RED TAPE REDUCTION ACT, 1998 LOI DE 1998 VISANT À RÉDUIRE LES FORMALITÉS ADMINISTRATIVES
ONTARIO MUTUAL INSURANCE ASSOCIATION
CANADIAN ENVIRONMENTAL LAW ASSOCIATION
URBAN DEVELOPMENT INSTITUTE/ONTARIO
CONTENTS
Tuesday 29 September 1998
Red Tape Reduction Act, 1998, Bill 25, Mr Tsubouchi /
Loi de 1998 visant à réduire les formalités administratives,
projet de loi 25, M. Tsubouchi
Ontario Mutual Insurance Association
Mr Rick Walters
Mr Glen Johnson
Canadian Environmental Law Association
Mr Paul Muldoon
Ms Theresa McClenaghan
Urban Development Institute/Ontario
Mr Jeff Kratky
Mr Reg Webster
Consumers' Gas
Mr Glenn Hills
STANDING COMMITTEE ON ADMINISTRATION OF JUSTICE
Chair / Président
Mr Jerry J. Ouellette (Oshawa PC)
Vice-Chair / Vice-Président
Mr E.J. Douglas Rollins (Quinte PC)
Mr Dave Boushy (Sarnia PC)
Mr Bruce Crozier (Essex South / -Sud L)
Mr Peter Kormos (Welland-Thorold ND)
Mr Gerry Martiniuk (Cambridge PC)
Mr Jerry J. Ouellette (Oshawa PC)
Mr David Ramsay (Timiskaming L)
Mr E.J. Douglas Rollins (Quinte PC)
Mr R. Gary Stewart (Peterborough PC)
Mr Bob Wood (London South / -Sud PC)
Substitutions / Membres remplaçants
Mr Tim Hudak (Niagara South / -Sud PC)
Mr Tony Martin (Sault Ste Marie ND)
Mrs Lillian Ross (Hamilton West / -Ouest PC)
Clerk / Greffier
Mr Douglas Arnott
Staff / Personnel
Mr Avrum Fenson, research officer, Legislative Research Service
The committee met at 1700 in room 228.
RED TAPE REDUCTION ACT, 1998 LOI DE 1998 VISANT À RÉDUIRE LES FORMALITÉS ADMINISTRATIVES
Consideration of Bill 25, An Act to reduce red tape by amending or repealing certain Acts and by enacting two new Acts / Projet de loi 25, Loi visant à réduire les formalités administratives en modifiant ou abrogeant certaines lois et en édictant deux nouvelles lois.
ONTARIO MUTUAL INSURANCE ASSOCIATION
The Chair (Mr Jerry J. Ouellette): I call this committee to order. I'd like to welcome everyone here today to the standing committee on administration of justice for hearings on Bill 25. I welcome all the guests who are here.
I see our first guests have come forward. If you could identify yourselves for Hansard, we'd greatly appreciate it. Just so you know, there is a total time allocated of 15 minutes for presentation. At the conclusion of your presentation, the time remaining is divided equally between the three caucuses. You may begin.
Mr Rick Walters: Good afternoon. My name is Rick Walters. I'm the chairman of the Ontario Mutual Insurance Association and also the manager of the Lennox and Addington Mutual Fire Insurance Co in Napanee.
Mr Glen Johnson: I am Glen Johnson and I am the president of the Ontario Mutual Insurance Association and manage the association's office in Cambridge.
We appreciate the opportunity of supporting Bill 25, the Red Tape Reduction Act, 1998, and in particular the sections of the bill which pertain to the provincially registered mutual insurance corporations.
This brief is presented on behalf of the members of the Ontario Mutual Insurance Association, commonly referred to as the farm mutuals. A listing of our members is provided on page 2 of our presentation. Most farm mutuals have been in operation for over 100 years. These companies were formed in farming communities in the mid-1800s, primarily to provide a mechanism of protection against fire losses. Ontario's farm mutuals now collectively rank 10th in premium volume in the province and provide most types of property and casualty insurance, primarily to rural and small-town Ontario. While the niche market continues to be farm insurance and directors of farm mutuals tend to be farm operators, farm mutuals now provide insurance to large numbers of residential, commercial and automobile insureds.
In total, approximately 250,000 policies are in force. The largest farm mutual is Farmers' Mutual (Lindsay), which has over 35,000 policies. The smallest is Amherst Island Mutual, with less than 500 policies. An average farm mutual has between 4,000 and 5,000 policies.
On behalf of its members, the Ontario Mutual Insurance Association has asked the Ministry of Consumer and Commercial Relations to make amendments to the Corporations Act which would:
(1) Amend section 159(l) such that mutual insurance companies are permitted to hold annual meetings within the first three months of the year instead of the first two months.
(2) Amend section 161(1) such that mutual insurance companies are able to publish the notice of the annual meeting in local papers instead of mailing the notice to every policyholder.
(3) Amend section 161(3) such that mutual insurance companies are able to publish their annual statements in local papers instead of mailing a copy to every policyholder.
Reasons for change:
Time of annual meeting: A two-month time period in which to hold an annual meeting may have been appropriate when mutual insurers were smaller, less complicated business entities. Holding the annual meeting within two months of year-end is becoming more and more difficult for farm mutuals, especially large farm mutuals. The two-month time limitation is not imposed upon federally licensed insurers or other corporations. In fact, other corporations without share capital which are regulated under the Ontario Corporations Act are allowed to hold their annual meetings within three months of their year-end. Federally regulated mutuals are afforded six months.
Notice of annual meeting and annual statement: Currently, mutual insurance corporations are required to advertise the notice of the annual meeting in local newspapers and mail a notice to every policyholder. Seven days' notice is required. In addition, the annual statement must be mailed to every policyholder at least seven days before the annual meeting.
While these requirements may have been appropriate when first implemented many years ago, we believe they are somewhat excessive in today's business environment and result in unnecessary cost, which must be passed on to consumers. Farm mutuals have become larger and more complex organizations and rules and guidelines for production of financial statements are such that these documents are now lengthy. They usually take the form of a small booklet with extensive notes which are not easily produced in leaflet format any longer. Assuming bulk mail could be used, the unit cost to print, assemble and mail an annual statement can range from 75 cents per statement for the largest companies to about $1.20 per statement for smaller companies. In addition, Canada Post has recently challenged the eligibility of annual statements for bulk mailing rates.
We believe it is important that the notice and annual statement be publicized through local papers. This seems to be the norm for other community organizations. Naturally, any policyholder who requests an annual statement should be provided with one. We feel that mailing to every policyholder can be wasteful and should be left to the discretion of the individual farm mutual.
Other supporting considerations:
(1) Our membership is very supportive of these recommendations. Every member company, with the exception of one, has confirmed this by way of a signed declaration from the board chairman. In addition, every member company has confirmed that the changes could not be implemented until the company bylaws are amended to reflect these changes. Before bylaws can be changed, every policyholder will receive a notice of the change.
(2) The requested changes would not prevent or impede any farm mutual from continuing to mail annual statements to every policyholder and hold their annual meeting before the end of February if the farm mutual chose to do so.
(3) Sections 158 through 173 of the Corporations Act apply only to provincial mutual insurance corporations. All of these companies are within the OMIA membership and have been consulted.
(4) We have written to the superintendent of the Financial Services Commission of Ontario, formerly the commissioner of insurance, and have received confirmation that our recommendations are acceptable, with the proviso that farm mutuals continue to provide the Ontario Insurance Commission with the financial reports that are used for regulatory purposes, ie, the Ontario P&C1 form, by February 28. This is acceptable to our members.
(5) Farm mutuals tend to operate in a small number of communities and maintain close contact with policyholders. We anticipate that, if the requirement for mailing of the full, formalized annual statement is removed, and financial statements are published in local newspapers, most farm mutuals will continue to provide highlights of the financial statement in a more user-friendly format along with other company news in promotional brochures or policyholder newsletters. Such communications may be combined with other promotional activities and/or tailored to specific segments of their policyholders, eg, farmers, homeowners, auto insureds and so on.
(6) Individual members of the Ontario Mutual Insurance Association have been requesting the changes described for well over 10 years. We recognize that these changes are not substantive enough to warrant amending the Corporations Act on their own. We feel that the red tape reduction process presents an excellent opportunity for these changes to be made.
The requested changes to the Corporations Act will remove unnecessary red tape for Ontario's mutual insurance companies resulting in reduced operating costs which will ultimately be passed on to consumers in our highly competitive marketplace. We urge you to proceed with the passage of Bill 25.
The Chair: Thank you very much for your presentation. That affords us approximately two minutes per caucus. We begin with the official opposition.
Mr Bruce Crozier (Essex South): Thank you, gentlemen, and welcome. I certainly understand, appreciate and support the reasons that you've given today for the changes as you see them.
A question: How likely is it that a mutual insurance company, for example, the Kent and Essex, will sell insurance coverage in a broad geographical area, ie, Collingwood-Cornwall?
Mr Walters: I would say that's quite highly unlikely, due to the cost of servicing a policy that far away.
Mr Crozier: So when you say you would publish in local newspapers, I expect that you'd cover most of your policyholders within a much smaller geographical area.
Mr Walters: That's correct.
Mr Crozier: When you say the financial statements usually take the form of a small booklet, how would you publish this in a local newspaper? If it's too difficult to condense for a policyholder, would it not be too difficult to condense for a local newspaper?
Mr Walters: What generally happens is the financial statement is put together in a booklet form so that it can fit in a normal-sized envelope. The main ingredients of the financial statement could be put on a full-page ad in a newspaper and fit quite readily.
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The Chair: We move to the third party.
Mr Tony Martin (Sault Ste Marie): I am just wondering, in putting together this set of amendments, did you consult with the actual policyholders who would receive these notices as to how they felt about the changes that you're asking for?
Mr Walters: At this stage the individual policyholders would not have been consulted. Our board of directors is elected by the policyholders, and before any of our bylaws can be changed to allow us to do this, the bylaws would have to be changed at an annual general meeting and all the policyholders would be given notification of the change and the date and time of the annual meeting to attend and voice their opinion at that time.
Mr Johnson: We did a survey of all the member companies and confirmed that each one would have to change bylaws as well. Through the notice of the annual meeting and the description of the bylaws to be changed, every policyholder would get notice, essentially.
Mrs Lillian Ross (Hamilton West): I just want to ask you about the difference between the two months and the three months, how that's going to impact. What's the difference and why do you need it changed?
Mr Walters: We're finding as the requirements for the auditors are increased, the length of time for them to conduct their audit increases. It does get quite cramped in there sometimes, trying to get the auditors in and out and produce the document. Then of course we have to take it to a printer and have it reprinted and bring it back to the office and stuff the envelopes.
Mr E.J. Douglas Rollins (Quinte): Welcome. Coming up from Napanee, it's not our riding but it's awfully close. Thanks for coming in. Last winter we had a substantial ice storm in eastern Ontario. Was that a major loss to many mutual farm companies in that area?
Mr Walters: Yes, it was. Last I heard, the farm mutuals that were hit consisted of the Bay of Quinte Mutual, head office located in Picton, and Lennox and Addington Mutual in Napanee and the companies east. So far I think the gross claims incurred by the five or six farm mutuals in eastern Ontario is about $11 million or $12 million.
Mr Rollins: A pretty substantial amount of cost to you people for one storm.
Mr Walters: Yes. We also own our reinsurance company. It was the first Canadian-owned reinsurance company. We buy catastrophe reinsurance that protects us and we have the backing of all of the other mutuals in Ontario in a situation like that, and that's how it works.
The Chair: Thank you very much for coming forward today with your presentation. We very much appreciate that.
CANADIAN ENVIRONMENTAL LAW ASSOCIATION
The Chair: We call our next presenter forward, the Canadian Environmental Law Association. If you could identify yourselves for Hansard, we would appreciate it. Thank you for coming. You may begin.
Mr Paul Muldoon: My name is Paul Muldoon. I'm the executive director of the Canadian Environmental Law Association, and with me is Theresa McClenaghan, counsel at the association.
The Canadian Environmental Law Association is a public interest group founded in 1970 to use and improve laws to protect the environment and conserve natural resources. We represent groups and individuals throughout the province under a legal aid mandate. We carry on community education and law reform activities.
We also have a general interest in issues pertaining to public access to environmental decision-making and ensuring transparency and accountability of government decision-making, and that's the issue we'd like to speak on this afternoon. In particular, we'd like to comment on schedule C to Bill 25, which is the proposed Statute and Regulation Revision Act, 1998. Bill 25 is the Red Tape Reduction Act, 1998, but schedule C is the one we'd like to comment on.
We'll be writing a detailed submission on schedule C for your consideration, as well as written submissions on schedule I to the bill dealing with the amendments and repeals proposed by the Ministry of Natural Resources. In particular with schedule C, though, we have some very serious concern about the way the bill is drafted and organized.
If I just read you the pertinent section of clause 2(1)(c) of schedule C, it states that "the chief legislative counsel may make changes that are necessary to clarify what is considered to be, in the case of a statute, the intention of the Legislature."
In our view, this is a broad unwieldy power, whereby an unelected official gets to change the intent of a statute by way of clarification. In our view, there is no analogous power, federally or provincially, for this type of power, and although it may be used for expediency in routine matters, there are constitutionally valid ways to do this and achieve the objective efficiently. Since in our view the act is worded inappropriately, it could lead to serious problems of constitutionality.
If time permits, we'll go through some examples of what the practical implications may be. In the meantime, I'd like my colleague Theresa McClenaghan to respond to some of the legal issues that this provision raised.
Ms Theresa McClenaghan: Paul has mentioned that the concern with schedule C is its approach to revision. We're assuming this Statute and Regulation Revision Act is intended by the way it reads to deal with fairly routine amendments. We're also assuming there is a need for that, that there is a need for some expeditious way of dealing with routine amendments. Our concern, however, is that when you read this statute, the process on its face is that the chief legislative counsel drafts the amendment and, as Paul points out, some of the provisions are fairly broad in terms of what they can do, and the one about clarifying intent is particularly of concern.
After that, when you read the statute, you'll see there is a provision in section 3 that the chief legislative counsel reports to the Lieutenant Governor in Council that a statute has been revised and the Lieutenant Governor in Council may cause a copy of the revised statute, signed by the chief legislative counsel, to be deposited in the office of the clerk of the assembly as the official copy of the revised statute. Then there is provision that it is enforced on a day to be named by proclamation and not earlier than the date that it's published. Nowhere in this process is there provision for introduction of the revisions contemplated to the Legislative Assembly. Nowhere is it contemplated that there's an opportunity for debate, for any sort of parliamentary democracy to be at play.
Now, if the revisions are only clerical, only typographical, why would that be of concern? That would obviously be of less concern if they were only clerical or typographical. But when you read the whole list of what can be done in (a) through (j), you can conceive of situations where reordering, renumbering, clarifying intent, using different language, repealing, revoking statutes, all those things that are mentioned may have substantive import, intended or not. In our view, that's contrary to the requirements as to how legislative revision is to be carried out under the constitution and under the rule of law in Ontario.
Our concerns are:
(1)That the proposal is unconstitutional, because it takes the legislative responsibility away from the legislative branch and places it in the hands of the executive.
(2) That the act contravenes the rule of law; that legislating is so fundamental an activity that it's the Legislature that must carry out that activity.
(3) That the proposed act offends rules of parliamentary democracy, from the inception of this province forward.
(4) That it's unprecedented and not the way statute revision has normally been done, whether you look at Ontario or other jurisdictions.
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Assuming that the intent is to come up with an expeditious way of statutory revision, and assuming that there is a need for that, which we can grant, there are appropriate ways to do that which would be constitutional. An example is found in the 1989 statute, and I think we have copies of that, which dealt with a slightly different issue but is illustrative of the point, that being the 1990 Ontario statute consolidation. When you read that legislation you'll see some similar language, but the point is that it was introduced as a bill in the House, opened to debate, went through first reading, second reading in committee, third reading and a vote. It was specific. It dealt with the revision and consolidation particular to the 1990 revision, and it was executed by the legislative branch, which then delegated some of the administrative functions to the executive.
Another example: If the concern is to come up with an ongoing ability to consolidate, revise and correct statutes, then another interesting precedent is the federal statute, and because it's fairly lengthy we only have one copy of that. There was obviously a perceived need at the federal level to do this kind of thing, so they enacted something called the Statute Revision Act in 1974, 1975, 1976. That provides for the ongoing ability to revise statutes in similar circumstances to deal with routine amendments. A couple of important distinctions: That legislation more narrowly and more specifically describes the power of amendment to use words like, for example, "minor amendments" and "with no substantive difference in the import."
Second, it provides that once there's a determination that there's a need for revision, those revisions are to be approved by the appropriate committee and then put in a bill for Parliament. They may deal with a number of different things at one time, and that's not the problem here. The point is that they would take all those needed amendments, have the appropriate legislative oversight and then give them to Parliament for review and approval. In my view, that would be a constitutionally acceptable way of going about legislative revision.
The fundamental concern here is not with perhaps the underlying objective which we're reading into this statute -- the need for expeditious amendment and correction of errors that might have slipped through the process -- but rather to ensure that it's constitutional and carried out by the legislative branch.
The Chair: Thank you very much for your presentation. That's approximately two minutes per caucus, and we begin with the third party, Mr Martin.
Mr Martin: I have no questions. Thank you for coming.
The Chair: We'll move to the government members. Mr Stewart?
Mr R. Gary Stewart (Peterborough): Yes, I'd just make one comment. Your comments sound like a whole bunch of red tape to me, and I don't mean that disrespectfully, in any stretch. What we're trying to do is cut down on red tape, and what you are telling me -- if I gleaned a little bit of it, and you had me pretty confused. That's one of the reasons why we're pushing to make some changes and get rid of all the red tape.
Ms McClenaghan: The fundamental point here is that legislative process itself is not red tape and there are ways to expedite those revisions, as described in a couple of the other examples, without being unconstitutional. But you can't actually give away your right to make laws, and that's what's happening here.
The Chair: We move to the official opposition, Mr Crozier.
Mr Crozier: I think you've made some excellent points. I'm not a lawyer, therefore it scares me a bit, what you've said, for the Legislature to give away its democratic right. When you mentioned parliamentary democracy and listed a number of concerns with respect to that, I have to say it's strikingly similar to a lot of things that have gone on in this Legislature in the last three years where parliamentary democracy has been thrown to the wind. That scared me as well.
I agree with your point and explanation just a moment ago that the Legislature itself is not red tape. I agree with you 100%. It's our responsibility to minimize the red tape with the legislation we produce. I think your point is well taken and I'm certainly going to want to get your comments from Hansard. You may hear them repeated in the Legislature in third reading debate on this bill.
The Chair: Thank you very much for coming forward. We appreciate that.
URBAN DEVELOPMENT INSTITUTE/ONTARIO
The Chair: We call the next group of presenters, if members or a member of the Urban Development Institute could come forward.
Good afternoon, and welcome. If you could identify yourselves for Hansard we'd appreciate it. In the event you did not hear earlier on, there's total time allocated of 15 minutes. At the conclusion of any presentation you may have, your time is divided equally between the three caucuses. You may begin.
Mr Jeff Kratky: Thank you, Mr Chairman. My name is Jeff Kratky and I am a director of policy for the Urban Development Institute/Ontario. With me today is Mr Reg Webster, president of the firm G.M. Sernas and Associates, a firm of consulting engineers and land use planners who are active throughout Ontario and also one of UDI's member companies. Reg is in fact a member of our board of directors and appears as such on your agenda.
Thank you for the opportunity to appear before you today regarding schedule I of Bill 25, the Red Tape Reduction Act, to provide you with the comments and thoughts of our institute from the land developer's and owner's perspective. Schedule I is the amendments and repeals proposed by the Ministry of Natural Resources in order to reduce red tape. In particular, UDI wishes to address the Conservation Authorities Act amendments, Lakes and Rivers Improvement Act amendments, Surveyors Act amendments and Surveys Act amendments.
Also, the committee should be aware that our submission to the Ministry of Natural Resources did address the proposed amendments to the Forestry Act, although we will not be specifically addressing any comments to you at this time.
I wish to begin by stating that the Urban Development Institute/Ontario is here today in support of the government's proposed amendments that carefully balance the needs of all people of Ontario while responding to some very significant needs of the land development and real estate industry. We believe that the balance will allow both the sustainable management of Ontario's natural resources at the same time as economic and job growth continue to be facilitated by this government and our industry.
Before providing you with additional detail regarding our support for Bill 25, I wish to provide some background to this presentation for the benefit of this committee by briefly describing the role of the Urban Development Institute/Ontario and the nature of its membership.
The Urban Development Institute/Ontario, or UDI, has acted as the voice of the real estate development, building and property management industry in Ontario for over 40 years. The institute is a non-profit organization supported by its members, which include firms and individuals who own sizeable holdings of raw land, apartment units and both industrial and commercial buildings. Our membership is engaged in all aspects of the planning and development of communities and the construction of residential, industrial, commercial and retail projects. UDI serves as a forum for knowledge, experience and research on land use planning and development.
Today, UDI's members include land developers, builders, land use and environmental planners, investors, financial institutions, engineers, lawyers, surveyors, economists, landscape architects, marketing and research firms and architects. Together they constitute the collective forces guiding the creation and improvement of Ontario's built environment. Further, the institute is a partner in UDI Canada, the coast-to-coast organization representing the national interests of the development community.
The land development and construction industry is a very important part of Ontario's economy, contributing more than one tenth of its total economic output. Unfortunately, despite the importance of this industry in helping this government to get Ontario back to work, the industry continues to be one of the most overregulated and overtaxed.
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In response to that burden, the Urban Development Institute/Ontario called for numerous reductions in red tape at the time that this government was elected on a platform that Ontario should be open for business. Many of the government's initiatives have moved the province towards that goal, although there is still some way to go, and UDI is confident in saying that Bill 25, if proclaimed, will be an addition to those initiatives.
However, the institute clearly understands that economic health must be pursued in harmony with the health of the natural and social environments. Ontario's high quality of life depends on all three being managed in a sustainable fashion. We believe that Bill 25 strikes that balance.
The public consultation and facilitation of discussions undertaken by both the red tape secretariat and staff of the Ministry of Natural Resources were instrumental in finding that balance. The Urban Development Institute/Ontario would like to express its thanks via this standing committee directly to Rob Messervey of the ministry and Frank Sheehan, MPP and leader of the secretariat.
I now wish to address the specific comments of support from the institute for schedule I of Bill 25 to the standing committee.
UDI believes there is a need in the Conservation Authorities Act to clarify the relationship of jurisdictions for municipal review under the Planning Act and the agency review performed under the Conservation Authorities Act. In the past, the distinctions have blurred, causing our industry to be subject to unnecessary duplication, red tape, cost and delay. Section 12 of schedule I of Bill 25 provides a new section 28(5) of the Conservation Authorities Act that we believe will appropriately distinguish those areas of jurisdiction.
Secondly, the public, including members of the Urban Development Institute/Ontario, has not thus far had guarantees of consultation and an opportunity to appeal the actions of Ontario's conservation authorities. Section 21(a) of the current Conservation Authorities Act provides an authority with the "power to study and investigate the watershed and to determine a program whereby the natural resources of the watershed may be conserved, restored, developed and managed." UDI believes the significance of this power is similar to that of the municipalities under the Planning Act, where Ontario has historically recognized the importance of public input and given the public such rights. It is as important to include public consultation and appeal mechanisms in the Conservation Authorities Act as it is in the Planning Act. We congratulate this government for including the public's rights of consultation and appeal in Bill 25.
Thirdly, UDI supports the government's initiative through Bill 25 to create a single regulatory set of standards across Ontario. We believe the standards of the generic regulation will provide certainty that will ensure that best natural resource management practices exist in all areas, as well as reducing red tape on our industry.
Further, the institute wishes to offer support for section 30 of Bill 25, which would amend the Lakes and Rivers Improvement Act section 15(l). We believe the proposed section will allow for the development of a one-window permitting approach at the conservation authorities. This change will significantly reduce overlap that now occurs and costs our industry time and money. It is also likely that it will better manage our natural resources, since one agency would be responsible to understand an application in its entirety.
Finally, UDI supports shifting the responsibility for developing procedures and standards for surveys from the Ministry of Natural Resources to the Association of Ontario Land Surveyors. The association has already demonstrated its ability to consult stakeholders and the public through its ongoing development of a deferred monumentation procedure.
In conclusion, the Urban Development Institute/Ontario believes the Bill 25 reforms balance the needs of natural resource management in an environmentally responsible manner with this government's and our industry's goals to promote economic and job growth in Ontario. Bill 25 accomplishes this balance after a thorough public and stakeholder consultation, for which UDI congratulates the red tape secretariat and the Ontario Ministry of Natural Resources.
I wish to quickly reiterate the reasons for our industry addressing its support of Bill 25 to this standing committee.
(1) Bill 25 proposes amendments to the Conservation Authorities Act that (a) improve public accountability; (b) clarify jurisdictions and the relationships between approval authorities under both the Planning Act and the Conservation Authorities Act; and (c) create consistent standards across Ontario for the protection and review of land development impacting natural resources.
(2) The proposed Red Tape Reduction Act, 1998, amends the Lakes and Rivers Improvement Act to maintain environmental quality while allowing for a one-window approach to receiving land development applications.
(3) The devolution of responsibility for standards and procedures for surveying from the government to the surveyors allows for the establishment of new approaches beneficial to land developers and owners as well as individual homeowners.
Thank you for your attention. Both Reg and I would be pleased to answer any questions that you may have regarding UDI's support for Bill 25.
The Chair: That allows each caucus approximately a minute and a half. We begin with the government members.
Mrs Ross: Thank you very much for your presentation. Can you tell me, with respect to the regulations and requirements that conservation authorities use relative to the timing of approval, how that has affected your industry?
Mr Reg Webster: As it relates to the proposed act, or as it is today?
Mrs Ross: As it is today, and the difference.
Mr Webster: I can probably best explain it -- water resource management is an issue that land developers deal with quite often. Up until fairly recently, when we were dealing with a development application we would have to seek approval from the area municipality, quite often the regional government, the local conservation authority, the Ministry of Natural Resources directly and maybe, as an issue through the Fisheries Act, from the federal fisheries department. All of those were not necessarily going in the same direction. Quite often, in all honesty, there was considerable overlap, they were going in different directions. What we're starting to see through the proposals for the act is to put these into little boxes so we can more clearly understand. What it should do in the long run is allow a practitioner to go directly to one source, be able to find it and have clearly established mandates of all that aren't overlapping and are not conflicting.
Mr Crozier: Thank you, gentlemen, for coming today and giving us your comments. The only thing I would say is that Mel Lastman many years ago said, "Developers are not to be feared, but they are a force to be reckoned with." I'll take that into consideration when I review your comments.
The Chair: Mr Martin, no questions?
Thank you very much for coming forward today. We very much appreciate you taking the time.
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CONSUMERS' GAS
The Chair: We now move to the last presenter for today. If the representative of Consumers' Gas could come forward and identify yourself for Hansard, we would greatly appreciate it. You may begin.
Mr Glenn Hills: Good afternoon. My name is Glenn Hills. I'm senior vice-president and corporate secretary for Consumers' Gas. I'm the person who's responsible for regulatory affairs within our company. I'd like to thank the committee for allowing me to appear before you today and explain why some of the proposed changes in Bill 25 are so timely and so important to the energy industry.
Our interest in Bill 25 focuses on amendments to section 19 of the Ontario Energy Board Act, which currently requires that the Ontario Energy Board determine the rates charged by natural gas distributors in the province on a cost-of-service basis. If passed, Bill 25 will allow the OEB to use other, more market-responsive regulatory tools.
Consumers' Gas supports this bill for one very simple reason: We can't restructure Ontario's energy industry unless we also restructure the regulatory process. By allowing the Ontario Energy Board to find new ways of doing business, Bill 25 would support greater customer choice and greater price competitiveness in the emerging energy marketplace.
Indeed over the next two years we will witness an extraordinary transformation in our province's energy industry. These changes include the deregulation of the electricity industry; increasing competition between energy services companies, each offering new and more targeted services to its customers; convergence of natural gas and electricity -- if Bill 35 passes, customers will be able to buy both their natural gas and electricity supply from the same company; and utilities, both natural gas and electricity, will go through tremendous transformation -- as natural monopolies, their sole focus will be the safe and reliable delivery of energy.
As a result, we need to develop incentive-based forms of regulation to instil a new competitive spirit within regulated utilities, one which will bring down the cost of regulation and also generate guaranteed savings for the customers.
To explain, let me first start with a little history. Consumers' Gas, as you probably know, is Canada's largest and oldest natural gas distribution company. The vast majority of our 1.4 million customers are located in central Ontario from Mississauga to Penetanguishene and Havelock, in eastern Ontario from Brockville to Deep River to Hawkesbury, and throughout the Niagara region.
We have served our customers for 150 years, satisfying their energy needs by providing low-cost and abundant energy. The arrival of natural gas supplies from Alberta in the 1950s and 1960s brought terrific expansion of the natural gas system and helped fuel much of the economic surge of the post-war years. In those days the price of gas was regulated by the federal government. The Ontario Energy Board kept a close eye on the utilities, making sure that this expansion was rational, wouldn't unduly affect existing customers, and ensured just and reasonable rates. We were, after all, a natural monopoly, so regulation through the OEB became the best substitute for competition.
Then in 1985 came deregulation of the price of natural gas. Now we could buy natural gas much like any commodity, and our customers benefited. The cost of the actual gas supply has remained relatively stable since that time. Gas supply, however, only accounts for about one third of a customer's gas bill. The cost of delivering the gas to homes and businesses makes up the remaining two thirds, and is regulated.
As we have come into the 1990s, cost-justified allocation has become a complex and cumbersome process in the evolving competitive market. It requires legions of staff on both sides to in effect go through our books line by line to ensure that our competitive activities, such as our appliance centres or our financing programs, are not benefiting from the distribution business. It's a tough way to run a business. We believe, and as I understand, so does the OEB, that there is a better way of doing things.
As I mentioned earlier, utilities are now focusing on the core functions, that being distribution of the commodity. We are currently seeking approval from the OEB to take all those businesses we have developed over the years which are not pure monopolies and spin them off into separate businesses. This process of separating our ancillary businesses from the core utility is commonly referred to as "unbundling."
Let me use our appliance centres as an example. Our competitors are companies such as Bad Boy and The Bay. Their operations are not regulated, so it doesn't make sense that our retail outlets would be either.
We are also proposing that the remaining utility, after unbundling, be subject to performance-based regulation. Simply put, that means that the utility and the regulator sit down and agree to some performance targets. Let's say that we, as utility X, agree to reduce our operating costs by Y% over the next three years. That would be an automatic saving for our customers. There'd be no lengthy review process, but we would still be accountable for the rates we charge.
We, as the utility, now have an incentive to push for even further efficiencies because any savings beyond the agreed-upon target can stay within the utility, whether they be reinvested back into the company or passed on to our shareholders, many of whom are our employees.
Performance-based regulation creates a new entrepreneurial culture within a utility. We would be able to take our ideas to improve service or operations and implement them quickly, without requiring prior approval from the regulator. For the regulator, it satisfies the need to ensure stable and fair rates and accountability to the consumer.
The OEB has a big challenge before it. Under Bill 35, it could soon be not only responsible for the two natural gas utilities but also the 276 municipal electric utilities, Ontario Hydro and the numerous energy marketers arriving on the scene. Cost-justified regulation in this context would be counterproductive and futile, requiring enormous resources and stifling competition.
You can see how, if passed into law, Bill 25 supports the continued evolution of our industry and the belief that energy customers have the right to demand greater price competitiveness and to choose how and from whom they get their energy supply. From our point of view, and from our customers' point of view, that's exactly the kind of innovative thinking we need.
Thank you. I'd be happy to answer any questions you may have.
The Chair: Thank you. That affords us approximately two and a half minutes per caucus. We begin with the official opposition.
Mr Crozier: Thank you, Mr Hills, for coming. Chair, I have no questions.
Mr Martin: I take this opportunity to ask for a little explanation. We've had a bit of a discussion going on in my office in Sault Ste Marie where, I believe, Union Gas provides the service.
Mr Hills: Right.
Mr Martin: Even though the industry is now deregulated we've seen an enormous increase in the cost of gas over the last few months. Customers have written in to my office or called me. I've written to the Ontario Energy Board to ask why, if there is this cap on the increase in services, there's this tremendous increase in the cost of the gas itself. It was explained that even though the provider, Union Gas, has a cap on what it can charge for the delivery of the product, there is open competition for the gas itself from suppliers.
The concern is that many people over a few years have changed from one source of energy to another to heat or light their homes because it was sold to them as less expensive. What they're finding now is that the cost is actually going up. You're suggesting that under Bill 25 and some of the further deregulation that's going to take place, prices are in fact going to go down. Is that what you're telling me today?
Mr Hills: With respect to the distribution component of the rates, in other words, the cost of the pipes in the ground, essentially, and the services provided by the public utility, I'm not saying they will go down; they should go up at less than the rate of inflation because in the end probably the form of incentive regulation that would be adopted would be that the utilities would have the right to raise their rates at inflation, less a productivity factor, to make sure that they are continuously improving their business.
That's not what's causing the problem for your people in Sault Ste Marie. That's on the commodity side, where natural gas prices have increased over the past year in Alberta and that has been passed on by Union Gas. So this particular item is part of the commodity that has been deregulated and will now be serviced by other than the natural gas utilities, and in the end would not form part of performance-based regulation for the utility.
Mr Rollins: Thank you for your presentation. A question that I have in my constituency office quite regularly is that a company comes in servicing a new area and they want to go down this road but they don't go that way, and my constituents cry, "This company has a monopoly; they owe me the pleasure of putting that pipe down," in front of them. What's my answer from you to them, to say, "That's tough, you can't get gas."
Mr Hills: We would love to serve every potential customer in the province, but we also have to be fair to existing customers to make sure their rates don't go up too much, because they have to cross-subsidize uneconomic expansion. We have to make sure we have enough business on a pipeline before we build it to make sure it's economically feasible. It's an area that the Ontario Energy Board looks at very carefully. They get a lot of calls in this regard and so do we. We're always striving to make it as economic as we can to expand the system as fast as we can, but we don't want to be unfair to our existing customers either.
Mrs Ross: I just have one quick question. On page 7 you say that "it satisfies the need to ensure stable and fair rates." I just don't understand how changing this is going to ensure stable rates. Can you expand on that a little bit?
Mr Hills: There are many forms of performance-based regulation. It depends on what the deal is. Typically what a utility would do, as I mentioned before, is offer to enter into a five-year transaction where the rates would go up at less than the rate of inflation each year over those five years. So the customer would know for the distribution system exactly what he or she would be paying over that five-year period, and any ups or downs would be to the cost or the credit of the utility and its shareholders.
The Chair: Thank you very much for coming forward today, Mr Hills.
There being no further business of the committee, this committee sits recessed until 1700 of the clock on Monday, October 5.
The committee adjourned at 1753.