The House resumed at 8 p.m.
ONTARIO HYDRO AFFAIRS
Consideration of the October 26, 1978, report of the select committee on Ontario Hydro affairs.
Mr. MacDonald: Unaccustomed as I am to addressing such absent audiences, Mr. Speaker, I shall nevertheless proceed.
Honourable members will have noted that the report, which I trust has reached each of their desks, deals exclusively with the construction of the heavy water plants at Bruce. The select committee on Ontario Hydro affairs has done other work and has not yet completed its original terms of reference; there will be a further interim report within a few days outlining that and seeking permission to extend the time so that we can complete our terms of reference.
Honourable members may also recall that the issue of the heavy water plants at Bruce originally was referred to this select committee because there was great public interest and concern about the size of the overruns in the construction of those plants.
Interestingly enough, indicating the dynamic of the situation, by the time the committee got around to considering the matter there was an equally if not more important matter -- certainly it’s more urgent, looking to the future rather than trying to review what had happened in the past -- namely, the whole question of supply and demand. It was discovered that, through the drop in electric power consumption in Ontario, we had a greater capacity to produce than our needs would require. The same kind of situation had emerged at the federal level in connection with Atomic Energy of Canada Limited production of heavy water. Therefore, there was the real prospect that we were going to have heavy water running out our ears, so to speak, and exactly how were we going to cope with that kind of situation?
Members might recall, if they haven’t had time to refresh their minds by reading the report as yet, that the situation at Bruce is that heavy water plant A was built originally by AECL and then was bought, and is now being operated, by Ontario Hydro. Heavy water plant B is just about completed, is in the process of being commissioned and during the year 1979 will be coming into production. Both of these plants are producing at something better than earlier heavy water production records and premise to be a real source of provision of this rather vital material for the generation of electric power from nuclear sources.
Heavy water C was a plant that was commissioned early in 1975 and then cancelled about six months later. I want to come back to that because it’s relevant to one portion of our report. Finally, and most important for the key recommendation and concern of the report, is heavy water plant D, a plant which is now 50 per cent completed -- a little better, I suspect, by this time. After careful consideration of the whole supply and demand situation, the staff of the committee recommended we should urge immediate cessation of construction and mothballing of the plant because there is no prospective need of that heavy water through to about the year 1990.
The majority of the committee came up with a compromise: that we should stop and store one half of the plant; that we should complete the other half of the plant, and that will be done by the year 1982. At that time, in light of circumstances, we could assess whether or not it should be commissioned and put into production, or whether it too should be mothballed.
In other words, the majority of the committee is in favour of completing only half of plant D. The dissenting members of the committee from the New Democratic Party said that in view of the recommendation from our staff that we wouldn’t need it until 1990 we should stop and store the whole of plant D and not proceed with it at the present time.
I want to deal with one rather unfortunate, to my mind, aspect of the public business related to this committee. We have conducted our affairs openly. In other words, there have been no in camera sessions. Even as we moved towards consideration of draft reports everybody knew what was in the minds of the committee and what differences there were. Everybody knew some weeks ago what the recommendation of the staff was and a week or two after that what the majority recommendation of the committee was.
In spite of that fact -- or conceivably because of that fact -- the minister has moved to reject the recommendation of the committee. Speaking in Hanover some weeks ago, the new Minister of Energy (Mr. Auld) stated that plant D should be completed in total. In other words, he has dismissed the carefully considered conclusion that was the majority report of the committee. To the extent there was any divergence from that majority report it was to the effect that we shouldn’t build any of the plant; not half of it, none of it.
The reason I regret this kind of development is that, without drawing any invidious comparisons between the kind of working relationship or tension that has existed between select committees that were working on rather high profile and political issues, I think this committee in the last three years of its operation -- in its original incarnation and then being set up again a year ago has had very good working relationships with the government.
I remind the House that in 1975 the committee was first set up because Hydro had indicated it wanted to have a rate increase for 1976 of 30 per cent. There was such a public outcry that Hydro voluntarily reduced it to 25 per cent. Even with that reduction the government saw fit to refer the issue of the 1976 rate increase to the select committee for further review. I personally always was of the view that if they did that it was because they too felt perhaps another reduction was possible and was defensible.
The committee examined the situation with the greatest of care and it came in with a recommendation that it could be reduced marginally further, at least to 22 per cent. That was immediately accepted by the government.
Secondly, the committee said it was impossible, examining a proposed rate increase in the months of November and December in any year for the following year, to do anything what might be deemed to be an excessive rate increase. At that point all the costs were locked in. The recommendation of the committee was that we should have extended terms of reference to examine the whole Hydro system, because it was only through such an examination that we might come to conclusions as to how costs could be lessened before they were locked in and therapy do something about the rather hefty rate increases that have characterized recent years.
In the second report of the committee there were some 38 or 40 recommendations, 30 of which were accepted by the government totally and five or six of which were accepted with relatively minor revisions. Only on one did the government desist and not accept. That was the question as to whether or not the Hydro system was unnecessarily large.
I remind the honourable members of the House that the name of that report was 4 New Policy Direction for Ontario Hydro. The basic thrust of it was that if we were going to do anything about reducing rates we should examine -- because we came to the conclusion that it merited an examination -- a slowdown in the expansion of the Hydro system. It was clear even at that point, though Hydro and the government have taken a long time to recognize it was clear, that hydro-electric power consumption was going to drop and therefore with all of the eight or 10 or 12 or 14 years’ lead time we were building more generating capacity than we needed.
The committee, if anything, was very prophetic. I remind the House -- and this is maybe the key point for consideration of honourable members and the public at the present time -- Ontario Hydro at this time has a productive capacity which is 44 per cent greater than its needs in the peak consumption period of the year. In other words, it has a generating capacity to produce electricity 44 per cent in excess of its needs in the peak period of the year, which is usually at some point in the winter. For the rest of the year it’s more than 44 per cent. Indeed, the projections are that in the year or two or three that lie ahead that excess capacity over the peak consumption period of the year is going to grow from 44 per cent to something over 50 per cent.
In other words, we have a generating capacity that’s far greater than we need. We’ve built it; we’ve paid for it; it’s now calculated and factored into the rate structure.
What are we going to do about this? I think honourable members are generally aware of what we’re trying to do with it. Last year we sold power to the United States and we made a “profit” of something over $100 million. The rate increase for the year was nine per cent. Because we were able to sell that excess power, we were able to reduce the rate increase during the course of the year down to about two per cent.
This year, Hydro has asked for a rate increase of 10 per cent. It says if it is able to sell this excess power at profit then that will be applied to the rate increase and it will be reduced to a figure which at the moment we can only speculate about.
One of the arguments I find that Hydro and proponents of the Hydro approach are advancing more and more, is that it’s a good thing to produce this excess power, we’re making a profit. But we’re gambling. We may not be able to sell it; we may not be able to make a profit to pay for the excess generating capacity that is in there and factored into our rates at the present time.
Indeed, the government has said to Ontario Hydro that it should seek markets in the United States for this excess power, and Hydro is trying to seek those markets to reduce its excess capacity down to about 30 or 32 per cent.
I pause for a minor digression. Hydro has always argued that it needs an excess generating capacity of 30 per cent as a reserve margin for what are known as planned and unplanned outages -- when they’re maintaining the plants and they have to shut down, or if they happen to have an emergency.
I remind the House that in 1974 the energy board suggested that that 30 per cent figure was too high, that 25 per cent was adequate. Indeed, they said a study should be made to see whether that reserve capacity shouldn’t be reduced to 20 per cent as is the general rule in the United States.
However, I return from my digression. Even if one forgets that possibility that reserve capacity could be reduced to 25 per cent or even 20 per cent, and accepts Hydro’s contention they need 30 per cent, that means they are now producing 15 per cent more than they need even for their conservative, cautious calculation of a necessary reserve. That 14 or 15 per cent is going to rise to something over 20 per cent. So they’re scrambling for markets in the United States.
Again I remind the honourable members that the legislation under which Hydro operates states that it shall produce power not for export but only to meet domestic needs, and it exports only what it happens to have as surplus. We’ve now got a surplus that is certain for so long that Hydro is going to be in a position to seek what in effect are going to be firm contracts for a number of years -- in effect a back-door violation of the statute under which they’ve operated; and incidentally the government has urged them to do it, as is wise since we’re stuck with this excess capacity.
So the key point -- and it was the key point that was spelled out in this report when it said, “We need a new public policy direction for Ontario Hydro” -- is that we’ve got to examine the Hydro system and recognize the fact that it is unnecessarily large, and because it is unnecessarily large it is costly and that cost is built into the rate structure and we have to pay for it.
Let me return to a point that I mentioned in passing a few moments ago about plant C. Because of Hydro’s projections in 1974 of what their new nuclear generating component was going to be -- and it was a projection on the base of Hydro’s traditional, historic estimate that the increase in consumption each year was going to be in the range of about seven per cent -- they said they would need four heavy water plants: A, B, C and D. But there were warnings that that growth rate was going to drop off.
I remind the honourable members that it has now dropped off to about five and a half per cent. Hydro recommends that through to 1987 it will be at about five and one half per cent, and indeed from 1987 to the year 2000 down to four and one half per cent, for an average from now until the end of the century of just a little over five per cent. I also remind the honourable members that the Porter commission report indicates that is too high, that a four per cent projection of increased consumption each year through to the end of the century is more realistic.
Because of these excessive, these exaggerated forecasts back in 1974, we got into the belief that we must build four heavy water plants. We began to recognize that it was excessive -- indeed the Ontario Energy Board warned, on the basis of the evidence of their hearings in 1974, that it was going to be excessive -- but in spite of that the government authorized, early in 1975, that we should proceed with plant C and six months later changed its mind. The defence is that it is being wise in hindsight to say that was a mistake.
The committee doesn’t accept that rationalization, because the committee in its hearings in 1975-76 saw the signals which Hydro and the government didn’t see -- or if they saw them, they didn’t react -- that we were building an excessively large generating system and therefore an excessively large capacity for production of heavy water to fuel the nuclear components of that system.
Ms. Gigantes: They didn’t want to see it.
Mr. MacDonald: And because we authorized plant C and then cancelled six months later, it cost the taxpayers of Ontario, through Hydro, just $69 million.
Let me come back to the minister’s position, which I was speaking to a moment ago and about which I expressed some deep regret. Despite the majority view of the committee that we should only build half of plant D. and the minority dissent which said that we should not have any of plant D, the minister said, “Let’s complete all of plant D so that we will have heavy water to finance Canada’s offshore Candu sales.” All of the evidence that the committee got, and indeed evidence that some of us have got through other channels in an opportunity to sit down with AECL since the committee hearings in the summer, indicates that AECL states that under no circumstances are they going to need any heavy water from Ontario.
Mr. Leluk: Circumstances change.
Mr. MacDonald: Circumstances may change, but under no circumstances are they going to need it. If they do need more heavy water they can expand Glace Bay, which is now finally getting worked through the bugs and is producing at something like a defensible level of capacity. Make no mistake about it, for political reasons that we will all appreciate without me detailing them, if they do need more heavy water beyond the production at Glace Bay and Port Hawkesbury, they’re going to take La Prade out of mothballs -- in fact they may be forced by court action before then to take La Prade out of mothballs -- and to put it back into production.
Mr. Leluk: The cost will be astronomical.
Mr. MacDonald: Even if the costs are higher, because AECL has stated that. One of my colleagues in the committee is interrupting over here. All I want to say to him is that this is the clear-cut, flat evidence of AECL. I am told that Hydro and AECL are in continued negotiations. Maybe the minister has some information that the committee has not been given; I doubt it.
All I am saying is that the comment was made in the report, and can be found in chapter three, page four, to the effect that it would be imprudent for Ontario Hydro to finance a plant whose sole purpose is to gamble on the success of the federal Candu sales program. We’re having constant protests on the part of this government having to finance things on behalf of the federal government. It becomes a little bit ludicrous when the federal government through its agency says, “We don’t need American heavy water,” that this government should be second guessing them and saying, “We’re going to build an excess capacity beyond what we need,” which can be produced by two plants, A and B, through to about the year 1988 or 1990, and that we should do it with our capital to be able to finance a federal Candu sale.
Furthermore, for every month that we delay in reacting to the committee’s recommendation it is costing $10 million. In other words, the delay for every day in terms of an outlay of further capital to complete a plant whose production may well not be needed by the most careful kind of assessment, it is costing something like $333,000 -- every single day.
So much for that aspect. I know that other members of the committee will want to speak to other parts of it, so I won’t try to deal with it any more exhaustively. I want to turn now briefly to what ironically. was the original main concern with regard to the whole area of heavy water plants and the reason why it was referred to the committee, namely the costly overruns. The committee came to the conclusion that the responsibility for these overruns was the joint responsibility of both Hydro and Lummus, which was hired to construct them.
The reason Lummus was hired, as is pointed out in chapter two, pages seven, eight and nine, was that Hydro bad a large construction program at that time. Hydro had no experience in building chemical plants, because a heavy water plant is a chemical plant, not a generating plant in itself. It only produces one of the requisites for generating from uranium. Thirdly, the government was wanting greater private sector involvement, something that the former Treasurer (Mr. McKeough) was constantly reiterating in the House here. Therefore, Hydro gave Lummus the total responsibility for the project.
What the committee found beyond any shadow of doubt, was that there was inadequate planning and preparation, both on the part of Hydro and on the part of Lummus. The result was that they had great difficulties in doing their engineering; it was behind. They ran into even greater difficulties in procurement, because that was a very congested period in the industrial world, and invariably contracts were months late, sometimes a year or 15 months late, in fulfilment. They had difficulty in getting skilled labour, because skilled labour was being drawn off on to a lot of other projects. They had difficulty in housing; and in maintaining not only skilled labour but also competent middle management.
All this resulted in delays, which cost money; and that cost has to be shared not only by Lummus but also by Hydro, which was overseeing this project. In overseeing the project, Hydro got on to the horns of a dilemma which it never really succeeded in getting off until it was too late; the dilemma being that they had handed the job over to Lummus, and they didn’t want to appear to be moving in and assuming any more responsibilities than the contract dictated, yet they knew that Lummus was falling behind and that Lummus’s estimates and schedules were overly optimistic. It was only two or three years later, when it got into a real crisis situation, that there was an investigation and they began to get the whole project back on line again. It is now on line, although not fulfilling some of the very optimistic estimates for productivity and so on that originally were calculated, but at least on a basis that is considered to be defensible.
However, I think the committee’s consideration was that, while we had found where responsibility lay, in a sense this is water over the dam. We are now within reaching distance of the completion of plant B and in the process of putting it into production. Plant D is on the rails; it will be completed three or four years from now, and schedules are being met. Therefore, the prospect that this kind of a problem is likely to rise again virtually doesn’t exist. Hydro is never going to have another superproject for the foreseeable future involving heavy chemical plants. Indeed, it is my personal conviction that, if they did require a superproject involving chemical plants, they now recognize that they could do the job on their own -- the job they hired Lummus to do -- with the experience they have acquired in this rather painful process.
There’s not much point in either assessing fault and so on, but rather to find out what the size of those overruns is and the reasons for them, and hope that Lummus, if it remains in the game, will have learned lessons and that Hydro will have learned some lessons in terms of greater supervision capacity when they hire outside people to build projects of that size.
My final word, which I don’t want to neglect, is to say a special word of tribute to the members of the committee and to the staff. I have had the opportunity, not as chairman -- this is the first time, in this committee, I have been chairman of a committee -- but of being a member of a committee now more times than I can recall over the last 23 years. As I said when we were debating the earlier report, I have never set on a committee that I felt was operating with the kind of basic research and preparatory work and with the quality of staff work which I think has given the reports of the committee a great deal of authority.
I want to pay tribute to the members of the committee because in this report, unlike the uranium contract report where we sort of split three different ways with the three different parties, we’ve come up with a fair measure of consensus on what was a rather high-profile and controversial issue.
As I indicated at the outset, we will have another interim report within a few days that may not require debate because it’s just a report on other work that we have done during the summer and an expression of our wish for your approval to get an extension of our time beyond December 31 in order that we may be able to complete our terms of reference.
Mr. Sterling: Mr. Speaker, although I did not have the opportunity to sit on the select committee that examined the construction of the Bruce heavy water plants, I have been extremely interested in this particular subject. Perhaps some of this interest relates to my civil engineering background, but I think perhaps it relates mostly to the possibility of Ontario Hydro building some kind of generation site in my particular riding. At present they are looking at different generating sites over the southern end of the riding and it is possible that in the far future --
Mr. Nixon: That doesn’t refer in any way to the committee report.
Mr. Sterling: -- Candu powered nuclear generating stations will be built there.
Mr. Kerrio: It’s this little green book we’re talking about.
Mr. Sterling: I have another interest in terms of understanding the impact this kind of project has on the community. I noted in a report in the London Free Press on October 5, at a conference held by the Ministry of Industry and Tourism, Warden Gary Harron said the suggestion that the Bruce heavy water plant D not be completed and up to 600 people laid off was only a suggestion by the select committee of the Legislature studying Ontario power planning. He said the premature layoff would be a very hard blow to the county, but he would believe it only when it’s approved by the provincial Legislature.
Mr. Nixon: If they got that $100 million they could all retire.
Mr. Sterling: It is important that this debate include the concerns of that community. Candu means three things to me. First, it means that Canada has managed to be at the forefront in the nuclear generating field and that a great opportunity exists for our country to capitalize on this technological skill. Second it means we can utilize the supply of uranium 235 which we have in Canada and be less dependent on other countries for a fuel source for future generating power. Third, heavy water is a key material in this whole process of nuclear generation that has been proven one of the safest processes for nuclear generation in the world. We are now technological leaders in the production of this type of liquid. As I did not benefit from all the information in the committee’s hearings, I have read a considerable amount of the information produced therefrom, including this final report. I want to deal with one aspect of the hearings which refers to the charges made by a member of the Lummus staff. You will recall that in August of 1977, Owen MacDonald, a cost analyst with the company, charged publicly that the heavy water plants were seriously behind schedule and substantially over budget. He further charged that neither Lummus nor Ontario Hydro were making any effort to improve the situation, and he claimed that middle management was incompetent in their on-site supervision. These are very serious charges and I waist to refer to the committee’s report and their findings in this regard.
With respect to productivity, they found that Lummus, and I quote directly from the report, “uses standards developed by its giant international parent in Bloomfield, New Jersey, to develop estimates of labour man-hours required to perform any and all of the major tasks in construction, whether it be pouring concrete or welding a particular size and type of pipe. The technique used by Lummus is to develop a man-hour estimate based on the standards and then apply a productivity factor based on the company’s knowledge and experience on projects of similar scope undertaken under similar circumstances. In the case of the Bruce heavy water plants, Lummus decided, for example, that the overall piping productivity would be about 87 per cent of the international standard. The 0.87 productivity ratio was based largely on the productivity levels achieved at plant A. The actual productivity ratio achieved on this project was substantially less than 0.87. In fact, for most of the project it seems to be in the range of about 0.5. At first sight this appears to be evidence of poor management of the construction site, and an indictment of the middle management or direct supervision levels.” However, as the committee continued its deliberations it found this was not so. First, productivity levels fell off very quickly to the 0.5 level, and have remained at about that level to date. All the evidence reinforces the conclusion that today the site is well managed, the systems are sound and a reasonably stable work force is on site. But even given all these favourable conditions, productivity has not risen above the 0.55 level, which is an increase of approximately 0.05 per cent from the original 0.5 level.
The explanation for this seeming contradiction was explained by expert witnesses called by Lummus. They told the committee that productivity levels on projects of very large scale and complexity, the so called superprojects, tend to be significantly below the productivity levels of smaller projects. Hydro’s observations of its own projects over the past decades have confirmed this phenomenon. All the factors that have contributed to this decline are not clearly understood. Nevertheless the resultant lower labour productivity does appear to be a fact.
It is my understanding that the overall productivity at the Petrosar project undertaken at about the same time was also about 0.55. The committee concluded, and with justification I think, that a major portion of the overrun due to low productivity is in fact the result of original productivity targets that were unrealistically high.
Ms. Gigantes: Mr. Speaker, I seek your advice. I don’t know whether I have a point of order or a point of privilege. Until such point as all visitors to this House are permitted to take notes in the gallery, is it admissible that a representative of Ontario Hydro be permitted to take notes in the gallery?
Mr. Deputy Speaker: It is my understanding that it’s the rule of this House that no one is allowed to take notes within the chamber.
Ms. Gigantes: Mr. Speaker, I don’t know whether I’m rising on a point of privilege or a point of order, but I would draw to your attention that there is a representative of Ontario Hydro in the gallery who is clearly taking notes. He sits opposite me in the gallery.
Mr. J. Reed: Gee. Terrible. Shocking.
An hon. member: Must be an NDP.
Mr. Deputy Speaker: I thank the honourable member and I would ask the security guard to check this out.
Mr. T. P. Reid: String him up.
An hon. member: From a Hydro tower.
Hon. Mr. Auld: He is just signing letters.
Mr. Sterling: Mr. Speaker I was referring to the productivity level at the Petrosar project as being relatively the same figure as has been achieved at the heavy water plants at Bruce.
The committee concluded, and with justification I think, that a major portion of the overrun that is due to low productivity --
Ms. Gigantes: Mr. Speaker, perhaps you could give a little guidance to the staff of the House. The person who is taking the notes is the gentleman sitting with the lady in the second row directly opposite me.
Mr. Villeneuve: Since when is this Russia?
An hon. member: What’s happened to civil rights in this country?
Mr. J. Reed: -- the gallows.
Mr. Nixon: Are you taking leave of your senses or something? Have you gone around the bend?
Mr. Sterling: Mr. Speaker, may I continue?
An hon. member: He’s got lots of rights but no memory.
Ms. Gigantes: There should be the same rights for everybody.
An hon. member: Norm, give the guy a copy of your speech; then he won’t have to take notes.
An hon. member: He can get it all in Hansard tomorrow.
Mr. Sterling: The committee has concluded that --
Mr. Bradley: You’re going to be shut off, Norm.
Mr. Sterling: -- and with justification, I think --
Mr. Bradley: Great speech, Norm.
Mr. Sterling: -- that a major portion of the overrun due to low productivity is the result of original productivity targets that were unrealistically high. They estimated that about two-thirds, or $44 million of the $66 million of labour productivity overrun, was attributable to the overly zealous and unrealistic productivity targets that were set at the origination of the project.
The remaining $22 million of the productivity overruns were attributed by the committee to management weaknesses and insufficient skilled tradesmen on the site.
Lummus agreed that in the early stages of the project middle management was not as strong as it should have been, and the company cited problems of recruitment which it felt were caused by the high industrial involvement and other activity across Canada.
A complicating factor was that there was almost no housing available in the immediate area for the supervisors and their families. As a result, Lummus was forced to conduct recruitment trips across Canada and to set up welding schools to train needed tradesmen for the project. Subsequently, the companies often lost those they had recently trained. Also, they lost many of the people they had recruited to other jobs which offered more overtime and better living conditions.
These facts illustrate the inadequacy of preparations Lummus made for the project. The high level of industrial activity was very much in evidence in late 1973 and continued into 1974 and early 1975. The evidence before the committee indicated that Lummus did very little to prepare for the unusual conditions in the way of manpower planning and early recruitment.
A second major factor in the overrun was the continued slippage in die schedule. Approximately $60 million is directly attributable to the schedule slippage of plant B. Slippage of the entire project is masked by the two-year deferral of plant D resulting from the 1976 capital constraints.
Mr. Nixon: You have studied this very carefully.
Mr. Turner: He has done an excellent job.
Mr. Nixon: He really has done an excellent job.
Mr. Sterling: The cost of that deferral is estimated at $101 million. Bitt most of those costs would have undoubtedly been incurred by the project even if plant D bad not been officially deferred.
From these and other facts, the committee concluded that $101 million of costs attributable to the deferral of plant D should be charged to the construction project; so that the total slippage costs amounted to $160 million on B and $101 million on D.
I think it needs to be underlined that the committee concluded that the major factor in the slippage was poor planning and inadequate preparation, rather than any mismanagement at the site.
Lummus also took the position that procurement difficulties played a major role in schedule slippage. They pointed to the large number of man-hours spent in expediting deliveries of critical equipment and supplies. Material deliveries were extremely late. However, it was clear from the documents that were tabled that a major cause of late material deliveries was late requisitioning, which was caused, in turn, by late engineering and, in turn, by late design.
The committee found that both Lummus and Ontario Hydro share responsibility for planning and preparation inadequacies. Its report says: “Overall, it is the committee’s judgement that Lummus is responsible for preparing a cost estimate and project schedule that was unrealistic in its optimism. This optimism was probably partially founded in the eagerness of Lummus Canada to obtain the contract. Further, Lummus is responsible for not making adequate preparation for the project, possibly because of its inexperience and partly because it had to build its corporate organization to the necessary level. However, it is also the committee’s judgement that, once the problems became clear, Lummus did its utmost to improve that situation. There is no evidence of irresponsibility or a lack of effort on the part of Lummus.”
Mr. Kerrio: That’s why Hydro was going to fire them.
Mr. Sterling: “There is, however, evidence of poor judgement and mistakes at the earlier stages of the project.”
Mr. Speaker, I have quoted the report rather extensively, because the charges made by the member for York South were very serious. They implied that both Lummus and Ontario Hydro were unaware of the problems and, when they did become aware of them, that they did nothing. Clearly, this was not the case. The committee found there was no evidence of irresponsibility or lack of effort.
It is perhaps easier to find fault from hindsight than to prevent mistakes in the future on such a new venture, in times when highly technical skills are in peak demand.
The majority of the cost of shortfalls, as I said before, relates to unrealistic cost estimates. They were therefore not available even if the project had been built with perfect planning and without slippages.
Ms. Gigantes: Who bought those estimates? Your government.
Mr. Sterling: That there was poor judgement and mistakes made at the beginning of the project is very regrettable, but can perhaps be understood in view of the size, the newness of this technology and the complexity of this project.
I think it is clear that both Lummus and Ontario Hydro have acquired an enormous amount of knowledge from this project.
Ms. Gigantes: What has the government done?
Mr. Sterling: I also believe that error in similar projects in the future would be virtually eliminated by the experience both these bodies have now gained.
Mr. J. Reed: I would suggest to you that if the citizen in the gallery who is committing the dastardly deed would like to pick up a report of this inquiry from my office, it will contain the entire speech of the member for Carleton-Grenville and some to boot.
Mr. Nixon: Too late smart, too soon old.
Mr. J. Reed: I would like to acknowledge the speech of the chairman of this committee and point out that he has really told us how the whole thing came to pass. I am not going to dwell on that. I think the thing we would like to concern ourselves with here tonight is how to ensure this situation that led up to the select committee studying the heavy water problem does not happen again.
There are a number of anomalies in the management of Ontario Hydro that I would like to mention tonight in the few minutes I have.
First of all, I would like to refer to something the chairman referred to when he talked about the surplus of heavy water, and it pertains to the overbuild in the system. The overbuild, as he said, is now, according to the government’s figures, 44 per cent. In other words, there is a 44 per cent excess capacity in the electric power system.
I should point out that 44 per cent is a very basic and very conservative estimate of the reserve, since that 44 per cent reserve takes in the total of the generation mix. We all know there is a portion of the generation mix which is not thermal and therefore, because of its performance, has not before been subject to the need for any reserve capacity. That is the hydraulic system.
If we were to extract the capacity of the hydraulic system from those figures, we would find the reserve margin is even larger than the 44 per cent. As was pointed out, that margin is over the annual peak; that is the annual uncontrolled peak, the point where we go to with no constraints whatsoever. It is no wonder we are paying for it now in terms of these large rate increases in the recent past. My colleague behind me used the term “Texas technology,” and the same kind of approach has applied to the construction of heavy water plants.
Yes, we must agree that initially, with the lack of success AECL had with their technology, it was incumbent upon Ontario Hydro to proceed to build a heavy water system. However, we found ourselves, by October of 1977, within Hydro and within the framework of Hydro, knowing that our heavy water would be in surplus. It’s tragic to think that between October 1977 and April 1978 that information was not communicated to the Minister of Energy. The reason given for its non-communication to the minister was that to have heavy water in surplus at this time was good news and not bad news and therefore need not be communicated.
Hindsight, of course, is always 20-20, and you can dwell on what should have happened and what shouldn’t have happened. The decision that we made to mothball half the plant and complete the other half of the plant was made at a certain point in history. It was made because certain realities existed at that time. But this problem -- and the fact that the problem existed at all -- has got to be evidence that there is a very serious gap between the Ministry of Energy and Ontario Hydro when it comes to the management of Hydro policy and Hydro affairs. This gap is so great that information which is critical to fundamental decision-making is not communicated.
We know that in order to by to close the gap under the legislation we have, a commitment is made to have a memorandum of understanding between the ministry and the utility. I would submit that such a memorandum of understanding, when it comes to pass, will be virtually useless in the long run. What we need in order to ensure this kind of thing does not happen again, and does not happen on the grand scale it happened this time, is probably going to be changes in the Power Corporation Act.
The people of Ontario expect the Ministry of Energy to be responsible and accountable for the functioning of Ontario Hydro. Rightly or wrongly, they expect it. I think rightly. But the Minister of Energy at the present time is operating with one hand tied behind his back. He does not have full and complete access to the operation of Ontario Hydro.
I don’t blame the operators of the utility, because they are splendid. They’re highly skilled and so on, but they’re not politically oriented and therefore cannot respond to political change.
Some mention was made of the problem of the bigness of the superprojects and the fact that in this situation the Lummus Corporation saw their productivity decline because of the actual numbers. It was an anomaly they discovered after they had been about their job for a while. Ontario Hydro has confirmed the anomaly that appears with superprojects. Surely some message should be beginning to come home to the operators of superprojects, that they really may not be quite so “super” as they appear to be on the surface.
The other problem with superprojects does not relate to productivity but relates to the fact that the decision-making, the construction, the capitalization, the commissioning process, now take longer to complete than the consuming habits of the public using electric power. Surely a message has got to begin to come to the utility that the magnitude of these projects and some of the positive economic effects are offset by this change in the consuming pattern of the public.
Bigger has been better in certain respects, economies of scale can be effective; but there are dis-economies that must be recognized and, I think for the first time, introduced into the system.
We’re faced with a situation where we are carrying, according to the government’s figures, this 44 per cent. Really, the dinosaur has a hard time slowing down; and when it slows down, it has a very hard time speeding up. In the meantime, the people of Ontario carry the can for all those costs.
Some of the ways out of this dilemma were broached by Ontario Hydro in the hearings. One way was the sort of concept -- I think it was an underlying dream that was needing fulfilment -- that Ontario Hydro might even replace Atomic Energy of Canada Limited as the source of heavy water for the Candu system, because they recognized that indeed their technology was in advance of AECL’s; as a matter of fact, one of the problems was that it suffered from success.
One of the decisions, which indicated a reluctance to slow down or to change their mind on plant D earlier in the game, must have had a certain foundation in the expectation or the desire to export heavy water.
I think it should go on record that the export of heavy water is the prerogative of the government of Canada and not the prerogative of Ontario Hydro.
It was of continuing concern to me that the agreement that had been struck initially with AECL was allowed to terminate. Hydro did make some advances to AECL about continuing the agreement but under some very stiff terms.
If we recognize that heavy water is a pre-capital good, if you like -- it’s something that is as necessary to the engine as the bricks and mortar -- and if we recognize that the bulk of the quantity of heavy water is necessary for the first filling of the engine, it seems to me that it stood to reason that those agreements should continue so that heavy water exchange could be made on as broad a base as possible. That did not happen.
I would like to refer as well to an incident that took place at the close of our hearings. The minister had gone on record, in a speech in the area, indicating a desire to complete heavy water plant D. About five days following that speech, the select committee was presented with a new set of evidence which showed a different saving of money if we continued with the resolution contained in this report, that Ontario Hydro should proceed with the construction of enricher 7, finisher 4, heavy water plant D, et cetera -- and I won’t read the whole thing.
I think most members of the select committee were rather astounded that new information suddenly would be available, when we had been considering this very detailed question for a number of months, and especially that it should be available about five days after the minister had made his speech.
Perhaps Hydro is very flexible politically and flexible in this regard. It did happen one time before. When a projection was made that the growth rate would be a particular amount, the Treasurer of Ontario put a damper on Hydro’s expansion plans to the tune of $5 billion. A few months later, a new and lust as plausible expansion program was presented to the select committee. One wonders about some of those anomalies.
I think the conclusion we must draw from this is that we’ve somehow got to close the gap between Hydro and the Ministry of Energy. Had that gap been closed, a decision would have been made on heavy water plant D months earlier, before hundreds of millions of dollars had been committed. Decisions could be made far more quickly, decisions involving the wishes of the people of Ontario and not just the technical viewpoints of the principals involved in Ontario Hydro. If the select committee ultimately comes to some conclusion of this nature I think it will have been worthwhile and I think we will have made a contribution to electric power in Ontario.
I’m not the least bit concerned about the people who are crying “Freeze in the dark,” and I should point out to those people who have concerns that too much is better than having too little, we’ve got to sit down and rationalize exactly how much is too much. When we consider margins of 25 per cent or 20 per cent, which is considered adequate in many areas in the United States where thermal production is predominant, we’ve got to ask ourselves what other margins are built into the system at the same time.
There are the margins that we have never yet considered seriously. There are the margins of load management; the margins of load-shedding, if you like, when you have a customer who can agree to take power on a temporary basis, remembering that these peaks occur once a year and they occur for a very few hours, and that all of our capitalization, all of the money that is spent on expansion, is spent with a view to that peak, that extreme peak that occurs once a year.
So we’re going to consider those other margins -- not just the margins of percentage but the margins of load management, the margins of voltage regulation, the margins of shedding and so on. I think then we can come to a practical conclusion about the direction that Ontario Hydro has got to head in. It’s going to be a number of years before the margins we have now begin to narrow and begin to come down to a more realistic level. But we’ve got to plan now for the time after that. I think if we do, we’ve made some contribution.
I’m not the least bit happy with having to deal with this great overbuild, or the least bit happy that we had to arrive at the decision we did. We made the best of what I thought was a second-best situation and I hope --
Ms. Gigantes: Julian, you should be happy.
You could have voted otherwise.
Mr. J. Reed: Just a minute. Don’t forget that you have gone to both ends of the spectrum in your party so far as decisions are concerned and my colleague is going to expand on that a little later.
Ms. Gigantes: I can’t say, Mr. Speaker, that it’s a delight to partake in this debate because personally I haven’t had what I wanted out of the work of the select committee on Hydro affairs during 1978. We dealt with the uranium contracts; I didn’t get what I personally wanted out of that. It so happens that I was in consensus with my party on being disappointed. Nor did I get what I wanted out of this report on the Lummus project for the building of the Bruce heavy water plant D. Again, I am in consensus with my party members on that.
When it comes to the member for Halton-Burlington who has just spoken, the words he used are difficult to deal with. There’s almost a poetry of avoidance that exists in this field by now. The government, of course, has protected it over many years and the Liberal Party is now developing its own way of dealing with it. We shall hear later, I presume, by the shattering warnings from the member for Halton-Burlington --
Mr. J. Reed: Are you going to tell us about the flip-flop or do we have to?
Ms. Gigantes: -- about the fact that the New Democratic members on the select committee proposed, early on in the considerations of the committee, that it were better, were the committee to come to a conclusion, that it come to it quickly and that we complete D and mothball it.
The committee eventually came up to the decision that we should complete half of D -- D as in Donald; I should say D as in Donald because it is going to be very hard for our recorders to sort this out after.
Mr. Bradley: You’ve got his pencil out.
Mr. Nixon: Don’t anybody write anything.
Ms. Gigantes: We’re going to complete half of D as in Donald now and we are going to mothball the other half. Well, we were wrong earlier on, but we were right in a way, because as the chairman of the committee, my colleague from York South, has already pointed out, each day of delay on the decision costs the Ontario public $330,000. Had we made even the decision to continue and mothball at that stage, we would have at least saved the expense of the committee and Hydro’s time. I haven’t done a final accounting on that but it might well amount to almost the same amount as to complete half of D and mothball it, which is the unsatisfactory conclusion of this committee in my personal view.
It’s unsatisfactory because after six weeks of study and, as the member for Halton-Burlington alluded to, a final submission from Hydro on how much we might save, we discovered that every day we met we would save less by doing anything. If we could have kept the committee going for another six months, we could have saved nothing by doing anything. As it is, we are saving a partial amount, which is not what we should be saving. So we were too quick, hut we would have saved money by being quick; they’re too late by having taken too long; we were impatient. They took too long and they did the wrong thing in the end.
The chairman of our select committee has outlined some of the background of the select committee on Hydro affairs and many of the important points that relate to the structure of our work over the last three years. The speaker from Carleton-Grenville has rehashed the findings of our committee and has spoken them in soft tones. My colleague from Halton-Burlington has talked about how we should change the Energy Corporation Act to ensure accountability by Hydro to the Energy ministry, as if one could ever ensure accountability by writing legislation.
The thing that the member for Halton-Burlington and his colleagues from the Liberal Party on our committee have to learn is that to ensure accountability you have to make some tough decisions sometimes -- some very tough decisions. You have to, as he put it in one of our discussions, decide how much land does a man need as in the old Dostoevsky story; how much power does Ontario need and how much heavy water does Canada need and therefore how much does Ontario build.
I think it’s important that the Liberal Party begin to learn that accountability, as they like to say at the bottom line, has to be assured politically. Changing the Power Corporation Act is not going to ensure accountability to anybody, not even the Minister of Energy. He has to know and his colleagues have to know that as a representative of the Ontario public in matters that involve billions of Ontario public dollars, he has to be willing to make a choice at some point “How much is too much?” he says. I think he knows how much is too much. Too much is what we’ve got of heavy water. We’re going to be floating in it.
But be couldn’t make that decision. He said at the end of our hearings -- six weeks of hearings, six weeks of hearings -- “most members were astounded by the fact that Hydro stepped in with yet a new accounting of how little we would have if we stopped construction on Bruce D.” Let me say to you, Mr. Speaker, I think only the naive members of the committee were astounded. I was not. Because we knew that every day we worked on that committee Hydro was building more, Lummus was building more and we had less to save, and that’s the way the process works. There’s a kind of drama that goes on in these matters that somehow we haven’t found a --
Mr. Cureatz: It never stops you people from mouthing off.
Ms. Gigantes: -- way of expressing adequately in the Legislature of Ontario and with the public of Ontario. I’d like to take a few minutes and review what I consider to be the drama associated with the building of the heavy water plants at Bruce.
If we begin way back in 1971 and we turn to the documents provided to the select committee on Hydro, there was a letter addressed by Mr. George Gathercole, then the chairman of the Hydro-Electric Power Commission of Ontario as it was then called, to Dr. J. L. Gray, who was the president of Atomic Energy of Canada Limited, which I will hereafter refer to as AECL. He presented the potential of the development of a nuclear program in Ontario, the Candu program, and he said that Ontario needed heavy water to go with that program and he had a very important point to make.
He said, on September 9, 1971; “We do not have the financial resources to finance the construction of heavy water manufacturing plants plus the expansion of electric power facilities. We have looked to AECL to assume the responsibility for supplying heavy water. There can be no justification for AECL seeking commitments from Ontario Hydro that it does not require in connection with heavy water supply to other countries and jurisdictions. Such treatment in our view would be intolerable in the light of the pioneering role and the large financial commitment Ontario Hydro has made to the development of nuclear electric power in Canada. This is our position.” That was September 9, 1971.
We move a little further, a year and a half further, into this struggle that developed between Ontario Hydro and the government of Ontario and the federal agency -- which assumes all control of everything, including uranium mining and, as the member for Halton-Burlington has pointed out, any export sales we have for heavy water -- AECL, the arm of the federal government. [f we move on to August 16, 1973, we find a memorandum from the director of thermal generation for Ontario Hydro, Mr. L. J. McConnell, to the Hydro-Electric Commission of Ontario, the predecessor of the Ontario Hydro Corporation, and included in that memo is this statement: “Current status of Canadian heavy water program. Atomic Energy of Canada has financed the majority of heavy water developments in Canada to date and are expected to continue in this role in the future.” That was on August 16, 1973.
Some time after that Mr. Gray of AECL wrote to Mr. Gathercole and told Mr. Gathercole that AECL would be interested in discussing the question of whether AECL, the federal government arm, would be helping to finance Ontario’s need for heavy water connected with the expanded nuclear program only after Ontario had fully described what kind of nuclear program it was prepared to commit. After that, Mr. Speaker, we had, on June 7, 1973, the adoption in principle in this Legislature, in a statement of the Premier of Ontario (Mr. Davis), of the general development program of Ontario Hydro for nuclear power, and a well-rounded program it was and a very ambitious program it was.
Then we move to June 29, 1973, and we find a kind of pathetic letter. It goes from George Gathercole, the same man who wrote in September 1971 to Mr. Gray saying that the Ontario position was clear. He wrote back to Mr. Gray after a meeting in March 1973 and said: “At the meeting of March 12 we gained the impression that firm commitments on the part of Ontario Hydro might make our proposal for financial assistance more acceptable. Now that these commitments to the nuclear program have been made, we believe the federal government should provide the necessary financial support for this 3,200 megawatt per year capacity heavy water program.
“We believe that the nuclear program to which Ontario Hydro and Ontario have contributed substantially benefits to the whole of Canada and that the heavy water capacity which is essential if the program is to go ahead should be financed to the largest possible extent by the government of Canada.” That was after the nuclear commitment bad been made in this Legislature.
The sad aftermath of that commitment and the response to that pathetic letter comes in a memo of Mr. Gathercole to the Treasurer, Mr. McKeough, and that memo is dated November 5, 1973. I will quote one paragraph:
“At the meeting between representatives of the federal Department of Energy, Mines and Resources the Ontario Ministry of Energy, AECL and Ontario Hydro on October 24, 1973, the Honourable D. S. Macdonald, Minister of Energy, Mines and Resources, advised that the federal government was not prepared to participate in the financing of additional heavy water manufacturing capacity to meet Ontario Hydro’s heavy water production requirements. The federal government will soon announce plans for financing additional heavy water plant, but not in Ontario, and as non-Ontario reactors will have first claim on its production Ontario cannot count on meeting its heavy water needs from this source.”
So by this date, November 5, 1973, we had a commitment, which the feds bad encouraged from us, of an extensive nuclear program. We didn’t know where the heavy water was coming from and the feds, having encouraged us to make the commitment to the Candu program, told us that they weren’t going to help pay for it.
I go back over these events because the theme involved in those events, the theme of Ontario making its commitment to this national program and then getting stuck with the bill, continues till 1978. It’s a theme which I think it would do well for my Liberal friends in this House to admit. I know they are reluctant to do that but it’s about time.
The history of the heavy water plants is nothing short of amazing and appalling. To describe the history of plant B, in April 1973, when the whole process began, the prediction of cost for plant B was $285 million. That was the cost which the cabinet received as an adequate estimate. By April 1974, internally, Hydro was predicting that the cost would be $382 million. The preliminary estimates of 1975 indicated that the plant would cost $492 million. By April 1975, the estimate, which included escalation and interest cost by now, was up to $567 million. There was an update of the estimate of cost in March 1976. We were now up to $631 million. By March 1971 with a new update, the costs for heavy water plant B was $739 million. The estimate we received, dated April 1978, was by now up to $766 million.
If you take the difference between the initial unescalated or whatever estimates accepted by the cabinet of the government of this province in 1973 and the estimates that we received at a committee in 1978, the cost increase for heavy water plant B was 169 per cent.
The history for heavy water plant D is very similar. The early estimate in 1973 dollars that Darcy McKeough received and passed on to the public of Ontario was $250 million. It’s surprising that the Treasurer didn’t mention that that was unescalated. I wonder if he asked. We saw no evidence he did. By August 1974, what was called the preliminary estimate with escalation for Bruce heavy water plant D was $348 million. Already the cost had risen 73.6 per cent. By December 1975, we had what was called a definitive estimate. That was $434 million. By September 1976, with an update we got an estimate of $533 million. In August 1977, the update said $585 million.
That means that when the Treasurer of Ontario received and passed on the estimates for that heavy water plant of $250 million in 1973, he saw that estimate changed by $335 million-plus in four years. That’s a 134 per cent increase I
It’s all very well to say, as the member for Carleton-Grenville said, there’s nobody to blame, that Lummus did its best, did its private best; and Ontario Hydro did its best, did its public best. But there are people here who were elected by the taxpaying public of Ontario for the purpose of representing their financial interests in those decisions. I put it to you, Mr. Speaker, those figures speak for themselves. The proper questions were not asked.
Let us admit there was poor judgement by Ontario Hydro. We are all human. Most of them are engineers and it’s a new era of development. We all make mistakes and we all learn. Let us admit that Lummus did its best, that it exercised poor judgement and made mistakes in judgement. Again they’re human.
But I fail to understand how a Treasurer and a cabinet of a government of Ontario doesn’t know how to ask questions that get better information about cost estimates than those that were available when we were committed here in Ontario to paying the cost of that heavy water expansion.
I want to read into the record the dissent that I and two other members of the NDP signed as members of the committee dealing with this whole question, for the report of the select committee on Ontario Hydro affairs on its inquiry into the construction of heavy water plants at Bruce.
“On September 11, 1978, the staff of the select committee, Messrs. Schwartz and Fisher, recommended on page 38 of the document entitled, The Select Committee on Hydro Affairs Inquiry Into Heavy Water Plant Construction, Summary and Recommendations of the Staff, filed as exhibit B 129, as follows:
“1. Ontario Hydro should not be gambling its resources on AECL’s Candu sales program and the ultimate cancellation of La Prade.
“2. The federal government must have a reliable source of heavy water in order to sell Candu reactors.
Postponement of La Prade as a capital constraint measure gives no indication of such a commitment.
“‘For D’ “ -- as in Donald -- “ to be effective in stimulating Candu sales, a significant proportion of its input must be committed outside Ontario.
“‘3. Therefore, Hydro should not proceed with D on the vague prospect of export sales, unless AECL and Hydro agree in advance that financial responsibility for at least two thirds of the plant or its output will be borne by AECL.”
“and concluded on page 41 of the above report:
“Supply and Demand:
“1. The major capital commitment to the C plant should not have been taken in April of 1975.
“2. Construction activity on the D plant should cease immediately unless the federal government is willing to make an appropriate financial commitment.
“The New Democratic members of the committee, Ms. Gigantes, Jim Foulds and Ian Deans, concur with the staff recommendations and conclusions, and believe that they accurately reflect the evidence presented to the committee during its hearings and would wish that the government would accept these recommendations and conclusions, rather than the view expressed by the majority of the committee.
“The funds saved by this decision could be used to far greater advantage on other projects, many of which could and should have been specifically undertaken in the Bruce Peninsula in order to stimulate, both in the short and long term, the economy in that part of Ontario.”
Every member of this House is aware of the position this party has taken on the question of the subsidy that was given by Ontario to Ford of Canada Limited for the establishment of a plant in the Windsor area. What we paid to Ford was $28 million. We believe it should not have been paid. But for this $28 million we got 4,000 to 5,000 permanent jobs; for the $200 million we are wasting in completing Bruce heavy water plant D, we are losing, in my fair judgement, no matter what the final figures of Hydro would claim, up to $200 million of potential investment in this province for 3,500 man-years of work.
That is 3,500 temporary jobs. My heavens. If we have got to waste our money, let’s put it into projects like the Ford project at Windsor. At least we get permanent jobs out of that.
I don’t know what the rationale was -- we still have to learn, we have asked for the information -- for the huge layoffs going on at Bruce right now. We all knew there were going to be layoffs. They were going to happen anyway, but the timing of these layoffs is exquisite and in style with Hydro’s past history.
When the Ministry of Industry and Tourism goes up to the Bruce Peninsula, as it did a few weeks ago, to sit down with the community and outside experts and discuss how to deal with this crash that will come in the Bruce economic community -- in the Bruce community because of the economics -- it would have been nice, I am sure, for them to talk about having $28 million to play around with for 4,000 or 5,000 permanent jobs. We could have saved up to $200 million on this one.
We are going to be up to our eyeballs in heavy water by the time Bruce D is finished and for years in the future. Before we wrap ourselves in the national flag and tell ourselves that we can build heavy water plants, one of the most expensive technologies in the world, before we do all that in the name of Candu sales abroad, let us hope there will be research that will show the benefits to the people who live here in Ontario and pay for these grand schemes --
Mr. Leluk: You don’t want to create any jobs, do you?
Ms. Gigantes: -- research that was better than went into the magnificent schemes of 1973, the commitment that was made then for construction and the billions of dollars we have put into it. It is time we watched where we are spending our money.
It was a painful process for me. I said to my colleagues at the beginning of the summer, “I don’t want to sit on the Hydro committee looking at the Lummus contract for the construction of Bruce heavy water plant D. I don’t want to do it because in the end I know what the committee is going to say.”
Mr. Leluk: You people knew before the committee even started.
Ms. Gigantes: Most of the committee members won’t have, as the Premier (Mr. Davis) always says, the intestinal fortitude to make a decision. I knew we would but I knew we wouldn’t carry it.
Mr Kerrio: On a point of order: I wonder if I misunderstood that we were going to divide the time on this particular debate among the three parties? If I was, I apologize. If not, I would like to go on with the debate.
Mr. Acting Speaker: I am not aware of any private arrangements which may have been made among the House leaders. The member may continue.
Mr. Mackenzie: Besides, we like the speakers to make sense.
Mr. Turner: That would be a treat. That would be a change.
Ms. Gigantes: When you indicate that our caucus time has run out, I will sit down.
Mr. Kerrio: I just want to find out if we have an agreement.
An hon. member: Why don’t you ask your House leader?
Mr. Nixon: As the unofficial timekeeper, the NDP has now used 53 minutes, if that is any assistance, all of it good.
An hon. member: If you can understand it.
Ms. Gigantes: Mr. Speaker, with your indulgence, I will wrap up very quickly.
Mr. Bradley: Time to check your pencils.
Ms. Gigantes: I didn’t want to join the committee dealing with this subject because I felt that the conclusion would be, “Bad boys, don’t do it again.” That’s essentially what we’ve got from the committee. It could have been better, and I recommend to all members of the House --
Mr. Nixon: You wanted to boil them in oil.
Ms. Gigantes: -- to read the dissent and to read the reasoned arguments that the staff presented to us why that dissent should have stood as the major recommendation of our committee.
Mr. Leluk: As a member of the select committee on Hydro affairs, I’m pleased to be able to take part in this evening’s debate on the committee’s recent report. I’d like to begin on a more positive note and offer my congratulations to the staff for the hard work that went into the preparation and completion of this report Certainly the subject with which we had to deal was complicated, highly technical and detailed. They deserve our thanks for working through the summer to master the voluminous evidence put before them.
The history of nuclear energy and the benefits that have accrued to Ontario citizens through it have been well documented in this House. Through the efforts of the provincial government, Ontario Hydro and Atomic Energy of Canada Limited we have demonstrated that we can be world leaders in technology and development. There can be no argument that our record here in Ontario of providing electricity from nuclear energy is better than any other country in the entire world. I think we can be justly proud of that record.
The direct benefits to citizens of this province are immediately apparent when one compares the cost of electrical power to Ontario consumers with the cost to consumers in other jurisdictions. For example, consumers in New York City in July of this year had to pay $82 per 1,000 kilowatt hours for their electricity.
Mr. Laughren: What do they have to pay for parking?
Mr. Leluk: Citizens of Boston paid $40. In St. John’s it was $34 while Vancouverites paid $33. By comparison, Toronto consumers paid only $26. Those figures make it abundantly clear that Ontario residents are enjoying substantial savings each month because we can supply 27 per cent of our electrical needs through nuclear power and because of our long-standing hydraulic power base.
We are not an energy-rich province and we have not been blessed with the kinds of resources that Alberta and Saskatchewan possess. Most of our hydraulic sites have been developed, but we do have one energy resource -- uranium -- and we have made excellent use of it in order to guarantee a reasonable supply of energy for the future at a fair and reasonable price.
I think all members of this House agree about the benefits that are accruing to us through this development, but that does not mean that there are no problems. One of the major difficulties is the enormous lead time that is involved in projects of this magnitude. During our deliberations, we heard from various people who appeared before the committee how in 1973 Ontario Hydro decided to make a major commitment to nuclear power. At the time the nuclear generating station at Pickering, known as Pickering A, was performing far beyond expectation and it was projected that the future demand for electricity would go at a rate of about seven per cent per annum.
Between 1972 and 1992, Ontario Hydro proposed to expand its nuclear generation from one 2,000-megawatt station at Pickering to nearly 29,000 megawatts of installed capacity. This large nuclear generating program demanded an equally sizable program for the reliable supply of heavy water. The key factor in Hydro’s heavy water plan was that Ontario would have to be entirely self-sufficient with adequate contingency reserves.
Two related factors led to this premise. First, AECL had, of necessity, taken over, rebuilt and subsequently operated the unsuccessful heavy water plant at Glace Bay, Nova Scotia. Later, AECL acquired and took over the operation of the heavy water plant at Port Hawkesbury, also in Nova Scotia. AECL had financed the construction of heavy water plant A at Bruce, just being released from commissioning at the time.
In 1971, Ontario Hydro began to strongly urge AECL to finance and build enough heavy water capacity to assure Ontario Hydro a reliable supply of heavy water. Despite several years of negotiation and discussion, the government of Canada flatly refused to fund any further heavy water plants in Ontario.
Mr Kerrio: That was never the intention.
Mr Leluk: The federal Minister of Energy, Mines and Resources stated in October 1973 that it was federal policy to finance the start of a province’s nuclear program but, once launched, the province was on its own. This decision had major implications for Ontario Hydro and the government because it meant the security of heavy water supply was a matter for which we in this province would have to be solely responsible.
A second significant factor influencing Hydro’s planning was that the Glace Bay plant, as originally designed, had never worked and the Port Hawkesbury plant was not working anywhere close to its design capacity. Bruce plant A, while operating reasonably well, had only demonstrated that it could operate at about 70 per :cent of its design capacity.
These two factors convinced Hydro’s planners that Ontario would have to have a heavy water production facility capable of meeting Ontario’s needs entirely on its own and with an adequate safety margin. Ontario Hydro’s operating group decided it would be capable of making the heavy water plants operate at design capacity and a 70 per cent capability factor over a 10-year period. Hydro’s planners considered it necessary to allow for some safety margin, called a reliability buffer, because of the importance of heavy water to the nuclear program and the uncertainties associated with meeting construction schedules, getting a plant up to its design capacity and maintaining a capability factor over a long period of time.
In essence, the safety margin or reliability buffer came from planning to have the heavy water needed for the nuclear program on hand some 18 months in advance of its ultimate need. This would give Hydro some room in the very likely event of problems in either the construction or operation of the new heavy water plants. Circumstances do change. I would like to quote directly from the report. “The committee has tried to reconstruct the situation in 1973 and 1974 to determine whether the decision to have a four-plant complex at Bruce was a sound one at the time. The committee can find no reason to question the decision.”
I think that point needs to be made. The fact that today we are questioning whether or not to proceed with Bruce D is because conditions have changed, not because of poor decisions in the past. None of us has a crystal ball and, as long as those decisions Were based on reasonable assumptions within the context of the day, I don’t think we can point any fingers now that the context has changed.
What we have now is a situation where we in this province have proved beyond all doubt that we can produce nuclear power better than anyone else. We have the capacity to produce the heavy water that is needed to run the Candu reactors. In the light of reduced load forecasts, it is likely that we will now have more heavy water capacity than we need in the early 1980s. This could be used either for export or in any other reactors here in Canada. It seems to me that the logical and sensible step for Canada to take under these circumstances is to aggressively market our technology in other countries and to take advantage of Ontario’s expertise by providing heavy water for export. But again we face some major obstacles.
The federal government has reserved for itself the right to determine what sales of Candu reactors and heavy water can be made to other countries. It controls the sale of uranium, although why this resource should be different than other resources owned by other provinces, the federal government has yet to explain in any logical way.
Until recently, the record of the federal government has been dismal in the extreme. The sale of Candu reactors to Argentina saw millions of dollars disappear down the drain and our failure to capitalize on our technology and leadership in this field has threatened the nuclear industry here in Canada and has cost Canadians thousands of potential jobs. Even worse, it has been the stubborn and senseless determination of the federal government until recently to proceed with the La Prade heavy water plant in Quebec in the face of the fact that Ontario could produce sufficient supplies of heavy water to meet the demand and at much less costly rates.
Mr. Nixon: There is a federal-provincial agreement.
Mr. Kerrio: Do your research.
Mr. Leluk: The fact that La Prade has now been mothballed is only of little consolation since it has been forced on the government by the need to cut back drastically under expenditures, instead of being cut back because common sense prevailed.
I, for one, would feel better if I thought that they had seen the light, but I realize that this is asking too much of a government that has lost direction and has lost a great deal of its public support. There is, however, some brightness on the horizon. We are currently involved in discussions with AECL about this whole matter of heavy water supply. AECL acknowledged earlier this year that they lacked a marketing component and were taking steps to improve this aspect of their operations.
The recently announced sale of double reactors to Romania will provide a $200 million shot in the arm for the nuclear industry in Ontario and Quebec. According to a story in the October 19 edition of the Globe and Mail, there is new interest in the Candu reactors being shown by several countries, including Yugoslavia, Italy and mainland China. Romania is apparently planning to build more reactors before the turn of the century.
I might also mention that I have just recently returned from a visit to the Republic of China, better known as Taiwan, where I had discussions with senior government officials about potential trade between Ontario and their country.
Mr. Nixon: And who paid the shot for that.
Mr. Leluk: I was told that as early as 1970 they officially indicated a desire --
Mr. Peterson: Is that instead of a seat in the front row?
Mr. Leluk: -- to our federal government to purchase the Candu reactor because they are committed to a program of nuclear generated electricity similar to ours.
Mr. Cunningham: All that and a seat in the front row too.
Mr. Leluk: They already have some of the fast breeder reactors made by the United States, but they do believe that the Candu reactors are exceptional. Unfortunately for us, Mitchell Sharp, then Minister of External Affairs, blocked the sale. The result that we lost a potential customer and the United States picked it up, which is just one more example of the way the Trudeau government operates.
An hon. member: You don’t like to hear the truth over on that side of the House.
Mr. Kerrio: Can’t you manage your own affairs over there?
Mr. Peterson: You are embarrassing yourself. You are embarrassing the government and you are embarrassing me.
Mr. Leluk: I don’t know whether the potential difficulties can be overcome, but it does indicate that a market does exist for the Candu reactor. It is a market that we need to pursue actively and develop. I would strongly urge the federal government to get moving in this area.
The difficulty facing the provincial government, and all of us as citizens of Ontario, is that events can and do change with startling swiftness. The sales to Romania occurred after the select committee had completed its hearings, which reinforces my point. Whatever decision the government takes on this report, it is my hope that we will continue to press the federal government in the strongest possible way to strengthen our efforts to market our technology and expertise in this field.
Mr. Nixon: They are going to hire an agent in Tel Aviv.
Mr. Kerrio: This is a job for Joe McTeer.
Mr. Leluk: He’ll be there. Joe Clark is going to be there after the next federal election. Just wait and see, my friend.
Mr. M. Davidson: Joe who?
Hon. Mr. Walker: Not any more; it’s Joe when now.
Mr. Leluk: You won’t be saying that when June rolls around my friend. If there is a possibility of that happening then I believe we would be justified in putting some faith in the future and completing Bruce D. One of the strongest marketing pluses in selling the Candu would be our ability to guarantee a supply of heavy water.
Mr. Kerrio: How did you vote?
Mr. Leluk: This we would be able to do, and I am confident that the government will consider that in deciding what course to take.
Mr. Peterson: Let Hansard note that there is a standing ovation for Mr. Nixon.
Mr. Eakins: Now we will hear common sense.
Mr. Nixon: Mr. Speaker, I don’t intend to spend a lot of time talking about what has already been said, but I should bring to your attention that the honourable member who just said the government should complete heavy water plant D signed his name to the report that said only half of it should be completed.
Mr. Leluk: That’s right, Bob. An open mind down the road.
Mr. Warner: Events change.
Mr. Nixon: It concerns me that the lead off speaker for the Conservative Party and for the government in this debate was not a member of the committee. He admitted and said as much himself, but it seems to me very peculiar that the Conservative members of the committee who took part in the debate throughout, or at least listened to the material presented to us, were unanimous in their recommendation --
Mr. Warner: None of them is here tonight.
Mr. Nixon: -- that the last half of heavy water plant D not be completed since there could not be a foreseeable use for the heavy water that it is going to be producing. Despite the argument that we can rely on the expert salesmanship of some member of the government -- even the honourable member who has just spoken, who was on a selling tour to Taiwan, where even he couldn’t sell an atom bomb evidently -- it is really not fair to suggest there is a great market awaiting Ontario heavy water. Atomic Energy of Canada has made it clear that it is quite capable of producing the heavy water for any foreseeable sales between now and the year 2000.
It is only on the basis of the projections put before the committee by Ontario Hydro that I and the majority of the members of the committee felt it was justifiable to recommend the completion of the first half of heavy water plant D, which is already very largely on the way towards completion, and in our opinion should be completed, and then the decision made as to whether to put it into service could be made at that time.
We’ve discussed this quite fully and I think the recommendations are valid. I agree with the chairman that it is surprising indeed, and very disappointing, that the new Minister of Energy (Mr. Auld) in a long succession of new Ministers of Energy announced almost immediately after the recommendations from the committee were made public that he was rejecting them and going forward with the completion of the total heavy water package, including plant D. I think he indicated we were Jeremiahs, and my Old Testament knowledge is not as precise as it should be. I do think in this instance we are knowledgeable prophets and I think the minister might do very well to follow the recommendations we have given him.
I want to speak briefly, which I know will please many --
Mr. Peterson: Take your time.
Mr. Nixon: -- on the specific terms of reference. Many members of the House will recall the questions that were put to the then Minister of Energy about the reported cost overruns and delays in the construction of the heavy water complex in the Bruce Peninsula. These were brought to public attention by the charges made by a junior employee of the Lummus corporation, which had and still has the major contracts for the building of the heavy water installation.
Mr. Owen MacDonald has already been mentioned in this debate, and in my view he served the community in a very effective, almost an heroic way, in making his public charges that there was not sufficient cost control in the interests of the clients and the public at large in this particular project. I personally believe he was correct. I believe the evidence before us bore that out. I am not nearly as critical of the Lummus corporation as of the Ministry of Energy and Ontario Hydro.
It’s an interesting aspect to this that the Honourable Darcy McKeough is both the villain and the hero in the development of the story as it goes on, because it is true that Ontario had properly made a very large world-class commitment to the Candu reactor system of producing electrical energy through atomic procedures. With the co-operation of the government of Canada and its heavy involvement in the financing of the project, we were able to bring on the Douglas Point system, the small one to begin with, which was a bit bigger than experimental, and then go on with the Pickering project, which, as has already been pointed out, is a world leader in this type of electrical energy production.
Atomic Energy of Canada Limited found to their dismay -- and to our dismay in Ontario -- that they could not produce the heavy water because the government of Nova Scotia, which had entered into a very elaborate program to produce heavy water for the AECL program, simply found that theft plans had fallen apart; the huge installation at Glace Bay was simply unworkable and didn’t produce a drop of heavy water until the last few months and weeks. So it was necessary for Ontario to go forward with the production of heavy water ourselves.
The heavy water plants and the atomic plants at the Bruce Peninsula will, when they are completed, involve the expenditure of about $6.5 billion and will make it undoubtedly the largest atomic complex in the world. We really don’t know what there is in -- what do they call it? -- the centrally organized part of the world, but I would doubt very much if there is anything in the Soviet Union to compare with the structures and the development here in Ontario.
So the orders were given to go full speed ahead with the production of heavy water, because the reactors already were being built and the commitment had been made otherwise. It is to the credit of all concerned that the heavy water was delivered on time; so there was a minimal delay in the procedure which allowed Pickering to go on stream.
Just as a footnote, it’s interesting that Ontario Hydro had to buy heavy water wherever they could get a few gallons or a few megatons. They bought some from the Soviet Union. I believe they bought some from either Norway or Sweden; I forget which. As a matter of fact, they had to milk -- if that’s what you can do -- the heavy water out of other reactors that were experimental at that time so they could allow the reactors at Pickering to go critical as near to the scheduled startup as possible.
There was tremendous pressure -- almost the kind of pressure you would experience in wartime. In other words, “We’ve got to get the heavy water, and somebody” -- Ontario Hydro, through their major contractor, Lummus -- “simply has to deliver the goods.”
The aspect where I think Mr. McKeough perhaps did not serve us well in this was his devotion to reprivatization -- a terrible word, which I think he coined; I never heard it before he used it, and it may be that we will never hear it again. Frankly, I hope not. But he had this wild idea that we were going to move gradually into the private sector; as a matter of fact, I think he even envisaged chopping up Ontario Hydro and selling that off to the highest bidder.
Mr. MacDonald: That was a Liberal idea a few years ago.
Mr. Nixon: My friend from York South has been around here too long.
Mr. MacDonald: I’ve been around here long enough to know --
Mr. Nixon: Before his unkind comment, I was even going to suggest that, since Ontario Hydro is looking for a new chairman, he is one of the people who, frankly, I would trust in taking on the job -- much as I would hate him to leave this House, except by the electoral process, which we’re working on.
Mr. McClellan: Not very effectively.
Mr. MacDonald: You’ve got a century to go.
Mr. Nixon: Anyway, whether he or someone else in this room becomes the chairman of Ontario Hydro remains to be seen.
But I do feel that Mr. McKeough almost dictated to Hydro what their procedure and their attitude should be. Other Ministers of Energy since then have tried to communicate in a gentlemanly way with Hydro, and Hydro just ignores them. But there was something about McKeough that, when he spoke, they listened. And quite often they heard things that he never even intended to say. I have a feeling that many people in the government were like that; they thought they knew what Darcy wanted and did several back flips to try to do what he wanted, and probably there was some misunderstanding.
Every effort was made to move into the private sector. Mr. McKeough even went down to the headquarters in Lummus International in an attempt to buy out the Canadian subsidiary so that it would be Canadian; they could let the new Lummus Canada build these plants and he, with all the feeling he could muster under these circumstances, would then say, “The private sector is doing it.” He came back, because they had refused to sell it to him down there, and said -- he was quoted in this way, because I would never refer to any corporation this way, even an American international conglomerate -- he said they were, and I quote, “bastards.”
Mr. Lane: You’d never say that.
Mr. Nixon: Anyway, they would not sell their Canadian plant to Canadian owners so the next best thing he could do was allow the Canadian subsidiary of Lummus International to take it on here.
I gather that Hydro was really torn by this. The chairman of the committee, in an excellent address which unfortunately the Minister of Energy and his advisers did not hear but maybe the service was a little slow at the cafeteria tonight, indicated that Ontario Hydro had already a good many important construction projects in hand. But in my view, and I sense it was the view of Hydro, many of their senior management felt they could have taken it on, they should have taken it on, and I’m sure they were kicking themselves or somebody all over the lot when they got into trouble with the construction program at the Bruce.
They were kicking themselves that they didn’t insist that the construction be undertaken by Hydro itself. Lummus had a great international reputation and somebody has been reasonably kind in indicating they did the best they could under very difficult circumstances. The major spokesman in this matter who spoke first tonight and who is not a member of the committee, indicated that all other projects were suffering the same way. But figures available to us indicated that time delays and the cost overruns were not parallel to other construction of the type for a number of reasons, but once again this is a matter of judgement.
We felt in listening to the testimony from Hydro and Lummus that there must have been some very tense times when Hydro. under instructions to keep their hands off the direction of the construction, found it very difficult to do so because in their opinion it was handled from time to time in an inefficient and non-productive way. The orders kept coming through from Hydro to Lummus to get that plant working no matter what and this is where the lack of cost control came into the picture. There was an immediacy and an urgency for a successful completion of the plant, which meant such things as cost control and the normal procedures which would have led to efficient construction procedures were simply thrown out the window and abandoned in an effort to get the juice in the tank at the right time.
It is regrettable that it had to happen that way. I don’t think anybody is particularly culpable. It would have been better if Hydro had undertaken the construction and managed it themselves. They could have had Lummus, with their undoubted international experience associated with superprojects, as some kind of a subcontractor or delivering some sort of service and advice in that connection. I am not at all convinced the result would have been tremendously different.
This has been stated by some other members, but I, too, was very impressed by the approach taken by Ontario Hydro and their top administrative people in presenting us with information and giving their rather frank views. But it became apparent, and this has already been mentioned, that the flow of communication between Ontario Hydro and the government, particularly the Ministry of Energy, was inadequate in the extreme. Without talking about the succession of Energy ministers whose political careers have been either blighted or stunted by this situation, I would simply draw to the attention of Ontario Hydro --
Mr. MacDonald: Or obliterated.
Mr. Nixon: -- or obliterated, all right -- that the new minister, while he’s a very busy man as you can see by his actions here tonight -- he’s got a lot of papers to sign and a lot of phone calls to make -- has survived one way and another since 1961 when he first came into the cabinet. I’m sure Hydro may find they’ve now got a hunk of jelly they can’t nail to the wall who may even survive the present chairman of Hydro and some of the people in the senior capacity there.
I would certainly hope and trust that that’s so. I don’t want to talk about the doubling of his ministry, which in a sense downgrades that matter.
Ms. Gigantes: Don’t take powers of prediction upon yourself now. We are going to have a new chairman of Hydro.
Mr. Nixon: Well, I hope so. The member who is interjecting impresses me very much. As a mailer of fact, she spoke with the intensity tonight I usually associate only with my colleague from St. George (Mrs. Campbell), who does not happen to be with us. The only thing that occurred to me was that she was just as intense and just as knowledgeable and just as condescending when she was trying to convince the committee that the heavy water plant should be completed and mothballed. I would simply say to her that she should learn not to be quite so sure of herself in these matters.
Mr. Laughren: You are being condescending now.
Mr. Nixon: Other people share her commitment to the universal good of the province and the taxpayers therein. And while I have a high regard for her ability, I don’t know how she can suck and whistle at the same time. In this instance, the majority report is reasonable and I hope the minister, when he has a chance to reply, and I’ve used up quite a bit of the time --
Ms. Gigantes: The government is glad to get away with it and you helped.
Mr. Nixon: -- will be able to indicate that on sober second thought, the Jeremiahs including all the parties of the Legislature, have indicated as clearly as we can, as apolitically as we can, that the government should mothball or store the second half of heavy water plant D, complete the first half and then consider whether or not it should be put into operation.
Ms. Gigantes: At $33,000 a day.
Mr. Nixon: You are dreaming if you think there is going to be a large sale of heavy water before the year 2000. If it happens, Mr. Leluk or somebody else can go out and sell a whole lot of these reactors to his friends in Taiwan and South Korea or wherever it is he went and at that point we could decide to go forward and produce the heavy water that Atomic Energy of Canada might need. We shouldn’t he so naive as to think we are going to enter the world market independently. Whether we like it or not, this is a monopoly lodged with the government of Canada and through their agency, Atomic Energy of Canada, and we have had rather a good result for the production of power here in Ontario through the kind of cooperation we’ve experienced in the past.
Mr. Deputy Speaker: The member for Niagara Falls.
Mr. Laughren: This I’ve got to hear. Give it away, Vince.
Mr. Kerrio: I take pleasure in joining in the debate as a member of the committee.
Mr. Deputy Speaker: Order. Order.
Mr. Ashe: I understood there was a party rotation taking place here and if the New Democratic Party did not have further speakers it would revert to the government side.
Mr. MacDonald: Our time is expired and I presume if you are going in cycles he is correct.
Mr. Deputy Speaker: I’m sorry, the member for Durham West.
Mr. Ashe: I had already sent up the indication I was about ready to speak. I guess it was before the chair changed, and I don’t know whether he communicated that to you.
Mr. Kerrio: We had a commitment we were going to divide the time. Now the NDP has agreed that they used up their time. Do you have any idea what time is left on the government side?
Ms. Gigantes: We know how to co-operate. You can’t add.
Mr. Deputy Speaker: Order. I appreciate the comments made and the question posed by the member for Niagara Falls. However, there is no time limit set in the standing orders.
Mr. Kerrio: It was a gentlemen’s agreement from the gentlemen over there.
Mr. Deputy Speaker: Fine. I hope you can live up to the gentlemen’s agreement, but the chair has no responsibility for that.
Mr. Ashe: It’s my understanding we’ve only used something like 20 or 25 minutes on this side, so I don’t know where the time went. In any event, I’ll try to be as fast as possible. As a member of the select committee on Ontario Hydro affairs, I’m pleased to take part in this debate this evening.
The latest part of the committee’s work was to examine the heavy water plant construction and this was done over a considerable period of time during the summer and early fall months. During the committee’s inquiry, we received more than 130 exhibits and had access to all project records including minutes of meetings held throughout the project. We have been able to conduct a very thorough examination and investigation into this whole matter and the members of this House can be assured that our task was well and truly done.
I want to concern myself this evening with that aspect of the report that dealt with improved communications between Ontario Hydro and the government, a very important aspect of our particular function.
I want to quote the relevant section from the report, section 2, page 11: “The committee has satisfied itself as to the nature and extent of the overrun and responsibility for it. But the committee was also concerned that some positive action be taken to prevent a similar situation from occurring. It has concluded that it need not make recommendations to Hydro and the management of construction projects, but should try to close the information gap between Hydro and the public.”
The report goes on to say: “The events leading up to and including the construction of the heavy water plant demonstrated a serious communications gap between Ontario Hydro, the government, and the Legislature in the approval and monitoring of capital projects. First, when approval in principle was sought for the project, Ontario Hydro did not feel compelled to give cabinet a meaningful estimate of costs. Cabinet approval of plant B was based on an estimate of $285 million that was wrong by a factor” -- as we found out -- “of three” --
Ms. Gigantes: You never asked.
Mr Ashe: -- “partly because it omitted the enormous cost of common services such as the water intake treatment and discharge facilities.
“The estimate failed to state clearly and explicitly the preliminary nature of the figures. Approval of plants C and D was based on an estimate that the two plants would cost $500 million together. This estimate was based on the same unrealistic assumption used in the $285 million estimate for plant B, and in addition did not include any allowance for escalation. The government approved the construction of three heavy water plants using two unrealistic and inconsistent estimates.”
Ms. Gigantes: Why did they do that?
Mr. Ashe: “Over the course of the next few years, the government received many different estimates concerning the cost of constructing the heavy water plants. Different estimates were used in the 1974 and 1975 reviews conducted by the Ontario Energy Board. Other estimates were used in the request for proposals from the private sector for the financing and construction of the plants.”
During oar deliberations, as we became aware of the different estimates that had to be dealt with by cabinet, I think all of us began to appreciate how easy it was to arrive at decisions that later might be and would be questioned. Given the complexity of the matter and the changing nature of the estimates, the government laboured under obvious difficulties.
Ms. Gigantes: Yes. It couldn’t add.
Mr. Ashe: Still further estimates were used for the environmental approval. There was no explanation of the numbers as they changed, and there was no apparent attempt to show any consistency in approach among the various estimates.
Ms. Gigantes: Who asked for consistency? We did.
Mr. Ashe: The report also said that: “If government and the Legislature are to play a useful role in safeguarding public funds, they must be given relevant, accurate and timely information on Hydro’s enormous capital expenditure.” I think the emphasis there must be on the words “relevant, accurate, and timely.”
I think it’s possible, and certainly the committee agreed, that if the government and the members of this House had been aware in 1973 and 1974 of the ultimate costs of the heavy water plants another approach might -- and I state again, “might” -- have been taken to the heavy water situation.
Ms. Gigantes: You could have been aware if you had asked.
Mr. Ashe: The committee then went on to recommend: “That Ontario Hydro provide the government semi-annually with a summary of each major capital project under construction and proposed new capital projects showing: The original budget and schedule; expenditures committed to date; and, current forecasts of cost and schedule. And the government shall refer that information to this select committee while it exists, or to a standing committee,” in its absence.
Ms. Gigantes: What about future projects?
Mr. Ashe: Recommendation number 2 states that: “Ontario Hydro and government work out a set of definitions and reporting format that will ensure the consistency and clarity of the reported information.”
The government members of the committee agree with the intent of the first recommendation, but it is our view that legislative review should only be of capital projects under construction and should not include new capital projects. Clearly this is the responsibility of the Ministry of Energy and this government.
Ms. Gigantes: Clearly you failed.
Mr. Ashe: There are several reasons why we take this position. I’d like to elaborate on them briefly. I think all members agree that in the last couple of years we have been almost buried under a blizzard of reports and recommendations from various committees and hoards. Somewhere we have to strike a balance or the government is going to grind to a complete paper halt.
I also have some concern about the tangents that various committees can get off on, and the enormous cost in time and money that is involved. I have no great quarrel with select committees, but it seems to me that we need to re-examine the way in which they function and the purposes they serve.
At the very least we need to ensure that the time and money involved pays a return to the people of this province in better legislation and better management of government services.
Under the rules by which select committees now operate they take up almost 20 to 25 per cent of the total year and there is potential for them actually to be in being for approximately half of the year.
At the same time we are, in my opinion, wasting an enormous amount of time in estimates by reviewing ministry statements that are already six to nine months into the fiscal year in consideration. It seems to me there is some room for improvement also in this area.
So far as having regular reports go to select committees I agree that they should, for projects that are already under way but not -- and I repeat, not -- for proposed projects. It is the responsibility of the government to govern and part of the governing process is, of course, making decisions.
The Legislature has a real role to play in reviewing and monitoring what the government is doing, but I sincerely believe we have to leave to the appropriate ministries the reviewing of proposed projects. It seems to me to be unrealistic to expect committees to play a vital role at that stage of events.
Another aspect of that is considering the cost of time for all officials involved when we look at what was involved just in our committee alone, the staff of officials of Lummus and Ontario Hydro as well as the Ministry of Energy. If we could put a price tag on that I think it would scare all of us in its size.
Ms. Gigantes: How about $2 billion on the heavy water projects?
Mr. Ashe: As far as Ontario Hydro is concerned -- and I think we all agree -- they have not been keeping the Ministry of Energy and the government informed as they should have. However, I think we also agreed that steps are being taken to improve that and will continue to be taken to make sure the government has the information it needs and deserves,
Mr. Kerrio: As a member of the committee, I certainly would like to join with those who have thanked our staff, and indeed the chairman for the valuable direction he gave the committee.
Ms. Gigantes: Don’t thank him, support him.
Mr. Kerrio: There are a few matters I would like to get on the record that I think are very important as they relate to heavy water.
Initially I would like to suggest that it certainly has been to the advantage of the people of Ontario to bring before such a select committee the kind of expertise in the field of heavy water nuclear power as appeared before us in the persons of the various gentlemen who represented other countries and other areas of responsibility; they certainly brought tremendous expertise before us in order for us to weigh the evidence that led to some of the conclusions here.
Just a little aside might be worth mentioning. For want of just a few thousand pounds of heavy water during the Second World War, the Axis wasn’t able to perfect the atomic bomb, because the Allies and particularly the British commandos went into Sweden and knocked out a heavy water producing plant.
Ms. Gigantes: That’s a good argument.
Mr. Kerrio: And here we are just a short few years later with an overabundance of this product which would have made a change in history as we know it. The fact that some of those people who go back to that very early development of heavy water appeared before us, and in fact allowed us to question them, was certainly an experience that many of us will never forget.
Mr. Wildman: Did anyone from the Axis appear before the committee?
Mr. Kerrio: But I would like to tell you, Mr. Speaker, that some of the positions that were taken by some of the parties should he put on the record, and my colleague has already done that.
The NDP of course had a very firm position and that was that we complete plant D and mothball it. I thought that was worth repeating, because that was a position they had arrived at and subsequently changed their minds.
Ms. Gigantes: On a point of personal privilege.
Mr. Havrot: Ah, poor baby.
Mr. Turner: Is someone taking notes again?
Ms. Gigantes: This misinterpretation of what the NDP members on the committee did has been stated once too often for my taste. As a point of personal privilege, I would like to point out that we did not make a motion. We recommended for discussion --
Mr. Leluk: You brought in a position paper signed by every member on the committee.
Ms. Gigantes: -- that at $33,000 a day we consider making a decision quickly and for discussion purposes we proposed to the committee early in its proceedings that we simply finish D and mothball it.
Mr. Kerrio: That’s what I said.
Ms. Gigantes: That was all we did. No, that’s not what he said, and I’d like to leave that on the record.
Mr. Nixon: It’s a distinction without a difference.
An hon. member: It was your position, it was already on the record.
Mr. Nixon: What’s your position?
Mr. Kerrio: I won’t question that at all. That’s exactly what I said. They put that position and changed their minds. I don’t fault the member for Carleton East for that; you’re entitled as a lady to change your mind, and if you can drag the other people with you that’s great, too.
Mr. Wildman: Oh, come on.
Mr. B. Newman: You asked for it.
Mr. Kerrio: I think I’m treating that in the same light. She treated us in such a condescending manner.
Ms. Gigantes: You’re shining tonight.
Mr. Germa: Oh come on, Vince, withdraw it.
Mr. Kerrio: Oh, that’s too bad. In any event, I thought that should go on the record again as having happened.
I’d like to suggest that one of the other members who stood up now and is backing the position that the minister has taken also voted in favour of the amendment as it was put, that we complete half of plant D and then make that determination on the completion of half the plant. I have to think that those seemed like responsible positions at the time from both of you. I’m not questioning you changing your mind, but I’d just like to have the record straight.
In any event, I think the one thing that I’d like to bring before the House that is rather significant -- and the crux of the whole discussion may be in the way this all started, in the person of Mr. Owen MacDonald. When he appeared before our committee the member for Durham West (Mr. Ashe) proceeded to discredit this man with not having any kind of expertise as it related to cost assessment. He was absolutely right. There was very little expertise this gentleman brought with him to be able to assess the tremendous overruns that were taking place.
But lo and behold, when we began to investigate the whole group that was put together in that section of Hydro to look into cost control, every other member that sat in that particular group had even less experience than Mr. MacDonald. The important point that I’d like to make here in this Legislature is that while I concur that Hydro has one of the greatest degrees of expertise in the world in construction -- yes, and in engineering -- it wanted to win the war at any cost. That’s the way it was run. There was absolutely no addressing itself to cost.
The fact is that subsequent to the disclosure by Mr. MacDonald that there was very little expertise in that particular area of Lummus, I think that it was agreed on nearly all sides, if they were willing to admit the truth, that we had never had to address ourselves to controlling the costs before. I’m not being critical about that. All I’m suggesting is that we are no longer able to function in that way.
As far as taking credit in this province of ours for having the lowest-cost Hydro of many jurisdictions, I’d suggest that the government would have to hang its head in shame if such were not the case. We have more hydraulic potential, we have more uranium, we have more of everything to make power with in this jurisdiction than almost any other place in the world, so I can’t believe that you should take all this credit for developing power in this jurisdiction that we have in this province of Ontario. In fact, I don’t think we’re doing it to the degree of efficiency that we should be with all the things we have going for us.
When we relate to the heavy water commitment, there were questions raised that were not answered. The United States had made quite a commitment at Savannah and they had a producing plant there. When they decided to go in another direction and we pursued the Candu reactor system, no one ever followed up the possibility of continuing some way of producing at that plant so that we had it as a back-up unit while we got ours on stream. AECL didn’t answer the question, nor did Hydro, nor do we have any kind of confirmation that any kind of real investigation was made on what would have appeared to be a worthwhile alternative to a panic situation in getting our plants on stream.
I further questioned Dr. Thayer as to the merit of building such huge complexes, one of the reasons that led us to the amendment of finishing half a plant. The fact is that our plants are all too big and we’ve never had the flexibility that we should have when the power demands change so that we can change quickly to adjust to the demand. If we continue to have this Texas technology, as I share with my colleague, we’ll continue to have these kinds of problems. These plants are so huge that they cost untold extra money to build; because of the complexity they have to be built on the site, they can’t be built in smaller units and taken to the site and assembled. The fact is that when we make a commitment we’re talking multimillions of dollars and superprojects, instead of projects that could be done in a much more sensible way.
The cheap-shot artists on the other side on two occasions today began to take those shots at the federal government when it doesn’t even relate to the issue at hand. I take exception to that because I’m one of the people who stood during the uranium contract and questioned the federal government’s involvement in making it easier to export uranium to Japan than to put it to use for the province of Ontario.
At the same time this province gave permission to export uranium. They didn’t take a strong stand and suggest that they would start it right here. So the government members are in the same bed with the feds on that issue, and they weren’t looking after the interests of the people of Ontario. They certainly were not. And we brought that to their attention.
So the government members and the Minister of Industry and Tourism (Mr. Grossman) today can stop the cheap-shot baloney about the relationship of this group to the federal government. I’ll accept it when it happens, but I will not accept it when it’s not true.
The fact of the matter is that Ontario Hydro had to put up $300 million front money to guarantee uranium that’s under our feet.
Mr. Laughren: Are you a Liberal?
Mr. Kerrio: The fact is that this government condoned that action and was a party to it, and without its help it couldn’t have happened.
We made the recommendation. This party, this Ontario Liberal Party, made the recommendation that we not sign those contracts.
Mr. Laughren: An Ontario Liberal, listen to that.
Mr. Kerrio: And that government over there decided they should do it anyway.
Mr. M. Davidson: You’re responsible for the layoff of 2,000 people at Bruce B.
Mr. Kerrio: I’m suggesting to the House that I’ll stand any time with the people from Ottawa when the issue is fair, but I will not accept the kind of criticism that’s directed to us by the cheap-shot artists, one at each end of that bench.
Mr. Kerrio: Would the minister like some time to respond?
Hon. Mr. Welch: In all fairness, the minister would like an opportunity to say something, if he could.
Mr. Kerrio: Yes.
Thank you very much, Mr. Speaker. I thought that those particular matters should be put on the record and I’m pleased to join in this debate with other members of the Legislature.
Hon. Mr. Auld: I’m pleased to have this opportunity to take part in the debate on the select committee’s report. I do think it’s important, after all we’ve heard this evening and in the past weeks, to place in context a few basic facts about heavy water production in Ontario, and in Canada, basic facts that somehow seemed to have been overlooked.
However, first I would like to offer my compliments to the select committee for its very exhaustive and thorough review. The committee heard from all sides during its extended deliberations and I think we’ve benefited from the process.
For one thing, I was most gratified that the committee, after re-examining all the allegations of irresponsibility levelled against Ontario Hydro and the Lummus Corporation more than a year ago, did not support or find substance to those allegations.
Further, I think there is some justification in the observation that more information about Hydro’s operations should be made available to the public.
As I said during my ministry’s recent estimates, we’re currently working to develop improved monitoring and reporting procedures and I expect a memorandum of understanding to be signed with Hydro in the near future, which will more clearly define the respective roles and responsibilities on matters such as this.
In terms of the select committee’s recommendations to cease construction on the second half of Bruce heavy water plant D, however, I would like to emphasize some essential facts as I see them and state why I find this recommendation premature. I think the first think we have to remember is that Ontario Hydro produces heavy water more reliably and more efficiently than any other source in Canada. As if we needed any further evidence of this fact, we received new proof and positive confirmation when last spring the federal government provided figures on the cost of the La Prade heavy water plant in Quebec which showed that the capital cost of that plant would be more than twice the cost, $1.5 billion versus about $650 million to construct the Bruce heavy water plant D -- this is a fact -- even though the expected capacity of the La Prade plant would be about 22 per cent less than Bruce D. It is also a fact that, based on current forecasts, Hydro’s needs can be met by completing only one half of Bruce heavy water plant D. I’ve said so many times.
Ms. Gigantes: We need none of it.
Hon. Mr. Auld: The third fact, and an important one in this equation, is the decision by the federal government during the past summer to mothball the La Prade heavy water plant. What that decision means for Canada is that if more heavy water is required for potential export sales in the coming years, then Ontario Hydro’s heavy water complex at Bruce is the logical source for additional heavy water supplies to meet Canada’s export needs.
Mr. Deputy Speaker: Order. It’s now 10:30. I was just wondering if the minister has much more.
Hon. Mr. Welch: Mr. Speaker, I understand the minister only has about seven more minutes or so. Could the House agree to at least allow that to go on the record?
Mr. Peterson: How do you know? Did you write it?
Mr. Deputy Speaker: Does the House agree?
Mr. Ashe: If you hadn’t taken so much time, there would be lots left.
Ms. Gigantes: Certainly not.
Hon. Mr. Welch moved that the House allow the minister to complete his remarks.
Mr. T. P. Reid: Could I speak to that Mr. Speaker? In view of the fact that the minister is reading his speech rather than giving an answer, I think we’d agreed that he do carry on because if he was just giving an answer to a question or to the responses we’d be here all night.
Ms. Gigantes: I have to speak against this motion. The minister had opportunity to participate in this debate earlier. I don’t know what reason there was for the fact that he did not participate in the House debate earlier.
Mr. Turner: When?
Ms. Gigantes: The House rules say that the debate should adjourn at 10:30. I think the House leader’s motion is totally unacceptable.
Hon. Mr. Welch: How could he have interrupted you?
Mr. Laughren: On a point of order, Mr. Speaker.
Mr. Deputy Speaker: On the motion?
Mr. Laughren: Yes. I didn’t understand why the House leader had to express a motion. Surely that motion could have been put before the minister even rose to speak.
Ms. Gigantes: The minister could have risen to speak hours ago.
Mr. T. P. Reid: May I speak to the House leader’s motion? We have a dichotomy of feeling about this because when we came into the House at eight o’clock there wasn’t a cabinet minister on the benches. In fact, the minister in question came in somewhat late, although I understand that he was in Ottawa. It does recall to mind that at one point the member for Carleton East and her colleague at the end of the front benches were the only NDP members in here. Some of us sat and listened to what she had to say. I think we can only do the courtesy of listening to the minister who is responsible for this ministry to have the opportunity to wind up the debate.
Mr. Peterson: If you promise to tell us who wrote it, we will listen.
Mr. Deputy Speaker: Order. It appears to me that one member wanted to get up on a point of privilege or a point of order -- I’ve forgotten which. I wonder if the House leader could clarify the motion he made.
Hon. Mr. Welch: I moved that the House extend beyond 10:30 to allow the minister to complete his statement. I had indicated before that he only has about seven or eight minutes to go. In all fairness, the minister has been in Ottawa all day at a meeting of mines ministers. It’s only fair, as the member for Rainy River indicates, that he be allowed to finish his remarks. That’s all that’s involved in this motion.
Mr. T. P. Reid: He has a responsibility. Let him say his piece.
Hon. Mr. Welch: We’ll use the whole seven minutes arguing about allowing the minister to put his remarks across.
Ms. Gigantes: It will be better spent.
Mr. M. Davidson: If I may, Mr. Speaker --
Mr. T. P. Reid: That is the party that used to advocate free speech.
Mr. Deputy Speaker: Order.
Mr. M. Davidson: If I may, I would like to support the position of the member for Carleton East.
Mr. Turner: Naturally.
Hon. Mr. Welch: Why doesn’t she want to hear the minister?
Mr. M. Davidson: This debate has taken place since S o’clock this evening. Each party has bad equal opportunity, I would think, to speak --
Mr. Sterling: Not equal time.
Mr. M. Davidson: I know. If there is a question to be asked, I’ll toll my friend how I know. Each party has had the opportunity to speak to the report.
Mr. Turner: So?
Mr. M. Davidson: Each party, I think, has to the best of its ability -- although I qualify that statement, because I am not at all sure that each party was aware of what it was speaking to --
Mr. Turner: I think you’re right.
Mr. M. Davidson: Yes, I think my friend is right also.
Mr. Ashe: We also agree.
Mr. M. Davidson: Each party has had the opportunity to put forward its view as to its beliefs, for political purposes, regarding the report of the Hydro select committee.
Mr. Rotenberg: Are you worried about the time or do you just want to cut off the minister?
Mr. Tuner: He wants to be on the record.
Mr. M. Davidson: I have no reason to be on the record, my friend.
Mr. Rotenberg: Then what are you speaking for?
Hon. Mr. Walker: Seven minutes are up.
Mr. M. Davidson: The rules of this House say that the House shall adjourn at 10:30 unless a motion is made previous to the adjournment hour. The motion made by the House leader for the Conservative Party was not made prior to 10:30. I would suggest to you, Mr. Speaker, that if a motion is to be put to extend the hours of the House, then the rules of this House should be abided by; and they were not.
If the minister would like to respond, then I would suggest that he do so at a later date as Minister of Energy and not necessarily on the report of the Hydro select committee.
Mr. Ashe: You took seven minutes.
Mr. Deputy Speaker: Is there any other honourable member wishing to speak to the motion?
Shall the motion carry?
All those in favour will say “aye.”
All opposed will say “nay.”
In my opinion the ayes have it.
Motion agreed to.
Hon. Mr. Auld: Mr. Speaker, I think the last sentence was that Ontario Hydro’s heavy water complex at Bruce is the logical source for additional heavy water supplies to meet Canada’s export needs on a reliable basis. Hydro produces heavy water cheaper and more reliably than any other source in Canada. I don’t think it is necessary to take us through the history of the Glace Bay or Port Hawkesbury heavy water plants to make my point. The facts speak for themselves.
In the context of those facts, I have to ask this question: Is it in Ontario’s interest -- or in Canada’s interests, for that matter -- to accept the recommendation to cease all construction immediately on half of heavy water plant D? I know what the committee recommended, but I believe it is the responsibility of the Minister of Energy to look at the circumstances from a broader perspective.
Another question which must be asked is:
Could Ontario bargain effectively with the federal government for rights to export heavy water if it has already decided to suspend construction of a plant which would cost less than half of the La Prade plant? I suggest we could not.
It seems to me that our interests are best served if we wait until we are more certain of the direction of the present negotiations with the federal government.
Ms. Gigantes: You know the answer now.
Hon. Mr. Auld: We mustn’t forget either that Ontario at the present time is in the process of delivering $100 million worth of heavy water to the province of New Brunswick for its Point Lepreau reactors --
Ms. Gigantes: You are doing all the same things again.
Hon. Mr. Auld: -- because Atomic Energy of Canada Limited, with its earlier commitment to supply heavy water to Argentina, was unable to supply New Brunswick’s need. Now, with the pending sale of the Candu to Romania and much-talked-about possible further sales to Japan and other countries in the works, it may not be long before any projected surplus Ontario capacity becomes a sure-fire sales item, either within or outside the country.
Ms. Gigantes: My heavens, this isn’t believable.
Hon. Mr. Auld: When, in addition there are a substantial number of Ontario jobs at stake, I think it is well worth while waiting until we get a better picture on how events will unfold. And when we consider the relative total costs of the project --
Mr. Laughren: We sat beyond 10:30 p.m. to hear this shameful -- At 10:31 you moved the motion too, I might add.
Hon. Mr. Auld: -- the costs entailed on such a postponement are modest.
I heard and read the comments of the leader and members of the New Democratic Party. Their leader is on record stating that he wants Hydro to slow down the pace of construction at Bruce and look more towards other sources of energy besides nuclear. I’m not sure if his idea to make jobs last at Bruce means less productivity or some form of featherbedding or just precisely what. But I do know that both Hydro and the government are very concerned about preserving as many productive jobs as possible at the Bruce project. That is why we’re so hopeful that a reasonable --
Ms. Gigantes: You people can’t add.
Hon. Mr. Auld: -- arrangement can be worked out with Ottawa so that the workers can maintain their jobs and so that Canada can benefit from export sales of heavy water in its balance of trade. I might add that during this past week, we met again with the federal government and there is broad agreement in principle --
Ms. Gigantes: What is the benefit to Ontario?
Hon. Mr. Auld: -- with Ontario’s suggestion that ways be found to rationalize Canada’s heavy water supply and demand.
Ms. Gigantes: Run your own province, not Canada.
Hon. Mr. Auld: Further discussions are planned over the coming week. In short these are the basic reasons the government is not prepared to accept at this time all the recommendations of the select committee. In an energy-short world, where the constant threat of energy boycotts or unconscionable increases in the price of energy on world markets is a very real danger, we cannot act precipitously to close off any energy option. Nuclear power in Ontario and in Canada is a safe, well-researched, carefully-constructed, efficiently-operated way of producing electricity. It means thousands of well-paying jobs and it has helped to keep Ontario’s electrical costs low.
Indeed, without nuclear power, Ontario, which imports 80 per cent of its energy, primarily in the forms of oil, gas and coal, would not only be in a very vulnerable position from a security of supply point of view, we would also have to pay much higher electrical rates than we do now.
We often forget when sitting in the isolation of the committee rooms of Queen’s Park that it isn’t as easy to stop and start large construction projects as it is to wave a hand or to pass a motion. There are several thousand jobs, many employing skilled tradesmen, involved in the construction of these plants. We can’t suddenly uproot and disengage these workers and their families without a very substantial additional cost and without wreaking havoc --
Ms. Gigantes: They are going to be out of work anyhow. Why don’t you plan for them?
Hon. Mr. Auld: -- on the communities where they live. As I said in Hanover just a month ago, some people suggest Hydro should never build facilities to serve any purpose other than the needs of Hydro customers. That’s a general rule most of us accept. But it is also a principle which must have some flexibility. When conditions change, as the demand for electricity has changed, and cause you to have a long-term investment in facilities you can’t use for your own purposes, then the prudent thing to do is go out and find a market for these facilities and protect your investment.
As I said then, and as I repeat now, that is what the discussions with the federal government and AECL are all about. We haven’t so much a problem at Bruce as we have an opportunity. It’s an opportunity which can be turned to the advantage of those living and working in the Bruce peninsula as well as those who pay electrical bills all over Ontario. We must remember that the Bruce nuclear power development is a major industrial complex by any standard and that it offers an energy source that is more stable, more economical, than any other alternative non-renewable energy source available in this province. For all these reasons, it would simply be premature to stop work now in the second half of heavy water plant D. The government will not accept that approach unless or until every opportunity has been --
Ms. Gigantes: Why do we bother? What nonsense.
Hon. Mr. Auld: -- exhausted for making the fullest possible use of the potential of the Bruce complex.
On motion by Hon. Mr. Welch, the House adjourned at 10:44 p.m.