FILE NO.: EB-2005-0551
DATE: July 19, 2006
BEFORE: Gordon Kaiser Presiding Member and Vice Chair
Cynthia Chaplin Member
Bill Rupert Member
4 THE ONTARIO ENERGY BOARD
7IN THE MATTER OF the Ontario Energy Board Act, 1998,
8S.O.1998, c.15, Schedule B;
10AND IN THE MATTER OF a proceeding initiated by the
11Ontario Energy Board to determine whether it should
12order new rates for the provision of natural gas,
13transmission, distribution and storage services to
14gas-fired generators (and other qualified customers)
15and whether the Board should refrain from regulating
16the rates for storage of gas;
19 Hearing held at St. Andrews Conference Centre,
20 150 King Street West, 27th Floor, Toronto, Ontario,
21 on Wednesday, July 18, 2006,
22 commencing at 5:00 p.m.
26 Volume 13
29B E F O R E:
31GORDON KAISER PRESIDING MEMBER and VICE CHAIR
33CYNTHIA CHAPLIN MEMBER
35BILL RUPERT MEMBER
1 A P P E A R A N C E S
5DONNA CAMPBELL Board Hearing Team
9KRISTI SEBALJ Board Support Team
13GLENN LESLIE Union Gas Limited
15DAVID STEVENS Enbridge Gas Distribution
18ROBERT WARREN Consumers Council of Canada
20PETER THOMPSON IGUA and AMPCO
22MICHAEL JANIGAN Vulnerable Energy Consumers
25PAT MORAN APPrO
27DAVID BROWN Sithe Global Power,
28 TransCanada Energy,
29 Portlands Energy Centre
31JASON STACEY Natural Gas Consultant
33LOUIS-ANDRE LECLERC Gaz Métropolitain
36JOHN DeVELLIS School Energy Coalition
38BRIAN DINGWALL Canadian Manufacturers
39 & Exporters
41ALICK RYDER City of Kitchener
44LAURIE SMITH Market Hub Partners Canada
48VALERIE YOUNG Aegent Energy Advisors
1 A P P E A R A N C E S (Cont’d)
4CHERYL WORTHY BP Canada
7PAT KEYS TransCanada PipeLines
9MALCOLM JACKSON LIEN
11GEORGE KATSURAS IESO
1 I N D E X O F P R O C E E D I N G S
3Description Page No.
5--- Upon commencing at 5:00 p.m. 1
7Preliminary Matters 1
9BP CANADA – PANEL 1: 10
10C. Worthy, S. Acker; Sworn
11 Examination by Mr. Brett 10
12 Questions from the Board 26
13 Cross-examination by Mr. Leslie 43
14 Cross-examination by Mr. Cass 47
15 Cross-examination by Mr. Warren 49
17--- Recess taken at 6:30 p.m. 54
18--- On resuming at 6:49 p.m. 54
20 Cross-examination by Mr. Thompson 54
21 Cross-examination by Mr. Brown 66
22 Cross-examination by Mr. Moran 76
23 Further Questions from the Board 78
25--- Whereupon the hearing adjourned at 7:28 p.m. 79
1 E X H I B I T S
4Description Page No.
6EXHIBIT NO. J13.1: BACKGROUND INFORMATION OF 13
9EXHIBIT NO. J13.2: BACKGROUND INFORMATION OF 13
12EXHIBIT NO. J13.3: QUESTIONS FOR BP 13
1 U N D E R T A K I N G S
3Description Page No.
5 No undertakings were entered during the hearing
1 Wednesday, July 19, 2006
2 --- Upon commencing at 5:00 p.m.
3 MR. KAISER: Please be seated.
4 Mr. Brett.
5 MS. SEBALJ: As I understand, Mr. Chair, there may be
6a few preliminary matters.
7 MR. KAISER: All right. Any preliminary matters?
8 PRELIMINARY MATTERS:
9 MR. THOMPSON: Yes, Mr. Chairman. I have one. It
10will take me a few minutes to outline it to you, but my
11clients, both IGUA and AMPCO, Mr. Fournier of IGUA and Mr.
12White of AMPCO, have concerns with what has happened
13procedurally since your ruling on Monday, and I'm
14instructed to record these concerns and register a
15reservation of rights with what, to my clients, appears to
16be emerging as a lack of objectivity with respect to the
17secondary market issue.
18 If you would bear with me a few moments, I'll just put
19the circumstances on the record that gives rise to these
21 In your ruling on Monday, as I understood it, BP was
22to attend and give its evidence publicly, except to the
23extent there would be rulings dealing with items that BP
24thought should be conducted in camera.
25 I didn't sense any restrictions on questions by those
26opposite in interest to BP, and you indicated that if
27fairness dictated there might be adjournments.
28 When I received the procedural notice yesterday, I had
1received some e-mails -- I think Mr. Brown had indicated
2that as a result of his conversations with Ms. Sebalj, BP
3had questioned the ruling and that there were some efforts
4being made to respond to that. And I took it that the
5procedural notice issued yesterday was the result of those
6discussions between your counsel and BP's counsel.
7 That notice indicates now that there has been a
8variance, as I see it, to the ruling that you made on
9Monday. The current process now is not to deal with
10objections with respect to public hearing of certain
11responses to questions on an ad hoc basis; they're going to
12be dealt with at the front end. And now, as I read the
13notice, BP will have an option to refrain from
14participating in the process if they don't like the ruling
15that is made with respect to the in camera versus public
16process. And the notice appears to indicate that there
17will be constraints on questions by those opposite in
18interest to BP, confining them to the list of questions
19that the Board has circulated, and perhaps imposing time
20constraints on them.
21 So this appears, to my clients, to be a rather
22extraordinary procedural result, where the Panel, through
23its lawyer and a particular party that the Panel wishes to
24hear from have in effect negotiated terms for the party's
25appearance before you today. And in addition, that party
26appears to have an option to refuse to testify if they
27don't like the ruling that you plan to make at the outset
28of the process.
1 Now, the other aspect of the matter that is of concern
2to my clients is the questions; the questions that have
3been framed, for example, with respect to the geographic
4market for storage. There's a paraphrase made in the first
5bullet of what some parties have said and what other
6parties have said, and then a series of questions follow.
7To my client, the questions appear to proceed on the basis
8of some assumptions or presumptions that, as far as my
9client is concerned, are not substantiated in the record.
10 First, there appears to be a presumption that a
11secondary market in “X” Ontario storage capacity and
12related transportation to Dawn actually exists, and we
13question whether there's evidence to support that premise.
14The questions assume that such a secondary market prevents
15the exercise or can prevent the exercise of market power by
16someone operating in the primary market at Dawn; namely,
17Union. And the third thing that these questions appear to
18assume is that BP is qualified to have some expert opinion
19on the depth and the liquidity of this secondary market if
21 The problem we have there is, is someone going to
22qualify the BP witnesses as having sufficient expertise to
23express these opinions? We doubt it.
24 So what we have, as far as my clients see it, in these
25questions, and in particular the question under secondary
26market view -- do you think there is a deep and liquid
27secondary market -- that strikes my clients as rather
28leading. And the document as a whole, in the context of
1these circumstances that I describe, evidence a questioner
2in search of evidence to support a pre-conceived conclusion.
3 So we don't know where this is all going to lead us.
4But I am instructed to record that my client suggests that
5there is now information in the record to cause reasonable
6people to question the objectivity of the Panel with
7respect to matters pertaining to these secondary market
8issue, and we reserve our rights to rely on this state of
9affairs if necessary.
10 Thank you.
11 MR. KAISER: All right. Thank you. Any other
13 MR. WARREN: Mr. Chairman, very briefly. I adopt the
14submissions that my friend Mr. Thompson has made, and I
15have a somewhat different submission on the questions
17 In my respectful submission, the questions,
18particularly in the first two subject headings, "Geographic
19Market” and “Secondary Market Overview," call for an
20opinion from an expert. And to the best of my knowledge,
21the representatives of BP do not have the necessary
23 I acknowledge, Mr. Chairman and members of the Panel,
24that a regulatory agency can call whatever evidence it
25feels is relevant, and I also acknowledge that, within the
26limits imposed by the law with respect to bias, that a
27Panel is free to ask, essentially, any questions it wants.
28 The submission I make is whether or not this Panel
1should ask the questions.
2 If, for example, I were to put forward the BP
3witnesses and without qualifying them as experts ask those
4questions, there would be objections, legitimate
5objections, which I suspect would be sustained.
6 And the reason that they would be sustained is because
7they're not experts and because at this stage of the
8proceeding the answers to the questions may be deeply
9prejudicial, and in the circumstances, we have no
10opportunity to respond to them in the form of reply
12 Therefore, my submission, Mr. Chairman, is that I
13would invite the Board to exercise its discretion not to
14ask the questions in the first two headings and to confine
15the questions only to the experience of BP, what it does in
17 Those are my submissions. Thank you.
18 MR. KAISER: Thank you. Any other submissions?
19 Yes, sir? Mr. Moran.
20 MR. MORAN: Thank you, Mr. Chair.
21 I simply wish to record some concern on the part of
22APPrO as well.
23 The first concern is with respect to how the evidence
24from this witness would unfold. It strikes me that it's
25possible that the witness or BP may be fine with some
26evidence, some questions, and may be not fine with other
27questions. And in effect, a witness who is in front of you
28is being given the option of choosing what evidence,
1perhaps, it wishes to give and avoiding evidence it doesn't
2want to give, which strikes me as different from how it
3would normally go for most other witnesses.
4 You're on the stand; you have to speak to what you
5know, and you have to answer the questions whether you like
6giving the answer or not. So I have some concern about
7that part of the process.
8 Secondly, there are aspects to the proposed questions
9which, in my submission, do go beyond the experience, the
10factual experience, that BP would have in the marketplace,
11and in the absence of being qualified appropriately, it
12would be, in my submission, inappropriate to solicit those
13kind of answers from a witness who really should only be in
14a position to speak to his own experience in that
15marketplace and what actually happens with them in the
16market ass opposed to what happens generally or whether
17it's deep and liquid, or whether there's even a secondary
19 Those would be my submissions.
20 MR. KAISER: Thank you. Any other comments?
21 Mr. Brett, before we deal with the submissions, can
22you help us, and all of us, I guess -- the Board, of
23course, has provided you with these questions to give you
24some advance notice as to the matters that we want to
25examine on tonight.
26 My understanding through counsel, and not having heard
27from you, is that your client was prepared to answer these
28on the public record? Do I have that right?
1 MR. BRETT: Mr. Chairman, I was going to say, and
2perhaps I should give at least part of what I was going to
3say, that it may be helpful with regard to this other
5 In fairness, for the record purposes, at least, when
6we were apprised of Monday's ruling, BP made a
7determination that it was not prepared to come down on that
8basis. And I advised your counsel accordingly.
9 Yesterday, subsequently, during the day, I was in
10telephone contact with your counsel, who indicated that was
11there a way where this could happen and made a proposal to
12me. It was essentially the proposal that was subsequently
13issued to all parties.
14 I indicated that I would seek instructions on that.
15 Subsequently, about, probably, an hour and a half
16before all parties received them copies of the questions
17were forwarded to me. I can indicate I had been asking for
18questions since Wednesday, shortly after you extended the
19invitation, only because BP witnesses wanted to sort of
20prepare themselves for what parties or at least the Board
21would be interested in.
22 Having reviewed the questions briefly, I communicated
23to your counsel that BP was prepared to appear on the basis
24set out in Ms. Sebalj's e-mail; namely, submissions on what
25should be dealt with confidentially in camera, what should
26be public, and if we didn't like the ruling, in effect, BP
27was free to decline while sitting here the invitation to
28go, proceed, further.
1 Since then BP has had an opportunity, and Mr. Acker in
2particular has had an opportunity to go over the questions
3in detail, formulate responses.
4 And what I was going to say to you at the opening of
5the proceedings today is that BP is prepared to respond to
6the questions in, substantially, the form set out in the
7ones provided, in public session.
8 The issue, therefore, wasn't the questions themselves;
9it was the follow-up, it was the desire of parties,
10including the Board, to drill further into certain details
11of some of the matters that would be testified to by Mr.
12Acker where matters of a -- deal-specific or strategic
13importance, commercially sensitive, potentially prejudicial
14might arise. And what I was going to propose in those
15circumstances is that, in effect, we create a parking lot
16for those issues and deal with them to the extent parties
17still felt they should be or wanted to deal with them in
18camera, at the conclusion of the public session.
19 And I can't anticipate specifically what they might
20be, and there might be none. There might be none.
21 Certainly in light of the objections, I mean, BP is
22prepared not -- I mean, we have come down here at the
23request of the Board prepared to respond to questions of
24the Board and parties, but we are also prepared to leave if
25that is your desire.
26 MR. KAISER: Thank you. Well, I think that will help.
27The submissions have been made that the questions
28themselves, the form of the questions, constitute some
1apprehension of bias. The Board doesn't accept that
3 Nonetheless, that's not something that we are prepared
4to deal with at the moment. As I understand Mr. Thompson
5and Mr. Warren, they're putting us on notice, as it were,
6that these matters may be raised, and I guess as things
7unfold we'll delve further into that.
8 As to whether these witnesses are experts, they, of
9course, are appearing at the Board's invitation not as
10experts but as company representatives of a market
11participant. And as in all of these things the Board will
12have to give weight to their evidence on the basis of their
13qualifications, as no doubt Mr. Brett will outline for us
15 So, on that basis, Mr. Brett, we would propose to turn
16it over to you.
17 MR. BRETT: With regard to, in effect, my proposal,
18sir, I have given you my pitch, as was originally
19contemplated, in terms of proceeding in public session and
20deferring to an in-camera proceeding to the extent that
21subsequent follow-up questions require that. If that's
22satisfactory to you, then --
23 MR. KAISER: Yes, I think that will allow everyone an
24opportunity to deal with that issue. And what I would
25suggest, Mr. Brett, rather than us -- I know this is a bit
26unusual, but we've laid out the areas and the questions,
27and perhaps it would be easiest if you just took the
28witnesses through those and gave what responses they feel
1comfortable giving on the public record. And if that's all
2right with you, we'll have the witnesses sworn.
3 MR. BRETT: It will, sir. Perhaps I can introduce
4them to you. Sitting closest to you is Mr. Stephen Acker,
5who is the director of marketing and origination for an
6area including Eastern Canada. Beside him is Ms. Cheryl
7Worthy, who is director of regulatory affairs for BP
9 MR. KAISER: Thank you.
10 BP CANADA – PANEL 1:
11 Cheryl Worthy; Sworn.
12 Stephen Acker; Sworn.
13 EXAMINATION BY MR. BRETT:
14 MR. BRETT: Mr. Chairperson, I have distributed
15documents entitled "Ontario Energy Board docket number BP
16Canada Energy Company," background information for each of
17Mr. Acker and Ms. Worthy. I propose to very briefly lead
18them through that, given that no parties have seen it
19before now, just so that we can establish their positions
21 MR. KAISER: Thank you.
22 MR. BRETT: Ms. Worthy, first of all, I understand
23that most recently -- that is to say, from 1996 to the
24present -- you have been employed by BP Canada and have and
25have had increasing responsibilities related to the
26management of all regulatory issues in respect of natural
28 MS. WORTHY: Yes.
1 MR. BRETT: Prior to that time, you held similar
2positions with other gas companies going back to 1975?
3 MS. WORTHY: That's correct.
4 MR. BRETT: And you have, in connection with that
5position, testified either on behalf of your then-employer
6or on behalf of associations with which you were aligned
7before the Ontario Energy Board, the National Energy Board,
8the Régie in Quebec and the Alberta Energy & Utilities
10 MS. WORTHY: That's correct.
11 MR. BRETT: All right. Thank you.
12 Mr. Acker, you are currently the director of marketing
13and origination with respect to specific geographical
14responsibilities with respect to BP Canada's direct natural
15gas sales in Eastern Canada?
16 MR. ACKER: That's correct.
17 MR. BRETT: Mr. Acker, I did not tell you I was going
18to ask you this question, but that title is a little bit
19intriguing and might be a little bit different, given BP's
20own nomenclature, than some parties are used to. Can you
21just explain what the director of marketing and origination
23 MR. ACKER: I'm responsible for the commercial sales
24of natural gas for BP Canada into the areas of Manitoba,
25Ontario, Saskatchewan, and Quebec, and for a period of time
26when we were active in the Maritimes, also for gas produced
27off Sable Island.
28 MR. BRETT: And, Mr. Acker, it is the case, is it not,
1that you have been involved in positions like the current
2one for in excess of two decades?
3 MR. ACKER: I've been employed by Dome Petroleum, its
4acquirer, Amoco Canada, and its subsequent acquirer, BP
5Canada, since 1981. I spent some time when with Dome
6Petroleum in the 1980s with natural gas, and then full time
7in natural gas since 9990.
8 MR. BRETT: Now, Mr. Acker, in connection or as a
9result of the position you have, I gather you have some
10familiarity with what is being referred to generally in
11these proceedings as the secondary market for natural gas?
12 MR. ACKER: I have some familiarity with the secondary
13market as it exists in Ontario.
14 MR. BRETT: And, Mr. Acker, flowing out of the Board's
15invitation for a witness or witnesses from BP to attend
16before the Board, and as you've just heard in an exchange
17among counsel, a series of questions were sent to all
18parties indicating that the Board and/or Board Staff would
19be interested in hearing BP's response to those questions.
20And at the Chair's invitation, rather than him or the Board
21or Board Counsel taking you through those questions, I
22will, if that is satisfactory.
23 Do you have those questions in front of you, sir?
24 MR. ACKER: I do.
25 MR. BRETT: All right. And I am not going to,
26Mr. Chairman, editorialize these questions at all. The
27question, as delivered to all parties, I will read into the
28record, and Mr. Acker can respond as he sees fit.
1 MS. SEBALJ: If I could, Mr. Brett, just mark the two
2background information papers that you've given?
3 MR. BRETT: Certainly.
4 MS. SEBALJ: Mr. Acker's background information is
5J13.1 and Ms. Worthy's is J13.2. And, Mr. Chair, did you
6want the questions marked as well?
7 MR. KAISER: Yes, thank you.
8 MS. SEBALJ: That will be J13.3.
9 EXHIBIT NO. J13.1: BACKGROUND INFORMATION OF STEPHEN
11 EXHIBIT NO. J13.2: BACKGROUND INFORMATION OF CHERYL
13 EXHIBIT NO. J13.3: QUESTIONS FOR BP
14 MR. BRETT: So, for the record, then, Mr. Acker, you
15have a copy of Exhibit J13.3, headed "Questions for BP" in
16front of you?
17 MR. ACKER: Yes, I do.
18 MR. BRETT: The first heading on there is “Geographic
19Market for Storage”, and the first bullet is this:
20 "In this hearing, a key issue has been
21 defining the geographic scope of the storage
22 market in which Union and Enbridge operate.
23 Some parties maintain that storage facilities
24 outside Ontario cannot be considered to be
25 part of the market if the pipeline capacity
26 connecting Ontario and the other storage pools
27 is fully or substantially reserved. Others
28 maintain that secondary markets in
1 transmission capacity are deep and liquid,
2 and therefore allow market participants to
3 consider storage in Michigan and other U.S.
4 states to be substitutes for Ontario storage.
5 What is BP's experience?"
6 MR. ACKER: Mr. Chair, if I might, I will be referring
7to notes I wrote on the airplane this morning flying to
8Ontario, as I only received the questions late yesterday,
9so I ask your indulgence.
10 MR. KAISER: That's fine.
11 MR. ACKER: We at BP do have access to, or do hold, or
12have held Union storage. We at BP do have access or have
13held Michigan storage. We also have held or do hold
14transport capacity between the two. And as well, we have
15held and do hold transportation capacity to and from the
16two storage fields.
17 Marketers are generally attempting to generate revenue
18from their ownership or control of assets and do so by
19creating or selling services to the marketplace.
20 We at BP have been successful in both buying and
21selling these services, but we've always had to compete
22with others in the marketplace, also buying and selling
24 I can't comment that we have never been frustrated by
25our ability or access to services or assets. At times we
26have been frustrated by what we see in the cost of those
27assets, but in a competitive marketplace, we believe that's
28the way it should operate.
1 MR. BRETT: Thank you, Mr. Acker. The second bullet
2under that heading, I understand, Ms. Worthy, you will
3respond to, and the question is:
4 "Do you have any concerns arising from the
5 integrated operation of Union's storage and
6 transmission business?"
7 MS. WORTHY: We did have a question with respect to
8the actual intent of the question arising -- concerns
9arising from the integrated operation of Union's storage
10and transportation business. We weren't quite sure what
11the intent of the question was. But on the assumption that
12we're dealing with the issue of the fact that they are
13affiliates, and that as affiliates there could be issues
14that arise with respect to things like transfer of
15information or preferential treatment, any of those kinds
16of things, certainly whenever transmission and storage are
17held by the same party there can be concerns.
18 Those concerns, however, can be mitigated, and
19particularly through the appropriate codes of conduct,
20affiliate relationships, and to the extent necessary
21oversight and complaint mechanisms that would allow for any
22issues to be addressed on a timely basis.
23 So my answer to the question, do you have concerns
24arising? I think we always have concerns when elements of
25the market, in fact, are held by one party and operated in
26tandem when, in fact, the pieces have value separately
27-- and how they're allocated and what the fair and
28equitable treatment of those are for all users of the
1system. I hope that's helpful.
2 MR. BRETT: Second heading is, "Secondary Market
3Overview." The first question, Mr. Acker, is:
4 "Do you think there is a deep and liquid
5 secondary market? What is the evidence of
7 MR. ACKER: I do want to state initially that both
8Mr. Thompson and Mr. Warren are correct. I am not offering
9myself as an expert. I am a commercial participant in the
10secondary marketplace and offer only personal opinions.
11 That being said, if you're asking me specifically
12about the Dawn hub, which I define as not only the Dawn
13storage field but areas around the Dawn storage field,
14including Michigan, my personal opinion is that the
15secondary market is deep and liquid. My personal evidence
16for this is that BP has been beaten on numerous occasions
17by other buyers of services. We've also been beaten by
18other sellers of services in a secondary market.
19 We believed our offer to sell or our offer to buy
20services and assets was competitive. But other options
21were apparently available to buyers and sellers. That
22being said, we have enjoyed some reasonable success in
23either buying or selling services and assets. And so, in
24my opinion, that is evidence of a competitive and
25relatively liquid secondary market.
26 MR. BRETT: Mr. Acker, if we could back up a bit, the
27second bullet under the second heading is:
28 "Describe the evolution of the secondary
1 market since the early 1990s."
2 MR. ACKER: I don't offer myself as a historian
3either. However, the primary markets have fully bundled
4services -- as that market, fully bundled services, as
5provided by pipelines and LDCs have matured and unbundled,
6there was increasing access to physical assets that ended
7up in the hands of end-users and marketers. These entities
8strove to mitigate the cost of these assets by using access
9to the secondary markets in order to generate revenue
10opportunities to mitigate their costs.
11 The marketers per se went one step further, and
12developed services that they hopped that they could offer
13to the marketplace in order to generate a profit or a
14return on their personal investment.
15 To the extent that the market has found these services
16attractive and affordable, they were successful.
17 MR. BRETT: The third question under the second
18heading is the following, and I will read the entire
19question. It's, in effect, a number of subsections, though
20the question is the following:
21 "What is your assessment of each of the
22 following on the depth and liquidity of the
23 secondary market: NYMEX futures contract and
24 other financial instruments; Alliance-Vector
25 Pipeline and the Dawn hub; collapse of Enron;
26 entrance of banks and other financial
28 MR. ACKER: When we're speaking about the NYMEX
1natural gas futures contract, it is my understanding that
2this is the most liquid and highly traded commodities
3contract on the NYMEX. Hence, by its very definition, it
4is extremely liquid.
5 Financial instruments are also very liquid, but they
6become less liquid as they become either longer dated or
7more complex. A simple financial instrument might be
8swapping an index sale for one year to a fixed price for
9one year. That is a very simple financial instrument, and
10available from many parties.
11 Swapping an index price to a fixed price for 10 or 20
12years is a product that is offered by far less counter-
13parties for a variety of reasons, and, hence, is defined as
14being far less liquid.
15 When we get into very exotic derivative products, of
16course, there are even fewer people that can offer those,
17so that by definition is less liquid.
18 I personally have very little experience on the
19Alliance pipeline, but I am aware that there is vigorous
20competition among many marketers to secure management
21contracts on the Vector Pipeline corridor; that is,
22marketers are looking to acquire the right to manage
23services that are held by primary shippers, and for that
24right have been known to offer compensation in return for
25taking the risk to either make or lose money for managing
27 Obviously they would only make that offer if they
28thought they could generate a profit.
1 The Dawn hub, in my mind, is also very liquid,
2although some critics of the Dawn hub say it will not truly
3be deemed to be a world-class liquid hub until it has a
4more reliable first of the month index, and that index is
5evolving as trading volumes increase at the Dawn hub.
6 That being said, in my opinion, -- well, I should say
7in my experience, BP has never been frustrated in either
8being able to sell gas or to buy gas at the Dawn hub for
9any reasonable amount of volume, for any reasonable amount
10of time. And I would suggest that reasonableness is in the
11eye of the beholder.
12 Now, the Enron collapse, of course, obviously served
13to decrease liquidity in the financial markets and the
14physical marketplace for natural gas in North America, as
15many players were either forced financially to exit the
16merchant business or chose to decrease voluntarily their
17participation in that marketplace.
18 The result of that lack of liquidity, of course,
19created increased gas price volatility, which then
20attracted participants back into the marketplace, as
21volatility is usually presumed to be a trader's friend.
22 Of course, as more market players entered into the
23business again, that volatility was somewhat smoothed out,
24as evidenced now by increasingly tight bid/offer spreads at
25places like the Dawn hub.
26 The opportunity to generate profit, of course,
27eventually enticed financial institutions, and specifically
28banks, into the natural gas business. It is my
1understanding that one can now buy natural gas from most if
2not all of the Canadian chartered banks, at places like
3Dawn or AECO in Alberta.
4 MR. BRETT: Thank you, Mr. Acker.
5 The third subject matter heading is "Secondary Market:
6Specific Services and Pricing." And the first question is
8 "What sort of products do you offer” - you
9 being BP – “on the secondary market?"
10 MR. ACKER: The secondary market products that we
11offer our customers include commodity sales, which is just
12the straight sale of natural gas. And we sell that in a
13base load, a spot or a peaking fashion.
14 We also offer financial services, which are usually
15defined as price-shaping tools. People willing to change
16their index exposure for fixed price exposure or reverse
17are willing to cap the price of natural gas they might pay,
18or having a call on future price ceilings in order to
19protect their budgets.
20 We also offer transportation management.
21Transportation services, which can be defined as swaps or
22exchanges between two points. We also offer what we call
23"park and loans," which is really short-term lending or
24borrowing of gas in order to balance daily accounts with
25the utilities or the pipelines.
26 We also offer what we call delivery and redelivery
27services, which are both long and short-term.
28 That generally is what we and other market
2 MR. BRETT: The second question under this heading is:
3 "Can you provide us with some examples of
4 transactions executed by BP Canada involving
5 storage at Dawn where the transaction could
6 have been done using facilities other than
7 Dawn's storage? How does BP evaluate the
8 economics and risks of various alternatives to
9 using Dawn storage?"
10 MR. ACKER: I'd actually like to use a real-life
11example. However, I'd like to refrain from naming the
12counter-party with which BP conducted this transaction. So
13I'll refer to that party as party A, if I may.
14 So party A was a long-time holder of a firm storage
15contract with Union Gas. Party A is an exfranchise entity,
16that meaning it is not an end-user within the franchise
17area of Union Gas.
18 Through other channels, BP became aware of a pending
19contract renewal option that this party A held with Union
20Gas. So BP approached party A and offered a
21delivery/redelivery service at Dawn that would for all
22intents and purposes be similar to directly holding a Dawn
24 BP and party A negotiated a price for this service,
25and subsequently entered into a formal contractual
26agreement. Subsequently party A did not renew its Dawn
27storage contract with Union Gas.
28 So, for this service, BP took delivery from party A in
1the summer of an amount of natural gas, prorated evenly
2over the number of days in the summer season, and
3redelivered that same volume, prorated over the winter
4days, November 1st through March 31st of the following year.
5 This delivery and redelivery all occurred at Dawn.
6 BP used its own suite of assets, at that time, which
7consisted of its access to the financial, the physical,
8natural gas markets; its suite of pipe capacity into and
9out of the Dawn area; and exfranchise storage accounts we
10held in other jurisdictions. It's probably of particular
11interest to the Board to know that we did not hold and did
12not use any access to Union's storage in order to offer
14 This arrangement continues today, and, in fact, the
15two parties are now entering into preliminary negotiations
16to extend this deal for another period of time, subject to
17agreement on the price for that service.
18 The price, no doubt, will be renegotiated at least in
19part on the alternative of costs that party A has to the
20price that BP was hoping to acquire or negotiate and
21conclude this deal on.
22 It's up to the customer to evaluate the economics and
23risks of this service in light of holding a physical
24storage contract with Union Gas.
25 MR. BRETT: The next question in this section is:
26 "What types of primary services do you use to
27 create the secondary market products? For
28 example, how much storage do you hold in
2 MR. ACKER: Specific to Michigan, I know that our
3storage accounts are actually on the record, and I do not
4personally know that, but I believe that you have that
5information, Mr. Brett, and can refer to it.
6 MR. BRETT: Mr. Chairman, for the record, I believe
7the Union Gas Undertaking K5.2 lists the holders of
8Michigan storage positions, which, among other things, lays
9out BP Canada's position.
10 MR. KAISER: And is that accurate, from BP's point of
12 MR. ACKER: To the best of my knowledge, Mr. Chair, it
13is accurate on the date it was reported.
14 MR. KAISER: Thank you.
15 MR. ACKER: So BP does hold transportation and storage
16accounts, both outright and in its own name, and under
17management for third parties, in both Michigan and Ontario.
18 This suite of assets, as well as our active buying and
19selling of natural gas at various points along the Vector,
20Great Lakes, ANR, Union, and TransCanada systems, create
21opportunities to provide services in the secondary markets,
22and we pursue those opportunities aggressively.
23 MR. BRETT: Mr. Acker, can you describe the
24relationship between the prices of primary products and the
25prices of secondary market products?
26 MR. ACKER: I'm not sure I completely understood the
27question, but in my mind, in the primary market the prices
28reflect the actual costs a shipper or owner must pay to
1acquire either the transportation or the service from
2parties such as Union or TransCanada or Vector or Enbridge,
3that being the tariffed rate for those services, subject
4only to some potential negotiation for rates with U.S.
6 In the secondary market, of course, all prices are
7negotiable and may at one point in time under-recover,
8fully recover, or quite often over-recover the full cost of
9that asset or service, subject, again, only to regulatory
10constraints. For example, in the United States, one is not
11able to release or acquire pipeline capacity from a
12principal holder at rates greater than the tariffed maxed
13rate. That is not true in Canada.
14 MR. BRETT: And lastly, under the third section,
16 “From BP's perspective as a marketer, does
17 the mixed nature of storage pricing in the
18 Midwest, Ontario (some at market, some at
19 cost), significantly affect the nature or cost
20 of transactions that BP wants to execute?"
21 MR. ACKER: As a marketer, I would dearly love to have
22access to cost-based storage but I do not. So I have
23access to market-based storage, whether it be in the United
24States or Canada, and that access is on a competitive
25basis, and of course the price that I end up -- or BP ends
26up paying for that does, in fact, impact the price at which
27we try to remarket that asset and/or associated services to
28third parties in the secondary market.
1 MR. BRETT: Mr. Acker, the last subject heading is
2“Power Generation Services.”
3 First question:
4 "Is there a difference in your ability to
5 offer intra-day services versus day-ahead or
6 longer-term services?"
7 MR. ACKER: There most definitely is. We can offer
8firm day-ahead and firm longer-term services, but to date
9we are unable to provide firm intra-day service. The
10number of NOM windows is currently restricted to four, and
11other than the first NOM windows the subsequent three
12windows are on a reasonable-efforts basis. So it is very
13fair to say that we are not yet in any position to offer
14firm intra-day services to those market participants
15looking for them.
16 MR. BRETT: And the last question on the sheet,
18 "Does BP have experience serving dispatchable
19 gas-fired generators? Are the storage
20 services and nomination windows currently
21 available in the market sufficient to permit
22 generators or marketers on their behalf to
23 manage their gas supply without excessive
25 MR. ACKER: I'm going to restrict my comments only to
26Ontario because I'm unfamiliar with BP's power generation
27services business in the United States.
28 But BP Canada does not have any experience servicing
1dispatchable gas-fired generators in the Province of
2Ontario. We have been approached by prospective power
3generators in Ontario to provide services in a fashion that
4they deem necessary in order to run their facilities, and
5we have responded to those approaches by stating at this
6point in time BP is unable to provide either high-
7deliverability storage or multiple NOM windows outside
8those that exist today.
9 It's our intention as these services are created and
10eventually made available to the marketplace, hopefully on
11a non- discriminatory basis, that BP will look at acquiring
12and possibly repackaging these services in order to then
13offer them to the secondary marketplace.
14 MR. BRETT: Thank you, Mr. Acker, Mr. Chairman.
15 MR. KAISER: Thank you, Mr. Brett. Thank you,
16Mr. Acker, Ms. Worthy. Any questions? Mr. Thompson?
17 MR. THOMPSON: Well, under the procedural schedule, I
18understand there's questions from the Panel to follow now,
19and then there's a list of parties. I don't know if I'm
20the first up but...
21 MR. KAISER: All right.
22 [The Board confers]
23 QUESTIONS FROM THE BOARD:
24 MR. RUPERT: I guess this would be for you, Mr. Acker.
25I just wondered if you could provide some further detail
26around, I guess it was in response to question 5. You
27talked about the Vector Pipeline and the market in that.
28 I just want to get a sense of what the secondary
1market and pipeline capacity on a line like Vector
2involves. You have the holders of the space which have
3their contracts or service with the pipeline.
4 In this secondary market for that, how does that
5actually operate? It's not a bulletin board or anything
6like that, I assume, in the pipeline space? Or how to do
7you actually as a marketer procure space from a primary
8holder on that line?
9 MR. ACKER: Well, there are a number of answers to
10that. First off, I'll preface my comments by, BP currently
11is a holder of firm service on the Vector Pipeline. We
12acquired that in an open season from Vector Pipeline, and
13we've also participated in a subsequent open season on
14Vector Pipeline, and will increase our position on Vector.
15 That is what I define as the primary markets. We will
16be preparing a negotiated rate subject to FERC tariff
17provisions to Vector Pipeline. We will then use that
18capacity to service either markets that we contract for
19directly -- i.e., end-users, LDCs, industrial users == or
20we will use that asset and associated assets to attempt to
21trade natural gas for a profit.
22 The secondary market, of course, are those people
23looking to acquire services from us predicated on us having
24acquired the Vector capacity in the primary market.
25 We also participate in the secondary market by looking
26to manage capacity for third parties, subject to FERC
27compliance issues, or take release of excess capacity from
28primary holders. And in the United States, that is done
1under a FERC-mandated procedure that does require primary
2holders of capacity on U.S. interstate pipelines to post
3them on a bulletin board to make them available for
4bidding, unless two parties have agreed to pay the max rate
5in a pre-determined negotiation, and then that deal is
6posted on a bulletin board for information purposes only,
7to show that the releasing party and the acquiring party
8have agreed to a deal at max rates.
9 To my understanding, the intent of posting pipe for
10release in the marketplace is to allow all participants to
11participate in bidding for that capacity, so that no one
12party is deemed to be in a preferential position.
13 Of course, that is capped by, nobody is able to pay
14more than max rate for release capacity on U.S. interstate
16 Interestingly enough, that is not the situation in
17Canada, where the secondary market is completely
18unregulated, and any two parties are free to negotiate any
19deal whatsoever, both for the pipe at below -- at or, in
20fact, greater than the tariffed rate.
21 MR. RUPERT: Just a quick follow-up on that. I
22believe we've had some evidence at this hearing from some
23experts about the pipeline capacity releases and the
24pricing and the FERC ceilings along the lines that that may
25be in fact the limit on the pricing for the initial
26release, but if someone takes that and bundles that product
27with something else, then, obviously, there seems to be no
28ongoing obligation to ensure that you always pass through
1the maximum FERC tariff in whatever the bundled product is;
2i.e., the secondary market would work to in effect make the
3storage component of any bundled products the market price
4as opposed to the tariffed price, if you understand my
6 MR. ACKER: I do understand it, but I want to make a
7point that one must be completely cognizant and aware and
8adhere to FERC compliance rules, which are extremely
9onerous when compared to the secondary Market Rules in
10Canada. And I am restricting my comments in this forum to
11providing delivery/redelivery services at Dawn, which BP
12may or may not be using exfranchise hard assets such as
13Vector Pipeline, such as Washington 10 storage.
14 I'm not saying that we have to have access to
15Washington 10 storage, for example, in order to provide a
16Dawn delivery/redelivery service, but we may.
17 We also can access pipeline capacity into and out of
18the Dawn area, and we can also use the deep and liquid
19physical gas market at Dawn in order to buy and sell gas to
20meet our obligations.
21 [The Board confers]
22 MR. ACKER: I guess I would like to make one further
23comment, Mr. Rupert.
24 The FERC is extremely diligent in enforcing its rules
25that one does not tie gas sales to pipe capacity release.
26They view that extremely poorly. And, in fact, certain
27parties have been subject to criminal prosecution when
28found to have entered into deals where they have tied the
1purchase or sale of gas to the lease of acquiring of
3 MS. CHAPLIN: Thanks. Sorry, I had a follow-on
5 One of the things you mentioned in your response to
6Mr. Rupert, and also earlier, was a reference to in
7addition to holding capacity on Vector you can also manage
8capacity for third parties.
9 Could you explain that a little bit?
10 MR. ACKER: It's probably an easier example first if
11we look at the Canadian situation, and TransCanada's a very
12nice generic example.
13 Anyone who holds TransCanada capacity is free to
14assign or release or enter into an agency agreement with
15any third party to manage that capacity. So a generic
16example would be if an industrial end-user is a capacity
17holder on TransCanada. If this capacity goes from Empress
18to Dawn, for example, they will be purchasing gas at
19Empress into that capacity. They will be taking gas off of
20that pipe at Dawn.
21 They'll be paying a demand charge to TransCanada,
22whether they use that capacity to its fullest extent, each
23and every day of the term of the contract.
24 Marketers such as BP and competitors to BP, when they
25look at the opportunities along the TransCanada corridor,
26and when they look at that pipeline capacity in a bigger
27picture in association with other capacity and customers
28they have along that line, believe on occasions that they
1can extract value from managing that capacity that the
2industrial end-user cannot.
3 So generically, they would approach that capacity-
4holder and ask if the owner of the capacity would be
5interested in a situation where they would release the
6capacity to BP; BP would don't pick up their third-party
7acquired gas at Empress in this example, continue to
8redeliver it on a base load basis to the end-user at Dawn,
9but may or may not use that particular capacity at any
10point in time, but would be looking for opportunities to
11exploit or earn incremental revenue by moving that capacity
12around, while at all times firmly honouring the obligation
13to deliver gas at Dawn.
14 Generically speaking, marketers would offer some sort
15of compensation for that opportunity in Canada, whether it
16be a profit-sharing or a straight-out fee; it's left to the
17parties to negotiate.
18 That situation in the U.S. is much more difficult,
19because of FERC compliance issues. Primarily, the one that
20shipper must have title. So you cannot take and nominate
21pipe that has gas in it that you do not own. Those
22obligations do not exist in Canada.
23 So, while, for example, XY company may own TransCanada
24company and have bought gas from anybody, they are free to
25assign that pipe to a third party who will continue to pick
26up the gas from the original supplier and deliver it to the
27end-user, but, in fact, never take title to the gas. That
28kind of situation is not permitted in the United States.
1 So you tend not to get as many asset management
2opportunities but more what we would call agency
3opportunities. And it's an ongoing challenge to understand
4and remain FERC-compliant.
5 So that kind of activity is not as prevalent in the
6United States as it is in Canada.
7 MS. CHAPLIN: And you've described that that can take
8place on TCPL. Can it also be done for parties that hold
9capacity on Union?
10 MR. ACKER: We have not entered into any distribution
11or transportation capacity management arrangements for end-
12users behind the Union City gate. That being said, the S&T
13capacity, for example, the M12 capacity between Dawn and
14Parkway, very much, that can be handled name exactly in a
15fashion as I have described with TransCanada. And again, I
16should add that that is not a regulated activity. The
17price for that is freely negotiated between buyer and
18seller and is not required by any regulatory body to be
19reported in the public domain.
20 MS. CHAPLIN: Okay. When you were answering the
21questions regarding services to power generators, and you
22indicated that BP's not in a position to offer firm intra-
23day services given the current nomination windows, do you
24expect that that will change, given the settlement proposal
25that we have before us regarding the increasing the
27 MR. ACKER: It's my understanding that the settlement
28proposal, if it results in services that are attractive and
1meet the needs of the power generators as they've been
2described, that BP would then contemplate and evaluate
3entering into that market, either looking to acquire some
4of those services itself in order to repackage and rebundle
5and offer a service to the power generators, or possibly
6approach power generators that have acquired those services
7themselves to see if a negotiation can be concluded that
8would result in those services being managed by BP on
9behalf of the power generator.
10 MS. CHAPLIN: In talking about the Dawn hub, you
11commented that BP had never been frustrated with respect to
12buying or selling reasonable quantities of gas. What sort
13of information can you give us regarding how frequently BP
14trades at Dawn and what sort of volumes are involved?
15 MR. ACKER: I can certainly comment to the frequency.
16 We have a number of traders dedicated to trading the
17Dawn hub each and every day of the week, both bilaterally,
18and also on the NGX platform, which is a computer-based
20 As to the volume, I am not able to give you an exact
21number, but I am comfortable in saying that on any
22particular day there are multiples of the actual physical
23volume that is changing hands, traded at Dawn. And what I
24mean by that, my numbers are very general, but if there's
25500 million a day of actual molecules passing through Dawn,
26there may be 2.5 Bcf a day of volume actually traded. A
27particular molecule may well be traded several times at
28Dawn. However, that molecule can only be burnt once by
2 MS. CHAPLIN: Thank you. And coming on to the example
3that you described with entity A, where you entered into a
4delivery/redelivery service, my understanding of your
5description of that -- well, that BP took even -- took even
6summer deliveries, and then provided an even redelivery
7over winter. And you made the comment that either
8coincidentally or whatever the same entity did not enter
9into a Union storage contract.
10 I'm just wondering if you could discuss the nature of
11that delivery/redelivery service, which sounds like it's
12sort of a very flat -- I don't know if flat's the right
13term, but an even profile, versus whether or not a more
14flexible profile might be something that a customer would
15require. Would that be a similar type of service that BP
16would offer, I guess is what I'm asking.
17 MR. ACKER: BP can offer a service that is far less
18than vanilla-like than that service. And I guess the
19initial step in that process would be for the markets to
20describe what they want. And so I guess what we've
21described with party A as the most generic of
22delivery/redelivery services -- we are delivered the same
23amount of gas each and every day in the summer, and we
24redeliver the same volume spread over a shorter number of
25days on an equal basis every day. But party A is free to
26come to the market, and BP is able to provide one-day
27notice. We can take your gas on one day, or we can deliver
28your gas on one day.
1 If you would like to create a redelivery profile that
2is not flat or uniform, that can be done. It's safe to say
3that the cost of that will probably be different than the
4cost of delivering the same amount of gas each and every
6 MS. CHAPLIN: And would it be your view that BP's in a
7position to offer the same amount of flexibility or the
8same variety of services or delivery patterns or usage
9patterns that would be afforded by a customer contracting
10directly with Union storage?
11 MR. ACKER: To the best of my knowledge, when you
12contract with Union for storage, you've contracted for a
13particular delivery profile. Once you've entered into
14that, it's my understanding that is the profile that you've
15contracted for. You, of course, are free to use or not use
16that service on any particular day, subject to, I believe,
17Union's obligation for you to either fill up or empty that
18storage over a particular period of time.
19 So it's probably safe to assume that a marketer
20providing these secondary market services has some greater
21degree of flexibility to offer services that are not
23 MS. CHAPLIN: Okay. Thank you. That's it for me for
25 MR. RUPERT: Unless I was not listening, I'm not sure
26that Mr. Brett asked you the question which is the last
27bullet under the secondary market. Am I wrong about that?
28 This was the one about the mixed nature of the storage
1pricing in the Midwest/Ontario. And by that, the question
2was intending to mean that in Michigan or New York or Ohio,
3whatever you want to define as the Midwest, some of the
4storage pools have cost-based rates for tariffs, other ones
5have market-based rate authority.
6 And the question really gets to the issue of, in that
7kind of a market sector where some of the available storage
8pools have these tariffs and some of them charge market-
9based rates, how does that affect the nature and cost of
10things you can do in this sort of mixed hybrid market of
12 MR. ACKER: I don't believe I'm qualified to speak to
13storage fields that go further into the Midwest than
14Vector. But with respect to the Vector field, once we've
15negotiated a rate with Vector on the pipeline or Washington
1610 DTE for the Washington 10 storage field, we are then on
17the hook for whatever that cost is. Whether that cost was
18market-based or cost-based, I guess, is almost irrelevant
19to the risk we've taken on to try to repackage that service
20and sell it to a third party, hopefully for a profit.
21 To the extent that cost-based is below market-based,
22we, of course, would prefer to have access to the lower
23cost. But we are quite comfortable participating in the
24competitive marketplace in order to acquire access to those
25types of services.
26 MR. KAISER: Mr. Acker, you've indicated that you
27hold, certainly from time to time, storage in both Michigan
28and Dawn. In providing the services that you've described
1at Dawn, how important is the Michigan storage?
2 MR. ACKER: I think, Mr. Chair, that changes at any
3point in time. Obviously, it's nice to have physical
4storage at the point that you're providing services, but it
5is not necessary. So the decisions that we make about
6whether to hold Union storage at Dawn or Enbridge storage
7at Dawn or Washington 10 storage in Michigan are always
8influenced by the least-cost alternative we face.
9 We don't think we are prejudiced in any way in
10offering delivery/redelivery services by virtue of which
11field we actually may or may not contract for. But
12certainly it's not our intention to offer services that we
13don't think we have the physical ability to honour, whether
14that be transportation and/or delivery/redelivery services.
15 MR. KAISER: If you didn't have access to Michigan
16storage, would your business be substantially impacted?
17 MR. ACKER: We would seek other alternatives. There
18are other storage fields in the area, and as I'd mentioned,
19I think, earlier, to provide storage-like services or
20delivery/redelivery services at Dawn particularly one does
21not have to hold either infranchise or exfranchise storage.
22One can use both the physical and financial markets and the
23suite of transportation assets one holds into and out of
24the area to effect the same kind of service.
25 So it is safe to say that it is not Union storage, but
26it can provide services that are very similar to Union
27storage. The cost and risk associated with those services
28are left to the purchaser to decide if the cost is
1appropriate and if the risk is acceptable.
2 MR. KAISER: And in your experience, from the
3perspective of your business, have you seen any benefit to
4you of the FERC policies in the U.S. to create an incentive
5for storage to be offered at market-based rates? Has that
6in any fashion impacted your business?
7 MS. WORTHY: I assume you're talking about Order 678?
8 MR. KAISER: Yes.
9 MS. WORTHY: I think the order is just too new to
10determine whether or not what the exact impact of that is
11going to be. I think, knowing the FERC process, there's
12probably more to come.
13 MR. KAISER: And what's been the experience, if any,
14with respect to the Michigan Commission and their -- we've
15heard some evidence, not a great deal, about there being
16both market-based rates and cost-based rates in Michigan.
17Has there been any policy development there in that regard
18that's impacted your business?
19 MS. WORTHY: I'm sorry, we're not -- we actually
20didn't look at that before we came.
21 MR. KAISER: All right.
22 MS. WORTHY: I apologize.
23 MR. KAISER: And, Mr. Acker, looking at what the daily
24trading is or even the annual trading at Dawn, how
25important are marketers in terms of volume?
26 MR. ACKER: It would be my position, Mr. Chair, that a
27substantially large percentage of volume that is reported
28is, in fact, marketers moving gas around that -- obviously,
1at Dawn there is very little native equity production in
2Ontario so the majority of gas that is traded at Dawn or
3bought and sold at Dawn has been brought in from somewhere
4else. So it's safe to assume that the majority of that gas
5has been brought in by marketers or producer/marketers who
6have actually taken out transportation in order to get gas
7to a liquid point such as Dawn.
8 MR. KAISER: And how big a player would you be in
9that? I mean, what -- are you a major player in that
11 MR. ACKER: At the Dawn hub?
12 MR. KAISER: Yes.
13 MR. ACKER: We consider ourselves a major player at
14the Dawn hub in the daily business, I think. I am more
15involved in what we call the origination or marketing
16business, where we are selling to actual end-users, be they
17LDCs or industrial end-users.
18 The LDCs both infranchise, being Union and Enbridge,
19exfranchise, being GMI and the U.S. north LDCs that have
20come into Canada recently to purchase gas at Dawn.
21 So we are very active in that marketplace, but because
22it is a competitive marketplace, we certainly face stiff
23competition from our competitors to chase that business.
24 So, while we are big, we are not dominant by any means.
25 MR. KAISER: And who would be the two or three largest
26competitors that you would face as marketers? I don't mean
27the LDCs. Who do you regard as your top competitors?
28 MR. ACKER: I mean, we see the likes of Corals and
1Nexens and Seminoles and ConocoPhilips as the kind of
2people that we compete with on an origination or marketing
3basis, and then those same players plus the banks and
4several other second-tier players when we get into the
6 Dawn being a very liquid and deep hub, it attracts an
7awful lot of players who enter that marketplace for the
8sole purpose of trading natural gas, as opposed to trying
9to serve an end-use market such as an LDC or an industrial
11 MR. KAISER: Thank you.
12 MR. RUPERT: One other question, Mr. Acker. If I'm an
13entity that currently has storage at Dawn, and I have these
14seasonal load balancing -- you know, seasonal storage
15requirements, besides contracting with a firm like BP
16Canada or other competitors you've just listed, what does
17your experience tell you about the extent of that kind of
18an entity being able to do it themselves, if I could put it
19that way, rather than contracting with you to decide today
20to go out and get some storage space in Michigan, say, to
21get some pipeline space to bring the gas to Ontario?
22 Do you have any sense from your experience of the
23market as to whether that type of transaction -- so it's
24not a marketer now, it's an actual industrial user or
25someone, an LDC, someone that has seasonal storage needs –-
26being able to do this themselves? Or is this a case where,
27from your experience, people have to come to firms like
1 MR. ACKER: I'm going to make the assumption, Mr.
2Rupert, that you're referring to, for example, industrial
3end-users that may reside within either the Union or the
5 MR. RUPERT: Well, not so much them as exfranchise
6consumers who currently may have Union storage, because, of
7course, we get into this whole bundling question right now
8here, which is -- I don't want to have that issue --
9 MR. ACKER: Certainly.
10 MR. RUPERT: -- muddy up the waters with your answer,
11but someone who currently may have access to the storage at
12Dawn who decides: I'm going to check around to see if
13there's alternatives to doing that.
14 MR. ACKER: Well, I'm very familiar with three
15situations that may be of interest to you. One -- and
16again, I'm not going to, except where it's already on the
17public record, use particular company names, but there are
18several exfranchise LDCs who hold Union storage accounts.
19I think that's well known.
20 The example that I gave of party A is an exfranchise
21entity who did hold a storage account and chose, for
22whatever reasons, to let that contract expire and purchase
23a delivery/redelivery service at the same point. And I
24know that Union Gas has put on the record at these
25proceedings companies such as Southern Connecticut,
26Connecticut Natural Gas, Bay State, and Yankee Gas, all
27exfranchise U.S. Northeast utilities who have contracted
28with Union for ten years of transportation take-away from
1Dawn to Parkway way, and then subsequently contracted with
2TransCanada for ten years of service from Parkway to
3Waddington, which is the interconnect with Iroquois
4Pipeline, and then gone to the market to buy gas. And they
5had the option of buying gas at Dawn. They had the option
6of buying gas further upstream. They had the option of
7purchasing storage from Union at Dawn. They had the option
8of purchasing storage further upstream in Michigan.
9 Those particular companies chose to bypass Dawn as a
10storage location and contracted with Vector, and did
11subsequently contract with Washington 10 to acquire storage
12services and transportation away from that facility, and
13then through the Dawn hub.
14 So those individuals, depending on their Vector
15capacity, will either buy gas into their storage facility,
16delivered into Michigan at Washington 10, or those that
17hold capacity back to Chicago will then buy gas in Chicago
18for injection in the summer to their Washington 10
19facility, and then in the winter will remove that gas and
20redeliver it to themselves at Dawn, and then subsequently
21take it away to their downstream pipelines.
22 As they own that capacity, and if they choose to
23manage it themselves, they have the opportunity of
24optimizing that path, and by that I mean they may well sell
25their Michigan gas in Michigan in the winter, and choose to
26buy gas at Dawn to fill their downstream obligations if the
27costs are outweighed by the incremental revenue.
28 And in that example, they would save the cost on
1Vector from -- moving gas from Washington 10 to Dawn. They
2would still be subject to their demand charges, but their
3variable or incremental costs, being fuel in this example,
4would be saved.
5 So if they can sell gas in Michigan, buy gas at Dawn,
6and save 5 cents on the fuel, then they are better off to
8 But getting back to your question about Union's
9storage, those particular well-seasoned storage purchasers,
10being exfranchise LDCs, chose not to buy Union storage but
11chose to buy storage further upstream. That being said,
12some northeast LDCs have chosen to buy Union storage, and
13some have chosen to let theirs expire.
14 So there's a variety of experience or examples in the
16 MR. KAISER: Thank you.
17 Mr. Leslie, do you have any questions?
18 MR. LESLIE: I do, sir. Thank you.
19 CROSS-EXAMINATION BY MR. LESLIE:
20 MR. LESLIE: Mr. Acker, I thought it was -- the
21light's on. Thanks.
22 Mr. Acker, Ms. Worthy, my name is Glenn Leslie, and
23I'm counsel to Union Gas. I have a few questions.
24 The genesis of your appearance here was a phone call
25from a consultant who appeared for one of the parties,
26named Bruce McConihe, and I just wondered whether either of
27you were parties to that telephone conversation.
28 MR. ACKER: Yes, Mr. Leslie, both of us were parties
1to that conversation.
2 MR. LESLIE: Have you seen the note that Ms. McConihe
3made of that conversation?
4 [Witness panel confers]
5 MS. WORTHY: I saw it when I was in the hearing room
6the other day. I don't have a copy of it right now.
7 MR. LESLIE: No, that's fine. I principally wanted to
8follow up on some of the questions about services to power
10 Presently, would BP be in a position to provide a
11power generator with a service that involved delivery of up
12to 20,000 gJs of gas at Dawn with four nomination windows
13on the NAESB nomination standard; on a daily basis, that is?
14 MR. ACKER: Are you asking whether or not that
15nomination would change within the day or whether on a day-
16ahead basis are we able to provide 20,000 a day delivered
18 MR. LESLIE: On a day-ahead basis.
19 MR. ACKER: Yes, we can --
20 MR. LESLIE: As matters presently stand.
21 MR. ACKER: Yes, we can.
22 MR. LESLIE: Yeah. And there has been some discussion
23of intra-day services, and you've made it clear that you
24are not presently in a position to provide those.
25 MR. ACKER: On a firm basis, I would add. We can
26provide them on a reasonable-efforts basis, but it is not
27on a firm basis.
28 MR. LESLIE: All right. Well, we'll note that.
1 Enbridge, Union, and others, and I'm told Bluewater,
2are developing, as you know, new services, for higher
3deliverability and more nomination windows.
4 When those products become available on the market, as
5I understand your evidence, you would look at them with a
6view to potentially buying such products yourselves,
7repackaging them and selling them if you could make a
9 MR. ACKER: That is true.
10 MR. LESLIE: And the question of cost-of-service
11versus market rates: I take it that if the people who were
12using those services, the power generators, were acquiring
13them at cost-of-service rates, and your company, BP, did
14not have access to them at cost-of-service rates, that
15would probably make it more difficult for you to do it at a
17 MR. ACKER: I would say that is a very safe assumption.
18 MR. LESLIE: Thank you. Do you think you would be
19able to enter the business if that inequality existed --
20that is, cost-of-service versus market rates?
21 MR. ACKER: I'm sorry, could you repeat the question,
23 MR. LESLIE: Do you think it would be feasible for BP
24to get into that business if the power generators were
25getting the service from Union at cost-of-service rates,
26whereas you were paying something different from cost-of-
28 MR. ACKER: But enter into what business?
1 MR. LESLIE: The business of providing high-
3 MR. ACKER: If the end-use market has already acquired
4that service, I'm not sure what I have to offer.
5 MR. LESLIE: All right. Well, I'll let it go at that.
6 A couple of follow-up questions on the questions that
7the Board asked you, one of which was, and this is the
8third bullet point under "Secondary Market, Specific
9Services and Pricing." And the question was:
10 "What types of primary services do you use to
11 create secondary market products?"
12 I wonder, do you buy services or assets from other
13marketers as well as from primary providers?
14 MR. ACKER: At any point in time, we may or may not
15acquire assets from other market participants and, by
16definition, that would mean we do enter the secondary
17market to acquire services and/or access to assets.
18 MR. LESLIE: Right. So do I take it from that that
19you do, at times, deal with other marketers?
20 MR. ACKER: Yes, we do.
21 MR. LESLIE: Thank you. And, I think this is the next
23 "Can you describe the relationship between
24 the prices of primary products and the prices
25 of secondary market products?"
26 Do you have any knowledge of the relationship between
27cost-of-service rates and market rates for storage in
28Michigan and/or Ontario?
1 MR. ACKER: I personally do not.
2 MR. LESLIE: All right. Thank you very much, sir.
3 MR. KAISER: Thank you, Mr. Leslie.
4 Mr. Cass.
5 CROSS-EXAMINATION BY MR. CASS:
6 MR. CASS: Panel, I represent Enbridge Gas
7Distribution. I have only one area of questioning. In
8order to try to avoid getting into anything confidential,
9I'm going to keep it very high-level and try to give it to
10you all in one question, if I can.
11 Could you please comment, from your experience, on the
12responsiveness of the market when new needs emerge or new
14 MR. ACKER: It's been my experience that the market
15can react very quickly if access to the appropriate assets
16and/or services is available. The suite of assets that BP
17has access to at any one time allows us to respond to
18requests for services. The challenge, of course, is do the
19assets we have access to at any one time result in a
20service that is of value to the counter-party. That
22 MR. CASS: Yes. I had actually meant, in my question,
23to distinguish between BP and the rest of the market, and
24you did that in your answer.
25 So I would take it that your response would indicate
26your experience on behalf of BP, and also your experience
27from seeing how the rest of the market operates; is that
1 MR. ACKER: It is fair. I mean, my personal
2experience is that we've worked diligently to try to solve
3problems or challenges that are brought to us by our
5 MR. SOMMERVILLE: On occasion those challenges have
6been met better by our competitors. Occasionally we are
7successful in meeting our competitors' market challenges
8better than they.
9 MR. CASS: So your experience is that BP works
10diligently to meet those types of challenges and there are
11competitors in the market who do the same thing?
12 MR. ACKER: BP works diligently to attempt to meet
13those challenges. We are not always successful. And there
14are many competitors to us working just as diligently.
15 MR. CASS: Fair enough. Thank you very much,
16Mr. Acker. Thank you, Mr. Chair.
17 MR. KAISER: Thank you, Mr. Cass.
18 Mr. Brown, any questions?
19 MS. SEBALJ: Sorry, there was an order sort of
20suggested in this procedural e-mail that went out
21yesterday. I don't know whether Mr. Smith or Ms.
23 MR. KAISER: I jumped over Mr. Smith because he was
24busy talking to Mr. Beck, but I'll ask him.
25 MR. SMITH: I apologize, sir. I don't have any
26questions, as I had indicated yesterday.
27 MS. SEBALJ: And Ms. Campbell?
28 MR. KAISER: Ms. Campbell.
1 MS. SEBALJ: Then it’s Mr. Thompson.
2 MR. KAISER: Mr. Thompson?
3 MR. THOMPSON: Yes, if it's acceptable to the Board,
4Mr. Warren and I had collaborated and we thought he would
5go in with the factual stuff and then I would come in as a
6follow-up with more theoretical stuff, if that's
7satisfactory to the Board.
8 MR. KAISER: That's fine.
9 Mr. Warren.
10 CROSS-EXAMINATION BY MR. WARREN:
11 MR. WARREN: Members of the panel, my name is
12Robert Warren. I act for Consumers Council of Canada. And
13as Mr. Thompson indicated, my function is to ask the
14prosaic and dull questions. He will occupy a higher plane
15than I do.
16 I have just a couple of questions, sir, and they're
17about the services that you described yourself as
19 In the list of services, or the products, you were
20asked, you listed them, and there were six or seven of
21them. Is BP in the business of selling unbundled storage
23 MR. ACKER: We are not in the business of selling
24storage. We are in the business of selling delivery and
26 MR. WARREN: Are there any services that you provide,
27sir, that are not connected with or do not involve, I guess
28more accurately, the sale of the commodity as well?
1 MR. ACKER: If we are offering a delivery/redelivery
2service, that easily can be separated from the commodity.
3We are not buying or selling the commodity; we are
4providing a service to the owner of that commodity. And if
5we are also managing transportation on behalf of a client,
6we do not necessarily sell or buy gas from that client,
7although we may.
8 MR. WARREN: The reason I asked the question,
9Mr. Acker, is that when you described your functions with
10the company, they were couched exclusively in terms of
11marketing the sale of the commodity natural gas, which is
12the reason I asked the question.
13 In your business, BP's business, in Ontario, what
14percentage of your business would involve the sale of
15something other than -- or that did not involve the sale of
17 MR. ACKER: The majority of my business that I am
18responsible for in the Province of Ontario is the sale of
19the natural gas commodity. I have never been approached in
20my 25 years in the industry by any user within the -- end-
21user, within the franchises of Ontario or Quebec, to offer
23 The only persons or entities that I've ever been
24approached by for those services are exfranchise.
25 MR. WARREN: Then what percentage of the business of
26BP -- let me take it beyond the horizon of what you do -–
27what percentage of the business of BP would involve -- in
28Ontario, or perhaps, fairly, in the eastern market as
1you've described it, would involve the sale -- that do not
2involve -- sorry, it's too convoluted -- do not involve the
3sale of the commodity?
4 MR. ACKER: Well, I don't know the exact numbers or
5percentage. It is safe to say that the majority of our
6business in Ontario, both what I am responsible for and my
7peers -- responsible for Ontario, is the commodity sale.
8The sale of delivery/redelivery so was services is not the
9major component of our services available in Ontario.
10 MR. WARREN: Okay. Would I have, just to drill down a
11little bit further on this, it's a bad pun, but if you'll
12allow me. Would it be fair to say that the
13deliver/redeliver business is a very small portion of BP's
14business in this sector, or in this area, rather?
15 MR. ACKER: It would be fair to say that it's nowhere
16near as large as the commodity sales in the Province of
18 MR. WARREN: We're one step ahead of how many angels
19can dance on the head of a pin, so I think I’ll leave it at
21 My next question is with respect to the one
22transaction that you described, and I'll avoid, I hope,
23questions of a confidential nature, can you tell me -- this
24is where you had entity A, and this was the
25delivery/redelivery arrangement -- can you tell me what
26volume was involved in that?
27 MR. ACKER: Actually, Mr. Warren, I don't think I can.
28I think that is what I would say falls in the realm of a
1competitive bit of information I would prefer that my
2competitors are not aware of. And while we're on the
3record, I believe they would have access to my answer.
4 MR. WARREN: Can you tell me, in one of the first
5answers you gave to the first question, you said you have
6held and do hold storage capacity in Union. I take it that
7you don't hold -- sorry, Michigan. I take it that you
8don't hold storage capacity anywhere beyond Michigan in
9this geographic area; is that fair?
10 MR. ACKER: To be quite honest, I don't know. Any
11storage that BP may hold in the U.S. northeast, to the best
12of my knowledge, is not used to serve the Ontario or Quebec
13market. It's safe to assume that storage we do hold in the
14Chicago area can on occasions be used in part to serve the
15Ontario market that is accessed through Vector.
16 MR. WARREN: But that would be occasional or very
17occasional; is that fair for me to assume that?
18 MR. ACKER: To be honest, I don't know. I think
19economics of the day dictate which fields and which suite
20of pipe assets we have access to we might use on any one
22 MR. WARREN: Would it be fair for me to assume that
23the further afield you get from Michigan, one of the
24significant economic factors would be the cost of
25transportation. Is that a fair assumption on my part?
26 MR. ACKER: It's a fair assumption, but I would
27further describe it as the value of that transportation on
28any one day versus the cost.
1 MR. WARREN: Can you tell me, sir, how much capacity
2you hold at the present time, storage capacity you hold, on
3the Michigan market?
4 MR. ACKER: I'll defer to Mr. Brett, who will read the
5evidence. I believe it's already on the record for this
7 MS. CAMPBELL: Mr. Chair, with your leave, I thought
8I'd give the witness a copy of Union Undertaking K5.2,
9which purports to lay out the holders of storage at various
10Michigan storage facilities.
11 MR. KAISER: Thank you.
12 MS. CAMPBELL: If it's on the record, then you don't
13need to answer it, sir.
14 MR. WARREN: The information that's contained in that,
15is that typical of the storage you hold at any given time?
16You say you have held and hold some now. I take it with
17ups and downs, is that typical of the volume of the storage
18you hold in Michigan?
19 MR. ACKER: I'm not sure that there is a typical
20volume. Market prospects as we view them will dictate
21whether we renew or increase our position at this point in
22time. If we believe that the market offers prospects to
23generate revenue, then we will look to increase our
24position. If it doesn't, presumably, then we will let them
25expire as they would naturally.
26 MR. WARREN: And the storage capacity which you hold
27in Michigan at any given time, is that held in connection
28with your delivery and redelivery business?
1 MR. ACKER: It is not necessary for us to hold storage
2anywhere in order to effect a delivery/redelivery business.
3 MR. WARREN: Because you may use, as you've said,
4other assets, financial assets, or pipeline capacity; is
6 MR. ACKER: At any point in time, that's correct.
7 MR. WARREN: Okay. Those are my questions. Thank you
9 MR. KAISER: Thank you, Mr. Warren.
10 MR. KAISER: Mr. Thompson?
11 Mr. Thompson, the reporter would like a little break.
12Is this convenient?
13 Now she says she is ready for a break, so you can have
14a break. Fifteen minutes.
15 --- Recess taken at 6:30 p.m.
16 --- On resuming at 6:49 p.m.
17 MR. KAISER: Please be seated.
18 Mr. Thompson.
19 CROSS-EXAMINATION BY MR. THOMPSON:
20 MR. THOMPSON: Thank you, Mr. Chairman.
21 Panel, I represent the Industrial Gas Users
22Association as well as the Association of Major Power
23Consumers in Ontario. I have a few questions, if I might.
24 Dealing first with this question of your lack of
25expertise in market power analysis, can I take that to mean
26that you have no particular knowledge or expertise in how
27FERC defines market power?
28 MS. WORTHY: The knowledge we would have with respect
1to how FERC defines -- or at least my knowledge with
2respect to how FERC defines market power all relates to my
3recent reading of Order 678.
4 MR. THOMPSON: All right. And, Mr. Acker, do you have
5any knowledge or reading experience in that connection?
6 MR. ACKER: Mr. Thompson, I'm a lowly gas marketer. I
7have no expertise or knowledge in that area.
8 MR. THOMPSON: Yes, well, as a lawyer, I recognize the
9depths of despair there.
10 Anyway, and does it also follow that, apart from
11reading the material in this case, neither of you have any
12special knowledge or expertise in the framework that FERC
13applies to evaluate whether a particular company lacks
15 MS. WORTHY: Mr. Thompson, we aren't experts in that
16area. And I think, to make it very clear on the record, we
17actually are not going to be taking any position on the
18issue of whether or not the OEB should or should not
19forbear from regulating services and whether there is or is
20not market power. That is not going to be part of our
21argument or part of our testimony here in this proceeding.
22 MR. THOMPSON: Thank you. That's helpful to know that.
23 If I could then turn, Mr. Acker, just to get a clear
24understanding of what you mean when you use the phrase "the
25secondary market" -- and perhaps I could do it this way.
26 You did talk about your company having capacity on
27some pipelines -- I think you mentioned Vector and you may
28have mentioned TransCanada pipelines. Did I understand
2 MR. ACKER: At any point in time, we have had or do
3hold capacity in our own name on pipelines, such as Vector
5 More particularly, I define the primary market as,
6I've participated in the primary market if I have acquired
7services on those pipelines from the pipeline company
9 MR. THOMPSON: Right.
10 MR. ACKER: If I've acquired services on those
11pipelines by dealing with third parties, then I consider
12that to the secondary markets.
13 MR. THOMPSON: Yes.
14 MR. ACKER: If I were to provide services to, for
15example, members of your association, I would consider that
16or define that as the secondary market.
17 MR. THOMPSON: Right. But I just want to nail this
18down. At the moment, do you have capacity on TransCanada
19in your own name?
20 MR. ACKER: Yes, sir, we do.
21 MR. THOMPSON: Okay. And so you're a primary market
22shipper on TransCanada. You would pay full toll.
23 MR. ACKER: Yes, sir.
24 MR. THOMPSON: All right. And then you also told us,
25I thought you had some capacity as a primary market
26participant on some U.S. pipelines as well as, I think, in
27the Washington 10 storage. Did I understand that correctly?
28 MR. ACKER: Yes, sir, you did correctly.
1 MR. THOMPSON: Right. And so when you are using those
2assets to provide a service at Dawn, those are primary
3market assets -- they're assets for which you're paying the
4primary market toll?
5 MR. ACKER: I believe what I said, Mr. Thompson, was
6that at any point in time I may use primary market assets.
7I may use secondary market assets. I may, in fact, provide
8those services while using no assets of a physical nature
10 MR. THOMPSON: Okay. But you made it clear that what
11your business is is packaging -- I think, you said
12services, and primarily services with commodity. And as I
13understood it, selling them at the Dawn hub. Did I
14understand that correctly?
15 MR. ACKER: We do that at the Dawn hub. We also do it
16at many other points of competition, but it was my
17understanding that this hearing was dealing specifically
18with the Dawn hub and areas close to the Dawn hub.
19 MR. THOMPSON: And what do you call the market at the
20Dawn hub? Are you using the phrase "secondary market" to
21define -- or to describe the Dawn hub?
22 MR. ACKER: Anybody who purchasing natural gas is
23participating in what I would define as the primary market.
24Somebody owns the gas and somebody would like to buy the
25gas. So that I think the commodity business is the primary
26market. That being said, as I said earlier, eventually, a
27molecule can only be consumed by one person, however many
28times it may have changed hands. Where we are also dealing
1with assets and services, I would define all of those as
2the secondary market.
3 MR. THOMPSON: Right. Well, my clients look at the
4Dawn hub as a delivered gas commodity trading hub. Is that
5the way you look at it?
6 MR. ACKER: From the perspective of your clients, yes,
8 MR. THOMPSON: Okay. And I think they would see that
9as a gas commodity hub primarily, gas commodity trading
10hub. Bundled with delivery to get it there but --
11 MR. ACKER: I guess I would agree, Mr. Thompson. My
12familiarity is deepest with your IGUA clients, and to the
13best of my knowledge, I have never been approached by an
14IGUA member to provide a Dawn storage -- or
15Dawn delivery/redelivery service, but I have dealt with a
16number of your members in the commodity business at the
18 MR. THOMPSON: Okay. And so that, then, takes me to
19Union and the product it sells at the Dawn hub in the
21 My understanding is that what Union is selling there
22is storage space, storage injection, and withdrawal. Do I
23understand that correctly?
24 MR. ACKER: That is my understanding of your
26 MR. THOMPSON: Okay. Well, that's what they're
27selling; it's a product that doesn't include commodity?
28 MR. ACKER: Yes, sir, that is my understanding.
1 MR. THOMPSON: Okay. And so I then want to understand
2what impacts Union's actions have on what you folks do.
3And this takes me to -- I think Mr. Brett's going to have
4to put this in front of you. This was the notes in the
5conversation that Ms. McConihe had with yourself and
6Ms. Worthy, and it has an exhibit number, but I'm not quite
7sure what it is. Perhaps somebody could help me.
8 MS. WORTHY: J8.3.
9 MR. THOMPSON: Okay. Thanks. And I don't know if the
10J8.3 has attached to it the e-mail that Ms. McConihe
11circulated to, I think she said six marketers, of which you
12were one. Does it? Do you have that in front of you as
14 MS. WORTHY: We have that as well.
15 MR. THOMPSON: Okay. And she was trying to get a
16handle on quantities and this kind of thing, and asked you
17folks for some assistance. And there was this discussion,
18as I understand it, and the sentence I'm interested in in
19her record, which, as I understand, was based on
20discussions with you, is in the first paragraph at the
21bottom. It reads as follows:
22 "Currently Union's storage rates are high
23 relative to Michigan's storage, and this
24 provides" and there's redaction, which I
25 presume is "BP," "the ability to price
26 secondary products to Ontario customers at a
27 price capped by Union's storage rate."
28 Does that accurately capture what you folks said to
2 MR. ACKER: I don't think it does. What we meant with
3that comment was, we were aware that the market-based
4secondary market for Union storage was being priced at
5prices that, in our mind, exceeded the ability to contract
6for storage in Michigan and contract for service from
7Michigan to Union. And as such, given the option, in
8theory, we would look to contract for Michigan storage and
9transportation to Union if we could do it cheaper than what
10we believed the Union storage itself was trading for at
11that point in time.
12 MR. THOMPSON: But are you talking about there a
13bundle that includes commodity in this discussion? It
14sounded to me like you were, and that's where I'm confused.
15 MR. ACKER: Well, if it appears that way, it is a
16mistake. The intent was storage-like services, and
18 MR. THOMPSON: All right.
19 MR. ACKER: And the experience we have is that we have
20bid several times in the recent past in Union open seasons
21for storage service at Dawn. And we have been unsuccessful
22because other parties have been willing to pay more than we
23thought that service was worth. And we would mitigate what
24we would offer Union by the price of alternatives, which in
25that context, and at that point in time, were cheaper than
26what Union was going for.
27 MR. THOMPSON: Sorry, you've lost me. You lost bids
28because your price was too low?
1 MR. ACKER: We've lost bids because other parties have
2been willing to pay more than we were.
3 MR. THOMPSON: Pay more for what?
4 MR. ACKER: For Union storage.
5 MR. THOMPSON: So your bids were too low.
6 MR. ACKER: I would say others' were too high. And I
7would say that, sir, because we were able to acquire
8service that provided us with almost identical capability
9at a lower price.
10 MR. THOMPSON: Well, I guess Enbridge will have to
11answer for that.
12 In Mr. Stauft's evidence -- and let me just reflect.
13There is a chart. And I don't know if you had an
14opportunity to either hear or review the evidence of GMI,
15but they were asked, when you're looking for options to
16Union's storage, what do you consider? And my recollection
17is that Ms. Brochu said, well, we look at the other
18options, the physical options, and that includes Michigan
19storage and transportation to Dawn. Just stopping there,
20does that seem reasonable, to look at that option?
21 MR. ACKER: I would say that that's a very reasonable
22way of evaluating options available to someone like GMI at
23that point in time.
24 MR. THOMPSON: Right. And she also indicated one of
25their options is to just increase their capacity on
26TransCanada to Dawn and, in effect, bypass Union storage.
27Is that another option?
28 MR. ACKER: I would consider that another physical