WPC  Z?g E_ңqm$B m nC` s:`]0WE"v_|Lu`&_43Uh}fH uH=gu%\DqD:LYR7r4jO9;BYgs% -p(M s EIlF]X9YRWˌ7?=]ϭKG=0rLw#>"&V0J^fv]mh#(o`}sSt u!ыËjE*FAb!k {ZZ)W\\kj &O.bMh fi{/yV4KU9xݿ'86?(S^ 0 0  U* 0 0< 0G# 0j 0} 04x 0 % 0 0J7 0J 0.  0 0'\ 0 0'-) 0MtV 0K! 0% 0& D+& A w& C ['u' 0 g( A)o)@ S*o]*@ +o+@ ++ 00 e1oy1@ )2 1U32 2 1 o2 1Y3 0Cn336J9i;0=@jCrFIKBOe>RTo$W6Yh[71_ 1UhaU,a|aeeeRh 0Shi 0,iU*Ni %ij 1mjw"mj4j BjmjUN-oU>{o@ oooMsp 0lwp BpqMqqq@ sos@ OtoYt u@ uou@ vov@ LwoVwxy@ zo z@ zoz@ w{o{@ 1|o;||S@ so}-@ "o,@ ܄o@ o@ PoZ@ o@ ćo·@ ~o@ 8oBϊ\  `&Times New Roman64Heading 1  XXXS\  `&Times New RomanS               S\  `&Times New RomanSXXX6^~4Heading 2  ?%2A`Arial?    S\  `&Times New RomanS   %2A`Arial6Xx4Heading 3  ?%2A`Arial?   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Pleading  ]'  JX`XXJXX`XXJX`  $ (#X$X`XXX`  s  -  hXT~X0* p @  dd@EhXX&X&X& "td` ~ZF3p@"03d 3F3E #XF&F&"X& $td` ~jF3p@"03d 3F3EXF&F&X& &td` ~F3p@"03d 3F3EVXF&F& X&-  (s2]$ Il!  JX`XXJXX`XXJX`  (s2]$ Il!  JX`XXJXX`XXJX`  'dxdo&"D&raw Object Text <C HKKKKdd ]"  JX`XXJXX`XXJX`    1  234567891011121314151617181920212223 Z$Z$ 2425(s2]$ Il!  JX`XXJXX`XXJX`  &Draw Object <<=8C HKKKKWPCX %X %"3'XXXXKKKK9)%1 `!X%% X ! WPCX %X %"3'XXXXKKKK9)%1 `!X%% X # WPCX %X %"3'XXXXKKKK9)%1 `!X%% X %   (])  JX`XXJXX`XXJX`  $ (#X$X`XXX`  s    % ) %) s݌̌$ X (#$X`XXX`  $ (#X$X`XXX`    -   +td` ~Vp@"0xdx VExVxV?-   ݌̌$ X (#$X`XXX`  $ (#X$X`XXX`  _    ӀIPPSOINTERVENTIONINOHSCAPPLICATIONDecember7,1998T Page  1  _݌ N Ќ$ X (#$X`XXX`  (s2]$ Il!  JX`XXJXX`XXJX`  SummaryWPCX %X %"3'XXXXKKKK9)%1 `!X%% X * $359=AEIMQ1-1111111AttorneyName$35;CKS[ci21.(a)(i)(i)(a)(i)1.a.$35=AEIMQU3a.)1111111($      Il!  JX`XXJXX`XXJX`  E1` hp x (#XE_XX`__    __    1  >I__  ݀  Theinformaldiscussionswiththeapplicant,conductedwiththeassistanceoftheBoard,whileofsomebenefit, X arenosubstitute,soearlyintheregulatedlifeofOHSC,forafullscale,formalpublichearing.X`X_  Il!  JX`XXJXX`XXJX`  E1` hp x (#XE_XX`__    __    2  >I__  ݀  IncertainareasoftheProvinceitisalsothebeginningoftheBoardsregulationofOHSCsdistribution X monopoly.X`X_  Il!  JX`XXJXX`XXJX`  E1` hp x (#XE_XX`__    __    3  >I__  ݀  P.12,l.58X`X_  Il!  JX`XXJXX`XXJX`  E1` hp x (#XE_XX`__    __    4  >I__  ݀  P.11,l.18X`X_ & Il!  JX`XXJXX`XXJX`  E1` hp x (#XE_XX`__    __    5  >I__  ݀  Forexample,itisacknowledgedinvariousplacesthroughouttheevidencethatrelevantcostofservicestudies X havenotbeendone.Muchoftheevidence,suchasthecostofcapitalstudy,readslikeanexecutivesummaryofevidenceratherthantheevidenceitself.X`X_  Il!  JX`XXJXX`XXJX`  E1` hp x (#XE_XX`__    __    6  >I__  ݀  Thistariffapplicationissupposedtosetthepatternforthecompetitivemarket.Thus,ithasimplications X m extendingfarbeyond2000.X`X_  Il!  JX`XXJXX`XXJX`  E1` hp x (#XE_XX`__    __    7  >I__  ݀  IPPSOwouldnotbemakingthissubmissioniftherehadalreadybeenseveralformalhearingsduringwhicha X databaseofinterrogatoryresponses,costofservicestudiesandtranscriptsofcrossexaminationhadbeenaccumulated.X`X_  Il!  JX`XXJXX`XXJX`  E1` hp x (#XE_XX`__    __    8  >I__  ݀  Section78(1)oftheActpreventsOHSCfromchargingfortheelectricityittransmitswithoutarateorderfrom X theBoard.X`X_  Il!  JX`XXJXX`XXJX`  ?+` 4` hp x (#X?_XX`__    __    9  8I__  ݀  DespitetheBoardspower,undersection129(3)oftheAct,toapproveratesforuptoamaximumof24 X months.X`X_  Il!  JX`XXJXX`XXJX`  ?+` 4` hp x (#X?_XX`__    __    10  8I__  ݀  ItisimportanttorecognizethatOHSCisundergoingamajorreorganizationnow,whichshouldhavethe X effectofreducingcosts.Aswell,themarketrulesgoverningaccesstothetransmissiongridhavenotyetbeenfinalized.Whilethesekeyfactorsareinsuchastateofflux,theBoardshouldbeloathtomakefinaldecisionsofastructuralnature,suchastheshifttoPBR.X`X_  Il!  JX`XXJXX`XXJX`  ?+` 4` hp x (#X?_XX`__    __    11  8I__  ݀  Undersection78(5)oftheAct.ThiswouldmakechallengingOHSCsratemethodsinfuture,whentime X m pressuresarelesssevereandafullhearingcanbeconducted,muchmoredifficultwithoutOHSCsconsent.X`X_ [ Il!  JX`XXJXX`XXJX`  E1` hp x (#XE_XX`__    __    12  >I__  ݀  TheMDCisnottheonlyMinister'sadvisorycommittee,astheBoardwillbeaware.X`X_ w Il!  JX`XXJXX`XXJX`  E1` hp x (#XE_XX`__    __    13  >I__  ݀  Wesay isbecausetheMDCstillexists,butwillshortlybedissolvedasithascompleteditsmandate.X`X_ e Il!  JX`XXJXX`XXJX`  E1` hp x (#XE_XX`__    __    14  >I__  ݀  Thisloadcouldbealargeindustrialcustomeroraloaddistributioncompany( LDC).X`X_ , Il!  JX`XXJXX`XXJX`  E1` hp x (#XE_XX`__    __    15  >I__    Paragraph12.2.1oftheapplication.X`X_ ^ Il!  JX`XXJXX`XXJX`  E1` hp x (#XE_XX`__    __    16  >I__  ݀  IPPSOdoesnotknowtheprecisenumber,butestimatestheimpactonOHSCstransmissionrevenuestobe X trivial.Hadtherebeenanopportunityforinterrogatoriesandcrossexamination,IPPSOwouldhaveaskedOHSCtoprovideitwithrevenueforecastsbasedonratesasproposedbyOHSCandasproposedbyIPPSO,below.X`X_ - Il!  JX`XXJXX`XXJX`  E1` hp x (#XE_XX`__    __    17  >I__  ݀  Essentially,thegridownedbyOHSC.X`X_$359=AEIMQ4 1111111(\ Y`Symbol r Il!  JX`XXJXX`XXJX`  B.` hp x (#XB_XX`    18  IX`X_  _XX`Ԁ  Inreplytothisargument,OHSCmayrespondthattheremaybeunfairnessintheprovisionofbackup X transmissionratesifthenetbasisisusedforembeddedgeneration.Thisunfairnesswillnotresultas,whenthebackupisusedinanyparticularmonth,itispaidforundertheratesproposedforthatservice.____    X`X_  Il!  JX`XXJXX`XXJX`  E1` hp x (#XE_XX`__    __    19  >I__  ݀  Ataxisapaymentoneislegallyrequiredtomake(andthatistheeffectofatransmissionrateapprovedbythe X OEB)forwhichonereceivesnothingdirectlyorspecificallyidentifiableinreturn.X`X_(2$ Il!  JX`XXJXX`XXJX`    0  #|x(Xl$  JX.uXXJXX.uXXJX.u(9 Z 6Times New Roman RegularJX# e37=CIQYag1.a.i.(1)(a)(i)1)a)TUUU@1dX%% d c (G)  RX`XXJXSX`XXJX`  $ (#X$SX`XXX`  s    % ) %) s݌̌$ X (#$SX`XXX`  $ (#X$SX`XXX`    -   Ttd` ~Vp@"0xdx VExVxV?-   ݌̌$ X (#$SX`XXX`  $ (#X$SX`XXX`  _    ӀIPPSOINTERVENTIONINOHSCAPPLICATIONDecember7,1998T Page  1  (9 Z 6Times New Roman Regular\  `&Times New RomanU WPCX %X %"3'XXXXKKKK9)%1 `!X%% X :8Page Number1  d  ]'  JX`XXJXX`XXJX`  $"%X$X`XXX`  s  Q()    Figure1 󀀀PageW_XX`  1of2WD X`X_  s݌ X Ќ$ X"%$X`XXX`  B.@ HPX "%XB^ WPCX %X %"3'XXXXKKKK9)%1 `!X%% X ` WPCX %X %"3'XXXXKKKK9)%1 `!X%% X  ]"  JX`XXJXX`XXJX`    OHSC  SUBSTATION    c WPCX %X %"3'XXXXKKKK9)%1 `!X%% X e WPCX %X %"3'XXXXKKKK9)%1 `!X%% X g WPCX %X %"3'XXXXKKKK9)%1 `!X%% X  ]"  JX`XXJXX`XXJX`    GENERATOR  METER  (50MW)       ]"  JX`XXJXX`XXJX`    WIRESOWNEDBY  INDEPENDENTGENERATORORLOAD      k WPCX %X %"3'XXXXKKKK9)%1 `!X%% X m WPCX %X %"3'XXXXKKKK9)%1 `!X%% X o WPCX %X %"3'XXXXKKKK9)%1 `!X%% X q WPCX %X %"3'XXXXKKKK9)%1 `!X%% X   ]"  JX`XXJXX`XXJX`    *THELOADMAYBEASINGLEINDUSTRIALCUSTOMERORANLDCSYSTEM.     GROSSBILLINGBASIS: NN  THEBASISFORTRANSMISSINGCHARGESISTHE20MWNETFLOWPLUSTHE  50MWEMBEDDEDGENERATIONAMOUNT.    NETBILLINGBASIS:   TRANSMISSIONCHARGESAREBASEDONTHENETFLOWACROSSTHE zz REGISTEREDWHOLESALEMETERONLY,EQUALTO20MWINTHISEXAMPLE.     ]"  JX`XXJXX`XXJX`    IMO  CONTROLLEDSYSTEM   ]"  JX`XXJXX`XXJX`    CUS  TOMERSYSTEM   ]"  JX`XXJXX`XXJX`  OHSCCONNECTIONASSETS  Ї ]"  JX`XXJXX`XXJX`  OHSCNETWORK  ASSETS  Їx WPCX %X %"3'XXXXKKKK9)%1 `!X%% X  ]"  JX`XXJXX`XXJX`    REGISTERED  WHOLESALE  METER(20MW)    { WPCX %X %"3'XXXXKKKK9)%1 `!X%% X } WPCX %X %"3'XXXXKKKK9)%1 `!X%% X  WPCX %X %"3'XXXXKKKK9)%1 `!X%% X  WPCX %X %"3'XXXXKKKK9)%1 `!X%% X  WPCX %X %"3'XXXXKKKK9)%1 `!X%% X  WPCX %X %"3'XXXXKKKK9)%1 `!X%% X  WPCX %X %"3'XXXXKKKK9)%1 `!X%% X  WPCX %X %"3'XXXXKKKK9)%1 `!X%% X  ]"  JX`XXJXX`XXJX`    INDEPENDENT  GENERATOR(50MW)     ]"  JX`XXJXX`XXJX`    LOAD*  (70MW)     Il!  JX`XXJXX`XXJX`    Xh'QX`XXX`       THEONTARIOENERGYBOARD@݌  Ќ X`XXX`  X`XXX`       S݌̌ X`XXX`  X`XXX`     >݌̌ X`XXX`  X`XXX`     ݌̌ X`XXX`  X`XXX`     ݌̌ X`XXX`     X`XXX`      INTHEMATTEROF theOntarioEnergyBoardAct,1998, ݌ O  Ќ  X`XXX`     X`XXX`     Section129 #݌   Ќ  X`XXX`     X`XXX`      !݌̌  X`XXX`     X`XXX`       ݌̌  X`XXX`    C , $#MC ,B.` hp x (#XB 2-3  @..and     ,E.` hp x (#XE INTHEMATTEROF anApplicationbyOntarioHydro   ServicesCompanyInc.foranorderinrelationtothetransmissionofelectricityinOntario  X`XXX`      INTERVENTIONOFTHEINDEPENDENTPOWERPRODUCERS  ݌ i Ќ   X`XXX`    X`XXX`      ASSOCIATIONOFONTARIO(IPPSO) L ݌  Ќ   X`XXX`   X`XXX`       % - %- _݌̌X`XXX`   X`XXX`      P݌̌X`XXX`   X`XXX`      ݌̌X`XXX`   X`XXX`      ݌̌X`XXX`   X`XXX`   ]    Submitted: ` February5,1999 ]݌ !% ЌX`XXX`   X`XXX`   j     j݌̌X`XXX`   X`XXX`   =   =݌̌X`XXX`   X`XXX`      L݌̌X`XXX`   X`XXX`      ݌̌X`XXX`   X`XXX`      ݌̌X`XXX`   X`XXX`   Y   Y݌ e'"+ ЌX`XXX`   X`XXX`   4  AndrewJ.Roman 4|݌  ЌX`XXX`   X`XXX`     MillerThomson g݌  ЌX`XXX`   X`XXX`      250020QueenSt.West  Q݌  ЌX`XXX`   X`XXX`     Toronto,OntarioM5H3S1 D݌  ЌX`XXX`   X`XXX`     DirectLine:4165958604 7݌ w ЌX`XXX`   X`XXX`     Fax:4165958695 +݌ c  ЌX`XXX`  CounselforIPPSO  ' `   TABLEOFCONTENTS   X`XXX`   5  m  5݌̌ X`XXX`  X`XXX`   "  ' (#X'I.  INTRODUCTION@@B 3"t݌ U Ќ X`XXX`         X`XXX`     X0 (# X0  mII.  THEREGULATORYPROCESSANDRATESETTING  < FOR1999AND2000@@B 4  ( ݌̌ X`XXX`         X`XXX`   !  0 (# X0III.  TRANSMISSIONCHARGESFORNEWEMBEDDED   GENERATIONA 10    !"݌̌ X`XXX`  X`XXX`   #  X0 (# X0IV.  COSTSA 24 ##݌  '`  Ќ X`XXX`  X`XXX`   $  I.  INTRODUCTION$;%݌  Ќ X`XXX`    C . $$,C--N1` hp x (# XN2  1  .3    IPPSOisanonprofitorganizationforthepromotionofnonutilitygenerationinOntario.IPPSO  representsallformsofindependentpower,includingabout500membersinthefieldsofprojectdevelopment,financing,constructionandoperations;equipmentsupplying;servicesupplyingandenvironmentalissues.Technologiesrepresentedincludecogeneration,smallhydro,wastefueluseincludingbiomassandwoodwaste,windenergy,andothers.IPPSOhasbeenincorporatedsince1986inOntarioandhasanelectedboardofdirectorsof15members.IPPSOrepresentstheindependentpowerindustrybyadvocatingtheirconcernsbeforepublicagencies,thegovernmentandutilities.IPPSOisinterveninginthisproceedingtorepresenttheseinterests.Inpursuingtheinterestsofitsmembers,IPPSOisalsocognizantof,andfullysupportiveof,theoverallobjectivesofthepresentrestructuringoftheindustry.Theinterestsadvancedhereareconsistentwiththepolicyobjectivesofthisrestructuring.K1` hp x (#,` XK2  2  .3    IPPSOwillbemakingfourmainsubmissionsinthisintervention:    X  E+ ` hp x (#,` XEX`XXX`  ,  C / $$.C-- X<(` ` hp x (#X< 2  a  .)3   ` TheBoardshouldnotgrantallofwhattheapplicantseeksonpage11ofthe C| applicationbecausetheprocesscreatedbysection129oftheOntarioEnergyBoard T Act(the Act)doesnotpermittheBoardtoprovidescrutinyofsufficientfocusand , depthtotheapplicantsproposalstoenableittosetjustandreasonableratesfor1999withfinality,andnextyear,tomoveontoPBRwithonlythese1999ratesasafoundation;,,݌̌   $,` X` ` X$X`XXX`  B(` ` hp x (#,` XB2  b  .)3   ` Theapplicantseeks,initsparagraph12.2.2,tomaketransmissionchargesona ! grossedupbasisinrespectofnewembeddedgeneration(definedbelow),whichchargesarenotjustandreasonable,andshouldbedenied;<(` ` hp x (#` ` X<2  c  .)3   ` Theapplicantseeks,initsparagraph12.2.2(lines2022),tousenoncoincidentpeak v#" demandasthebasisforNetworkService(BasicUse)charges,(ratherthancoincidentpeakdemand)andsuchchargeswouldnotbejustandreasonable;<(` ` hp x (#` ` X<2  d  .)3   ` IPPSOshouldbeawardeditscostsinthisproceedingunders.30oftheAct. '="&   X?+ ` hp x (#` ` X? X`XXX`   4  X  II.  THEREGULATORYPROCESSANDRATESETTINGFOR1999AND20004%5݌ } Ќ X`XXX`    X`XXX`   6    6t6݌̌   X`XXX`           X`XXX`   U7    C . $$/CE1` hp x (#XE2  5  .3    Section129(1)(b)and(3)permittheBoardtoissueanorder,withadurationofuptotwoyears, - f approvingorfixingjustandreasonablerates,withoutahearing.TheBoardhasdecidedtoconductthisproceedingwithoutafullpublichearing_XX`  9 X`X_  1 0  1      ,butmerelyinwriting.Thishasresultedinaninability    onthepartofintervenorstosenddetailedinterrogatoriestoOHSCseekingadditionalinformation!informationthatcouldbeusedbyexpertsretainedbytheintervenorstoprepareevidenceinreplytothatofOHSC.Similarly,ithaspreventedintervenorsfromcrossexaminingOHSCsexpertstodeterminewhethertheassumptionsandmethodstheyusedinmakingtheircalculationsarereasonable.According,withfewexceptions,intervenorsarepreventedfromeffectivelychallengingOHSCsallegedrevenuerequirement,proposedrateofreturn,ratestructureandratedesign.Intervenorshavenochoice,withmostofOHSCsevidence,buttoacceptitonfaith.U77݌    X`XXX`           X`XXX`   E>    E>>݌  Ќ   X`XXX`           X`XXX`   ?    K1` hp x (#,` XK2  6  .3    Thislackofaneffectivepublichearingprocessshouldbeseeninthecontextofwhatthis  proceedingis:thebeginningofthefirstyearoftheBoardsregulationofOntariostransmission_XX`  A X`X_  2 0  2        monopoly.OHSCitselfdescribesitsapplicationtotheOEBascreatingtwonewbeginnings_XX`  BXX`X_  3 0  3      :??݌ w     X`XXX`           X`XXX`   sD  X  E+ ` hp x (#,` XE  First,itmarksaconstitutionaldocumentforthenewlyestablishedcompany.Second,it O  marksthebeginningofaregulatoryregimefortheelectricityindustryinOntario.sDD݌̌   X`XXX`           X`XXX`   F  X  F=G݌̌   X`XXX`           X`XXX`   ,H    Itwouldbedifficulttofindthebeginningofaregulatoryregimeoveranaturalmonopoly  8  whenthesystemhastobecalibratedforthefirsttimewhichhaslefttheregulatorandthestakeholdercommunitywithlessopportunityforreal,meaningfulscrutiny.,HH݌̌   X`XXX`           X`XXX`   J    JJ݌̌   X`XXX`           X`XXX`   K  2  E1` hp x (#XE2  7  .3    OHSCisseeking_XX`  MXX`X_  4 0  4      ,onthebasisoftheratherskeletalevidence_XX`  NXX`X_  5, 0  5      ׀initsapplication,notmerely _ approvalofitsforecastedratesandrevenuerequirementsfor1999but,also,thebeginningofPerformanceBasedRegulation( PBR)andratesderivedtherefromfortheyear2000_XX`  OXX`X_  6!  0  6      .PBRis, H inherently,anindexingsystemforlighthandedregulatoryscrutiny,restingonthefoundationofanestablishedbase.Inthiscase,thebasewouldbethe1999ratesonly,tobeapprovedwithoutanypublichearing.Thus,OHSCisseeking,withinayear,ahighlevelofderegulationbeforerealregulationhasevenbegun_XX`  QXX`X_  77 0  7      .K%L݌ O         X`XXX`           X`XXX`   S    H.` hp x (#XH SIT݌̌   X`XXX`           X`XXX`   rU    H1` hp x (#XH2  8  .3    DespiteIPPSOscommentsabouttheunsatisfactorynatureoftheprocessbeingemployedby   theBoard,thisisnotintendedtobeacriticismofeithertheBoardorOHSC.ThereissimplyinsufficienttimebetweenthedateoftheapplicationandthedatewhenOHSCwillneedapprovaltoitsrates_XX`  WXX`X_  8, 0  8      ׀toallowforafullformalratehearing.Giventhisreality,NeitherOHSC 7p northeBoardhadanypracticalalternativetotheprocessemployed.rUU݌̌   X`XXX`           X`XXX`   Y  2  YXZ݌   Ќ   X`XXX`           X`XXX`   [[  2  K1` hp x (#XK2  9  .3    Facedwiththeinevitabilityofusinganunsatisfactoryprocess,theBoardshouldensurethatit  doesnotmakeanyunsatisfactorydecisionsfromthisprocess.Anylongtermorpermanentdecisionwouldbeanunsatisfactorydecision.Inparticular,theBoardshouldnot:[[[݌̌   X`XXX`           X`XXX`   `^  2   C / $$.C- -E+` 4` hp x (#XE2  a  .)3   4 approvetheforecasted1999ratesandrevenuerequirementforlongerthanthatone O  year_XX`  w`XX`X_  9 0  9      ׀butshould,ifpossible,holditsfirstformalOHSCratehearingduring1999 ' ` forratesfortheyear2000_XX`  aXX`X_  : 0  10      ;  8  `^^݌̌   X`XXX`           X`XXX`   fc    B+` 4` hp x (#` 4` XB2  b  .)3   4 approveorintroducePBRforOHSC,amonopolywhichhasnolegitimateneedfor,   orclaimto,lighthandedregulationatthistime,untilatleasttwofullandfairformalratehearingshavebeenconducted; fcc݌̌   X`XXX`           X`XXX`   "f    B+` 4` hp x (#` 4` XB2  c  .)3   4 installthese1999rates,orthemethodortechniqueusedbyOHSCforsettingthese H rates,intoOHSCslicence_XX`  gX`X_  ;z  0  11      ׀whenitslicenceisgrantedbytheBoard."ff݌        X`XXX`           X`XXX`   i    ij݌̌   X`XXX`           X`XXX`    k    C . $$/CH1` hp x (#` 4` XH2  4  .3    Finally,ourcommentsontheprocesswouldbeincompletewithoutsomeobservationson  OHSCsrelianceontherecommendationsoftheMarketDesignCommittee(MDC)insteadofrelevantevidenceandargument.OHSCtreatsMDCdiscussions/recommendationsasiftheywerebindingprecedents,determinativeofissuesbeforetheBoard. kkk݌̌   X`XXX`           X`XXX`   n    nn݌̌   X`XXX`           X`XXX`   o    K1` hp x (#,` XK2  5  .3    TheMDCisunquestionablyanimportantresourcewhichhasdonemuchexcellentworkina   veryshorttime.WeintendnodisrespecttotheMDCwhenwenotethatitisnotasourceoflaworprecedentfortheBoard.ItwouldbeajurisdictionalerrorfortheBoardsototreattheMDCsrecommendations.TheMDCisanadvisorycommitteetotheMinister,notapartybeforetheBoard,noralawmakingbody.TheBoardmusttakeitsinstructionsfromtheapplicablelegislation,particularlysection1oftheOntarioEnergyBoardAct(the OEBAct),notfromthe H MDC,theMinisteroranyofhisseveraladvisors_XX`  |sX`X_  <7 0  12      .TheBoardisrequiredtoachievethe   objectivessetoutinsection1oftheOEBAct,anditisagainsttheseobjectivesthatthisapplicationmustbeassessed.TheBoardshouldbaseitsdecisionsontheevidenceandargumentsubmittedbytheparties,andnotfetteritsdiscretionbyfollowingtherecommendationsoftheMDC.op݌ G"  Ќ   X`XXX`           X`XXX`   sv    svv݌̌   X`XXX`           X`XXX`   w    K1` hp x (#,` XK2  6  .3    ThiswouldnotprecludetheBoard,ifitfindspersuasiveapositionadoptedbytheMDC,  fromacceptingtheMDCsreasoning,buttherearelimitationsonthis.TheBoardshouldnotaccepttheMDCsreasoningwithoutsomeanalysisbytheBoard,initsreasonsfordecision,astohowthisreasoningfitswithsection1oftheOEBActandtheevidence,andwhytheBoardfindsit,ratherthanotherpositions,morepersuasive.Indoingthis,theBoardshouldbecarefulnottakeasingleMDCdiscussionorrecommendationoutofcontext.wx݌̌   X`XXX`           X`XXX`   {    {|݌̌   X`XXX`           X`XXX`   |    K1` hp x (#,` XK2  7  .3    TheMDCis_XX`  &~X`X_  = 0  13      ׀acommitteewhichincludesinitsmembershipseveralstakeholders.Its  reportsprovideacoherentpackageofrecommendations.Toarriveatconsensusonthepackage,variousstakeholdershadtomakecompromisesonsomeissues,inreturnforcompromisesbyothersonotherissues.|U}݌̌   X`XXX`           X`XXX`   ـ    ـ7݌   Ќ   X`XXX`           X`XXX`   -    K1` hp x (#,` XK2  8  .3    WhenOHSC,initsapplication,citesanMDCrecommendationinsupportofitspositionon  oneissue,itmaybeoverstatingtherealsupportontheMDCforthatissueinisolationfromalltheothers.Theconsensusonthatissuemayhavebeen,atleastinpart,theresultofconcessionsmadeonotherissuesnotcitedbyOHSC.-݌̌   X`XXX`           X`XXX`   ^    ^݌ $X" Ќ   X`XXX`           X`XXX`       K1` hp x (#,` XK2  9  .3    BecausetheBoardisnotinapositiontoinvestigateandevaluatewhatweightitshouldgive  anyoneMDCrecommendationbyexploringtheinternaldiscussionprocessesoftheMDC,theBoardshouldbereluctant,indeterminingrateapplications,totreatanisolatedrecommendationasdeterminativeofspecificrateissues.݌̌   X`XXX`           X`XXX`   ܉    ܉:݌̌   X`XXX`           X`XXX`       K1` hp x (#,` XK2   10  .3    ItisalsoimportanttorememberthatonmanyevidentiaryissuestheMDChadonlyone  8  sourceofinformationaboutOntarioHydroscosts,orotherinformationvitaltotheMDCprocess.DespitemakingeveryefforttotestthevalidityofOntarioHydro'sassertions,theMDChadanenormoustaskandaveryshorttimetable.TherewasnotimeforittoconductapublichearingfortestingtheinformationprovidedtoitbyOntarioHydro.Inshort,theMDCisnotaregulatoryagencyliketheOEB,anditsprocessesarenotasubstitutefortheOEB's.Forallthesereasons,theBoardshouldtreattheparticularMDCrecommendationscitedbyOHSCwithrespect,butalsowithcaution.y݌̌   X`XXX`           X`XXX`       ݌̌   X`XXX`         X`XXX`     ݀III.  TRANSMISSIONCHARGESFORNEWEMBEDDEDGENERATIONE݌  Ќ X`XXX`  X`XXX`     g݌̌ X`XXX`           X`XXX`   0    K1` hp x (#,` XK2   11  .3    Anembeddedgeneratingplantisonewhichislocatedbehindtheregisteredwholesalemeter. G"  Thus,itisembeddedbehindit.Suchgenerationhasadirectconnectiontoitsload_XX`   X`X_  > 0  14      ,ratherthan $X" towhatisnowOntarioHydrostransmissiongrid.Therefore,itscustomerissomeoneotherthanOntarioHydroor,infuture,theIMOmarket.Thissituationisillustratedschematicallyin Figure  1 ,below.0݌  Ќ   X`XXX`         H.` hp x (#,` XHӀ _    X`XXX`   9    E1` hp x (#XE2   12  .3    ExistingembeddedgenerationwouldbeunaffectedbyOHSC'sproposedcharges_XX`   X`X_  ? 0  15      ׀butall   newembeddedgenerationwouldbe.ThisisamajorconcerntoIPPSO.9݌̌   X`XXX`           X`XXX`       ݌̌   X`XXX`           X`XXX`   ̜    K1` hp x (#,` XK2   13  .3    TheBoardmayconsiderthatembeddedgenerationisaratherthanminorissue,butthat I  wouldbeamistake.TherearerelativelyfewsuchembeddedplantsinexistenceinOntariotoday,probablylessthantwenty_XX`  ٞ X`X_  @7 0  16      ׀ofanysignificantsize(over20MW).Inthenearfuture, 2 however,astheOntariomarketisopenedtocompetition,embeddedplantscouldbecomeanincreasinglyimportantvehicleofcompetition.TheBoardwillrecallthattheprimarypurposeofthemarketrestructuringinthenewlegislationistoseesignificantgenerationcompetition introducedintoOntario.Thus,theencouragementofcompetitiveembeddedgenerationis Y entirelyconsistentwiththepolicyofthenewlegislation.OHSC'sratesshouldnotbepermittedtodetersuchdevelopment.̜*݌    X`XXX`           X`XXX`   â    â!݌̌   X`XXX`           X`XXX`       K1` hp x (#,` XK2   14  .3    OHSCsproposedtransmissionratesfornewembeddedplantswouldaddtheoutputfromthe O  embeddedgenerationtotheamountmeteredbytheOHSCsmetersforachargebasedonthegrossload.Intheexamplein Figure1 ,thiswouldaddthe50MWpurchasedfromthe  8  independentgeneratorandtransmittedonlinesownedbythegeneratororthecustomertothe20MWpurchasedfromandtransmittedonthetransmissionsystemoperatedbytheIndependentMarketOperator( IMO)_XX`  ? X`X_  A 0  17      .Thecustomerwould,therefore,payatransmissionchargeasifit  took70MWofloadoverthetransmissionsystemwhenitactuallytookonly20MW.`݌̌   X`XXX`           X`XXX`   o    oͩ݌̌   X`XXX`           X`XXX`       K1` hp x (#,` XK2  15  .3    Suchatransmissionchargewouldnotbejustandreasonable,forthereasonswhichfollow. P Accordingly,theBoardshouldexerciseitsdiscretionundersection78(7)oftheActtorejectthisproposedrateandinstead,tofixaratewhichisjustandreasonable.Sucharatewouldbebasedonthenetloadtakenfromthegrid,andwouldignoretheembeddedload,whichisnottransmittedviaOHSCsgrid. ݌    X`XXX`           X`XXX`   1    1݌ O"  Ќ   X`XXX`           X`XXX`   z    K1` hp x (#,` XK2  16  .3    Insection12ofitsapplication,OHSCproposescertaingeneralprinciplesforratestructure   design.Theseprinciplesappeartohavebeenextractedfromstandardpublicutilitieseconomicstextsonthesubject,mostofwhichwouldbepublishedintheUS.Moreover,mostwouldhavebeenbasedonasummaryofhistoricalstatepublicutilitycommissiondecisionsgoingbackovermanydecades.ThesedecisionsweremadeinthecontextofthetypicalU.S.statelegalstructureunderwhichapublicutilityisgrantedalegalfranchiseinagivenarea.ThiscontextisneithercorrectnorrelevantunderthenewlegislativeschemeinOntariotoday.zد݌̌   X`XXX`           X`XXX`       U݌̌   X`XXX`           X`XXX`   6    K1` hp x (#,` XK2  17  .3    First,theenvironmentinOntariotodayisnotoneoftheperpetuationofamonopoly,butofa  rapidtransitiontocompetition.Second,althoughOHSCisanaturalmonopoly,ithasnotbeengivenalegalmonopolyfranchise.Indeed,theActspecificallycontemplatesthatwiththeOEB'sapproval,basedonshowingnecessity,personsotherthanOHSCcanbuildtransmissionlinesinOntario.Forthesereasons,anyratemakingprincipleswhichpermitrateswhichareundulyorunfairlyanticompetitiveareinadequate.Withoneexception,discussedbelow,wehavenoquarrelwiththeprinciplessetoutbyOHSC,asfarastheygo.However,theyareinadequatewithouttheadditionofafurtherprinciple.6݌̌   X`XXX`           X`XXX`       ?݌̌   X`XXX`           X`XXX`        K1` hp x (#,` XK2  18  .3    Inaccordancewithsection1,paragraph1oftheOEBAct,theBoardshouldrequireOHSCto $X" addanewprinciple:transmissionratesshouldbeneutralasbetweenOntarioPowerGenerationIncorporated( OPGI)generationandnonOPGIgenerationand,inparticular,shouldnot '#& discriminateagainstembeddedgeneration.TheproposedtreatmentofembeddedgenerationfavorsOntarioHydroandOPGIattheexpenseofprospectivecompetition.Thisiswronginprinciple,andthefailureofOHSCtoproposeanyprinciplewhichwoulddealwiththisissuedemonstratesthatsuchaprincipleneedstobeadded. ~݌̌   X`XXX`           X`XXX`   z    zؿ݌̌   X`XXX`         K1` hp x (#,` XK23.  TheoneprincipleforsettingtransmissionratesproposedbyOHSCwithwhichIPPSO  8  stronglydisagreesissetoutatthetopofPage187:"Transmissionchargesshouldbedesignedtobenonbypassabletothemaximumextentpractical".ThisiscontrarytotheintentionoftheLegislatureinenactingboththeEnergyCompetitionActandtheOntarioEnergyBoardAct.Itis -  indirectconflictwiththeOEBsmandateinsection1oftheOEBAct,paragraphs1(tofacilitatecompetitioningeneration)and4(topromoteeconomicefficiency).H.` hp x (#XH24.  Theproposalthatallnewembeddedgenerationbeaddedtothenetloadinarrivingatthe  transmissionchargedeterminantwill,inmanyinstancesdiscourageeconomicinvestmentorencourageuneconomicinvestmentforthefollowingreasons:C B $$.C-- ,B.` hp x (#XB CXMKXXX`2 3    X`XXCXMKEmbeddedgeneration,bydefinition,addstothediversityofsupplyataload,andtherefore, , e contributestotheoverallsystemreliability.Thiswillnaturallyreducetheneedfortransmissionnetworkinvestments,althoughtheeffectsmaybecumulativeandnotpossibletoattachexplicitlytoanyindividualgenerationinvestment.  ,E.` hp x (#XE &" C B $$BC-- ,B.` hp x (#XB CXMKXXX`2 3    X`XXCXMKConversely,ifembeddedgenerationisdiscouragedbyfailuretorecognizethisbenefit,  OHSCwillberequiredinduecoursetoinvestinthesystem,atacosttoallitsusers.  ,E.` hp x (#XEC B $$BC-- ,B.` hp x (#XB CXMKXXX`2 3    X`XXCXMKEmbeddedgenerationprovidesparallelbenefitsinthereliefofcongestion;congestionwhich   mightotherwiseraisecosttoallotherusers.  ,E.` hp x (#XEOnthesegroundsaloneitshouldberecognizedthatembeddedgenerationisnormallybeneficialandshouldnotbepenalizedbythegrossingupproposedbyOHSC.25.  ItmightbeleftopenforOHSCtoraisespecificobjectionstotheOEBatthetimeof   first/preliminarylicensingofanynewgenerationfacilityifitbelievedthatthesoleeconomiclogicforanewprojectissocalled"uneconomicbypass".26.  Inthealternative,eveniftheBoardweretoacceptOHSC'spositionthatgrossloadmay B{  beanappropriatebasisforcharging,foraninitialperiod,torecoversunkcosts,thetariffstructuremuststillrecognizethatthesunkcostportionofthetariffdeclinesovertimeascostsarerecoveredandreplacedbythecostsofnewinvestmentundertakenaftertheinstallationofthenewgeneration.Anynewembeddedgenerationmayprovidetemporaryloadreduction(andrevenuereduction)foraperiod,butthiswillbeoffsetinafewyearsbysystemloadgrowth,whichwouldotherwisehaverequiredadditionaltransmissionsysteminvestments. % ! 27.  Itisessentialtobuildin,fromthestart,aperiodoverwhichthe"grossingup"is  amortized,letussay,fiveyears.ThisshouldalsotakeintoaccountthefactthatOHSChassignificantperiodofnoticeofnewgeneration'sgridconnection,justbyvirtueofthetimetakenfromprojectannouncementtoitscommissioning.28.  InthepresentOntariocontextitishighlyimprobablethatafloodofgenerationprojects  C willsignificantlydepletetherevenuesofOHSC.CorrectionofanyminorrevenuelossescanbeeffectedthroughthePBRmechanism,oncethebaselinehasbeenestablishedoveranumberofyears.29.  Thestrongdiscouragementofembeddedgenerationwillhavetwoadditional,deleterious M  sideeffects.C B $$BC-- ,B.` hp x (#XB CXMKXXX`2 3    X`XXCXMKInmanyinstancestheembeddedgenerationprojectsunderconsiderationhavesignificant B{  environmentalbenefits(e.g.greenhousegasreduction,wastefuelutilization)orotherbenefitssuchasjobcreationthroughinprovinceinvestment.Raisingthehurdlesohighwillprecludetherealizationofthese.  ,E.` hp x (#XEC B $$BC-- ,B.` hp x (#XB CXMKXXX`2 3    X`XXCXMKEvenprojectsinlocationswheretheyprovidenecessaryancillarysupporttothesystemwill " bediscriminatedagainstinthiswaybyintentionalexclusionofrecognitionofthesebenefits.  ,E.` hp x (#XE % ! C . $$BC-- ,E1` hp x (#XE 2  30  .3    TherulesproposedbyOHSCwillperpetuatetheanomalyunderthePowerCorporationAct,  wherebytherealbenefitsofdirectconnectiontocustomerswerenotrecognizableduetothemonopolygrantedtoOntarioHydro.Thepresentregimeshouldensurethatthebenefitsofsuchdirectconnectionsareindeedrecognized.Failurenowtodothiswouldperpetuateillogicalplanningofnewconnections.  ,H.` hp x (#XH  X`XXX`         ,E1` hp x (#XE 2  31  .3    Transmissionchargesarecostsfortheprovisionofaservice.Ordinarily,onecanavoidthe   costofaservicebynotusingtheservice,andonecanreducethecostoftheservicebyusinglessofit.Thereisnoprincipledreasonwhythetransmissionsystemshouldbeanydifferent. W݌̌   X`XXX`           J X`XXX`X`XXX`  U  & r K1` hp x (#XK 2  32  .3    Thereisnolawrequiringanygeneratororenduserofelectricitytousethetransmissiongrid,  orifitdoesuseit,totakeanyparticularloadfromgrid.OHSC'sprincipleappearstoconfusetheimportanttodifferencebetweenitshavinganaturalmonopolyanditshavingalegalrighttocompelsomeonetousethegridforallofitsloadortopayasifitwas.Inasense,theproposedtariffisanalogoustoacoercedtakeorpaytransmissioncontract. U݌̌X`XXX`X`XXX`  K1` hp x (#XK2   33  .3    Thecustomerwiththe70MWloadwouldbeforcedtopayatransmissionchargebasedon   all70megawatts,eventhoughitpurchasedonly20megawattsthroughthetransmissiongrid.Thiscustomerwouldpaythesamerateasanothercustomerwiththesamesizeofloadwhotookall70megawattsofloadthroughthetransmissiongrid.IfOntarioHydro/OPGIandanindependentgeneratorwhoproposedtobuildanembeddedplantwerecompetingforthebusinessofalargecustomertheindependentwouldbeatacompetitivedisadvantage.'r  ,H.` hp x (#XH34.  IPPSOacceptsthatchargesfortheuseofthegridforbackupinconnectionwithnew %^  embeddedgenerationmayinsomecircumstancesbeappropriate.However,theuseofmonthlynetpeakasthetransmissionchargedeterminantwillnaturallycapturetheactualusemadeofsuchbackup.Anycostsoverandabovethosethuscaptured,arisinginOHSCasaresultofbackup,wouldneedtobebasedonapropercostofservicestudy,tobemadepublicandreviewedbytheOEBpriortotheyear2000rateapproval.Backupcharges,totheextentanycanbejustified,shouldapplyonlyinmonthswhensystemchargeswerenotrecoveredthroughactualuse,andshouldbesignificantlylessthantheratesforafulltimeuser,inrecognitionoftheiroccasionaldemandsonthesystem,havinghighdiversitywithotherloads.OHSCbackupratesthusdeterminedwouldexcludeanyofthegenerationbackupprovidedthroughtheancillaryservices. C . $$.C-"!- ,E1` hp x (#XE 2"  35  .3    Whatisthepublicpolicyrationaleforforcingsomeonetopayforsomethingwhichtheyuse 5 n verylightlyasiftheyuseditforalloftheirload?OHSC'sreasonisthattheexistingtransmissionsystemcostisa"sunkcost".Thisishardlypersuasive.Allcapitalintensivebusinesses,ifnotallbusinesseshavesunkcosts.Certainlytheexistinggenerationsystemsisasunkcost.Thatdoesnotmeanthatgenerationchargesshouldbedesignedtobenonbypassable.What,then,shouldbethebasisfordistinguishingbetweensunkcostswhichareacceptabletobypassandsunkcostswhichshouldnotbebypassed?  ,H.` hp x (#XH &!   ,E1` hp x (#XE 2#  36  .3    TheanswergivenbyOHSCisthat"uneconomicbypass"isundesirablebecausethe   avoidanceofthechargedoesnotreducethesunkcosts,butinstead,unfairlytransfersthemtotheremainingusers.Thismakesallsortsofmoralassumptionswhichreallybegthequestionevenfurther.Indeed,theargumentisentirelycircular.  ,H.` hp x (#XH ,E1` hp x (#XE 2$  37  .3    TheavoidanceofpurchasingelectricityfromOPGI,orshoesfromEaton's,orflightsfrom c  AirCanadaalsodoesnothingtoreducethesunkcostsofthosethreeenterprises.Theywillsimplyhavetorecoverthesecosts,iftheycan,fromtheirremainingcustomers.Whatmakessuchavoidanceofcharges"atransfer"toothers?Andevenifweweretoassumethatthiswasatransfer,whatwouldmakeitso"unfair"inthecaseoftransmissionsunkcostsbutnotothersunkcosts?Theapplicationprovidesnobasisfordistinction.  ,H.` hp x (#XH ,E1` hp x (#XE 2%  38  .3    Perhapsoneexplanationisthattheproposedtarifffunctionsasaformofexitfee.Itisaform   ofchargeimposedtorecovercostforsomeonewhohasnotionallyleftthesystem.Exitfeesweredebatedpriortotheintroductionofthenewlegislation,butwerenotintroducedand,therefore,arenotlegal.TotheextentthatOHSCisattemptingtojustifyaratethatisfunctionallyanexitfee,itistryingtodoindirectly,throughtheregulatoryprocess,whatitwasunabletodointhelegislativeprocess:toobtainanexitfee.Thereisnolegalbasisforanexitfee.  ,H.` hp x (#XH ,E1` hp x (#XE 2&  39  .3    Itisalsoimportant,whenevaluatingtheproposedrate,togivecarefulattentiontotheuseand 7p misuseoftheexpression"bypass".Bypassisanimprecise,emotionallyloadedwordwithastronglypejorativeconnotation.Ifonedoesnotusesomethingbecauseonedoesnotneedit,thatisnotbypass.Ifonepurchases/usesalesseramountofaservice,oneexpectstopaylessthansomeonewhopurchases/usesagreateramount.Yetsuchusagepatternsarenotreferredtoasbypass.  ,H.` hp x (#XH40.  TodemonstratehowvalueladenandarbitrarytheuseofthewordbypassbyOHSCisin  thiscontext,letusconsidertwoadjacenthypotheticalcustomers,eachtakingaloadof70megawatts.Initially,bothtake100percentoftheirloadfromOntarioHydro,viathegrid.Later,bothsimultaneouslyreducethisto20megawatts.Thefirstcustomerisanindustrialcustomerwhichlosesalargeshareofitsbusiness,andreducesitsbusinessoperationssothatitsloadisreducedto20megawatts.InthatcaseOHSCcouldnotcallitsloadreductionbypass.Inthesecondsituation,thecustomer,anotherindustrialcustomer,decidedtopurchase50megawattsfromanindependentembeddedgenerator,andreduceditsloadthroughOHSCforthatreason.Inthatcase,OHSCwouldcallitbypass.IfOHSC'sproposedembeddedgenerationrateswereapproved,thefirstcustomerwouldbechargedasifitwastakingaloadof20megawatts,the second,asifitwastakingaloadof70megawattsfromthesystem.Witheachcustomertaking &"% preciselythesameload,itissurelyarbitraryandirrationaltochargethemdifferentrateswhenthecostofsupplyingtransmissiontotwoloadsof20megawattshastobethesame_XX`  RSCiX`X_  D 0  18         C . $$.C-('- ,E1` hp x (#XE 2(  41  .3    Theonlydifferencebetweenthesetwohypotheticalcustomersistheirmotivationforhaving  reducedtheirload.Butcustomermotivationisirrelevanttosystemcost.Thetransmissionlinesneitherknownorcarewhytheyarenowcarryingonly20megawattsratherthan70megawattstoacustomer.Andratesaresupposedtoreflectcosts.Insubstance,whatOHSCisproposingisdifferingratestocustomerswithidenticalloadonthebasisofwhetherornotOHSCapprovedofthecustomersmotivationinreducingitsload.Ratesbasedonsucharbitrarinesscannotbejustandreasonable.  ,H.` hp x (#XH ,E1` hp x (#XE 2)  42  .3    Thefactthatthegridisanaturalmonopolydoesnotcreatealegalobligationonanyone $  constructingnewgenerationtouseit,ortopayforitsusewhennotusingit.ThesuccessorcorporationstoOntarioHydromustlearntorecognizethattheydonothavealegalmonopoly,andcannotcoercecustomersintobeingtheircaptives.Tochargeonecustomermorethananotherimposingtheidenticalloadontransmissionsystem,merelybecausetheformerispurchasingelectricityfromanothersupplierwhichdoesnotrequireuseofthegrid,istochargesomeoneforsomethingtheyarenotreceiving,namely,ahigherleveloftransmissionuse.Theproposedhigherratetothedisadvantagedcustomerisanunjustlydiscriminatoryrateand,ineffect,atax_XX`  SCiX`X_  E, 0  19      .Thedifferencebetweenwhatthetwocustomers K wouldpayOHSCforreceivingthesameloadviathetransmissionsystemistheamountofthetaxpaidbythedisadvantagedcustomer.  , ,K1` hp x (#XK 2*  43  .3    ItistritelawthatOHSCcannotimposewhatis,insubstance,atax,andthattheOEBcannot 4 approveit.  ,H.` hp x (#XH    ,E1` hp x (#XE 2+  44  .3    OntarioHydro'sstrandeddebtrecoveryisintendedtorecoversunkandunrecoverablecosts.  Anonbypassabletransmissionchargeis,therefore,doubledipping.  ,H.` hp x (#XH ,E1` hp x (#XE 2,  45  .3    WhentheLegislaturerescuedOntarioHydrobyallowingittoberecapitalized,shedding  muchofitsdebt,theLegislatureeffectivelyimposedachargeinthenatureofaconsumptionorsalestax.Thepolicy,astheverynameofthe EnergyCompetitionActproclaims,isto c  movetoacompetitiveframework.Thisimpliestheavoidanceofanticompetitiverates,especiallyfortransmission,amonopolyservice.   ,H.` hp x (#XH ,E1` hp x (#XE 2-  46  .3    OHSC'senthusiasticpursuitofanonbypassabletransmissionchargemightbemore  8  understandableiftherewasarealdangerthatabypassablechargewouldbeextensivelybypassed,resultinginsignificantrevenueerosion.Thisisnotthecase.OHSCspursuitofbypassseekstocorrectanonproblem,andwillresultindiscriminatoryandanticompetitiverates,whichshouldnotbeapproved. 47.  TotheextentthatanyoftherevenuesofOHSCareputatriskbyviableprojectswhose   solepurposeisnottocapturebenefitsofuneconomicbypass,thisriskisaddressedinthecalculationoftheOntarioHydrostrandeddebt.Itisinappropriatetochargeallcustomersforstrandeddebtrecovery,andatthesametimepreventthemfromsecuringthebenefitsofthenewregime.  ,H.` hp x (#XHC . $$.C-/.- ,E1` hp x (#XE 2/  48  .3    Inthealternative,evenifbypassbyembeddedgenerationwasaconcern,thereisnoevidence #\ thatembeddedplantsthathavebeenconstructed,orwillbeinfuture,haveastheirsoleobjectivetheavoidanceoftransmissioncharges.Sincetransmissionisarelativelysmallpercentageofthefinalcostofelectricity,itisunlikelythatsomeonewouldbuildageneratingplanttoavoidtransmissioncosts.Theopportunityforsavingsonthemuchmoresignificantgenerationcosts,savingsandenvironmentalbenefitsinuseofbyproductsforgeneration,aswellasincreasedreliabilityinsomecircumstances,willbemuchmoreimportant.Embeddedgenerationcanoftenobtainthemainbenefitsofcogenerationcostefficiencyinthejointproductionofheatandelectricity.IfOHSChadpresentedclearevidencethattherewasawidespreadpracticeofbuildingembeddedgenerationsolelytoavoidtransmissioncosts,itmightthenhavehadanargumentinfavourofwhatitproposes.Ithas,however,presentednosuchevidence.  ,H.` hp x (#XH ,E1` hp x (#XE 20  49  .3    Subsection78(8)oftheActimposestheburdenofproofinanapplicationontheapplicant. $X" Withrespecttotheproposedtransmissionrateapplicabletoembeddedgeneration,thisburdenhasnotbeenmet.  ,H.` hp x (#XH &"%  ,E1` hp x (#XE 21  50  .3    Anewplant,ifnotbeingbuiltjusttoavoidtransmissioncharges,shouldpayratesonanet   basis,bothforreasonsoffairnessmentionedaboveandalsobecausetherewillbesystembenefits.Examplesofsuchbenefitsincludeinstallinggenerationcapacityclosetoload,therebyincreasingefficiencythroughareductioninlinelosses;addingtosystemreliabilityatthatloadpointbecauseofanincreasednumberofgeneratingsourcesatthatpoint;andreducingcongestioninthetransmissionsystem,therebydelayingtheneedforandcostofaddingthenextincrementoftransmission.Assystembenefitswillaccruefrombuildinganembeddedplant,transmissionchargestoitshouldbeonanetbasisbecausetheregulatorshouldnotdiscouragesuchbenefits.  ,H.` hp x (#XH ,E1` hp x (#XE 22  51  .3    TheBoardshouldnotpermitOHSCtochargeembeddedplantsfortransmissiononagross  8  basiswithoutdemonstratingasubstantiallikelihoodthatbypassingtransmissionchargeswasthesolereasonfortheconstructionoftheparticularplant.Evenmoreimportant,theBoardshouldnotpermitOHSCtomaketheimprobableassumptionthatalltheembeddedgenerationthatwillbebuiltinOntariowill,ineverycase,beforthesolepurposeofavoidingtransmissioncharges.  ,H.` hp x (#XH ,E1` hp x (#XE 23  52  .3    Applicationparagraph12.2.2,atpage189,proposes,asratedeterminantsfortheconnection s charge,thenoncoincident(individual)peakdemand;andforthebasicusecharge,thesame.Atransmissionsystemisdesignedforthehigheststresscase,whichisnormallyclosetothesystempeak.Accordingly,whileitisacceptablethattheconnectionchargebebasedontheindividualpeak,thesystemusagechargeshouldusethecoincidentpeak.Thatwouldbemorefaithfultothedesignconditionofthesystem.  ,H.` hp x (#XH53.  Onceitisacknowledgedthatthesystemcoincidentpeakisagoodapproximationtothe   stresscasewhichdeterminesthesystemdesignandcosts,thenitiseasytorecognizethattheuseofthefixedsystemforhighindividualloadflowsduringoffpeakperiodsimposesnoadditionalcosts.YettheuseofsuchindividualpeaksasthetransmissionchargeX XXX`ԀX`X XX determinantmayprovide  inappropriateeconomicsignalstogeneratorsandloads.Theymayinfactbethecauseofuneconomicuseofgenerationorofdemandsidemanagement.Forthesereasonsthebasicservice(network)chargedeterminantshouldbethecoincidentpeak.   E1Y` hp x (#XEX XXX`  o*  "&G"H.` hp x (#YXHX`X XX 54.  Inthealternative,thereisacompromisebywhichtherecognized offpeakperiodswould "&  beexcludedfromtheperiodforwhichthepeakdemandismeasured.ThepresentOntarioHydro offpeakperiod(developedforgeneration)comprisesroughlyhalfthehoursinanyyear.Thisoff &!$ peakcouldbeextendedtocoverahigherproportionofthetotal.The"peakloadflowperiod"duringwhichthetransmissionpeakloadwouldbeassessed,andthechargedetermined,wouldberestrictedtothosehourswhenthereisareasonableriskofattainingthestressconditions.Thiscouldprobablybeestablishedassomethingintherangeof10%to25%ofthetotalhoursinanymonth.Thiswouldencouragemosteconomicaluseofthecommittedcapitaltransmissionnetworkresourceandofthegenerationresourcesavailable.Useofpredeterminedhoursforthiswillpreventsignificantgaming,willallowconstructiveplanning,andwillencouragethemosteconomicallyefficientuseofallresources.o**݌̌   XXX`XXX`  -f  55.  Intheshorttermthiswillhavetheaddedbenefitofprovidingcontinuityfromtheexisting -f regimeintothenewregime.Withoutsuchmodificationthiscouldbecomeasignificantlydisruptiveissueforanumberofcustomersinadvanceofthemarketimplementation.Withoutmodification,itwouldalsoruncountertotheprincipleswhichhaveinformedsomeoftheMDCthinking;duringtheinitialpostagestamptransmissiontariffphasethereshouldbelimitedchange.   $ 56.  Finally,wementionthesomewhatsurprisingpositiontakenbyOHSCinitsparagraph  12.4onpage194.Ratherthanseekingatariffforwheeloutandwheelthroughtransactions,OHSCmentionsthattheseserviceswillbeprovidedbytheIMO.IPPSOwasunawarethattheprovisionofsuchservicesfallswithintheroleoftheIMO.WewouldhaveexpectedthatalltransmissionservicesaretheresponsibilityofOHSC.IfitisappropriatefortheIMOtoprovidesuchservices,theIMOshouldberequiredtoapplytotheOEBforapprovalforthechargesfortheseservices.Otherwise,theseservices,ofconsiderableimportancetocompetitioninOntario,willescaperegulatoryscrutiny.IPPSOwouldrespectfullyrequestedthattheBoardaddressthisissueinitsreasonsfordecisiononOHSC'sapplication.X`XXX`   6  IV.  COSTS6c6݌ ]$   X`XXX`    X`XXX`   7    7n7݌ 5&n! Ќ   X`XXX`    X`XXX`   A8    C . $$.C-84- ,E1` hp x (#XE 28  57  .3    TheBoardhas,pursuanttosection30oftheAct,thediscretiontoawardcostswheneverit   conductsa proceeding".Theword proceeding"isnotadefinedterm,buthasamuchbroadermeaningthan"hearing".InthecontextoftheBoard'swork,areasonablenotionof proceeding"wouldbeanyapplicationforalicence,rateorothernecessaryapprovalfromtheBoardinwhichpersonsotherthantheapplicanthave,oraregiventherighttomakesubmissions,otherthanonamerelyproceduralquestion.Inthisregard,itdoesnotmatterwhethertheBoardcallsthisproceedinga"consultation",a"meeting"ora"hearinginwriting";itisnotthelabeloftheprocess,butthenatureoftheapplicationwhichgivesrisetotheBoard'sjurisdiction. A88݌̌   X`XXX`           X`XXX`   =    K1` hp x (#XK29  58  .3    EffectiveparticipationintheBoard'sproceedingshasalwaysbeencostly.Thisisevenmore 7p sotoday,whentheBoardisregulatingwithbrandnewlegislationinthefirstcase.Giventhelandmarknatureofthiscase,IPPSOregardeditasimportanttointervene.ThenecessaryhastewithwhichthecasehadtobecompletedmadeitimperativethattheBoardbegiventhebenefitofaprofessionallypreparedpresentationfromIPPSO.=#>݌̌   X`XXX`           X`XXX`   oA  ,  oAA݌̌   X`XXX`           X`XXX`   B     ,H.` hp x (#XH 2:  59  .3    Despitethestreamlined,nonadversarialprocedureusedbytheBoard,thereisaninherent G"  conflictbetweentheanticompetitivenatureoftheproposedtransmissionrateforembeddedgeneratorsandtheinterestsofcompetitioningenerationintheOntariomarket.IPPSObelievesthatithasfairlyandadequatelyrepresentedthesecompetitioninterests.Indoingso, '#& ithascontributedtoabetterunderstandingoftheissuesbeforetheBoard.IPPSOhasalsodealtinaresponsiblewayinthissubmissionwiththeneedtotempertheobligationtoprovideOHSCwithaninterimsetoftransmissionratesquicklywiththeneedtocalibratethesystemproperlybeforeintroducingperformancebasedregulation.Forthesereasons,IPPSOshouldbeawardeditscosts.BC݌̌   X`XXX`           X`XXX`   G  ,  G:H݌̌   X`XXX`           X`XXX`   )I     ,H1` hp x (#XH 2;  60  .3    Apartfromitspresentationofthiswrittenintervention,IPPSOalsoparticipatedinanearlier   stageoftheprocessbyattendingthepublicconsultationmeetings.Itsoughtandobtainedasmallamountofintervenorfundingforthatpartoftheprocess.SinceitisunclearwhetherintervenorfundingwouldextendtocoveringIPPSO'scostsfortheassistanceoflegalcounselindevelopingandpreparingthissubmission,IPPSOisrequestingthattheBoardexerciseitsdiscretiontoawardcosts.If,however,OHSCiswillingtocoverIPPSO'scounselfeesatthesamerateastheOEBdoesinitscostsawards,thenIPPSOwouldacceptanequalamountofintervenorfundinginlieuofcosts.)II݌̌   X`XXX`         X`XXX`   M  ,  M?N݌̌   X`XXX`        X`XXX`   O     ,K1` hp x (#XK 2<  61  .3    Forreasonsofbothsubstanceandpublicperception,itisimportanttotheBoardtohave o  effectivepublicparticipationinitsproceedings.Toawardcostsforappropriateinterventionsdoesnotinanywayharmthosewhowouldpaythecosts;ifanything,itbenefitsthem.Allof OHSC'scostswillbepaidbyitscustomers.OHSCisarguingforaratestructurethat,intheOzO݌ %0!$ Ќ   X`XXX`        X`XXX`   R  ,  aspectrespondedtobyIPPSO,isratheranticompetitiveandunfair.Itisbeneficialtothese   customersthatIPPSOpresentitsarguments,toattempttoredressthebalance.RS݌̌   X`XXX`        X`XXX`   T    TU݌̌   X`XXX`        X`XXX`   U    X AllofwhichisrespectfullysubmittedthisfifthdayofFebruary,1999,by:U shXT~gX p @  dd@EXa!X !v thXT~_( p @  dd@EX! (  vuhXT~HG  p @  dd@E %  $> vvhXT~" p @  dd@E.].f wtd` ~1( p@"0@ 2d@  E*  *D yXXXXp`\~ 8 p @d dd@EH8N ztd` ~3k (p@"0 d (E -(( Z |td` ~lKR(p@"0 d R(E R(R(  ~td` ~ p@"0h d hEUp ZF td` ~D+Rp@"0h d hRERRF td` ~Rp@"0 d REDRRR td` ~[ p@"0 d E MZ~ td` ~l+pRp@"0( d( pRE pRpR  td` ~3c(p@"0 d (E %(( ZXXXXp`\~H p @d dd@E NN FXXXXp`\~O p @d dd@EN] F-  #X`X |ٌi#      X`XXX`   S}    -p x (#X- S}}݌̌   X`XXX`           X hB.` hp x (#XB@ XX`.0F Z:\RC\OHSCF5.WPD0Z:\RC\OHSCF5.WPD/   B