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Allwest Reporting Ltd. #1200 - 1125 Howe Street Vancouver, B.C. V6Z 2K8 BRITISH COLUMBIA UTILITIES COMMISSION IN THE MATTER OF THE UTILITIES COMMISSION ACT R.S.B.C. 1996, CHAPTER 473 and RE: British Columbia Hydro and Power Authority Waneta 2017 Transaction Application Project No. 158933 BEFORE: D. M. Morton, Panel Chair R. I. Mason, Commissioner A. Fung QC, Commissioner VOLUME 1 Community Input Session Castlegar, B.C. January 13, 2018

Transcript of BRITISH COLUMBIA UTILITIES COMMISSION · BRITISH COLUMBIA UTILITIES COMMISSION ... 2018 B....

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Allwest Reporting Ltd. #1200 - 1125 Howe Street Vancouver, B.C. V6Z 2K8

BRITISH COLUMBIA UTILITIES COMMISSION

IN THE MATTER OF THE UTILITIES COMMISSION ACT R.S.B.C. 1996, CHAPTER 473

and

RE:British Columbia Hydro and Power Authority Waneta 2017 Transaction Application

Project No. 158933

BEFORE:

D. M. Morton, Panel Chair

R. I. Mason, Commissioner

A. Fung QC, Commissioner

VOLUME 1

Community Input Session

Castlegar, B.C. January 13, 2018

B

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APPEARANCES

P. MILLER

Commissioner Counsel

Ms. A. GRIEVE Area A Regional District of Kootenay Boundary Mr. M. CABIANCA

Self

Mr. N. GABANA

Self

Mr. B. ONYSCHUCK United Steelworkers Local 480 Trail BC

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JANUARY 13, 2018

CASTLEGAR, B.C.

(PROCEEDINGS COMMENCE AT 1:00 P.M.)

(PRESENTATION BY BCUC STAFF)

Proceeding Time 1:12 p.m. T2

THE CHAIRPERSON: I invite the people who have registered

to speak up. I am going to invite you up to the

podium. As Erica said, I ask that you please state

and spell your first name and last name so that when

it is transcribed we can make sure we are accurate.

The transcription will begin now, and I

know it said limited to five minutes, but we have a

fair amount of time this afternoon, and there is not a

lot of people that are going to speak, so I won't be

enforcing a five minute limit, just to let you know.

So, my first speaker is Ms. Ali Grieve, as

I understand it, from the Regional District of

Kootenay Boundary. Thank you.

SUBMISSIONS BY MS. GRIEVE:

MS. GRIEVE: Hello, my name is Ali Grieve, I am the

director for Area A of the Regional District Kootenay

Boundary, and I represent the area where the Waneta

Dam is situated.

Our regional district encompasses over 8000

square kilometres and is home to over 30,000 residents

who lives in five rural areas, and eight

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municipalities. The Waneta dam plays a roll in

supporting services to all these communities, and

their residents and businesses. On behalf to he

Regional District Board of Directors, I am speaking

here today to protect the services our local

government provides to the people we serve.

I am speaking to protect the funding that

makes those services possible, and in support of the

economic and social wellbeing of our region. That

wellbeing includes the continued positive presence of

Teck's Trail operations, a key employer, taxpayer, and

corporate citizen. It also includes access to

affordable, clean, and renewable power to our region.

Our Regional District understands that Teck

Resources is able to sell its private property how it

sees fit, according to legislation, and regulations

set out by the BCUC and the Province of B.C. Our

Regional District is more concerned with potential

impacts to its residents and protecting our natural

resources over and above who owns the dam. That is

why we have concerns about the BC Hydro plan to

purchase the remaining two-thirds ownership in the

Waneta Dam and generating station from Teck.

This sale could have a negative impact on

the service delivery for the Regional District of

Kootenay Boundary. This sale could result in an

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increase in electricity rates in our region. The sale

risks undermining one of Teck's historical reasons for

operating in Trail, which is proximity to affordable

power it owns and produces itself.

The Waneta Dam assessment is a key source

of funds for delivery of local government services.

We are uncertain how BC Hydro's interest will be

managed in regard to property taxation, and so we are

uncertain how a change in taxes will affect our

ability to fund and provide necessary services. Any

reduction in the Waneta Dam's assessment with the

resulting reduction in the ability of our Regional

District to requisition funds could impact current

services residents may require, and also into the

future.

Assessment changes could result in

significant residential tax increases. As part of the

industrial tax base for the region, the Waneta Dam

plays a significant role in Regional District service

delivery. The removal of the Waneta Dam from the tax

base with a consequent grant in lieu of taxation

received as an alternative, may impact the level and

or structure of revenues available to our Regional

District to deliver its services. Similarly, if the

sale of the remaining two-thirds of the Waneta Dam to

BC Hydro jeopardizes the long-term sustainability of

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Teck's Trail operations, there would be a significant

impact upon the regional tax base that supports

services delivered to communities within our Regional

District.

Examples of services directly or indirectly

funded by the Waneta assessment and/or current

participation of Teck related to ownership of the dam

include: a local noxious weed service helping to

protect our agricultural lands in the Beaver Valley

which is part of the Electoral Area A which I

represent; vital services such as fire protection,

recreation and transit; waste management, planning and

development and regional building inspection; funding

of education and capital financing for local

healthcare.

A secondary issue is the possible impact on

electricity rates in the FortisBC service area, which

encompasses part of the Regional District. FortisBC

buys power from the Waneta dam, and if this source is

no longer available, FortisBC may be forced to buy

electricty on the open market and/or to rely on less

sustainable sources of power.

Proceeding Time 1:18 p.m. T3

A change in where FortisBC gets its power

could lead to higher electricity rates for FortisBC

customers in our area.

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Teck is a key employer, a key taxpayer and

corporate citizen in our communities. The Waneta Dam

provides low cost clean and renewable power to Teck's

metallurgical operations. As a condition of the sale

Teck has requested a 20-year lease to use the two-

thirds interest in Waneta to produce power for its

industrial operations in Trail with an option to renew

that lease for another ten years. We ask what happens

when that time is up?

The regional district is keenly interested

to see Teck remain a vital part of our community for

well beyond the next few decades and is concerned that

no longer having affordable access to Waneta power in

the future could jeopardize that. The regional

district does not want to interfere in a private

firm's ability to conduct business as it sees fit.

However, the sale of any part of a publicly regulated

utility cannot be allowed to negatively impact a local

government's ability to provide services.

The regional district asks that the

following might be considered as conditions of sale:

That the assessment status of the Waneta dam, both now

and into the future be maintained to ensure the

sustainability of current and future local government

services; that the power rates for FortisBC customers

not be increased due to any requirement of Fortis Inc.

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or FortisBC to purchase or develop power sources

independent of the Waneta Dam; that local government,

and by extension, local residents, continue to

maintain some measure of control and influence over

our natural resources.

Our region has been pivotal in the

production of power from local waterways for the

benefit of British Columbia. We want to ensure we

continue to benefit from that resource at our local

level.

Thank you very much for listening to my

comments today on behalf of Regional District of

Kootenay Boundary.

THE CHAIRPERSON: Thank you, Ms. Grieve.

Mr. Mario Cabianca. Sorry if I got your

last name incorrect.

MR. CABINACA: Hello.

THE CHAIRPERSON: Hello.

SUBMISSIONS BY MR. CABIANCA:

MR. CABINACA: My name is Mario Cabianca, C-A-B-I-A-N-C-

A. I represent myself as an individual in Trail,

British Columbia. I have several points that I'd like

to bring to your attention. Although they may not be

under the UCBC scope, I would just like to make sure

that they're recorded for the public.

The first item is the location of this

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meeting. And this is supposed to be a community

discussion but it's happening in Castlegar, where the

resource that we're talking about is under Area A and

the company that is in the process of selling that is

in Trail, British Columbia. So having the meeting in

Castlegar, it just is incredulous.

Next item is, if BC Hydro is to purchase

this asset, I would ask the BCUC to discuss with BC

Hydro the possibility of transferring the ownership at

some future point via a sale or some type of

transaction to the Columbia Power Corporation. Both

are under the authority of the provincial government

and having the Columbia Power Corporation own this

asset I think would be a benefit for the local

community in which both are located, rather than being

managed by the BC Hydro corporation which is in

Vancouver.

Another point that I have is initially I

think a lot of people were under the assumption or

understanding that Teck was going to purchase power

for 20 years at $75 million a year. And now it's come

to light that this is going to be a leasing agreement

and that there is a possibility that this leasing

agreement could terminate sooner than 20 years. So,

when I see that, that looks like an exit plan.

Proceeding Time 1:23 p.m. T4

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The question then becomes, what happens

after that lease ends? Who's going to pay for the

clean-up of the Trail metallurgical site? If there is

an asset available, and Teck has no money for clean-

up, there's a possibility that an asset could be sold

to help pay for that clean-up, but once that asset is

sold there is -- you can't get blood from a stone.

So I would be opposed to seeing this asset

being sold to BC Hydro at this time, until there is

some way to ensure that there will always be funds to

clean up the Trail metallurgical site, whether it be a

bond of some type, or some other funding that is set

aside for future problems.

I think those were my three issues. Thank

you for your time.

THE CHAIRPERSON: Thank you, sir. Mr. Gabana?

SUBMISSIONS BY MR. GABANA:

MR. GABANA: Members of the Commission, staff. I guess

I should get the complaint out first. Where are the

cookies? I don't mind you economizing, but you know,

there's some standards that are not being met.

Anyway, getting to the sale of this

structure, which I personally am in favour of, but

during the process of the proceedings, from my past

experience I have found it very difficult to

participate, especially in written submissions. Yet

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the -- and particularly the cases with Fortis, where,

you know, they have full-time staff experts to fine-

tune the wording, and slice the opinions rather thin.

So, in this process, I think that rather

than be concerned about what's going to happen in

twenty years from now, which that will just make me

103, I intend and might be around to harass you. I

think I'd like to see the rationale for the purchase.

Why is it economically viable for Hydro to purchase

this structure?

And if you start looking at the tie-ins,

and looking at the Waneta expansion, the Waneta

expansion standing on its own is a very, very

difficult structure to amortize or to justify.

Because under the water flow agreements on the river,

there is a very limited window that water rights

presently doesn't cover. And we're talking a number

of less than three months here. How you justify $900

million for three months of power --. My arithmetic,

or my personal evaluation of money, cannot justify or

even rationalize the decision. But somehow, along the

way, and I don't know really adequate wording for it,

but the canal plant agreement got thrown into the

Waneta expansion.

Proceeding Time 1:28 p.m. T5

So that immediately injected a massive

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amount of money into the project with no water rights.

And if you investigate the dividends from Columbia

Power, Columbia Basin Trust, and Fortis – Fortis Inc.,

that is; we're not talking about local Fortis – you

start to see money in dividends passed out to the

three participants in the order of 15 million dollars.

And if you slice one of the participating members

down, you are seeing dividends of five percent. Well,

certainly five percent is a justifiable return

investment, but where did that money come from, and

how is that affecting the dam as, I think I'm right,

from the information that I have, and the few friends

-- and one is related to the royalty in England and is

sitting back here by me.

You know, we are running one unit now in

Waneta to keep it warm. And running all the rest of

the power through the Waneta expansion. So, how does

all that money -- how do you justify paying 1.2 for a

structure that has really limited access to water

rights? And the numbers.

So, I what I would recommend to the

commission, having had several years experience during

the hearing processes, it is certainly Fortis leans --

the local hearing process from our rates, that we

participate here, not the overall gamut of rates that

the Commission deals with. So, it would be -- they

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certainly prefer written submissions. And I guess it

is an effective economical way of managing business.

But I think from the point of view of getting at

costs, it is very, very difficult, at least for me and

the participation that I read from proceedings. And I

think if we just go to hindsight and look at this five

year plan that Fortis was tabeling, we've had

correspondence upon correspondence, upon

correspondence, and it just goes really on to the

point of – I guess I'll have a Trump-ism here –

stupidity in my opinion. I don’t know how you

possibly could be discussing a potential theoretical

plan for all this time, consuming all this.

So, I think we've got to be able to get at

the meat of all this. What are the economics? The

only thing that has an opinionin this particular

structure is numbers. We can evaluate what we're

getting for what we're paying if we can produce some

numbers. So, as a result of the Canal Plant

agreement, as you people know, there is a block amount

of power that Hydro controls the whole source, gets

the whole block of power, takes the losses in the

event of a shortfall, grabs the gain as a result of

excessive moisture, and slices off the rest and

anybody can take their power whenever they want.

Well, personally, I think the canal plant agreement is

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a fabulous structure. I think it is from an economic

point of view, and from a citizen's point of view,

because I view power as -- it is not a privilege

anymore, it is a responsibility. And there is no

question, and I think about that, it's got more so the

days of the company being able to decide how far

they're going to run a powerline to somebody's house

is over. And I think that is wonderful.

Proceeding Time 1:33 p.m. T6

So, what I would urge the Commission to try

and have -- not try to have, but have workshops. Get

Hydro to present the rationale for the purchase. If

you're going to buy something, you're going to spend

my money, I want to know what you're going to spend my

money on, and what I'm going to get for it. And to

date, I have not been able to extract any of those

numbers. You know, when I looked at the 1.2, if you

go back in time of -- Utilicorps, and Fortis

operation, the Commission had -- is on record of

rejecting a sale, because of the conditions -- well,

they did not reject the sale as such, Mr. Chairman.

You laid the condition out that Utilicorp wasn't going

to walk across the 49th Parallel with a whole bucket of

money, and I think that was a very commendable

decision.

So, how do we get at numbers? It's all

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right to have opinions of what -- you know, what we're

going to have philosophically, or what we need

philosophically but that's an opinion. And to me, an

opinion is acceptable, but it's yours. It's

indefensible. It is an indefensible position, because

there is nothing to support it. If you have one of

anything, you have nothing. Until you can produce two

of something, then I can start telling you what I'm

going to get for my money. You know, I'm going to pay

so much here, I'm going to pay so much here, I'm going

to have operating costs here, and I know once you have

too, you could produce whole gamut of things.

But presently, we do not have any of that

information. We don't know what are the historical

benefits of the canal plant agreement as a result of

this merger with throwing in the Waneta Dam.

And I think that's important. What is

being -- it would be interesting to see the record of

the surplus power that Hydro has benefited from as a

result of more money, more power, than they were

guaranteed on the canal plant agreement to each of the

participants. And I think that is very, very

important. And being a boilermaker, and not a

mathematician, I'm not able to offer guidance of how

to do that.

But there's certainly people in your

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organization, there's people exist, who know how to do

structure analysis of benefits. And that, I think, is

your real number-one job. What are we getting for

what we're paying?

And I just would love to see that process,

because we certainly have not seen, you know, the

hearings presently with Fortis, or -- they're very

good with numbers, they're very -- from my point of

view, the participations, they have been great. I can

phone up friends like Mr. King and other people, and

they are too willing to give me the information that

is not confidential.

In the particular case of the Waneta

expansion, we don't know what we're paying for --

selling that power for. It's a secret deal. Why

could it possibly be a secret deal of selling power

from the river that's there, and we, as Fortis

ratepayers, have no idea: Are they paying more for it?

Are they paying less for it? You know, are we getting

into the -- you know, the power rates become negative,

as you all know, some time in the spring when there's

a high water run-off.

Proceeding Time 1:38 p.m. T7

Actually the Americans have been known to

pay you to take power. You know, under very

restrictive hours as you know. And when I tell my

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friends that they think they should resurrect Esendale

and I should be the first one in. And I could

understand, you know, people wondering how do you pay

somebody to take power, but, you know, it's a fact and

-- anyway, I guess I could ramble on and go on, but I

just urge the Commission to have a workshop and have a

detailed presentation from Hydro on the rationale of

purchase and the analysis of benefits from the

existing agreement, primarily the Canal Plant

Agreement.

With that, if the Commissions has any

questions, I'd be delighted to try and help. Other

than that, I'm delighted you've moved a workshop out

of Vancouver to here where people can participate.

And I guess that's it, Mr. Chairman. I

hope you have better luck flying out of the area than

I've had in this last week.

THE CHAIRPERSON: Thank you.

MR. GABANA: So thank you very, very much for your time

and hope I've been able to contribute a little bit

towards the problem.

THE CHAIRPERSON: Thank you, sir. Is there a Mr.

Onyschuck, please? Sorry, Brian?

MR. ONYSCHUCK: Yes.

THE CHAIRPERSON: Mr. Brian Onyschuck? Yeah. Sorry.

MR. ONYSCHUCK: You mispronounce it.

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THE CHAIRPERSON: Sorry.

MR. ONYSCHUCK: It's okay. You wont' be the first -- or

the last.

THE CHAIRPERSON: Okay.

SUBMISSIONS BY MR. ONYSCHUCK:

MR. ONYSCHUCK: Good afternoon. Thank you for giving me

this opportunity to speak. My name is Brian

Onyschuck. I am the president of United Steelworkers

Local 480 in Trail. We represent approximately 1,000

production and maintenance workers at the Teck

smelter.

I think I would like to first bring you

back to the sale of the one-third of the dam back in

2009, when then our current president, Mr. Doug Jones,

had submitted an application to Ms. Erica Hamilton in

regards to that sale. At that time Mr. Jones wrote:

"Also concerning is the fact that BCH's

analysis of the Waneta transaction ignored

the broader public interest. The workers at

Trail Operations and the surrounding

communities depend critically on the

continued operation of the smelter. BCH

states that it is only acquiring Teck's

surplus power. The fact remains that it

will leave the operation in Trail with no

surplus or contingency supply when it's

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operating at capacity."

Mr. Jones went on to say:

"Finally, the issue will have a definite

effect on workers at Trail Operations,

where…"

back then,

"…four out of the last ten years the surplus

power has played a significant role in

keeping the operation positive in terms of

profit. It will undoubtedly have an equal

effect on the ratepayers in Trail and the

greater area in the coming years. Either

Teck or BCH, if they disagree with that,

should have no problem putting their

assurances in writing so they may be held

accountable down the road."

It's also notable to mention that Teck's

submission back on that one-third sale, in their

submission, "Concerns Raised by the City of Trail and

USW Local 480." The City of Trail and USW Local 480

expressed concern that the transaction may affect the

viability of Teck's industrial operations. A similar

concern is also expressed in some of the letters of

comment filed by interested parties.

The City of Trail says that:

"In the past Cominco, now Teck, made it

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known that access to low cost power was

necessary to be competitive and maintain

smelter operations in the community, both

operationally and as a factor of production.

Teck acknowledged that it has made such

statements in the past and access to low

cost power continues to be necessary for the

Trail industrial operations to be

economically viable.

It is for this reason…

they stated,

"…that the transaction has been structured in a manner to

provide the industrial operations with low-cost power

they require, as set out at page 3-6 of the filing.

Teck stated they would use two-thirds interest on the

Waneta assets to provide power for its industrial load

at the Trail smelter. The parties recognize that

Teck's industrial load may require less than the two-

thirds of the CPA entitlement associated with the

Waneta assets in some months, and greater than two-

thirds in other months. Accordingly, the operating

terms would contemplate a series of entitlement

adjustments until at least December 31, 2035, designed

to ensure that Teck would have sufficient energy to

serve industrial load in all months.

Proceeding Time 1:44 p.m. T8

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Now, we fastforward to 2017, and Teck is

stating that they don’t need to have that power in

their hands, and they have a 20-year lease agreement

to purchase that. Being an employee up at Teck

Cominco for over 35 years, since 1979, I have attended

numerous management presentations, and was always told

by the management in power at the time that the only

reason Teck operations is profitable and running was

because of the low power rates acquired from the

Waneta Dam. Trail operations had the lowest power

costs of over 25 other smelters worldwide, and that

was the biggest advantage over the smelters. In 1982,

Cominco stated in an application to the B.C. Utilities

Commission, that the economic disadvantage of

operating the smelter was offset by the advantage of

its low cost energy supply, that being the Waneta Dam.

What has changed? So they now have this

lease agreement that is going to have them pay 75

million per year, with an escalating clause of 2

percent per annum, for something they already owned.

And they have informed us they will also have ongoing

costs of 10 to 12 million annually, for maintenance

costs on top of that. These costs will now become

part of Teck Trail operations.

So, how profitable will Trail operations be

to Teck? Research tells us that Teck did not need to

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sell the dam for further debt reduction, which was one

of the reasons at the time of putting the sale

forward. Because they had a one billion repayment

earlier this year in 2017, their debt levels are

already within the range of management targets. The

reality is that Teck could take that money and bolster

their decision to proceed with the phase two expansion

of the Quebrada Blanca copper mine in Chile, expanding

that mine life for another 25 years. But we are

concerned about Trail, British Columbia, and the sale

of the dam here will leave Teck's Trail smelter

particularly vulnerable to reduced operations, sale,

or even closure. Any of these events could mean loss

in jobs and prosperity in Trail and the surrounding

areas. This is not good for the development of our

area.

If this sale is going to be allowed to go

through, we need better assurances than a 20-year

lease and an option for 10 more. This is our

lifeline, and we deserve better. This community is

worried. My members are worried. We have a lot of

young, newer members with the babyboomers, such as

myself heading out the door and to tell them in 20

years that they're not sure where their future lies,

is a scary proposition. And not only for the workers

of Trail, but all the jobs that are offset from the

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high-paying people up at Teck. And we ask that if the

sale is allowed to go through, that we get better

assurances that this smelter will continue to be

viable in this region for much longer than the 20-year

lease that is contemplated in the sale.

Thank you for your time today, I appreciate

the opportunity to speak.

THE CHAIRPERSON: Thank you, sir. Questions? No? Thank

you. Is there a Mr. O'Conner please?

MR. O'CONNER: I've decided I am just going to make a

written submission.

THE CHAIRPERSON: Okay, thank you. Having come to the

end of the list of people who had signed up initially,

would anyone who hadn't signed up like to take the

opportunity to say anything? Or would anyone that has

said something care to rebutt or comment on anything

that someone else has said?

Okay. Is there anyone else? Please go

ahead, sir.

MR. GABANA: Mr. Chairman, thinking of process that we're

into right now, the existing process of an application

is in blunt, quick terms, somebody puts out a sale, a

news release, "I want to buy a dam." Comes to you

people, all of a sudden we say, "Okay, round one of

questions." Well, it is sort of like taking the top

off of a barrel with a bunch of information in it. So

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everybody starts firing questions in, with really no

knowledge of the total process.

Proceeding Time 1:49 p.m. T9

So I would urge the Commission to rethink

its hearing process, and have a workshop before

questions, with a detailed presentation, analysis, of

what we're talking about. Does that make some sense?

What do you think, as a Commissioner, of that?

THE CHAIRPERSON: We will certainly consider your

suggestion, sir. We will take that into

consideration.

MR. GABANA: Yeah, because, you know, I see the process,

and you don't even really dig into what they're doing,

you know? And just a little example, you go back to

the Fortis hearings on hot taps. All of a sudden you

have this big demand for hot taps, pictures of a wire

down in front of a school in Kelowna, we're going to

be burning up all these future generations of the

world. Well, once the questions started, the whole

thing kind of -- hey, what are we talking about? What

is the frequency here? You know, what are we doing?

Is there a solution? You know, and it generated, I

think, a positive outcome.

But in this particular case, we're talking

about a multitude of things in here that I think

people -- you know, we should know about. Because I

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certainly appreciate the concerns of the sale, but how

do we get information whether we start the riots or

not?

Thank you very much.

THE CHAIRPERSON: Thank you.

MR. GABANA: I hope that makes a little bit of sense.

THE CHAIRPERSON: Thank you. It does, sir. Thanks.

I'd like to thank everyone for coming out

this afternoon. My apologies if our choice of

location could have been a little better, but I do

appreciate you taking the time that you did. And for

those of you that traveled from Trail, we appreciate

that also, thank you.

And if you have any further comments,

please feel free to submit them to the Commission

secretary in writing. By e-mail is fine. If you

would like to register as an intervener, you've had a

presentation on how that can be done, and if you have

any further questions about that, please contact us.

Feel free to contact us.

Otherwise, I'll adjourn our session today

and thank you again all very much. Appreciate it.

(PROCEEDINGS ADJOURNED AT 1:52 P.M.)

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January 15, 2018