The Committee met at 9:00 a.m.

CHAIR (E. Byrne): Order, please!

I would ask Jack Byrne to - I believe yesterday he (inaudible). (Inaudible) to you, Jack.

MR. J. BYRNE: We will review during this Public Accounts Committee (inaudible) a lot of issues with regard to the Public Utilities Act. (Inaudible). Do you have the Act there in front of you?

MR. VARDY: The Public Utilities Act.

MR. J. BYRNE: Pardon?

MR. VARDY: The Public Utilities Act, yes.

MR. J. BYRNE: Okay. On page 7, section 11 (inaudible) -

MR. VARDY: I suspect we have different versions of the Act because my page 7 has the last one as section 9, so the pages may be numbered a little differently.

MR. J. BYRNE: (Inaudible).

MR. VARDY: Looks like the same one.

MR. J. BYRNE: I will just refer to -

MR. VARDY: Refer to the section. I think that will probably do it, yes.

MR. J. BYRNE: Section (inaudible) of the act. It says: (inaudible) made by legal counsel and what have you. We touched on this a bit yesterday. I was just wondering if the staff that you mentioned are included in this; and if you are hiring legal counsel or what have you, do you keep them on, on either a part-time, contractual or permanent basis? By what process do you (inaudible) these people?

MR. VARDY: This is the section under which we would employ staff and legal counsel. In the case of legal counsel, we have a legal counsel on staff who is employed on a permanent basis. Initially he was hired on a part-time basis, and there was a competition process. Subsequently, the board decided to make his appointment full-time. So he is full-time legal counsel of the board.

MR. J. BYRNE: Is that Mr. Hanrahan?

MR. VARDY: That is Mr. Hanrahan, yes.

MR. J. BYRNE: He has a full-time job?

MR. VARDY: He is full-time with the board, yes.

MR. J. BYRNE: So, he is not involved with a law firm (inaudible).

MR. VARDY: No. Previously he had been. When he was on a part-time basis he had his own legal practice on the outside, but currently he is full-time with the Board.

MR. J. BYRNE: What about engineers and people like that?

MR. VARDY: We don't have any engineers with the board, other than as a part-time commissioner. Two of our part-time commissioners are engineers. One is an electrical engineer, Wally Reid, and the other is a civil engineer, Gordon MacDonald.

MR. J. BYRNE: (Inaudible).

MR. VARDY: Those would be the consultants. Now, there is another section under which people can be appointed.

MR. J. BYRNE: Section 15, subsection 3, the amount of revenue (inaudible) to exceed the amount initiated by the board (inaudible). I would just like to know sir, basically, how much money are we talking about? What are your views on that, and would it be possible for some of this money basically (inaudible) Newfoundland Power, a presentation made (inaudible), of course.

MR. VARDY: Yes. We had, I guess, an extensive discussion on this yesterday, on this question of the interpretation of section 3, 15(3).

MR. J. BYRNE: (Inaudible).

MR. VARDY: I won't go into what I did yesterday. Perhaps if you asked a more specific question, then I could respond to it.

MR. J. BYRNE: (Inaudible).

Section 53: (Inaudible) are having problems with poles, wires, (inaudible) and what have you. I have often wondered about this, because we have competitions sometimes between Newfoundland Power and Newfoundland Telephone, where they are using each other's poles; and probably with Cable Vision now. You people set the rates that these poles - charged once a year type of thing.

I often wonder, also with respect to the general competitions between the phone companies, using one another's equipment. (Inaudible). What are your views on that? How is that handled?

MR. VARDY: Well at the moment, we do not regulate Newfoundland Telephone at all. We regulate Newfoundland Power, and we do regulate the access to their poles by the cable companies. In fact, there is an inquiry going on right now, and there is a hearing scheduled in December to deal with that whole issue. Mrs. Galway has been very heavily involved in this issue, so I am going to call upon her to speak to give you the response.

MS GALWAY: Essentially, there is a difference between the pole rental of Newfoundland Telephone under the CRTC regulations and the pole rental agreements under our regulations because they are now done by two different bodies. The CRTC is more uniform across the country, they use a different formula.

With the pole agreement between Newfoundland Power and Newfoundland Telephone, because they share many of the same poles as well, they have what is called a `Joint Use Agreement'. That agreement was about three years, I guess, in the making, between the two companies, before they actually came to terms with it. We would play an arbitration role if necessary on that, and we have in the past.

The last agreement was settled by the companies without having to come before the board, and it has a mechanism that helps equate the two companies; so no one is a winner. No matter who owns more poles, the rentals will be structured in such a fashion that no one company is better off than the other. It is rather complicated and it takes a talented accountant and auditor to go through it to follow the flow of the numbers; but it has worked well and they have not needed to come before the board on that issue.

With the cable companies, they had their own regulation that dictated the type of formula that was to be followed in any pole rental agreement; and that was a special regulation. I may have it here.

MR. J. BYRNE: (Inaudible).

MS GALWAY: Well, with the regulatory review, the regulation to which I was going to refer is now taken off the books, it is gone. So what will probably happen is that after this audit process of the pole audits is complete and the companies are all satisfied, after possibly a hearing before the board - and that will be determined I think on December 16 - what will happen is that there will probably be another hearing to establish a new formula, and that formula will take into consideration the views that you would probably have on keeping the competition fair with the use of the poles and so on. It is a much more competitive environment in 1996-1997 than it probably was back in the late 80s.

MR. J. BYRNE: (Inaudible). What did the board have to do with going back to the (inaudible) by Newfoundland Power?

MR. VARDY: This was a central issue, of course, in the hearing that was just concluded. What the board does is they hear evidence from witnesses with regard to rate of return on capital. We did, in fact, have two witnesses there, one from the consumer advocate and the other from Newfoundland Power.

What the board does is look at the cost of capital to the company and what kind of rate of return is required in order to provide a sufficient return to the investors, so that the investors will continue to invest in the company. In order to do that, what we do essentially is look at the rates of return that are earned in investments of comparable risk in the private sector. So you look at rates of return of companies that are listed on the Toronto Stock Exchange. There is an analysis is done to sort out those that are high risk companies because utilities are low risk, so they sort out and classify those that are essentially low risk and are comparable in risk to the utilities. Then, of course, there is a risk premium that is actually calculated in terms of the premium over and above the long-term rate of return on government bonds, 30-year Government of Canada bonds. So, basically, in measuring the risk, what the board does is to take this long-term bond rate and add to that a risk factor; and the risk factor is really determined from the study of low-risk securities, low-risk shares and the rate of return on those low-risk shares.

So that is essentially a kind of analysis, and, of course, depending on how you do the analysis, you can end up with different results. This is what we experienced during the past summer where we had - I don't recall now what the exact variances were - but quite significant variances depending upon the companies that were included, the shares that were included and the period of time over which the measurement was conducted. So at the end of the day, the board made a judgement determination which was between the two; so you had one set of rate of return which was put forward by the consumer advocate and another which was put forward to the board by the company. In that particular case, the board made the determination which was in the middle and the number that we came up with at that time was 11 per cent.

MR. J. BYRNE: There are, of course, many other factors, including (inaudible) rate of return (inaudible). Many people out there say to me: You know, when you talk about Newfoundland Power and the rate of return (inaudible). I often say: Well, it kind of depends on how that (inaudible) in the first place.

My concern is that if they using the proper factors to determine what their investment is in the first place, (inaudible).

MR. VARDY: That's right and that was, as I say, one of the major issues that was discussed for quite a long time over the summer.

MR. J. BYRNE: Okay, section 90, (inaudible). This is going to be passed on to the consumer.

MR. VARDY: That's right.

MR. J. BYRNE: So the amount of money that was spent last summer was already passed on to the consumer?

MR. VARDY: That's right.

MR. J. BYRNE: Both sides?

MR. VARDY: That's right. Section 13, that you referred to earlier, deals with the recurrent, ongoing operating expenses of the board and those are financed also through an assessment on the utility. Now section 90 relates to those hearings or proceedings that come up from time to time. As you say, in the case of the Newfoundland Power rate case, those costs are covered under section 90. The board basically ordered that those costs, all of the costs, be borne by the applicant, in this case Newfoundland Power.

MR. J. BYRNE: Under subsection 2 of the same section, it says that where an order for payment under subsection (inaudible) two or more public utilities, the expenses shall be apportioned among them in proportion to their earnings. I was noticing here, after this one, (inaudible). It says that the Public Utilities Board (inaudible). You probably addressed that yesterday, did you?

AN HON. MEMBER: No.

MR. J. BYRNE: You didn't? Well, these are the questions to ask, those that have not been asked.

Well, basically the Auditor General (inaudible) that the allocation of budgeted costs was important to ensure that the utilities being used were not subsidized (inaudible). In the chart on page 4 it shows (inaudible) costs. (Inaudible).

MR. VARDY: I am still trying to find it.

MR. J. BYRNE: Basically, the question I started out with (inaudible) page 4.

MR. VARDY: I have the report itself.

MR. J. BYRNE: (Inaudible).

MR. VARDY: I found the page now. I am just trying to find what you just read from. So, you are asking why we use this particular distribution here, the allocation of budgeted costs?

AN HON. MEMBER: (Inaudible) more benefits are not allocated for insurance for these people. (Inaudible).

MR. VARDY: Sure.

WITNESS: And also the salary and benefits of the (inaudible) insurance/motor carrier was allocated, 33 per cent to the motor carrier division and 67 per cent (inaudible) salary and benefits of the secretary, allocated completely to the motor carrier division.

MR. VARDY: Yes. I am going to ask Mrs. Galway to respond to that.

MS. GALWAY: If I trip up, I am going to ask Doreen Dray.

AN HON. MEMBER: I suspect (inaudible).

MS. GALWAY: Yes.

What the board does with respect to Budget figures - and I believe this is the table that would be used for budgeting for one particular year - what happened in the past was that 80 per cent of the salaries went to public utilities and 20 per cent went to insurance. So we will start at that line and I will explain the benefits after that.

AN HON. MEMBER: How does that division work?

MS. GALWAY: The reason there is nothing for the commissioners and employees, except the manager and his secretary, in motor carriers, is because we had a specific directive back through Treasury Board that told us that because the board existed anyway it was not considered appropriate to allocate the commissioners' and employees' salaries to motor carrier and be funded through consolidated revenue. That is what we were told.

AN HON. MEMBER: So, that was a written directive from the department through Treasury Board?

MS. GALWAY: Yes. So, that is why that looks so peculiar, because obviously we spent time on motor carrier matters, but we were told that we could not collect that because we existed anyway. That would explain one of the zeroes under the benefits column.

What we did, at that point, was examine our own calendars, and each of us submitted detailed information to Doreen Dray, who is our accountant, on what we spent our time, and that is where the initial 80 per cent and 20 per cent figures came from.

CHAIR: So, this is not a reflection of your own time management in terms of (inaudible).

MS GALWAY: That is what was used, essentially, for budgeting purposes.

With respect to the benefits, it was considered, I guess, not necessary to allocate additional monies to the insurance area because that is a smaller division of our office. The amount of benefits is rather small in comparison, and we felt that depending on how the year went, if it was a busy year with a lot of hearings, we probably would not be spending that much time with insurance. They were softer numbers with respect to being budget figures. With respect to actuals, when we finished off the year we try to be more precise in terms of the time.

One of the recommendations that came out of the Auditor General's Report was that we formalize our time-reporting system, and while it may not have been specifically to every single week, I think it was with respect to hearings. What the board decided to do was introduce to every staff member, every commissioner, a time-reporting system on a weekly basis; so that we track all time now on a weekly basis, so we know precisely how much is allocated to PU motor carrier insurance.

CHAIR: So in terms of year-end reporting, with you time management system, (inaudible), do you find that it has helped tremendously in determining your accuracy, or has it introduced a new level of bureaucracy to be maintained or managed? How do you find it? (Inaudible) the different percentages would change.

MS GALWAY: The percentages would have to change every year under an actual reporting system. What you will find with such a small office, and the fact that we have spent so much time on public utilities this year, and on Newfoundland Power, it is not typical of ordinary years. So suddenly you are going to have very high numbers in PU this year - I should say public utilities; I feel like I am at home. In the public utilities area, as a result of that, it could look as if we should have a much higher assessment, say in 1996-'97, for PU than you might next year, if it were not as lengthy a year in terms of hearings.

CHAIR: You said it was a small office (inaudible) spend all your time tracking your time. Do you think that the concerns highlighted in the Auditor General's Report with respect to this issue were warranted?

MS GALWAY: I think in any review you try your best to identify what might be helpful. The suggestion was with respect to tracking your costs accurately with the hearing, which we were doing. It just really was not in a formal package, and they wanted something more formalized. But we felt uncomfortable with the commentary with respect to the budget figures here, and it flows through each section of the report. So to get a better feel for that you would almost need these numbers for a twelve-month period to see who is right, and how we should manage the figures, and what is the fairest allocation. From that perspective I am very happy with the figures that we can work with.

MR. J. BYRNE: Just to continue, under section 92, page 42, dealing with the division of surplus property, subsection (1): Nothing in this act (inaudible) by division and distribution of its surplus properties.

I just want to get a few comments on the (inaudible) of any surpluses in the past. (Inaudible) and basically some comment on - you are talking about division and distribution of surplus properties of employees. What kind of dollar value are we talking about (inaudible) in the past, so we will have some idea what you are talking about?

MR. VARDY: During the period that I have been with the board they have not really had occasion to deal with this, although I know Ms Galway and I have talked about this. She may have some comments on it. I would like to ask her if she would comment.

MS GALWAY: Section 92 is put in place in the event that there should be a deferred profit-sharing plan or some sort of employee share plan that the companies may have that fall under the Public Utilities Act.

With respect to Newfoundland Power, they have an employee share purchase plan as they have a consumer purchase plan; they run the same way. They also have, I guess, as part of their executive benefits, certain share arrangements as well. For the most part there isn't anything that fits under that section that has been problematic for the board, other than to note that they do have the standard employee compensation packages that everyone has.

CHAIR: Would this be a factor in setting the rates?

MS. GALWAY: It has not been a problem for the board. They do not get any special increment for divisions of surplus profit in terms of determining the cost of electricity. It is based on operating costs, the cost of fuel and so on, and then you add to that the approved rate of return on equity; and it would cover anything under there only because it is 11 per cent. It does not get increased to 11.25 per cent to cover that sort of arrangement.

MR. VARDY: Just to add further, Ed, to what Ms. Galway said. They do have this incentive program, and the incentive program that has been put in place over the last couple of years has been linked to their rate of return. So there was nothing really in that arrangement that the board could take exception with, in terms of this arrangement. There is an incentive program, and it is linked to a number of performance indicators, including reaching the bottom of the minimum rate of return that the board has established.

AN HON. MEMBER: So you have increasing rates for consumer?

MR. VARDY: No.

AN HON. MEMBER: Section 103, (inaudible), I believe you had some questions on this with regard to (inaudible).

MR. VARDY: This act, of course, was revised in 1989. I am not sure whether these numbers were changed at that time, but that is something we are going to be looking at because we are doing a review, as I mentioned yesterday, of the act to see whether these numbers are still appropriate. We are not in a position, I guess, to indicate whether they are out of line at this stage but that is something we are going to review.

MR. J. BYRNE: (Inaudible).

MR. VARDY: Well, not really.

MR. J. BYRNE: (Inaudible).

MR. VARDY: Yes, that is right.

MR. J. BYRNE: Section 114, pension schemes. Do you have any (inaudible) "pension scheme to officers and employees of the Board providing for... (b) the grant of another benefit whether in cash or in service, to those officers and employees or to their beneficiaries or dependents." I would like that explained to me.

MR. VARDY: This section, of course, deals basically with a pension plan for the board. To my knowledge, this pension plan, in terms of employees, has really not been - there has been no special plan for employees put into effect, so we haven't had a lot of experience with that. On the other hand, there is a pension scheme for commissioners set out in 115 where there are actual active commissioners. So we haven't really had a lot of experience in dealing with this particular clause. I will ask Ms Galway if she has any comment on it.

MS GALWAY: The commissioner's pension plan was in place, I guess, just before I joined the Board in 1990, and at that time Commissioner Good, who was vice-chair at that stage, was participating in that plan. When I joined the Board it was the conscious decision of that government that that plan would not be offered to any new commissioners. So at this stage it is what we call a dead-ended plan, and the people who contributed and had benefits to that are still receiving their pensions, but there isn't anyone who can be eligible for it. For a commissioner like me who joined in 1990, or anyone who would be full-time who comes after me, we would have to go on the public service pension plan.

MR. J. BYRNE: So, this section, 115, (inaudible)?

MS GALWAY: For all practical purposes, yes.

MR. VARDY: Except there are two commissioners who are still on the plan. Not two commissioners, there is one former commissioner, and a wife of a former commissioner. They are the only two people left on that plan. Nobody has been admitted into the plan, I guess, since - well, I can't really say when, but certainly in recent years.

MR. J. BYRNE: (Inaudible) section 114(b): "the grant of another benefit whether in cash or in service, to those officers and employees or to their beneficiaries or dependents." I still don't know what that covers.

MS GALWAY: Sections 114 and 115 really are not active in practice. I'm not entirely sure what it might have covered in the past, but it would have been a long time in the past, in terms of employees in particular.

MR. VARDY: We wouldn't have had any reason to interpret this because it is defunct.

CHAIR: (Inaudible).

MS THISTLE: Thank you, yes, good morning. I would like to ask the Auditor General a question with regard to government policy on the hiring of pensioners to sit on this board. What is the policy?

MS MARSHALL: I don't have that information here before me now but there is a policy (inaudible).

MR. VARDY: You are referring to the concerns raised in the (inaudible) with respect to hiring of some pensioners?

MS THISTLE: That is right. Apparently there were some exceptions to government policy, as you noted, and I was wondering if you would elaborate on those? I think it was in respect to the (inaudible) program.

MS GALWAY: This is not on the Public Utilities Board, is it? I will just make sure I am correct in my understanding. I think you are referring to an incident that we reported (inaudible) relating to a past executive director who was re-employed on a part-time basis?

MS THISTLE: That's correct.

MS GALWAY: Okay. In this particular case, government policy is to give preference to persons who are not in receipt of government pension. In this particular case, we had noted that a past executive director, who was in receipt of a pension, was re-employed on a part-time basis, from, I think it was June, 1989 until October, 1994. We checked to see if the approval of Cabinet was obtained for that arrangement and we found that it wasn't during that period but that in November, 1994, I think, a request went to get this arrangement approved, but that person did not avail of the arrangement after that. So it was discontinued as of November, 1994.

MS THISTLE: In other words, it was an issue of double-dipping as such. So are you satisfied now, as the watch dog of this board, that this situation has not since reoccurred and there are measures in place so that it won't reoccur in the future?

MS GALWAY: Yes, I think we are. In this particular case, I think it was an issue of the board, in their response to us, not having received that particular directive from government, and was not aware during the period that there was a government policy on this issue.

WITNESS: (Inaudible).

MS GALWAY: That is essentially what had happened. To give you some background as to why the past executive director was rehired on a part-time basis, he was the person during that period of time who had the expertise in insurance, and there wasn't any other staff person in our organization with that expertise. It had been discussed with our minister to let the minister know this arrangement was in place from the beginning; and that predates me. Every month -

MR. J. BYRNE: (Inaudible).

MS GALWAY: No, it would be the Department of Justice. I'm not entirely sure when in 1989 that would have been discussed. In any event, this individual had the expertise in insurance, and we were fortunate that Bob Byrne agreed to take the insurance training. At the time the transition did occur, Bob was heavily engaged in the insurance program and was taking over those duties. That is part of the reason why it stopped there, because we were very reliant - we needed that expertise in-house.

MS THISTLE: So what you are saying is that if somebody has the expertise and training, and have worked with government over the years and they (inaudible) a consulting practice on retirement, that there is no possibility of contracting that person's service for your board?

MS GALWAY: As was pointed out by Ms Peach, we did not receive that specific directive, and we were operating under the section of the Act that gave us the authority to hire the staff that we required, and we didn't realize at the time that we were doing anything untoward, particularly having mentioned it already to the Minister of Justice. But in terms of going forward from October, 1994 on, any time anyone has any sort of pension at all that is a matter that would have to go before Cabinet, and we would submit that as a Cabinet paper through the Minister of Justice.

MS THISTLE: (Inaudible) is critical for hiring pensioners.

MS GALWAY: That is right.

MS THISTLE: Okay, thank you.

CHAIR: Any more questions, Anna?

MS THISTLE: No.

CHAIR: Mr. Whelan.

MR. WHELAN: Mr. Vardy, I wonder if you could sort of go through the process of the way electrical companies, whether the established companies or new companies, are involved with hydro projects. (Inaudible). What process do they go through and what role do you play in (inaudible).

MR. VARDY: If they are less than fifteen megawatts they are referred to as non-utility generators and we do not really regulate them that small.

MR. WHELAN: Under fifteen megawatts?

MR. VARDY: Under fifteen megawatts, that's right.

In terms of presenting their plans, capital budgets, the utilities generally come to the board with their forecasting, with their load forecast and with their energy forecast. So, in the context of that when a utility - and I am thinking particularly of Newfoundland Hydro - comes to the board with their capital program and when they present the board with plans with regard to the future, then they disclose the extent to which they would be dependent and the extent to which they intend to procure power from non-utility generators. So it is in that context that the board would have an opportunity to review those. In terms of any kind of a regulatory process for those small utility generators, we are not directly involved under the act.

MR. WHELAN: So fifteen megawatts is the (inaudible).

MR. VARDY: That's right.

MR. WHELAN: Fifteen megawatts (inaudible).

MR. VARDY: Yes. If it is above that, then they can apply to the board to become a public utility and the board then will deal with any application from them to provide service.

Now, there is an anomaly in the act that we pointed out and it relates to the definition of public utility, because the anomaly that is there right now is that a company that is not currently a public utility cannot become one. That is an anomaly in the act which we have pointed out and which will have to be corrected. In that case, assuming that is corrected, then any company which proposes to supply power would come before the board to seek approval for rates, as would any existing utility. So that is essentially where it stands right now.

MR. WHELAN: Are they compelled to go through Newfoundland Hydro? Do they have to supply power to the grid or would they realistically be able to expect (inaudible) to set up their own grid?

MR. VARDY: They would have to gain access. For practical purposes, they would have to gain access to the existing grid and that would require some kind of arrangement with Newfoundland Hydro; that is correct.

MR. WHELAN: To what degree does Newfoundland Light and Power have the monopoly in the Province with regard to power? Is it because it is so hard for anybody else to get into it or (inaudible) in the Province with regard to the power lines (inaudible) that they have.

MR. VARDY: The concept of monopoly, public utility monopoly, is a change in concept. In parts of North America there are quite significant changes taking place with regard to the structure of the industry, because traditionally the generation, transmission and distribution has been viewed as being subject to natural monopoly. What is happening in other places in North America is that the generation side of things is becoming competitive and is being broken down separately; well, the generation in particular. But there still remains a transmission line which is subject to regulation because anybody supplying power would need access to the transmission lines and would need access to distribution lines.

To get back to your question, in Newfoundland today there is a monopoly. Newfoundland and Labrador Power does have a monopoly in their franchise territory. In order to change that I think it would be fair to say that legislative changes would be required. So, the answer is yes.

MR. WHELAN: These non-utility companies coming up, obviously they, with the understanding of Newfoundland Hydro, would receive their power. (Inaudible).

MR. VARDY: That is correct, they do. Non-utility generators enter into a contract with Newfoundland Hydro. That is basically how they proceed as opposed to dealing directly with the customers. It is difficult for them to do right now, because, as I mentioned, there is a problem with the definition of a public utility and there is a monopolistic situation in place.

MR. WHELAN: (Inaudible). Anybody who would have entered into a contract with Newfoundland and Labrador Hydro to sell power, 15 megawatts (inaudible), Newfoundland Hydro then would have to bring that before the Public Utilities Board. Is that how it works?

MR. VARDY: If it is more than 15 megawatts.

MR. WHELAN: If it is more than 15, it may have to come before the Public Utilities Board and argue their case?

MR. VARDY: Yes, that's correct.

MR. WHELAN: (Inaudible) and demonstrate the need for such a development. Does the board then have the power to make a decision and say that, in their estimation, the power is not needed? How does that go?

MS GALWAY: I will just point out, there is a slight definition and terminology that may be helpful. A non-utility generator would be someone not considered to be a public utility. Presently, under the Public Utilities Act definition, section 3 defines a public utility, basically, that has total installed generating capacity of the public utility at each location within the Province at which the public utility has equipment, is less than, and has been revised to 1500 kilowatts; so that makes them exempt, essentially. That does not apply to them although they would initially fall under the overall definition of a public utility. A non-utility generator would not be a public utility. So that is a bit of a difficulty in terminology and we usually get hung up on this when we are talking with the Department of Energy.

In any event, should a project be considered appropriate, and Hydro was interested in entering into a contract with such a venture, and if they qualified as a public utility to start with, to have that capital program approved initially, and so on, you would still examine it under the section referring to planning, allocating, and reallocation of power and facilities under the Electrical Power Control Act. That essentially allows you to evaluate whether or not it is the most efficient cost-effective approach for your power needs. That is the way the government has tried to begin its planning towards these changes in the marketplace.

AN HON. MEMBER: I am not sure, and this is my personal opinion, (inaudible) with new programs. There are several that under construction today. In terms of the megawatts, they have entered into a long-term contract with Newfoundland Hydro. What more would the board (inaudible)? The board has to, I guess, put its own interpretation on what is before it. (Inaudible)?

MS. GALWAY: Part 2 of the Electrical Power Control Act, 1994, addresses those sort of issues. I think, in the scenario that you described, it is as if the horse is already out of the barn. Where it should come into play is before these plans for the next source of electricity are firmly in place. There is a requirement, and they have responsibility under that section, to appear before the board and look at these plans.

MR. FRENCH: I have a couple of questions I would like to ask.

You say that the rate of return for Newfoundland Power is at 11 per cent. Is that correct now?

MR. VARDY: That is what it was set at over the past summer.

MR. FRENCH: That is probably about the only thing in Newfoundland we can probably get at 11 per cent (inaudible) from banks and this sort of thing. If we were investing in money in banks, I think that if we got seven, or maybe a little over seven, we would be lucky. Is there any thought to rolling back? When I see profits - in my district anyway - of $20 million or $30 million a year to Newfoundland Light and Power, it blows my constituents' minds, and to be quite honest with you it blows my mind. I think, with the low interest rates today, maybe we should be giving consideration to lowering the rate of return to Newfoundland Power. I am just wondering if there is anything on that on the agenda right now that would be leaning that way.

MR. VARDY: The rate that was set by the board was based upon the evidence presented to the board up to the time of the conclusion of the hearing. Now, if there are changes in interest rates and rates of return on capital emerging in the marketplace that would warrant a change in that, then the board would have to consider whether a further hearing should be called, and that would not be based on just a couple of months; that would be based on some kind of a trend that would have to be maintained over a period of time.

MR. FRENCH: And that would come out in your monthly evaluation totals?

MR. VARDY: Yes, that is right. Obviously, things change. This month it may appear to be inappropriate; in six months' time the rate of return that was awarded may, in fact, appear to be appropriate or whatever. There is a continuing monitoring process. The market changes a lot. It is fairly volatile. What we have to look at are the trends. As I said, the rate that the board set at that time was based on the evidence that was before it at that time and certainly not on any evidence that came before the board after the end of the hearing. The board can only consider the evidence that is presented up to the end of the hearing. Now there may be, in some cases, things that take place between the end of the hearing and the writing of the order to which the board cannot pay any attention.

MR. FRENCH: So when would this be reviewed again?

MR. VARDY: This situation would be reviewed continuously every month.

MR. FRENCH: Okay.

There is presently legislation before the House of Assembly which will add more work to the Public Utilities Board if it is passed. I'm just wondering, are you aware of this legislation, and if you are, how do you propose to handle this with the limited staff that you have? Are you aware of the new legislation?

MR. VARDY: Is this the expropriation legislation?

MR. FRENCH: Yes.

MR. VARDY: Yes. This is something the Board has discussed with the Minister of Justice and the Department of Works, Services and Transportation. This is a new activity which the board would undertake. It is something that would probably require, for most of these arbitrations, one or two commissioners. We would not be looking at a full panel of the board in order to reach those kinds of determinations. We would expect that most of the staff work would have been done by other people before it comes to the board.

Certainly this is an additional responsibility. We don't consider that to be an onerous responsibility, not as onerous as some other aspects of our present responsibilities. We have looked at that, we are aware of it, we have discussed it, and we feel the Board can handle it. At the present we have only four part-time commissioners. We will probably want to have the full complement of six part-time commissioners in order to be able to carry out those responsibilities. We don't consider those to be onerous.

I think Ms Galway may add to that.

MS GALWAY: I will add just a little bit to that. In the past, when we had responsibilities under the Motor Carrier Act, there were ongoing small hearings all the time which provided a good training ground, basically, for the commissioners. Now under the present regime there are fewer hearings, and yet it is one of the most important functions that we provide. So if we take on this role with the expropriations, it gives each commissioner a chance to get a little bit more training in smaller hearing settings. So it is useful to the board in that sense as well.

CHAIR: Okay, we will have one more question now before we take a short break.

MR. FRENCH: Just a quick thing here, and then I will ask the question. I hope the board monitors Newfoundland Light and Power very, very closely over the next little while because my rates for past six months have been pretty well downward, but I don't see interest rates moving upward.

Yesterday, Mr. Vardy, you mentioned the work in groups. I wasn't really sure what you were referring to. I didn't know exactly what it was and I just made a note of it. If you could probably explain a bit more as to what you meant by working in groups.

MR. VARDY: This was in the context of our strategic planning process. We have, within the commission, set up these working groups, and they are basically commissioners and staff as well as one person from the Department of Justice, a person from the Department of Mines and Energy and a person from the Department of Government Services and Lands who are involved with us on these working groups. There is one on electric utility regulation, there is one on automobile insurance regulation, there is one on information technology, there is one on human resources and administration within the board, and I may be forgetting one. Those working groups are essentially to help the board in designing its strategic plan.

So, as I mentioned yesterday, what they are doing is looking at what options are available to the board to improve the effectiveness of our programs. They are looking, as well, at what the goals of the board should be in terms of operational goals over the next twelve months and what should be the direction, longer term goals, that should be set by the board.

In the Auditor General's report, she had mentioned that there is a need for a strategic plan. So these working groups are - this is a mechanism with reviews to bring people together to work on these various aspects of the strategic plan.

MR. FRENCH: So, if there are any expenses, they are paid by the board?

MR. VARDY: Yes, that's right. We also have a strategic planning coordinator consultant who we have hired through a competitive process and this is a person who works with us as a facilitator and does a little bit of writing for us. I mentioned four of these working groups. The other one that slipped my mind was the one on communications and public interface which is a very important one.

MR. FRENCH: Okay.

CHAIR: (Inaudible).

MR. FRENCH: I'm assuming that - let me go back to insurance - that you people set a benchmark for the insurance as well?

MR. VARDY: Yes, we do.

MR. FRENCH: The same as you do with the PUB?

MR. VARDY: The approach is different with regard to insurance in terms of - the benchmark approach is established in order to establish ranges. When the applications come in, the files come in from the insurance companies, if they come within the benchmarks then they are accepted. If they come outside the benchmarks then they are not accepted. The benchmarks are adjusted annually based upon the actuarial cost of each line of insurance; namely, third party or collision or comprehensive, whatever the line of coverage may be. So there is a benchmark and a benchmark range for each line of coverage.

It is different from public utility regulation because there we deal with each company and we look at the actual audited statements, the revenues and the cost of each regulated entity. In the case of insurance, we look at the companies. When we establish the actuarial benchmarks it is based on industry data as opposed to individual company data, and the reason for that is because there are fifty-five companies.

MR. FRENCH: So each particular type of insurance probably has it own benchmark?

MR. VARDY: That's right. Third party liability, for example, there is a benchmark range for that, and there is a range as well for collision and comprehensive. Mr. Byrne is the expert, so he might just want to add to that.

MR. R. BYRNE: That pretty well covers it. The only additional point is that each of these benchmarks is derived on the basis of the current territorial designation; so there is a third party liability benchmark for Territories 1, 2 and 3, which is based on the experience exhibited as a result of the statistical information supplied to the board by the IBC for each of those territories. It is a situation where each coverage for each territory is costed out on a stand-alone basis.

The equitable average rate, being the benchmark, is deemed to be the appropriate way to cover all the expenses of acquiring and writing the business, as well as paying the claims associated with the coverage in question.

MR. FRENCH: Who draws the different zones? (Inaudible).

MR. R. BYRNE: That is under the superintendent's automobile insurance statistical plan.

CHAIR: That is something set (inaudible) by the superintendent authorities that the PUB (inaudible). It is not something that they are involved (inaudible).

Mr. Lush.

MR. LUSH: Mr. Vardy, the Auditor General (inaudible). I thought I would mention about a half-dozen points, but I can't find even one right now. As I was reading the report, it seems to me that I came across a statement (inaudible) that the board lacked a strategic plan, an operational plan, and developed goals and objectives. I am just wondering; the Public Utilities Board has been around for a long time. It is a serious complaint to me, to think that an organization has no strategic plan; there are no goals or objectives. Without goals or objectives you do not know where you are going, and it is difficult to get there.

I am just wondering: When you came to this job did you feel it? Because obviously, as you have said, the board has been around for a long time, and this notion about goals and objectives came (inaudible) particularly around the sixties and seventies. That is when we (inaudible) goals and objectives.

I am just wondering, when you came to this job, whether you felt that was a difficulty, that there was no strategic plan, no goals or objectives? Did you feel that was an impediment (inaudible) perform this function?

MR. VARDY: Well, of course, we did establish a process for strategic planning. That was one of the things that we did, I guess, last year when we set up this process which we have been talking about in terms of the working groups and so forth. But, you know, one of the comments I would make is that the board is a somewhat different animal, a different creature, than most agencies. One can look at the need for... I do not disagree that there is a need for a strategic plan, and we have embarked upon a strategic planning process, but the board's mandate is quite clear in the legislation, and the board knows what it is about. The board is, to a large extent, driven by the legislation and the regulations with which we are dealing. The board has in place ongoing processes in terms of audits and reviews, compliance audits of the utility, and that kind of thing. I think that the board's jurisdiction is fairly clear in that respect. What we have set out to do is really to look at quality of service, to try to see how we could improve quality of service.

I would not want to leave the impression that the board was drifting in any sense. The board has a clear sense of goals. They just did not happen to be written down in a document called a strategic plan. There had been reviews previously. There had been reviews undertaken by the Board. There was a review done some years ago which was sort of intended to review where the Board was and where it was going. This was done involving the chair of the Board at that time along with some people from government.

While there was no document that was actually entitled the strategic plan, there were other documents in the works. They were in documents, for example, dealing with insurance that indicated the process the Board was following, and there was a discussion paper on insurance regulation. There were a lot of bits and pieces in the organization that were never pulled together under a nice glossy cover and called a strategic plan. A lot of what comes under the rubric of strategic plans are nothing but collections of documents that get put together. What we are doing now is something a bit more basic and a bit more fundamental.

I think it is fair to say that the Public Utilities Board, in terms of a short answer to your question, was not without direction and was not handicapped by the fact that it didn't have a nice glossy document called a strategic plan.

MR. LUSH: I asked the question deliberately because I (inaudible) your answer, and I realize that there are some organizations that lend themselves more to establishing goals and objectives than others. You have answered the question adequately in terms of the fact that a lot of your duties are legislated. I suppose if you do everything that is legislated, in a sense really the Board is a convenience.

You have stated here, in fact, that you are in the process of initiating a strategic plan, stating your mission statement, and probably outlining your goals and objectives. I'm just wondering if you could, very briefly, give us an example of what might be a goal of the Board. Because, again, the Auditor General mentioned in the annual report that she would like to see results linked to goals and objectives. I just wonder what your perception of that might be.

MR. VARDY: Yes. In terms of goals, what might be goals that we would - I don't want to anticipate what might be in our final document, but the kind of things that we would want to put in would be in terms of operational goals for the coming year. We have in place a process with regard to a review of contributions in aid of construction. That is an issue before the Board. That is an issue we would like to deal with over the coming year. In fact, we have a study being undertaken now by Doane Raymond.

One of the issues we would propose to deal with over the coming year is, in fact, the whole business of contributions in aid of construction, which relates to the extent to which people in remote areas should have to contribute to an extension of the electrical line to service their particular home or dwelling; or, for that matter, industrial customers, mines for example that are setting up. We have a number of those right now under consideration where the companies are developing mines and the utility has to develop a transmission line to the mine. The question is: What kind of contribution, in aid of construction policy, should be in place to ensure that the rate payer is not burdened with the cost of an extended line to accommodate a mine? These are the kinds of things we would want to look at in terms of contribution in aid of construction. I use that as an example, on the public utilities side, of things we should look at and we intend to look at.

Also, there is the question of intervenor funding that I mentioned yesterday in my opening statement. We are working with the Department of Justice to come forward with some ideas for the government to deal with on intervenor funding, as to whether some kind of a more user-friendly intervenor funding process should be put in place.

With regard to the new planning responsibilities under the Electrical Power Control Act, the Board has expanded planning responsibilities. One of the things we are looking at there is setting up a process over the next year which would involve a review of all of the plans of the utilities - Newfoundland Power and Newfoundland Hydro, in particular - just to see whether they are conducting proper system planning. One of the responsibilities of the Board is, in fact, system planning. Our responsibility is to ensure that system planning takes place. These are the kinds of goals that are on what I will call the public utilities side of things.

On the insurance side of things, there are a number of goals as well that the Board sees as being important; one of which is to review the current benchmark system that we have and to see whether the benchmark system is the best way to regulate insurance companies, or whether we should be moving toward a more company-specific approach, which might be one where each company or each of the larger companies might be called before the board to defend an application for increased rates which would then be moving the insurance regulation more toward the motive that we have been using with regard to electric utility regulation as opposed to the benchmark approach. So this review of options is something on our agenda for goals over the next year.

Another thing that we have on our list is that we have an audit approach to the automobile insurance rates. We are into a review now of the auditing process and we want to review that over the next year as well, just to make sure that the sample size is appropriately large and that the audit is effective in disclosing compliance between the rates that are actually charged and those that are filed and approved by the board. So those are some examples of operational goals that we would hope to deal with over the next year.

MR. LUSH: There seems to be a perception abroad in the public, sometimes at least, that the board simply rubber stamps the requests of the (inaudible).

I just want to use an example. I worked as a real estate agent at one time in my illustrious career and I often had the feeling that I was in a conflict of interest. If Mr. Burns listed his house with me I felt obligated to give him a good price but I was also negotiating with the buyer. How did I reconcile these two positions of trying to get him a good price and getting a good price for the buyer, because I am working for both? I assume the Public Utilities Board is in a similar position. I am just wondering whether or not a specific goal or objective should not be stated in that regard, because they are looking after the consumer and they are also looking after the company.

What is your position on that? It seems to me the public is not aware of that, what the goal of the board is in working for these two groups, the consumer and the supplier of the service.

MR. VARDY: I think that is an excellent question, and is one that has concerned us. In our deliberations that has been a central issue. What we have done is established a mission statement of the board which is defined in terms of the balancing of the interest of the consumers and the general public, including the regulated entities. Because we have a responsibility to the public utility itself and we have a responsibility to the consumers who are served by the public utility, and there is a balancing process.

The question is: How can the board best reconcile that process? In terms of the perception, one of the problems with the process is that quite often what the public sees is the applicant, whether it is a utility or an automobile insurance company, in a very strong position coming before the board with strong expertise, where the board is presented with evidence from one side by the applicant and then there isn't the countervailing strength of expertise on the other side.

Of course, when the government appointed the consumer advocate this past summer in Newfoundland Power, that was intended to provide this balance before the board, between the applicant and the ratepayers represented by the consumer advocate. There are situations where the board has to protect the public interest and there quite often may not be other interveners before the board.

I will give you an example. Over the last few weeks we had a hearing in the capital account of Newfoundland and Labrador Hydro, and that is a major part of our regulatory role. You do not hear much about it, but we did advertise the hearing. The hearing was advertised for the general public well in advance of the hearing and interveners were invited to come forward, but the only intervener that came forward was Newfoundland Power. Newfoundland Power came forward as an intervener in the capital program of Newfoundland and Labrador Hydro; and that's fine. They came in and made an intervention and so forth. But apart from Newfoundland Power there was nobody else there.

The board has the responsibility to ensure that there is a balance struck and that all the evidence presented by Newfoundland Hydro is tested by experts. Now, if there were no intervener in that hearing, if Newfoundland Power did not intervene, then the responsibility of the board would still be the same, to ensure that there is basically a challenging and a testing of the evidence presented before the board.

This is something that is probably not well known, that in those instances in the past where there has been no consumer advocate parallel to such an office, the board has taken it upon itself to bring in experts and to challenge the applicant. This has happened, I think it is fair to say, in every hearing. If the major issue was rates, for example, a change in the structure of rates, the board would bring in its own rate expert to challenge the proposal coming from the applicant.

So, the board, as I said, does do this. The board ensures that there is a balanced view. If it appears as if there are no intervenors who are going to be presenting countervailing evidence, then the board ensures that there is an expert coming forward who can challenge and test the evidence of the applicant.

That brings you then to the question of perception, and the perception is that, notwithstanding all of that, the applicant has a strong position before the board. That is one of the things we are trying to come to grips with. I do not have an answer to that, I don't have a pat answer, but we do know that is a problem in terms of the perception of the role of the board. One of the things that would be helpful is, if there were some mechanism which would enable other interested parties to come before the board and to challenge the applicant, whether it is automobile insurance or whether it is public utilities or whatever. That is where I think the whole question of intervenor funding comes in, because there are very few people who, even though they might have a strong interest in the matter, are prepared to invest their own time, to come in and to mount their own intervention. That does not mean there aren't people from the public who will come in and make presentations; we have experienced that. But in terms of providing a sort of a detailed professional critique, there are very few people who are prepared to do that or have the expertise to do it. That is why the board looks upon some kind of an approach to this question of intervenor funding as being quite important to the process, to make sure that the process not only is fair but is seen to be fair.

MR. LUSH: Perhaps, to be more specific: The Auditor General (inaudible), with respect to Hydro, that the board hire a consultant to review costs and that kind of thing, and makes reference to the fact that, in terms of doing its reviews on Hydro, that it has to be done on an annual basis. The fact that there could be several years between hearings, the suggestion was made that this makes it difficult in terms of establishing the continuity of costs. What are your reactions to the fact that the annual reviews are not being conducted on a timely basis?

MR. VARDY: Well, up until December of 1995, the board did not have full regulatory power over Newfoundland Hydro. So in terms of doing an annual review, this was a matter of voluntary compliance by the company with this process. In terms of the annual review, this is a practice that the board has adopted. There is no statutory requirement for it. The board has done this as a matter of convenience, to a large extent, so that when a hearing comes up we do have the material before us and it is readily available. Of course, we have done it in the case of Newfoundland Power as part of our normal, ongoing supervision responsibility under section 16. We had no such mandate with regard to Newfoundland Hydro, so I think you have to make that distinction between Newfoundland Hydro and Newfoundland Power. They are different animals in terms of the control that the board had.

Under the old Electrical Power Control Act, the board could only recommend to the Lieutenant-Governor in Council, and the Cabinet, the Lieutenant-Governor in Council, would make a reference to the board. When there was a rate application forthcoming, the board would conduct a hearing and report to Cabinet, but we did not have the full regulatory power with regard to Newfoundland Power. Now, of course, in the context of 1996, we do. Under the new Electrical Power Control Act and the consequential amending act, the board now is in a position where both of those companies are in the same position and we regulate them in the same fashion.

MR. LUSH: There is one other item that the Auditor General mentioned, and that with regard to (inaudible). The board does not have the statutory right, or an obligation, to (inaudible) annual review of Hydro. I have sort of been going all over the place here, but there was another issue similar to the point you made comment on, that the Auditor General mentioned that there was no annual report submitted to the House of Assembly. I do not know whether the Auditor General was making a suggestion that there ought to be a report to the House of Assembly, but (inaudible).

MS. MARSHALL: I recommended for almost all the agencies of the Crown (inaudible) funded by government that a report be tabled in the House of Assembly. (Inaudible).

MS GALWAY: Yes, we did prepare an annual report. As part of the strategic plan in process we, in fact, are trying to improve some of the content within that report. In addition to the matters that the Auditor General just mentioned, we are also trying to make it an easier document to read. It has been our history to prepare it and we have always presented it to the minister. The insurance division prepares an annual report and that is tabled in the House.

MR. LUSH: Would that report be sufficient? It is presented to the minister. Ought that to be tabled to the House as well?

MS GALWAY: That is correct, yes. If the minister is receiving the information, I think that members of the House of Assembly should also be receiving the information.

MR. LUSH: So, we are not talking about a new report, we are talking about the report that is submitted to the minister, that ought to be tabled in the House?

MS GALWAY: Yes. (Inaudible).

WITNESS: (Inaudible) all organizations are funded by government, to what extent (inaudible)?

CHAIR: Mr. Whelan.

MR. WHELAN: I just have a couple of things actually. The Auditor General in her report noted that in section 59, the act requires the board to report to the Minister of Justice to (inaudible) public utilities. It has been my understanding that most of the assessments that were done (inaudible). I guess my question is: Did the board ever receive that assessment, and if not, why not? (inaudible) have not receive them?

MR. VARDY: This was a company that went into bankruptcy.

MR. WHELAN: Bankruptcy, okay.

MS THISTLE: I want to ask (inaudible) about the Statements of Revenue, Expenditures and Surplus on page 38. Just a couple of questions. I'm wondering why the revenue dropped down in 1994, around $200,000. Is there any clear explanation for that?

MR. VARDY: Which year is this?

MS THISTLE: This is 1994 as compared to 1993, on page 38.

MR. VARDY: We are operating with different documents here.

MS THISTLE: It is the Doane Raymond report.

MS GALWAY: Would you like me to start?

MR. VARDY: Sure.

MS GALWAY: In 1993, we had a different, I guess, jurisdiction. We were still more heavily involved in the regulation of motor carrier. In 1994, that was phasing out, and some of the costs associated with that you can see are reflected in the dip in the overall costs under Expenditures. That dipped slightly as well. So the allocation of expenses between the various entities changed. Is that the year we tried to -

MS DRAY: We gave the money back to (inaudible).

MS GALWAY: Right. That was the year after we - you can see that the Expenditures over Revenue column, if you look under 1993 and go to the second last figure, there was $390,335 in surplus, basically from the year before, if (inaudible). I guess in a business environment you would almost say that it was closer to your net income. But the $390,335 resulted that year from not having a full complement of commissioners. We had budgeted for the consumer advocate's cost of $84,000 - $85,000. We had a normal travel budget for that year that we didn't use because it was a year that government essentially cut back. So we cut back a lot of our costs, and yet, due to the nature of our assessments, we had assessed people up front when we thought these costs would be incurred; so we reduced their assessment in 1994. That is part of the Auditor General's commentary.

MS THISTLE: So having a surplus in 1993, would that be a reason for the reduction in the government grant in 1994?

MS GALWAY: The government grant reduced, I guess, partially for any surplus that might have occurred at the end of that year. They would reduce that automatically in the next year's grant. In addition to that, and perhaps more relevant, that area of our operation was deregulated and some of the responsibilities that remained were transferred over to the Department of Works, Services and Transportation. We had very little activity going on, so that also was a contributor to the reduced grant from government. It also was the year that they told us that we could no longer recover the cost of the commissioners.

MS THISTLE: So, would you find in your annual budget now, on a year to year basis, that you don't have any government grants as such there? Do you always allow for a particular consumer advocate if the need arises during the upcoming year?

MS GALWAY: In 1993, the consumer advocate's position was a full time position. It was filled by Jeff Brace at that period of time. The current provision is still under the public utility regulation - I think it is 117 - and that is the prerogative of the Lieutenant-Governor in Council to appoint a consumer advocate under that section. At this point, we are under the impression that would happen with respect to a specific hearing and then it would not be part of your regular budget. It would be included as part of your regular costs for a hearing and billed directly under Section 90.

MS THISTLE: Which government pays initially and then it is billed back to, say, Newfoundland Power or whoever has the hearing. Is that correct?

MS GALWAY: Well under section 173, all costs relating to the consumer advocate shall be borne by the board. Because of cash flow dilemmas this year, the Department of Justice advanced us funds to help cover the cost of the consumer advocate up front, and we have undertaken to pay that back upon collecting it from Newfoundland Power; but it would normally be our cost.

MS THISTLE: Under the section, miscellaneous revenue, what would be the makeup of that? Where did that come from?

MS DRAY: Over the past few years we have not been using our boardroom totally for hearings like we had in the beginning, when we had motor carrier regulation. We have had some available space and we have been tied into a lease. Besides that, when it came time for Newfoundland Power hearings or anything like that, this space was very important to us. So we have been renting out our hearing room whenever the occasion arises, mostly to the Department of Justice.

MS THISTLE: So is there any set limit that you can sort of include in that figure? Do you have any guidelines as to how high your miscellaneous revenue should be before it is counted in some other section?

MS DRAY: We record it ourselves as rent recovery, but when the auditors did the financial statements they didn't think it was a significant amount, so they just put it under miscellaneous.

MS THISTLE: That's my question, thank you.

MR. LUSH: (Inaudible) question on the tabling of reports and (inaudible) the Auditor General's (inaudible). I think we ought to make the point that the board has been (inaudible) its responsibility in preparing its report and presenting it to the Minister of Justice which is the Statutory requirement.

I'm just wondering: Is the Public Utilities Board the only exception to this? I know that there are documents or reports tabled. Are you aware of any other government-sponsored agencies that don't?

MS MARSHALL: Most don't.

MR. LUSH: Most don't?

MS MARSHALL: Most don't. I believe last year there may have been fifteen or twenty out of about 150 that tabled reports. The majority do not require that (inaudible).

CHAIR: I just have one final question. You spoke earlier in terms of an appropriate mechanism, whereby the balancing act that you go through each and every year (inaudible) is receiving a fair and just increase in terms of its maintenance and the ongoing competitiveness of the company. Do you see the lack of a consumer advocate, or do you see possibly that a consumer advocate's office should be re-instituted? Do you see that as an appropriate mechanism?

Some have argued that the cost of a consumer advocate, specifically during this period of time, would have more than compensated for maintaining the office of consumer advocate over a period of three or four years. Do you see that as part of a mechanism that would assist the board in the balancing act it goes through?

MR. VARDY: My experience with this, as chair of the board, this two-year stint as chair and chief executive office - in terms of whether that is a representative period or not, I don't know. The argument that was made initially was that there are periods when the consumer advocate really wouldn't have a lot to do, and therefore why would you have somebody on payroll if there are no active issues? That is why I think the government decided to move toward an ad hoc arrangement and to put one in place when the need arises. Without a very thorough analysis of the cost and all aspects of it, I don't know whether I would want to come down on one side or the other. It is a government prerogative as to how it wishes to proceed on that, and I don't think I wish to express any kind of preference of one over the other.

CHAIR: Okay. You have also mentioned that intervening funding, which is more to the point in terms of the mechanism you were talking about, would give, I guess, greater power and control to the board in protecting the public interest? Have recommendations are made to any department of government with respect to intervening funding and how recent were those recommendations (inaudible)?

MR. VARDY: We have been directed by government to work with the Department of Justice to come forward with the options, what are the options to put an intervenor funding arrangement in place. That is something we are actively discussing right now with the Department of Justice, how can this be put in place and how does that match with government's wishes with regard to the consumer advocate; so that is essentially where it is. We have done a fair bit of work on it in terms of whether it would be advantageous to have such an intervenor funding model in place, and we will have the information available to government so that they can make a decision as to what is the best approach. From where we stand, the important thing is that there be people in the hearing room who represent all sides of the issue.

CHAIR: Are there any further questions? (Inaudible).

Mr. Vardy.

MR. VARDY: I think this has been a very thorough analysis and it is very difficult to come up with an area that has been overlooked. So I just wish to thank you for the opportunity to come before you to explain what we do. As I mentioned to you, we like to take every opportunity that is offered because we do know that the board is not well-understood. One of the things that I have tried to do is - it is very difficult for the board to be pro-active in terms of any kind of a public relations approach in the middle of a hearing.

Prior to the onset - if I may use that term - of the Newfoundland Power hearing, I was attempting to try to do presentations to Rotary Clubs to try to explain the role of the board, but the reality is - and I am sure my predecessors encountered this as well- that without the context of a hearing and a rate application, people are as interested in the Public Utilities Board as they are in watching paint dry.

CHAIR: Thank you very much.

WITNESSES: Thank you.

The committee stands adjourned.