5637 1 MANITOBA CLEAN ENVIRONMENT COMMISSION 2 3 VERBATIM TRANSCRIPT 4 Volume 24 5 6 Including List of Participants 7 8 9 10 Hearing 11 12 Wuskwatim Generation and Transmission Project 13 14 Presiding: 15 Gerard Lecuyer, Chair 16 Kathi Kinew 17 Harvey Nepinak 18 Robert Mayer 19 Terry Sargeant 20 21 Thursday, May 13, 2004 22 Radisson Hotel 23 288 Portage Avenue 24 Winnipeg, Manitoba 25 5638 1 LIST OF PARTICIPANTS 2 3 Clean Environment Commission: 4 Gerard Lecuyer Chairman 5 Terry Sargeant Member 6 Harvey Nepinak Member 7 Kathi Avery Kinew Member 8 Doug Abra Counsel to Commission 9 Rory Grewar Staff 10 CEC Advisors: 11 Mel Falk 12 Dave Farlinger 13 Jack Scriven 14 Jim Sandison 15 Jean McClellan 16 Brent McLean 17 Kyla Gibson 18 19 Nisichawayasihk Cree Nation: 20 Chief Jerry Primrose 21 Elvis Thomas 22 Campbell MacInnes 23 Valerie Matthews Lemieux 24 25 LIST OF PARTICIPANTS 5639 1 2 Manitoba Conservation: 3 Larry Strachan 4 Trent Hreno 5 6 Manitoba Hydro/NCN: 7 Doug Bedford, Counsel 8 Bob Adkins, Counsel 9 Marvin Shaffer 10 Ed Wojczynski 11 Ken Adams 12 Carolyn Wray 13 Ron Mazur 14 Lloyd Kuczek 15 Cam Osler 16 Stuart Davies 17 David Hicks 18 George Rempel 19 David Cormie 20 Alex Fleming 21 Marvin Shaffer 22 Blair McMahon 23 24 25 5640 1 LIST OF PARTICIPANTS 2 3 TREE/RCM 4 Peter Miller 5 Ralph Torrie 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 INDEX OF EXHIBITS 5641 1 2 Number Page 3 4 MH/NCN 1037: Manitoba Hydro's 5 TREE/RCM rebuttal, 6 May 4, 2004 5705 7 8 TREE/RCM 1008: Dr. Peter Miller's 9 presentation to the CEC 10 Wuskwatim hearings 5705 11 12 13 CAC/MSOS 1011: Summary of Manitoba Hydro 14 Calculations of Wind Power 15 Economics, corrected 5810 16 17 MC-1003: Glenboro Rugby Harvey 230 kV 18 Transmission Project Environmental 19 Protection Plan, 20 February 2002 5812 21 22 23 24 25 5642 1 2 INDEX OF EXHIBITS 3 4 Number Page 5 6 MH/NCN 1038: Cross-examination Reference 7 Material CNF/RCM/TREE 1 NFAAT-4 8 REV, Energy Available for Export 9 Medium-Low Load Growth 10 Scenario Median Flow Conditions; 11 Energy Available for Export 12 Medium-Low Load Growth 13 Scenario-Dependable Flow conditions; 14 MH-NCN-NFAAT-S-2a Revised: 15 January 16, 2004 5813 16 17 OTH-1030: Submission by International 18 Brotherhood of Electrical Workers, 19 submitted by Garnet Boyd 5826 20 21 OTH-1031: Presentation of the Assembly of 22 Manitoba Chiefs Secretariat, 23 submitted by Dennis White Bird, 24 Assembly of Manitoba Chiefs 5832 25 5643 1 2 3 INDEX OF UNDERTAKINGS 4 5 UNDERTAKING NO. PAGE 6 7 8 9 TREE-RCM-84: Provide copy of graph 10 and numbers underlying graph in terms of available 11 resources 5756 12 TREE-RCM-85: Provide underlying 13 values for resources available for figure 14 TREE/RCM/CNF 13.1 5757 15 16 17 18 19 20 21 22 23 24 25 5644 1 THURSDAY, MAY 13, 2004 2 Upon commencing at 9:05 a.m. 3 4 THE CHAIRMAN: Ladies and gentlemen, we 5 may be few in numbers but we're here in quality. 6 We're here to proceed this morning with the 7 presentation from Time to Respect the Earth's 8 Ecosystems, TREE and RCM. 9 Before we begin, I know we're going to 10 have a combination of good and bad. Good today and 11 bad before because you reminded me a while ago, Mr. 12 Torrie, that last time you were here, you got the 13 blame for the bad weather. So today we'll give you 14 the blame for the good weather. It's changed 15 considerably so we expect better conditions. 16 MR. TORRIE: I'm always out of season. 17 THE CHAIRMAN: Mr. Grewar. 18 MR. GREWAR: Gentlemen, could you each 19 state your names for the record, please. 20 DR. MILLER: Peter Miller. 21 MR. TORRIE: Ralph Torrie. 22 MR. GREWAR: Gentlemen, are you aware 23 that in Manitoba, it is an offence to knowingly 24 mislead this Commission? 25 MR. TORRIE: I am aware of that. 5645 1 DR. MILLER: Yes. 2 MR. GREWAR: Do you promise to tell only 3 the truth in proceedings before this Commission? 4 MR. TORRIE: I do. 5 DR. MILLER: Yes. 6 7 (RALPH TORRIE: SWORN) 8 (PETER MILLER: SWORN) 9 10 THE CHAIRMAN: Now you may proceed. 11 DR. MILLER: Okay. I am going to start 12 out by saying a little bit of why we've been pursuing 13 the intervention and make just a few largely 14 non-numerical observations and then I'll turn it over 15 to Ralph Torrie for the meat of the presentation. 16 TREE, Time to Respect Earth's Ecosystems, 17 and RCM, Resource Conservation Manitoba, are both 18 concerned with issues of applied sustainability. 19 TREE, however, as its acronym implies, has focused on 20 forest issues. Along with most Manitobans, we share 21 a concern for the health and sustainability of 22 Manitoba's forest ecosystems and values. The guiding 23 principles of both organizations are appended to the 24 written copy of this. Unfortunately, I didn't make 25 enough copies to distribute to everyone but I think 5646 1 Rory has made a few for the Commission and perhaps 2 for Hydro. 3 There are links between forest and energy 4 production obviously and the Pembina Institute study 5 done for the screening of the options pointed out 6 some of these in terms of land use and greenhouse gas 7 production. And the one thing that they omitted was 8 energy conservation and that's the thing that we were 9 pushing the most. 10 Manitoba's northern forests have a great 11 deal at stake from climate change, mitigation efforts 12 because of the projected impacts on that forest from 13 global warming. You've probably all seen charts of 14 how the boreal forests will almost disappear in 15 Manitoba, perhaps surplanted by other forests or 16 increased grasslands. 17 And so obviously for those who care about 18 the forests, mitigation is a very important concern. 19 And the project proposes to contribute to that 20 mitigation effort by producing electricity for export 21 that, at least theoretically, and there's some 22 debate, will displace fossil-fuelled generation of 23 electricity in the United States. 24 From the standpoint of the forest, energy 25 conservation is the preferred alternative. The more 5647 1 energy that is saved by Manitoba consumers, or 2 produced by alternative means, the more that is 3 available for export without the impacts of new 4 impoundment or the swath of new transmission 5 corridors through forests entailed by the 6 hydroelectric development. And of course 7 conservation and alternative generation in markets 8 where the base load is fossil-fuelled will directly 9 reduce greenhouse gas emissions. 10 So these are some of the basic and 11 perhaps obvious links between concern for the forest 12 and concern for energy just to indicate why TREE is 13 here. 14 Another observation is that hydroelectric 15 power, although a renewable resource, is still 16 finite. Manitoba Hydro estimates there are still 17 another 5,000 megawatts of capacity on the Nelson 18 River system. But when that is gone, then what? 19 Will the head be raised at Wuskwatim to realize 350 20 megawatts of capacity? Will the Hayes River be 21 exploited next? What is the end game when the 22 potential for the Nelson and perhaps other available 23 sites has been fully exploited? Dam the remaining 24 free-flowing rivers in Manitoba? Burn more fossil 25 fuel from Alberta or from more remote and sensitive 5648 1 sites offshore and in the Arctic? 2 Even if one were to grant, for the sake 3 of argument, that the impacts of further development 4 on the Burntwood and Nelson systems were tolerable, 5 the imperative to conserve remains. Growth in energy 6 consumption, hence generation, cannot proceed forever 7 nor is it too soon to contemplate that end game. 8 Just checking Manitoba Hydro's website, I 9 saw that 3,700 megawatts of the existing Nelson River 10 capacity came on line in the short space of 16 years 11 from 1974 to 1990. A similar building binge, and 12 we've seen one projected, could complete the job in a 13 comparatively short time. So that establishes a 14 social imperative for conservation. 15 Now, what are the figures? We've all 16 heard of the OECD comparison which indicates that 17 North Americans and Canadians in particular are 18 energy hogs. 27th out of 29 OECD nations in terms of 19 energy use per capita, that's Canada, using almost 20 twice as much as the OECD average. And increasing 21 per capita use at a greater rate than the average 22 OECD increase since 1980. 23 Moreover, Canada is 28th out of 29 in 24 energy efficiency or the term energy productivity has 25 been used in these hearings and Mr. Torrie uses that 5649 1 term. The energy used per dollar of gross domestic 2 product. And that's 33 per cent less energy 3 efficient than our major trading partner, the U.S. 4 and less than half as efficient as the OECD average. 5 This should obviously be a matter of 6 concern for anyone who cares about the environment 7 and the economy and is seeking a path to 8 sustainability. 9 MR. MAYER: Before you go on, are those 10 numbers correct? You call this 27th out of 29th. 11 How could we be so much above the average? Are you 12 sure it isn't 27 out of 29 in terms of energy 13 efficiency? 14 DR. MILLER: Inefficiency. I mean 15 it's -- 16 MR. MAYER: 27 out of 29 in terms of 17 energy use per capita. That sounds pretty good. 18 DR. MILLER: That sounds good? 19 MR. MAYER: That's what it says. 20 DR. MILLER: Well, you want a low figure 21 per capita rather than a high one. 22 MR. MAYER: If I -- 23 THE CHAIRMAN: It's the wording. 24 DR. MILLER: Yeah, okay. 25 MR. SARGEANT: We're 27th worst. 5650 1 DR. MILLER: 27th worst on the scale. 2 MR. MAYER: Okay. That's not what it 3 says. 4 DR. MILLER: Thanks for the 5 clarification. 6 In each case, it's towards the bottom 7 and it means we're 28th out of 29 in energy 8 efficiency which means that there are 27 more 9 efficient than we are. And this record is 33 per 10 cent less efficient than the U.S. 11 It is sometimes argued we live in a cold 12 climate, are spread out over large distances and have 13 attracted energy-intensive industries so that, 14 regrettable as it may be because of the environmental 15 impacts, we should resign ourselves to our standing 16 as energy hogs. Moreover, such resignation may be 17 further excused in Manitoba by the fact that our 18 hydroelectric energy supply makes our Manitoba 19 economy less carbon-intensive than others. 20 On the contrary, I believe that the more 21 energy we consume and the less energy efficient is 22 our economy, for whatever reasons, the more it is 23 incumbent upon us to ask how we can improve that 24 situation. 25 Is it just physical climate and geography 5651 1 or is it a social climate of practices, policies, 2 regulations, standards, incentives, investments, 3 infrastructure and performance measures that is at 4 fault? 5 The fact that we are part of a 6 continental grid also means that our consumption 7 patterns and conservation efforts do indeed affect 8 continental greenhouse gas emissions, which has been 9 an essential part of the Hydro submission. 10 So we can't be unconcerned about these 11 matters in Manitoba. 12 Unfortunately, in Manitoba we've had 13 little opportunity to examine and debate questions of 14 energy policy as a whole. As a province, we 15 developed an array of sustainability policies through 16 public consultation but an energy policy was not 17 among them. 18 More recently, the Climate Change Task 19 Force chaired by my President at the University of 20 Winnipeg, Lloyd Axworthy and Public Utility Board 21 rate hearings have provided two windows on aspects of 22 an energy policy. Consideration of the 23 justification, need for and alternatives to Wuskwatim 24 advancement is a third such window. 25 So that provides our rationale for 5652 1 engaging in this intervention. 2 Okay. Where does Manitoba stand now? 3 Well, Ralph is going to give certainly a more 4 detailed analysis of this but I'd just like to make a 5 few observations. 6 The social imperative is, first, for 7 energy conservation and efficiency measures and, 8 second, for least impact generation options. And 9 where do we stand in Manitoba? 10 In our closing argument to the 2002 PUB 11 intervention, found at Appendix 5 of our compiled 12 written submissions which were distributed a couple 13 of days ago to the people who were intervening in the 14 NFAAT part, we pointed out that the Sustainable 15 Development Act and the Manitoba Hydro Act provide a 16 sound legal base and a legal requirement to respond 17 to the social imperatives of sustainability and 18 efficiency in the policies and practices of Manitoba 19 Hydro including the promotion of end-use efficiency 20 of customers. 21 And these same Acts also provide, the 22 Sustainability Act in particular, that Manitoba's 23 regulatory and review bodies, like the PUB and CEC, 24 are similarly bound. Thus, Manitoba has many of the 25 right principles in place even if performance is 5653 1 sometimes spotty. The challenge is to translate 2 these legal mandates into practice and we still have 3 a ways to go. 4 Looking at Manitoba Hydro's corporate 5 strategy and goals. It is important to get these 6 right because as they indicate in their strategic 7 planning document, that is supposed to guide 8 everything that they do. 9 We note the addition of a new corporate 10 goal of being a leader in implementing cost effective 11 DSM measures and we hope this signals a shift from 12 the position taken by management in the 2002 hearings 13 that DSM is, I'm quoting, "not a social 14 responsibility that we bear." It's a legislated 15 requirement. 16 The Manitoba Hydro Act says otherwise. 17 Identifying the notion of end-use efficiency is one 18 of its purposes. But you need more than just a goal, 19 you need performance measures and we indicated that 20 these were lacking. There have been some exchanges 21 in the interrogatory process which suggests some ways 22 of doing a measurement and comparison. And perhaps 23 with the new end-use data, there can be comparisons 24 between how energy efficient a typical Manitoba home 25 is compared with one in another jurisdiction. So I 5654 1 hope that those will be explored. 2 There is also a need to revise the 3 statement of purpose of the PowerSmart program to 4 include a reference to the environmental and 5 sustainability benefits that it evokes in it's 6 advertising. The branding of PowerSmart through 7 images of children embracing nature suggests that a 8 sustainability purpose directs energy conservation 9 programs. 10 However, when one turns to the corporate 11 purpose for implementing demand-side management, one 12 finds instead two economic objectives: To provide 13 alternative cost effective methods of power supply 14 and to minimize the total cost of energy services to 15 customers. There's nothing about how can the 16 footprint of Manitoba Hydro and of its customers be 17 reduced. And yet, that would seem to be an essential 18 part of the rationale, certainly recognized in the 19 advertising. 20 It could be interpreted as somewhat 21 cynical to say we know our customers have these 22 environmental values and we're going to appeal to 23 them in our advertising but they are not at the core 24 of our program planning. I'm not saying this is not 25 true of many Hydro personnel but I'm just saying 5655 1 institutionally when you identify the purposes of 2 your PowerSmart program, you have to bring in the 3 environmental benefits, the environmental links. And 4 that still needs to be done. I hope that will be 5 done when you revise your next PowerSmart plan. 6 And finally, the purpose of our last PUB 7 intervention and the current one is to look at 8 perverse incentives and so on that might be related 9 to rates. We asked what are the implications of low 10 electricity rates in Manitoba for energy conservation 11 given the general economic principle that lower costs 12 of a product tend to increase its consumption. And 13 we sought to explore rate options that were more 14 favourable to conservation and proposed an inverted 15 rate for the residential sector. And the PUB ordered 16 that Hydro study inverted rates for all customer 17 classes as well as some other measures that might 18 contribute to conservation. 19 In our view, there are a number of 20 factors that depress Manitoba's rates such as those 21 identified in our response to 22 CAC/MSOS/TREE/RCM1-NFAAT-8. We argued that current 23 methods of allocating costs and the system export 24 dividend, which are the foundation of rate setting, 25 are both inefficient and inequitable. 5656 1 They are energy inefficient because low 2 cost power encourages wastage and reduces the 3 incentive to conserve. That principle was 4 uncontested at the hearings. They are 5 environmentally inefficient because the wasted energy 6 is unavailable to displace greenhouse gas producing 7 fossil fuel generation elsewhere on the continental 8 grid thus adding to the global environmental costs of 9 North American electricity. 10 They are economically inefficient because 11 wasted energy is non-productive and using the system 12 export dividend that sales to the States and the 13 profits to subsidize inefficient consumption makes 14 the dividend unavailable for more productive 15 investments including conservation investments that 16 would reduce energy wastage and customer bills and 17 increase the system export dividend to Manitoba. 18 And we argue that these subsidized rates 19 in the present manner of the subsidy are inequitable 20 because higher consuming customers grab more than 21 their share of both the benefits of low cost 22 resources in the system, such as the Winnipeg River 23 generation which doesn't face the long transmission 24 and has depreciated capital costs. And the export 25 dividend earned by a crown corporation and resource 5657 1 belonging to us all. 2 So you get what, to my mind, is the 3 outrageous situation of the entrepreneurial profits 4 from exporting electricity to U.S. markets being 5 redistributed to the bottom lines of other 6 corporations and not to the owners of the 7 corporation, which is the government on behalf of us 8 all. 9 Now the point of these conclusions for 10 the Wuskwatim hearing is that as part of a concerted 11 effort to adhere to the principles of sustainability 12 and the Manitoba Hydro legislated mandate to promote 13 efficient production, distribution and end-use of its 14 product, we have to stop subsidizing the wastage of 15 energy and promote the preferred alternative to 16 Wuskwatim of energy conservation. 17 It is possible to stop subsidizing 18 wastage of energy while still trying to reduce 19 customer energy costs. Two principal ways of doing 20 this are, first, to redirect subsidies from rates to 21 conservation measures and within the rates from the 22 tailblock rates to the initial block rates and fixed 23 charges. That is, the subsidies which lower the 24 costs should be applied not uniformly across the 25 pricing of electricity but to places where they will 5658 1 have -- the subsidies will have less effect on 2 conservation. 3 It is possible to do this in a revenue 4 neutral way that will lower the bills of conservers, 5 raise the bills of larger consumers, bring tailblock 6 rates closer to the marginal cost of energy and thus 7 increase the incentives and cost-effectiveness to 8 consumers of conservation measures. 9 My final observations are about the new 10 PowerSmart standard for new homes. Finally, with the 11 new home program, it encourages building to a new 12 PowerSmart standard. And the intention of this 13 program is to increase the penetration of efficiency 14 measures and new home construction. That's good. 15 But it is disappointing that it falls short of what 16 the DSM report says is the cost effective R2000 17 standard. So we're settling for less than we should. 18 The lower interest rates of recent years 19 have created a new housing boom. It is a failure of 20 regulation and building standards that all of this 21 new construction represents lost opportunities and 22 embodied inefficiency that is not readily corrected. 23 And the PowerSmart New Home Program is supposed to 24 lessen this but it will not eliminate that. And I 25 think we should be able to do better. 5659 1 I note that Hydro indicates in its second 2 rebuttal that the program was developed in 3 consultation with industry advisory teams. Where 4 were the conservation groups, the consumer groups and 5 municipalities in these consultations? Builders have 6 frequently resisted implementation of the highest 7 conservation standards because of incremental initial 8 costs even though these more than pay for themselves 9 in the long run, perhaps not to the builder who 10 doesn't pay the auto utility bills. And so that's 11 just an observation on one of the points in the 12 rebuttal. 13 So those are my initial comments. And 14 for the remainder of the presentation, I'll turn it 15 over to Ralph. 16 MR. TORRIE: Thank you, Peter. And good 17 morning, members of the panel and Commission I should 18 say and everyone else. I now feel responsible for 19 the weather. And it's the second time I've come here 20 and it's had unusual weather events following me it 21 seems, although I was kind of enjoying it. I went 22 for a walk down to the train station last night and 23 just when I got there, the cross-Canada train was 24 making its 45 minute stopover. So there were 25 tourists streaming out of the station with their 5660 1 cameras, getting their pictures taken in the snow of 2 Winnipeg in the middle of May and everybody was 3 having a good time with it. So that will be their 4 memory of their Winnipeg stop on their cross-Canada 5 trip. 6 MR. SARGEANT: I'm glad somebody is 7 enjoying it. 8 MR. TORRIE: Yeah. And the station too, 9 it's really nice what they've done there. It's quite 10 a historic place. 11 What I wanted to do, first of all, is 12 tell you what I'm going to try and do. I'm never as 13 well prepared or as eloquent as my client beside me. 14 But what I would like to try and spend a little bit 15 of time doing is, first of all, addressing the NFAAT 16 question in a general way because I think that 17 probably the single -- in my view at least, the 18 single biggest and most important observation that I 19 have made in my sort of experience with this process 20 and with this proposal, which obviously has not been 21 as intense as yours, is that there wasn't really an 22 NFAAT case on the table and I want to talk about that 23 a little bit. And then I'd like to just highlight 24 some of the analytical work we did. I am not going 25 to go into a lot of detail. 5661 1 There is a rebuttal that had arrived, I 2 don't know exactly when, around a week ago or so from 3 Manitoba Hydro that responded to a lot of the 4 information that we provided in the interrogatory -- 5 in our interrogatory responses and it's about a 36 6 page document. I have had a chance to read that in 7 addition to having read most of the NFAAT case. I 8 read both binders. I think I've read all of the 9 NFAAT interrogatories. I haven't understood them all 10 but I've read them all. Some of them I've read a few 11 times. And so I have a fairly extensive familiarity 12 I guess with the NFAAT part of the case, or at least 13 what was called the NFAAT part of the case. And then 14 I would like to just sort of wrap up with a few other 15 observations. 16 Peter referred, in his opening remarks, 17 to a compilation of our prepared statement from 18 February as well as the interrogatory responses that 19 we put together in order to hopefully facilitate the 20 discussion here today. And there is one small 21 difference between the material and the binder and 22 what you may already have and that is in the main 23 submission, which is the first section in the binder. 24 At the end of each of the sections, there is an 25 indication which of the interrogatory responses also 5662 1 relates to that particular question. 2 So it's a cross-referencing system, in 3 other words, where you can quickly find at the end of 4 each response in the main document where else you can 5 read material in the interrogatory responses that is 6 relevant to that point. 7 And the other thing that we did just by 8 way of leafing through this document. If you haven't 9 already noticed, if you take a look at the appendices 10 1, 2, 3 and 4, in each case, both the header and the 11 footer have information that tells you which appendix 12 you're in. So for example, Appendix 1, you can see 13 right away, as you're leafing through, that it's the 14 Canadian Nature Federation questions because it 15 starts with CNF. And you can also see which 16 interrogatory you're looking at because the 17 interrogatory number is also right in the header and 18 the footer. So we've tried to do a couple of things 19 like that to make it a bit quicker to leaf back and 20 forth between the cross-references in the main text 21 and the interrogatory responses that they are 22 referring to. 23 We came into this exercise about a year 24 ago, not even a year ago really, and agreed to 25 undertake what we thought would be an analysis of a 5663 1 full-fledged Need For and Alternatives case by 2 Manitoba Hydro. So I had certain expectations about 3 what I was going to find. And when it wasn't in the 4 main submissions, and I'll be more specific in a 5 moment about what I'm talking about, we tried to ask 6 interrogatories to see if perhaps it was there but 7 just not well-reflected in the main submissions. And 8 the interrogatories confirmed that what I would call 9 a Need For and Alternative analysis was never really 10 done in the preparation of this proposal. And it's 11 not even clear from the responses from Manitoba Hydro 12 that they know what it means, at least as an 13 organization. 14 What I mean at least, and perhaps I'm 15 being presumptuous because there are obviously a lot 16 of interpretations of what NFAAT is, but it seems to 17 me that central to the concept of Need For and 18 Alternatives in environmental assessment, and more 19 generally in planning, is that requirement that you 20 stand back from what it is that you're doing, 21 identify what the fundamental purpose of that 22 undertaking is and define and analyze other ways that 23 you could achieve that fundamental objective. That's 24 what NFAAT analysis is all about. 25 In a slightly different way, that's what 5664 1 the witness, I think it was Mr. Harper, have I got 2 his name right, yesterday, for the Consumers 3 Association, was talking about when he said you need 4 to be doing full portfolio analysis for this kind of 5 an investment decision. And it's not there in the 6 Hydro case. 7 And so the first thing that I did then, I 8 guess from a legal point of view, one could have just 9 thrown up their hands at that point I suppose and 10 say, well, there is no NFAAT case on the table so 11 there's nothing to talk about. But we were 12 determined to try and go further than that with the 13 resources that TREE and RCM had from the funding 14 process. So we set out to try and illustrate what a 15 NFAAT case might have looked like, one example or 16 maybe a couple of examples if it had been put 17 forward. 18 And even before you can start that 19 exercise, you really have to make sure that you have 20 that central definition of the objective and the need 21 of the undertaking clear in your mind. 22 And it actually is not as easy as it 23 might have been to pull it out of Manitoba Hydro's 24 evidence on the Need For and Alternatives. One would 25 expect it to be right there and labelled as such. 5665 1 But the passage that it seems to me most concisely 2 summarizes the need that should have been the focus 3 of an NFAAT analysis is this passage from I believe 4 Volume 1. It's right out of our main submission and 5 the full reference is in the written material. But 6 the word "primary" is highlighted because I think 7 here we have it, perhaps it's obvious to everybody, 8 and I think there is agreement on this point that the 9 primary objective of this particular proposal is to 10 maintain current export revenues and profits. That's 11 the primary objective. 12 I don't think there's anything else that 13 comes close to it in terms of the motivation for why 14 we're all here right now. I know there are a lot of 15 other things that are listed as justifications for 16 building the dam but this is what I think should be 17 the focus of an NFAAT discussion, is what are the 18 other ways that you could maintain current export 19 revenues and profits? And what are the other ways 20 that one could identify for investing the type of 21 money that is being -- that will be required to bill 22 Wuskwatim in those alternatives. 23 It's not the same thing as saying that a 24 particular investment stays profitable or doesn't 25 stay profitable under different sensitivity analyses. 5666 1 That's not an NFAAT analysis. You can call it one 2 but that doesn't make it one. You know, if it's not 3 a duck, you know, calling it one is not going to make 4 it quack. And when you look at what we got from 5 Manitoba Hydro over and over and over again on the 6 question of NFAAT, it was always but it will make 7 money no matter what else happens. And that may be 8 true but it's not the central issue in an NFAAT 9 analysis. 10 What we would have expected and hoped to 11 see is a full portfolio analysis starting with an 12 integrated look at the end-use structure of the 13 future demand for energy starting in the market, in 14 other words, and developing one's business plans and 15 strategies from the market. And that's what we 16 didn't get. 17 And there was a passage in one of the 18 interrogatory responses that we received, number 32b, 19 and I had a bit of an ah-ha moment when I read this 20 because I think it really epitomizes what was lacking 21 in some ways in the approach that was taken by 22 Manitoba Hydro to the NFAAT question. They state 23 quite clearly here that they don't start with the 24 market, that they really start by assessing a project 25 that's been defined with respect to how it would fair 5667 1 under different conditions in a market-place. 2 And that's a tried and true way of 3 running an electric utility, make no mistake about 4 it. But it also represents a supply-oriented and 5 somewhat anachronistic approach to planning in the 6 21st century. We would have hoped to have seen a 7 more services demand-oriented market-based philosophy 8 pervading the NFAAT question as opposed to the more 9 engineering project-specific orientation that we 10 found and which is reflected -- and which is a 11 reflection of a philosophy that is apparent in this 12 passage from Manitoba Hydro's evidence. 13 So I mean I know it's probably too late. 14 I guess it's too late. I've never really understood 15 what all the rush was about around this dam but, you 16 know, I'm not from here. But perhaps it's too late 17 at this point for an NFAAT analysis to be required of 18 Manitoba Hydro and it's not obvious that you could 19 get it because it's not clear that the capacity is 20 there to do it yet. 21 But this is not going to be good enough 22 as we look forward to the future of energy and 23 resource and sustainable planning for the 21st 24 century. We've got to move on to a much more 25 integrated market-based and end-use approach to the 5668 1 way that we think about our energy system and the way 2 we evaluate particular investments in it. 3 So I wanted to say that first because I 4 guess I've been starting to think about what will be 5 the lessons learned hopefully or what will be the 6 recommendations at least that I would make for what 7 needs to happen in the NFAAT area with regard to 8 energy planning in general and Manitoba Hydro in 9 particular and I think that it still has a way to go 10 in that regard. 11 Faced then with that basic starting 12 point, and you know with not a lot of resources 13 compared to the mountain of evidence and analyses 14 that we had to try and assimilate and understand, 15 what we decided to do was to take almost an auditor's 16 perspective, if you like, towards the quantitative 17 analyses that had been presented and the data that 18 had been presented by Manitoba Hydro on the question 19 of the demand for electricity. And we did this in a 20 series of steps. And I'll say I'd like to highlight 21 a little bit about what we did in each of those 22 steps. But I will tell you what they wear first or 23 remind you what they wear. 24 The first thing that we did is we tried 25 to take the load forecast. In our case, it was the 5669 1 2002 load forecast which still did not have the 2 Winnipeg service area integrated into the totals. 3 And that presented us with a significant problem that 4 we had to solve. Starting with that load forecast in 5 one hand and the consultant studies that were done on 6 the DSM market potential in the other hand -- 7 actually you can't hold all three of them in one 8 hand, you'll break your arm -- but starting with 9 that, we constructed a description of electricity use 10 both in a base year and out to the year 2018, 11 2017/18, we work on the fiscal year systems on this, 12 in which the forecast could be described in an actual 13 end-use model. Not just for the residential sector 14 which Manitoba Hydro already does, but also for what 15 gets lumped together into the general service class 16 in the load forecast and which includes all 17 industrial and commercial electricity use in the 18 province. And so we spent quite a bit of time trying 19 to tune, if you like, our end-use spreadsheet type 20 models to the 2002 load forecast. 21 And what an end-use model basically does 22 is it represents let's say electricity use as the 23 product of an activity variable and an electricity 24 intensity variable. And there's two or three others 25 that come into it. But essentially, it says the 5670 1 electricity use in Manitoba will be the number of 2 single family detached houses multiplied by the 3 electricity use per refrigerator, multiplied by the 4 number of refrigerators in each house. And then you 5 repeat that calculation for apartments and you repeat 6 it for other appliances and you repeat it for the 7 houses and the buildings and the industries 8 themselves. And you build from the bottom up a 9 description of the electricity use, both now and in 10 the forecast, that is rooted in an actual physical 11 description. So you have square metres of commercial 12 floor area multiplied by electricity use per square 13 metre in the commercial sector. And in the 14 industrial sector, we worked with electricity per 15 dollar and dollars of output, as did the Manitoba 16 Hydro consultants in that case. 17 And essentially then, you need this to do 18 a DSM analysis because to do a DSM analysis, you need 19 to go back and look at that line, for example, that I 20 just was describing that tells you how much 21 electricity is being used in refrigerators in single 22 family dwellings and you do an analysis about what 23 you can do about that, how much more efficient can 24 you make those refrigerators. 25 So end-use models are particularly useful 5671 1 and I would say even necessary to do good market 2 planning for DSM. 3 And when you try to do this, almost 4 invariably, I don't know if I've ever seen a utility 5 load forecast successfully tuned or calibrated, if 6 you'd like, to an end-use model where you didn't end 7 up having to make some assumptions that didn't seem 8 right in order to get the end-use model to agree with 9 what the utilities load forecast was putting out 10 there as the future demand for electricity. 11 And this is what you would expect because 12 it's a completely different way of thinking about the 13 future of electricity use and it forces you to try 14 and imagine some kind of a real future that would use 15 the amount of electricity that your forecast is 16 telling you is going to be used in a particular 17 economic case. 18 And what we found when we did this with 19 the Manitoba Hydro 2002 forecast, a couple of things. 20 First of all, in order to tune our end-use model to 21 the 2002 load forecast, we had a problem in the 22 commercial sector and we had a problem in the 23 industrial sector. We accepted all of the Manitoba 24 Hydro consultant's assumptions about electricity use 25 per square feet metre of floor area and all of that. 5672 1 But we -- and we accepted -- well, we didn't have 2 quite the same floor area profile but, you know, we 3 basically didn't disagree with any aspect of the 4 commercial reference projection, I think it's called 5 in the DSM studies, except that in order to tune up 6 to what we thought at the time was, and I don't think 7 we're actually that far off, was the total commercial 8 electricity use in Manitoba in 2002. A number which 9 by the way does not appear in the load forecast. You 10 have to deduce it. At least you used to have to 11 deduce it. 12 You know, we have a whole lot of new 13 evidence that's come in this rebuttal which needs to 14 be examined and we won't have an opportunity to do. 15 But what I would say is that we found that the growth 16 rates of the commercial building types that you would 17 have to have in terms of how a floor area would have 18 to grow in order to keep up with the forecast even 19 with the efficiency improvements that were being 20 assumed by the DSM consultants were just not 21 believable. 22 And this is the point that we discussed 23 when we were here to cross-examine Manitoba Hydro and 24 I just distributed a table directly from their 25 evidence showing the rates of growth of commercial 5673 1 floor area that are necessary in order to tune up to 2 the forecast. 3 And so that was one area where we think 4 that the end-use model was basically telling us that 5 the commercial electricity probably was not going to 6 be as high as the forecast was suggesting. 7 And then the other one was the industrial 8 sector. And in this case, we were thrown off the 9 trail for a long time because of the errors in the 10 industrial sector DSM report which got corrected 11 incorrectly. So it was really -- you know, it was a 12 real drag for us the amount of additional time that 13 it took to sort through that, but these things 14 happen. 15 In the end what we found there, however, 16 is that the -- we adopted the same business as usual 17 improvement in electricity productivity as had been 18 used in the DSM potential study report. I didn't 19 think we had at first but when we finally got the 20 correct information from Manitoba Hydro, it became 21 apparent to me that it wasn't the industrial 22 electricity productivity that we disagreed with, it 23 was again the rate of output growth. And the output 24 growth rates of industries in the industrial DSM 25 market potential study are way out of line with the 5674 1 output growth rates in Manitoba Hydro's economic 2 outlook. They are not even close. They are taken 3 for reasons that I don't -- I cannot fathom from a 4 federal greenhouse report of some sort that had some 5 economic scenarios in it for the provinces. And I 6 don't think there's any direct connection with 7 Manitoba Hydro's own economic outlook there. But I 8 would love to be stand corrected on that. 9 So this was a difficult issue for us 10 because we didn't have something like floor area or 11 physical barrier to work with, we only had dollars of 12 output and growth in that. So what we did is we did 13 an analysis of Manitoba Hydro's GDP over the past 15 14 or 18 years and we used Statistics Canada data to do 15 this. And we looked at what the relative growth 16 rates were of the different economic segments within 17 Manitoba over that same period. And it turned out 18 that I think it was a 15 year historical growth rate 19 in GDP in Manitoba, industrial GDP, was about the 20 same as what was in the economic forecast of Manitoba 21 Hydro. 22 So what we decided to do was make the 23 assumption that if you indeed did have another 15 24 years of industrial output growth, like you just had 25 the last 15 years, the same rate, that we would also 5675 1 assume that the structure stayed the same. So the 2 growth is there in all of the energy intensive 3 industries which grow faster than the average because 4 that's what happened in that past 15 years in 5 Manitoba. 6 So the underlying driver of our 7 industrial forecast is still quite aggressive on 8 electricity intensity industry in Manitoba and I 9 think it's still quite aggressive, and by that I mean 10 toward the high side, on the question of industrial 11 output growth in general. 12 But it still means that when you combine 13 it with the electricity use per dollar of output 14 characteristic of those industries, with only a 0.9 15 per cent per year improvement assumed as a background 16 sort of level before DSM programs, and that's quite 17 modest, that you still end up with electricity use in 18 the industrial sector that comes out below the load 19 forecast. 20 So I think it's important. And in all of 21 the highlights that I wanted to touch on with you 22 today with respect to the analysis that I did, please 23 remember that none of this was done with the 24 resources that could have and should have been 25 brought to bear on these questions by Manitoba Hydro. 5676 1 And secondly, that it's not really the responsibility 2 of an organization like TREE or RCM to have to try 3 and be the one that comes to a hearing like this and 4 shows what an NFAAT analysis would have looked like. 5 And all we can do with the resources that -- you 6 know, we should have been here responding to one. So 7 all we can do with the resources we had -- you know, 8 we came to assess an NFAAT argument, not to make one. 9 So all we could do with the resources 10 that we had was pretty quickly, as these things go, 11 sketch out some scenarios of what it would look like 12 because we thought if we could sort of almost draw a 13 picture of what we're talking about, that maybe we 14 could finally connect with Manitoba Hydro where 15 there's been such a disconnect throughout the hearing 16 on what is meant by an NFAAT analysis. So that's why 17 we were doing it. 18 So when I talk about the first step, 19 which was to critically assess the load forecast, we 20 may not have found everything that could be found in 21 a more thorough analysis and we may very well have a 22 base year starting number which is too low. This was 23 one of the points that was raised in Manitoba Hydro's 24 most recent rebuttal. 25 It's a very complicated thing to really 5677 1 know but it would have -- I should say it's a 2 complicated thing to change. And I'll come back to 3 this question of the base year number in a moment. 4 But the bottom line was that we felt that just even 5 starting with the base forecast for 2002 and not the 6 medium low forecast but accepting the population and 7 the economic growth assumptions of the base forecast 8 but examining the end-use structure of the system, we 9 felt that the Manitoba Hydro load forecast was too 10 high for those economic inputs. And I still do. 11 I think that I would just like to remind 12 you about the discussion that we had when I was last 13 out here in helping to cross-examine Manitoba Hydro 14 and we were talking about the load forecast. And a 15 load forecast, in a nutshell, involves having some 16 assumptions about the future rate of economic growth 17 and how electricity demand is going to be affected by 18 that. And when Manitoba Hydro creates the medium low 19 and the medium high variations on their base 20 forecast, they do so by assuming different 21 demographic and economic futures. 22 We didn't do that. We kept the 23 demographic and economic assumptions that are in 24 Manitoba Hydro's economic outlook and reflected in 25 their base forecast. What we did, and this was the 5678 1 issue that we talked about last time I was here, is 2 we went in and looked at the relationship between the 3 economic growth and electricity use and how that was 4 changing and how that was likely to change. And that 5 led us on the basis of this analysis I was mentioning 6 a moment ago in the commercial and in the industrial 7 sectors to create what I call an adjusted version of 8 the base forecast that you see in a lot of our 9 evidence. 10 So the way that all of this comes into 11 the NFAAT discussion, this is a famous graph that is 12 a reproduction of the original by the artist known as 13 Manitoba Hydro. But this is basically, I think it's 14 figure 5.5 from volume 1 of NFAAT if I'm not 15 mistaken. And this is not my idea, this is the 16 graphical method by which Manitoba Hydro made its 17 case in Volume 1 of NFAAT for why there was a need 18 for building, not only building but advancing 19 Wuskwatim. 20 And I don't think there's much need to 21 even summarize what this means because I think this 22 figure has been pretty thoroughly discussed here. 23 But that large blue block goes down directly in 24 relation to the load forecast going up. It 25 represents the amount of power that would be left for 5679 1 the export market after domestic demand is met under 2 medium flow conditions, et cetera, et cetera. 3 And the turquoise represents the power 4 that would be delivered if Wuskwatim was brought on 5 line. And I think this one is still showing 2009/10 6 for start-up. 7 And at that 10,500 gigawatt hour line 8 represents the estimated on-peak export market 9 which, as you know, is constrained by operational and 10 technological factors to that level at this time. 11 And when we were finished this analysis 12 that I was telling you about just now and we adjusted 13 the forecast, it had the effect of moving that blue 14 block up, pushing Wuskwatim over the 10,500 line, if 15 you like, and moving the domestic need date out to 16 the year 2035. And it's very similar to the impact 17 of assuming the low -- medium low forecast. It's in 18 the same order of magnitude but we got there by a 19 completely different route which did not make any 20 assumptions about lower economic growth or lower 21 population growth as I was just saying a moment ago. 22 This might be an appropriate time since 23 this really is an illustration of the adjusted or the 24 reference projection if you'd like. I'm sorry, this 25 is the one with the medium low. Well, that's 5680 1 interesting actually. The one I was showing you is 2 what happens if you assume the medium low load 3 forecast according to Manitoba Hydro's numbers. 4 There are some errors in the 5 representation of the medium low forecast in the 6 Hydro evidence and I only discovered that very very 7 late in my work. And I don't know how widespread it 8 is and whether that issue has been cleared up or not, 9 but there are some places where the numbers in the 10 Manitoba, and I point this out in a footnote to one 11 of the interrogatories where there's definitely been 12 some kind of an error made in the representation of 13 the medium low and the medium high forecast. 14 But presuming that this is true, then 15 this is the effect of the medium low. And this 16 graph, which looks very similar, is the result of the 17 adjustments that I was just discussing. 18 Now, this might be an appropriate time to 19 respond to this issue of the base year of electricity 20 use which is raised in Hydro's recent rebuttal that 21 has been provided to us. And I don't know if this 22 has an exhibit number or not, does it? Maybe it 23 should if we're going to be talking about it today. 24 Would that be appropriate or how does that work? 25 THE CHAIRMAN: It will be given an 5681 1 exhibit number immediately after your presentation. 2 Or we could do it now, Mr. Grewar, if you wish. 3 MR. GREWAR: Sorry, Mr. Chairman, we have 4 some other items. Perhaps at the end. 5 MR. TORRIE: Just for the record, I'm 6 referring to something called Manitoba Hydro's 7 TREE/RCM rebuttal. And it's actually undated. And 8 that may just be a fault of my printer but I think it 9 came out about a week or so ago. And there's -- 10 MR. MAYER: The last page is dated. 11 MR. TORRIE: Is it? Oh, okay. Great, 12 that's right. There we go. 05/04/2004, which is the 13 month and which is -- 14 MR. MAYER: I would suspect that's May 15 4th. 16 MR. TORRIE: Right, okay. Do you have 17 that document today? 18 MR. MAYER: Yes. It was our homework 19 last night, Mr. Torrie. 20 MR. TORRIE: Oh, yeah. If you turn to 21 page 30 of that document, table 1.7, you will find a 22 comparison or an attempt at a comparison of our 23 reference projection for electricity use. And that's 24 this adjusted forecast that I've been talking about. 25 And historical electricity use for various years, 5682 1 some fiscal, some not. And I mean like I say, we 2 haven't had resources to really go into this in the 3 detail that one would like but there's a couple of 4 things that I'd like to draw to your attention. 5 First of all, the top half of that table is the 6 numbers don't include Winnipeg Hydro. And I think it 7 might not have been as clear as it could have been, 8 the reason that those numbers for 2002 sales only add 9 up to 16,400. And then down on the bottom, you see 10 2003 sales at 19,206. Well, sales did not go up by 11 3,000 GWh in one year in Manitoba, what happened is 12 the Winnipeg Hydro numbers are integrated in the 13 numbers in the bottom part of the table and are not 14 integrated in the numbers in the top part. That's 15 one thing I just wanted for clarity. I hope I'm 16 right about that. It's not my document but that's 17 what it looks like to me. 18 And then what they've done in the bottom 19 half of the document, I have to say this annoys me, 20 they have attributed growth rates to our reference 21 projection by taking something called an actual 2003 22 sales number, and I understand that's a calendar 23 year. I don't know if it's weather corrected or not. 24 I presume it is. 25 Part of the problem, and this is a more 5683 1 generic problem that we have with this document, is 2 there is considerable information we've never seen 3 before coming out here and some of it we don't 4 totally understand and some of it I think we might 5 wish to challenge, but I don't know how one deals 6 with that this late in the process. 7 But what they have then in the column 8 beside that actual 2003 sales figure is the 9 electricity use in 2017/18 in our adjusted forecast. 10 And then they used those two numbers to come up with 11 reference growth rates for our projections. Well, 12 these are not the reference growth rates for our 13 projections, these are the growth rates that you get 14 if you splice a different starting year onto our end 15 year and recalculate the growth rates. And it's not 16 a valid method. It makes a certain point but you 17 can't turn around and say that Torrie is saying that 18 the reference projection in the commercial sector is 19 negative .4 per cent. We were plus 1.1 per cent I 20 think in the commercial sector. 21 So notwithstanding the question that -- I 22 mean the issue that is underneath this is that the 23 actual electricity use in the year that we used for 24 the base year, which was actually not the one 25 portrayed here but the year before that, actually it 5684 1 was fiscal 2002/03. So it was mostly 2002 with the 2 first three months of 2003. 3 We were possibly in our reference 4 projection too low, maybe by 300 or 400 gigawatt 5 hours. I don't know. It's not a simple thing to 6 know for sure because in order to really change that 7 year, you'd have to recalibrate the whole model. And 8 it would also change one's DSM estimates. 9 So there is a discussion over the 10 appropriate base year number in all of this but 11 please don't refer to this as indicating that our 12 reference projection had negative growth rate. It 13 did not. And it's a misrepresentation to suggest 14 that. 15 And I am in no way suggesting it's 16 deliberate. Frankly, I don't think Manitoba Hydro 17 has done a lot of end-use calibration of their 18 forecasts. And this is probably somewhat new to 19 them. But what you need to recognize in end-use 20 analysis is that the dynamic of a particular scenario 21 or forecast is a somewhat separate thing from its end 22 points. And we had positive growth rates in all of 23 the sectors in the dynamics of our reference 24 projection. We could not have because we were using 25 Manitoba Hydro's activity economic forecast to drive 5685 1 the thing. And there isn't much electricity 2 efficiency improvement embedded in Manitoba Hydro's 3 forecast as we know. 4 However, I did, after reading this, I 5 took a look like here, for example, on the screen, 6 you're looking at the effect of introducing the 7 adjusted forecast on how that Need For graph appears. 8 And this is what it looks like. I had done a 400 9 gigawatt offset and it does substantially lower 10 everything obviously and but I can't respond in any 11 more detail to this because it's just come at me. I 12 do know that the year that's the calendar year 2003 13 that's represented in this comparison was not our 14 base year and shouldn't be used to calculate growth 15 rates for the work that we did. 16 Once we had the forecast that we've felt 17 comfortable with -- you see, the dilemma that you've 18 got when you are doing this kind of work is you have 19 to -- if you're using an end-use model, to then go in 20 and start estimating where the DSM opportunities are, 21 you have to have a believable starting point. And if 22 the schools in your model are growing at 10 per cent 23 per year, because that's what they have to to agree 24 with the forecast, you can't, it's crazy. We know 25 they are not. So that's the kind of adjustment that 5686 1 we did. 2 And then we proceeded to take a look at 3 the economic potential for DSM. And here, the 4 exercise was, as I said earlier, more one of an 5 auditor than starting with a clean piece of paper and 6 doing a completely independent analysis. So we did 7 go through and identified some technologies and made 8 arguments for why we felt the threshold was too low 9 and produced a different estimate of the economic 10 potential for DSM from Manitoba Hydro's. 11 And if you look at CNF -- hang on. I 12 lost track of my place here, sorry. If you look in 13 the appendix that has the CNF interrogatory 14 responses, I believe it's Appendix 1 -- I'm sorry, I 15 can't find the table I needed. 16 MR. WILLIAMS: Might it be number 9, page 17 2? 18 MR. TORRIE: CNF 9, 2? 19 MR. WILLIAMS: Try that one. 20 MR. TORRIE: Yeah, I'm looking for the 21 one that compares the DSM estimates. And you know 22 what, it may be one of the responses to you, to the 23 Consumers Association. You're right, CNF 9.1 on page 24 2 of that interrogatory response. It's called table 25 TREE/RCM/CNF 9.1. Thank you, Mr. Williams. 5687 1 And if you look at the third column of 2 numbers, the one labelled economic potential DSM, and 3 at the very bottom, if you look at the totals, the 4 one that's labelled Manitoba Hydro (MPS), that's 5 Market Potential Study, is at 3,500 gigawatt hours of 6 DSM. We ended up lowering that number after we 7 adjusted the forecast because you can't save 8 electricity in schools that don't exist. 9 So one of the effects of adjusting the 10 forecast down is that it reduces the amount of DSM 11 that you will have in your economic potential 12 assessment even without changing any of Manitoba 13 Hydro's assumptions about which technologies are in 14 or out. And then we added back in the technologies 15 that are discussed in the evidence that we thought 16 should be included. And that brings us up to our 17 estimate of 4,500 gigawatt hours. 18 And so there is a difference there. I 19 frankly don't think that it's a turning point issue 20 in this hearing because the quantity, regardless of 21 whether it's 3,000 or 4,500, is so much higher than 22 what the utility is intending to mobilize that. The 23 much more important question is, is the gap between 24 any of those numbers and the likely effect of the DSM 25 activities. 5688 1 So that in a nutshell, I think in that 2 table, gives you a sense of the perhaps the range of 3 difference on this question. And I am not going to 4 spend more time detailing how we did that because 5 it's described in the evidence and no doubt there 6 will be more that comes out under cross-examination 7 on that. 8 Again, referring to the second rebuttal 9 of Manitoba Hydro. In their critique in here of our 10 assessment of DSM potential, there are a number of 11 responses that are made which, in many cases are -- 12 well some of them are not really responsive. And if 13 you're a sharp reader, you see those for yourselves. 14 But there's some which are only partial responses. 15 And where the point that is made in response is 16 actually quite secondary to the main point to which 17 it's supposedly responding to. 18 For example, on the question of 19 commercial buildings, you know, I really think that 20 the electricity savings that are available as the 21 result of recommissioning and retrofitting of natural 22 gas-heated buildings is quite a significant item that 23 I don't think has been properly assessed in the 24 potential. 25 And I guess what we'll probably try and 5689 1 do is provide an itemized list of responses to the 2 rebuttal. I mean we're running on empty a little bit 3 at this point but there's so many of these little 4 things that need to be addressed that we'll provide a 5 written list of comments on the rebuttal. 6 The next thing that we did in our 7 approach then, having assessed the load forecast and 8 assessed the economic potential for DSM is we then 9 took a look at Manitoba Hydro's actual DSM or 10 PowerSmart activities and programs and planning 11 processes with a view to asking ourselves whether or 12 not the achievability which they seem to have been 13 satisfied with in the past or, for that matter, in 14 their existing plan really represents what could be 15 and perhaps should be the targets for a public 16 utility like Manitoba Hydro. 17 So in order to do this, we did spend some 18 time looking at practices in other jurisdictions, 19 something that we do on an occasional basis in any 20 event as part of the work that we do. And one of the 21 things that is important to understand with regard to 22 this whole question of DSM achievability is that that 23 industry has been on one heck of a roller coaster for 24 the past 10 years, past 15 years really. And by that 25 I mean the electric power industry. And the changes 5690 1 have manifested themselves in different ways in 2 different jurisdictions. But everywhere, DSM 3 investment took a huge dive in the mid-1990s. It was 4 a very very dramatic falling off of billions and 5 billions of dollars of investment in DSM and it 6 happened very quickly over only about an 18 month 7 period from when the curve started to fall until it 8 sort of started to slow down a little bit. So it 9 basically went into free fall. There's a number of 10 ways that you can explain this, depending on what 11 lens you look through. 12 For me, fundamentally what happened is 13 that the electric utility sector in the 1970s and 14 1980s, they just failed to read their market 15 properly. They just didn't see it coming. And this 16 was true everywhere. And it was true not only of the 17 electric utility industry but of all the energy 18 commodity supply industries including the solar 19 industry, including the -- remember the synthetic 20 fuels industries and all the crazy ideas that were 21 getting all kinds of money thrown at them in the late 22 seventies and early 1980s because if everybody 23 thought that if OPEC Oil was going to go up and up 24 and up in price, we needed to find alternative 25 sources of supply. 5691 1 So the nuclear industry and the solar 2 industry and the energy commodity industry in general 3 responded to the first round of price shocks with 4 huge plans for scaling up mega project investments of 5 all sorts from the tar sands to the north sea from 6 Ontario's nuclear program to the hydroelectric 7 developments of Quebec. All of this was part of a 8 huge wave of investment that was committed in the 9 belief that the only way that one was going to be 10 able to have energy security in an OPEC world was by 11 having more and more diverse and alternative sources 12 of supply. And obviously there's some truth in that. 13 But it wasn't any of those mega projects 14 that really saved the day, it was what happened on 15 the demand side. Between the early seventies and the 16 mid 1980s, the energy productivity of all of the OECD 17 countries increased by 30, 35 per cent, including 18 places like Denmark which were already highly 19 efficient to start with. 20 And that increase in energy productivity 21 delivered more energy security to us and is still, to 22 this day, continuing to deliver more energy security 23 to us in the western world than all of the new oil, 24 gas, hydro, nuclear, coal, everything else added 25 together. That's how big it is. And that's what 5692 1 broke the back of OPEC. It wasn't the North Sea, it 2 wasn't the Gulf War, it wasn't the tar sands, it was 3 what happened on the demand-side. 4 But the flip side of that, and it's 5 actually quite a good news story for the western 6 mixed economies. But if you were one of those energy 7 commodity producers or electric utilities that made 8 large investments in gearing up for a demand curve 9 that never materialized, then the consequences could 10 be fairly severe. 11 And that's what happened in the electric 12 utility sector throughout North America. They went 13 into a very significant investment overshoot from 14 which they never really recovered in the form that we 15 were in before. And that, in some ways, triggered 16 the restructuring and re-regulation of that industry 17 that has been going on now for the last 10 or 15 18 years. 19 And DSM was a casualty of the 20 restructuring and re-regulation activities that were 21 occurring. But it was also the case that many many 22 utilities found themselves in surplus supply 23 situations even without finishing all of the projects 24 that they started in the seventies and eighties. 25 So DSM took a dive. And some North 5693 1 American entities stayed in, Manitoba being one of 2 them. Manitoba is playing on the weekend, if you 3 want to use a sports analogy when it comes to DSM, 4 but many dropped out altogether. The ones that did 5 stay in, there were dramatic reductions in what they 6 were doing. They retreated into a lost opportunity 7 at best sort of mode. And we saw the rate of 8 improvement begin to languish as a result, 9 improvement in electricity efficiency. 10 DSM is now on a resurgence. It's 11 coming out of the ashes, if you like, in different 12 forms, depending on what sort of re-regulation and 13 restructuring history a particular jurisdiction 14 has been through. So in some places, where there 15 no longer is a large electric utility with a 16 monopolistic control on the market-place, the DSM 17 activity is being sponsored through things like 18 public benefits charges where the operator of the 19 wire system in the jurisdiction puts a charge onto 20 all of the users of the transmission system that 21 is applied to investments in DSM and green power, 22 for example. 23 What's extraordinary about the 24 situation here is that Manitoba Hydro has survived 25 as a public utility. That by itself actually is a 5694 1 fairly rare thing, even in Canada, when you stop 2 to think about it. A lot of our big public 3 utilities are not quite so public as they used to 4 be. But you still have that. 5 You also have gas and natural gas 6 within the same corporate structure. And it seems 7 to me that this means that there are opportunities 8 for DSM to be developed in this Province which are 9 probably greater than they are in many places 10 where a lot of the capacity that you still have 11 has been dismantled, and where there isn't still 12 as much of a commitment to the types of values 13 that we associate with Winnipeg and with Manitoba 14 which are so much a part of a community-based 15 energy efficiency and sustainable development that 16 we're talking about. 17 So I think that the bar for this 18 Province should be set very high when it comes to 19 achievability. And I think that that means 20 looking at not this silly question that there's 21 been this debate going on, Manitoba Hydro said 22 they were the best or they were among the best. 23 And we said, well, maybe, maybe not. And they 24 said oh, we are too. I mean, you know, in the 25 rebuttal, for example, they say don't compare our 5695 1 2001 numbers to the American 2001 numbers, compare 2 our 2004 numbers about what we're going to do with 3 the American 2001 numbers. I mean, come on. 4 The fact is, however, that Manitoba 5 Hydro, it's there. I wouldn't put it in the lead 6 group. But, you know, if you want to say you are 7 in the lead group, you know, if it helps -- I 8 don't want to have that argument anymore. 9 But more importantly is what are the 10 most effective approaches that can be taken to 11 getting as much of that economic potential as 12 possible into place. And I think the answer to 13 that can often be found not even among -- well, 14 among some of the best practitioners today, but 15 also by looking at some of the best programs as 16 they existed or as they were conceptualized during 17 the first round of DSM. Because we're not even 18 back there yet. We're not even close to being 19 back to the levels of investment in DSM that were 20 occurring in the late eighties and early nineties. 21 And even at the rate it's growing, it won't be 22 back there for some time. 23 So there was a lot going on back then. 24 And there was some very advanced approaches, 25 including here, that probably need to be revised 5696 1 and dusted off and put forward as models. 2 So in the end, you know, I don't think 3 that a program that would double the DSM is 4 particularly out of line at all. I think that a 5 three times DSM scenario would be an achievable 6 stretch target in Manitoba. So I don't think that 7 there's much question that if there had been, you 8 know, a full NFAAT analysis done in this case, 9 that would obviously have included an attempt to 10 look at whether or not you could achieve the 11 objective of maintaining export revenues through 12 different strategies and advancing Wuskwatim, then 13 a much larger DSM program would have revealed 14 itself than the one Manitoba Hydro has, you know, 15 and hasn't updated now for a couple of years. 16 It's interesting, by the way, that we 17 keep getting told not to worry, building Wuskwatim 18 won't affect anything we do on DSM. We're going 19 to do all the DSM we can. But I'm sure when I was 20 out here this winter, somebody asked, why don't we 21 have an update to the PowerSmart program? And 22 people say, well, we've been too busy with 23 Wuskwatim. And I thought, man, it's already 24 having an affect, you know. 25 The preparation of a new DSM strategy 5697 1 has taken second place to the priority that's been 2 given to the Wuskwatim proposal. We'll get around 3 to it later. 4 I think that what we then did at the 5 end of all of this, and there's a number of these 6 different scenarios in the written evidence, is we 7 just played with them and we did a lot of these. 8 And I am not going to go through even all of the 9 ones that are in the evidence book. But what we 10 found was that the scale of the numbers that we 11 are talking about, even within the disagreements 12 that exist over base years and growth rates, puts 13 us within the range where there would be a surplus 14 of power available for export over and above the 15 estimated on-peak market most of the time without 16 advancing Wuskwatim. It's not an insane concept. 17 It's not something that is so completely off the 18 wall it's not even worth considering. It should 19 have been considered. And if it had been, I think 20 that Manitoba Hydro would have found all kinds of 21 pleasant and positive surprises about the business 22 attractiveness of a strategy which puts supply 23 expansion in second place and puts the focus on a 24 market-based energy services, DSM oriented 25 strategy that can deliver sooner and more cheaply 5698 1 and with less risk than expansion on the supply 2 side. 3 And this particular one that's up on 4 the screen now shows the same chart we were 5 looking at earlier only with 500 megawatts of 6 wind, eventually by the middle of the 20 teens, 7 and three times the current DSM which is the 8 target that I was referring to a moment ago, and 9 building it on a forecast which conforms to our 10 adjusted basic. 11 I did take a look at adding another 12 400 gigawatt hours onto the adjusted forecast as a 13 way of at least getting a sense of the impact and 14 adjustment to our base year would have. And here, 15 for example, is the way the previous chart looks 16 with that kind of an offset. And it does -- 17 obviously everything sinks by that amount, but we 18 found still within quite plausible ranges that 19 there were actually definable alternatives to 20 Wuskwatim that could have been brought before the 21 Commission by the proponent and compared with 22 Wuskwatim and Wuskwatim advancement, but were not. 23 And we think they are very interesting 24 scenarios. We've pointed out in our evidence many 25 of the benefits we think would flow from them. 5699 1 They are the types of scenarios that are 2 consistent with the principles that Dr. Miller was 3 describing in his opening comments and in which 4 both TREE and RCM subscribe, which is that we need 5 to start now to put ourselves on a footing toward 6 sustainable energy futures. And they are more 7 effective and more equitable in their distribution 8 when it comes to issues such as job creation and 9 economic impacts. And they allow the supply-side 10 expansion, when and if it might occur, to be built 11 on a much more solid base of efficient electricity 12 use, which of course reduces again the risk and 13 strengthens the case for future investment plans 14 on the supply side. 15 So I think it was a missed 16 opportunity. And I think that there was an 17 opening represented by all the effort that went in 18 to applying for permission to build this dam, 19 there was an opportunity there to move the power 20 planning process forward to a more integrated and 21 market-based philosophy, customer-oriented 22 philosophy, if you like, and sort of missed the 23 boat. 24 It's not as big a dam as it could be. 25 The risk of these things goes up in proportion to 5700 1 the size of the project. But that might actually 2 be another reason why this is the project that 3 ought to have been used to develop the type of 4 NFAAT analyses that we are going to need if we are 5 going to navigate through the very difficult 6 climate change/energy/environmental nexus that 7 we're facing. 8 So, I mean, I could go on about this 9 but I think I would like to wrap up now before 10 people start nodding off in boredom. But just to 11 reiterate, I think that, number one, I did not 12 find what I would consider an adequate NFAAT 13 analysis in the Hydro material. I just don't 14 think it's there. Number two, I think that if 15 they were practicing a more intensive and end-use 16 oriented planning within the organization, that 17 they would be able to -- that they would find that 18 their load forecasting could be improved by doing 19 that as I think it has been in the residential 20 sector. And they would find that it would give 21 them the tools to do the type of marketing and 22 business planning which is going to be essential 23 if we are going to sort of turn the corner on 24 sustainability. 25 Maybe since I started off by 5701 1 preaching, I'll come back to that, but I spent 2 most of my time, in one way or another, trying to 3 think of ways of making sustainable development 4 actually happen. I was part of a group that sort 5 of got involved in this about 20 years ago and I'm 6 way beyond -- I'm at the stage now where I really 7 had been trying to work on practical strategies 8 for getting this, in the case of my specialty, 9 energy onto a more sustainable pathway. And I had 10 been particularly involved in the climate change 11 issue. 12 And I've just spent the last two days, 13 in fact your Minister was at the same meeting, 14 Minister of Energy -- and I think the Premier was 15 supposed to be but got snowed in because the 16 meeting was in Toronto -- of an invited group of 17 about 70 people from around the world to spend a 18 couple of days taking stock of where we stand on 19 the climate issue. And we had one of the world's 20 leading authorities on what's going on with the 21 science of climate change there to brief us on the 22 latest information and findings in that regard. 23 And a number of large corporations were 24 represented, who are achieving very large 25 reductions in their emissions and energy and are 5702 1 feeling that this is the economic future. This is 2 an initiative which has got a lot of support from 3 the British government, because Prime Minister 4 Blair I think has particularly recognized the 5 economic opportunity by pursuing the environmental 6 technologies and the emission reduction targets. 7 But what's clear to me is that if and 8 when we get serious about responding to the 9 climate change issue, and we have not yet, 10 notwithstanding the framework convention and 11 notwithstanding the Kyoto protocol, the types of 12 emission reductions that we are going to have to 13 achieve within this century, if we are going to 14 stop this problem from getting completely out of 15 control -- and it's going to be a rough enough 16 ride as it is now, the types of strategies and the 17 types of effort that it will take are so far 18 beyond what we're contemplating now that you need 19 to -- that you can -- the potential is there to 20 repeat history in the sense of missing what is 21 going to have to happen on the demand side in the 22 energy economy. 23 If we successfully address climate 24 change, there will be a transformation on the 25 demand side of the energy economy the likes of 5703 1 which will make our heads spin. Because that's 2 the only way that you can get to the low emission 3 future. You need the 100 mile a gallon car and 4 you need the energy efficient office buildings and 5 you need the R-2000 and better housing, and you 6 need the Energy Star appliances, and you need all 7 of that to happen. And what's holding us back is 8 not an absence of technology, and it's not an 9 absence of economic technology. That's the other 10 thing that's becoming very clear from all the 11 analysis that's been done. 12 We've shown in Canada, for example, 13 the possibility of a 50 per cent reduction in 14 greenhouse gas emissions using technologies that 15 we can point to which are either economic or on 16 the cusp of being economic. So that's not the 17 issue. The issue, just like it is with DSM here 18 in Manitoba, is achievability. It's mobilizing 19 the institutional and financial innovations and 20 solutions that can unlock that potential. 21 And I think that I wanted to end by 22 saying that that's another reason and perhaps a 23 more important reason why finding a way to make 24 sure that Manitoba Hydro becomes an instrument for 25 the transition to sustainable development is so 5704 1 important, because the challenge is really an 2 institutional and a financial one. And it begs 3 out for the type of mixed economy, public 4 investment, perhaps public utility type approach 5 which has worked so well here in Manitoba for so 6 long. Thank you. 7 THE CHAIRMAN: Thank you, Mr. Torrie. 8 Thank you, Mr. Miller. We shall take a 15 minute 9 break at this point, be back at five to 11:00. 10 11 12 (PROCEEDINGS RECESSED AT 10:43 A.M. 13 AND RECONVENED AT 11:04 A.M.) 14 15 MR. GREWAR: Mr. Chairman, if we might 16 just enter two exhibits while we're waiting for 17 everyone to get organized. The exhibit that Mr. 18 Torrie referred to is actually a Hydro exhibit. 19 It would be the Manitoba Hydro's TREE/RCM 20 rebuttal, Time to Respect Earth's 21 Ecosystem/Resource Conservation Manitoba rebuttal. 22 And that was actually submitted to the Commission 23 several days ago, and it would be MH/NCN 1036. 24 That's MH/NCN 1036. 25 And the only other item that I think 5705 1 we would enter would be Dr. Miller's presentation 2 to the CEC Wuskwatim hearings and that would be a 3 TREE exhibit, TREE/RCM 1008. 4 MR. MAYER: Mr. Grewar, I could have 5 sworn we did Hydro 36 yesterday? 6 MR. GREWAR: I will check. 7 DR. MILLER: One is a TREE rebuttal 8 and the other is TREE/RCM rebuttal. 9 MR. GREWAR: You certainly are sharp, 10 Mr. Mayer. It is true. We did 1036 yesterday 11 late afternoon. And so this would be, once again 12 to correct, Manitoba Hydro's TREE/RCM rebuttal 13 would be MH/NCN 1037. My apologies. 14 (EXHIBIT MH/NCN 1037: Manitoba 15 Hydro's TREE/RCM rebuttal, May 4, 16 2004) 17 (EXHIBIT TREE/RCM 1008: Dr. Peter 18 Miller's presentation to the CEC 19 Wuskwatim hearings) 20 THE CHAIRMAN: Thank you, Mr. Grewar. 21 We'll now go to the questions. Mr. Mayer? 22 MR. MAYER: Mr. Torrie, although this 23 Hydro exhibit I'll call 37 appears to have been 24 produced on May 4th, we got it yesterday with 25 clear instructions from Secretary Grewar that that 5706 1 was our homework to read for last night, and I 2 did. And I did note with interest on page 4 of 36 3 in response to TREE's allegation that the Hydro's 4 DSM program lacks continuity and characterizes the 5 program as on again/off again. And Hydro's 6 response was hardly a response in that it admitted 7 that it was on again/off again. It was on when 8 Conawapa was going to be built. It was off after 9 Conawapa wasn't going to be built. It went on 10 again. That appears to be a clear admission. 11 However, you made reference about a 10 12 per cent growth in schools and how that would be 13 totally unrealistic. Can you refer me to which 14 piece of this document -- and I am assuming you're 15 referring to this document, Exhibit 36 -- deals 16 with a 10 per cent growth rate in schools? 17 MR. TORRIE: First of all, I didn't 18 have the correct figure in front of me. It's not 19 10 per cent. I don't know what it is. I was just 20 trying to illustrate a point that we got into 21 during the cross-examination of Hydro earlier this 22 winter when we were looking at the growth and 23 floor area of different building types that would 24 have to take place in order to tune up to the 25 level of commercial electricity use in the 5707 1 forecast. And it resulted in floor area growth 2 rates which were high, especially for some of the 3 sectors which are related more closely to 4 population than to economic output, like for 5 example, schools. And there was a table that was 6 used that day. I'm just trying to see if I can 7 lay my hands on it. 8 MR. MAYER: Table 1.4 on page 25 of 36 9 deals with growth rates, growth percentages by 10 building type. It shows school is 3.8, college is 11 0.9. Table 1.5 deals with load forecast by 12 building type, no percentage. But if I calculate 13 the numbers, it certainly doesn't come out to 10 14 per cent a year although it may come out to 10 per 15 cent over the 20 years, which doesn't sound as 16 unreasonable to me as you suggested it should. 17 MR. TORRIE: Right. I'm sorry, I 18 shouldn't have even said 10 per cent. I was only 19 trying to illustrate that we found growth rates 20 that seemed large, 3.8 per cent. Is that what you 21 are seeing there? 22 MR. MAYER: I saw that at one page. 23 MR. TORRIE: And that's an annual 24 growth rate? 25 MR. MAYER: I'm not entirely sure. 5708 1 MR. TORRIE: I don't think it's for 2 floor area, because Hydro doesn't generally -- I 3 think it's probably for electricity use, isn't it? 4 Which page was it? 5 MR. MAYER: I was looking at page 25 6 of 36. 7 MR. TORRIE: These are growth rates 8 and electricity use you're looking at. And the 9 issue that I was referring to was that in our 10 reference projection where we were trying to tune 11 our model to Ontario Hydro, to Manitoba Hydro's 12 load forecast, we found that the only way we could 13 do it was by using growth rates in commercial and 14 institutional building floor areas that seemed 15 quite high. And that was one of the adjustments 16 we made in doing the adjusted forecast. 17 MR. MAYER: All right. I was 18 concerned about this 10 per cent growth rate of 19 schools, because I could see 10 per cent over time 20 with the introduction of computers. We could not 21 see a 10 per cent annual growth rate, nor can I 22 find it in any of Hydro's materials. 23 MR. TORRIE: Fine, thanks. 24 MR. MAYER: I have only one other 25 question, Mr. Torrie. Exactly when did we break 5709 1 the back of OPEC? I am now paying 86.9 cents a 2 litre for my gas. 3 MR. TORRIE: Yeah. Well, then some 4 other things happened later. 5 MR. MAYER: I have no further 6 questions. Thank you, sir. 7 THE CHAIRMAN: Mr. Torrie, I just 8 wanted a sense of, in general terms, what your 9 position is in regards to the viability of the 10 proposal made by Manitoba Hydro/NCN in terms of 11 they have made a commitment to 250 megawatts of 12 wind power, twice DSM along with this 200 megawatt 13 project. I'm not sure if it's 250 megawatt 14 wind-generated energy or 200. But are you saying 15 that if all of these targets are achieved, this 16 puts Hydro in a situation where it has surplus 17 power for sale and that, as a result, increases 18 the risk to an extent which is beyond the hurdle 19 rate which is what we've heard here today or since 20 the hearings are on? 21 MR. TORRIE: I think if I understand 22 your question that my answer is yes. That the 23 general impression that one gets from the Manitoba 24 Hydro evidence is that they don't think that 25 there's any credible scenario in which they would 5710 1 not be able to sell most, if not all, of their 2 power into that high priced market. And I think 3 that there are some scenarios that should have 4 been looked at in which you could get over that 5 line. And if you advance Wuskwatim, I think it 6 becomes even more likely that you could get over 7 that line, but presumably we'll be on a down again 8 DSM curve if that starts to happen. 9 THE CHAIRMAN: Mr. Sargeant. 10 MR. SARGEANT: A question for Dr. 11 Miller. In your opening comments, you made a 12 somewhat passing reference to the cold climate and 13 the large distances in the country. And I'm just 14 wondering how much our climate does contribute to 15 the fact that Canadians -- and I have read 16 anecdotally Manitobans are very high users of 17 electricity or energy -- how much does our 18 climate, given the fact that our winters are 19 pretty cold, our summers can be pretty hot, how 20 much does that contribute to our excessive use or 21 apparent excessive use of energy? 22 DR. MILLER: Well, I certainly am not 23 in a position to break out the numbers. I mean, 24 this was basically a response that we encountered 25 that of course our energy consumption is up there. 5711 1 And I mean, it's not unreasonable to think that 2 that is a significant contributor to it. But what 3 we were looking at is, you blame the climate for 4 everything, then that suggests that there's 5 nothing that we, as a society, could or should do 6 about it, that it's inevitable. And I think first 7 of all, on the climate issue itself, it's been 8 pointed out that in the States, the heat, 9 particularly in the southern states, is such that 10 the air conditioners are on for many more months, 11 or equivalent months anyhow, of what our heating 12 season would be. And so there are climate factors 13 on the other side as well. But the question is 14 whether this is exacerbated. 15 I mean, if we live in a cold climate, 16 one would expect peak standards of conservation, 17 right? But the reflexive response has been, keep 18 the energy rates low. And this is done sometimes 19 by, as in earlier years, cutting back on 20 investments in conservation. It's done by, I 21 believe this is the case, not attaching a 22 Provincial sales tax to energy consumption for 23 heating. It's done by the fact that we have a 24 Crown corporation which doesn't have to pay 25 dividends to anyone. It wasn't considered 5712 1 extraordinary. It made a lot of people angry, 2 which the Provincial government did on a one-time 3 basis to deal with the budgetary problem, but why 4 shouldn't there be a regular dividend built into 5 the structure? 6 MR. MAYER: Some of us agree with 7 that. 8 DR. MILLER: And just to point out 9 that there are different ways of dealing with 10 windfall profits from a Provincial resource. 11 Alberta created a Heritage Fund out of its 12 windfall, achieved in different ways, through 13 royalties, of energy sales. And that goes to 14 social investment. An Albertan to buys gas at the 15 tank, they don't have the sales tax, but they are 16 basically paying market rates to fuel their car, 17 they are paying market rates I believe for their 18 electricity. 19 MR. MAYER: But we had a rebate on 20 natural gas, a direct rebate from the Heritage 21 Fund a couple of years ago. 22 MR. SARGEANT: Which would correlate 23 to the policy decisions of Manitoba to keep Hydro 24 rates low for -- 25 DR. MILLER: Except that's a one time 5713 1 event versus a continuous subsidy to the program. 2 MR. SARGEANT: But, I mean, it's 3 arguable that that may or may not be a legitimate 4 policy decision, to keep the rates low for all 5 Manitobans. 6 DR. MILLER: But in my brief I was -- 7 MR. SARGEANT: I don't really want to 8 debate that point. 9 DR. MILLER: Okay. 10 MR. SARGEANT: Mr. Torrie, in your 11 concluding comments, well throughout your 12 presentation but in your concluding comments, you 13 made the point that in your view, Hydro has not 14 made a very good case for the NFAAT. 15 Now, if they had made a good case, in 16 your view, would it have shown that there was no 17 need -- or if they had made a better case, it 18 would show that there is indeed a need for 19 Wuskwatim? 20 MR. TORRIE: I think that, to be 21 careful, to make sure we're using the terms the 22 same way on this, the need for Wuskwatim has to be 23 defined before I can answer your question. And if 24 the need for Wuskwatim is to maintain export 25 revenues and profits at their current levels, if 5714 1 we accept that as the need, then -- there may be 2 some Manitobans that don't agree with that, but 3 that's where I started from. I said all right, we 4 just accept that's the need, because there isn't 5 any need in a more cogent sense for this dam. 6 There's no way it's needed by Manitobans for their 7 own electrical needs, for example, any time soon. 8 And you don't need, I suppose, to increase or 9 maintain your export revenues either. 10 But if you take that as the need, then 11 I think what the analysis would have shown is that 12 there are different ways that you could do it, and 13 they might be better ways. I think that they 14 might be. That's my hunch, because I think that 15 so many of the benefits of the DSM/distributed 16 generation type of approach would reveal 17 themselves if you did the type of sophisticated 18 portfolio analysis of that kind of a scenario, 19 where you get to see the effect it has on your 20 cash flow and how quickly you can cycle your 21 capital, and the extent you can get that 300 or 22 400 million dollar triangle that opens up on that 23 chart we were looking at, which Wuskwatim can't 24 touch because it can't be built fast enough. And 25 you start to bring all of those things into the 5715 1 quantification of the benefits of, for example, a 2 DSM/DG alternative, then, yes, I think an NFAAT 3 analysis might have very well concluded that 4 Wuskwatim advancement was not the best way to meet 5 the need that has been identified here. 6 MR. SARGEANT: Without oversimplifying 7 all of the work that you've done, your bottom 8 line, at least as I understand it, is that to 9 realize that need to keep up export revenues could 10 be done better by other means than building 11 Wuskwatim. 12 MR. TORRIE: Yes. 13 MR. SARGEANT: Thank you. 14 MR. TORRIE: That's the question that 15 at least should have been explored. 16 MR. ABRA: Dr. Miller, Mr. Torrie, my 17 name is Doug Abra. I'm counsel to the Clean 18 Environment Commission. With me is Jean McLellan 19 who is from Price Waterhouse Coopers and is one of 20 the consultants on the NFAAT issue that's before 21 the Commission. 22 Firstly, Mr. Torrie, I'm not 23 attempting to challenge your qualifications at 24 all, but I do want to ask you some questions 25 related to your experience related to certain 5716 1 aspects. In particular, in your initial filing, 2 you gave a background on your experience and so 3 forth as it relates to DSM, and what roles you 4 had, or at least who you had served with as far as 5 DSM and so on is concerned. But what exactly, 6 sir, have you done in that regard? Have you 7 actually planned DSM programs -- or you've 8 obviously spent a significant amount of time on 9 DSM, but what role have you played in that regard? 10 MR. TORRIE: My direct experience with 11 DSM has been never from inside utility designing 12 programs and never from within a government 13 either, I've been self-employed for my whole life, 14 so as a policy consultant in this particular case 15 and as a technical consultant. So I've done quite 16 a bit of analytical work on DSM, very often as the 17 material on my qualifications indicates, from the 18 perspective of evaluating or assessing a utility 19 or government strategies. 20 I introduced the so-called supply 21 curve concept of costing electricity conservation 22 to Canada. We did the first -- you know, this 23 "cost of save the electricity method" that you see 24 throughout the DSM reports that were done by 25 Manitoba Hydro consultants, I introduced that 5717 1 approach to Canada back in the mid-1980s as a way 2 of trying to bring a more symmetrical approach to 3 comparing demand and supply-side options. So I've 4 been there in terms of my engagement in the issue, 5 but it's been primarily in an analytical mode. 6 MR. ABRA: Okay. What about load 7 forecasting, have you actually done load 8 forecasting yourself, or what experience do you 9 have as far as analyzing load forecasting is 10 concerned? Because one of the basic precepts of 11 your report is the load forecast that Hydro has 12 done. 13 MR. TORRIE: Well, I have a lot of 14 experience constructing quantitative analyses of 15 energy futures. And I'm sorry to not just say 16 load forecasting, but part of the point, I guess, 17 of the perspective that I tried to bring to this 18 is that the load forecasting approach to thinking 19 about the energy future is part of the problem. 20 I have done it, and I have done a lot 21 of work over the years of critical analysis of 22 load forecasting exercises. 23 MR. ABRA: By various utilities? 24 MR. TORRIE: Yes. 25 MR. ABRA: Okay. What about wind 5718 1 generation, wind development and so on? 2 MR. TORRIE: I don't know very much 3 about wind generation. I would not portray myself 4 as an expert on that by any means. I try to keep 5 current of what I need to know to integrate it 6 into bigger energy planning, and scenarios and 7 studies, but -- 8 MR. ABRA: We heard evidence from Dr. 9 Higgin yesterday on behalf of CAC/MSOS that 10 because of what he identified as being fairly 11 significant risks with respect to the development 12 of wind, that he didn't think that it was an 13 option that really Hydro should be looking at on 14 its own, as far as alternatives are concerned. Do 15 you agree or disagree with that, or do you not 16 want to comment because you don't have much -- 17 MR. TORRIE: I have not reviewed that 18 transcript. Someone did describe in a little bit 19 more detail the point that you're making. And as 20 I understood it, that the risk that he was 21 referring to was the business risk of a large 22 electric utility getting in