Consumers Gas Application to the Ontario Energy Board -

Intervention in Hearing by City of Toronto

The Works and Utilities Committee recommends the adoption of the following report (March 11, 1998) from the Chief Administrative Officer:

Purpose:

To update Council on the status of the City of Toronto intervention in the Consumers Gas Rate Case before the Ontario Energy Board.

Funding Sources, Financial Implications and Impact Statement:

Not applicable.

Recommendations:

It is recommended that:

(1)Council ratify the interim steps taken to date by the City Solicitor in intervening in the application to the Ontario Energy Board by Consumers Gas Inc. for the unbundling of the appliance sales, rental and servicing unit to an affiliate, and that the Chief Administrative Officer explore the possibilities of linking the City=s intervention with that of other intervenors in respect of the same issue;

(2)the Chief Administrative Officer consult with the Commissioner of Works and Emergency Services to determine if any issues on the proposed Shared Savings Incentive Mechanism in Phase II of the Consumers Gas Rate application may impact the City or City residents on matters such as access to or cost of services provided by Consumers Gas, and that the Chief Administrative Officer be granted the discretion to instruct the City Solicitor to intervene in Phase II of the Consumers Gas Rate application, if deemed necessary; and

(3)the Chief Administrative Officer be given the authority to limit the form and content of the City=s intervention in respect of the issues noted in Recommendations Nos. (1) and (2) in consultation with the Commissioner of Works and Emergency Services and the City Solicitor.

Council Reference/Background/History:

Council, at its meeting of February 4, 5, and 6, 1998, adopted a Motion of Councillor Layton which provided, in part, that:

A(3)the City Solicitor be authorized to take any interim steps required on the application made by Consumers Gas in order to reserve the City of Toronto=s rights to intervene or comment as may be required by the Board=s rules and to file comments consistent with the above-noted position and, further that, if on examination of the Consumers Gas Application, any further position or intervention is required in the opinion of the Chief Administrative Officer, the Chief Administrative Officer report back to Council through the appropriate Standing Committee at the earliest opportunity.@

The Motion also provided that the City support Pollution Probe=s petition to Cabinet that the Ontario Energy Board Abe required to take into account the broader public interest in any application, including any application affecting the residents of the City of Toronto, for the transfer of merchandising rentals, sales and servicing to unregulated companies@, as well as the City=s opposition Ato the potential substantial increases in the rental, sale and servicing of natural gas appliance equipment as a result of deregulation by the gas companies@.

Comments and/or Discussions and/or Justification:

The Motion noted above drew Council=s attention to a proposal submitted for consideration by the Ontario Energy Board (the ABoard@) initiated first by Union Gas and Centra Gas, and then by Consumers Gas. The proposal seeks to Aunbundle@ or separate into independent business units, portions of the regulated natural gas utility. Currently most aspects of the utility=s operations are submitted on an annual basis to the Board for approval, in the form of a rate case. At the same time, the utility may propose various new initiatives for providing different customer services or for carrying out its business. The Board=s responsibility is to ensure that those directly or potentially affected parties, or those with an interest in the proceedings, are provided with an opportunity to participate in the proceedings.

Current Status of Proceedings:

Council has already instructed the City Solicitor to intervene in the Consumers Gas hearing, with respect to the unbundling of the Consumers Gas appliance rental, sale and servicing unit, as well as the potential impact that unbundling may have in terms of increased pricing.

It should be noted that the hearing is comprised of four separate, but linked applications. Phase I - the Rate Case, and Unbundling of certain financial and administrative services to an affiliate company; and Phase II B Unbundling of the appliance sales, rental and servicing unit to an affiliate, and two separate incentive mechanisms, one related to Operations and Maintenance and the other (AShared Savings Incentive Mechanism@) related to the Demand Side Management program.

The City has obtained Intervenor Status and the Board has determined that the City is eligible to apply for a cost award (but only to the extent that the City=s intervention relates to its status as a consumer of natural gas). It should also be noted that costs may only be awarded in the event that the City is required to retain outside legal or technical expertise.

Further, the Board encourages Intervenors or other parties who have similar interests or issues to, as much as possible, combine their efforts, both from the consideration of the potential length of the proceeding and from the consideration of evaluating any cost award. Therefore, it is appropriate for City staff to canvass other Intervenors to establish whether the City can combine its efforts with one or more other Intervenors in this proceeding. This will also serve to limit the City=s involvement with this proceeding, since these cases are quite technically complex and generally involve weeks of hearing dates (in addition to the extensive review and preparation time required).

Other Issues:

There may be similar broad policy issues of concern to the City related to the Shared Savings Incentive Mechanism, including how it may impact accessibility or the cost of utilizing Consumers Gas incentives by its customers (including the City) where those incentives relate to reducing CO₂ emissions or other energy efficiency measures. This matter will be addressed in the Phase II materials, which may not be available until the end of April, and given the tight timelines governing procedural steps in the hearing (which may be out of sync with scheduled Council meetings), I am seeking authority to instruct the City Solicitor, based on my consultation with the Commissioner of Works and Emergency Services, to intervene on this issue, if necessary, for reasons set out in Recommendation No. (2) above.

Conclusions:

That the recommendations contained in this report be adopted. The Commissioner of Works and Emergency Services and the City Solicitor have been consulted and agree with the recommendations of this report.

Contact Name and Telephone Number:

Lorraine Searles-Kelly

392-7240