This version is an unofficial translation prepared by Fasken Martineau Dumoulin LLP of the original decision rendered in French by the Québec Régie de l'énergie. This unofficial translation is for information purposes only.
QUÉBEC RÉGIE DE L’ÉNERGIE
D-2010-053 P-110-1565 May 11, 2010 P-110-1597 P-110-1678
PRESENT:
Jean-Paul Théorêt Richard Lassonde Marc Turgeon Commissioners
Newfoundland and Labrador Hydro Plaintiff
and
Hydro-Québec Defendant
Decision
Complaints filed under Section 86 of the Act respecting the Régie de l’énergie
TABLE OF CONTENTS
1. INTRODUCTION ...... 5
2. BACKGROUND ...... 5
3. COMPLAINTS...... 7
4. PROCEDURE...... 7
5. FACTS ...... 8
6. MATTER NO. P-110-1565 ...... 13 6.1 NLH’S POSITION...... 13 6.2 HQT’s Position...... 24 6.3 NLH’S REPLY ...... 44 6.4 THE Régie’S Opinion...... 47
7. Complaint P-110-1597...... 65 7.1 NLH's Position ...... 65 7.2 HQT'S Position ...... 73 7.3 NLH's REPLY...... 79 7.4 THE Régie's OPINION...... 80
8. Complaint P-110-1678...... 96 8.1 NLH's Position ...... 96 8.2 HQT's Position ...... 103 8.3 NLH's REPLY...... 111 8.4 the Régie'S OPINION ...... 112
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LEXICON
AC Alternating Current ATC Available Transfer Capability CF Lines Lines 7051, 7052 and 7053 CF(L)Co Churchill Falls (Labrador) Corporation Limited CF Station Hydro-electric station in Churchill Falls, Labrador CRT Cedars Rapids Transmission Co. DC Direct Current DRQC Designated resource - Québec ETC Existing Transmission Commitments FCGL First contingency generation loss FERC Federal Energy Regulatory Commission GWAC Contract Churchill Falls Guaranteed Winter Availability Contract HQD or Distributor Hydro-Québec, in its electricity distribution activities HQM Hydro-Québec Marketing HQP Hydro-Québec, in its electricity production activities HQT Hydro-Québec, in its electricity transmission activities HVDC High Voltage Direct Current IESO Independent Electricity System Operator ISO Independent System Operator NAESB North American Energy Standards Board NATC Non-Recallable Available Transfer Capability NB Nouveau-Brunswick NE New England NERC North American Electric Reliability Corporation NLH Newfoundland and Labrador Hydro NPCC Northeast Power Coordinating Council NY New York OASIS Open Access Same-Time Information System OATT Open Access Transmission Tariff PPA Power Purchase Agreement RATC Recallable Available Transfer Capability
Régie Régie de l’énergie TRM Transmission Reliability Margin TTC Total Transfer Capability USA United States of America
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1. INTRODUCTION
[1] Plaintiff Newfoundland and Labrador Hydro (NLH), a legal person established in the public interest, is wholly owned by Nalcor Energy, which is held by the government of Newfoundland and Labrador. NLH’s operations include the production, transmission and distribution of electricity throughout the territory of Newfoundland and Labrador. 1
[2] Defendant Hydro-Québec, in its electricity transmission activities (HQT), has been the Hydro-Québec division responsible for electricity transmission in Québec since May of 1997. The rates and conditions under which HQT transmits electricity are fixed by the Régie de l’énergie (the “Régie”).
[3] When NLH filed a request for power transmission service on HQT’s network, a dispute arose between the parties that led to the filing of five complaints: P-110-1565, P-110-1566, P-110-1597, P-110-1678 and P-110-1692. Complaint P-110-1566 was dismissed 2 at the admissibility stage, while complaint P-110-1692 was withdrawn by NLH during the hearings of the three other complaints in January and February 2010.
[4] This decision therefore contemplates complaints P-110-1565, P-110-1597 and P-110-1678.
[5] Before dealing with each of these complaints, some background on the dispute, the goal of each complaint and the procedure followed before the Régie would be in order.
2. BACKGROUND
[6] On May 12, 1969, the Commission Hydro-Électrique du Québec , now known as Hydro-Québec, and Churchill Falls (Labrador) Corporation Limited (CF(L)Co) reached an agreement (the “Power Contract”) specifically contemplating the construction and operation of the Churchill Falls hydro-electric station in Labrador (the “CF Station”) and the sale by CF(L) Co, and purchase by Hydro-Québec, of virtually all of the capacity and power produced by the CF Station for an initial period of 40 years, extended automatically for an additional period of 25 years upon expiry of the initial period on August 31, 2016. This means the Power Contract is set to expire in 2041.
1 Hydro Corporation Act , 2007, S.N.L. 2007, c. H-17. 2 Decision D-2009-025.
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[7] CF(L)Co owns the CF Station. The shareholders of CF(L)Co are NLH and Hydro- Québec, with each holding an interest of 65.8 % and 34.2 %, respectively.
[8] The 7051, 7052 and 7053 lines (the “CF Lines”) connect the CF Station to HQT’s system at the Montagnais substation. CF’s 735 kV lines operate unidirectionally. The CF Station is synchronized with HQT’s transmission system.
[9] The CF Station has a capacity of about 5,500 MW.
[10] Historically, the capacity delivered from the CF Station used to power Québec’s native load stood at 5,202 MW, namely the capacity corresponding to the transient stability limit of the 735 kV lines in question. The average transmission, calculated based on real data recorded between 1983 and 2007, is 5,156 MW, with a maximum recorded transmission of 5,224 MW.
[11] The electricity generated at the CF Station has been a Hydro-Québec supply resource since December 6, 1971, date of the first deliveries, and today allows Hydro- Québec to honour a significant part of its obligation to deliver 165 TWh of heritage pool electricity.
[12] The government of Newfoundland and Labrador and its subsidiary NLH are planning to develop the hydraulic resources of Lower Churchill and to build the Gull Island and Muskrat Falls stations more than 200 km east and downstream of the CF Station. The stations are scheduled to be commissioned on December 31, 2014 (Gull Island) and December 31, 2017 (Muskrat Falls).
[13] The projected stations are currently designed to deliver a capacity of 2,264 MW (Gull Island) and 824 MW (Muskrat Falls), 2,824 MW of which are to be transmitted on the HQT system using, among others, the CF Lines.
[14] On January 19, 2006, NLH filed a request for a 30-year term, firm point-to-point transmission service with HQT to export into Québec, Ontario, New Brunswick, New England and New York electricity generated by the future stations in Lower Churchill. This request ranks 101st on the Open Access Same-Time Information System (OASIS) (the “First Request”).
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3. COMPLAINTS
[15] Complaint P-110-1565 contemplates a dispute between the parties over the Available Transfer Capability (ATC) of the CF Lines for transmitting the power that will be generated by the future Lower Churchill stations beginning in 2015. This complaint was amended, specifically on October 31, 2008, to contest (among other things) the CF Station’s status as a designated resource of Hydro-Québec in its electricity distribution activities (HQD or the Distributor), and to have the Régie decide which of HQD or NLH has priority to use the CF Lines.
[16] Complaint P-110-1597 is related to the first and contemplates the issue as to whether the system impact study conducted by HQT was carried out in accordance with the Hydro-Québec Open Access Transmission Tariff (the “OATT”) and whether the 45-day period set forth in Section 19.3 of the OATT was applied in accordance with that section.
[17] Complaint P-110-1678 is related to complaint P-110-1597 and flows from the same HQT decision to refuse to provide NLH, in the context of the First Request, with the services that NLH requested on January 24, 2008 and asks whether NLH can use the HQT point as a point of delivery and of receipt of electricity for deliveries in Québec. This complaint also asks whether the impact study’s failure to consider the HQT-LAW path for transactions towards Ontario complies with Section 19.3 of the OATT.
4. PROCEDURE
[18] The parties’ approach, from the filing of the first complaint in January 2008 up to the Régie’s hearing of three of the five complaints in January and February 2010, required 13 interlocutory decisions on the part of the Régie to deal with the various preliminary and procedural issues.
[19] First, complaints P-110-1565 and P-110-1566, filed January 11, 2008, were followed by other complaints all resulting from HQT’s decisions respecting NLH’s requests for power transmission services from the CF Station: complaint P-110-1597 in April 2008, complaint P-110-1678 in October 2008, the amendment of complaints P-110- 1565, P-110-1566 and P-110-1597 in October 2008 and complaint P-110-1692 in November 2008.
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[20] These complaints and their amendments brought HQT to file declinatory pleas in December 2008. The Régie heard the parties on these issues in February 2009 and rendered its decisions on the HQT motions in March 2009.
[21] In its decision D-2009-025, the Régie allowed HQT’s motion regarding complaint P-110-1566 and ceased its examination of that complaint.
[22] The hearing on the complaints began January 19, 2010, and ended February 12, 2010, date on which the Régie took the case under advisement.
5. FACTS
[23] NLH’s First Request was submitted to HQT on January 19, 2006. It contains five specific energy delivery options for precise amounts of power for Québec, Ontario, New England, New Brunswick and New York from the future Lower Churchill stations presented in the table below: 3
3 Exhibit NLH-1, Schedule 1, file P-110-1565.
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Points of receipt and of delivery Option Points of Capacity Points of delivery Power Link Service Term of receipt (including losses) commencement service date 1 7051, 7052, 1,200 MW ON: 711 MW 4.0 TWh HVDC 2015 30 years 7053 lines, NE: 95 MW 0.5 TWh Idem Montagnais QC: 332 MW 1.8 TWh Idem 2 Idem 1,600 MW ON: 948 MW 5.2 TWh HVDC 2015 30 years NE: 95 MW 0.5 TWh Idem QC: 474 MW 2.7 TWh Idem 3 Idem 2,000 MW ON: 948 MW 5.2 TWh HVDC 2015 30 years QC: 474 MW 2.7 TWh Idem NE: 95 MW 0.5 TWh Idem NB: 190 MW 1.0 TWh Idem NY: 190 MW 1.0 TWh Idem 4 Idem 2,500 MW ON: 1,422 7.9 TWh HVDC 2015 30 years MW QC: 474 MW 2.7 TWh 2018 Idem NE: 95 MW 0.5 TWh 2015 Idem NB: 284 MW 1.6 TWh Idem NY: 95 MW 0.5 TWh Idem 5 Idem 2,824 MW ON: 895 MW 4.9 TWh HVDC 2015 30 years QC: 1,001 5.5 TWh 2015 Idem MW QC: 781 MW 4.4 TWh 2018 Idem ON: Ontario NE: New England QC: Québec NB: New Brunswick NY: New York HVDC: High Voltage Direct Current
[24] On February 20, 2006, HQT confirmed with NLH that it would have to conduct an impact study in order to follow through on the First Request.
[25] On February 27, 2006, HQT informed NLH that, for the purposes of the impact study, it would be using the previous studies pertaining to the power and energy that will be generated by the future Lower Churchill stations. HQT also stated that the request for transmission towards Ontario would require that a new direct current (DC) interconnection be studied in addition to the DC interconnection already being studied, emphasizing that the study would be major and involve the Ontario authorities. HQT also mentioned that the equipment for the HQT-NB, HQT-NE and HQT-MASS
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interconnections had been commissioned a number of years ago. The impact study would determine their remaining useful life and whether new equipment was necessary.
[26] The parties signed an impact study agreement on March 7, 2006. It provided that, for each of the five options, an impact study report would be produced and the final report would consist of the five separate reports that were to be delivered to NLH. The various reports making up the impact study were sent to NLH from December 4, 2006 to December 11, 2007.
[27] Between the months of February and December 2006, HQT formulated several requests for clarification, specifically on the fifth option of the First Request and the deliveries destined for Ontario.
[28] On June 2, 2006, HQT informed NLH that the requested transmission service for a maximum of 1,422 MW to Ontario could be provided on a number of existing or future paths:
• HQT would examine, with the entity to be designated by NLH, all direct paths between Québec and Ontario; • Two other paths, HQT-CRT and MATI-MAHO respectively involving the neighbouring systems of CRT ( Cedars Rapids Transmission Co. ) and Brookfield Power , could also be considered.
[29] On July 28, 2006, NLH sent the Independent Electricity System Operator (IESO) of Ontario a power transmission impact study request for power coming from the Lower Churchill stations on the transmission facilities along the Québec-Ontario border.
[30] On December 4, 2006, HQT gave NLH its concept impact study report for option 5. That report presents the solution that HQT retained based on certain hypotheses, though it lacked specific information in order to be finalized. These hypotheses contemplate, among other things, the delivery of 895 MW in Ontario; due to the absence of specific data on the location of the interconnection from NLH or IESO, an equivalent load was simulated at the Chénier substation.
[31] On February 13, 2007, HQT handed NLH a supplementary impact study report on option 1 respecting the two additional scenarios required in that option for connecting to the Gull Island station. Moreover, HQT informed NLH that the impact study would be considered final when the fifth and final report was submitted, and that the reports handed
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in previously would not be updated on the date that the last report completing the impact study was submitted.
[32] On March 22, 2007, Hydro-One filed the Québec-Ontario interconnection concept phase study. It concluded that the integration, in Ontario, of an additional 700 MW to 1,500 MW from the HQT system at each of the Hawthorne TS, St-Lawrence TS or Chat-Falls TS interconnection points required the construction of a new interconnection and reinforcement of the Ontario transmission system.
[33] On May 14, 2007, NLH wrote to HQT to question the ATC on the CF Lines, arguing that it was under-evaluated at 450 MW.
[34] On June 21, 2007, HQT responded to NLH’s letter dated May 14, 2007 and stipulated that the ATC had been calculated based on real point transmission measurements from the CF Station over the years, not based on the data set forth in the Power Contract between CF(L)Co and Hydro-Québec.
[35] On July 26, 2007, HQT gave NLH the concept phase study for option 3 of the First Request, with underlying hypotheses.
[36] On September 26, 2007, HQT gave NLH the concept phase study for option 4 of the First Request, with underlying hypotheses.
[37] On October 12, 2007, NLH filed a complaint with HQT alleging the ATC had been under-evaluated for the LAB-HQT interconnection, and that the information on the ATC had not been posted on OASIS.
[38] On December 11, 2007, 4 HQT responded to NLH’s complaint by indicating that the CF Lines are used to ensure deliveries from the CF Station to supply Québec’s native load as a designated resource, in accordance with Part IV of the OATT, and that no posting on OASIS is required in the case of a designated resource.
[39] On December 11, 2007, HQT also sent NLH the report for option 2 of the First Request and the supplementary report on the interconnections with New York, New England and New Brunswick. HQT claims that the production of those two reports completed the impact study for the First Request.
4 Exhibit NLH-12, file P-110-1565.
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[40] In its second letter dated December 11, 2007, 5 HQT specified that, for the facilities study, NLH would have to provide, as a prerequisite for signing a facilities study agreement, certain information on the choice of the option retained for the interconnection with Ontario and other data respecting deliveries to Québec. HQT also specified that information on the Québec-Ontario interconnection and on clients of the deliveries to Québec was required under Section 17.2 of the OATT and added that, were NHL to fail to provide that information within 45 days of the second letter, the First Request would be deemed terminated and withdrawn.
[41] On January 11, 2008, NLH filed a complaint before the Régie respecting the dispute between the parties resulting from, among other things, HQT’s December 11, 2007 decision.
[42] In a letter dated January 24, 2008, NLH presented a complaint against HQT in respect of the imposed 45-day deadline prescribed in Section 19.3 of the OATT. It also indicated that it would be willing to enter into talks to sign a transmission service agreement to export a certain quantity of power to New Brunswick, New England and New York, and that it was willing to enter into a 20- to 30-year agreement if HQT was able to confirm the work required to increase the useful life of the equipment.
[43] In that letter, NLH also maintained that the impact study submitted to it on December 11, 2007 was not complete. NLH considered that, inter alia , HQT had to complete the impact study in order to describe all of the possible scenarios for the Québec-Ontario interconnection . As regards deliveries to Québec, NLH informed HQT that the point of delivery to consider was the HQT point. The receiving parties would be the clients of wholesale markets that participate in that market in Québec. For the purposes of the impact study, NLH asked HQT to consider that deliveries downstream from the HQT point would be assured by a non-firm point-to-point transmission service . It also repeated that it intended to sign a facilities study agreement as soon as possible.
[44] On March 20, 2008, HQT responded to NLH’s letter dated January 24, 2008 by communicating its decision on the latter’s complaint respecting the 45-day period beyond which the First Request would be deemed withdrawn.
[45] The letter explained HQT’s position as follows: the impact study of the First Request was complete, the transmission service could not be provided in whole or in part, the impact study did not need to cover anything other than DC interconnections where the
5 Exhibit NLH-11, file P-110-1597.
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Québec-Ontario interconnection was concerned (seeing as NLH’s initial request referred only to the DC links), the HQT point could not be used by NLH for deliveries to Québec and a facilities study agreement could not be reached without the information requested on December 11, 2007.
[46] HQT’s March 20, 2008 decision was followed by the filing of complaint P-110-1597 respecting the export request dated January 24, 2008.
[47] On October 31, 2008, NLH filed complaint P-110-1678 regarding the dispute set out in its letter to HQT dated August 4, 2008.
[48] Complaints P-110-1565 and P-110-1597 were amended on October 31, 2008. Complaint P-110-1565 was re-amended April 29, 2009.
6. MATTER NO. P-110-1565
6.1 NLH’S POSITION
[49] In this first complaint, NLH submits that HQT improperly determined the ATC on the CF Lines in connection with the impact study it conducted further to Request 1.
[50] NLH was allegedly given first priority over the CF Lines, as the CF Generating Station and the Power Contract are not a properly designated resource of the Distributor.
[51] NLH argues subsidiarily that, even if the CF Generating Station and the Power Contract were considered a designated resource of the Distributor, the ATC on the CF Lines is underestimated.
[52] NLH adds the importance of the determination of the ATC on the CF Lines due to the impact of this data on the level of investment required to act on Request 1.
6.1.1 NLH’ S FIRST ARGUMENT : THE CF GENERATING STATION AND THE POWER CONTRACT ARE NOT DESIGNATED RESOURCES OF THE DISTRIBUTOR AND HYDRO -QUÉBEC DOES NOT HAVE PRIORITY FOR TRANSMISSION SERVICE ON THE CF LINES
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[53] NLH submits that the LAB-HQT path existed on January 19, 2006, the date of Request 1, and that Hydro-Québec’s power production activities (HQP) or HQD had not made any reservation on this path or signed a service agreement with HQT for its use. NLH infers from the above that the ATC on the LAB-HQT path at the time was equal to the total capacity of the CF Lines, namely 5,200 MW.
[54] According to NLH, a reservation or a service agreement was required, as the CF Generating Station is not a designated resource in accordance with sections 1.51 and 38.1 of the OATT.
[55] In support of this argument, NLH submits that, based on the history of the use of the HQT transmission system since the opening of wholesale electricity markets in March 1997, the Québec government approved Hydro-Québec bylaw number 659 6 adopted par Hydro-Québec. The purpose of this by-law was to set out conditions and tariffs for transmission service for access to Hydro-Québec’s network in the context of Hydro- Québec’s application before the Federal Energy Regulatory Commission (FERC) for status as a trader on the wholesale electricity market in the USA. Hydro-Québec’s application to the FERC was accompanied by Bylaw 659 based on the Open Access Transmission Tariff (OATT) adopted by FERC in the U.S.
[56] Between 1997 and 2001, NLH submits that service agreements were entered into between the parties then designated as follows: TransÉnergie, a division of Hydro- Québec, and Hydro-Québec groupe services énergétiques.
[57] Exhibit NLH-13 7 shows that Hydro-Québec groupe services énergétiques designated the system load and resources, indicating in its correspondence with TransÉnergie that such information was “ already in your possession ”.
[58] NLH concludes from this historical situation that the LAB-HQT path should have been posted on OASIS as of 1997.
[59] In 2000, the Act respecting the Régie de l’énergie 8 ( Régie de l’énergie Act ) was amended, along with the Act respecting Hydro-Québec 9 ( Hydro-Québec Act ) to give Hydro-Québec the responsibility of supplying heritage pool electricity on the conditions set out in Décret 1277-2001 concernant les caractéristiques de l’approvisionnement des
6 Order-in-Council No. 276-97, 1997 O.G. II, page 1248. 7 Exhibit HQT-4, document 3.4, transmission agreements prior to 2000, Matter No. R-3401-98. 8 R.S.Q., c. R-6.01. 9 R.S.Q., c. H-5.
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marchés québécois en électricité patrimoniale [order-in-council respecting the characteristics of the supply to Québec markets of heritage pool electricity10 dated October 24, 2001 (the Décret patrimonial ). In the context of the functional separation of the activities of Hydro-Québec, HQP was in fact responsible for the supply of heritage pool electricity.
[60] In 2002, in the context of HQT’s first rate hearing, the Régie asked HQT (Decision D-2002-95 11 ) to change the wording of By-law 659 to include a new Part IV on respecting the conditions for the supply of native load.
[61] NLH refers to certain passages of that decision which it claims shows that generating stations were not explicitly designated to serve the native load.
[62] NLH devotes several paragraphs of its written arguments to analyzing the concepts of distributor resources and designated resources of the distributor in view of the facts, the wording of the provisions of the OATT and the Régie’s decisions.
[63] NLH bases its argument on the wording of the OATT adopted by Decision D- 2007-34 on March 30, 2007, the text in force when Complaint P-110-1565 was filed, including the following sections:
“1.51 Distributor Resource: Any resource designated by the Distributor as defined herein and applicable to Native-Load Transmission Service, including heritage pool electricity under the Act respecting the Régie de l’énergie (R.S.Q., c. R-6.01) and any other resource of the Distributor. A Distributor Resource may be a contract, a generating station, a sales program, commitment or obligation, including those originating from an interconnection, or any other energy resource that can be used to meet Native Load requirements. A resource can be supplied by several generating facilities. Distributor Resources do not include any resource, or any portion thereof, that is committed for Third-Party Sale or otherwise cannot be called upon to meet the Distributor's Native Load requirements on a non-interruptible basis.” [emphasis added by NLH]
“38 Distributor Resources
38.1 Designation of Distributor Resources: Distributor Resources shall include all generation purchased by the Distributor and designated to supply
10 (2001) 133 O.G. II, 7705. 11 Matter No. R-3401-98.
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Native Load under the provisions herein. Distributor Resources cannot include resources, or any portion thereof, that are committed for sale to third-party load other than the Native Load or otherwise cannot be called upon to supply the Distributor's Native Load on a noninterruptible basis. Generating stations able to supply the Distributor’s Native Load in date of January 1, 2001 shall be included in Distributor Resources until such time as written notice to the contrary is given by the Distributor to the Transmission Provider .” [emphasis added by NLH]
[64] According to NLH, section 1.51 of the OATT distinguishes distributor resources and designated resources of the distributor .
[65] For NLH, a distributor resource becomes a designated resource of the distributor through the designation process. Distributor resources thus provide the pool in which all the resources which can be designated are found. Inversely, all the designated resources of the Distributor are necessarily distributor resources.
[66] NLH interprets section 38.1 in fine of the OATT as not referring to designation but only to the notion of distributor resource:
“[…] Generating stations able to supply the Distributor’s Native Load in date of January 1, 2001 shall be included in Distributor Resources until such time as written notice to the contrary is given by the Distributor to the Transmission Provider .” [emphasis added by NLH]
[67] For NLH, a distributor resource is not automatically a designated resource . The designation stems from a positive act which cannot be assumed. Accordingly, NLH does not accept HQT’s claim that HQD’s sending of the Resource Plan to HQT constitutes a designation of resources.
[68] NLH also submits that 38.1 in fine of the OATT should be read in conjunction with section 36.2:
“36.2 Transmission Provider Responsibilities: The Transmission Provider shall plan, construct, operate and maintain its Transmission System, and control power flows in its Control Area in accordance with Good Utility Practice in order to provide Transmission Service for the delivery of capacity and energy from Distributor Resources to supply the loads of Native-Load Customers over the Transmission Provider’s system.
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The Distributor shall designate available resources, under the Transmission Provider’s control, to supply its Native Load.”
[69] NLH concludes from this analysis that the Distributor must designate the resources which are available under HQT’s control to supply its native load. Thus, units which could supply the native load in 2001 had to be under HQT’s control.
[70] NLH also bases its arguments on the fact that, during the hearing of HQT’s Request 1 and Decision D-2002-286 12 in which the Régie approved the wording of the OATT, it was allegedly said and accepted by the Régie that generating stations were not designated. NLH bases its arguments on the following passage from that decision:
[Translation] “ The transmission provider included a definition of distributor resources at the request of the Régie expressed at the hearing, as the Régie finds it necessary to define this concept which is often referred to in Part IV.
The Régie accepts the definition found in section 1.51 for the purpose of this matter. It was not asked to decide on the actual short-term consequences.
With respect to a possible conflict between section 1.51 and sections 37.1 and 38.1, the Régie believes that this point could be raised, if necessary, during a later tariff case.
The Régie understands from the testimony of the transmission provider that the production purchased by the distributor under the order-in-council respecting the heritage electricity pool is a designated resource, as opposed to the generating stations which may supply such electricity.
The Régie acknowledges that, to operate its system in real time, a transmission provider must be aware of the generating stations and the import contracts which meet the demand of the distributor and the needs of its other customers, including export contracts, but that does not necessarily imply that such generating stations must be designated as distributor resources.
A list of generating stations is provided to the transmission provider so it will understand where the electricity requested by the distributor comes from. The Régie considers that, out of a concern for transparency found in its Decision D-2002-95, a transmission provider must make available, at a
12 Matter No. R-3401-98, pages 15 and 16.
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customer’s request, information in its possession regarding the resources designated by the distributor.
For the purpose of this matter, the Régie accepts section 1.51, as proposed by the transmission provider in its revised text dated November 20, 2002.
The Régie accepts section 38.1, as submitted in the revised text of the “OATT”. It asks the transmission provider to make available, at the request of a customer, information regarding the designated resources it has in its possession .” [emphasis added by NLH]
[71] NLH infers from this passage from Decision D-2002-286 that the Régie clearly decided what a distributor resource and a designated resource of the Distributor is. The Régie thus allegedly indicated that the production purchased by HQD from HQP under the Décret patrimonial is a designated resource, contrary to the generating stations which may provide that electricity.
[72] The Régie allegedly also acknowledged that, to operate its system in real time, HQT must know the generating stations and the import contracts which meet HQD’s demand and the needs of its other customers. The identification of the generating stations and contracts does not necessarily imply, according to NLH, that such generating stations must be designated as distributor resources.
[73] NLH summarizes as follows its interpretation of sections 1.51, 37.1 and 38.1 of the OATT:
[Translation] “ The designation rules are therefore the following:
1. Only distributor resources can be designated, i.e. generating stations forming the subject of the presumption under section 38.1 or resources belonging to or having a direct legal relationship with the Distributor. It cannot be a contract, a generating station, a commercial program, an undertaking or commitment to sell, including those from an interconnection, or any other power resource which may be used to fill native load needs.
2. A resource or part of a distributor resource cannot be designated when it is also used to supply electricity to third parties.
3. Resources or part of a resource under the control of the Transmission Provider cannot be designated under section 36.2 of the Rules.
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Accordingly, the Distributor can only designate resources which are under the control of the Transmission Provider .”
[74] According to NLH, neither the CF Generating Station nor the Power Contract are distributor resources and, accordingly, they cannot be designated.
[75] The CF Generating Station is allegedly not a distributor resource within the meaning of the OATT because it does not belong to HQD and part of the production from that generating station is used by customers other than HQD.
[76] According to NLH, if HQD in fact designated the CF Generating Station, it would follow that Hydro-Québec Marketing (HQM) or HQP could use that resource to export electricity to other markets, as stipulated in section 1.51 of the OATT.
[77] NLH also submits constitutional law arguments to the effect that an interpretation or application of the OATT which would allow HQD to designate the CF Generating Station as one of its resources would be tantamount to illegally giving extraterritorial effect to the OATT, as that generating station is not located in Québec.
[78] NLH cites several authors in support of its position that the Régie de l’énergie Act , the Hydro-Québec Act and the bylaws or tariffs and conditions stemming therefrom do not have extraterritorial effect, that the designation cannot target a structure which is not located in the Province of Québec and that the OATT cannot be interpreted and applied in an unconstitutional and extraterritorial manner.
[79] According to NLH, the patrimonial contract is designated. In this regard, it bases itself on section 38.1 of the OATT:
“38 Resources of the Distributor 38.1 Designation of Distributor resources: Distributor Resources shall include all generation purchased by the Distributor and designated to supply Native Load under the provisions herein. […]” [emphasis added by NLH]
[80] In this regard, NLH again refers the Régie to testimony rendered in 2002 at the public hearing which led to the adoption of the wording of the OATT and Decision D- 2002-286 according to which the Régie allegedly recognized that the heritage pool electricity was a designated resource, contrary to the generating stations which may provide such electricity.
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[81] NLH concludes that only heritage pool electricity is designated and that the identification of the generating stations which allow the demand of the Distributor to be met does not constitute a designation within the meaning of the OATT.
[82] It claims that the fact that it [Translation] “ cannot sell a designated resource to third parties ” explains why no generating station supplying heritage pool electricity is designated by name.
[83] Lastly, on this issue, NLH submits that HQD does not have a generating station and only has supply contracts, including the patrimonial contract, and that only those contracts may be considered designated resources.
6.1.2 NLH’ S SECOND ARGUMENT : EVEN IF HYDRO -QUÉBEC HAD PRIORITY FOR TRANSMISSION SERVICE ON THE CF LINES , IT LOST THAT PRIORITY , AS HQP DID NOT RESERVE THE CAPACITY AS OF THE FUNCTIONAL SEPARATION OF HYDRO -QUÉBEC
[84] NLH discusses the issue of the reservation of transmission on the CF Lines because it considers that, since 2000, there is more than one user on those lines, including NLH since Request 1, HQP and HQD, it is not an internal connection, as HQT claims, but a path to be posted on OASIS and the reservation priority rule applies.
[85] To establish that there is more than one user of the CF Lines, NLH refers to the functional separation between HQP and HQD which was implemented in 2000 and infers from it that HQD and HQP should be considered users of the CF Lines, which would make it a path to be posted on OASIS. In addition, according to NLH, the functional separation means that HQP is the purchaser under the Power Contract.
[86] NLH is therefore contesting HQT’s claim that the CF Lines were an internal connection until April 1, 2009, the date the LAB-HQT path was opened.
[87] On a path, the priority rule (first come, first served) under section 13.2 of Part II of the OATT applies and the path must be the subject of a posting on OASIS.
[88] NLH submits that the CF Generating Station is not in HQT’s control area and, although Labrador is not a control area recognized by the North American Electric Reliability Corporation (NERC), this territory is not de facto attached to Québec’s control area.
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[89] NLH adds that, if this path really had an internal connection, it would only apply for the period during which the power being transmitted over the said line was on a path to serve a single customer. Thus, under the OATT and section 37.6 of the Code of Federal Regulations , the qualification of “internal connection” is dropped when more than one customer asks to use the lines.
[90] NLH concludes that the LAB-HQT link is not an internal connection and that, according to the applicable rules, that path should have been posted on OASIS as being accessible to HQT’s customers since at least 2004.
[91] NLH then draws a link between access priority to transmission on the CF Lines, or on what NLH considers a path, and the counterparty to the Power Contract.
[92] According to NLH, since the functional separation, it has become relevant to ask who the current counterparty is to the Power Contract with CF(L)Co.: Hydro-Québec, HQP or HQD.
[93] NLH bases itself on Régie Decision D-2007-121 13 in support of its claim that, since the functional separation of Hydro-Québec, a division of Hydro-Québec should be seen as the counterparty to the Power Contract.
[94] Thus, according to NLH, the Régie must determine which of HQP or HQD is the counterparty of CF(L)Co since the functional separation, in order to be able to then assess the rights of NLH, HQP and HQD over the CF Lines.
[95] According to NLH, the only way for HQD to argue its transmission priority over these lines would be to rely on the fact that the Power Contract includes provisions relating to both the transmission supply and service.
[96] NLH submits that, since the functional separation of Hydro-Québec in 2001, Hydro-Québec is no longer a load serving entity and it can no longer take advantage of the Network Integration Transmission Service under Part III of the OATT, as only municipal systems and the Coopérative-de-Saint-Jean-Baptiste-de-Rouville may use this service.
13 Matter No. P-110-1490.
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[97] According to NLH, the amendment of the Régie de l’énergie Act in June 2000 and the adoption by the Régie in 2002 of Part IV of the OATT applicable specifically to the native load did not release the components of Hydro-Québec (HQP or HQD) from the obligation to take positive action, like all participants in the wholesale electricity market, with respect to the reservations of electricity transmission capacity.
[98] Thus, HQP should have reserved in point to point import mode as of 2001 to import the production purchased from CF(L)Co and the evidence allegedly shows that it did not do so.
[99] As HQP did not purchase this type of transmission service from HQT, NLH’s Request 1 would have priority over that of HQD dated March 31, 2009, under the first come first served rule set out in section 13.2 of the OATT:
“13.2 Reservation Priority : Long-Term Firm Point-to-Point Transmission Service shall be available on a first-come, first-served basis, i.e., in the chronological sequence in which each Transmission Customer has reserved service . […]”
[100] NLH refers the Régie to Exhibit NLH-20 ( Screen shot of TTC (Total Transfer Capability ), NATC (Non-Recallable Available Transfer Capability ) and RATC (Recallable Available Transfer Capability ) posted for LAB-HQT path on March 31, 2009 ) to show and express surprise at a quick registration to reflect the holding of the firm transfer capability by HQD and indicate that there was no firm capability available on the LAB-HQT path.
[101] Lastly, according to NLH, whether HQP or HQD is the counterparty with CF(L)Co to the Power Contract, NLH has a priority of 2,824 MW over these lines.
6.1.3 NLH’ S THIRD ARGUMENT : SUBSIDIARILY , EVEN IF THE RÉGIE WERE TO DECIDE THAT HQP OR HQD HAS PRIORITY FOR TRANSMISSION SERVICE ON THE CF LINES , THE ATC WAS NOT CORRECTLY DETERMINED , AS IT SHOULD BE BASED ON THE FIRM CONTRACT COMMITMENTS BETWEEN HYDRO - QUÉBEC AND CF(L)C O
[102] According to NLH, the ATC on the CF Lines should have been determined based on the firm contract commitments in the Power Contract.
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[103] It bases itself on, among other things, the testimony of expert witness Robert Sinclair who, although he accepts the idea that the transmission rights for resources supplying the native load may be based on the historical use of the system, states that they should be commensurate with the firmness of the transmission flows.
[104] NLH and its expert witness Sinclair thus draw a distinction between historical firm usage and historical non-firm usage . NLH therefore submits that firm historical flows should be considered and, to do so, the contracts on which such flows are based must be referred to.
[105] The Power Contract provides the maximum quantities to which Hydro-Québec is entitled in winter and summer, i.e. a maximum of 4,382.6 MW per hours during the months of October, November, December, January, February, March, April and May each year, and a maximum of 4,163.5 MW per hour during the months of June, July, August and September each year.
[106] The same contract provides for the possibility of additional sales over and above these levels of capacity in megawatts indicated in the foregoing paragraph, but such additional sales are made if and only if CF(L)Co decides that it has the available flexibility to do so. According to NLH, this explains that additional sales were made beyond the capacity referred to in the contract. Such additional sales cannot, however, be assimilated to sales of firm capacity under any circumstances.
[107] NLH also refers to the “ Churchill Falls Guaranteed Winter Availability Contract ” (GWAC Contract) entered into in 1998 between Hydro-Québec and CF(L)Co.
[108] According to NLH, this contract allows Hydro-Québec to purchase additional capacity or energy provided it is available. The GWAC Contract does not create a conditional or suspensive obligation for CF(L)Co and the quantities of energy provided for in that contract cannot be considered energy or firm capacity made available to Hydro- Québec.
[109] As the GWAC Contract does not provide for firm deliveries, NLH concludes that HQT can only take account of a maximum of 4,083 MW in winter and 3,863 MW in summer to determine the ATC on the CF Lines or the LAB-HQT path, as NLH designates it. It follows, considering the total capacity of these lines, that the ATC on these lines is 1,120 MW in winter 1,339 MW in summer, if the ATC is determined in accordance with the terms of Attachment C of the OATT.
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6.2 HQT’S POSITION
6.2.1 INTRODUCTORY STATEMENT
[110] In an introductory statement if, HQT deals firstly with the role of the Régie respecting complaints and draws its attention to certain contextual elements relevant to the analysis of NLH’s complaints.
Role of the Régie respecting complaints
[111] Referring to sections 98 and 101 of the Régie de l’énergie Act , HQT notes that, in connection with its examination of a complaint, the Régie checks whether the application of the OATT was followed by HQT and, in the case of default, orders the measures it determines with respect to the application of the OATT within the time it determines.
“98. When examining a complaint, the Régie shall ascertain whether the rates and conditions for the transmission or distribution of electric power or the rates and conditions for the supply, transmission, delivery or storage of natural gas have been complied with by the electric power carrier or the distributor.
101. If the Régie determines that a complaint is valid, it shall order the electric power carrier or the distributor to implement, within the time fixed by the Régie, measures determined by the Régie concerning the application of the rates or conditions; the Régie may also determine the date on which such measures are to be implemented.” [emphasis added by HQT]
[112] As part of the examination of NLH’S complaints, HQT submits that the Régie must place itself at the relevant time when HQT made decisions respecting the handling of Request 1 and see whether HQT correctly applied the OATT. According to HQT, the Régie is not bound by the conclusions of the complaints, as it may determine the measures regarding the application of the OATT, as provided for in section 101 of the Régie de l’énergie Act .
[113] NLH has the burden of proving the existence of a breach of the OATT by identifying the provisions of the OATT which were not properly applied in processing
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Request 1 and making proof of the facts in support of such breach. In this regard, HQT refers the Régie to, among other things, its Decision D-2008-136 14 .
[114] HQT submits that the Régie, in evaluating the evidence, must take into account the credibility and evidentiary value of the witnesses heard, and in particular the testimony of expert witness Sinclair. According to HQT, the expertise of this witness and the evidentiary value of his testimony on certain topics was weak, and in particular with respect to the following issues: the point that HQT is a trading hub , an ideal location , the CF Generating Station as a compelling candidate for redispatch , legal opinions that a generating station, a source of heritage pool electricity, cannot be a designated resource of the Distributor or as to the contractual rights of HQP and CF(L)Co.
[115] HQT notes that, in connection with the examination of these complaints, the Régie is not asked to decide on the contractual rights between Hydro-Québec and CF(L)Co, as those parties are not before it. Based on Decision D-2009-061 15 , HQT recalls that the examination of a complaint is not an investigation into the actions of HQT and that the allegations and proof which relate to a decision by HQT or a situation which is not the subject of a complaint are irrelevant and inadmissible as evidence, to the extent that they do not allow the Régie to determine whether or not such decisions breached the OATT when they were made.
[116] HQT notes that NLH progressively passed from complaints dealing with certain specific infringements of the OATT in the processing of Request 1 to a trial of HQT’s general conduct, in the absence of grievances and specific conclusions.
[117] Also in terms of the Régie’s role involving complaints, HQT recalls the consistent jurisprudence of the Régie that one cannot add to the OATT as part of a complaint 16 . Thus, NLH cannot, under the pretext of a complaint regarding the application of the OATT, seek a change or interpretation of the OATT which, due to its nature or effects, constitutes a change thereof.
[118] Lastly, HQT, basing itself on Decisions D-2008-059 17 , D-2009-025 18 and D-98-18 19 of the Régie, submits that NLH cannot, in connection with a complaint, seek a purely theoretical or exclusively declaratory remedy or measure. More specifically, HQT
14 Matters No. P-110-1565, 1566 and 1597. 15 Matter No. P-110-1565. 16 Decision D-2009-026, Matter No. P-110-1597, page 10. 17 Matter No. P-110-1544. 18 Matter No. P-110-1566. 19 Matter No. R-3396-98.
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concludes that the Régie should not intervene with respect to the issues raised by NLH which are purely theoretical or which exclusively seek a declaration by the Régie with respect to the interpretation of the OATT.
Contextual elements relevant to the analysis of the complaints
[119] Basing itself on the testimony of NLH’s representative, witness Gilbert Bennett, HQT argues that the question arises whether the filing of complaints and the wording of certain grievances or remedies stem from the dissatisfaction of NLH in not being able to use the impact study tariff process for purely exploratory purposes to conduct its own cost/benefit analyses and define its plans for the hydro-electric development of the Lower Churchill Falls.
[120] The following extracts from the Mr. Bennett’s testimony indicate that the dissatisfaction of NLH has no relationship to the actual infringements of the OATT but rather, are evidence of a poor reading of the purpose or scope of the impact study and unfounded expectations held by NLH:
“A. […] Five different options varying in total capacity from 1100 up to 2824 megawatts were put forward in the service application as a means to organize a study of the range of different capacities. The intent was to understand the incremental impacts that the range of different service requests would have on the system, and the incremental cost associated with the different upgrades that might be required to accommodate the different capacity requirements. So that a cost benefit analysis could be performed by NLH.
[…]
On March 7, 2006, a system impact study agreement was executed. A schedule for completion of the study of the different options was included. The results of the studies were received during a period commencing in late 2006 and ending in late 2007. Contrary to our expectations, these studies did not provide us with the information that we require to move forward with our transmission service request, and we do not believe that the studies are complete. The results of the system study did not reveal any significant variation in the extent of upgrades required to accommodate the range of transmission service capacity studied. Regardless of whether 1100 or 2824 megawatts of service is required, the upgrades to the HQT system were the same. […]
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A. […] What's important for us in this part of the study is understanding whether there were any break points, or in other words, how much capacity might be made available for a given amount of upgrade. That's why this study is organized in varying capacity levels, so that we can see the magnitude of the investment that's associated with each of the capacities.
[…]
Q. So you mentioned bottlenecks; you talked earlier on of breaking point, so I understand you want to understand the inflection point of where – what would cost – what all of those upgrade costs, depending on those information.
A. Right. There’s two fundamental questions: one, how much capacity might be available to meet our service request. Secondly, once you undertake an upgrade, how much capacity would be made available for use.
We are trying to optimize the amount of capacity that we would receive for the investment in upgrades that might be required 20 .”
[121] According to HQT, this testimony indicates that:
[Translation] “ NLH considered the preparation of the impact studies not as a process allowing the Transmission Provider to define “the least-cost transmission expansion plan,” as defined by Attachment D of the OATT, but as a step for exploring options and multiple combinations allowing it to collect information of financial use to commercially define its plans to for the Lower Churchill Falls hydroelectric development project .”
[122] NLH therefore allegedly used its own forecasts for HQT’s obligations and confused its dissatisfactions with contraventions of the OATT.
[123] In addition, according to HQT, the evidence shows that NLH’s step, in terms of Request 1 and the complaints, was exploratory and designed to obtain advice or instructions from the Régie or to make a deal, regardless of the applicable rules.
[124] HQT submits that these contextual elements are relevant to the assessment of the evidence and NLH’s arguments.
20 Stenographic notes (SN) from January 19, 2010, Volume 1, pages 104, 105, 129 and 134.
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6.2.2 SPECIFIC STATEMENT REGARDING COMPLAINT P-110-1565
[125] HQT identifies five grievances which are made against it in this complaint:
First grievance : HQT acted in breach of sections 13.2 and 36.3 of the OATT, given its failure to acknowledge, further to the filing of Request 1, NLH’s transmission right (Part II of the OATT) on the CF Lines in priority to HQD’s transmission right pursuant to Part IV of the OATT for the purpose of supplying the native load;
Second grievance : HQT acted in breach of section 4 of the OATT, considering its failure (i) to post the ATC on the CF Lines on OASIS before April 1, 2009, (ii) to post the LAB-HQT path on OASIS before April 1, 2009 and (iii) to post on OASIS specific information understandable for all users regarding the LAB-HQT path and references to NLH’s complaints with respect to the existing rights on the LAB- HQT path;
Third grievance : HQT acted in breach of sections 15.2 and 17.5 of the OATT and of the Attachment C, considering (i) its failure to determine the ATC on the CF Lines prior to April 1, 2009, (ii) the use of an inadequate methodology to calculate the ATC on the CF Lines up to April 1, 2009, resulting in an underestimation of the ATC and (iii) the use of an inadequate methodology to calculate the ATC available on the LAB-HQT path as of its opening on April 1, 2009;
Fourth grievance : HQT acted in breach of sections 4 and 17 of the OATT, considering the unjustified delay in posting Request 1, declared complete on January 20, 2006, namely a 12-day delay;
Fifth grievance : HQT acted in breach of sections 17 and 19 of the OATT, considering the commission of errors in the preparation of the impact study in Request 1.
[126] HQT notes that the fourth grievance seems to have been abandoned. With respect to the fifth grievance, it discusses it in connection with complaint P-110-1597.
[127] Dealing with the first grievance (the failure of recognizing NLH’s transmission right in priority to HQD’s right on the CF Lines), HQT sets forth the relevant facts in
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paragraphs 4 to 37 of its Statement of Position and Argument (written arguments). At the hearing, HQT drew the Régie’s attention to the following facts in particular 21 :
• NLH’s letter dated May 14, 2007 22 in which it reports on an under-valuating of the ATC by 450 MW; • HQT’s letter dated December 11, 2007 23 , namely HQT’s decision from which the complaint stems regarding the fact that the CF Generating Station is a designated generating station, that HQT is governed by Part IV of the OATT for the purpose of the supply of native load and, accordingly, no ATC was determined or posted; • The filing of the complaint before the Régie on January 11, 2008 and the changes made to that complaint nine months later on October 31, 2008; • On October 31, 2008, NLH filed the report of its expert witness Sinclair, filed a third request for transmission service and made major amendments to its complaint; • On October 31, 2008, NLH contested the status of the CF Generating Station as designated resource and took the position that its transmission rights under Part II of the OATT dated January 19, 2006 are prior transmission in priority to any transmission right which HQD could invoke under Part IV of the OATT. NLH is not limiting its opposition, as it originally did, to the issue of the under- valuation by 450 MW of the ATC on the CF Lines.
[128] HQT notes that the amendment made to the complaint dated October 31, 2008 completely changes that said complaint and that the heart of the matter is now whether the CF Generating Station is a designated resource of HQD.
[129] At paragraphs 38 to 57 of its written arguments, HQT discusses this question generally to rebut the claim by NLH and its expert witness Sinclair that the CF Generating Station is not a designated resource of HQD.
[130] According to HQT, there are three ways of designating a resource: Under section 38.1 of the OATT (“Generating stations able to supply the Distributor’s Native Load in date of January 1, 2001 shall be included in Distributor Resources until such time as written notice to the contrary is given by
21 SN, February 10, 2010, Volume 16, pages 82 to 86. 22 Exhibit NLH-9, Matter No. P-110-1565. 23 Exhibit NLH-12, Matter No. P-110-1565.
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• the Distributor to the Transmission Provider”). HQT notes that, although the work designated is not used in this extract from section 38.1 of the OATT, it goes without saying that such generating stations are designated resources of the Distributor, as that provision is under the heading “ Designation of Distributor Resources ”; • By the sending of a notice pursuant to section 38.2 of the OATT for the designation of a new resource; • Through the effect of the Hydro-Québec Act , the Décret patrimonial and of the Régie de l’énergie Act pursuant to which generating stations which are the source of heritage pool electricity are, like heritage pool electricity, designated resources 24 .
[131] According to HQT, the generating stations which are sources of heritage pool electricity correspond, within a few megawatts, to generating stations which supplies the native load as at January 1, 2001. These generating stations were therefore equivalent in 2001: they are the generating stations which supply the native load and the generating stations which are the sources of heritage pool electricity 25 .
[132] For HQT, the CF Generating Station has been designated in particular, since at least 2001, pursuant to section 37.1 of the OATT as a distributor resource for the purpose of the supply of native load and as a distributor resource for the purpose of the supply of heritage pool electricity 26 .
[133] In this regard, HQT bases itself on the testimony of Daniel Mongeon, head of programming and optimization, HQD electricity supply department. He explained that each year he sends HQT a designation letter in which the CF Generating Station is specifically indicated. That designation letter refers to the resource plan 27 . HQD has sent a similar letter to HQT since at least 2001 28 .
[134] This manner of designating HQT’s resources allegedly complies with the terms of section 37.1 of the OATT which indicates what information is required from the Distributor annually, including a description […] of the Distributor resources (present and 10-year projection) , which shall include for each resource: the size of the unit and
24 SN, February 10, 2010, Volume 16, pages 88 and 89. 25 SN, February 10, 2010, Volume 16, page 90. 26 SN, February 10, 2010, Volume 16, pages 94 to 96. 27 Exhibit NLH-38, Matter No. P-110-1565. 28 Exhibit NLH-39, Matter No. P-110-1565.
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capacity from that unit to be designated as Distributor Resource , […] i including generating stations used to deliver heritage pool electricity [...] 29 “.
[135] HQT notes that the testimony of Mr. Mongeon from HQD is corroborated by that of Sylvain Clermont, engineer, head of neighbouring systems at HQT’s marketing department, and that this evidence cannot be ignored 30 .
[136] According to HQT, the wording of section 38.1 in fine of the OATT leas to the following two questions: could the CF Generating Station supply the native load as at January 1, 2001 and does that section effect the designation of such generating stations thorough the effect of the OATT without there being any designating act other than the Régie’s approval of such wording 31 ?
[137] On the question of fact relating to the use of electricity from the CF Generating Station, HQT notes the uncontradicted evidence admitted by NLH 32 that the said generating station is used to supply a significant portion of Québec’s native load.
[138] HQT cites extracts 33 from the testimony of Louis-Omer Rioux, manager of HQT’s Power Movement Control, which can be summarized as follows:
• Electricity from the CF Generating Station is dealt with as a designated resource which is used to supply the native load; • This resource is included in the resource plan daily, 365 days a year; • The CF Generating Station supplies a significant part of the native load, i.e. 5,000 MW out of a total of 36,000 MW; • If the system was deprived of this load in the long term, the system would have to be changed. In the short term, to maintain the reliability of the system without the load from the CF Generating Station, electricity would have to be imported or diverted; • HQT has always had access, except in the case of a power outage, to the full amount of power it has asked for from the CF Generating Station.
29 SN, February 10, 2010, Volume 16, pages 93 and 94. 30 SN, February 10, 2010, Volume 16, page 96. 31 SN, February 10, 2010, Volume 16, page 97. 32 SN, February 10, 2010, Volume 16, page 103. 33 SN, February 10, 2010, Volume 16, pages 98 to 102.
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[139] HQT refutes the argument of NLH that the CF Generating Station cannot be a designated resource of the Distributor because that electricity could be sold to third parties.
[140] HQT submits firstly that there is no evidence that the electricity from the CF Generating Station is being sold to third parties. On the contrary, according to Mr. Rioux’ testimony, the electricity from this generating station has always been used for the native load. In addition, even if the electricity from this generating station were sold to third parties, that would not change its status as a designated generating station of the Distributor. In this regard, HQT refers to a FERC decision which states:
“It was not the Commission's intent to prohibit the network customer from engaging in non-firm sales from idle designated network resources. We find that the non-firm operation of network resources will not affect the availability of such resources on a firm basis because such non-firm uses are subject to interruption 34 .”
[141] According to HQT, section 38.1 in fine of the OATT also raises a question of law: does this section effect the designation of these generating stations through the effect of the OATT without there being any designating act other than the Régie’s approval of this wording?
[142] HQT notes firstly that expert witness Sinclair did not examine the texts before concluding, based on what his attorneys told him, that the CF Generating Station could not be designated.
[143] HQT recalls the evolution of sections 1.51, 37.1 and 38.1 of the OATT since Decision D-2002-95 35 .
[144] The evolution of these texts begins with the Régie’s request that the serving of the native load be the subject of a new Part IV of the OATT. HQT quotes in particular the following extract of that decision:
[Translation] “ To adequately reflect distinctions of this nature, the Régie requests that the transmission provider specify in the “OATT” the conditions relating to the serving of the native load when the resources
34 HQT’s Statement of Position and Argument, Matter No. P-110-1565, page 22, paragraph 97. 35 SN, February 10, 2010, Volume 16, pages 108 to 116; statement of historical and legal facts, paragraphs 57 to 79.
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used form part of the heritage pool electricity and those which apply when resources not forming part of the heritage pool electricity are used . It would also be appropriate to indicate, providing the appropriate references, that the cost of complementary services for the volume of heritage pool electricity of 165 TWh/year is included in the average supply tariff of 2.79 ¢/kWh and that, accordingly, the distributor does not have to pay it 36 .” [emphasis added by HQT]
[145] According to HQT, the Régie made a clear connection between generating stations which are sources of heritage pool electricity and heritage pool electricity 37 .
[146] HQT refers to the changes made to section 1.51 of the OATT in terms of the definition of “distributor resource” on June 25 and October 18, 2002 and to the cross- referencing changes made to section 38.1 of the OATT involving the “Designation of Distributor resources”.
[147] HQT summarizes the evolution of the texts in stating that section 1.51 became a section which lists resources whereas section 38.1 is the section which designates the distributor resources 38 . Thus, section 38.1 deals with generating stations which form part of the distributor resources.
[148] According to HQT, sections 1.51 and 38.1 indicate the intention to ensure two things: that heritage pool electricity is a resource and that generating stations which are the sources of this resource are those which were there when the legislator adopted the principle of heritage pool electricity in 2001 39 .
[149] HQT cites section 37.1 of the OATT as an illustration of this intent. That section says that, although a distributor resource plan must indicate “ the size of the unit and capacity from that unit to be designated as Distributor Resource, including generating stations used to deliver heritage pool electricity [...]”. According to HQT, there is no doubt that generating stations used to deliver heritage pool electricity refer to resources of the unit which are designated 40 .
36 Decision D-2002-95, Matter No. R-3401-98, pages 336 and 337. 37 SN, February 10, 2010, Volume 16, page 109. 38 SN, February 10, 2010, Volume 16, pages 111 and 112. 39 SN, February 10, 2010, Volume 16, pages 111 and 112. 40 SN, February 10, 2010, Volume 16, pages 112 and 113.
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[150] HQT also refutes NLH’s thesis according to which heritage pool electricity could be designated, without the designation of generating stations 41 .
[151] HQT recalls that section 22 of the Hydro-Québec Act requires that Hydro-Québec ensure the security and reliability of the heritage electricity pool. Hydro-Québec cannot deliver to Quebeckers 165 terawatt hours of electricity if it does not have the corresponding transmission rights. For these transmission rights to take priority (Part IV of the OATT), we must know where the electricity is coming from. To find out where the electricity is coming from, the generating stations must be designated 42 .
[152] NLH’s argument that one cannot designate a generating station itself is also allegedly not contradicted by the very working of section 1.51 of the OATT as approved by the Régie, where the words “generating station” specifically appears.
[153] With respect to NLH’s argument that section 38.1 in fine does not include the word “designated” and that the said section only refers to resources “which could be designated”, HQT notes that this provision is found in a section of the OATT entitled “Designation of Distributor Resources”.
[154] HQT further notes that other provisions in the said section 38.1 do not use the word “designated” but clearly refer to distributor designated resources. That applies to the following extract from section 38.1:
“Distributor Resources cannot include resources, or any portion thereof, that are committed for sale to third-party load other than the native load [...] on a non-interruptible basis.”
[155] According to HQT, there is no doubt that this provision covers designated resources and states that a resource cannot be designated if there is a commitment to sell to third party load on a non-interruptible basis 43 .
[156] HQT also refutes NLH’s argument that the Distributor cannot designate a generating station which it does not own. HQT recalls that, other than generating stations in an independent network, HQD does not own any generating station in Hydro-Québec’s production fleet. According to this argument by NLH, the Distributor could not designate any generating station because it does not own one.
41 SN, February 10, 2010, Volume 16, pages 113 to 116. 42 SN, February 10, 2010, Volume 16, pages 114 to 116. 43 SN, February 10, 2010, Volume 16, pages 121 and 122.
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[157] In addition, the wording of section 38.2 of the OATT suggests that the owner of a designated resource could be an entity other than the Distributor 44 .
[158] HQT adds that, although section 30.1 of Part III of the OATT includes the concept of ownership, this concept is excluded from Part IV of the OATT. The Régie implicitly rejected such an argument in Decision D-2002-286 as it die not accept the argument of the Regroupement national des conseils régionaux de l’environnement du Québec that section 38 includes the concept of possession or ownership. The Régie approved the wording of section 38.1 without any reference to the ownership or possession of generating stations.
[159] HQT then deals with the testimony of expert witness Sinclair, according to whom the CF Generating Station cannot be a designated resource of the Distributor. Expert witness Sinclair based himself on the following extract of Decision D-2002-286 which he reproduces in his report:
[Translation] “ The Régie understands from the testimony of the transmission provider that the production purchased by the distributor under the order-in-council respecting the heritage electricity pool is a designated resource, as opposed to the generating stations which may provide such electricity 45 .”
[160] HQT notes that expert witness Sinclair has not read the Décret patrimonial nor all the testimony of Mr. Roberge to which he refers in his report. Expert witness Sinclair did not follow the evolution of the wording of sections 1.51 and 38.1 of the OATT or read the Hydro-Québec Act or the Régie de l’énergie Act before stating in his report that the CF Generating Station could not be a designated resource 46 .
[161] According to HQT, the extract from Decision D-2002-286 cited by expert witness Sinclair cannot be a precedent in support of NLH’s thesis that heritage pool electricity can be designated but not the generating stations which may provide it. Firstly, in Decision D- 2002-286, the Régie only mentioned its understanding of Mr. Roberge’s testimony but did not retain that testimony in its decision, as it accepted the texts submitted by HQT, namely sections 1.51 and 38.1. In addition, the Régie indicated in that decision that, in the
44 SN, February 10, 2010, Volume 16, pages 127 to 129. 45 Decision D-2002-286, Matter No. R-3401-98, page 15. 46 SN, February 10, 2010, Volume 16, pages 133 and 134.
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event of a conflict between section 1.51 and sections 37.1 and 38.1, that point could be raised, if necessary, during a later tariff case 47 .
[162] Thus, according to HQT, what counts in Decision D-2002-286 is not what a witness said or what the Régie understood from that testimony but what was decided with respect to the wording of sections 1.51 and 38.1 48 .
[163] HQT then broaches 49 the constitutional argument put forward by NLH. HQT notes firstly that this argument does not appear in the proceedings and that no notice was given to the Attorney General of Québec, contrary to what is required when a constitutional argument is raised.
[164] HQT also submits that the mere effect of the designation of the CF Generating Station, a generating station located outside Québec, is to give prior right to HQT’s system located in Québec according to Part IV of the OATT. There is therefore no unconstitutional extraterritorial effect from the designation of that generating station as a distributor resource.
[165] HQT discussed another of NLH’s argument based on the wording of section 36.2 of the OATT, which reads as follows:
“The Distributor shall designate available resources, under the Transmission Provider’s control.”
[166] According to NLH, the CF Generating Station is not a generating station which can be designated because it is not under HQT’s control. HQT submits that this argument by NLH is inconsistent with the evidence in the file.
[167] HQT refers in this regard to the testimony of Mr. Rioux from HQT 50 which cover, among other things, the fait that the CF Generating Station is considered a designated resource and dealt with as such on a daily basis, that this generating station forms part of Québec’s control area and is considered “on system” and that HQT has access to electric power from the CF Generating Station to supply its native load at all times, up to the capacity required. In terms of operations, Mr. Rioux explained that the parties had agreed
47 SN, February 10, 2010, Volume 16, pages 134 and 135. 48 SN, February 10, 2010, Volume 16, page 139. 49 SN, February 10, 2010, Volume 16, pages 141 to 143. 50 SN, 5 February 2010, Volume 14, pages 101 and 102 and 117 to 121.
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that the management, programming, safety control and balancing authority are all functions carried out by HQT.
[168] HQT therefore concludes that the CF Generating Station is de facto under HQT’s control for reasons which have been agreed on, accepted and perfectly acted upon forever 51 .
[169] With respect to the issue of transmission priority 52 , HQT refers to section 13.2 of the OATT which clearly indicates that native load customers have number 1 priority.
[170] The issue is therefore which of Hydro-Québec or NLH has prior rights. In support of its claim that its rights had priority over those of Hydro-Québec as of January 19, 2006, NLH must show that Hydro-Québec does not have a prior transmission right over the CF Lines, despite the use it has made of those lines for 40 years for the purpose of supplying the native load 53 .
[171] According to HQT, such an argument does not hold up. When HQD supplies the native load, the power which moves over a path benefits from a prior transmission right pursuant to Part IV of the OATT, without it being necessary to sign a service agreement and pay tariff fees other than those annually determined by the Régie 54 .
[172] HQD therefore has had transmission rights over the CF Lines prior to January 19, 2006 and at current levels over such lines for decades. The opening of the LAB-HQT path did not change that.
[173] HQT refutes as irrelevant 55 NLH’s arguments based on the Power Contract. According to HQT, NLH’s strategy of introducing this contract has nothing to do with the application of Part IV of the OATT. The question before the Régie is whether HQT breached the OATT. To decide on it, the Régie must put itself in the shoes of HQT and, in so doing, conclude that HQT is not aware of the terms of the said contracts between Hydro-Québec and CF(L)Co. However, HQT knows the capacity and energy carried on the CF Lines for the purpose of supplying the native load from a designated generating station.
51 SN, February 10, 2010, Volume 16, page 152. 52 SN, February 10, 2010, Volume 16, page 153 and following. 53 SN, February 10, 2010, Volume 16, page 154. 54 SN, February 10, 2010, Volume 16, page 155. 55 SN, February 10, 2010, Volume 16, pages 161 to 164.
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[174] HQT recalls that the posting on OASIS on March 30, 2009 after the LAB-HQT path was opened in not a reservation but information which it became necessary to post in relation to this new path 56 . HQT reiterates that, under Part IV of the OATT, HQD does not have to make a reservation to benefit from its transmission priority for serving the native load.
[175] The registration as Québec-designated resource (QCRD) on March 30, 2009 therefore informed OASIS users that, beginning on April 1, 2009, 4,885 MW would be carried on this path from a generating station designated to supply the native load 57 .
[176] According to HQT, this registration merely preserved rights which Hydro-Québec has exercised for over 40 years.
[177] HQT notes that the preservation of acquired rights for serving the native load complies with the FERC decisions, as admitted by experts Robert Sinclair and Philip Hanser. Expert witness Hanser refers more specifically to the following passage of FERC Order No. 888:
“The transmission provider may reserve in its calculation of ATC transmission capacity necessary to accommodate native load growth reasonably forecasted in its planning horizon […] 58 .”
[178] In this regard, HQT cites the following extracts of the reports of experts Hanser and Sinclair:
Report by P.Q. Hanser, December 2008, paragraph 43, Exhibit HQT-30: “To prevent native load customers from being harmed, FERC has determined that the native load customers of vertically-integrated utilities should have access to the same generation sources that they had access to prior to the implementation of open access. ”
56 SN, February 10, 2010, Volume 16, page 165 and following. 57 SN, February 10, 2010, Volume 16, page 165. 58 Order No. 888, page 323.
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Report by R.A. Sinclair, October 2008, page 17, Exhibit NLH-12-C, Tab 70: “The Heritage Pool is similar to the native-load arrangement typically established under pro-forma OATTs in the U.S. Because the native load customers have paid for the generation and transmission facilities prior to open access, it is fair that their demands are met from the existing facilities. What is different in the case of HQD is the status of the resources deployed by HQP to meet the Heritage Pool requirements. In particular, the typical arrangement under the OATT is that the underlying units that supply native load obligations are designated as network resources and thereby receive network transmission rights. ”
[179] HQT submits that the opening of the markets in the 1990s or the opening of the LAB-HQT path on April 1, 2009 did not change the goal of protecting the rights of native load customers 59 . Thus, NLH’s thesis that the native load lost its transmission and that it should make reservations according to Part II of the OATT is contrary to the intention behind these texts and that of all the legislators which followed it. It would be tantamount to having native load customers pay transmission fees twice 60 .
[180] HQT ends its arguments on this first grievance by recalling that, if the Régie allowed NLH’s first and third conclusions, it would be the equivalent of illegally reopening the Hydro-Québec decisions respecting the serving of the native load in performance of its statutory obligations set out in section 22 of the Hydro-Québec Act . HQT reiterates the arguments previously submitted with respect to the Régie’s powers and the privative clause under section 26 of the Hydro-Québec Act 61 . In this regard, HQT refers the Régie to its Decision D-2009-024 62 .
[181] With respect to NLH’s second grievance, namely whether HQT acted in breach of section 4 of the OATT given its failure to post the ATC on the CF Lines before April 1, 2009, HQT notes that, to be in default of the posting requirements, there must be a posting requirement. Referring to the FERC Order, the testimony of expert witness Hanser and witness Clermont 63 , HQT explained that the purpose of the OASIS posting is to communicate to customers of the transmission service, efficiently and without
59 SN, February 10, 2010, Volume 16, page 169. 60 SN, February 10, 2010, Volume 16, page 176. 61 SN, February 10, 2010, Volume 16, pages 183 to 190. 62 Matter No. P-110-1565. 63 HQT’s Statement of Position and Argument, Matter No. P-110-1565, page 24, paragraph 110.
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discrimination, relevant and useful business information which could have an impact on decisions regarding the purchase or sale of electricity 64 .
[182] The posting requirement stems from the Attachment C of the OATT:
“The Transmission Provider’s OASIS site gives interconnection capabilities (TTC and ATC) for specific future periods. Each interconnection is designated as a path linked to point HQT, which represents all Points of Receipt on the Transmission Provider’s system, except the interconnections themselves.”
[183] According to HQT, this obligation covers a path, i.e. the notion of business, a path open to commerce 65 . However, the CF Lines did not have a commercial purpose before April 1, 2009. These lines were an internal connection. In support of this claim, HQT refers to the definition of posted path and interconnection in ch. 18 CFR 37 of the FERC regulations and the testimony of Christian Deguire, head of planning and strategy for HQT’s principal network, and Messrs. Hanser, Clermont and Rioux 66 .
[184] HQT adds that the CF Lines do not connect two control areas, as the CF Generating Station forms part of HQT’s control system 67 .
[185] Lastly, HQT notes that even the FERC does not require posting about paths which have little commercial value:
“The Commission will not require the posting of all paths across control areas, since customers can request to have ATC [Available Transfer Capability] and TTC [Total Transfer Capability] posted for any path. Given that customers can request to have ATC and TTC posted for any path, adopting CCEM’s proposal would burden OASIS sites with a very large number of posted paths that may have little commercial value 68 .”
64 SN, February 10, 2010, Volume 16, page 192. 65 SN, February 10, 2010, Volume 16, page 192. 66 HQT’s Statement of Position and Argument, Matter No. P-110-1565, page 25, paragraph 115; testimony of P.Q. Hanser, SN, February 4, 2010, Volume 13, pages 51 to 55, questions 48, 49 and 51; SN, February 5, 2010, Volume 14, pages 68 to 70, questions 179 to 183; Exhibit HQT-30, report by P. Q. Hanser, December 2008, pages 17 and 18, paragraphs 45 to 49; testimony of S. Clermont, SN, January 29, 2010, Volume 9, pages 27 and 28, questions 34 and 35, page 36, question 51 and pages 37 to 39, questions 55 and 56; testimony of C. Deguire, SN, February 3, 2010, Volume 12, page 95; testimony of L.-O. Rioux, SN, February 5, 2010, Volume 14, page 114, question 273. 67 SN, February 10, 2010, Volume 16, page 196. 68 HQT’s Statement of Position and Argument, Matter No. P-110-1565, page 26, paragraph 116; testimony of P.Q. Hanser, SN, February 4, 2010, Volume 13, page 53, question 50.
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[186] The question of fact is therefore, according to HQT, whether the CF Lines constituted, before April 1, 2009, an internal connection 69 . In this regard, HQT points out the uncontested evidence in the file that these lines were made in connection with and for the purpose of performing the Power Contract, that the power flows are one-way to supply the native load, that Hydro-Québec purchases almost all the production from the CF Generating Station, other than native load to Labrador and the recall capacity under the Power Contract and that they are high-tension lines synchronized with HQT’s system. This reality indicates that the CF Lines are a link which allows capacity and power to be injected into the supply of native load 70 .
[187] HQT recalls that the Régie accepted this fact in its Decision D-2006-66:
[Translation] “ The Régie is paying special attention to the notion of transmission equipment associated with production due to the system- specific characteristics, and in particular its geographic scope, the particular role of certain lines and the essentially hydraulic nature of the production fleet . Accordingly, if the generating stations had not been built, the associated transmission equipment, including a very large part of the THT lines, would not have been required. The role of this equipment is to integrate the electric power production of the generating stations with consumption centres, which explains why the electricity flow is essentially one-way .
The equipment found in the connection function for the generating stations, including […] the connection lines, have these characteristics and thereby constitute transmission equipment associated with production. In the Régie’s view, other equipment also meets these criteria.
The same applies to the THT lines from the interconnection with Churchill Falls which are used exclusively in reception mode. Although light loads compared to the capacity of the lines are supplied in passing by the THT network, it has not been shown that the supply of these loads justified their construction 71 .” [emphasis added by HQT]
69 SN, February 10, 2010, Volume 16, page 198. 70 SN, February 10, 2010, Volume 16, pages 198 to 200; HQT’s Statement of Position and Argument, Matter No. P-110-1565, pages 26 and 27, paragraph 120. 71 HQT’s Statement of Position and Argument, Matter No. P-110-1565, page 28, paragraph 121.
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[188] With respect to the grievance incidental to the previous one to the effect that the March 30, 2009 posting is a recognizing that the ATC should have been posted before that date, HQT recalls the circumstances surrounding the opening of the LAB-HQT path and the contents of the agreement signed with NLH for the exporting of 265 MW ( recall capacity ) under the Power Contract 72 .
[189] The last grievance regarding the OASIS posting involves the failure to post specific information which is comprehensible for all users and references to NLH’s complaints regarding the LAB-HQT path.
[190] Although NLH did not insist on or argue this issue, HQT recalls that witness Clermont explained the “ATC forcé” and “ATC insuffisant” registrations as well as the limitations of the computer systems. According to HQT, the answers given by witness Clermont and expert witness Hanser do not in any manner show discriminatory or inexplicable conduct in terms of HQT’s registrations on OASIS 73 .
[191] With respect to the third grievance which stems from Complaint P-110-1565, namely the failure to determine or calculate the ATC on the CF Lines before April 1, 2009, HQT recalls that, in the absence of a requirement to post the ATC on the CF Lines, there was no obligation to calculate the ATC 74 .
[192] In addition, HQT notes that a distinction must be made between the requirement of calculating the ATC from that of posting it. Thus, in connection with the impact study for NLH’s Request 1, HQT calculated the available ATC on the CF Lines and communicated that information to NLH. HQT had no obligation to post the content of the impact study on OASIS 75 .
[193] Regarding the other aspect of this grievance to the effect that HQT acted in breach of sections 15.2 and 17.5 and of the Attachment C of the OATT by using an inadequate methodology to calculate the ATC on the CF Lines up to April 1, 2009, HQT submits that witnesses Clermont and Deguire clearly explained the method used that that there was no real contestation regarding the method itself or the value of the figures used. Rather, what was contested was the issue of whether the data [TTC ( Total Transfer Capability ), TRM (Transmission Reliability Margin ), ETC ( Existing Transmission Commitments )] were
72 SN, February 10, 2010, Volume 16, pages 205 to 209; HQT’s Statement of Position and Argument, Matter No. P-110-1565, pages 29 to 31, paragraphs 128 to 137. 73 SN, February 10, 2010, Volume 16, pages 209 to 213; HQT’s Statement of Position and Argument, Matter No. P-110-1565, page 31, paragraphs 138 to 141. 74 SN, February 10, 2010, Volume 16, page 214. 75 SN, February 10, 2010, Volume 16, pages 215 to 217.
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appropriate under the circumstances, and in particular whether the ETC should be based on actual measured data or on the firm contract quantities in the Power Contract 76 .
[194] HQT recalls that it is not aware of the contract data of its transmission service customers. In addition, it notes that the Régie cannot decide on the contract rights in the Power Contract between Hydro-Québec and CF(L)Co, parties which are not before it. HQT refers the Régie to FERC Order No. 890 to the effect that transmission providers are not responsible for verifying the content of PPA ( Power Purchase Agreements ):
“The Commission adopts the NOPR [Notice of Proposed Regulation] proposal that transmission providers continue to be responsible for verifying that third-party transmission arrangements to deliver the pu [r] chase to the transmission provider’s system are firm, but that transmission providers are not responsible for verifying that generation units and power purchase agreements network customers designate as network resources satisfy the requirements in sections 30.1 and 30.7 of the pro forma OATT . […]
[…]
We reject requests to allow the transmission provider to voluntarily seek information which verifies that contractual terms meet the requirements of sections 30.1 and 30.7 of the pro forma OATT. Allowing transmission providers to verify terms and conditions of power purchase agreements would put transmission providers in the position of interpreting contracts and accepting or rejecting designations based on their interpretations. We believe such authority is unnecessary in light of the new attestation requirements and that instances of non-compliance are better handled by the Commission’s enforcement staff in the context of audits and Enforcement Hotline reports 77 . […]” [emphasis added by HQT]
76 SN, February 10, 2010, Volume 16, pages 218 to 225; HQT’s Statement of Position and Argument, Matter No. P-110-1565, paragraphs 150 to 164. 77 HQT’s Statement of Position and Argument, Matter No. P-110-1565, page 37, paragraph 166.
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[195] Lastly, HQT notes that the fourth grievance involving the posting delay for NLH’s Request 1 was withdrawn as admitted by witness Bennett 78 . With respect to the fifth grievance (errors in the preparation of the impact study), HQT deals with them in connection with Complaint P-110-1597.
6.3 NLH’S REPLY
[196] In its Reply 79 , NLH refutes certain arguments submitted by HQT, reiterating its original position in several cases. The Régie has read all the arguments submitted by NLH in reply and summarizes the main ones below.
[197] NLH submits firstly arguments relating to the evidence, procedure and the Régie’s jurisdiction 80 .
[198] With respect to the evidence, NLH recalls that administrative tribunals are not bound by the rules of evidence of the courts 81 . Accordingly, any evidence which tends to show that HQT acted unfairly toward NLH is irrelevant, especially when it is a fact alleged in the complaint. According to NLH, the factual evidence relating to non- discrimination is at the heart of the Régie’s mission and is the subject of specific provisions of the OATT.
[199] NLH refutes HQT’s argument that facts subsequent to the complaints are not relevant. According to NLH, all the facts which occurred before, during and after the posting of the LAB-HQT path are relevant in the context in which HQT is arguing, even under reserve, the commercial evolution which led to the posting of the said path. NLH bases itself in this regard on a decision of the Supreme Court of Canada involving interrelated facts on a continuum 82 .
78 Testimony of G. Bennett, SN, January 20, 2010, Volume 2, page 150, questions 436 and 437. 79 Exhibit B-113, NLH’s Reply; SN, February 12, 2010, Volume 18. 80 SN, February 12, 2010, Volume 18, pages 5 to 20. 81 Y. Ouellette, Les tribunaux administratifs au Canada , Montréal, Thémis 1997, pages 265 and 266; Hearings before Administrative Tribunals , 3rd edition, Carswell, Toronto 2007, page 17-6.5. 82 SN, February 12, 2010, Volume 18, page 9; Centre universitaire de santé McGill (Hôpital général de Montréal) v . Syndicat des employés de l'Hôpital général de Montréal, [2007] 1 S.C.R. 161; 2007 SCC 4 (January 26, 2007).
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[200] NLH reiterates that the subsequent facts involve one of the issues at the basis of Complaint P-110-1565 and demonstrate the persistent breaches by HQT and the continuing breaches of the OATT which are the subject of this complaint 83 .
[201] Regarding the Régie’s jurisdiction, NLH submits that section 101 of the Régie de l’énergie Act allows the Régie to order HQT to implement measures it determines if the OATT is not correctly applied by HQT. The wording of that legislative provision is broad and gives the Régie freedom to create a customized remedy”. Contrary to what HQT claims, NLH is not asking the Régie for any interpretation or application of section 22 of the Hydro-Québec Act 84 .
[202] NLH submits that the arguments submitted by HQT regarding the restraint which must be shown vis-à-vis HQT’s discretionary powers in the application of Attachment D of the OATT involving the methodology of carrying out an impact study do not apply as HQT is not the public administration 85 . The relationship between NLH and HQT cannot be likened to relationships with the administration; rather, it is a commercial relationship governed by the OATT 86 .
[203] NLH also attacks the credibility of expert witness Hanser, noting that he assumed the accuracy and well-foundedness of the position given to it by his client HQT regarding the notion of “designation of resources”, whereas he gave his own opinion on other concepts, such as “ transmissions rights ”87 .
[204] NLH reiterates its argument regarding the interpretation of section 38.1 of the OATT to the effect that that section does not deal with the designation process but rather, it describes what can be designated in terms of distributor resources 88 .
[205] NLH submits that HQT improperly quoted or misunderstood its argument by stating that, according to NLH, the CF Generating Station cannot constitute a designated resource of the Distributor because it does not belong to HQD. NLH states in this regard that it does not limit the argument to the ownership of the generating station but covers
83 SN, February 12, 2010, Volume 18, page 13. 84 SN, February 12, 2010, Volume 18, pages 14 and 15. 85 Exhibit B-113, NLH’s Reply, pages 12 and 13; P. Garant, Droit administratif , 5th edition, Les Éditions Yvon Blais, 2004, pages 3 and 4. 86 SN, February 12, 2010, Volume 18, page 18. 87 SN, February 12, 2010, Volume 18, page 23. 88 SN, February 12, 2010, Volume 18, page 24 and following.
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more a legal relationship between CF(L)Co and HQD, whether it is an ownership right or a relationship stemming from a contract 89 .
[206] NLH reiterates its arguments that the CF Generating Station cannot be a designated resource of the Distributor as the Power Contract clearly provides for third party sales, i.e. Twinco, and sales under a recall right 90 .
[207] NLH goes back to the scope of Decision D-2002-286 in which, according to NLH, the Régie held that [Translation] “ the production purchased by the distributor, under the decree relating to heritage pool electricity, is a designated resource, contrary to the generating stations which may provide such electricity 91 “. NLH submits that the Régie’s intention was clearly that only heritage pool electricity is designated. Although the res judicata theory does not apply, NLH argues that administrative tribunals cannot ignore their own decisions and must seek consistency 92 .
[208] Regarding the more technical issue of the Designation of resources, NLH submits that the Designation of Loads and Resources which HQD sends HQT annually is not a document covered by section 37.1 of the OATT and adds [Translation] “ that there is no material proof and no list of such resources is posted on OASIS 93 “.
[209] According to NLH, HQD cannot designate the CF Generating Station because it is not under HQT’s control within the meaning of section 36.2 of the OATT 94 .
[210] According to NLH, to find out who can use the transmission service for supplying he native load under section 36.5 of the OATT, [Translation]“ the Régie must determine who the counterparty is who will carry the production from the Churchill Falls generating station 95 ”. According to NLH, HQP is that counterparty and HQT cannot allow such third party to use its service in contravention of section 36.5 96 .
89 Exhibit B-113, NLH’s Reply, page 18, paragraphs 86 and 87. 90 SN, February 12, 2010, Volume 18, pages 27 to 32; Exhibit B-113, NLH’s Reply, pages 18 to 20. 91 Decision D-2002-286, Matter No. R-3401-98, page 15. 92 Exhibit B-113, NLH’s Reply, pages 20 to 23; S. Comtois, Le control de la cohérence décisionnelle au sein des tribunaux administratifs , 6 th annual conference of the Conférence des membres des tribunaux administratifs du Québec, Montréal, 28 September 1990, (1990), R.D.U.S. 577. 93 SN, February 12, 2010, Volume 18, pages 37 and 38. 94 SN, February 12, 2010, Volume 18, pages 39 and 40. 95 Exhibit B-113, NLH’s Reply, page 24, paragraph 125. 96 SN, February 12, 2010, Volume 18, page 42.
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[211] Regarding the issue of whether the ATC should be determined based on the historical value or on firm or non-firm contractual rights, NLH reiterates its arguments and adds that HQT is quoting FERC Order No. 890 out of context in stating that HQT does not have to interpret the power supply contracts in order to determine whether they are firm or non-firm. NLH interprets section 1 b) of the Attachment C of the OATT as referring to supply contracts. It concludes that ’HQT and the Régie should look to the Power Contract to determine the ATC on the CF Lines97 .
[212] NLH reiterates its argument that the LAB-HQT path should have been posted on OASIS since 1997, at the time of the functional separation at -Québec, to comply with the definition of posted path under the American rules 98 .
[213] Regarding the issue of the determination of the ATC based on historical values or the contractual rights under the Power Contract, NLH does not add anything new in stating that the additional rights under that contract are non-firm. It also relies on section 38.1 of the OATT to the effect that distributor resources cannot be used for committed sales to third parties to emphasize its approach 99 .
6.4 THE RÉGIE’S OPINION
[214] According to section 94 of the Régie de l’énergie Act , NLH had to apply to the Régie for the examination of its complaint “within 30 days of the date on which the decision of the electric power carrier or the distributor is forwarded ” if it disagreed with HQT’s decision.
[215] HQT’s decision from which this complaint stems is its letter dated December 11, 2007:
“Following your October 12, 2007 Complaint 100 , we submit the following.
NLH’s Transmission Service Request dated January 19, 2006 is for transmission service for the Lower Churchill plants of Gull Island and Muskrat Falls. Your complaint refers to “actual reservations that are made in the HQT OASIS of the Churchill Falls facility”. The existing transmission facilities between the Churchill Falls plant and Hydro-Québec TransÉnergie’s system are used only for the deliveries from the Churchill Falls plant as a designated resource pursuant to Part IV of Hydro-Québec TransÉnergie’s OATT. There is no OASIS posting for such facilities that serve solely as a designated resource. Therefore, Hydro- Québec TransÉnergie did not “fail to disclose the calculated available transfer
97 SN, February 12, 2010, Volume 18, pages 46 to 53; Exhibit B-113, NLH’s Reply, pages 25 to 27. 98 SN, February 12, 2010, Volume 18, page 61. 99 SN, February 12, 2010, Volume 18, pages 63 to 68. 100 Exhibit NLH-11, Matter No. P-110-1565.
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capacity available for exports from Churchill Falls” since such a calculation doesn’t need to be performed […] 101 .”
[216] The October 12, 2007 complaint involves a disagreement arising out of the Option 1 impact study report for Request 1. NLH informed HQT that HQT was underestimating the ATC available on the 450 MW CF Lines. In other words, NLH believed that at least 450 MW of the electric power generated by its Lower Churchill Falls project could be sent on those lines.
[217] The said complaint was amended on October 31, 2008 to contest, among other things, the status of the CF Generating Station as a designated resource of the Distributor and, accordingly, to have NLH’s Request 1 on the CF Lines recognized as a priority.
[218] The measures, relief or remedies which NLH is asking the Régie to apply in accordance with section 101 of the Régie de l’énergie Act are stated as follows in the amended conclusions of the said complaint:
“GRANT the present complaint of NLH;
DECLARE ORDER to HQT to consider 102 that NLH has a priority reservation for firm point-to-point transmission service for capacity and energy for the proposed Lower Churchill Falls hydroelectric development under the HQT’s OATT;
ORDER HQT to post on its OASIS site the transmission service requests made on the LAB-HQT path by NLH in the chronological order received and correct any inadequacies in light of this posting and the applicable OATT rules;
ORDER HQT to provide NLH with a transmission service agreement from the Labrador interconnection to the HQT point;
ORDER HQT to fully disclose on OASIS the available transmission capability between the proposed Lower Churchill Falls hydroelectric development and the HQT system and any bookings for transmission service (in any form) from the Churchill Falls facility;
ORDER HQT to revise the base case underlying the SIS 101 analysis and conclusions in light of the revised ATC from the Churchill Falls substation to the HQT point; and
ORDER that this revision should be undertaken at no additional cost to NLH .”
[219] This complaint essentially asks the following questions:
101 Exhibit NLH-12, Matter No. P-110-1565. 102 NLH’s written arguments, page 18, paragraph 62.
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• Is the CF Generating Station a designated resource of HQD under the OATT? • Under the OATT, did HQP or HQD have to make a reservation for transmission service on the CF Lines? • Are the CF Lines a path within the meaning of the OATT which has to be posted on OASIS? • Did HQT, as part of the impact study, comply with the OATT by calculating the ATC based on the historical electricity flows rather than based on Hydro-Québec’s right to firm deliveries in the Power Contract?
6.4.1 IS THE CF GENERATING STATION A DESIGNATED RESOURCE OF HQD UNDER THE OATT?
[220] Before analyzing the legislative and regulatory provisions relevant to this question, it is useful to recall certain aspects of the context, including the role of the CF Generating Station when open access to transmissions systems was implemented in North America and Québec in 1996.
[221] The testimony of Louis-Omer Rioux from HQT 103 helps us better understand the role and operation of the CF Generating Station and the lines connecting it to the HQT system.
[222] Mr. Rioux explained that the electric power from the CF Generating Station is considered, in terms of operations, as a designated resource to supply Québec’s native load. All the programs include the production from this generating station and this programming covers all horizons, in all the resource plans, 365 days a year. The witness also explained that the CF Generating Station is synchronized with the HQT system and considered in HQT’s “on system”. According to witness Rioux, the CF Lines are internal lines connecting to the HQT system.
[223] The evidence also shows that the CF Generating Station provides a significant portion, approximately 5,000 MW out of 35,000 MW, of the electricity supplying the native load, which Hydro-Québec and HQD could not do without. Witness Rioux explained that, except in power outage situations, the production from the CF Generating Station has always been available to supply Québec’s native load.
[224] The testimony of expert witness Hanser is also important in order to understand the situation and the rights of native load customers in the context of the implementation of open access in North America:
“To prevent native load customers from being harmed, FERC has determined that the native load customers of vertically-integrated utilities should have access to
103 SN, February 5, 2010, Volume 14, pages 112 to 117.
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the same generation sources that they had access to prior to the implementation of open access 104 .” [emphasis added]
[225] Expert witness Hanser referred to the following extract of the FERC Order:
“[…] The amount of transmission capacity available to wholesale and unbundled retail customers under the Final Rule pro forma tariff is clearly affected by the amount of transmission capacity that the transmission provider reserves for the use of its native load customers and the future load growth of those customers […] 105 .”
[226] It appears from the foregoing that, since 1971, the production of the CF Generating Station has represented a significant portion of the supply of Québec’s native load. Thus, the opening of the HQT transmission system to non-native load customers is not supposed to hinder access to this resource by such customers.
[227] The Régie accepts the following contextual elements of HQT’s Statement of Historical and Legal Facts :
• Since its inception, Hydro-Québec has supplied electricity to Québec consumers according to rates and conditions which, until May 2, 1998, were set by way of a Hydro-Québec by-law adopted in accordance with the Hydro-Québec Act and approved by Order-in-Council; • In 1996, the Québec government tabled Bill 50 respecting the Régie. That legislation carried out a sweeping institutional reform in the power business, subjecting Hydro- Québec, for the first time ever, to the jurisdiction of a regulatory body, namely the Régie, for the establishment of rates and conditions for the supply and transmission of electricity; • The creation of the Régie and the granting to it of jurisdiction over rates for the supply of electricity took into account conditions for accessing the transmission systems imposed by the FERC in its April 24, 1996 Order for the implementation of a new regulatory framework (“Order No. 888”); • As of that date, the FERC chose to subject access to wholesale U.S. markets to certain conditions, both in terms of reciprocity (requiring that entities wishing to sell electricity on U.S. markets give non-discriminatory access to their own transmission system) and the unbundling of production, transmission and distribution activities; • In May 1997, HQT, Hydro-Québec’s division in charge of electric transmission, was set up. Since then, Hydro-Québec has adopted internal standards of conduct and set up
104 Exhibit HQT-30, report by P.Q. Hanser, December 2008, paragraph 43. 105 FERC Order 888, Docket Nos. RM-8-000 and RM94-7-001, page 323.
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an organization which ensures the functional separation of its electric transmission activities and control of power flows from its production and sales activities; • In December 1996, Hydro-Québec adopted and the Québec government approved Hydro-Québec Bylaw number 652 106 respecting the conditions and rates for wholesale electric transmission service. This bylaw was replaced in March 1997 by Hydro- Québec bylaw number 659 respecting the conditions and rates for open access transmission service; • On June 16, 2000, the legislator amended the Régie de l’énergie Act and the Hydro- Québec Act 107 in order to introduce the concept of heritage pool electricity and the resulting rate terms, among other things; • Hydro-Québec was required to supply the heritage electricity pool pursuant to section 22 of the Hydro-Québec Act : “22. The objects of the Company are to supply power and to pursue endeavours in energy-related research and promotion, energy conversion and conservation, and any field connected with or related to power or energy. The Company must supply the heritage electricity pool as established by the Act respecting the Régie de l'énergie (chapter R-6.01). The Government shall determine the characteristics of the supply to Québec markets of 165 terawatt-hours of heritage pool electricity. The supply must include all necessary and generally recognized services to ensure its security and reliability .” [emphasis added] • On October 24, 2001, the government passed the Décret patrimonial concernant les caractéristiques de l’approvisionnement des marchés québécois en électricité patrimoniale [order-in-council respecting the characteristics of the supply to Québec markets of heritage pool electricity]; • The Décret patrimonial sets forth the characteristics of the supply to Québec markets of heritage pool electricity up to a maximum volume of 165 terawatt hours and states as follows: [Translation] “ Heritage pool electricity is supplied to Québec markets by means of electricity generated or purchased by the supplier [Hydro-Québec] or recalled/taken back by it under special contracts or service agreements containing interruptible power clauses in effect on January 1, 2001 .”
[228] These legislative provisions require that Hydro-Québec supply the heritage electricity pool but gives it the discretion to use electricity it generates or electricity it purchases, such as the CF Generating Station under the Power Contract. If Hydro-Québec can choose to supply part of the native load from the CF Generating Station, it goes without saying that it must have the right to use the HQT transmission system to fulfil this statutory requirement.
106 Order-in-Council No. 1559-96, 1996 G.O. II, page 7387 107 An Act to amend the Act respecting the Régie de l'énergie and other legislative provisions , S.Q. 2000, c. 22.
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[229] Accordingly, by interpreting the OATT which was passed after these legislative provisions came into force, we must avoid giving it a meaning which would make it incompatible with these provisions respecting the rights and obligations conferred on Hydro-Québec and Québec consumers with respect to the heritage pool.
[230] That said, we will go back to the specific question of whether the CF Generating Station is a designated resource of HQD under the OATT.
[231] The rate provisions relevant to this complaint are those adopted by Decisions D-2002-286 108 and D-2006-66 109 .
[232] The designation of the Distributor’s resources deal with the supply of Québec’s native load. Part IV of the OATT “Native-load transmission service” applies in this case, and more specifically section 38.1 (Designation of Distributor Resources) and section 1.51 (Distributor Resource), which definition is applicable to Part IV of the OATT.
[233] The Régie does not share NLH’s position regarding the interpretation to be given to these rate provisions for the reasons set forth below.
[234] Firstly, NLH’s historical argument that, from 1997 to 2001, service agreements were entered into with TransÉnergie, a division of Hydro-Québec, and Hydro-Québec groupe services énergétiques, does not help us interpret the provisions of sections 1.51 and 38.1 of the OATT. Those provisions were adopted in 2002 when Part IV was added to the OATT specifically covering the conditions for supplying Québec’s native load. Although the native load was in fact supplied differently at the beginning of the functional separation of Hydro-Québec, that is not relevant for the purpose of determining, in relation to the complaint, whether HQT properly applied the provisions of sections 38.1 and 1.51.
[235] In NLH’s view, section 1.51 is a list of the Distributor’s resources, whereas section 38.1 refers to the concept of designated resource, not the designation. Thus, according to NLH, a Distributor Resource can be designated but the designation stems from a positive action which cannot be presumed. NLH does not agree with HQT’s claim that HQD’s providing of the Designation of Loads and Resources to HQT constitutes a designation of resources.
[236] One of NLH’s fundamental arguments is based on a passage from Decision D-2002-286 110 where the Régie writes that it understands [Translation] “from the testimony of the transmission provider that the production purchased by the distributor under the order-in-
108 Matter No. R-3401-98. 109 Matter No. R-3549-2004. 110 Matter No. R-3401-98.
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council respecting the heritage electricity pool is a designated resource, as opposed to the generating stations which may provide such electricity 111 ”.
[237] The extract in question from Decision D-2002-286, quoted by expert witness Sinclair in his report, cannot be a precedent in support of NLH’s argument that the heritage electricity pool can be designated but not the generating stations which may provide such electricity. In this extract from the decision, the Régie only mentions its understanding of Mr. Roberge’s testimony; it did not base its decision on that testimony, as it accepted the texts submitted by HQT, namely sections 1.51 and 38.1, which do not support NLH’s arguments.
[238] Therefore, for the purpose of this complaint, sections 1.51 and 38.1, as adopted by the Régie, must be applied.
[239] NLH also argues that the CF Generating Station is not a Distributor Resource because it does not belong to HQD and part of the production from that station is used by customers other than HQD.
[240] The Régie notes that there is no evidence that the electric power from the CF Generating Station is sold to third parties. On the contrary, according to the testimony of Mr. Rioux from HQT, the electric power from that station has always been used for the native load. In addition, even if part of the power from that station were sold to third parties, that would not change its status as a designated generating station of the Distributor. The FERC deals with a similar issue:
“It was not the Commission's intent to prohibit the network customer from engaging in non-firm sales from idle designated network resources. We find that the non-firm operation of network resources will not affect the availability of such resources on a firm basis because such non-firm uses are subject to interruption 112 .”
[241] This extract from FERC Order No. 888-A is also in keeping with the provisions of section 1.51 of the OATT to the effect that “Distributor Resources do not include any resource, or any portion thereof, that is committed for Third-Party Sale or otherwise cannot be called upon to meet the Distributor's Native Load requirements on a non-interruptible basis ”.
[242] The evidence shows that part of this resource, the CF Generating Station, was not the subject of a third party sale prior to April 1, 2009, when NLH, assignee of part of the rights of CF(L)Co under the Power Contract, chose to export 265 MW under three firm long-term point- to-point transmission service agreements 113 .
111 Page 15. 112 HQT Statement of Position and Argument, Matter No. P-110-1565, page 22, paragraph 97. 113 Exhibit C-40, Matter No. P-110-1565, e-mail sent on March 30, 2009 and 4 service agreements between NLH and HQT.
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[243] NLH also submitted a constitutional law argument to the effect that an interpretation or application of the OATT which would allow HQD to designate the CF Generating Station as one of its resources would be tantamount to unlawfully giving extraterritorial effect to the OATT, as the generating station in question is not located in Québec.
[244] The Régie does not believe that the designation of the CF Generating Station gives extraterritorial effect to sections 37.1 and 38.1 of the OATT. Furthermore, as HQT notes, the only effect of the designation of the CF Generating Station, a generating station located outside Québec, is to give priority rights to the HQT system located in Québec according to Part IV of the OATT.
[245] NLH also submits that section 38.1 should be read in conjunction with section 36.2 which deals with the nature of the native load transmission service and HQT’s responsibility in this regard:
“36.2 Transmission Provider Responsibilities : The Transmission Provider shall plan, construct, operate and maintain its Transmission System, and control power flows in its Control Area in accordance with Good Utility Practice in order to provide Transmission Service for the delivery of capacity and energy from Distributor Resources to supply the loads of Native-Load Customers over the Transmission Provider’s system. The Distributor shall designate available resources, under the transmission Provider’s control , to supply its Native Load . [emphasis added]
[246] NLH concludes that the Distributor is required to designate the resources which are available and under HQT’s control to supply its native load. According to NLH, there is no direct link giving HQT control over the CF Generating Station.
[247] Three concepts can identified in section 36.2 of the OATT:
• HQT plans, constructs and operates its system and controls power flows in order to supply its native load; • The Distributor must designate available resources to supply its native load. Such resources must be under the HQT’s control, i.e. HQT must be able to control power flows from these resources; • HQT must include the native load in its system planning.
[248] The fact that HQT controls power flows from the CF Generating Station is proven by uncontradicted evidence provided by witness Rioux from HQT 114 , who explained the following:
114 SN, February 5, 2010, Volume 14, pages 101 and 102 and 117 to 121.
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• The CF Generating Station is considered a designated resource and dealt with as such on a daily basis; • This generating station forms part of Québec’s control area and is considered “on system”; • HQT has access to electric power from the CF Generating Station to supply its native load at all times, up to the capacity required; • In terms of operations, the parties agree that the management, programming, safety control and balancing authority are all functions carried out by HQT.
[249] The evidence is therefore clear that the CF Generating Station is a resource under HQT’s control within the meaning of section 36.2 of the OATT and that the Distributor may therefore designate the said generating station as an available resource.
[250] To come to the conclusion that the CF Generating Station is a designated resource of the Distributor, the following provisions of the OATT must be read and interpreted in context:
“36.2 [...] The Distributor shall designate available resources, under the Transmission Provider’s control, to supply its Native Load […];”
“37.1 Information Required Annually from the Distributor The Distributor shall provide, or have provided, all of the information, [...] the size of the unit [...] to be designated as Distributor Resource, including generating stations used to deliver heritage pool electricity […].”
“38.1 Designation of Distributor Resources […] Generating stations able to supply the Distributor’s Native Load in date of January 1, 2001 shall be included in Distributor Resources until such time as written notice to the contrary is given by the Distributor to the Transmission Provider .”
[251] The context is as follows:
• In 2001, the CF Generating Station had been supplying Québec’s native load for 30 years, contributing up to approximately 5,000 MW out of 35,000 MW through deliveries of what became the heritage electricity pool pursuant to the amendments made to the Hydro-Québec Act, the Régie de l’énergie Act and the Décret patrimonial ; • The Décret patrimonial gives Hydro-Québec the discretion to provide the heritage pool electricity out of the electric power which Hydro-Québec generates, purchases or recalls; • Hydro-Québec is legally required to provide the heritage electricity pool but HQP fulfils this requirement in practice;
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• Witness Mongeon from HQD came to explain that he receives a designation letter from HQP every year in which the CF Generating Station is specifically indicated and that HQD sends this information to HQT 115 .
[252] In practice, as long as Hydro-Québec chooses to fulfil its obligation to provide heritage pool electricity using the CF Generating Station, that generating station will be a Distributor Resource used to supply the native load.
[253] The evidence is that HQD and HQT’s procedure complies with the terms of sections 36.2, 37.1 and 38.1 of the OATT. HQP avails itself of its right to supply the native load through heritage pool electricity from the CF Generating Station and notifies HQD thereof annually. HQD sends the information required under section 37.1 to HQT 116 . The CF Generating Station, a resource used to supply the native load in Québec, thereby becomes a designated resource of the Distributor.
[254] Therefore, for the above-mentioned reasons, the Régie finds that the CF Generating Station is a designated resource of the Distributor pursuant to sections 36.2, 37.1 and 38.1 of the OATT.
6.4.2 UNDER THE OATT, DID HQP OR HQD HAVE TO RESERVE TRANSMISSION SERVICE ON THE CF LINES ?
[255] NLH’s position is that, since the functional separation in 2000, the CF Lines have become a path used by more than one user, namely HQP and HQD and that, as a result, the priority rule under section 13.2 of Part II of the OATT applies.
[256] According to NLH, as a result of the functional separation, HQP became a party with CF(L)Co to the Power Contract. Accordingly, beginning in 2001, HQP should have reserved point-to-point service in order to import the production purchased from CF(L)Co. NLH notes that HQP did not make such a reservation. It follows that Request 1 has priority over HQD’s request dated March 31, 2009 under the first-come first-served rule in section 13.2 of the OATT.
[257] In support of its claim, NLH cites the Régie’s Decision D-2007-121 117 handed down in another complaint matter. However, in the Régie’s opinion, in that decision the Régie simply recognized that a servitude had been granted to Hydro-Québec for its power transmission system, not to connect the customer to Hydro-Québec’s distribution system. Accordingly, when the Régie writes that in 1973, the [Translation] “ servitude was granted to Hydro-Québec for its electric
115 SN, January 27, 2010, Volume 7, pages 58, 59 and 81. 116 Exhibits NLH-38 and NLH-39, Matter No. P-110-1565. 117 Matter No. P-110-1490.
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power transmission activities ”, it is suggesting that the servitude allowed the installation of equipment from Hydro-Québec’s transmission system. We cannot infer from that decision that the functional separation which occurred in 2000 changes a party to a deed of servitude dating back to 1973.
[258] It also cannot be claimed that one of the effects of the functional separation of the production, transmission and distribution divisions of Hydro-Québec is to change one of the parties to the Power Contract by substituting HQP for Hydro-Québec. Furthermore, the HQP, HQT and HQD divisions can only be parties to contracts in the context of section 2 of the Régie de l’énergie Act :
“Any supply of electric power by Hydro-Québec to the electric power distributor is deemed to constitute a supply contract. Any electric power transmission service provided to Hydro-Québec by the electric power carrier is deemed to constitute a transmission service contract.”
[259] This exceptional provision applies exclusively to deemed contracts between the Hydro- Québec divisions. It does not apply to a contract entered into in 1969 between Hydro-Québec and a third party, CF(L)Co.
[260] Furthermore, NLH’s arguments based on the Power Contract are not relevant to the application of Part IV of the OATT. HQT does not have to be aware of the terms of the contracts between Hydro-Québec and CF(L)Co, but it must know the capacity and energy transferred on the CF Lines for the purposes of supplying the native load from a designated generating station.
[261] As HQT notes, for NLH to be able to establish that its rights take priority over those of Hydro-Québec as of January 19, 2006, it must show that Hydro-Québec does not have a prior transmission right over the CF Lines, despite the fact that it has used them for over 40 years in order to supply the native load.
[262] Even expert witness Sinclair who testified for NLH admits that HQD benefits from priority transmission service under Part IV of the OATT, without it having to make reservations or enter into a transmission service agreement, contrary to the procedure set out in Part II for point-to-point transmission service:
“Q. [278] But if a resource is designated as a network resource, HQD doesn't need to make a reservation under Part IV for transmission rights, the rights exist by the simple fact that it is from a designated resource for purposes of supplying the heritage... the native load? A. That's right. Q. [279] You agree...
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A. Yes 118 .”
[263] It therefore appears from sections 36.3 and 13.2 of the OATT, Régie Decision D-2006-66 119 and the evidence of expert witness Sinclair that HQD has level 1 transmission priority when it supplies its native load from designated resources, without having to reserve. It appears from the same sections of the OATT, the evidence and Decision D-2006-66 that a reservation of firm long-term point-to-point service under Part II of the OATT ranks after the transmission service to supply the native load from a designated resource of HQD prior to such reservation 120 .
[264] Therefore, according to the OATT, HQP or HQD did not have to reserve transmission service on the CF Lines to supply the native load.
6.4.3 ARE THE CF LINES A PATH WITHIN THE MEANING OF THE OATT WHICH HAS TO BE POSTED ON OASIS?
[265] The respective positions of the parties on this question are summarized above.
[266] The Régie does not accept NLH’s position that, since the functional separation, the CF Lines have become a path used by more than one user, in this case HQP, HQM and HQD, or that these lines are an interconnection or “posted path” between two systems or control areas and that this would require a posting of the ATC or TTC on OASIS.
[267] Instead, the preponderance of the evidence is that, before April 1, 2009, no one other than Hydro-Québec used or could use the CF Lines. Under the Power Contract, Hydro-Québec [Translation] “ is entitled and has agreed to purchase almost all the power and energy generated by the CF Generating Station, with the exception of a capacity of 225 MW for the benefit of Twin Falls Power Corporation Limited and an option to take back a maximum of 300 MW for the benefit of CF(L)Co for consumption outside Québec 121 ".
[268] The only change of use of the CF Lines by Hydro-Québec occurred on April 1, 2009 when NLH asked for and was given a transmission right over these lines to export and sell
118 Testimony of R.A. Sinclair, SN, January 25, 2010, Volume 5, page 115, questions 278 and 279; see also page 117, question 287. 119 Matter No. R-3549-2004, page 46. 120 Exhibit HQT-30, report by P.Q. Hanser, December 2008, paragraphs 41 and 42; testimony of S. Clermont, SN, January 28, 2010, Volume 8, page 171, question 6, and pages 175 and 176, questions 9 to 11; testimony of R.A. Sinclair, SN, January 25, 2010, Volume 5, page 115, questions 278 and 279; see also page 117, question 287. 121 HQT Statement of Position and Argument, Matter No. P-110-1565, page 27, paragraph c).
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265 MW to third parties according to three firm long-term point-to-point transmission service agreements 122 .
[269] On April 1, 2009, HQT made a posting on OASIS to reflect the use of the CF Lines by NLH for purposes other than to serve Québec’s native load:
[Translation] “[t] he Carrier’s OASIS site shows the (TTC and ATC) capabilities of the interconnections for given future periods. Each of the interconnections is sent to it as a path, connected to the HQT point which represents all the reception points on the Carrier’s system, other than the interconnections themselves 123 .”
[270] The evidence shows that the purpose of the OASIS posting is to communicate to customers of the transmission service, efficiently and without discrimination, relevant and useful business information which could have an impact on decisions regarding the purchase or sale of electricity 124 .
[271] It was also established in evidence that the concept of path refers to a commercial notion which is different from the physical installation of the connection 125 :
[Translation] “[A] path posted on OASIS connects a reception point to a delivery point for the purpose of providing transmission service to a customer eligible for the transmission service 126 ”.
[272] The preponderance of the evidence is also to the effect that, before the LAB-HQT path was opened on April 1, 2009, the CF Lines were an internal connection, not a path within the meaning of the OATT.
[273] In this regard, the following facts alleged by HQT were not contradicted and, we can assume, were also known by NLH as 65.8 % shareholder of CF(L)Co, owner and operator of the CF Generating Station: [Translation] “a) The lines were built by CF(L)Co in connection with and for the purpose of performing the 1969 Power Contract according to the specifications prepared by Hydro-Québec specifically for that purpose; Power Contract, definition of “Plant” and s. 4.1 and 7.1;
122 Exhibit C-40, Matter No. P-110-1565, e-mail sent on March 30, 2009 and 4 service agreements between NLH and HQT. 123 Attachment C of the OATT. 124 HQT Statement of Position and Argument, Matter No. P-110-1565, page 24, paragraph 110. 125 HQT Statement of Position and Argument, Matter No. P-110-1565, page 25, paragraph 112; testimony of S. Clermont, SN, January 29, 2010, Volume 9, pages 25 to 28, questions 32 to 35. 126 HQT Statement of Position and Argument, Matter No. P-110-1565, page 25, paragraph 113.
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G. Bennett, Jan. 21, 2010, S.N. Vol. 3, p. 151; S. Clermont, Jan. 28, 2010, S.N. Vol. 8, p. 155, Q. 254; b) The power flows on the lines are one-way and are used exclusively for the injection of the capacity and energy produced by the CF Generating Station in the HQT system, in the absence of any other supply; Report by P.Q. Hanser, December 2008, para. 45, Exhibit HQT-30; Decision D-2006-66, p. 11; S. Clermont, Jan. 28, 2010, S.N. Vol. 8 p. 155, Q. 254; Jan. 29, 2010, S.N. Vol. 9 p. 38, Q. 55; c) Under the Power Contract, HQ is entitled and has agreed to purchase almost all the power and energy produced by the CF Generating Station, with the exception of a capacity of 225 MW for the benefit of Twin Falls Power Corporation Limited and an option to take back a maximum of 300 MW for the benefit of CF(L)Co for consumption outside Québec; Power Contract, s. 2.1, 4.2.2 and 6.6; d) The lines are operated at very high tension (735 kV) to minimize losses during transmission to the HQT system; See in particular Exhibit HQT-7 at p. 9; e) Although located outside Québec, the CF Generating Station is synchronized with the HQT system; See in particular Exhibit HQT-7 at p. 10; S. Clermont, Jan. 28, 2010, S.N. Vol. 8 p. 155-156, Q. 255; f) The lines did not have to be designed or built for third party commercial use and have never been used for such purpose within living memory, and this historic reality has been accepted by the market; See in particular Decision D-2006-66, p. 11; S. Clermont, Jan. 29, 2010, S.N. Vol. 9 p. 37-38, Q. 54-55 127 ”.
[274] The Régie has previously recognized that the CF Lines were an internal connection, although in another context and for other purposes:
[Translation] “ The Régie is paying special attention to the notion of transmission equipment associated with production due to the system-specific characteristics, and in particular its geographic scope, the particular role of certain lines and the essentially hydraulic nature of the production fleet . Accordingly, if the generating stations had not been built, the associated transmission equipment, including a very large part of the THT lines, would not have been required. The role of this equipment is to integrate the electric power
127 HQT Statement of Position and Argument, Matter No. P-110-1565, pages 26 and 27, paragraph 120.
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production of the generating stations with consumption centres, which explains why the electricity flow is essentially one-way . The equipment found in the connection function for the generating stations, including […] the connection lines, have these characteristics and thereby constitute transmission equipment associated with production. In the Régie’s view, other equipment also meets these criteria .
The same applies to the THT lines from the interconnection with Churchill Falls which are used exclusively in reception mode […] 128 .” [emphasis added]
[275] Section 4 of the OATT refers to the terms and conditions relating to the OASIS set forth in ch. 18 CFR 37 of the FERC regulations (the “OASIS Rules”). For these rules to apply in Québec, OASIS must “comply with Régie decisions, orders and regulations 129 ”.
[276] There is nothing to indicate that the notions of “path” and “posted path” in the OASIS Rules do not comply with Régie decisions, orders and regulations. It would therefore be useful to determine whether the CF Lines may be considered a path for the purpose of the said Rules.
[277] The OASIS Rules provide that the requirement to post an ATC is only for “posted paths”, not for physical transmission facilities (internal connection or interconnections) which do not constitute paths :
OASIS Rules:
“37.6 […] (b) Posting transfer capability. The available transfer capability on the Transmission Provider's system (ATC) and the total transfer capability (TTC) of that system shall be calculated and posted for each Posted Path as set out in this section.
(1) Definitions. For purposes of this section the terms listed below have the following meanings:
(i) Posted path means any control area to control area interconnection ; any path for which service is denied, curtailed or interrupted for more than 24 hours in the past 12 months; and any path for which a customer requests to have ATC or TTC posted . For this last category, the posting must continue for 180 days and thereafter until 180 days have elapsed from the most recent request for service over the requested path. For purposes of this definition, an hour includes any part of an hour during which service was denied, curtailed or interrupted.
128 Decision D-2006-66, Matter No. R-3549-2004, page 11. 129 Section 4 of the OATT.
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[…]
(iv) The word interconnection, as used in the definition of “posted path” means all facilities connecting two adjacent systems or control areas130 .” [emphasis added]
[278] As the Régie has noted above, because the CF Lines are an internal line, they could not be a “path for which a customer could request to have ATC or TTC posted” .
[279] The FERC even held that posting on OASIS is of little value when a path has no or little commercial value:
“The Commission will not require the posting of all paths across control areas, since customers can request to have ATC [Available Transfer Capability] and TTC [Total Transfer Capability] posted for any path. Given that customers can request to have ATC and TTC posted for any path, adopting CCEM’s proposal would burden OASIS sites with a very large number of posted paths that may have little commercial value 131 .” [emphasis added]
[280] The CF Lines therefore continue to be used to connect the CF Generating Station to the HQT system, for the exclusive benefit of Hydro-Québec for the supply of Québec’s native load. The recent rights granted to NLH to export part of the production from the CF Generating Station using the CF Lines does not change this situation of fact which dates back several decades under the Power Contract.
[281] For all the above reasons, the Régie finds that the CF Lines did not constitute a path within the meaning of the OATT and that HQT did not have an obligation to post the ATC or the TTC on the said lines before the LAB-HQT path was opened on April 1, 2009.
6.4.4 DID HQT COMPLY WITH THE OATT BY CALCULATING THE ATC BASED ON THE HISTORICAL ELECTRICITY FLOWS RATHER THAN ON HYDRO -QUÉBEC ’S RIGHTS TO FIRM DELIVERIES IN THE POWER CONTRACT ?
[282] NLH argues that, even if the Régie holds that HQP or HQD has a priority for the transmission service on the CF Lines, the ATC was not correctly determined, as it must be based on firm contract commitments between Hydro-Québec and CF(L)Co 132 .
130 HQT Statement of Position and Argument, Matter No. P-110-1565, pages 25 and 26, paragraph 115. 131 HQT Statement of Position and Argument, Matter No. P-110-1565, page 26, paragraph 116. 132 NLH Outline of Argument, pages 34 and 35, paragraph 134.
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[283] NLH relies on, among other things, the testimony of expert witness Sinclair who, although he accepts the idea that the rights to the transmission of resources supplying the native load may be based on the historical use of the system, nonetheless states that they must be “commensurate with the firmness of the transmission flows ”133 .
[284] NLH has put forward an analysis of the scope of the obligations under the Power Contract between Hydro-Québec and CF(L)Co to determine whether they are conditional or suspensive obligations and concludes from its analysis that part of the quantities of power in that contract is deliverable if the power is available and that the obligations under the GWAC contract are conditional or suspensive. According to NLH, the power delivered under these contracts therefore cannot be considered power or firm capacity made available to Hydro-Québec.
[285] The Régie does not have to decide on the nature of the obligations of CF(L)Co under the Power Contract and the GWAC contract (conditional, suspensive, etc.) but rather, it should take account of what HQT has knowledge of, i.e. the quantities of power delivered to Hydro-Québec from the CF Generating Station which transit over its system. In other words, whether Hydro- Québec received, for over 40 years, the electricity produced by the CF Generating Station under firm or additional non-firm obligations agreed to by CF(L)Co does not change the historical reality of the electricity flows on the Hydro-Québec transmission lines from the CF Generating Station to supply Québec’s native load. As a result, the distinction drawn by expert witness Sinclair for NLH between “historical firm usage” and “historical non-firm usage” is irrelevant.
[286] The procedure for calculating the ATC set out in Attachment C of the OATT defines ATC as follows:
“Available Transfer Capability (ATC) is the amount of unused transfer capability after consideration of the system reliability margin and requirements to: (a) meet obligations of existing Transmission Service for the delivery of resources to Native-Load Customers; (b) meet obligations of existing contracts under which Transmission Service is provided; and (c) meet obligations of existing accepted or queued valid Applications for Transmission Service.”
133 NLH Outline of Argument, pages 75 and 76, paragraph 304.
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[287] Attachment C also states that industry guidelines and principles are applied to assess ATC: Good Utility Practice, Northeast Power Coordinating Council American Electric Reliability Corporation (NERC) and North American Energy Standards Board (NAESB) criteria and guidelines, as well as the criteria and guidelines applicable to HQT.
[288] NLH is not contesting how ATC is calculated on the CF Lines but rather, the data on which the calculation is based, namely the actual measured historical data rather than the firm transit values set out in the Power Contract.
[289] In fact, in the normal course of business, HQT does not have any information other than the actual historical flows measured on the CF Lines 134 to determine the ETC. HQT does not have access to other information allowing it to quantify the transit value on these lines 135 . It goes without saying that HQT cannot plan its system based on data from supply contracts of which it is unaware of the contents.
[290] It is useful to recall that open access to the electric power transmission markets or systems was not intended to limit the supply rights of native load customers or, consequently, to limit the historical electrical flows used for such purpose:
“To prevent native load customers from being harmed, FERC has determined that the native load customers of vertically-integrated utilities should have access to the same generation sources that they had access to prior to the implementation of open access 136 .”
“[…] The amount of transmission capacity available to wholesale and unbundled retail customers under the Final Rule pro forma tariff is clearly affected by the amount of transmission capacity that the transmission provider reserves for the use of its native load customers and the future load growth of those customers […] 137 .”
[291] Based on the evidence and the arguments submitted to it, the Régie finds that HQT complied with the OATT by calculating the ATC based on the historical electricity flows from the CF Generating Station.
134 SN, February 3, 2010, Volume 12, pages 95 and 96. 135 SN, February 3, 2010, Volume 12, page 98. 136 Exhibit HQT-30, report by P.Q. Hanser, December 2008, page 17, paragraph 43. 137 FERC Order 888, Docket Nos. RM-8-000 and RM94-7-001, page 323.
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7. COMPLAINT P-110-1597
7.1 NLH'S POSITION
[292] This complaint concerns application of the provisions of section 19.3 of the OATT:
"19.3 System Impact Study Procedures
[…]
In order for a request to remain a Completed Application, within forty-five (45) days of receipt of the System Impact Study, the Eligible Customer must either execute a Service Agreement or confirm its intention to execute a Facilities Study Agreement in a timely manner or, for connection of generating station, indicate which commitment under Section12A applies to its project and, where appropriate, confirm in writing its intention to execute in a timely manner a Facilities Study Agreement or a Connection Agreement, failing which the Application shall be deemed terminated and withdrawn. […]."
[293] According to NLH, application of those provisions raises two issues:
• Was the system impact study, paid for by NLH and conducted by HQT, carried out in strict compliance with the OATT? • Did NLH reply to HQT's requests within the 45-day time limit, thus interrupting the time limit stipulated in section 19.3 of the OATT?
7.1.1 STATUS OF THE SYSTEM IMPACT STUDY ON DECEMBER 11, 2007
[294] In order to find that the system impact study conducted by HQT was incomplete as at December 11, 2007, the date HQT sent the last impact study report to NLH 138 , and that the 45-day period stipulated in section 19.3 of the OATT could not begin to run from that date, NLH refers the Régie to a series of letters.
[295] The aforementioned letters, exchanged between NLH, HQT and Hydro-One in Ontario, concern, inter alia , the Ontario interties, the impact study conducted by HQT pursuant to the System Impact Study Agreement signed on March 7, 2006, the study
138 Exhibit NLH-11, Matter No. P-110-1597.
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conducted at NLH's request by Hydro-One in Ontario ( Concept Phase Study ) and whether the HQT's impact study was properly conducted by HQT, specifically as regards the Ontario interties.
[296] Firstly, NLH refers to a letter from HQT dated February 27, 2006 139 in which HQT informs NLH that the service request will require the study of a new Ontario DC intertie, which will involve coordination with Ontario. In that letter, HQT proposed that, given the scope of that study, to proceed according to a phased work plan.
[297] On June 2, 2006, HQT wrote to NLH 140 to inform it that its request for High Voltage Direct Current or HVDC service up to 1,422 MW to Ontario " can be potentially served through a number of possible paths, existing or future "). HQT added the following:
"Hydro-Québec TransÉnergie will study with the party that NLH will identify (Hydro One) all the direct paths between Quebec and Ontario, Two other paths can also be studied with two other neighbouring networks, namely, Cedar Rapids Transmission Company Limited ("CRT' ) and Brookfield."
[298] On July 28, 2006, NLH wrote to the Ontario IESO 141 to advise that organization that the system impact study respecting the future 1,250 MW HVDC line had been completed. It also put it in touch with an HQT representative.
[299] That letter also refers to the System Impact Assessment Application for Transmission Facilities by NLH filed with the IESO.
[300] On August 1, 2006, NLH informed HQT of its dealings with the IESO and that it authorized HQT to communicate with the IESO to send it the information required for the study that NLH had requested the IESO to conduct.
[301] On August 18, 2006 142 , HQT replied to NLH's August 1, 2006 letter. NLH understood from that letter (i) that HQT would not consider that path (1,250 MW HVDC) for its transmission service request, because it had already been reserved by HQP for the same period, (ii) that HQT had not stated that it was ceasing to study the other direct paths
139 Exhibit NLH-4-A, Matter No. P-110-1597. 140 Exhibit NLH-6A, Matter No. P-110-1597. 141 Exhibit HQT-38. 142 Exhibit NLH-6C, Matter No. P-110-1597.
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between Québec and Ontario and (iii) that HQT's reference to the study of the other direct paths referred to in the June 2, 2006 letter stood.
[302] On August 28, 2006, NLH replied to that letter from HQT 143 and asked HQT, until such time as a duly executed service agreement was signed by HQT and HQP, to continue to study the option of increasing the capacity of the 1,250-MW HVDC intertie beyond the initially planned capacity, just like all other paths between Québec and Ontario.
[303] NLH refers to HQT's reply dated September 27, 2006 144 , which, as NLH understands it, stated that the HQP reservation has priority over the HQT reservation and that that particular option would not be studied with the IESO.
[304] NLH stressed the fact that HQT and HQP signed an accelerated agreement on October 16, 2006 145 for firm point-to-point transmission service for 50 years over the new 1,250-MW HVDC Ontario intertie pursuant to section 19.8 of the OATT.
[305] The same day, HQT sent a letter to NLH 146 to confirm that the system impact study report on Option 5 would be completed December 15, 2006 and that it would not pertain to the 1,250-MW HVDC intertie.
[306] A series of written communications then ensued between NLH and HQT, on December 11, 2006 147 , December 22, 2006 148 , February 13, 2007 149 as well as a telephone conference involving representatives from Hydro-One , NLH and HQT respecting, inter alia , the different paths contemplated and studied by Ontario.
[307] NLH draws the Régie's attention to the following passage from the minutes 150 of the telephone conference referred to in the previous paragraph:
"Ontario states that all solutions should be deal [t] with Hawthorne. It is seems (sic) that the most interesting Ontario solution is through Hawthorne, because it entails fewer lines in Ontario and this is where the 500 kV main system is. Chat Falls is good for up to 700 MW, but only at 230 kV. Hawthorne is better suited for
143 Exhibit NLH-6D, Matter No. P-110-1597. 144 Exhibit NLH-6E, Matter No. P-110-1597. 145 Exhibit NLH-6F, Matter No. P-110-1597. 146 Exhibit NLH-6G, Matter No. P-110-1597. 147 Exhibit HQT-8, Document 1. 148 Exhibit HQT-9, Document 1. 149 Exhibit HQT-11, Document 1. 150 NLH Argument, p. 93, para 392.
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the higher MW and St-Lawrence site reinforcement is required even for 100 MW or 200 MW ."
[308] On March 22, 2007, Hydro-One completed the first version of the Concept Phase Study 151 .
[309] NLH submits that at that time it was clear, because Ontario would consider various paths from Québec in its report and that the Person in charge of system impact studies, as well as the business affairs division for HQT, was attending meetings with the IESO, that all paths between Québec and Ontario were necessarily going to be considered in the HQT system impact study, including the HQT-DYMO, HQT-OTTO, HQT-CHNO, HQT-Q4C, HQT-P33C and HQT-LAW paths.
[310] NLH stated that it was only informed of the various constraints related to the Ontario paths in question at the oral hearing of the complaints on February 2, 2010.
[311] Given HQT's apparent criticism of NLH for not having acted on the Concept Phase Study by then signing a Feasibility Study Agreement, NLH submits that because it was waiting for the final submission by HQT of the impact study for each option contemplated, it could not give precise instructions to Ontario for continuing the work, given that HQT had only delivered partial results and not a final system impact study.
[312] On October 24, 2007, NLH sent a letter to HQT 152 seeking specific information pertaining to the network upgrades and a partial interim transmission service over the NY, NB and NE interconnections, on which there was available capacity.
[313] On December 11, 2007, HQT replied to NLH 153 and informed it that the impact study pertaining to Option 2 of Request 1 was completed (the report was enclosed with that letter). HQT also enclosed with that letter the supplementary report on the NY, NB and NE interconnections.
[314] HQT then imposed, illegally according to NLH, a 45-day deadline by which NLH had to provide it with the following information: (i) NLH's selection of one of the five options, (ii) information concerning the Ontario intertie, specifically the location of the line that NLH intended to use and (iii) information respecting deliveries in Québec, the
151 Exhibit HQT-12, Document 1. 152 Exhibit NLH-26, Matter No. P-110-1597. 153 Exhibit NLH-11, Matter No. P-110-1597.
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location of the point of delivery, the identity of its co-contractant and the load to be supplied.
[315] NLH submits that it could not advise HQT of the location of the path that it intended to use to reach Ontario, when instructions to be given to the IESO for the Feasibility Study presupposed NLH obtaining information from HQT respecting the paths from Québec to Ontario.
[316] According to NLH, it was unable to act on the December 11, 2007 letter from HQT, and it was in that context that NLH sent its January 24, 2008 letter 154 to HQT, on the eve of the expiration of the 45-day time deadline given to it by HQT.
[317] In its January 24, 2008 letter, NLH submitted certain comments and grievances to HQT, including the following 155 :
• NLH stated that it wanted to sign a service agreement respecting the NY, NB and NE interconnections for 20 or 30 years; • It noted the failure of the system impact study report to consider the HQT-LAW and HQT-ON interties (1,250 MW HVDC) and requested that HQT complete the impact study for the purpose of providing information on those two interconnections; • It requested use point HQT for its deliveries into Québec and contested the relevance of the information requested by HQT; • It selected Option 5 for moving on to the next step of the process; • It filed a formal complaint regarding the 45-day deadline; • It confirmed its intention to sign a feasibility study agreement as soon as possible, the whole in accordance with section19.3 of the OATT.
[318] HQT's response to that letter from NLH arrived March 20, 2008 156 . HQT informed NLH as follows:
• HQT refused to sign a service agreement for NY, NB and NE claiming that the service could be provided only in accordance with the service request, and not "in parts or in sections";
154 Exhibit NLH-13, Matter No. P-110-1597. 155 Written argument of NLH, pp. 96 to 98, para 405. 156 Exhibit NLH-14, Matter No. P-110-1597.
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• It was of the view that the Alternating Current or AC interties were not covered by the system impact study agreement and that the HQT-LAW interconnection services a designated resource of the Distributor and was used to ensure reliability of the native load service and that therefore third parties may not use that interconnection; • It reiterated that NLH was required to provide the information (location of the interconnection, etc.) required respecting the Ontario intertie; • It reasserted its view that point HQT may not be used solely as a point of receipt for generating units on the HQT grid or to connect transmission receipt paths to transmission delivery paths in the context of a wheel-through ; • It reiterated its view that NLH could choose only one of the five options that it had identified in Request 1 for the propose of entering into a service agreement with HQT; • It rejected NLH's complaint, hence the filing by NLH of Complaint P-110-1597; • It reiterated its view that NLH was required to identify its co-contractant in Québec and its option into Ontario on order to move to the next stage (Feasibility Study ) and it informed NLH that it could therefore not move on to the feasibility study stage.
[319] Based on the facts specific to this complaint, NLH submits the following arguments.
[320] NLH relies on sections 1.21 and 19.3 of the OATT and, specifically, on the underlined passages to conclude that the impact study was not completed and that the 45- day period could not therefore run from December 11, 2007:
"1.21 System impact study: An assessment by the Transmission Provider of (i) the adequacy of the Transmission System to accommodate an Application for Point- to-Point Transmission Service , Network Integration Transmission Service or Native-Load Transmission Service; and (ii) the need to incur additional costs to provide Transmission Service . For a request to connect a generating plant, this study is called an “interconnection study". [Emphasis added by NLH]
"19.3 System Impact Study Procedures: upon receipt of an executed System Impact Study Agreement and the required technical data, the Transmission Provider shall use due diligence to complete the System Impact Study within one hundred and twenty (120) days, except for instances where the study requires more time, which shall be specified to the customer. The System Impact Study
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shall identify any system constraints and redispatch options or Network Upgrades required to provide the required service, and the estimated cost and time for Network Upgrades . In the event that the Transmission Provider is unable to complete the System Impact Study within such time period, it shall so notify the Eligible Customer and provide an estimated completion date along with an explanation of the reasons why additional time is required to complete the required studies. A copy of the completed System Impact Study and related work papers shall be made available to the Eligible Customer. The Transmission Provider shall use the same due diligence in completing the System Impact Study for an Eligible Customer as it uses when completing studies for itself […]"[Emphasis added by NLH]
[321] NLH's grievance in respect of the impact study is that HQT had not identified and properly assessed all the system constraints as required by section19.3 of the OATT. As HQT had not identified all the elements in question, logic dictates that the 45-day period could not begin to run.
[322] According to NLH, HQT also had not identified the redispatch option or the possibility of overdimensioning the 1,250-MW HVDC Ontario intertie, contrary to the provisions of section 19.3 of the OATT.
[323] NLH also repeated its argument to the effect that the ATC had not been properly determined by HQT and that, therefore, it was impossible for NLH to ascertain if the impact study was complete.
[324] NLH submits that, although various interconnection options were being studied in Ontario, the Hawthorne and HQT-LAW options had not been studied by HQT, contrary to its undertaking to study all direct paths .
[325] NLH contests HQT's claim to the effect that NLH had requested that the study be limited to DC interties. NLH stated that it had merely expressed a preference for that type of interconnection.
[326] According to NLH, HQT had been discriminatory in considering a "preference" for a DC intertie and for having disregarded the other options.
[327] NLH further submits that by refusing to study the HQT-LAW option because the Beauharnois generating station was a resource designated to service the native load, HQT derogated from what it had maintained before the Régie in 2002 to the effect that it is the heritage pool and not the generating stations that are designated resources.
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[328] HQT should have explained, in the impact study, why the HQT LAW interconnection could not accommodate NLH's service request. HQT also should have studied a redispatch option and not only restrict the study to network upgrades.
[329] According to NLH, from the impact study it could not be ascertained if HQT had assessed the possibility of relieving a constraint more economically by a new redispatch.
[330] Lastly, on that issue, NLH adds that the impact study should have been accompanied by working documents. As long as there were no such working documents, the 45-day time limit could not begin to run.
7.1.2 INTERRUPTION OF THE 45-DAY TIME LIMIT STIPULATED IN SECTION 19.3 OF THE OATT
[331] NLH submits that in its letter of January 24, 2008 to HQT, it clearly stated its intention to enter into a facilities study agreement. It had complied with the provisions of section 19.3 of the OATT and the 45-day time limit could not, therefore begin to run:
"19.3 […] In order for a request to remain a Completed Application, within forty- five (45) days of receipt of the System Impact Study, the Eligible Customer must either execute a Service Agreement or confirm its intention to execute a Facilities Study Agreement in a timely manner […]."
Letter of January 24, 2008: "Notwithstanding the points made in this letter regarding the completion of the SIS, we wish to officially notify you of our intent to enter into Facilities Study Agreement(s) as required in accordance with section 19.3 of the OATT. We are of the view that following completion of the SIS, any remaining outstanding matters identified in your letter dated December 11, 2007, can be resolved during the negotiation of the Facilities Study Agreement(s), and pending resolution of the outstanding regulatory issues before the Régie de l'énergie, we can move forward on a timely basis 157 ." [Emphasis added by NLH]
[332] NLH concludes its argument respecting this complaint by reiterating that the impact study it received was incomplete, that HQT must complete it and, therefore, that the 45-day time limit stipulated in section 19.3 of the OATT cannot be set up against it.
157 NLH Argument, pp. 117 and 118, para 480.
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7.2 HQT'S POSITION
[333] As far as HQT is concerned, this complaint concerns whether the impact study conducted by HQT was complete on December 11, 2007 and if it had been conducted in compliance with OATT provisions 158 .
[334] Specifically, HQT responded to the following grievances of NLH:
• Failure to study options allowing for wheel-through transactions into Ontario; • Failure to study use of the Ontario AC interconnection; • Failure to study the possibility of redispatch; • Failure to study use of the HQT-LAW interconnection and path to Ontario and use of the Beauharnois generating station; • Failure to study use of the new 1,250-MW HVDC Ontario intertie, under construction in 2010 and now in operation.
[335] HQT also noted certain facts to which it wishes to draw the Régie's attention 159 :
• NLH's Request 1 specifically required an HVDC intertie; • The impact study covered the five distinct options requested by NLH; • The March 7, 2006 Impact Study Agreement specifically stipulated that HQT was to conduct the system impact study over its system and that it was not responsible for making any arrangement regarding any other entity's system but that it would assist NLH in that regard; • On February 27, 2006, HQT confirmed the scope of its study and stated that the request necessitated a new study for a new DC Ontario intertie; there was no question of an AC interconnection; • HQT confirmed to NLH that the 1,250-MW HVDC intertie could not be considered for the purpose of the impact study because of HQP's reservation that took priority over that of NLH 160 ; • On July 28, 2006 161 , NLH asked HQT to study the possibility of increasing the capacity of the 1,250-MW HVDC intertie or to build another one. NLH's request always concerned a DC intertie;
158 SN, February 11, 2010, Vol. 17, p. 26. 159 SN, February 11, 2010, Vol. 17, pp. 28 to 40. 160 Exhibit NLH-6C, Matter No. P-110-1597, letter of August 18, 2006.
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• On March 22, 2007, HQT received the Concept Phase Study from Hydro-One , which clearly states that receipt in Ontario of 700 to 1,500 MW from the Hydro-Québec system required construction of a new DC intertie. HQT emphasized Mr. Deguire's uncontradicted testimony explaining the Hydro-One report; • Production of the reports constituting the impact study followed. The report on Option 2, dated December 11, 2007, is the last report; • On the same date, HQT asked NLH to confirm certain things that had been assumed in connection with the impact study but details of which were necessary in order to move onto the facilities study stage. HQT specifically asked NLH to identify its selected option; • On January 18, 2008, HQT sent NLH the working documents further to the signing of a confidentiality agreement; • On January 24, 2008, NLH sent a letter to HQT stating that it considered the impact study incomplete and, according to HQT, changed several aspects of its request. For the first time, NLH raised the possibility of using the HQT-LAW AC interconnection. NLH did not indicate its selected option in that letter, as requested by HQT. In the same letter, NLH lodged a complaint; • On March 20, 2008, HQT advised NLH of its decision regarding the complaint and confirmed that the information provided by NLH was insufficient and did not allow for moving onto the facilities study phase.
[336] HQT submits that it conducted an impact study of all NLH's Request 1 options, in compliance with the OATT.
[337] HQT refers the Régie to specific provisions of section 19.3 of the OATT pertaining to conducting a system impact study:
"19.3 System Impact Study Procedures: upon receipt of an executed System Impact Study Agreement and the required technical data, the Transmission Provider shall use due diligence to complete the System Impact Study within one hundred and twenty (120) days, except for instances where the study requires more time, which shall be specified to the customer. The System Impact Study shall identify any system constraints and redispatch options or Network Upgrades required to provide the required service, and the estimated cost and time for Network Upgrades ." [Emphasis added by HQT]
161 Exhibit HQT-38.
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[338] HQT refers the Régie to Mr. Deguire's testimony explaining how HQT assessed NLH's request 162 : the establishment of a basic minimum power system, identification of system constraints, evaluation of available capacities and of the redispatch of resources, testing of the different scenarios in order to present NLH with the optimal scenario in conformity with the OATT.
[339] HQT noted that the scope of the impact study must be distinguished from what must be delivered to the customer in the report. The report must pertain to the required service, as stipulated in section19.3 of the OATT. In the case of NLH's Request 1, the required service involved, inter alia , a new Ontario HVDC intertie.
[340] HQT refers to Mr. Deguire's uncontradicted testimony explaining that HQT's practices in conducting impact studies are the same for all customers and are in compliance with the provisions of section 19.3 and of Attachment D of the OATT 163 .
[341] Regarding NLH's grievance to the effect that HQT had not studied redispatch, HQT quotes expert Hanser on the definition of the concept:
"Redispatch refers to a situation in which a vertically-integrated utility dispatches its generation out of merit [in] order to (i.e. relatively low-cost generation is displaced by more expensive generation, or economical power purchases are curtailed) to free up transfer capability to accommodate a request for third-party transmission service 164 ."
[342] HQT also refers to the FERC order in that respect: " redispatch is required only if it can be achieved while maintaining reliable operation of the transmission system in accordance with prudent utility practice 165 ". FERC Order No. 890 also addresses that issue:
"The resources identified in the system impact study need not be available to provide the dispatch. Customers must simply be provided with the set of generators that could, if available , make a significant contribution toward relieving the constrained facility at issue 166 ."[Emphasis added by HQT]
162 SN, February 11, 2010, Vol. 17, pp. 40 and 41. 163 SN, February 11, 2010, Vol. 17, specifically pp. 42 to 46. 164 HQT's Statement of Position and Argument, Matter No. P-110-1597, p. 16, para 71. 165 HQT's Statement of Position and Argument, Matter No. P-110-1597, p. 17, FERC Order No, 888, April 24, 1996, p. 307. 166 HQT's Statement of Position and Argument, Matter No. P-110-1597, p. 17, para 78.
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[343] According to HQT, the redispatch of resources " is generally not a satisfactory answer for ensuring firm long-term transmission service for higher capacity levels, as it is not technically feasible and could compromise the system 167 ".
[344] In that respect, HQT notes that the redispatch of resources requires the consent of the owners of the generation resources. Thus, the generating stations deemed to be designated resources could not become available to complete a firm long-term point-to- point service request as contemplated by NLH 168 .
[345] Lastly, on that issue, HQT emphasized that there is no evidence establishing that a redispatch of resources would have been a more economic way of satisfying NLH's service request 169 .
[346] HQT then dealt with NLH's allegation that it did not study an Ontario AC interconnection. It notes that one month after Request 1, it confirmed that the impact study would require consideration of a new Ontario DC intertie 170 .
[347] According to HQT, it was not up to it to unilaterally amend Request 1 and to contemplate, for the purpose of the impact study, a transmission service different from that requested by NLH 171 .
[348] The study conducted by Hydro-One further confirmed that at three locations considered, namely Hawthorne, St-Lawrence and Chat Falls, it would be necessary to build new DC interties, new lines, substations and other equipment on the Ontario grid 172 .
[349] As regards using the HQT-LAW path to Ontario, HQT noted that it was not under an obligation to study the possibility of using the Beauharnois generating station and that interconnection because it was an AC interconnection and, in any event, as HQT's witness Rioux explained, HQT cannot dispense with that generating station to reliably supply the Québec native load 173 .
167 HQT's Statement of Position and Argument, Matter No. P-110-1597, p. 16, para 73. 168 SN, February 11, 2010, Vol. 17, p. 52. 169 SN, February 11, 2010, Vol. 17, pp. 52 and 53. 170 SN, February 11, 2010, Vol. 17, pp. 60 and 61. 171 SN, February 11, 2010, Vol. 17, p. 61. 172 SN, February 11, 2010, Vol. 17, pp. 69 and 70; Exhibit HQT-12, Document 1; Testimony of C. Deguire, SN, February 3, 2010, Vol. 12, pp. 111 to 120. 173 SN, February 11, 2010, Vol. 17, pp. 73 and 74; Testimony of L.-O. Rioux, SN, February 5, 2010, Vol. 14, pp. 128 to 131.
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[350] Lastly, as regards using that generating station and the HQT-LAW path, HQT refutes NLH's argument to the effect that the generating station cannot be a designated resource by virtue of the fact that it would be used for third party sales. HQT emphasized that interruptible sales are permissible and that it does not therefore forsake its qualification as a " designated resource generating station ". According to HQT, there was no evidence to the contrary. Moreover, witness Rioux noted that the generating station is not used for non-interruptible or firm sales 174 .
[351] Regarding the issue of increasing the capacity of the 1,250-MW HVDC intertie, the evidence was to the effect that this hypothesis was not possible 175 . The Concept Phase Study conducted by Hydro-One in Ontario confirmed that it was impossible for the Ontario network to receive greater electricity through that interconnection 176 . Thus, the Ontario study found that it would be necessary to build a new interconnection with a DC converter 177 .
[352] As regards the issue of whether the impact study was complete on December 11, 2007 and if that date must be regarded as commencement of the 45-day period in section 19.3 of the OATT, HQT emphasized that it reminded NLH on several occasions that delivery of the last report would mark the end of the impact study. NLH never contested that before its January 24, 2008 letter to HQT on the eve of the expiration of the 45-day period 178 .
[353] According to HQT, two things must be distinguished: completion of the impact study and contestation of the content of the study. Just because NLH contests the content of the impact study that does not give rise to a presumption that it was conducted in contravention of the OATT 179 .
[354] As regards conducting the impact study, HQT noted that it was not acting as NLH's consultant to help it develop its project but that its obligation was to accommodate NLH's request 180 . HQT's obligation regarding the report sent to NLH was restricted to
174 Testimony of L.-O. Rioux, SN, February 5, 2010, Vol. 14, p. 130, questions 319 and 320. 175 SN, February 11, 2010, Vol. 17, p. 76 et seq.. 176 SN, February 11, 2010, Vol. 17, p. 77; Exhibit HQT-12, Document 1; Testimony of S. Clermont, SN, January 29, 2010, Vol. 9, pp. 106 to 108, questions 161 to 163; Testimony of C. Deguire, SN, February 3, 2010, Vol. 12, pp. 113, 122 and 123. 177 SN, February 11, 2010, Vol. 17, p. 78. 178 SN, February 11, 2010, Vol. 17, pp. 78 and 79. 179 SN, February 11, 2010, Vol. 17, pp. 79 and 80. 180 SN, February 11, 2010, Vol. 17, p. 81.
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formulating a single least-cost transmission grid expansion project that took into account various pertinent factors. HQT noted that it is in the best position to determine the optimal scenario. In that respect, it noted the deference applicable to the exercise of its discretion and cites several authorities on that point 181 .
[355] HQT further noted that no evidence has been submitted to establish that the content of the impact study and of the reports was inadequate182 .
[356] Thus, NLH's contestation of the impact study cannot, according to HQT, delay commencement of the 45-day time limit of section 19.3 of the OATT, specifically because the information required by HQT on December 11, 2007 was necessary and NLH had not provided it 183 .
[357] Moreover, HQT submitted that it studied the impact of wheel-through transactions into Ontario contained in all Request 1 options over its entire grid. It studied the impact of those requests for wheel-through transaction into Ontario up to the Chénier substation and made concrete assumptions for the connection of that new Ontario intertie. Therefore, according to HQT, it was missing NLH's reply regarding what it wanted to do and where it wanted the service loop to be made.
[358] The impact study was therefore completed on December 11, 2007 and the 45-day time limit of section 19.3 of the OATT must be applied to NLH like any other HQT customer 184 .
[359] Thus, NLH's letter of January 24, 2008 did not meet OATT conditions and could not interrupt the 45-day period 185 . According to HQT, it was not sufficient that NLH stated its intention at the end of that letter to move onto the facilities study phase and to sign a facilities study agreement. The letter changed several aspects of Request 1 to which the impact study pertained: new undefined wheel-in/wheel-out regarding the receiving party, the load ultimately serviced and use of the Beauharnois generating station. Moreover, NLH failed to provide HQT with the required information on the selected option.
181 P. Garant, Droit administratif , 5 e édition, Les Éditions Yvon Blais, 2004, pp. 206 to 209. 182 SN, February 11, 2010, Vol. 17, p. 83. 183 SN, February 11, 2010, Vol. 17, pp. 84 to 88. 184 SN, February 11, 2010, Vol. 17, pp. 87 and 88. 185 SN, February 11, 2010, Vol. 17, p. 91 et seq.
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[360] HQT noted that the information that it requested from NLH on December 11, 2007 was fully justified, because a facilities study is used to refine the work done in the impact study. The information required by HQT to carry out the facilities study is much more precise 186 .
[361] HQT refutes 187 NLH's argument to the effect that HQT's letter dated June 2, 2006 obliged it to study " all the direct paths between Quebec and Ontario " whereas it was clear that HQT was studying what it had been requested to study, namely an HVDC intertie.
[362] Regarding this complaint, HQT submitted in conclusion 188 that the impact study conducted by witness Deguire's team was complete and that it had been conducted in compliance with the OATT. The reports provide the optimal scenarios for each option, and transmission to Ontario was studied as completely as the other services. All that remained was for NLH to confirm what it wanted to do. The impact study was therefore declared complete on December 11, 2007.
7.3 NLH'S REPLY
[363] NLH reiterated that HQT should have considered building new HVDC interties given Hydro-One's findings in the Concept Phase Study .
[364] NLH reiterated that its letter of January 24, 2008 did not contain a new request and that NLH stated therein its intention to move on to the feasibility study phase. NLH further argued that the impact study could not be considered complete because as at December 11, 2007, it had not received any working documents 189 .
[365] NLH referred again to HQT's letter of June 2, 2006 190 , which stated that HQT would study " all the direct paths " to Ontario. According to NLH, this was not done and the impact study is incomplete 191 .
186 SN, February 11, 2010, Vol. 17, pp. 89 and 93. 187 SN, February 11, 2010, Vol. 17, pp. 94 to 97. 188 SN, February 11, 2010, Vol. 17, pp. 107 and 108. 189 Exhibit B-113, NLH Reply, p. 30, para 165. 190 Exhibit NLH-6A, Matter No. P-110-1597. 191 Exhibit B-113, NLH Reply, p. 32.
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[366] NLH refutes HQT's argument concerning the scope of application of section 19.3 of the OATT and the distinction made by the OATT between the scope of the impact study and what must be delivered to the customer. According to NLH, the impact study must list all system constraints, identify all options and explain why a redispatch of resources cannot be done. It notes that it did not receive explanations on those issues in the impact study, and only heard them at the oral hearing of the complaints 192 .
[367] NLH argues that it was not required to submit evidence to establish that the impact study was not complete. In its view, it suffices to refer to the wording of section 19.3 of the OATT to find that the study did not contain the essential elements required by that OATT provision 193 .
7.4 THE RÉGIE'S OPINION
[368] The HQT decision at the origin of this Complaint is its March 20, 2008 letter 194 in reply to NLH's letter of January 24, 2008 195 .
[369] This complaint raises two issues:
• Was the Request 1 impact study conducted in compliance with Hydro-Québec's Open Access Transmission Tariff (OATT)? • Was the 45-day period stipulated in section 19.3 of the OATT applied in compliance with OATT provisions?
[370] The measures or adjustments that the NLH asks the Régie to order pursuant to section 101 of the Régie de l'énergie Act are set forth in the following conclusions of this Amended Complaint:
"GRANT the present complaint of NLH;
DECLARE ORDER HQT 196 to consider that the System Impact Study for Reservation for firm long-term point-to-point transmission service number
192 Exhibit B-113, NLH Reply, pp. 32 and 33. 193 SN, 1February 2, 2010, Vol. 18, p. 80. 194 Exhibit NLH-14, Matter No. P-110-1597. 195 Exhibit NLH-13, Matter No. P-110-1597. 196 Conclusion amended by NLH during argument; see NLH Outline of Argument, page 20, paragraph 75.
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101 is not completed and that consequently, the 45 days deadline was not in effect on December 11, 2007;
ORDER HQT to modify the status as “pending” instead of “completed” on the “Table of Impact Studies” found on HQT’s website under the heading “Impact studies” referring to the System Impact Study No. 101T until the Régie de l’énergie resolves the present complaint.
ORDER HQT to calculate the Available Transmission Capacity between Labrador and Québec pro perly, disclose this information to NLH and amend the SIS as necessary; 197
ORDER HQT to annul the existing HQT -ON transmission service agreement and to undertake to offer the export capacity on the HQT -ON path to all market participants in a non -discriminato ry manner. 198
ORDER HQT to provide complete information on redispatch or reconfiguration scenarios, system constraints and network upgrades regarding interconnection into Ontario in order to enable NLH to make an informed decision."
7.4.1 WAS THE REQUEST 1 IMPACT STUDY CONDUCTED IN COMPLIANCE WITH THE OATT?
[371] To answer that question, reference must be made to the following: (i) the regulatory framework established by section 19.3 and Attachment D of the OATT, (ii) NLH's Request 1 to ascertain the transmission service that was requested 199 , (iii) the System Impact Study Agreement 200 indicating the points agreed upon by the parties from the outset and (iv) the documentary evidence and testimony respecting the manner in which the study was conducted.
7.4.1.1 The regulatory framework
[372] The provisions of the OATT applicable to the procedure and methodology for conducting an HQT system impact study are as follows:
197 Conclusion withdrawn by NLH and formally noted by the Régie in Decision D-2009-026. 198 Conclusion cancelled by Decision D-2009-026. 199 Exhibit NLH-1, Matter No. P-110-1597, January 19, 2006. 200 Exhibit NLH-5, Matter No. P-110-1597, dated February 20, 2006 but signed March 7, 2006 by NLH.
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"1.21 An assessment by the Transmission Provider of (i) the adequacy of the Transmission System to accommodate an Application for Point-to-Point Transmission Service , Network Integration Transmission Service or Native- Load Transmission Service; and (ii) the need to incur additional costs to provide Transmission Service. For a request to connect a generating plant, this study is called an “interconnection study”.
19.3 System Impact Study Procedures: upon receipt of an executed System Impact Study Agreement and the required technical data, the Transmission Provider shall use due diligence to complete the System Impact Study within one hundred and twenty (120) days, except for instances where the study requires more time, which shall be specified to the customer. The System Impact Study shall identify any system constraints and redispatch options or Network Upgrades required to provide the required service , and the estimated cost and time for Network Upgrades. In the event that the Transmission Provider is unable to complete the System Impact Study within such time period, it shall so notify the Eligible Customer and provide an estimated completion date along with an explanation of the reasons why additional time is required to complete the required studies. A copy of the completed System Impact Study and related work papers shall be made available to the Eligible Customer . The Transmission Provider shall use the same due diligence in completing the System Impact Study for an Eligible Customer as it uses when completing studies for itself. The Transmission Provider shall inform the Eligible Customer immediately upon completion of the System Impact Study of whether the Transmission System will be adequate to accommodate all or part of the service request , or whether costs are likely to be incurred for Network Upgrades. In order for a request to remain a Completed Application, within forty-five (45) days of receipt of the System Impact Study, the Eligible Customer must either execute a Service Agreement or confirm its intention to execute a Facilities Study Agreement in a timely manner […]
ATTACHMENT D
Methodology for Completing a System Impact Study
1. The System Impact Study is conducted as follows:
(1) System impact shall be assessed based on reliability requirements to:
(a) meet obligations under Service Agreements entered into prior to the effective date of the Hydro-Québec Open Access Transmission Tariff (OATT );
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(b) meet obligations for accepted or queued valid Applications under the OATT ;
(c) meet planned emergency generation import requirements;
(d) account for power flows reasonably expected to occur on the Transmission System to supply Native-Load Customers;
(e) maintain thermal, voltage and stability performance of the system in accordance with the guidelines and principles; and
(f) consider the ability of the system to withstand, under transfer conditions, severe but credible disturbances without experiencing cascading outages, voltage collapse or widespread blackouts, in accordance with the guidelines and principles.
(2) The Transmission System shall be assessed following the guidelines and principles below:
(a) explore the adequacy of the Transmission System to accommodate an Application for Transmission Service;
(b) determine whether any additional costs must be incurred in order to provide Transmission Service; and
(c) discover any other potential problems.
(3) If the requested use cannot be accommodated without impairing system reliability, the System Impact Study analyzes the impact of the proposed Application for Transmission Service on thermal capacity, transient stability and voltage stability of the Transmission System. Where operating guidelines can be used to increase the available Transfer Capability, such guidelines are to be used and if the operating procedure is to be exercised in another Control Area, the applicant for Transmission Service shall contact that other Control Area to determine the general availability of the operating procedure.
(4) If the System Impact Study indicates that Network Upgrades are needed to supply the applicant’s Application for service, the procedures shall be the same as those used by the Transmission Provider for its own system expansion. The least-cost transmission expansion plan, considering but not limited to such factors as present value cost, losses, environmental aspects and reliability, shall be developed for review by the Transmission Provider. Based on the study results, the Transmission Customer can decide whether to proceed, modify or cancel its Application.
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(5) Immediately upon receipt of a Facilities Study Agreement, the Transmission Provider performs a more precise engineering estimate of the costs of the Network Upgrades .
2. Guidelines and principles followed by the Transmission Provider - The Transmission Provider is a member of NPCC. When conducting a System Impact Study, the Transmission Provider applies the following rules, as amended and/or adopted from time to time:
(a) Good Utility Practice;
(b) NPCC criteria and guidelines; and
(c) Hydro-Québec criteria and rules.
3. Transmission System model representation – The Transmission Provider estimates Total Transfer Capability (TTC) using Transmission System models based on a library of power flow cases prepared by the Transmission Provider for studies of the Transmission Provider’s Control Area. The models may include representations of other NPCC and neighboring systems. This library of power flow cases is maintained and updated as appropriate by the Transmission Provider and NPCC. The Transmission Provider uses system models that it deems appropriate for studying the Application for Transmission Service . Additional system models and operating conditions, including assumptions specific to a particular analysis, may be developed for conditions not available in the library of power flow cases. The system models may be modified, if necessary, to include additional system information on loads, power flows and system configurations, as it becomes available.
4. System conditions - The loading on all Transmission System elements shall be within normal ratings for pre-contingency conditions and within emergency conditions for post-contingency conditions. Transmission System voltage shall be within the applicable normal and emergency limits for pre- and post- contingency conditions respectively.
5 Short circuit - Transmission System short-circuit currents shall be within applicable equipment design rating.
6. Loss evaluation - The impact of losses on the Transmission Provider's Transmission System is taken into account in the System Impact Study to ensure Good Utility Practice in evaluating costs to accommodate the Application for Transmission Service.
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7. System protection - Protection requirements are evaluated by the Transmission Provider to determine the impact on existing system protection ."
[Emphasis added]
[373] It should be noted from the outset that if Attachment D of the OATT prescribes the methodology for conducting a System Impact Study, its application by HQT concerns technical questions, and a certain latitude required by the nature of the work is afforded to HQT as the expert. That is clear from the following expressions used in Attachment D:
"[...] discover any other potential problems [...] [...] considering but not limited to such factors as [...] [...] Good Utility Practice [...] [...] The Transmission Provider uses system models that it deems appropriate for studying the Application for Transmission Service [...] [...] Additional system models and operating conditions, including assumptions specific to a particular analysis, may be developed [...] [...] The system models may be modified [...]."
[374] Thus, in order to find that the content of a Transmission System Impact Study does not satisfy the abovementioned regulatory and technical standards, preponderant technical evidence would be required.
[375] Sections 13.5 and 15.4 cited by HQT are also pertinent to the issues of redispatch and HQT's latitude in designing and building its facilities:
"13.5 Transmission Customer Obligations for Network Upgrade or Redispatch Costs: In cases where the Transmission Provider determines that the Transmission System is not capable of providing Firm Point-to- Point Transmission Service without (1) degrading or impairing the reliability of service to Native-Load Customers, Network Customers and other Transmission Customers taking Firm Point-to-Point Transmission Service, or (2) interfering with the Transmission Provider's ability to meet prior firm contractual commitments to other customers, the Transmission Provider shall be obligated to expand or upgrade its Transmission System pursuant to Section 15.4. The Transmission Customer shall agree to compensate the Transmission Provider for any Network Upgrades pursuant
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to the terms of Section 27. To the extent the Transmission Provider can relieve any system constraint by redispatching the Transmission Provider's resources, it shall do so, provided that the Eligible Customer agrees to compensate the Transmission Provider pursuant to Section 27.
15.4 Obligation to Provide Transmission Service Requiring Transmission System Expansion or Modification: If the Transmission Provider determines that it cannot accommodate a Completed Application for Point- to-Point Transmission Service because of insufficient capability on its Transmission System, the Transmission Provider shall use due diligence to expand or modify its Transmission System to provide the requested Transmission Service, provided the Transmission Customer agrees to compensate the Transmission Provider for such costs pursuant to the terms of Section 27. The Transmission Provider shall be consistent with Good Utility Practice in determining the need for Network Upgrades and in the design and construction of such upgrades . This obligation applies only to those facilities that the Transmission Provider has the right to expand or modify." [Emphasis added]
7.4.1.2 NLH's Request for service
[376] HQT was required to conduct an impact study of its system based on NLH's request 201 . The request was for 30-year firm point-to-point transmission service from the Gull Island and Muskrat Falls generating stations to Labrador on the basis of five specific options detailed in the table in paragraph 23 of this Decision:
• For each option, the same electricity reception point is specified, namely the Montagnais substation, the destination of CF Generating Station lines 7051, 7052 and 7053; • The power deliverable at the Montagnais substation varies for each option, from 1,200 MW (Option 1) to 2,824 MW (Option 5); • The points of delivery and the specific power delivered vary for each option and are distributed among Québec, Ontario, New England, New Brunswick and New York; • For deliveries in Ontario, the Request for service specifies an HVDC intertie to the Ontario system;
201 Service Request 1, Exhibit NLH-1, Matter No. P-110-1597, January 19, 2006.
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• Regarding the location of the charge to be ultimately supplied, the request indicates Ontario IESO, Hydro-Québec, NB Power, New England Independent System Operator (ISO) and New York ISO.
7.4.1.3 The impact study agreement
[377] The parties signed a System Impact Study Agreement 202 on March 7, 2006 containing the following noteworthy passages:
"[…] The System Impact Study will be performed for five (5) options as described in the transmission service request […]
[…] The System Impact Study will identify the modifications required to Hydro-Québec TransÉnergie’s transmission system to provide the requested transmission service […]
Hydro-Québec TransÉnergie will perform the System Impact Study with regard to its own transmission system only […] Hydro-Québec is not responsible for making arrangements for any necessary engineering, permitting, and construction of transmission or distribution facilities on the system(s) of any other entity or for obtaining any regulatory approval for such facilities. Hydro-Québec TransÉnergie will undertake reasonable efforts to assist NLH in obtaining such arrangements […]
As soon as the System Impact Study is completed, Hydro-Québec TransÉnergie will provide the following technical documents and information: A description of the system modifications that could be necessary to provide the requested transmission service over Hydro- Québec TransÉnergie’s transmission system for each of the five (5) options specified in the service request ; the estimated cost of the system modifications identified above expressed in 2006 dollars and their associated completion delays; whether a Facilities Study is required to further analyse modifications to Hydro-Québec TransÉnergie’s transmission system […]
Hydro-Québec TransÉnergie may revise its cost estimates and its date of completion should there be significant revisions to NLH’s request , significant delays in obtaining necessary information from NLH or for any valid reason not under Hydro-Québec TransÉnergie’s control […]." [Emphasis added]
202 Exhibit NLH-5, Matter No. P-110-1597, dated February 20, 2006 but signed March 7, 2006 by NLH.
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[378] In this impact study agreement, the parties agreed to limit the study to the five options described in Request 1. The parties also agreed to the following deliverable upon completion of the aforementioned impact study: " A description of the system modifications that could be necessary to provide the requested transmission service over Hydro-Québec TransÉnergie’s transmission system for each of the five (5) options specified in the service request […]".
7.4.1.4 The evidence
[379] NLH's allegation that the impact study is not complete is based on the fact that HQT limited its study to DC interties, whereas NLH had " merely indicated a preference for that type of intertie 203 ".
[380] However, the HQT letter of June 2, 2006 204 , NLH's Request for service 205 and the system impact study agreement 206 are clearly to the effect that the study would concern the HVDC intertie:
• Respecting deliveries in Ontario, the NLH Request for service specified " via HVDC intertie-same for options 2 to 5 "; • The impact study agreement provides that " The System Impact Study will be performed for five (5) options as described in the transmission service request […]"; • On February 27, 2006, HQT confirmed 207 the scope of its study and stated that the request would require a new study for a new DC intertie to Ontario. That letter makes no reference to an AC intertie: "[…] However, NLH’s Request for transmission service also requires transmission of this electrical energy under five options to a number of delivery points: Ontario: The requested transmission service requires the study of a new DC intertie with Ontario in addition to the DC tie that is already under study. This is a major study that will require extensive reviews of
203 NLH Outline of Argument, page 113, paragraph 456. 204 Exhibit NLH-6-A, Matter No. P-110-1597. 205 Exhibit NLH-1, Matter No. P-110-1597. 206 Exhibit NLH-5, Matter No. P-110-1597. 207 Exhibit NLH-4-A, Matter No. P-110-1597.
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possible routes including a crossing of the Outaouais River. This will obviously involve coordination work with the relevant entities in Ontario […]"; • The HQT letter of June 2, 2006 stated: " Your request for a maximum 1,422 MW HVDC transmission service to Ontario can be potentially served through a number of possible paths, existing or future. Hydro-Québec TransÉnergie will study with the party that NLH will identify (Hydro-One) all direct paths between Québec and Ontario […]".
[381] Witnesses Deguire and Clermont dealt with the DC intertie issue and their testimony is to the following effect:
• Engineer Deguire, under whose direction the impact study was conducted, clearly stated at the hearing that he had considered the customer's request for a maximum 900 MW back-to-back HVDC intertie to satisfy the request for 895 MW 208 ; • For HQT, NLH's choice of a DC intertie was logically necessary to satisfy Request 1 in an effective manner, considering, inter alia , that the HQT system is not synchronized with the adjacent systems 209 and that new interties added to the system are typically DC interties 210 ; • HQT acted on the basis of NLH's requirement in conducting the impact study, in accordance with its design criteria and the characteristics of the Québec Intertie 211 ; • Witness Clermont explained that, given the breadth of the study and the costs to the customer, HQT's impact study focused on what was requested for the required service, namely in this case, a DC intertie, and not on just any assumption 212 .
[382] On the issue of the DC intertie, HQT submits the following in argument:
"89. In the context of the "Québec Intertie" (namely one of the four major systems as defined in the NAESB glossary) an AC intertie is used to connect
208 SN, February 3, 2010, Volume 12, pages 51 and 52. 209 Testimony of C. Deguire, SN, February 3, 2010, Volume 12, page 173. 210 Testimony of S. Clermont, SN, January 29, 2010, Volume 9, page 87. 211 Exhibit HQT-30, report of P.Q. Hanser, December 2008, page 23, paragraph 62; testimony of S. Clermont, SN, January 29, 2010, Volume 9, pages 81 to 83. 212 Testimony of S. Clermont, SN, January 29, 2010, Volume 9, page 54.
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a generating station to a load and the production or load must be isolated on the adjacent system. The AC interties connecting Québec and the other systems all have this feature;
90. These features ensure that that it is the owner of the generating station upstream of the intertie who controls its use and who must give its consent respecting any request to use its resources in this particular intertie method;
Attachment C of the OATT ("Attachment C");
91. Conversely, a DC intertie corresponds to a different technology that does not have the same operating and usage constraints. As systems that exchange capacity and energy are not synchronized, the system equipment can be programmed to exchange a precise capacity and amount of energy and are not subject to the constraints connected with synchronous equipment;
92. The very basis of NERC recognition of the Québec Intertie is the fact that its exchanges of energy with the adjacent systems are asynchronous (or with synchronized equipment on the other system). HQT system design criteria retain the features of the Québec Intertie and hence DC interties are preferred for wheel-in and wheel-out transactions;
95. NLH was unfounded in describing that specification, for the first time on the eve of the expiry of the 45-day period as a "mere preference" whereas on numerous occasions during the conduct of the impact it had been advised study that HQT's analysis concerning the service to Ontario involved a DC intertie;
HQT letter to NLH dated February 27, 2006, Exhibit NLH-4-A, Tab 24:
Ontario: The requested transmission service requires the study of a new DC intertie with Ontario in addition to the DC tie that is already under study. This is a major study that will require extensive reviews of possible routes including a crossing of the Outaouais River. This will obviously involve coordination work with the relevant entities in Ontario.
See also Exhibits NLH-5 in support of Complaint P-110-1565 (Tab 21), NLH-6-A (Tab 26), NLH-6-C (Tab 28), […] 213 ".
213 HQT Statements of Position and Argument, Matter No. P-110-1597, pages 20 and 21.
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[383] In light of the evidence and arguments submitted to it, the Régie does not accept NLH's claim that the impact study is incomplete on the grounds that HQT had restricted its study to DC interties.
[384] According to NLH, the impact study was also incomplete in that it failed to identify and properly assess all system limitations, as required by section 19.3 of the OATT 214 .
[385] In that respect, reference must be made to Engineer Deguire's testimony and to the impact study reports.
[386] The only testimony from a professional with expertise in transmission system impact studies and the manner in which the impact study in question was conducted is that given by Engineer Deguire 215 . NLH did not call any experts to testify on these technical questions or to contradict witness Deguire.
[387] The following should be noted from the aforementioned testimony:
• Impact studies involve complex and lengthy procedures; • HQT must establish a base system for the date the service is required; • The base system must be built taking into account patrimonial obligations, signed transmission service agreements and requests that rank ahead of the request that is the subject of the study, namely all requests queued ahead of those submitted by NLH; • The base system is established using software that determines various system constraints, including thermal capacity, stability, voltage and current limits, to ensure that the system will comply with Hydro-Québec's transmission system design criteria and with NPCC, NERC and NAESB standards; • Once the base system is completed and stable, HQT studies the impact of the Request for service and verifies the margins available to satisfy that request and if HQT can redispatch. If that is not possible, HQT assesses the system upgrades required by applying all the criteria used to establish the base system and it validates the system constraints;
214 NLH Outline of Argument, paragraph 423 et seq. 215 SN, February 3, 2010, Volume 12, pages 37 to 135.
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• If upgrades are required, HQT ensures that the final system required to satisfy the Request for service is the optimal solution in terms of costs, losses and the environment; • The first report 216 on Option 5 took into account the need for a new HVDC intertie to Ontario. As the exact location of the intertie was not known, HQT conducted the study with the working assumption of a load simulation at the Chénier substation, i.e., the transmission substation on the edge of the Ontario border 217 ; • In the report on Option 5, the redispatching possibility was quickly disregarded, because it did not provide a valid alternative to satisfy a request for a firm 30- year transmission of up to 2,800 MW. Moreover, as Engineer Deguire noted, the topology of the HQT transmission system, in which all megawatts are generated in the north of the system, whereas the load points are in the south, does not lend itself to redispatch 218 . Moreover, witness Clermont of HQT further stated that the redispatch alternative is not really possible over a 30-year period 219 ; • Lastly, witness Deguire stated that the method that he described and that was used to conduct the impact study for the NLH request is the method used by all engineers 220 . The same method was a used for the other reports constituting the impact study conducted for the NLH request 221 .
[388] NLH did not any tender technical evidence to contradict witness Deguire. In reply, it restricted itself to arguing that it was not required to submit evidence to establish that the impact study was incomplete and that it sufficed to refer to the wording of section 19.3 of the OATT for a finding that the study did not contain the essential elements required by that regulatory provision 222 .
[389] With respect, the Régie is of the view that the preponderance of evidence does not support NLH's position that the impact study does not contain the essential elements stipulated in the OATT.
216 Exhibit HQT-7, Document 1. 217 SN, February 3, 2010, Volume 12, page 48. 218 SN, February 3, 2010, Volume 12, pages 68 and 69. 219 SN, February 3, 2010, Volume 9, pages 62 to 65. 220 SN, February 3, 2010, Volume 12, page 51. 221 SN, February 3, 2010, Volume 12, page 55. 222 SN, February 2, 2010, Volume 18, page 80.
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[390] Furthermore, and by way of example, consideration of the Preliminary Impact Study Report, Option 1 223 shows that this is not the case:
• The report indicates in the beginning that "[t] he upgrades required between the system before and after the Gull Island generating station conveying 1100 MW over the TransÉnergie system constitute the entirety of the investment required to provide the transmission service required in Québec, except for the crossing of the Outaouais River 224 "; • The context for the report, like all the other reports, was as follows: "[...] An impact study [...] provides an initial estimate of the system upgrades and of their costs, based on available information and on basic assumptions and, to the extent permitted by the process for such a study [...] the Facilities study will be based on more detailed information and on more precise assumptions "; • The report notes the assumptions required to conduct the study, the criteria or constraints to be complied with: First-contingency loss of generation (FCLG) criteria, synchronous reserve and event criteria (loss of two lines, criterion N-1-1500) 225 ; • The selected solution is presented and described; • The report notes the transmission capacity insufficiency, for example, between the Micoua and Saguenay substations 226 ; • The report refers, inter alia , to thermal limit problems 227 ; • The report identifies and describes the system upgrades required by the selected solution to render possible the requested service, taking into account system constraints/limitations; • The report presents an estimate of the costs of the system upgrades identified in that stage of the process, as well as the time required to carry out the corresponding work; • Lastly, the report indicates that a facilities study would allow for more precise cost estimates and project schedule.
[391] Considering the evidence submitted in that respect, the lack of any technical evidence in support of NLH's allegations and the aforementioned latitude afforded
223 Exhibit HQT-13, Document 1. 224 Exhibit HQT-13, Document 1, page 5. 225 Exhibit HQT-13, Document 1, page 9. 226 Exhibit HQT-13, Document 1, page 22, section 6.1. 227 Exhibit HQT-13, Document 1, page 28, section 7.
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HQT by the OATT when it conducts an impact study, the Régie is of the view that the system impact study completed by issuance of the last report of December 11, 2007 is an impact study conducted in conformity with the provisions of the OATT.
7.4.2 WAS THE 45-DAY DEADLINE STIPULATED IN SECTION 19.3 OF THE OATT APPLIED IN CONFORMITY WITH OATT PROVISIONS ?
[392] Section 19.3 of the OATT provides that " In order for a request to remain a Completed Application, within forty-five (45) days of receipt of the System Impact Study, the Eligible customer must [...] confirm its intention to execute a Facilities Study Agreement in a timely manner ".
[393] On December 11, 2007, HQT sent the final report constituting the impact study for Request 1 to NLH. That study is held to be in conformity with the aforementioned OATT provisions.
[394] The issue therefore is to determine whether NLH complied with the provisions of section 19.3 of the OATT and confirmed its intention to execute a Facilities Study Agreement in a timely manner.
[395] That answer to that question is contained in NLH's letter of January 24, 2008.
[396] In that letter, NLH actually stated " we wish to officially notify you [HQT] of our intent to enter into Facilities Study Agreement(s) as required in accordance with section 19.3 of the OATT". That statement by NLH must however put in its proper context.
[397] In order to sign a Facilities Study Agreement, an agreement had to be drafted and, to do this, NLH first had to reply to HQ's December 11, 2007 requests, namely, as stated above, to confirm certain information respecting the selection of the option applied, respecting the intertie with Ontario and other data concerning deliveries to Québec.
[398] Respecting the issue of selection of a Request 1 option, the Régie finds that the issue remained confused until oral hearing of the complaints. Although NLH maintained
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that it had decided on Option 5in its written 228 and oral 229 argument in chief, in its written 230 and oral 231 reply, NLH stated that it had selected Option 4. One thing is clear, NLH's January 24, 2008 letter does not provide the information requested by HQT in its December 11, 2007 letter.
[399] The information requested by HQT in its December 11, 2007 letter arises from the obligations of transmission service customers under section 17.2 of the OATT, which stipulate the following:
A Completed Application shall provide The location of the Point(s) of Receipt and Point(s) of Delivery and the identities of the Delivering Parties and the Receiving Parties [...] the location of the load ultimately served by the capacity and energy transmitted [...] A description of the supply characteristics of the capacity and energy to be delivered [...] An estimate of the capacity and energy to be delivered to the Receiving Party [...] The transfer capability requested for each Point of Receipt and each Point of Delivery on the Transmission Provider's Transmission System [...]."
[400] Thus, the more detailed information requested by HQT was warranted in the context in which it had been clearly established in evidence that a facilities study is necessarily used to refine the work done during the impact study.
[401] Rather than reach agreement with HQT regarding a more specific framework for the facilities study within the 45-day period, NLH decided to contest the content of the impact study and to file its complaint on the eve of the 45-day period stipulated in section 19.3 of the OATT.
[402] NLH asks the Régie to consider that its complaint has suspended the 45-day period . The Régie cannot accede to NLH's request, firstly, because extending the deadline would amount to changing the terms of section 19.3 of the OATT. The Régie has always maintained that in deciding a complaint, it would apply the transmission tariff and would not change it.
228 Page 96, paragraph 405. 229 SN, February 9, 2010, Volume 15, page 164, lines 24 and 25. 230 Pages 35 and 36, paragraph 199. 231 SN, February 12, 2010, Volume 18, pages 86 to 88.
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[403] Even if the Régie could extend the 45-day period stipulated in that section, doing so would adversely affect the other applications ranking ahead of Request 1. It could necessitate modifications to impact studies subsequent to Request 1, if any. As there is no evidence on file respecting the effect extending the 45-day deadline would have in that regard, the Régie cannot accede to such a request.
[404] The Régie finds that NLH, by its letter of January 24, 2008, does not satisfy the requirements of section 19.3 of the OATT and the therefore NLH's Request 1 could not, past the 45-day period expiring January 25, 2008, remain a Completed Application within the meaning of the aforementioned section of the OATT.
[405] That being said, the fact that Request 1 loses its assigned rank (No. 101) in the sequence of impact studies on OASIS, does not mean that NLH's steps taken with HQT for the purpose of completing its Lower-Churchill project are compromised, but rather that they should continue, as the case may be, in accordance with OATT provisions and the scope given to them by this decision.
8. COMPLAINT P-110-1678
8.1 NLH'S POSITION
[406] On August 4, 2008, NLH submitted this complaint to HQT as the result of another dispute 232 originating in an exchange of letters between both parties, to which the Régie has referred in the preceding complaints: HQT's letter of December 11, 2007 233 , NLH's reply of January 24, 2008 234 and HQT's reply of March 20, 2008 235 .
[407] More specifically, NLH contests the reply received from HQT to its letter of January 24, 2008, specifically concerning its request for partial transmission service available to NY, NB and NE.
[408] In its letter of December 11, 2007, HQT informed NLH that the impact study had been completed. HQT then sent the final report constituting the impact study, namely the
232 Exhibit NLH-14, Matter No. P-110-1678. 233 Exhibit NLH-10, Matter No. P-110-1678. 234 Exhibit NLH-11, Matter No. P-110-1678. 235 Exhibit NLH-13, Matter No. P-110-1678.
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study respecting Option 2 for Request 1 and enclosed therewith the supplementary report on the NY, NB and NE interconnections. That letter is also the starting point of the 45- day time limit at issue in complaint P-110-1597.
[409] In its supplementary report of December 11, 2007, HQT stated 236 " the deliveries requested by NLH to New England, the State of New York and New Brunswick can be sent using existing interconnections from commencement of the requested service until the end of the useful life of those interconnections, without further network upgrades ".
[410] NLH's letter of January 24, 2008 was in response to HQT's letter dated December 11, 2007. From the outset, NLH refused the 45-day time limit imposed on it by HQT. It informed HQT of its intention to immediately sign a partial service agreement for a term of 20 years. NLH also inquired what HQT proposed respecting use of the NY, NB and NE lines for the final 10 years, given the available capacity identified by HQT.
[411] In that same letter, NLH noted that the impact study made no reference to the HQT-LAW and HQT-ON interties (1,250 MW HVDC). NLH asked HQT to complete the impact study by providing the information concerning those two interconnections.
[412] NLH also indicated in that letter its intention to use point HQT for its deliveries in Québec and added that the information requested by HQT is not pertinent.
[413] On March 20, 2008, HQT replied to NLH's January 24, 2008 letter. HQT informed NLH that in its opinion NLH had not provided a satisfactory reply to its December 11, 2007 letter, and further stated as follows:
• HQT refused to sign a service agreement for NY, NB and NE, alleging that the service can only be provided in accordance with Request 1, and not "in parts or in segments"; • The AC interconnections were not covered by the impact study agreement (System Impact Agreement )237 , and the HQT-LAW interconnection is connected to generating stations that are designated resources used to supply the native load and therefore that interconnection may not be used by third parties on a long-term basis; • NLH was required to provide it with the information ( inter alia , the location of the interconnection) that it required respecting the corridor to be used with the Ontario system;
236 Exhibit NLH-12, Matter No. P-110-1678, p. 9. 237 Exhibit NLH-8, Matter No. P-110-1678.
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• It reiterated its position that point HQT can only be used as point of receipt for generating units located on the HQT grid or to connect transmission reception paths to transmission delivery paths in a wheel-through .
[414] According to NLH, this complaint concerns the following three issues:
"1) The methodology based on scenarios used in conducting the impact study for NLH's Request 101 and the obligation to provide NLH with a service agreement for the portion of the transmission service that is available;
(2) The notion of designated resource in the specific context of the HQT-LAW path and the Beauharnois generating station; and lastly
(3) The use of point HQT as a point of delivery."
[415] Regarding methodology, NLH's allegations are to the effect that pursuant to section 19.7 of the OATT, HQT had an obligation to provide NLH with partial transmission service as requested in its January 24, 2008 letter:
"19.7 Partial Interim Service: If the Transmission Provider determines that it will not have adequate transfer capability to satisfy the full amount of a Completed Application for Point-to-Point Transmission Service, the Transmission Provider nonetheless shall be obligated to offer and provide the portion of the requested Point-to-Point Transmission Service that it can accommodate by redispatch without Network Upgrade s. However, the Transmission Provider shall not be obligated to provide the required incremental amount of Point-to-Point Transmission Service that requires Network Upgrades until such upgrades have been commissioned,."[Emphasis added by NLH]
[416] NLH stressed the subject of its January 24, 2008 request: the signing, as soon as possible, of an agreement for transmission export service over HQT-NB, HQT-NY and HQT-NE lines for up to the total capacity identified by the impact study on those paths.
[417] According to NLH, section 19.7 of the OATT cited above would in no way limit the partial service that HQT is required to offer and provide. HQT has " an obligation to offer and provide the portion of the point-to-point transmission service requested that it can accommodate by a redispatch without Network Upgrades" .
[418] Moreover, NLH infers from the following passage from section 19.7 of the OATT that, despite its partial transmission service request, Request 1 subsists:
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"The Transmission Provider shall not be obligated to provide the required incremental amount of Point-to-Point Transmission Service that requires Network Upgrades until such upgrades have been commissioned." [Emphasis added by NLH]
[419] According to NLH, use of the phrase "until" would indicate that from the time the required upgrades have been commissioned, HQT will be obliged to provide the transmission service for the amount of additional service required, namely that portion of the requested transmission service that was not covered in a partial transmission service request.
[420] NLH further submits that its January 24, 2008 request for partial export service to New England, the State of New York and New Brunswick is not a new request as claimed by HQT.
[421] HQT's supplementary report stated that there was available capacity over those paths.
[422] NLH submits that in requesting an available transmission capacity agreement over those three paths, it did not modify Request 1, but rather requested a portion of the subject of that request. According to NLH, section19.7 of the OATT obliges HQT " to provide what it can provide ".
[423] NLH submits an alternative argument in that respect: if HQT considered the partial service request of January 24, 2008 a modification of Request 1, NLH was entitled to make such a modification.
[424] In support of that claim, NLH stated that the five delivery-point options in Request 1 " had never been regarded by NLH as distinct reservation requests. Furthermore, this is proved by the fact that a single reservation containing the maximums was posted on HQT's OASIS site" .
[425] NLH further stressed that the reports constituting the impact study indicated that, irrespective of the option selected, the same network upgrades would have to be made. NLH therefore inferred that its partial service request of January 24, 2008 would not create an impact on the HQT grid "greater" than that considered in the impact study.
[426] NLH also refutes HQT's argument to the effect that NLH's January 24, 2008 request constitutes a change in the transmission service period requested and that it is therefore not allowable.
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[427] NLH stressed that it requested, and is still requesting, transmission service for a period of 30 years. Its January 24, 2008 letter stated that it wanted to avail itself of the provisions of section 19.7 of the OATT by requesting service for a period of 20 years given the availability of such service. Beyond the 20 years, NLH inquired into the improvements to be made to the HQT grid for the remaining 10 years. Thus, NLH is not changing Request 1, which is for transmission service for a 30-year term.
[428] Regarding the third HQT grievance to the effect that the January 24, 2008 request does not satisfy HQT's requirements because NLH could not identify the source of the electricity that it wanted to export, NLH refers to an excerpt from the 2001 stenographic notes of the oral hearing for HQT's Rate Request 1 238 .
[429] NLH accepts the HQT representative's testimony to the effect that HQT [translation:] " agreed that the Transmission Provider can sell export transmission service without having generation in Québec 239 ". NLH makes an analogy between the situation under consideration by the Régie in 2001 and its present situation.
[430] Lastly, NLH noted that in exercising its right to obtain a partial transmission service agreement pursuant to section 19.7 of the OATT, it is not requesting that the studies cease but, on the contrary, is sending a signal to HQT that it actually intends to proceed to the next step, namely conducting a facilities study.
[431] NLH considers HQT's refusal to offer it a transmission service agreement that it states is similar to that which was offered to HQP over the paths to NY and NE, is discriminatory and in contravention of the OATT.
[432] The second issue raised by this complaint concerns the concept of designated resource in the specific context of the HQT-LAW path and the Beauharnois generating station.
[433] NLH contests the fact that HQT did not consider, and refused to consider, the HQT-LAW path in the impact study because it is connected to the Beauharnois generating station, HQP equipment that is considered a designated resource of HQD for servicing the Québec native load.
238 Matter No. R-3401-98. 239 SN, February 9, 2010, Vol. 15, p. 212.
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[434] NLH repeated certain previously submitted arguments respecting the concept of Distributor resource and of designated resources of the Distributor, the tenor of which the Régie summarized earlier in this decision. NLH concludes that the Beauharnois generating station is not a designated resource within the meaning of section 38.1 of the OATT, specifically in that the generating station is used for third-party sales.
[435] Furthermore, NLH submits that it never asked HQT to restrict the impact study to DC interties. On the contrary, it noted that HQT had agreed, in its letter of June 2, 2006 240 to study all paths between Québec and Ontario ( all the directs paths between Quebec and Ontario ).
[436] In that respect, NLH criticizes HQT for not having explained in the reports constituting the impact study the reasons for rejecting certain paths, including the HQT- LAW path.
[437] The third issue raised by this complaint concerns the use of point HQT as a point of delivery.
[438] NLH submits that it should be able to use point HQT as a point of delivery, as is done by HQP.
[439] It notes that each of the five Request 1 options provided for delivery in Québec.
[440] In its December 11, 2007 letter, HQT, asked NLH for certain details respecting the deliveries in question including, (i) the point of delivery (ii) the identity of the receiving party and (iii) the location of the load ultimately serviced, with respect to the electricity that NLH would like to send to Québec:
"Québec deliveries: Québec wholesale customer(s) confirmation: Confirmed location of the point(s) of delivery and the identities of the receiving parties as well as the location of the load ultimately served by the capacity and energy transmitted for the chosen option."
[441] In response to the information sent by NLH to HQT 241 respecting use of the HQT point as a point of delivery, HQT stated on March 20, 2008 that, "[t] he HQT point cannot be used as a delivery point by NLH. […] , the HQT point is only available as a reception point for generating units situated on HQT’s Transmission System. Therefore, NLH had
240 Exhibit NLH-18, Matter No. P-110-1678. 241 Exhibit NLH-11, Matter No. P-110-1678, letter dated January 24, 2008.
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to identify in its January 24th response wholesale customers for the Québec deliveries identified in its Transmission Service request # 101 for the purposes of a Facilities Study ".
[442] NLH cites sections 1.32 and 1.33 of the OATT for the definitions of "Point(s) of delivery" and "Point(s) of receipt".
[443] NLH concludes from its analysis of those OATT provisions that it is untrue to claim, as does HQT, that point HQT is used exclusively as a point of receipt for generating stations in Québec.
[444] NLH also bases its claims on a Régie Decision rendered in 2002 242 which states the following at pages 324 and 325:
"Therefore, the Régie orders the Transmission Provider to allow all point-to-point transmission service customers to designate HQT in service agreements as a point of receipt in the same manner permitted to customer Groupe Production Hydro- Québec and to inform customers to that effect on its OASIS site."
[445] NLH submits that non-discriminatory access to the HQT grid implies that all customers can import and export from Québec in the same manner permitted to Hydro- Québec.
[446] NLH also bases its argument on Régie Decision D-2006-66 243 to infer that point HQT would represent the load around Montréal that is ultimately serviced.
[447] NLH notes that its Request 1 stated its intention to deliver electricity in Québec, namely to use point HQT as a point of delivery. That Implicitly indicated that the load ultimately serviced was identified, namely the load in southern Québec with reference to Decision D-2006-66 cited above. NLH notes that HQT acknowledged that the aforementioned transmission service request was complete within the meaning of section 17.2 of the OATT.
[448] In its January 24, 2008 letter, NLH therefore reiterated that the load to be serviced was " wholesale customer(s) participating in the Québec wholesale market" .
242 Decision D-2002-95, Matter No. R-3401-98. 243 Matter No. R-3549-2004.
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[449] According to NLH, provided that NLH still regards Québec as the location of the load ultimately to be serviced, HQT would not need to consider another scenario.
[450] NLH submits that HQT's position on the issues pertaining to point HQT, to partial interim service and to designation of the Beauharnois generating station, is inconsistent with the OATT. Issues of a technical or operational nature should not divert us from the meaning of words in the OATT.
8.2 HQT'S POSITION
[451] HQT noted that it would deal only with the first and third conclusions of this complaint 244 , as the second and fourth conclusions fall more under Complaint P-110-1597. The relevant conclusions of this Complaint are as follows:
"ORDER HQT to offer a Service Agreement to NLH for the following transactions posted on the HQT OASIS under number: 501235: 284 MW (New Brunswick) 501233: 95 MW (New England) 501231: 190 MW (New York) […] ORDER HQT to recognize that NLH is in its right [sic] to use the HQT point as a delivery [sic] and a point of receipt and, […]."
[452] This complaint is the result of HQT's decision 245 of October 3, 2008. The relevant parts of that letter are as follows:
"Issue Number 1 Service Agreement
NLH’s Transmission service request #101 is for Wheel through service from Labrador through HQT’s transmission system to neighboring systems and for Wheel in service for deliveries into Québec. A request for service from the “HQT” point for deliveries to New Brunswick (“NB”), New England (“NE”) and New York State (“NY”) is a request for Wheel out service.
244 SN, February 11, 2010, Vol. 17, pp. 115 and 116. 245 Exhibit NLH-15, Matter No. P-110-1678.
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The Interconnections complementary report identified the availability of service on the interconnections in conjunction with the implementation of the network upgrades identified for each one of the five options studied to transmit power from the Lower Churchill plants into HQT’s transmission system. This complementary report to the System Impact Study performed for Request #101 was related to Wheel through service and it was not provided as a System Impact Study for a Wheel out transmission service request.
[…]
Issue Number 3 HQT Point
NLH requires the use of the “HQT” point as a delivery point. HQT has already requested and maintains that NLH must identify wholesale customers in Québec for such deliveries. This issue will not be addressed further in this response since it is an object of Complaint P-110-1597 filed by NLH at the Régie de l’énergie du Québec. Reference is made to section 36 of this Complaint."
[453] According to HQT, Complaint P-110-1678 raises three grievances:
• HQT acted in contravention of section 1(4) of Attachment D and of section 19.7 of the OATT, given its refusal to enter into negotiations with a view to entering into a firm point-to-point transmission service agreement for the export transactions to New Brunswick, New England and New York described on OASIS; • HQT allegedly acted in contravention of section 19.3 of the OATT in conducting its system impact study of NLH's Request 1, given its failure to study the use of the HQT-LAW path for the wheel-through transactions into Ontario; • HQT allegedly acted in contravention of sections 1.32 and 17.2 of the OATT by concluding that NLH could not identify point HQT as a point of delivery for import transactions in Québec.
[454] As the second grievance was dealt with in Complaint P-110-1597, HQT focuses on the aforementioned first and third grievances.
[455] The relevant facts are set forth in the following letters: HQT's letter dated December 11, 2007 246 , NLH's letter dated January 24, 2008 247 , HQT's letter dated March
246 Exhibit NLH-10, Matter No. P-110-1678. 247 Exhibit NLH-11, Matter No. P-110-1678.
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20, 2008 248 , NLH's letter dated August 4, 2008 249 and HQT's letter dated October 3, 2008 250 .
[456] HQT submits that NLH's request 251 is a new request that differs from Request 1. In its January 24, 2008 letter, NLH request that the import segment be severed from the export segment, contrary to its Request 1, which is a wheel-through request. That second request contains a recombination of the options included in Request 1 252 .
[457] According to HQT, that constitutes a substantial change of Request 1, given that, in a wheel-through transaction, the load ultimately serviced is not in Québec. In the case of a wheel-through transaction, the HQT point us used as a point of receipt and of delivery, but is not a load 253 .
[458] HQT notes that Request 1 was the subject of a system impact study based on the specific options requested by NLH, and that the study did not contemplate any permutations, as witness Deguire stressed:
"R. In fact, we clearly established various scenarios and our studies are very sophisticated, very exhaustive. And to make modifications or crossovers and really, to dare to think that our studies will not be serious. And if you want to make crossovers, that would be a new study that would require validation to ensure that the system could handle that new request. Each request is unique and requires calculations and analyses of power flows, impact on stability, frequency, voltage, short-circuit. So it's important to know with accuracy what you want to do with the megawatts. So, to use, crossovers also do not seem consistent with what we can guarantee. We are responsible for guaranteeing that we can satisfy the transmission service requested. And if we have not validated and conducted studies, we'd never be able to guarantee that approach 254 ."
[459] In HQT's view, NLH's request that the Régie order HQT to sign an agreement for the service requested in NLH's January 24, 2008 letter, is equivalent to a request for authorization for electricity supply when the impact of that supply is unknown 255 .
248 Exhibit NLH-13, Matter No. P-110-1678. 249 Exhibit NLH-14, Matter No. P-110-1678. 250 Exhibit NLH-15, Matter No. P-110-1678. 251 Exhibit NLH-11, Matter No. P-110-1678, letter dated January 24, 2008. 252 SN, February 11, 2010, Vol. 17, pp. 119 to 122. 253 SN, February 11, 2010, Vol. 17, p. 122. 254 Testimony of C. Deguire, SN, February 3, 2010, Vol. 12, pp. 124 to 126. 255 SN, February 11, 2010, Vol. 17, p. 128.
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[460] As far as HQT is concerned, the January 24, 2008 request was equivalent to a request " to export energy from point HQT that came from somewhere and from nowhere, the source of which would be known in the future 256 ".
[461] Furthermore, expert Hanser has confirmed, by comparing Request 1 and the request of January 24, 2008, that the later request constituted a new request. In his view, the January 24, 2008 request covered a type of wheel-out transaction whereas the one that was the subject of the Request 1 impact study concerned wheel-in and wheel-through transactions. Moreover, the term of the requested service (20 or 30 years) depending on whether HQT will be able to specify the replacement equipment that will be required at the expected end in 2035 of the useful life of the interconnections, changes the situation 257 .
[462] In the sequence of service request, a substantially modified request ranks according to its modification date 258 .
[463] HQT refutes NLH's argument to the effect that its January 24, 2008 request is a "lesser and included request" covered in Request 1 or that it is partial interim service within the purview of Request 1 259 . A service request for 20 years has nothing interim about it and HQT refers to the testimony of Messrs Clermont and Hanser on that point 260 . Furthermore, the requested service is not partial, i.e., NLH is not requesting transmission service for part of the Request 1 options but a recombination of options 261 .
[464] HQT emphasized that pursuant to subsection 1(4) of Attachment D of the OATT, upon receipt of the Request 1 impact study NLH was entitled, to " proceed, modify or cancel its Application 262 ". Instead, in its January 24, 2008 letter, NLH declared its intention to proceed to the facilities study stage, all the while requesting something to the contrary, namely continuation of the impact studies to embrace new options. NLH was entitled to change its request, but HQT would then have had to resume work with a new request and a new ranking 263 .
256 SN, February 11, 2010, Vol. 17, p. 131. 257 SN, February 11, 2010, Vol. 17, p. 132; Testimony of P.Q. Hanser, SN, February 4, 2010, Vol. 13, pp. 3 to 85, question 78. 258 SN, February 11, 2010, Vol. 17, p. 132. 259 SN, February 11, 2010, Vol. 17, p. 132 et seq. 260 Testimony of S. Clermont, SN, January 29, 2010, Vol. 9, pp. 142 and 143, question 207; Testimony of P.Q. Hanser, SN, February 4, 2010, Vol. 13, pp. 198 to 201, questions 337 to 339. 261 SN, February 11, 2010, Vol. 17, p. 135. 262 SN, February 11, 2010, Vol. 17, pp. 139 and 140. 263 SN, February 11, 2010, Vol. 17, p. 141.
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[465] According to HQT, the transactions requested on January 24, 2008 pertain solely to the delivery segments of the wheel-through transactions ultimately contemplated. The transmission receipt segments required to complete the wheel-through transactions are not the subject of any reservation or service request. In such a scenario, neither HQT nor NLH can guarantee that the transmission receipt segment required to complete the requested wheel-through transactions would be provided. Thus, the requested transactions do not pertain to a firm point-to-point transmission service but to a non-firm point-to- point transmission service 264 .
[466] Therefore, NLH's January 24, 2008 letter contains a new request. According to HQT, that request is non-compliant with the provisions of sections 17.2 of the OATT respecting a firm request or section 18.2 respecting a non-firm request 265 . Mr. Deguire's testimony is uncontradicted regarding the fact that the Request 1 impact study does not deal with a recombinations of options and that additional studies are necessary for that purpose 266 .
[467] In paragraphs 103 to 130 of its written submission 267 , HQT elaborated on five reasons that would justify the Régie to refuse to accede to NLH's request to order HQT to sign a service agreement for the new services requested in the January 24, 2008 letter, namely: " (1) The proposed agreement does not specify the term of the service requested; (2) the New Requests are incomplete; (3) Additional studies are required to determine the conditions under which the requested service can be provided; (4) Insofar as the requested transmission service covers a non-firm point-to- point transmission service for a wheel-through transaction for a period greater than one month, it pertains to service not provided for in the OATT; or
264 SN, February 11, 2010, Vol. 17, p. 145; Testimony of S. Clermont, SN, January 29, 2010, Vol. 9, p. 160, question 233. 265 SN, February 11, 2010, Vol. 17, pp. 149 and 150. 266 SN, February 11, 2010, Vol. 17, pp. 151 and 152; testimony of C. Deguire, SN, February 3, 2010, Vol. 12, pp. 128 and 129. 267 HQT's Statement of Position and Argument, Matter No. P-110-1678; SN, February 11, 2010, Vol. 17, pp. 155 to 161.
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(5) Alternatively, to the extent that the transmission service request covers firm long-term point-to-point service without identifying the source or point of receipt, it is non-compliant with the OATT268 ."
[468] As regards the third grievance to the effect that HQT had allegedly acted in contravention of sections 1.32 and 17.2 of the OATT in concluding that NLH could not identify point HQT as a point of delivery for wheel-in transactions in Québec, HQT summarizes its position as follows 269 : Point HQT can be a point of delivery in a wheel- through transaction because, in that case, the load is not in Québec. In a wheel-in transaction, the HQT point can be a point of delivery if the load, in capacity and energy, is designated and intended for the native load.
[469] HQT noted that Request 1 was therefore declared complete because the load to be serviced was the native load 270 . When the point of delivery concerns the native load in Québec, delivery may be made at point HQT.
[470] That is not what NLH wants to do in its new request of January 24, 2008. According to HQT, NLH wants to deliver energy to point HQT without knowing where that energy will be consumed. In the absence of a load, NLH cannot deliver energy to the point HQT.
[471] According to HQT, the problem with NLH's request is the fact that point HQT is not in itself sufficient information for HQT to analyze a wheel-in request in the absence of a load 271 .
[472] HQT further submits a point of law for seeking disallowance of the following conclusion of this complaint:
"ORDER HQT to recognize that NLH is in its right [sic] to use the HQT point as a delivery [sic] and point of receipt,"
[473] According to HQT, the Régie had defined in section 1.33 of the OATT the circumstances in which point HQT can be designated as a point of receipt:
"1.33 Point(s) of Receipt: Point(s) of interconnection on the Transmission
268 HQT's Statement of Position and Argument, Matter No. P-110-1678, p. 23, para 97. 269 SN, February 11, 2010, Vol. 17, pp. 161 to 165. 270 SN, February 11, 2010, Vol. 17, pp. 162 and 163. 271 SN, February 11, 2010, Vol. 17, p. 164.
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Provider's Transmission System where capacity and energy will be made available to the Transmission Provider by the Delivering Party under Part II herein. Point HQT, as specified in Sections 13.7 and 14.5 herein, can be designated as a Point of Receipt. The Point(s) of Receipt shall be specified in the Service Agreement."
[474] Sections 13.7 and 14.5 of the OATT state that point HQT may be designated where the " transmission service customer may purchase transmission service to sell capacity and energy from multiple generating units that are on the Transmission Provider's Transmission System" .
[475] According to HQT, what NLH is seeking by its request is recognition that point HQT may be a point of receipt in circumstances other than those already provided for in the sections of the OATT quoted above:
"Q. [134] When you’re asking the Régie, in this third conclusion, that you want the Régie to order that Point HQT is a point of receipt, you're asking the Régie to recognize… or have HQT recognize that the point HQT can be a point of receipt in other circumstances than those provided already in the Tariff, is this not a fact?
A. Yes 272 ."
[476] According to HQT, this NLH request is equivalent to seeking a declaratory judgment that would amend the OATT, which is outside the scope of sections 98 and 101 of the Act respecting the Régie de l'énergie 273 .
[477] As regards the argument to the effect that section1.32 of the OATT is silent regarding recognition of point HQT as a point of delivery, HQT stressed that the argument to the effect that "that which is not prohibited is allowed" does not hold. According to HQT, what is involved is an engineering issue: from a technical perspective, energy cannot be injected into point HQT without having a load ultimately served 274 .
[478] What NLH is requesting, according to HQT, is recognition that point HQT may be used as a trading hub for all market participants. This NLH project, which follows from the testimony of expert Sinclair, falls outside the scope of a complaint 275 .
272 Testimony of G. Bennett, SN, January 22, 2010, Vol. 4, p. 78, question 134; SN, February 11, 2010, Vol. 17, p. 168. 273 SN, February 11, 2010, Vol. 17, p. 170. 274 SN, February 11, 2010, Vol. 17, p. 178. 275 SN, February 11, 2010, Vol. 17, pp. 182 and 183.
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[479] HQT submits that it was justified in regarding the January 24, 2008 request as an incomplete request not allowing it to move onto the facilities study phase without the load or sink and source being specified 276 . HQT notes the discretion afforded by FERC to Transmission Providers in that respect:
"[…] the commission concluded that transmission providers are afforded discretion in source and sink matters relating to information disclosure. To this end, we stated that a transmission provider’s OATT may uniformly require customers to reveal the identities of the respective bus bars of the particular generators and loads as part of a completed request for transmission service. We continue to believe that transmission providers should be afforded discretion to fashion their OATTs to determine what source and sink information is to be disclosed by a customer as part of a request for transmission service. Furthermore, transmission providers are entitled to complete and accurate information when evaluating a transmission request, not just when evaluating the transmission schedule or electronic tag 277 ."
[480] HQT refutes the arguments of expert Sinclair and of NLH to the effect that point HQT can be a trading hub . Expert Hanser and witness Clermont explain why this is not possible in the following terms:
"a) The apparent absence of any published data on the price of the energy interchanged at Point HQT;
b) The apparent absence of any consensus regarding recognition of a Trading hub at Point HQT;
c) The apparent absence of a volume of energy interchanges at Point HQT that could indicate the existence of a Trading hub;
d) The constraints specific to the HQT grid that prevent or considerably limit its development as a Trading hub, including (1) the limited transfer capability with neighbouring systems, (2) a highly radial structure, and (3) limited flexibility of interconnections asynchronous with the neighbouring systems 278 ."
276 SN, February 11, 2010, Vol. 17, pp. 186 to 193. 277 HQT's Statement of Position and Argument, Matter No. P-110-1678, p. 51, para 223. 278 HQT's Statement of Position and Argument, Matter No. P-110-1678, pp. 42 and 43; Exhibit HQT-32, report by P.Q. Hanser, June 2009, p. 6, paras 9 to 12; Testimony of P.Q. Hanser, SN, February 4, 2010, Vol. 13, pp. 95 to 100, questions 84 and 85; Testimony of S. Clermont, SN, January 29, 2010, Vol. 9, pp. 171 to 175, questions 251 to 255.
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[481] As regards NLH's argument to the effect that its request does not cause imbalance on the HQT grid, because at a later date wheel-outs of energy will be programmed at the same time as wheel-ins , HQT stressed that this is not the problem. In a 20 or 30-year transmission service request for 2,800 MW, HQT must have data to build its system based on the requested transmission service 279 . HQT further notes that the impact study was conducted for each of the options requested in the initial request and not according to one or two option parts 280 .
8.3 NLH'S REPLY
[482] Contrary to what HQT has argued, NLH stresses that it is not asking the Régie to rule on the issue of whether point HQT is a trading hub. According to NLH, the Gull Island and Muskrat Falls generating stations that provide the electricity to be transmitted pursuant to Request 1 are in fact on the HQT grid, synchronous with the HQT grid or electrically in Québec 281 . From that NLH infers that those generating stations are therefore on point HQT in the same way as are HQP's generating station. HQT was therefore wrong to treat the NLH's January 24, 2008 request as a new wheel-out request rather than as a wheel-through transaction.
[483] NLH noted that HQP could have signed service agreements after its requests 102 and 103 on OASIS and obtained partial service over the same paths (the NY, NB and NE interconnections) forming the subject of its January 24, 2008 request. NLH submits that it was entitled to the same service over those paths given that the Gull Island and Muskrat Falls generating stations are also on point HQT.
[484] NLH states that its January 24, 2008 letter did not constitute a new request but further specified quantities for the fourth option and affirmed its intention to sign a facilities study agreement 282 .
279 SN, February 11, 2010, Vol. 17, pp. 216 and 217. 280 SN, January 29, 2010, Vol. 9, pp. 138 and 139. 281 Exhibit B-113, NLH Reply, p. 34. 282 Exhibit B-113, NLH Reply, pp. 35 and 36, paras 197 to 201.
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8.4 THE RÉGIE'S OPINION
[485] This complaint is related to Complaint P-110-1597 in that it arises from the same HQT decision, namely the above-mentioned March 20, 2008 letter in reply to NLH's letter of January 24, 2008.
[486] The conclusions or measures sought by NLH in that complaint, which are unrelated to Complaint P-110-1597, are as follows:
"GRANT the present complaint of NLH;
ORDER HQT to offer a Service Agreement to NLH for the following transaction substations on the HQT OASIS under number:
501235: 284 MW (New Brunswick)
501233: 95 MW (New England)
501231: 190 MW (New York)
[…]
ORDER HQT to recognize that NLH is in its right to use the HQT point as a delivery and a point of receipt and,
[…]."
[487] In applying sections 94 and 101 of the Régie de l'énergie Act , the two questions that the Régie must answer are as follows:
• Is HQT's refusal to give effect to the NLH Request for service of January 24, 2008 in contravention of OATT provisions? If yes, can the Régie render the following order sought: " ORDER HQT to offer a Service Agreement to NLH for the following transactions substations on the HQT OASIS under number: 501235: 284 MW (New Brunswick) 501233: 95 MW (New England) 501231: 190 MW (New York)"? • In the context of this decision with regard to Complaints P-110-1565 and P- 110-1597, can the Régie render the second order sought, namely, " ORDER HQT to recognize that NLH is in its right to use the HQT point as a delivery and a point of receipt […]" or in the circumstances, would such an order be in lieu of a purely declaratory decision?
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8.4.1 HQT' S REFUSAL TO ENGAGE IN NEGOTIATIONS WITH A VIEW TO ENTERING INTO A FIRM POINT -TO -POINT TRANSMISSION SERVICE AGREEMENT RESPECTING WHEEL -OUT TRANSACTIONS TO NEW BRUNSWICK , NEW ENGLAND AND NEW YORK
[488] Before considering the textual arguments submitted specifically by NLH respecting whether its letter of January 24, 2008 constituted a new request to which HQT could not give effect without conducting an impact study or, in other words, if the impact study for Request 1 sent to NLH suffices to satisfy the Request for wheel-out service to New Brunswick, New England and New York set forth in that letter, the evidence submitted to the Régie in that respect must be considered.
[489] The Régie notes the following facts from NLH's evidence, including the following excerpts from Mr. Bennett's testimony:
• HQT's complementary report No. 6 states that there was ATC on the paths to NY, NB and NE 283 ; • That report finding is common to all five Request 1 options; • "The intent [i.e. Request 1 options] was to understand the incremental impacts that the range of different service requests would have on the system, and the incremental cost associated with the different upgrades that might be required to accommodate the different capacity requirements. So that a cost benefit analysis could be performed by NLH 284 "; • NLH has not changed the period of its service request; it always requested and still requests a 30-year service. In its January 24, 2008 letter, it requested service under section 19.7 of the OATT for 20 years because that was what was available and it signaled that it wanted to know how HQT planned to improve its system to give effect to the part of the request covering the 10 final years. This does not change Request 1, which is for 30 years.
[490] The Régie also notes the following facts from HQT's evidence:
283 Exhibit HQT-17, Document 1, Complementary Impact Study, December 11, 2007. 284 Testimony of M. Gilbert Bennett, SN, January 19, 2010, Volume 1, page 104.
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• The transactions requested in NLH's letter of January 24, 2008 are wheel- through transactions, in which the wheel-out segment of the wheel-through transaction is temporarily separated from the wheel-in segment 285 ; • Deliveries to the ON, NY, NB and NE markets constitute wheel-through transactions 286 ; • A wheel-through transaction comprises two simultaneous segments, namely an import or wheel-in of electricity, simultaneously matched to an export or wheel-out of electricity 287 ; • The wheel-in and wheel-out segments of a wheel-through transaction are the subject of a single reservation and of a single transmission service agreement 288 ; • HQT needs to know both the wheel-in and wheel-out segments at the time of the reservation, because that information is required in order to conduct the system impact study of the wheel-through transaction 289 ; • The simultaneity of inputs is essential for energy on the system to remain in balance 290 ; • The five Request 1options were presented by NLH and handled by mutual consent of the parties as five distinct transmission service alternatives 291 ; • At no time before January 24, 2008, had HQT ever considered studying any options other than those listed in Request 1 292 ; • NLH cannot claim that the five options analyzed in the impact study are merely methods for organizing work that could be the subject of permutations likely to have a major impact on HQT's findings, as NLH's sees fit 293 ; • This new wheel-out request (the January 24, 2008 request) recombines the delivery segments of the wheel-through transactions contemplated in Option 2 (95 MW – over path HQT-NE), in Option 3 (95 MW – HQT-NE path and
285 Testimony of G. Bennett, SN, January 21, 2010, Volume 3, page 73. 286 Testimony of S. Clermont, SN, January 29, 2010, Volume 9, page 128, questions 187 and 188. 287 Exhibit HQT-30, report of P.Q. Hanser, December 2008, Annexure H. 288 Testimony of S. Clermont, SN, February 2, 2010, Volume 11, pages 180 to 182, questions 360 to 363. 289 Testimony of S. Clermont, SN, February 2, 2010, Volume 11, pages 186 and 187, question 377; testimony of P.Q. Hanser, SN, February 4, 2010, Volume 13, pages 110 and 111, question 93. 290 Testimony of S. Clermont, SN, February 2, 2010, Volume 11, page 185, question 375. 291 Testimony of C. Deguire, SN, February 3, 2010, Volume 12, pages 42 and 43. 292 Testimony of S. Clermont, SN, January 29, 2010, Volume 9, pages 71 and 72, question 100. 293 Testimony of S. Clermont, SN, January 29, 2010, Volume 9, pages 72 to 74, questions 102 and 103; testimony of C. Deguire, SN, February 3, 2010, Volume 12, page 124 et seq.
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190 MW –over path HQT-MASS) and in Option 4 (95 MW – over path HQT-NE and 284 MW –over path HQT-NB) 294 ; • This new wheel-out request does not specify the source of power to be transferred or the service period. Whereas under Request 1, the power came from the Lower-Churchill generating stations and the service requested was for 30 years, HQT does not know the source of the power to be wheeled out under new request or the service period, which could be for 20 or 30 years 295 ; • In these circumstances, HQT was well founded in considering this recombination as constituting a different request, which should have been the subject of a new service request 296 ; • The new wheel-out request is not "lesser and included", because it covers a type of transmission service (wheel-out) that differs from that contemplated in Request 1 (wheel-through) 297 ; • Section 19.7 of the OATT, as regards partial interim service, has no application in this case 298 .
[491] The preponderance of evidence is to the effect that the January 24, 2008 request is not a partial request within the meaning of section 19.7 of the OATT cited above, i.e. part of the requested point-to-point transmission service, but rather it is a new Request for service resulting from the recombination of options. This is clear from the testimony of Engineer Deguire 299 and that of expert Hanser 300 .
[492] Thus, as noted by HQT, to grant that request would be the same all allowing electricity transmission of even though the impact of such transmission is unknown 301 .
[493] NLH asks the Régie to disregard the sole evidence of witnesses with expertise in power flows over the HQT transmission system, and especially respecting the issue of
294 Testimony of S. Clermont, SN, January 29, 2010, Volume 9, pages 125 to 127, questions 184 and 185 and pages 136 and 137, question 198. 295 Testimony of S. Clermont, SN, January 29, 2010, Volume 9, pages 139 to 141, questions 202 to 204. 296 Testimony of S. Clermont, SN, January 29, 2010, Volume 9, pages 139 and 140, questions 200 to 202; SN, February 2, 2010, Volume 11, pages 79 to 82. 297 Testimony of C. Deguire, SN, February 3, 2010, Volume 12, page 127. 298 Testimony of P.Q. Hanser, SN, February 4, 2010, Volume 13, pages 198 to 201, questions 337 to 339; testimony of S. Clermont, SN, January 29, 2010, Volume 9, pages 141 to 143, question 207. 299 Testimony of C. Deguire, SN, February 3, 2010, Volume 12, page 124 et seq. 300 Testimony of P.Q. Hanser, SN, February 4, 2010, Volume 13, pages 83 to 85, question 78. 301 SN, February 11, 2010, Volume 17, page 128.
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whether HQT should conduct an impact study before giving effect to NLH's new request of January 24, 2008.
[494] The Régie cannot hold that the Request 1impact study was sufficient to provide the 20-year transmission service requested by NLH on January 24, 2008, whereas the preponderance of evidence is to the contrary, i.e., that the three transactions requested are the result of recombining the options studied and should be the subject of an impact study within the meaning of section 19.3 of the OATT. To give effect to such a request would be pure speculation. Obviously the Régie cannot venture down that path.
[495] The Régie finds that HQT was entitled to refuse to engage in negotiations with a view to entering into a firm point-to-point transmission service agreement respecting wheel-out transactions to New Brunswick, New England and New York, and that the first conclusion of this complaint is unfounded in fact and in law.
8.4.2 ORDER TO RECOGNIZE THE HQT POINT AS THE DELIVERY POINT AND RECEPTION POINT
[496] Considering that the result of the Régie's decision regarding Complaint P-110-1597 is that Request 1 is no longer considered a Completed Application within the meaning of the OATT, and considering its decision regarding Complaint P-110-1678 to the effect that HQT is entitled to not act on the NLH's January 24, 2008 new Request for service and to not sign a service agreement with NLH, the issue of whether NLH can use the HQT point as a delivery point and as a reception point has become theoretical.
[497] The Régie does not render declaratory decisions 302 .
[498] Therefore,
The Régie de l’énergie:
DISMISSES complaints P-110-1565, P-110-1597 and P-110-1678.
302 Decision D-99-156, Matter No. P-110-19; Decision D-2000-151, Matter No. P-110-356; Decision D-2004-107, Matter No. P-120-11 and Decision D-2008-059, Matter No. P-110-1544.
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Jean-Paul Théorêt Commissioner
Richard Lassonde Commissioner
Marc Turgeon Commissioner
Newfoundland and Labrador Hydro represented by Mtre André Turmel, Mtre Pierre- Olivier Charlebois and Mtre Pierre Plante; Hydro-Québec Distribution represented by Mtre Éric Fraser; Hydro-Québec Production represented by Mtre Stéphane Brière; Hydro-Québec Transport represented by Mtre Éric Dunberry and Mtre Marie-Christine Hivon.