ONTARIO
ENERGY
BOARD
FILE NO.:
EB - 2007- 0680
VOLUME:
4
DATE:
December 7, 2007
BEFORE:
Paul Sommerville
Presiding Member
Paul Vlahos
Member
David Balsillie
Member
EB-2007-0680
THE ONTARIO ENERGY BOARD
IN THE MATTER OF the Ontario Energy
Board Act, 1998, S.O. 1998, c.15
(Sched. B);
AND IN THE MATTER OF an application by
Toronto Hydro Electric System Limited
pursuant to section 78 of the Ontario
Energy Board Act, 1998 for an order
approving
just
and
reasonable
distribution rates and other charges
for electricity distribution to be
effective May 1, 2008.
Hearing held at 2300 Yonge Street,
25th Floor, Toronto, Ontario, on Friday,
December 7, 2007, commencing at 9:31 a.m.
-----------VOLUME 4
-----------B E F O R E:
PAUL SOMMERVILLE
PRESIDING MEMBER
PAUL VLAHOS
MEMBER
DAVID BALSILLIE
MEMBER
A P P E A R A N C E S
PETER FAYE
Board Counsel
CHRISTIE CLARK
KEITH RITCHIE
SILVAN CHEUNG
MARTIN BENUM
Board Staff
MARK RODGER
Toronto Hydro-Electric System
Limited
GLEN WINN
COLIN MCCLORG
COLLEEN RICHMOND
JACK LENARTOWICZ
BASIL ALEXANDER
MURRAY KLIPPENSTEIN
Pollution Probe
ROBERT WARREN
JULIE GIRVAN
Consumers Council of Canada
MICHAEL BUONAGURO
Vulnerable Energy Consumers
Coalition
JOHN DeVELLIS
School Energy Coalition
KIMBLE F. AINSLIE
DAVID MACINTOSH
Energy Probe
I N D E X
O F
P R O C E E D I N G S
Description
Page No.
--- Upon commencing at 9:31 a.m.
1
PRELIMINARY MATTERS
1
THESL - Panel 3: CONTINUED
3
IVANO LABRICCIOSA; Previously sworn.
ASHEEF JAMAL; Previously sworn.
ROBERT WONG; Previously sworn.
EDUARDO BRESANI; Previously sworn.
SUSAN DAVIDSON; Previously sworn.
CROSS-EXAMINATION BY MR. KLIPPENSTEIN
4
CROSS-EXAMINATION BY MR. DeVELLIS
41
--- Recess taken at 11:00 a.m.
51
--- On resuming at 11:20 a.m.
51
CROSS-EXAMINATION BY MR. FAYE
58
--- Luncheon recess taken at 11:51 a.m.
67
--- On resuming at 1:31 p.m.
67
PRELIMINARY MATTERS
68
CROSS-EXAMINATION BY MR. BUONAGURO
70
QUESTIONS BY THE BOARD
72
QUESTIONS BY BOARD STAFF
81
CROSS-EXAMINATION BY MR. FAYE (Continued)
86
--- Recess taken at 2:59 p.m.
121
--- On resuming at 3:18 p.m.
121
--- Whereupon the hearing adjourned at 4:46 p.m.
173
E X H I B I T S
Description
EXHIBIT NO. 4.1:
POLLUTION PROBE.
Page No.
DOCUMENT REFERENCE BOOK OF
3
EXHIBIT NO. 4.2: INTERROGATORY 10 AND RESPONSE
OF POLLUTION PROBE.
3
U N
Description
UNDERTAKING NO. T4.1:
EQUITY WAS DONE.
D E R T A K I N G S
Page No.
HOW THE CALCULATION FOR RETURN ON
86
1
1
Friday, December 7, 2007
2
--- Upon commencing at 9:31 a.m.
3
MR. SOMMERVILLE:
4
This is Day 4 of the oral evidence in the matter of an
Good morning.
Please be seated.
5
application for rates, made by the Toronto Hydro-Electric
6
System Limited.
It has been designated EB-2007-0680.
7
Mr. Rodger, are there any preliminary matters?
8
PRELIMINARY MATTERS:
9
MR. RODGER:
Good morning, Mr. Chairman.
Just a
10
couple of matters.
11
the Board some responses to undertakings that were given.
12
In particular, you will receive shortly a copy of
13
Undertaking Response T3.3, T3.4, and T3.7.
14
additionally, there is a blue page, which is an update to a
15
response to an Ontario Energy Board Staff interrogatory.
16
I've handed to Mr. Faye to be handed to
And then,
And just to explain this blue page quickly, Board
17
Staff's interrogatory had to do with incremental OPEX
18
changes as a result of Smart Meters, and the table that was
19
provided in the interrogatory answer was created
20
specifically to address the Board staff's issue, but Ms.
21
Davidson has discovered that there was an Excel spreadsheet
22
duplication of some of the numbers, which have been
23
corrected here.
24
Now, there is no impact on the distribution revenue
25
expenses used in the application.
The change only affects
26
the answer to this interrogatory, and nothing else in the
27
application.
28
interrogatory response to reflect the change.
But Ms. Davidson did want to update the
ASAP Reporting Services Inc.
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1
And those are the preliminary matters, sir.
2
MR. SOMMERVILLE:
3
Now, we left off with -- Mr. Warren had -- are there
4
Thank you.
preliminary matters from any other party this morning?
5
Mr. Warren had left off.
6
MR. KLIPPENSTEIN:
7
believe I am.
Who is next in line?
Good morning, Mr. Chairman.
I
Murray Klippenstein for Pollution Probe.
8
MR. SOMMERVILLE:
9
you ready to proceed?
10
MR. KLIPPENSTEIN:
11
MR. SOMMERVILLE:
12
MR. KLIPPENSTEIN:
Thank you, Mr. Klippenstein.
Are
Yes, I am.
Thank you.
Mr. Chairman and members of the
13
Panel, for convenience, or hopefully for convenience, I on
14
behalf of Pollution Probe have prepared a cross-examination
15
reference book, a copy of which should be before you, and
16
which we distributed to my friend, Mr. Rodger, a while ago,
17
and copies are available here for anyone who we missed in
18
the distribution.
19
And in addition, there is one document, which is
20
Pollution Probe Interrogatory 10, and the response, which
21
we weren't able to get into the book.
22
So if those two documents are available to the Panel,
23
that would perhaps be convenient.
24
friend does not have any objection to that document
25
reference book being made an exhibit, and that might be the
26
convenient --
27
MR. SOMMERVILLE:
28
MR. FAYE:
And I understand my
Mr. Faye?
It's Exhibit 4.1.
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3
1
EXHIBIT NO. 4.1:
2
PROBE.
3
MR. SOMMERVILLE:
DOCUMENT REFERENCE BOOK OF POLLUTION
And should we make the interrogatory
4
a separate exhibit, or do you want to just consider it part
5
of the --
6
7
MR. FAYE:
Maybe for convenience, it would be useful
to have it separate.
8
MR. SOMMERVILLE:
9
MR. FAYE:
Thank you.
Make that 4.2.
10
MR. SOMMERVILLE:
Thank you.
11
EXHIBIT NO. 4.2:
INTERROGATORY 10 AND RESPONSE OF
12
POLLUTION PROBE.
13
MR. SOMMERVILLE:
Let me say, Mr. Klippenstein, that
14
this kind of booklet is extremely helpful to the Board.
15
Thank you.
16
17
18
MR. KLIPPENSTEIN:
It may be too early to say that,
but -MR. SOMMERVILLE:
I may have to eat those words later,
19
but it's early in the day, and I'm looking on the bright
20
side.
21
22
MR. KLIPPENSTEIN:
Thank you.
I hoped it would be
helpful.
23
THESL - Panel 3:
24
IVANO LABRICCIOSA; Previously sworn.
25
ASHEEF JAMAL; Previously sworn.
26
ROBERT WONG; Previously sworn.
27
EDUARDO BRESANI; Previously sworn.
28
SUSAN DAVIDSON; Previously sworn.
ASAP Reporting Services Inc.
(613) 564-2727
(416) 861-8720
4
1
CROSS-EXAMINATION BY MR. KLIPPENSTEIN:
2
MR. KLIPPENSTEIN:
Good morning, members of the
3
witness panel.
4
representing Pollution Probe here, and I would like to ask
5
you a number of questions for a while about the plan we are
6
considering in this hearing.
7
My name is Murray Klippenstein.
I'm
Pollution Probe would like to test whether the plan
8
from Toronto Hydro to meet its customers' electricity
9
service needs is economically prudent and cost-effective.
10
And as part of that, I would want to be asking
11
questions directed to whether Toronto Hydro's customers'
12
electricity needs could be met in a more prudent and more
13
cost-effective manner if there was more in the plan about
14
energy conservation and small-scale local generation, or
15
what I'll loosely call distributed generation.
16
So I'm going to be asking a lot about energy
17
conservation and distributed generation, and I guess the
18
obvious context is that what Toronto Hydro is seeking here
19
is OEB approval for a three-year, $900-million capital
20
plan.
Have I got that obvious point right so far?
21
MR. LABRICCIOSA:
22
MR. KLIPPENSTEIN:
That's correct, sir.
Good.
I'd like to start by asking
23
you to turn in the document reference book, Exhibit 4.1, to
24
Tab 4, and this appears to be a letter from David S.
25
O'Brien, dated July 13th, 2007, on behalf of Toronto Hydro
26
Corporation.
Does that make sense so far?
27
MR. LABRICCIOSA:
28
MR. KLIPPENSTEIN:
Yes, sir.
And Toronto Hydro Corporation is
ASAP Reporting Services Inc.
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5
1
the sole shareholder of Toronto Hydro-Electric Services
2
Limited, or Toronto Hydro; is that right?
3
4
MR. LABRICCIOSA:
The City is the shareholder.
Toronto Hydro Corporation is the parent corp. company.
5
MR. KLIPPENSTEIN:
6
And the letter is addressed to Councillor Paula
7
Okay.
Thanks.
Fletcher, of the City, I guess; right, it would appear?
8
MR. LABRICCIOSA:
9
MR. KLIPPENSTEIN:
Yes, sir.
I'd like to refer to several
10
sentences in this letter for beginning my cross-examination
11
about the topics I mentioned.
12
sentences.
13
make sure the context there isn't misunderstood:
I'll read the first two
And some of it is kind of fluff, but just to
14
"Further to our conversation yesterday regarding
15
the information released by Toronto Hydro at a
16
meeting on July 10th, I want to state
17
emphatically that neither Toronto Hydro nor Hydro
18
One is pursuing any option, such as the so-called
19
third line, as the preferred solution to the
20
security of supply issues facing this City.
21
Minister Duncan has made it very clear that the
22
government does not support the third line as an
23
option, and we support that opinion."
24
Now, just by way of background, the reference to the
25
"third line", just so I can make sure I understand this, in
26
very simple terms, I take it that there are basically two
27
major transmission lines coming into and serving the
28
general downtown Toronto core, one of which ends at Leaside
ASAP Reporting Services Inc.
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1
station, and one ends at Manby station; is that right?
2
MR. LABRICCIOSA:
3
MR. KLIPPENSTEIN:
That's correct, sir.
And so the "third line" referred to
4
here is the idea of a third major transmission line to
5
serve -- or to additionally serve, basically, the downtown
6
Toronto area generally.
7
MR. LABRICCIOSA:
8
MR. KLIPPENSTEIN:
9
Is that generally right?
Yes, sir.
Okay, and just following up on
that, the two transmission lines that I mentioned which end
10
at Leaside and Manby, Toronto Hydro's distribution system
11
picks up on the other side of those two stations and
12
distributes the power basically from there to the downtown
13
Toronto area.
14
Is that roughly right?
MR. LABRICCIOSA:
It's a bit more complex than that,
15
but I guess in simple terms, if you look at it as two
16
extension cords that have nodes connected from it -- I
17
mean, there are many transmission stations throughout the
18
city, 35, in fact, that pick up -- that are pick-up points,
19
essentially, from there that we feed the customers of
20
Toronto.
21
So, you know, essentially they come off two main
22
trunks, which end at Leaside and Manby.
23
point is relatively correct in terms of the two trunks feed
24
those 35 pick-up points.
25
MR. KLIPPENSTEIN:
I see.
So, you know, your
And the parts of the system
26
between the two -- Leaside and Manby stations, and then
27
those 35 points that you mentioned -- are those part of
28
Toronto's system or Hydro One's system?
ASAP Reporting Services Inc.
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1
MR. LABRICCIOSA:
With the exception of one
2
transformer station, they're all Ontario -- Hydro One's
3
pick-up points.
4
5
6
7
MR. KLIPPENSTEIN:
I see.
Okay.
Thank you, that's
helpful.
Let me continue with the letter, just skipping over a
sentence:
8
"Unfortunately, a piece of outdated information
9
was included in the presentation which gave the
10
impression that Toronto Hydro and Hydro One were
11
pursuing the third line option.
12
further from the truth."
13
14
Nothing could be
Then if I could skip one sentence to the next
paragraph:
15
”The material that has been provided to you by
16
Mr. Gibbons has been taken out of context and it
17
was made very clear by my staff to all in
18
attendance that Toronto Hydro is, first and
19
foremost, committed to seeking demand-side
20
management and distributed generation solutions
21
to the supply concerns that all parties recognize
22
must be addressed."
23
Now, skipping the first part of that sentence, which
24
refers to Mr. Gibbons, who I am not here today to defend,
25
but just looking at what it says about Toronto Hydro.
26
says that Toronto Hydro is:
It
27
"-- first and foremost committed to seeking
28
demand-side management and distributed generation
ASAP Reporting Services Inc.
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1
solutions."
2
Would you agree that it would be fair and appropriate
3
for this Board to take this letter and that statement as an
4
appropriate context in which to consider the plan that it's
5
considering in this hearing?
6
MR. LABRICCIOSA:
I really can't speak for the Board,
7
Mr. Klippenstein, but I'm trying to understand your
8
question in terms of:
9
materials submitted do not reflect conservation and demand
10
Are you suggesting that the
management?
11
MR. KLIPPENSTEIN:
Well, we'll get to that, but I want
12
to take it step by step.
My first question is whether you
13
would agree with me, and I'm suggesting to you that it is
14
fair and appropriate for this Board to take that sentence
15
and the rest of the letter, but that sentence, into
16
consideration as context when it evaluates the plan before
17
it.
Would you agree that's fair?
18
--- Witness panel confers
19
MR. LABRICCIOSA:
I would agree with you.
I would say
20
conservation demand management is included in this plan,
21
and it is a part of the submission to the Board.
22
MR. KLIPPENSTEIN:
All right.
And if you turn to the
23
second page of the letter and just look at the cc list, the
24
copy list, I see that this letter was apparently copied to
25
the Honourable Dwight Duncan, the Minister of Energy; the
26
Mayor of Toronto, David Millar, Dr. Jan Carr, the CEO of
27
Ontario Power Authority, and Laura Formusa, the then-acting
28
president and CEO of Hydro One, and I gather she's now the
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1
2
president and CEO.
You would agree with me that this letter has been made
3
as a public statement to many, if not most of the major
4
players in the plan that we're dealing with today?
5
Is that fair?
6
MR. LABRICCIOSA:
7
MR. KLIPPENSTEIN:
I would say so.
Have you become aware of any way in
8
which the author of this letter, the president of Toronto
9
Hydro Corporation, or anyone on behalf, has withdrawn or
10
changed in any way the contents of this letter and the
11
statements therein?
12
13
14
MR. LABRICCIOSA:
I'm not aware of a follow-up letter
beyond that.
MR. KLIPPENSTEIN:
And as far as you know, Toronto
15
Hydro Corporation, through its president, has never backed
16
away from the statements in this letter?
17
MR. LABRICCIOSA:
Again, I'd just reiterate, outside
18
of this letter I have not seen anything else come out of
19
this.
20
MR. KLIPPENSTEIN:
I'd like to then change references
21
and look at some of the aspects of the distributed
22
generation issue in the context of that letter.
23
could turn to Tab 5 of the Pollution Probe document book,
24
Exhibit 4.1.
25
Pollution Probe Interrogatory No. 6 and Toronto Hydro
26
answers to that.
And if you
That's Tab 5 of the document book, which is
Do you have that?
27
MR. LABRICCIOSA:
Yes, I do, sir.
28
MR. SOMMERVILLE:
Just to clarify matters,
ASAP Reporting Services Inc.
(613) 564-2727
(416) 861-8720
10
1
Mr. Klippenstein, the actual exhibit number is S4.1.
2
MR. KLIPPENSTEIN:
3
MR. SOMMERVILLE:
4
I'm sorry.
Thank you.
And similarly, S4.2 for the other.
Thank you.
5
MR. KLIPPENSTEIN:
The first question asked in that
6
interrogatory at Tab 5 says:
7
"Please provide your best estimate of the amount
8
of distributed generation in MW that your system
9
can presently accommodate in downtown Toronto."
10
Now, for the context of this discussion, as I
11
understand it, distributed generation means generation that
12
occurs inside the boundaries of Toronto Hydro's system,
13
roughly, rather than generation that occurs outside and is
14
transmitted in. Fair enough in a general way?
15
MR. LABRICCIOSA:
In the industry, it's more or less
16
known as a small-scale footprint type generation.
17
know, the larger footprint, like the Portlands Energy
18
Centre -- that's a recent one that's being built by OPG --
19
is not distributed generation, even though it's located
20
within the City of Toronto.
21
MR. KLIPPENSTEIN:
Okay.
So, you
I'll get to the larger-scale
22
ones, later, but in general it would include instances of
23
the large buildings, or users that create their own
24
generation capacity that's within Toronto Hydro's
25
jurisdictional area, within your system; right?
26
MR. LABRICCIOSA:
27
MR. KLIPPENSTEIN:
28
I would agree with that.
And would that include things like
a large shopping mall, like perhaps Eaton Centre or a
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1
condominium building or some kind of commercial
2
establishment, or even an apartment building or even a
3
home?
4
distributed generation.
5
6
7
Those would all potentially be examples of
MR. LABRICCIOSA:
We have many examples today where
that's working in our system, correct.
MR. KLIPPENSTEIN:
What we asked for in the
8
interrogatory was your best estimate of the amount of
9
distributed generation that your system can presently
10
accommodate in downtown Toronto.
Part of the answer is
11
found on the next page, which is at page 9 of the document
12
book.
13
that?
And it says: "Based on a preliminary..."
14
MR. LABRICCIOSA:
15
MR. KLIPPENSTEIN:
Do you see
I do.
(Reading.)
16
"Based on a preliminary and high-level review,
17
THESL indicated that there may be room for up to
18
300 MW of DG" -- I guess that's distributed
19
generation – "in sizes of less than 10 megawatts
20
in the combined Leaside and Manby systems.
21
assumed that with appropriate planning and design
22
for this level of penetration, the form and
23
function of the distribution system would not be
24
altered.
25
currently designed, built, operated and protected
26
as a unidirectional power system would be
27
maintained and the installation of a generation
28
would not impose restrictions on the ability of
It is
That is, the distribution system
ASAP Reporting Services Inc.
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1
the distribution system to connect new or serve
2
existing customers."
3
And just stopping there in the quote, let me connect
4
this back to the letter that I reviewed with you.
Is it
5
fair to say that, in the letter from Mr. O'Brien, when he
6
talks about Toronto Hydro's commitment to distributed
7
generation solutions, and the quote in the interrogatory I
8
just read, we're talking partly about the same thing there.
9
Is that right?
It's distributed generation?
10
MR. LABRICCIOSA:
11
MR. KLIPPENSTEIN:
Yes.
Yes.
Now, returning to the answer
12
in the interrogatory, one of the words I notice is
13
"unidirectional." It says:
14
"The distribution system currently designed,
15
built, and operated and protected as a
16
unidirectional power system..."
17
Am I right in understanding that means that the
18
distributed generation we're talking about in that sentence
19
refers to power generation units which would supply the
20
needs of the particular building but would not feed into
21
Toronto Hydro's grid?
22
"unidirectional?"
23
MR. LABRICCIOSA:
Is that what's meant by
That's what's meant by
24
"unidirectional", but in essence, I think the term
25
"unidirectional" in that sentence is really used to
26
identify the system is actually built to supply power in
27
one direction.
28
The fact that it can accommodate bidirectional feeds
ASAP Reporting Services Inc.
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1
is a byproduct of the design we have.
2
it's hinting at there are some restrictions because of the
3
design, both from a unidirectional perspective as well as
4
short-circuit capacity, that limits the amount of
5
distributed generation you can connect up to the grid.
6
7
8
9
MR. KLIPPENSTEIN:
Okay.
I think later on
I'm a little confused, then,
and I'd like to just ask for some clarification on that.
The amounts referred to in this question, the 300
megawatts, does that include some sources which in your
10
mind would feed into Toronto Hydro's system in addition to
11
supplying the needs of the particular institution?
12
MR. LABRICCIOSA:
Well, let's come back to the 300
13
megawatts.
I think, you know, I want to make sure we're
14
not taking the words that are on the page out of context.
15
300 megawatts was an assumption, or a number put
16
together based on an assumption from some technical
17
documents delivered out of the U.S., that basically
18
suggests there -- in most urban centres there's about 10
19
percent of the load is available in distributed generation
20
format.
21
So I don't want to leave the impression that this 300
22
megawatts is accounted for in discrete elements out in the
23
system.
24
drawn from two studies out of the States.
25
It's based on that high-level notional conclusion
MR. KLIPPENSTEIN:
Well, I do want to ask some
26
questions about that some more.
But before I do, let me
27
just understand the words "unidirectional power system".
28
Maybe it's not as important as I think.
ASAP Reporting Services Inc.
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1
Are you saying that the 300 megawatts -- I understand
2
it's rough -- the 300 megawatts does include some units
3
feeding back into the system, or is it -- sorry?
4
MR. LABRICCIOSA:
Again, you know, we didn't identify
5
300 customers with 1-megawatt generators, so whether it can
6
or can't, I can't say with certainty that it's out there.
7
But I think, if your question's really hinting at,
8
could there be some that feed into the grid, yes, I would
9
imagine there's probably some that's there that could
10
11
12
13
qualify with that statement.
MR. KLIPPENSTEIN:
Does your estimate in that
paragraph -- well, let me rephrase that.
I assume that there are some technical issues when you
14
install a distributed generation plant that is going to
15
feed back into the system?
16
MR. LABRICCIOSA:
17
MR. KLIPPENSTEIN:
Yes, there are.
Now, in this estimate, are you
18
making the assumption that your present system can
19
accommodate that?
I'll bet it's not that simple.
20
MR. LABRICCIOSA:
21
MR. KLIPPENSTEIN:
No, it's not that simple.
Okay.
So when you talk about this
22
300-megawatt figure, you're not really sure how much of
23
that, if any, would be bidirectional?
24
MR. LABRICCIOSA:
Correct.
You know, I can also
25
describe our experiences in this area.
26
distributed generation that we have connected today just
27
offsets the load of that building.
28
Most of the
So, for example, you mentioned, you know, one example
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15
1
you used was the Eaton Centre, and it's a commercial
2
building.
3
worth of load.
4
generation to be connected.
5
own load rather than feeding into the grid.
6
A typical centre like that may be 10 megawatts
It may have 1 megawatt worth of distributed
So essentially, it offsets its
So most of our connections today are pretty much
7
offsetting load connections, rather than bidirectional
8
connections.
9
MR. KLIPPENSTEIN:
Okay.
Now, when I look at this
10
answer to the question, I have to say, you know, speaking
11
as a lawyer using technical, legal language, I see a lot of
12
weasel words in there, frankly.
I see the words:
13
"-- based on a preliminary and high-level review,
14
indicated that there may be room for up to 300
15
megawatts, and it is assumed that the form and
16
function of the system would not be altered".
17
That's a lot of weasel words in there, if I may say so.
18
MR. LABRICCIOSA:
I object to your terminology of
19
"weasel", but I would say that's technical people writing
20
to be certain about not leaving false impressions out
21
there.
22
23
24
25
MR. KLIPPENSTEIN:
Well, as you can see, you
didn't leave any false impressions with me.
MR. LABRICCIOSA:
I'd also come back to the
interrogatory that said "your best estimate."
26
MR. KLIPPENSTEIN:
27
MR. LABRICCIOSA:
28
Okay.
Okay.
So again, the impression we're
trying to leave here is, there's an estimate.
We've done
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our best with a lot of assumptions in there.
2
3
MR. KLIPPENSTEIN:
Oh, so it's now our fault that you-
-
4
MR. LABRICCIOSA:
5
MR. KLIPPENSTEIN:
It may be a weasel word then.
But anyway, my concern about that
6
is, I see what is a very loose estimate, and you say this
7
was based on basically two studies from the US.
8
9
MR. LABRICCIOSA:
I'm going back to my experience with
our distributed generation portfolio, and at that time we
10
reviewed two key studies out of New York State and, I
11
believe, California that suggested as an approximation to
12
understand how much capability is out there, the 10 percent
13
rule is a general rule of thumb that's out there.
14
MR. KLIPPENSTEIN:
All right.
Well, I'm going to
15
suggest that I see a bit of a gap.
16
gap between, on the one hand, this statement from the
17
president of Toronto Hydro that Toronto Hydro is "first and
18
foremost and is committed to seeking distributed generation
19
solutions" and, on the other hand, this statement, which,
20
frankly, is very general, and it's based on two studies
21
from the U.S.
22
In fact, I see a large
It's based on a rule of thumb.
I take it you haven't actually prepared a listing of
23
possible sites.
24
commitment to -- or a seeking, or that it's a first and
25
foremost priority.
26
And to me that doesn't look like a
I don't know.
MR. LABRICCIOSA:
I disagree with you, and I'd offer
27
to submit maybe some supporting evidence to try and
28
convince you that we are first and foremost committed to
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conservation.
2
A couple of points that I would submit to you:
3
recently we received an international award for our
4
conservation program.
5
program, where it is load curtailment, and that
6
international award recognizes Toronto Hydro as having a
7
high energy-efficiency program and a very high market
8
success rate, again, globally, and that stems from our
9
efforts in conservation.
10
Just
And in fact, it's our peak-saver
The other element that I would subscribe to you is in,
11
again, our conservation demand management program, under
12
the DG portfolio, I believe we were, out of all the
13
utilities participating, we were the utility with the
14
greatest success of connected megawatts in DG under that
15
program.
16
So I would say our history and track record has been
17
pretty good, in terms of being a leader in conservation and
18
including distributed generation.
19
MR. KLIPPENSTEIN:
Well, I can tell you I've won some
20
awards, some of which are pretty dodgy, but -- and the
21
peak-saver is -- you know, when I first heard about your
22
results, I was delighted.
23
impressed.
24
I must say I was just totally
But, you know, this is a slightly different question
25
we're dealing with here.
26
grain, and it's on, you know, on the one hand, this
27
statement.
28
And so my focus is at a finer
And this statement was made to all the public
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political leaders and to the public.
It left an impression
2
of an enormous commitment, and yet what I see here is
3
generalities and a rule of thumb from two U.S. studies.
4
I mean, do you actually have -- did anybody make a
5
list of possible offsetting distributed generation sites in
6
your system?
7
MR. LABRICCIOSA:
We do have a list of generation
8
connected to the system.
9
that are interested in connected.
10
MR. KLIPPENSTEIN:
And that list also includes those
So when you say you have a list of
11
people connected, what do you mean, presently existing
12
distributed generation?
13
MR. LABRICCIOSA:
That's correct, sir, and I think our
14
-- we have a process to connect generators to the system,
15
so in other words, you know, we invite applicants to come
16
forward.
17
connect to the grid.
18
We work with applicants in developing a plan to
And it is a process, it is an application, so some
19
people apply, and we don't hear from them.
20
apply and would like a little effort on our part to help
21
sort through how to connect up, but they still don't
22
connect, I mean, so we work through that.
23
Some people
So there are different people at different stages in
24
the process of connecting generation to the grid, but it is
25
based on an application process.
26
MR. KLIPPENSTEIN:
You are the folks who know the
27
system more than anyone else, and I would think you have
28
experience and theoretical knowledge and access to
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2
information from systems all over the world.
You could actually be a little more proactive and
3
identify lots of specific sites and contact those people
4
with proposals.
5
6
Have you done that?
MR. LABRICCIOSA:
question.
I mean, we have 700,000 customers in our system.
7
MR. KLIPPENSTEIN:
8
MR. LABRICCIOSA:
9
It's not that I'm confused by your
Exactly.
I guess our reach program is really
driven through a couple of channels, one being our Web-
10
based site.
11
to and get additional information as well as download our
12
connection agreements and requirements to connect.
13
We have a DG section where you can connect up
Under the CDM program, we visited many establishments
14
of possible sites to try and stimulate some interest.
15
We've also presented through various forums the offerings
16
of our program and how it works and what the process is to
17
connect up to the grid.
18
many people, and we did outreach into the public sector to
19
try and get that happening.
20
MR. KLIPPENSTEIN:
So, I would say we did canvass
But you know who are good
21
candidates, and you know what are the big buildings and
22
what new buildings are coming up.
23
them?
24
and here's three options.
25
take it?
26
Did you go and talk to
You are the folks who can say:
MR. LABRICCIOSA:
This is how it works
But you haven't done that, I
Well, we do have key account reps
27
that talk to the large customer class, so that the ones
28
that you're referencing, we do have people that have that
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2
conversation.
Again, I'm going to remind you as well, you know, it
3
is voluntary from the perspective of the customer has to
4
want to do this.
5
should decide not to, I mean, I don't think we can force
6
them to do it.
7
They own the generation, and if they
It is their choice.
MR. KLIPPENSTEIN:
You didn't include any of the
8
information about your outreach program in the evidence for
9
this application, I take it?
10
MR. LABRICCIOSA:
No, the question that was asked was
11
provide a best estimate, if you're referring to the
12
interrogatory, and again, it was trying to be an all-
13
encompassing type question with an all-encompassing type
14
answer to say this is what is possible.
15
16
17
I guess we could have narrowly answered the question
by saying:
This is what we know.
MR. KLIPPENSTEIN:
Now, what about bidirectional
18
distributed generation?
19
assessment of bidirectional opportunities in your system
20
for distributed generation?
21
MR. LABRICCIOSA:
Do you have any estimate or
Again, if you're asking for an
22
estimate, we could put the language back in that
23
I guess you don't really like.
24
some today.
25
aware of it.
26
taken it any further that we know of.
27
I'm sure there are units out there we don't know of that
28
can be bidirectional.
But I would say we have
We have some that are connected and we're
We have some that have applied but have not
And then we have --
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MR. KLIPPENSTEIN:
Well, one reason why I'm asking
2
these questions is because we're here to look at a capital
3
plan today, and I would assume, in my ignorance, that if
4
you foresaw an aggressive uptake of distributed generation,
5
whether it's unidirectional or bidirectional, you would
6
have to consider what kind of technical investments or
7
changes you would have to take to your system.
8
fair?
9
MR. LABRICCIOSA:
Is that
We would have to definitely take
10
that into account, sure.
11
regular process today.
12
MR. KLIPPENSTEIN:
I mean, we do that as part of our
And have you done some estimate of
13
what technical capital planning requirements would arise
14
from aggressive distributed generation, unidirectional and
15
bidirectional?
16
MR. LABRICCIOSA:
For distributed generation units
17
that have to connect up to the grid that want to be
18
bidirectional, our connection agreement states that they
19
are responsible for the costs and the upgrades that are
20
responsible to make it bidirectional.
21
So from a capital planning perspective, if your
22
question is have we accounted for that in our plan, again,
23
I'm going to maybe give you a bit of a complex answer.
24
Our plan today is based on the Market Rules that we
25
know of today, which has a small uptake of distributed
26
generation, some.
27
28
And we've already factored that in.
So we don't expect, unless the rules change, a huge
flow of connections coming forward.
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Having said that, if it does happen, along your point
2
of, you know, should it go forward, what would we do, we
3
would follow our connection agreement, which basically puts
4
the onus back on the customer who wants to connect up to
5
the grid, and not put that burden on the rest of the rate
6
base.
7
MR. KLIPPENSTEIN:
So your present assumption is that
8
if somebody wants to do a major distributed generation
9
project, it's their problem to deal with and pay for the
10
11
technical upgrades that are required.
MR. LABRICCIOSA:
I wouldn't necessarily say it's
12
their problem.
13
with them in helping to put some solutions in place that
14
will work.
15
16
17
I would say we have a process that we work
The financial burden, of course, resides with them if
there are major implications on the grid.
MR. KLIPPENSTEIN:
Well, I have to say again, I really
18
question whether that is the kind of commitment that merits
19
the public statement that the president made.
20
telling me that you don't really expect a huge flow.
21
sort of up to the clients, or whatever you want to call
22
them; that they're responsible for the costs and the
23
technical stuff to some degree.
24
This is a formula for not much happening.
25
MR. LABRICCIOSA:
You're
It's
I mean, the policy is what it is,
26
and it really is a policy-type statement I think you're
27
making, reflective of, if the market doesn't bear fruit
28
it's a function of the policies and structure of the
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2
marketplace.
MR. KLIPPENSTEIN:
Let me ask a more specific question
3
about small-scale distributed generation; let me say 40 MW
4
or less as a cutoff point.
5
MR. LABRICCIOSA:
We generally use 10 MW or less, but
6
I mean, let's go with your 40, and we'll see how the
7
question plays out.
8
MR. KLIPPENSTEIN:
What is your best estimate of the
9
quantity of that size of distributed generation site that
10
could be embedded into your distribution system with the
11
status quo, the given infrastructure.
12
13
14
MR. LABRICCIOSA:
perspective.
Forty is a good number from your
It's a very complex answer.
When you look at the grid, for example, a feeder that
15
supplies consumers generally handles 20 MW.
So at 10 MW or
16
less, you really can handle two or more connections at the
17
feeder level.
18
Once you exceed 20, you now have to connect up to the
19
transformer station level, which is really outside of that
20
feeder at the bus level, which is almost connected up to
21
the transmission system.
22
the bus, but, depending on technical issues at the station
23
level, it could require you to connect up to the high-
24
voltage level.
25
26
27
28
It still can be connected up to
So 40, I guess, in that example is a bit of a complex
borderline issue.
MR. KLIPPENSTEIN:
But to go back to my question, do
you have an estimate, or what would be your best estimate
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or what would be, given what you've said, of how many 40-
2
megawatt or less facilities you could embed?
3
4
5
MR. LABRICCIOSA:
I don't have that estimate, and I
really don't know how many exist out there.
MR. KLIPPENSTEIN:
Is that something you could
6
produce, an estimate of how many up-to-40 megawatt
7
facilities could be embedded with the status quo
8
infrastructure?
9
MR. LABRICCIOSA:
I would say the answer would be, we
10
don't have any.
11
nothing.
12
because you keep saying 40 megawatts.
13
know, there are none in Toronto of that size that are
14
connected to our grid, subject to check -- go back into our
15
databases and ask, you know, people downstream in the
16
organization to scour all the connection files.
17
So I could produce a list that says
And I'm struggling a little bit with the answer,
MR. KLIPPENSTEIN:
And as far as I
That's partly my point, is it's
18
partly about potential, I think.
19
that was my question -- how many could be connected up of
20
that size?
21
22
23
MR. LABRICCIOSA:
No.
I mean, do you know --
Sorry, I wouldn't know how to
frame up that estimate.
MR. KLIPPENSTEIN:
24
this plan, obviously?
25
MR. LABRICCIOSA:
26
MR. KLIPPENSTEIN:
You haven't done it for purposes of
No.
So if this Board were looking at
27
distributed generation in terms of a capital plan and as
28
part of the solution to the supply concerns that all
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parties recognize must be addressed, to quote the
2
president, you don't have any answer as to how many of
3
those 40-megawatt or less facilities could be embedded?
4
You just don't know?
5
6
7
MR. LABRICCIOSA:
I would say, based on what we know
today, none.
MR. KLIPPENSTEIN:
And in the capital budget as
8
proposed, will it increase the capacity of the system to
9
accept such facilities in the future in downtown Toronto?
10
11
12
13
14
15
16
17
18
19
20
MR. LABRICCIOSA:
We're not designing it for that size
and scale of unit at this time.
MR. KLIPPENSTEIN:
Isn't that a bit of a problem?
Don't you think you should be?
MR. LABRICCIOSA:
There are none that we know of
today.
MR. KLIPPENSTEIN:
And you haven't really looked,
though, have you?
MR. LABRICCIOSA:
Well, in our efforts to look,
nothing has come up.
MR. KLIPPENSTEIN:
So what we can take from your
21
evidence, what the Board can take, is that the capital plan
22
and budget as proposed, if it was approved, really does not
23
in any way address the potential distributed generation
24
sites of up to 40 megawatts that might be out there for the
25
future.
26
MR. LABRICCIOSA:
27
MR. KLIPPENSTEIN:
28
MR. LABRICCIOSA:
Well, up to -Up to 10.
Up to 10, yes, I think we, you know,
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we do have some connections in play today.
2
megawatts.
3
we have none that exist today.
4
You asked at 40
At that discrete level, that discrete number,
Could one come forward?
I guess it's possible.
I
5
would come back to the CDM section in our capital plan that
6
identifies the amount of effort and investment we have in
7
CDM, which would include those -- you know, which would
8
include DG effort, and would incent, you know, generation
9
that we're familiar with today to come to the grid.
10
MR. KLIPPENSTEIN:
All right.
Let me ask about this
11
in the context of the third line.
About how many megawatts
12
of smaller-scale distributed generation would need to be
13
embedded into your system in downtown Toronto to avoid the
14
need for the third line?
15
MR. LABRICCIOSA:
16
speaks to that issue.
17
many 1-megawatt generators do you need to get to 300, it
18
would be 300, or 150 2-megawatt or, you know, 30 10-
19
megawatt.
20
The 300-megawatt number really
So if your question is, well, how
Any combination would do.
MR. KLIPPENSTEIN:
But if, you know, the third line
21
was raised as a way to get more power into downtown
22
Toronto, distributed generation is a way of avoiding the
23
third line, because you're generating the power or you're
24
offsetting the power right within Toronto.
25
And so how many megawatts -- are you telling me that
26
you will need 300 megawatts of small-scale distributed
27
generation within Toronto to avoid the third line?
28
MR. LABRICCIOSA:
I can't really comment on the third
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line, whether it avoids it or not, at this stage.
2
issue stems from the fact that, should a contingency happen
3
in the City of Toronto, we would not have 300 megawatts of
4
available capacity in the grid today the way it exists, to
5
deal with that -- with that outage, that first contingency
6
situation.
7
But the
So whether it avoids the third line, there are a whole
8
host of issues around that third line that I think Hydro
9
One can speak of from a technical perspective in support of
10
11
that solution, beyond just this contingency issue.
So, you know, your question comes back to, if you had
12
300 megawatts, you can avoid it altogether?
13
comment on avoiding that solution.
14
impact of not having that solution or any other solutions
15
on the City of Toronto.
16
power outages in the system.
17
MR. KLIPPENSTEIN:
I can't really
I can comment on the
And it would be 300 megawatts of
Well, if I understand your answer -
18
- I'm not sure I do -- but if I understand your answer, it
19
seems to me your plan should be looking at how to
20
facilitate or incentivize or stimulate or plan for 300
21
megawatts of distributed generation in Toronto from a
22
technical and financial point of view; isn't that right?
23
MR. LABRICCIOSA:
And I would say it does.
With the
24
CDM program, it's aimed at trying to stimulate as much
25
conservation or supply that we can get at this stage.
26
I would also suggest to you -- again, you keep coming
27
back to the context of the third supply.
In our filing
28
it's nowhere to be found, in terms of evidence or solutions
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or contribution.
2
promote or not promote that solution from that perspective.
3
That's really a Hydro One system responsibility.
4
And it's not within our jurisdiction to
And again, from what I know in working with Hydro One,
5
there are a whole host of issues outside of just the
6
shortage of supply that that solution is trying to address
7
as well.
8
9
MR. KLIPPENSTEIN:
If I was going to ask for a
description of the technical aspects of the system that are
10
presently in this budget that will accommodate expanded
11
distributed generation, what would I look for?
12
any such examination or study?
13
MR. LABRICCIOSA:
Do you have
Again, if I understand your question
14
correctly, when you -- we don't know of any single 40-
15
megawatt generation sources that are going to come forward.
16
However, the impact of any generation, regardless of
17
the size, is reconfiguration of the system, both from a
18
protection-scheme perspective -- that's one element, in
19
terms of providing protection downstream, and protection
20
coordination.
21
When you do that, we have things like electronic
22
relaying versus electromechanical relaying.
23
that we put in front of you, when you look at the circuit
24
breaker replacement and switch-gear replacement programs,
25
deals with converting electromechanical to electronic type
26
relaying.
27
--- Reporter appeals.
28
MR. LABRICCIOSA:
This program
Sorry, electromechanical versus
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2
electronic relaying.
So from that perspective, you know, there are elements
3
of these investments we're making today that would
4
facilitate not only small-scale generation, but most
5
generation that would exist.
6
reprogram the protection setting rather than replace it.
7
8
9
In essence, we would have to
So that's an example I bring forward that's included
in this plan.
MR. KLIPPENSTEIN:
And that's an example, but do you
10
have at all an overall strategy?
11
example.
12
let's say, a 30-megawatt bidirectional distributed
13
generation.
14
You've mentioned one
There must be other technical requirements of a,
MR. LABRICCIOSA:
It's a rarity in the system today,
15
so, you know, our program is really addressed at
16
reliability of the system and replacing aging assets and
17
infrastructure.
18
That's our focus.
And to the extent that we could design it to
19
accommodate typical generation, we are.
20
conductor, relaying, modernizing the asset, those kinds of
21
elements.
22
for the atypical connection.
23
24
25
I would suggest to you we're not designing it
MR. KLIPPENSTEIN:
And bidirectional would be an
atypical connection?
MR. LABRICCIOSA:
No, we do have bidirectional today.
26
40 megawatts would be atypical.
27
MR. KLIPPENSTEIN:
28
Again, size of
Do you have any 30-megawatt?
MR. LABRICCIOSA:
No, sir.
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MR. KLIPPENSTEIN:
2
MR. LABRICCIOSA:
3
MR. KLIPPENSTEIN:
4
MR. LABRICCIOSA:
5
MR. KLIPPENSTEIN:
Any 15?
No, we have a 12-megawatt
How many do you have, let's say,
between 10 and 15; do you know?
8
MR. LABRICCIOSA:
9
MR. KLIPPENSTEIN:
10
No.
connection.
6
7
Any 20?
A handful.
Is your system now ready to accept
a 15-megawatt or 20 or 30 or 40-megawatt bidirectional?
11
MR. LABRICCIOSA:
Again, we classify distributed
12
generation as 10 megawatts or less, and the answer would be
13
yes.
14
say, if you're connecting to the distribution system, no.
15
It's inherently not designed to carry anything more than 15
16
to 20 megawatts, so we would not connect it there.
17
As you're getting closer to 15 and 20, I'd have to
It would have to be an express connection either to
18
one of those 35 delivery points or to the Hydro One
19
transmission system.
20
MR. KLIPPENSTEIN:
Basically, the system is not
21
capable now, and your plan doesn't make it capable, of any
22
embedded distributed generation above 15 megawatts, and
23
your plan doesn't have any money or planning to deal with
24
that?
25
MR. LABRICCIOSA:
We've had no applications come in
26
beyond the 12-megawatt that I spoke of.
And I would say
27
we're very much connected with our customers and know what
28
they're doing.
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MR. KLIPPENSTEIN:
I take it the answer to my question
2
is no, and I also take it that if such a thing ever is
3
proposed to you or someone, or it dawns upon you that it is
4
possible and is a good idea, the present regime is the
5
customer has to pay for it.
6
7
8
9
MR. LABRICCIOSA:
In terms of making the connection,
that's correct.
MR. KLIPPENSTEIN:
I take it it would be possible for
Toronto Hydro to go back and have another look at its
10
capital plan and say:
11
distributed generation of 15, 20, 30, 40 megawatts, and do
12
an assessment of what might be required in your capital
13
plan to do that.
14
MR. LABRICCIOSA:
Let's try and accommodate
I would suggest to you that we could
15
not connect it to our grid regardless of how often we
16
looked at it.
17
you're connecting upstream, not at the grid level.
18
I mean, once you get past a certain size,
So we would have to work with Hydro One and any other
19
stakeholders in the transmission arena that would require
20
that, which would include the IESO, and possibly the OPA as
21
well.
22
Again, from a technical constraint perspective, 20 is
23
the limit, and it's not necessarily by design to avoid
24
generation, it is in terms of the design of the system and
25
how it feeds the customers today.
26
MR. KLIPPENSTEIN:
Now, the proposed three-year
27
capital budget is part of a larger ten-year capital budget
28
to meet your customers' electricity needs, correct?
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2
3
4
5
MR. LABRICCIOSA:
It's part of a ten-year plan, that's
correct.
MR. KLIPPENSTEIN:
Right.
And what is the dollar
value of your ten-year plan?
MR. LABRICCIOSA:
The initial estimate in the
6
submission, I believe, subject to check, would be 1.17
7
billion, close to 1.2 billion.
8
9
10
11
MR. KLIPPENSTEIN:
1.17 billion.
Okay.
And I take it
that will have some rate impact; in other words, -- sorry,
let me clarify.
Not the 10-year budget but the three-year capital
12
budget will have some rate impact; it will cause the rates
13
to rise somewhat.
14
Is that fair?
MR. LABRICCIOSA:
The three-year plan is --
I think Mr. Haines in his opening
15
remarks had said it's 4 percent over three years in terms
16
of the net impact.
17
MR. KLIPPENSTEIN:
Okay.
And so you have to watch
18
your level of capital spending in those three years, in
19
2008, 2009, 2010.
20
words, because you have to avoid undue rate increases; that
21
constrains your capital budget expenditures?
22
You're somewhat constrained, in other
MR. LABRICCIOSA:
I think if you are asking whether
23
rate fluctuations are a consideration in terms of the plans
24
we put forward, I would say yes.
25
MR. KLIPPENSTEIN:
And specifically, they constrain
26
your ability to increase capital spending because you have
27
to avoid undue rate increases that might come in?
28
MR. LABRICCIOSA:
I mean, the investment we put
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forward is for the system and power delivery, reliable
2
power delivery.
3
investment, rate increases, and the reliable grid
4
performance that you're looking for.
5
And there is a connection between
So it's all embedded in there together.
There's a
6
balancing point, I would suspect.
7
aimed at one or the other, there's a balancing point you
8
have to contend with.
9
MR. KLIPPENSTEIN:
If your question is
And so if you were going to later
10
decide to increase your spending in one area, you have to
11
offset by a reduction in another area if you want to
12
maintain the same balance?
13
MR. LABRICCIOSA:
14
15
16
17
I would say it's a fair statement.
You would have to consider that.
MR. KLIPPENSTEIN:
I'd like to ask about distribution
system losses, changing the focus for a bit.
If you could turn to Tab 6 of the Pollution Probe
18
reference book, which is Exhibit S4.1.
19
your answer to interrogatory, Toronto Hydro lists its total
20
system losses for the period 1998-2006.
21
And at subtab A, in
And we calculated those as a percentage of the total
22
purchased energy, and you see our calculations there.
23
over that period, it averages out to 3 percent; in other
24
words, the annual average distribution losses as a
25
percentage of total electricity purchases is approximately
26
3 percent.
27
Take that subject to check?
28
MR. LABRICCIOSA:
Yes.
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MR. KLIPPENSTEIN:
Now, that's the average losses.
2
Let me focus instead for a moment on losses at the time of
3
the annual system peak, such as a hot summer day.
4
you agree with me that the marginal system losses as a
5
percentage of electricity purchased will be larger than
6
that average 3 percent on a peak day, because system losses
7
will be greater on a peak day as a percentage?
8
9
10
11
MR. LABRICCIOSA:
It would be 3 percent.
saying the absolute number would be different?
Would
Are you
I would
probably agree with you, but it's still a percentage.
MR. KLIPPENSTEIN:
At the time of an annual peak, on a
12
summer day, first of all, the system loss will be higher on
13
an absolute level; right?
14
that, as a percentage, it would be higher?
15
saying that at the higher level, the system loss is still
16
at the same rate?
17
be wrong.
18
And do you agree or disagree
Or are you
Seems to me it would be higher; I could
MR. LABRICCIOSA:
You're causing me to think about the
19
technical criteria on this one.
I mean, the losses range
20
with the square of the current.
So certainly there is a
21
non-linear effect there.
22
MR. KLIPPENSTEIN:
23
MR. LABRICCIOSA:
24
MR. KLIPPENSTEIN:
Right.
So just using that --
Sure.
Whenever I hear -- I'm not a
25
mathematician, but whenever I hear the word "square", I
26
know it's not a linear, it's --
27
MR. LABRICCIOSA:
28
MR. KLIPPENSTEIN:
You got it.
It's some other kind of curve.
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Which means that at a higher level, as on a peak day, your
2
system losses are now going to be losing at a higher rate,
3
and therefore it will be higher than average?
4
5
6
7
8
9
MR. LABRICCIOSA:
It could be different.
talking the -MR. KLIPPENSTEIN:
No, no, not "could" be different.
It will be different, right?
MR. LABRICCIOSA:
We're talking the technical stream.
I also think of the non-technical side, the non-technical
10
losses as well.
11
power consume more during peak periods?
12
will be different.
13
14
So we're
So diverting power -- do people who divert
Probably.
So it
I agree with you.
So if it's an unmetered load, will that have an
impact?
Probably.
15
MR. KLIPPENSTEIN:
16
All things being equal, at a higher level of current,
17
Well, let me try and sort this out.
the loss is at a higher rate, correct?
18
MR. LABRICCIOSA:
19
MR. KLIPPENSTEIN:
Correct.
Okay, so on a peak day, as opposed
20
to an average day, where the current is higher, then, all
21
things being equal, the loss will be at a higher rate.
22
necessarily follows, correct?
23
MR. LABRICCIOSA:
24
MR. KLIPPENSTEIN:
Correct.
So all the other things being
25
equal, the marginal system losses as a percentage of
26
electricity purchases will be higher than the average,
27
right?
28
On a peak day?
MR. LABRICCIOSA:
Correct.
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MR. KLIPPENSTEIN:
Will the capital plan -- the
2
expenditures in the capital three-year plan, will it reduce
3
that increase?
4
Hydro's system losses as a percentage of electricity
5
purchases at a time of system peak?
In other words, will it reduce Toronto
6
MR. LABRICCIOSA:
7
MR. KLIPPENSTEIN:
8
MR. LABRICCIOSA:
9
MR. KLIPPENSTEIN:
10
11
Yes.
And do you know by about how much?
No.
Do you have any basis for saying
"yes"?
MR. LABRICCIOSA:
As we modernize our plant, our
12
designs take into account optimizing the system for
13
operational flexibility and delivery efficiency.
14
equipment, newer equipment today, modern equipment has, by
15
design, lower losses.
16
As we upgrade our system, we do things like voltage
17
conversion.
18
level to a higher voltage/lower loss level.
19
examples.
20
As we buy
So we convert from a lower voltage/higher loss
MR. KLIPPENSTEIN:
Those are some
Do you have any estimate or any way
21
of advising us of the cost-effectiveness of those
22
expenditures in reducing distribution losses during the
23
peak hours?
24
MR. LABRICCIOSA:
25
MR. KLIPPENSTEIN:
26
No.
And is there any reason why you
don't?
27
MR. LABRICCIOSA:
28
MR. KLIPPENSTEIN:
We have never been asked.
And you've never decided that the
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distribution losses at peak times are worth that kind of
2
look?
3
MR. LABRICCIOSA:
No.
I think the issue we have in
4
front of us today, the plan we have in front of us, deals
5
with reliability, not necessarily focused around load
6
losses.
7
investment.
8
9
10
11
Load-loss improvement is really a byproduct of our
MR. KLIPPENSTEIN:
Then I'd like to change to
conservation and demand-management programs.
If you turn to tab 7, we have a summary of THESL's CDM
programs.
Do you see that?
12
MR. LABRICCIOSA:
13
MR. KLIPPENSTEIN:
Yes.
And I see three sections and three
14
grand totals under the column of "total costs", one for
15
8.357 million, 8.542 million, and 5.199 million.
16
see those?
17
MR. LABRICCIOSA:
18
MR. KLIPPENSTEIN:
Do you
Yes.
Now, I'm going to do a grand total
19
of those grand totals, and I get 22,098,000, so
20
approximately 22 million, for a total conservation budget.
21
Is that accurate, subject to check?
22
23
24
MR. LABRICCIOSA:
Well, subject to check. I'm trusting
your math; I would say it's correct.
MR. KLIPPENSTEIN:
As we noted before, Toronto Hydro's
25
total three-year budget for supply-side infrastructure is
26
906 million, approximately 900 million.
27
simple math, it seems to me that for every dollar you are
28
spending or proposing to spend on conservation, you're
And if I do that
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2
proposing to spend $41 on supply, so a 41:1 ratio.
And in that context, if you could turn to Tab 8, which
3
contains Hydro's response to Pollution Probe's
4
Interrogatories 1 and 2, at the bottom of that table, I see
5
that for the year 2006, Toronto Hydro's peak-day demand was
6
4,995 megawatts.
Do you see that?
7
MR. LABRICCIOSA:
8
MR. KLIPPENSTEIN:
9
Yes.
And if I turn the page to the
Interrogatory No. 2 answer, the table at the bottom, in the
10
line 2007, that peak became in that year, one year later,
11
4,686 megawatts, right?
12
MR. LABRICCIOSA:
13
MR. KLIPPENSTEIN:
14
Correct.
In other words, your peak-day
demand dropped in 2006/2007, right?
15
MR. LABRICCIOSA:
16
MR. KLIPPENSTEIN:
The numbers show that, yes.
If I do that calculation, I get a
17
drop of 6.2 percent.
18
I also see the numbers going up again in that table on
19
Interrogatory No. 2 answer, that for 2008, 2009, and 2010,
20
compared to 2007, the peaks are going up again, right?
21
MR. LABRICCIOSA:
22
MR. KLIPPENSTEIN:
And despite that drop of 6.2 percent,
That's correct.
And I don't see any load forecast
23
or conservation forecast for time periods beyond 2010; is
24
that right?
25
MR. LABRICCIOSA:
I don't think we've supplied them.
26
I think if you're referencing the previous table, those are
27
OPA-funded programs, and they only go until 2010.
28
MR. KLIPPENSTEIN:
Well, I'm just looking at the
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sentence above the table that says:
2
"THESL has not produced load forecasts beyond
3
2010."
4
MR. LABRICCIOSA:
5
MR. KLIPPENSTEIN:
Right.
Okay.
Well, we asked in that
6
context some questions about studies for more aggressive
7
CDM programs.
8
studies Toronto Hydro has done with respect to the
9
potential for more aggressive CDM programs to, (a), first
If you turn to Tab 9, we asked for what
10
of all, increase system reliability.
11
is none, basically.
And your answer below
12
We asked for studies you might have done about
13
potential for more aggressive CDM to reduce the ten-year
14
capital budget, and you haven't undertaken any such things.
15
Same thing for reducing customers' electricity bills or any
16
combination thereof.
17
So we have a very large supply budget of 900 million,
18
compared to a tiny fraction of that for CDM, and we do see
19
a drop from 2006 to 2007, which is great, but then you're
20
upping it again for future.
21
about the possible CDM response to that.
22
any such studies?
23
MR. LABRICCIOSA:
But we don't see any studies
Are you planning
There are no studies directed at the
24
specific questions you've asked around increasing
25
reliability, altering the magnitude of the capital budget
26
or reducing customer electricity bills, but most of our
27
work has been at achieving conservation targets.
28
if you look back, our historical spend is over $60-million
I think
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2
to achieve the results we have to date.
I would suspect one would say that our learnings part
3
of the study is what we're trying to understand in how
4
conservation works and what incents customers.
5
asking specifically in those three areas of reliability,
6
capital investment, or reducing electricity bills, we have
7
no intentions to study those as part of this plan.
8
9
If you're
I would also draw your attention to -- you keep coming
back to the comment of 900 million on the supply of the
10
system.
11
of failing infrastructure, and that's really the delivery
12
aspects of the system.
13
supply, but rather repairing a failing asset, replacing it.
14
The 900 million is really to address replacement
MR. KLIPPENSTEIN:
It's not aimed at bringing in new
However, in replacing it, you
15
haven't done any of these studies to see if you could
16
specifically replace it in a way that enhances the
17
conservation?
18
MR. LABRICCIOSA:
Again, I think the evidence is in
19
front of you.
There's $22-million in future earmarked at
20
conservation, which is embedded in this plan.
21
MR. KLIPPENSTEIN:
22
MR. LABRICCIOSA:
Right.
We talked about the losses and the
23
go-forward view of buying lower-loss equipment and
24
designing the system for lower losses, but the thrust of
25
this plan in front of you is really aimed at the
26
reliability of the grid in replacing equipment that is
27
failing.
28
MR. KLIPPENSTEIN:
All right.
I'd like to turn to
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issue 7.3, which is the fixed monthly charges.
2
MR. LABRICCIOSA:
3
MR. RODGER:
4
5
6
7
8
9
10
Mr. Klippenstein, that would be another
panel.
MR. KLIPPENSTEIN:
That's another panel, but can I
give it a try here?
MR. RODGER:
No.
We'd like to move that to another
panel.
MR. KLIPPENSTEIN:
I think, Mr. Chair, those are all
my questions.
11
MR. SOMMERVILLE:
12
MR. KLIPPENSTEIN:
13
What tab?
Thank you, Mr. Klippenstein.
Thank you very much, Members of the
Panel.
14
MR. SOMMERVILLE:
15
MR. DeVELLIS:
16
MR. SOMMERVILLE:
Mr. DeVellis.
Thank you, Mr. Chairman.
Mr. DeVellis, it's a quarter to 11.
17
Normally we would take our morning break around 11.
18
your schedule of questions sort of fit with that model?
19
20
MR. DeVELLIS:
Does
Well, I have about 45 minutes, so I can
stop at 11 or --
21
MR. SOMMERVILLE:
All right.
Why don't we do that?
22
MR. DeVELLIS:
23
MR. SOMMERVILLE:
24
CROSS-EXAMINATION BY MR. DeVELLIS:
25
MR. DeVELLIS:
26
I want to ask first about the process in establishing
Okay.
Thank you.
Good morning, panel.
27
the capital plan that you've presented before the Board.
28
know that some of those questions have already been
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addressed by panel 1, but I just have a few questions in
2
that area.
3
In the 2006 decision from the 2006 rates case, the
4
Board had, I guess, directed you to provide a capital plan.
5
And that was released in April 2006; is that right?
6
could take it subject to check.
7
MR. LABRICCIOSA:
8
MR. DeVELLIS:
9
Or you
Subject to check.
And I think we heard earlier that by
about August of '06, you had had a capital plan ready
10
that's pretty much the same as the one that you presented
11
here; is that accurate?
12
MR. LABRICCIOSA:
13
MR. DeVELLIS:
That's correct.
I just want to understand the
14
relationship or the role that the Kinectrics asset
15
condition study played in your capital plan.
16
that study, which is in your evidence, is dated
17
February 2, 2007?
18
MR. LABRICCIOSA:
19
MR. DeVELLIS:
I see that
That's correct.
Okay.
Can you help me understand how
20
that study played into your plan, if it was pretty much a
21
done deal by August of 2006?
22
MR. LABRICCIOSA:
Well, I'm glad I said subject to
23
check.
24
year capital plan is dated January 2007.
25
I think what we filed in front of you with the ten-
MR. DeVELLIS:
No, I understand that, but we've heard
26
evidence in the earlier panel that by August of 2006 you
27
had in your business plan capital spending projections
28
which are fairly similar to what you have in the capital
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plan here.
2
really set at that time.
3
after that, but basically it was done as of August of '06.
4
I understood from Mr. Haines that the plan was
MR. LABRICCIOSA:
There were some iterations of it
Right.
If your question's aimed at
5
how did the two pieces of evidence form together, we used
6
the asset condition assessment as a check to corroborate
7
the capital plan; so in other words, the capital plan is
8
predominantly based on age and performance, and factors
9
those two elements in.
10
We used the condition assessment to corroborate the
11
conclusions in that plan, and then factored in changes from
12
there.
13
14
15
16
17
MR. DeVELLIS:
All right, so it was sort of an after-
the-fact -MR. LABRICCIOSA:
It was a supporting document;
correct.
MR. DeVELLIS:
Thank you.
And can I ask you to turn
18
to Interrogatory Response to the School Energy Coalition
19
No. 42, and that's Exhibit R1, Tab 5, Schedule 42?
20
I apologize for not being as organized as
21
Mr. Klippenstein.
22
MR. LABRICCIOSA:
23
MR. DeVELLIS:
We have it in front of us.
Okay.
And what we did there is we took
24
columns in your capital plan and amalgamated them into one
25
table.
26
let me back up.
27
28
And you'll see that we have the first column is --
In your capital plan, you mention that you have these
two methods of evaluating the condition of your system.
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One is an age-based assessment and one is a condition-based
2
assessment.
3
results for certain assets and dissimilar results for
4
others, and you list the categories in the capital plan.
And the two methods, you say, produce similar
5
What we've done is we took the two: the number of
6
units to be replaced according to both methods -- which is
7
in the plan -- and then we added another column, which was
8
the recommended unit replacement, the number of units that
9
you've recommended to be replaced in your capital plan.
10
Have we done that accurately there?
11
MR. LABRICCIOSA:
12
MR. DeVELLIS:
Yes, I think so.
Okay.
And I think you also say
13
somewhere in your capital plan that the number of units to
14
be replaced forms the basis for your capital spending
15
requirements; is that fair?
16
MR. LABRICCIOSA:
17
MR. DeVELLIS:
That's fair.
Okay.
Can you help me understand how
18
you arrived at the number of units to be replaced, because
19
if you compare the two columns, the first column and the
20
second column and then the third column, the numbers don't
21
always match, and sometimes you have a recommended number
22
of units that's lower than both estimates, sometimes
23
higher.
24
could understand, but it's the ones that are higher or
25
lower than both estimates that I don't understand.
26
Sometimes it's between the two, which I guess we
MR. LABRICCIOSA:
Sure.
And I think you asked that in
27
the interrogatory.
And the response was that for the ones
28
that -- you've talked about a couple of asset classes where
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the replacement units are lower than suggested by either
2
age or condition.
3
MR. DeVELLIS:
Right.
4
MR. LABRICCIOSA:
And there were two reasons for that.
5
The first one of which is, when you look at transmitters,
6
for example, if you're going to convert or decommission a
7
transmitter, you wouldn't necessarily replace it because
8
you're eliminating those types of assets from the system.
9
So, for example, if you convert 4 kV to 27, you
10
eliminate a station, you likely eliminate hardware out on
11
the street, which exists for 27, but you eliminated it for
12
4 kV, so you would need fewer poles, fewer of those types
13
of transformers.
14
The other reason for that was also the element that we
15
could maintain equipment rather than replace it, to keep it
16
in a fair condition, and eventually deal with the
17
replacement further out.
18
So, while the condition factors in what the state of
19
the component is today, our view is we can maintain it,
20
going forward, to push out the replacement.
21
MR. DeVELLIS:
Okay.
22
MR. LABRICCIOSA:
So that's why it would be lower in
23
our plan, relative to what both the age or the condition
24
was saying.
25
MR. DeVELLIS:
Okay.
I'm not sure I'm quite following
26
you, but maybe we can use specific examples, and you can
27
explain.
28
Station transformers; the first row?
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MR. LABRICCIOSA:
2
MR. DeVELLIS:
3
replacement is 61.
Mm-hmm.
147, 142, and your recommended unit
4
MR. LABRICCIOSA:
5
MR. DeVELLIS:
6
MR. LABRICCIOSA:
Correct.
Can you explain that?
So as an example, the voltage
7
conversion, if a station transformer is eventually not
8
needed, we wouldn't replace it.
9
load supplied by that station to another voltage level, we
So when we convert the
10
would eliminate that station.
11
put the capital investment in place to replace it.
12
MR. DeVELLIS:
13
MR. LABRICCIOSA:
So therefore, we wouldn't
Okay.
So that's an example of one; we
14
wouldn't replace that asset.
15
out for a little longer until we convert the load, and then
16
eliminate the asset entirely.
17
MR. DeVELLIS:
Okay.
18
2,101, and then 6,118.
19
--- Reporter appeals.
20
MR. DeVELLIS:
21
MR. LABRICCIOSA:
We'd keep it in, stretch it
Submersible transformers; 2,209,
6,118 is your recommended number.
So that would be the part C of your
22
interrogatory, which sort of hinted at why in some cases
23
assets that are being replaced or recommended to be
24
replaced are higher --
25
MR. DeVELLIS:
26
MR. LABRICCIOSA:
27
28
Right.
-- than what's found in both of the
studies.
MR. DeVELLIS:
Yes, I know you've answered that.
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just didn't understand the answer.
MR. LABRICCIOSA:
Sure.
So in a case with the
3
underground cable, for example, there's a connected --
4
they're connected assets.
5
transformer, which is connected to a service to a home.
6
the --
7
--- Reporter appeals.
8
MR. LABRICCIOSA:
9
10
So a cable is connected to a
Oh, I'm sorry.
To a home.
If
I should
probably speak into this mic.
So in that particular case, if you're going to replace
11
the cable and put the effort in to replace it, keeping in
12
mind that the existing infrastructure's on one side of the
13
street, energized and connected and supplying the home, we
14
have to rebuild the infrastructure on the other side, and
15
therefore require a transformer, as well as service
16
connections, as well as civil infrastructure.
17
So while we're trying to deal with a failing asset on
18
cable, especially in direct buried cable, our method of
19
replacement will inherently include the transformers, the
20
civil infrastructure, and the service connections to the
21
home.
22
So in that particular case, we're forced to replace
23
the cable, or our plan is to really address the cable.
24
Inherent by design is the connection of transformers and
25
other services as part of that, so that's why we have more
26
in submersible types.
27
28
MR. DeVELLIS:
Okay.
Is it fair to say then you're
sort of accelerating your replacement of other certain
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assets, because you're already in there replacing something
2
that you really need to replace?
3
MR. LABRICCIOSA:
4
MR. DeVELLIS:
Yes.
Okay.
You mentioned cable.
You have
5
underground cable XLPE in ducts.
6
the condition-based assessment.
7
kilometres, I guess?
8
based, you have 401 kilometres; nothing for the age-based.
9
Is that because they haven't reached end of life, according
10
11
No number of units for
And you have 401
Is that -- Sorry, for the condition-
to your age-based analysis?
MR. LABRICCIOSA:
No, the age-based analysis, I think
12
the caveat in there, in the plan, describes it as lack of
13
information, so as part of the amalgamation, we all came
14
together at a point in time in 1998 through 2000.
15
still merging systems, collecting data, trying to
16
consolidate databases.
17
We're
I think you heard earlier we've just finished -- you
18
heard a term called GEAR, or geo-spatial system.
19
just finished putting that platform together, in terms of a
20
consolidated platform which houses some of this data.
21
We've
So at the time we did some of this study, we didn't
22
have age information, and I think the ACA also pointed out
23
that, you know, there are some gaps in data that have to be
24
closed, and so we are putting those data collection
25
initiatives or efforts together as we speak, going forward.
26
MR. DeVELLIS:
Okay.
And earlier, when we were
27
talking about the process of coming up with the capital
28
plan, and you said that the condition-based assessment was
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an after-the-fact aid -- but I take it then when you did
2
capital plan initially, if you didn't have any age-based
3
information, did that mean that you didn't have anything in
4
there for underground cable replacement?
5
6
7
MR. LABRICCIOSA:
I'm sorry, can you repeat the
question again?
MR. DeVELLIS:
Well, earlier we were talking about the
8
process of how you came up with your capital plan you
9
presented to this Board, and you said that, well, it was
10
basically done in August of 2006, but supplemented by the
11
Kinectrics study, the condition-based assessment.
12
But that would suggest to me that if you didn't have
13
age-based information for underground cables, that you
14
couldn't have any forecasted expenditures in your original
15
capital plan for underground cables, because you didn't
16
have age-based information.
17
MR. LABRICCIOSA:
No, we have performance data as well
18
that shows that cables do fail, and again, it's
19
deteriorating performance in that area of the system that
20
caused us to look at things like the ten-year plan and the
21
asset condition assessment.
22
our submissions the cable study plan.
23
We also included as part of
So based on our performance, was focusing us in that
24
particular area, causing us to collect better data to make
25
better plans and decisions.
26
And again, the majority of that effort really focused
27
in on the investment in this first phase, on the
28
underground components.
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MR. DeVELLIS:
According to the condition-based
2
replacement people, the recommendation was to replace 401
3
kilometres of underground cable XLPE, and you're
4
recommending 561 kilometres.
5
explained that, but if you did, I didn't catch it.
6
MR. LABRICCIOSA:
You may have already
Again, I would turn you to a cable
7
study that was completed by John Densley, which is really -
8
- it's listed as Exhibit R1, Tab 3, Schedule 25, Appendix
9
"B".
I've just noted for the reference that it's a very
10
detailed study that explains the condition of the cable,
11
even though, at a cursory level, when Kinectrics did their
12
review, there really wasn't a lot of corroborating evidence
13
on condition that can be collected to identify that the
14
system is probably in a condition worse than what the data
15
is showing today.
16
For example, in Densley's report it talked about using
17
probes and dielectric receivers, acoustic emission
18
receivers, to identify which cables are failing, because
19
that would give better indication of the quality or the
20
condition of the asset.
21
From his information, we're extrapolating that the
22
system is worse, and as well as, from the performance data,
23
it is performing worse than what it's telling us, hence
24
leading us to the conclusion we would have to get at it a
25
lot sooner.
26
MR. DeVELLIS:
27
Mr. Chairman, I'm about to move on to another area.
28
Thank you.
Would this be a convenient time to break?
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MR. SOMMERVILLE:
Thank you.
We'll resume at 11:15.
We'll take a break.
Thank you.
3
Oh, just for everyone's information, the Board has a
4
commitment over the lunch break, so we'll take lunch from
5
11:50 to 1:30.
Thank you.
6
--- Recess taken at 11:00 a.m.
7
--- On resuming at 11:20 a.m.
8
MR. SOMMERVILLE:
9
Mr. DeVellis.
10
MR. DeVELLIS:
Please be seated.
Thank you.
Thank you.
Can I get you to turn to
11
Interrogatory Response No. 27 to School Energy Coalition?
12
It's Exhibit R1, Tab 5, Schedule 27.
13
We asked you for your unit costs for your underground
14
direct buried cable replacement, and I just want some
15
clarification here, because when we add up your per-unit
16
cost and multiply by the number of units, we get
17
approximately $256,000, and it just struck me that that
18
can't be correct.
19
million.
20
21
I think your budget is actually $45-
MR. COUILLARD:
I'm not sure which unit.
doing all three tables in terms of units?
22
MR. DeVELLIS:
23
MR. LABRICCIOSA:
24
25
26
Are you
Yes.
And are you using conductor lengths
and cables or circuit lengths?
MR. DeVELLIS:
You lost me there, but you have the
number of units up on top, number of kilometres?
27
MR. LABRICCIOSA:
28
MR. DeVELLIS:
Right.
So, 180, 124, 130, and we took a total
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unit cost for the three phases, I guess, and added them up.
MR. LABRICCIOSA:
3
up like that.
4
calculation.
5
I don't think you can just add them
Sorry, I haven't really looked at your
MR. DeVELLIS:
All right.
We have other
6
interrogatories where we've asked for that and we've taken
7
your total unit costs and multiplied by the units, and it
8
came out to whatever your budget was.
9
couldn't do that.
10
MR. LABRICCIOSA:
And this one we
Again, I'm sorry, I can't speak to
11
how you did your calculation.
12
explain the difference between your calc. and what the
13
table presents here, I don't think we can do that there.
14
MR. DeVELLIS:
If you're asking us to
Well, I tell you what, we added $534
15
for example, for 2008, so unit costs 534, plus 245, plus
16
345, multiplied by 230.
17
cost of $1,114 multiplied by 230.
18
MR. LABRICCIOSA:
So it comes out to a total unit
And, again, those are three
19
different types.
What you're seeing is a breakout by three
20
different types of cable replacements, so they're not on
21
equal ratios.
22
MR. DeVELLIS:
23
MR. LABRICCIOSA:
24
MR. DeVELLIS:
25
Can I ask you to turn to Schedule 33 of the same
26
So you can't add them.
I don't think you can.
All right.
That's fine.
exhibit?
27
MR. LABRICCIOSA:
28
MR. DeVELLIS:
Okay.
Again, we asked for your unit costs for
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your transformer station replacements, and if you could
2
turn to table 4, which is on page 4.
3
MR. LABRICCIOSA:
4
MR. DeVELLIS:
Yes.
And you say in the explanation that's
5
at page 5 that the cost variance shown in table 4 from
6
2007-2008 is attributed to the fact that for 2008 and
7
beyond, the circuit breakers to be replaced are outdoor
8
bulk oil circuit breakers, which are more expensive to
9
purchase and install than indoor metal-clad circuit
10
breakers, which were replaced in 2007.
11
MR. LABRICCIOSA:
12
MR. DeVELLIS:
That's correct.
Now, if you look at the material costs
13
that are in table 4, the per-unit cost -- those material
14
costs, that's the total?
15
MR. LABRICCIOSA:
16
MR. DeVELLIS:
17
Yes.
And so to get per-unit, you divide by
the number of units.
18
MR. LABRICCIOSA:
19
MR. DeVELLIS:
20
MR. LABRICCIOSA:
21
MR. DeVELLIS:
Sure.
So the math is there.
It's good for that one, yes.
And we actually have the per-unit cost
22
decreasing from $23,000 to $17,000 for material, which is
23
not what we're concerned about.
24
labour costs, the per-unit costs.
25
from the numbers that the per-unit cost for labour, the
26
total is the same, but the number of units are much lower
27
in 2006 -- the per-unit costs are much higher for labour.
28
Can you explain that?
It's the next line, the
Well, you can just see
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MR. LABRICCIOSA:
2
you're going from 51 to 4.
3
MR. DeVELLIS:
4
MR. LABRICCIOSA:
Yes.
It's different equipment when
You've obviously seen that.
Yes.
And the explanation really deals
5
with the 51 are encapsulated units, self-contained, sort of
6
pre-packaged, slide them in.
7
labour and effort to replace those is a lot less; hence the
8
cost per unit being lower.
9
That's why the amount of
The outdoor type, you're dealing with a higher
10
voltage.
11
install but a lot of effort working around the energized
12
equipment outside, so it takes longer to replace.
13
Outdoor requires more effort, not only effort to
MR. DeVELLIS:
I'm just a little confused why the unit
14
itself actually costs less, but it takes a lot longer to
15
install it.
16
MR. LABRICCIOSA:
Again, because the four units that
17
you see from 2008-2010 are 27,000-volt units.
18
in the 2007, the bridge year, the 51 units are for 4,000-
19
volt units so, again, it's just that they're not
20
necessarily compatible or comparable in terms of type of
21
effort to install.
22
voltages versus lower voltages.
23
are pre-packaged and sort of slide-in type installation,
24
whereas the other units, you have to break them down, get
25
them back in, and build them back up.
26
27
28
MR. DeVELLIS:
The numbers
Safety procedures around higher
Okay.
As well as the 51 units
I have a question next about
your reactive capital spending.
You say in the evidence -- you don't have to turn it
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up, but you can if you want.
2
2.
3
increase substantially in the bridge year to address a
4
significant increase in system failures, resulting from the
5
growing base of aging assets.
6
It's at D1, Tab 8, Schedule
The evidence is, the reactive capital requirements
And then at our Interrogatory No. 35, we asked you for
7
a breakdown of the number of work requests by type of
8
equipment.
9
10
Maybe you could turn to that.
MR. WONG:
Yes.
MR. DeVELLIS:
And we added up the totals of your
11
various tables there, and again, perhaps my math is wrong
12
again, but what we did is just added up the totals on each
13
table.
14
decreasing from 2006, 7,454, to 5,755 in 2007, and then
15
staying at about that level, going forward.
16
And we have here number of work requests actually
MR. WONG:
That's true, but the mix of the units are
17
different.
18
units are increasing, and those costs are generally higher
19
than for the other types of units.
20
21
What you see on table 4 is that the underground
MR. DeVELLIS:
Sorry, total underground units are
increases?
22
MR. WONG:
Correct.
23
MR. DeVELLIS:
24
MR. WONG:
25
MR. DeVELLIS:
26
MR. WONG:
27
MR. DeVELLIS:
28
MR. WONG:
You're looking at table 4?
Yes.
That's actually decreasing.
Oh, from '06 to '07.
Yes.
It's decreasing, yes.
In the test years they're -- are you
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referring just to from '06?
MR. DeVELLIS:
Well, from the evidence in the bridge
3
year, the number of work requests is increasing.
4
showing that from 2006 to 2007 the work requests are
5
decreasing.
6
MR. WONG:
7
MR. DeVELLIS:
This is
Sorry, can you repeat the question?
You had pointed to the underground
8
efficiencies, I guess, as the reason for the increased
9
expenditures in this area, but it looks like those are
10
decreasing, if you look at table 4.
11
MR. WONG:
12
units as well.
13
versus higher-costs underground units.
14
you're seeing -- what it shows is that the lower-costs
15
underground units are decreasing, whereas the higher-costs
16
ones are increasing.
17
Yes, but again, it's also the mix of those
There are lower-costs underground units
MR. DeVELLIS:
And I think what
I don't want to dwell on this for too
18
long, but are there some in here that jump out at you that
19
are the higher-cost ones?
20
MR. WONG:
Well, for instance, the underground
21
secondary service repairs are -- we're seeing lower volumes
22
of that.
23
units going forward.
24
25
26
27
28
So that would be a factor for the decreasing
If you'd like a better explanation, I would have to
defer.
MR. DeVELLIS:
I don't think it's necessary.
I
thought there would be a quick answer, though.
I'll move on to my last area of questions, and it has
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to do with your response to our Interrogatory No. 44, which
2
is R1, Tab 5, Schedule 44.
3
MR. WONG:
We have that up.
4
MR. DeVELLIS:
I'm looking at Part C, and we asked for
5
an explanation of the variation in the sustaining capital
6
spending from the distribution capital plan, and in your
7
evidence, your prefiled evidence in this proceeding, the
8
answer you gave was that the capital plan used 2007
9
dollars, whereas the evidence -- the figures in your
10
prefiled evidence -- represent actual projections for 2007
11
and forecasted amounts for 2008, '09, and '10, taking
12
inflation effects for the various project components into
13
consideration.
14
MR. LABRICCIOSA:
15
MR. DeVELLIS:
Correct.
So does that mean that the capital
16
plan, the amounts that we see in there, the only variation
17
we would see would be due to the changes in work?
18
MR. LABRICCIOSA:
19
MR. DeVELLIS:
20
MR. LABRICCIOSA:
21
MR. DeVELLIS:
22
MR. LABRICCIOSA:
Correct, volume of work.
So they're all fixed at 2007 -Dollars.
-- dollars.
It doesn't assume inflationary
23
effects for materials and labour and those kinds of
24
elements.
25
MR. DeVELLIS:
Those are all fixed.
26
MR. LABRICCIOSA:
When we put this plan together, the
27
EDR, presuming we put our budgets together, we used the
28
wage rates in those respective years, given the assumptions
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2
3
we gave in the assumptions section of the filing.
MR. DeVELLIS:
And materials costs and wages and all
of that --
4
MR. LABRICCIOSA:
5
MR. DeVELLIS:
6
Right.
-- would be fixed in the capital plan,
but not in the prefiled evidence?
7
MR. LABRICCIOSA:
Correct.
8
MR. DeVELLIS:
9
Those are my questions.
Okay.
Thank you very much, panel.
10
MR. SOMMERVILLE:
Thank you, Mr. DeVellis.
11
Mr. Faye?
12
CROSS-EXAMINATION BY MR. FAYE:
13
MR. FAYE:
14
I'd like to start just by reviewing a couple of items
Thank you, Mr. Chair and Panel.
15
that I found a little confusing in the cross by other of
16
the intervenors.
17
examination of distributed generation, it seemed to me that
18
one of the reasons why distributed generation would be
19
limited on THESL's system is this issue of short-circuit
20
availability.
21
layman's terms what short-circuit availability means, so
22
that the Panel understands that.
23
And starting with Pollution Probe's
And I wonder if you could just describe in
MR. LABRICCIOSA:
Short-circuit availability or
24
capacity deals with the ability of the system and the
25
design to protect itself against cascading failures.
26
other words, as you connect more resources to that grid,
27
you have to have the means to interrupt failures, should a
28
failure exist.
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For example, if you were to connect more resource
2
capability to that section of the grid, and you exceed the
3
short-circuit capability, the ability of the system to
4
protect itself against any one failure is compromised.
5
So in other words, it can take down the entire grid,
6
it could cascade out, prevent, you know, huge -- more than
7
designed damage during a failure condition.
8
Is that a fair enough explanation, Mr. Faye?
9
MR. FAYE:
Yes, I think that's very understandable.
10
And the contribution that distributed generation makes
11
to that issue is that, if you have a generator on a feeder,
12
it's available to feed current into a fault if a fault
13
occurs, and you could exceed the limits of your system in
14
so doing; is that correct?
15
MR. LABRICCIOSA:
16
17
That's correct.
DG is considered a
source of current, or energy, into that failure.
MR. FAYE:
Now, are there measures that didn't get
18
discussed that you can employ on your system to limit the
19
amount of short-circuit availability at any given point in
20
the system?
21
MR. LABRICCIOSA:
There are.
You can buy -- again,
22
it's by design.
23
not sure how much detail you want me to get into, but
24
essentially you can mitigate limits by design of systems or
25
buying additional components.
26
MR. FAYE:
You can buy higher-rated components.
Okay.
I'm
And I think where I'm going with
27
this is just to clarify that the response seemed to say
28
that there's limits on the system introduced by short-
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circuit considerations, and I'd just like the Panel to be
2
aware that you're saying there are some technical solutions
3
possible to that, which you haven't necessarily
4
implemented, but if the circumstances were right and a
5
distributed generation project came along that needed some
6
technical assistance on short-circuit, there are solutions
7
available?
8
9
MR. LABRICCIOSA:
case-by-case basis.
It would have to be looked at on a
And again, there are, you know,
10
technical solutions available depending on the situation of
11
the problem at hand.
12
MR. FAYE:
All right.
Another point that Pollution
13
Probe was asking you about, and I think I was left with the
14
wrong impression.
15
hasn't been left with the wrong impression, and that is
16
this issue of distribution line losses and the relationship
17
between that and current.
18
I just want to clarify so the Panel
I think the discussion sort of left the impression
19
that losses are directly related to the square of the
20
current, and that that's the reason why the rate of loss,
21
the percent rate of loss, should increase as you put more
22
load on a feeder.
23
I just wanted to clarify with you, is it the fact that
24
you're putting more load on the feeder, or is it the fact
25
that the impedance of the circuit, the alternating current
26
equivalent of resistance, is a non-linear function?
27
28
MR. LABRICCIOSA:
You're correct.
the impedance is a non-linear function.
It's the fact that
I was a little
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confused by his line of questioning, in a sense that there
2
are many factors that go into losses, both technical and
3
non-technical.
4
And I believe his line of questioning, the way he was
5
presenting his question, was really trying to arrive at a
6
conclusion that, as the day peaks, there are more losses.
7
And it's really a percentage, and the percentage is linear
8
over that period.
9
But, you know, there are -- in a non-technical loss
10
area, there are behaviour issues around how you deal with
11
theft of power or diversion of power, as well as models
12
that deal with flat-rate billing.
13
14
So those present the non-linearities that I was trying
to arrive at.
15
MR. FAYE:
No, but --
16
MR. LABRICCIOSA:
But as a whole, the non-linear
17
aspects of impedance is what drives the non-linear
18
elements.
19
MR. FAYE:
So what we'd like to leave on the record
20
clearly is, if you ignore the sources of losses that aren't
21
directly attributable to the current running through the
22
line, such as people stealing power, if we just consider
23
the current on the line, the percent loss does increase at
24
a non-linear rate as you put more current through the wire,
25
but it's because the wire heats up, and as the wire heats
26
up, the resistance increases.
27
MR. LABRICCIOSA:
28
MR. FAYE:
Correct.
So Pollution Probe's conclusion that there
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is a non-linear function attributed to percent is true;
2
it's just they understood it for the wrong reasons?
3
MR. LABRICCIOSA:
Correct.
4
MR. FAYE:
5
I'd like to return to an issue that came up before the
Thank you.
6
prior panel that my co-counsel, Ms. Campbell, asked
7
yesterday, and the previous panel said that that would be a
8
more appropriate question for this panel to answer.
9
I think she was attempting to discover how much of the
10
increase in manpower that you forecasted over the test year
11
is attributable to this capital program expansion.
12
was going to refer you to an exhibit, which is a graph, and
13
it's Exhibit R1, Tab 6, Schedule 5, Appendix "A".
14
sure that she was directly interested in the actual numbers
15
on this, but was more interested in following the trend
16
line here and getting an answer to that question as to how
17
much is being driven by capital investment here.
18
MR. LABRICCIOSA:
And she
I'm not
That question came up several times,
19
I think, during the hearing.
And I think my sense is,
20
people want to de-couple or break out the elements of staff
21
addition into individual components.
22
In actual fact, the staffing plan you see there is in
23
preparation -- predominantly driven by the aging workforce
24
that are going to be leaving the organization.
25
Notionally, with the increase in capital spend and the
26
forecast in diminishing resources or the resources retiring
27
from the organization, in general, we know we're going to
28
have to add.
We have more work.
We have fewer people
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expected.
2
difference.
3
We're going to have to add people to make up the
On top of that, what amplifies that is it takes four
4
years to actually replace leaving talent with incoming
5
talent, and one would argue that, even after the four
6
years, the amount of knowledge that's retained when a
7
35-year veteran leaves versus someone who's just come in at
8
five years, I don't think you can equate that.
9
still also a bit of latency or lag period when that new
So there's
10
employee comes up to speed and can be a fully productive
11
employee replacing one that has left with the level of
12
experience he or she left with.
13
The root of the question always comes back to, well,
14
how many are related to this particular component, which is
15
just increased capital.
16
we've presented in front of you encapsulates the components
17
I just described to you.
18
expectation that the workforce is declining, based on age
19
and retirement forecasts, coupled with the fact it takes
20
four years to ramp up this new resource to contribute to
21
the organization at a level that the person who has left.
22
MR. FAYE:
We don't have that absence.
What
An increasing capital spend, an
Do I understand you to say, then, that
23
ignoring the apprentices who apparently are not going to be
24
a hundred percent productive for some time, would you agree
25
that, with the ramp-up of your capital, you have
26
insufficient staff right now to cope with that?
27
28
MR. LABRICCIOSA:
No, I wouldn't necessarily agree
with that statement, Mr. Faye.
I think I would say that we
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have the resources today to undertake the plans we put
2
forward, if staff were not retiring in the future that we
3
see coming forward with the aging workforce.
4
It is the fact that they are retiring means we have
5
to start now to prepare for that replacement in order to
6
keep our effort in work production at the levels today.
7
MR. FAYE:
If you were able to take these retirements
8
out of the equation and you could count on all the staff
9
that you have right now being available, do I understand
10
you say that you would be able to cope with your work
11
program without having to add all these apprentices?
12
MR. LABRICCIOSA:
13
MR. FAYE:
That's correct.
Would you agree that your work program has
14
expanded between the historical year and the bridge year
15
and test years?
16
MR. LABRICCIOSA:
17
MR. FAYE:
Correct.
Well, am I to conclude, then, that your
18
staff wasn't a hundred percent occupied in the historical
19
year?
20
year, and you're adding work, how could they do the new
21
work?
22
If they were all fully occupied in the historical
MR. LABRICCIOSA:
No, I wouldn't necessarily say they
23
weren't fully occupied.
I think we'd say we would explore
24
new techniques and methodologies to make our staff more
25
productive and implement new processes and look for
26
efficiencies along the way.
27
that we will capture that efficiency going forward, to make
28
up the difference in this plan.
And we have an expectation
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MR. FAYE:
If we look at this nice exhibit here, D1,
2
Tab 7, Schedule 1, and this one, if you could take it out
3
and just keep it handy, because I'm going to refer to this
4
quite a lot throughout the cross-examination.
5
6
It's page 10 of that schedule, and it's a chart
called "Summary of capital budget."
7
Looking at "Total distribution system," this is
8
probably the line that's most indicative of how much
9
manpower you need in your line construction and line
10
11
maintenance department; would that be so?
MR. LABRICCIOSA:
Embedded in those sustaining capital
12
budgets or the total distribution system is also work we do
13
with external contract resources like civil construction.
14
I think you mentioned that earlier.
15
16
17
18
So if you include that in your statement in terms of
all resources, I would say yes.
MR. FAYE:
Okay.
Well, looking at the historical
year, the number is 124 million; is that right?
19
MR. LABRICCIOSA:
20
MR. FAYE:
That's correct.
Then going to the bridge year, we jump to
21
167 million.
And just in rough terms, that looks like
22
about a 30 percent increase; would you agree there?
23
MR. LABRICCIOSA:
24
MR. FAYE:
Yes.
Then going up to the 2008 test year, it
25
looks like an increase of probably close to 90 percent,
26
maybe 85 percent?
27
MR. LABRICCIOSA:
28
MR. FAYE:
Yes.
And it only increases from there.
The 2009
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test year is even higher; 2010, higher yet, although the
2
rate of increase does drop off.
3
correctly, are you suggesting that you're going to get
4
almost a hundred per cent productivity improvement between
5
now and 2010?
6
MR. LABRICCIOSA:
No, sir.
If I understood you
I wouldn't conclude that.
7
I would say there are many factors that contribute to that
8
increase.
9
An example that we just talked about was use of civil
10
construction resources.
11
rebuilding our underground system, there's a greater cost
12
associated with rebuilding that system, involving a civil
13
component.
14
15
16
17
18
When most of our effort is at
We do not do that internally in the organization; we
contract that out, so that element increases.
MR. FAYE:
How much would you attribute to the civil
component?
MR. LABRICCIOSA:
There is an exhibit that deals with
19
contracts, and I think it would be in there.
20
double, I would say.
21
to check -- 20 to 40 million, but I could look that up.
22
MR. FAYE:
It's roughly
I would say it went from -- subject
So, of the 2008 test figure there, what's
23
the best number to compare to, the 228 total distribution
24
system, or the 115 total sustaining capital?
25
applicable?
26
27
28
MR. LABRICCIOSA:
Which is most
I'm sorry, what's the question
again?
MR. FAYE:
When we're talking about civil construction
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expenditures that are contracted, and what I want to do is
2
-- you said it's gone to 40 million.
3
million to the 228 total, or do I compare it to the 115?
4
Is all that 40 in the sustaining capital section, I guess
5
is the question.
6
MR. LABRICCIOSA:
Do I compare that 40
Not all of it; a predominant amount
7
of it.
8
connections work which is below that line.
9
10
There are some elements in reactive and customer
MR. FAYE:
All right.
Well, then let's stay at the
total distribution system line.
11
MR. LABRICCIOSA:
12
MR. FAYE:
Sure.
In the 2007 bridge year, the 167, do I
13
understand you to be saying that about 20 million is civil
14
contracts there?
15
MR. LABRICCIOSA:
16
MR. FAYE:
17
18
Correct.
And of the 228, about 40 million is civil
contracts?
MR. LABRICCIOSA:
Correct.
19
that contract statement.
20
exhibit.
21
22
23
24
25
26
MR. SOMMERVILLE:
Again, subject to check on
I'm just trying to recall the
Mr. Faye, we have a hard-edged
obligation that we have to meet, so we're going to -MR. FAYE:
We can leave this here, because the panel
looks like they need a little time to look this number up.
MR. SOMMERVILLE:
We're going to break at this stage,
and we will resume at 1:30.
Thank you very much.
27
--- Luncheon recess taken at 11:51 a.m.
28
--- On resuming at 1:31 p.m.
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MR. SOMMERVILLE:
Thank you.
Please be seated.
2
Any preliminary matters, Mr. Rodger?
3
PREMILINARY MATTERS:
4
MR. RODGER:
Just one, Mr. Chairman.
I've handed up
5
to Mr. Faye, and will give to you an update, and this was
6
discussed yesterday during this panel.
7
Warren, it's an update to Exhibit R1, Tab 1, Schedule 4-1,
8
Appendix "B".
9
equity.
10
11
I believe, Mr.
And these were the changes to the return on
It's an update of the page of Appendix "B", THESL
financial data, years ended December 31st.
In speaking to a couple of my friends here,
12
Mr. Chairman, I thought it might be helpful if I just asked
13
at this time Mr. Jamal to explain this update.
14
Particularly, there were some questions my friends have
15
raised in terms of the difference between what actual
16
return on equity is, and what allowed return on equity is,
17
and why in particular the actual return on equity is lower
18
than the allowed return on equity for 2008.
19
20
21
22
23
With the Board's permission, I wonder if perhaps
Mr. Jamal might be able to explain that.
MR. SOMMERVILLE:
I think that would be helpful.
Thank you.
MR. JAMAL:
Thank you.
Mr. Warren had asked some
24
questions yesterday around return on equity.
25
indicated that in the pro-forma financial statements there
26
was an administrative error related to that, that needed to
27
be updated.
28
I had
The impact of those changes to the pro-forma financial
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statements which were issued yesterday have been reflected
2
in two of the interrogatories that were handed out earlier
3
this afternoon, just a moment ago.
4
The actual return on equity for 2007, '08, '09, and
5
'10, are now 9.3 percent, 6.7 percent, 9.3 percent, and
6
10.2 percent, respectively.
7
The actual or projected return on equity is based on
8
an accounting formula which is essentially net income
9
divided by the average equity.
The allowed return on
10
equity is based on a prescribed formula, which is described
11
in Exhibit P.
12
they're derived using two totally different methods, so
13
they're not directly comparable.
14
So, although they have the same name,
MR. RODGER:
What's the significance of the difference
15
between these two concepts?
16
from these different numbers over the different years,
17
depending on whether it's actual return on equity or
18
allowed return on equity?
19
MR. JAMAL:
What should the Board take
The actual projected return on equity has
20
different factors, or different factors affect that.
21
example, dividends and any other changes in equity.
22
factors don't affect the prescribed or allowed return on
23
equity, because that's based on a formula.
24
MR. RODGER:
For
Those
Maybe just one final question, and this
25
comes from my friend from Schools, who I don't believe is
26
any longer in the room, but he would like to understand why
27
in 2008 the actual return on equity is lower, 6.7 percent,
28
as opposed to the allowed return on equity which is now
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shown as 8.8 percent.
2
lower?
3
MR. JAMAL:
Why is the actual return on equity
I believe a lot of that had to do with the
4
operating costs differential, and any changes in net
5
revenues or operating expenses that affect revenue will
6
impact this.
7
higher costs and the net revenues that impact this.
8
9
10
11
And at a high level, I believe that it was
The specific differences are described in Exhibits F1
and F2, which will clarify why that's the difference.
But, once again, there are two different formulas, and
they are driven by different aspects.
12
MR. RODGER:
Thank you, Mr. Chairman.
13
MR. SOMMERVILLE:
Thank you.
It occurs to me,
14
Mr. Rodger, although not all of the intervenors are
15
present, and Mr. DeVellis in particular, that it may be
16
worthwhile, if there are some questions arising from your
17
questions, then it may be worthwhile to here if Mr.
18
Buonaguro, for example, has questions or questions from the
19
Board.
20
Mr. Buonaguro, do you have questions?
21
CROSS-EXAMINATION BY MR. BUONAGURO:
22
MR. BUONAGURO:
Just following up to make sure I
23
understand it, I took it from what you are saying that when
24
you make your application I'm assuming that you make your
25
application with the intent, from a regulatory perspective,
26
of meeting the 8.8 percent allowed return; right?
27
MR. JAMAL:
Yes.
28
MR. BUONAGURO:
And that the 6.7 actual is based on a
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projection of certain factors which aren't accounted for in
2
a regulatory context?
3
MR. JAMAL:
Specifically, I'm not sure if it's
4
specifically related to stuff that's not accountable.
5
that's derived based on the projected net income, which,
6
for the most -- and, sorry, there's also a dividends
7
component in there that's not factored into the allowed
8
return on equity.
9
But
However, primarily, that's going to be as a result of
10
the variances caused, I believe, at a high level, subject
11
to check, related to operating expenses.
12
specifics in front of me right now, but this is purely a
13
function of the $49.6-million worth of net income, as you
14
can see in the line above, which is considerably lower.
15
MR. BUONAGURO:
Okay.
I don't have the
It's just because -- I think
16
the questions arose because normally you don't forecast a
17
shortfall between what you're supposed to -- and when you
18
come forward over the test year, you calculate the test
19
year at the allowed return on equity, and that's what –-
20
you’ve structured your filing to meet that.
21
MR. JAMAL:
Yes.
22
MR. BUONAGURO:
And then, in the actual year, if you
23
fall below it, it's because of bad weather or something;
24
right?
25
MR. JAMAL:
Right.
26
MR. BUONAGURO:
On the gas side, at least.
And
27
because you're forecasting a shortfall, it's a little
28
confusing.
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What I'm taking from what you're saying that that's
2
because there are things that just aren't taken into
3
account when doing the filing that happen every year.
4
if other companies came forward and reproduced their
5
actuals from previous years and their forward test years,
6
if they were doing a multiple-year test year, in the same
7
way, they would have the same sort of possibility of a
8
shortfall, even though they wouldn't be planning for it?
9
MR. JAMAL:
So
Once again, I'm not exactly sure what's
10
causing the shortfall based on the information I have
11
available in front of me.
12
I would suggest that we probably look at this variance
13
again, once all the proposed changes are factored in, after
14
we've identified any of the changes that are required, and
15
recalculate this number, and then do an assessment or an
16
analysis.
17
18
MR. BUONAGURO:
I think that's as close as I'm going
to come to understanding it.
19
MR. VLAHOS:
Mr. Jamal, I'll pick it up from here.
20
QUESTIONS BY THE BOARD:
21
MR. VLAHOS:
Frankly, I don't understand what this is
22
all about.
This is a schedule based on financial data, and
23
I see from the exhibit number, is this pursuant to a
24
question or interrogatory by Staff?
25
there.
Is that what this designates?
26
MR. JAMAL:
27
MR. VLAHOS:
28
I see an arrow "1"
Yes.
So why do you feel compelled to change
this every time there is a change, unless you were asked
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specifically to make that adjustment by the person that
2
perhaps has asked the question in the first place?
3
MR. JAMAL:
This change resulted from the update into
4
the pro-forma financial statements that were handed out
5
yesterday.
6
This was a downstream effect of that change.
MR. VLAHOS:
Okay, sir.
There are about 1,500
7
interrogatories, okay?
8
something would cause a change into more than just one
9
schedule in the 1500 responses.
10
Were you asked to?
12
MR. JAMAL:
14
Why did you feel compelled
to update this one?
11
13
And I'm sure that a change in
Yes.
I believe Mr. Warren asked for this
yesterday.
MR. VLAHOS:
He asked for it.
But I thought he asked
15
for the update because you brought that to his attention;
16
is that not the case?
17
MR. JAMAL:
18
MR. VLAHOS:
How would that come up, then, Mr. Rodger?
19
MR. RODGER:
I believe it was part of Mr. Warren's
20
I don't believe, sir, that was the case.
cross-examination.
21
MR. VLAHOS:
Right.
22
MR. RODGER:
He wanted to confirm these numbers of
23
both the actual and allowed return on equity, and that's
24
when Mr. Jamal advised him that there was likely going to
25
be a change, because of some of the other changes that have
26
been talked about over this case.
27
28
MR. VLAHOS:
Okay.
Maybe I'm confusing this with the
other blue sheets that --
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MR. SOMMERVILLE:
If I may, I think there may be some
2
miscommunication.
3
in going over the original response to the interrogatory,
4
Mr. Jamal, at that point, indicated for the first time that
5
there were consequential changes to this exhibit as a
6
result of the filings that had been made earlier yesterday
7
morning, to the pro-forma financial statements.
8
9
I think that, if I recall what happened,
What Mr. Warren asked for was the document that we now
have, which was the correction that I don't think goes to
10
your question, Mr. Vlahos, which is why in his testimony in
11
cross-examination Mr. Jamal indicated that, "Oh, by the
12
way, we have to change this as well."
13
right.
14
MR. VLAHOS:
I think that's
Maybe I can just backtrack then and ask
15
some specific questions about this schedule, and also
16
another schedule, another update which I don't have in
17
front of me, but it also, Mr. Rodger, was a blue update.
18
And that was a couple of days ago, and there was some
19
questions, and I think Mr. Chairman has it in front of him,
20
so I'm going to grab a copy in a few minutes.
21
Mr. Jamal, this is the financial data of the company
22
that has actuals, it has bridge, and it has going forward.
23
Okay?
24
So if we look at the actual return or the allowed
25
return, the second and third rows, what does it tell me?
26
It tells me in 2006 what was the actual return and what was
27
allowed, and the company has earned more; right?
28
that without any qualifications.
We know
That's a fact.
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2
MR. JAMAL:
What you do know -- excuse me, was that a
question?
3
MR. VLAHOS:
4
MR. JAMAL:
Yes.
What you do know is that the actual return
5
on equity based on the accounting formula resulted in 11.3
6
percent.
7
prescribed formula, was 9.0 percent.
8
formula.
9
The allowed return on equity, based on the
They're not the same
They're just called the same thing.
MR. SOMMERVILLE:
That's --
Your point is that the actual return
10
on equity as represented in this exhibit is not a like
11
measure, so that I cannot compare the allowed return on
12
equity to the actual return on equity, because they are
13
fundamentally different formulae.
14
MR. JAMAL:
15
MR. VLAHOS:
Yes, sir.
Well, it must mean something, though.
I
16
mean, if you compare one with another, it must mean
17
something.
18
equity -- that is, if the company were to earn precisely as
19
they had forecast, or as what the rates reflected, it would
20
have been 9-point percent, right?
21
it was a test year.
22
MR. JAMAL:
23
MR. VLAHOS:
What it tells me is that the allowed return on
Let's look at 2000, and
Yes.
All right?
The company made an
24
application.
It was a future test year.
25
rates, okay?
And everything worked out just perfectly.
26
The two numbers will be the same.
27
MR. JAMAL:
28
MR. VLAHOS:
The Board set the
I don't think that's the case.
Okay.
So if it's not the case, then this
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is not a regulatory construct.
2
construct, and I'm trying to make some sense as to what use
3
is this for me.
4
MR. JAMAL:
We provided the information that was
5
requested in the interrogatory.
6
intend to make the comparison.
7
interrogatory as requested.
8
9
MR. VLAHOS:
This is an accounting
All right.
We, Toronto Hydro, didn't
We just responded to the
So you responded to the
interrogatory, and that's as far as it goes.
You don't put
10
any significance as to how the numbers are for 2008, 2009,
11
and 2010.
12
MR. JAMAL:
13
MR. VLAHOS:
Correct.
We don't put any significance.
All right.
Thank you very much.
That
14
really clarifies it, because I can just put it at the
15
bottom of my drawer now.
16
promise you I will not bother you with this again.
17
18
Now, it's not over yet, though.
Thank you.
So I
Mr. Chair, may I have
your indulgence, and just give me that?
19
--- Board confers.
20
MR. VLAHOS:
21
All right.
Yes, Mr. Rodger, one more time, if you
don't mind, if you can be patient with me.
22
It's the purpose of -- and I'm looking at Exhibit B1,
23
Tab 7, Schedule 1, Appendix "A" -- and those are the blue-
24
sheet updates.
25
don't mind, just remind me as to why they were updated -- I
26
guess they're blue colour, so there must have been updates,
27
and the reason for that, and what is the plan going
28
forward.
And again, since we're on the topic, if you
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So maybe you can help me one more time with it?
2
if you would rather leave that in my discussion with the
3
regulatory people later on, that would be fine as well.
4
--- Pause in proceedings.
5
MR. RODGER:
And
Sir, this update that you referred to,
6
again, this resulted from the exchange that Mr. DeVellis
7
had with one of the panels.
8
explain once we get to one of the regulatory panels.
9
10
11
MR. VLAHOS:
Okay.
I think it might be easier to
That's fine, sir.
I will wait for
that.
In the meantime, the company may wish to refrain from
12
filing those things again until we sort it out as to what
13
they are, what they're supposed to represent, and what is
14
the potential value for those things, because I'm sure
15
intervenors who received that, they don't know what to make
16
of it, and I don't know what to make of it right now.
17
The only thing I want to note is that, specifically on
18
Tab 7 -- sorry, Exhibit B1, Tab 7, Schedule 1, Appendix
19
"A", it is again a financial construct, a financial
20
accounting construct.
21
what its use is for purposes of this Board Panel, okay?
22
that's the first question.
23
It's not regulatory.
I don't know
So
The second question is, again sticking with the blue
24
pages, at the same time we had received Exhibit D1, Tab 2,
25
Schedule 3, and that has to do with -- I don't know what it
26
has to do with, other than Table 2, year ending December
27
2008, test dollar millions; and that's all I know.
28
There's nothing else here to help me as to what this
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is, other than to indicate there is an update to the
2
services and meters number, which changes the total in
3
service assets number.
4
it.
5
MR. RODGER:
But I don't know what to make of
Yes, this particular one, sir, D1, Tab 2,
6
Schedule 3, if you look to the right of the table, you'll
7
see there's two "C"s, and this was to reflect changes as a
8
result of the Smart Meter depreciation update that Mr.
9
Jamal spoke to yesterday.
10
MR. VLAHOS:
All right.
11
MR. RODGER:
And that --
12
MR. VLAHOS:
So that was spoken to.
13
MR. RODGER:
That's right.
14
MR. VLAHOS:
That was just to update -- okay.
15
MR. RODGER:
That's right.
So there was an exhibit
16
earlier in the week in a memo format that explained how the
17
depreciation treatment changed, and now he's extended it
18
further to show you how this one exhibit would be changed
19
to reflect that update.
20
MR. VLAHOS:
I guess, Mr. Rodger, it goes to some of
21
my previous questions.
Changing the depreciation on one
22
line item, it would have a number of impacts on many lines
23
of the prefiled evidence.
24
MR. RODGER:
Yes.
25
MR. VLAHOS:
That's why I fail to understand what is
26
the significance of this specific update, as opposed to,
27
why don't we take it all the way down to the revenue
28
requirement change?
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MR. RODGER:
Yes, I think that that latter change is
2
the significant job that we'd spoken about earlier, that
3
would take a number of days to flow it through the whole
4
revenue model and ultimately into rates.
5
I think what these updates try and do is, as fast as
6
the company can, make these changes we've talked about so
7
the record will be more complete.
8
the driver.
9
MR. VLAHOS:
I think that's really
And, believe me, I'm not the one who's
10
going to suggest that you update your revenue requirement
11
every time, by any means.
12
selectivity of just one exhibit as opposed to two or three
13
or five?
14
many, many documents in the pre-filed evidence.
15
I fail to understand as to why we're doing it just on this
16
schedule, and not others, and do we have to do it on this
17
schedule as well, unless it comes up and somebody says,
18
"Well, could you please update this?", in which case it
19
will be an undertaking.
20
But at the same time, why the
I'm sure that depreciation expense will be in
MR. RODGER:
That's why
I think with respect to this Smart Meter
21
depreciation issue, the feeling was that it was a material
22
change, and thus we would update the evidence accordingly.
23
For other very minor changes, we wouldn't do that, but
24
I think this was one in particular that the company felt
25
strong enough we wanted to provide the Board with first, a
26
memo format explaining what had happened, and then update
27
the particular page that dealt specifically with this cost
28
item.
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MR. VLAHOS:
All right, sir.
2
Finally, I guess there were two more exhibits that
3
were filed by way of blue sheet updates.
4
Schedule 2.
D1, Tab 3,
5
MR. RODGER:
Mm-hmm.
6
MR. VLAHOS:
I have updates to pages 1 out of 10, page
7
8
9
10
11
12
13
5 out of 10, and page 6 out of 10.
Let's stop there.
So there are three pages that were updated, and that
exhibit is entitled "Distribution assets - variance
analysis."
Can you help us as to the purpose of that update and
no other?
MR. RODGER:
Yes, and it's the same response, Mr.
14
Vlahos.
All these pages deal with the same Smart Meter
15
depreciation issue.
16
MR. VLAHOS:
The same item?
17
MR. RODGER:
The exact same issue, yes.
We're just
18
tracking it through the different documents in the prefiled
19
evidence.
20
21
MR. VLAHOS:
And the same would apply for the update
to Exhibit D1, Tab 14, Schedule 1?
22
MR. RODGER:
That's correct.
23
MR. VLAHOS:
No, I understand that now.
So are we now
24
further ahead in terms of going forward what we need to
25
update, whether anything?
26
MR. RODGER:
Yes.
27
MR. VLAHOS:
Mr. Chair, are you okay with that?
28
MR. SOMMERVILLE:
Yes, I think that's a very good
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1
caution, going forward, to ensure that if there are changes
2
of a certain magnitude that sort of draw the interest and
3
require updating immediately, in course, that's one thing.
4
But I think to go about this in a kind of fractured,
5
piecemeal fashion is probably not a best way to go about
6
it.
7
8
9
10
11
12
13
Mr. Faye, did you have any questions respecting the
schedule?
MR. FAYE:
Yes, Mr. Chair, just a couple.
MR. SOMMERVILLE:
Just on the return of equity
schedule.
MR. FAYE:
Yes.
Well, this is procedural, the first
question.
14
QUESTIONS BY BOARD STAFF:
15
MR. FAYE:
We've entered this one.
This is the one
16
Mr. Vlahos was just questioning about return on equity.
17
But there's a second schedule attached to that, and
18
I don't believe it's been referred to in the record, so I
19
just wanted to bring that forward.
20
Appendix "A" has been entered in the record as submitted.
21
MR. VLAHOS:
R1, Tab 6, Schedule 17,
Yes, Mr. Faye, you're right, it was
22
attached to my R1, Tab 1, Schedule 4.1.
23
the same discussion there.
24
MR. SOMMERVILLE:
25
MR. FAYE:
So, yes, I guess
Well, let me ask the --
Are these the underlying changes?
Yes, and these are the filing requirements,
26
and it's just again updated to reflect the same discussions
27
on ROEs.
28
MR. VLAHOS:
So this is connected to the ROE update?
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MR. FAYE:
2
MR. VLAHOS:
3
Exactly.
Exactly.
Does it also incorporate the depreciation
expense change variance or not?
4
MR. SOMMERVILLE:
5
MR. VLAHOS:
I wouldn't think so.
All right.
So I guess the same would
6
apply to this schedule as Exhibit R1, Tab 1, Schedule 4.1,
7
Appendix "B", okay?
8
documents?
Those are the bottom-of-the-drawer
9
MR. RODGER:
Yes.
10
MR. VLAHOS:
Thank you.
11
MR. RODGER:
And we do appreciate the Board's
12
concerns.
13
some material change that we think has arisen, we’re just
14
trying to get the best information before the Board,
15
understanding that you don't want changes for every single
16
element of this many thousands of pages that may change.
17
So we are aware of that and we'll take that.
18
19
What we're trying to do, as I say, if there is
MR. FAYE:
A second question, Mr. Chair, on this,
which I could direct to Mr. Jamal.
20
Looking at this schedule, and considering the
21
discussion that's gone on here, I think everybody would
22
like to see something that compares forecast retained
23
earnings with Board-allowed retained earnings.
24
somewhere in the evidence that we can make that comparison,
25
or will you bring that forward towards the end of the
26
hearing?
27
28
MR. JAMAL:
Is there
I believe that we are planning to update
the amounts after all the discussions have been had.
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1
regulatory panel will be fielding that and processing the
2
numbers, then we'll be issuing something after that.
3
believe that was the plan, to do that after all the
4
adjustments had been identified.
5
MR. RODGER:
Well, Mr. Faye, to be helpful; isn't that
6
what's shown on this R1, Tab 1, Schedule 4.1?
7
income line, projected out to 2010?
8
9
I
MR. SOMMERVILLE:
It's the net
I thought that Mr. Jamal indicated
that this was not really a -- these two lines do not
10
represent comparable figures.
11
question to be the production of a document that does
12
provide, on a common basis, the allowed return on equity
13
and the actual return on equity.
14
And I took Mr. Faye's
My caution in this really goes back to the original
15
interrogatory that asked for the percentage of actual
16
return on equity, and it's not my interrogatory by any mean
17
means, but just reading it, it looks at if what was asked
18
for was the actual return on equity as a percentage, the
19
allowed return on equity, and looking for the actuals,
20
planned and projected.
21
needed now is production of that document on a common
22
basis.
23
MR. VLAHOS:
I would have thought that what's
And, Mr. Chair, that's why I have a
24
difficulty with before, when I was asking the question, is
25
that there's absolutely no reason beyond, in 2008 and
26
after, to have any value other than this same value in the
27
two circumstances.
28
I see Mr. McLorg is nodding there, so I guess maybe
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I'm not too far off.
2
To the extent that the 2007 bridge, you know, the
3
estimate may be different from actual to forecast,
4
definitely for the historical year 2006 -- sorry, did I say
5
'06?
6
may be a difference between the actual and the allowed, and
7
we understand the potential sources of that.
8
9
10
2007, the bridge year, 2006, the actual year, there
But going forward on a forecast basis, there's no
reason why the numbers would be different.
MR. SOMMERVILLE:
I wonder if the way to get to this
11
-- and it may be that people take more than one shot to
12
sort of get to this at the end of the day -- is to really
13
understand the formulas that were used.
14
the allowed return on equity is the formula that the Board
15
uses.
16
helpful is to know precisely what the actual return on
17
equity formula that was used by you in creating the
18
original document.
19
may give us some help.
20
question, but I think it will be helpful.
That's the Board methodology.
I'm assuming that
And what might be
If you can provide that, I think that
21
MR. JAMAL:
22
MR. SOMMERVILLE:
23
MR. JAMAL:
It may not be an end to the
May I answer that question?
Yes.
It's a standard accounting formula, that's
24
net income divided by the average equity, shareholders
25
equity of the company.
26
MR. SOMMERVILLE:
27
MR. RODGER:
28
Okay.
And I thought that part of the difficulty
was bringing your actual figures into the regulated model.
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2
I thought that was the problem.
MR. VLAHOS:
Yes, correct.
I might as well keep going
3
back to my thesis, that it does not make sense to have
4
those numbers side by side for the forecast period.
5
think everybody's agreeing there.
6
to advise your counsel there?
7
MR. RODGER:
So I
Mr. McLorg, are you able
I think we're agreeing with you.
I think
8
all we're saying, Mr. Vlahos, is we did this to try to
9
respond the best we could --
10
MR. VLAHOS:
No, I understand that.
I understand it.
11
But do we make anything more of it, or do we just stop
12
here?
13
it is stopped here.
14
I thought we decided to just stop it here, okay?
MR. SOMMERVILLE:
So
Well, I'd like to get the -- I guess
15
we know what that formula is, and we'll -- I hesitate to
16
say that it's stopped at this point, because the party who
17
asked the interrogatory is not in the room at the moment.
18
The interrogatory, the original -- oh, it was.
19
beg your pardon.
20
answers.
21
Oh, I
So I guess we are satisfied with the
Is that fair, Mr. Faye?
MR. FAYE:
I think Board Staff, Mr. Chair, would like
22
to see in black and white how this calculation was done,
23
and if it's not too much trouble and they could give us an
24
undertaking on that, it would probably satisfy Board
25
Staff's confusion.
26
MR. SOMMERVILLE:
Sure enough.
27
MR. FAYE:
28
UNDERTAKING NO. T4.1:
That would be T4.1.
HOW THE CALCULATION FOR RETURN
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ON EQUITY WAS DONE.
2
MR. RODGER:
3
I'm warning you, Mr. Vlahos, this is
another blue page coming.
4
MR. VLAHOS:
5
MR. SOMMERVILLE:
6
Oh, that's okay.
This shouldn't be a blue page.
This
should be a white page.
7
MR. RODGER:
Okay.
8
MR. SOMMERVILLE:
9
MR. VLAHOS:
This is not an update.
I'm sorry, you're referring to the
10
response to the undertaking?
11
pink now.
Oh, no, we're going to go to
12
MR. SOMMERVILLE:
Mr. Faye?
13
CROSS-EXAMINATION BY MR. FAYE (Continued):
14
MR. FAYE:
Sorry, picking up where we left off just
15
before the lunch break, I'll just remind everybody what the
16
context of this was.
17
that my co-counsel Ms. Campbell asked, and she was advised
18
to ask this panel -- and it concerns Exhibit R1, Tab 6,
19
Schedule 5, Appendix "A", which is this nice coloured chart
20
-- of the number of full-time equivalents prospectively
21
being added to Toronto Hydro, THESL, and how much of that
22
could be attributed to the increase in the capital program.
23
This is a discussion of a question
Where we were at is that the response from the THESL
24
panel is that, as usual, it's not quite so simple, and some
25
things have to be removed.
26
What we got to is that civil construction is done by
27
contract and not by Toronto Hydro forces.
28
numbers on this, if you will.
And check my
I think you said that for
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2007 about 20 million was attributable to civil
2
construction, and for 2008 about 40 million was
3
attributable to civil construction.
4
5
6
MR. LABRICCIOSA:
I think by 2010 it reaches 40, so
it's scaled up.
MR. FAYE:
Okay.
But for the purposes of this sort of
7
back-of-the-cigarette-package calculation I'm going to do
8
here, this is probably good enough.
9
All right.
Now, if we take the schedule that I
10
initially referred everybody to and asked to keep handy --
11
that is, D1, Tab 7, Schedule 1, page 10 -- this is the
12
summary of capital budget.
13
distribution system line.
14
I'm looking at the total
For the bridge year, it's 167 million.
We're going to
15
take 20 off that, and we arrive at 147 million, and for the
16
test year, 2008, it's reading 228.
17
off that and get 188.
18
We're going to take 40
Now, are there any other costs embedded in those two
19
numbers I just came up with that really need to be taken
20
out, that are not THESL in-house costs?
21
MR. LABRICCIOSA:
I think I'll draw your attention to
22
a couple of points, in addition to the civil construction.
23
One would be Smart Meters.
24
and although it's not just embedded in the 2008 test year,
25
it does not show up in the previous years.
26
the go-forward view and eventually drops off beyond the
27
filing years.
28
It's a one-time type program,
So it inflates
The other matter I'll draw your attention to is,
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within metering, there is the ISO metering work, which is
2
roughly 8 million in 2008, 10 million in 2009, and 7
3
million in 2010; rough numbers, again, which, again, are
4
one-time expenses that are external to the company, related
5
to market requirements.
6
And the last point I'll draw your attention to is, in
7
the asset-management line, there is Hydro One contributions
8
for, as identified, the Leaside to Birch project, and
9
roughly, it's 5 million in 2008, 10 million in 2009, 20
10
11
million in 2010.
Once you extract those sort of round numbers, you're
12
left with a view of what the type of work, the activity in
13
the work program is all about.
14
MR. FAYE:
15
So I'm just going to look at 2008.
16
Thank you.
It just gets too
confusing to try more than one year.
17
MR. LABRICCIOSA:
18
MR. FAYE:
Sure.
We were at 188.
We've taken 228, taken out
19
40 for civil construction.
Now we're going to take out 36
20
for Smart Meters, eight for the system operator, and five
21
for Hydro One.
That's 13, 49, 137.
Do you agree?
22
MR. LABRICCIOSA:
Agree.
23
MR. FAYE:
Now, what I want to do is compare
Okay.
24
that to the 2006 historical year, and that was 124.
25
what we were discussing was -- what I thought you had said
26
was that if we can set aside the fact that a lot of people
27
are going to retire, and the fact that you're hiring
28
apprentices, you seemed to imply that you would be able to
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handle this upswing in capital work that's evident between
2
the two numbers that we're talking about here, 124 in 2006,
3
and this one we just arrived at, 137.
4
million there.
5
There's about $13-
Now, did I understand you right to say that your own
6
forces would be able to handle that, because you were going
7
to have programs in place that would promote better
8
efficiency, more productivity?
9
10
11
MR. LABRICCIOSA:
In reality, we are adding staff, and
you're honing in on the small adjustment numbers.
We are adding staff due to this plan.
So that is --
12
the 13 million roughly represents the increased effort
13
required for this plan.
14
because of it.
15
And, yes, we do have to add staff
But I'll also add, in addition to that, there is an
16
expectation of some productivity improvement due to new
17
processes, new systems, and skills upgrade that we're
18
addressing with, again, people processing systems going
19
forward.
20
MR. FAYE:
Okay.
Are you able to estimate what that
21
number ought to be in a percentage term of productivity
22
improvements?
23
the historical year and the test year that we're trying to
24
sort of explain here.
25
is going to be accounted for by better productivity?
Let's take -- we've got 13 million between
Of that 13, how much would you say
26
MR. LABRICCIOSA:
I can't say offhand, sir.
27
MR. FAYE:
Then I'm going to assume, for the
28
Okay.
sake of argument, that it's nominal.
Can I then conclude,
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coming back to where we started from -- this nice coloured
2
chart -- that at least in 2008, at least 13 million of that
3
budget, capital budget, is going to be consumed by the
4
folks that you hire in that rising line?
5
sorry, I didn't get a response there.
6
7
8
9
MR. LABRICCIOSA:
And can I -- I'm
Well, it is a balanced program, so
that's the expectation that we have.
MR. FAYE:
And without going through this exercise for
2009 and 2010, can we say, by analogy, the numbers are
10
somewhat similar, and so there's bound to be 13- to $15-
11
million worth of capital work in those years that the
12
people hired here are going to be involved in?
13
MR. LABRICCIOSA:
The logic makes sense.
Okay.
I will also
14
caution you that we are also -- recall from the training
15
perspective, there's a bit of a lag behind schooling,
16
ramping up, setting up the program, setting up the
17
resources, and getting them to a point to replace staff
18
that are expected to leave as well.
19
in with that logic and conclusion as well.
20
MR. FAYE:
So that's commingled
Yes, and I think where Ms. Campbell was
21
going with this is, do you have the capability to do this
22
capital program?
23
just come up with a broad sort of number here.
24
of roughly 15 million each.
25
by people that you don't have right now.
26
heard you say is, the people that you're planning to hire
27
aren't going to be able to do this work until they're
28
trained.
What I hear you saying, you know, we've
Three years
$45-million has to be taken on
And now what I've
Did I get that right?
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MR. LABRICCIOSA:
Not necessarily.
I mean, that's a
2
very -- that's a long leap in that conclusion.
3
doing work.
4
but we're also adding them in in anticipation of retiring
5
people as well.
6
They are productive.
So they are contributing.
They are
We're adding them in,
They are contributing to
7
the extra work that you've identified, in terms of that
8
extended logic, but at the same time they will be replacing
9
people leaving as well.
10
I just caution you that it's all mingled into these
11
sets of numbers.
12
then there's a capital element.
13
the two out.
14
they -- we haven't built these plans in separation.
15
There's a human resource element, and
It's difficult to separate
I don't want to lose train of thought that
MR. FAYE:
No, I appreciate that this is probably
16
considerably more complex than I'm trying to make it,
17
because we're trying to deal with it in fairly simple terms
18
here.
19
I understand also that as you go through your
20
apprenticeship program, those individuals get more and more
21
productive.
22
correct?
Each year they can do more, I think; is that
23
MR. LABRICCIOSA:
24
MR. FAYE:
25
26
27
28
That's correct.
So the effect of the training starts to
mature towards the end of if 2010 test year.
All right.
I think that's all I have to ask about that, subject
to Ms. Campbell instructing me to pursue it any further.
So, with that, I have one more follow-up question and
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then I can get to my actual cross-examination, and this has
2
to do with a Pollution Probe question that I'd like
3
clarification on.
4
I think you said, in response to one of their
5
questions, that the ten-year capital expenditure plan
6
amounted to 1.17 billion.
7
number right, or did I misunderstand what you were saying
8
there?
9
MR. LABRICCIOSA:
10
going to check right now.
I just wonder if I got that
I did say subject to check, and I'm
11
--- Witness panel confers.
12
MR. RODGER:
13
I believe, Mr. Faye, was not the question
-- did it not relate to sustaining capital?
14
MR. FAYE:
That was going to be my next question.
15
MR. LABRICCIOSA:
Yes.
Just to clarify, in our
16
submission, the ten-year capital plan, which I believe is
17
Schedule 10 of D1, Tab 8, and I'm going turn you to page
18
13.
19
capital requirements in this plan, it's 1.17 or 1,170
20
million, or 1.17 billion.
21
There's a table, table 6, and, again, for sustaining
MR. FAYE:
I did have it right.
Thank you.
That clears it up.
I was
22
unclear as to whether it was sustaining capital or total
23
capital, but if you say it's sustaining capital, then the
24
amounts being spent in each of these years is relatively
25
one-tenth of it.
26
Thank you.
I'm looking again as this schedule of capital, D1, Tab
27
7, Schedule 1, page 10.
28
the numbers here.
We already talked about some of
I would just like to get some
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2
confirmation on the record of what these numbers are.
Starting with the 2006 test year to 2007, we're going
3
from 213 to 157, and by my calculation that's about a 35
4
percent increase.
5
check?
Would you agree with that, subject to
6
MR. LABRICCIOSA:
7
MR. FAYE:
I would.
And following up on that one, 2007 to 2008,
8
it appears that there's an increase of about 81 million.
9
Again, that's about 38 percent.
10
MR. LABRICCIOSA:
11
MR. FAYE:
Would you agree with that?
I would agree.
And comparing 2006 expenditures to that
12
2008, the difference is about 137 million.
13
that to be about 87 percent.
14
MR. LABRICCIOSA:
15
MR. FAYE:
I calculate
That's correct.
Would you agree with that?
Now, between
16
2008 and 2009 the increase slows down, and it's only about
17
7 million between those two years, about two and a half
18
percent.
19
144 million, and I make that to be about 92 percent.
20
you agree with that?
But between 2006 and 2009, the increase is
21
MR. LABRICCIOSA:
22
MR. FAYE:
Do
I would agree with it.
Finally, between 2009 and 2010, the
23
expenditure increase between those two years is only 9
24
million; again, about 2.9 percent.
25
the increase is 153 million, and that translates into about
26
97 percent.
But, comparing to 2006,
You agree?
27
MR. LABRICCIOSA:
28
MR. FAYE:
That's correct.
Now, turning to the first subcategory,
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"Sustaining capital."
2
description of what distinguishes that section, that
3
category, from the next one?
4
MR. LABRICCIOSA:
Could you give us a brief
In the sustaining capital, it's
5
strictly distribution equipment, and it's strictly dealing
6
with equipment that's in place today, that is
7
deteriorating, aging, and at the end of life and
8
underperforming, that needs to be replaced.
9
MR. FAYE:
And contrasting that with some of the work
10
that's noted in the second, ignoring things like capital
11
contributions, engineering capital, but focussing on
12
reactive work, what's in reactive work that wouldn't be up
13
above?
14
MR. WONG:
I will try to answer that.
15
Reactive work is the work that we do to try to restore
16
the grid to its normal state after an emergency-type
17
failure.
18
MR. FAYE:
So it's unplanned work?
19
MR. WONG:
It's unplanned.
20
MR. FAYE:
Would it be fair to say that the sustaining
It's demand-driven.
21
capital section is planned work and the reactive stuff,
22
customer connections, you really just are responding to
23
demands placed on the system that you don't have much
24
control over?
25
MR. WONG:
Correct.
26
MR. FAYE:
Okay.
27
Then, looking at the sustaining capital in a little
28
more detail, the underground direct buried category is the
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first one.
2
your expenditure plans in that category.
3
I wonder if you could describe how you develop
MR. LABRICCIOSA:
How the projects are identified is a
4
function of both the inventory we have of underground
5
direct buried cables -- so we've split that out as a
6
portfolio, sort of an asset class -- and we look at
7
performance of those assets, historical performance, which
8
pinpoint areas of the grid that require the attention, and
9
our assessment then becomes is it a one-time anomaly or is
10
it a trend?
11
investment plan to replace, because again, the situation
12
being at end of life.
13
that review process, and categorized and defined more
14
distinctly into particular specific project units.
15
plans are developed to execute on that plan.
16
And if it's a trend, it becomes a long-term
MR. FAYE:
And so projects are extracted from
Then
Am I right in assuming that that's what you
17
refer to as your asset management plan at various places in
18
the thing?
19
MR. LABRICCIOSA:
20
MR. FAYE:
21
22
That's correct.
Could you just elaborate a little bit on
when this asset management plan was first developed?
MR. LABRICCIOSA:
It stems from the 10-year capital
23
plan.
24
sustaining capital.
25
stay with underground direct buried cable.
26
I mean, that is the asset management plan for
There are parts and pieces -- we'll
During the course of these reviews, in the particular
27
case of cable, as we identify specific instances where
28
cable is failing, we begin to look at: is it an anomaly or
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is it an actual trend?
2
a trend, we go back into sort of study mode to figure out,
3
well, what's causing this trend?
4
sort of spending a little time here:
5
Densley's cable analysis from our system, so we asked
6
somebody to help us through understanding what's happening
7
with that cable.
8
9
When we actually identify it being
And the reason why I'm
We submitted John
And once it's confirmed that it is at the end of life,
and validated, then we begin to look at the areas that are
10
failing in terms of performance, and then that really
11
starts to form the genesis of the plan, the steps that we
12
take to replace it.
13
So we go with the highest outage area, highest outage
14
frequency areas, and start divvying up those areas as
15
projects, and that forms what we call a scoping package in
16
the planning process.
17
18
19
We begin to scope out these areas, and put estimates
together.
Once we've defined a geographic area and how far and
20
deep we want to go with the replacement, we develop a
21
project estimate that eventually goes into construction.
22
What you see in front of you, in terms of the filing, is
23
the project estimates that have been defined in that
24
process.
25
So the estimates really reflect a detailed plan,
26
execution plan, that has to go out into construction.
27
28
MR. FAYE:
Okay, so I understand that that's the
application and your methodology.
I think maybe my
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question was:
When did you develop the methodology that
2
you're using?
This asset management planning tool thing?
3
Does that go back to the origins of Toronto Hydro or is it
4
something that came in after amalgamation?
5
getting at.
6
MR. LABRICCIOSA:
That's what I'm
I've only come into my role and
7
responsibility within the last year, so I can't really
8
comment exactly when it came into play.
9
the company quite a long time, and we've always had this
10
11
I have been with
aspect of asset management, in terms of a process.
I would say it's not as rigorous or detailed as I've
12
defined it at this stage, or as mature, but we've always
13
had this view of looking at assets that are performing
14
poorly, and then doing further study in terms of
15
determining whether it's a one-time issue or if it's a
16
trend, and then once we've confirmed it being a trend, to
17
develop a parsed-out or segmented plan around replacement.
18
19
MR. FAYE:
One element of that plan, I think I hear
you saying, is reliability.
20
MR. LABRICCIOSA:
Correct.
21
MR. FAYE:
22
In the course of that plan, do you attempt to
Is that right?
23
reconcile or draw a balance between what you're trying to
24
get reliability-wise and what effect it's going to have on
25
your customers' rates?
26
process?
27
28
MR. LABRICCIOSA:
Is that a consideration in that
I wouldn't say we draw those two
endpoints together with a straight line, in terms of so
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many dollars, or so many dollars of rate impact are
2
reflected in reliability performance.
3
look at it that way.
I don't think we
4
I think there is a loosely coupled link there, in
5
terms of what projects are necessary to keep reliability in
6
check.
7
to do that, which eventually links back to rates.
Eventually, it defines the dollar investment needed
8
MR. FAYE:
Mm-hmm.
9
MR. LABRICCIOSA:
So if your question is, is there a
10
direct link, do we look at rate impact and reliability, I
11
don't think we do that directly, not in the asset
12
management plan.
13
14
15
MR. FAYE:
Okay.
Then do you do it at some other
point in your planning process?
MR. LABRICCIOSA:
I think at the end of the day, once
16
we put all the plans together from a budget perspective, as
17
part of our planning cycle in our company -- I think Mr.
18
Couillard talked about that budgeting cycle -- there is a
19
rate analysis done at the very end.
20
MR. FAYE:
And if there tends to be rate shock as a
21
result of the plans, do you revisit the plans and try to
22
come up with some other -- you know, extend them, whatever?
23
24
25
MR. LABRICCIOSA:
In my short tenure we haven't done
that.
MR. FAYE:
All right.
So it sounds like the capital
26
budget is driven by what your asset management plan
27
assesses as a need, and primarily to maintain reliability,
28
and you've picked some target band for reliability.
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MR. LABRICCIOSA:
Correct.
2
MR. FAYE:
Thank you.
3
I'd like to go now to the notion that in 2006, if I
Okay.
4
heard you right, this sort of planning was in place at the
5
time.
It hasn't just come out last year.
6
MR. LABRICCIOSA:
7
MR. FAYE:
Correct.
And the results of that planning are
8
significantly different than the results in the test years,
9
and in the bridge year, for that matter, in terms of how
10
11
much capital you're going to invest.
Can you elaborate a little bit on what happened in
12
your planning process that changed the outcome so
13
dramatically in the test years?
14
MR. LABRICCIOSA:
In looking back, I think what we can
15
say is, even if you go pre-2006, you'll notice the level of
16
spending for capital refurbishment is typical of 2006 or
17
lower.
18
I think what you can say is, while we were -- while we
19
had invested in a system years before that, we were maybe
20
riding a bit of a wave of complacency, in terms of the
21
system.
22
riding its performance.
23
We've invested it in previous years.
We're still
The performance has not been catching up to that
24
investment until the last couple of years, in terms of,
25
we've noticed that the system is deteriorating, and as we
26
have failed to keep up with that replacement, we've now
27
realized that the performance is not going to come back
28
without major capital investment.
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So one might argue -- I can only speculate, looking
2
backwards -- that we either -- we're taking a very short-
3
sighted view, and we're comfortable with the performance we
4
were getting and the state of our system.
5
having had a look at it through an asset-condition
6
assessment and re-evaluating our performance and the
7
condition of our system, we've realized that it's at the
8
end of its life.
9
MR. FAYE:
Okay.
But recently,
I think you've presented some
10
evidence that, you know, seeks to support that situation.
11
I'd like to take you to this first consultant's report that
12
you commissioned; and this is the Kinectrics study, and
13
it's in Exhibit D1, Tab 8, Schedule 9, Appendix "A". That's
14
another one you might want to keep out, because I'll be
15
referring to it a couple of times.
16
17
So I'll just ask you some general questions on that
while the Panel gets their copies out.
18
Can you tell us who Kinectrics is?
19
MR. LABRICCIOSA:
Kinectrics is a company that came
20
about or as a result of the divestiture of Ontario Hydro
21
into separate companies.
22
Research Labs, as one of a group of departments within
23
Ontario Hydro, located on Kipling Avenue.
24
It used to be Ontario Hydro
As it broke out, it broke out under its own entity,
25
known as Kinectrics, and I believe they've been bought out
26
entirely by a separate company.
27
MR. FAYE:
So it's a private corporation?
28
MR. LABRICCIOSA:
It is a private corporation today.
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MR. FAYE:
Now, I'm sure the reason you put this in
2
here is that you would like them to be recognized as an
3
expert opinion on the condition of your plant; is that
4
right?
5
MR. LABRICCIOSA:
6
MR. FAYE:
7
8
9
That's correct.
Can you tell us why you think that they are
experts in this?
MR. LABRICCIOSA:
other companies.
They have conducted similar work for
Hydro One, namely, is another company
10
that they've done work for in this umbrella.
11
they do have a reputation worldwide for research in the
12
power industry itself.
13
14
MR. FAYE:
So --
Would you consider them, for instance, to
be experts in utility management?
15
MR. LABRICCIOSA:
16
MR. FAYE:
17
MR. LABRICCIOSA:
18
management, probably not.
Utility management?
Yes.
19
MR. FAYE:
20
MR. LABRICCIOSA:
21
MR. FAYE:
Okay.
Asset management, yes.
Works
Design of systems?
Yes.
You think that they could -- you could call
22
them up and contract out your urban design for
23
subdivisions?
24
And I believe
MR. LABRICCIOSA:
That may be a bit of a stretch, but
25
I would think that if you look at the components used in
26
that design, I think they're experts in that.
27
MR. FAYE:
Okay.
28
MR. LABRICCIOSA:
They have lab facilities, do they?
I still think they run a lab on
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Kipling Avenue.
MR. FAYE:
And they do what's referred to in this
3
report, forensic testing of components?
4
sort of thing?
5
MR. LABRICCIOSA:
6
MR. FAYE:
7
8
9
10
11
Do they do that
That's correct.
Has THESL used them for that kind of
service?
MR. LABRICCIOSA:
We have in the past, in terms of
poles, pole strength, cable testing, cable-failure
analysis.
MR. FAYE:
Okay.
Now, they're a for-profit entity.
12
They're in business to make money.
13
testing failed components, as I understand it, and they're
14
rendering an opinion on which components are at risk in
15
your system.
Do you see any conflict there?
16
MR. LABRICCIOSA:
17
MR. FAYE:
18
They make money by
No, sir.
You would consider them to be completely
independent?
19
MR. LABRICCIOSA:
Yes, sir.
20
MR. FAYE:
When did you get the report back
21
22
23
24
Okay.
from them?
MR. LABRICCIOSA:
The report is dated Friday, February
2nd, 2007.
MR. FAYE:
Do you agree with the analysis that
25
Kinectrics has undertaken and the recommendations they've
26
made?
27
MR. LABRICCIOSA:
28
MR. FAYE:
I would agree with it.
Have you taken any steps to implement the
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recommendations?
2
MR. LABRICCIOSA:
3
MR. FAYE:
4
MR. LABRICCIOSA:
5
interrogatory.
6
that back up.
We have taken some.
Could you elaborate on which ones?
I believe we've provided that in an
If you would give me a second, I can pull
7
MR. FAYE:
Okay.
8
--- Pause in proceedings.
9
MR. LABRICCIOSA:
I'm going to point you to Exhibit
10
R1, Tab 2, Schedule 10.
It's Energy Probe's interrogatory.
11
I believe the question is similar to what you asked:
12
"What is THESL's response to each of the
13
recommendations arising from the Kinectrics
14
report as listed in Section 6?"
15
MR. FAYE:
Can you just go through that briefly?
16
MR. LABRICCIOSA:
Sure.
The first response, and I
17
guess it's in the order of recommendations made in the
18
report:
19
"THESL has initiated a review of the health
20
indices to include a more comprehensive
21
indication of condition."
22
And essentially, we're in the midst of that work.
23
Some of that work has been stalled to date, due to some of
24
the work we had to put together with the rate filing.
25
we still anticipate that it will be done by the end of
26
2008.
27
28
But
With respect to the second recommendation, which is:
"A risk assessment should be conducted to
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prioritize the assets that require replacement."
2
We've referred to another exhibit in the schedule.
3
think it's a Consumers Council of Canada, under D1, T8, S1.
4
Schedule 1.
5
I
On the third recommendation:
6
"The health index formulation for the asset
7
classes for which the audit found a significantly
8
poorer than average condition need to be re-
9
examined and possibly reformulated."
10
11
12
13
Again, we point to another interrogatory response
there, and it's related to D1, Tab 8, Schedule 9.
On the need for re-examining circuit breakers, our
response there was:
14
"THESL as part of the review being conducted in 1
15
above will be directing information to enable a
16
more granular examination of non-homogeneous
17
asset classes like circuit breakers.
18
specifically, circuit breaker data will be
19
collected so that the specifics of each
20
interrupting type -- that is, oil, SF6, gas,
21
aeromagnetic, et cetera -- will be captured."
22
And
In the fifth recommendation, it was looking at failure
23
modes of assets, and trying to classify and evaluate them
24
and incorporate them into maintenance programs.
25
response there was:
And our
26
"Asset failure modes have been identified through
27
THESL's reliability-centred maintenance analysis.
28
The maintenance strategy support system is
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currently being developed in Ellipse in order
2
track those failure modes."
3
Ellipse is our ERP, enterprise resource planning
4
system.
5
module, and failure-mode tracking is part of that module.
6
We're in the midst of implementing that.
7
In that system, it includes an asset management
The sixth recommendation:
8
"Further study is required to gain an improved
9
understanding of the condition information of
10
11
underground cables."
In our response, it's referencing the response in
12
Exhibit R1, Tab 3, Schedule 31, for the types of
13
assessments on cable condition.
14
part of Ellipse, we have a linear asset-tracking module
15
that we're looking to implement.
16
In addition, again, as
In Densley's report, and I referred to that a couple
17
of times, it talked about exploring the use of non-
18
destructive testing, and that's the acoustic pickup
19
methodologies for trying to look at arcing of cables and
20
using arc sound to predict the performance of the cable.
21
And, again, with us being tied up with this rate
22
filing, we have yet to follow up with that particular work,
23
but we intend to do so.
24
And the last recommendation:
25
"Statistics should be gathered on age at which
26
assets were replaced in the past, and why they
27
were replaced."
28
Our response is:
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”The tools being developed in 5 above --" and
2
again, that's the maintenance tracking system --
3
"will be used to address this recommendation.
4
THESL has decided to focus on improving its
5
condition-based assessments."
6
And that would be the response.
7
MR. FAYE:
Okay.
Thanks.
Of the seven, we have
8
number 1: there's going to be a review of the health
9
indices system to sort of fine-tune it.
10
11
12
That will be
completed in 2008.
Number 2, risk assessment: you referred us to another
exhibit.
13
Number 3, health index formulation: disagreement,
14
possibly, with other systems, I think you could categorize
15
that as.
16
17
That's been referred to another exhibit.
Number 4: you're going to collect some more data to
get better granularity.
18
Number 5, understanding the failure modes: you're
19
collecting that in your reliability data management system.
20
Number 6, further study to gain an improved
21
understanding of the condition of your underground cable:
22
you've referred us to another exhibit there, and maybe
23
that's one of the ones I'll ask you another question on.
24
And you've mentioned the Densley report.
And number
25
7, stats gathered at the age at which assets are dying: and
26
you're starting to collect that, although you haven't had
27
enough time to put into it.
28
MR. LABRICCIOSA:
Mm-hmm.
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MR. FAYE:
Before we go further, let's concentrate a
bit on number 6:
3
"Further study is required to gain an improved
4
understanding of the condition information of
5
underground systems."
6
That suggests that there's some doubt in the
7
conclusion that cable systems need replacing; and the
8
secondary conclusion I draw is that the projects included
9
in your capital budget are based on inadequate information,
10
if you compared it to this recommendation.
11
assessment?
12
MR. LABRICCIOSA:
Is that a fair
I wouldn't draw that conclusion.
I
13
would say, in parts of the ACA, it does talk about, there
14
is good data for underground cable and station
15
transformers, which corroborate the levels of investment
16
we're making.
17
they concluded in their analysis.
18
So it's based on good data in terms of what
I think what it does say is underground cable is a
19
linear asset, so there's quite a bit of it in the ground.
20
There's a significant investment being made.
21
You want to take a closer look at how you prioritize
22
those investments, a lot closer than what we possibly have
23
in terms of data today, so that you have it in the right
24
sequence and order as opposed to looking at such a large
25
volume at once.
26
So the takeaway I have is, collect more data to help
27
stratify your investment better in a sequence of priority,
28
as opposed to drawing the wrong conclusions on the data is
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inaccurate.
MR. FAYE:
I could see where that could be an
3
interpretation of it, but if you look at recommendation
4
number 5, it says:
5
"There is a need to further understand the
6
particular failure-mode of assets on the THESL
7
system, in order to ensure that replacement
8
programs are truly warranted, and not the result
9
of a reparable condition."
10
It sounds to me that your consultant is telling you
11
you need more data before you can draw broad conclusions
12
about cable replacement programs.
13
interpretation of this?
14
MR. LABRICCIOSA:
Is that a reasonable
I wouldn't necessarily say on cable.
15
I think, again, more data is helpful, to help determine the
16
exact timing of that investment.
17
statement also couples to all the other asset classes, and
18
there are some we did not have specific data for, or enough
19
data for, and we had to rely on the age-based methodology
20
to develop the 10-year plan.
21
MR. FAYE:
Yes.
But I think that
So if you're relying on age-based
22
methodology, that's not as legitimate, do you think, as --
23
that's probably not the right word.
24
MR. LABRICCIOSA:
25
MR. FAYE:
26
27
28
Right.
It's not as good as a reason to replace it
as if you had a health index; is that what you're saying?
MR. LABRICCIOSA:
I would say it’s not as helpful an
in-depth analysis as a health index, that’s correct.
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3
4
age could be used as a proxy for replacement.
MR. FAYE:
Yes, but what I hear you saying, it's not a
real good proxy.
MR. LABRICCIOSA:
Again, I think we're claiming to be
5
a company that is progressive, and getting better at how it
6
does its work and gets better going forward.
7
I think asset managers in general, in terms of
8
evolving in the future, it's evolving with better analysis,
9
better data, better results, better decision-making.
10
11
12
I would say it's not a fixed plateau that you achieve;
it's one that you continually evolve and get better at.
MR. FAYE:
I guess I'm still a little confused.
If
13
you have full condition assessment of your cables, then
14
presumably you know; you know, in detail, how bad they are.
15
And if you don't have that, then you have these other
16
proxies.
17
One is age.
What I was asking is:
If all you've got is age, are
18
you less confident in the cable condition than you would be
19
if you had partial discharge testing like mentioned in some
20
of these reports and that sort of thing?
21
MR. LABRICCIOSA:
Yes, I would think some methods
22
would lead to a stronger conclusion around end of life,
23
performance.
24
is also a good indicator as well, albeit it's a lagging
25
indicator or a reactive type indicator.
26
confirm, along with age, that assets are at the end of
27
life.
28
MR. FAYE:
But I'd also caution you to say performance
Okay.
But that will also
Turning to, then, the way you have
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constructed your cable-replacement program, I'm thinking
2
particularly of the direct buried cable, because that seems
3
to be where you have the most problems.
4
5
6
7
8
9
What did you base those replacement programs on?
that based on age?
MR. LABRICCIOSA:
Are you referring to the projects in
the plan?
MR. FAYE:
Well, you have a summary here on this one I
keep referring to: underground direct buried.
I'm assuming
10
that that is the sum of all the projects that you've
11
submitted?
12
MR. LABRICCIOSA:
13
MR. FAYE:
14
15
Is
That is correct.
And those projects, are they based on an
analysis that is founded on age of the cable?
MR. LABRICCIOSA:
No, I think you'll notice in some of
16
the -- in the age study, or in the age review, the age of
17
that particular type of cable was not available, or was not
18
accurate enough to solely base a determination of age
19
alone, in terms of a record.
20
21
22
23
So I would have to say it's both age, performance, and
condition.
MR. FAYE:
Okay.
your reliability indices; is that right?
24
MR. LABRICCIOSA:
25
MR. FAYE:
26
MR. LABRICCIOSA:
27
28
Performance, you're measuring from
That is correct.
Condition, how are you measuring that?
From this work that was done by
Kinectrics.
MR. FAYE:
And did Kinectrics actually go out and test
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2
3
4
5
6
your cables?
MR. LABRICCIOSA:
In some cases, they did a field
audit, which corroborated their conclusions.
MR. FAYE:
The field audit was some of these forensic
or diagnostic testing procedures?
MR. LABRICCIOSA:
I don't think they took samples of
7
the cable back to the lab and did a strength or breakdown
8
analysis.
9
concentric neutral corrosion condition in the field, did a
I think they just went out and looked at
10
visual inspection.
11
MR. FAYE:
Okay.
And where in your system,
12
considering that it's direct buried now, where do you get
13
to see that sort of thing?
14
MR. LABRICCIOSA:
15
16
Well, when it comes into a pad-
mounted vault location, you peek at the face of the vault.
MR. FAYE:
Okay.
So you can see the part of the cable
17
that you've referenced as a concentric neutral, and if it's
18
corroded at that point, you assume it's corroded all the
19
way down the cable?
20
MR. LABRICCIOSA:
That's a strong assumption.
21
MR. FAYE:
Nobody did any connecting of
Okay.
22
instruments or sending any pulses down the cable that would
23
give them an indication of a particular section, how bad
24
that cable was?
25
MR. LABRICCIOSA:
No, you're correct in that.
26
MR. FAYE:
Is it always the case that if you
Okay.
27
have corrosion on the concentric neutral, that the rest of
28
the cable is necessarily in danger of failing?
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2
3
MR. LABRICCIOSA:
Not always the case, but it is a
symptom.
MR. FAYE:
So in summary then, it sounds like, at
4
least for the direct underground buried part, you have
5
taken into account age and a visual inspection of what
6
would necessarily be a very limited part of your system,
7
simply where the cable comes out of the ground and you can
8
see the end of it.
9
10
MR. LABRICCIOSA:
MR. FAYE:
That's correct.
And are you confident that that gives you
11
sufficient information to base a capital program on that is
12
in the $50-million range?
13
MR. LABRICCIOSA:
14
MR. FAYE:
15
Yes, we are.
Are you planning to undertake any
diagnostic testing to confirm that?
16
MR. LABRICCIOSA:
17
MR. FAYE:
18
MR. LABRICCIOSA:
Not to corroborate this plan, no.
And why wouldn't you do that?
This three-year plan is really
19
addressing our poorest areas.
20
that are poor and very poor.
21
dealing with outages of 12 times a year.
22
It's addressing those assets
In most of these cases, we're
So we could spend a lot more time researching.
But I
23
would say with fairly good confidence that we have a tiger
24
by the tail in this particular case with underground cable;
25
that we have to go out and replace it.
26
27
28
MR. FAYE:
Okay.
You do collect statistics on how
cable failed?
MR. LABRICCIOSA:
We collect failure statistics;
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correct, yes.
2
MR. FAYE:
3
MR. LABRICCIOSA:
4
5
Okay.
So -The mechanisms of failure?
Is that
what you're leading to?
MR. FAYE:
No, what I'm getting at is, when you get a
6
call-out because the cable has failed and people are out of
7
power -- someone's got to go out and dig it up and fix it -
8
- do you know how many instances that is for failure of a
9
splice, for instance?
10
MR. LABRICCIOSA:
11
12
We do collect that information.
trend it.
MR. FAYE:
Yes.
And do you have information on how
13
many splices have failed?
14
MR. LABRICCIOSA:
15
16
17
18
We
failures.
We collect splices and cable
We distinguish between the two.
MR. FAYE:
Okay.
And how do they compare,
numerically?
MR. LABRICCIOSA:
I don't have that data in front of
19
me, but it is cable failures, not splice failures, we're
20
addressing here.
21
MR. FAYE:
So you're confident that you have no, you
22
know, sort of generic faulty splices in your system that
23
could explain your cable problems?
24
MR. LABRICCIOSA:
Correct.
You know, I think the
25
industry as a whole in the past, given my history, there
26
were workmanship issues and equipment issues with respect
27
to pre-moulded splices and hand-taped splices that would
28
lead to a great deal of splice failures.
But I think we
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grew out of that through the '80s and '90s.
2
predominant failures we're experiencing right now are not
3
splices, but cables.
4
MR. FAYE:
The
Cable.
Then in summary, I guess what I'm hearing
5
is, age of cable is a criterion that you use to identify an
6
area that might be problematic, and within that, you look
7
at reliability statistics to see how many outages you've
8
had on the cable, and then you prioritize them according to
9
the impact of an outage, I'm assuming, and list out your
10
projects; and that's your plan?
11
MR. LABRICCIOSA:
12
MR. FAYE:
13
MR. LABRICCIOSA:
14
MR. FAYE:
15
MR. LABRICCIOSA:
That's correct.
Does diagnostic testing take a lot of time?
For underground cables?
Yes.
It's not necessarily the time that
16
we'd be concerned with, I think, in some cases.
It's the
17
impact to the system.
18
de-energized.
19
other cables that are at the end of life, higher than what
20
they are, in which case you're exposing them even further
21
in order to test segments.
So to do the testing, it would be
To de-energize it means you put -- you load
22
Again, we'd be looking for non-destructive energized
23
testing, and I don't think that environment, that sort of
24
realm of testing, has matured yet.
25
MR. FAYE:
You're suggesting that it's unreliable?
26
MR. LABRICCIOSA:
I don't know that there are any
27
techniques yet that are around that make it both pragmatic
28
and reliable, in terms of results.
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MR. FAYE:
All right.
Well, let's take, for example,
2
one of the projects that you have.
3
subdivision, and you want to replace all the cable in
4
there.
5
6
It's an underground
In order to test that cable, am I right in saying that
you would have to go transformer to transformer?
7
MR. LABRICCIOSA:
Correct.
8
MR. FAYE:
So in order to do that and take it
9
Okay.
out of service to do that, how many customers would you
10
have on two transformers -- or one transformer, is what it
11
amounts to?
12
13
14
MR. LABRICCIOSA:
Anywhere from 15 to 30 customers
could be on that transformer.
MR. FAYE:
All right.
So you could take an
15
interruption on that leg of conductor.
16
test.
17
30 customers' loads, would they be picked up from some
18
other place?
19
20
You could do your
15 to 30 customers would be inconvenienced.
MR. LABRICCIOSA:
Sure.
15 to
They'd have to, I would
think.
21
MR. FAYE:
How would you do that?
22
MR. LABRICCIOSA:
Well, in a loop system, you just
23
transfer them over to the other part of the loop, so you do
24
segment by segment, so I'm assuming if that's -- that if
25
that's the example you're using --
26
27
28
MR. FAYE:
Fifteen to 30 customers are going to be put
on the rest of the loop?
MR. LABRICCIOSA:
The adjacent loop.
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MR. FAYE:
The adjacent loop.
Okay.
2
And are you suggesting that that 15 to 30 customers
3
would impose such a burden on that adjacent cable that it
4
would experience a failure or would be put in jeopardy?
5
MR. LABRICCIOSA:
It would burden the cable, double
6
than what it would be normally.
7
would describe it as.
8
9
So that's one element I
The other is, you know, the situation you're
describing, you're testing 30 metres of cable or less, 15
10
metres of cable.
11
segments that make up an entire subdivision, so it becomes,
12
again, impractical to do it segment by segment.
13
possible.
14
So there's a lot of 15-metre cable
But it's
The other element I'll add to it is, again, if you
15
know that the cable is at the end of its life, so the age
16
is there, the performance is telling you that it's tenuous,
17
and, you know, you've had field audits confirm -- albeit
18
not the entire length of that cable -- but confirm
19
conclusions drawn by a paper analysis that was done of the
20
records, I would question whether we would actually want to
21
go out and do that on every one of the projects we've
22
listed.
23
MR. FAYE:
Well, I guess where I'm driving at, of
24
course, is if it's possible to replace just the bad parts
25
of the system --
26
MR. LABRICCIOSA:
27
MR. FAYE:
28
Mm-hmm.
And if you can determine which are the bad
parts, by diagnostic testing, it would seem to make some
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sense to invest the time and money involved in that, rather
2
than not only costing yourself a lot of money in capital,
3
but inconvenience your customers by digging up their whole
4
street.
5
So I'm wondering, if you have a tool available,
6
according to the Kinectrics reports, I think it's not an
7
expensive tool -- I think they quoted something like $5,000
8
a day that this service was available for.
9
even quoted something in the neighbourhood of $400 per
I think they
10
cable section for testing it.
11
replacing this stuff seems to be in the $500 a metre range,
12
I'm wondering why you wouldn't put $400 into a test before
13
you committed to spend a huge amount of money to replace
14
cable that may not need replacing.
15
MR. LABRICCIOSA:
Given that the unit costs of
Oh, no, it will need replacing for
16
sure.
I think what we're talking about is, again,
17
stratifying that investment.
18
I'll respond in two parts.
19
One is this cable is at the end of its life, so you
20
might push it out for six months, so it is somewhat of a
21
stranded investment.
22
of months early.
23
don't think so.
24
Perhaps you've replaced it a couple
You said it makes sense to do that?
You need to replace it.
I
Period.
The other element is the costs you've quoted were the
25
Kinectrics costs to rent the equipment.
We didn't talk
26
about all the set-up costs in order to isolate the pieces
27
of equipment, so if you're trying to do 100 kilometres of
28
cable 10 metres at a time to test it out, that's going to
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take quite a long time to do, and it's going to involve a
2
lot of isolation work in order to do that, so it's not a
3
question of $400 or $500.
4
Add to that all the work to isolate, and the
5
inconvenience to the customers in terms of the outages, and
6
we're talking quite a bit of effort and inconvenience.
7
MR. FAYE:
I note that we started out that these
8
transformer segments were 35 to 40 metres, and now we're
9
going down to 10 metres apart.
10
every house in Scarborough?
11
12
That means there's one at
MR. LABRICCIOSA:
Could be.
You know, I might have
been generous at 45.
13
MR. FAYE:
Can I take you, then, to -- I'll give you a
14
moment here -- Exhibit R1, Tab 3, Schedule 25, Appendix
15
"A".
16
17
MR. LABRICCIOSA:
"A"?
18
MR. DeVELLIS:
19
MR. LABRICCIOSA:
20
MR. DeVELLIS:
21
Appendix "A".
buried cable in Toronto Hydro distribution system.
MR. LABRICCIOSA:
23
MR. FAYE:
27
28
Correct.
Now, this has been prepared by your own
staff, I'm assuming?
25
26
"A".
This is the study report on direct
22
24
Did you say Appendix "B" or Appendix
MR. LABRICCIOSA:
That's correct.
Mr. Kahn works for
us.
MR. FAYE:
If you look at the top of page 7, first
paragraph, I'll read it:
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"In the residential subdivision, a single-phase
2
transformer feeds 10 to 15 houses.
3
are spaced between an average of 400 metres."
4
Is that an incorrect statement in there, or a mistake?
5
MR. LABRICCIOSA:
I think the analysis he did was in
6
his area.
7
he's correct in his analysis.
8
9
10
11
12
13
That's what he looked at.
MR. FAYE:
Transformers
But I'll take it that
So that would vary from your assumption of
even 35 to 40 metres by an order of magnitude.
MR. LABRICCIOSA:
system.
It doesn't represent the entire
I think that was just done in a particular area.
MR. FAYE:
But you do have areas where transformers
seem to be spaced 400 metres apart.
14
MR. LABRICCIOSA:
Absolutely.
15
MR. FAYE:
And so to bring in a diagnostic
16
Okay.
testing program for that, you would be testing 400 metres.
17
MR. LABRICCIOSA:
18
MR. FAYE:
Sure.
So I'd ask you once again, if it costs $400
19
to test that section, and at $500 a metre, my quick math
20
would say you're going to spend $200,000 replacing that
21
cable -- does it not make sense to do a few 400-metre
22
sections and to see if they're good or bad?
23
MR. LABRICCIOSA:
Again, your cost on that doesn't
24
include the effort used to isolate and set up for the
25
tests.
26
MR. FAYE:
No, I recognize that you do have to do some
27
switching in order to isolate transformers.
But your
28
trouble crew does that all the time, I'm sure, doesn't it?
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MR. LABRICCIOSA:
Again, in responding to cable
2
failures, yes.
3
testing it at that point.
4
MR. FAYE:
But once the cable's failed, there's no use
No, I agree, but you certainly have the
5
capability to do this, and it's not an unusually onerous
6
task.
7
MR. LABRICCIOSA:
Yes.
But again, your question or
8
your comment related to:
9
doesn't, not on cable at the end of life.
10
MR. FAYE:
Does it make sense?
No, it
But I think we're getting into a little
11
circular reasoning here.
12
diagnostic testing program is to determine whether the
13
cable is at the end of its life, and you haven't done that
14
yet.
15
MR. LABRICCIOSA:
The whole push purpose of a
What we filed in front of you is the
16
evidence that shows what our conclusions are and that it is
17
at the end of life.
18
MR. FAYE:
And that conclusion is based on age of the
19
cable, a review of reliability statistics, and a visual
20
inspection of some parts of the system that Kinectrics did
21
in conjunction with their study?
22
MR. LABRICCIOSA:
23
MR. FAYE:
That's correct.
And you would still maintain that that's a
24
sufficient basis to develop a replacement program that
25
approaches $1.1-billion, and you don't plan to undertake
26
any further testing?
27
28
MR. LABRICCIOSA:
For cable, I believe what we're
putting in front of you is close to $100 million, and it's
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only for the first three years.
I would concede the point
2
to you that I think as time goes on, we probably have
3
better -- we need better methodologies or better methods to
4
test the remaining parts of the plan in order to create the
5
strata necessary that we deal with those in worse condition
6
than those that are in better condition.
7
And that would be part of our plan, as noted in the
8
recommendations in the Kinectrics report and some of the
9
work that we're proceeding with, going forward.
10
11
12
MR. FAYE:
And so, does that mean you are going to
implement some sort of diagnostic testing program?
MR. LABRICCIOSA:
I think you're right.
We started
13
off in that interrogatory response.
14
doing some of that work, and we intend to do that.
15
just we don't have that result today.
16
MR. FAYE:
subject, at least another section.
18
break, this would be a good time.
20
MR. SOMMERVILLE:
at 3:15.
It's
Mr. Chairman, I'm going to move to another
17
19
We're in the midst of
If you want to take a
Seems reasonable.
We will reconvene
Thank you.
21
--- Recess taken at 2:59 p.m.
22
--- On resuming at 3:18 p.m.
23
MR. SOMMERVILLE:
24
Mr. Faye, you were cross-examining.
Thank you.
Please be seated.
It would appear
25
as though, perhaps, Mr. Faye, you could advise me that this
26
panel will probably have to return on Monday morning?
27
28
MR. FAYE:
I think at the pace that we're going, yes;
I don't think we're going to finish by 5:00.
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MR. SOMMERVILLE:
Does that create any particular
2
difficulties?
3
go over until Monday in any event, pick a convenient break,
4
so that you're not sort of stuck in between issues, so if
5
you have to deal with an entire subject matter on Monday
6
morning, that's better than splitting it over the weekend.
7
Thank you.
8
9
MR. FAYE:
Let's pick a convenient -- if we're going to
Where we were at before the break, we were
just sort of finishing up with this issue of what underlies
10
the replacement of all these cables and the justification
11
for it.
12
in the report of distribution capital, D1, Tab 8, Schedule
13
1, page 8 -- if you could turn that up.
14
15
16
17
And I think we can just summarize by saying that
MR. LABRICCIOSA:
again?
Sorry, Mr. Faye, can you repeat that
Sorry.
MR. FAYE:
That would be Exhibit D1, Tab 8, Schedule
1, page 8 of 26.
18
MR. SOMMERVILLE:
19
MR. FAYE:
20
MR. SOMMERVILLE:
21
MR. FAYE:
22
MR. SOMMERVILLE:
23
MR. FAYE:
24
underneath Table 3:
This is the Kahn report?
This is distribution capital.
I beg your pardon.
Thank you.
Have you got that?
Yes.
I'm reading at the top of that page, just
25
"THESL used two key criteria to assess the
26
circuit areas in need of replacement, and those
27
two criteria are the number of failures per unit
28
length of installation and the age of each direct
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buried cable."
2
I'm assuming that's an accurate statement?
3
MR. LABRICCIOSA:
4
MR. FAYE:
Yes.
And I think I'll finish off this part of
5
the questioning just by asking you, prior to the Kinectrics
6
report, what did you use as your basis for replacing cable,
7
direct buried cable?
8
failures per unit length?
9
MR. LABRICCIOSA:
10
11
Was it age of the circuit, number of
Probably the latter, failures per
unit length, prior to this submission.
MR. FAYE:
Okay, and at the time that you were using
12
that, the amount of cable that you were replacing was a lot
13
less than what you are proposing to replace in the test
14
years?
15
MR. LABRICCIOSA:
Again, it's hard for me to comment
16
on how far back you want to go.
17
I would -- it's hard to quantify a lot less or --
18
MR. FAYE:
It's definitely less, but
Well, as an example, we could just take the
19
2006 historical year.
20
the bridge.
It was 7 million there.
It's 31 in
It's 45 in the first test year.
21
Just comparing to 2006, when you used this criteria as
22
well, the conclusion you drew at that time was that you had
23
to spend 7 million?
24
MR. LABRICCIOSA:
25
MR. FAYE:
Right.
Now, using the same criteria, the
26
conclusion is you've got to quadruple or quintuple that
27
amount.
28
MR. LABRICCIOSA:
That's correct.
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MR. FAYE:
Okay.
Thanks.
2
I'd like to turn you to the ArborLek report, and
3
that's at Exhibit R1, Tab 3, Schedule 25, Appendix "B".
4
Got that?
5
MR. LABRICCIOSA:
6
MR. FAYE:
7
8
Yes.
Can you just give us a quick run-down on
why you commissioned this kind of study and report?
MR. LABRICCIOSA:
Again, we felt that, given the
9
trends we were facing in terms of performance and our look
10
at the age of cable and the amount of cable we had in the
11
ground, our own analysis pointed to a problem area, and we
12
felt that we needed an outsider's perspective on it.
13
And Mr. Densley -- and I've referred to him a couple
14
of times -- is regarded as a cable specialist in the
15
industry, so we sought out his advice at that time.
16
MR. FAYE:
All right.
When did you get this report?
17
I didn't see a date on it, so I'm curious as to when you
18
commissioned this and got it.
19
MR. LABRICCIOSA:
2006.
20
MR. FAYE:
And do you agree with the analysis
21
2006?
and recommendations of this report?
22
MR. LABRICCIOSA:
23
MR. FAYE:
24
Has THESL taken any steps to implement the
recommendations?
25
MR. LABRICCIOSA:
26
MR. FAYE:
27
MR. LABRICCIOSA:
28
Yes.
Some.
Would you describe those to us?
page of the report.
I'll turn you to the conclusions
Some short-term actions they recommend
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-- if I read them off to you, is that all right?
2
MR. FAYE:
3
MR. LABRICCIOSA:
4
Sure.
And tell you, sort of give you a
state-of-the-nation in where we are with some of these?
5
MR. FAYE:
That would be great.
6
MR. LABRICCIOSA:
"Consolidate the databases from six
7
former utilities into one database."
8
the Ellipse references and the systems that we were using
9
to do that.
10
"Collecting cable accessory/age."
I referred to some of
We're in data-
11
gathering mode, and we're putting a plan together as we go
12
forward to have field staff collect data and populate the
13
fields that we've created in our systems to capture and
14
house the data.
15
Talked about "the lengths of different types of cable
16
installed each year."
17
earlier, and that's our geo-spatial mapping type system.
18
Since we are finishing that project, we now have one
19
database, mapping database, where we can capture accurate
20
lengths and start to label it with the type of cable, the
21
age, those kinds of elements.
22
There was a reference to GEAR
Looking at "examining alternatives to soldering, lead
23
wiping to repair PILC cables," that's lead cables.
24
experimenting and looking at heat-shrink type components
25
that are out on the market.
26
We're
"Continuity of cable crews by maintaining a good
27
apprenticeship program."
A lot has been said about our
28
trade school, one of which carries this trade and prepares
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this group of entrants in the organization, the underground
2
joiners and mechanics, for this type of work, and it
3
supports the apprenticeship that we do there, the internal
4
apprenticeship program that we have there.
5
The next bullet talks about "forensic program could be
6
part of an EPRI ECTN program."
7
to, EPRI is a research -- Electric Power Research
8
Institute, a company out of the States, that could do some
9
forensic analysis.
10
11
I think what he's referring
We have yet to explore that at this
point.
Again, I've mentioned it a couple of times.
The
12
better part of this year has been spent compiling these --
13
this filing and putting this information together.
14
one of those to-do items that we still have to explore.
15
This is
In the long term, there are a couple of items in there
16
that we have in the works: the development of electronic
17
failure reporting from the field, the development of in-
18
house statistical cable replacement model.
19
speaks to your point of testing, gathering data and
20
developing a model for projecting end of life or predicted
21
failures.
22
I think that
And then the diagnostic program: again, I don't think
23
we've done anything there, but we have that on the radar of
24
things to do.
25
MR. FAYE:
Thanks.
That was very, very helpful.
26
If I could just go quickly through them again, number
27
1 involves an IT system.
That's what this Ellipse system
28
is, and I think we'll talk about that when we get to the IT
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capital.
2
recommendation number 2, the lengths of cable.
3
like you're going to be able to extract that from this
4
automated mapping system called GEAR.
5
right?
6
There's some data-gathering going on for
MR. LABRICCIOSA:
It sounds
Did I get that
That's correct, and it's part of the
7
amalgamation.
8
and they work to varying degrees in terms of the type of
9
functionality they are provided.
10
We had six different systems come together,
So different levels of data and support came together,
11
and had to be merged together, and we have missing data in
12
some systems and good data in other systems, so it's not
13
complete across the city.
14
MR. FAYE:
I think you missed "restore the feasibility
15
of using EPR cables."
16
super-duper cable?
17
MR. LABRICCIOSA:
What are EPR cables?
Are they some
It's just a different compound of
18
dielectric, so it's still the same -- you know, they are
19
considered somewhat plastic cables like XLPE.
20
different technology of cable manufacturing that's used.
21
MR. FAYE:
It's just a
Do you think that this would make a
22
significant difference to your cable performance, using
23
this particular type?
24
MR. LABRICCIOSA:
We have not studied it, so it's hard
25
for me to tell.
I think in the materials I've read, I
26
would liken it to the advent of technology that we went
27
from lead cables to cross-linked cables.
28
out on which is really the best cable in the system.
The jury is still
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is another one of those leaps of technologies or
2
modernization.
3
the market, and so I think the jury is still out on whether
4
it's better, in terms of performance and longevity, than
5
cross-linked polyethylene.
6
MR. FAYE:
EPR is relatively new in terms of coming to
Okay.
The next one involves maintaining
7
the internal capability to actually handle cable, and you
8
say your apprenticeship program is addressing that.
9
The forensic program you haven't explored yet, but do
10
I hear you making a commitment to undertake some forensic
11
investigation of cables that have faulted, or components
12
that have faulted?
13
MR. LABRICCIOSA:
14
MR. FAYE:
We have to do that.
Yes.
(Reading)
15
"Possible higher failure rate in accessories with
16
jacketed extruded cables should be investigated
17
to see if it's a problem with cable crew
18
training."
19
Can you explain what that means?
20
MR. LABRICCIOSA:
I believe this point refers to some
21
problems we've had historically in the industry with
22
extruded jacketed cross-linked polyethylene cables, and the
23
workmanship in preparing the cables for terminations, as
24
well as installing them in the system.
25
instance, the workers cut too deep, cut back the insulation
26
too far, it created problems; so it was more of a
27
workmanship issue than it was a product issue.
28
And if, for
It was a newer product, which required a different
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skill set in training to handle, and so I think what he's
2
referring to is to ensure that we've crossed that point in
3
time, and I think we have.
4
5
MR. FAYE:
These cables are not the ones that we're
customarily talking about in your direct buried program?
6
MR. LABRICCIOSA:
7
MR. FAYE:
That's correct.
These are other ones, more modern cables,
8
and there was a small blip in failures there that caused
9
them to focus on this?
10
MR. LABRICCIOSA:
That's correct.
11
MR. FAYE:
You're going to develop an
Okay.
12
electronic reporting form; and automatic entry to the
13
database, joining EPRI and joining their cable asset
14
management program is not under consideration at the
15
present time?
16
MR. LABRICCIOSA:
I think that was a plug by John in
17
terms of putting a bit of a program forward that he
18
believes in personally, in trying to promote it.
19
haven't considered it or dismissed it, but we think it's
20
something we can push a little bit back in terms of
21
decision point.
22
MR. FAYE:
We
And the next one, "development of an in-
23
house statistical cable replacement model," is that along
24
the same lines?
EPRI's not noted there, but I wonder if --
25
MR. LABRICCIOSA:
I think, Mr. Densley does some work
26
with other utilities.
27
utilities that we interact with for exchange of best
28
practices and information, and I think he's referring to
Progress Energy is one of these
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some of the work they did in modelling their system, and
2
using their models to project failure rates or end of life
3
points in cables.
4
MR. FAYE:
And the last one, the diagnostic testing
5
program, what I think I heard you say was you haven't got
6
it yet but it's on the horizon, and you expect this to
7
yield some better data around cable condition?
8
9
MR. LABRICCIOSA:
Yes, and, again, I'm going to come
back to some of the points you raised earlier -- Mr.
10
Densley referring to part of his long-term strategy, or
11
long-term effort -- and again, given the situation we're in
12
today, yes, we do have to do this, but it does not solve
13
what we're facing today, with our Phase I of our ten-year
14
capital plan, which is the immediate replacement of cables
15
that are imminently failing out there.
16
MR. FAYE:
17
MR. LABRICCIOSA:
18
19
20
Can I turn you to page 33 of that report?
You will have to help me.
I don't
think my pages are marked on this one.
MR. FAYE:
You're right.
Oh, I'm sorry.
I had to mark my own.
This particular report does not have pages.
21
That would be -- how far back -- the conclusions page
22
that we were looking at is page 49, so you want to be back
23
about 16 pages from that.
24
MR. LABRICCIOSA:
25
MR. FAYE:
26
Cable life extension?
The top of that page has a square box.
The
first word in it says "accessible."
27
MR. LABRICCIOSA:
28
MR. FAYE:
Does it say accessories?
No, accessible, and then "risk of inducing
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damage to cable during tests that might cause failure."
2
MR. LABRICCIOSA:
3
MR. FAYE:
4
5
6
Okay.
So, in this section of his report, he's
talking about testing of cables.
In the paragraph just following that boxed comment on
sort of consequences of tests, he says:
7
”Partial discharge tests can be carried on-line
8
or off-line."
9
10
11
12
13
So that suggests that you can do this with the cable
alive.
Is that how I should understand that?
MR. LABRICCIOSA:
That would be the general sense of
that point, yes.
MR. FAYE:
And if we skip down to paragraph number 4:
14
"On-line testing does not require an outage,
15
although a utility crew is usually present during
16
the testing."
17
18
Do I take it that to mean that the cable can be tested
alive in that situation too?
19
MR. LABRICCIOSA:
20
MR. FAYE:
Yes.
Okay, and so you've mentioned previously
21
that not all the costs are in here.
22
typical cost per cable is 400, and you have to add to that
23
the cost of your standby crew here, because it's being
24
performed live; I understand that.
25
MR. LABRICCIOSA:
26
MR. FAYE:
27
MR. LABRICCIOSA:
28
He does say that the
Mm-hmm.
All right.
I just wanted to confirm that.
But I do think, if you read further
on, it's D.T. Proben is the company that has developed this
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technology.
2
MR. FAYE:
Yes.
3
MR. LABRICCIOSA:
And they were the only ones doing it
4
at the time, and I do believe other utilities have put
5
together materials that show that -- put it this way, that
6
draw a different conclusion on the reliability of that
7
test.
8
9
MR. FAYE:
The reliability of the test done on a live
cable as opposed to a dead cable?
10
MR. LABRICCIOSA:
Using this method; that's correct.
11
MR. FAYE:
I'll take your word on that.
12
If you could flip forward a few pages to page 43.
13
The caption at the top of the page is "Cable life extension
14
techniques."
15
16
Okay.
At the bottom, it looks to be the last two sentences
of that paragraph:
17
"Localized neutral corrosion can be repaired, but
18
general corrosion over a considerable length of
19
cable can become a safety concern, and the cable
20
should be replaced."
21
Previously, I asked you about the visual inspection,
22
and you've given evidence that someone could open up a
23
transformer and look at the cable where it's terminated on
24
the transformer, and from there you can see these
25
concentric neutral wires all grouped together and see if
26
they're corroded.
27
28
But you can't necessarily conclude from that, that
that corrosion is continuous down the cable, can you?
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MR. LABRICCIOSA:
2
MR. FAYE:
That's correct.
Are there conditions in that transformer
3
case that might cause corrosion in there and not cause
4
corrosion anywhere else?
5
MR. LABRICCIOSA:
6
MR. FAYE:
Could be situations like that, yes.
So I'm thinking of, in submersible vaults,
7
subject to road salt and runoff, same thing.
If a pad-
8
mount transformer is sitting right beside the road and a
9
salt truck is going along, throwing salt all over
10
everything, it gets ploughed up by the snowplough.
11
there are some situations that almost lend themselves to
12
corrosion inside your transformer cases, right?
13
MR. LABRICCIOSA:
So
I guess I would agree with you, but
14
I'd also agree with you that it's part of the conditions of
15
the whole environment.
16
it's exposed to that contaminant or that exposure within
17
the vault; it's exposed in the soil.
18
Everything, you know, everything; it affects the
19
installation, I would say, quite uniformly.
20
MR. FAYE:
So it's not only that, you know,
It's the runoff.
Yes, I would agree that there are other
21
factors, but I'm only trying to get at, in this case, that
22
if someone lifts the lid on a pad-mount transformer and
23
looks inside and sees corrosion on the neutral wire, is it
24
sensible to conclude, just from that visual inspection,
25
that that corrosion has somehow travelled down the cable
26
and undermined the neutral all along the cable?
27
28
MR. LABRICCIOSA:
It's possible.
I wouldn't say,
again, that -- unless you inspect the entire cable, it's
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inconclusive at that point, I would suspect.
2
trying to do is draw an analogy that if it is extensive, in
3
terms of exposure to the environment and age, given that
4
corrosion is oxidation, which is really exposure to
5
elements, that if part of the cable is extensively damaged,
6
it's likely damaged throughout.
7
MR. FAYE:
What we're
I think that was the purpose of that
8
question.
9
a transformer case and in submersible transformers are such
10
that you could get localized corrosion, simply because it's
11
exposed to salt from the road and other environmental
12
contaminants, and that the rest of the cable is buried.
13
It's underground three feet, and not subject to the same
14
exposure.
15
I think I heard you agree that conditions inside
MR. LABRICCIOSA:
But you also have to keep in mind,
16
Mr. Faye, that we also do maintenance on that equipment.
17
So it does see maintenance activities, cleaning, so on and
18
so forth, whereas the rest of the cable does not.
19
So there, you're right, there are other factors that
20
do come into play.
21
is around absolute certainty, then I'd have to agree with
22
you.
23
expose the whole thing.
24
You know, if your line of questioning
You cannot be absolutely certain until you actually
I think what we're trying to do is draw an inference
25
and some logical conclusions that lead you to believe,
26
given the age, the condition, and the environment that it's
27
installed in, that it would lead you to believe that it is
28
at a stage of life that is corroded and end of life.
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MR. FAYE:
Okay.
I take your point.
2
Moving on to the following page, at this point Mr.
3
Densley is talking about alternatives to replacing cables,
4
and I wonder if you could just give us your opinion on
5
these methods that he's suggesting here; that is, injection
6
of cables with a silicon compound.
7
viable technology from reading his paper, but I'm no
8
expert.
9
That appears to be a
What do you think of that?
MR. LABRICCIOSA:
If you're -- I'm going to assume
10
we'll disregard the PILC dialogue around heat-shrink and
11
the 3M- and Tyco-type sleeves that are used there and focus
12
on the last part of it, which is really around cross-linked
13
cable.
14
15
16
Is that okay with you?
MR. FAYE:
Yes, go ahead.
If I have any objections,
I'll note them.
MR. LABRICCIOSA:
We are exploring the use of cable
17
injection going forward right now.
18
with two different companies on a pilot basis to determine
19
the effectiveness of this type of rejuvenation.
20
In fact, we are working
This is not new technology to the industry.
We've
21
explored this in the past in our other companies, and there
22
are people inside our company who are familiar with it.
23
think they go back as far as 15 to 20 years in the
24
industry, in terms of cable injection.
25
I
What has changed from then to now is the workmanship
26
required to do the rejuvenation.
We are experimenting with
27
it right now to see if it's a better alternative, rather
28
than replacement at this stage.
We don't know enough about
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it at this point to draw a conclusive point or direction on
2
changing the capital program.
3
MR. FAYE:
Okay.
I understand, though, that you said
4
it's been around for 15 to 20 years, so it's not a new
5
technology.
6
those cables that were treated 20 years ago have lasted?
7
There's lots of data available on how long
MR. LABRICCIOSA:
Some have failed.
The conclusions
8
drawn in the past in those experiments by those companies -
9
- again, I'm only going by the reports, not firsthand
10
11
12
13
14
15
knowledge.
They dismissed the technology at that stage.
MR. FAYE:
I'm sorry, could you just repeat?
Why did
they dismiss the technology?
MR. LABRICCIOSA:
They've dismissed it in terms of
it's not cost-effective.
MR. FAYE:
Not cost-effective.
And yet in the middle
16
of the second-to-last paragraph, I see your consultant
17
says:
18
"Most utilities justify the use of rejuvenation
19
based on the 40 percent to 50 percent savings,
20
compared to replacing with a new cable, and that
21
they've had good experience with cables that have
22
been rejuvenated for at least 18 years."
23
24
25
Are you suggesting there is more current information
that would discount that conclusion he's drawing there?
MR. LABRICCIOSA:
No, I think what he's saying is
26
probably factual and correct, depending on the utility
27
applications and the conditions for which they have done
28
the work.
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I recall, again going back in time, Orange and
2
Rockland Utilities in the U.S. had experimented with this
3
technology, were very promoting of the technology at one
4
point, and no longer do this any more.
5
So again, given more information that comes to light,
6
each utility draws its own conclusions.
7
utilities do find it cost-effective, given whatever
8
situations they've based themselves in.
9
case, if I go back to our old companies, two utilities that
10
I think some
In our particular
did explore it, dismissed it.
11
MR. FAYE:
Okay.
12
MR. LABRICCIOSA:
But we are looking at it again to
13
see if it has changed and it would be cost-effective for us
14
to consider.
15
MR. FAYE:
I think in the context of such a huge
16
capital budget, any alternatives to trying to do that kind
17
of work in the time period you're predicting it can be done
18
in might be prudent; if they can be spread out over a
19
larger number of years by using some of these techniques,
20
that that might be a more satisfactory solution than
21
burdening your ratepayers all in the course of a few years.
22
Would you agree?
23
MR. LABRICCIOSA:
I think you have a very positive
24
statement in there, and I'll draw that statement into a
25
direction we're taking.
26
We have a problem right now.
The first three years
27
deals with cables that are at the end.
28
experimenting with these technologies to prepare for the
We are
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next phase, so that's really years 3 through 7, and as we
2
update our plan, we will fold these conclusions going
3
forward into that part of the plan.
4
In essence, we're sort of running in parallel here.
5
We can't afford to do this in sequence, determine whether
6
technology is mature and reliable enough today to use that
7
going forward, and then, if it doesn't, then do capital
8
rebuild.
9
We have to do our capital rebuild now, but we also
10
have to be mindful and keep our eye on evolving
11
technologies and revisit even older technologies that have
12
changed, to see if it still can be tapped into our program.
13
So I would see the results of this work folded into
14
years 4 through 10.
15
MR. FAYE:
Okay.
I think the last comment I'd like to
16
draw out on this report is the last paragraph, and it
17
suggests that there are some technical remedies, if you
18
will, that can be applied to limit the amount of damage
19
done, if I understand them correctly, when you do get a
20
fault or when you do get a lightning strike, that can
21
degrade the insulation and lead to earlier failures.
22
He mentions one, surge protection at both ends of the
23
cable circuit.
24
that means?
25
Can you just describe for the Panel what
MR. LABRICCIOSA:
I think what Mr. Densley's referring
26
to is, some utilities, especially in the States, have
27
higher occurrences or higher isochronic levels, higher
28
occurrences of lightning strikes.
Up here in Canada, our
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isochronic level is relatively low in contrast to, say,
2
Florida, so we have not explored this particular protection
3
scheme for us, at this stage, because we do not see a lot
4
of lightning strike-induced failures in our underground
5
cables, although he points out that it can protect your
6
cables going forward.
7
MR. FAYE:
All right.
8
I'd like to turn you now to Exhibit D1, T8, S10.
9
is your 2007-16 Electrical Distribution Capital Plan.
10
MR. LABRICCIOSA:
11
MR. FAYE:
12
13
Thanks for that.
This
Yes.
Got that turned up?
Could you look at page
8, under "Underground cable XLPE direct bury."
The number over in the right-hand column is 777.
And
14
if you then flip to page 12, a similar presentation; near
15
the bottom, "Underground direct cable buried."
16
number is 2321.
17
Panel why those numbers are different.
18
And the
I wonder if you could explain for the
MR. LABRICCIOSA:
The first table that you reference,
19
which is table 2, when we presented that table, we
20
presented it in circuit kilometres, so every circuit in the
21
system is mapped with -- it generally has three cables to a
22
circuit, although there are some circuits that could have
23
two or possibly one.
24
So it measures cable in circuit kilometres.
25
Table 5, which is your page 12 reference, identifies
26
cables by conductor kilometres, so in essence every
27
individual conductor is measured.
28
MR. FAYE:
Is your budget proposal founded on this
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2
3
number for underground direct buried?
MR. LABRICCIOSA:
It is founded on the conductor
kilometre.
4
MR. FAYE:
Conductor kilometre.
5
MR. LABRICCIOSA:
6
MR. FAYE:
That's exactly how we replace it.
And I heard in your explanation to the
7
Panel that cable systems can be three-phase, in which case
8
there are three conductors.
9
which case there are two, and they can be single-phase, in
10
which case there is one.
11
phase; right?
12
MR. LABRICCIOSA:
13
MR. FAYE:
They can be two-phase, in
There's none that can be four-
No, we don't use that.
So if I multiply three times 777, I get
14
very close to this number, 2361.
15
number is a little larger.
16
number in this chart is actually a little larger than you
17
would arrive at by assuming every circuit was three-phase.
18
But I think I've heard you say, not all circuits are three-
19
phase, and they're certainly not more than three-phase,
20
they're less.
21
Not exact; in fact, this
I actually get 2331, so the
And so I'd like to ask you why that hasn't been
22
factored in.
23
than factor in the number of two-phase and single-phase
24
circuits?
25
Why do you take such a large number, rather
MR. LABRICCIOSA:
It really is a function of the
26
accuracy of our underground records.
I talked earlier
27
about our GEAR systems, and there are legacy systems from
28
the six independent companies, so bringing them together,
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we're at a stage now where we're trying to become more
2
accurate with the information that we have.
3
4
It's a function of referencing two data points that we
have.
5
MR. FAYE:
Okay.
6
MR. LABRICCIOSA:
That would be the inaccuracies
7
between the two.
8
we have, you know, more cable in one system than we have in
9
the other; strictly inaccuracies between the systems we
10
11
We don't have the magical fourth phase or
use.
MR. FAYE:
Okay.
But would you agree that the
12
inaccuracy results in overstatement of the amount of cable
13
that really needs to be replaced?
14
--- Witness panel confers.
15
MR. LABRICCIOSA:
It's very hard to say over or under
16
at this point in time.
17
confident if it's not inaccurate by magnitudes of 10, it's
18
inaccurate in terms of the last kilometre or series of
19
kilometres, so if we said plus or minus 5 or 10 percent, I
20
think we'd be okay.
21
MR. FAYE:
Okay.
It is inaccurate.
But we feel
Well, it certainly can't be plus,
22
not based on the analysis -- if 777 is the correct number,
23
then the very maximum it could be is 2331, because you
24
multiply it by 3.
25
26
27
28
Would you agree it can't be more than 2331, unless the
777 number is wrong?
MR. LABRICCIOSA:
Again, I would say there is some
level of inaccuracy between the two.
It's not a strict
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2
multiplication by three to get one to the other.
MR. FAYE:
Right.
Yes, and I guess what I'm trying to
3
get at is sometimes it's a multiplication by one, and
4
sometimes by two, and sometimes by three, but never by
5
four?
6
MR. LABRICCIOSA:
7
MR. FAYE:
Right.
So the net result is, if you come up with
8
that number by multiplying by three, the inaccuracy is
9
overstated, not understated?
10
MR. LABRICCIOSA:
Well, again, it's data that's coming
11
from two systems.
12
just information we're extracting from both sides.
13
14
15
MR. FAYE:
We're not trying to equate them.
It's
All right, and you're relatively confident
that it's within 5 to 10 percent; did I hear you say that?
MR. LABRICCIOSA:
We haven't quantified the error,
16
but, again, our records shows there's cable exists out in
17
the system.
18
metres.
19
-- or 420; and, again, it's by route, as opposed to by
20
roadway.
When we go there, the system may say it's 400
When we go there, it might actually be 390, and so
21
Some utilities did not necessarily use a transit
22
system to mark the path of the cable, the direction or the
23
route of the cable.
24
kilometres and didn't necessarily reflect where the route
25
of the cable went, so that's where some of this error comes
26
from.
27
MR. FAYE:
28
Kinectrics report.
Others just went by, you know, roadway
Can I turn you back, then, to the
That's at D1, Tab 8, Schedule 9,
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2
Appendix "A".
I'd like you to look at page 7.
There's a chart
3
there, and the first two entries in the chart are
4
"underground feeder cable direct buried,"
5
distribution cable direct buried."
6
through the rest of the table, I don't find anything else
7
that says "direct buried."
8
if I add together the first two categories, if you look
9
under the "Population" column, if I add 300,000, and
10
1,188,000, I get 1,488,000 metres, or 1,488 kilometres.
Would you agree with that?
12
MR. LABRICCIOSA:
13
MR. FAYE:
15
And then if I look down
I see some stuff in "duct." But
11
14
"underground
Mm-hmm.
Could you explain why that number varies so
much from the 2361 number in the capital plan?
MR. LABRICCIOSA:
Again, I believe the answer to that
16
one would be circuit kilometres versus conductor
17
kilometres, whereas the work done in the ACA or the asset
18
condition assessment, was done in circuit kilometres --
19
circuit kilometres, correct -- and the work done in the
20
THESL ten-year capital plan is conductor kilometres.
21
22
23
So what you're seeing is the population in circuit
kilometres.
MR. FAYE:
So if we use the three-times rule, would
24
you then say that we're looking at a total population of
25
about 4.3 kilometres?
26
MR. LABRICCIOSA:
27
MR. FAYE:
28
Why would that be?
Three times 14 is 4.2, plus a bit?
Again, that's an approximation.
But it's double what you have in your plan.
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MR. LABRICCIOSA:
Again, when you look at it, again,
2
circuit kilometres, it's just one method of collecting
3
data.
4
or some delivery points are single conductors.
5
think you can do a strict multiplication of the two to get
6
the number.
7
8
9
10
11
As we mentioned before, some feeders are actually -I don't
I would say I would say conductor kilometres is the
more accurate figure, what we have in our plan.
MR. FAYE:
That you've arrived at by multiplying 777
by 3?
MR. LABRICCIOSA:
No, I didn't say that.
12
telling you, we extract data from two systems.
13
has conductor.
14
MR. FAYE:
Another has it in circuit.
I kept
One system
So --
Can I turn you, then, to a Staff report
15
that we've looked at previously, and I believe it's at R1,
16
Tab 3, Section 25, Appendix "A".
17
on direct buried cable.
18
MR. LABRICCIOSA:
19
MR. FAYE:
This is the study report
I'm looking at page 2.
Correct.
The second chart on that page appears to
20
list all of the different types of cable and how much of
21
them there is in the system, and it comes to, the bottom
22
number, 1,489.
23
number we've just seen in the Kinectrics report.
24
agree with that?
It seems to agree very closely with the
25
MR. LABRICCIOSA:
26
MR. FAYE:
27
MR. LABRICCIOSA:
28
Would you
The numbers do match.
Would you think that's coincidental?
No, sir, I don't know if that's
conductor kilometres or circuit kilometres.
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MR. FAYE:
No, I agree; it does not specify.
2
MR. LABRICCIOSA:
3
MR. FAYE:
Right.
I think the point I'd like to make is that
4
in one place your capital plan relies on one number, and
5
there's other evidence here that is radically different.
6
Whether it's conductor kilometres or circuit kilometres,
7
it's different by an order of 2.
8
9
I think there's some parts of that chart that would
indicate to you that it's single-phase, for instance
10
triplexed conductor.
That would be secondary, would it?
11
Or am I misunderstanding?
12
to triplexed or tree-retardant?
Is that -- does the "TR" refer
13
MR. LABRICCIOSA:
No, that's tree-retardant, sir.
14
MR. FAYE:
So there's no way of telling from
15
16
Okay.
this whether these lengths are conductor or circuit?
MR. LABRICCIOSA:
I would tend to believe -- and I'll
17
do it subject to check if you like -- that it would be
18
circuit kilometres.
19
that, you know, the data we presented here is inaccurate.
20
I think there are some inaccuracies, as I've mentioned, but
21
not to the point where they're double or triple, factors of
22
2 or 3, levels of inaccuracy.
23
I would take exception to your point
As I've pointed out before, the THESL capital plan,
24
conductor lengths in kilometres, reflect what we know about
25
the lengths of cable in our system today, and that's the
26
one we're using going forward.
27
28
The circuit kilometres in the ACA is data we submitted
to a third party, not necessarily coming from the same
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systems, as well as the report done by Mr. Khan, is again
2
an extrapolation from a different database.
3
We are confident, with the THESL capital plan in front
4
of you, D1, Tab 8, Schedule 10, that that is a best
5
reflection of what we know about the system today, with a
6
relatively high degree of accuracy that we're working with,
7
given our history.
8
MR. FAYE:
9
And it's arrived at by inspecting your
electronic maps of the system, and doing some sort of -- if
10
it was a physical map, you would have a little wheel that
11
measured things off, but on an electronic map, the
12
electronic equivalent?
13
MR. LABRICCIOSA:
Sure.
What we've done is, in the
14
process of converting our maps to one common platform, the
15
GEAR platform, which we have -- we are just finishing now
16
or have just recently completed, depending on how close we
17
are to the end of the year -- we're pretty much at the end
18
of it now.
19
accurate, based on that one system.
20
The information that we have now is more
MR. FAYE:
Okay.
And so what you have done is added
21
up -- had your computer add up everywhere where you know
22
there is cable, and so you have a route length.
23
you've made some assumptions to convert that into conductor
24
length.
25
MR. LABRICCIOSA:
26
MR. FAYE:
27
28
And then
Correct.
And what were the assumptions you made
there?
MR. LABRICCIOSA:
Again, when you say "assumptions",
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we've looked at the characteristics of the route being --
2
it's either three-phase or single-phase.
3
phase, it's one cable.
4
three-phase is there's three cables in there.
5
some cases where we have three-conductor cable, which is
6
really one conductor -- or three conductors, one piece of
7
cable.
8
9
If it's single-
I guess the assumption on the
There are
So maybe it's a complicated answer to the question.
I'm just not sure where you're going with that.
In that
10
case, we call that the replacement, when we put it in three
11
different ducts, which we would do in some cases.
12
call that length-three, because we have to replace it with
13
three pieces of conductor.
14
with one conductor again, or one run with three conductors
15
embedded into one jacket, and we'd call that one.
16
MR. FAYE:
Okay.
We would
In some cases we replace that
So I think, in summary, what I'm
17
hearing is, even though it was THESL that supplied
18
Kinectrics with the data that they used, you're not
19
confident in Kinectrics' 777-kilometre figure, right?
20
MR. LABRICCIOSA:
Again, I keep coming back to, it was
21
data we pulled out of a system that measured in circuit
22
kilometres, and that's the way they've handled it.
23
MR. FAYE:
And presumably someone, Mr. Khan, used the
24
same system and got this 1,489.
25
system, then, to come up with your 2,361?
26
MR. LABRICCIOSA:
Have you used some other
Again, when we look at 2,361, we're
27
referencing a common system platform from the GEAR system
28
and using that data.
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2
3
4
5
MR. FAYE:
And that data originated in six separate
systems?
MR. LABRICCIOSA:
Six separate systems, held by each
utility, prior to amalgamation.
MR. FAYE:
And so when you gave Kinectrics
6
information, did you go to those six systems and get it out
7
of there and then send it over to them?
8
9
MR. LABRICCIOSA:
that.
I'd have to go back and ask exactly how we pulled
10
that data together.
11
MR. FAYE:
12
But it would be a reasonable assumption
that --
13
MR. LABRICCIOSA:
14
MR. FAYE:
15
16
I can't really comment on how we did
Sure.
-- you wouldn't have missed one system.
You would have got all six.
MR. LABRICCIOSA:
Sure.
They'd have to go to some
17
level of system, whether it's actually hardwired -- or
18
hard-coded maps, mapping information, or the other system.
19
Some utilities did not have a geo-spatial type mapping
20
system.
21
where, in fact, the actual routes, cable routes, were held
22
in physical hard maps.
23
They just had a schematic-type mapping system,
MR. FAYE:
Okay.
Before we leave the Staff report
24
here, could you just take a look at the top of page 7?
25
think I've read you the first sentence here before, when we
26
were discussing the distance between transformers.
27
read it again:
28
I'll
"In a residential subdivision, a single-phase
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transformer, 50 to 167 kVA, feeds ten to 15
2
houses.
3
average of 400 metres.
4
houses, with 11-and-a-half-metre service from the
5
roadside, including the stretches along the road,
6
cables, there will be about 150 metres of
7
secondary spur cables off the primary cable route
8
along the roadside for every 400 metres of
9
primary cable."
10
11
12
Transformers are spaced between an
Assuming an average of 13
Do I understand that to mean that there's more primary
cable in a residential subdivision than secondary cable?
MR. LABRICCIOSA:
I'm not sure I can draw the same
13
conclusion as you.
I think that just sort of rep -- those
14
statements talk about the lengths of wire within a
15
subdivision that feed homes versus that feed the
16
transformers there.
17
MR. FAYE:
It seems to be fairly clear.
It says
18
here's 400 metres of cable between transformers if they're
19
400 metres apart.
20
sensible.
21
next transformer to make it connected.
That's primary, and that sounds
You would need the cable to actually reach the
22
MR. LABRICCIOSA:
23
MR. FAYE:
24
Mm-hmm.
And then it says there's 150 metres of
secondary.
25
MR. LABRICCIOSA:
26
MR. FAYE:
Mm-hmm.
But is that a sensible conclusion?
Is it
27
your experience that there's less secondary cable in a
28
subdivision than primary cable, typically?
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MR. LABRICCIOSA:
Again, it depends on the areas.
I'd
2
have to take a look at the 400-metres statement that we've
3
made there.
4
subdivisions I know.
5
frontages on that.
6
homes, if I look at it that way.
7
metres is correct.
8
MR. FAYE:
9
10
I mean, that seems very long, from the
Ten houses represent about 40-metre
So I think those are pretty exclusive
Okay.
So I'm not sure that 400
In general, would you agree with the
conclusion that there's usually more secondary cable than
there is primary cable?
11
MR. LABRICCIOSA:
12
that would be fair.
13
MR. FAYE:
I would say as a general statement,
I'd like to turn to the costs associated
14
with cable replacement, and while we're still on this
15
report, look back on page 6, and you'll see in that bottom
16
chart 1490 kilometres at $600, and I'm assuming that $600
17
is per metre.
18
million to do that replacement.
And he comes up with an estimate of $894
19
MR. LABRICCIOSA:
20
MR. FAYE:
21
Now, if we can go back to the Kinectrics report.
22
page 7, in that chart that we were looking at on conductor
23
lengths.
So, keeping in mind $600 per metre here.
On
"Underground feeder cable direct buried," 500.
24
MR. LABRICCIOSA:
25
MR. FAYE:
26
buried," 280.
27
it?
28
Mm-hmm.
Mm-hmm.
And "Underground distribution cable direct
These are, again, costs per metre, I take
MR. LABRICCIOSA:
Correct.
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MR. FAYE:
I'd like to take you to a schedule that we
2
looked at a little earlier, if I can find it here, and that
3
is an interrogatory from the Schools, Interrogatory No. 27.
4
It's Exhibit R1, Tab 5, Schedule 27.
5
MR. LABRICCIOSA:
6
MR. FAYE:
Have that turned up?
Yes, I do.
I refer you to the table on page 2 of that
7
interrogatory, the response, and looking at "three-phase
8
feeder" in the top box, the entire cost -- again, per
9
metre, I'm assuming -- is $500.
10
11
MR. LABRICCIOSA:
Would you agree with that?
In the first box, total unit cost,
the bottom left-hand corner?
12
MR. FAYE:
Yes.
13
MR. LABRICCIOSA:
14
MR. FAYE:
Correct.
And if I look at the bottom box,
15
"Distribution three-phase," comparable figure in 2006 is
16
$323.
17
like to suggest to you that the top box, 500, seems to
18
correspond very closely with the Kinectrics study that we
19
just looked at for the top entry in their table, 500 per
20
metre.
21
recall, and I'm comparing that to this 323.
22
if you could comment on why there would be such a
23
difference between those two numbers.
24
So per kilometre, that would be 323,000, and I'd
But the second entry in their table was 280, if I
MR. LABRICCIOSA:
And I wonder
I would suggest to you, sir, that
25
the table that's concluded in the interrogatory is the more
26
accurate.
27
vehicle.
28
It has the breakout of material, labour,
MR. FAYE:
Well, while we're on these tables, could
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you tell us what is in the other category in each of those
2
breakdowns?
3
MR. LABRICCIOSA:
Could be a variety of costs outside
4
of material, labour, and vehicle.
5
costs.
6
7
MR. FAYE:
One could be contractor
Could that be the cost of a civil
contractor to put in a reinforced duct bank?
8
MR. LABRICCIOSA:
9
MR. FAYE:
Yes.
Okay.
10
MR. LABRICCIOSA:
11
just a direct buried duct.
12
MR. FAYE:
Okay.
Could also be the cost of pulling in
Thank you.
Would there be
13
significant costs other than that cost?
14
any?
15
MR. LABRICCIOSA:
Can you think of
It could also include restoration,
16
depending on the extensiveness of the restoration involved
17
in the neighbourhood.
18
MR. FAYE:
Can I conclude from this that, looking at
19
these figures, 0.250, compared to the total, it's about 50
20
percent.
21
220, it's about 50 percent.
22
box, 0.162 is about half of 0.323.
The next box down in "Other," 110, compared to
And similarly, in the third
23
So 50 percent of the costs is in the other category,
24
and is it fair to assume that most of that is civil work,
25
concrete encasing and that kind of thing?
26
27
28
MR. LABRICCIOSA:
I would say it's a fair assumption
at this stage, at the high level.
MR. FAYE:
Then can we turn to some of the other
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alternatives, then, one of which you just mentioned, a
2
direct buried duct.
3
If there's significant costs in reinforced concrete
4
structures, do you gain some measure of reliability and
5
protection for your cable and save some money if you don't
6
put the concrete in?
7
know, put the sand on top of it, how does that compare with
8
a reinforced concrete structure?
9
MR. LABRICCIOSA:
If you just put in a duct and, you
Well, obviously the concrete
10
encasement provides, I guess, the mechanical protection of
11
the cable, probably the ultimate mechanical protection in
12
cable, in contrast to cable and duct, and in contrast to
13
direct buried cable.
14
MR. FAYE:
Okay.
So if, for instance, you're going to
15
cross a road, and you have buses down there and heavy
16
traffic, as, you know, forcing frost down, I think I would
17
agree with you that there's some sense in building
18
reinforced concrete structures.
19
residential subdivision, where you're in the front lawn of
20
customers and you're crossing underneath their driveways,
21
well, that's about the worst exposure you're getting.
22
wondering why you would go to the extent of putting in a
23
reinforced concrete structure in that case, why you
24
wouldn't just butt a direct buried duct system in there.
25
MR. LABRICCIOSA:
But I'm wondering, in a
I'm
Again, we wouldn't necessarily put a
26
reinforced concrete system underneath a driveway, per se.
27
In some cases, depending on the nature of the subdivision,
28
regarding the requirements of occupying the boulevard
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allowance and what the City mandates in terms of the place
2
where we have to comply in terms of their road allowance.
3
In some cases we're forced to put in a concrete-encased or
4
an unshrinkable fill environment, or some specifications
5
that require stronger mechanical protection other than
6
direct buried duct or direct buried cables.
7
So in some cases, we have no choice.
In other cases,
8
we do have a choice, and when it comes to that choice, I
9
guess it's a judgment on our part, depending on, again, a
10
lifecycle analysis.
11
instance, if a cable fails in a duct bank, you pull that
12
section of cable out.
13
know, maybe you could just replace a section at a time.
14
When you look at a duct bank, for
You alluded to that earlier; you
A duct bank will allow you to do that and will house
15
maybe three generations of cable, as opposed to one.
16
are the kinds of aspects we consider whenever we look at an
17
area, a replacement in an area in an underground
18
subdivision.
19
Those
So I wouldn't say definitely every case calls for a
20
concrete encasement.
21
depending on the situation, we would use that or we would
22
use the alternative, which would be direct buried duct.
23
MR. FAYE:
I would say we'd consider it, and
Of the projects that you have listed in the
24
binders here, have you customarily used direct buried duct
25
in residential subdivision applications?
26
27
28
MR. LABRICCIOSA:
I believe in some of those projects
they are direct buried duct.
MR. FAYE:
Okay.
Thank you.
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I think I heard you mention in one of the intervenors'
2
questions that the method you propose to employ in
3
reconstructing a subdivision is to go to the other side of
4
the street from where a cable system currently exists,
5
prepare a whole new system and then abandon the old.
6
Could you elaborate on the logic of that?
7
MR. LABRICCIOSA:
8
behind that decision.
9
existing neighbourhood that is energized.
There really are two main thrusts
One is, again, we have to work in an
Generally, if
10
you're working a greenfield space, you're able to go in
11
there, slice away at the boulevard allowance, install your
12
equipment while the houses are being developed, and no
13
one's relying on power.
14
When you're into the second generation, which is what
15
we're facing here, people live there.
16
is to leave them energized while you're building the
17
replacement system and allow you to only reserve the outage
18
for the end when you're transferring the connection to the
19
new -- from the old asset to the new asset.
20
So that the choice
The second thrust is really the congestion in the
21
boulevard space.
22
elaborate boulevard allowances that the cities were used to
23
have been shrunk.
24
So as time has moved on, the maybe more
And so going in to replace an asset that has no
25
boulevard allowance on the one side, because you're already
26
occupying that space, requires us to go on the other side.
27
And in fact, it actually secures our space in the future
28
for future rebuilds.
So now we basically have an allowance
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2
3
on both sides of the street.
MR. FAYE:
Okay.
side of the street right now?
4
MR. LABRICCIOSA:
5
MR. FAYE:
6
MR. LABRICCIOSA:
There's no gas main or --
Could be.
-- water main sort of thing?
7
subdivisions have gas.
8
and Bell.
9
the other side.
10
And there's nothing on the other
Could be.
Obviously, you know, some
All of them, I suspect, have water
So, you know, they could be on one side or on
MR. FAYE:
And of course, if your primary system is
11
currently on one side of the street, the houses on the
12
other side, the secondaries have to cross the street, so
13
they're over there as well.
14
MR. LABRICCIOSA:
15
MR. FAYE:
You got it.
I'm wondering, if indeed that's a good way
16
to go about it, to build on the other side of the street,
17
why do you need to replace all the secondaries?
18
back up.
19
Are you replacing all the secondaries?
20
MR. LABRICCIOSA:
21
MR. FAYE:
22
the primary cable?
23
No.
You're not.
MR. LABRICCIOSA:
Maybe I'll
So your projects just replace
There's a combination in some,
24
depending on how bad and deteriorated the secondaries are,
25
dictated by the number of cable failures on the secondary
26
systems feeding the homes.
27
will replace the secondaries.
28
MR. FAYE:
If it warrants replacement, we
But would you agree that it's a fairly
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simple matter to replace a secondary the day it burns off,
2
and it only takes one customer out, right?
3
MR. LABRICCIOSA:
Much simpler when, again, if it's in
4
a ducted system and, you know, in contrast to primary
5
cable, it's much simpler to replace.
6
MR. FAYE:
Did I just hear you say you're going to put
7
your secondaries in duct?
8
MR. LABRICCIOSA:
9
10
11
Some do, and if we're replacing an
area that does have secondary in duct, and they're bad
cables, we will replace them.
MR. FAYE:
But in the case of replacing primary, you
12
could just splice on to the existing secondaries' tails and
13
re-energize them and not have to dig up or tunnel up to a
14
person's meter base, right?
15
MR. LABRICCIOSA:
That's correct.
16
MR. FAYE:
And you are planning to do that sort
Okay.
17
of thing in your projects?
18
MR. LABRICCIOSA:
19
MR. FAYE:
20
MR. LABRICCIOSA:
21
22
Yes, in some of the projects, yes.
Would you say a majority of the projects?
It's hard to tell without digging
into the details at this point.
MR. FAYE:
But I think I heard you say that in the
23
situations where you're going to replace the secondaries,
24
you would have a history of burn-offs on secondaries that
25
would justify doing that.
26
cavalier decision?
It wouldn't be sort of a
27
MR. LABRICCIOSA:
That's correct.
28
MR. FAYE:
Thank you.
Okay.
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2
3
I'm going to move a little faster here, because I
think we don't want to beat this to death.
I think before we leave this direct buried subject, I
4
would just like to turn you just to a couple of the
5
projects.
6
a couple of them.
7
I'm not going to go through every one, but just
And if you could turn up Exhibit D1, Tab 8, Schedule
8
8.1, page 1 of 130, and again, I'm not going to go through
9
130 pages here, so we'll finish quickly.
10
Ready to go?
11
MR. LABRICCIOSA:
Yes.
12
MR. FAYE:
The first entry on that first page
Okay.
13
is EO7316 project number.
14
MR. LABRICCIOSA:
15
MR. FAYE:
Correct.
And have I read somewhere in the evidence
16
that this particular project has been deferred to 2011
17
because of something called a city moratorium?
18
ring a bell?
19
MR. LABRICCIOSA:
Well, there are projects that that
20
occurs.
21
read it in there, I will --
I don't know this one in particular, but if you've
22
MR. FAYE:
23
MR. LABRICCIOSA:
24
MR. FAYE:
25
Well, subject to check, subject to check.
Correct.
I've made myself a note as I was reading
the evidence.
26
MR. LABRICCIOSA:
27
MR. FAYE:
28
Does that
Correct.
And I'm wondering, what's a city
moratorium, and how does it apply to your business?
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MR. LABRICCIOSA:
It's a good point that you raise.
2
You know, not only do we have to develop a program that
3
deals with the conditions of our assets, we also have to
4
execute these programs in the environment that we find
5
ourselves in.
6
So in this particular case, with the example you
7
raised, the City has -- must have gone through that area
8
and rebuilt the roads and the boulevards and, you know,
9
repaved the streets, done the sidewalks.
And so they have
10
a moratorium on road cuts and construction work on that
11
street.
12
So while we have a project that requires work to be
13
done, we basically have to coordinate with the City and
14
convince them that they should lift that moratorium for us
15
on that street.
16
special process we have to follow to actually get that work
17
done.
18
19
MR. FAYE:
On some occasions they do, but it's a
But if they won't lift the moratorium,
you're pretty much stuck with waiting until 2011?
20
MR. LABRICCIOSA:
21
MR. FAYE:
Correct.
And if this project has been prioritized in
22
your asset analysis to be done in 2008, I have to assume
23
that this is a more urgent project than some that are
24
coming in 2009, right?
25
MR. LABRICCIOSA:
26
MR. FAYE:
That's correct.
How do you propose to cope with an urgent
27
replacement required and you can't do it for four or five
28
years?
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MR. LABRICCIOSA:
Well, generally what we would do is
2
invite those people that say we can't go to do this work to
3
one of the town-hall meetings where people are complaining
4
about reliability.
5
have to get this work done.
6
MR. FAYE:
They tend to get the message that we
Okay.
So there's some possibility that if
7
you've got an urgent priority, that the City is going to
8
give you some relief?
9
MR. LABRICCIOSA:
Yes.
MR. FAYE:
Can you flip then to page 35?
10
Okay.
And
11
here's another chart.
12
projects".
13
involve St. Clair Avenue.
14
got about $4.5-million in projects on this list that refer
15
to St. Clair.
16
This is "underground rehab
And I'm looking particularly at those that
I'm just adding quickly -- I've
What I'd like to ask you is, why are you burying the
17
conductor on St. Clair?
18
it is, why are you burying it?
19
MR. LABRICCIOSA:
Is it on poles right now?
And if
In answer to your question, yes, it
20
was an overhead location, and the reason for burying it is
21
the work of the TTC to reconstruct their transit line along
22
St. Clair, their bus route or streetcar line along St.
23
Clair, required the road to be widened, and in order to
24
widen the road, we had to relocate our plant, and given the
25
movement of the relocation, we either required the poles to
26
be in front of people's buildings or underground.
27
28
MR. FAYE:
And is the widening symmetrical on both
sides, or is it widened on one side and not the other?
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MR. LABRICCIOSA:
It could be on both, depending on
2
the run.
3
to, I think, Gunn's Road in the west end.
4
I mean, that run is extensive from Yonge Street
MR. FAYE:
All right.
Thanks.
I won't belabour it.
5
I was just curious as to why that kind of money had to go
6
into a project like that.
7
And could you just comment on who pays?
8
MR. LABRICCIOSA:
9
MR. FAYE:
I'm sorry?
Excuse me.
Could you comment on who pays
10
for that kind of project where you're being forced to do
11
it?
12
you, you have to do it?
13
You would rather not, maybe, but someone is telling
MR. LABRICCIOSA:
I'm going to reference you, in terms
14
of the -- the economic contribution or the financial
15
contributions to projects like that, to the Public Service
16
Works on Highways Act, R.S.O. 1990, Chapter 49, which
17
dictates the formulaic expression used by each party to
18
determine who pays for what.
19
MR. FAYE:
Who does pay?
20
MR. LABRICCIOSA:
Well, Toronto Hydro has a financial
21
obligation to pay in that road-widening, to move its work.
22
And the City does pay its contribution for the work that
23
they drive as well.
24
MR. FAYE:
All right.
And that contribution in round
25
figures or percentages, can you give the Panel an idea of
26
how much that is?
27
28
MR. LABRICCIOSA:
It generally comes out to 50 percent
contribution.
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MR. FAYE:
Fifty percent.
And is that figure
2
reflected as some sort of an offset to the project costs in
3
the evidence?
4
MR. LABRICCIOSA:
It's a capital contribution, yes.
5
MR. FAYE:
Good.
6
Can I turn you to page 83?
7
MR. LABRICCIOSA:
8
MR. FAYE:
9
10
Okay.
Yes.
There was an IR on this, and I'll just
mention it so that the Panel understands.
Two projects that appear to be identical here, both
11
the same amount of money, and if you look at the write-up,
12
about the same number of switches, are actually two
13
separate projects of the same quantity of switches in two
14
parties of their system.
15
They're not a duplicate.
16
That's why they're identical.
But what I'm interested in is EO8232, equipment
17
nomenclature enhancement east.
18
is, what is that?
19
MR. LABRICCIOSA:
I guess my first question
The nomenclature project stems from
20
work that we're carrying on as part of our amalgamation.
21
You can appreciate each of the six utilities labelled their
22
equipment using a labelling system or a nomenclature system
23
unique to their own areas.
24
Given the fact that we've amalgamated, we have
25
undertaken a project to basically standardize the
26
nomenclature.
27
consistency in our organization.
28
This is really driven by safety and
You have to eliminate the possibilities of duplicate
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nomenclature as part of the amalgamation, and you also have
2
to come back to a homogeneous methodology of labelling your
3
equipment, so there is no confusion as to when someone goes
4
out to switch a system or isolate a piece of cable, that
5
there is no confusion of how you label it and where you
6
apply your protection.
7
MR. FAYE:
8
My question, I guess, is, in the context of cables
9
Okay.
Thanks.
A very good explanation.
that are failing, customers that are out of service, where
10
does this one fit in the priority order of that sort of
11
thing?
12
Is this a really urgent sort of project?
MR. LABRICCIOSA:
The priority is high enough that it
13
belongs in the first part of this rate filing.
14
have the assessment right in front of me that tells you, in
15
a hierarchical sense, relative to the project above and
16
below it, where.
17
MR. FAYE:
I don't
But the consequence of not doing it, if I
18
understand you, are people might open the wrong switch and
19
interrupt customers that shouldn't have been interrupted.
20
That's the sort of mistake that can occur?
21
MR. LABRICCIOSA:
22
MR. FAYE:
That's correct.
And if you would just like to remind me,
23
when did Toronto Hydro and the other municipalities
24
amalgamate?
25
MR. LABRICCIOSA:
26
MS. DAVIDSON:
27
MR. FAYE:
28
November of 1988, I believe -- 1998.
1998.
So we're closing in on ten years.
You've
been living with this separate sort of nomenclature, maybe
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conflicting nomenclature, and if the Board, for instance,
2
just said, "Well, we can't give you the money you're
3
looking for," is this the kind of project that you would
4
scale back or defer?
5
MR. LABRICCIOSA:
Again, without knowing where it sits
6
relative to the projects above and below it, I can't really
7
comment on is this one I would scale back or not.
8
have to analyze that.
9
We'd
But I will maybe make a comment to your point around,
10
you know, it's almost ten years after the fact.
I just
11
mentioned to you that we're just completing our
12
amalgamation of information systems, from a mapping
13
perspective.
14
nicely in a sense that we have to standardize on one
15
methodology to label everything, and that took a while to
16
sort through, as well as the systems and all the pieces of
17
data that go with it.
This project ties into that project quite
18
So, you know, while it may seem a bit late or lax in
19
terms of getting this done, there was a sequence in order
20
to get to this stage where we're at.
21
it's not important, it's not that we let it go.
22
had to go ahead of it, before we can get to this stage.
23
24
MR. FAYE:
And it's not that
Other work
If I could flip you, then, to page
106.
25
MR. LABRICCIOSA:
26
MR. FAYE:
Yes.
This project, number 08144, is to replace
27
50 network transformers, at an estimated cost of $5-
28
million.
If I divide one by the other, it seems to me each
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one of those network transformers on average would cost
2
$100,000 to replace.
3
MR. LABRICCIOSA:
4
MR. FAYE:
That's correct.
If I could turn you back for a moment to
5
the Kinectrics report, page 7, in the middle of that table
6
I see network transformers, protectors, 85,000 each.
7
MR. LABRICCIOSA:
8
MR. FAYE:
9
Yes.
So there's a possibly 15 to 17 percent
variance between the Kinectrics estimates and the estimate
10
that's gone to make up this $5-million figure.
11
comment on why this would be 15 percent more?
12
MR. LABRICCIOSA:
Could you
In some cases the replacement
13
requires rewiring of the vault.
It also may require some
14
civil work inside the vault.
15
forward, that it's convenient while you have the outage or
16
while you're working in that vault to take on those repairs
17
while you're there.
18
MR. FAYE:
So what we found, going
Were you saying that in estimating this
19
project, and all of this projects for that matter, that you
20
have a detailed estimate sheet for each one of these?
21
isn't just a sort of rule of thumb estimate?
22
23
MR. LABRICCIOSA:
MR. FAYE:
25
MR. LABRICCIOSA:
26
There is an actual estimate for this
particular project, yes.
24
Someone would have gone out -There's a location, it tells you
where it is, what work you're doing.
27
MR. FAYE:
28
MR. LABRICCIOSA:
It
Very good.
The fact that we put it in this
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portfolio and aggregate it like this just tells you that,
2
you know, we've looked at it as a portfolio, but there are
3
locations for these.
4
the filing that shows you where they're at.
5
MR. FAYE:
I think there's a map somewhere in
And if you went directly to the project
6
file, you would find detailed estimate sheets in there that
7
says it's going to take so much manpower, so much material?
8
MR. LABRICCIOSA:
9
MR. FAYE:
That's correct.
Someone's gone to that trouble?
10
MR. LABRICCIOSA:
Yes.
11
MR. FAYE:
And while we're still on the
Good.
12
Kinectrics table, could you look at note number 6, at the
13
bottom of that table:
14
"Replacement costs provided may be maximum values
15
rather than average values."
16
I'm wondering if you could comment on that.
17
MR. LABRICCIOSA:
I think in some cases, like
18
stations, buildings, when you look at that figure, it is an
19
estimate, and it's probably a high ballpark estimate in
20
that whole table.
21
22
23
MR. FAYE:
So it doesn't mean that all of these unit
prices are the maximum unit prices you ever incurred?
MR. LABRICCIOSA:
No.
When you look at things like
24
stations, buildings, we don't repair those things every
25
year.
26
every year.
27
rough cut at something like that.
28
We don’t replace station buildings or build them
It's very infrequent.
So we might have take a
Of course, something like the network protectors, we
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do that every year.
2
costs.
3
4
5
6
7
8
9
10
11
MR. FAYE:
I'm fairly certain of some of those
And while we're still on this statement,
can we look at underground ATS switches?
MR. LABRICCIOSA:
What are they?
Underground automatic transfer
switches.
MR. FAYE:
Okay.
And they are on your network, and it
looks like they cost $19,428 to replace.
MR. LABRICCIOSA:
That's a number that's in the ACA;
that is correct.
MR. FAYE:
Could you turn to page 108?
This is a
12
project number NO8148.
13
automatic transfer switches, but the estimate is 654,000.
14
I wonder if you could explain why, if each one only costs
15
20, how we would get to 654 for five of them.
16
MR. LABRICCIOSA:
It appears to be to replace five
In this particular case, they're
17
replacing the ATSs using stand-alone protector
18
configuration, so it's changing the design.
19
one for one replacement, it's an actual reconfiguration of
20
that arrangement.
21
22
MR. FAYE:
So it's not a
And the actual unit itself, is it a
comparable unit to an automatic transfer switch?
23
MR. LABRICCIOSA:
24
R. FAYE:
No, it isn't.
Could you describe the difference?
Without
25
getting into too many technicalities, why would it be such
26
a more expensive unit?
27
28
MR. LABRICCIOSA:
I'm going to give it a shot at
trying to stay high enough that it makes sense but doesn't
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2
diminish the answer.
When you look at ATSs, they are really primary
3
switches.
4
really secondary devices.
5
system from a selective primary arrangement into a
6
secondary type arrangement.
7
equipment, a different-rated component.
8
9
When you look at stand-alone protectors, they're
MR. FAYE:
Okay.
So we're reconfiguring that
So they're a different-rated
I think that's all I have on the
direct buried section.
And I certainly don't have near as
10
much on the next section, so we'll move along.
11
how far we can get.
12
MR. SOMMERVILLE:
We'll see
If you're not going to complete the
13
section, I think we're better to take it up on Monday
14
morning, rather than break it somewhere in the middle.
15
16
MR. FAYE:
I think I can complete the section on
underground rehabilitation.
17
MR. SOMMERVILLE:
18
MR. FAYE:
It's not nearly as detailed.
Okay.
So we're turning back now to our road-map
19
sheet here, and that is D1, Tab 7, Schedule 1, page 10.
20
That's our summary of capital.
21
down is "underground rehabilitation."
And the second category
22
And as I understand it, the distinction between this
23
and the category we've just spent so much time on is that
24
this stuff is all in duct work already.
25
MR. LABRICCIOSA:
26
MR. FAYE:
That's correct.
Am I right there?
Okay.
Looking at the
27
PILC -- that's paper-insulated, lead-covered, I think is
28
the correct terminology?
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MR. LABRICCIOSA:
2
MR. FAYE:
That's correct.
The replacement criteria appears to be
3
based on the number of failures per unit length of
4
installation and the age of the cable circuit.
5
accurate understanding?
6
MR. LABRICCIOSA:
Is that an
I don't know where you are drawing
7
that conclusion from, but I would say that's one of the
8
factors.
9
Another could be leaking cables, leaking splices.
MR. FAYE:
So you might have data on how many breaks
10
you have in the lead cover that's letting out some of the
11
insulating oil; is that --
12
MR. LABRICCIOSA:
That's correct.
13
MR. FAYE:
But in general, once again, in the
Okay.
14
same context as the direct buried, it seems that most of
15
the information is age-related, and the number of failures
16
per unit is what we're relying on, on these ones.
17
a fairly accurate statement?
Is that
18
MR. LABRICCIOSA:
Yes.
19
MR. FAYE:
So all of our discussion around
Okay.
20
diagnostic testing, forensic testing of cables, would apply
21
to the PILC as well, would it?
22
MR. LABRICCIOSA:
It is a different type of cable than
23
cross-linked, so it's not identical, but the same sort of
24
theories apply.
25
MR. FAYE:
All right.
We seem to have established
26
that most of this cable was in duct work.
27
buried cable.
28
MR. LABRICCIOSA:
It's not direct
That's correct.
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MR. FAYE:
Is it reasonable, then, that this could be
2
replaced in sections, rather than the wholesale replacement
3
of an entire circuit?
4
MR. LABRICCIOSA:
It is very reasonable, only when,
5
again, a section of cable is bad, you can actually break it
6
down and replace it.
7
MR. FAYE:
And in order to understand whether that
8
section is good or bad, we sort of have to go to diagnostic
9
testing; is that right?
10
MR. LABRICCIOSA:
Or inspect it again.
If the whole
11
cable section is leaking from the start of the feeder to
12
the end, different parts and pieces along the way, we're
13
likely to replace it.
14
MR. FAYE:
Okay.
There's various references in the
15
evidence to this statement that it's always cheaper to
16
repair than replace, as long as there's some -- there's no
17
real reliability concerns.
18
about right?
19
20
21
22
MR. LABRICCIOSA:
MR. FAYE:
It's mentioned in the Kinectrics study.
It's mentioned in your own capital -MR. LABRICCIOSA:
24
MR. FAYE:
25
MR. LABRICCIOSA:
27
28
I'm not sure where you're
referencing that statement, but --
23
26
Have I got that summarized
In general.
Subject to check.
Sure.
If you can repair it, we
will.
MR. FAYE:
And one of the recommendations, I think,
from the density report, was that rather than wiping more
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lead and solder into these cracks in the cable, that there
2
might be other technologies, and you've referred to them as
3
heat-shrink.
4
MR. LABRICCIOSA:
5
MR. FAYE:
That's correct.
So it is practical to withdraw a section of
6
your lead-covered cable from the duct, put a heat-shrink
7
patch on it, more like something like patching a bicycle
8
tire, I imagine, and then pulling it back in again?
9
MR. LABRICCIOSA:
I don't think we would necessarily
10
pull it out and push it back in.
11
is, inside a chamber, cable chamber, you know, if we saw a
12
leaking section of cable or a leaking splice, again, as a
13
temporary means to keep the cable in service and prolong
14
its life, we would put heat-shrink over top of it, as you
15
say, patch it like a bicycle tire in that respect.
16
MR. FAYE:
Okay.
I think what we would do
And so I gather from that that most
17
of the problems that you can identify happen in these
18
splice chambers, where you can actually see the thing?
19
MR. LABRICCIOSA:
Yes.
20
MR. FAYE:
21
MR. LABRICCIOSA:
No.
22
MR. FAYE:
Good.
Not halfway down this duct.
Okay.
I'm going make you a quote
23
out of the Kinectrics report, and ask you to take it
24
subject to check.
25
here.
I think I've transposed it properly
It's from page 27.
And Kinectrics says:
26
"It is important to distinguish between
27
condition-related and non-condition-related cable
28
failures."
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And they mention third-party damage to your system is
2
one of these things that is non-condition.
3
you have statistics, both on direct buried and on cable and
4
duct, how many times does a third party damage your system?
5
MR. LABRICCIOSA:
We do keep data.
And I wonder if
I just don't have
6
it handy in front of me, in terms of how many external
7
parties interfere with our equipment, dig-ins or damages to
8
our cable.
9
MR. FAYE:
Do you have a sense of, in percentage
10
terms, percent of failures that would be caused by third-
11
party damage?
12
MR. LABRICCIOSA:
I don't.
It's -- it's relatively
13
small, in contrast to the number of condition-based
14
failures.
15
MR. FAYE:
If we took, though, all of the non-
16
condition-related things, and then we tossed into that
17
bucket as well all of the accessory failures, splices,
18
elbows, things of that nature that cause you to have a
19
customer outage, of course, but don't necessarily cause the
20
cable to be evaluated as failed, throw all those into it,
21
and again, as a percentage of your outages, do you have a
22
feel for how many of those there would be as compared to
23
true cable faults as a result of water getting in or
24
whatever, corrosion?
25
MR. LABRICCIOSA:
I would say condition of the cable
26
is a predominant failure-mode.
The other elements are all
27
less than that.
28
actually have all of the numbers in front of me, so it's
I don't -- you have to excuse me.
ASAP Reporting Services Inc.
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I don't
173
1
pretty hard for me to focus in on any particular number.
2
know that the condition is the predominant mechanism of
3
failure.
4
MR. FAYE:
5
latitude.
6
on that on.
But you would agree there's a wide band of
You could go everywhere from 51 percent upwards
So it could be half of them?
7
MR. LABRICCIOSA:
8
MR. FAYE:
9
10
11
12
13
14
15
I would agree.
And the other half could be accessories and
dig-ins and other third-party damage.
It could be as bad
as that.
MR. LABRICCIOSA:
I agree.
It could vary.
I don't
think it's quite as bad.
MR. FAYE:
Okay.
I think that's all my questions on
that category, and the next category we can start next day.
MR. SOMMERVILLE:
Thank you very much.
Thank you very
16
much, panel.
17
little bit left for Monday morning, just to start the week
18
off right.
19
I
It's been a long day for you, and there's a
We'll adjourn now, to resume on Monday morning at
20
9:30.
We'll conclude with this panel on Monday, and then
21
start panel 7.
And --
22
MR. RODGER:
Panel 5.
23
MR. SOMMERVILLE:
I beg your pardon, panel 5, dealing
24
with OMA&G, except for the shared services and compensation
25
issues.
26
27
28
Are there any matters before we close today?
Thank
you very much.
--- Whereupon the hearing adjourned at 4:46 p.m.
ASAP Reporting Services Inc.
(613) 564-2727
(416) 861-8720