DEMANDE DE MODIFIER LES TARIFS DE SOCIÉTÉ EN COMMANDITE GAZ MÉTRO À COMPTER DU 1er OCTOBRE 2011
DOSSIER : R-3752-2011 Phase 2
RÉGISSEURS : M. GILLES BOULIANNE, président Me MARC TURGEON
M. JEAN-FRANÇOIS VIAU
AUDIENCE DU 16 SEPTEMBRE 2011
VOLUME 7
CLAUDE MORIN Sténographe officiel
REQUÉRANTE :
Me VINCENT REGNAULT Me HUGO SIGOUIN-PLASSE Me ÉRIC DUNBERRY
procureurs de Société en commandite Gaz Métro (GM);
INTERVENANTS : Me GUY SARAULT
procureur de Association des consommateurs industriels du gaz (ACIG);
Me ANDRÉ TURMEL
procureur de Fédération canadienne de l'entreprise indépendante (FCEI);
Me GENEVIÈVE PAQUET
procureure de Groupe de recherche appliquée en macroécologie (GRAME);
Me ÉRIC DAVID
procureur de Option consommateurs (OC);
Me FRANKLIN S. GERTLER Me JACYNTHE LEDOUX
procureurs de Regroupement des organismes environnementaux en énergie (ROEÉ);
Me ANNIE GARIÉPY
procureure de Regroupement national des conseils régionaux de l'environnement du Québec (RNCREQ);
Me DOMINIQUE NEUMAN
procureur de Stratégies énergétiques et Association québécoise de lutte contre la pollution
atmosphérique (SÉ/AQLPA);
Me PIERRE GRENIER M. ÉRIC NADEAU
représentants de TransCanada Energy Ltd (TCE);
procureurs de Union des municipalités du Québec (UMQ).
TABLE DES MATIERES
PAGE
LISTE DES ENGAGEMENTS . . . 5 LISTE DES PIÈCES . . . 6 PRÉLIMINAIRES . . . 7
PREUVE DE ACIG-FCEI (suite)
ANTOINE GOSSELIN LAURENCE BOOTH
CROSS-EXAMINATION BY Me ÉRIC DUNBERRY . . . . 9
____________
LISTE DES ENGAGEMENTS
E-1 (ACIG) : Provide copy of a document confirming or defining Dr.
Booth's mandate for IGUA in
relation to this case . . . 17 E-2 (ACIG) : Produce the exact references to any decisions in Canada where witness has actually recommended an "A" spread, the latter being the spread between Corporate A bonds and LTC yields
(requested by GM) . . . 138
____________
LISTE DES PIÈCES
PAGE B-277 : (Gaz Métro-17, Doc.9) Réponse à
l'engagement numéro 8 . . . 8 B-278 : (Gaz Métro-17, Doc.10) Réponse à
l'engagement numéro 9 . . . 8 B-279 : (Gaz Métro-17, Doc.11) Réponse à
l'engagement numéro 10 . . . 8 B-280 : (Gaz Métro-17, Doc.12) Réponse à
l'engagement numéro 11 . . . 8 B-281 : (Gaz Métro-17, Doc.13) Réponse à
l'engagement numéro 12 . . . 8 B-282 : Table 1 - Recommended ROE - Québec . . 78 B-283 : (GM-7, Doc. 19) Tableau ROE Recommended by Dr. Booth . . . 87 B-284 : Document intitulé Market Risk Premium
used in 2010 by Professors: a survey
with 1,500 answers. . . . 161 B-285 : Document intitulé Market Risk Premium
used 56 countries in 2011: a survey with 6,014 answers. . . 162 B-286 : Décision BCUC Terasen Gas inc. December 16, 2009 . . . 247 B-287 : Décision D-96-31 . . . 260 B-288 : Décision D-2010-147 . . . 260
____________
L'AN DEUX MILLE ONZE, ce seizième (16e) jour du mois de septembre :
PRÉLIMINAIRES
LA GREFFIÈRE :
Protocole d'ouverture. Audience du seize (16) septembre deux mille onze (2011), dossier R-3752- 2011, Phase 2. Demande de modifier les tarifs de Société en commandite Gaz Métro à compter du premier (1er) octobre deux mille onze (2011).
Poursuite de l'audience.
LE PRÉSIDENT :
Bon matin, Mesdames et Messieurs. Bon matin, Maître Regnault.
Me VINCENT REGNAULT :
Bon matin, Monsieur le Président, Messieurs les Régisseurs. Juste avant de replonger dans le vif du sujet du taux de rendement simplement déposer, produire en fait des engagements souscrits par le panel sur les taux d'amortissement, donc les
engagements 8 à 12 qui ont été cotés par madame la greffière B-277, B-278, B-279, B-280 et B-281, les documents Gaz Métro-17, Document 9 à Gaz Métro-17, Document 13. Merci.
B-277 : (Gaz Métro-17, Doc.9) Réponse à l'engagement numéro 8.
B-278 : (Gaz Métro-17, Doc.10) Réponse à l'engagement numéro 9.
B-279 : (Gaz Métro-17, Doc.11) Réponse à l'engagement numéro 10.
B-280 : (Gaz Métro-17, Doc.12) Réponse à l'engagement numéro 11.
B-281 : (Gaz Métro-17, Doc.13) Réponse à l'engagement numéro 12.
LE PRÉSIDENT :
Merci, Maître Regnault.
Me ÉRIC DUNBERRY :
Monsieur le Président, Messieurs les Régisseurs, nous reprenons ce matin avec le contre-
interrogatoire de monsieur Booth.
______________
PREUVE DE ACIG-FCEI (suite)
L'AN DEUX MILLE ONZE (2011), le seizième (16e) jour de septembre, ONT COMPARU :
ANTOINE GOSSELIN,
LAURENCE BOOTH,
LESQUELS témoignent sous la même affirmation solennelle :
CROSS-EXAMINATION BY Me ÉRIC DUNBERRY : (9 h 8)
Q. [1] Dr. Booth, I will be conducting the cross- examination in English, I think that will be more efficient for both of us.
Dr. LAURENCE D. BOOTH :
A. I definitely agree with that.
Q. [2] And for purposes of this, I would invite you to take a few documents, and I may have others for you. I would ask you to take, obviously, a copy of your report, a copy of your presentation, a copy of your answers to both the Régie and Gaz Métro's questions, and a copy of your exhibits as well that were produced in support of your answers to
requests for information. I know that you sent electronic formats, but you and I will be having a conversation using hard copies, if that can be arranged.
And, in fact, the first document I would like to refer you to is Exhibit Gaz Métro-IR.1,
which is a table that appears in front. Actually, it's your first exhibit in support of your answers a request for information. It's a table that I believe that was prepared by the witness at some point. Do you recognize the document, Dr. Booth?
A. No, I have my answers to the information requests.
Q. [3] Yes.
A. I don't have all of the...
Q. [4] Okay.
A. ... the data files, because, as Mr. Sarault indicated, it's a large number...
Q. [5] Well, we'll ask your lawyer to assist here, because you may have a hard copy...
Me GUY SARAULT :
You have them on your computer...
A. I've got them on my computer, yes, but if he wants to look at them... well, I think it would be easier to look at them on hard copy.
Me ÉRIC DUNBERRY :
Q. [6] And we will be going back and forth from your report to your answers for requests for
information, so it would be easier for you as well to have hard copies.
A. I agree.
Me ÉRIC DUNBERRY :
Écoutez, c'est toujours un défi pour moi, les cotes de pièces, c'est GM-1, IR.1, qui est une pièce jointe aux demandes de renseignements; elles ont été cotées de cette façon par...
Me GUY SARAULT :
Pouvez-vous me donner un petit instant...
Me ÉRIC DUNBERRY : Oui.
Me GUY SARAULT :
... parce que je vais devoir suivre sur mon ordinateur parce que j'avais cette copie-là et, évidemment, j'aimerais être en mesure de regarder les pièces sur lesquelles vous interrogez en même temps.
Me ÉRIC DUNBERRY : Évidemment.
Me GUY SARAULT :
J'avais seulement cette copie papier-là, le beau gros cartable. Alors je vais être obligé, à chaque fois, vous devrez m'endurer parce que...
DISCUSSION HORS DOSSIER Me ÉRIC DUNBERRY :
Q. [7] And, Mr. Booth, while people are organizing themselves, I will ask you to take a copy of your
report, on Page 2, while we wait for everybody's preparation.
A. Yes.
Q. [8] Actually, it's on Page 3.
A. Yes.
Me ÉRIC DUNBERRY :
Monsieur le Président, je m'en excuse tout de suite, nous allons... c'est un de ces contre- interrogatoires où nous mettrons le doigt sur les textes. Alors je m'excuse d'avance pour vous inviter à, tout au long de la journée, à passer d'un document à l'autre. Il y aura ce genre de révision de certains textes de déclarations, d'extraits, de réponses à des demandes de
renseignements. Alors on va véritablement passer d'un document à l'autre, plutôt que de paraphraser ou de tenter de se rappeler, nous allons aller voir les textes d'origine. Alors c'est plus sûr comme ça pour nous tous.
Q. [9] So, Mr. Booth, and I will... I will go from "Mr. Booth" to "Dr. Booth" and I apologize for this in advance, I know that before the Régie, you are called Mr. Booth, or Dr. Booth actually, but where I usually practice, everybody is called "Mister", so...
A. I'm called a number of things, so I respond to just about anything.
Q. [10] Okay. So, again, I will, might be going from "Mr." to "Dr. Booth". So, Dr. Booth, on Page 3, Lines 19 and 20, you start by saying, and I quote you,
I have now been involved in 3 Gaz Metro ROE cases in five years, each time Gaz Metro has presented a different ROE witness.
And in answering some particulars, requests for particulars, you provided this summary table of your appearances before a number of boards over the last, let's say, five, six years?
A. That's correct.
Q. [11] If we take this document very quickly, we see, for instance, at the bottom of the first page that, as you say, you appeared before this board in two thousand and nine (2009), on behalf of IGUA, and that led to Decision D-2009-156, do you see that?
A. That's correct.
Q. [12] And we also see that you appeared -- and I'm not at the bottom of Page 2 -- you appeared in two thousand and seven (2007) before the Régie, again on behalf of IGUA, and that rate case led to
Decision D-2007-116, is that correct?
A. That's correct.
9 h 16
Q. [13] And we see as well that you appeared, on the first page, that you appeared on behalf of IGUA again in the Gazifère rate case, that was in two thousand ten (2010), and that led to a decision, D-2010-147.
A. That's correct.
Q. [14] And there is one element missing here, but you will probably recall that in two thousand eight (2008) you also appeared on behalf of IGUA before the Régie, and that led to decision D-2008-140. At that point I think the debate was whether the adjustment formula would be stayed and you some evidence again dealing with the flotation cost. Do you recall again this appearance?
A. That's correct, that wasn't rate of return or capital structure, if I remember correctly it was Gaz Metro asked for my recommended issue, cost of fifty (50) basis points instead of thirty (30) basis points...
Q. [15] Do you mean IGUA asked for your recommendation? Your client was IGUA.
A. I'm sorry, what did I... yes.
Q. [16] Yes.
A. Gaz Metro, I think, asked for my recommended issue costs to be used instead of the thirty (30) basis points that the Régie allowed.
Q. [17] That's right.
A. Plus I seem to remember there was something to do with the credit spreads as well, the... but that wasn't an ROE capital structure hearing.
Q. [18] But that was your fourth appearance in the last four, five years actually?
A. That's correct, I've been here every year since two thousand and seven (2007).
Q. [19] And I'm just referring to the July eleventh (11th), two thousand one (2001) letter from Me Guy Sarault to the secretary of the Board where it is said, and there's no need for you to go back there, I'll simply refer to it, that this was the actual filing of your evidence on July eleventh (11th), two thousand eleven (2011) and it is said in French:
"Dépôt de la preuve de l'ACIG" in this case and this is your fifth consecutive appearance again on behalf of l'IGUA in the last five years.
A. That's correct.
Q. [20] So I guess IGUA is a regular client, five in five years?
A. I would say that I've... I think I've appeared before IGUA with, ask by IGUA to provide testimony at the Ontario Energy Board and I can't remember exactly who asked me to provide testimony with my colleague, Dr. Berkowitz in the Gaz Metro hearing at least fifteen (15) years ago, but...
Q. [21] So Gaz Metro, I'm sorry, IGUA is a regular client?
A. IGUA is somebody that has hired me. I wouldn't say it's a regular client. I would say that I've
appeared on behalf of a number, I've been ask to appear on behalf of a number of people, IGUA is one of those people that has asked me to appear.
Regular, it would depend on whether they want to hire me.
Q. [22] Let's agree on one simple fact. You appeared five times in five years on behalf of the same client before the same Régie?
A. That's correct.
Q. [23] Now, this fifth mandate, was it given to you in writing, was there a confirmation in writing of your mandate?
A. I don't think I got a formal letter, I think I got an email or a telephone call from monsieur Sarault via... from Marie Newton, head of IGUA, saying that
Gaz Metro had filed yet again, would you like to enter testimony on behalf of IGUA again. And I think I said yes. I can't remember whether that was an email or whether it was a telephone call.
Q. [24] By way of undertaking, I would simply ask you, and we will expedite matters today perhaps by way of undertaking, time being short, I would ask for your diligence in supplying the information asked.
So by way of an undertaking I would ask you to provide us with a copy of a document, by document I refer to the more modern definition of document which includes any electronic documents, confirming or defining your mandate for IGUA in relation to this case.
E-1 (ACIG) : Provide copy of a document confirming or defining Dr. Booth's mandate for IGUA in relation to this case
A. I think in terms of... if it was an email and it was probably an email, it certainly didn't define the mandate, it simply said are you interested in appearing on behalf of IGUA in Gaz Metro's upcoming case.
Q. [25] I will not ask you opine yourself on the
nature of the document, I would simply ask you to provide us copy of any documents relating to the mandate, relating to this mandate that eventually led to the presentation of your report, be it understood that if there is any privileged information in the documents I would invite Me Sarault to review the document, advise us if there are any issues and eventually perhaps file a
retracted copy, just leaving the information which is relevant according to the rules for the Courts.
Me GUY SARAULT :
Est-ce que vous avez terminé?
Me ÉRIC DUNBERRY : Oui.
Me GUY SARAULT :
Simplement, je ne suis pas certain qu'on a nécessairement... on n'a jamais donné de long mandat au docteur Booth. Ça se peut que ça ait été des téléphones, OU quelque chose comme ça. On va faire les meilleurs efforts, là, mais je peux déjà dire à la Régie qu'il n'y avait pas de mandat précis avec des paramètres ou quoi que ce soit.
D'ailleurs on se fait un devoir de laisser carte blanche au docteur Booth justement pour préserver son intégrité.
Me ÉRIC DUNBERRY :
Alors, Monsieur le Président, on verra le document, s'il est produit.
(9 h 17)
Q. [26] Dr. Booth, I understood, reading your report, that you are the...
Me GUY SARAULT :
U-1, « Undertaking 1 »... parce que j'ai
l'impression qu'il va y en avoir beaucoup, ça fait qu'on va les compter.
Me ÉRIC DUNBERRY :
Je n'ai rien dit, Monsieur le Président.
Me GUY SARAULT : Ah! je pense que...
Me ÉRIC DUNBERRY :
Q. [27] Mr. Booth, I understood that you're the author and sole author of your report, that you presented yesterday by way of a PowerPoint presentation, and the documents filed in the evidence as well?
A. That's correct.
Q. [28] And I assume that your client reviewed the document prior to its filing and endorsed the conclusions and recommendations contained in your report?
A. That's my assumption, I don't know whether they...
they reviewed it in detail, and I don't know
whether they agree with everything in it, that's a question to ask my client.
Q. [29] But you did provide a copy to your client prior to its filing?
A. That's correct.
Q. [30] Okay. And the filing was made on your behalf, but by your client with your accord?
A. With my agreement, yes, I sent them a document and they filed it. And I was in agreement with them filing it.
Q. [31] Now from Page 14 to 17 of your report, Mr.
Morin... sorry, Mr. Booth, there is a review of a number of decisions. If you look at your report starting on Page 4, where you review a number of decisions made by the Régie, and then moving
forward, Page 5, 6, 7, 8, 9, and following, I guess until Page 17, you review a number of decisions by boards across Canada, the Ontario Energy Board, the Alberta Utilities Commission, the British Columbia Utilities Commission, may I assume, or tell me otherwise, that you have actually reviewed, personally reviewed, these decisions by boards?
A. I looked at the decisions, correct.
Q. [32] Personally?
A. Personally, yes. Whenever there is a decision, I read as much of the decision as I can related to the material that I was involved with. Obviously, I am interested to see whether, what the decision was in terms of rate of return and capital structure.
Q. [33] Some of these decisions, Dr. Booth, are in French, right?
A. That's just what I was going to say, in the case of the Régie's decision, there is an English
translation of the cost of capital section, and I asked, for the Gazifère decision involving the adjustment mechanism, for a French translation. So I did not read all of, as you're probably aware, the Gazifère decision simply because it was in French. I focus on the areas that I'm interested in.
Q. [34] So what you have reviewed, if we summarize, is the translation of extracts of decisions released by the Energy Board, this Energy Board, relating to the return on equity issues?
A. That's correct.
Q. [35] Okay. And the translations that were provided, were these the official Régie translation, or were these, to use the expression of Dr. Morin,
"homemade" translations, or by, you know, internal
resources or by your lawyers?
A. I think it was a mixture, I think the, one of the decisions, I was under the impression it was an official translation; and then, I think in terms of some of the things I asked for, Monsieur Sarault got a translation.
Q. [36] Okay. And these are decisions D-2007-116, D-2009 and D-2010, those decisions which are identified in your report?
A. That's correct.
Q. [37] Okay. Now, perhaps there is no need for you to go there, but there is a document here I would like you to look at from a distance, and perhaps you can simplify this, it's a document, Gaz Métro-7,
Document 11, entitled, "Taux de rendement", "Rate of return", Gaz Métro...
A. I can see it, yes.
Q. [38] It's a document in French, have you been provided with a translation of that document, and have you reviewed the translation? I can give you my copy, if you want, just to recognize it.
A. Can I have a quick look at it?
Q. [39] Sure. My notes are in French, so it's a safe exercise.
A. They're privileged, I won't read them.
Q. [40] It's highly privileged, I just lost it, but...
the privilege, I mean.
A. This is... I...
Q. [41] This is Gaz Métro...
A. This is the actual filing?
Q. [42] This is the actual evidence in documentation, documentary evidence by Gaz Métro. I gather you haven't seen it before?
A. No, I thought I'd read the...
9 h 23
Q. [43] My guess is you haven't read it because there's no reference in your report to it at all, according to my review. I may be wrong, but I didn't find any direct reference to it.
A. There's lots of things that I've read that I don't reference so that's not a check. I thought I'd read the piece in Gaz Metro's filing immediately prior to Dr. Morin's testimony and I'm not sure whether that's that, I'd have to go back and check, but...
Q. [44] Let me understand this, you're not sure if you read this document, this is the original copy, this is what was actually filed, this is identical to what was filed and it was not translated, based on your earlier answer, so do you or do you not
recognize this document?
Me GUY SARAULT : Si ça peut aider...
A. I would have to...
Me GUY SARAULT :
... si ça peut aider, je vais confirmer, I'll confirm that I did not provide a translation of this document to Dr. Booth, that's for sure.
Me ÉRIC DUNBERRY:
Q. [45] Okay. So...
A. I can confirm that if that was the information that was filed by the company immediately before Dr.
Morin's testimony then I looked at it. My French is not perfect, in fact it's four years of schoolboy French and I can read enough to understand what's going on and I believe that I looked at that, but just to look at the numbers because the numbers are the same apart from commas versus decimal points, they're the same in English that they are in French.
Q. [46] So just to summarize, you're not sure if you read or not that document, but if you did, you concentrated your readings on the tables and the numbers?
A. That's correct.
Q. [47] Okay. So you did not, that's something that
you and I established this morning, you did not actually translate the document?
A. I did not get a translation of that document and I would have to admit that my French isn't good enough for me to be a hundred per cent (100%) that I understood everything in that document.
Q. [48] So just so you know, this is the evidence in chief of Gaz Metro, for the record. I'd like to go through the list very quickly, and these are all preliminary questions by the way, the list of exhibits, I'll provide you with a copy or someone can provide you with a copy, I'd just like to confirm whether you've actually been provided with a few additional documents. I will be referring you to Gaz Métro, series 7 document. It's all in
French. You said you have some...
A. Some familiarity.
Q. [49] ... some familiarity. You and I will be
discussing French documents as we go along so we'll test that.
A. You'll test my familiarity.
Q. [50] So if you take that document, page 17, page 7 of 17, this is the actual list of exhibits. It may not be updated, but that section I will be
referring to has not changed. It's a list of
exhibits, I doubt that this was actually filed as an exhibit.
Me GUY SARAULT :
Liste des pièces révisée?
Me ÉRIC DUNBERRY:
Q. [51] I'm using my client's list of exhibits which looks like this. So, Mr. Booth, I'm using this document, we can use another one if you want, but it's just a list of documents which have been filed. I'd like you to take a copy of the document and flip the pages to the Gaz Metro 7 series. And you see there that you have a list of documents under Section 7 going from document 1 to document 12.8. These were the documents filed on behalf of Gaz Metro prior to the beginning of this hearing and prior to the actual preparation of your report.
Can I ask you whether you recall having been provided with translations or with the original French copy of these documents?
A. No, I was not provided with any of these either in English or French.
Q. [52] You were not?
A. I was not.
Me GUY SARAULT:
It's a bit tricky to testify on the basis of a
table of contents. For example, I see that the credit notation reports, DBRS and Standard &
Poor's, are mentioned in this. Those are in English. Did you take a look at those?
9 h 28
A. Those were not... those were provided as an information request when I asked Gaz Metro and I received, I think I... that was provided as an information request, I certainly had those, and I was certainly aware of them.
Me GUY SARAULT :
That's the danger on testifying on the basis just of a "liste de pièces", without seeing the actual documents. So I think, you know...
Me ÉRIC DUNBERRY : Okay, so...
Me GUY SARAULT :
... you've got to be careful there.
Me ÉRIC DUNBERRY :
So, again, the answer was given by the witness.
Monsieur le Président, je ne veux pas revenir, ce sont des questions préliminaires, on a beaucoup de travail devant nous. The answer was given that the witness does not recall having been provided with these documents. I will take that as an answer, and
if there is, at the break, a correction to be made...
Me GUY SARAULT :
I think he just did the correction, he did say that he looked at the credit notation reports.
Me ÉRIC DUNBERRY :
What I suggest, Monsieur le Président...
Me GUY SARAULT : So...
Me ÉRIC DUNBERRY :
Monsieur le Président, ce que je suggère, c'est, à la pause ou à l'heure du lunch, si le témoin, ou lors d'un réinterrogatoire, veut préciser sa
réponse et nous indiquer qu'il a pris connaissance des documents... on peut faire ça ensemble, ça va prendre vingt, quinze minutes, là, prendre la pause et nous confirmer, par voie de correctif, qu'il avait effectivement eu connaissance de certains documents. Pour moi, ça serait tout à fait
acceptable, et peut-être également plus efficace.
Q. [53] So what I just said, Dr. Booth, is that we will... we will keep you answer, which was a "no", but if, after reviewing the materials with your lawyer, there is a change to be made to your answer to the effect that you were provided with a
translation of some or all of these documents, or that you were given copies, and that you've
reviewed the documents, you can correct your answer later on. But, depending on the answer, I will have additional questions, so you understand?
A. My answer stands that I was not given translation of the French documents, and I didn't get the French documents. I get the, and I have the bond rating reports, and in my Appendix C, I make
extensive references to the bond rating reports. So the, I sorted out documents that I thought were relevant for my evidence, including the annual information form and the filings on SEDAR, which are not part of this hearing.
Q. [54] Okay, and that documentation was, whatever was provided, it was provided by your client IGUA?
A. No, I provided that.
Q. [55] Okay.
A. That's my responsibility to seek out information that I think is relevant for my testimony.
Q. [56] But the documents that were given to you, such as for instance a copy of Dr. Morin's report, that was provided to you by your lawyer, I guess, from IGUA?
A. That's correct.
Q. [57] Okay. Now did you receive documents from other intervenors?
A. Not that I'm aware of.
Q. [58] Did you have any exchanges with other intervenors...
A. No.
Q. [59] ... prior to the filing of your report?
A. No.
Q. [60] No. You understand that you're testifying on behalf of a group of intervenors, right?
A. Now I understood, as of yesterday, that I was... I was not aware that there were other intervenors that were part of the group. I was approached by IGUA, through Mr. Sarault, and yesterday, I became aware that other intervenors had sponsored my testimony as well. But as of yesterday, I was not aware of this.
Q. [61] So you learned yesterday that you have four more clients?
A. Apparently so.
Q. [62] I'd like now to refer you to some of these decisions by the Régie that you referred to, and to simplify matters, I will be using the official translation of the document, that is made available by the Régie. Unfortunately, I was not able to
retrieve all the translation, so I'll still have a few decisions in French, but you and I can probably progress substantially. So I have translations for you, unless you have yours already.
So we have copies for the Board members as well. C'est la décision, peut-être distribuer les trois décisions, D-2009-156 et la D-2007-116. I've made copies of everything, Monsieur le Président, to perhaps expedite matters as well.
Monsieur le Président, est-ce que, pour vous, c'est utile ou non d'avoir des décisions papier? Je peux les distribuer, ça permet peut-être de vous...
LE PRÉSIDENT :
C'est justement ce que je discutais avec un de mes collègues.
9 h 34
Ça fait qu'on va prendre les documents.
Me ÉRIC DUNBERRY :
Vous allez prendre les documents, Monsieur...
LE PRÉSIDENT : Oui.
Me ÉRIC DUNBERRY :
Puis je pense que ça va nous faire gagner... on abat quelques feuilles sur les arbres mais on gagne
une heure ou deux peut-être.
Q. [63] So, Mr. Booth, I'll give you a moment while everybody is reviewing these decisions. So this is the first decision to which you've referred on numerous occasions yesterday and in your report.
I'd like you to... D-2009-156... I'd like you to take a copy of the document and look at paragraphs 194 and 195.
A. Yes.
Q. [64] So I will read this for the record and then I have a few questions. So 194, and I quote:
Finally, as stated in the Hope decision, "Under the statutory of 'just and
reasonable', it is the result reached, not the method employed, which is controlling".
I this regard, the US courts have allowed regulatory agencies wide latitude and discretion in determining the best method for fixing a reasonable return on the rate base.
The fact that the automatic adjustment formula or any other approach suggested by the experts for the parties before the Régie may or may not be challenged is not a decisive factor; it is the result which is
conclusive, as the US Supreme Court stated in Hope: "it is the result reached, not the method employed which is controlling... It is not theory, but the impact of the rate order, which counts... The fact that the method employed to reach that result may contain infirmities is not then important".
The Régie considers that its duty in this respect is to determine a reasonable rate of return and that the method it uses is a matter of discretion.
May I assume that you and I agree with this statement made by the Régie?
A. Absolutely, it's a common statement made, I think the National Energy Board made the same statement when they used the ATWACC approach in two thousand and eight (2008), but it's... the statutes, from what I remember, is that... and I think I... even in my testimony I say about the BC Electric
decision that the statute was the board has the right to consider all factors that go into the rate case which ultimately what matters is the prices the consumers are charged are fair and reasonable.
Q. [65] Paragraph 290, Dr. Booth, 2-9-0, on page 25 of the translation which is not the same page number
that in the original decision, that's why I'm using the paragraph numbers. So in 290, and I quote, The Régie said the following:
However...
Actually we could read the previous paragraph:
In the Régie's view, the CAPM remains the most appropriate base model to guide the determination of a reasonable rate of return.
The second paragraph says:
However, all the experts also acknowledged that no one model can correctly represent investor expectations under all
circumstances and in all phases of the economic and financial cycles. Therefore, the Régie believes that the results
produced by the other models submitted by the experts must be taken into account.
Again, can I assume that you agree with the statement of the Régie, actually, the three
statements of the Régie or a part or all of that?
A. As I said in my direct testimony, I believe the CAPM is the foremost model, it's the most difficult to make gracious errors, but there is value to looking at discounted cashflow, there's value to
looking at the two factor model that are presented towards the Régie in two thousand and seven (2007) and two thousand and nine (2009). Other models are useful. Ultimately, we look at these models to check at judgment as to what is a fair and reasonable rate of return.
Q. [66] So your answer is yes?
A. I think it's always useful looking at other models, yes, to validate judgment, correct.
Q. [67] I will be very specific here, the line that I just read says:
... the Régie believes that the results produced by other models submitted by the experts must be taken into account.
Do you agree or not with this statement?
A. No, the... in terms of my evidence, I provide judgment in terms of the estimates produced by the discounted cash flow model and the Capital Asset Pricing Model and I show that over the last thirty (30) years there's been systematic biases in terms of the errors produced by these two models. So sometimes, if a model produces a result that does not accord with judgment, then you do not have to take that into account.
(9 h 39)
Ultimately, as the prior decisions stated, the paragraph, the reference stated, you have to come up with a recommendation that provides just and reasonable rates of return. If you come up with a model that produces results that are not
acceptable, they're outside a reasonable range, then I do not think that, as this states, it has to be taken into account.
Q. [68] And in the event that another model, whatever it is -- DCF or other models -- does produce
acceptable results, to use your word, and at that point then it must be taken into account?
A. I would say that, for example, two years ago, when we were looking at the ATWACC model, the ATWACC model produced results that were clearly way beyond any reasonable range of values. And as Dr. Morin indicated, he's never put any weight on the ATWACC model, and it's not acceptable. So if you come in with an expert that produces a model that is not widely accepted and produces values that are
outside a reasonable range, I don't think you have to place any weight on that model.
Q. [69] Okay, I'll ask the question again, Dr. Booth - - if the results are acceptable, would you agree
that they must be taken into account?
A. Just because a model gives an acceptable result doesn't mean to say that that is an acceptable model. And I give an example in my testimony of looking at discounted cash flow models based upon U.S. earnings forecasts by analysts, which we know are biased, that produces results that are in a reasonable range. But it doesn't mean to say that just because a model gives reasonable results that the model itself is reasonable. As I mentioned at that point in time, a broken clock gives the right answer two times a day, but the clock is still broken.
Q. [70] I will ask the question again, Dr. Booth -- assuming DCF is an acceptable model to most Canadian...
Me GUY SARAULT :
Monsieur le Président, je vais m'objecter ici, je pense que le docteur Booth répond honnêtement et clairement aux questions puis là, on revient à la charge, on revient à la charge pour interpréter puis... à un moment donné, si on pose la même question trois fois de suite à chaque fois, on ne sera pas sortis d'ici ce soir...
Me ÉRIC DUNBERRY :
Monsieur le Président, je vais reformuler ma question.
Me GUY SARAULT :
Je pense que c'est de l'acharnement.
Me ÉRIC DUNBERRY :
Monsieur le Président, je vais reformuler ma question.
Q. [71] Mr. Booth, Dr. Booth, would you agree with me that the DCF, or in French IFM, is a model accepted by Canadian and American regulators as being an acceptable model for purposes, as other are, I would add, but that the DCF model is a model accepted by Canadian and American regulators, in the context of rate case years?
A. I would go even further than that -- the Discounted Cash Flow is one of the two basic models for
estimating fair rates of return. We teach it in class, and it's widely used. As I indicated yesterday, ten to twelve percent (10 - 12%) of chief financial officers in the United States do place reliance upon the Discounted Cash Flow model.
Q. [72] Okay, so we've established...
A. It is extensively used in the United States, it has not been extensively used in Canada, and as far as
I am aware, no regulator has put any weight on the DCF prior to the BC Utilities Commission decision in two thousand and nine (2009), mainly because the number of peer utilities in Canada where you can use the DCF model is almost zero. And, in fact, the Ontario Energy Board made decisions repeatedly, said it would like to use the DCF but the fact is we don't have any peer utilities to use it against.
Q. [73] Okay, so we've just established that the DCF is an acceptable model?
A. Yes.
Q. [74] My next question will be -- using the DCF as an acceptable model, if the DCF produces acceptable results, would you agree with me then that a
regulator would, as the Régie said, take it into account, because you have two things that you've mentioned, an acceptable model, producing
acceptable results; in that set of circumstances, when two conditions are met, would you agree with me that the results, as the Régie said, must be taken into account?
A. I... you keep forcing me... "must be taken into account", I can't tell the Régie what they have to take into account. What I can tell the Régie is that the Discounted Cash Flow model is a legitimate
model. The Capital Asset Pricing Model is a
legitimate model. These are the two main models we have that are technically correct.
In terms of the application, there's problems always in the application of models, and it's up to the Régie to determine whether the application of an acceptable model is legitimate and provides reasonable results, in which case they will take them into account. The After Tax Weighted Average Cost of Capital is a legitimate model, the problem is that it was used two years ago in a totally unreasonable manner, and in which case the Régie did not take it into account. So these models are acceptable, it's a question of how they're used, and that's up to the Régie to decide whether the results are reasonable.
Q. [75] Moving to Paragraph 249, Dr. Booth, there is another statement made by the Régie here concerning the use of American data and the Régie has said in paragraph 249, and I quote:
With respect to the weighting of Canadian and US data in the market risk premium calculation, the Régie's Decision D-99-150 established a weighting of 60% for the Canadian data and 40% for the US data. In
view of the evidence in the present case, the Régie has decided to base its
assessment of the market risk premium on Canadian and US data in equal proportions.
The Régie is of the opinion that more open markets are giving investors a variety of investment options, which must be reflected in setting a reasonable ROE. It also
believes that increasing the weighting of US data is warranted by the growing
integration of the two economies.
Now, you are aware that for a number of years now, I would say for at least twelve (12) years, the Régie has, for purposes of establishing market risk premium, has relied on both Canadian and US data in growing proportions with time. Would you agree with that statement?
A. That's correct.
Q. [76] Do you know what was the original ratio that the Régie used to apportion or to give weight to the American and US data, do you recall what the original portion was or ratio I should say?
A. No.
Q. [77] If I said to you that it was eighty per cent (80%) Canadian, twenty per cent (20%) American,
would that make sense?
A. That's what I was going to guess.
Q. [78] I don't want you to guess, Dr. Booth, I will provide the answer...
A. That's why I didn't provide the answer, I was going to say eighty (80), twenty (20), but I wasn't sure, so I said no.
Q. [79] Now, are you aware of the fact whether this ratio was increased with time and changed prior to being what it is today, that is equal?
A. The weight given to the US has clearly been
increasing. The... we've been removing the foreign property rule which basically meant that big
institutional funds were restricted in the amount of foreign assets that they can hold and Canada was moved from a capital importer to a capital
exporter, as I discussed yesterday, once we started solving the budgetary problems to the federal level we moved into surplus and Canada is now a capital exporter. So there's a significant amount of
capital flowing out of Canada into foreign markets and at the same time, because of that, the federal government removed the foreign property rule. So there's absolutely no question that over the last twenty (20) years we had moved from a segmented,
protected, domestic capital market to one that is more and more closely interrelated with the rest of the world. And I agree with what the Régie has done.
Q. [80] I agree with your answers and I will ask the question again. Do you know what was the ratio that was used after eighty twenty (80-20)?
A. I would guess is was sixty forty (60-40), but I mean, I cannot remember, this is... these... as we go back in time I seem to remember it was sixty forty (60-40) and then it was fifty fifty (50-50).
Q. [81] So the ratio has been increased since nineteen ninety-nine (1999) to today from eighty twenty (80- 20) to fifty fifty (50-50), can we agree on that?
A. Yes.
Q. [82] Now, this increase from sixty forty (60-40) to fifty fifty (50-50) took actually place when you were asked to testify on this issue in two thousand nine (2009) and we just read the Régie's decision on this, is that correct?
A. Yes.
Q. [83] Now, can you and I also agree that in all these cases when the Régie decided to change the ratio it always justified its decision to give more weight to US data by referring to the growing
integration of the two economies?
A. That's correct, there's actually two things going on. One is that you can just look at the US as a laboratory for assessing the risk aversion of the investors, in which case even if the markets are totally segmented you can say, well, here's a second set of data illustrating the risk aversion of individuals and what sort of risk premiums that they want. That's why Elroy Dimson of the London Business School has sampled risk premiums all the way around the world, not that the markets are integrated, but just seeing the behaviour of
investors frequently under different institutional circumstances, but it's useful information.
Q. [84] Now, can you...
A. So that's the first thing.
Q. [85] Yes.
A. The second one is the fact there's absolutely no question that the markets are more global and more integrated now than they were twenty (20) years ago. If we hadn't had the integration of markets with the United States we wouldn't have been buffeted by the financial crisis in the United States the way that we have been.
Q. [86] My next question, Dr. Booth, is again can you
and I agree that this growing integration is not likely to end or be reversed in two thousand twelve (2012)?
A. Certainly not in two thousand and twelve (2012), but the idea of history has progressed, has been debunked by historians, we do get significant changes. We thought we were going through
integration in the twenties (1920's) when we're more integrated than we are now.
Q. [87] Okay.
9 h 50
A. Then we reverted to protectionism again.
Q. [88] All right. So now, for purposes to become very concrete about this, for purposes of establishing a market rate premium for two thousand twelve (2012), do you agree with the notion of giving at least fifty per cent (50%) weight to the American data that has been filed and fifty per cent (50%) weight to the Canadian data that has been filed?
A. That's the Régie's fifty fifty (50-50) weighting.
What I have done is look at the historic evidence in Canada and the United States, five per cent (5%) in Canada, six per cent (6%) in the United States, and I looked to see what people are actually using, which tends to be five per cent (5%) and six per
cent (6%) for professors of finance, five per cent (5%) across the board. So the last several years I've started giving weight to survey evidence based upon US data and the US market risk premium. By coincidence, the range of five (5%) to six per cent (6%), the mid-point would be fifty fifty (50-50), which would be five point five (5.5%) which is the mid-point of my range, which is exactly what the Régie is doing.
Q. [89] So the...
A. But that's entirely coincidental.
Q. [90] It's entirely coincidental, so your decision to use five point five (5.5%) being half of what you feel is five (5%) and six (6%) the right numbers is absolutely coincidental, it is not to give fifty per cent (50%) weight to the Canadian data and fifty per cent (50%) weight to the US data, this is not what you did, it's just a coincidence?
A. It's just a coincidence. When you look at the median, the typical person from that survey data, it tends to be five (5%) to six per cent (6%) which I regard as being a reasonable range. So I've used five (5%) to six per cent (6%). The Régie, I think, used five point five (5.5%) to five point seven
five per cent (5.75%), which is not fifty per cent (50%) of my range, but that's in the ballpark.
Q. [91] Moving now to paragraph 189, that's a very easy question, Dr. Booth. This is a conclusion at the end of a fairly long discussion on the legal considerations that are relevant. You may want to start at paragraph 172. There is no need for us to read all this, but essentially here to give you context, the Régie went through the major Canadian and American Supreme Court decisions, they referred to Hope, they referred to Northwestern, Blue Field, referred to its decisions in Canada like TQM, and at the end of all this in 189, the Régie made a determination, and I will read that determination to you:
The Régie accepts that the three criteria referred to by counsel for the Applicant, namely the comparable investment, financial integrity and capital attraction
requirements...
The three criteria that were just mentioned yesterday.
... are fully supported by these bodies of case law. It further notes that these criteria are not being challenged by
IGUA,...
Your client here today.
... acting as the representative of the gas users' associations. It notes that these criteria are also recognized and used by the various groups of experts testifying before it. The Régie find that these
criteria enjoy consensus support and may be used to guide the exercise of its authority to determine a reasonable rate of return.
Now, from your own perspective, I know you're not a lawyer so I'm not going to ask you to give us a legal opinion, but from your own perspective as an expert testifying on rate of return issues, can we agree that these three criteria, as the Régie said, are accepted widely, not contested and relevant as at least guides, to use the word that the Régie used, for determining a rate of return on equity?
Me GUY SARAULT:
First of all, just to accelerate things, I may answer that we do admit that, it's not a problem, we admit those criteria both legally and
financially, but I think at this juncture we're...
my confrere is going through the Régie's decisions and asking the witness for his interpretation,
agreement or disagreement.
These decisions speak for themselves and I think it's much more a matter of argument at the end of the case than a matter of cross-examination.
Really, I don't know where we're going with this, but I am bit concerned that this may last forever and I don't know really if it's necessary or productive and if we have the right witness to provide an interpretation of the legal requirements that are clear from the record in these decisions which speak for themselves and which can be argued at the end.
9 h 55
Me ÉRIC DUNBERRY :
Alors, Monsieur le Président, mon confrère s'est objecté. Je pourrais répondre à la question. Je pourrais lui dire également que c'était la dernière des questions que j'avais sur le sujet en
particulier. Nous reviendrons à d'autres décisions.
Mais pour répondre plus spécifiquement à son
commentaire, je pense qu'il est très utile, compte tenu du fait que vingt (20) pages du rapport de son expert analysent, commentent et tirent des constats et des conclusions à partir des décisions de la Régie et des régulateurs canadiens, que parce qu'il
a choisi de témoigner et d'offrir comme expert sa lecture et sa compréhension des décisions des régulateurs canadiens, qu'il m'est permis de l'interroger sur vingt (20) pages de son rapport, sauf si ces vingt (20) pages sont déclarées
irrecevables parce qu'elles sont non pertinentes.
Et à ce moment-là, on pourra sans doute retirer mes réponses et mes questions et retirer une partie du rapport de mon confrère.
Me GUY SARAULT :
À ce moment-là, j'aimerais mieux que mon confrère réfère aux fameuses pages du rapport comme base de ses questions. Là, on est dans les décisions de la Régie.
LE PRÉSIDENT :
D'accord. Donc, vous pouvez poursuivre sur...
Me ÉRIC DUNBERRY :
Merci, Monsieur le Président.
LE PRÉSIDENT :
... votre ligne de questions. Merci.
(9 h 56)
Me ÉRIC DUNBERRY :
Q. [92] I would like now to ask you to take a copy of Dr. Morin's presentation.
A. So I'm not allowed to answer your question?
Q. [93] Sorry?
A. I'm not allowed to answer your question?
Q. [94] No, you're allowed. No, no, we're having a good conversation here, Mr. Booth, we can continue.
Now, on Page 10 of that PowerPoint presentation, Dr. Morin said the following, and this one is only in French so you can do two things -- trust me...
A. I'll trust you.
Q. [95] ... or trust the translators.
A. I trust you, you're a lawyer.
Q. [96] This is on the record now.
A. Ah! Is my smile on the record?
Me GUY SARAULT : Now it is.
Me ÉRIC DUNBERRY :
Q. [97] And mine is still on. So Dr. Morin said the following, in French so this is a translation : Note that all evaluation methods, including the science of Economy, evolves and is affected or carries implementation difficulties and will always be subject to diverging
opinions from experts.
Would you agree with that?
A. That's correct. Unlike the, as I mentioned in my
presentation, the only objective piece of evidence we have in the capital market of a long-run
expected rate of return is the expected return on the long Canada bond. That's the only objective piece of information that we can read in the newspaper. If there was no difference of opinion, we wouldn't be here for three days talking about adjusted betas and all sorts of things.
Q. [98] And you said yesterday, for instance -- and these are all examples, I believe, from your own testimony -- that in two thousand ten (2010), for instance, the Régie approved a new adjustment formula to reflect variations in what you call the "A spread". That was a change made by the Régie in two thousand ten (2010), right...
A. That's right, the credit spread.
Q. [99] ... the formula was adjusted... sorry?
A. The credit spread, correct.
Q. [100] Yes, so the formula was changed?
A. That's correct.
Q. [101] Okay. Now, in two thousand nine (2009), I understand that the OEB also -- and you referred to that yesterday -- approved a new adjustment formula by making two changes; one was to change the
elasticity factor for the first term, which was the
LTC yield adjustment, and it added a second term to reflect variations in corporate "A" spreads. Would you agree with that?
A. That's correct.
Q. [102] That was also a change?
A. That's correct.
Q. [103] Would you agree that it was a significant change to the formula that was implemented prior to that change?
A. The credit spreads?
Q. [104] Well, two changes, changing the elasticity factor and changing by adding a second term, that was a significant change?
A. No, I would regard the credit spreads as not being a significant change. As I said last year in
Gazifère, the credit spreads vary over the business cycle, they vary from say fifty to two hundred (50 -200) basis points, normally. Over the business cycle, I would expect the credit spread adjustment to average out to zero. Sometimes it's going to mean a lower rate of return in good markets, and in bad markets, when the yield spread is higher, it's going to be a higher adjustment...
10 H
Q. [105] I was not...
A. ... hold on...
Q. [106] I was not referring to the impact of the change or the effect of the change, I'm looking at the change itself, not its effect.
Q. [107] Okay, so...
Q. [108] You had -- let me complete -- you had the formula with one term, and one elasticity factor of point seven five (0.75), irrespective of the net effect in the future, I'm simply suggesting to you that by changing the elasticity factor to the first term and adding a second term, when you actually look at the previous formula and the new formula, the OEB has made a significant change to the formula. I'm not talking about the impact on the future, I'm talking about the formula itself, that formula was changed in a significant manner?
A. Yes, it's a different formula, I'll accept that it's a different formula. My point was simply that adding the credit spreads I don't think has any long-run implication for the fair rate of return.
Q. [109] Okay. Now, in two thousand and eight (2008), you also referred to the National Energy Board decision to move to a, I call it the ATWACC
approach, I don't know if that's the right acronym?
A. That's perfectly fine.
Q. [110] And I know you disagreed with that change, but that was also a change in approaches to assess a fair rate of return. Would that be fair to say that the adoption of that new formula, or that method, was a change from previous approaches?
A. No, it would not be fair. There's two parts to ATWACC, one is that you can always calculate the After Tax Weighted Average Cost of Capital, and that's what the NEB did, they calculated the After Tax Weighted Average Cost of Capital, and they said, "Here, TQM, you can get this After Tax Weighted Average Cost of Capital", and they said, "Oh! by the way, it's equivalent to a nine point seven percent (9.7%) ROE on a forty percent (40%) common equity ratio under the traditional method", and they gave a couple of examples of what it was equivalent to.
What we were discussing two years ago here in TQM was not just using the ATWACC to estimate the cost of capital but using the ATWACC assuming that the ATWACC is constant in making leverage adjustments to the return on equity. So, again, it was a change in the sense that the, it was the first time I've seen a utility board go directly to ATWACC to estimate the overall cost of capital. But
where we were disagreeing in two thousand and nine (2009) was not the ATWACC itself but the way it was used in assuming that it was constant, which is inconsistent with finance.
Q. [111] Could you take your report, Page 17, Line 12?
A. My report or...
Q. [112] Your report.
A. Yes... yes.
Q. [113] This is what you said in your report about the ATWACC, on Page 17, Lines 10 to 12, you said the following :
The NEB in its TQM decision has moved to an ATWACC approach and dispensed with its ROE formula; a policy unique to the NEB and not followed elsewhere in North America or by the Régie itself in 2009.
Do you still agree with that statement?
A. Yes, I do. That's what I just said, there's two parts to ATWACC. The NEB used ATWACC to estimate the overall cost of capital, and as I said, as far as I was aware, no utility board in Canada has done that. But there's the second part, which was
assuming that the ATWACC is constant in making leverage adjustment. And I've come across several
people that said, "Well, the NEB adopted ATWACC", but there's two sides to ATWACC, one is just using the ATWACC to estimate the cost of capital, which is what the NEB did; there's a second part, which is assuming the ATWACC is constant in making leverage adjustments, and that's what the NEB did not do. And the Alberta Energy and Utilities Board specifically rejected, and this board didn't go with that two years ago.
Q. [114] Okay, but my point...
A. So that's... perhaps I'm being too cautious in sort of saying what the NEB did, because I don't want anybody to believe that the NEB accepted a constant ATWACC and the leverage adjustments that Dr. Colby and Vilbert proposed here two years ago.
Q. [115] Okay, we can all read that decision and provide our own interpretation of what it did or did not do, my question is very simple -- what the NEB was a change from previous approaches?
A. That's correct.
Q. [116] Okay. Now in the year two thousand nine (2009), this Régie, when it applied a CAPM
methodology, decided, I believe for the first time, to grant an adjustment to take into effect the market conditions observed at the time with respect
to the "A" spread, an adjustment from twenty-five to fifty-five (25 - 55) points; you call it a
"crisis adjustment", or the "bonus adjustment", but that was something new?
A. That's correct, it's a bonus in the sense it was a bonus over and above what would have been predicted by the straight application of the ROE adjustment methods.
10 h 5
Q. [117] So you, Mr. Booth, and Dr. Morin, or Mr.
Morin, can agree or disagree with all these changes, but you and I can agree that markets, adjustment formulas and methodologies have changed the last years.
A. I think we can agree, as I say on that page 17, unfortunately, for the first time in many years we have the prospect of dramatically different allowed ROE's emanating from different regulatory boards in Canada using different approaches. So what I
pointed out in this review, and this review, as far as I'm aware, is a comprehensive review of most of the major regulatory decisions in Canada, is that prior to two thousand and eight (2008) we had a consensus, everybody was using ROE formulas, just about. And then we had this traumatic event, the
worst financial crisis for seventy (70) years and different boards have reacted in different ways.
And so as a result, there's a big range in allowed ROE's at a common point in time.
Q. [118] Again, Dr. Booth, to simplify matters, I know you give very long and detailed answers, but I'll try, perhaps my questions are not clear enough. You may agree or disagree with these changes, they may permanent or they may be temporary. I'm not looking for reasons or consequences, I simply want to
recognize with you that in recent years, and we could go back and do this until nineteen ninety-six (1996), but over the years, markets, adjustment formulas and evaluation methods have changed.
A. From nineteen ninety-four (1994) to two thousand and eight (2008) we were converging on a consensus.
And throughout the two thousands (2000's) until two thousand and eight (2008) we had a consensus. I will agree with you, as I state in my evidence, that since the onset of the financial crisis we've had a variety of different responses by regulators all trying to seek out what is a fair rate of return for the utility and as a result we've got a range of allowed ROE's from Newfoundland Power and the... where Newfoundland has gone back to its
adjustment methodology with eight point three eight per cent (8.38%), all the way up to high nines by the Ontario Energy Board. So we didn't have this range of estimates two, three years ago.
Q. [119] But now we do, right?
A. Now we do, there's a lot of disagreement amongst regulators.
Q. [120] But you, as a finance professor and as an expert, I can only assume, Dr. Booth, that you would welcome a change that facilitates the
determination... that facilitates the determination of the, let me use the word fairest, the
determination of the fairest possible rate of return, you would, as a professional, welcome a change that facilitates the determination of the fairest rate of return.
A. I've been...
Q. [121] Would you be against a change that would allow for a fairer determination of a rate of return?
A. I was involved in the BC Utilities' decision in nineteen ninety-three (1993) that came out with the adjustment formula. I was involved with the
National Energy Board decision in nineteen ninety- four (1994) that came out with an adjustment
