Wednesday 30 September 1998
Energy Competition Act, 1998, Bill 35, Mr Wilson / Loi de 1998 sur la concurrence dans le secteur de l'énergie, projet de loi 35, M. Wilson
STANDING COMMITTEE ON RESOURCES DEVELOPMENT
Chair / Présidente
Mrs Brenda Elliott (Guelph PC)
Vice-Chair / Vice-Président
Mr Peter L. Preston (Brant-Haldimand PC)
Mr David Christopherson (Hamilton Centre / -Centre ND)
Mr Ted Chudleigh (Halton North / -Nord PC)
Mr Sean G. Conway (Renfrew North / -Nord L)
Mrs Brenda Elliott (Guelph PC)
Mr Doug Galt (Northumberland PC)
Mr John Hastings (Etobicoke-Rexdale PC)
Mr Pat Hoy (Essex-Kent L)
Mr Bart Maves (Niagara Falls PC)
Mr Peter L. Preston (Brant-Haldimand PC)
Substitutions / Membres remplaçants
Mr John R. Baird (Nepean PC)
Mrs Helen Johns (Huron PC)
Mr Wayne Lessard (Windsor-Riverside ND)
Mr Robert W. Runciman (Leeds-Grenville PC)
Mr Toni Skarica (Wentworth North / -Nord PC)
Clerk / Greffière
Ms Donna Bryce
Staff / Personnel
Mr Doug Beecroft, legislative counsel
The committee met at 1538 in committee room 1.
ENERGY COMPETITION ACT, 1998 / LOI DE 1998 SUR LA CONCURRENCE DANS LE SECTEUR DE L'ÉNERGIE
Consideration of Bill 35, An Act to create jobs and protect consumers by promoting low-cost energy through competition, to protect the environment, to provide for pensions and to make related amendments to certain Acts / Projet de loi 35, Loi visant à créer des emplois et à protéger les consommateurs en favorisant le bas prix de l'énergie au moyen de la concurrence, protégeant l'environnement, traitant de pensions et apportant des modifications connexes à certaines lois.
The Chair (Mrs Brenda Elliott): Good afternoon, colleagues. The resources development committee is called to order for the purpose of clause-by-clause consideration of Bill 35. When we left off, we were just completing an amendment, so we'll begin today with an NDP motion for an amendment. It's on page 5 of your notes. Mr Lessard, would you like to read that into the record, please, and we'll begin.
Mr Wayne Lessard (Windsor-Riverside): I move that section 1 of the Electricity Act, 1998, as set out in schedule A of the bill, be amended by striking out "and" at the end of clause (f), striking out clause (g) and substituting the following:
"(g) to actively promote energy efficiency and the use of cleaner, more environmentally benign energy sources; and
"(h) to reduce electricity bills for all consumers."
This amendment, I think, is fairly similar to the previous Liberal amendment that has been defeated, which talks to what the objectives of the bill are as set out in its title. The title of the bill of course is An Act to create jobs and protect consumers by promoting low-cost energy through competition, to protect the environment, to provide for pensions and to make related amendments to certain Acts.
We have noted that, in the purposes clause of the part of the bill that deals with the Electricity Act, those purposes don't set out the government's intention, as set out in the title of the bill, to promote low-cost energy. I think that this was just an oversight on behalf of the drafters of the bill. In fact, the reason I say that is that the minister has been quite consistent in his remarks with respect to lower prices for energy.
I'm referring to the press release that came out on June 9. The title of the news release says, "Lower Prices, More Jobs Goal of Competitive Energy Bill," and there is a quote that is attributed to the minister in there. Minister Wilson says, "Electricity customers stand to benefit most from a competitive electricity market with greater choice, lower prices and a safe and reliable power supply."
I know that when we were last meeting, the parliamentary assistant was saying that if we put lower prices as the objective in the bill, that would make it restrictive for people who were prepared to pay higher prices for cleaner energy if they were going to be higher prices. But if that's the case, then I suggest we should take "promoting low-cost energy through competition" out of the title to the bill so it isn't misleading for people who read this legislation and expect that it's actually one of the government's intentions to have options for lower-cost energy as one of the objectives of the bill.
We have asked for some guarantee that rates are going to go down because, as I indicated, the minister has said that the objective of this bill is to provide lower-priced energy for people. We have asked for some commitment that there will in fact be lower-priced energy as a result of this legislation. Now the government doesn't want to give us that commitment. I can understand that in light of the remarks from the parliamentary assistant. Some types of energy, green energy, solar power or some other options that may be more environmentally friendly, may be more expensive. I can accept that.
However, we suspect that the cost of energy is going to go up as a result of the changes that have been set out in the Electricity Act, 1998, whether people will buy green power or not. They're going to go up for smaller consumers who won't be in the position to make the choices that large consumers will be able to make. It's going to be the small residential and farm customers of electricity who will end up paying higher prices, while those who are larger consumers will end up with the benefit of this legislation. Some people are going to profit, some people are going to end up paying more. We think we know who that's going to be and those are the people that we want to make sure are protected.
I think that putting in the purposes of the act "to reduce electricity bills for all consumers" makes good sense. If that's what the government is trying to achieve here, then it should be set out in the bill. If they're saying they don't expect that there are going to be lower electricity bills for all consumers, then let's just say that. Just say that that's not the objective here and now and admit that, take it out of the title, and let's hope the minister doesn't keep saying it as part of his big sales pitch to convince us that Bill 35 is good for all of us.
We've also suggested a change to the section that deals with the promotion of energy efficiency and the use of cleaner, more environmentally benign energy sources. In that section we have suggested that the words "consistent with the policies of the government of Ontario" be removed because we have some serious concerns about the policy of this government with respect to environmental protection, and I think those concerns aren't just partisan in nature. They have been reflected and borne out in the environmental commissioner's most recent report that has been quite scathing with respect to the policies of environmental protection of this government.
She basically said in her report that ministers aren't paying any attention to environmental regulation. We've seen the incredible cuts that the Ministry of the Environment has sustained over the past few years. We've seen the environment ministry office in Windsor, for example. The staff there has been cut by 50% and therefore the level of service, the ability to monitor emergency spills, for example, has been greatly reduced. I believe that having the words "in a manner consistent with the policies of the government of Ontario" is really permitting the government to -- well, it's redundant wording.
If the wording means that the environmental policies of this government are going to be the ones that will be used to determine environmentally benign energy and environmental protection, this is not the direction I think that we want to go. I'd rather see those words removed because I don't think they add anything to the section and in fact they take away from the section because it reflects the commitment of the government, and the commitment of the current government to protection of the environment is one that I don't think causes the environmental community any comfort whatsoever.
We've also changed the word "facilitate" to "actively promote" energy efficiency, and we think that does far more to help improve energy efficiency and a cleaner environment than the word "facilitate." I don't know what the word "facilitate" means. If the parliamentary assistant has some suggestions, I would like to hear what those are. Those are my remarks with respect to the section at this time.
Mr Doug Galt (Northumberland): [Failure of sound system] a lot of advertising in this government -- at least the opposition has criticized us for some of the advertising, although the advertising carried out by this government is far less than previous governments. But aside from that little bit of a dig there, "to actively promote" really isn't saying much other than "We're going to wave the flag." The wording that was already there is "to facilitate," and it's unfortunate that you're missing the meaning of "to facilitate." As I interpret it, it's going to allow it to happen, get rid of some of the red tape, get that kind of thing out of the way so it will flow, it can happen.
Already we're getting green energy companies showing an interest. The paper, I believe it was a week ago Monday, indicated that there's quite an interest already in the green industry to produce electricity in Ontario. They recognize what's happening with this energy competition bill and they recognize that they're now able to get into the market. Previously with the monopoly it was not possible for them to enter into the market and they were very discouraged, unless there was some pilot project where Ontario Hydro was running the particular pilot project. But now they do see a possibility of a market, as you heard from the parliamentary assistant for energy the other day. She and many other people want to be responsible for clean energy going on to that grid.
If you compare, as one of the delegations compared, the grid to a lake like Lake Ontario, you're drawing something out like a pail of water, what kind of water do you want to put back into that lake? Does it want to be clean, or do you want to put just any old water back in? The same could be said for electricity, although it's not nearly as visual, those little electrons going up and down those copper wires, as water in a lake, although when you describe it as water in a lake or gas in a pipeline, it's a little more visual and it can be seen.
The present purpose section here, under "General" "Purposes," 1(g), also goes on to say, "...in a manner consistent with the policies of the government of Ontario," which is going to be consistent regardless of which party happens to be in government and which regulations are changed. You will have recognition for those other regulations that are present and the policies of the Ontario government.
It's also of interest to note, when you talk about reducing the electricity bills for all customers, that we're already seeing all kinds of interest being shown for cogeneration, as I mentioned earlier, for green power. We're also seeing major companies come in here. British Energy has been here since January. They've had an office in Toronto looking at competition in this province. American Power is here actively looking at the possibility of entering into this market.
Section (h) that you're putting in, "to reduce electricity bills for all customers": I've yet to hear of any jurisdiction where competition was brought in where the price actually went up. The price has either consistently held its own or has come down. It's my understanding that in England, if I remember the figures correctly, the residential price dropped something like 15%; commercial-industrial dropped 20%. In California, I believe it dropped almost 20%, and in Norway as it's rolling out they're more in the neighbourhood of a 25% drop.
The NDP might be very enthused if a cap was put on the price, for example, if we put a ceiling on the price. But we can see what happened when we put a ceiling on rents in Ontario. Apartments disappeared. Developers quit building apartments. We see what happens when you put a ceiling on, particularly if you put an unrealistic ceiling on. We're coming out with competition, and to put some kind of maximum ceiling on or some kind of limit really doesn't fly; it may in the socialist viewpoint, or in your eyes it may work, but just have a look at rent control and see what a mess it made of rental accommodation in Ontario. Everybody suffered, particularly the renters, the very people you thought you were trying to help. I'd suggest the same is going to happen here if you put some kind of requirement on, if you put some kind of ceiling or some kind of cap on the amount we charge for electricity.
I certainly empathize with your thoughts to reduce electricity bills for all consumers, and that's what probably will happen. If it doesn't happen tomorrow, it's going to happen down the road. One thing you can be assured of is that the price isn't going to go up. You can also be assured that if we maintain the status quo the price will go up. Certainly your predecessor Floyd Laughren agreed with that kind of philosophy. Certainly all parties agreed that the energy competition bill is very important and it will have an effect on the price of electricity.
All in all, your motion for (h) is redundant, and I don't see in (g) that it's going to really be of any benefit to improve the bill at all.
Mr Sean G. Conway (Renfrew North): Dr Galt has stimulated me in a variety of ways. He makes the point that we should be very careful about arbitrary caps. I think he makes a good point. Back to the 1997 Ontario Hydro financial statement; let me just read from page 52, notes to the financial statements, how the board had to use its rate-setting power to write down in excess of $6 billion worth of non-recoverable costs. Why? Because the government of Ontario decided that there would be a five-year rate freeze, 1995 to 2000. That was a political decision I think we can all understand, but it was clearly a political decision with real consequences on the financial health of Ontario Hydro, because the board told us last year they had to use, because of that political decision -- they say beyond their control -- let me just quote: "In 1996 the board of directors used its rate-setting authority to charge the nuclear recovery expenditures planned to be incurred over the period 1997-2000 to operations in 1996."
They go on to say how they could not recover billions of dollars worth of incurred or to-be-incurred costs because of the rate freeze imposed by the government. That's a cap. That's a cap which, in the period of this government, will set aside something like $8 billion to $10 billion worth of non-recoverable costs. They're not in the rates, according to Hydro. They are not going to go away, trust me. Those costs will have to be paid.
I just want the good doctor from Northumberland to be very careful when he talks about his concern about the arbitrariness of caps. He's part of a government that has imposed a very real cap on Hydro that has forced multi-billion dollar writedowns that are just parked on a siding, to be decided, to be apportioned, presumably after the year 2000, which just happens to be in the new world order of electricity competition in Ontario. I make that point.
I make a second point. I'm always struck by the witnesses who come, and I find some people make the case better than others. Do you remember Guelph Hydro? I know the Chair would know Guelph Hydro. Guelph Hydro is a pretty good group, from everything I know. On page 3 of their submission presented to us in Sarnia, on the subject of low-cost energy they say the government, that is the Ontario government, has introduced this legislation with a preamble that it is "An Act to create jobs and protect consumers by promoting low-cost energy through competition." My friend from Windsor has already referred to that.
However, "The purpose section of the act does not explicitly address low-cost energy; this is not specifically defined in the Electricity Act or the Ontario Energy Board Act," says Guelph Hydro. "It is certainly a concern to us and to our customers that the chair of Ontario Hydro, Mr Farlinger, was quoted immediately following the release of this legislation that he would not guarantee lower prices and in some respects it was a leap of faith to expect that this" -- meaning lower prices -- "would be achieved from restructuring. We" -- Guelph Hydro -- "also have some concerns that lower prices for all customers" -- the purport of the current amendment -- "will not be achieved through this legislation, as competition has not been effectively introduced in the area of greatest cost, namely the production of electricity -- generation. Restructuring must be for the benefit of customers served by the system. If it is not, then why are we restructuring? To ensure that future decision-makers understand the purpose of this legislation, there should be specific reference, both in the purpose section of the Electricity Act and in the objectives of the Ontario Energy Board Act, to the commitment of lower-cost energy."
The member for Northumberland made a point just a moment ago, saying that with these changes it was hard to imagine how costs would go up. I've talked to people, including Guelph Hydro. They make a very good case. I'll use one example. Let's take the treatment of assets. When the Macdonald commission was advising the government, basically they advised book value as the basis for transfer, which, as I understand it, essentially is that you take whatever debt is assigned to whatever asset.
Now the talk seems to be, "Well, no, maybe it's market value." Let's say it is market value. I don't know yet what the actual government policy is, let's say, for distribution assets that might transfer from Ontario Hydro retail over to, say, Guelph Hydro or Pembroke Hydro or Cobourg Hydro. Let's say it's not book value on the basis of that transfer; let's say it is market value. Let me tell you, if it is market value, you have just created in this policy a very real pressure, a very real cause to force rates up. Why? Because if it's market value, the acquisition cost to, say, the utility will almost certainly be two or three or four times what it would be under book value. The way you deal with that, of course, if you're the utility, is to debt-finance that. Where does the utility pass on the debt-financing costs but to the ratepayer?
I simply mention these two examples to my friend from Northumberland. In supporting the amendment from my friend from Windsor -- I happen to think mine was a bit better, but listen, that's just my own egocentric personality -- I think the member makes a very strong point. If the government is to be believed, if the government is to be taken at its word, then clearly this policy intends to promote lower-cost electricity for all consumers. Because I thought that was what the government intended, I supported that principle. Perhaps unlike my friend from Windsor, I -- and maybe some others -- see some very real problems in the next three to five years. Because of the rate freeze, we're going to be fine for 18 months. This rubber is going to hit the road in about 2001.
If I were a betting person, as I think I said here yesterday, I would tell people, residential and farm customers, "In the period from about 2001 to 2004, you probably are going to see some upward pressure on rates." It's the only way I can imagine that a very large debt and some other transitional issues are going to be managed. I'd be very cautious in telling anybody I knew about what we are going to be able to deliver in that early period of transition.
On the other hand, I would be very quick to say in the early going of the new marketplace I would expect that big business is going to be able, for the reasons Mr Preston advanced here Monday, to acquire some very quick and significant benefits. It's already happening. We don't know what kind of deals Ontario Hydro cut in the Chemical Valley and elsewhere in the province with big business customers, who in the 1990s said, "Listen, Hydro, you either make a deal with us or we're leaving your system," and deals were made.
The NDP -- and I'm not here to pick on my poor friends from the NDP -- were forced with some very real market pressures. Back in the early 1990s, Bud Wildman, who was the minister, called it pilot projects; a minister's best friend, a pilot project, a special-need circumstance. If we got a really good look at what kinds of deals have been cut, we would find that a number of very large consumers in this province, industrial consumers particularly, have been able to use their market power to get a volume discount.
The point of the member's amendment, and I will support it, is that we want to see in this legislation, particularly in the purpose clause, some language that speaks to a principle that the minister has advertised and that we all support, namely, that this bill has as one of its core principles the promotion of lower-cost electricity for all customers.
If the language being advanced by the opposition is imprecise, is too broad-ranging, let me say to the parliamentary assistant that I will defer to her to come up with language from those wonderful people in the department. I just think we are not holding ourselves in very good stead with the broad public, whom, as the member from Windsor just said, the minister has spoken to. He has rightly said, "I want to deliver low-cost electricity to everybody." And we sit here and say we're not prepared to put that in the purpose clause?
I stress again, lower-cost electricity for all classes of customers, because it's manifest that some classes will receive benefits that will be significant and almost immediate, where other classes of customers, particularly the large base of residential and farm consumers, may very well have to wait to a later point in the day for a lower benefit. If this policy -- and I've said it before -- is going to work, it has got to be seen to be working on Main Street as well as on Bay Street. I mean that.
There is a real expectation that there is a need for change; it enjoys a broad base of support. I've got to tell you, if I were just a general citizen watching this, I'd be thinking, "Surely to God, if they're doing this for any reason, one of the four principles here is the promotion of lower-cost electricity." If that's not a purpose, I don't know what the hell is.
The Chair: Further debate.
Mr Galt: I think it's interesting to note that in purpose 1, of the seven statements or subclasses, five of those seven talk about energy efficiency and prices. The first one: "to facilitate competition in the generation and sale of electricity." Competition is about getting the price down. The third one, (c): "to protect the interests of consumers with respect to prices." I'll go on to (d): "to promote economic efficiency in the generation, transmission and distribution of electricity." Then you skip (e) to (f): "to facilitate the maintenance of a financially viable electricity industry." Then you go to (g): "to facilitate energy efficiency," and the rest is environmental in that one.
Five out of the seven are talking about energy efficiency, which is about prices. It's all about giving the best price to all customers. It's all in there, said many different ways. To say it another way may be redundant with the five we already have. Certainly adding it again is a redundancy. It's said in so many different ways. I don't know how you can say it in any more ways, that all consumers are going to benefit.
No question, as was discussed the other day, if there's going to be a volume discount -- the GMs or the Incos of the world are going to use a larger volume and, yes, probably their prices are going to be a little lower than the residential. That's supply and demand, and volume sales.
It's just said in so many ways in here. I don't know how you can say it in any other way and not be redundant. I see what's suggested as very redundant.
Mr Conway: But, Doug, you can't say it another way.
Mr Galt: It's said that way five times.
The Chair: Are you finished?
Mr Galt: Yes, I'm finished.
Mr Conway: A reasonable person would wonder why the near-congenital anathema on the part of the government to include in the purpose clause something as clear and as necessary, according to people like Guelph Hydro -- forget me. I think the Guelph Hydro people make the case that there is a straightforward way to acknowledge in language that's clear -- again, I'm quite prepared to hear from some theologian in the legal branch at the department of energy as to why the words might be -- well, words are important. I don't want to make too much of this, but if you've ever been a minister, let me tell you, these words in these places matter. I suspect that's why it's not here. The absence of this phrase in the purpose clause I would take to be premeditated. I think the member for Northumberland is doing a valiant job, but he's not dealing with the main point.
The minister has said in his speeches, the government has said in the title of this bill, that it is clearly the intention of the cabinet, the government -- it's certainly the intention of the Legislature -- to change electricity policy in a way that is going to "promote lower electricity prices for consumers," all classes of consumers. A reasonable person would have to wonder why we would be reluctant as a committee to include that language in the purpose clause of this bill.
The member for Northumberland takes some pain to talk about the facilitation of competition in generation. That's interesting. To provide generators, retailers with -- right. I look for the simple, clean phrase that speaks to a point that I think is central. What's the phrase? You've got my attention. There it sits in the title of the bill: the protection of consumers by the promotion of low-cost energy. But it's window dressing in the title. It means nothing in the title. It can mean something in the purpose section of the bill. It is not there and I think it should be there.
If Conway's language or Lessard's language is overreaching or imprecise, then I, for one, would be quite happy to see other language, so long as the language speaks to the point, which is the promotion of lower-cost electricity for all classes of customers.
Mrs Helen Johns (Huron): We've heard from one group who talked about rate prices and capping prices, and I think it's important at the same time to put some of the other theories that we heard over the two weeks we were on committee into the record.
First of all, I want to remind the members that yesterday I proposed different wording and asked for unanimous consent, much to the Chair's chagrin I think. Of course, I didn't get unanimous consent on that, so I think we have tried to be accommodating on that issue.
Also, twice Mr Conway suggested that the title talked about promoting lower-cost power. The title is actually "low-cost" power. I have expressed my concerns from yesterday that not everyone will have low-cost power because some people have choice for the first time in the history of Ontario and they will choose to do what they believe is right when it comes to such things as their children's health and safety in the future, as was suggested by the OMA.
We heard from Encore Energy about its expectation of rights. I'm not sure if Mr Conway or I asked this question, but they said, "It is our expectation, based on experience, that competition will lead to lower prices, greater choice and new products and services. There is absolutely no doubt about that or we would not be here."
We had David McFadden from the Stakeholders' Alliance for Electricity Competition and Customer Choice who said, "I don't think there's an example in the world where prices don't go down in a competitive market."
We had the Sarnia Chamber of Commerce say, "Let's move forward so we can all enjoy lower rates."
We had Toronto Hydro, which has an article in the paper, "Toronto hydro bills may drop 20%," say to us, "It's our feeling that electricity rates should drop under this scenario and we are quite optimistic about what competition can do for the consumer."
I then asked, "Should we cap these rates?" I asked this question to a couple of people who I have quotes from. One was to Encore Energy and they said, "In California they tried to legislate the savings and at the end all they did was scare away the people who were going to come into the market to generate the long-run savings." I think that's a concern we have to consider.
Another group said, "I think the best method of dealing with prices, in order to deliver reduced prices, is to set up arrangements which introduce effective competition...if you introduce effective competition, then one group competing against another would powerfully drive down prices. I think it would be a mistake to put in a number which would cause people to focus high, rather than saying, 'Get your sleeves rolled up, and if you don't deliver a better service and a cheaper service, someone else will.'"
Those kinds of comments reflect what the government is concerned about. We believe prices will come down because we're creating a market that's driven by demand and supply, but we do not believe they will come down all around. I have stated very clearly that in my house they won't come down because I have different concerns. I'm not price-sensitive, I'm environment-sensitive. I think we have to look at that too.
I hope you understand why the government is concerned about both of your statements. As I said, we talked about competitive pricing yesterday but that wasn't where you wanted to be and I understand that. That was our offering, if you will, to try and make this a better bill.
Mr Lessard: With all due respect to Mr Galt and his comments about how some of the words that we've suggested are redundant or unnecessary, we're in the word business. We're legislators and policy-makers, and the way we implement those policies and legislation is through laws, laws that we draft here and laws that are interpreted by the people who are governed and laws that are interpreted in the courts. Words mean a great deal, as Mr Conway has indicated, especially if you're a government minister faced with strong arguments, either one way or the other, with respect to interpretation of those words.
I'm not wedded to the words that are in my suggested amendment. I indicated my support for the Liberal amendment yesterday, to promote lower-cost electricity for all consumers. If that wording isn't to the government's liking, then that can be changed as well. May I suggest, "to promote low-cost electricity for all consumers," which really reflects what's in the title of the bill.
I don't want appear to belabour this point and get hung up on one section that is at the beginning of the bill. We've got a bill that's over 170 pages long and we're only on the second page. But I think this is an important argument because it's central to the reason the government introduced this legislation, something that we all want, and that is low-cost energy. That is what the minister has been setting out as the reason for pursuing this policy, that's what's set out in the title of the bill, and I think for the government not to want that to be set out in the general purpose of the act really is a matter of credibility for this government. Why would they not want to have it in the purposes of the act if they've set it out in the title and the minister is consistent that that's what he hopes to achieve through this change in policy?
Mr Galt has asked: "When in other situations where they've introduced competition have prices ever gone up? Why would they ever go up in this scenario that we've set up?" Well, I would respond by saying why is it that the Ontario Hydro chair wouldn't assure us that prices were going to come down. He's a knowledgeable person in a position of influence who has some ability to make those judgements and he said there is just a leap of faith to expect that prices are going to go down.
In this amendment we're not asking for a cap on prices, we're not asking for a guarantee to be set out in the legislation. We have made that suggestion and it's going to come up in another amendment that we've made if we ever get there, but I don't expect that's going to be supported if we can't even agree that the purpose of the legislation is to promote low-cost energy. We're just saying that the purpose of the bill should reflect what is in the title and what the minister has said is the intention of the government.
How could costs go up? Well, Mr Conway has indicated that in his remarks and that is determining the value of the assets either by market value or by book value.
How competition is going to unfold is possibly going to have an impact on price. Mr Galt says anyplace competition has been introduced the price has gone down. With all due respect, the competition that has been introduced in other jurisdictions is not the same as the competition that's being introduced here. Time and time again we were told by the people who were presenting to our committee that as long as Ontario Hydro remains intact as an entity similar to what it has been throughout decades, there isn't going to be true competition. So if they want to hang their hat on the definition of competition leading to lower rates, then everything we've heard from the presenters saying you're not going to have it if this is pursued has just been basically discounted, hasn't been considered at all.
We've seen the impact that competition has had in the telecommunications market, for example. People who make a lot of long-distance telephone calls, businesses who rely heavily on long-distance phone services have been able to benefit a great deal, so for them competition has meant lower prices. For other people, the average residential telephone consumer who doesn't make a lot of long-distance calls, it's meant that their rates have gone up. So that is an example of where competition has led to higher prices.
We know the cost of the generation of green power, either solar or through wind power, through bio-mass, is going to be higher than the price of power generated in other ways. That's something that's going to lead to higher prices.
Finally, the amount of the stranded debt could possibly lead to higher prices and at this point in time we have no idea of what that amount is going to be. We don't know how it's going to be calculated, and until that amount is determined we have no idea whatsoever what influence the amount of stranded debt is going to have on price, whether it's going to be higher or lower. Those are just some of the things off the top of my head that might affect what the price of energy is going to be. I think that if the government is legitimate in its intention of promoting low-cost energy, if they put it in the title, it should go in the purpose of the bill. If they're not prepared to do that, I really wonder why, and wonder why we're even here debating the clause-by-clause of this bill much further.
I'd like to ask anybody who might have been involved in the drafting of this bill, and we seem to have quite a few people here today to provide a response, and we haven't heard from any of them, but if there is anybody out there who can explain to me why in the title of the bill it says "promoting low-cost energy," but in the purposes of the act section, it doesn't refer to promotion of low-cost energy. Whether this is some kind of a drafting consideration, I'd like to know that. If it's strictly a political consideration, then nobody needs to respond to it. But I'd be interested in knowing whether there's some reason other that a political policy reason or a concern that we're not going to lead to low-cost energy in Ontario, whether that's a decision that's been made as a political decision.
To me this is a fundamental question, and that's the reason I've taken the amount of time that I have. There are a number of areas that I'm concerned about in this policy and this legislation. I might as well outline them here because I want to know whether the government, after having looked at our amendments, has any interest whatsoever in considering any of them seriously. If they're not, I don't see the point of continuing to sit here with a lot of high-priced energy and environment officials when I know we could all be doing something better, if the government is not prepared to consider any of our amendments in the areas of lower-cost energy and increased environmental protection, promoting energy efficiency and protecting consumers from unscrupulous marketers.
Those are the areas that are of concern to me and, if the government doesn't share those concerns, I'd really like to know now, because I don't know whether there's much point in my continuing to make these arguments over the next number of days.
Mr Conway: Very quickly to a couple of points that have been made, and we are talking about I think a pretty fundamental dispute. I understand that if the government doesn't want to include the language, "the promotion of lower-cost electricity rates for all consumers," then that's their decision. But there were just a couple of things that the member from Huron said that I want to quickly speak to.
I personally don't believe there should be caps either. I think you're going to have to let a reasonable market develop. I'm not here arguing for arbitrary measures. There will be a regulator to impose certain constraints and that's as we expected. But the member said that for the first time I have competition. Well, I live in a community where for decades we had a source of electricity before Ontario Hydro ever existed, or ever knew we existed. In the last couple of years, after 90 years of a local, very competitive source, what happened? Hydro slammed the door on it. They did so for a broad corporate policy that had everything to do with their court case against London and Ajax, and nothing to do with the people in Pembroke. Now they papered it over and the deal was that 15% to 20% of our electricity in the city of Pembroke comes from the old Pembroke Electric Light Co, which has its source of generation in the Black River across the interprovincial border with Quebec.
That source of electricity provided us with 15% to 18%, I think, of our electricity, at a rate much below the going rate of Ontario Hydro. But the monolith that Hydro was, for big corporate reasons, as I said, that had nothing to do with us, fixed that arrangement. They would say, "We offered an alternative." Well, it's some alternative. My concern is that we've had -- I mean, there's been a lot of misunderstanding. Hydro has become quite a monolith and quite gargantuan, particularly in the nuclear age when it just pushed out mostly everybody else. I guess the problem I have with this is that I thought we were going forward with certain objectives.
One, we were going to endorse competition in generation. We understood that would mean the disaggregation of Ontario Hydro Genco. That's not happening, certainly not in the conventional or expected way, and I go back to Macdonald, a pretty good blue-ribbon panel of people who could not have been clearer. We're not doing what those learned men and women said we ought to do, and that instinct has been reinforced by the Market Design Committee. We're going to second-best measures, the ones we have talked about before.
We are going to get a stronger Servco, apparently -- Ontario Hydro Retail -- not just from the evidence tendered in the committee, but if you've talked to anybody in the field, it is very interesting what's been going on in the field. Mr Osborne is as good as his word.
I am increasingly nervous that while the advertisements for the policy are quite compelling, the reality of what we're doing here appears to be something else.
I heard today, and I might ask my friend from Nepean, while walking over here this afternoon that we've got a new Deputy Minister of Finance, Bryne Purchase. If that's true, I have to ask myself, was Bryne testifying to us in Ottawa three or four weeks ago while he was negotiating a contract with the Ontario public service? I am a big Bryne Purchase fan. I think he's a hell of a smart guy. But let me tell you, if that was going on two or three weeks ago, I would expect anybody setting a job interview to be the Deputy Minister of Finance would be very guarded about what he'd have to say about this legislation. Absolutely. I know I would be. "I'm going to be empowered through this policy to make some really important decisions," one of which Lessard just mentioned.
Critical to the whole rate structure is going to be the treatment of the stranded debt. You might say, "What does he mean?" Let me use this example: I've used it before and I don't think I'm being difficult. If according to Steve Dorey -- and we're talking now about rates. I was looking, just while Mr Lessard was talking. If you don't like Guelph Hydro, I think, in government, you really ought to like Hydro Mississauga. Karl Wahl, I would think, is no enemy of this government.
Remember what Wahl told us in Mississauga? I made a note of it. It's a paraphrase but I think it's pretty good; it struck me. He said, "One of our worries is that electricity rates may in the short term in fact go up." He cited a lot of the same evidence. But let's come back to a very important one, about stranded debt.
If we're thinking about rates, Mr Galt said, "They can't really go up under this policy." I can think of another way they could go up. If I am looking at a multi-billion dollar stranded debt, and we are going to be looking at that, according to Steve Dorey -- if we're all wrong on that then I will sleep very comfortably and I'd like to see the Social Credit economist that has got us there, but they might be able to do it -- if there is evidence on the record someplace.
If you have got a multi-billion dollar stranded debt, the interest of finance, I can tell you, is going to be to get it out of there as fast as possible. to write it down as quickly as possible. If you're going to do that, you've got to take it out of the rates. The quicker the write-down period, I would think, the greater the pressure on rates. If I'm a ratepayer, and quite frankly if I'm the Minister of Energy and I'm a politician I'm probably saying, "You know what, my instinct would be that we should stretch that retirement period over a longer, rather than a shorter period," because my common sense would tell me that I'm probably going to have a less significant impact on rates.
That's one of the reasons why for us as a committee, apparently bright, public-spirited individuals, to allow this bill to be disposed of without some clarity around that -- somebody mentioned a moment ago what we heard in Sarnia. Do you remember what people like TransAlta said about that question when we were in Sarnia? Some pretty important business people said, "We want to see that, we want it to be clear and we want it to be public," paraphrasing again. And I know why. Now you're going to wave another clipping.
My point is that if you're looking at the basic point here, lower-cost electricity for customers, we've got some enormously significant policy decisions that we have no answers for. I don't expect maybe all the answers to all the questions, but I've got to tell you that a blank sheet is not very helpful. I suspect what the government is trying to do is ride that -- it's like that old Bengough cartoon of John A. Macdonald with feet on two horses. You're desperately trying to have it both ways. I can understand why. You've got very significant policy decisions to make, the answers to which certainly have not been made public.
I think the obligation of the Legislature is to say, "What are those answers going to be, and how are they going to impact on rates?" We focus on this particular item because it is a central question around the rate structure. We're doing this presumably because we want to promote the possibility of lower-cost electricity to all classes of electricity ratepayers. That's my concern.
Mrs Johns: I just want to add -- I'm not sure whether Mr Conway or Mr Lessard has had a chance to see their faxes today -- that the government has announced today to all of us through a fax that they're going to discuss the Ontario Hydro financial restructuring and asset valuation with all of us on October 26 in room 163 of this building.
Mr Conway: I got the fax and I certainly appreciate that. Where does that fit in terms of the -- my point is that one of the things I think we've all benefited from in this exercise is this is very complicated stuff. I would rate it the most complicated policy and legislation I have ever seen here. It is really difficult and it is occupying the attention of a lot of very bright people in accounting firms, investment banking firms and law firms. I am really struck, in my travels, by just how many high-priced, professional people are seized of this question. It's been that way in the United States and elsewhere.
One of the reasons, I say to Ms Johns and the committee, that I want some transparency, and one of the reasons for my amendment yesterday that there be no proclamation until we have some greater understanding, is that I want not just the committee but the public, particularly the informed public on this dossier, to have a look before the bill is passed, just as I would fully expect -- I can't believe the cabinet. I think no cabinet would be irresponsible enough to say, "We'll pass the bill, and tell us about it later." The cabinet certainly will want to know, and is right to want to know, these answers. I think, given the gravity of this question, the importance of the financial and related questions, we owe it to the broad public to say, "Here is where we are."
I was just reading Karl Wahl's testimony and he makes the point again about these nuclear assets. I don't mean to be repeating myself. I'm very interested to go to the October 26 briefing, but I can tell you that if it is the intention of the government to have this bill passed and then offer me a briefing, I want to be very clear: If I did that to you people as a minister, I would expect you to walk out of the room, because you would be right in saying that is a contempt of your rights, privileges and duties as members of the Legislature, a gross contempt. I will certainly view it as something similar. If I am expected to pass this bill and then go to a briefing, then that would represent for me the greatest Hydro hoodwink of a quarter-century, and I, for one, won't participate in it.
Mr Lessard: I got the note about October 26 as well. I thought maybe it was a transcribing error, because October 26 is a long time from now. By that time, as a result of the resolution that binds us and the amount of that we can spend on clause-by-clause consideration, that time period will have long gone by and this bill will be back in the Legislature for consideration on third reading and probably passage. I'd like to know, if we're going to have this briefing on October 26, whether the minister is making the commitment that this legislation isn't going to be called for third reading debate before that time. I'd like to know whether the parliamentary assistant has a response for that.
Mrs Johns: It is our intent to give the best estimate of the stranded debt number and the residual stranded debt number on the 26th, and it is our intent at this point to have third reading after that number comes out.
Mr Conway: That's helpful.
The Chair: Further questions and comments on this amendment? Seeing none, I put the question.
Shall the NDP amendment, which we see on page 5 and just discussed, carry? All those in favour? Opposed? The amendment is lost.
Any further discussion or comments on section 1, schedule A?
Shall section 1 of schedule A carry? All those in favour? Opposed? It carries.
Moving now to schedule A, section 2, we have a government amendment. It's on page 6.
Mrs Johns: I move that the definitions of "integrated power system" and "market participant" in subsection 2(1) of the Electricity Act, 1998, as set out in schedule A to the bill, be struck out and the following substituted:
"'integrated power system' means the IMO-controlled grid and the structures, equipment and other things that connect the IMO-controlled grid with transmission systems and distribution systems in Ontario and transmission systems outside Ontario" -- and then there is a little French blurb there;
"'market participant' means a person who is authorized by the market rules to participate in the IMO-administered markets or to cause or permit electricity to be conveyed into, through or out of the IMO-controlled grid."
What we're doing here is addressing some issues that have come up as a result of discussions with the Market Design Committee and the IMO. When we went to the central marketing office, I think we all were struck by what an important job they were going to have in the future to ensure reliability and safety. They have asked that the integrated power system be expanded to ensure that there is no question about who will be involved in the system and about who the market participants are. We have done this to take away some of the questions that were being asked and, as I say, it has been requested by the IMO themselves and the Market Design Committee.
One of the things with the market participants that we were particularly concerned about was that the MDC suggested that we may need to use bilateral contracts as a market power constraint. We wanted to ensure that people who were entering into bilateral contracts were considered to be market participants.
The Chair: Further questions or comments? I'll formally put the question, then, seeing no further questions or comments.
Shall the amendment to subsection 2(1) carry? All those in favour? Opposed? It's carried.
The next amendment is a government amendment on page 7.
Mrs Johns: I move that subsection 2(3) of the Electricity Act, 1998, as set out in schedule A to the bill, be amended by inserting at the beginning "Subject to the regulations."
What we're concerned about here and what we heard about is that in the transition period there may be a problem with bills and other issues where they talk about Ontario Hydro as opposed to Genco and Servco, so we wanted to have a smooth transition. That's why that section has been set up.
Mr Conway: Why would we quibble over one more regulation? In anything this complicated, there has to be a regulatory power, but again, as someone who's been around a while, one of the things I'm increasingly struck by is what the Legislature is asked to do, whether it's Bill 26, whether it's Bill 35. If I'm in the executive branch of government, it is to have died and gone to heaven. You have a three-day sitting of the Legislature and ask for a sweeping omnibus bill to deal with everything from the setting of the sun to the falling of the winter snows. "We'll see you again in four years and you'll have some kind of a plebiscite on whether you thought we managed it well." It's all one massive transfer or increase in executive power.
I don't know that anybody cares about that any more. The level of political science and literacy around the place seems to be diminishing as we speak. I don't mean that just as a criticism of current -- because the fashion is: "We won the election. We get to run the place for four years and we'll talk about it. Let's."
This bill is noteworthy for the incredible amount of regulatory power. Why would I quarrel about one more? I haven't added them all up but they run to several hundreds. I say this, and let me just make it quick. There's a great debate led particularly by my friends on the right wing that, "You know, the real problem is that there are too many politicians running around and they've got too much to say and not enough to do." So what do we do? We get rid of some of them, get rid of as many as possible, and part of that I understand.
But the real evil in our system, if you look at the political science, is that we have an executive or cabinet dominance that is perverse. It is just absolutely perverse, certainly by British benchmarks and by the benchmarks of some of our other Commonwealth friends. We have managed both federally and provincially in this country to have taken executive cabinet power to the absolute Olympian heights. How do we do that? You have weak legislatures and strong cabinets. How do you get strong cabinets? You pass bills like this. Power to the people be damned. Power to the cabinet.
If you wonder why I'm a bit ornery about some of this stuff, I thought the current argument was around less power to government and more power to the people. How do you empower the people? You give them reasonable information; you give them reasonable transparency. So I'm not going to fight over this one. It's a chance for me to make a little speech about the incredible executive power this bill visits upon a cabinet.
I know Mrs Johns is a bit frustrated: "He must know that I'm a good, well-intentioned person." Everything I do know suggests that. But how do I know how you or some successor is going to exercise these powers? Let me tell you some very dramatic things have been done under the guise of pretty innocuous powers in statutes and in the regulations. I think there is just so much at play here.
The regulations: The conflicts of interest that I've talked to you about before, with the Minister of Finance -- as a democrat, I'm a bit troubled by that because a lot of this stuff I'm never going to see.
Mr Conway: Well, my friend laughs over here, your trusted ally. He laughs. I guess it's Mr Galt's hour. Go and read today's New York Times and read yesterday's New York Times. There's a front-page story in both editions called the "Influence Industry." You should just pedal your hot little feet down to the library and do me a favour and read that, and you might all read it. This is a $10-billion industry. Let me tell you the influence peddlers are at work, they're at work big time, and they work happiest when they've got this kind of opportunity. We are giving them a tremendous field day here. At the end of the day we'll be judged by how it all works out and I will be interested. I simply note with some concern that we've got regulations coming out of our ears and that means only one thing: a lot of basically private executive power around a lot of very important, though very complicated, questions.
Mrs Johns: I hesitate to wade into this debate, but I think it must be said that we're dealing with an incredible bill here. It's moving us from a system that we've known for a hundred years, a monopolistic system that has not worked well, to introducing competition into a system. There is no question that this process has to be seamless. This legislation itself is going to create jobs and investment in Ontario and it's going to affect people in the energy they produce, it's going to affect people in their businesses, it's going to affect people in every walk of their life. We have to do what we can to ensure that this system is seamless, that we move forward and that the people of Ontario get what they deserve, which is a good energy system, which they do not have right now.
Yes, there are regulations in this bill, because this is something that hasn't been done before. We can't possibly imagine all the issues we're going to come in touch with. If we chose at this time to go to legislation with every issue or in this particular case to look at every bill that might have the name "Ontario Hydro" in it that will then become the Ontario Financial Corp, and should have become Genco or Servco, we're going to spend a lot of time in paperwork. I personally don't see in this particular section how anyone could object. I understand that Mr Conway is not objecting, but you would have to be a fortune teller, a soothsayer, to say how everything is going to proceed on this. If we can't have the flexibility to use the mammoth number of consulting people, the mammoth number of stakeholders who are involved in this today, the Market Design Committee and the Ontario Energy Board, to help us move forward in this process, we could never get this legislation done.
As much as I understand your concern about regulations, in this practical world where we're moving forward to do what's best for the people of Ontario -- because we're losing businesses, we're losing jobs, we're losing our competitive cost of electricity -- we have to have some regulations to move forward.
The Chair: Further questions and comments? Seeing none, I put the question.
Shall this amendment to schedule A, subsection 2(3), carry?
All those in favour? Opposed? Carried.
Any further questions and comments on this section?
Shall section 2 of schedule A, as amended, carry?
All those in favour? Opposed? Carried.
We're moving now to a new section. There is a government amendment.
Mrs Johns: I move that the Electricity Act, 1998, as set out in schedule A of the bill, be amended by adding the following section:
"Public Utilities Act
"2.1 This act applies despite the Public Utilities Act."
What's happening here is as a result of Carl Kropp, from Ottawa Hydro, who came to speak to us when we were in Ottawa. He had a grave concern about how the process was going to evolve in the transition period. We felt this was clear in the previous act -- it was in section 148 -- but we have moved that forward so people will understand that this act applies despite the Public Utilities Act.
The Chair: Further questions and comments? No.
Shall this amendment carry?
All those in favour? Opposed? Carried.
The next one is a Liberal amendment on page 9.
Mr Conway: This basically reflects an instinct I've had about some of this stuff over many years and the testimony of Andy Frame, who you will recall spoke to us at Queen's Park. Andy has been around the business both in terms of the private sector, the MEUs, and for many years as a senior policy analyst to the Ontario Ministry of Energy.
It's really interesting talking to people who've been around. Most of us accept our share of blame for mistakes, oversights and the like. It's just astonishing then to listen to these people as they look at the current environment. I don't want to embarrass any of the old boys and girls, but it is certainly the view of many that it would be a useful thing -- and it's my view as well that there are probably few policies that are going to be more important in terms of the economic and social well-being and, I suspect, the political day-to-day lives of MPPs and ministers over the next five years, than in the rollout of this policy.
It seems to me that the idea of some kind of legislative interest and oversight of some of this activity might not be a bad way for people who are paid by the taxpayers to hold governments to account for what they're up to, and important emanations of government, that this would be perhaps a mechanism to do that. It's in that spirit that I move the amendment, but to accept it you'd have to believe there was a meaningful role for the Legislature. I don't really want to say much more.
The Chair: Further questions or comments?
Mrs Johns: I think we all know that we could set up a standing committee with any government at any time if we thought the need existed. In this past year I guess we've set up what's called a select committee, which I see as somewhat similar, although not consistently, that would allow people to delve into issues if they felt things had gone awry. In fact, this government has done that as a result of NAOP, which happened in the past year or two. I think we had a frustrating experience, but I think it was good to uncover a lot of the information. I think some of us feel the wiser for being on it.
The difference, I think, between what the government believes and what Mr Conway and I think Mr Lessard believe -- because he had something very similar to that as a motion also -- is that they believe the Legislature should be charged with a specific committee that deals with Ontario Hydro every time. The government believes that we have charged some people with dealing with Ontario Hydro and the whole sector over a long period of time. In fact, we believe we're the first people who have given the Ontario Energy Board any teeth whatsoever to deal with the issues of electricity. We believe that the Ontario Energy Board is there to monitor this and will have expertise that legislators certainly cannot have. I consider myself a generalist, if you will. I hope I'm at least that. We believe that the Ontario Energy Board is there to do that.
As they issue reports, any of us of course will see those reports and understand the difficulties. The Ontario Energy Board I'm sure will be meeting with the minister, and if they see certain issues that are of concern, then of course the minister at any time could call a select committee, or any government, as they chose what the standing committees would be, could choose to put this standing committee in.
I think we have to give the system some time to work. Right now we have the system being monitored not only by the Ontario Energy Board but by the IMO. Before the system gets started, we also have the Market Design Committee and the electricity transition committee monitoring it. So we believe we have a lot of people who are very specialized in nature who have a great deal of expertise in monitoring the system, both in the short term and the long term, for the betterment of the people of Ontario.
Mr Conway: I don't doubt that that is true, and ever has it been thus. There have been a lot of very smart people involved with this debate for a long time, but it is generally interesting how the Legislature has not played a very major role in that. The Legislature has been involved in Hydro affairs, usually, when there is some complete screw-up or some really delicious scandal. We've had a lot of select committees. I can think of about six in my time, and one really good one before I got here in the early 1970s.
I think about the select committee you did last year. I was stunned by what had gone on there in that seven- or eight-year period. I said then that if some of that information had ever become public in the early 1990s or the late 1980s -- say from 1989 through 1996 -- let me tell you, the environment certainly would have changed. If some of those exchanges between the federal regulator and the top brass at Ontario Hydro had ever seen the light of day, let me tell you, there would have been change, certainly because there would have been a very different kind of public environment. I was astonished at just how much of that stuff stayed put. It never did get out and I think the public interest was seriously harmed by that. I think a lot of people are responsible for that.
The exercise last year I thought was very useful, but on something this complicated, particularly for the politicians, because ultimately those are some of the decisions we're going to have to make -- I, for example, like to be able to go back and say, "How's it going?" How is it going? We heard last year. Where are we this year? I would like the opportunity.
If I were running NAOP I wouldn't like it because of course it would be about accountability, and it might even be about transparency, because I might actually have to show up and face people like Johns and Lessard and Conway who were there last year and I might just check their notes and say, "This was the problem and this was the plan. How are we doing?" In the private sector, I think we call that benchmarking. For benchmarking and accountability to work there has to be some discipline and some rigour and some ongoing oversight.
I just think that the remarkable legacy of the electricity business in this province, particularly Ontario Hydro, is that it managed over a long period of time, for a variety of reasons, to be a very powerful and significant force that was public but beyond any kind of real public scrutiny and oversight. We're changing that with this new policy framework and I think that's in principle a good idea. Whether in practical terms this policy is going to deliver remains an ever-increasing question in my mind. But I just thought that Mr Frame particularly made a good point. It's not something about which I'm going to go to the wall, obviously, but I draw a distinction between some of the special committees that might be in place and one that involves the Legislature.
I sometimes think these days that if I were advising my constituents, increasingly, particularly after reading that Times piece this morning, I'd say: "Don't waste your time. Go extraparliamentary. It's a fiction. Don't play this game the way the rules of the 19th century would have you play it. Forget it. Go and do it through extraparliamentary means, to use a polite phrase, and go after them. Go after them with a vengeance because you have some chance of perhaps getting some attention. Just don't be foolish enough to play this game by the old Marquess of Queensberry Rules, because they don't apply any more, and even if they did, that arena is a kind of pathetic, expensive irrelevance. Go where the action is. It's on the street. It's not in Parliament."
Mr Lessard: I want to speak in support of the amendment as well. I think the development of Ontario Hydro over the years has happened because it's a matter of tremendous importance for the economic well-being of our province. That wasn't unique in Ontario. It happened in a lot of other areas. It was such an important resource that it was deemed in the public interest to be a public utility. There have been other examples where we thought that things were that important. I can think of the airwaves, where the CRTC is so heavily involved. At one time the government was heavily involved in the development of the air traffic business. There are numerous other examples where the development of a segment of the economy was done, either by the public sector because it was important to make that investment at the time because nobody else would, or because it was so important that it needed to be regulated in the public interest.
This policy is really changing that in a fundamental way. Bill 35 is really taking the government, to a great extent, out of the hydro business and opening the doors for others to come in and take over. I have some real concerns, some real fears, about how this is all going to pan out, but the decision has been made by the government to pursue this policy and we're just going to have to wait and see how it turns out.
When I think about the times when government committees have been involved in Ontario Hydro's affairs in the past, Mr Conway makes a good point: It has generally been at times of crisis, times of scandal, times when things have gone so seriously off the rails that intervention by politicians was a necessity. Perhaps if there's some reason that the government has chosen to pursue the policy set out in Bill 35, some reason we feel the way we do about Ontario Hydro, it's because legislators in the past have really not been involved as much as they should have been. Because of that Ontario Hydro has ended up in the situation it is in now, where there's an incredible amount of debt and they have assets that have little ability to pay for themselves, and the government is taking what they feel are some drastic steps to try and change that. I'm not sure this legislation is going to do that, but that is the stated intention of the government.
Even though the parliamentary assistant has said there are some very capable people who have been charged with developing the framework and policy and have some oversight abilities, like the Ontario Energy Board and the Independent Market Operator and the Market Design Committee, the concern I have is that as capable as those people are, they're not elected representatives. They're hired because they're experts, and they're being involved in a process that is a political process; the policy decisions that have been made here are political decisions.
There needs to be accountability. There needs to be transparency. There needs to be some mechanism through which we, as legislators, in making the policy decision that is being made by this government, have a means of being able to monitor the impact of those decisions as the protectors of the public interest.
I think that is the reason this suggestion was made by Mr Frame and that's the reason it has been put forward by Mr Conway, so we can evaluate at some point in the future how all this policy turns out. Maybe there is some reason the government doesn't want to have that mechanism there. I'd be interested in hearing why they don't want it there.
Mrs Johns: I'd just like to say two things. I stand with what I said before, but we believe, of course, that accountability will come if people decide to stay with Genco or Servco or to move on to different companies. The accountability we're looking for to protect our people in the province of Ontario will come as a result of their decisions on where they'll purchase their power and what they'll do.
The second thing that's important to recognize is that for the first time in history, a government has introduced an independent regulator to regulate Ontario Hydro. Those people are there. They have a job to do. Hopefully, the legislation is such that the Ontario Energy Board has the power to control them. That's what we intended; that's what we have in place. The accountability, from my perspective, is totally there.
Mr Conway: The member makes a good point that this is a new scheme and that we are going to a competitive marketplace where we're not going to have the monopoly, so we are going to have a different kind of energy board. Quite frankly, there was a time when Hydro wasn't a monopoly and we did have competition, and there was no regulator. She makes a point, and I think it's a good point.
But as Mr Laughren observed when he was at the committee, they're going to be regulators but they are going to work within a certain framework. If the member has forgotten, and I'm sure she hasn't, the intention of the government is certainly to put the regulator in a policy framework. That's an issue we will debate later on. It's not as though the regulator is just going to operate without direction -- that's according to your own bill -- and the direction to be decided as prescribed in the regulations.
So let's not be too precious about just how the regulator is going to operate. You're absolutely right that the regulator is going to have, for the first time, some real and significant powers, and I think that's a good thing, a very good thing. But the policy environment in which the regulator is going to do business is not something that in the main the regulator is going to establish.
To come back to Mr Lessard's comment, I'm a former government House leader and I can think of a couple of very good reasons why you wouldn't want to do this, but it would be all to do with my concerns as a minister of the crown. My responsibilities are not as a minister of the crown at this point; I'm a member of the Legislature and I've got responsibilities to the broad public. The interests of the cabinet are not always the interests of the Legislature. It comes as a big surprise to people, but it's reality. It used to be that in our system of government if you were a member of the Legislature or of Parliament, elected, and you were asked to join the cabinet, the first thing you had to do was resign and go and get a new sanction to sit in the executive council. It's just an old point to make the point that the two functions were different and sometimes contradictory.
The cabinet will set a potentially very sweeping range of policy for the regulator to follow. We'll talk about that later. But it's hard to imagine a more critical policy for the economic and social well-being of the public of Ontario than energy and electricity. I just make a very radical move to suggest that maybe the Legislature might have some ongoing involvement on an annual basis to review. I don't know whether it's my amendment or Wayne's amendment that talks a bit about -- I guess it's that the standing committee's function would include consideration of the reports of the various -- Genco and Finco and whatever else.
But, listen, it's no big deal. Compared to the other things in this bill -- trust me -- this is a second-tier concern.
The Chair: Further questions or comments? Seeing none, I put the question. Shall this amendment carry? All those in favour? Opposed? It's lost.
The next amendment is an NDP amendment.
Mr Lessard: I move that the Electricity Act, 1998, as set out in schedule A of the bill, be amended by adding the following section:
"Reports referred to standing committee
"2.1(1) Every report made by the IMO under section 20 or 21, by the generating corporation or the services corporation under section 49 or 50, or by the finances corporation under section 75 or 76 shall be tabled in the assembly and referred to a standing committee of the assembly.
"Report to assembly
"(2) The standing committee shall consider the report and make a statement of its findings to the assembly within 90 days after the report is tabled."
This is a similar amendment to the previous Liberal amendment that comes as a result of Mr Frame's presentation before our committee hearings. He was a very knowledgeable fellow with a great deal of experience in the Ministry of Energy for the Ontario government. I think that is experience that we should pay some credence to. He has seen a lot happen in Ontario Hydro over the years and I think we can benefit from that experience when he says that perhaps you should have a legislative committee look at the generating corporation and the services corporation operations after Bill 35 comes into force. This amendment would allow for public debate on electricity policy on a regular basis, and on the performance of the system of competition.
Not to repeat my previous remarks, this is a major shift in public policy and it is incumbent upon us as legislators to ensure that the benefits that have been stated as a result of this change in policy -- and those are the same ones we've been debating previously, that is, to promote competition and low-cost energy and to protect the environment. It's incumbent upon us to ensure that those objectives are achieved and, if they're not, to know why not and to be accountable for this policy change.
I understand the parliamentary assistant's remarks that the accountability is going to be through market forces. I have a real concern about that. I don't think it works effectively all the time. I don't want to see the role of us as legislators being diminished to the point where we turn over all of our powers to the marketplace and give up our ability to regulate and hope that what the marketplace determines is going to be good for all consumers. I don't think the market works that way. The market is a very ruthless force, and there are some people who win as a result and some people who lose. The people who are the losers are generally people who are the disenfranchised or the persons without the resources or the finances to defend themselves. That is the reason we do the job we do, to serve that public, to provide protection for those people who find it difficult to protect themselves in a completely market-based environment. This provides some level of accountability at the legislative level to ensure that benefits as they've been set out in this legislation are achieved.
Mr Conway: I'm not going to repeat the previous argument. I'll support this. It's obviously not going to go anyplace. It just reminds me of the need for a good old minority Parliament. The committee system, in my experience, is not much good unless you've got a minority environment -- and I say that of all governments -- because there's this tyrannical instinct in all Ontario cabinets. Trust me, if we ever get to another time of a minority Parliament, we'll get this and it will be very useful for all concerned.
The Chair: Further questions and comments? Seeing none, I put the question, shall this amendment carry? All those in favour? All those opposed? The motion is lost.
Questions or comments on schedule A, section 3? Seeing none, shall section 3 of schedule A carry? All those in favour? Opposed? It carries.
Schedule A, section 4: We have a Liberal amendment proposed on page 11.
Mr Conway: Can we just put the question? We know the result.
I move that subsection 4(1) of the Electricity Act, 1998, as set out in schedule A of the bill, be amended by adding the following clause:
"(h) to promote lower-cost electricity for all consumers."
Mrs Johns: I believe in this case that the legal department that was used by the Liberals has misinterpreted Mr Conway's intent here. This section is dealing with the Independent Market Operator, and the Independent Market Operator, as I see it in my world, is like a stock exchange: They bring together demand and supply, but they don't have any role in price-setting, if you will. So I think this section isn't what Mr Conway intended to have happen. I just wanted to understand if that was the case or if I'm missing something on it.
Mr Conway: I appreciate that. I sent a memo to those worthies in the legislative drafting world. If in fact this attaches to the IMO -- does it?
Mrs Johns: It's in section 4, and 3 and 4 are the IMO.
Mr Conway: Let me withdraw it. We've had the debate and I'm not going to waste time.
The Chair: It's withdrawn, then. Any further questions or comments on schedule A, section 4? Seeing none, shall section 4 of schedule A carry? All those in favour? Opposed? Carried.
Schedule A, section 5, questions or comments? Shall section 5 of schedule A carry? All those in favour? Opposed? Carried.
Schedule A, section 6: We have a government amendment on page 12.
Mrs Johns: I move that section 6 of the Electricity Act, 1998, as set out in schedule A to the bill, be amended by adding the following subsection:
"Ceasing to hold office
"(7) A director ceases to hold office in the circumstances specified by the governance and structure bylaw."
The concern in this section is that the Market Design Committee has suggested that the board of the IMO be set up with different stakeholder groups and different individuals who bring expertise to the board of the IMO. In this case, we are concerned that if we put someone in who comes from generation expertise, for example -- in other words, they fit into the section that the Market Design Committee has suggested for a generator of power -- and that person is no longer with a company that's a generator of power, we need the ability to have them cease to hold office in that particular example. This is a recommendation by the Market Design Committee to make sure we have a broad range of stakeholders on the board of the IMO.
Mr Lessard: It's interesting that the government considers our amendments to be redundant but that they come in with things like this one, when in clause 6(2)(b) it says, "At least 10 and not more than 20 other directors appointed by the minister in accordance with the regulations," and 6(6) says, "The minister or the board of directors may remove a director from office for cause." I don't really know what this adds to those sections. I think that power to determine whether a person continues to hold office is already in the bill.
Mrs Johns: A person leaving a position of employment with a generator, for example, is not cause. We have tested that before and we know that to be the case. The important part here is to recognize that we need a wide group of stakeholders to best represent the public. The IMO is charged with responsibility and safety; this is a very important board, so we need to make sure we always have the right people on it to ensure the safety and reliability of power in the province of Ontario.
The Chair: Further questions or comments? Seeing none, shall this amendment carry? All those in favour? Opposed? This amendment carries.
Any further questions or comments to section 6? Shall section 6 of schedule A, as amended, carry? All those in favour? Opposed? Carried.
Schedule A, section 7: Any questions or comments? Shall section 7 of schedule A carry? All those in favour?
On looking further through, we have no amendments up to and including section 14 of schedule A. Any questions or comments on any of those sections? Seeing none, shall sections 8 through to and including 14 of schedule A carry? All those in favour? Opposed? Carried.
Schedule A, section 15, is a government amendment on page 13.
Mrs Johns: I move that clause 15(2)(c) of the Electricity Act, 1998, as set out in schedule A to the bill, be struck out and the following substituted:
"(c) the filling of vacancies in the board, the removal of directors from office by the board and, for the purpose of subsection 6(7), circumstances in which a director ceases to hold office."
This is a consequential amendment as a result of our change to subsection 6(7) that we just discussed.
The Chair: Further questions or comments? Seeing none, shall this amendment carry? All those in favour? Opposed? This amendment carries.
Shall section 15 of schedule A, as amended, carry? All those in favour? Opposed? Carried.
We have no amendments proposed for schedule A, sections 16 through to 24. Questions or comments? Seeing none, shall schedule A, sections 16 through to and including 24, carry? All those in favour? Opposed? Those carry.
Schedule A, section 25, is a government amendment on page 14.
Mrs Johns: I move that subsection 25(5) of the Electricity Act, 1998, as set out in schedule A to the bill, be struck out and the following substituted:
"(5) Subsections (3) and (4) do not apply to a contract for the supply of electricity to a low-volume consumer.
"(6) A contract for the sale of electricity between a low-volume consumer and a person who, at the time the contract was entered into, was not authorized under the Ontario Energy Board Act, 1998 to retail electricity ceases to have effect on the date subsection (1) comes into force unless, after the person becomes authorized under the Ontario Energy Board Act, 1998 to retail electricity and before the date subsection (1) comes into force, the low-volume consumer reaffirms the contract in writing.
"No cause of action
"(7) No cause of action arises as a result of a contract ceasing to have effect under subsection (3), (4) or (6).
"Return of prepayment
"(8) Despite subsection (7), a person to whom electricity was to be supplied under a contract referred to in subsection (3) or (4), or a low-volume consumer to whom electricity was to be sold under a contract referred to in subsection (6), may recover any amount paid under the contract before the day the contract ceased to have effect in respect of electricity that was to be supplied on or after that day.
"Application of subsections (3), (4) and (6)
"(9) Subsections (3), (4) and (6) do not apply to contracts prescribed by the regulations.
"(10) In this section,
"'low-volume consumer' means a person who annually uses less than the amount of electricity prescribed by the regulations."
The Chair: Comments?
Mrs Johns: As a result of the consultation we had, and I especially remember the woman from London Hydro coming to Sarnia and talking about energy marketers already starting to sign up consumers, we have a balance to run here of creating business and also, which is a very important issue, of making sure the consumer is protected.
At this point most of us were very concerned that people were making contract decisions without understanding what the implications were and what the market was going to be like. What we have done here is we have said that for anybody who signed a contract before we're out there talking to consumers, before the consumers really understand what the marketplace is going to be like, we're going to give them a second chance to be able to reaffirm that contract.
We have also said that these marketers should not be out there right now, because they are not licensed to be out there, and we have to ensure that they get their licence first to be able to sign up people.
This is the height of protecting the consumer, and I think it's a very good way to start off the electricity market, with as many people as possible understanding all the implications of the marketplace.
The Chair: Further questions and comments?
Mr Lessard: A couple of the reasons that we have public hearings are, first of all, to give people an opportunity to provide input as to how they feel about government policy and legislation. Secondly, it gives people an opportunity to point out where there might be screw-ups in the bill as a result of the haste with which the government has gone through this exercise.
This is one of those sections, where I think subsection (5) corrects an error that would have led to the automatic cancellation of all contracts between consumers, MEUs and Hydro. I know that was an inadvertent oversight; that wasn't the intention of the government. Because of that, that was something that was pointed out during the time period after the bill was introduced and the time that people had an opportunity to provide some input into the legislation. So the committee hearings are a useful exercise, and I would hope the government considers some of the amendments that we have been putting forward, and will continue to put forward, as the result of the comments that we heard from people as well.
I'm going to support this amendment for one very good reason, and that is that it does enhance consumer protection. I think we may have an amendment that is similar in nature in a different section of the bill which we may not have to go forward with to treat the issue of consumers who sign contracts with brokers prior to the proclamation of the bill. We know there are a lot of unscrupulous brokers who are out there, or will be out there, trying to take advantage of consumers who may not know better. They may not ever know any better if the government doesn't decide to undertake, or require the undertaking of, some consumer education program, which we've also asked that they undertake, because we feel that's an important consumer protection mechanism also.
We think it's a good idea that any contracts that have been signed by consumers before the date that the legislation comes into effect be voidable, and I'm going to be supporting this amendment.
The Chair: Further questions and comments? Seeing none, I put the question, then. Shall this amendment carry? All those in favour? Carried.
Any further questions or comments on section 25?
Shall section 25 of schedule A, as amended, carry? All those in favour? Opposed? It carries.
Schedule A, sections 26, 27 and 28 have no amendments proposed. Questions or comments?
Shall schedule A, sections 26 through to and including section 28, carry? All those in favour? Opposed? Carried.
Section 28.1 is a new section. It's a government amendment on page 16.
Mrs Johns: I move that the Electricity Act, 1998, as set out in schedule A to the bill, be amended by adding the following section:
"Allocation during emergencies, etc.
"28.1(1) If the supply of electricity to a distributor is interrupted or reduced as a result of an emergency or a breakdown, repair or extension of a transmission or distribution system, the distributor may allocate the available electricity among the consumers in its service area.
"No breach of contract
"(2) An allocation of electricity under subsection (1) shall be deemed not to be a breach of any contract."
This section was suggested to us by the MEA and the municipal commissions that came before us. They were citing the example of the ice storm and the tough decisions that had to be made, as a distributor, about how to provide electricity. We have given them the opportunity to be able to do this so that things like hospitals and necessary institutions could be given power first.
The Chair: Further questions or comments? Seeing none, shall this amendment carry? All those in favour? Opposed? This amendment carries.
Going on then to section 29, schedule A, a government amendment on page 17.
Mrs Johns: I move that section 29 of the Electricity Act, 1998, as set out in schedule A to the bill, be struck out and the following substituted:
"Termination of service
"29(1) A distributor may shut off the distribution of electricity to a property if any amount payable by a person for the distribution or retail of electricity to the property pursuant to section 28 is overdue.
"(2) A distributor shall provide reasonable notice of the proposed shut-off to the person who is responsible for the overdue amount by personal service or prepaid mail or by posting the notice on the property in a conspicuous place.
"Recovery of amount
"(3) A distributor may recover all amounts payable despite shutting off the distribution of electricity."
What we are concerned about here is that we changed the word "rate" to "amount" in subsections (2) and (3) and we cross-referenced this to section 28, "pursuant to section 28." The MEA came before us and suggested that there was a concern with default suppliers and the non-payment of bills.
The Chair: Further questions or comments? All those in favour? Carried.
Further questions or comments to section 29? Shall section 29 of schedule A, as amended, carry? All those in favour? Opposed? Carried.
Schedule A, section 30, we have a government amendment, page 18.
Mrs Johns: I move that subsection 30(2) of the Electricity Act, 1998, as set out in schedule A to the bill, be amended by adding the following clauses:
"(a.1) governing the conveying of electricity into, through or out of the IMO-controlled grid and the provision of ancillary services;
"(b.1) authorizing and governing the giving of directions by the IMO, including,
"(i) for the purpose of maintaining the reliability of electricity service or the IMO-controlled grid, directions requiring persons, within such time as may be specified in the direction, to synchronize, desynchronize, increase, decrease or maintain electrical output, to take such other action as may be specified in the direction or to refrain from such action as may be specified in the direction, and
"(ii) other directions requiring market participants, within such time as may be specified in the direction, to take such action or refrain from such action as may be specified in the direction, including action related to a system emergency."
What we heard when we went to the IMO was that they were to be charged with reliability and safety. The IMO felt that this section wasn't clear enough to make sure that power was being dispatched. So this section was put in there for the IMO.
The Chair: Questions or comments? Seeing none, shall this amendment carry? All those in favour? Opposed? Carried.
The next amendment is also a government amendment, found on page 19.
Mrs Johns: I move that subclause 30(2)(c)(i) of the Electricity Act, 1998, as set out in schedule A of the bill, be struck out.
This section was moved to 30(2)(b.1)(ii).
The Chair: Questions or comments? Seeing none, shall this amendment carry? All those in favour? Opposed? It carries.
The next is also a government amendment, on page 20.
Mrs Johns: I move that subclauses 30(2)(c)(iii) and (iv) of the Electricity Act, 1998, as set out in schedule A to the bill, be struck out and the following substituted:
"(iii) authorizing a person to participate in the IMO-administered markets or to cause or permit electricity to be conveyed into, through or out of the IMO-controlled grid, or
"(iv) terminating, suspending or restricting a person's rights to participate in the IMO-administered markets or to cause or permit electricity to be conveyed into, through or out of the IMO-controlled grid."
In this section we wanted to ensure that when we were talking about the IMO's responsibilities, we were sure that a bilateral contract, which I think everyone knows is a contract between two persons to buy and sell power, was going to go through the IMO grid, that there was going to be some accountability within the IMO for the bilateral contract so that everyone knew what kind of power was being moved throughout the province.
The Chair: Further questions and comments? Shall this amendment carry? All those in favour? Opposed? This amendment carries.
The next one also is a government amendment. This is found on page 21.
Mrs Johns: I move that subsection 30(4) of the Electricity Act, 1998, as set out in schedule A to the bill, be amended by striking out "any orders" in the second line and substituting "any directions or orders."
What we're trying to do is to ensure that the regulatory act cannot interfere with or does not apply to the directions or the orders made by the IMO.
The Chair: Further discussion? Seeing none, shall this amendment carry? All those in favour? Opposed? This amendment carries.
Further questions or comments to schedule A, section 30? Shall section 30 of schedule A, as amended, carry? All those in favour? Opposed? This section carries.
Schedule A, sections 31, 32 and 33 have no amendments. Is there any discussion or comment on those sections? Seeing none, shall sections 31, 32 and 33 of schedule A carry? All those in favour? Opposed? They carry.
Schedule A, section 34, a government amendment found on page 22.
Mrs Johns: I move that clauses 34(1)(b) and (c) of the Electricity Act, 1998, as set out in schedule A to the bill, be struck out and the following substituted:
"(b) denies the person authorization to participate in the IMO-administered markets or to cause or permit electricity to be conveyed into, through or out of the IMO-controlled grid; or
"(c) terminates, suspends or restricts the person's rights to participate in the IMO-administered markets or to cause or permit electricity to be conveyed into, through or out of the IMO-controlled grid."
In this section what we are ensuring is that the IMO powers extend to individuals with bilateral contracts. Also, if people feel they have been wronged, they have an appeal process through the Ontario Energy Board.
The Chair: Questions or comments? Seeing none, shall this amendment carry? All those in favour? Opposed? This amendment carries.
Further questions and comments on section 34? Seeing none, shall section 34, as amended, carry? All those in favour? Opposed? It carries.
Section 35, schedule A, a government amendment found on page 23.
Mrs Johns: I move that subsection 35(1) of the Electricity Act, 1998, as set out in schedule A to the bill, be amended by adding at the end "or the conduct of a market participant."
This is a consequential amendment that's referring to the market participants we talked about in, I think, section 2 of the act. What we're trying to ensure is that all market participants are covered under the IMO and only those people have the ability to use the grid.
The Chair: Further questions or comments? Seeing none, shall this amendment carry? All those in favour? Opposed? It carries.
Any further questions or comments on section 35? Shall this section, as amended, carry? In favour? Opposed? This section is carried.
There is no amendment proposed on section 36. Questions or comments? Shall section 36 of schedule A carry?
In favour? Opposed? Passed.
A new section proposed, 36.1, by the government, on page 24.
Mrs Johns: Is this not the Liberal motion here at 36.1 and 36.2?
The Chair: My apologies. We've got an error in our writing. Sorry, it is a Liberal motion. Mr Conway, sorry.
Mr Conway: You're doing a stellar job, Madam Chair, under difficult circumstances, so I commend you for your fortitude.
I move that the Electricity Act, 1998, as set out it in schedule A of the bill, be amended by adding the following sections:
"Hearing re market issues
"36.1(1) The board shall hold a public hearing to determine,
"(a) whether market power has been or is likely to be abused; and
"(b) whether market dominance has prevented or is likely to prevent some or all customers from gaining benefits that could be achieved.
"Hearing an additional requirement
"(2) The hearing is required whether or not the Market Surveillance Panel acts under section 35 and whether or not the panel makes recommendations described in subsection 36(1).
"Time for hearing
"(3) The hearing shall begin after the second anniversary of the coming into force of section 3 but before its third anniversary, and shall be completed by March 30, 2003" -- my goodness, it sounds millenarian already.
"Time for report
"(4) The board's report on the hearing, which may include any recommendations that the board considers appropriate, shall be made public within 60 days after the hearing is completed.
"(5) The government of Ontario and the Generation Corp shall each respond to the report and shall make their responses public within 60 days after the report is made public.
"Additional powers of board
"(6) On the completion of the hearing, the board may amend a licence or make an order in the same way as on the completion of a review under subsection 36(2) or (3).
"Further hearing, disaggregation of generation facilities
"36.2(1) After the responses of the government of Ontario and the Generation Corp have been made public under subsection 36.1(5), the board may hold a further hearing,
"(a) to determine whether the Generation Corp should be required to divest itself of a proportion of its generation facilities; and
"(b) to determine what the proportion should be.
"(2) On the completion of the hearing, the board may make an order requiring the Generation Corp to divest itself of a specified proportion of its generation facilities and may give all necessary directions in that connection."
This, colleagues, is for me an important aspect of the critical debate around market power. In fact, the genesis for this amendment arises out of testimony advanced by everyone from the MEA, the consumers' association, AMPCO and a number of other individual utilities like Lincoln and Pelham, two that I just made a note of.
I take my lead here from the consumers' association, which I thought really gave us a very good brief. They reminded us that residential consumers consume 70% of all electricity in the province, and they are really very much at sea with this, particularly if they don't get the protection of the board. I won't bore you with the details, but looking at it again I was struck by some of the language, reading now from the consumers' association presentation to us here at Toronto. Who'll ever forget the way poor Mr Dyne was cross-examined by the ever-charming member from Scarborough.
Can you imagine what the nuns would have done with Mr Gilchrist had he performed like that in front of -- Anyway, I gather he spent some time at the Robert Land Academy, and I'm not surprised.
Mr Conway: Well, think about it.
Mr John R. Baird (Nepean): We don't want to.
Mr Conway: I know.
The Chair: Perhaps we should turn our attention to the matter --
Mr Conway: He's not here and I shouldn't say it in his absence, but that was pretty remarkable.
Mr Baird: You're scaring us.
Mr Conway: I don't know that there's much to laugh about. If I were a citizen and I came to this committee and one of my elected officials treated me that way, I'm going to tell you it wouldn't be very pretty, what I would contemplate doing, and it probably wouldn't be Marquess of Queensberry Rules either.
"This committee must understand," said Peter Dyne of the Consumers' Association of Canada, "that the process of working out those details can and will be captured by those with an economic stake in the" form and content of the "restructured energy market. Those entities do not have the interests of residential consumers at heart. The inevitable result...is that there will be more devil in the details than residential consumers would like." That's just one citation from the brief.
Market power is a very real concern of mine, because it is abundantly clear that someplace between Macdonald and the white paper the government made a sharp change in direction. They did not do as Macdonald warned had to be done as a precondition to effective competition. That's a dramatic development in this whole story. It is an important development because it speaks to that part of the marketplace where the bulk of the savings has got to occur. This lack of competition, this market power issue, is aggravated by the fact that the sole shareholder going into the competitive marketplace is going to be the government of Ontario. Ernie Eves and Bryne Purchase, or whoever is over there running that ship, has a vested interest that is not going to be in the interests of residential consumers, particularly around market power questions.
The policy contemplates that the successor companies are going to go out, Genco especially, and be aggressive in the marketplace, that they're going to pay taxes and dividends. I understand that, but you can appreciate how that could lead a residential consumer to think, "Whose interests are going to be served here?"
The point I'm getting at with this amendment is quite straightforward. The amendment essentially requires the following: that sometime, probably two, two and a half years into the competitive marketplace, the regulator shall hold a public hearing to look at whether or not in the view of the regulator, my protector, if I'm a residential consumer -- remember what Mr Dyne and his colleagues said.
AMPCO comes in beating its breast, saying they are representative of the major power consumers. Seventy percent of the power in this province is consumed by the millions of residential and farm customers. Because they are so small and so individual, they do not have the kind of protection, save and except the energy board. For me, as a residential or farm customer who's hoping and praying for a fair deal and reasonable treatment, my protection in this is the energy board.
I'm going into this concerned about market power. The concern may be misplaced, but it's hard to go in feeling very positive since there is a lot of literature and testimony saying that the way to get the competition is to disaggregate the giants going in. We haven't done that, and we're going to do some other things as yet to be determined. So market power may very well mean that some of the big players, including the Ontario government, which has a very real financial interest -- remember, it's going to be the sole shareholder of Genco. It's going to expect a rate of return. It's going to expect dividends. One could very quickly imagine how the interests of the sole shareholder would lead to some decisions around the behaviour of Genco that very well might not be in my interests as a residential consumer.
I thought the fair thing to do here was -- and not right away. I think the market has got to be given the time to evolve, but sometime two or three years out, not later than March 30, 2003, a hearing must be held by the regulator to assess whether or not there is, or there appears to be, an abuse of market power by Genco. Let's not kid ourselves. If there isn't, there is no problem. If there is, the board is empowered to give some direction around the mitigation of that market power.
I think it is a very reasonable point. It's a very reasonable amendment, particularly if you believe that the broad base of residential and farm consumers have a right to some reasonable protection around what anyone who's looked at the deregulation of the electricity marketplace would tell you is one of the critical questions, namely market power. Since these discussions -- I read from Osborne and Farlinger and others that this isn't going to be a mom-and-pop operation. This is going to be about big boys and girls with 20,000 and 30,000 megawatts of power to bring to the table. If they're right, and they may be, all the more reason why I want the regulator making an assessment openly and dispassionately around market power. It has to be the regulator. I'm quite prepared to say it ought not to be the Legislature, but it cannot be the government. The government is in a conflict of interest here, not just this government, any government, under this proposition.
Market power, the potential abuse of market power, is a critical question for ratepayer protection, particularly for residential and farm consumers. This I think very reasonable amendment is offered as a straightforward effort to bring some transparency to the market power issue, particularly two or three years into the working of the competitive marketplace. It may be that there is no problem, in which case that will be the report of the board and it's quickly disposed of. But in the event that the regulator determines that there is market power working against the interests of consumers, then the amendment contemplates that the board has some power to order a mitigation of that.
Mrs Johns: I first of all just want to say that I don't quite buy that the Minister of Finance or the government of Ontario isn't concerned, as a shareholder, as you said, but more importantly, for the residential consumers in Ontario. They elect us all and we certainly, hopefully, represent them and are concerned about them.
What I'd like to leave with today so that you can consider this is that we believe the Ontario Energy Board has these powers at this present time. We're concerned about abuse of market power. That's of course why the Market Design Committee has been working on this for their last report.
Let me just draw to your attention that the bill contains authority for the minister to be able to direct the Ontario Energy Board to undertake such a hearing, which I understand doesn't give you very much comfort. The board can also enter into a hearing as a result of a policy directive from the government, a complaint by any person or a complaint or a request to the Market Surveillance Panel to look into this issue. So we have three different alternatives there, and two of them are not government-directed. Any person who feels that they've been slighted as a result of abuse of market power -- and the Market Surveillance Panel, which is part of the IMO, of course.
What's important to recognize is we think that this monitoring of market power is going to happen on day one and continue throughout the process. We think we have this in here in a much stronger way than you do, where just at the end of three years we start to look at this. Any generator who feels they've been slighted as a result of market power from Genco could ask the Ontario Energy Board to investigate that. So I think we have this in a much stronger way that starts on day one and doesn't just have some magic date on it, where in 2003 we start to look at that. This is an issue that we're concerned about today. We're going to be concerned about this all the way through the process. I will get you those sections if you'd like to have a look at them.
Mr Conway: I appreciate the member's point, and she's right. This is an important point for me. I do not take any comfort from the directive power of the minister, both because, as I said the other day, I can imagine the fighting that is going on, and that will go on, inside government between finance and energy. Those will be the ugliest, nastiest, dirtiest fights of all. When finance is finished with him or her, if the Minister of Energy is alive to drag his or her feet and posterior down to some regulator, I'll be surprised. Les knows of what I speak, if no one else does. I won't embarrass him by asking for any stories, but the landscape is littered with these kinds of battles.
I would have much less worry if I had players who were purporting neutrality but who clearly have an interest. Good God, if anything is clear, the Minister of Finance has real interest. I understand that. I've said to you before, I played a lot of sports in my day and I always like an umpire who has no interest in the result of the game. This is a referee with a huge interest in the result of the game and a very real control over some of the rules of the game. We've got this problem with market power going in. If we had what Macdonald recommended, I'd be a lot less concerned if, going into this, we were doing what Don Macdonald and Darcy McKeough and company suggested two and a half years ago.
Remember what they suggested? They suggested that in the first instance, but as a fundamental first instance, there ought to be a disaggregation of the current Genco into three, four or five competing public companies. I'll tell you, if we had that going in, I would be a lot less concerned, but we don't have that. Everybody knows, going in -- Osborne keeps saying it -- we've got 86% of the market power. Once this market is opened up, these two new companies, but particularly Genco, have one shareholder, and the shareholder is going to have a variety of interests.
I can't imagine there's going to be anybody over there who imagines they're going to be doing things that are completely antithetical to the public interest, but they may be thinking about the public interest in the intermediate and longer term. The Minister of Finance will always be looking at and worried about his cash flow, his financial situation. He's now got his hands on something that is going to produce some very real cash through a variety of means: dividends, taxes or payments in lieu of taxes.
Going back to Dr Galt's point that with this policy, it's hard to imagine rates going up, I say again that if the government decides that, for example, the only way an MEU is going to purchase Servco distribution or retail assets is at market values, let me tell you that is a critical point that will drive rates up. It has to. Similarly, you've got to borrow the money. If I'm going to buy it, and I'm going to buy it at $40 million, not at $10 million, I've got to borrow that extra $30 million. I can certainly borrow it and I can finance it, but those financing charges have got to go on rates. There's no place else to put them.
On market power, if I am looking at this and saying, "I'm going in now and I'm the principal shareholder" -- I won't be the only shareholder after a short while, I can assure you of that. That's where Mr Lessard may get really nervous. Trust me, you're not going to be the only shareholder, but you're going to be the big shareholder for some time. I'm telling you that, particularly if the economy starts to behave in an unexpected way and you start to get into choppy waters, what do you think you're going to do? I've been around finance departments long enough to know what their first, second and last instincts are going to be: "Dividends, payments in lieu, you crank them out fast. Get them in here." That has an implication on rates, particularly on the broad base of rates, because that's the place you'll get the most money for the least apparent impact.
Remember, 70% of power is consumed by I don't know how many millions of residential and farm customers. I'm one of those customers. I'm from Missouri. I want some protection, and I really want some protection around market power, particularly because of the design of this policy going in. I don't think it is unreasonable to say to that farmer or apple grower in Northumberland, "We're going to ask those smart people at the energy board just to make sure."
I've written this so that it's not on day one. You're absolutely right; I expect it's going to take some time to get moving. If I've been too generous, tell me, we can amend it, but I want to be reasonable. I just think that the member made the point a while ago, and she's right, that we're giving the OEB, the regulator, significant new powers, and we're giving those powers because we've got now a market that we want to work largely on market forces. We don't want it to be unduly manipulated by the politicians of whatever stripe. I understand that. So if that's going to work, I am going to put my faith in the independent regulator. Some of these other groups are all well and good, but I'm from Missouri and I'm going to take my chance with the apparent free-standing regulator.
If other people want to get involved and have some ancillary activities around this question, fine. But because of my concern that this policy works to the advantage of all customers, especially residential and farm customers, I think we owe it to them, given the clear concerns about market power going in, given the fact that the government rejected, for whatever reason, the Macdonald committee's recommendations around disaggregation, given the fact that because the government will be the sole shareholder in the successor companies and because they will be thirsty for money and they'll get their money through dividends and other special payments, and that will lead to a conflict of interest that may very well not work in the short and intermediate term to the benefit of residential and farm customers, millions of them, as they are.
I think it is a very modest and reasonable proposal to suggest that this newly empowered independent regulator be given the opportunity two, two and a half years into the operating of this new market to have a hearing, to hear from all players: Is there a problem? Does there appear to be an imminent problem around market power? If not, no problem. If so, give them some opportunity to mitigate that in the public interest, especially the consuming interest of those millions of residential and farm customers.
The Chair: Further questions or comments?
Mrs Johns: We're over the limit. I understand your discomfort with the government, but I want to once again reinforce in clause 73(1)(b) we talk about the Ontario Energy Board being able to go in in the public interest. In subsection 73(3) we talk about the Market Surveillance Panel being able to request that the Ontario Energy Board look at these. This starts on day one and moves through. I asked you to consider that because I think what has been put in the bill is a stronger opportunity than what you're suggesting with a review in three years.
Mr Conway: You know that we have testimony from people like Energy Probe and others who were very concerned about the fact that some of those provisions to which Mrs Johns has just made reference comes after the significant, sweeping directive powers that the government has given itself around policy issues to guide the regulator.
I can say this more easily than you. I went ballistic here about five or six years ago when the then government of the day in the old Bill 118 sought to give itself pretty significant new directive powers. If you believe in the market, you've got to take the market and you've got to put some kind of arm's-length regulator. That's what I thought we were doing.
I look at the OEB sections of this bill and I see the directive power the government seeks to give itself in framing the policy environments in which the OED's got to work. Given the conflict of interest in which the government finds itself because of the kind of initial structure it wants to have, I think the public, the residential and farm customers, need a clearer, firmer protection around the potential abuses of market power for that reason and I think this amendment gives it to them.
Mr Baird: I think the member for Renfrew North has made some thoughtful comments on this. I think we're all certainly concerned about the market power it's going to have.
Given the time on the clock, perhaps we could have until the next meeting to reflect on his thoughts and vote on it at that time.
The Chair: Okay. It is six o'clock so we will adjourn and reconvene on Monday.
The committee adjourned at 1804.