4309 NSUARB-ML-Nov 14, 2013

NSUARB-ML-2013-01 Matter No.
M05419
NOVA SCOTIA UTILITY AND REVIEW BOARD
IN THE MATTER OF:
The Maritime Link Act
- and -
IN THE MATTER OF:
An Application by NSP MARITIME LINK INCORPORATED for the approval of the Maritime Link Project __________________________________________________________
TRANSCRIPT __________________________________________________________ HEARD BEFORE: Peter W. Gurnham, Q.C., Chair Roland A. Deveau, Q.C., Vice-Chair Offices of the Board Halifax, Nova Scotia November 14, 2013
PLACE HEARD:
DATE HEARD: APPEARANCES:
DICTUM DIGITAL INC.
CERTIFIED COURT REPORTERS
__________________________________________________________ Board Counsel: S. Bruce Outhouse, Q.C. Richard Melanson Steve Pronko P.Eng. Jocelyn Fraser, C.A. Anne Bonang, NSUARB
Board Advisors:
Hearing Clerk: Electronic Display: Recorded by: Transcribed by:
Jeff Goodine Dictum Digital Inc. Dictum Digital Inc. Halifax, Nova Scotia Firefly Digital Media Inc.
Audiocast by:
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P R O C E E D I N G S PAGE NO.
May 28, 2013 Hearing opens..................................... Discussions....................................... Opening Statement of NSP Maritime Link Inc........ Opening Statement of Nova Scotia Power Inc........ Opening Statement of the Province of Nova Scotia.. Opening Statement of the Consumer Advocate........ Opening Statement of the Small Business Advocate.. Opening Statement of Canadian Wind Energy......... Opening Statement of Lower Power Rates Alliance... Opening Statement of the Industrial Group......... Opening Statement of the NS Liberal Caucus........ Opening Statement of the PC Caucus................ NSPML ALTERNATIVES ANALYSIS PANEL Direct Examination by Mr. Smellie............... Opening Statement of NSP Maritime Link............ Cross-Examination by Mr. Merrick................ Cross-Examination by Mr. Blackburn.............. Discussions....................................... Hearing adjourns.................................. 99 115 124 258 299 302 1 1 13 19 20 33 42 59 65 78 83 90
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May 28, 2013 - Evening Session Hearing resumes................................... ORAL PRESENTATION BY MR. BARRY ALEXANDER.......... ORAL PRESENTATION BY MR. BILL BLACK............... ORAL PRESENTATION BY MS. BARBARA PIKE............. ORAL PRESENTATION BY MR. LUCIANO LISI............. ORAL PRESENTATION BY MR. FRED MORLEY.............. ORAL PRESENTATION BY MR. JOHN HERRON.............. ORAL PRESENTATION BY DR. BARBARA CLOW............. ORAL PRESENTATION BY MS. GAIL BAIKIE.............. ORAL PRESENTATION BY MS. ROBERTA FRAMPTON-BENEFIEL ORAL PRESENTATION BY MR. KEITH MacDONALD.......... Hearing adjourns.................................. May 29, 2013 Hearing resumes................................... Discussions....................................... NSPML ALTERNATIVES ANALYSIS PANEL Cross-Examination Cross-Examination Cross-Examination Cross-Examination by by by by Ms. Ms. Mr. Mr. Rubin.................. Stewart................ Levy................... Thomson................ 459 570 603 695 700 439 439 303 305 321 336 349 364 370 380 390 409 431 437
Hearing adjourns..................................
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May 30, 2013 Hearing resumes................................... Discussions....................................... NSPML ALTERNATIVES ANALYSIS PANEL Cross-Examination Cross-Examination Cross-Examination Cross-Examination Cross-Examination Cross-Examination by by by by by by Ms. Mr. Mr. Mr. Mr. Mr. Abreu.................. Stewart................ Younger................ Bates.................. Baillie................ Outhouse............... 704 717 796 863 871 944 701 701
Hearing adjourns.................................. 1006 May 31, 2013 Hearing resumes................................... 1007 Discussions....................................... 1007 NSPML ALTERNATIVES ANALYSIS PANEL Cross-Examination by Mr. Outhouse (Contd....... Questions from Mr. Dhillon...................... Questions from Mr. Deveau....................... Questions from The Chair........................ Further Cross-Examination by Ms. Rubin.......... 1010 1142 1173 1220 1248
Discussions....................................... 1251 Hearing adjourns.................................. 1253
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June 1, 2013 Hearing resumes................................... 1255 ENGINEERING, DESIGN, AND NSPI OPERATIONS PANEL Direct Examination by Mr. Smellie............... Cross-Examination by Mr. Mahody................. Cross-Examination by Mr. Blackburn.............. Cross-Examination by Mr. Stewart................ Cross-Examination by Mr. Outhouse............... Questions from Mr. Dhillon...................... Questions from Mr. Deveau....................... Questions from The Chair........................ Cross-Examination by Ms. Rubin.................. 1257 1263 1289 1331 1339 1369 1407 1438 1444
Discussions....................................... 1447 Hearing adjourns.................................. 1450 June 3, 2013 Hearing resumes................................... 1451 Discussions....................................... 1454 POLICY AND COMMERCIAL PANEL Cross-Examination Cross-Examination Cross-Examination Cross-Examination Cross-Examination by by by by by Mr. Mr. Mr. Ms. Ms. Merrick................ Mahody................. Miller................. Rubin.................. Stewart................ 1455 1493 1506 1532 1594
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June 3, 2013 MR. PAUL WIEBE (via teleconference) MR. ALAIN BOISSET (via teleconference) Direct Examination by Mr. Outhouse.............. 1619 Questions from Mr. Dhillon...................... 1621 Questions from Mr. Deveau....................... 1627 POLICY AND COMMERCIAL PANEL (Resumed) Cross-Examination by Ms. Stewart (Contd)....... Cross-Examination by Mr. Stewart................ Questions from Mr. Dhillon...................... Questions from Mr. Deveau....................... Questions from The Chair........................ MR. JOHN DALTON Direct Examination by Mr. McGrath............... 1707 Opening Statement of Mr. John Dalton.............. 1723 Cross-Examination by Mr. Mahody................. 1733 Hearing adjourns.................................. 1752 June 4, 2013 MR. JOHN DALTON Cross-Examination by Mr. Mahody (Contd)........ Cross-Examination by Mr. Blackburn.............. Cross-Examination by Ms. Stewart................ Cross-Examination by Mr. A. Stewart............. Cross-Examination by Mr. Levy................... Cross-Examination by Mr. Younger................ Cross-Examination by Mr. B. Stewart............. Questions from Mr. Dhillon...................... Questions from Mr. Deveau.......................
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1635 1661 1688 1692 1700
1753 1786 1818 1837 1909 1971 2001 2008 2024
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June 4, 2013 Questions from The Chair........................ 2031 CONSUMER ADVOCATE PANEL Direct Examination by Mr. Merrick (Quals)....... Cross-Examination by Mr. Smellie (Quals)........ Direct Examination by Mr. Merrick............... Direct Examination by Mr. Merrick (Quals)....... Cross-Examination by Mr. Smellie (Quals)........ Direct Examination by Mr. Merrick (Contd)...... Direct Examination by Mr. Merrick (Quals)....... Direct Examination by Mr. Merrick (Contd)...... 2039 2043 2044 2050 2057 2058 2060 2061
Opening Statement of Mr. Levitan.................. 2062 Opening Statement of Mr. Chernick................. 2076 Hearing adjourns.................................. 2084 June 5, 2013 Hearing resumes................................... 2085 Discussions....................................... 2086 CONSUMER ADVOCATE PANEL Cross-Examination by Mr. Dalgleish.............. Cross-Examination by Mr. Smellie................ Cross-Examination by Mr. A. Stewart............. Cross-Examination by Mr. McGrath................ Cross-Examination by Mr. Outhouse............... Questions from Mr. Dhillon...................... Questions from Mr. Deveau....................... Cross-Examination by Ms. Rubin.................. 2086 2099 2144 2145 2194 2208 2215 2230
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June 5, 2013 MR. PHILIP RAPHALS Direct Examination by Mr. Northey............... 2236 Direct Examination by Mr. Northey (Quals)....... 2242 Cross-Examination by Mr. Campbell (Quals)....... 2249 Opening Statement of Mr. Philip Raphals........... 2253 Cross-Examination by Mr. Campbell............... 2269 MR. ROBERT FAGAN Direct Examination by Mr. Outhouse.............. 2303 Opening Statement of Synapse Energy............... 2310 Cross-Examination by Mr. Smellie................ Questions from Mr. Deveau....................... Questions from The Chair........................ Re-Direct Examination by Mr. Outhouse........... 2316 2339 2362 2366
Discussions....................................... 2368 Hearing adjourns.................................. 2371 June 6, 2013 Hearing resumes................................... 2373 Discussions....................................... 2373 POLICY AND COMMERCIAL PANEL (Resumed) Cross-Examination by Mr. Levy................... 2377 Cross-Examination by Mr. Outhouse............... 2423 Questions from Mr. Dhillon...................... 2432
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June 6, 2013 Questions from Mr. Deveau....................... Questions from The Chair........................ Cross-Examination by Ms. Rubin.................. Further Cross-Examination by Mr. Levy........... CABLE CONSULTING INC. PANEL (via teleconference) Direct Examination by Mr. Outhouse.............. 2461 Questions from Mr. Dhillon...................... 2463 Questions from Mr. Deveau....................... 2474 MORRISON PARK ADVISORS PANEL (via teleconference) Direct Examination by Mr. Outhouse.............. Cross-Examination by Mr. Levy................... Questions from Mr. Dhillon...................... Questions from Mr. Deveau....................... Questions from The Chair........................ Cross-Examination by Mr. Smellie................ Re-Direct Examination by Mr. Outhouse........... Discussions....................................... 2485 2487 2557 2570 2579 2585 2588 2590 2438 2443 2453 2457
Hearing adjourns.................................. 2597
November 14, 2013 Hearing resumes................................... 2599 Opening Statement of the Consumer Advocate........ 2606 Opening Statement of the Small Business Advocate.. 2612 NSPML PANEL Direct Examination by Mr. Smellie................ 2622
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November 14, 2013 Opening Statement of NSPML Panel................... 2625 Cross-Examination by Mr. Merrick................. Cross-Examination by Mr. Blackburn............... Cross-Examination by Mr. MacDonald............... Cross-Examination by Mr. dEntremont............. Cross-Examination by Mr. McGrath................. Cross-Examination by Mr. Outhouse................ Questions from Mr. Deveau........................ Questions from The Chair......................... Further Cross-Examination by Mr. McGrath......... Cross-Examination by Mr. Mahody.................. Further Cross-Examination by Mr. Blackburn....... 2629 2714 2739 2752 2758 2800 2835 2874 2887 2888 2890
Hearing adjourns................................... 2894
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LIST OF EXHIBITS
EXHIBIT NO.
DESCRIPTION May 28, 2013
PAGE NO.
M-104
Tear sheets from the Halifax Herald/Cape Breton Post............................... Map - Atlantic Canada Energy Tariffs............................ May 29, 2013
M-105
114
M-106
Renewable Energy Integration Study Update....................... Stability Agreement................ May 30, 2013
443 493
M-107
M-108
Nova Scotia Energy Mix 2040 Pie Graph.......................... Base Load Case - Energy by Source Category by Year............ May 31, 2013
832
M-109
971
M-110
Combined undertakings.............. June 1, 2013
1008
M-111
Mutual Energy press release........ June 3, 2013
1269
M-112
ROE Data re: McShane Reply Evidence...........................
1454
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LIST OF EXHIBITS
EXHIBIT NO.
DESCRIPTION June 3, 2013
PAGE NO.
M-113
North American Windpower Press Release..... ................ Extrapolation of Exhibit M-2, page 33, Figure 2-1........... Dalton Report - Replacement Table ES-2 and Table 4 Sensitivity Case Results........... Report - Gull Island............... June 4, 2013
1487
M-114
1514
M-115
1715 1743
M-116
M-117
Cape Breton Post Article re: Maritime Link................. Nalcor Submission to Board of Commissioners of Public Utilities re: Muskrat Falls Project, dated November 10, 2011............................... REC Pricing Chart - Article Renewable Energy World.com......... News Release article from Premier of NS Website re: Energy Projects.................... Translated Article from Le Soleil re: Hydro Quebec........ Errata to Levitan (LAI) Evidence and RIRs..................
1780
M-118
1931
M-119
1938
M-120
1978
M-121
1988
M-122
2045
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LIST OF EXHIBITS
EXHIBIT NO.
DESCRIPTION June 4, 2013
PAGE NO.
M-123 M-124
Exhibit LAI-10 page 1 of 1......... Exhibit LAI-11, page 1 of 1........ June 5, 2013
2045 2046
M-125
Excerpt from Board Decision 2010 NSUARB 196.................... LAI-10 According to WKM Reply Evidence..................... ERCOT Quick Facts.................. Errata - Mr. Philip Raphalss Evidence................. Direct Testimony of George Foote (NSUARB-E-ENSC-R-12)......... Errata - Synapse Energy............ Direct Testimony of Tim Woolf - ENSC Electricity DSM Plan 2012...................... June 6, 2013
2086
M-126
2103 2137
M-127 M-128
2269
M-129
2283 2304
M-130 M-131
2325
M-132
Presentation Labrador Mining and Power How Much and Where From............... Argus US Electricity Report.......
2517 2538
M-133
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LIST OF EXHIBITS
EXHIBIT NO.
DESCRIPTION November 14, 2013
PAGE NO.
M-147
Province of Newfoundland (Hansard) 47th General Assembly Volume XLVII Number 25 (2nd Session) dated November 06, 2013........... Various Board documents referring to NSPI and Affiliates Code of Conduct and FAM Audit.....................
2643
M-148
2796
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LIST OF UNDERTAKINGS NO. May 28, 2013 U-1 To provide the operating range for $/Mwh re: Wind Integration Costs................................... To provide the reference to the contractual right to Nalcor Surplus Energy (M-46)................... To draft a Low Load scenario onto Figure 4-4 of Exhibit M-2.......... May 29, 2013 U-4 To provide Draft GE Wind Integration Study to the Boards Confidential Site............... To provide names of the three small Electrical Utility Projects forecasted in NL............... To provide the On-Peak/Off-Peak Division by Zone (NB & NL).............. May 30, 2013 U-7 To provide the DSM costs from ENSC.................................... If available provide a copy of the letter from the Premier of New Brunswick to Hydro Quebec........... PAGE NO.
144
U-2
214
U-3
224
441
U-5
653
U-6
662
717
U-8
876
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LIST OF UNDERTAKINGS NO. May 30, 2013 U-9 To provide any documentation or correspondence between the Province of Nova Scotia and NSPI regarding the naming of Muskrat Falls in the Regulations............................. May 31, 2013 U-10 To confirm the NPV differential for the ML assuming a Net Back Pricing Component........................ To provide a Strategist Run Analysis reflecting no purchase of surplus power and no export of surplus power through the Maritime Link............................
To provide whether or not the Federal Loan Guarantee can be extended to the full 50 years vice 35 years............................
PAGE NO.
879
1022
U-11
1023
U-12
1042
U-13
To advise does the backstop still apply at full avoided cost beyond the 35-year point [satisfied at hearing]................... To provide a reconciliation demonstrating that the expected transmission tariffs will be equal to or balance out with the capital and re-dispatched costs..........
1046
U-14
1061
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LIST OF UNDERTAKINGS NO. May 31, 2013 U-15 To confirm that the unbundled option was the one costed and included in the ML Alternatives Analysis................................. To provide the Rate Base for 2011 and 2012 [satisfied at hearing].......... To provide copies of the Standard & Poors Report relating to the credit rating of NSPI re: the ML................................... June 1, 2013 U-18 To provide the reliability/availability percentage numbers for the entire project, including the land portions........................... To provide an analysis of how the cable failure rates of 0.04 and 0.08 were attained.................. To provide the probabilistic analysis of how the risks were assessed and quantified................. To file an updated version of the Gates and Milestones Projections in Enerco IR-8.............. To provide a Proposed Reporting Schedule to include timelines and elements............................ PAGE NO.
1217
U-16
1229
U-17
1242
1347
U-19
1354
U-20
1408
U-21
1413
U-22
1425
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LIST OF UNDERTAKINGS NO. June 1, 2013 U-23 To provide an estimated breakdown of project costs utilizing the NSPMLs failure rate numbers of 0.04 and 0.08........................... June 3, 2013 U-24 To provide a transcript of an analysts call (Huskilson) dated December 18, 2012................. To provide the Earnings per Share (EPS) for Emera shareholders as a result of the entire ML Project (Accretion Analysis).................... To provide the 50-year version of the XL Model Exhibit M-14 CA/SBA IR-112(a)........................ To update the status of Conditions Precedents for NL found in Exhibit M-2(iv), Appendix 4.03, FLG s. 3.5...... To provide an explanation of costs during an extended outage and costs incurred...................... 1 To provide the maximum transmission capacity of the NB System 2 To verify the maximum capacity of the MEPCO transmission lines......... PAGE NO.
1435
1477
U-25
1505
U-26
1509
U-27
1583
U-28
1593
U-29
1604
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LIST OF UNDERTAKINGS NO. June 3, 2013 PAGE NO.
U-30
To verify who pays for the reservations on a system once its blocked and what the incurred costs are once the Transmission has been nominated under the NB TUA........................ Enerco/AHB 2000 to provide a list of proposed items to be included in reports to the Board and how often the items are to be reported (including reports by NSPML and by an engineering firm retained by the Board............................ To provide a detailed analysis of the Transmission Tariff Revenues for ML and reconcile the differences in these amounts between Exhibit M-110 (U-14) and Exhibit M-12 (IR-64)......... June 4, 2013
1617
U-31
1633
U-32
1660
U-33
To provide derivation of the Portland Creek levelized cost of $78/MWh.............................. To provide the figures used to derive Power Advisorys estimates and reconcile with the response that NLH is carrying a 9.2 cents/KWh (2010$) in the wind PPAs for new wind development.............................
1929
U-34
1933
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LIST OF UNDERTAKINGS NO. June 4, 2013 U-35 To provide the data missing from the Excel spreadsheet at Exhibit M-81(i) Power Advisory Output Summary re: CanWEA IR-22.3.............. To provide the NL DSM Forecast used in calculations for preparation of the Power Advisory Reports................................. To provide a version of the Table from Exhibit M-115 using a 6.56 percent rate..................... June 5, 2013 U-38 To provide a link or a list of sources concerning pump storage costs as it relates to wind integration............................. To provide a revised table (Exhibit M-45, LAI-9) reflecting a netback pricing to Woodbine............................. To provide information detailing the requirements necessary in order to complete a Real Option Value (ROV) study......... To provide results of hybrid-run scenario (Table 10/11 format) comparing GHG graphs and backup data.................................... PAGE NO.
1942
U-36
1970
U-37
2031
2143
U-39
2229
U-40
2232
U-41
2361
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LIST OF UNDERTAKINGS NO. June 4, 2013 U-42 Provide detailed breakdown of the integration costs per KWh................................. To replicate the table found at Exhibit M-61, page 7 of 15 using the Argus figures found in Exhibit M-133........................ To produce a demonstrated band of costs displaying the pricing differences between Surplus Energy purchased at netback to the NB/NE interconnect versus Woodbine............ November 14, 2013 U-45 To provide a copy of the Edison Electrical Institute Standard Form - Master Purchase and Sale Agreement............................... To obtain and file a document that demonstrates the interruptible load showing the absolute size, class of customer and percentage of Newfoundland load....................... To provide a description of any protection provided under the Energy Access Agreement................. PAGE NO.
2418
U-43
2538
U-44
2587
2796
U-46
2813
U-47
2846
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Page 2599 Halifax, Nova Scotia
--- Upon commencing at 9:03 a.m. THE CHAIR: everyone. Well, good morning,
This is a hearing on the application by NSP
Maritime Link Incorporated for approval of the Maritime Link Project. And the purpose of this hearing is to
examine whether the conditions imposed by the Board in its July decision have been satisfied. The Panel for this hearing is me, I'm Peter Gurnham, and Roland Deveau is the Vice-Chair. Kulvinder Dhillon, who was part of the Panel in the last hearing, is out of the country on an extended absence, and so you're down to the two of us. I think we'll start with appearances, and we'll start with NSPML. MR. SMELLIE: Chairman. Good morning, Mr.
James H. Smellie together with Rene Gallant.
And also seated with us at the counsel table, Ms. Shellie Woolham on behalf of NSPML. THE CHAIR: Thank you.
Nova Scotia Power. MS. GODBOUT: Good morning, Mr. Chair.

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Nicole Godbout and David Landrigan for Nova Scotia Power, and we also have with us Tim Wood for Nova Scotia Power. THE CHAIR: Thank you.
Consumer Advocate. MR. MERRICK: Good morning. John
Merrick and Bill Mahody for the Consumer Advocate. THE CHAIR: Thank you.
Small Business Advocate. MR. BLACKBURN: Nelson Blackburn and
Paul Miller for Small Business Advocate. THE CHAIR: Alliance. MR. MacDONALD: the Lower Power Rates Alliance. THE CHAIR: MacDonald? Over there. Sorry. Where are you, Mr. Craig MacDonald for The Lower Power Rates
Thank you.
PC Caucus. MR. d'ENTREMONT: Hi, Chris
d'Entremont and Kati Saxton for PC Caucus. THE CHAIR: Good morning.
Port Hawkesbury Paper. (NO RESPONSE)

NSUARB-ML-2013-01/M05419 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 you. Chair. THE CHAIR: MR. McGRATH: NSDOE. Good morning.
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Steve
McGrath and Ryan Brothers for the Department of Energy. THE CHAIR: Thank you.
Board counsel. MR. OUTHOUSE: Good morning, Mr.
Bruce Outhouse, and with me my partner, Richard Of course, on the left Board advisory staff,
Melanson.
Steve Pronko and Jocelyn Fraser. THE CHAIR: Thank you. The
A couple of preliminary matters.
exhibits that were filed since the last hearing have been marked, and I'm sure everyone has copies of them. Mr. Outhouse, did you want to say a word about the circumstances surrounding the transcript of the technical conference? MR. OUTHOUSE: Yes, Mr. Chair. Thank
As I think everybody here knows, the technical conference was put in place and they're often held in these matters, but not recorded and not part of the official record.
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In this case, because there were

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going to be no IRs, it was understood that the transcript would be -- sorry, that the technical conference would be recorded, a transcript prepared and circulated to all parties. In effect, it was in lieu of written IRs and responses that the information that was given at the technical conference could be used by parties in preparing their written evidence, and that has been done, as you're aware from reading the evidence, that parties could use the transcript for purposes of crossexamination. So I suggest that the Board treat the transcript as it stands as a substitute for written IRs and can treat the evidence -- not evidence, the statements made at that -- by the responders, not the questioners, at the technical conference as evidence for purposes of this proceeding. As a result of that, obviously if any of the persons who made such statements are aware now that they were in error, then that should be corrected. If
there are typos in the transcript that people are aware of and that need to be corrected so that the evidence is
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correct, the Board should also be made aware of those corrections. THE CHAIR: Thank you. Then I take it
Any comments on that? that's agreed?
Just so people are aware of it --MR. OUTHOUSE: MR. GALLANT: THE CHAIR: MR. GALLANT: Mr. Chairman. Sorry, Mr. Chairman. Sorry. And folks may know this
because I think the email went to all the parties, but there was one error that was brought to our attention, which was Mr. Raphals's name was recorded incorrectly in the transcript, so wherever that incorrect name is, it should be Raphals. I just don't remember exactly how it was recorded, but it was an error. THE CHAIR: Okay. I don't recall
seeing that, so you could just make sure the Clerk's aware of that --MR. GALLANT: THE CHAIR: We will. --- and that will get to
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us. MR. OUTHOUSE: Actually, consistently
throughout, he was referred to, as I believe, it's R-a-tl-e --THE CHAIR: spelled wrong. MR. OUTHOUSE: that rather than Raphals. THE CHAIR: Okay, I did notice that. --- or something like Oh, sorry, his name was
I thought you meant he was speaking and somebody else was credited with his words. Okay.
And just so you know, the order of cross-examination of the NSPML panel will be the Consumer Advocate, the Small Business Advocate, the Lower Power Rates Alliance, the PC Caucus, Port Hawkesbury Paper, if they arrive, NSDOE, and Board counsel. Any other preliminary matters? Then we have counsel opening statements. I wasn't sure whether the NSPML statement was
a counsel Opening Statement or a panel Opening Statement, but --MR. SMELLIE: It's intended to be a
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Page 2605 I do not have an
panel Opening Statement, Mr. Chair. Opening Statement. THE CHAIR: we'll start with you.
Okay.
So Mr. Merrick,
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NSUARB-ML-2013-01/M05419 OPENING STATEMENT - CONSUMER ADVOCATE MR. MERRICK: Thank you, Mr. Chairman.
At the hearing of this application, NSPML and Emera acknowledged that the cost to ratepayers of the Nova Scotia block and supplemental energy was high. As noted by the Board, that energy would not meet the regulated requirement of being at the lowest long-term cost for ratepayers. Key to the application was the provision of surplus Nalcor energy, which would be available at market prices and then blended with the Nova Scotia block price, which would bring the total cost down to meet the assumptions of Figure 4.4 in IR-37. Because access was key to the application satisfying the regulated requirement, the Board imposed a condition requiring a commitment by Nalcor to give access to sufficient market-priced energy to meet the assumptions. Assuming Nalcor was prepared to give the commitments described at the hearing, the provision of such a commitment should have been a straightforward and simple matter, but that has not been the case.
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What has
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been filed with this Board is a commitment which has substantial changes from the assumptions at the hearing. The issue on this compliance filing is whether the commitment now put before the Board provides for sufficient access for market-priced energy that it would result in the lowest long-term cost to ratepayers. To put it another way, is the commitment filed with the Board of sufficient value that it justifies paying the high cost of the Nova Scotia block? It is the position of the Consumer Advocate that the Energy Access Agreement, or EAA, does not satisfy the condition for the following reasons. First, the quantity of energy provided by the EAA is significantly less than the -- than identified in the application as being the amount required to bring the blended price down to meet the requirement of the regulations. The maximum amount which is committed
under the EAA is an average of 1.2 terawatt hours over the 24-year term of the agreement. terawatt hours. The amount of market-priced energy
That is a total of 28.8
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that was required under the terms of the original application to provide sufficient blending was a total of 39.8 terawatt hours over the same 24-year period. There are various calculations of the shortfall which have been presented in evidence. While
the numbers may be confusing, what is clear is that there is a substantial shortfall. In our view, the shortfall is increased by the fact that Nalcor's requirements to bid or deliver energy is reduced to the extent that Nalcor requires such energy to meet native Newfoundland load. And I refer there to the Clause 4(e) of the agreement. The shortfall is increased by the fact that the amount of energy which Nalcor is committed to provide is reduced by energy supply that is outside of the agreements, energy that is bid that is not accepted, and forecast energy that exceeds the Nova Scotia Power solicitation and that is -- and that is not supplied. Second, there are now conditions attached to the energy in question which make the energy less attractive and useful to NSPI. The conditions
require NSPI to commit to energy purchases up to a year in

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Nalcor can also interrupt the delivery of any
energy at its option by as much as a year. The conditions increase the likelihood that NSPI will take less of the Maritime Link energy and will instead make energy acquisitions on market terms that are available at that time. Third, the pricing mechanism of the EAA results in Nalcor being able to charge at the highest market price bets available to Nalcor, regardless of whether Nalcor actually sells at that price. The question
can be asked; why aren't the ratepayers of NSPI entitled to a market price which is at the low end of the market? Fourth, to the extent that NSPI goes to the market to acquire energy, either because there is none available under the EAA or because the terms and pricing of the EAA energy is too restrictive or not sufficiently competitive, those acquisitions cannot be used to blend down the cost of the Nova Scotia block. In
evaluating the application, the only market-priced energy that can be taken into account in calculating the total blended cost to ratepayers is energy which is available to NSPI as a result of the EAA.
Page 2610 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22
NSUARB-ML-2013-01/M05419 Energy made available to NSPI through
the EAA will be sufficiently diminished quantity and at premium market pricing such that as a result of blended costs, the Nova Scotia ratepayers of the energy available under the Maritime Link Application will be significantly higher than the assumptions at Figure 4.4 in IR-37. To put it another way, the value to NSPI of the provisions of the EAA energy is not of sufficient value that it justifies paying the high cost of the Nova Scotia block. It is the position of the Consumer Advocate that the commitments in the EAA do not result in the lowest long-term cost to Nova Scotia ratepayers. compliance filing should be rejected. The Consumer Advocate wishes to comment on a fundamental issue that arises again in this transaction in connection to the relationship between Emera and NSPI. This transaction is another example of The
Emera seeking to leverage the cash flow of rate revenue to the advantage of Emera by having NSPI incur the capital costs of the project, thus providing Emera with an opportunity for a relatively risk-free rate of return.
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In order to do that, energy acquisition arrangements are entered into that are more convoluted than need to be and which bring with them increase risks that are related to the fee of the ratepayer. In the negotiation of these transactions, the interests of Emera are aptly and wellrepresented, but the interests of the ratepayer are not at the table. These problems arise because the entity which
is committing to pay the costs is not the entity which has to pay the costs. The Consumer Advocate acknowledges that this broader issue is not directly before the Board in this proceeding, but it is a concern that underlies this proceeding and a number of other transactions which Emera and NSPI have entered into. Thank you. THE CHAIR: Thank you.
Mr. Blackburn? MR. BLACKBURN: Thank you, Mr. Chair.
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OPENING STATEMENT - SMALL BUSINESS ADVOCATE MR. BLACKBURN: The Small Business
Advocate had indicated in its opening and closing argument in the application hearing in June that it was not, per se, opposed to the concept of the Maritime Link, and that it could benefit Nova Scotia ratepayers over its expected life. The issue before the Board then was whether the application structured met the terms of the Maritime Link Costs Recovery Process Regulation, Section 6, and that it, the project, represents the lowest longterm cost alternative for electricity for ratepayers in the province. Small Business Advocate, along with the Consumer Advocate and other intervenors, took the position that the Maritime Link, as structured in the application, did not meet this condition. The Board in
part had referenced the lack of assurance of additional market-price energy to offset the cost of the higher priced clock energy accepted this argument and at paragraph 457 of its decision stated:
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Page 2613 "The Board concludes that the availability of market-price energy is crucial to the viability of the Maritime Link project proposal as against the other alternatives. More
importantly, the Board finds that without some enforceable covenant about the availability of the market-price energy, the Maritime Link project does not represent the lowest long term cost alternative for electricity ratepayers in Nova Scotia." read) (As
To cure this defect and to require that the Maritime Link Project indeed provide the lowest long-term alternative for ratepayers as set out in the Regulations, the Board ordered at paragraph 459:
"That NSPML obtain from Nalcor

Page 2614 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22
NSUARB-ML-2013-01/M05419 the right to access Nalcor market-price energy consistent with the assumptions in the application as noted in NSUARB IR-37 and Figure 4-4. What
needed to economically serve NSPI and its ratepayers or to provide some other arrangement to ensure access to market-price energy." (As read)
The sole question before the Board now is whether the compliance filing of NSPML Exhibit M-134 filed with the Board on October 21st, 2013 meets this criteria as set out by the Board. Respectfully, it is the
position of the Small Business Advocate that the compliance filing does not meet the requirement of the Board as set out for the following reasons. One, the amount of market-price energy as set out in the compliance filing is significantly less than set out in the application and is not in conformity with the amount of energy assumed in IR-37 and Figure 4-4
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Page 2615
as required in the Board's decision. Two, the requirements of the Energy Access Agreement as set out in Appendix A of NSPML's compliance filing requires the energy be offered in fixed quantities in annual solicitation which requires NSPI to project its needs months in advance and to possibly take energy when it's not required, to be in compliance with its contractual obligations. This differs significantly from the day ahead where hourly purchase options outlined in the application and is not nearly as adaptable to NSPI's evolving needs, which often cannot be predicted months or a year in advance. Three, the price of the energy is not market priced or Mass Hub as outlined in response to IR-37 Exhibit M-11 and depicted in Figure 4-4 in the application which is Exhibit M-2 page 92 of 151 but is market price plus in the compliance filing in that the price is adjusted the higher of market priced Mass Hub or that of a spot market that may be willing, for a number of reasons, to pay a premium to the average market price. This suggests that the actual price
Page 2616 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22
NSUARB-ML-2013-01/M05419
NSPI must pay will from time to time exceed market price, Mass Hub, if there's any spot market willing to pay a premium. This is not only inconsistent with the
assumptions set out in IR-37 and Figure 4-4, but also calls into question whether the Maritime Link Project will actually meet their criteria in the Regulations as being the lowest long-term cost alternative for electricity for ratepayers in the province. Four, the guarantee of market-price energy as set out in the compliance filing is no guarantee at all, as it identifies Newfoundland's native load -Newfoundland and Labrador's native load as forgivable event. Should Newfoundland Labrador need the Muskrat
Falls energy for its own energy needs as growing energy needs in mining or other sector growth, there may be no additional energy other than block energy available to NSPI. The term of the EAA as set out in the compliance filing is for approximately 24 years, rather than the 35 years as set out in the application. And as
specifically addressed by the Board in paragraph 226 of its decision, the Board will impose a condition relative
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Page 2617
to the availability of market-price energy over the 35year term. Six, the timing of the delivery of energy is exclusive within Nalcor's control and the EAA, and at Nalcor's discretion may be delayed for up to 365 days. This differs significantly from the application and
modelling in Figure 4-4 in IR-37 which presumed a more or less steady flow of energy as needed by NSPI. The interruption of flow of energy to NSPI is likely to result in higher cost to NSPI and its ratepayers which costs may or may not be recoverable from NSPML or Nalcor, depending on the circumstances and complexity of providing proof of such additional costs. Seven, the balancing option if there is a variance as set out in the EAA presents a unique situation that posits the possibility that Emera may be allowed to compete with NSPI and independent wind energy producers in providing wind energy to make up its share of any variance in delivery of the average 1.2 terawatt hours per year under the compliance filing. This certainly was not contemplated in the application or the hearing of the application and is
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inconsistent with the concept of ensuring that Nalcor provided a minimum amount of energy over the ML to compensate for NSPI's ratepayers financial commitment, at the same time providing the lowest long-term cost alternative to Nova Scotia ratepayers. For all of the above reasons which will be further fleshed out and debated at the compliance filing hearing, the Small Business Advocate regretfully cannot support the compliance filing as meeting the requirements of the Board's decision as referenced above or of being in the best interests of Nova Scotia ratepayers. It is submitted that the compliance filing
and Energy Access Agreement is in fact more onerous and less than the ratepayers interest in the terms set out in the NSPML's application. They do nothing to balance or
alleviate the risks to Nova Scotia ratepayers that was apparent and addressed in the hearing of the application and the Board's decision, all of which we respectfully submit. Thank you. THE CHAIR: Mr. Smellie?
Thank you.
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Page 2619 Thank you, Mr. Chairman.
MR. SMELLIE:
Seated before you is the witness panel for the Applicants today. Closest to you, Mr. Wayne
O'Connor, Mr. Mark Sidebottom, Ms. Nancy Tower, and Mr. Rick Janega. As this is a continuation, sir, of the original proceeding, I take it that Mr. Sidebottom and Mr. Janega and Ms. Tower needn't be reaffirmed, but perhaps Mr. O'Connor could be affirmed. THE CHAIR: Yeah, actually I thought
I'd swear everybody in all over again --MR. SMELLIE: THE CHAIR: That's fine. --- if that's all right.
Just -- it's been a while, and there are some new players, so if that's okay with you folks. MR. SMELLIE: Please.
Page 2620 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22
NSUARB-ML-2013-01/M05419 MR. RICK JANEGA, Affirmed: MS. NANCY TOWER, Affirmed: MR. MARK SIDEBOTTOM, Affirmed: MR. WAYNE O'CONNOR, Affirmed: THE CHAIR: Thank you. And I will
swear in all of the other panels as well. MR. SMELLIE: MR. OUTHOUSE: Thank you. Mr. Chair, just before I should have said
the panel give its Opening Statement.
this at the beginning, but the -- this hearing is a solepurpose hearing; that is, to determine whether the conditions imposed by the Board's decision in July have been met. It is not to re-litigate any of the previous
issues, and so I think it's quite appropriate that these witnesses be sworn --THE CHAIR: Sure. --- at this time. But
MR. OUTHOUSE:
this hearing is for the single purpose of determining whether those conditions have been met. And I'm sure that the Consumer -- the Small Business Advocate referred to it in his opening submission that way and I'm sure all parties understand
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Page 2621
that it is not to re-litigate the Board's earlier decision. THE CHAIR: I agree, and I thought the
Board made that clear in the letter convening the hearing. MR. OUTHOUSE: emphasize that point. THE CHAIR: Okay. Well, if I strayed I just wanted to
from that script I didn't know that I did that. MR. DEVEAU: So just in relation to
that, Mr. Smellie indicated that this was a continuation. So that's the wording that you want to caution us on? MR. OUTHOUSE: I heard him say that.
I regard this as a separate proceeding in the sense that it is to determine a new issue that is before the Board whether those conditions have been satisfied. That
doesn't mean that the exhibits and all that are before the Board, but it is, in my view, a special purpose hearing to determine whether those conditions have been satisfied. MR. SMELLIE: That's fine, Mr. Chair.
I take it you don't need me to reintroduce to you and your colleague Mr. Janega and Ms. Tower and Mr. Sidebottom? THE CHAIR: No, no.
Page 2622 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Mr. Chair. MR. SMELLIE: THE CHAIR:
NSUARB-ML-2013-01/M05419 That's fine. And they just need to
adopt the evidence that's been filed in connection with this proceeding. MR. SMELLIE: All right.
Well, let me do that first of all,
DIRECT EXAMINATION BY MR. SMELLIE MR. SMELLIE: Starting with you, Do each of you
Mr. Janega, and working to your right.
adopt as your evidence in this proceeding the compliance filing Energy Access Agreement that has been filed with that compliance filing in response to the Board's conditions imposed in its July 22nd decision? MR. JANEGA: MS. TOWER: Yes, I do. Yes, I do. Yes, I do. Yes, I do. Mr. Chair, the panel's
MR. SIDEBOTTOM: MR. O'CONNOR: MR. SMELLIE:
collective responsibility is obviously to address that compliance filing, and bearing in mind the purpose of this proceeding I can tell you that each member of the panel
NSUARB-ML-2013-01/M05419 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 more formally. was involved to a greater or lesser degree in the
Page 2623
negotiations leading to the Energy Access Agreement and so they are able to address the market-priced energy condition and that agreement. Let me introduce to you Mr. O'Connor
He is the Executive Vice-President of Operations for Nova Scotia Power. He did testify before
this Board last February in NSPI's 2013 ACE Application. And Mr. O'Connor, let me ask you if you would quickly remind the Board of your qualifications, experience, and current duties with NSPI. MR. O'CONNOR: Thank you.
I joined Nova Scotia Power in October of 2012, and in my current role I am responsible for power generation, fuel procurement and IT systems. Before
joining Nova Scotia Power, I was the President and Chief Operating Officer of Emera Energy, an affiliate of NSP, and was at Emera Energy for over nine years. Prior to joining Emera, I spent 13 years with TransCanada Pipelines in various roles in their power and natural gas, marketing, and trading businesses.
Page 2624 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22
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NSUARB-ML-2013-01/M05419 Over my 25 years in the energy
business I have gathered extensive experience in the buying, selling, and hedging of physical and financial energy products mainly relating to natural gas and electricity. I have extensive experience in the energy markets of Eastern Canada, the Maritimes, the U.S. Northeast, including New York, and have a deep working knowledge of the electricity and natural gas infrastructure in these markets. I have a business degree from the University of Lethbridge in Alberta. THE CHAIR: MR. SMELLIE: Thank you. Thank you, Mr. O'Connor.
There is one correction, Mr. Chairman, to the compliance filing, and perhaps we could have Exhibit 134 up on the screen, page 7 of 20, and I'm looking, in particular, at Item 6 at the bottom of that page. The statement that is made in the first column should read as follows:
NSUARB-ML-2013-01/M05419 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 read, Ms. Tower? MS. TOWER: THE CHAIR: MR. SMELLIE: respect, Mr. Chairman. Yes, it is. Thank you.
Page 2625 "Details of the asset demarcation for the transfer of the Maritime Link assets to Nalcor and Woodbine upgrades to NSPI at the end of the 35 year term of the agreements are to be supplied to the UARB (paragraph 388)."
Is that the way that paragraph should
And that's all in that
We did file a panel Opening Statement yesterday, and with your leave, I would ask Mr. O'Connor to deliver that Opening Statement on behalf of the panel. THE CHAIR: Sure.
OPENING STATEMENT - NSPML MR. O'CONNOR: Good morning, Mr.
Chair, Members of the Board, and thank you for the opportunity to provide this Opening Statement.
Page 2626 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22
NSUARB-ML-2013-01/M05419 On July 22nd, the Board confirmed that
the Maritime Link is the lowest long-term cost option to meet demand in Nova Scotia within environmental obligations, as long as Nova Scotia Power has access to market-priced energy. The Board directed that we obtain
commercial assurances that Nova Scotia Power can access market-priced energy. The Energy Access Agreement that is
contained in the compliance filing achieves this objective. In regard to the Energy Access Agreement and the comments contained in the intervenor evidence, we would like the Board to understand our views: Nalcors 60-year history of hydrology experience and its generating planning criteria, as explained in the compliance filing and at the technical conference, gives Nova Scotia Power, Emera, and Nalcor the confidence to make the contractual commitments contained in the Energy Access Agreement. Nalcor has a contractual obligation to forecast and bid all of its available surplus energy throughout the term of the contract, up to 1.8 terawatt hours per year, and this obligation continues in each year
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Page 2627
of the agreement, including after Nalcor has met the overall commitment of an average of 1.2 terawatt hours per year. The Energy Access Agreement provides an enforceable covenant with respect to Nova Scotia Powers right to access market-priced energy. Commercial
assurances have been obtained, as requested by the Board. Because of the Energy Access Agreement, Nova Scotia Power customers have been guaranteed first access to the available surplus energy in Newfoundland and Labrador. Nova Scotia Power continues to retain the necessary flexibility about procurement to be able to make decisions in the best interests of customers, and these decisions will remain subject to the Boards prudence requirements under the Fuel Adjustment Mechanism. Nova Scotia Powers annual and additional competitive solicitations will ensure value can be obtained for customers. Green energy pricing is not applicable to the economy energy product that is the subject of the Energy Access Agreement.
DICTUM DIGITAL INC.
This energy will be available at

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the market price that is applicable to economy energy at the time of any transaction, and Nova Scotia Power will have full audit rights to protect the interests of customers. We have not attempted, in this Opening Statement, to address every item raised by intervenor evidence. We look forward to the opportunity to address
any questions the Board or intervenors may have about the Energy Access Agreement and the compliance filing. The Energy Access Agreement and the Maritime Link are in the best interests of the customers of Nova Scotia Power. We note that Board counsel
consultant, Morrison Park, agrees that we have achieved compliance with the Boards condition. Thank you. THE CHAIR: MR. SMELLIE: Mr. Chair. Thank you. That's all I have,
The panel is available for cross-examination. THE CHAIR: Mr. Merrick, were just
going to take a minute to let the cameras leave. (SHORT PAUSE) THE CHAIR: Whenever you're ready.
NSUARB-ML-2013-01/M05419 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 MR. MERRICK:
Page 2629 Thank you, Mr. Chairman.
CROSS-EXAMINATION BY MR. MERRICK MR. MERRICK: Good morning, panel.
Let me first deal with the agreement, the EAA, and just what it guarantees as a basic minimum. If you can turn to Exhibit 134, which is the application, and attached to that, I understand, is the EAA. page 7. And I see there 6(a), which says that: And if you can turn to Clause 6 at the bottom of
"Subject to Section 7(e)(i) and to force majeure events, Nalcor shall make available to NSPI an average of at least 1.2 TWh of Energy per Contract Year."
And I'm assuming that that's the clause that sets out at least a guarantee of the 1.2. I correct on that? And Mr. Janega, I'll look to you, but I'll leave it to whoever wants to answer.
Am
Page 2630 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 MS. TOWER:
NSUARB-ML-2013-01/M05419 So yes, that is the
commitment, to make available the 1.2 on average per contract year. MR. MERRICK: Here's my problem. If I
go back to 4(e), and that's on page 6, I believe, same page, it says that:
"Nalcor's requirements to bid the Nalcor Forecast or schedule delivery of the Nalcor...Energy...[et cetera, et cetera, subject to] the following: (i) Nalcor requires
such Energy to meet NL Native Load..."
Does that override 6(a)? MS. TOWER: So maybe it would be
helpful if I just talk a bit about how it works at a high level. So ultimately, what the agreement guarantees is that Nova Scotia Power will receive, on
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Page 2631
average, 1.2 terawatt hours of energy annually bid in to solicitations on average on an annual basis. So what Nalcor is required to do is bid in the amount of energy that they have after they've satisfied -- they've looked at their hydrology, their hydrology forecasts, and satisfied native load. And so the maximum amount up to 1.8 terawatt hours that comes from that calculation gets offered to Nova Scotia Power or gets put to Nova Scotia Power in a forecast. Ultimately, at the end of -- at the end of everything, Nalcor and Emera have stepped up to backstop that commitment to ensure that there will be 1.2 terawatt hours, on average, offered to Nova Scotia Power. MR. MERRICK: problem is this. All right. But my
When you look at those two clauses,
assume for the moment that in a particular year, or perhaps over the whole term of the contract, native load pre-empts or is -- native load requires the excess or surplus energy that Nalcor has, that extra 40 percent surplus. Assume for the moment that native load
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NSUARB-ML-2013-01/M05419 Does that clause override 6(a)? In
takes it all up.
other words, is even the 1.2 not a guaranteed minimum? MR. SIDEBOTTOM: So native load and
the hydrology are not forgivable events when it comes to the 1.2 average through time. MR. MERRICK: Where does it say that? Under 6(a), it's only
MR. SIDEBOTTOM:
subject to 7(e)(i) and force majeure is the commitment excusable, so it's not hydrology and load-related over the average of the term. MR. MERRICK: My problem is, I can
understand somebody perhaps advancing that as an interpretation, but I don't see it expressly set out in the contract itself. There doesn't seem, to me, to be anything to limit 4(e). MS. TOWER: parties. It is the agreement of the
It is the understanding of the parties that
that's how it works, that the 1.2 is not -- the 1.2 on average commitment is not forgivable by hydrology or native load. MR. MERRICK: So that your
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Page 2633
understanding is that when you read all the clauses together, native load may, in fact, reduce the obligation to bid -- to forecast or to bid energy down to a maximum or a minimum, an amount of 1.2, and that that you cannot encroach on for native load. Is that correct? No, that's not correct.
MR. O'CONNOR:
I believe if we look at that section, which is forgivable events, so Nalcor's requirement to bid the forecast or schedule delivery is then subject to those items there. It does not in any way alleviate them of the obligation over the term to meet at least the 1.2 terawatt hours. MR. MERRICK: MR. O'CONNOR: All right. So the forecast itself
could drop below it, but their overall obligation for the entire term is not affected by that. MR. MERRICK: At the end of the 24
years, they must have provided the 1.2 average, so that is our solid minimum guaranteed amount. MS. TOWER: MR. MERRICK: MR. JANEGA: Is that correct?
That is correct. All right. I think there's -- the

Page 2634 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 you --THE CHAIR:
NSUARB-ML-2013-01/M05419 As you
key point in there as well, that is a minimum.
described it in your Opening Statement, you would call it a maximum. It's not maximum. That's the minimum. Well, I sometimes my --
MR. MERRICK:
the point is, that's the amount we can say that, all other things playing however they may play, there must at least be that amount supplied under the agreement. load can't pre-empt that. MR. JANEGA: MR. MERRICK: That's correct. All right. Can I ask And native
When you say "can't pre-
empt it", it could pre-empt it temporarily if there's a timing issue. contract. MR. MERRICK: THE CHAIR: more difficult than it is. MR. MERRICK: Sorry. Over the long term. Let's not make this any It can't pre-empt it over the term of the
And on a very minor point, looking at 6(a), the commitment, it says, "Subject to 7(e)(i)," and I have trouble. I don't understand the reference to that
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NSUARB-ML-2013-01/M05419 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Nalcor for the 900. MR. MERRICK: MS. TOWER: the Nalcor initial commitment. MR. MERRICK: All right. All right. 7(e)(i), how that plays into that statement. MS. TOWER:
Page 2635
So to the extent that
Nalcor forecasts for some reason that they will not be able to meet the commitment of the 1.2, then 7(e)(i) is the -- is where Nalcor and Emera step up behind that commitment to assure that the commitment is met. So Emera steps up for the 300 GWh and
So it's a backstop against
But we are
reading it correctly when we see that if native load requires it, Nalcor does not have to either forecast or bid any minimum amount down to that -- maintaining the average of 1.2. MR. SIDEBOTTOM: That is only in a
particular year, but the commitment to the amount of energy through the term still stands at an average of 1.2. MR. MERRICK: All right. Is my
calculation correct when I go to look at what the original quantity of energy was that was being considered in the
Page 2636 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 application. MR. SIDEBOTTOM: to the base-load --MR. MERRICK:
NSUARB-ML-2013-01/M05419
application, and am I right in stating it in the terms that the minimum committed in the application, the 4.4 in the IR-37, was an -- was access to 1.5 terawatt hours over the Link and .9 terawatt hours over the New Brunswick transmission for a total of 2.4 terawatt hours for the five years and then 1.7 terawatt hours over the Link and .9 over New Brunswick transmission for a total of 2.6 for the balance of 19 years for a total of 61.4 terawatt hours? Is that a correct calculation? MR. SIDEBOTTOM: So you're referring
The original
--- the base-load
case in which there's energy flowing from Nalcor and from other markets like New Brunswick. I think our calculation would have it around 51 terawatt hours. And what we've done is we've
taken a look at the decision and understood that the Board has said that the most likely scenario is a low-load scenario. And that what weve done it acquired the
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Page 2637
equivalent amount of energy through the Nalcor path, which was the point of most concern, that matched the low-load conditions, and thats approximately the 1.2 terawatts through time in that particular case. MR. MERRICK: All right. But my
question was simply that at the time of the application, the assumption was that the amount of energy that would be made available was the 51.4 terawatt hours? your 51 that you said you calculated. MR. SIDEBOTTOM: So I think were Im using
talking about two scenarios, the base-load scenario and the low-load scenario, and --MR. MERRICK: No. My question was
At the time of the application, the volumes that
you put forward as being available from Nalcor was a total of the 51 point whatever? MR. SIDEBOTTOM: No. No, that would
be made available from the market until -- remember, once the Maritime Link is built, youve got two access points to the market; one through Nalcor and a second one through the market in New Brunswick, and that is the total of the two market access points that is the 51.
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NSUARB-ML-2013-01/M05419 MR. MERRICK: But taking into account
you testified to access volumes, the amount of access that you were saying the Figure 4.4 was based on, was that not the 51.4 terawatt hours? MR. SIDEBOTTOM: In the base-load
case, yes; it was 51 gigawatts of total energy access through the access points, yes. MR. DEVEAU: Im sorry, you said
gigawatts there; you mean terawatts? MR. SIDEBOTTOM: Thank you for the correction. MR. MERRICK: And can you give me in Sorry, terawatts.
terawatt hours, the same unit of measurement, the amount that you say this agreement provides for? MR. SIDEBOTTOM: This agreement
provides access to 28 terawatt hours from Newfoundland, as a minimum. In fact, the commitment is to the 1.2, but in
fact, even when that is satisfied, theres still further commitments of access energy beyond the 28. Because they
still have to bid in their access energy if they do, in fact, make the 1.2 average. MR. MERRICK: Why would you not use
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Page 2639
the same assumptions as were used in the original application, the same assumptions as to volume of energy that was to be made available under the EAA? Why wouldnt
you negotiate with Nalcor for volumes under the EAA that would be equivalent to those that you used in your application? MS. TOWER: So we -- as Mr. Sidebottom
said, when we received the decision and had the benefit of reading the decision in its entirety along with the condition, we were -- we understood in paragraph 106 of the Boards decision which reads that on balance the Board believes that NSPMLs low-load forecast, which most closely aligns with NSPIs current load forecast, is a more realistic scenario than the base-load forecast. so there was lots of discussion of course, as youll remember, around the low-load versus the base-load, and its -- certainly we took the conclusion, this conclusion of the Board, and read that in conjunction with the decision and the condition, and determined that what the Board asked us to do was look at the condition in a lowload scenario. MR. MERRICK: So am I understanding
And
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you correctly, that what you have provided for in the EAA are volumes that are based solely on the low-load scenario? MS. TOWER: At a minimum. So as Mr.
Sidebottom says, we believe there will be much more energy than that, but the commitment is for the Nalcor volumes of energy in the low-load scenario; yes, thats correct. MR. MERRICK: And if by chance it
turns out that all you can acquire under the EAA is the minimums you provided for, then all youve provided for us is acquiring energy to service the low-load forecast or the low-load scenario? MS. TOWER: the Board asked us to do. MR. MERRICK: And if somebody were to And thats what we believe
suggest to you that it was important to have a more robust testing of your acquisition abilities so that you should also look at your medium-load forecast -- Im not using the correct terminology -- you havent done that? MR. JANEGA: Well, I think the 1.8
terawatts that is embedded in the agreement, as well as the expected upper end of available energy does address
NSUARB-ML-2013-01/M05419 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 requires otherwise? MR. JANEGA: that.
Page 2641
We know, and as Nalcor presented in the hearing,
there is information supporting the hydrology in their expected energy, that they do have surplus. the minimum. MR. MERRICK: for the 1.8, is there? MR. JANEGA: Yes, if they have energy, But theres no guarantee The 1.2 is
they have to bid it to Nova Scotia Power and the demonstration of the hydrology information -- and Mr. Sidebottom can speak to it in detail -- provides that insight of what Nalcors expected available energy is; they have to bid it. MR. MERRICK: MR. JANEGA: MR. MERRICK: Unless --It is committed. Unless native load
That, again, youre The 1.8 exceeds what
asking if that covers the upper end. was in the base-load modelling. volume.
It actually exceeds that Nova
If Nalcor has it, they have to bid it.
Scotia has first right to it.
If they dont take it, they
still have a second right to that energy by it flowing to

Page 2642 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 market, second opportunity. MR. MERRICK: me back to my first point.
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Mr. Janega, that takes
As I read the agreement, and I
thought what the panel agreed with, was that as far as a guaranteed minimum amount -- guaranteed, not subject to being encroached upon by native load; the guaranteed amount was 1.2 terawatt hours averaged over the whole time. An average of 1.2 terawatt hours. MR. SIDEBOTTOM: Thats right, and
maybe I could help a little bit with that. So the reason that Nalcor is comfortable with that is that a hydraulic system, and especially one where theyre looking to be renewable into the future, they will always have to have sufficient resources to serve their firm customers through time. what that means is that they will have a surplus by design, which then allows us to have confidence that that energy will be available into the future. So thats, in fact, why we believe theres as a most probable case, much more energy than the 1.2. I take your point, the absolute guarantee is the 1.2 But my expectation is theres
And
and that is the commitment.

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Page 2643
hydraulic system works, and the way the excess energy is currently -- or predicted to be available through the term of this agreement. MR. MERRICK: I would have a lot -- I
would have greater assurance if I knew that that was the same expectation of Newfoundland. Mr. Chairman, Id like to introduce an exhibit which is a copy of the Hansard of the Newfoundland and Labrador Legislature. A copy has been made available Its
to the Board and its in electronic form, I think. dated November the 6th, 2013. THE CHAIR: --- EXHIBIT NO. M-147: Province of Newfoundland
Thatll be Exhibit M-147.
(Hansard) 47th General Assembly Volume XLVII Number 25 (2nd Session) dated November 06, 2013 MR. MERRICK: Now, panel, I want to
take you to the third page, which on the bottom is number 1378, and this records the proceedings of the House of Assembly on November the 6th, 2013.
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And if you go up into
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the second column near the top of the page, it starts with the paragraph, Mr. Speaker, make no mistake... that? And it says: You see
Mr. Speaker, make no mistake, we will sell that 40 percent surplus power. (As read)
This is the 40 percent that would be made available under the EAA.
...we will sell that 40 percent surplus power. As time goes on
when we need that power we will not be selling it, we will be using it. We have said there is
industrial growth; there are growing demands of the province. When we need the power, Mr. Speaker, we will have it available. (As read)
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And if you can skip down a couple of paragraphs to where its Mr. Dalley he says:
Mr. Speaker, this gets me to Nova Scotia with the Maritime Link. So because of the Maritime
Link and that 40 percent power, we now have a chance to sell that power when we do not need it because we have access to markets. We can sell it in New
England, we can sell it in New York, we can sell it Ontario, or we can sell it in Nova Scotia. It does not matter to us who buys it. It just so happens that Nova
Scotia [Power] wants access to that power.
And in the last paragraph he says:
Mr. Speaker, how much [we are]

Page 2646 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22
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NSUARB-ML-2013-01/M05419 going to have to sell? where it gets a little complicated, and I will not get tangled up with numbers too much, but we have 40 percent of the firm power [thats] going to be available right away. it until we need it. be clear. So we sell I want to This is
We have not signed a
contract that commits the 40 percent of firm power to Nova Scotia.
And then just if you can flip to the second -- the next page in the right-hand -- left-hand column down near the bottom, youll see in the yellow where he goes on to say:
We are only guaranteeing that Nova Scotia has access to the power created from...rain and snow, the nonfirm power, which is
NSUARB-ML-2013-01/M05419 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 an average of 1.2 terawatt hours.
Page 2647
And I take it that that is consistent with the proposition that anything over 1.2 is subject to being withheld or not bid or not sold or not available if native load requires it. MS. TOWER: The first, I -- without I assume
having read all of it, what he says is correct.
that what hes talking about in the first 40 percent, the firm power, is the Muskrat power. And the 1.2 terawatt
hours is the firm to average surplus, as Mr. Humphries talked about in the technical conference in the chart that he presented. And so in the hearing in May when we talked about surplus energy, we actually didnt talk about this 1.2 terawatt hours, firm to average surplus. So
thats in addition -- what were talking about now and what hes referring to is in addition to what we talked about at the time. So we had lots of discussion about the
Muskrat surplus and the recall energy from the Upper Churchill. This, in fact, is in addition to that.
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NSUARB-ML-2013-01/M05419 So it is for that reason that Nalcor
is confident that they will have the 1.2 terawatt hours on average. And the reason that they have stepped up, not
only to offer it in the first place, but to then backstop it with Emera in the second instance, and so they are confident they will have lots of energy. The 1.2 is what they need -- and Mr. Sidebottom probably better to explain, but what they need to ensure that on a very, very dry year they still have enough energy to meet their firm load. And so in many
other years there will be more than that, and in fact, above the 1.2. on average. MR. MERRICK: Did Emera make any And so that is the calculation of the 1.2,
attempt in negotiate a higher maximum guaranteed minimum? In other words, instead of 1.2, negotiate to get a 1.8 guaranteed amount? MS. TOWER: What we negotiated and
what we got was access to all of Nalcors energy on an annual basis, subject to hydrology and native load. So
the fact that they have to offer it to us before they commit it to a long-term contract is really what we got.
NSUARB-ML-2013-01/M05419 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 fairly clear. about pricing.
Page 2649
And I think if you look at the 40 percent that is referred to in the Hansard, which is the Muskrat surplus, the recall energy, plus this firm to average surplus of the reference to the rain and snow, we believe therell be lots of energy available. The 1.8 -- so Nalcors confidence in that led them to offer a maximum of 1.8 or what can be delivered at the delivery point. and then the average of 1.2. So yes, we did get -- we actually did get more than the 1.2. MR. MERRICK: Lets talk for a moment But that maximum of 1.8
And if I can take you to Clause 4(c) of
the EAA -- and all I am looking for here is clarification of some of the terminology thats been used. If you have it, if you look at the first paragraph, second line where it says, Nalcor will consider NSPIs market alternatives; whats meant by that? MR. OCONNOR: I believe it to be
They will, in putting their bid price And then I
together, look at what the alternatives are.

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think theyre more specifically defined contractually in (i) and (ii) below. MR. MERRICK: So the market
alternatives are as defined in those sub-clauses that follow it? MR. OCONNOR: Thats correct. The
pricing must conform to either (i) or (ii). MR. MERRICK: But that wouldnt make
sense if youre talking about NSPIs market alternatives. In those two sub-clauses youre talking about markets that may be available to Nalcor. MR. OCONNOR: They are markets that Theyre not
are available in our region, generally. exclusive to Nalcor or to us. MR. MERRICK:
Well, NSPI would be
looking for vendors; Nalcor would be looking for purchasers. So the market alternatives, they would be
different, wouldnt they? MR. OCONNOR: No, they are the same. So
These represent the market alternatives in the region. the one under (i) is New England, ISO New England. Mass
Hub is the clearing point for that entire market, which

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Page 2651
generally has a peak of around 30,000 megawatts or installed capacity of 30,000 megawatts, so, you know, well in excess of 10 times our market size. generally the market. So that is
The other one represents largely
New York, or it could, in the future, represent Ontario. So those are the markets in the region, both for buyers and sellers. MR. MERRICK: So when we talk about
Nalcors opportunities in the main clause of sub-clause (c), were talking about the same thing as (ii), where it says any alternative spot-market opportunities; youd be referring -- the contracts referring to the same opportunities, I take it? MR. OCONNOR: MR. MERRICK: Yes. It says in Clause (ii):
Any alternative spot-market opportunities identifiable by Nalcor at the time of its bid which are available to Nalcor at any time within one year...
Page 2652 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22
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NSUARB-ML-2013-01/M05419 And just help me understand how that
would work.
Because as I read the provisions dealing with
the solicitation and the bid mechanisms, its contemplated that there may be a solicitation for supply over the coming year, a year in advance. MR. OCONNOR: Thats correct. Yeah,
the solicitation is detailed here but its for the contract year which commences September 1st. MR. MERRICK: So if Nalcor is looking
to increase the price that it can recover by pointing to an alternative with -- any time within one year following the Nalcor bid, youre looking at an alternative that exists at that point in time for a year in advance; am I right on that? MR. OCONNOR: Thats correct. Im What
not sure if I agree with the increasing the price. they have to show is that there is a -- and its
important, the words are important; to the extent Nalcor can demonstrate both the liquid trading node with associated published forward pricing in an actual transmission path. So it is true, it could be for that
NSUARB-ML-2013-01/M05419 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 correct, yes. MR. MERRICK: All right.
Page 2653
year, September through August, anytime in that year, but it has to conform to the rest of that paragraph. MR. MERRICK: But, for example, if
Nalcor were bidding, it would have to be aware of the alternative at the time it bids; am I correct on that? MR. OCONNOR: Thats absolutely
So that any
opportunity that might become apparent to it a month or two down the road wouldnt be -- wouldnt qualify? MR. OCONNOR: Thats right. At the
time they submit the bid, they have to, at that time, identify if condition (ii) will be some of the pricing, some of the energy will be priced under that. MR. MERRICK: But Nalcor would not They wouldnt All theyd
have to actually bid to sell that energy. have to actually enter into a transaction.
have to do is say, Look, we look at this as being a possible market hub. We look at prices that are being Thats
posted or applicable today for a year in advance. our opportunity. point to that?
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We dont have to do anything more than
Page 2654 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 MR. OCONNOR:
NSUARB-ML-2013-01/M05419 So what they need to do
is say, Here is a market thats verifiable, its liquid. There are buyers and sellers there. They dont have to
actually have a contract with a buyer there, they just have to be able to demonstrate that we could move our energy to that market and sell and achieve that price. MR. MERRICK: MR. OCONNOR: have a buyer for the energy. So --They do not have to
But this market, we will be
able to verify that thats the market price for that period. Well be able to verify that they can get that So we will know that it is an
amount of energy there.
alternative that they can access. MR. MERRICK: And am I correct in
assuming that this is brown energy pricing that were talking about? MR. OCONNOR: So all of the energy in It comes with no
the Energy Access Agreement is non-firm. other attributes.
So no renewable credits, no other -Its not a term that I
Im not sure what brown energy is.
would define but it is non-firm energy that comes with no renewable considerations.
NSUARB-ML-2013-01/M05419 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 quite frankly. a second. (SHORT PAUSE) MR. MERRICK: in the contract. MR. MERRICK: what brown energy is, I dont. MR. OCONNOR:
Page 2655 Well, if you dont know
Its not a term thats
Its not a defined term. MR. MERRICK: And I assume, though,
that the assumptions that were being put before the Board at the time of the hearing in the summer, those assumptions were based on brown energy pricing as well, to the extent that that term applies? MR. SIDEBOTTOM: MR. MERRICK: Yes, that's correct. Just give me
All right.
So all that Nalcor has
to do in order to ask for a price higher than Mass Hub is point to another market node or trading point and say, "Here's what we could have gotten or can get for our energy today or a year from now; that's all they've got to do? MR. O'CONNOR: I think that's a lot,
I think they have to -- they have to
demonstrate that there is a liquid trading with forward

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pricing that they have an actual transmission path to get to that market. So I think it's more than what you characterized. I do think there are fairly stringent
conditions set upon them, of which of course we'll be able to verify. it. MR. MERRICK: Let me take you to So I think it's more than as you characterized
another provision that I just need some help in understanding, and that's the redelivery clause in 4(d), which is on that same page. And can you explain to me
what the rationale or the necessity for that one year interruptibility provision is? Why is that in there? If there's a market
MR. SIDEBOTTOM:
opportunity during the period, Nalcor has the right to redirect that energy into an alternate market. Now, while
exercising that right, they do have to keep Nova Scotia Power whole through an equivalent value proposition. So
they have that opportunity to get into that market, but Nova Scotia Power and its customers are left whole with that particular right. MR. O'CONNOR: And, sorry, if I just
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Page 2657
may add to Mr. Sidebottom's comment that it's clear that if the -- if this is exercised, Nalcor shall redeliver such energy as soon as commercially possible. days is at the outer limit. The 365
There is an expectation that In fact, it's a
it will be done sooner than that. contractual obligation. MR. MERRICK:
But the triggering
event, the entitlement that Nalcor has to suddenly say, "Oh, wait a minute. We put in a bid to Nova Scotia Power
Inc. which was accepted, but we suddenly discovered a new market opportunity"; is there any qualification as to what that market opportunity has to be, do, or satisfy in order to justify Nalcor saying, "We're going to interrupt your delivery, send it to another customer. to you within a year." MR. SIDEBOTTOM: There isn't. And the It will come back
comfort we get from that is the fact that Nalcor are then obligated to ensure Nova Scotia customers are kept whole with that money being -- or that energy being redelivered at a separate time. MR. MERRICK: keep the customers whole?
How are you going to
Page 2658 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 MR. SIDEBOTTOM:
NSUARB-ML-2013-01/M05419 We will simply ensure
that the energy that's redelivered has equivalent value as actually set out in page 6 of the agreement. The energy
has the equivalent economic value to Nova Scotia Power. That is how we keep them whole. MR. MERRICK: And just going with that
for a moment, is that simply a case of comparing the price? MR. SIDEBOTTOM: It's a combination of
price and any other costs incurred associated with redirecting that energy, which is quite a typical normal calculation we would carry out in the course of our business. energy. We have interruptions in power on economy We do those calculations today. MR. MERRICK: All right. But if you
incur costs because of an interruption, Nalcor interrupts your supply. And I take it they can interrupt with no
minimum notice period given? MR. SIDEBOTTOM: That's not correct.
There is a protocol where the energy gets finally scheduled, which is set out in the agreement. Once that
energy is scheduled, this right to redirect is lost and

NSUARB-ML-2013-01/M05419 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 it's only at force majeure at that point. So it's between the period of
Page 2659
committing to the Board of the RFP to a point prior to scheduling the delivery of the energy. MR. MERRICK: And just for my
reference, where do I find that in the agreement? MR. O'CONNOR: MR. MERRICK: Thats 3(c). And am I correct that
that's a day-ahead notice that would be involved? MR. SIDEBOTTOM: MR. MERRICK: That's correct. But you say
All right.
that you would make the customers whole by doing -- making sure that the energy was equivalent economic value. So I'm taking -- I'm assuming what you mean by that is when it comes time that Nalcor is now prepared, possibly a year later, to deliver energy that Nova Scotia Power had asked for, that at that time you'd merely do a price -- one of the things you'd do to keep the customer whole is do a price comparison. And let's assume that the energy being delivered a year later is worth a lot less than it was at the time it was originally committed.
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How would you do
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the -- how would you hold the customers whole? MR. SIDEBOTTOM: It would be at a
time, price, and quantity such that the equivalent value was realized for customers. that. And it works as simply as
So the quantity is not specified, but the value And keeping customers whole is the intent
proposition is. there.
MR. MERRICK: Power didn't need it at that time?
What if Nova Scotia
MR. SIDEBOTTOM:
I really can't
envision some point in one year finding the equivalent economic value. That's -- that doesn't seem like anything
likely that I can think of. MR. MERRICK: In any event, I assume
that if you declined the delivery of the interrupted energy that would be a credit off of Nalcor's obligation to supply a certain quantity? MR. SIDEBOTTOM: would decline the energy. I don't know why we
I can't think of a situation
where we wouldn't want to create the equivalent economic value. That's just simply what we would do. And so I But assuming
can't even understand how that would happen.

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it did, which it would count towards the obligation, yes. MR. MERRICK: I'm just trying to think You say that
Assume then that -- let me back up.
of course having supply interrupted and then rescheduled somewhere within a year down the road has costs to it. MR. SIDEBOTTOM: And -- yes. And that
is why we put that particular sentence in Clause (d). MR. MERRICK: sort of costs would there be? MR. SIDEBOTTOM: There may be the cost All right. And what
of replacement energy and any associated value with redispatching the fleet at the time. And because this is
actually set out as a broad statement of value, it would be whatever effectively was the cost at that point in time due to the energy being moved away from Nova Scotia at that point in time. MR. MERRICK: So how would the
customers be made whole for those additional costs? MR. SIDEBOTTOM: Again, we would
foresee that they be an energy with a certain quantity and price that it would offset other generation that Nova Scotia Power would otherwise foresee.
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We can easily
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calculate that value and we'd ensure that that value was equal to the value or the cost of the energy that was removed for redelivery. MR. MERRICK: Assume the value of the
interrupted energy and the now-to-be-supplied energy is the same, so that the only cost that has been incurred has been the cost of the interruption. MR. SIDEBOTTOM: MR. MERRICK: the customers whole in that case? MR. SIDEBOTTOM: -- just take a quick example. THE CHAIR: If --I think what we're Do we get So maybe we'll just That would be a cost.
But how would you make
struggling with here is do we get more energy? a cash payment? MR. MERRICK: THE CHAIR: does it get keyed up? MR. SIDEBOTTOM: quite easily --THE CHAIR: MR. MERRICK: Yes.
How does it get -- how
Yeah, so it could
Sorry, Mr. Merrick. No, that's my concern.

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Page 2663 Yeah. Thank you, Mr.
MR. SIDEBOTTOM: Chair.
It could quite easily be a different quantity of And we'll
energy, and it could be at a different price.
be able to calculate the value at that time based on what we otherwise would have done if that energy would not have been there. And so we'll calculate both the cost of the
energy being removed at the time of removal and we'll calculate the benefit of the energy with a new price and volume. And they do not have to be the same volume. THE CHAIR: So say that the
interruption comes in February at a time when your marginal cost of generation is, let's say, $12 and they come to you in July and say, "We'll give it back to you when your marginal cost is at $8"; how do you fix that transaction? MR. SIDEBOTTOM: So what we'd have to
do is we'd have to take more energy or at a lower price to ensure that that be the case. THE CHAIR: The --So they could interrupt,
say, 10 hours of energy in February and redeliver 15 in the summer? Is that what you're saying? MR. SIDEBOTTOM: Absolutely, yes.
Page 2664 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 THE CHAIR: MR. MERRICK:
NSUARB-ML-2013-01/M05419 I see. And that would assume
you would need or require or be able to use that energy in the summer. MR. SIDEBOTTOM: Yes. And as I said,
we can -- we calculate the cost of generation every hour of every day, and so we can do that. MR. O'CONNOR: And I think the -- if
the energy's coming back in a time of the year where it's of lower value, it will have lower economic value so we would need to have more energy to achieve the same economic outcome. So I think it is -- that notion's captured in this equivalent economic value. MR. MERRICK: Well, the notion is not
captured in very much detail, so let me ask you the question. How's it coming in doing the negotiations for improving the wording of this agreement? Are you working on refining this? This is advanced as a binding and complete document, but admittedly subject to being
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elaborated on. MS. TOWER: So this is, as you say, a
binding agreement between the parties. We will -- we haven't started on the next version of this agreement before we hear from the Board. MR. MERRICK: So there have been no This -- the document
further negotiations to refine this.
that we have in front of us is the document as it exists today between the parties. MS. TOWER: MR. MERRICK: It is. Just give me one second
because I'm not -- I want to make sure I understand this interruption in redelivery. The obligation to schedule interrupted energy, is that not subject to the forgivable events? MR. O'CONNOR: Yes, it is subject to
forgivable events, I guess, under Section 4(d). MR. MERRICK: Yeah, I see it there.
And my question is, obviously, forgivable events include Newfoundland having another use for it. So I'm assuming that if you read that,
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what it says is that Newfoundland -- Nalcor could interrupt the supply and would not have to reschedule if native load pre-empted that. MR. O'CONNOR: days, have to redeliver the energy. MR. MERRICK: bottom of page 6, Clause (d): Well, it says at the They, within the 365
"Solicitation contract term will be extended accordingly, if necessary. Nalcor's obligation
to schedule and deliver the daily quantities of Redeliverable Energy is subject to Forgivable Events, provided however that Nalcor shall deliver the total...in accordance with the foregoing provisions..."
If I may, Mr. Merrick, it
applies in that case if it was Tuesday afternoon that the energy was intended to flow and load required that to be
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Page 2667
interrupted, it doesn't relieve them from having to deliver it. It's just at that particular period of time. It's not a -- it's not a removal of their obligation to make up the energy. Just that if it
happened on -- as I said, on a Tuesday afternoon and load required it, then they'd have to deliver it the next day or the next opportunity NSP saw the need. MR. MERRICK: Well, as I read it, it
says the obligation to schedule and deliver the daily quantities is subject to forgivable events, which includes native load, provided however -- and I take it what you're telling me is that you understand that clause to say that redeliverable energy -- there is a commitment for Nalcor to provide the redeliverable energy provided it's within the 1.2, I guess. MS. TOWER: delivered. It's required to be
It is absolutely required to be delivered. MR. MERRICK: All right. It also goes
on to say down at the bottom of page 6 of that Clause (d) that one of the other things that will happen is that the contract term will be extended accordingly. Just explain to me how that's supposed
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to work.
term is it we're talking about? MR. SIDEBOTTOM: Well, we'd be
envisioning that there will be annual solicitations and there will be a certain quantity of energy. And what
we're talking about is the redelivery of the energy under that solicitation so envisioning that the term of that particular contract would have to be extended to accommodate the redelivery period. And that's -- it is not the broader redelivery period, or the broader term of the overall agreement. MR. MERRICK: So that there's an
interruption of six months, for example, say, in the -- in the deliverable -- delivery of that surplus -- that energy, what you're saying is that there will then be an extension to that one-year term timeframe. that one -- that extension work? But how will
Does that mean that
Emera -- Nova Scotia Power puts out another solicitation for the extended six months and Nalcor bids for an extended six months? MR. SIDEBOTTOM: No, it's simply to
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Page 2669
encompass the obligation of redelivering that energy that has been taken to another market. And so that extension
could go as far as 365 days, effectively. And it's to really ensure that we track and capture, under one contract, the award of the RFP and all equivalent value that was associated with it. MR. MERRICK: Panel, you'll understand
why I'm taking some time in asking these questions, ineptly, but trying to, because it's the position of the Consumer Advocate that there -- if you look at too many bells and whistles tacked on to this formula for accessing energy, that what's going to happen in the future is that Nova Scotia Power is going to go to the market to access energy rather than going through the AEE because it provides them with no benefit. And if that's the scenario, then we haven't justified the cost of that Nova Scotia block. That's the rationale for my questions and why I'm spending a little bit of time on this because we think it's critical to the proposition that, at the end of the day, this is not going to be a particularly worthwhile mechanism for acquiring energy for Nova Scotia
Page 2670 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Power.
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But let me continue with my questions. MR. JANEGA: Mr. Merrick, though,
before you do, if we could, your questions are perfectly reasonable relative to understanding and providing clarity over the obligations that Nalcor has; nothing unreasonable about them. What we're trying to do is provide clarity that assures you that the value is achievable by Nova Scotia Power customers. The energy will be delivered
by Nalcor and the minimum of 1.2 will be achieved with an upper limit of 1.8 terawatt hours per year. Your questions over the last few minutes have essentially supported what we've been presenting, which is, even in the redelivery in these circumstances, those clauses are intended to ensure that Nalcor can't just, at the end of the year, roll over and say, "Well, we can't get the energy to you." It continues to keep them committed, and they agreed to these terms. They agree with the
principles and the representations, including the discussion about how we interpret the equivalent value.
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Page 2671
They have the same interpretation of This is not an agreement that leaves Nova Scotia It's an agreement that
Power customers with risks.
actually satisfies the conditions and provides the assurances that they have to be delivered. MR. MERRICK: But I assume that,
having looked at the statement in the Newfoundland Legislature, you would agree that Newfoundland -- Nalcor is quite prepared to enter into agreements like this for the sale of the surplus 40 percent of the energy from Muskrat until they need it themselves, and when they need it themselves, it's gone. MR. JANEGA: But there is commitment.
So in Nova Scotia, our regulator would say the same thing about firm customers; you build generating capacity to serve them. With this hydraulic system that Newfoundland operates, they have a requirement. And in
the forecasting that they presented at the technical conference, and you may recall they talked about that energy being a requirement for them to meet firm load was represented as one current, and we could call that up -DICTUM DIGITAL INC. CERTIFIED COURT REPORTERS
Page 2672 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 that item up.
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But above that, they have to -- so thats what they have to have available on the system as capacity. Everything that gets produced above that is
available for sale. So when the Minister in Newfoundland speaks about their commitment to supply customers, thats actually a good thing for Nova Scotia because they have to build capacity in order to satisfy that firm load based off the lowest overall hydraulic inflows in Newfoundland. And they use a 60-year series of data to predict that, but its based on the lowest. So everything they build has to be able to satisfy the firm at a minimum. that is for sale. What Nova Scotia has -- Nova Scotia Power customers have with this agreement is a commitment for Newfoundland to sell that, to offer that to Nova Scotia first, and it does provide benefit because they meet their minimum, they have to build generation based on the minimum inflows. for sale.
Everything above
Everything above that is available
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Page 2673
And what the Minister is saying is accurate, have to serve Newfoundland customers, were going to have this excess available and theyre willing to sell it to Nova Scotia. MR. MERRICK: Do you agree that on the
information that has been provided to us by Nalcor as to the situation in Newfoundland, it certainly appears likely that theres going to be a significantly increasing demand for native load in Newfoundland such that it will, at some point, pre-empt all the surplus energy from Muskrat Falls? MR. JANEGA: Actually, remembering the
earlier statement that they have to build firm capacity based on the minimum inflows, every time they hit a position where they cant supply the firm load with those minimum inflows, they have to build generation. And as they described -- I think it was Mr. Jones or Mr. Humphries -- in the technical conference, they will build firm generation to meet that firm requirement. That firm requirement, based on minimum
flows, always has surplus in it just by the nature of the way its actually -- the regulations require them to serve firm load.
Page 2674 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 scenario. that. MR. MERRICK: commentaries.
NSUARB-ML-2013-01/M05419 So as the firm load grows and it
starts to consume surplus, they predict and they will have to build to meet that firm requirement, thus creating more surplus energy. MR. MERRICK: Youll have seen in one
of the filings that was done by Mr. Bill Black -- and youre aware that he has filed several submissions in this proceeding. I assume youre aware of those. MR. JANEGA: I dont know --MR. MERRICK: MR. JANEGA: Commentaries. --- if its more than I believe he provided
Ill call it the Black
He put forward the proposition that one
scenario that was possible was that Nalcor would provide or bid or make a forecast and make available for acquisition a full 1.8 terawatt hours a year, and that if that were to happen, whether NSPI took that energy or not, it would be credited against the minimum requirement of 1.2 averaged out such that, at the end of 16 years, Nalcor would have no further obligation to provide the guaranteed
NSUARB-ML-2013-01/M05419 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 possible? MR. SIDEBOTTOM: MR. MERRICK: No. proposition? MR. SIDEBOTTOM: with the proposition. MR. MERRICK: Do you agree its minimum. Are you familiar with that
Page 2675
So we are familiar
Why not? Well, I think his
MR. SIDEBOTTOM:
proposition suggests theres no obligation on Nalcor after the 16th year to bid in surplus energy, and theres a positive obligation on their part to continue to offer us this surplus energy. The hydraulic system itself, in the 60 years of hydrology, say that that is not a likely scenario. I would practically say its impossible. And
Theres no data that supports that kind of scenario. so I just simply dont agree with his proposition. MR. MERRICK:
You said that Nalcor has
an obligation to continue to bid in even if theyve exceeded their 1.2 minimum.

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But if you look at Clause

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4(e), it says Nalcors requirements to bid the Nalcor forecast is subject to native load. MR. SIDEBOTTOM: I think Id go back
to Mr. Janegas explanation just a few minutes ago, is that Newfoundland is going to build to serve its customers with renewable energy. And what that means is that they
will build sufficient to serve them in a firm fashion, which means that if they add another hydraulic system, another hydro system, there will, in fact, be more surplus energy available in the future. So actually, the use of and the growth of load in Newfoundland and the further development of the hydraulic system or even a wind system will further make available excess energy to Nova Scotia as per this agreement. MR. MERRICK: I dont want to repeat,
but I just want to make sure youre getting the focus of my question. Assume that Nalcor has, over 16 years, offered and forecast 1.8 terawatt hours so that, at the end of 16 years, they have averaged 1.2. Under that
scenario, are they not free to use all the rest of that
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surplus energy for native load, if they have a requirement for native load, without having to forecast it and without having to bid it according to the terms of the contract? MR. SIDEBOTTOM: So technically, I
suppose if you could imagine that there was no surplus energy in the hydraulic system, which there is no evidence to that point, and you assumed that the hydraulic system was a perfectly level number through time, you could satisfy the commitment on the 1.2. But you cant ignore
the rest of the commitments inside of this agreement, which says they have an ongoing obligation to offer up the surplus energy to Nova Scotia. value. So that actually goes to the point which is, if they do offer up 1.8 through the early parts of the contract, the most likely scenario is that there will be substantially more energy offered to Nova Scotia through the term of this than the 28 terawatts. MR. MERRICK: Has Emera had an Was it a And that is a significant
opportunity to discuss this issue with Nalcor? subject of discussion and agreement? MR. SIDEBOTTOM:
Yes, theyre in
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complete agreement with this. MR. MERRICK: What commitments have
they given you that they would -- if they had offered the full 1.2 over 16 years, what commitments have they given you that they would still continue to offer you something, notwithstanding whatever their own native load requirements may be? MR. SIDEBOTTOM: The commitment is set
out in the Energy Access Agreement, and the comfort is gained through the 60 years of hydraulic data that provides the backdrop for the excess energy. MR. MERRICK: Can you point me to the
clause that gives you that assurance? MR. SIDEBOTTOM: So the ongoing
obligation is set out in Clause 4 in (a) and (b), and those obligations continue through the term of the Energy Access Agreement. MR. MERRICK: All right. Well, I
guess we can all read those as we read them. Can I turn you to Clause 3(e), which is on page 5, and it says:
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Page 2679 Nalcor Supplied Energy will be for end-use consumption in Nova Scotia only, except that NSPI shall have the right to resell Nalcor Supplied Energy in the event that such Energy is surplus to NSPIs requirements due to variations...
Et cetera, et cetera. Am I right in understanding that NSPIs right to resell is limited to that one -- limited to that one scenario thats called for in that clause, that they can resell only if such energy is surplus to NSPIs requirements due to variations in NSPIs load or generation identified subsequent to NSPIs is acceptance of a Nalcor bid? In other words, Nova Scotia Power is going to have to satisfy that criteria before they could resell any energy that they might have gotten from the EAA. MR. SIDEBOTTOM: That's right. So
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this is a recognition that the load may be different or the generation profile may be different, and under those conditions we could resell the energy. The intent of this clause was, really, that Nalcor wasn't interested in us buying to resell into the market as a market participant, and our primary use and intent was around using it in Nova Scotia. But there
was also the recognition that things can change, either in the load and the generation side, and under those circumstances we could resell the energy. MR. MERRICK: Is -- does this not put
a restriction on that energy that, to one extent or another, is -- would be viewed as a negative? MR. SIDEBOTTOM: No. Remember, Nova
Scotia Power has many generation sources, and at its maximum at a point in time this might represent, you know, 10 or 20 percent of the energy at any moment in time, and Nova Scotia Power is free to resell other electrons. So effectively, we are fully free to sell into the markets because we have many generation sources. And the real intent of this clause is around
Nalcor's concern that we aren't becoming a reseller of

NSUARB-ML-2013-01/M05419 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 you're right. It's on page 10. their energy in alternate markets. MR. MERRICK:
Page 2681
Can I discuss with you
for a few minutes what happens if there is a variance, so-called, in other words, if the -- Nalcor does not supply the energy that is being provided for? And if you can turn to Clause 7(f)(i).
I understand the basic proposition that if there is a shortfall in the supply of energy under the EAA, then NSPI picks up 300 megawatt hours of it. MS. TOWER: MR. MERRICK: No, Emera does. Emera does. Sorry;
But then we look at Clause (f)(i), and it says that NSPI shall have the option, but shall not be obligated to, construct or contract wind generation to make up the shortfall in energy. And I'm having a little trouble getting my mind around that. If Nalcor is in breach of
this agreement, why should Nova Scotia Power incur the costs of building wind generation to supply the missing energy?
Page 2682 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 MS. TOWER:
NSUARB-ML-2013-01/M05419 So this is not
contemplated that Nalcor would be in breach. MR. MERRICK: Well, we're talking here
about a scenario where there is a -- where the amount of energy called for by the EAA is not provided. MS. TOWER: Yes, so that they would in
the -- in the, as we've discussed, highly unlikely scenario that the forecast says that there is no energy or they will be unable to meet the 1.2, then Emera and Nalcor collectively step up to ensure that it does get provided to Nova Scotia Power. MR. MERRICK: And one of the ways that
Emera would step up because Emera would get the benefit of this, first off, Emera has an obligation to pick up the first 300 gigawatt hours of the shortfall. MS. TOWER: Yeah, to provide it in the
same way as described in the previous sections that we've just been through, so to bid it in every -- on an annual basis. So to the extent that it was 150 megawatts, for
example, or GWh, rather, they would have to bid it in. They have to bid it in at the same -in the same way and at the same price -- same maximum
NSUARB-ML-2013-01/M05419 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 scenario.
Page 2683
prices as provided for in the earlier clauses of this agreement. MR. MERRICK: But why should Emera be
relieved of its backstop agreement by having NSPI build wind power? NSPI is the injured party in this It's the one that's not getting as much energy And why is a remedy for
as it maybe otherwise would need.
that, which offsets Emera's liability -- a remedy for that saying to NSPI go out and build wind? MS. TOWER: This is simply an option,
and it would be an option that would be approved by this Board. So it's not meant to be an obligation on Nova
Scotia Power, but simply an option. If the best option for them was to not have Emera bid on an annual basis and supply that energy on an as needed basis over the remaining term, then Nova Scotia Power has the option and it was really tied to the option and the ability to invoke the balancing right. So there's no obligation on Nova Scotia Power to build the wind. Simply an option that
would be approved by this Board and would do that under a

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circumstance when it was determined that it would be the least cost for customers. MR. MERRICK: MR. O'CONNOR: But --I would just add, it It's
was -- it's really here to protect our customers. really there for that measure. It is our option.
We will only elect
it for our customers if it is a lower cost alternative than what the variance would otherwise produce. no other reason at all. And then should we not elect the option, then Emera has its processes which are decline -clearly marked out here. But it's really for the It's for
protection of our customers, not to drive costs into them at all. MR. MERRICK: THE CHAIR: always have that option? In other words, if at some point the Nalcor energy becomes very expensive, the market-priced energy becomes very expensive, you can always build to displace it and not buy it, can't you?
Assuming NSPI --Mr. O'Connor, don't you
NSUARB-ML-2013-01/M05419 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 MR. O'CONNOR: THE CHAIR: about these 300 megawatts? MR. O'CONNOR: Yes.
Page 2685
So what's so peculiar
So I think -- and
Mr. Sidebottom can maybe speak to the balancing component. I think that was an important component in why we wanted to identify this clearly here because the balancing is an important and valuable feature of it. in the agreement. And you are absolutely correct; we can elect that option at any time. MR. MERRICK: back up for a second. I -- assume that NSPI exercises that option and builds wind. I'm assuming that whatever the My problem is -- let me So that's why it's
cost of building that wind was gets passed on to ratepayers. Am I right? MR. SIDEBOTTOM: That's correct, but
that is only after the test that it's least cost for customers. So it's an option to step into a lower cost
opportunity that is also tied very much to a balancing arrangement which is uniquely available by being tied to a
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hydraulic system such as Newfoundland. MR. MERRICK: If the cost of the wind
is greater than market but cheaper than what Nalcor may -Nalcor's energy might have been had Nalcor supplied it -I'm just sort of having to get my mind around this. Why should NSPI's ratepayers pay the cost of wind when that is costing them more than would have been the cost of the energy under the EAA? MR. SIDEBOTTOM: So the proposition
you're putting to us would be -- would not be possible because we're going to compare the market price of energy with the cost of wind energy with the associated rights, including the balancing, and we're going to determine and put before this Board for a capital work order as a least cost solution. And so the only reason we would get into this option if it was a better price than the market price. MR. MERRICK: I'm still having a
disconnect, but I can't frame it as a question. Let me skip on and --MR. JANEGA: Mr. Merrick, though, I
NSUARB-ML-2013-01/M05419 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 an obligation. can be. customers.
Page 2687
think what Mr. Sidebottom and Mr. O'Connor are saying is that first -- in the first instant with this backstop, essentially, Emera is obligated to step in up to 300 GWh. No risk to the customer, nothing is changed. essentially is the same as the day prior. It
No exposure.
If Nova Scotia Power identifies an opportunity that they could actually put another energy source in place, it just gives them the right to access the balancing if it's another -- if it's an intermittent source and that was beneficial. So it only helps to reduce the cost to It doesn't create any risk. It doesn't create
additional exposure because they have in their hand the decision of continuing with the EAA and that supply arrangement, with the conditions that cap it at market. It's going to be -- that's the most it And if a wind farm, as an example, costs more for
Emera to build it and produce, all Emera would get paid is that market price. It would incur the loss. Nova Scotia Power has that right, not They are protected in this provision and
it leaves the control completely in their hands.

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NSUARB-ML-2013-01/M05419 MR. MERRICK: Let me try it on -- try
it this way.
Under the EAA, NSPI would be entitled to
access a certain amount of power -- let's say it had been forecast and bid and accepted - a certain amount of power. Nalcor breaks the contract in whatever scenario you want to posit, and says I'm not supplying that energy in breach of my agreement, not because I'm entitled to interrupt service. But in breach of the
agreement, I'm not going to supply that energy. As I read this contract, Nova Scotia Power could say, well listen, we're short that amount of energy. We're going to build wind to replace it. Wind is
going to be more expensive than EAA, but still a good prudent purchase in the marketplace with other options considered. But then Nova Scotia Power has to pay more
for wind than it certainly would have had to pay for the EAA power. MS. TOWER: Just to be clear, that --
what's contemplated is not when Nalcor's in breach of this contract, so just to be clear on that. MR. MERRICK: When there's an
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interruption or where there's a --MS. TOWER: When under the contract,
the forecast does not show that they'll meet the 1.2 which, as I said earlier, we believe is a highly unlikely scenario. MR. MERRICK: the 1.2, period. MS. TOWER: They're forecasting that Or if they don't meet
over the 24 years they will not meet the 1.2, then we step up and Nalcor behind us to fulfill that obligation. So in all cases, Nova Scotia Power gets energy, on average, at 1.2 terawatt hours for the 24 years. MR. MERRICK: so that --MR. JANEGA: Mr. Merrick, please, And take that example,
before you continue, you're talking about a scenario where we have our partner in supplying energy with Nova Scotia block accessing the market through Nova Scotia. They
still need to get lots of energy post 2041 through this market. I don't think there's any situation
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where we should sit and be thinking about a breach of that arrangement. I don't think that's a reasonable state with
the importance that Nova Scotia will play in their attaining access to the market. unreasonable. MR. MERRICK: Mr. Janega, I understand I think that's
that, but appreciate where I'm coming from. Every time I see a provision that says Emera gets to do something that doesn't cost them any money, my alarm bells go off and I try to figure out what's going on. But let me come back to the question. Taking your scenario, Ms. Tower, that there has been a failure to provide the 1.2 so that there's a variance, one of the options available to NSPI is to build wind to replace that shortfall, that variance. MS. TOWER: MR. MERRICK: At their option, yes. At their option. If
they do so, but at a price much higher than the EAA energy that they should have been getting --MS. TOWER: Board would approve that. MR. O'CONNOR: We won't do that.
So I can't imagine this
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Page 2691
There's no reason for us, nor any logic for us to do that. If the EAA and Emera's obligation is a lower cost solution, we will merely enforce that upon Emera that they have to meet that obligation. If we, through Nova Scotia Power, can find an alternative for our customers that's cheaper or lower priced, we want to be able to have that option, and that's what this - it gives us. And it gives us the
option then to utilize the balancing service agreement as well. So I just want to be clear that that won't happen as you described it. MR. MERRICK: Well, bear with me just
Assume the worst and that it did, that Nalcor did not meet its minimum obligation under the EAA. So there is a shortage in the energy that otherwise NSPI would have been entitled to achieve at EAA pricing so that the next best alternative in the market, taking all factors into consideration, is building wind. So Nova Scotia Power builds wind, but at a greater cost than it should otherwise have been
Page 2692 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 relief of everyone. acquiring the energy from Nalcor.
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Why does that relieve Emera of its responsibility to backstop the initial loss? MS. TOWER: So there's no scenario So
where energy gets bid in at other than EAA pricing.
when and if Emera and NALCOR have to step up under Clause 7, it gets bid in at exactly the same price as outlined in Clause 4(c). Those prices, those market prices, still apply in that situation so there's no scenario -there's no scenario as you describe it where that pricing is no longer available because it is always available, the market pricing. So the idea of the EAA is that there is market energy assured to Nova Scotia Power ultimately and, at the end of the day, that there is an obligation by parties to bid at market prices into solicitations by Nova Scotia Power. MR. MERRICK: Let me move on, to the
Let me ask you about the provision, the pricing mechanism that Nalcor -- the Nalcor bid price.
NSUARB-ML-2013-01/M05419 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 It's on page 6, Clause 4(c). THE CHAIR:
Page 2693
Mr. Merrick, before you go
on, just talking to Mr. Deveau, I think it's important that we have a clear understanding, that is, the Board, as to how this works. And that's the - and I apologize for interrupting, but I don't want to be confused on this. As I understand it, in the circumstances where the variance happens and Emera has to step in, we still have a pot of 1.2 terawatt hours a year. But at that point, Emera is responsible for 300 and Nalcor is responsible for the balance. So what would happen is, there would be bids from Nalcor and from Emera to - at market prices, and Nova Scotia Power can still accept all or part of those bids. So am I correct thus far? MS. TOWER: THE CHAIR: You are correct. Good. So then the only
scenario that I see where Nova Scotia Power would build - and this is where I think the contract is confusing people - where Nova Scotia Power would build its own generation
Page 2694 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 that to happen.

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is if it could beat the market price.
that in year one or year nine or year 24. But there is still the obligation once the variance happens to bid 1,200 -- 1.2 terawatt hours a year. It's just that the bid is coming from two different
people at market prices. MS. TOWER: THE CHAIR: correctly? MS. TOWER: THE CHAIR: That is correct. I think it's fairly That's correct. Have I stated that
fundamental that we all understand how this contract is supposed to work. MR. MERRICK: appreciate that. it, I suppose. THE CHAIR: So it would make no sense Oh, absolutely. I
And I may need some remedial lessons in
for Nova Scotia Power, assuming they were getting the bids on the 12 - 1.2 terawatt hours, to build something if it was more expensive. And as they say, we wouldn't allow
NSUARB-ML-2013-01/M05419 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 MR. MERRICK: may alleviate my concern.
Page 2695 And that may be - that
I just have to take a little
time and think it through because --THE CHAIR: Well, I just don't want
the record confused because I thought I understood it going in. And I normally wouldn't interrupt, but it's
such an important point, I think it's --MR. MERRICK: THE CHAIR: Yes. I want to make sure that And I'm
that's the way the contract's intended to work. looking over to my left here --MS. TOWER: Absolutely.
MR. SIDEBOTTOM: MR. MERRICK:
That is correct. Coming to
All right.
the bid price - and there's just one aspect of this mechanism that I want to explore. At the time of the original application, my understanding was that the price that was being considered was referenced as being the Mass Hub price and that what this clause does is it adds one more component to it in that, if there's any alternative spotmarket opportunities that provide a higher price, then
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Nalcor's entitled to bid that higher price. My question to you is, how hard did Emera negotiate to try to get that down so that we wouldn't have that clause, alternative spot-market opportunities, that might, in fact, justify a price higher than Mass Hub? How big a negotiating item was that? MS. TOWER: of things about that. What we - what the negotiations were trying to do was get access to energy at market prices. And so to the extent that there's a Mass Hub price or Nalcor has a - can access another market, we believe that is market prices. The other interesting thing about this is that the likely alternate market for that energy, and we would have discussed this through the negotiations, is the New York market. And so if we were to model this today under the same scenario as we did for the original application, the economics would not change because, as we discussed during the hearing, the market -- the New York
So maybe I'll say a couple
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Page 2697
market traditionally trades at a lower price. So we were quite comfortable with this, for those two reasons, that it was a market price. And I think the other thing, it's helpful to remind us all is that this an up to price. This is a maximum price. And we can speak to how - and
my colleagues from Nova Scotia Power can speak to how it will work in the moment, but we truly believe that there will be a lesser price than this. there for a lower price to be bid. price, an up to price. MR. MERRICK: I appreciate that. And The opportunity is This is the maximum
because it is the maximum permissible price, one has to anticipate that that may well be used by Nalcor to charge that price. MS. TOWER: Maybe, but the -- there So I assume that
will be competitive solicitations.
they'll -- to the extent that they're looking to sell their energy, which I think is their objective, they will price it at a price to win the bid. MR. MERRICK: MR. O'CONNOR: If you were to --Sorry. If I just may
Page 2698 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 add something.
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Just to the negotiations of the contract and the points within it, Mr. Sidebottom and I vigorously negotiated for Nova Scotia Power on all of the contracts. that point. MR. MERRICK: MR. DEVEAU: And did you also --Sorry. Again, just on I just didnt want there to be any doubt about
that very point, I can't find it right now, but there's -it seems to me there's a paragraph in the agreement that speaks to the concern that the Board had about it being conceivable that Nalcor might want to secure another contract with another party, presumably someone like New York and Ontario, and that they might do so just to secure a longer-term contract down the road when 2041 becomes available. And it seems to me that this clause, this -- the addition of this alternate spot market, and that someone like New York and Ontario might be willing to pay more for having -- you know, for some energy now with the promise that, after 2041, they could get a lot more after the Quebec contract finishes.
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Page 2699
So it seems to me that this clause was actually -- yes, it benefits Nalcor, but it was directly counteract that concern that the Board had that it's conceivable that that could happen and that, you know, that scenario where sort of, you know, shortcuts Emera or Nova Scotia Power out of the question. MR. SIDEBOTTOM: talk a bit about that. I think one of the very significant commitments is that Nalcor has reserved their energy until we get the first opportunity to bid on that. happens every year. And I remember the concern of the Board, and what this does is, before anyone else gets the opportunity to transact, Nova Scotia Power decides if it's economic for its customers in front of being offered into the market. And that, of course, also limits the ability for any contracting to be, at a maximum, 12 months for Nalcor for this energy as well. So those are valuable to Nova Scotia and Nova Scotians, and the alternate pricing under page
Maybe I could just
And that
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6(2)(i) just simply represents that if you can get to a place and you can get there with real transmission, it is, by default, the market price. Whether we -- whether we
like it or not, that is the market price and that's what the energy would fetch in the future. As it sits right now, the Mass Hub is, in fact, the higher of the two markets and so even incorporating this clause in the modelling wouldn't change the outcome, so that hopefully that helps a bit. MR. DEVEAU: Just to complete the
circle, the -- actually, the paragraph I'm referring to is paragraph 205. And it's -- and I'll just read it.
Paragraph 205, and the fourth line from the bottom:
"It is not inconceivable that Nalcor could see the benefit of exporting market-priced energy to New England rather than to Nova Scotia on a short term uneconomic basis in order to secure the more lucrative longer-term arrangement with the counterparty in New
NSUARB-ML-2013-01/M05419 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 into that.
Page 2701 England after the 35-year term of the Nalcor transaction with Nova Scotia." (As read)
Which is -- and obviously, 2041 plays
So when the Board wrote that, it was in terms of short-term uneconomic basis, and obviously it's debatable whether that short-term uneconomic basis for Nalcor or for the other spot market, whether it's New England or New York. So you know, conceivably, perhaps New York would pay more now for anything more than market and to secure a relationship with Nalcor for -- you know, for more power after 2041. So it appears that this alternative spot market that's in the agreement was something that, you know, Nalcor negotiated for, you know, to circumvent that. So that -- you know, that was the question. MS. TOWER: Commissioner Deveau, I
think the other thing in Morrison Park -- and that may be what you were thinking about.
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Morrison Park addresses the

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issue as well in their evidence, and it says that the possibility of Nalcor contracting with other targets for its exports, long-term contracts, is conclusive and binding. Nalcor must offer power into NSPI's annual
station and cannot commit that power to anyone else on a multi-year basis. So I think that's the other thing. MR. DEVEAU: about the commitment there. But we're not talking
We're talking about the
ability to say there's an alternative spot market or we can deliver to somebody else. It goes through pricing, not the -not the -- you know, the commitment. I mean, pricing,
basically, can short-cut the commitment. MS. TOWER: I was going to -- in order
to get the longer-term deal, was the part that I thought that you were referring to. MR. DEVEAU: MR. MERRICK: Sorry, Mr. Merrick. No problem. Just let me
finish the point that's my concern. What position, what efforts did Emera take to try to limit or cap or reduce the price that
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Page 2703
addition of the alternative spot-market opportunities can, according to our view, be viewed as possibly -- as to creating the possibility of a higher price being able to be charged over what might otherwise have been the Mass Hub pricing mechanism. What effort did Emera take to cap or limit or reduce the price that's going to have to be paid by ratepayers for the EAA energy? MR. O'CONNOR: The pricing conditions
as outlined in the Energy Access Agreement are, I think it's important and critical to understand, up to. not say they will be. So the -- it is our belief that the market will start to operate more fully and more properly and that we will see prices that are up to that, not at the cap or at the max. And as Ms. Tower highlighted, the second pricing component as we think about what those prices are compared to Mass Hub are substantially below it. So we believe there's incremental value to our
They do
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customers because this is up to and would anticipate that, over time, market forces will prevail and it's likely that we see prices below Mass Hub. MR. MERRICK: I'm looking at the
wording on page 6 of Clause (c), the last sentence that says:
"Pricing up to the greater of (i) and (ii) above shall be deemed to be a good faith bid with respect to price." (As read)
So obviously, Nalcor is entitled to go to the higher of the two. MR. O'CONNOR: MR. MERRICK: That's correct. Just from -- what
efforts were made to make it the lower of the two? MR. O'CONNOR: So what we've achieved And I believe that's
here is market value for the energy.
what the Board instructed us to do, and we've -- in this, reflect those market realities. MR. MERRICK: All right. That brings
NSUARB-ML-2013-01/M05419 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 worse off? MR. SIDEBOTTOM: me to my last point. phrase the question.
Page 2705
Mr. Janega, I'll look to you as I
One of the major risks that we would see on behalf of ratepayers is that this EAA agreement really, in the long term, turns out to be of limited value or interest because in the long term NSPI will have better market opportunities to acquire energy under more traditional terms of negotiation, under more flexible terms in negotiation, under terms that will be more attractive than the bells and whistles that come attached to EAA such that the energy obtained under the EAA is of -- does not finally, at the end of the day, offset the increased costs of the Nova Scotia block. In other words, that everything that can -- everything in the EAA -- that any energy acquired under the EAA never does offset that Nova Scotia block pricing. In that case, would not ratepayers be
So I -- actually, if
Nova Scotia is not selecting the energy under the EAA, it means it's found lower cost options.
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And that could be
Page 2706 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Mr. Sidebottom. advantageous place.
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occurring because now we're connected at two points in the market and energy is flowing through this province. It's going to put us in an And I think that is where the value It's the
proposition comes in in this particular case.
connection to two markets, and that we are on the way to a market that ultimately gives us the best value. This agreement guarantees us access to amount of energy, but I would expect that well be doing energy deals outside of the committed amount and in other quantities and structures because the market is much more fulsome. MR. MERRICK: And thats my concern,
And if its -- if those are advantages
that will come with the future in any event, not because of the EAA, but theyre coming in any event, then thats something that ratepayers would have had the advantage of anyway and shouldnt have had to pay the cost of the Nova Scotia block to get it. MR. SIDEBOTTOM: I think the important
part that I put out first is that we have two connections. This particular investment is to create the second
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Page 2707
If you dont make that investment the market You cant separate one
doesnt develop in the same way. from the other. MR. MERRICK:
Is there any evidence at
all that would say that if the compliance filing is rejected by the Board that Muskrat Falls is not going ahead? MR. JANEGA: Mr. Merrick, I think
theres another piece before I answer your question on what about this hearing. Nova Scotia Power customers do
not have access to energy on any terms and conditions similar to this EAA today. There is no energy access that
Nova Scotia Power has been able to achieve that aligns or even comes close to the provisions and covenants of this agreement -- of the Energy Access Agreement. So I disagree with the premise that there will be no energy transact or potentially no energy transact under this. The first thing that happens is the Maritime Link is plugged in and the market is created, as Mr. Sidebottom has indicated, which creates a new future state for Nova Scotia.
Page 2708 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22
NSUARB-ML-2013-01/M05419 The second is, you have first right of
refusal to purchase energy at market prices at the greatest it can be. The highest it can be is the market
price that you cant attain today because you cant get the energy here today. So you get that as your second position with the EAA, which is a first right of refusal to Newfoundland and Labradors surplus energy up to 1.8 terawatt hours per year. If you dont want to purchase
that, if Nova Scotia Power decided Im going to try something different this year, that energy is still available to be sold in the marketplace and is still available tomorrow morning, or the next day, or the next hour. If there is a volume that comes on top of what is bid into the solicitation or more rain falls, Nova Scotia Power is in a position to purchase that energy for its customers at prices that are not available to Nova Scotia today. So to do anything to diminish the value thats created by the EAA and to indicate that there are other options that are out there might be similar to
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Page 2709
it, they do not exist today for Nova Scotia and only exist with the Maritime Link and with the EAA thats in front of the Board. MR. MERRICK: doesnt exist today either. Let me ask you this, once Muskrat Falls is plugged in, Nova Scotia Power has really at least two options, doesnt it; it can take power under the EAA, assuming it enters into that agreement, or it can go into the market to take energy; right? MR. JANEGA: So make the first And the EAA availability
presumption that without the agreement, which was expected by the Board as a part of this -- of the conditions of the prior approval, that this satisfies that condition and creates this market opportunity for Nova Scotia that doesnt exist prior to the Maritime Link or prior to the EAA, then I think thats the test as to whether or not Nova Scotia Power creates, because of this, better opportunities after that that are enabled by this, I think thats what weve been extolling as the benefits of the Maritime Link and the interconnection all the way through these hearing processes.
Page 2710 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22
NSUARB-ML-2013-01/M05419 But what was requested was -- you were
one of the advocates of -- try to get confidence for us that that energy will be available. well beyond creating confidence. This agreement goes
It creates a first right That
of refusal for Nova Scotia to access that energy.
goes well beyond what was originally anticipated, in our view, at pricing that Nova Scotia Power has been able to get embedded in contract, which was another point that was talked about, is we dont know what the final pricing will be. Here you have demonstrated in an obligation from Nalcor to bid in and thats the most they can charge for the energy. The market will actually Nova Scotia
determine if its a lower price than that.
Power doesnt buy the energy one day the likelihood is that the price is going to be a bit lower the next day. If its flowing to market and you decided not to buy it, the next day you have the opportunity to buy it again. So there are multiple layers of benefit that are embedded in this agreement that I know it may have some terms that we need to spend time to explain and make sure theyre understood, but we absolutely
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Page 2711
believe it creates first choice for Nova Scotia, which is what we were asked to do, is get access to energy at market prices. MR. MERRICK: I am correct, am I not,
in saying that once its plugged in, once Muskrat Falls is plugged in, Nova Scotia Power will have the ability to buy under the EAA or to go into the market and buy on whatever terms it seems appropriate at that time; correct? MR. SIDEBOTTOM: MR. MERRICK: That is correct.
And if it buys on
whatever terms it wishes on its own, thats not because of any commitment that it made in the EAA, thats something that it would be entitled to do anyway? it through the EAA? MR. SIDEBOTTOM: Thats right. We It hasnt come to
have the flexibility in the EAA to select in whatever quantity the amount of energy that makes sense for Nova Scotia customers, and so thats actually part of the value we have. Its not a -- its not something that youre Its only under economic conditions do
forced to take.
you solicit and award that energy. MR. MERRICK: Its sort of like
Page 2712 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 was presented.

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getting into a rock concert, I suppose. MR. JANEGA: Actually its a backstop.
What this is, is this is an assurance that this is the volume of energy you have access to that supports the original investment in the Maritime Link that lowers the average cost to Nova Scotia customers. This is the part
that you were looking for was that assurance that theres additional energy. This delivers it. If you can do better than that its only because you created the opportunity by having the EAA in your hand. MR. MERRICK: What Im looking for is
benefits from the EAA which offset and justify the cost of the Nova Scotia block. Scotia block? MR. JANEGA: MR. MERRICK: value? MR. JANEGA: MR. MERRICK: MR. JANEGA: Absolutely. And if --It delivers exactly what Absolutely. Does it give us enough Is this agreement worth the Nova
NSUARB-ML-2013-01/M05419 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 question. MR. MERRICK:
Page 2713 Just let me finish my
And if at the end of the day Nova Scotia Power
has the ability to buy power in the market, without going through this EAA, then thats not a cost that can be used to justify the Nova Scotia block; the only justification for the Nova Scotia block is if theres something of advantage under this agreement that it has taken, but if Nova Scotia Power decides its not worth taking certain purchases under here because they can get it on better terms, more flexible terms, more lenient terms in the market, then thats something it would have been entitled to do anyway? MR. SIDEBOTTOM: already addressed this. I think we may have
We believe that the second
connection actually creates a very valuable market in Nova Scotia. It creates a competitive environment. The EAA
gives the assurance of access to market-priced energy. And Nova Scotia Power has the freedom to choose the best energy source and price at that time in the future. So
all of those things go together, including the actual -the physical connection itself to create value for customers.
Page 2714 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Chairman. THE CHAIR: Well take a 15-minute break. --- Upon recessing at 11:10 a.m. --- Upon resuming at 11:31 a.m. MR. MERRICK:
NSUARB-ML-2013-01/M05419 Thats all I have, Mr.
Thank you, Mr. Merrick.
MR. RICK JANEGA, Resumed: MS. NANCY TOWER, Resumed: MR. MARK SIDEBOTTOM, Resumed: MR. WAYNE OCONNOR, Resumed: THE CHAIR: Mr. Blackburn? Thanks, Mr. Chair. I
MR. BLACKBURN:
want to thank my colleague, Mr. Merrick, for his thorough analysis. I had a lot questions similar to his and I
scratched a lot of them out so maybe I can expedite some of my questions to the panel. CROSS-EXAMINATION BY MR. BLACKBURN MR. BLACKBURN: In a question by Mr.
Merrick, I believe -- Im not sure which one it was now -that indicated that the minimum of 1.2 terawatts per hour was based on the low load that you interpret at the decision?
NSUARB-ML-2013-01/M05419 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 MR. SIDEBOTTOM: MR. BLACKBURN:
Page 2715 That is correct, yes. Yeah. And in
paragraph 228 of the decision, it says:
Accordingly, the Board directs as a condition to its approval of the ML Project that NSPML obtain from Nalcor the right to access Nalcor Market-priced Energy (consistent with the assumptions in the Application as noted in NSUARB IR-37...Figure 4-4) when needed to economically serve NSPI and its ratepayers; or provide some other arrangement to ensure access to Market-priced Energy.
Where in that did you determine that it had to be on the low load? MR. SIDEBOTTOM: Well, I think we read
the decision as a whole and we also took a look at page 38, paragraph 103, which talks to the low load being the
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more likely load aligned with NSPs current forecast. we found that instructive in the way we structured the access of energy. MR. BLACKBURN: All right.
Ill just
move on then but its more for argument, but I just -- it is on the reading of 228; there was no reference by the Board to the low load. And I want to get into -- touch on some aspects of the agreement -- thats the Energy Access Agreement -- so thats Appendix A of M-134. can bring that up. Okay. 3, paragraph f. Okay. Page 5 of 16, thats paragraph Its f -- 3(f); Perhaps we
Do we have that?
there it is, Energy-Only Product.
Okay.
The definition of Energy-Only Product:
Nalcor Supplied Energy shall be provided to NSPI as an energyonly product. For greater
certainty, Nalcor retains all rights and value associated with such Energy in respect of
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Page 2717 Capacity and GHG Credits.
That differs from the application, doesnt it? MR. SIDEBOTTOM: No, the application
does have -- it actually is set out that its an energy or economy project that is modelled and is priced that way in the models. MR. BLACKBURN: So youre -- are you
saying that in the model, the GHG credits werent -didnt go to NSPI? MR. SIDEBOTTOM: If you take a look at
the low-load scenario, we meet the RES requirements and all of the environmental requirements around the greenhouse grass without the excess energy being required to have any of the other attributes, and therefore, its an energy-only product. Theres sufficient other energy from the Nova Scotia block and the other renewables actually set out and planned for in the Nova Scotia Generation Plan to satisfy that condition through the planning period. MR. BLACKBURN: But what would you do
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if -- for instance, I mean, if NSPI needed the credits, youd have to go out and purchase it, which the ratepayers would have to pay for, so why would you assign those credits to Nalcor? MR. SIDEBOTTOM: I might turn that
around another way and say, why would you pay for a piece of a product that you dont need? If, in the future, you
find you need that product, then you go out and find the most economic way to acquire that product at the time. dont need anything other than economy energy to satisfy the needs of this low-load case. MR. BLACKBURN: I just want to move on Again, go to We
there to some of the terms and definitions.
paragraph (d), same page -- just scroll up if you could? Thanks. The [definition of] term of this Agreement and the Final Agreement shall commence on Full Power and shall terminate on August 31...
So if full power is not 2017, its 2018 or whatever, 19, thats when it commences?
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Page 2719 Thats right. Okay. Its ---
MS. TOWER:
MR. BLACKBURN: MS. TOWER: is in. MR. BLACKBURN: about it for a quick second. done on the project.
--- when the fourth unit
Okay.
Lets just talk
So now there has been work
Anything --MS. TOWER: Theres work being done at
Muskrat; is that --MR. BLACKBURN: MS. TOWER: Yes. MR. BLACKBURN: MS. TOWER: Yes. Have you any reason to Yes. Yes.
--- is that what you mean?
MR. BLACKBURN:
believe that its not going to go on-stream in 2017? MR. JANEGA: No. This day?
MR. BLACKBURN: MR. JANEGA:
No, we know --No delays or anything
MR. BLACKBURN: like that that youre aware of? MR. JANEGA:
We know its a long-term,

Page 2720 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 multi-year project.
NSUARB-ML-2013-01/M05419 I mean, there are potentials for But, no, theyre still
projects to hit roadblocks.
indicating that they will have generations starting in 2017. MR. BLACKBURN: Okay. Why did you -The application
why does this agreement just go to 2041?
that was filed was -- had a 35-year term and this is what the Board had referenced in its decision as well, in paragraph 226 of the Boards decision. So you -- perhaps
you can just explain again; why is the term to 2041? MS. TOWER: So again, we did -- we
read all of the decision and interpreted the condition in light of all the paragraphs of the decision. And
paragraph 200 reflects a lot of the discussion that happened during the course of the hearing. But the Board
found that the evidence clearly showed that there was no shortage of market-priced energy, even when the Churchill Falls arrangement with Hydro Quebec comes to conclusion in 2041. So we certainly believe that and the Board found that to be the case. So we set out to get an
agreement until that point when we knew there would be

NSUARB-ML-2013-01/M05419 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 specifics. lots of surplus energy. MR. BLACKBURN:
Page 2721
The reason Im saying
is that if my memory serves correct -- and Im sorry, I dont have it in front of me, but at the Link hearing in June, didnt -- wasnt there some reference that there was talk about a 50-year term or whatever, then Nalcor wanted to have a 35-year term. to have a 24-year term. Now it appears that Nalcor wants Do you recall that? I think there was some
MS. TOWER:
discussion about 50 versus 35, yes. MR. BLACKBURN: Yes, and I believe it
was a Nalcor-driven matter; do you recall that? MS. TOWER: I cant remember the
Wed have to call up the transcript --MR. BLACKBURN: MS. TOWER: Yeah.
--- but --Im sorry I dont have
MR. BLACKBURN:
it in front of me but I made some notes and I should have tied it in, but was this driven by Nalcor then, the 24year term as opposed to NSPI and --MS. TOWER: This was really driven by
the fact that we all believed and the Board found that
Page 2722 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 it.

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after 2041 there would be lots of market-priced energy. And what the condition asked of us was that we get assurance of market-priced energy. And so we set out to
do that and believe weve fulfilled that condition. MR. BLACKBURN: about a few wordings. Im a little curious
Now, perhaps we can just scroll on
the same page -- okay, 4(a) at the bottom -- 5, 6 -- right there, thanks:
Nalcor Forecast -- On a monthly basis during the Term, Nalcor will provide a good faith forecast to NSPI...
Why do you use the word good faith? I notice throughout here, and well go to the next page in a minute and another good faith and so forth. reason to put that in? Is there
I mean, surely to goodness that Is there a reason
goes without saying its a good faith. that good faith was put in there? THE CHAIR:
Some lawyer made them do
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Page 2723 The lawyer made them
MR. BLACKBURN: --(LAUGHTER) MS. TOWER:
I was going to say --Mr. Chair, Ill buy
MR. BLACKBURN: that. MS. TOWER:
Yeah, thats right. Okay. No, no, I just And
MR. BLACKBURN:
-- its just for a good-faith forecast and so forth. it goes on to say:
...available...to NSPI for the following 24 months, [a forecast of 24 months] up to a maximum of 1.8...per Contract Year...
And you indicated a while ago, I think, Ms. Tower, that the minimum will be 1.7 -- 1.2 terawatts per hour per year guaranteed. MS. TOWER: Guaranteed on average 1.2
terawatt hours per year over the term of the contract; thats correct. MR. BLACKBURN: And just while were
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on that, as Mr. Merrick had indicated -- but lets just go over to the -- quickly to page 7 of 16, paragraph (e) the Forgivable Events; I just want to touch on that for a minute. (e) Forgivable events. Okay. So
notwithstanding it says that -- so you're saying that 1.2 on average per year. And we have the forgivable events
that if Newfoundland and Labrador needed it or hydrology events, force majeure, safety event, a forced outage, an action required to be taken by any party to comply with the good utility practice. Then you went on to say, "However"; and we go to the section -- okay, as -- I guess -- this is on page 2. we are. Go right to the bottom of the -- page 7. Here
The bottom of the page, the commitment. So you're saying that it's guaranteed,
no question, on average 1.2 to Mr. Merrick because notwithstanding the forgivable event, but it's subject to 7(e)(i) and to force majeure events Nalcor will make available at least 1.2 per contract year. So you're saying that those forgivable events that Newfoundland needs that are -- that doesn't
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Page 2725
All that applies here, they're guaranteed 1.2 on
average, subject to 7(e)(i) -- let's look at 7(e)(i). Next page; top of the next page. 7(e)(i), I should say, deals with the commitment: Or
available by Nalcor to NSPI in each Contract Year used to determine fulfillment of the Commitment shall be calculated as the sum of: (i) Nalcor Supplied Energy in such year..."
So the Nalcor supplied energy in each year of 1.2 terawatts, it's only subject to force majeure. Is that what you're saying? MS. TOWER: not seeing that clause. MR. BLACKBURN: MR. OUTHOUSE: right reference, I think.
Sorry.
Mr. Blackburn, I'm
Oh, I'm sorry.
Okay.
That's not quite the
Page 2726 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Okay, there we are. Okay. got the wrong --MR. OUTHOUSE: MR. BLACKBURN: I'm sorry, you're right. So page 9. Okay. And: --MR. BLACKBURN: MR. BLACKBURN: MR. OUTHOUSE:
NSUARB-ML-2013-01/M05419 Isn't it, 6(a)? If you look on page 9
I'm sorry.
Yeah, I
You'll see (e)(i). Yes, (e)(i). Yes.
Okay. We go to page 9 (e)(i).
"Emera and Nalcor Variance Amounts - Subject to force majeure events, Emera and Nalcor shall be responsible for any Variance as follows..."
So if they don't, then Emera comes up with 300 GWh and Nalcor's responsible for the balance. that correct? So that's what you're tying in. You're saying it's guaranteed to the 1.2, subject to force
Is
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Page 2727
majeure. MS. TOWER: That is correct. Okay. Now, my second
MR. BLACKBURN:
question is, where is force majeure defined in this agreement? MS. TOWER: defined in this agreement yet. next version of this agreement. It has been defined in the Energy and Capacity Agreement and the other agreements that we negotiated in the set of formal agreements. And my So force majeure is not It will be defined in the
expectation is that that definition, the definition that ends up in the agreement, would be very similar to that. MR. BLACKBURN: Is the reason -- this
agreement, my understanding is, it's basically a done deal other than what? I mean, are we just talking about finalizing some of the wording, or what do you anticipate is going to be different from this Energy Access Agreement, then, that's going to be finalized, hopefully, by October of 2014? MS. TOWER: If you look in Clause
Page 2728 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22
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2(a), we talk in there about what other things we expect to finalize in the final agreement, the definitive agreement, including --MR. BLACKBURN: second. MS. TOWER: 2(a). MR. BLACKBURN: one second. Okay. MS. TOWER: So about the middle of the Page 4 of 16. Just Sorry. Page 4 of 16, Just -- hold on a
-- sorry, the middle of the paragraph. MR. BLACKBURN: MS. TOWER: Yeah.
It says:
"...appropriate terms for transaction [sic] of this nature contemplated by this Agreement, including as required tax, audit rights, force majeure and metering provisions, and the standard agreement template..."
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Page 2729
You might remember that the definitive agreements as filed under the application had a fairly consistent template. And we would expect that those and
other things would be -- mainly those things would be included in this. We were anxious to get this agreement finalized and didn't want to wait to do the -- those other things. MR. BLACKBURN: I guess what I'm For instance,
troubled about is, it includes including.
Nalcor could say, "Well, we" -- for instance, if you're asking the Board -- if you're asking the Board to approve this, which includes the appendix that you're filing, we're talking about an agreement -- to enter into an agreement by August 1st, 2014. And if you don't, then you
have a dispute resolution procedure to try to deal with issues. So what if this -- some material changes should come up? How -- let's say Nalcor decides
to have a change of heart about a few of the material conditions in the agreement? How do we deal with that? We don't
Page 2730 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 binding agreement. have a final agreement. MS. TOWER:
NSUARB-ML-2013-01/M05419
So this -- this is a
And we would expect, as outlined in
paragraph 2(a), that the final agreement will incorporate the commercial terms of this agreement. And it certainly would not be our expectation and it would be -- and as we say, outlined in here that Nalcor has committed to do certain things, as has Emera, and we would expect that those things will be outlined in the final agreement consistent with this agreement in front of the Board. MR. BLACKBURN: excerpt from Hansard today. Well, we just heard an
It seems to be changing as
we're here from Newfoundland Legislature --MS. TOWER: consistent with this. MR. BLACKBURN: Yeah. Well, maybe That -- that's completely
consistent, but also we're talking about, you know, the government wanting to get as much -- get the best price they can for the -- for their surplus energy. And if
there's a premium that they can get for it, then they'll probably check the market for that.
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Page 2731 So the terms of what they
MS. TOWER:
can bid in are clearly outlined in this agreement and have been agreed to by the parties. MR. BLACKBURN: argument. I want to go to the pricing for a minute. Okay. We bring up page 6, paragraph (c), "Nalcor Yeah, that's more for
Bid Price". Okay. So the -- this has been gone
through kind of in a fair bit of detail this morning or earlier. I just want to -- if there's an alternative spot market such as New York -- you mentioned New York a minute ago, or wherever -- and there's a premium. So that premium, if there's a premium for that
energy, does that clause say that Nalcor can sell at that premium? MR. O'CONNOR: sure on the word "premium", so --THE CHAIR: that, Jeff, it's the next page. MR. BLACKBURN: Oh, I'm sorry. I Just before you answer I'm not 100 percent
Page 2732 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 it properly. MR. O'CONNOR: MR. BLACKBURN: MR. O'CONNOR: described here. didn't check. Page 6 of 16(c). There it is. MR. O'CONNOR:
NSUARB-ML-2013-01/M05419
Thank you. So it is the price as
There is no language that says there If -- if
would -- could be a premium added to that.
they're choosing this, it's presumably because it's higher than (i) --MR. BLACKBURN: MR. O'CONNOR: MR. BLACKBURN: That's what I meant. Okay. Yeah.
Sorry I didn't phrase
So yes, it --So --It allows if that price
was, indeed, higher than (i) that they could elect to price under (ii). MR. BLACKBURN: And with -- you're
aware of -- it came up at the hearing in June that various New England states have now passed regulations dealing with renewable energy and green energy, and so there's probably going to be a market for it and probably it will be the kind of market, say, here through the Muskrat -DICTUM DIGITAL INC. CERTIFIED COURT REPORTERS
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Page 2733
through Nalcor or through Quebec Hydro, I suppose, or whatever. But -- so is it more probable than I guess that's my question, that there's probably
going to be alternate spot markets and there's going to be a premium attached to it, which means that Nova Scotia Power are going to be paying a premium and the ratepayers are going to be paying a premium? MR. O'CONNOR: with that completely. This talks about an alternative spot market, which is for energy only. It is a separate and Those No, I -- I disagree
distinct from whatever the renewables or capacity. are separate markets.
They would not -- and the value of those markets would not be in this pricing. And if Nalcor
were trying to achieve the value for that, they would have to do it under some other mechanism. We will not pay for those other attributes through this pricing mechanism. MR. BLACKBURN: Okay. If there is an
alternative buyer, I don't see anything in this agreement,

Page 2734 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22
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that's the Energy Access Agreement, that the -- that an alternate buyer of this premium product to be subject to any of the requirements that Nova Scotia Power has, such as selling -- you know, to resell the surplus energy that they don't need or other conditions that are in the contract. Is -- was there any intention that if there was an alternate buyer that the -- that they would be subject to similar conditions of Nova Scotia Power? MR. O'CONNOR: So the Energy Access
Agreement clearly says that there can be no other alternative buyers until it is offered to Nova Scotia Power through the solicitation process. And through that
process, if we elect not to take the energy, then Nalcor is free to sell it to them. And we've never discussed
what those terms and conditions might look like. MR. BLACKBURN: point. So you resell it to whoever and there will be no similar conditions that are attached to Nova Scotia Power. In other words, there's clauses in
Right.
That's my
NSUARB-ML-2013-01/M05419 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22
Page 2735
here dealing with Nova Scotia Power can -- you know, they can't resell other than on a limited condition, for instance. MR. O'CONNOR: So if we acquire energy
through the solicitation, the terms and conditions that are here will apply to all of that energy. If we buy
energy from them or anyone else under a different arrangement, of course, these terms would not apply to those transactions. MR. BLACKBURN: Also dealing with
volume, I mean, we're -- does -- the alternate buyer, does he have to purchase the exact same volume per month that's offered to NSPI? See, the -- I guess what I'm trying to get, was there any thought given when this was negotiated that if there was an alternate buyer that perhaps the same terms and conditions would be put on NSPI. And if not, if
the answer is, well, why, then why did -- why does NSPI -why are you getting -- why did you negotiate such a restrictive agreement? MR. O'CONNOR: I guess I don't agree
with the words, "restrictive agreement."

Page 2736 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22
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NSUARB-ML-2013-01/M05419 I think there's a good amount of
flexibility in the agreement, that these are commercially reasonable terms that we've come to with Nalcor. reflect industry standard types of clauses. -- I guess I don't agree with your premise. MR. JANEGA: Mr. Blackburn, but nobody Part They
And I don't
else has the opportunity that Nova Scotia Power has.
of the -- this is a package that nobody else has, so you can't look to another agreement to compare it because Nova Scotia Power has the right of first refusal of this energy. MR. BLACKBURN: Did Nova Scotia Power
ever have an agreement that -- with restrictions of what they can do with the power when they purchase it? MR. JANEGA: I can recall a number of
agreements where we are buying from a party and there are resale restrictions. It's actually quite common in commercial practice that if you are a seller of a product, the -- there are some restrictions on reselling. is not unusual at all. But I think, as I've already
So that
NSUARB-ML-2013-01/M05419 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22
Page 2737
testified, we maintain all the flexibility we need through both clauses that are set out in the EAA and our underlying ability to buy and sell into the market because we have a portfolio generation. So the main intent for the restriction on resale was simply Nalcor not wanting us to become a market reseller of their energy. And that's all it is.
And it doesn't restrict us from optimizing the energy we have once committed to. MR. BLACKBURN: Go back on the
agreement to -- I mean, we're on the -- let me just check now. Page 7 of 16. Again, it's paragraph 80 under,
Forgivable Events. There's a couple of forgivable events that I'm not sure what they mean, and perhaps you can just -- or somebody can let me know. It refers to a safety event. I
suppose that's -- what would be an example of that? MR. SIDEBOTTOM: A safety event is if
you find something unsafe on your system or your equipment, the very appropriate thing to do is to shut down and secure it and repair the piece of equipment.
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And
Page 2738 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 questions.

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NSUARB-ML-2013-01/M05419
that's a safety event. MR. BLACKBURN: And an action required
to be taken by any party to comply with good utility practice, what does that mean? MR. SIDEBOTTOM: Any number of things,
but if there are certain testing that's required by regulatory bodies for reliability purposes, that might mean that a piece of equipment is taken out to be tested and proven that it's reliable and appropriate. one of an example that we would have there. MR. BLACKBURN: And refer just for my And that's
edification, the Edison Electrical Institute Standard Form Master Purchase and Sale Agreement; is this something standard in the industry? MR. O'CONNOR: standard contract. MR. BLACKBURN: I think Mr. Merrick Yes. Yeah, it's a
covered most of the other -- my other questions on the agreement. (SHORT PAUSE) MR. BLACKBURN: I think those are my
NSUARB-ML-2013-01/M05419 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 THE CHAIR: Thanks very much.
Page 2739
Lower Power Rates Alliance. MR. MacDONALD: THE CHAIR: Good morning.
Good morning. Or afternoon, I guess.
MR. MacDONALD:
CROSS-EXAMINATION BY MR. MacDONALD MS. TOWER: Good morning. Good morning.
MR. MacDONALD:
Just a couple of questions I have, mostly containing the RES, the Renewable Energy Standards. If we can put Exhibit M-14 up, page 1520. (SHORT PAUSE) MR. MacDONALD: Thank you, yes.
Just we want to clarify some points about this chart here, so we're saying line 1, the year, line 2, existing renewables, both NSPI-owned and IPPs. won't go through all of them. But is it fair to say, I guess, from your understanding that line 7 -- or sorry, line 7 is total RES renewable -- eligible renewals. And then -- so Is I
line 7 is the sum of line 1 through 5 minus line 6. that fair enough?
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NSUARB-ML-2013-01/M05419 MS. TOWER: Do we have the right chart
up?
It's indigenous wind low load? MR. MacDONALD: Oh, no, we don't.
Sorry.
Fifteen twenty (1520), Attachment 3, page 1, yes.
Thats correct. Okay. Sorry about that. So just
again, going through the categories, and were saying -so line 7, that being total RES eligible renewables, is basically the sum of lines 1 through 5 minus line 6. MR. SIDEBOTTOM: MR. MacDONALD: Thats correct, yes. Okay. Going back to
the earlier hearing, it was acknowledged in the testimony that imports over the Nova Scotia-New Brunswick tie line are not expected to be RES eligible. MR. SIDEBOTTOM: Is that correct? I think they could
be, but it would require acknowledgment of that large hydro. MR. MacDONALD: Okay. So is -- the
figures here in the total RES eligible, does that include the fact that the Nova Scotia and New Brunswick ones are eligible, or not? MR. SIDEBOTTOM: This particular table
NSUARB-ML-2013-01/M05419 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22
Page 2741
shows them as counting towards eligible renewable, and I think whats helpful, and I think I said earlier, is that -- I dont see the line numbers, but the one titled "renewables NSP owned and IPP", you can see it as approximately 3.2 terawatts of energy there. MR. MacDONALD: MR. SIDEBOTTOM: Yes. And then under
contract, the base block and supplemental, which is the next line down, which goes between about 1.1 terawatt to about .9 terawatt, they are known and qualified RES. And
they add up to about -- well, actually, more than four terawatts of RES qualified energy in a low-load scenario. I think, actually, you flashed up just a few minutes before the load in a low-load scenario, and the requirements of RES in a low load are less than four terawatts of energy annually. So again, going back to the fact that we dont, in fact, need this energy to be RES energy, it is an energy-only product is actually shown through this, and I think elsewhere in the document it actually shows you the low-load scenario and the requirements for RES for that.
Page 2742 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Attachment 1.
NSUARB-ML-2013-01/M05419 So you actually dont have to count
either the New Brunswick imports or the excess energy as RES compliant to meet the Nova Scotia needs. MR. MacDONALD: Okay. Just so I
understand, those are -- so they wont be considered or they wont count towards the RES compliant quota. MR. SIDEBOTTOM: They dont need to
count and, as an energy-only product which is being offered through the Energy Access Agreement, we dont actually need those credits. MR. MacDONALD: Okay. Thank you.
Okay, same exhibit, page 15 -- 18, So this is the table -- this is for the And its showing that
base load -- yeah, wind base load.
the RES requirement is in the fourth column over from the left. RES energy in 2020 -- sorry, RES requirement in
gigawatt hours. MR. SIDEBOTTOM: MR. MacDONALD: Thats correct, yes. Okay. And its
growing from 4,123 gigawatt hours in 2020 to 4,581 in 2040. So under the -- looking at this, and under the
terms of the EAA, what makes you think that there is still
NSUARB-ML-2013-01/M05419 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 -- where is it here? Its M-142, page 19. Okay.
Page 2743
enough RES eligible energy to meet the RES requirement? MR. SIDEBOTTOM: So as weve already
said, we took a look at the total decision and we understood that the Board felt that the more likely scenario was the low-load scenario. And in that
particular case, the RES requirements are below four gigawatt hours and, therefore, we are fully compliant without having to have the excess energy be RES qualified. Another interesting note, though, in - this is actually the base-load scenario. Youll see
that its not much above the 4 gigawatts even in a baseload scenario, and so the increment of RES requirements is not that significant, actually, to achieve that. And if
we saw the load grow towards the base-load requirements, wed find the most economic solution for customers at that time to acquire the appropriate RES credits. MR. MacDONALD: Okay. Can we bring up
Its from Mr. Raphalss testimony.
So this is from his evidence
and showing the analysis of the RES eligible versus requirements, again, on the base-load case.
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So if youre
Page 2744 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22
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going with low load, well, just bear with me as we go through the base load, I guess. As you can see, the dotted red line shows the RES requirement under the base load, and the blue line is the RES eligible resources. And then the
dotted green line shows the percentage of renewables along the right axis. So really, what Im -- what this graph is showing, that with surplus imports from both New Brunswick and Nalcor treated as non-eligible resources, the percentage of RES eligible resources remains under 40 percent for each year from 2020 to 2040. So again, does that go back to your earlier comment about the Nova Scotia-New Brunswick could be RES compliant? MR. SIDEBOTTOM: I think what I would
take from this is that, first, if the load grew to the base case, which, again, we have taken the lead of the Board on the low load being the more probable case. But
even at that case, I draw how close it is with simply the renewables that are seen as available through Nova Scotia, as being envisioned and built in Nova Scotia, and the
NSUARB-ML-2013-01/M05419 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22
Page 2745
Maritime Link, and that we would only need to bridge a small gap if the load actually did appear as a low load or as the base-load scenario. MR. MacDONALD: moving to the next topic. I think its been brought up before, so I wont beat this to death. But I guess were just -Thank you. Okay,
I think everyone is trying to understand, you know, what happens at the end of the contractual period of the EAA if the 1.2 terawatt average, you know, has not been met. So theres provisions, you know, in the EAA about they shall compensate NSPI accordingly, and I think it was raised earlier with the Small Business Advocate about some of the wording in the agreements. So is there any -- will that wording be finalized in the final agreement? MS. TOWER: So it is the intention of
the parties to meet the 1.2 over the period of the term of the 24 or 25 years, and so we have not only the initial commitment of Nalcor, but the backstop of Emera and Nalcor. And so I'm -- sorry, your question is -- the
wording --DICTUM DIGITAL INC. CERTIFIED COURT REPORTERS
Page 2746 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 question again. MR. MacDONALD: MS. TOWER: Im sorry. MR. MacDONALD:
NSUARB-ML-2013-01/M05419 Yeah. I guess Im ---
Sorry, maybe ask your
Sure.
Im just -- Im
getting at -- theres wording in there that says if either Emera or Nalcor fails to meet their variance obligations, they shall compensate NSPI accordingly. So I guess were just trying to get at, you know, when will the definition of "accordingly" be developed? MR. SIDEBOTTOM: So the intent here,
of course, is to ensure that Nova Scotia customers are kept whole and that we would put sufficient language in there to ensure that it was that exact intent, exact calculation of that because that could be some time in the future. May not be prescribed, but the principles at
which it would be applied I would expect would exist in the contract. MS. TOWER: Ultimately, I think this
Board has oversight over how the ultimate calculation, if there was a default, and the parties had to step up. I
think the ultimate test would be this Boards oversight

NSUARB-ML-2013-01/M05419 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 their plan, yes. MR. MacDONALD: back to M-142, page 23? Okay. yes. MR. MacDONALD:
Page 2747
over how Nova Scotia Powers customers were compensated for that. MR. MacDONALD: Final question. Thank you. Its for -- I guess
for Mr. Sidebottom, who referenced it earlier. You said before that if Nalcors firm load grows, it will have to build new renewables which will increase the available surplus energy due to the difference between average and firm energy from renewables; correct? MR. SIDEBOTTOM: That sounds right,
So according to your
testimony, for the duration of the EAA, Nalcor could build only renewable energy resources? MR. SIDEBOTTOM: Thats certainly
Could we go
So this is from the Manitoba Hydro International report. It was prepared for the
Newfoundland and Labrador Public Utilities Board in 2012.

Page 2748 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22
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NSUARB-ML-2013-01/M05419 According to this chart, I believe it
represented Nalcors description of the Muskrat Falls scenario. It shows the next generation resource after
Portland Creek to be a 170 megawatt combined cycle combustion turbine. Have I got that right so far? MR. SIDEBOTTOM: Yes, and thats under That CCGT
a scenario of Newfoundland not being connected.
doesnt exist in their resource plan in a connected system. MR. MacDONALD: Okay. Does it not at
least suggest that, at minimum, that theyre open to the idea of thermal? MR. SIDEBOTTOM: I would say that it
is just a recognition of what their system needs if its not connected. In this particular scenario, they are not connected to the rest of North America and they have other needs. In, I believe, the same report, in a connected system that unit doesnt exist. MR. DEVEAU: So Mr. Sidebottom, what
NSUARB-ML-2013-01/M05419 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 piece of generation. MS. TOWER:
Page 2749
youre saying is that chart that relates to the, I think it was called, the island only alternative that the Newfoundland POB was looking at? MR. SIDEBOTTOM: MR. DEVEAU: THE CHAIR: Thats correct, yes.
Okay. Just before you go there,
do you know if they need the approval of the regulator to build in Newfoundland? Forget Muskrat Falls, but another
Were uncertain because --
I think that they did appear, of course, as you know, in front of the regulator for Muskrat. I know they file regularly with the Public Utilities Board in Newfoundland. Newfoundland and
Labrador Hydro does generation plants and such, but I dont know the specifics. THE CHAIR: I guess my question is if,
at a given point in time, a CT was the least cost alternative, isnt that what theyd be allowed to build? MR. JANEGA: I think they do follow
very similar tests of lowest cost alternative, similar to

Page 2750 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 competitive.
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what they went through in front of the Public Utilities Board relative to Muskrat Falls. So I think you would be
right, if that was the least cost option for them at a point in time, they may consider it. What we know of Newfoundlands outlook for their actual hydro builds, the ones that are represented on the top line, the Portland Creek and the others that we talked about, Round Pond, Island Pond are three of the projects that they have. Theyve talked about the cost of bringing those online. I think there was actually
evidence presented during the hearing earlier this year and what those anticipated levelized costs are. They, in our view, would remain You know, unless somebody was getting
something for free on a combustion turbine, theyd beat those costs on a long-term levelized. THE CHAIR: Thank you.
Sorry, Mr. MacDonald. MR. MacDONALD: I think that sort of
got to the question, but Ill just -- Ill pose the question anyway.
NSUARB-ML-2013-01/M05419 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Chair. of my questions. THE CHAIR: So to the best of any of your
Page 2751
knowledge, are any of you aware of any formal commitment on the part of Nalcor, Newfoundland Hydro or the government under which it renounces the possibility of building thermal generation in the future? MS. TOWER: speak for any of them. I dont think we could
What we do know is Mr. Humphries,
when he was at the technical conference, talked about what Newfoundland and Labradors plans were, and my recollection is that that was -- he talked about future plans of hydro development. So other than that, I dont think we can really speak for the parties that you named. MR. MacDONALD: Thank you. Thats all
Thank you, Mr. MacDonald.
PC Caucus, any questions? Welcome, Mr. d'Entremont. this is your first appearance here if I --MR. d'ENTREMONT: Thank you, Mr. I think
Its a pleasure to be here for a few moments, and
Ill try to keep this one as short as we can.

Page 2752 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22
NSUARB-ML-2013-01/M05419 CROSS-EXAMINATON BY MR. d'ENTREMONT MR. d'ENTREMONT: Weve had a lot of
discussion and I know that theres been a lot of the -probably the answers that I probably have from previous presentations, but the question around low load and high load and all that stuff. So if the low load has essentially become the base load, why hasnt the EAA agreement not been tested across, or has it been tested across and we just havent seen it yet for potential future loads using that projection as the base instead? MR. SIDEBOTTOM: So the EAA actually
contemplates up to 1.8 terawatts of energy each year, and that is made available. Its a combination of, obviously,
the variable hydrology along with energy thats not committed to load in Newfoundland. So we actually believe
there is opportunity for energy from that standpoint. As well, we do have access to economy energy through New Brunswick, although its more limited, but its facilitated by the Maritime Link itself. And if you can recall back in the cases, weve brought in about .8 terawatts of energy
NSUARB-ML-2013-01/M05419 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 through New Brunswick independently.
Page 2753 Once youve got the
Maritime Link, youve got a better ability to import energy into Nova Scotia as well. So we believe that it certainly makes higher load scenarios even easier to manage in the future. I think when we actually took a look at the cost comparison amongst the alternatives and getting back to what is the lowest cost alternative for customers, as the load grows, it becomes even further, the distance between the Maritime being the lowest load option and other options, and thats because of the advantage of the multiple connections to other markets. MR. d'ENTREMONT: You struck on
something that Ive been trying to understand throughout this proceeding where we talk about the construction of the Link. But when it comes to actually a better deal for
ratepayers, which is, I think -- and the reason why were here today -- that the best option for them is purchasing electricity from other sources other than Muskrat Falls. Could you explain that one just a little bit more for me? Because it seems the better
connection for ratepayers is actually the one thats

Page 2754 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 between those? MR. SIDEBOTTOM: disagree with you.
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coming from New Brunswick or coming from other sources. MR. SIDEBOTTOM: Actually, Id
And the analysis would show that
having a second connection is actually the best answer for Nova Scotia customers. Because youve got two sources, we create a competitive market, we invigorate the Maritime market because youve got a source of energy flowing through this province, which inherently is going to provide value to customers beyond even what weve modeled. MR. d'ENTREMONT: Okay. The regional
application envisioned greenhouse gas credits applying to both the Nova Scotia block and to the surplus energy block. The Energy Access Agreement is different. It
strips the surplus energy, other greenhouse gas credits. So could you explain the difference
Well, I think what we
know in the low-load scenario is you dont need to have the greenhouse gas credits to actually serve the load in the low-load scenario, which was seen to be the most likely scenario into the future.
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Page 2755
I think the second point is that we would then, at the time, if the load did grow, be more than advantaged by being able to access multiple markets for sources of that green credit at that time. MR. d'ENTREMONT: Okay. And I know
you sort of already answered this, but how can you say that ratepayers arent disadvantaged when theyre getting surplus energy without those greenhouse gas credits? MR. SIDEBOTTOM: I think its as
simple as theyre not required at this point, and so theres no need for customers to pay for it. It creates the lowest cost solution for customers and, therefore, it is not a disadvantage; it is the advantage. MR. d'ENTREMONT: Okay. You claim not
to need them for Renewable Energy Standard based on the low-load projection, but Nova Scotia ratepayers need to be protected against the range of future forecasts. In the
event that future demand exceeds the low-load forecasts, how can you be sure that Nova Scotia ratepayers -- that the RES requirement will be met with no additional cost to them?
Page 2756 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 MR. SIDEBOTTOM:
NSUARB-ML-2013-01/M05419 Well, what we do know
is that as load increased in Nova Scotia, having a second connection to the Maritime Link showed very clearly it was the lowest-cost option for customers. It was only under the low-load scenario there was the question of this being a close race, as I believe it to be seen, so what we've done is we've ensured the access to the energy that gives us confidence that this is the low-load solution in -- sorry, the right solution in a low-load case. MR. dENTREMONT: Okay. In the event
that Emera is called upon providing renewable energy, what is the assurance that we have that it will not show up in our rate base? You have to go and construct something, by the sound of it. MS. TOWER: So if Emera is stepping up
to its 300 GWh obligation, it is required to bid in at the same costs -- maximum costs as outlined. And so as Mr. O'Connor said earlier, those do not envision a green energy product or a green credit. So we are under -- we, Emera, are under the same
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obligation as Nalcor and as is outlined and we are bound by the agreement that's in front of us. MR. dENTREMONT: question, Mr. Chair. The Board made their decision on July 22nd. 21st. You've asked for quick turnaround without, you know, a whole lot of explanation on that. sort of had a lot of time to prepare it and a very short period of time to respond to it. So just when it comes up to the issue, what is the real deadline here? How long do we have We NSPML submitted their compliance filing on October Okay. And my final
before you need to have that final decision from the Board? MS. TOWER: I would simply say that we
need it as soon as the Board can make it. MR. dENTREMONT: Thank you.
Those are all my questions, Mr. Chair. THE CHAIR: so stick around. MR. dENTREMONT: Okay. That's an I may come back to that,
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interesting one. THE CHAIR: Thank you very much. Thank you.
MR. dENTREMONT: THE CHAIR: NSDOE. MR. McGRATH: Chair. (SHORT PAUSE) Yes.
Port Hawkesbury Paper.
Thank you, Mr.
CROSS-EXAMINATION BY MR. McGRATH MR. McGRATH: MS. TOWER: MR. McGRATH: Good afternoon, panel. Good afternoon. Does NSPI currently
import energy through annual solicitations? MR. SIDEBOTTOM: point. MR. McGRATH: So that aspect of the No, we don't at this
EAA would be a new aspect of NSPI's procurement practices? MR. SIDEBOTTOM: New only in term, but
all the rest of the characteristics would be very similar, so it's not unlike what we do today, just a little bit longer. MR. McGRATH: And a little bit more,
NSUARB-ML-2013-01/M05419 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 as that, yes. MR. McGRATH: And now, when as well? MR. SIDEBOTTOM: MR. McGRATH: Yes.
Page 2759
So you're looking at,
under the EAA, energy that's approximately, I think, 10 percent of your annual energy requirements? MR. SIDEBOTTOM: It could be as high
undertaking these annual solicitations, will NSPI strive to do so in a manner that fosters as competitive a market as possible? MR. SIDEBOTTOM: Absolutely. You
know, if we draw a comparison to today, we negotiate RFPs out for multiple years of energy source supplies. not be electricity today. We do this for natural gas and coal, and those solicitations can also represent upwards of 10 percent of a particular year's energy requirements as well. MR. McGRATH: And you'll also, when It may
you go out for these annual solicitations, seek to eliminate as much risk as possible to Nova Scotia
Page 2760 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 document is? MR. SIDEBOTTOM: MR. McGRATH:
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ratepayers in the manner in which you conduct these procurement processes? MR. SIDEBOTTOM: Yes, we will. We'll
seek to structure it for the total best value for customers, including the right risk profile. MR. McGRATH: And the manner in which
NSPI undertakes its procurement through these annual solicitations is fully reviewable by the Board? MR. SIDEBOTTOM: It is. There's a FAM
audit every second year, and all our transactions and decisions are fully scrutinized and transparently available to the Board and intervenors. MR. McGRATH: And am I correct that
NSPI currently has a document that details its policies and procedures for procuring fuel for generations? MR. SIDEBOTTOM: MR. McGRATH: It does.
And the name of that
The Fuel Manual.
Does NSPI have a similar
document with policies and procedures for its power purchase activities?
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Page 2761
activities are actually encompassed in the Fuel Manual today. MR. McGRATH: And in terms of the Fuel
Manual itself, am I correct that that was -- initially came to be or came into existence as a response to coal procurement issues that were raised in past Board decisions? MR. SIDEBOTTOM: It was developed
based on concerns of the Board and stakeholders, and it was created with significant amount of input and reviewed by stakeholders and the Board and Board consultants. MR. McGRATH: In light of the change
in NSPI's anticipated practices in procuring power, both in terms of the length of the contract and the volumes of energy that you'll be dealing with, would you agree that it would be prudent to review those policies and procedures to make sure that they are robust enough to accommodate the activities that you envision under the EAA in order to foster as competitive a market as possible? MR. SIDEBOTTOM: In fact, the fuel
manual goes through a fairly continuous review process,

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and there is engagement through what's called the FAM Small Working Group in which we endeavour to keep interested stakeholders abreast of the evolving market, whether it be electricity, natural gas, coal, or any other product we're purchasing to generate electricity. MR. McGRATH: Before NSPI begins
acquiring energy under the EAA, if the Board approves the arrangement, would NSPI commit to specifically engaging the FAM Working Group to conduct a specific review to determine whether any policies and procedures need to be changed to accommodate that anticipated activity? MR. SIDEBOTTOM: MR. McGRATH: Of course.
And in terms of the
solicitation process, I just want to make sure how it's contemplated it would work under the EAA. As I understand it, it appears to be fairly flexible in that NSPI is free to issue a competitive solicitation on any terms that it pleases, more or less. Is that fairly accurate? MR. SIDEBOTTOM: MR. McGRATH: That's correct, yes.
And is it flexible
enough to, for example, deal with the situation where if

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Page 2763
NSPI went to market and five bidders put prices in to NSPI in response to the solicitation that NSPI could accept parts of the bids from all five of those bidders for part of the year that it's looking for and maybe even none for other parts of the year? MR. SIDEBOTTOM: MR. McGRATH: Yes, it is.
And if NSPI accepts
bids, whether from Nalcor or a third party, it would be obliged to take that energy? MR. SIDEBOTTOM: MR. McGRATH: Yes.
And the bid prices are
likely going to be tied to an index? MR. SIDEBOTTOM: MR. McGRATH: Yes.
And so it may come to
pass, therefore, that by the time the energy is delivered, the price for the energy will be higher than anticipated when the bid was accepted? MR. SIDEBOTTOM: Yes, but because we
are identifying liquid trading hubs, if we want to hedge the price, we have the ability to do that, so based on risk management practices and how much of the portfolio we wanted to in fact, lock in a price that effectively can
Page 2764 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22
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fix the price before the energy is delivered.
you've got one part of the contract that is indexed, the end effect for customers is that it's a fixed price. MR. McGRATH: And in terms of the
potential for hedging the prices for economy energy, is that currently addressed in the policies and procedures that you have? MR. SIDEBOTTOM: MR. McGRATH: Yes.
And that will be part of
the review that you indicated to me that you'd be prepared to take a look at a moment ago, to see whether those hedging practices are robust enough to accommodate your new activities under the EAA? MR. SIDEBOTTOM: Yes, we're always to
open to understanding how customers would like the risk profile addressed on buying energy. MR. McGRATH: If NSPI is being
delivered energy, either hedged or unhedged, under the terms of the RFP response that is more costly than it expects, and in fact, more costly than it costs NSPI to self-generate at that time, how will NSPI mitigate that impact on ratepayers?
NSUARB-ML-2013-01/M05419 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 MR. SIDEBOTTOM:
Page 2765 So we always have the So if the market
ability to sell energy into the market.
is at a premium, so, like, let's build out that scenario, then as an opportunity for Nova Scotia Power to sell into that same market and effectively reduce that risk by selling energy into that market, so we would have lower cost energy that we could effectively create a profit with which would offset that cost. MR. McGRATH: And you say you'd always Are there any
be able to sell energy in the market.
constraints on your ability to sell at any given point in time? MR. SIDEBOTTOM: From time to time
there can be a transmission constraint, but my experience has been getting in to the New England market, and especially the New Brunswick market, has not really offered much restriction at all. It's typically the
inbound flow that has been more the restriction. MR. McGRATH: Any other constraints? I suppose -- sorry; I
MR. SIDEBOTTOM: don't understand the question. system?

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On the transmission
Page 2766 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 MR. McGRATH:
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that might constrain your ability to sell energy into the market at any given point in time if you receive market energy from Nalcor that's -- that costs too much? MR. SIDEBOTTOM: I see.
So we are constrained from reselling Nalcor energy subject to load change or generation change, but as I said, Nova Scotia Power has a portfolio of generation so any number of other generating megawatts can produce the outbound sale which, effectively, is like selling energy on. MR. McGRATH: Would there be the
potential that environmental restrictions would limit your ability to generate, to sell energy at any given point in time? MR. SIDEBOTTOM: I guess potentially,
you'd have to be at the upper bounds of a particular constraint, but that would certainly be considered in how we do the resale. But that doesn't stop us actually
considering that resale; we'll just factor that in. MR. McGRATH: In terms of the
alternate market price arrangement -- sorry.

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In terms of the alternate market price arrangement that's in the EAA, I just want to make sure that I understand it correctly. So if we can pull that
document up, Exhibit M-134, and we're looking in particular at Section 4(c). (SHORT PAUSE) MR. McGRATH: I won't read the whole
thing, but I want to focus on the middle part of that that says:
...to the extent Nalcor can demonstrate both liquid trading node [and] associated published forward pricing in an actual transmission path...
It's the, to extent language that I want to focus on. You'd indicated earlier in testimony that this alternative opportunity is something that Nalcor would have to identify at the time it bids? MR. O'CONNOR: That's correct, yes.
Page 2768 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 MR. McGRATH:
NSUARB-ML-2013-01/M05419 And if it identifies
that it has an opportunity where it can achieve a better price on one day of the entire contract year, either at the beginning or at the end, it doesn't really matter, is it's alternative price applicable only to that one day, or would it apply to the entire year under the contract? MR. O'CONNOR: It's only applicable to
the volume that could flow on that one day. MR. McGRATH: Thank you.
And Mr. O'Connor, you'd testified earlier in response to questions today in respect of the ability to have a premium market that's built on green attributes or a green premium as setting an alternative price, and I think you'd indicated -- I don't have the exact words, so if I'm mischaracterizing it let me know, but that you viewed the language alternative spot-market opportunities as precluding that because spot market ruled out anything other than an economy energy with no attributes. MR. O'CONNOR: Yes, that's correct.
And what we're buying is only energy, it's not capacity or other environmental attributes, so those two conditions
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Page 2769
would preclude the environmental attributes being in this pricing. MR. McGRATH: Sorry; what was the
That the actual product
we're buying is energy only, as defined in the contract. MR. McGRATH: (SHORT PAUSE) MR. McGRATH: During the course of the Okay.
agreement with Nalcor, if NSPI determines that it's more economic at any point in time to self-generate by building additional wind generation rather than acquiring market energy from Nalcor, is it still at liberty to do that? MR. SIDEBOTTOM: MR. McGRATH: Yes.
And if it does, would
Nalcor still be obliged to respond to annual solicitations to determine whether there may not still be low price periods when acquiring market energy might still be appropriate? MR. SIDEBOTTOM: MR. McGRATH: They are.
And so maintaining
Nalcor on the hook with respect to this is a benefit to

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ratepayers? MR. SIDEBOTTOM: MR. McGRATH: Yes.
Now, in the situation
where Nalcor for whatever reason isn't able to provide the average 1.2 terawatt hours over the course of the contract, and Emera and Nalcor have to step in to provide the variance amounts, as I understand it there's an option where if NSPI did that exact same thing because it was more beneficial to build a wind farm to provide the energy, that Emera would then be relieved of its obligation to provide the variance amount of energy -- its variance amount to the extent that the wind farm was producing up to the 300 gigawatt hours. MR. SIDEBOTTOM: That would only be
the case if -- and, again, it's an option for Nova Scotia to choose it as a low cost option -- at that point it's a better solution for customers and that satisfies that 300 gigawatts of the variance. MR. McGRATH: Right. But it's a
better solution because it's more cost effective to build wind in that scenario; correct? MR. SIDEBOTTOM: Yes, as you've
NSUARB-ML-2013-01/M05419 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 a different way. you restate that? MR. McGRATH: proposed it, yes. MR. McGRATH: Right.
Page 2771
And when there's
no variance amount and it's Nalcor, and NSPI builds wind because it's more cost effective, Nalcor remains committed to its obligation to bid in its commitment to the 1.2 terawatt hours, why then wouldn't you keep Emera on the hook for the variance amount when in similar circumstances you're building a wind farm, because, again, it's cost effective? (SHORT PAUSE) MR. SIDEBOTTOM: Can you -- sorry, can
Let me try to come at it
If NSPI builds wind generation because
it's cost effective for its own reasons, and we happen to be in a variance situation, why should Emera be let off the hook? MR. SIDEBOTTOM: The reason for that
is that there's a cheaper solution for customers because Nova Scotia Power, for whatever reason at that time, either its cost of capital or its position, is able to present a lower cost to customers.
Page 2772 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Emera in that case. MR. McGRATH:
NSUARB-ML-2013-01/M05419 So if we're not in a
variance situation though, we're just dealing with Nalcor under its 1.2 terawatt hour commitment, it's the same cheaper alternative for NSPI that it takes advantage of, but it doesn't relieve Nalcor from its obligation. what is different in that scenario from the variance amount scenario where Nalcor is kept on the hook but Emera isn't? MR. SIDEBOTTOM: understand your question. So I think I now So
So there is no variance and
Nova Scotia Power determines that it's -- it's cheaper to build a wind farm. And in fact, in that particular case
with no trigger event, as it's called in the agreement, Emera is not off the hook. that particular case. MR. McGRATH: So not worried about They are still on the hook in
It's Nalcor who's not being let off They still have to bid in
the hook in that case either.
to the full amount of their 1.2 terawatt hour obligation; correct? MR. SIDEBOTTOM: Yes. And I think
your question went to why is Emera being let off the hook.
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And I believe if there's no variance, then there's no trigger event. And, therefore, if Nova Scotia Power just
in its normal course of business decides that building a wind farm is a better solution than facing a market-price energy, for whatever reason, they are still both obligated to stand behind their commitment, because the commitment has not been diminished. MR. McGRATH: Okay.
Go ahead, Ms. Tower. MS. TOWER: Yeah. So it has to do
actually with the fact that in the first instance Emera doesn't have any generation and, secondly, the balancing. So in a situation where Nova Scotia Power has taken the option and is using the balancing service, then Nova -- then Emera can't use that wind option and use the balancing service, because there's only one. So it was contemplated that that was the case. And since Emera doesn't have generation in -- of its own, then the balancing service would be taken up and it would be very difficult in that instance for Emera to build wind, depending on what was on the system here, to satisfy its 300 GWh commitment.
Page 2774 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 MR. McGRATH:
NSUARB-ML-2013-01/M05419 So as I -- if I
understand you correctly, Emera is being let off the hook because NSPI is taking the balancing opportunity that Emera would otherwise have with Nalcor? (SHORT PAUSE) MS. TOWER: So that is the situation,
that there is only one opportunity for balancing because it does tie up capacity on the Link. So to the extent
you're using the Link for balancing, you're not able to use it for energy transmission, separate and apart from that. So in the situation where Nova Scotia Power decides and the Board approves the fact that to -to satisfy part of the obligation, Nova Scotia Power building wind and using that balancing service, then Emera would be relieved of its obligation because it doesn't then have access to the balancing service which would help it fulfill its obligation. MR. McGRATH: paying for the balancing service? MS. TOWER: No. So if -- in that So NSPI will still be
instance, if Emera builds wind and uses the balancing

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Page 2775 It has to bid in -- it has
service, it's at Emera's risk.
to continue to bid in at the prices at outlined in the agreement. So -- and to the extent that Emera has built wind and is using the balancing service and paying for it and Nova Scotia Power decides they don't want any energy that year, then Nova Scotia -- then Emera would be on the hood for the cost of the wind with no -potentially no sale for it. MR. McGRATH: So the scenario that
we're discussing is where NSPI builds the wind generation and Emera gets let off the hook. And so Emera -- NSPI in
that case would be paying for the balancing services? MS. TOWER: But only because that It would be a
would be a better option for customers. less expensive option. approved by this Board. MR. McGRATH:
And, again, I would go back to and
And it's not paying any
more than Emera would pay if Emera was taking advantage of the balancing services; it's the same price? MR. SIDEBOTTOM: MR. McGRATH: Same price.
And so has there been

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any assessment of the value of having access to that balancing arrangement in exchange for letting Emera off the hook?
MR. SIDEBOTTOM:
Again, I -- I'll take
the first part of the question, the assessment of the balancing service. So we have -- have done a number of
calculations of the cost of integrating wind and I think they were actually presented as some of the follow on in the last hearing. This balancing service would equate to about a 25 to $30 megawatt hour cost. As we see in Nova
Scotia going forward, the potential cost of balancing wind or integrating wind could be as high as $60. So it
represents about 50 percent of the cost of what it would -- might otherwise be with other -- other sources. was a valuable product on that front. MR. JANEGA: I think, Mr. McGrath, You keep So it
there's an important distinction, though.
referring to Emera and being relieved of its position. It's -- Nova Scotia Power has an option. If it wants to leave Emera with the
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obligation to serve at the market prices, it's completely within Nova Scotia Power's control, which would be with -in front of the UARB; would be completely transparent and visible that they had a better alternative or not. So
it's only by the choice of NSP creating a lower-cost circumstance for the customer that Emera can't serve that load. MR. McGRATH: So I guess my concern
though, Mr. Janega, is if it's actually more cost effective at that point in time for Nova Scotia Power to build wind generation to fulfill a need that it sees, this agreement, in a variant situation, contemplates that Emera would be relieved to the extent that the wind farm or the wind generation is producing energy from providing that energy as part of the variance amount. that would be the case. MR. SIDEBOTTOM: THE CHAIR: From --I'm wondering why
Before you answer that
question, there's no restriction on where Emera can get this power, is there? windmill? It doesn't have to be from a
With that caveat, can you answer the question? MR. SIDEBOTTOM: So I think -- the way
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I looked at this is, there's an opportunity for Nova Scotia Power to better its position by availing itself of a combination of a unique balancing product combined with the build of a wind farm. And if that yielded a lower
cost, we want to step into that, because it's the better solution for our customers. And again, as was said by Ms. Tower, once you've got the balancing associated with that as well, they are kind of a part and parcel of this. And so
Nalcor is stepping in to assist in the backstop of this first 300 by facilitating a wind farm. of this backstop. There's two parts
Emera wind with a Nova Scotia option to
take the place if it's low cost, facilitated by the balancing services from Nalcor. MR. McGRATH: And under the Balancing
Services Agreement, Nalcor is not relieved of its obligation to provide any variance amount if it's subject to that requirement at the time? MR. SIDEBOTTOM: That's correct. So
their component of the variance continues on. MR. McGRATH: Right. And so it's only
Emera whose obligation is relieved.

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And I'm just
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Page 2779
I think it's simply
an option for Nova Scotia customers where it's more beneficial for Nova Scotia to actually provide a better solution. And because the balance --THE CHAIR: Well, why can't they get
that and the 300 megawatt continuing obligation? MR. JANEGA: Perhaps if I could, Mr. Emera is
In the first place, the 300 is created.
not a party, does not own any of the generation at Muskrat Falls, nor Newfoundland and Labrador. So the obligation on Emera is because of the case where Nalcor may not be able to satisfy the requirements. So it's not a backing out of a requirement It's actually that Emera is
because of an NSP option.
stepping in to ensure that Nalcor's 1.2 can actually be attained, even they aren't able to achieve that. THE CHAIR: I understand that point.
And the question is, why are they being relieved of that obligation? MS. TOWER: I think it really has to
do with the balancing and the fact that there is really

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only one opportunity to get that balancing service. while there is an opportunity to, as you say, import energy, we don't own the transmission.
We don't have transmission paths and we don't -- we're the only party in this agreement without transmission path access or energy, for that matter. so as part of our stepping up for the 300 GWh, to facilitate that, there was a negotiation of the balancing service with Nalcor, but offered in the first instance to Nova Scotia Power should that be the best option. THE CHAIR: But the balancing only And
relates to if somebody supplies it with a windmill, doesn't it? MS. TOWER: THE CHAIR: That's correct. Sure. So if you supply it
with natural gas or Emera does or something else, the balancing is nice to have, but not necessary. MS. TOWER: THE CHAIR: MS. TOWER: That would be correct. So why are they relieved? So in an -- sorry; in an
instance when we're supplying it some other way, we would not be relieved.
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Page 2781 Yes, you would be if Nova
THE CHAIR:
Scotia Power decided to build a windmill. MS. TOWER: And perhaps if the Board So it really is
approved the -- that that was -- yes.
about our ability, Emera's ability, to be able to access energy without having -- owning any transmission or owning any generation. THE CHAIR: didn't mean it to be a battle. MR. McGRATH: you. THE CHAIR: MR. McGRATH: I think I have your point. I'm going to take a look Quite all right. Thank Sorry, Mr. McGrath. I
now at the interruption and redelivery provisions in the agreement, so that's 4(d). Do I understand correctly that this gives Nalcor a right to interrupt that is essentially unrestricted, either in time, frequency, quantity? MR. SIDEBOTTOM: That is correct, but
with the obligation to provide Nova Scotia customers with the equivalent value. MR. McGRATH: And in terms of tracking
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that equivalent value, I think you indicated that that's something that's fairly simple to do? MR. SIDEBOTTOM: energy department, yes. MR. McGRATH: Would NSPI be prepared For the people in the
to commit to providing regular reports to the Board on the operation of the interruption and redelivery provisions to satisfy Nova Scotia ratepayers that they are getting the same economic value for the energy? MR. SIDEBOTTOM: Absolutely yes. I
think there are some mechanisms in place now.
There's FAM
quarterly reports, even monthly reports, and of course, there's the FAM audit. can provide that update. MR. McGRATH: be particularly confidential? I know the FAM discussions are quite I'm hoping to get something that might be a There are -- would this So there are many ways in which we
little bit more transparent. MR. SIDEBOTTOM: To the extent that
the information doesn't harm the competitiveness and the overall value for customers, we'd endeavour to make it
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available. MR. McGRATH: THE CHAIR: Okay. Thank you.
Mr. McGrath, when you get
to a convenient point, we're going to -- or if you want to carry on for 10 more minutes, that's fine, too. MR. McGRATH: in about 10 minutes, Mr. Chair. I'd like to move into the agreement, Section 6(a), please. You've had some discussion about this provision earlier today, and that's the one that establishes the 1.2 terawatt hour commitment on the part of Nalcor. And it's noted that it's subject to force I may be able to finish
majeure events. And you've had some discussion as well about the definition of force majeure, and I just want to touch upon that again just very briefly. Force majeure is used in a number of different places in the document. It's used with respect It's also used as a
to the 1.2 terawatt hour commitment. feature of a forgivable event.
Is it intended that force majeure has

Page 2784 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22
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the same definition throughout the document? MS. TOWER: MR. McGRATH: in the agreement to Section 4(e). Looking at the definition of forgivable event, which includes force majeure and some other items, can I conclude from that that because force majeure is separated from those other items that none of those other items are included within the definition of force majeure? MS. TOWER: MR. McGRATH: Yeah. And more specifically, Yes. And if we can move now
the NL native load is not going to be an element of force majeure? MS. TOWER: MR. McGRATH: That is correct. Just while I'm on that,
I believe NL native load is a defined term in the agreement. It's on page 2, if we could just pop to that
for a second. So it's the cumulative electricity consumption within Newfoundland and Labrador by customers of Newfoundland and Labrador Hydro, Nalcor and affiliates.
NSUARB-ML-2013-01/M05419 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 priority. MR. McGRATH: to 4(e), I believe it was --THE CHAIR: didn't hear the last answer. MR. SIDEBOTTOM: Okay.
Page 2785
There's no restrictions there in terms of type of load, and I'm wondering about interruptible load. Do you know if Newfoundland and Labrador has any
sizable amount of interruptible load? MS. TOWER: MR. McGRATH: We don't know. You don't know? Do you
know whether your rights under the Energy Access Agreement would take priority over interruptible load in Newfoundland? MR. SIDEBOTTOM: It doesn't take a
If we can go back
Sorry, Mr. Sidebottom.
So Mr. Chair, I don't
believe the interruptible load -- it's load in Newfoundland that it still counts as load. THE CHAIR: As Newfoundland load. It does, yes.
MR. SIDEBOTTOM: MR. McGRATH:
So another item included
there was Newfoundland and Labrador hydrology events, so

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that also would be excluded from the definition of force majeure. MS. TOWER: MR. McGRATH: events in Newfoundland? That is correct. What are hydrology
What is that intended to mean? It's the variability
MR. SIDEBOTTOM:
in precipitation, so as has been set out by Nalcor in the technical conference, there's a variability in the amount of precipitation year to year, and so those hydrology events mean that the amount of resource in a particular year is different. MR. McGRATH: And as I understand it,
Nalcor will provide you with a forecast of what it expects for energy monthly and that your annual solicitation is going to be based on, is it the May forecast? MR. SIDEBOTTOM: Yes. Nalcor will
provide us monthly a 24-month outlook of the resources they see from their system. And typically, the wettest
season is through the early spring until May, and at the end of May, you have the very best look at what the resource will look like for the next two years. And so the solicitation is designed to
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Page 2787
use the best available information, and that's how it's timed. We still actually get a monthly update of that 24-
month view, which is very helpful because you actually get a line of sight going well out into the future on how much energy resource is coming out of Newfoundland and Labrador, which is, frankly, a very helpful thing when youre planning what youre going to do with your energy purchase requirements into the future. MR. McGRATH: And so just going back
to that term hydrology events in Newfoundland and Labrador, if, in these forecasts, its anticipated that Newfoundland and Labrador is going to experience a particularly dry year and thats taken into account in the forecast, am I correct in assuming that when it sees its dry year that will not be a hydrology event in Newfoundland and Labrador? MR. SIDEBOTTOM: I think the hydrology
event is there to recognize that what you see in May may be different by September. Youre using your best
available information, and thats reasonable, and there is relief for that change from an average. I mean, the way
they hydraulic system will work is youve got 60 years of

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data and youve got a reasonable expectation of an average precipitation or a run-in. And so that will then
ultimately affect how much energy is available for this current period. MR. McGRATH: And so essentially it is
just variances from the forecast that youre trying to capture there? MR. SIDEBOTTOM: MR. McGRATH: to Article 7(e)(viii). Yes.
And Id now like to go
So that says:
If either Emera or Nalcor is unable or fails to meet the respective Variance Amount obligations, such parties shall compensate NSPI accordingly.
And I know this was asked a few moments ago; I just want to come back to it, just so I can get a sense as to how the mechanics of this might work. In terms of how one might determine this compensation, are you trying to capture the value of an amount that would
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Page 2789
not have been bid into a solicitation in this clause? MR. SIDEBOTTOM: So this would go to
the variance amounts or the shortfall. MR. McGRATH: Yes. And thatll be a
MR. SIDEBOTTOM:
quantifiable amount of energy, and if either Emera or Nalcor are unable to provide that, therell be a shortfall --MR. McGRATH: Right. --- calculated as a
MR. SIDEBOTTOM:
And we would use forward curve pricing to From that we could
understand the pricing of that.
understand what the respective compensation might be associated with missing that variance. Its a fairly
common practice when you look at contract non-performance. MR. McGRATH: Yeah, I guess where Im
having a bit of difficulty though is that this is energy. So if its Emera and if Emera was obliged under a variance its triggered to provide the full 300 but it only bids in 200, it doesnt bid in the additional 100 gigawatt hours. So you dont know what that bid price would have been, you dont know when it would have been bid for in the year;
Page 2790 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 how do you capture a value for it? MR. SIDEBOTTOM: have a cap on pricing.
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Well, we absolutely
So theres a pricing indication
which would be one reasonable way to assess the value of the energy and --MR. McGRATH: That cap would be the
worst -- the worst rate that ratepayers could expect to see though; correct? MR. SIDEBOTTOM: MR. McGRATH: Yes.
So why would you assume Youve lost
that as a starting point for compensation?
when you never know what the bid might have been. MR. OCONNOR: So I think its the So in a
damages that flow from their non-performance.
hypothetical example youve provided where theyve -there are variances occurred and Emera has not bid in to it, we would have to determine what are the actual damages that flow from that. So in your example we may take the average price outcome of everyone else who was in that solicitation and compare that to what we -- in this -- in your example, 100 GWh that they didnt perform on and we
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Page 2791
could say that the incremental cost to customers is the damages that flowed from that -- from their failure to perform or failure to provide under the agreement, but its the damages that naturally flow from it. And thats -- that would be one approach; Im sure theres others. And in any event, with
whatever solution we come up to, the Board will hold us accountable to make sure that its done in a manner thats prudent and in the best interests of our customers, so --MR. McGRATH: And just in terms of
that, so -- and Ms. Tower, I think you spoke to this earlier, that the Board would be the final arbiter in terms of what the amount of compensation would be? MS. TOWER: I think ultimately they
have the ability to look and see whether it was appropriate, whether the -- you know, I guess whether Nova Scotia Powers been prudent. Is that --I wouldnt be asking I -- my perspective
MR. OCONNOR: the Board to determine the amounts.
would be if there is damages, there would be an ability to look at those and to test them for reasonableness and did we do everything under the contract and is that the right
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amount that customers should get from failure to perform. So that would be my view on -- I wouldnt be asking the Board to calculate the number at all, no. MR. McGRATH: But if the Board
determined that the amount of compensation that NSPI received was insufficient there might be some sort of disallowance associated with that? MR. OCONNOR: possible outcome, yes. MR. McGRATH: Okay. Thank you. I think it Yes, that could be a
I do have one more line. will be very brief. time, Mr. Chair.
I know Ive imposed and run over
So Im more than happy to break now and
come back and deal with that. THE CHAIR: back at 20 past 2:00. --- Upon recessing at 1:08 p.m. --- Upon resuming at 2:20 p.m. THE CHAIR: MR. McGRATH: MR. RICK JANEGA, Resumed: MS. NANCY TOWER, Resumed:
Okay.
I think well come
Province. Thank you, Mr. Chair.
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Page 2793 MR. MARK SIDEBOTTOM, Resumed: MR. WAYNE OCONNOR, Resumed:
CROSS-EXAMINATION BY MR. McGRATH (Contd) MR. McGRATH: Im going to go back to And Im
the Energy Access Agreement, Exhibit M-134. looking at Article 13.
And so I understand from this that, although there are some terms left still to be worked out, that the parties have specifically indicated that this is a -- as far as theyre concerned, a binding agreement and they can be held to the commitments in this document? MS. TOWER: MR. McGRATH: That is correct. And in terms of the
process now to get to the final document, if we could flip in the agreement to Article 2(a). I see there theres a
provision that outlines how you will get to done in terms of the final details of the agreement. And theres
reference to a Dispute Resolution Procedure at the bottom of that. Can you explain to me how that would work in
terms of getting to the final agreement? MS. TOWER: To the extent that there
was something in this agreement that was at dispute by the

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parties, assuming -- lets assume for a second that everything else got negotiated but there was one clause that was still in dispute, we would take that to Dispute Resolution Procedure. MR. McGRATH: And theres a reference
to specifically Section 6.1 of the Dispute Resolution Procedure. And I confess I wasnt sure what exactly you I didnt see a 6.1 in this
were referring to there. document.
MS. TOWER:
There is a separate -- my
recollection is theres a separate Dispute Resolution Procedure in the commercial agreements as filed, and so that would be -- that is what that refers to. MR. McGRATH: Okay. And the -- sorry.
The provisions in 2(a) refer to incorporating commercial terms contained in the agreement and a customary and appropriate terms for transactions of this nature. And at another point in the document -- I believe its 5(f), I think it is -- theres a reference to the Edison Electrical Institute Standard Form Master Power and Sale Agreement. And as I understand it,
thats the contract that NSPI will enter into with Nalcor
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Page 2795
if it accepts an award and an annual solicitation. MR. O'CONNOR: MR. McGRATH: Thats correct. And would this document
contain terms such as force majeure, which would be normal commercial terms that might apply to this arrangement? MR. O'CONNOR: Thats correct.
Theres -- within that document is a force majeure clause. MR. McGRATH: And is this something
youre able to file in short order, this document? MR. O'CONNOR: So the EEI is a
document that I believe thats already been filed with the Board by Nova Scotia Power for other transactions. an industry standard agreement. I do believe its Its
available publicly at their Web site; the master agreement is there. We, I guess, will, once this agreement is done and we have an EEI in place of course we would file that with the Board, but --THE CHAIR: it? MR. O'CONNOR: THE CHAIR: Sorry? Can you file the form of
Can you file the form of

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it? MR. O'CONNOR: THE CHAIR: Undertaking U-45. UNDERTAKING U-45 - To provide a copy of the Edison Electrical Institute Standard Form - Master Purchase and Sale Agreement MR. McGRATH: Now, I just want to go I Certainly, yes. That will be
Okay.
to a document -- Mr. Chair, it will be a new exhibit. provided it to Mr. Goodine, and Ms. Bonang has some hardcopies. So while thats being handed out, maybe I can just ask the panel in particular to take a
look at in the Affiliate Code of Conduct, Article 7.3, and the last page of the document, which is an excerpt from a Board 2007 decision. THE CHAIR: this will be Exhibit M-148. --- EXHIBIT NO. M-148: Various Board documents referring to NSPI and Affiliates Code of
While were doing that,
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Page 2797 Conduct and FAM Audit
MS. TOWER: the last page? MR. McGRATH:
Sorry; did you say 7.3 or
Both.
(SHORT PAUSE) MR. McGRATH: So without getting into
it in too much detail, just a general question in terms of those two references that I made, one to Article 7.3 and the other to the excerpt from the Boards 2007 decision, would you just agree generally that those provisions contemplate that in transactions that NSPI enters with affiliates it will make efforts to ensure that its counterparties have, to the extent possible, make commitments to provide documentation available to the Board to review? MR. O'CONNOR: MR. McGRATH: I would agree. And if I can go back to
the Energy Access Agreement, M-134, Clause 3(i), theres a provision there dealing with audit rights. It says:
The Parties agree that the audit provisions to be included in the

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NSUARB-ML-2013-01/M05419 Final Agreement shall be based on the principles of reciprocity, confidentiality of commercially sensitive information, and disclosure of information required by each Party to determine compliance with the Final Agreement.
Will the final agreement also include provisions that will provide for undertakings or consents for the Board to have access to the documentation of the parties to oversee NSPIs transactions relating to these arrangements? MR. O'CONNOR: We fully anticipate
that all of the transactions with our affiliates will conform with the Affiliate Code and will be subject to the Code. MR. McGRATH: So youll seek to have
provisions in the final agreement that would provide for Board access to documentation? MR. O'CONNOR: So the Board has access
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Page 2799
to this document and all transactions that we might do with the -- or any transaction we would do with the affiliate would, of course, be subject to affiliate scrutiny. MR. McGRATH: Right. So Im asking
specifically though whether when you go to finalize the audit rights provisions and the final agreement whether you will take steps to include a specific provision in the final agreement that outlines that Board right to access? MR. O'CONNOR: MR. McGRATH: MR. DEVEAU: Yes, we will do that. Thank you. Just because I was going
to ask that same question, are you asking whether they intend to extend the access rights just to an affiliate or to Nalcor, in terms of hydrology reports and so forth? Was that your question? MR. McGRATH: Well, I guess as I -- it
wasnt specifically, although I would understand that the document puts the onus on NSPI and its affiliates to make efforts to do just that. I dont think it necessarily
commits them to do it, as I understand it. Those are my questions, Mr. Chair.
Page 2800 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 THE CHAIR:
NSUARB-ML-2013-01/M05419 Thank you very much.
Mr. Outhouse? MR. OUTHOUSE: Thank you, Mr. Chair.
CROSS-EXAMINATION BY MR. OUTHOUSE MR. OUTHOUSE: I just want to start by
clarifying a few things that were said this morning, and well start with a series of questions which Mr. Merrick asked you about the 1.2 terawatt commitment. And he went through the forgivable events and the commitment in 6(a) of the Agreement. at the end of all that after youd given him your explanations, the question he put to you was that as a result of that commitment either Nalcor, or Nalcor and Emera combined if there was a variance, would supply, on average, 1.2 terawatt hours of energy per year for the term of the agreement; that is, until 2041, and the answer to that question -- Im not sure which one of your offered it -- was yes. It may have come just as a relief to you And
to be able to say that. But my understanding is that there is no commitment to supply that energy. There is a
commitment to, if I read 6(a) of the agreement -- just so

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Page 2801
that I capture it correctly -- it's -- it says:
"...Nalcor shall make available to NSPI an average of at least 1.2 TWh of energy per Contract Year..."
Correct? So it's not supply. it. You may not take
It's to make it available, correct, that's the
commitment? MR. SIDEBOTTOM: That's correct.
We'll only take the energy that's economically the right choice for customers. MR. OUTHOUSE: Sure. So -- and I want
to just explore that a bit further, because you did go on, I think, to -- you had explained to Mr. Merrick that this commitment was subject only to force majeure; correct? Plus, of course, then the cut off of the Emera piece for the 300 gigawatt hours, which is in 7(e)(i), I think. But let's forget that caveat for the
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NSUARB-ML-2013-01/M05419 If you turn to page 8 of the Energy
Access Agreement -- and right at the top, Jeff -- yes. The second sentence of that commitment says this: "The amount of Energy made available by Nalcor to NSPI in each Contract Year used to determine fulfillment of the Commitment shall be calculated as the sum of:"
So per contract year you determine fulfillment of the commitment by summing these four factors that are identified at the top of the page; correct? MS. TOWER: That's correct. All right. Nalcor
MR. OUTHOUSE:
supplied energy, I'm not going to take you back to it, it's a defined term, and really what it means is energy sold by Nalcor to NSPI pursuant to the annual bid; correct? MR. SIDEBOTTOM: Yes.
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Page 2803
MR. OUTHOUSE:
Somebody say yes.
All
And Item Number 2, it's, "any Energy supplied to NSPI by Nalcor during" that contract year, subject to certain things which are left out, like Nalcor supplied energy, which has already been included; "a Nalcor Variance Amount", which is excluded; and, of course, "the Nova Scotia Block", including the supplemental energy; correct? MR. O'CONNOR: MR. OUTHOUSE: Correct. Okay. So we're fine so
Here's where I have the problem, three:
"Nalcor Bid Energy to the extent not accepted by or supplied to, NSPI in such year..."
Now, I had always understood that to the extent that Nalcor bid energy -- and it's a defined term, and we can look back at that if we want to, but it's the amount that you bid, and if NSPI accepted that, that
Page 2804 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 supplied to".
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does count, if it doesn't accept it's also counted; correct? MR. O'CONNOR: MR. OUTHOUSE: Correct. Now, it says, "or
And my question is, if it's not supplied to
NSPI because of a forgivable event, does it count under this clause toward the commitment nonetheless? And then you might want to look at the -- in -- on page 6 when it defines the Nalcor bid, 4(b), you'll see that when it talks about the Nalcor bid energy it then says in the last sentence of 4(b):
"Following acceptance of a Nalcor bid by NSPI, Nalcor shall be obligated to sell and deliver to NSPI the Nalcor Bid Energy subject to the provisions of Section 4(d) and (e)."
And (d) is the Nalcor redelivery, which I'm not concerned with for the moment, and (e), and (e), of course, is the forgivable events.
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So there's a right in 4(b) not to deliver Nalcor Bid Energy due to a forgivable event or forgivable events. And then it seems to me, when I read 6(a)(iii), that energy which was not supplied counts towards the fulfillment of the 1.2 average commitment. So that's the problem I'm having with it, and I would ask you to respond whether that's the intent, as you understand it, or that's the effect as understand it. MR. O'CONNOR: up --MR. OUTHOUSE: ahead. MR. O'CONNOR: --- quite honestly. All right, you go So I'm still catching you
But the -- I can speak to the intent. So the intent is not to double count any volumes at all. And it will just take me a moment or maybe a couple of moments to --MR. OUTHOUSE: MR. O'CONNOR: All right. --- follow up.
(SHORT PAUSE)
Page 2806 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 events. MR. OUTHOUSE: get eroded --MR. OUTHOUSE: MR. O'CONNOR: forgivable events. MR. O'CONNOR:
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So in that case, the forgivable event would reduce the bid amount, so it wouldn't be included in the calculation in that case. MR. OUTHOUSE: I appreciate that,
Mr. O'Connor, and I'm not trying at all to be difficult. I'm concerned that despite what was said this morning that the 1.2 terawatt hours on average commitment --MR. O'CONNOR: MR. OUTHOUSE: Yes. --- gets eroded by
And I thought I heard from the panel
this morning that that did not happen. MR. O'CONNOR: MS. TOWER: No. No, that -- it does not No.
MR. O'CONNOR:
So ----- by forgivable
--- if this language
that I've referred you to permits that, on reflection, if you read that, it's going to be changed, I take it?
NSUARB-ML-2013-01/M05419 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 of that exhibit. at all. MR. OUTHOUSE: MR. SIDEBOTTOM: MR. O'CONNOR: MS. TOWER: Yes. Yes.
Page 2807
Yes. It would change ---
MR. O'CONNOR: MS. TOWER: because that is not the intent. MR. O'CONNOR:
We'll make it clear
That's not the intent
Okay, that's fine.
I just want to turn to your Opening Statement for a second. Mr. Chair, I have forgotten the number I think it's probably 145. Okay.
And if we would turn, Mr. Goodine, to page 3 of that; yes, green energy section. And I noted this morning, Mr. O'Connor, that when you were answering a question that had been put by Mr. Blackburn about the pricing -- the maximum price clause and he was focusing on 4(c)(ii), the alternate market, you made a comment to the effect that that clause wouldn't apply to a green energy product; that it wouldn't allow energy to be priced for bidding purposes
Page 2808 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Correct? MR. O'CONNOR: MR. OUTHOUSE:
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to you, to NSPI, on a green energy basis. And in your Opening Statement, the bullet point by line 7 says:
"Green-energy pricing is not applicable to the economy energy product that is the subject of the Energy Access Agreement."
Yes, that's correct. And am I interpreting
it correctly, then, that you're saying that NSPI's position is that Nalcor has agreed, in the Energy Access Agreement, that it cannot, for bidding purposes to you, be pricing a green energy product but is pricing an energy only product? MR. O'CONNOR: MR. OUTHOUSE: Yes, that is correct. So the discussion that
I see in the report by Mr. Chernick and Mr. Parker, for example, about the options that may become available in the green energy market in various north-eastern states
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Page 2809
for premium pricing does not detract from the arrangements in the Energy Access Agreement and does not allow the setting of a higher price? MR. O'CONNOR: That's correct. Those
-- what this is speaking to is purely the value of the energy itself. distinct. Those other products are separate, They
They have their own pricing parameters.
have their own markets whereby they will get priced and will not be included in these prices at all. So these alternative market prices are very much the same as the Mass Hub price, which is energy only. It has no renewable energy components to it. It
has nothing else.
Theres no capacity, which is another
separate and distinct product that the market price is independently of energy. This is only for energy. I suppose once the
MR. OUTHOUSE:
annual bid process is over, that piece is over with, it would be open to Nalcor then to price and respond to any solicitations NSPI may make as it chose? MR. OCONNOR: MR. OUTHOUSE: Thats correct, yes. If it had green market
opportunities in that following year, it could avail

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themselves of it, but not for the annual bid purpose? MR. OCONNOR: MR. OUTHOUSE: Thats correct. And presumably it could
not make commitments beyond one year either? MR. OCONNOR: The Energy Access
Agreement prohibits them from doing that. MR. OUTHOUSE: In response to a
question put to you by Mr. McGrath about the interruptible load in Newfoundland and whether it had priority over the Energy Access Agreement in terms of quantity supplied there under, the answer ultimately was that interruptible load in Newfoundland would qualify as Newfoundland native load. MR. SIDEBOTTOM: MR. OUTHOUSE: Thats correct, yes. Okay. There was,
though, uncertainty about -- I dont know whether there is any interruptible load in Newfoundland or any interruptible rate in Newfoundland, or whether there is any load under that rate. Is that correct? Well, were not sure
MR. SIDEBOTTOM:
of how many interruptible class customers in Newfoundland, thats true of this panel.
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Page 2811
differentiate between the two, because the interruptible class customer we have here in Nova Scotia is about avoiding capacity build and recognizing that through a rider credit to those customers. What they will generally The
count on is a fairly regular supply of energy.
interruptions are quite infrequent, numbering well less than one percent of the year, just to give you a sense of how often it might happen, and it happens a lot less than that. The envisioning a customer willing to take a floating or variable amount of energy, thats more of an interruptible energy component, not a capacity, and it would be hard to envision customers willing to take energy on 30 percent of the year or 40 percent of the year, as opposed to a very high percentage, which they get in Nova Scotia. So theyre not as interchangeable. dont know if Ive complicated the record, but Ive --MR. OUTHOUSE: Well, Im going to have I
The -- my concern is that weve heard
the evidence about the hydrology in Newfoundland and how

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they do their forecasting, how -- their commitment to serve, what they call their firm load. MR. SIDEBOTTOM: MR. OUTHOUSE: Mhm. So if indeed there was
a significant interruptible load that they do not regard as firm load and that they do not take into account in their planning, for planning purposes, this whole scenario of youve got to serve your firm load and if it grows you build to serve it, and in the meantime the variance is available as surplus energy to Nova Scotia Power, or others, that starts to erode and shrink -- that surplus energy shrinks depending on how much interruptible load you have on the system, because you dont need -- if youve got the interruptible load on the system and it counts as native load, but you can press it down and dont have to build for it, than it means that theres likely to be less surplus available in the NL forecast. forecast, I should say. MR. SIDEBOTTOM: So if you could find The Nalcor
a customer that would be happy with that kind of available energy that would be the effect on that energy. But then ultimately the fallback is
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Page 2813 The 1.2 terawatts per year
the commitment is unchanged.
on average, through the period, is not an event that changes a commitment. So ultimately, Emera and Nalcor will step up and ensure that commitment is met, even with that adoption of interruptible energy, as you proposed. MR. OUTHOUSE: I assume whether Nalcor
-- or whether there is an interruptible component to the Newfoundland native load is public information, is it not? MR. SIDEBOTTOM: Yes. And again, its
typically a capacity interruption type of product, not an energy interruption. MR. OUTHOUSE: All right.
Would you undertake to obtain and file with the Board a document that indicates the absolute size of the interruptible class of customer and the percentage of the total Newfoundland load that that constitutes? MR. SIDEBOTTOM: that. THE CHAIR: Thatll be U-46. Well undertake to do
UNDERTAKING U-46 - To obtain and file a document that demonstrates

Page 2814 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22
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NSUARB-ML-2013-01/M05419 the interruptible load showing the absolute size, class of customer and percentage of Newfoundland load MR. OUTHOUSE: I want to turn to the And
report of Mr. Chernick and Mr. Parker, which is 138. if we would go to page 3, please, Mr. Goodine? page 4, Mr. Goodine, I apologize. Yes.
Sorry,
Youll be pleased to know Im not going to traipse all the way through this report with you, and I realize its not your evidence. However, it bears Line
directly on what youre applying to the Board for. 6, the question is:
What are your conclusions?
And the answer is as follows:
We conclude that many components of the proposed EAA would reduce the quantity of economy energy, increase the price of that
NSUARB-ML-2013-01/M05419 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 What is your response to that conclusion; what do you say? MR. SIDEBOTTOM: First bullet point:
Page 2815 energy, or reduce the value of the energy to N[ova] S[cotia] P[ower]...ratepayers, compared to the assumptions in the Application. In more detail, we
conclude as follows:
The quantity of the marketpriced energy that would be assured by the EAA is substantially less than the quantity the Application assumes would be available.
I would say the EAA Its minimum amount
offers a substantive amount of energy.
is well matched with the low-load scenario from Newfoundland. And that there are sufficient other
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obligations, which is to continue to bid in the energy, even though the 1.2 commitment is made, and alternate paths through New Brunswick to manage any form of load growth beyond that into a base-case scenario. disagree with that. MR. OUTHOUSE: The -- as I understand, So I would
that conclusion in the report was based on two -- a couple of considerations at least, one of which was that the quantity offered was less, and B, that the quantity taken was very likely to be less. of what was offered. With respect to the take up of the energy, what would you -- as I understand the hypothesis its this; that the application was premised on the basis that the surplus energy would be available at all times -that was the assumption in strategist -- and that at every point in time when that energy, based on the Mass Hub for price curve, was economic -- it was less than the companys cost of generation the company would buy -- and thats how those surplus energy purchases were constructed. Is that correct? MR. SIDEBOTTOM: Yes, it used a In other words, the take up
NSUARB-ML-2013-01/M05419 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 arrangement, yes. MR. OUTHOUSE: Sure.
Page 2817
market-based price for the energy and it applied that value to when it took it, yes. MR. OUTHOUSE: Now, under the Energy
Access Agreement, there is no longer an assumption that the surplus energy will be available at all times, but it will be available in a particular format, namely, once a year in an annual bid, guaranteed. guarantee; correct? MR. SIDEBOTTOM: That's the backstop That's the only
And I realize
behind that there can be other day-to-day purchases, but in terms of assured access, it's through that annual bid. MR. SIDEBOTTOM: That's right. And if
you take a look at the EA, we would model this access to the energy identically to what we did in the prior modelling scenario because it avails of us of an average of the energy, which is not unlike any other variable resource we have. The way to think of this is if we do an application for a new hydro project, we know that hydro has a variability through time, as do wind projects.
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And
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the best -- the best way to model them into time is to use an average of the output, and that best reflects the longterm value of -- of a decision. So in fact, the wind alternative was done in the same way. We know it's a variable resource,
but the best available way to do that is actually to model it as an average through time. MR. OUTHOUSE: So if I understand your
answer correctly, Mr. Sidebottom, what you're saying is the fact that the EAA has packaged the guaranteed access as it has does not negatively impact, in your opinion -will not negatively impact, in your opinion, on the pricing that will be obtained or the quantities? MR. SIDEBOTTOM: that. MR. OUTHOUSE: that report, at line 28. Just turn to page 19 of I would agree with
There the authors conclude this
-- and they're referring to an exchange between you and Mr. Chernick at the October 28th technical conference. So I assume you've probably read this with some care, Mr. Sidebottom? MR. SIDEBOTTOM: I have, Mr. Outhouse.
NSUARB-ML-2013-01/M05419 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 What do you say to that? MR. SIDEBOTTOM: conclude this: MR. OUTHOUSE:
Page 2819 And the authors then
"In other words, NSPI would be entirely locked into a specific delivery schedule, typically a constant amount of energy in each hour in the year ahead market, and would be required to take the power whether or not it was beneficial to NSPI ratepayers." (As read)
Well, first off, when
you think of what we're doing in the annual solicitation, we're actually choosing the best option for customers at that point in time. cost solution. As we go forward into the year, we optimize the portfolio of fuels just like we do today. buy and sell or import/export power to balance our
So we do actually select the lowest
We
Page 2820 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22
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NSUARB-ML-2013-01/M05419 We will do that as
portfolio and change our generation. well.
And we can resell energy into the market as well if
it's not the most economic choice at that time. It really reflects how we do business today, which we have a portfolio of fuels and we -although we don't do annual solicitations, we have done seasonal solicitations and monthly solicitations for power. And we lock in low prices for customers through
those periods of time. So this actually is advantageous because we get the first access to the energy. And we get
one further component, which is we get a line of sight on how much resource is available as well so we can modify how much we actually purchase in an annual solicitation. We may decide to buy less in the confirmed matter and more in a later solicitation as well. MR. OUTHOUSE: What is new, I gather
from the exchange this morning, is that it would be unusual and perhaps unprecedented for you to be doing this on a year-ahead basis for power purchases -- for economy purchases, I should say. MR. SIDEBOTTOM: It would be new, but
NSUARB-ML-2013-01/M05419 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 What's your response to that? MR. SIDEBOTTOM:
Page 2821
not much different than what we do today in our annual -or in our monthly solicitations. MR. OUTHOUSE: The next bullet point
on page 4, if you can just go back to that for a second, Jeff, is:
"The EAA product that would be offered in fixed quantities in an annual solicitation is substantially inferior to the market priced energy assumed in the application and embedded in Figure 4.4." (As read)
I simply disagree.
I'm very comfortable with the fact that the way the EAA has been constructed is consistent with how we would model it. So if we actually went out and said, "How would you model this particular opportunity in our strategist model?" we would do it as we did -- did before
Page 2822 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22
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and feel comfortable that it properly represents the value of the energy access we have. MR. OUTHOUSE: I think the other
bullet points there specifically have been covered, but there's a statement starting at line 21 that:
"Nova Scotia ratepayers would assume all of the price, quantity and delivery risks under the EAA while Nalcor and Emera would bear very little risk." (As read)
What do you say in response to that? MR. SIDEBOTTOM: So I think Nova
Scotia Power is in a very good position of having energy reserved for it annually. That is quite a commitment.
We know it's going to be there, and there's a commitment behind that. And so that's of
incredible value to customers, knowing that you can count on it being there. When it comes to price and quantity, the way the RFP is constructed is we are not compelled to
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Page 2823
take one megawatt if it is not the right answer for customers. So the price and quantity risk is managed
through the flexibility of the RFP process, so it's reserved for us, and secondly, we hold the freedom to award based on our culmination of what's the best economic solution for the customers. MR. OUTHOUSE: Mr. Sidebottom, the
authors of the report have list -- specifically listed a number of additional risks that they say they have identified in the EAA, and those are found at page 31 -start of page 31, carry over onto page 32. of those is that: And the first
"The Application [that's the original Application] assumed that NSPI would have access to at least 300 megawatts of economy energy in every hour and at least 2.4 terawatt hours in every year of the Maritime Link's existence to 2052 and beyond. However, the
EAA would put ratepayers at risk

Page 2824 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22
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NSUARB-ML-2013-01/M05419 that Nalcor will have less than 1.8 terawatt hours to offer in any year and potentially no energy to offer in some periods." (As read)
And they identify that as an additional risk. As compared to the original application, what do you say? MR. SIDEBOTTOM: I would say that the
EAA is providing Nova Scotia Power with sufficient energy access so that we can ensure that the low-load case, which is -- has been identified as the more likely -- most likely case, will have sufficient economy energy to yield the benefits as set out in that -- that particular modelling run. MR. OUTHOUSE: says: The next bullet point
"The application assumes that NSPI could purchase economy

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Page 2825 energy on an hourly basis when it was less expensive than its own generation. However, the EAA
would require NSPI to commit to purchases up to a year in advance, putting ratepayers at risk of purchasing power that is not needed or beneficial and of missing opportunities to purchase energies that would have reduced costs." (As read)
Forgetting the last part for a moment, up to the point where it says the EAA would require NSPI to commit to purchases up to a year in advance, are the statements there factually correct, before we get to the risk shifting part? MR. SIDEBOTTOM: So the -- the price
of the economy energy is most likely going to be an index price. So it may be a floating -- floating index. So the actual price of the energy may not be actually known until the hour or the day ahead.
Page 2826 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 basis. MR. OUTHOUSE: MR. SIDEBOTTOM: ability to fix that with hedging.
NSUARB-ML-2013-01/M05419 Sure. There's also the
So the pricing
construct would be known one -- one year in advance, yes. MR. OUTHOUSE: So -- but the
commitment would also be one year in advance. MR. SIDEBOTTOM: MR. OUTHOUSE: saying that creates risk --MR. SIDEBOTTOM: MR. OUTHOUSE: I would ----- for NSPI's Yes, it would. And so the authors are
customers because they now may wind up in a situation where it's not economy energy at all. MR. SIDEBOTTOM: I would put it to you
the reason we would be selecting this energy is because it is the lowest cost option and so --MR. OUTHOUSE: MR. SIDEBOTTOM: On a year-ahead basis. On a year-ahead
So if we selected that energy at that point in time, we can mitigate that cost by reselling some other energy equivalently.
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The electron is still an

NSUARB-ML-2013-01/M05419 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 understand this? independent electron.
Page 2827
And we could run other generation
and still optimize our overall costs for Nova Scotia customers. So that is still within our ability and our rights to optimize our portfolio. So I don't
actually see that in the same way as a risk as Mr. Chernick has set out here. THE CHAIR: Can I just make sure I
So on the price issue, you say it's going to be an indexed price, so it would be, for example, Mass Hub, whatever that happens to be on the day you take it, less something --MR. SIDEBOTTOM: THE CHAIR: Yes.
--- that you pre-agree.
So then the price will reflect the price, you're saying, on the day that it's actually purchased, so I think I understand that. It's the
flexibility on quantity that I think I missed. MR. SIDEBOTTOM: So the quantity will
be delivered and the price to Nalcor will be delivered. That is the commitment in the EAA.
Page 2828 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22
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NSUARB-ML-2013-01/M05419 What Nova Scotia still has the ability
to do is let's assume that that energy was not the lowest cost that day. We could then resell energy into the So we can
market, assuming that market is now higher.
then realize the difference between our generation costs because we're now going to run lower cost internal generation and sell energy into the market for the differential. And so that differential in value, because we sold some energy, would allow us to move that -- effectively move that energy out into the market. I don't know if I was clear enough on that, but it --THE CHAIR: Yeah. So in other words, You've got to take
you're committed to the Nalcor volume. it, as I understand it.
What you're saying is in order to
ameliorate it, if, indeed, the price happens to not be advantageous, you'd sell something else. MR. SIDEBOTTOM: another electron at the market price. THE CHAIR: Okay. I would just sell
Sorry, Mr. Outhouse.

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Page 2829 I think that the other
MR. OUTHOUSE:
bullet points, with the exception of the last one, have already been covered, I think, directly or indirectly, in other evidence. 32 says: But the last bullet point on risk on page
"The Application assumed that economy energy would simply be purchased at day-ahead prices published by ISO New England. However, the EAA would put ratepayers at risk that NSPI will allow Nalcor and Emera to abuse many subjective and vague provisions (including determining the costs of deferred delivery of economy energy), in negotiations and litigations that would likely pit ratepayer interests against the interests of NSPI's corporate parent."
Page 2830 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22
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NSUARB-ML-2013-01/M05419 So as I understand it, the authors are
forecasting that the language of this agreement and its complexities will result in added costs and uncertainties, create opportunities for affiliate dealings which the -which create problems of their own in the mind of some and the Consumer Advocate, and if litigation would pit ratepayer interests against NSPI's corporate parent. What do you say in response to that? Is it worth that sort of a mess? MR. SIDEBOTTOM: Well, I guess the
first premise, I simply don't agree that it has that kind of risk. Nova Scotia Power's books are fully transparent to this Board and are reviewed on a regular basis. It's also the intention of Nova Scotia Power to And the markets that we're There's a reason we call
exercise its rights to audit. dealing with here are liquid.
them liquid markets because they're independent, they're benchmarkable. And so we can calculate appropriately
whether those bids are, in fact, what they're supposed to be. So I do not believe that it will be
NSUARB-ML-2013-01/M05419 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Thank you. MR. OUTHOUSE: hard to determine.
Page 2831
The business itself is complex, but not for the experts that preside and overview the actions of Nova Scotia -- Nova Scotia Power. MR. O'CONNOR: And if I may just add
on -- I feel somewhat compelled because of the language here. So we're never going to allow Nalcor, Emera or anyone to abuse the contracts or do any of the things that are alleged here. is vague. I don't think the agreement
I think it's fairly clear about what the
obligations are on all the parties, and we will make sure that we hold all of the parties accountable to fulfil their contractual obligations. I feel like I needed to say that.
I have one more area of
inquiry, and that relates to the RES standards and whether or not energy complies with those standards or counts towards those standards. There's been discussion in today's hearing and in the evidence about the fact that Nalcor's
Page 2832 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22
NSUARB-ML-2013-01/M05419
retaining the green attributes on the surplus energy, specifically, as I understand it, the GHG attributes. that correct? MR. SIDEBOTTOM: MR. OUTHOUSE: That's correct, yes. Are you aware, Mr. Is
Sidebottom, or anyone on the panel, of any requirement in Nova Scotia legislation that to count towards the renewable standards that you have to purchase or have the GHG attributes? MR. SIDEBOTTOM: So as -- I guess to
start with, we will have sufficient energy that will qualify for RES under low load. I think we covered that. I realize that. But
MR. OUTHOUSE:
I'm anticipating maybe it's not low load like one of the previous questioners. And I guess my understanding to date under the legislation is that it is the government and the legislation that determines whether something counts towards the renewable standard. MR. SIDEBOTTOM: MR. OUTHOUSE: That's correct, yes. We know that there's
specific legislation that says 20 percent of production

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Page 2833
from Muskrat Falls counts towards the renewable standard. Is that correct? MR. SIDEBOTTOM: MR. OUTHOUSE: I believe so, yes. All right. But in
addition to that, under the renewable electricity regulations, there's a whole list of things that count towards the standard, the last of which is any resource that, in the opinion of the Minister and consistent with Canadian standards, is able to be replenished through natural processes or through sustainable management practices so that the resource is not depleted at current levels of consumption. Now, do you know whether or not energy that comes from a system that would be entirely hydro would be considered renewable or not under that standard, under that definition? MR. SIDEBOTTOM: MR. OUTHOUSE: Minister. MR. SIDEBOTTOM: back to the Minister on that one. MR. OUTHOUSE: Yeah. And you wouldn't I would have to go I think we would --You'd wait for the
Page 2834 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22
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know if a system was 95 percent renewable what the Minister's attitude might be? MR. SIDEBOTTOM: So I'd say we
definitely know it for Muskrat Falls, and I think it would be a conversation with the Minister as to the rest of the hydro and whether that qualified for RES standards. MR. OUTHOUSE: I guess my point is
that the GHG credits retained by -- the green attributes retained by Nalcor under the agreement, you're not aware of anything in our legislation that would preclude those from counting towards the RES standard. MR. SIDEBOTTOM: MR. OUTHOUSE: No, I'm not. I should say preclude
surplus energy from Newfoundland and Labrador from qualifying for the renewable standard. THE CHAIR: Surplus energy that comes
without the GHG credit, you mean. MR. OUTHOUSE: THE CHAIR: Yeah.
Yes. All right. Those are
MR. OUTHOUSE: my questions. Thank you. THE CHAIR:
Thank you.
NSUARB-ML-2013-01/M05419 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Mr. Deveau? QUESTIONS FROM MR. DEVEAU MR. DEVEAU: Okay.
Page 2835
I have a few
questions all over the place, so bear with me. The first one that perhaps is a short question, and it's a situation that you indicate that if you commit a year ahead, youll probably be hedging that energy on some sort of index. And my question was what happens to that hedge if that energy is rescheduled? Is that money
that youve lost out on that hedge and is that something youd recover under the -- you know, the economic -equivalent economic value? MR. SIDEBOTTOM: So the way it would
work is the equivalent economic value really looks at what it would have cost to have the power delivered on that day versus what we have to replace it with. And because the
price of the power that would have been delivered would be matched to the hedge, you only actually have to calculate the difference between what the price of the power delivered for Nalcor was going to be priced at versus the replacement energy.
Page 2836 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22
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NSUARB-ML-2013-01/M05419 The hedge still functions effectively
because it would be an index priced energy delivery in the first place. So it doesnt actually go into the
calculation of the equivalent cost. MR. DEVEAU: So in that sense, you
bought the protection but, actually, Nalcors going to get the benefit of it. MR. SIDEBOTTOM: we bought the protection. responsible --MR. DEVEAU: Right. --- for the No, I would say that
Nalcor is still on the hook or
MR. SIDEBOTTOM:
difference between the real replacement energy cost and the price that we would have paid for the energy. Nalcor, hedge or no hedge, would be responsible for exactly the same amount of replacement costs. A hedge functions independently from that because that is stabilizing price for customers in Nova Scotia. And between the hedge and the value Nalcor So
would owe us removing the energy, customers in Nova Scotia would be whole from their decision to lock in that price. MR. DEVEAU: Okay. Right. And I
NSUARB-ML-2013-01/M05419 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 didnt mean anything negative in terms of --MR. SIDEBOTTOM: MR. DEVEAU: No.
Page 2837
--- Nalcor being
protected, but they just have to make up the difference. MR. SIDEBOTTOM: Absolutely. And its
going to be, you know, an interesting call for them because they dont know what its going to cost them. MR. DEVEAU: All right. So imagine, youre
MR. SIDEBOTTOM:
trying to decide to go into another market that day and youre trying to pull the energy that day and they dont know what its going to cost because they dont know where our resources are that day. MR. DEVEAU: But they can redeliver -They
or they dont have to redeliver at a specific time. do at a certain point.
You know, once they say theyre
going to do it theyre going to do it, but they have to do it within 365 days. going to do it. MR. SIDEBOTTOM: Absolutely. The part They have some option of when theyre
they dont know is how much its going to cost them to remove the energy from our schedule.
Page 2838 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 sure what page. there. presentation, 136. MR. DEVEAU:
NSUARB-ML-2013-01/M05419 Okay. The hydrology --
the whole hydrology issue, Ms. Rubin, I think, had asked you, Mr. Sidebottom, if Im not mistaken, at the technical conference -- and it may have been Mr. Gallant -- whether you had seen this information before in the original application. And you said no, and that -- or someone said
no, and that this was -- basically, this came up as a result of this -- the negotiation of this agreement. So in the technical conference -- and I think its Exhibit -- I want to bring it up. Mr. One
Goodine, Im sorry I didnt give you this exhibit. thirty-six (136), I think. MR. GOODINE: MR. DEVEAU: The transcript? No, the Nalcor
So theres -- perhaps just -- Im not Just flip through. Keep going. Theres a graph
Keep going.
Yeah, right there.
So I suppose, really, this is the only evidence that we have -- the Board has before us and the intervenors as to what -- you know, how much variable energy theres going to be.
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And theres no -- you know,

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Page 2839
the axes dont have particular times and I would suspect you have seen better information than this. This is not -- in fact, a lot of people thought, I think, at the technical conference this was the graph and then, later on in the session, it was said it was only for illustration. So Im not sure if
those peaks and valleys are the actual ones or just some sort of illustration someone came up with. So in terms of the evidence on hydrology, in terms of providing evidence -- comfort to the Board and ratepayers, what can you say, you know, to the evidence that there is support for the hydrology that Nalcor is presenting to you? MR. SIDEBOTTOM: So this effect or
characteristic of a hydro system is very similar to Nova Scotia, so it makes a lot of sense to me from the standpoint of the peaks and the valleys. I know Mr. Janega has seen a significant amount more of the detailed information. ultimately, all of this is backed up by the underlying commitment. So the hydrology is a way of
And
Page 2840 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 reasonable.
NSUARB-ML-2013-01/M05419
explaining how theres a level of comfort that this energy is going to arrive and why Nalcor is also willing to step up to the commitment as well. But ultimately, this Board
can further rely on the commitments made by Emera and Nalcor. I would offer that it looks very It is in line with how I would see and how we So
think about our hydro systems in Nova Scotia as well.
from a technical standpoint, its well aligned and it also makes a lot of sense that thats exactly how it would operate. MR. DEVEAU: I guess I dont disagree
with you that it makes sense in terms of there's peaks and valleys. I think everyone accepts that premise. I think
the question is, what evidence have you seen about the numbers to back up this type of chart if this is just for illustration. And I suppose my next question -- Ill give you that one as well at the same time -- is in terms of audit rights, is that the sort of thing youre going to pursue in your audit rights so that you can see it in terms of, you know, the planning that Nalcors going to
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Page 2841
give you as time goes on? MR. SIDEBOTTOM: last question first. So as things such as the hydrology and the backup and the forecast are exactly the type of thing we would seek in our audit rights, so thats what we would envision going forward. So Ill leave that one there, and Ill hand it to Mr. Janega for the second one. MR. JANEGA: What Nalcor provided as So Ill answer the
support for this document in particular was the total fixed energy capability on their hydro system in Newfoundland and their average peak energy production. That was all based off of their lowest overall hydrologic data for 60 years. And that data was used to create the
gap on this graph that you would see, which is a graphical representation just for purposes of demonstrating without the numbers, but actually supports the fact that there is additional energy above the firm load up to the red line that is the bottom of the band of essentially the guaranteed surplus volume. So the real volume and that blue
Page 2842 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22
NSUARB-ML-2013-01/M05419
segment thats in behind the faint blue section thats in back is what composes the minimum 1.2 terawatts, and it is based off of them calculating firm load requirement, the capacity that they need on the system. So they build the physical plant to actually produce that minimum firm load based on the lowest of the 60 years of data, then everything above it, as they run the rest of the data, produces the upper portion of the curve. So not only is the 1.2 terawatts of energy available, but if you look at the left-hand side of it in the early years, that pink segment is actual surplus thats available today. is load growth. So if the load growth doesnt show up, the front end of that curve actually stays much as it is today. MR. DEVEAU: So in terms of the firm Was it The only thing that eats that up
load, on what basis was that firm load projected?
based on -- I know the report is based on what everyone says Newfoundland is going to be the firm load or -- I suppose your answer to that is theyre just going to build
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Page 2843
Thats exactly it.
But it is based on the forecasts that they provided to the PUB in support of a filing. MR. DEVEAU: Okay. The next question,
there was -- as part of the original application, youll recall there was a number -- over a dozen formal agreements that were signed. And one of them -- I'm not
sure I gave you that, Mr. Goodine, Exhibit -- Appendix 2.13. And that was the Interprovincial Agreement; it's
Exhibit M-2(ii). And in that agreement, simply an agreement between Nova Scotia and Newfoundland working together in cooperation to ensure the continued and ongoing success of the formal agreement, and it provides for indemnification in the event of damages caused by government actions. And I'm just wondering, if that agreement related to the other agreements that are already signed. I'm just wondering where this -- the current
Energy Access Agreement, where it stands in relation to that Interprovincial Agreement, if that's come up.
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NSUARB-ML-2013-01/M05419 MS. TOWER: So the Interprovincial
Agreement was really to ensure that we worked diligently to ensure we get the conditions satisfied around the federal loan guarantee and move the project forward, if I remember it correctly. until financial close. MR. DEVEAU: Well, there was a And the indemnity was in place
Stability Agreement as well, but I think --MS. TOWER: MR. DEVEAU: MS. TOWER: Okay, maybe I'm ----- that was separate. --- getting that mixed up.
Maybe if you could just sort of flip through the --MR. DEVEAU: MS. TOWER: refresh my memory. MR. DEVEAU: just flip through -- right there. a second. (SHORT PAUSE) MS. TOWER: agreements. So this is the -- I think what we
Yeah. --- the Agreement, just to
Could we just -- yeah, Perhaps stop there for
Sorry.
That's a lot of
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Page 2845
called the Legislative Stability Agreement that comes into effect now upon what we call financial conditions resolution dates. So when we make the final decision -after your decision, we make the final decision to proceed through to financial close, then it is at that time that this comes into effect. Sorry, now ask again your question. MR. DEVEAU: Yeah. Well I guess my --
the only question was, I don't think the stability -- the Stability Agreement was Exhibit I think 107. think that applied. something different. But I'm just wondering if there was anything -- this agreement gave the commitment of both the Newfoundland government and the Nova Scotia government to basically make sure that the -- all the other agreements were carried through on. And I'm just wondering if -I don't
I think that was -- contemplated
where -- what's the status of the Energy Access Agreement in terms of the responsibilities of their respective governments? THE CHAIR: It's excluded from those
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NSUARB-ML-2013-01/M05419 I can't find the provision, but if
provisions, isn't it?
you can help me with it --MS. TOWER: MR. DEVEAU: I can say we didn't --And perhaps if you need
an undertaking, is that something that --THE CHAIR: Well, Mr. Gallant probably
knows off the top of his head, does he? MR. DEVEAU: THE CHAIR: Yeah. Okay. I thought there was
a provision in this agreement which excluded this agreement from those provisions, but I'm leafing through it, I can't find it. MS. TOWER: My -- so what I was going
to say was my recollection is that this agreement that you were just referring to did not come up in the discussions as we were negotiating the Energy Access Agreement. MR. DEVEAU: THE CHAIR: Okay. But I'm happy to give an
undertaking if someone wants to confirm that. MR. DEVEAU: THE CHAIR: Yeah, just --U-47.
UNDERTAKING U-47 - To provide a

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Page 2847 description of any protection provided under the Energy Access Agreement
MR. DEVEAU: the -- you will recall in the --MR. SMELLIE: just before you carry on. MR. DEVEAU: MR. SMELLIE: think Mr. Gallant was as well.
Okay.
You'll recall in
I'm sorry, Mr. Deveau,
Sorry. I was distracted and I
Can we just make sure that
we understand the nature of the undertaking? MR. DEVEAU: THE CHAIR: MR. DEVEAU: The --Go ahead. I think the question
would be whether if there's any protection provided by the Interprovincial Agreement, whether any protection afforded under that Agreement extends to the Energy and Access Agreement -- Energy Access Agreement. MR. SMELLIE: MR. DEVEAU: Thank you, sir. Thank you.
Okay, the next question is in relation to -- you'll recall in the -- it seems a long time ago,
Page 2848 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22
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but in the original hearing we had in May and June, that there was a lot of discussion about the change in term from the 50 years to the 35 years. And as a result of
that, out of that came the supplemental energy that was delivered in the first five years. So one of the questions obviously that came in as we were discussing that at the hearing was that some people thought, you know, you were -- you know, were getting that energy at the time when we really don't need it. It would have been better to get it throughout the
term of the agreement. So the question now in relation to this option for Nalcor, instead of providing 1.2 terawatt hours on an annual basis, they're allowed to, at their option, to move -- front load that as well to 1.8 terawatt hours obviously because they may need it more as they get closer to 2041. So I'm just wondering if we're just compounding the problem and if it's really -- from ratepayers -- from a ratepayers perspective here in Nova Scotia, we're getting that energy at a time when we really don't need it and what that does to the economics of the
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Page 2849
I mean, at the end of day, it still has to be
the lowest cost alternative and what does that do to that test. MR. SIDEBOTTOM: So the 1.8 is really
a recognition that if you're going to have variability in generation and your average is going to be 1.2, you need some years above 1.2 to allow yourself to make the average of 1.2. So it's really to reflect the opportunity to go
up and down through some time. And because the excess energy is -can undulate through time and Nalcor is obligated even past the 1.2 commitment to continue to bid, I believe we'll see energy through the whole period. There's no
doubt that there's more available energy in the near term because the building of Muskrat will actually provide a fairly significant period of energy. But it's interesting enough the supplemental energy that you mentioned actually creates a slight curtailment in the first five years, because technically you can only get about 1.5 terawatts across the Maritime Link to the delivery point in the first five years, and so that actually limits the 1.8 technically,
Page 2850 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 from the --MR. SIDEBOTTOM: MR. DEVEAU:
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because it has to be at the delivery point to be served into Nova Scotia through that period as well. So there's actually a bit of an offset on that and then an ongoing obligation. So I personally
believe that that value is there through the whole time. MR. DEVEAU: Sorry, on that point, the So you're
delivery point's not defined in this agreement. taking the delivery point as meaning what? MR. SIDEBOTTOM: substation in Nova Scotia. MR. DEVEAU:
Its a Woodbine
So you're taking that
From the ECA.
The ECA, yeah.
So in the first few years during supplemental energy then, you're saying that the 1.8 is not possible, it would be constrained to 1.5? MR. SIDEBOTTOM: (SHORT PAUSE) MR. DEVEAU: back to this RES and pricing. don't quite understand.
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That's right, yes.
Okay.
I'm going to go
I still -- something I
There's a disconnect there or

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Page 2851
something. time.
So I'll -- let's go through that one more
And obviously, I take what you said this morning -- that Mr. O'Connor said economy industry you wouldn't pay for any -- for any other attribute, that we're only dealing with economy energy. And before we get
there, let's look at -- or starting with -- let's look -I'd like you to refer to, and it's referred to in Mr. Raphals's evidence, but it's your response to CASPA IR-48, and it's the first page of that. It was Exhibit M-14.
So going down to (d), in (d) you were asked to:
"Please provide a tabulation of the renewable energy produced by each unit contributing to satisfying the RES for on-peak and off-peak for each month through 2050..."
And on the second page, you said,
Page 2852 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22
NSUARB-ML-2013-01/M05419 "Please refer to Attachment 3. Annual data is provided. This assessment has assumed surplus energy imports are RES eligible."
And now I'll refer you to page 3 of 12, and that's the table that you provided -- yeah. was the table that you provided for -- sorry. give you the right one. Page 4 of 12. So that was the RES And That
I didn't
compliance table that you provided for the low load.
under "imports" -- and imports is -- you defined imports as including surplus energy from the Maritime Link. And in there, as you go across there, you actually provided RES compliant amounts for each of those years, starting in 2017 at 281, and then 2018 approximately almost 1,300, and basically it stayed 1,200, 1,300 there across to 2034. I think there's another --
well, I think it goes to 2040 at some point. In any event, you've provided a number for RES -- that the surplus energy would provide so much RES compliant energy, and that was your low load.
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Page 2853
So I'm a little puzzled now why you would indicate that it -- or why it would be negotiated that you don't want that RES energy. I'm just -- a
ratepayer is getting less than what they were getting under the original application. MR. SIDEBOTTOM: they are. So I don't believe
The pricing is the Mass Hub pricing, which is And I think the point I wanted to
an energy only product.
make around that is that that energy, and I think we had a bit of an exchange here, potentially could be an RES product under the Minister's discretion. But independent of that, the point I wanted to draw out was that, in fact, under the low load or most likely load, there's sufficient RES energy prequalified as it is today between the Nova Scotia block, which includes a supplemental, and the planned RES generation to be in place at that point in time. So that wasn't a -- there wasn't a need to retain a GHG credit associated with that which Nalcor was interested in retaining. to make that RES compliance. MR. DEVEAU: But under the original
We didn't need that
Page 2854 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 application? MR. SIDEBOTTOM: MR. DEVEAU:
NSUARB-ML-2013-01/M05419
application, weren't you getting that surplus energy with the RES attached to it? MR. SIDEBOTTOM: We weren't modelling
it -- although it's in there as a compliant product, it wasn't required for compliance and there was no price associated with an RES factor associated with that energy. It was a pure market price. MR. DEVEAU: In the original
Yes. So if you got in a
Okay.
situation under this agreement that you received energy and it was more economical for you to keep it and try to sell your other energy, to keep the Nalcor energy and sell your other -- you discussed earlier scenarios where it might be advantageous to keep the Nalcor energy and sell your other energy. MR. SIDEBOTTOM: MR. DEVEAU: Yes.
But if your other energy
is RES compliant, you couldn't sell that other energy to the extent that it was RES compliant because you didn't have any other ones to replace it.
NSUARB-ML-2013-01/M05419 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 options. MR. SIDEBOTTOM: MR. SIDEBOTTOM: MR. DEVEAU: That's ---
Page 2855
It would limit your
Well, we wouldn't --
we wouldn't be selling, I believe, our RES compliant energy. What we do have is 60 percent of our energy can be non-RES energy, so as long as we keep that sales ratio, which is, in fact, the rule -- you know, 40 percent of our sales RES compliant -- then we can sell into the market. MR. DEVEAU: Okay. But to the extent
that you would have received more from Nalcor, you would have had -- you possibly could have had more RES compliant energy to sell off, though, that you didn't need. MR. SIDEBOTTOM: Yes. And I think it
still would be a matter for the Minister to consider whether it's compliant as it sits right now. MR. DEVEAU: Right. But in terms of
other jurisdictions who want to buy it, that's up to their executive branches or legislatures to decide what's RES compliant or not.
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NSUARB-ML-2013-01/M05419 MR. SIDEBOTTOM: MR. DEVEAU: That's correct.
It might be compliant in
Nova Scotia, but it might not be compliant in other provinces or in other states. MR. SIDEBOTTOM: MR. DEVEAU: Absolutely, yes.
All right. It's
So we'll go to the agreement. sort of on the same issue.
And let's go to -- and here,
just to give you a backdrop, the -- where I'll get a little confused is the character of the energy that's bid into the process versus the character of the energy that, at the very end, you pay for and is supplied to you. So let's go, first of all, to the end product, page 5, definition 3(f). Access Agreement. So (f) there, you see the Energy-Only Product. It says: And that's the Energy
"Nalcor Supplied Energy shall be provided to NSPI as an energyonly product. For greater
certainty, Nalcor retains all the

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Page 2857 rights and value associated with the Energy in respect of Capacity and GHG Credits."
So it talks there about the Nalcor supplied energy, and let's go to that definition, which is on page 3. So the definition of Nalcor supplied energy on page 3, it talks about energy that's sold and delivered "by Nalcor to NSPI pursuant to the provisions of this Agreement or the Final Agreement". And then:
"For greater certainty, Nalcor Supplied Energy is in addition to, and separate from, the Nova Scotia Block."
So on these two definitions, we talk about the Nalcor supplied energy is energy only, no GHG. It's the energy that's sold and delivered by Nalcor to NSPI; correct? MR. SIDEBOTTOM: That's right, yes.
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NSUARB-ML-2013-01/M05419 MR. DEVEAU: Okay. So let's go to the
front -- to the start of the process now, and let's go to Section 4(a), which is the forecasting and the bidding. That's on page 5. So at the top there, you'll see 4(a). So here, we talk about 4(a), Nalcor forecast. And it says:
"On a monthly basis during the Term, Nalcor will provide a good faith forecast to NSPI of Available Energy..."
And we don't have to go there, but the definition -- we can go if you wish, but the definition of available energy is in the definition section, and it means:
"Nalcor-generated Energy (excluding New Generation Development Energy) that is excess to the requirements to
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Page 2859 meet Newfoundland Native Load and the Nova Scotia Block, up to a maximum of 1.8 TWh per Contract Year."
So available energy doesn't talk about -- it doesn't talk about economy energy or energy only. It just talks about the energy that's produced by Nalcor, essentially, in excess of native load. So back to 4(a), it says Nalcor They have to provide a forecast to NSPI of
available energy forecast to be available for sale to NSPI and up to a maximum of 1.8 terawatt hours per contract year and such forecast is known as the "Nalcor Forecast". And then 4(b) talks about the bid, the bid into NSPI solicitation, and it talks about the Nalcor bid energy is the aggregate of all the forecast energy. And if you could go a little lower, Jeff, 4(c) defines the bid price. And I think -- I
suppose this is where it gets -- I don't quite understand your statements in terms of how we isolate out the, you know, the -- what we're paying for in terms of just
Page 2860 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 economy energy.
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When we get to the Nalcor bid price under 4(c), which is the pricing of this, it says that:
"Nalcor will make good faith bids of Nalcor Bid Energy into the NSPI solicitations."
And, of course, under (i) it's ISO New England or under (b) it's the -- or (ii) it's the liquid trading node, the other spot-market -- the alternative spot-market. So I -- it seems to me there's a different scenario about what is supplied and what is bid into the solicitation. The -- what you bid in the
solicitation under 4(a), (b), and (c) doesn't seem to relate at all to what the definition of economy -- of the Nalcor supplied energy is. So how can you be -- why -- how are you interpreting the Agreement to say that you're only paying for economy energy when the bidding doesn't refer to economy only energy?
NSUARB-ML-2013-01/M05419 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 economy energy. yeah. MR. DEVEAU: MR. SIDEBOTTOM: with the forecasting.
Page 2861 So maybe we'll start
So initially you're trying to quantify how much energy, and it'll be denominated in megawatt hours or gigawatt hours, peak and off peak, and that quantity is of economy energy, that's what it is defined to do, and of course, it's defined by the amount of resource minus the load. So the forecast we envision
having will really be 24 months of peak and off-peak values in megawatt hours. MR. DEVEAU: Okay, I've got to stop
you there, because that -- I think that's where I missed -- that's where I'm missing something. You're saying that the bid amount is the -- or the bidding process --MR. SIDEBOTTOM: The bid forecast,
--- is accounting for
And when I read the agreement, the only
definition of -- for economy energy talks about the supply of the energy, not about the bidding. If it had been
intended to apply to both, presumably they would have said

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that, you know, the energy only product would be Nalcor bid energy or Nalcor supplied energy. Why is the definition of a Nalcor only product only -- only relates to Nalcor supplied energy, not the bidding price -- the bidding part? MR. SIDEBOTTOM: it comes in several pieces. Well, the -- I guess
First, the forecasting tells
how much energy is available, and that's economy energy and that'll be in megawatt hours, and the expectation of the parties is it's a 24-month strip of data denominated in megawatt hours, which is a way to denominate economy energy, and you would know how much was available. When we go into the design of the RFP we'll look at what's available through the 24 months and decide how to structure our 12 months, and to the extent that it matches our needs we will ask for that into the market. And obviously more than Nalcor is bidding on this, but they will bid in competitively to that. They're obligation is to bid in their energy up to
the profile that they have supplied us in that 24-month period.

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Page 2863
And again, that's all in megawatt hours which is how economy energy is measured. And then
the award ultimately considers the price of that economy energy as set out in Section C. MR. DEVEAU: So how is GHG energy
measured then if it's not megawatt hours? MR. SIDEBOTTOM: It's usually a credit
associated and matched with a megawatt. MR. DEVEAU: With an amount? With an amount. And,
MR. SIDEBOTTOM: again --MR. DEVEAU:
So --Oh, sorry. So how -- I
MR. SIDEBOTTOM: MR. DEVEAU: understand the process totally. MR. SIDEBOTTOM: MR. DEVEAU: process; I just don't
Sorry.
Okay.
I understand that
understand how you're attributing
economy energy only as part of this bidding process. Where do you get from that the language of 4(a), (b), and (c) that that only applies to economy energy? MR. SIDEBOTTOM: So I think it was
Page 2864 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 price market. for energy only. an LMP market --MR. DEVEAU: MR. O'CONNOR: that. MR. O'CONNOR: energy price. internal hub? MR. SIDEBOTTOM:
NSUARB-ML-2013-01/M05419
Mr. O'Connor who said the pricing nodes that we've got identified don't have GHGs attributed to them. -MR. DEVEAU: Oh, so the 4,000H They are -
Yeah, that's an
So maybe Mr. O'Connor --MR. DEVEAU: Oh, okay. --- can help with
MR. SIDEBOTTOM:
So that price is purely
It's ISO New England's, what they call
M'hm. --- a location marginal
The ISO, amongst many things, calculates
the unconstrained energy cost in a day ahead basis for each hour and it is only purely for energy only. it. It is just the energy component. The rest of the instruments available in the market, renewable energy credits, is one term that would be used in New England, are sold separately and
That is
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Page 2865 They are connected to
completely apart from the energy.
the energy but they are not in the calculation that the ISO would do and in no way related to the energy --MR. DEVEAU: MR. O'CONNOR: MR. DEVEAU: through that long question --MR. O'CONNOR: MR. DEVEAU: MR. O'CONNOR: MR. DEVEAU: into the --MR. O'CONNOR: MR. DEVEAU: Yes. --- nitty gritty of the No, that's ----- but that --Is it helpful? --- because we don't get Okay. --- transactions. I'm sorry I had to go
trading every day, probably for a good reason, but that's the answer I'm looking for. MR. O'CONNOR: method will apply to point two. And that exactly same
It will be exactly the
same -- it will be in a different market but it will be only energy. MR. DEVEAU: Right, okay.
And then the last set of questions

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relates to Mr. Outhouse had taken you to Mr. Chernick's evidence, which is -- Mr. Chernick and Mr. Parker -M-138. And Mr. Outhouse had taken you to page 19. And
that was talking -- this is talking about the exchange again, Mr. Sidebottom, you had with Mr. Chernick at the Technical Conference and the nomination and the scheduling of the energy. MR. SIDEBOTTOM: MR. DEVEAU: Yes.
And what I'd like to take
you to is the next page, the very top paragraph there, and the question was:
"If Nalcor energy were uneconomic, would NSPI have any options?"
And it says:
"Depending on transmission availability, NSPI might be able to sell the energy into the New England market (minus
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Page 2867 transmission charges [and so forth]...or the New Brunswick market..."
And it said:
"If the transmission to New Brunswick is fully booked and NSPI is at minimum generation level [because of must run], NSPI would likely need to dump the energy back to Nalcor at whatever Nalcor was willing to pay. So
NSPI could pay Nalcor $60/MWh for energy priced at the [Mass] Hub and sell it back to Nalcor at [a dollar]."
So I'm just wondering, is that something that could happen, what's the likelihood, or it just couldn't happen at all? MR. SIDEBOTTOM: I was trying to think
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of a situation that I could recall where that would happen. You know, if the ties to New Brunswick weren't up
and running, which is a very rare occasion, something like that might occur. The probability of this type of event You'd have to
occurring, in my experience, is very low.
not be connected or have to have some unusual constraint occurring on the grid to have that be the case. MR. DEVEAU: year would that happen? MR. SIDEBOTTOM: The -- well you have In terms of how often a
to have a number of things going on at exactly the same time. So the reliability of the tie to New Brunswick is It's well over 99 percent, I believe, up time.
very high.
You would then also have to have a situation of low load, and then you'd also have to have a situation of minimum runs being met on the unit. So what really is happening is you're taking multiple low probability events and stacking them up against on top of each other. So it's hard to really
say how probable it is, other than you put multiple low probability events, one on top of the other, to create this scenario, would be my reaction to that piece of
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Page 2869
evidence. MR. DEVEAU: Okay, so the next
question immediately below that is talking about whether you'd be able to sell the uneconomic energy. And then the last question at the bottom there -- and of course, you know, theres the whole question of under the agreement whether -- you know, it talks about your load requirements and so forth, but assuming you were permitted to sell it, is it possible -at line 22, Is it possible that the price of the energy under the EAA would significantly see the cost of generating electricity from Nova Scotia Powers own plants?, and the answer there was yes. It talks about the hourly day-ahead prices at ISO New England exceeding $200 in 2013. Then it
talks about the variable costs for NSPI, $45 for its solid fuel plants and 227 for the old oil-fired combustion turbines on the next page. So then they say on page 21, line 3:
Even if NSPI could find a transmission path into New

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NSUARB-ML-2013-01/M05419 England during a price spike, it might not be able to sell the power back at the EAA price. September... In
Which I assume was September 2013.
...when transmission constraints and a heat wave drove the Hub price to $426/MWh, prices in Maine were about $116/MWh. If
Nalcor had been delivering energy to NSPI at that price, NSPI would lose the $310/MWh difference in the locational markets, in addition to transmission charges and line losses, even if it could sell the energy into New England.
So I suppose here we have a concrete example just a couple months ago where NSPI would be
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Page 2871
losing $310 a megawatt hour. So my question is, how often an occurrence would this be and is this not a risk to ratepayers? MR. SIDEBOTTOM: There are times where
the Mass Hub does get expensive, and this outlines a moment in time. What youve also got is youve got options to hedge the price of these commodities as well. So weve got a number of tools in the toolbox, and so lets take this very same example. And we
do have a portfolio and we hedged the portfolio as part of the fuel manual. If the price at the hub was $426 -and I dont know if this is an hour or a day. probably more likely an hour. Its
But you would find yourself
hedging that, and the hedge would bring the price back down to the economic value that you expected in the first place. So theres a number of ways you can mitigate the risk. Now, remember, we start with an
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NSUARB-ML-2013-01/M05419 It was the right
economic choice in the first place. choice of energy in the first place.
So in this example, if wed chosen to take this Mass Hub energy and it was below the 45, we could choose, as part of our risk management, to lock in that, call it, $40 energy on that day and the performance of the hedge would protect against that particular circumstances. So its an example of what can happen, but there are ways to mitigate it. MR. DEVEAU: Now, we saw in the fuel
audit case last year -- I think it was the fuel audit part of the case -- where not all hedges are -- you cant hedge against everything. So Im just wondering, is this the sort of hedge that would be on the margin or one that wed normally would make, or --MR. SIDEBOTTOM: Well, the reason
weve chosen liquid trading points is because they also come with --MR. DEVEAU: Better hedging products? Yeah. Its important
MR. SIDEBOTTOM:
NSUARB-ML-2013-01/M05419 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 to pick the right market point.
Page 2873 Whereas the interface
between New Brunswick and Nova Scotia is not a liquid point --MR. DEVEAU: Right. --- and is not as
MR. SIDEBOTTOM: able to be risk managed. MR. DEVEAU: MR. OCONNOR:
Okay. And just to the point
of liquidity and hedging, so Mass Hub is used by ISO New England participants regularly to hedge. liquid and fungible product. It is a very
So it would have all kinds
of opportunities to hedge for one, two years, for peak, off peak for 25, 50, 75, 100 megawatt hours. So its quite liquid. And I would
fully anticipate that we would utilize those hedging -and thats, in fact, the only way we can lock in the value. So if, through the solicitation, we find a month -- for instance, if this energy is $50 and, say, another form is $60, we will need to hedge to lock in that $10 of savings for our customers. And in that case,
have we hedged, were not exposed to these kinds of price

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vagrancies that occur from time to time. So I just thought I would offer that. MR. DEVEAU: going to earn their money, then. I think thats it. THE CHAIR: But this is just Your hedging experts are
describing a loss of opportunity, this section, isnt it? Its not describing an actual loss, isnt it? In other words, you didnt have the opportunity because of constraints to get the 426 price? Its just an opportunity loss. Its not a loss per se. Yes. In this case I
MR. OCONNOR:
think the other one was an actual loss, yes. THE CHAIR: So you didnt make as much
money -- because of transmission constraints, you might not make as much money flipping the power as you otherwise would, but you didnt lose money on the transaction with Nalcor. MR. OCONNOR: THE CHAIR: MR. DEVEAU: Thats correct, yeah.
Okay? Yeah.
QUESTIONS FROM THE CHAIR

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Page 2875 Theres not much left when
THE CHAIR: it gets to me.
I just wanted to follow up on a couple of
things, and the first one is for you, Mr. Sidebottom. Im going to go back to page 31 of -and its the same question I intervened with Mr. Outhouse, but Im still not sure I understand it. Chernicks evidence starting at line 20. MR. SIDEBOTTOM: you. THE CHAIR: question yet. screen. So line 20 says: I havent asked the Sorry; I didnt hear On page 31 of Mr.
I just want to make sure its up on the
The Application assumes that NSPI could purchase economy energy on an hourly basis, when it was less expensive than NSPIs own generation. However, the EAA
would require NSPI to commit to purchases up to a year in advance, putting ratepayers at

Page 2876 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22
NSUARB-ML-2013-01/M05419 risk...that is not needed or beneficial, and of missing opportunities to purchase energy that would have reduced costs.
And youve talked to me already about how there would be an index price, so the price would vary through the year. MR. SIDEBOTTOM: THE CHAIR: Yes, thats correct.
And youve talked to me
about what you might do to ameliorate the circumstance where you had energy you didnt need, and that is youd sell it. But you seem to suggest in response to a couple of questions that this was an advantage over the original application, and Im not sure I have that point; in other words, this year-ahead commitment. MR. SIDEBOTTOM: So I think the
advantage is around the reservation of energy force in the first place. And the second is the line of sight 24
months out on how much energy is potentially available in the market.

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And both of those things are very significant, so those are the parts that I believe are quite significant around the Energy Access Agreement that you just simply wouldnt typically find yourself with in most cases. THE CHAIR: And is it fair to say that
had you -- without this agreement, had you wanted to purchase on an hourly basis, it may not be available to you on that given hour without the EAA? MR. SIDEBOTTOM: You might not have a
person willing to do that for sure, yes. THE CHAIR: back here to begin with. MR. SIDEBOTTOM: THE CHAIR: you as well, Mr. Sidebottom. Assuming we get to the point where we have the variance issue and Emera steps in and there was this -- theres this provision about possibly Nova Scotia Power building wind generation, how do we get to that decision? What process do you see Emera, Nova
Which is the reason were
Yes. I guess this is for
Okay.
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Scotia Power and the Board going through to make a determination as to whether Nova Scotia Power should build something? MR. SIDEBOTTOM: I would expect a
typical process in which we put before the Board the options in which we are looking at option A, and if this is -- would be a proceeding where were looking to recommend Nova Scotia Power build the wind, wed put a clear case in front of you that says, under a capital investment, this is a better solution for customers. And if Nova Scotia Power was stepping into this position, it would also have the availability of the balancing service as set out by Nalcor as part of the commitment to facilitate the integration of the wind. And the two of those components wed put before the Board for a decision, ultimately, to decide whether Nova Scotia Power would proceed with building a wind farm and ultimately providing those 300 gigawatts. THE CHAIR: So youre saying that, as
you envisage this, Nova Scotia Power could only replace Emera with a project that would have to be approved by us. MR. SIDEBOTTOM: I dont see any other
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Page 2879
way, sir. THE CHAIR: is for you. And Mr. Outhouse took you to Section 6 -- I dont know if you need to turn it up -- 6(a)(ii) of the agreement. And a concern was expressed as to whether Okay. Mr. OConnor, this
the wording there reflects the intent of the parties. My question is, if it doesnt, what do we do about it? MR. OCONNOR: So the -- as you know, It
we have the definitive agreement yet to be finalized.
is the intent of the parties, us and Nalcor, that this is --THE CHAIR: from us way before that so --MR. OCONNOR: THE CHAIR: Yes. Ms. Tower wants a decision
So what do we do about it?
If that agreement as phrased does not reflect your intent, what do we do about it? It doesnt have to be you that answers, the panel can answer. MS. TOWER: Ill just say it does
Page 2880 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 reflect our intent. THE CHAIR: MS. TOWER: THE CHAIR: MS. TOWER: about the supplied energy --THE CHAIR: MS. TOWER: THE CHAIR: MS. TOWER: THE CHAIR:
NSUARB-ML-2013-01/M05419
You say --Both parties. --- it does? It does. Youre talking
Well, which --Six (6)(a) --Its 6(a)(iii). Six (6)(a)(iii). An exchange that Mr.
Outhouse took -- took you through with respect to the words or supplied to and the interrelationship with the other portions of the agreement. And I took you, Mr.
OConnor, to say that that, as phrased, may not reflect the intent of the parties. Now maybe I missed it. I -- to be honest, Im So the intent of the And through any of the So if that -- if the
MR. OCONNOR: not 100 percent sure now exactly. parties is not to double-count.
forgivable events or anything else.
wording here is not clear to that and needs to be clarified, we will do that --DICTUM DIGITAL INC. CERTIFIED COURT REPORTERS
NSUARB-ML-2013-01/M05419 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 question. does that get done? MR. OCONNOR: And I understand it. THE CHAIR: Yes. So -- good THE CHAIR: Right.
Page 2881
MR. OCONNOR: THE CHAIR:
--- to ensure --How
Thats my question.
I --If you want to take an But I
undertaking and talk to the lawyers, thats fine. would like to know the answer to that question. MS. TOWER:
I mean, we can tell you it
is the intent of the parties, but let us take that under advisement in terms of how we can might give you more comfort than our word -- than the oral testimony, if thats what youre looking for. THE CHAIR: Okay.
And just following up on a question from Mr. dEntremont, is there a date certain by which the federal loan guarantee has to be signed? MS. TOWER: Our obligation around the
federal loan guarantee really falls after Nalcors obligation, which 60 days after their financial close we need to have come to financial close or at risk of losing
Page 2882 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22
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the federal loan guarantee. THE CHAIR: MS. TOWER: THE CHAIR: Okay. So ---
Or 90 days, sorry. So what triggers the Or is it signed?
signing of the federal loan guarantee? I dont know.
In other words, is it now in place? MS. TOWER: We are both still
negotiating but Nalcor is moving forward faster than we are. They are in the throws right now of negotiating with
lenders for their financing and -THE CHAIR: Right. But has Canada
said, Look, its got to be signed by x-date or we withdraw it, or anything like that? MS. TOWER: They have not -- as far as
I -- they have not said that to Nalcor, as far as I know. THE CHAIR: MS. TOWER: Okay. Nalcor is negotiating and
looking to go as quickly as they can and, of course --THE CHAIR: MS. TOWER: 90 days. THE CHAIR: --- understand that.
I see.
I ---
--- our obligation falls
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Page 2883 Whats the timing
NSPMLs financing obligation is what? related to that? MS. TOWER: after. THE CHAIR: MS. TOWER: Yeah.
So financial close 90 days
Youre saying is our -- do
we have an obligation other than that? THE CHAIR: No, Im trying to
understand what your obligation is. MS. TOWER: Nalcors financial close. THE CHAIR: financing in place. Okay. MS. TOWER: federal loan guarantee in place. THE CHAIR: Im missing. So how does it work? What are the Okay. Thats the piece We have to have the So you have to have your Ninety (90) days after
steps that have to be -- to go through to get the federal loan guarantee in place? understand. Thats all. MS. TOWER: Yeah. So were right now Its just that I dont
Page 2884 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22
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negotiating an Emera guarantee agreement and an Emera completion agreement. And we have to actually negotiate Nalcor is doing that now. We
the terms of the guarantee.
suspect that the terms of the guarantee for us will follow quite closely. We have to -- so that would be considered financial close. That has to be 60 days and I keep
then there are certain -- or 90 days, sorry. saying 60 days.
And I think its 60 days after that there
needs to be a certain amount drawn -- there are certain timelines after that. But I think for us the big commitment is really financial close, which is that 90 days after Nalcor. THE CHAIR: MS. TOWER: Okay. Were just -- I think
were anticipating the next question which is --THE CHAIR: MS. TOWER: we have. THE CHAIR: MS. TOWER: That was --Mr. Janega certainly can
Go ahead. --- other commitments that
NSUARB-ML-2013-01/M05419 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 are --THE CHAIR: loan guarantee in place? MR. JANEGA: Janega --MS. TOWER: THE CHAIR: Yes. --- are there other speak to those. But were --THE CHAIR:
Page 2885
I was going to ask Mr.
milestones that have to be met --MR. JANEGA: Yes, they are and they
--- to get the federal
They are essentially And one of
linked to the federal loan guarantee process.
the commitments we made as an indication of our intention to proceed is the advancement of major awards of work that are pending our outcome of this process. So the reason that were linked in to those is we want to attain the assurance or a certainty around the decision from the Board and understand that before the final award of some of those major contracts. Right now there are a few of those that we have been able to extend the timeline. We have an agreement from
suppliers but this month is when we need to be concluded

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with those. THE CHAIR: Okay. Probably been here
too long when the witnesses can anticipate my question. MR. JANEGA: Well, our -- we were
anticipating but we were hoping the end of -- you know, if were to try and conclude -- and one of them is a fairly major contract, value and importance to the project -- by the end of next week was when our schedule and our timeline was when we had hoped to have an understanding of the outcome of this. THE CHAIR: MR. JANEGA: That may be difficult. We understand the Boards We respect
need to take time to consider the application. that. THE CHAIR: I have. Okay.
I think thats what
Any questions arising out of Board questions? Mr. McGrath? MR. MAHODY: Advocate has one, Mr. Chair. THE CHAIR: Okay. Ive asked -- Mr. Just -- the Consumer
NSUARB-ML-2013-01/M05419 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22
Page 2887
McGraths light went on first so Im going to let him go first. MR. McGRATH: Just a follow-up, Mr.
Chair, on your question for the panel. FURTHER CROSS-EXAMINATION BY MR. McGRATH MR. McGRATH: It relates to the
question that the Chair asked about if we were in a variance situation and NSPI wanted to build new generation and the process of getting that back to the Board. Im just looking at the provision in the Agreement on page 10 (f). It actually refers to an
NSPI option but not obligation to either construct or contract. And so my question is, would you envision that in the situation where there was a contract, rather than NSPI constructing directly, would that also therefore need to get to the Board somehow for some sort of approval? MR. SIDEBOTTOM: I think its been the
Boards typical practice that contracts are reviewed as part of a -- like the procurement of energy. As part of
the FAM we would expect a full scrutiny through that

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process of similarly looking that it was the lowest cost solution for our customers. I havent thought of it so much in that light but definitely in a capital application it would be before the Board for the decision. THE CHAIR: Actually, I dont know the
answer to this question, but now that we have the renewable electricity administrator, can you even procure stuff without his permission? I dont know. We would have to
MR. SIDEBOTTOM: cross that hurdle as well. THE CHAIR: the answer to that question. MR. McGRATH: THE CHAIR: MR. MAHODY:
Maybe Mr. McGrath knows
Possibly. Mr. Mahody? Thank you, Mr. Chair.
CROSS-EXAMINATION BY MR. MAHODY MR. MAHODY: Mr. OConnor, I want to
return to questions that Commissioner Deveau was asking you about the green attributes in the Nalcor bid energy. And Commissioner Deveau took you through a detailed walkthrough of the Agreement and the fact that the Nalcor
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Page 2889
supplied energy under your Agreement is specifically defined to exclude the green energy attributes. And when you were then asked what the basis is that youre saying that the Nalcor bid energy is also to exclude those green attributes, you took us to Clause 4 (c) 1 little i, which is the Mass Hub pricing. And thats the Mass Hub pricing were all too familiar with as being the basis on which the entire application was made back in June; correct? MR. OCONNOR: MR. MAHODY: Yes, thats correct. Okay. Now under Clause 4
(c) Roman at (ii), what is the basis in that clause for you saying that that bid energy is exclusive of any green attributes? MR. OCONNOR: way to describe the Mass Hub node. So the two is another So the Mass Hub node
is a liquid trading node with associated published forward pricing and its an alternative -- its a spot market. those are the characteristics of Mass Hub. MR. MAHODY: Its your understanding So
that Clause 4 (c) sub (ii) is descriptive of the Mass Hub? MR. OCONNOR: Its a different
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market.
the same characteristics. MR. MAHODY: And you have some
assurance that Nalcor shares your understanding in that regard, do you? MR. O'CONNOR: Absolutely, yes. This
is energy only we're purchasing from them. MR. MAHODY: THE CHAIR: Thank you. Thank you.
Any other questions? MR. BLACKBURN: see my --THE CHAIR: but I see your hand. MR. BLACKBURN: Mr. Merrick's -- the I didn't see your light, You probably didn't
top of his head was -- the grey hairs or whatever. THE CHAIR: Go ahead. Just arising out of
MR. BLACKBURN:
your questions, Mr. Chair and panel, dealing with the federal loan guarantee. FURTHER CROSS-EXAMINATION BY MR. BLACKBURN MR. BLACKBURN: I just want to be
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Page 2891
clear, perhaps it doesn't matter who answers -- maybe Ms. Tower. The federal loan guarantee is not conditional on
this Board approving the Link Project, is it? I mean, this is something you -- that the group wants, obviously, but it's not -- the Government of Canada is not saying that our guarantee is subject to approval of this Board. MS. TOWER: What the Government of
Canada -- one of the conditions is that it have an investment grade credit rating, and to get that investment grade credit rating it needs, really, in sort of a bit of a round-about way, but essentially, it needs the approval of the Board or it needs a regulatory approval to be able to get that investment grade credit rating to make it eligible for the federal loan guarantee. So in a round-about way, yes, it does. MR. BLACKBURN: Isn't the premise of
the federal loan guarantee more job creation and creating employment and so forth for Newfoundland and Nova Scotia? MS. TOWER: So I think the federal
government wants certainty around the recovery of the debt so that they don't have to step in to pay the debt on
Page 2892 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 to Mr. Outhouse? Mr. Outhouse. MR. OUTHOUSE:
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behalf of lenders -- or on behalf of us if we were to default. And so what they need to do is assure themselves that they've got -- that they're guaranteeing a project that has a very strong business case. And one of the ways they do that is to ensure that they -- that it has an investment grade credit rating. So there are certain things that Standard & Poors would need to assure themselves of that or to give us the investment grade credit rating. been through it on an indicative basis. And one of the things that they were very interested in is the -- is the -- how it would work under regulation, if you will. And so they would be -- to We've
get the ultimate investment grade credit rating, essentially, we need the approval of this Board. THE CHAIR: Anybody else before I go
Mr. Chair, I just
really wanted to correct something I'd put to the panel,

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and it bears on Commissioner Deveau's -- or Vice-Chair Deveau's questions about the green credits. And I'd referred to a section of the Act which was the definition of renewable low impact energy when, in fact, the definition that's relevant for this purpose is renewable electricity. And one of the components of that was not the one that I gave, but renewable electricity means all of the following. There are three items. The first
one is heritage renewables, second one is renewable low impact electricity generated after December 31st, 2001. And the last one is imported electricity that, in the opinion of the Minister, is generated from renewable resources. So I think it comes down to the same thing, that is, it's a Ministerial discretion whether or not the imported electricity is generated from renewable resources. THE CHAIR: Okay. Thank you.
Any re-direct, Mr. Smellie? MR. SMELLIE: THE CHAIR: No, thank you, sir. It's now 20 past 4:00. We
Page 2894 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Morrison Park. Park. THE CHAIR:
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were prepared to sit late if we needed to, but my sense is we don't need to. We have the two intervenor witness
panels tomorrow, but we have all day. MR. OUTHOUSE: We also have Morrison
Sorry, yes.
We also have
But I would have thought we could do all
of that tomorrow. I'm looking around. And I don't want
to sort of get Mr. Chernick on the stand and then have Mr. Merrick not able to talk to him for the sake of saving 10 minutes, so I don't think --MR. OUTHOUSE: I'm sure both Mr.
Chernick and Mr. Merrick would prefer if you did that, but I'm not encouraging you to go on. THE CHAIR: Well, Mr. Merrick, if
you'd prefer I do it, I will, but I think we'll come back at 9 o'clock tomorrow morning. All right. Thank you, panel. I
usually thank the panel, so thank you, panel. your evidence. --- Upon adjourning at 4:17 p.m.
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Appreciate
CERTIFICATE OF COURT TRANSCRIBER
I, Patricia Cantle, Court Transcriber, hereby certify that I have transcribed the foregoing and it is a true and accurate transcript of the evidence given in this matter.
Halifax, Nova Scotia Friday, November 15, 2013
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NSUARB-ML-2013-01 Matter No.

NOVA SCOTIA UTILITY AND REVIEW BOARD

IN THE MATTER OF:

The Maritime Link Act

IN THE MATTER OF:

DATE HEARD: APPEARANCES:

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Hearing Clerk: Electronic Display: Recorded by: Transcribed by:

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1635 1661 1688 1692 1700

1753 1786 1818 1837 1909 1971 2001 2008 2024

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DESCRIPTION May 28, 2013

Combined undertakings.............. June 1, 2013

Mutual Energy press release........ June 3, 2013

ROE Data re: McShane Reply Evidence...........................

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LIST OF UNDERTAKINGS NO. June 3, 2013 PAGE NO.

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Page 2599 Halifax, Nova Scotia

This is a hearing on the application by NSP

James H. Smellie together with Rene Gallant.

Nova Scotia Power. MS. GODBOUT: Good morning, Mr. Chair.