assessment process that went 5 along with these -- first of all, you talked about 6 the interim license, which maybe you better 7 explain that term to me? Then what kind of 8 license do you have now and how is it different 9 from or related to interim license? 10 MR. CORMIE: Manitoba Hydro received 11 an interim license under the Water Power Act for 12 the Churchill River Diversion. Interim licenses 13 are designed to allow for the construction and 14 initial operation of the project, and a final 15 license is requested once all the issues 16 surrounding the project are defined, the land is 17 identified, and the project is capable of working 18 in its final form. 19 Manitoba Hydro continues to operate 20 the Churchill River Diversion under the interim 21 license, because we have still not completed 22 resolving all the outstanding issues associated 23 with the project. 24 On an annual basis, the Minister has 25 the authority to adjust the terms and conditions 1301 1 of the interim license, and that's what we request 2 each year, and have done so since the original 3 test programs were undertaken in the late 1970s, 4 and the augmented flow program is -- are 5 authorized under and form part of the interim 6 license that we operate under now. 7 MR. MILLER: So, it is sort of like an 8 annual amendment to the interim license? 9 MR. CORMIE: Right. So, the interim 10 license is, in effect, amended each year and those 11 changes become part of the license. 12 MR. WOJCZYNSKI: Mr. Miller, you had 13 asked a question, part of the question was whether 14 there had been any assessment of the impacts. And 15 there have been studies of CRD impacts and AFP 16 impacts, and I wouldn't want to try to summarize 17 those, but you had also asked us to go through a 18 process in addition to the studies. It did go 19 through the previous environmental process that 20 existed, the MEARA process, the provincial one, 21 and in the earlier years. 22 MR. MILLER: Is the process that we 23 are now part of, the Wuskwatim process, is there 24 an intention to convert the interim to a final 25 license as part of this process? 1302 1 MR. WOJCZYNSKI: There is no intention 2 to do that as part of this process. Anything to 3 be done with CRD and AFP formalization would be a 4 separate process. That would be happening 5 independent of this one and would be occurring 6 with or without Wuskwatim. 7 MR. MILLER: Presumably that would 8 come under current environmental assessment laws 9 and regulations? In other words, there would be 10 some kind of environmental assessment of that? 11 MR. WOJCZYNSKI: I am not sure how far 12 we can go into this because we are not lawyers up 13 here, but the environmental assessments required 14 for that, my understanding is they were done 15 earlier, and those are the ones that are 16 applicable, and we don't have to do new ones. 17 MR. MILLER: Maybe that is something 18 we can ask the PAT team. 19 MR. MAYER: Mr. Miller, if I may? I 20 think we determined earlier in the proceedings 21 that the augmented flow program appears to be 22 within the exclusive jurisdiction of the person 23 who is now the Minister of Water Stewardship, 24 pursuant to the provisions of the Water Power Act. 25 The Water Power Act is a very small piece of 1303 1 legislation, but it gives the Minister a lot of 2 power to deal with any waters that are used to 3 generate electricity. I don't think they need 4 anything more. That's my best legal opinion. 5 MR. MILLER: Thank you. That's some 6 free legal advice and I appreciate it. 7 THE CHAIRMAN: But, we are not sure 8 whether another lawyer would disagree with him or 9 not. 10 MR. MAYER: Oh, for sure. 11 MR. MILLER: Does the Wuskwatim 12 economics presuppose the Churchill River Diversion 13 with the augmentation? 14 MR. WOJCZYNSKI: The Wuskwatim 15 economics that we have analyzed do assume that the 16 AFP program, which has been in place for over 15 17 years, and effectively more than 20 years, will 18 continue, and that there will not be a change from 19 that. So, that is assumed in there. 20 However, we did do a sensitivity on 21 that, that we had presented in the original 22 submission and also discussed subsequently, where 23 we looked at a sensitivity that effectively was 24 almost a 10 percent reduction on the Burntwood 25 River flows. We indicated that the IRR for 1304 1 Wuskwatim would decrease in order of about 0.5 2 percent. So, the Wuskwatim project would clearly 3 still be economic even if the AFP was not 4 extended, if we went back to the very original 5 interim license conditions. But, given that the 6 AFP is in place effectively for over 20 years, we 7 don't see that likely as changing. So, that is 8 just a sensitivity. 9 MR. MILLER: So, you're saying that 10 with a 10 percent reduction in the flows on the 11 Burntwood, I think that is the degree of 12 augmentation -- 13 MR. WOJCZYNSKI: Almost 10 percent. 14 MR. MILLER: Would that affect the 15 amount of generation out of Wuskwatim? I would 16 think so, but -- 17 MR. WOJCZYNSKI: Yes, it does, 18 absolutely, you're right. It doesn't change the 19 peak capacity that we have available from 20 Wuskwatim. 21 MR. MILLER: Right. 22 MR. WOJCZYNSKI: But, it would change 23 how much of the time we could operate the units 24 and it would reduce the energy by approximately 25 the same amount of -- as the flow reduce. 1305 1 MR. MILLER: 10 percent? 2 MR. WOJCZYNSKI: Just under 10 percent 3 in both cases. Then when I said that the IRR for 4 Wuskwatim dropped by around half a percentage 5 point, it was based on that. 6 It also then means you have got much 7 less water -- pardon me, you have that same amount 8 of reduction in water being reduced in the Lower 9 Nelson plants, and that's where the main benefit 10 and reason for the AFP program, is the plants on 11 the Lower Nelson. That's why we say our licensing 12 and our plans and intentions for CRD operation, 13 including the AFP are not modified by Wuskwatim 14 because they are really set up for the Lower 15 Nelson plants rather than Wuskwatim. 16 MR. MILLER: But still, I don't 17 understand -- and maybe you can give some kind of 18 an intuitive way to understand this -- how you can 19 produce 10 percent less energy and it can have 20 such a miniscule, same capital cost and all that 21 and it can have such a miniscule effect on the 22 return? 23 MR. WOJCZYNSKI: You are still having 24 the same capacity in the plant, you just don't get 25 the 200 megawatts, essentially the peak capacity. 1306 1 It also doesn't decrease the 2 dependable energy by 10 percent, it decreases the 3 average energy. The other thing is, the Lower 4 Nelson plants are now going to also be producing 5 less energy, so any additional energy from 6 Wuskwatim is worth a little bit more. 7 So, you take the combination of all 8 those factors and that would be the reason. The 9 exact percentage isn't 10 -- one moment, please. 10 The exact percentage average flow 11 reduction, we used a nominal 10 percent, but the 12 actual exact number, in retrospect, we probably 13 should have -- it would be more useful to use the 14 average rather than peak reduction, but anyways, 15 it was 8.6 percent. So, you combine all of those 16 factors together. 17 MR. MILLER: So, I guess the major 18 compensation for an 8.6 percent reduction in 19 energy is it is more valuable because the 20 system -- the Lower Nelson generation is reduced, 21 so that somehow makes this more valuable? 22 MR. WOJCZYNSKI: That is one element. 23 The other elements are important as well. I 24 offhand don't know what are the most important 25 factors in all of that. I think it would be 1307 1 pretty complicated to try and figure that out, but 2 they were all important. 3 MR. MILLER: Okay. That's as far as I 4 can pursue that one. 5 MR. WOJCZYNSKI: Okay. 6 MR. MAYER: It might help you to know, 7 Mr. Miller, this is information that has been 8 available to the panel here and assembled by our 9 people. Our best guess is that the limits on 10 augmented flow program allow for release of 34,000 11 CFS in winter, and as I understand it, Lake 12 Winnipeg Regulation -- sorry, Churchill River 13 Diversion had a 30,000 CFS maximum. So, it looks 14 like there is 4000 CFS in the winter extra 15 permitted by the augmented flow program, and 16 35,000 CFS in the summer, which is an extra 5000 17 CFS released in the summer over and above 18 Churchill River Diversion. 19 MR. MILLER: I will file that away, 20 thank you. 21 Let me move back to DSM. Again, in 22 the rebuttal to the TREE/RCM position, you 23 indicate that you -- and elsewhere -- you indicate 24 that you administer the Provincial R2000 program. 25 Could you give a capsule history of that program 1308 1 with and without your involvement? How old is 2 that program? How is it set up? What is it? 3 MR. KUCZEK: I am not sure how old it 4 is, but what I can say is the program is a Federal 5 Government program. It was initiated by the 6 Federal Government. It was funded by a group of 7 organizations in Manitoba and it was -- I guess it 8 was administered by the Manitoba Conservation for 9 a number of years and then Manitoba Hydro took it 10 over a couple years. I am not sure of the exact 11 year, 2001 or 2002; somewhere around there. 12 MR. MILLER: Does it sound right to 13 say that it began somewhere in the '80s? 14 MR. KUCZEK: Yes. 15 MR. MILLER: And just what does R2000 16 mean? What is it? 17 MR. KUCZEK: It is a brand, I guess, 18 to start with and it is an indication of how 19 energy efficient a home is. 20 Right now there is a scale, the 21 Energuide scale that the government is talking 22 about. When you get a rating on your home, the 23 scale goes from zero to 100. The Energuide rating 24 for an R2000 home, to give you some indication, 25 would be about 80 to 82. Homes on average are 1309 1 being constructed in the range of about 73 right 2 now in that Energuide rating. 3 MR. MILLER: So, you're saying the 4 average new home is around 73, but in terms of the 5 Energuide, which I take is a later kind of thing, 6 R2000 is 80 or 82? 7 MR. KUCZEK: For an R2000 home, it is 8 about -- it is over 80. It depends on what sort 9 of measures you put into a home, you can actually 10 go higher than that, but I am just giving you a 11 ballpark figure. 12 MR. MILLER: Okay. Would it be fair 13 to say that basically it is a certain standard to 14 build homes to, a major component of which is 15 energy conservation? 16 MR. KUCZEK: Energy conservation is a 17 major component, but it has an environmental 18 component as well. 19 MR. MILLER: Does it involve 20 certification? 21 MR. KUCZEK: Yes. 22 MR. MILLER: So, you have the 23 appropriate tests or audit and a home is either 24 R2000 or it isn't? 25 MR. KUCZEK: Yes. It goes through -- 1310 1 there is a computer model. It is a Hot R2000, Hot 2 2000 computer model. The design goes through that 3 test. There is input variables put into that 4 computer model. And then at the end of the -- 5 when the home is constructed, there is a blower 6 door test to test the air tightness of the home. 7 MR. MILLER: So, basically, to meet 8 that standard, there would be two requirements; 9 one, it would have to be R2000, to meet the design 10 specs; and two, it would have to meet the blower 11 test? 12 MR. KUCZEK: It is a blower door test 13 that is used for the air tightness. 14 MR. MILLER: What proportion of new 15 homes in Manitoba are constructed to R2000 16 standard would you say? 17 MR. KUCZEK: There is only about 30 18 homes a year, there might be more that are built 19 to R2000 standards, there is only about 30 that 20 are registered each year. I am giving you an 21 approximate number, but its in that range. 22 MR. MILLER: Do you have any idea how 23 many homes are built all together, so we can get a 24 percentage? 25 MR. KUCZEK: There is about -- it 1311 1 various by year, of course, but the average in the 2 last five years is 2,600. 3 MR. MILLER: Okay, 30 out of 2600? 4 MR. KUCZEK: Not a big number. 5 MR. MILLER: No. Are there advanced 6 standards beyond the R2000 -- for instance, in the 7 commercial/industrial sector, I believe you have a 8 new program for going better than -- I am sorry, I 9 don't have here -- the national model code? 10 MR. KUCZEK: Model code for -- 11 MR. MILLER: For commercial and 12 industrial, and I think to be -- to be a 13 PowerSmart home, not home, but building, it has to 14 be 25 percent better than the national standard? 15 MR. KUCZEK: Well, on the residential 16 side, we just launched a PowerSmart program for 17 new homes. That's to address this -- our concern 18 with regards to the low numbers on the R2000 19 program. We are not achieving what we would like 20 to achieve in terms of energy efficient homes. 21 So, we just launched that program. That program 22 is targeting the mass market. We are hoping to 23 achieve much more in terms of the participation 24 rates. Our target I think on the electrical 25 heated homes is 65 percent in five years. So, 1312 1 that is what we are doing on the residential side. 2 On the commercial side, we developed 3 the PowerSmart for business design standards, and 4 that is what we are using to address the 5 commercial industry in Manitoba. 6 You are correct when you say 25 7 percent greater than -- to be a PowerSmart 8 commercial building, you have to achieve an energy 9 performance 25 percent greater than that which 10 would be achieved by meeting the minimum 11 requirements under the model National Energy Code 12 for buildings. 13 MR. MILLER: Okay, so your 14 PowerSmart -- I guess both of them are trying to 15 increase the participation rates. Looking at the 16 PowerSmart for home program, you are targeting 17 increased participation. Is there any comparable 18 increase in standard over R2000 or any other 19 national standard? 20 MR. KUCZEK: What we are targeting 21 with the PowerSmart new home program is to move 22 the average rating for that -- on the Energuide 23 rating of homes from 73 to about 77. The R2000 24 program will still exist, and that is going to be 25 a higher standard, and we are still hoping that 1313 1 some homes will be constructed to the higher 2 standard. 3 MR. MILLER: Instead of supersizing 4 the R2000, it is a few notches below that -- 5 MR. KUCZEK: It compliments the R2000 6 program. We think moving to the R2000 level with 7 the mass market would be a big leap, and to get 8 industry to buy in, we didn't think that was 9 possible. So, we designed a program so that we 10 could get the industry to buy in, and that is how 11 we expect to get those targets that I suggested. 12 MR. MILLER: Is there any movement to 13 achieve a higher standard than R2000? Is there 14 any higher standard, if you will, that is on the 15 books, either by your own corporation, or 16 nationally or provincially? 17 MR. KUCZEK: I am not aware of any 18 nationally or provincially. In terms of the long 19 term, we would be looking at, once we get market 20 transformation with PowerSmart homes at that 21 level, we would be looking at raising the bar. 22 And we would assess whether that would make sense 23 in terms of launching another program or modifying 24 this program. 25 MR. MILLER: If I can make a comment, 1314 1 it just seems that we are in the midst still of 2 new home building boom, and all of this being 3 built presumably lower than your PowerSmart 4 standard, never mind the R2000 standard. It just 5 seems that we are embodying inefficiency in the 6 buildings that are being constructed. 7 MR. KUCZEK: In that ideal world, it 8 would be great if we could get all new homes built 9 at the higher level, I agree. 10 MR. MILLER: I think one point you 11 make in a number of places, including your 12 rebuttal, is that we shouldn't just look at 13 Manitoba Hydro programs, but your participation in 14 standard setting at National and Provincial 15 levels. I wonder if you could describe your 16 corporate experience in addressing the 17 standards -- the efficiency standards for 18 residential homes? 19 MR. KUCZEK: Addressing codes -- 20 incorporating codes and standards into our 21 overall, it is part of our overall strategy. We 22 are not responsible for codes and standards. That 23 is a responsibility of Department of Labour. 24 MR. MILLER: I realize that. 25 MR. KUCZEK: We are in discussions 1315 1 with government to formalize a process where this 2 would be reviewed on a more regular basis, as 3 opposed to an ad hoc basis right now. 4 MR. MILLER: This is a provincial 5 responsibility, I take it, to set home building 6 standards. Have there been occasions in the past 7 when you have sat on Provincial committees and 8 discussed what the standard should be? 9 MR. KUCZEK: We were involved in the 10 model National Energy Code, those standards when 11 they were developed, and we were also involved in 12 1997/98 when the codes were modified in Manitoba. 13 MR. MILLER: What seems to be the 14 barrier to upping the standards instead of 15 continuing to build the vast majority of homes to 16 embody the inefficiencies? 17 ================================================== 18 ================================================== 19 MR. KUCZEK: One of the barriers is 20 industry resistence. By incorporating these 21 standards, it raises the level -- the cost of new 22 homes. So, industry is concerned about that in 23 terms of competing against existing homes. 24 MR. MILLER: So far you haven't found 25 support from government to urge those higher 1316 1 standards? 2 MR. KUCZEK: I think government is 3 very supportive of our PowerSmart strategy and 4 that is to try to transform the market place. 5 Once you have achieved market transformation to a 6 certain degree, then you use codes and standards 7 to top up the balance of the market that hasn't 8 been transformed. 9 MR. MILLER: It has been a lot of 10 years since the 1980s, though, and a lot of time 11 when that could have happened. 12 MR. KUCZEK: Mr. Miller, maybe I can 13 address your other question that I suggested as an 14 undertaking because I don't think I will be able 15 to get any more information than what I will offer 16 here. I will see if this satisfies your needs. 17 You were asking if a certain event in 18 1999 influenced our activities later. Generally 19 speaking, whenever we are designing any PowerSmart 20 initiative or customer service offering, we take 21 into account feedback from customers and 22 associations, wherever we get this feedback. It 23 is hard to really say that one particular event 24 would have triggered it. There can be cases like 25 that. In general, with PowerSmart activities and 1317 1 customer services that we offer, we take into 2 account feedback that we receive from various 3 sources. 4 So, I am not sure if you are looking 5 for more information on that, but we obviously 6 would have taken into account those activities 7 back then. 8 MR. MILLER: I take it that building a 9 home to R2000 standards is amongst the cost 10 effective measures -- I believe that is one that 11 you identified in your new study. So that when 12 you take together, both the capital costs and the 13 operating costs of a home, people would be better 14 off with a R2000, I think that is part of your 15 sales pitch; is that correct? 16 MR. FLEMING: Alex Fleming. 17 It is very close. It comes in at 5.6 18 cents a kilowatt hour. So, it is very close to 19 that threshold of 6.15 cents, which would leave a 20 little bit of room for advertising for R2000 and 21 supporting it in that way. 22 There are some prescriptive parts to a 23 R2000 house that are very expensive, specifically 24 the heat recovery ventilator and that brings the 25 capital cost up to $6000 for a R2000 house. 1318 1 Most people elect not to go with that 2 particular device and they basically get savings 3 very close to R2000. It is not that significantly 4 lower. 5 There are other scoring criteria and 6 as the PowerSmart Home Program addresses, there 7 are other opportunities in housing, in particular 8 appliances, which now have become the focus of a 9 lot of energy conservation because R2000 which has 10 become, as far as the envelope is concerned, 11 almost become a de facto building standard for 12 Manitoba. That the lion's share of the energy 13 savings opportunity actually resides in the 14 appliances in the house and the lighting and 15 behaviour of operating equipment. 16 MR. MILLER: I think I heard you say 17 that even with the heat recovery ventilation it is 18 at least cost neutral? 19 MR. FLEMING: There is market 20 resistance to it economically. I would say it 21 slides in under what we call our screen for cost 22 of conserved energy. There is resistance to that 23 one item for R2000. 24 MR. MILLER: When you say R2000 is a 25 de facto standard, perhaps you could explain that 1319 1 in light of the earlier comment that only 30 such 2 homes are built a year in Manitoba? 3 MR. FLEMING: That would be certified. 4 Which, to be certified, they would have to have 5 the heat recovery ventilator device installed. 6 R2000 was designed in the '80s to 7 improve the building practices, going to the 2x6 8 stud walls that we see commonly, going to the 9 continuous air vapour barrier that we see commonly 10 and to reduce the drafts which is what the blower 11 door tests for, to reduce the drafts in the house 12 after construction because of a detailed air vapor 13 barrier in the construction of the house. 14 Most all of that has been achieved in 15 standard construction to date, to the point where 16 if houses were made tighter, they would be 17 unhealthy environments. 18 So, that's where the heat ventilator 19 comes in. It brings fresh air into the house 20 because the house is so tight that it requires 21 additional ventilation. 22 MR. MILLER: Right. So, without the 23 heat recovery ventilation, if you made it any 24 tighter, it would be thicker; therefore, you allow 25 a few leaks? I mean, does that go along with the 1320 1 absence of the heat recovery ventilation? You 2 have to have a draftier house to keep it healthy? 3 MR. FLEMING: No, they don't build 4 them draftier, but what they do allow for is more 5 exhaust fans. So, you will see central exhaust 6 systems in an electrically heated house to reduce 7 condensation problems, which is a primary symptom 8 of a house that is too tight. 9 So, people will operate on a 10 humidistat; a central exhaust system. What 11 happens is that that central exhaust system will 12 operate without heat recovery, so that the home 13 owner bears the full cost of ventilation. 14 Heat recovery reduces that cost in 15 half and it is that little nuisance between R2000 16 and current construction that drives a lot of the 17 discussion as to what is considered near R2000, 18 which is very close to what we have achieved in 19 our market, which was really the goal of the R2000 20 program, to have those construction practices 21 inherent in the market by the year 2000 and that 22 was substantially achieved already by the year 23 2000. 24 MR. MILLER: We introduced in evidence 25 in the Manitoba Hydro update a couple years ago a 1321 1 couple of home examples. One, new construction 2 and one retrofit, both of which featured double 3 wall construction. 4 The new construction was done by, I 5 guess, one of the architects or designers of the 6 new Red River campus, but, you know, years before 7 when he built it somewhere in the Wolseley area. 8 The claim in the article was that he 9 spent about $300 a year, and this was two years 10 ago, in electric heating. It was a double wall 11 construction, with baseboard heading so that it 12 could be zone heating, unused parts you turn off, 13 and major living space on the second floor so that 14 it is more comfortable there. 15 It seems to me that there are lots of 16 design features like this. I do not recall 17 whether he had a heat exchanger not. I think the 18 construction may have preceded certainly the 19 contemporary one. So, it was just based on better 20 wall insulation. 21 Could you comment on double wall 22 construction and some of the features of this 23 house and whether they might advance the rating, 24 the Energuide rating? It would seem with $300 as 25 an annual heating bill, it doesn't sound like very 1322 1 much. 2 MR. FLEMING: It would be difficult to 3 talk to the case specifically. It could be the 4 orientation of the building and the windows that 5 allows for some solar, so it is fairly difficult. 6 To give you a perspective, our typical 7 house in Manitoba, electrically heated, 1400 8 square feet, under current construction would be 9 about 12,000 kilowatt hours a year for heating, 10 which would come into the order of around $650 or 11 so. This is pretty ballpark. 12 MR. MILLER: Yes. 13 MR. FLEMING: So, that is about what 14 we are looking at. 15 The R2000 or the whole movement in the 16 construction industry over the last 15 years was 17 to get the older construction style 2x4, leaky 18 walls and windows, to get that under control to 19 the point where they would reach the environment 20 we have now, where you are spending $650 a year 21 for heating. 22 So, now you have to look at what 23 options are available at what cost to reduce what 24 you are actually paying. You will only reduce the 25 $650. That is what is available to be reduced on 1323 1 an annual basis. 2 So, what you really have to look at in 3 construction is how much more would you have to 4 pay for another technology? Whether it is a 5 double wall technology or some integrated design 6 technologies that allow you to reduce the $650 a 7 year. 8 So, I can't comment on this house 9 specifically, but what has happened is that the 10 heating bill of new construction has gotten to the 11 point where there is less available to bring some 12 of those innovations cost effectively to the 13 market. 14 MR. KUCZEK: To add to that, 15 Mr. Miller, we are incorporating that -- those 16 designs somewhat in our PowerSmart New Home 17 program. Basement insulation requirements R24 and 18 that is with batts. Actually R12 batts being 19 perpendicular to each other, so you actually 20 insulate the studs. 21 With electrically heated homes, we are 22 requiring you go to -- add 1.5-inch rigid 23 insulation on the outside of the home so you will 24 achieve that with those homes as well to some 25 degree. 1324 1 MR. MILLER: But this is your new 2 PowerSmart standard? 3 MR. KUCZEK: PowerSmart home, yes, the 4 program that we just launched. 5 MR. MILLER: Okay. That would be a 6 standard requirement then to meet that 7 certification? 8 MR. KUCZEK: Yes. 9 MR. MILLER: I will move on to another 10 question. 11 The rebuttal again quotes the PUB 12 judgment, a recommendation on the 2002 hearing, 13 and this is page 2: 14 "The Board will direct Hydro to 15 prepare and study the merits of an 16 inverted rate structure across all 17 rate classes, including transition and 18 implementation issues." 19 So, my question is can you give any 20 indication of how that study is 21 proceeding? Who is doing that? Is 22 that an internal study? Just an 23 update on the progress on that. 24 MR. KUCZEK: That responsibility is 25 actually under another person and I don't know the 1325 1 status of it right now. All I know is that the 2 plans are to file the results of that study by 3 December 31, 2004. 4 MR. MILLER: This, presumably, means 5 you are looking at methods of -- if it is 6 following the order -- of not only the residential 7 which we focused on, but for commercial and 8 industrial, how do you get them to see the actual 9 cost of energy when they are making their 10 decisions, which is the purpose of an inverted 11 rate structure? I guess -- can anyone answer? 12 What department handles that, if not yours? 13 MS. WRAY: It is the Rates Department 14 that would handle that. I believe you probably 15 seen something in the rebuttal that does comment 16 on the fact that the rate application before the 17 Public Utilities Board does recommend changes that 18 go some way towards a higher tail block. In fact, 19 as much as 10 percent over two rate changes and 20 that that would move somewhat in the direction 21 that you were looking at. 22 I can't comment on the status of the 23 study beyond what Mr. Kuczek has mentioned, but I 24 could undertake to find out if there is anything 25 more to add to that? 1326 1 MR. MILLER: I thought I saw him here 2 this morning, but I guess he is not here now. 3 If you could provide just a brief 4 update on that and what are some of the strategies 5 and so on that might be under consideration. 6 7 (UNDERTAKING #MH-33: Further provide, if 8 possible, status of the study and if there is 9 anything more to add) 10 11 MR. MILLER: You were asked this 12 morning the NAFTA question and I guess the short 13 answer is NAFTA applies to governments and not to 14 corporations and that there is no requirement that 15 energy continue to flow to the U.S. in the same 16 proportion, which doesn't really work well in 17 Hydro planning because you plan on curtailing it 18 as domestic load grows. 19 I am wondering if Manitoba Hydro as a 20 Crown corporation isn't a bit of a hybrid? I 21 mean, for instance, the security of supply for 22 domestic customers, taking precedence over 23 exports; could any company write that into its gas 24 contracts? Is there any difference between the 25 forms of energy there? It is just that no company 1327 1 would do it unless ordered to by a government. I 2 suppose you could have a Crown gas company, a 3 producer, that was in the export business. 4 I wonder if you could just expand on 5 whether there is any connection between you being 6 a Crown corporation and NAFTA? 7 MR. ADAMS: I'm venturing out on very 8 thin ice here. There is very highly paid people 9 in various cities in the country looking at these 10 things. But, the best advice that we have been 11 able to glean is that the NAFTA applies to 12 government, Manitoba Hydro is not a government. 13 It is an agent of the government, but also, in 14 terms of contractual arrangements, has the powers 15 and duties of a natural person. 16 In our understanding, the terms and 17 conditions of the contract are paramount. NAFTA 18 is there to prevent governments from imposing 19 themselves between us and our export customers. 20 Now, I can't speak for the gas 21 industry. I never had cause to look at it that 22 closely. I am not too sure that it is a parallel 23 process anyway. 24 MR. MILLER: Well, I guess -- I 25 believe the gas industry -- I mean, the production 1328 1 is not Crown. I may be mistaken that it is 2 private industry? 3 MR. ADAMS: It is mostly private, 4 yeah. 5 As Mr. Mayer told you, you have two 6 lawyers in the room, you get three opinions. But, 7 most of the opinions that we have been given on a 8 legal perspective is that NAFTA application, as it 9 would apply to us, would prevent somebody from 10 preventing us doing what we have contracted to do. 11 That "somebody" being the government. 12 MR. MILLER: But, you wouldn't write 13 contracts that put domestic customers at risk, it 14 is your policy not to and I would imagine, at 15 least in part, that is because you are a Crown 16 corporation? 17 MR. ADAMS: No. No. The reason we 18 write into the contracts that we can curtail 19 deliveries in the event that we need that energy 20 to serve domestic customers. It is because our 21 domestic customers come first, not because we are 22 a Crown corporation. 23 MR. MILLER: Okay. I have -- okay. 24 Let me ask this about the new DSM study. 25 I believe there is a qualifier in 1329 1 there indicating that the estimates of the 2 achievable were assuming no change in the rate 3 regime, no implementation of inverted rates and so 4 on. 5 I guess my question is why was that 6 excluded? If there is an incentive power in the 7 price people pay, why would that not be a factor 8 in determining what is achievable? 9 Did you have anyone from -- did you 10 consult anyone in the Rates Department -- have 11 anyone from the Rates Department on the Steering 12 Committee for that study? How was a decision made 13 that it was irrelevant? Did anyone suggest it was 14 relevant? 15 MR. FLEMING: I am sorry, Alex 16 Fleming. This is to the DSM study. 17 We didn't use rates or price of 18 electricity. We didn't use paybacks, which are a 19 function of the price of electricity and the price 20 of the consumers' upgraded equipment. We used the 21 economic study of parameters. We call them "Cost 22 of Conserved Energy". 23 So, we were able to have Hydro commit 24 to 6.15 cents per kilowatt hour as being the value 25 of electricity. 1330 1 Now, that value of electricity is 2 higher than the run-off rate most certainly of 3 industrial -- or of commercial and residential. 4 So that value is what was used to screen 5 technologies. 6 We didn't do a financial analysis. 7 Rates impact a consumer's financial decision to 8 purchase an efficient product, but we valued 9 electricity at 6.15 cents in order to screen what 10 products would be made available in the efficiency 11 model to consumers or customers of Manitoba Hydro. 12 So, it is not in the context of the 13 DSM study. I am not saying it is not relevant, 14 but it was managed in terms of looking at a 15 long-run marginal cost or value for electricity, 16 not a price. 17 MR. MILLER: I appreciate that for the 18 economic DSM. 19 MR. FLEMING: Yes. 20 MR. MILLER: That wasn't all that your 21 study contained. It also contained an achievable, 22 which we have seen, is just a fraction of what is 23 economic and well less than half in all instances. 24 MR. FLEMING: But, the study assumes 25 the technologies which cost this much more because 1331 1 they are efficient get screened through the 2 analysis because they meet the 6.15 cents a 3 kilowatt hour. 4 Now, that extra cost of that 5 technology may be borne in part or in full by 6 Manitoba Hydro. That is currently done now with 7 these LED exit lights. Manitoba Hydro pays the 8 full cost of the exit lights. It is still a 9 higher value for Manitoba Hydro to pay for the 10 exit lights and have them installed. It meets the 11 economic criteria of Manitoba Hydro. 12 So, again, I am a little confused 13 about price. We are looking at the difference in 14 cost for the more efficient technology and the 15 number of kilowatt hours that more efficient 16 technology will produce over its life. 17 MR. MILLER: Yeah, I appreciate the 18 economic analysis. 19 MR. KUCZEK: Mr. Miller, maybe I can 20 answer that? 21 MR. MILLER: Yeah, okay. 22 MR. KUCZEK: When the achievable 23 potential was estimated, specific tools -- the 24 program designs weren't formulated at that point. 25 There is a number of tools that you 1332 1 can use to achieve this -- or motivate consumer 2 behaviour. One of them would be price and that 3 deals with the operating cost, if you are talking 4 in terms of rates and incentives. Another one 5 deals with the capital costs. 6 The next step that we are going 7 through right now is designing the programs 8 specifically, plus we are undertaking the study to 9 see what the feasibility of using an inverted rate 10 structure is right now as well, parallel with 11 that. 12 MR. MILLER: Okay, so you're saying 13 that incentives, whether it is things that you pay 14 out or in the rate structure, either one, come at 15 the level of program development and so you would 16 be consulting with the Rates Department in your 17 program development? How can we achieve more DSM? 18 MR. KUCZEK: As part of that study, 19 the study of the inverted rates, I think we will 20 be working with the Rates Department to see what 21 the effectiveness or the impacts of having an 22 inverted rate structure would be. 23 MR. MILLER: How do you regard the 24 current estimates of achievable -- it sounds like 25 you're saying that we won't know what is 1333 1 achievable until we develop the best programs we 2 can think of. How do you get achievable in prior 3 to your program development? I mean, you must 4 operate with some assumptions? 5 MR. KUCZEK: You assume current market 6 conditions and you base your estimate on the 7 knowledge that you have from your past experience, 8 the knowledge that the consultant brings to the 9 table and, I guess as well, the information that 10 we obtain from outside sources. Other utilities 11 that are designing programs and what they achieve 12 in terms of achievable potential. 13 MR. MILLER: Okay. I guess that is 14 all I can ask in that area. 15 My next question -- I was going to 16 leave all the numbers for Ralph Torrie, but I have 17 just a couple of numbers that I would like to 18 resurrect here, that, again, were presented in the 19 PUB hearings and that we cited in our brief that 20 was distributed here. 21 Basically, I just want confirmation of 22 our calculations. Your most recent PowerSmart 23 resource plan is the 2001, I think you indicated? 24 MR. KUCZEK: Yes. 25 MR. MILLER: Yeah. Okay. And in that 1334 1 on page 25, there is a table of estimated savings, 2 historic savings to the present and that would be 3 to 2001, I believe, and the residential is 37.6 4 gigawatt hours annual saved electricity. Does 5 that sound right? 6 MR. KUCZEK: I am on page 25, yes, and 7 I am looking for residential. 8 MR. MILLER: This is your resource 9 plan? Do you have a table there? 10 MR. KUCZEK: Sorry, I am apparently in 11 the wrong book. 12 MR. MILLER: Okay. 13 MR. KUCZEK: Okay, page 25. 14 MR. MILLER: If you look under the 15 historical savings, it is '89 to 2001? The whole 16 table would be, I think, for that time period. 17 And then -- 18 MR. KUCZEK: I am trying to find the 19 '89 you are talking about. I am sorry, 20 Mr. Miller. 21 MR. MILLER: Unfortunately, I don't 22 have it in front of me. What is the title of 23 table? 24 MR. KUCZEK: Sorry, did you say 37 25 gigawatt hours? 1335 1 MR. MILLER: 37.6 gigawatt hours as 2 the residential energy saving -- 3 MR. KUCZEK: You are correct. In my 4 mind, I was hearing 80 something. 5 MR. MILLER: What is the time period 6 indicated there? 7 MR. KUCZEK: '89, '90 to 2000/2001. 8 MR. MILLER: Okay, 11 years, I guess. 9 And the other figure that we got to 10 deal with comparable time period, the 2000/2001 11 annual report, which was the one we had at that 12 hearing, the total residential consumption was 13 5282 gigawatt hours. I don't know if you would 14 have that vintage of your annual report, but I 15 guess you could -- 16 MR. KUCZEK: I will accept that as 17 being right, but subject to check, I guess. 18 MR. MILLER: Okay. If you take the 19 37.6 gigawatt hours as a percentage of the -- 20 that's the energy saved as a percentage of the 21 total residential consumption of 5282 gigawatt 22 hours, our calculator said, 0.7 percent savings. 23 MR. KUCZEK: I will accept your 24 calculators calculating that. 25 MR. MILLER: Okay. So, in other 1336 1 words, 11 years of residential DSM yielded 2 seven-tenths of a percent of residential savings? 3 MR. KUCZEK: Okay. I think there is 4 more savings than that, but that is the savings 5 that were measured. 6 MR. MILLER: Okay. The ones that you 7 measured? 8 MR. KUCZEK: Yeah. 9 MR. MILLER: On various occasions, 10 Manitoba Hydro characterizes its DSM program as 11 aggressive. Do you think that adjective correctly 12 accompanies seven-tenths of a percent residential 13 savings in 11 years? 14 MR. KUCZEK: When we talk about our 15 PowerSmart program being aggressive, we are 16 talking about the overall PowerSmart program. 17 In terms of savings on the residential 18 side, we have additional programs and customer 19 service activities that also achieve energy 20 savings. That it is very difficult to realize 21 what the savings are from those programs. 22 So, I think we are achieving more than 23 what is being recorded there. 24 If we look at the programs that we 25 have in place today on the residential side -- and 1337 1 I agree, a number of them have just been initiated 2 in the last three or four years. But, we don't 3 measure a lot of the savings -- we don't measure 4 the savings from the programs at all. It is very 5 difficult. The whole PowerSmart branding 6 initiative for example, it is targeted at all our 7 customers, but it is targeted specifically at the 8 residential customers, trying to change behaviour 9 with consumers. 10 So, it is hard to measure what you 11 would achieve through that branding initiative and 12 the expenditures associated with that. 13 MR. MILLER: Okay. So, you are 14 suggesting that it is only seven-tenths a percent 15 that was measurably saved, but you think there 16 could well have been more? 17 MR. KUCZEK: Yes. So, when we do our 18 reporting, we say it is a conservative report. It 19 is conservative in terms of what we are reporting. 20 MR. MILLER: So, the characterization 21 of "aggressive" would depend on those unmeasured 22 savings in it is residential sector? 23 MR. KUCZEK: It is a characterization 24 of our entire program and in the context of what 25 is going on in North America per se, more 1338 1 specifically in Canada and what other people are 2 doing. 3 When we say today it takes into 4 account what we did in 1990, but more importantly, 5 the trend and momentum that we have in place right 6 now and where we are going in the future. 7 MR. MILLER: So, it is kind of a 8 prospective thing? 9 MR. MAYER: I am a little surprised 10 you're not little better prepared for this 11 question in light of the fact that TREE asked the 12 very same question at status update hearing and 13 got, admittedly, as fuzzy an answer as you are 14 giving us now. 15 MR. KUCZEK: Well, if you want more 16 specific information in terms of what we are doing 17 on residential sector, I can do that. 18 The PowerSmart Residential Loan 19 Program, for example, we launched that in 2001. 20 We have achieved $41 million dollars in retrofit 21 work in the marketplace through that program. We 22 are not specifically measuring -- we are measuring 23 to a certain degree, but we don't record those 24 savings through that program. But, there is 25 significant savings on the residential market 1339 1 through that program. 2 The Energuide Grant Program that is in 3 place right now, we took over that in 2001 or 4 2002. Nonetheless, we have achieved -- we 5 undertook 4000 audits on the residential sector 6 and we have gained momentum there too. We have 7 2600 of that 4000 was done since October of this 8 last year. So, there is energy savings that will 9 be achieved in the energy market there that is not 10 recorded. 11 The Wise Program is a program designed 12 to address the seniors in Manitoba. We 13 undertook -- it is a program that we undertake in 14 the summertime. 15 There is over -- close to -- not over, 16 there is about 1400 seniors' homes that we 17 actually undertook audits through that program. 18 We now have the PowerSmart R2000 19 program, which you heard the results of that, 20 which don't sound that great when you talk about 21 just the 30 homes. As Mr. Alex suggested, there 22 are accomplishments outside of those that are just 23 registered as certified with the program. 24 The home energy workshops we 25 reinitiated those in 2001. 1340 1 I forget the numbers this year, but in 2 2002/03, I think we provided 24 of those workshops 3 throughout Manitoba and there was about 1500 4 people that attended those workshops. They are 5 all targeted towards providing information and 6 educating consumers and how they could implement 7 energy efficiency measures in their homes. We 8 don't record what the savings are, that we 9 achieved through those initiatives. 10 We have a number of consumer 11 information services that we offer through 12 pamphlets, through the contact centre and our 13 district offices. We have these pamphlets 14 available to customers. 15 We also implement what we call a 16 PowerSmart Energy Expert. If you want to talk to 17 somebody that is knowledgeable in the area of 18 energy efficiency, you can phone this line and get 19 that information. 20 The Climate Change Connection was 21 another initiative on the residential side. It is 22 the public education and outreach initiative that 23 I mentioned earlier. 24 So, we are doing a fair amount -- 25 MR. MAYER: Better -- 1341 1 MR. KUCZEK: -- we just don't brag 2 enough about what we are doing. 3 MR. MILLER: That was my impression 4 reading this brief. I never heard such a defence 5 of your program as you did in our rebuttal here. 6 I must say, you know, that arithmetic 7 and that figure is possibly the reason that I am 8 here. It takes a lot of volunteer hours and it 9 just didn't seem to me that the historic program 10 was anywhere near aggressive. I recognize that in 11 commercial and industrial sectors that there is a 12 better performance, but in the sampling that we 13 took -- 14 MR. KUCZEK: Mr. Miller, if I can add 15 to that. We reorganize as well, which may give 16 you some comfort. We now have a residential 17 program design sector, so that we recognize that 18 the achievements through the different sectors 19 are, in some sectors, more cost effective. 20 Through this organization, we will make sure that 21 we have a focus on the residential market going 22 forward. 23 MR. MILLER: Well, that's good to 24 hear. I would be willing to accept, you know, no 25 percent increase from your programs if you could 1342 1 get the regulations up in the new housing 2 department. I mean, I would look for it in the 3 retrofit. 4 MR. KUCZEK: You and I. 5 THE CHAIRMAN: Can I interrupt at this 6 point because we seem to have reached a point 7 where Mr. Miller is saying, "I would be willing to 8 accept". It has gone past 5:00, and on that tone 9 of agreement, maybe we can also agree to adjourn 10 for today and get back here for 1:00 o'clock 11 tomorrow. 12 MR. MILLER: That is fine. I think we 13 will go right to Mr. Torrie then tomorrow. 14 THE CHAIRMAN: You can continue with 15 your questions or whatever you want to follow, or 16 whatever pattern you want to follow. 17 So tomorrow being Wednesday, we will 18 resume at 1:00 o'clock. Thank you. 19 20 (HEARING ADJOURNED AT 5:01 P.M.) 21 22 23 24 25 1343 1