L051B - Wed 28 Oct 1998 / Mer 28 Oct 1998 1
ENERGY COMPETITION ACT, 1998 / LOI DE 1998 SUR LA CONCURRENCE DANS LE SECTEUR DE L'ÉNERGIE
The House met at 1832.
ORDERS OF THE DAY
Mr Wayne Lessard (Windsor-Riverside): On a point of order, Mr Speaker: I don't think we have a quorum. Could you please check?
The Acting Speaker (Mr Gilles E. Morin): Would you please identify if we have a quorum.
Clerk at the Table (Ms Lisa Freedman): A quorum is not present, Speaker.
The Acting Speaker ordered the bells rung.
Clerk at the Table: A quorum is now present, Speaker.
The Acting Speaker: Minister.
ENERGY COMPETITION ACT, 1998 / LOI DE 1998 SUR LA CONCURRENCE DANS LE SECTEUR DE L'ÉNERGIE
Mr Wilson moved third reading of Bill 35, An Act to create jobs and protect consumers by promoting low-cost energy through competition, to protect the environment, to provide for pensions and to make related amendments to certain Acts / Projet de loi 35, Loi visant à créer des emplois et à protéger les consommateurs en favorisant le bas prix de l'énergie au moyen de la concurrence, protégeant l'environnement, traitant de pensions et apportant des modifications connexes à certaines lois.
Hon Jim Wilson (Minister of Energy, Science and Technology): It's been a year since I released our government's white paper on electricity reform, so it gives me great personal pleasure to preside over another significant milestone and introduce Bill 35, our Energy Competition Act, for third reading.
A competitive market would offer enormous benefits to all Ontarians by creating new jobs and an economy that is attractive to investors.
Customer interests would be protected. Reliability and safety of electricity supply would be ensured at the lowest possible cost.
Competition would be the best guarantee for customer choice. That means green power would be an option for consumers to light up their homes. That's good news for the environment and it's a first for Ontario.
Since the Energy Competition Act was tabled, it has generated almost $1 billion in private sector investment in the future of Ontario.
Projects proposed by companies like TransAlta, TransCanada Pipelines and Northland Power in Sarnia, Thorold and Hearst burn natural gas, which is an efficient and environmentally friendly fuel.
Canadian Hydro Developers in Peterborough has proposed a project which will produce environmentally benign hydroelectricity.
Here in Toronto, I recently attended an event launching the city's first cogeneration plant. The project, worth over $130 million, is a partnership between the Toronto Hydro Electric Commission and Cascades/Boralex, a company out of Montreal, Quebec. It represents almost 10% of Toronto's 2005 emission reduction targets and will result in the shutdown of the sewage waste incinerator at Toronto Works. So it's great news for the environment here in Toronto. The resulting reductions in carbon dioxide emissions are the equivalent of 81,500 fewer cars on the road, and it will reduce sulphur dioxide emissions by 4,000 tonnes, significantly reducing smog and acid rain in southern Ontario.
These companies have listened to our jobs and investment message, and that's what Bill 35 is all about. They recognize the benefits of competition and will be ready to take advantage of the opportunities that will be available in a competitive electricity market in the year 2000.
Passage of Bill 35 would allow us to keep pace with other jurisdictions and be able to compete on a globally competitive basis. In every case where other jurisdictions have introduced a competitive electricity market, it has led to greater efficiency in generation and distribution and, ultimately, to lower prices for consumers.
Other countries, such as Britain, Australia and Argentina, have already benefited from restructuring. Real distribution costs per customer in New Zealand fell by almost 20% between 1989 and 1994, and it's been estimated that Norway's distribution system could realize as much as 25% savings. In fact, anywhere competition has been introduced in this world, savings have been between 8% and 40%. Nowhere have prices gone up.
All jurisdictions that have gone from a monopoly to a competitive market in electricity have had to deal with the issue of market power, and we've certainly heard a lot about that in Ontario. In our province, Ontario Hydro has had a monopoly for 92 years. When our electricity market is opened to competition, Ontario Hydro's successor generation company, commonly known as Genco, will control about 90% of all the electricity supply in the province. So the issue of market power has been raised by both opposition parties and many electricity stakeholders, and it's a legitimate issue.
We knew from the beginning that we would have to address this issue if Ontario is going to achieve an efficient, fair and competitive electricity market. Investors need to be assured that there will be no abuse of market power, and limiting the exercise of market power is key to our commitment to consumers that prices will be as low as possible.
The Market Design Committee, a committee made up of experts from the marketplace and consumer experts working on behalf of the government and on behalf of consumers, was established in January of this year to advise the government on the rules for the competitive electricity market that will open in Ontario in the year 2000.
The MDC's third-quarter recommendations on market power, which we just received a couple of weeks ago, were unanimously endorsed by its membership and approved by Ontario Hydro. The report addresses the market power that Genco will have when the market is opened to competition. Their recommendations, which have been endorsed by this government, provide price stability and ensure a smooth but gradual transition to a competitive market. This framework will be essential in getting a credible market launched on day one at some point in the year 2000.
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The framework has a number of elements. First, a revenue threshold, or what the MDC calls a price cap, would limit Genco's ability to benefit from forcing up the price of electricity. Second, Genco would be required to reduce its share of the Ontario market to 35% or less within 10 years of the market opening.
There is flexibility in this model. Genco would be able to choose among a variety of decontrol instruments that reduce its Ontario market power without necessarily requiring it to sell assets. The decontrol instruments include long-term leasing and auctioned bidding. It may also sell or swap its Ontario assets and acquire assets in other jurisdictions.
Ontario Hydro says it can meet the 10-year goal and may even surpass it. It sees itself moving from being an Ontario monopoly supplier to becoming a top competitor in North America, with operations throughout the northeastern part of the continent, as electricity and energy markets become increasingly integrated.
As a first step, Genco would be required to reduce its share of fossil and renewable generation capacity to 35% within 42 months of the market opening.
Third, Genco's progress towards its market share targets would be subject to reviews by the Ontario Energy Board. The Ontario Energy Board would assess the company's success in meeting its 42-month target and review its plan for meeting the long-term target. The revenue threshold could be adjusted accordingly and the OEB could recommend additional measures if the decontrol targets were not being met.
The revenue threshold, or price cap, that's been set by the Market Design Committee is about 3.8 cents per kilowatt hour and applies to only a defined amount of Genco's generation. If the competitive market price is below this level, Genco may push the price up to the cap but can't exceed the cap.
If the market price is above the cap, Genco must rebate its excess revenue to the Independent Electricity Market Operator, called the IMO, and the IMO then pays out this rebate to all wholesale customers and eventually that gets to the consumers of electricity: you and me.
The legislation provides for both the Market Surveillance Panel of the Independent Electricity Market Operator and the Ontario Energy Board to promote competition, monitor the market and ensure market participants do not abuse market power.
This is all about good management in the province, something that's been long overdue when we're dealing with Ontario Hydro.
The province will be the majority shareholder in Hydro's successor companies. Concern has been expressed that these companies could incur more stranded debt. I want to remind people that this government, since coming to office in 1995, has not let Ontario Hydro borrow one penny more. In fact, the debt's been reduced by about $2.5 billion since 1995. I think that's a record for Ontario. Ontario Hydro has met all of its debt obligations to the people of Ontario and it has had to find savings for reinvestment within its own operation and has done a commendable job of doing that since we came to office.
We are committed to ensuring that tough financial benchmarks are in place and that all efforts are made by the successor companies to Ontario Hydro to avoid new stranded debt.
But the successor companies must be given a fair chance to compete. They would be given a commercial mandate. Investments would have to be supported by a strong business case.
The board of directors would be given authority to make commercial decisions and management would be responsible for performance. As well, other competitors would impose discipline on these decisions. We certainly know that this has been a transparent process; it's been that to date. We intend to keep that process open and transparent so that competitors in the new electricity market will be our best guides and our best watchdogs on the activities of the new successor companies to Ontario Hydro.
The credibility of having a competitive market is contingent on how we address market power, and we've succeeded in coming up with a good framework for market power mitigation. It demonstrates that this government is committed to an open and fair electricity market. We want the jobs and we want the investment. As we said at the beginning, we've already seen almost $1 billion worth of investment and that's before the act has even been passed by this Legislature.
In conclusion, Bill 35 will contribute significantly to investment and job creation in our province. It will ensure a safe and reliable supply of electricity at the lowest possible cost and it will provide choice of supply to consumers while protecting the environment. For the first time in 92 years, the people of Ontario will have the option of buying green power. Those that produce green power will be able to distribute that power to willing customers over the common carriers, which will be the wires of our transmission system and distribution system, and customers will have choice for the first time in many decades in this province.
With the approval of the legislature, the final market design details can be worked out and an implementation plan can be developed so we'll be ready to open up the electricity market in the year 2000. Then Ontario will once again be open for more business. At least $10 billion worth of new investment is expected in the province over the next few years as a result of this significant piece of legislation.
I urge all members of this Legislature to support the legislation. Jobs are important to our people. We can no longer be the third-highest jurisdiction with respect to electricity prices, just behind PEI and Nova Scotia. When the manufacturers and the auto sector came to this province in the 1960s and 1970s, it's because we had very low hydro rates. We've lost that competitive advantage over the past few years. We've had some mismanagement in the system and Bill 35 gives us a historic opportunity to correct the problems of the past and to move to the most competitive electricity market in this province and in this country. I look forward to the year 2000 when that market is opened up and we see more jobs and investment for the people of Ontario.
The Acting Speaker (Mr Gilles E. Morin): Questions or comments?
Hon Mr Wilson: Mr Speaker, I want to split my time. Can I mention that at this point? I'm going to split my time with the members for Huron, Bruce, Scarborough East and Lanark-Renfrew. There will be equal time allocation for those members.
The Acting Speaker: Agreed? Agreed.
Mrs Helen Johns (Huron): I would like to say that it's a privilege to be speaking to Bill 35 today. I've been involved in Bill 35 right from the beginning. When I moved to the Ministry of Energy about 15 months ago, the thought of introducing competition into the energy market was just a concept, and from that concept it has moved to a white paper and to a bill. It's been amazing to watch the process, and a good education for me.
One of the things that has really struck me is the stakeholders and how involved they've been in the process. We've had groups from municipal electric utilities, generators, retailers and wholesalers involved in this process, and they have done a terrific job of moving this process along. They really are the driving force behind this bill we're looking at today.
As a result of the bill being written, we went out and did some consultation during the summer, which I was involved in. We started in August and we did eight days of consultation across the province. We had an opportunity to hear from 90 different groups or individuals who gave us their best ideas, their best concepts, their best ways that we could change the bill, and we have listened very carefully to them.
In addition to those 90 people who came to talk to us, 150 people wrote to us and suggested improvements to the bill. We have certainly taken those into consideration. We've considered them very carefully and some of the issues they raised were very important.
We've tried to address some of those in our amendments, and for the people who haven't had an opportunity to see the amendments, I just wanted to run through some of the things that we changed.
I think the most important thing to recognize in this bill is that government and the stakeholders were primarily concerned about consumer protection. We wanted to ensure that the retailers, the people who turned on the switch in the province, had reliable, safe power, so we made sure there were a number of protections built into the system.
For example, we clarified the regulations to ensure licensing provisions cover all sellers in the wholesale market. One of the things we heard was that some people might come in from other provinces or other countries and we wanted to ensure that they also had to be licensed, so that everybody who is in this marketplace has a licence, they know what's expected of them and they work towards those expectations.
We also wanted to protect the small-volume customers, and that's the customers like you and me in our houses. We wanted to ensure that marketers who were selling natural gas and electricity to residential customers would need a licence, would have to get a licence, so that everybody who is selling in this market has a certain benchmark they have to meet. We felt that was very important to protect the consumer.
We also thought there had to be serious penalties for someone who sold into this marketplace without a licence or without the knowledge of the Ontario Energy Board, which is going to regulate this marketplace, so that came into effect also.
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In the past, we had heard a lot about gas sellers and some practices that had been around. We implemented a code of conduct in the bill, and that code of conduct will have to be approved by the Ontario Energy Board. The Ontario Energy Board therefore has the ability to ensure that code of conduct is maintained.
One of the things we heard from London Hydro that I think struck all committee members was that people are out there selling electricity contracts to you and me on the main streets of small towns and across the province. We wanted to ensure that people who are signing those contracts at this point, where there's a lot of information that they need to have before they enter into those contracts, had an opportunity in the future to say, "Did I enter into a good contract?" For those of you out there tonight who have entered into one of those contracts and are worried that maybe you've made an incorrect choice or you didn't have all the information, I want to put to rest any concerns you have. What will happen is that those people who have sold you electricity contracts in the future will have to reaffirm those contracts, and you will have another opportunity to look at those contracts. That's another degree of consumer protection we thought was important and that we implemented as one of the amendments. You have to be satisfied with the contract you've entered into, and the contract has to tie in to the licence conditions that were set out by the Ontario Energy Board. I think the process will be much more up front, and it will be a level playing field for everyone involved in this marketplace.
We also heard a number of concerns from municipal electric utilities or, for some of us, local public utility commissions. What we heard was that they were concerned that they couldn't enter into the broad range of opportunities that other groups, like gas companies, could. We wanted to make that level so that those of us who feel comfortable with our local public utility or municipal electric utility could then look at that and say, "I might be able to buy all my services from them." I think that was important. We want the municipal electric utility to be able to explore all potential business opportunities which they might think will benefit their customers.
We also wanted them to be able to look at joint billing and metering or providing telecommunications, because as they start to combine services, that gives efficiencies to the marketplace, and those savings can be passed on to the consumers. That's what we need in Ontario. We need to see pricing in all aspects, both in the generation side and in the distribution side, being honed to get down to the lowest possible price so that we are paying a reasonable price for our electricity in Ontario.
But we had to find a fine line with that. We want these municipal electric utilities to be able to enter into joint ventures and other opportunities, but on the other side we don't want the public paying for them to get into high-risk activities outside of their areas of expertise. We tried to find that balance, and I think we have found that balance, because the municipal electric utilities seem to be fairly satisfied with that.
We also decided, after going out and talking to a number of people about this bill, that the proposed payments in lieu that we had set up in the bill should be changed. We made the corporate tax the same for Genco and Servco as for the municipal electric utilities, once again, everybody being on a level playing field so that everybody competes and we as consumers can therefore choose who can best provide our services.
When my family talks to me about this whole electricity system, one of the concerns they always have is reliability: "When I turn on that switch, is it going to be the same as it has been in the past?" One of the things that got us really thinking about that was the people who came to the committee and said, "How do we know that you're going to always have power as we turn on the switch?"
The group that's going to be controlling that is called the Independent Electricity Market Operator. We tried to clarify what their responsibilities were, we tried to clarify their authorities, we tried to give them powers so that they could ensure we have reliability within the Ontario market. As a result of the changes and the amendments we've made to this bill, they seem satisfied that they can do their job and that we will have electricity as we need it, when we need it, at a reasonable price, at the best price they can offer us. I think that's a very important issue, and those were amendments that we heard as we travelled the province.
We've worked hard on this legislation. We've listened to what people in the province have said about energy competition. We've heard their concerns, and I think we've heard their dreams too, that they have reasonably priced power, that it's reliable, it's safe. We've done our best to address those in the amendments we have proposed.
Our work is not finished yet. Subject to the passing of Bill 35 in the month ahead, we need to refine regulations and the licensing agreements. We need to make sure that Genco and Servco are set up. We have a lot to do prior to Ontario moving forward to a competitive marketplace in the year 2000.
One of the things we've heard a lot about and which I just want to take a minute to talk about is the difference between Bay Street and Main Street in our consultations. I happen to live on Main Street, that is, in rural Ontario, and I don't come anywhere near Bay Street in Huron county, let me tell you. One of the things I've been concerned about and the minister has been concerned about is that there is no question that the transmission costs that come along could be more expensive in rural Ontario. So on Main Street in Exeter we have tried to ensure that rural and remote communities will receive special assistance with respect to this transmission.
Rural rate assistance is across the province as we speak, and it will continue to be there. In sparsely populated areas, what will happen is that people will have a calculation done so that they do not pay a greater rate for their transmission - the average rate that residential customers pay to the municipal utilities, and we compare that average rate to the rate being paid by rural residents. If the difference in the average rate is more than 15%, Ontario Hydro now gives a discount to those customers. It comes out to about $1.25 million a year, and this will continue to happen.
I want to reinforce tonight that whether you live on Main Street, Exeter, or Bay Street, the government has tried to work a process such that the 600,000 residents who live and the 100,000 people who have farms in rural Ontario will receive this assistance. We continue to work with the Ontario Federation of Agriculture and different groups to ensure that they receive this and that everyone is treated fairly within the province.
This has been a really good working experience for me, and I once again would like to close today by saying how wonderful it has been to work with the stakeholders who have been involved in this process. I'd like to thank the committee members who travelled across the province with me. I know today that Mr Baird from Nepean is in the House, and he travelled extensively and did a lot of work to deal with the financial issues. Mr Galt was there to talk about the environment and all the issues that revolved around that. We also had Mr Gilchrist there, who dealt with the municipal issues. Mr Jordan and Mr Preston were there. We had a number of different people who came in to help us throughout this committee, and we're very thankful to them. They did a wonderful job, and we thank them for all their help.
Mrs Barbara Fisher (Bruce): I am pleased to have the opportunity to speak in support of the third reading of Bill 35. The Energy Competition Act is long overdue in Ontario, and I think there's nobody in this House who will argue that point.
This legislation will ensure that the people of Ontario receive the kind of safe, affordable and reliable electricity that they demand and that they deserve. I believe that a competitive market will offer enormous benefits to all Ontarians. It will create new jobs and an economy that is attractive to investors, not just on a local basis but internationally as well. We have to renew that growth that we lost during the high increases to electricity prices in Ontario in the past decade. It is a proven fact that consumer prices have dropped in jurisdictions where electricity monopolies have been exposed to a competitive market. This has been the case in Great Britain, New Zealand and Argentina.
I'd like to dwell a little bit on the process that was used so that all Ontarians know that this is not something the government just dreamt up; this is something that has had a magnificent amount of community, local and, even broader than that, business input, consumer input, and it has been travelling throughout the province to have that type of input.
Bill 35 evolved from the general policy direction set out in the white paper released in 1997. That paper was entitled Direction for Change: Charting a Course for Competitive Electricity and Jobs in Ontario. The white paper was drafted with input from industry and consumer experts.
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The proposed legislation is also consistent with recommendations of the Market Design Committee, the select committee on Ontario hydro nuclear affairs, the Macdonald commission and the Minister's Electricity Transition Committee.
Weeks of public hearings in the late summer were held to hear and consider input from the public and interested stakeholders on the draft legislation. Several amendments to improve the legislation were made.
In a recent speech in Saskatchewan the president of the Power Workers Union, John Murphy, stated:
"We commend the Harris government for its consultative approach to electricity industry reform in Ontario, as well as for its decision not to break up Hydro's generating portfolio and privatize it, as some interests had been advising. I give the Ontario government a lot of credit for not only refusing to privatize these assets, but for also refusing to break them up. There is no doubt in my mind that the government did the right thing for Ontario."
I don't think there's anywhere in the province where this legislation has a higher impact than the riding I represent, Bruce. In representing those people, I also represent the interests of the Bruce nuclear power development site, of which eight of the 20 units that we talk about in this House when we relate to nuclear energy are involved. I have many constituents who continue to be concerned, and rightly so, with the recent changes in Ontario Hydro's power industry.
In July 1997, Ontario Hydro released the report of the independent integrated performance assessment, known as the IIPA, conducted by the nuclear performance advisory group. This report clearly outlined that there were significant problems as a result of poor management decisions in the past as they relate to Ontario Hydro's nuclear program.
From the report, Ontario Hydro prepared a plan to bring its nuclear program back to world-class standards. This plan, called the nuclear asset optimization plan, better known to us locally as NAOP, was presented to Ontario Hydro's board of directors in August 1997. The plan proposed the lay-up of seven of Ontario's 19 nuclear reactors in order to concentrate financial and human resources to the remaining 12.
In my community, this meant the lay-up of the remaining three units at Bruce A. Over 1,000 workers would be transferred to Bruce B or to the Pickering or Darlington sites. Earlier in 1997 the Bruce heavy water plant was closed, which also affected an additional 400 jobs.
In response to the release of the IIPA report, this government commissioned the select committee on Ontario Hydro's nuclear affairs, to which I was appointed. The committee's mandate was to review and report on the IIPA report, the recovery plan and the AECB's review of the independent assessment.
The committee received over 95 presentations and reviewed over 200 documents. The committee's final report included 39 recommendations, several of which address the expectation of competition in the electricity market. The white paper on electricity sector restructuring was released about two thirds of the way through the committee's mandate.
With regard to input, I want you to note that, as you've heard, many sources were available and many people wanted to be able to present. Unfortunately, you could never fit them all in. I think, however, most of them were supportive. Several submissions to the committee supported the introduction of competition into the electricity market.
I would like to provide a few examples of that. TransAlta submitted:
"The current nuclear difficulties being experienced by Hydro represent an opportunity for the province to take a positive step towards an electrical industry that will introduce prices set through competition."
The presentation by Energy Probe, which often differs with the opinions of Ontario Hydro, by the way, included these comments:
"Nuclear regulation needs to be strengthened. Make the transmission and distribution system subject to the Ontario Energy Board; that is, public regulation. The generation side would be open to market competition. We would consider privatizing all parts of the system including the transmission grid. The key is adequate public regulation. The analogy of successful deregulation of the gas markets is cited as an example of what can be achieved."
The consumers of electricity and natural gas were also extremely supportive of the government's proposal to eliminate Ontario Hydro's monopoly.
The Association of Major Power Consumers in Ontario stated:
"Competition and customer choice will provide a responsive, low-cost system. The monopoly should be dismantled and competition encouraged among many suppliers with light-handed regulation."
Finally, the Ontario Natural Gas Association submitted that, "In a competitive electricity system, all competing alternatives would be considered and the marketplace would determine the supply, demand and price."
There is an unprecedented level of support for the changes this bill proposes. Public opinion strongly endorses the idea that the status quo is not working.
With the passage of this bill, we will be able to bring full competition to Ontario's electricity sector and ensure a level playing field for all taking part in this new competitive market, and introduce reforms to natural gas legislation which would allow gas markets also to function more efficiently. As well, these proposed reforms will boost the economy by encouraging jobs and investment.
New products and services will stem from competition. This has been seen in the deregulation of the telecommunications industry. It will also open the door for new market players expanding their businesses and creating new jobs.
As a member for a rural riding, I am particularly interested in how electricity competition and Bill 35 will affect rural Ontario. I am pleased that this legislation is a positive initiative for rural Ontario in that it will assure service and continuing rate protection for customers who reside in rural and remote areas of the province.
The development of the legislation has been guided by the fairness and equity principles of the existing rural rate assistance program. Current customers in high-cost, sparsely populated areas of the province - that includes the north - will continue to receive current levels of support to limit rate differentials with urban areas. All customers will continue to pay for this assistance.
The legislation also provides flexibility to respond to changing demographics and local amalgamations, such as the ones that are happening in the riding I represent, Bruce, and more that will happen in the future.
On Monday, the Minister of Finance tabled the preliminary estimates of stranded debt of Ontario Hydro and the amounts to be assigned to the successor companies. It is not news that Ontario Hydro has accumulated significant debt over the past 100 years. This has been a concern of Ontario ratepayers for some time. The financial restructuring plan is intended to accomplish a number of goals: to keep electricity prices as low as possible; to put the new companies on a sound financial footing; to retain maximum value in the electricity sector until the stranded debt is retired; and to ensure that any residual stranded debt is recovered from the electricity sector and not the taxpayers.
Electricity consumers in Ontario are already paying rates to service existing debt within their electricity rates. With the introduction of competition, Ontario Hydro will no longer have a monopoly which allows it to impose these costs on electricity consumers.
The financial restructuring process has been designed to ensure that the debt can be serviced without an increase in electricity rates.
I would also like to address some of the environmental benefits of Bill 35. The introduction of a competitive electricity market is good for the environment. The government is committed to maintaining and enforcing strong limits on emissions and to meet our national and international commitments. The legislation allows for emission caps and trading, disclosure of emissions by generators and emission standards for those wanting to sell electricity in Ontario.
The Ontario Energy Board will also have an expanded role in electricity regulation. Time and time again in the hearing process or any of those processes that we talked about, this came out as one of the foremost factors.
Under the proposed rules, all transmitters, distributors, generators, purchasers and retailers of electricity would require a licence from the board. The licensee could be required to meet a number of conditions before a licence would be issued. Some of these are: following specified industry codes and technical and market rules; the need to meet performance standards and targets; and to provide reports concerning the source of electricity and emissions caused by its generation.
The board will be the independent regulator for the electricity sector with a mandate to protect consumers.
I welcome the changes and opportunities that this legislation will provide. I also believe that, for the good of the riding I represent, it probably is one of the last and only opportunities to allow a renewed Bruce site.
For too long, consumers have had too little choice and at too high a price. As we enter the 21st century, Ontario must be prepared to compete with the rest of the world in all endeavours, including the production and supply of electricity.
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Mr W. Leo Jordan (Lanark-Renfrew): It's a very special honour for me this evening to have a chance to speak on third reading of Bill 35.
Ontario's electrical industry, the present and the past: Over the past decade, the electricity cost advantage that made Ontario an attractive place to live and invest has been significantly eroded. Ontario rates rose by over 30% in the early 1990s and are now third-highest among the Canadian provinces. Electricity prices in Ontario have grown 54% faster than the consumer price index since 1986.
The Ontario economy depends heavily on international exports, and the cost of electricity is a major factor which influences the price of Ontario exports and the ability of Ontario companies to grow and create jobs.
A competitive market for electricity in Ontario would ensure a continuing safe and reliable supply of electricity for consumers at the lowest possible price. That statement is very important because we expect to continue a safe and reliable supply of electricity for consumers at the lowest possible price. We're not guaranteeing or freezing any prices as competition comes into the field, but you can't do that, as some would want us to, and still say we had a free, competitive market.
With the passage of Bill 35, we will have a competitive electricity market that would create increased opportunities for investment and job creation. These are two of the main reasons we are restructuring Ontario's electricity market.
For example, in my riding of Lanark-Renfrew, in the town of Almonte, we have a Canadian company called Canadian Hydro Components. This company builds turbines and installs turbines and generators internationally. They have such confidence in our ability to bring the electricity market into modern-day status that they now are in the midst of spending $2.5 million expanding that operation in the town of Almonte. I spoke with Mike Dupuis, the owner, and he tells me that he was in discussions with a friend of his in Idaho who is now 80-some years of age. He was saying to Mike, "If I could have sold the 50 kilowatts I was generating in my private little generating station years ago, I could have today been the owner of General Electric."
Small business, as I see Mike Dupuis, is watching as we come through this major change in the electricity market. We know, and he knows, a competitive market will provide more business opportunities not only for his company but for other companies in an expanding commercial market. With competition, savings in electricity costs would no longer be limited to big business. These smaller businesses, an example of which I pointed out, would be able to enjoy the fruits of the low electricity rates in many different ways, not only in the manufacture of goods relative to the hydroelectric area of small generation but through the retail part also.
There will be many opportunities in a competitive market. Commercialization has worked well in other jurisdictions and I feel confident in saying it's going to work well here in Ontario.
The proposed legislation, Bill 35, would end Ontario Hydro's 92-year-old monopoly and reorganize the company into two major commercial corporations: the Ontario Electricity Generation Corp and the Ontario Electric Services Corp. These would be known as Servco and Genco.
A non-profit crown corporation, the Independent Electricity Market Operator, would act as an impartial manager, ensuring reliable electrical supplies and fair access to this $10-billion market.
Passage of this bill will open a significant new chapter in Ontario's history, and that's something we shouldn't forget as we move through this legislation. It offers us an opportunity to take time to look back on how we got here.
I remember in 1948 I was accepted as a student at the Hydro-Electric Power Commission of Ontario, in their electrical engineering technology course. I was very fortunate to have been accepted because it was more people who had returned from World War II who had preference in these courses. I'm always thankful to the Hydro-Electric Power Commission of Ontario for having been accepted at that time.
However, we've come a long way from the steam-driven generators of the 1880s, from the first major hydroelectric station at Niagara Falls in 1895 and from Adam Beck being appointed as first chairman of the Hydro-Electric Power Commission of Ontario in 1906.
I had the privilege in the 1950s of working at DeCew Falls near St Catharines, a plant that generated 25-cycle, 60-cycle and 66 2/3 cycle; the 66 2/3 was predominantly to supply the steel plant in Hamilton. Back in those early days, transmission lines ran from Niagara Falls to Toronto and a dozen other southwestern Ontario municipalities.
The biggest hydroelectric station in the world, at Queenston, was delivering power in 1930. In 1929, in my riding on the Ottawa River, the Chats Falls development was a very major development in eastern Ontario. It generated 25-cycle power that was transmitted here to Toronto to a station at that time identified as the Leaside control centre. The major demand at that time here was for 25-cycle power.
But time moves on and things kept expanding and expanding after the Second World War. Consumers wanted a different kind of electricity - one with lights that didn't flicker. Ontario had a 25-cycle system in the overall picture of the electrical industry which became old-fashioned and out of step. So our Hydro-Electric Power Commission at that time spent $353 million converting appliances to 60-cycle.
On the 25th anniversary of Sir Adam Beck's death in 1950, the Queenston plant was renamed Sir Adam Beck Niagara generating station number 1 and work began on number 2. When it was completed in 1958, Niagara Falls had given all its power. The last untapped source was the St Lawrence River. The St Lawrence power project was undertaken jointly with the Power Authority of New York State and first produced power in 1958. This project tapped the last major source of hydroelectric power in southern Ontario.
By 1956, the commission had 65 hydro stations and two coal-fired stations. In 1962, the southern Ontario system and the northern Ontario properties were joined. The eastern and western parts of the province were electrically interconnected in 1970 through a newly constructed system of interconnecting lines across the north shores of Lake Huron and Lake Superior.
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Nuclear power then came to Ontario when the commission signed an agreement with Atomic Energy of Canada and Canadian General Electric to design and build an experimental nuclear station at Rolphton on the Ottawa River. It began feeding power into the provincial grid in 1962.
Then in 1964, the major decision to proceed with the Pickering nuclear development marked the province's commitment to nuclear energy.
The 1960s and 1970s also saw plans for more nuclear plants and the beginning of the extra-high-voltage transmission grid for the province. That was when we were able to build a 500 kV network across Ontario.
A government task force in 1971 recommended the commission be turned into a crown corporation, overseen by a board of directors. In 1972, the government enacted the Power Corporation Act. This gave the hydro commission a modern corporate structure and a new name - Ontario Hydro.
Public power has come full circle. We recognize and value the fact that Sir Adam Beck and other men of his age had a brilliant vision. We could also say today that our present chairman and Minister of Energy are moving ahead on what I would consider is a very brilliant and positive vision of the need for electricity in the future for this great province.
Mr Steve Gilchrist (Scarborough East): It's indeed my pleasure to add a few comments to this, the final debate on a very, very important piece of legislation, a bill that is obviously long overdue. We've heard from some of my colleagues, as we heard throughout the weeks of committee hearings and during the second reading of the bill here in the chamber, that most, if not all, of this bill has found favour across this entire province among consumers and business. Even the official opposition voted for the bill on second reading, and we're very encouraged by that consensus.
One aspect that has to be dealt with here tonight, though, in the limited time we have left is the financial aspect of this bill, the implications to the consumers, to small business and to large industry all across this province. As we have heard, what is currently known as Ontario Hydro is being broken up into three companies: the generating company, the service company and the financial company. All of these will form important legs in a three-leg stool perhaps, and each of them will take on specific tasks. Simply doing that, breaking it into three component parts, will bring about an accountability that we've never had before in Ontario Hydro. People will be able to compare apples with apples for the first time. We'll be able to go out in the marketplace and compare rate setting and the cost of operation between Ontario Hydro's successor companies and similar companies across Canada and around the world.
Part of the financial considerations, perhaps the most important part, has been in the media earlier this week, and that is the debt that will be assigned to the various components that will remain after Ontario Hydro is broken up. Some have suggested, taking advantage perhaps of the complexity of this issue, that this would add cost to the consumers. Nothing could be further from the truth. One of the little secrets that I'm sure Ontario Hydro has never been all that proud of and has never gone out of its way to explain on its monthly bills is that 40% of the amount of money that's being paid for electricity to Ontario Hydro by consumers and small business in Ontario today goes to service the debt, 40 cents out of every dollar you and I pay. It's an outrageous amount, and it shows exactly what the consequences are when you don't have accountability, when you don't have the ability to examine under a microscope exactly what is being done with these important assets bought and paid for by the taxpayers of Ontario.
The Minister of Finance and the Minister of Energy, Science and Technology have gone out to the marketplace, have found experts from Canada, the United States and around the world who have experience in exactly the initiative we're pursuing here today, moving from a monopoly energy distribution system to a competitive system, people who know whereof they speak when they talk about the amount of debt that can be assigned to each part of the new enterprise and, at the same time, people who have had tremendous experience with what's called stranded debt.
This is very complicated, and I have to admit - I'm sure I speak for most of the members - that we all had to go through this process two or three times before we came fully up to speed. I'd like to walk through, in the few minutes that are left, exactly what the steps are for determining who should get debt and who should get the stranded debt perhaps. The total debt and liability, when you looked at the outstanding bond issues, the outstanding financial liabilities that Ontario Hydro has today, plus certain non-book entries that there has been some dispute about, some debate over these last few years - for example, the cost of decommissioning the nuclear plants many years in the future. How much should we be putting aside for that rainy day, and how much should we have put aside in the last five, 10 and in fact 20-odd years?
When you look at the book value of the debt, it's $31.5 billion. The contracts signed in good faith years ago that now are not generating the sort of income one had hoped, as well as the unfunded decommissioning costs for the nuclear plants and the costs for the fuel disposal for all of the nuclear waste fuel that's presently sitting in two storage areas in the province, when you add that up together, you get to $39.1 billion. That's the bad news.
The good news is that when we looked at the value of the assets that would move into Servco and Genco and the financial company, clearly there is a value. How you arrive at that value takes a variety of paths. Perhaps the easiest way to explain it would be working backwards on the basis of the cash flow.
By looking into the future and knowing how much, at today's rates, the successor companies will be taking in in income and subtracting their costs, you can determine with a relatively fine degree of specificity the amount of profit the successor companies will make. You can then look at what that profit would translate to in terms of the ratio between its debt and its equity, in terms of the various other measures that are used in the financial marketplace, what costs of asset could be borne given that income stream.
There was some talk in the press earlier this week that the value assigned to Genco was too low, because the amount in the preliminary estimate - and I would stress that there is certainly nothing cast in stone at this stage - was only $5 billion. I would stress to anyone who is listening tonight that this is the net, again reflecting the fact that while the nuclear assets certainly have a value, as do the hydraulic and the fossil fuel, there are also the negatives, the liabilities, largely attached to the nuclear plants. It is the net of all of those numbers that takes us to $5 billion.
On the other hand, Servco, whose assets will largely be the wires, the transmission system in Ontario, has a value of $10.5 billion. When you subtract the value of the new companies added up together, it's $15.8 billion. That leaves us with debt that isn't covered on the day of the transfer of those assets of $23.3 billion. But even then we know today, as mentioned earlier, that Hydro is putting aside 40 cents of every dollar it's getting in to pay for that debt. So if the new companies did not have all that debt shifted over to them on day one, there would be an increased profit margin.
What the government has proposed in this legislation is that the new companies will be treated as if they were corporations in the private sector when it comes to paying taxes, particularly when it comes to paying both corporate income tax and the equivalent of property taxes, called payments in lieu. The same dollar paid to Hydro will now make Hydro more profit, but for the first time ever they will be deemed to have to pay taxes, and when you look at that income stream from the tax load they'll be able to pick up, you take another $15.4 billion off what is considered to be stranded debt. That leaves what we have been calling residual stranded debt.
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It has to be stressed that we are still six months away from the formal date that we hope to see the successor companies created. A lot can happen between now and then. Certainly we will have the benefit of further examination in the marketplace of exactly what debt load these new companies will be able to bear. We will have had a chance to hear from not just our opponents in the Legislature here but the informed and more experienced voices on Bay Street and other companies that are already in the energy field, and they too will share their thoughts about the proper value to be assigned to these companies.
Regardless of what amount is the final residual stranded debt, though, that will be covered by what we're calling a CTC, a competition transition charge. That will be financed out of the same dollar that you and I were paying for our electricity, of which 40 cents went to debt servicing. The amount we pay will not go up. We are encouraged, those of us who are supporting this bill, and I'm confident we'll see support on both sides of the House, that the Ontario Energy Board not only has the same powers to ensure there are no abuses in the marketplace in the future; their powers have been expanded. We've also seen what is called the Market Design Committee come out with rules which will guarantee that we will see that the rate will not go up.
On the other hand, reflecting on the experiences in every jurisdiction around the world that has gone to competition in their energy sector, we can look for energy savings of perhaps 8% to 40%, because that's what everyone else in the world has seen. That only makes sense.
To do nothing more than bring accountability, to bring an openness to the operations of these companies, to put them on a playing field where they now can be judged relative to the gas distribution companies, relative to electrical utilities in the United States, the United Kingdom, New Zealand, Australia, to all those enterprises in a variety of jurisdictions but from which we can develop an amalgam, we can come to a conclusion of what really are the appropriate costs of doing business.
I'm sure no one on the other side would be doing it to fearmonger, but the bottom line is that there is no merit in suggesting that this bill would lead to higher costs. The bottom line is that there will be the regulatory powers to ensure that consumers are protected. But more than that, we will have the advantages of competition, which in every jurisdiction, as I've said already, and in all likelihood will very quickly yield lower prices here in Ontario.
We know that the debt-to-equity ratios we're proposing for the new companies do something else as well. That guarantees that they will be viable entities. It guarantees, as we look forward, that we won't be sitting here five or 10 years from now and having to debate a bill to remonopolize the delivery of electricity. We are very committed to making sure that from day one the affairs of the three replacement companies are going to be manageable, are going to be something that any taxpayer - because remember, we are still the shareholders in these three companies - would recognize as being legitimate entities, legitimate corporations. There will be no smoke and mirrors. They will for the first time be able to have the sort of input, be able to have the sort of oversight that, if it had existed back as far as 1989, might have left us with a very different picture today.
Up until 1989, as we've heard earlier, Ontario Hydro had done quite well in managing its resources, and it's been only in this last less than a decade that we've seen that $39-billion debt explode. It's not a partisan issue. Again, we have support from a variety of sources, including many on the other side in this chamber, but the bottom line is that for the first time ever we're going to have accountable, accessible and open delivery of electricity in the marketplace.
The Acting Speaker: Questions or comments?
Mr Wayne Lessard (Windsor-Riverside): It's all well and good for the members of the government to suggest that competition is going to lead to lower prices, but Bill 35 really doesn't bring us into a competitive marketplace, at least in the short term. If there are going to be any limitations on prices, they're going to be the result of regulation and meddling by this government to make sure that price is controlled at least until such time as they get through the next election and are able to privatize Ontario Hydro and sell it to the highest bidder at some fire sale prices. That's the only time they're going to have true competition.
I thought that the member for Bruce made some interesting points when she talked about privatization in the introduction of competition, but she failed to consider that on Monday of this week it was announced that the nuclear assets, including Bruce A, were basically not worth a plug nickel and that instead of accountability, as the member for Scarborough East is talking about, the management and the operation of those facilities are going to be passed over to a completely independent board of directors who are going to make their decisions based on a return from their investment.
From what I can see, there isn't anybody who's going to justify throwing good money at Bruce A. I doubt very much whether we'll see Bruce A started up again in the environment that's being created under Bill 35. I would have thought the member for Bruce might talk about that a little bit. I thought she might talk as well about the rate protection for people who live in rural communities in Ontario because there is very little rate protection except if you stay in the house where you're living now. If you don't, your rates could be going up.
Mr John R. Baird (Nepean): I listened with great interest to the speeches of my colleagues, particularly the speech from the member for Huron. The member for Huron knows a terrific amount about this bill and that was certainly exhibited every day during the committee process.
The member for Huron spoke about the need for consumer protection. Indeed, she fought for that and had the bill amended to protect consumers who might have signed up to a distributor in some fly-by-night organization even before this House passed the legislation. She should be complimented for that as well as the terrific amount of consultation. Even some of the union locals and the power workers were in support of much of the bill. I congratulate her for her efforts.
I particularly was struck by her comments with respect to green power and consumer choice in green power, where a consumer now for the first time would have the choice if it might cost half a cent or a cent more a kilowatt-hour to choose green power. I know that the member for Huron's door will be the first one they'll knock on to sign her up for that issue, because I know she cares deeply about that.
In addition, I think competition is not the be-all and end-all but I believe, certainly after the extensive public hearings we had, it's the right path for Ontario. It won't be perfect and there are no certainties in life, but I believe it offers the best hope of reliable energy at a low cost, and that means lower than it would have been before Bill 35. That is extremely important to note.
We will, as a result of these hearings, and the member for Huron alluded to this, want to pay very close attention - and the member for Renfrew North spoke about this a terrific amount during the hearings - to the market power exercised by Ontario Hydro once this bill is implemented. I certainly accept that as a fair point. All of us will have to watch that, but obviously we want to ensure at this stage that it's in a position where it can compete south of the border. But that market power is something that I certainly appreciate and have a concern for that we'll all want to watch very closely.
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Mr Gerry Phillips (Scarborough-Agincourt): The member spoke about the financial benefits of this. I just want to say that we in the opposition were briefed on the finances two days ago and we asked a very fundamental question. We said, "Will you give us how you arrived at the profitability in these companies, the earnings in these companies?" That's fundamental to this bill. We're told that in the case of Genco the annual earnings can be $775 million; in the case of Servco, $352 million.
We said, "Give us the numbers." They said: "We really can't do that. That may be sensitive information." I come from a business background and I would like to know, before you ask us to approve this, how in the world they arrived at it, because I'll tell you this: For the last several years, Hydro has not paid a penny of its debt. They've paid its interest but not a penny of the debt. As a matter of fact, Hydro had to use a strange accounting trick to prevent them from having to increase the rates. They had to use this unique accounting trick that only they can use.
I say to the public, this will be the biggest business deal in North America probably in 10 years. There are hundreds of millions of dollars to be made on this. The government came to us two days ago with the finances and wouldn't even give us the basis on which they arrived at the earnings numbers. If this is how a government wants to operate, signing a blank cheque without the numbers, fine, but I'm not sure that's how good business people operate.
Mrs Brenda Elliott (Guelph): I am pleased to be able to rise and join my colleagues in commenting on Bill 35 and speak to the speeches that have been presented this evening. As a member of the government, I am very pleased to see this much-needed reform come forward. When I was first elected, I was appointed the Minister of Energy. From the very outset it became quite clear to me that major reform was needed in this industry. I can recall, as a new minister, lying awake in my bed at night as days and days passed of more and more stories about the nuclear plants and the regrettable shape they were in.
Ontario Hydro has a very proud history in this province, a very commendable history of providing reliable and for the most part affordable electricity to the province. But like all monopolies, its time, its place in history become altered in changing circumstances. It's been very clear to me, as a member of this government and as a taxpayer, that the time has come to reform this institution to make it modern, to make it responsive to the needs of our competitors from outside this province and, first and foremost, accountable to each and every citizen in Ontario.
From the first days of our government we have been consulting experts and ordinary Ontarians how best to reform this institution. I believe that in this bill we have found a very workable solution that will serve not only the institution of Ontario Hydro well over the years, but will allow opportunities for change to still occur, as they will in such a major transformation, and also affordable protection to taxpayers.
The Acting Speaker: The member for Huron, you have two minutes to respond.
Mrs Johns: I'd like to thank the members for Scarborough-Agincourt, Windsor-Riverside, Nepean and Guelph for their comments. One of the important things that needs to be said after listening to the member for Scarborough-Agincourt -
Mr Gilchrist: Scarborough East.
Mrs Johns: Scarborough East, thank you. How could I forget Mr Gilchrist here?
I'd like to say to the member opposite that the system is not working. Inasmuch as you talk about how you're not uncovering details, you think you're signing a blank cheque, the citizens of Ontario have been signing blank cheques for this company for the last 15 to 20 years. Decisions we have heard through the select committee and through the committee we were on as a result of Bill 35 heard about some of the expenditures that happened under all governments.
Maybe we wouldn't have done it the same way if we had been in government at the time they happened, but the important thing is that the taxpayers are on the hook. They have a $32-billion monkey on their backs, and it's growing every year. Something has to be done to ensure that Ontario Hydro and the electricity system become more accountable to the people of Ontario, become more accountable to the ratepayers of Ontario, become more accountable to everyone who uses electricity throughout the province.
What we have done is move to make it more accountable by adding competition to the system. We all know that as you add competition, it hones the skills in each area. We believe that as we do, we will see substantial changes in the way that Hydro operates, and it will be better for all of us in the province.
The Acting Speaker: Further debate?
Mr Sean G. Conway (Renfrew North): I am pleased to join the debate on third reading of Bill 35. I want to indicate that I have 60 minutes and I'll be sharing some of those minutes with my colleague from Agincourt. I want to say at the outset that I will be recommending to my colleagues that we vote against this bill on third reading for reasons that I will entertain and advance in the next few minutes.
I agree with previous speakers who have indicated that this is very important legislation. I would argue that this Parliament, not just this session but this four-year mandate, probably this decade, will not deal with more important legislation.
The member for Scarborough East, Mr Gilchrist, is also right: It is enormously complicated. I am a generalist. I've paid some attention to this. I say to my colleagues that I don't profess to have the remotest understanding of a number of the intricacies, both technical and financial. But make no mistake about it: This is as important a piece of legislation as I have seen in my time here over 23 years, and most of you will not see anything with this kind of significance and this kind of impact.
Because it is so complicated, because it is so technical, it misses a great deal of public attention. In one way, I deeply regret the process I've seen since the introduction of this bill on June 9. We have paid very little attention, and not just the Legislature. I would chastise my friends in the press. I think this bill deserves a lot more attention than it has received, particularly from the print media. I understand that other things are going on, particularly in the print media. It's certainly not a television story. But there was a time when a newspaper like the Globe and Mail, perhaps even the Toronto Star, would assign two or three reporters with a strong business background to go at this story and develop it over the course of several days. That has not happened. But, trust me, the day will come when it will capture a lot of attention.
The parallel, and it's only a modest parallel, has to do with property tax assessment, very complicated. Unless you are a municipal clerk, a tax lawyer or one of those citizens who really understands that stuff, it passes you by because it is so complicated. Have you noticed lately the interest once the impacts are being felt by the millions of ratepayers across the province? The interest is definitely heightened. The Legislature has been treated to six or seven or eight different iterations by this government to deal with this complicated problem of reforming the assessment and municipal tax system.
You ain't seen nothing yet. There will be sons and daughters of Bill 35, the likes of which we cannot imagine. I simply want to go on record as saying that this is important, complicated legislation that touches the very essence of our economic and social well-being.
I want to cite a reference from the Consumers' Association of Canada, a group which presented to us in Toronto in August, one of the fortunate groups. We had 91 witnesses who were able to be slotted in to the eight hot, muggy August days. For every one we heard, at least one or two delegations could not be accommodated. But I'm sure that when we next look at the pregnant mares' urine amendment act or when we next revise the warble fly amendment act we will have all kinds of time in peak season to go out and talk to the people, and well we should. I just note that the people of Ontario got eight days in the pits of August to debate the most important piece of legislation that we will see in this Parliament if not in this decade.
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What did the Consumers' Association of Canada say to us when they came to the committee, ably chaired by the member for Guelph, and presented on August 14? Let me just read in part from their submission.
"Before assessing the legislation according to those criteria, some basic background information needs to be restated. Residential consumers consume approximately 70% of the electric power in Ontario. Collectively, residential consumers will pay the lion's share of the cost of Ontario Hydro's stranded debt and its stranded assets. Electricity is to residential consumers an essential commodity. They cannot live without it. They must be assured the safe, reliable delivery of electricity at a reasonable cost. Individually, residential consumers have virtually no economic bargaining power. That is in stark contrast to the major industrial consumers of electricity and the various entities who would supply electricity in the restructured market. While residential consumers have a real stake in how the electricity market is restructured, they do not have the resources to influence how it is restructured."
They go on to point out, as my friend Mr Phillips did in his comment a while ago, that this is an enormously important commercial transaction. This is a $10-billion annual business that we are opening up for the first time in a long time, and you can bet that the vested interests are there like the most live sharks in the best pond. We've seen them. I have never seen so many well-resourced special interests and lobbyists on any piece of legislation in a long time, if ever, and that's understandable, because this is such lucrative business.
I don't complain about that, but my question is: Who is looking after the interests of the majority player here, the millions of residential and farm consumers who will be depending on this government and this Legislature to define and defend the public interest? There is abundant evidence from Britain, from Australia and from America that that interest is very seriously in jeopardy.
Let me come to some of my observations about what we heard, and other members have said this. We heard from almost all the deputants that the status quo is not an option, and I agree. I'm not going to try to compete with my friend Mr Jordan, from Montague township, who ably recited the history of the Hydro-Electric Power Commission of Ontario, but I could say that some of the bills that were listed in the early 1990s had everything to do with the way we financed Darlington. We didn't put the cost of Darlington on to the bills until the plant was actually commissioned, and that was widely complained of in this Legislature. The government, to the Te Deum of praise from big business and big labour and many in the community, said, "That's fine." That's what we did. What do you think we got in 1991 or 1992 or 1993 when you start to factor into the bills a $14-billion capital outlay? Unfortunately it happened when the economy was spiralling into a serious recession.
But what we did was no big surprise. Mr Davis was elected in 1981, with Ernie Eves and Mike Harris at his elbow, saying that that was precisely what they were going to do. I'm a democrat. I don't complain that they won the election with that commitment. But it takes some measure of chutzpah to stand up and say, "It all started in 1989-90." That is a very convenient but objectionably revisionist take on recent Ontario economic history.
What did we hear? We heard that, yes, the status quo is not an option; just about everybody said that. Almost everyone said that competition in generation was a good thing, and I believe that. Almost everyone who presented said that meaningful regulation of the electricity sector for the first time is a good thing, and my colleagues and I strongly support that. But we heard much more, and that's why I want to take some time tonight to explain why, having voted for this bill on second reading, because like most members, I am very troubled by the state of Ontario Hydro - I just heard a little speech from somebody across the way, and I thought, "The new accountability."
Let me just talk about one recent incident, and I want to be ecumenical, because I remember a year and some months ago when Norm Sterling, the then Minister of Energy, to his credit, sent a strong, sharply worded letter to Bill Farlinger, the chair of the board of Ontario Hydro. Minister Sterling, on our behalf, rightly said, "Before your board acts with undue haste to make some choices around the nuclear recovery plan" - which had to be decided, to be sure - "I want to know that there has been a good and clean canvass of all your options." That did not happen. The minister's letter arrived and was only dealt with at the board after a decision was made.
What do we now know about some of what has transpired? We know one thing we didn't know last year, that the board, under Farlinger's direction, accepted a compensation package, and I'm not even here to talk about the salaries, but the benefits - am I the only one here outraged by the fact that a year and some months ago, on our behalf, the board of Ontario Hydro, chaired by Bill Farlinger, approved directly or indirectly, I say to the taxpayers and the electricity consumers of Ontario, a decision not only to bring in a group of Yankees to try to fix the operation, but they agreed to a benefit package which in the case of Mr Carl Andognini is going to provide to Mr Andognini, after four years of whatever service to Ontario Hydro, a lifetime pension of C$200,000 a year? That is outrageous and obscene. That happened on the watch of this government, under the very noses of our committee, I say to the member for Huron.
I can't be the only one who is upset about that. I know everybody here has got to be upset. I thought we were going to end that kind of stuff. Can you imagine a scheme where we're paying somebody a lifetime pension of C$200,000 a year after four years of service at a salary of what is now I think $1 million-plus. I am just furious about that. I grant you that in the overall scheme of things it may not be a big point. I'll tell you, I was lambasted at home on the weekend over that. I was really struck by how angry a lot of my constituents were. I even got into a little bit of a fight about it at church on Sunday morning, with a good Mike Harris fan, I might tell you. Talk about accountability.
That may be the only thing that has happened that we ought to be concerned about, but that much we know. This is under the new scheme of things. What else has gone on that we don't know about? There are complicated problems to resolve at Ontario Hydro Nuclear, I admit that. I have said publicly that I was impressed by Mr Andognini, and I'm not even here to complain about his salary, although it does look pretty excessive, but that benefit package is an outrage. How any board of directors could have approved that is just beyond my comprehension. I think I probably speak for the entire House. But that happened, and it just happened a year and some months ago.
What else is going on in the nuclear recovery plan that we don't know? One of the things about Bill 35, I say to my colleagues, is that it is, as the member for Huron said, enabling legislation. It is the Delphic oracle. It can mean everything or it can mean nothing. It can mean X; it can mean negative-X. The standard phrase in this bill is "as decided by cabinet in the regulations."
Now to a central point. I believe that the sine qua non, the essential ingredient that we must provide to get the benefits we all want, is competition. I have quoted ad nauseam the work of the Macdonald commission, the advisory committee on electricity restructuring chaired by the former federal finance minister, served on by the former provincial finance minister Darcy McKeough and a number of other bright people. What did they say when they gave advice to the government and the Legislature two years ago? Let me tell you what they said. They said that a fundamental ingredient to this policy change, which they endorsed, was competition in generation, which they argued had to be accomplished by the unbundling of the Ontario Hydro generating assets. If you didn't do that, they argued, you would not and you could not get the benefit of competition in generation, which is 70% of the bill. The government of Ontario says it wants competition, but in its white paper and in this legislation they have specifically precluded the unbundling of Ontario Hydro's massive generating capacity, and for that reason alone I stand here to say nyet, no, to this policy.
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I am personally convinced that what we have to do, and what we're not doing, is unbundle that generating capacity at Hydro into three or four or five publicly owned competing generating units. If we don't do that, we are not going to get the juices of competition on the big part of the bill. Not only did Macdonald say it, but the Market Design Committee said it and a variety of other people have observed the same point. There probably will have to be the injection of some private equity in that process, and I am quite prepared to consider that. I am not interested in a wholesale privatization of Ontario Hydro, but I want the benefits of competition. I understand, as Macdonald did and as the Market Design Committee did and as a variety of other people - I can quote a Globe and Mail editorial. They make the point that knowledgeable experts, to almost a person, are agreed that that is an essential. We're not doing that.
What else are we doing? I went to the committee thinking that what we're going to do in this process is, in a difficult circumstance, inject some competition into generation, so that is going to mean that there will be a reduced role for Ontario Hydro in generation. I personally believe and my colleagues believe that it should be broken up into three or four or five publicly owned companies competing against one another. I certainly believed that on the distribution and services end we would have many fewer utilities, and on that I think we all agreed as a committee, and I certainly expected that we would see a substantially reduced role for Ontario Hydro Retail in southern Ontario.
What did we get at the committee? Who could forget that day, I think it was August 11, when Ron Osborne, the chief executive officer, came before us - my friend Phillips was there - and said: "No way. I intend to expand Ontario Hydro Retail. I'm going to grow the company." He said, in a famous phrase, "Listen, this is all about eat or be eaten, and I don't intend to be anybody else's lunch."
By about day two of the hearings, I was sitting there with this conundrum. I went into this exercise thinking we were going to get true competition in generation and we were going to get a streamlined, reduced Ontario Hydro Retail in southern Ontario and encourage a reduction of the number of municipal utilities, and we would get more private sector players in the services business, and we might get situations like we got in Cornwall, where a private company came in and bought the franchise for electricity distribution. I never imagined that what we were going to get was a bigger Ontario Hydro, and that is the fundamental problem.
I think this government has been hoodwinked in a way that all previous governments would appreciate. I think you started out going in this direction to get competition and a reduced role for Ontario Hydro, and Hydro has made no secret of what their ambition was. Somewhere along the line they got Jim Wilson to embrace it. What's the new vision? A big Hydro with at least 30,000 megawatts of electricity, a bigger not a smaller presence in retail, and we're going off to the United States to do business. That is an interesting policy objective, but I have to tell the House that is not what we set out to do. That is a very radical departure from what we started out to do, and I am deeply troubled by that.
Let me repeat, my colleagues and I support competition and we support regulation, and it's not easy. If we change places tomorrow, I am not under any illusions about the difficulty of some of these choices. But we have to decide, as Macdonald and others have told us, what do you want to do? If you want competition, you've then got to do those things which are going to give you the competitive benefit, particularly on the largest piece of this business which is generation, and that's 70%.
I want to say, on behalf of my colleagues, that we are very, very troubled by what we see as a sharp change in government policy. I spent some time listening to the Hydrocrats. Their position hasn't changed from day one. What they've want is to remain big; they want to be stronger not weaker. They understand the problems with market power. They will tell you: "Yes, now in the competitive marketplace, with 85% or 90% of the market share, there's a problem. We'll solve that by going south. We're going to Kentucky and Tennessee."
I look at this and say that Hydro appears to have won the day. They have more than won the day because when I went with Phillips the other day and looked at the financial breakout, the assignment of debt, what did I see? I saw a remarkable presentation. Ontario Hydro's generating assets, which are all going to be kept together, are going to be put in a new company called Genco, as the members opposite pointed out. Genco is going to be given $1.8 billion worth of the nearly $40 billion worth of Hydro debt. It's got a value, they say, of $5 billion.
Do you know what we're giving Genco? Just so you know, Genco is going to get some 69 hydroelectric plants with an installed capacity of 7,134 megawatts. They're going to get eight fossil plants with installed capacity of 12,391 megawatts. They're also going to get the nuclear problem, and it is a problem. But it may not be the problem that some imagine. Just setting the nuclear part of it aside for a moment, Genco, which is estimated to be worth $5 billion, is going to get 20,000 megawatts of installed hydroelectric and fossil-fired capacity. Wow.
Wall Street will be wetting its pants over that. That is enormously attractive business. I see the Wall Street Journal reported the other day that these power plants, fossil and certainly those hydroelectric numbers, are fantastic by American comparison. These conventional power plants, that is, non-nuclear, are commanding enormous prices on the market in the United States in recent days. So you betcha.
Another reason I won't sign on to this policy as presented to me is I believe that we have seriously underassigned Hydro debt to Genco. I think we have created a very, very valuable asset for Mr Farlinger to take into the commercial world. What did we see in Britain particularly? The scandal of the British deregulation was a fire sale of very valuable public assets.
Mrs Johns: That's not true.
Mr Conway: That is true. Any objective analyst who looks at -
Interjection.
Mr Conway: You know how true it is? It's so true that in the new government they've imposed an excess profits tax because they were so advantaged by the disposition of some time ago. We have been told by a number of experts that is a very real concern.
I chuckle when I see - we were treated the other day to Goldman Sachs being there with the red suspenders. When I read the Wall Street Journal, who's acting for purchasers and sellers? Of course, Goldman Sachs. They're all over the place. Talk about money. They are going to make - I don't complain about that. Whose interests are they protecting, I ask. Who's protecting the interests of the millions of residential and farm customers? I'm going to talk a little bit more about that in a moment.
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I was stunned, as I think many were, the day that Osborne walked in and said, "We're going to grow the retail company." If you're really a cynical oppositionist you might say: "Harris is going to starve these municipalities. He's going to put them in such a corner that he's going to make Joe Blow, mayor of Four Corners, Ontario, entertain a bid from whomever, Genco or Union Energy or Enron." "Come on, we'll give you $30 million or $40 million or $60 million or $80 million for your municipal electricity franchise, because we know you need the money." I'm telling you that is going to be a real issue. Municipalities - listen, one has already done it and I presume it has met with the approval of the people of Cornwall.
In my part of the province I think, and I suspect I speak for more than a few people across the way - I'm looking at my friend from Stirling, Rawdon township, and I'm just thinking what people in our part of eastern Ontario might think when they read in the Belleville Intelligencer or in the Lakefield Trombone that Ontario Hydro has come to buy out their retail electricity company. I've got to tell you, that's going to be news in my part of the province. I may be misreading my voters, but there is no one I know who's expecting this policy to spawn a bigger, more aggressive Ontario Hydro Retail. I didn't think that's what we were doing, but that's what we're doing apparently.
Let me tell you, we did not in this committee pay nearly enough attention to Servco. There is a real financial story at Servco. I think without a doubt that we have created a situation in this legislation, loudly complained of by a number of people in places like Huntsville and Lambton and North Bay, to the effect that we have tilted the ground legislatively in favour of giving Ontario Hydro Retail an undue advantage in terms of expanding their retail power, their retail mandate. We'll see what we'll see.
I wouldn't want to quote some of the testimony but I'm going to tell you, the general manager - and my friend from Guelph might remember this. Do you remember Mr Wills, the general manager of North Bay Hydro? I hope he has a word with his local member. He's just one; there were many others. I cite this evidence as simply an example of why my concern has heightened, not reduced, in the course of the last two or three months.
The question of rates is absolutely critical. We hear these pious platitudes offered by government members that this will bring rates down, that there's no evidence of the contrary happening. Let me tell you that's not true. But I think we had and my friend from Windsor-Riverside had a number of amendments that simply reflected the testimony. We had several people who came to the committee and quite legitimately said, "Listen, why don't you amend the purpose clause of this bill to make it a purpose of the energy restructuring legislation that you shall promote lower-cost energy for all consumers?"
The government wants no part of that and that's left a lot of consumers very dubious. They talk about, "Well, it's in the title of the bill," where it has absolutely no meaning. Where it has meaning is in the purpose clause of the bill. My colleagues in the Liberal Party, and, to be fair, Mr Lessard and the New Democrats, put forward amendments to simply say, "Let's amend the purpose clause of the bill to give that as an additional purpose," and the government used its majority to say no to that.
What are we seeing about rates? I was anxious to share with my colleagues who were giving these little speeches a moment ago the New York Times last Sunday. For those of you with an interest, you should go and read this. There's an article in the Sunday New York Times, October 25, 1998, talking about consumer revolt in California. What's happening in California? They were one of the first US states to get into the deregulated market. I want my friend Jordan to listen to this, because he made a very good point the other day in the briefing of which I was a member. What are we finding in California where when they passed their legislation the state Legislature mandated a 10% reduction in rates for residential and small business consumers? According to the New York Times on Sunday, we've got a revolt. They are mad as hell, not just the residential consumers and the farm consumers but the small commercial consumers. Why? Because they are finding that they are not getting the benefits. Big business is getting a quick, significant benefit.
Where my friend Jordan's point of the other day comes in, do you know what's happening in California? The rate has been reduced but the bill is going up, because of course the big three in California are now layering all manner of special charges on the bill, and particularly on the bill for the most defenceless, the big base of unorganized residential customers and small businesses.
California, the article says, "has become the flashpoint for consumer discontent. Since residential power service was opened to competition earlier this year, the electric bills received by California households have shown [the] mandated 10% discount. But the bills now include a variety of additional charges," including a stranded debt and stranded asset charge. Consumers are noticing that when you add that all up, it is wiping out any gain for them; not so for the big consumers. Read this article, a very interesting article about what's happening once we get into it.
Did anybody read the stories out of Alberta this week? You might say, why is Conway obsessing about the size of Genco? The fundamental problem with a generator that's got that much of the market share - 85%, it is expected, on the day the market opens - is you're not going to get other people to come in. They're simply not going to do it.
Again, I brought the clippings, a couple of articles in Tuesday's and Wednesday's Globe and Mail. They had power blackouts in Alberta last Sunday. Thousands of Calgarians sitting down to dinner Sunday night and they had no power. All kinds of farmers out in rural Alberta and they had no power either. This wasn't an accident. This was a mandated blackout because they have not got new people coming into the market. Why? Because their three existing players are thought to be so strong and so advantaged by the restructuring legislation that what they've got is growing demand but no growth in supply. So now they are looking at blackouts, and this is just the first of many rounds.
Let me tell you, if you live in Listowel or Pembroke or St Catharines or up in Vaughan township, you are not going to be a very happy customer if you're treated to this kind of rotating blackout. It's not fictional, it's not imaginary; it's happening. One of the reasons it appears to be happening in Alberta is market power, and they've got three players. We're going to have one leviathan, one gargantuan utility.
The member for Huron is right in saying we're going to have all kinds of mitigating measures, and I agree. There are going to be price caps, but they are all second- and third-best choices. Everybody who has looked at it said: "That stuff is going to be very difficult to manage. You've got a much cleaner, easier way to get the benefits of competition, and that is to break them up into four or five publicly owned but competitive utility companies." We didn't do that. I tell you, when I look to California and I look to Alberta, I get troubled by what I see because the Ontario situation is, I would submit, more complicated than California and more complicated than Alberta. I agree with the comments earlier about the particular problems we have as a result of the nuclear situation.
Here's that Globe and Mail clipping I was talking about. On Saturday, August 15, 1998, the Globe and Mail editorializes, "Trim Hydro, don't bulk it up." Let me read one paragraph.
"The experts are virtually unanimous: Keeping Hydro's generating assets in a single post-breakup entity will significantly reduce the benefits of electricity competition for Ontarians. The only virtue of keeping Hydro's generating assets in a single entity is that it will be, well, big, which is what Hydro has always wanted. But being oversize, impervious to criticism and crown-owned is Ontario Hydro's whole problem." I agree with most of that, and so do a lot of other people.
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Rates are an issue, obviously. The government would not accept amendments from the opposition reflecting many submissions to the committee that there should be some meaningful protection for every consumer group on the rates side, absolutely no consideration of that.
I think the reality of other experience is clear. The people who are going to benefit in a significant way early on are big industrial and commercial consumers of electricity. They, I will submit, will get the big, immediate benefit. Because of their size and sophistication, they will be able to hire the Jim Flahertys of the world to go to these various boards, agencies, and commissions and government and find a way to avoid paying their fair share of the cost of the stranded assets and stranded debt, while Mr and Mrs Ontarian living out in Westmeath township in Renfrew county are not going to have a similar luxury. They are going to depend on the Legislature and on the government to recognize, define and protect their public interest.
We know, for example, that when we move to a competitive marketplace in generation, particularly over the next few years, we are going to be relying to a greater extent on fossil-fired electricity. Yes, over time we're going to move to more combined-cycled, natural-gas-fired electricity. That's going to take a while to get up and running. In the next few years, we are going to see, in Ontario particularly, a greater reliance on fossil-fired electricity. That is clearly going to mean, as many important submitters to the committee made plain, a very real pressure on our air quality.
The Ontario Medical Association came to the committee in Mississauga. Dr John Gray and his colleague Ted Boadway made a very powerful submission, saying there must be a commitment on the part of the government to mandate emission caps on the various pollutants that we know are going to be increased because of our move to a marketplace in generation, because we're going to get more coal-fired electricity.
If you thought this summer was a smog-ridden time, you wait for the next couple of summers, on the basis of what a lot of people are saying. That's not Conway talking. If you want to read the submissions, there were very powerful submissions by, among others, the Ontario Medical Association about the first-order importance of imposing emission caps on a variety of pollutants that we know we're going to be exposed to in a greater way because of the new marketplace, which is going to depend, in the first few years at least, on more, not less, dirty, coal-fired electricity.
Have you noticed what the United States government has done? That's something we haven't even talked about. They've introduced new clean air standards for utilities in the United States, and presumably for Ontario Hydro if it wants to do business in Ontario. But a strong argument from a wide range of people: "Legislate emission caps before the market opens." The government would not accept amendments to respond to that very legitimate environmental concern expressed by doctors, by students, by experts and other people in between.
A couple of other quick points before I turn the floor over to my friend Dr Phillips. The government of Ontario is in a deep conflict of interest in this policy. Mr Phillips will talk about what we were told the other day. What a show. What a performance. We had the red suspender crowd come in. You've got 10 minutes to ask a few questions about these people, and that should just about do it.
If I weren't so cynical these days about the growing irrelevance of this place, I would say this is a true contempt of the Legislature, but most people wouldn't know what I'm talking about because it is de rigueur today to be contemptuous of the Legislature and of Parliament. That performance we saw the other day was a pretty splendid example.
Here's what we're being told: "We're going to cap rates. Don't worry." That was one of the headlines. "There's not going to be a problem on rates." But as Mr Phillips will say, we look at the new structure. We're going to have, for the first time, new hydro taxes. Harry, you're going to be interested to know, and a lot of your constituents are going to be interested to know, that if you just take the taxes that Genco and Servco and the municipally owned utilities will now pay for the first time on their businesses in lieu of provincial and corporate taxes, do you know what that is on an annual basis? One billion, fifty million bucks; and they're going to pay $1 billion worth of provincial and federal taxes, they're going to pay hundreds of millions of dollars in dividends and special charges, they're going to pay higher property taxes and they're going to be paying for acquisitions. All of that is going to happen and rates aren't going to go up. Hallelujah, Social Credit lives.
I can't meet very many experts who tell me that in the first three or four or five years of this exercise it is going to be possible to keep the rates from going up. The one way you might do it -
Interjection.
Mr Conway: Well, a very colourful politician.
Did you see today's Toronto Sun? Donato's cartoon has it bang on: poor old Joe Q. Taxpayer carrying as big a burden as ever. All I'm saying is that knowledgeable people who understand the rate business better than I tell me, "You are not going to restructure in the first few years and pay these new taxes, pay these new dividends, pay these increased property taxes, pay for acquisitions, pay for other things and keep rates down." The only way you'll keep rates down is, God knows, by manipulating things in ways that we know Hydro is famous for.
The government of Ontario under this legislation is in a complete conflict of interest. I don't mean this as a partisan criticism of this government. If I were the Minister of Finance under this bill, I would be a referee with more power than you can imagine and a referee with a real interest in the results of the game.
I'm that farmer in Westmeath township in Renfrew county; I'm the shoe clerk in Bancroft hoping that Conway and Phillips and Danford and Jordan are going to protect my interests. If I hear anything about what the government's stake in all of this is, I have a right to get very worried. The government has a huge corporate interest.
I've played a lot of sports in my day. I never like to be in a game where the umpire has a big interest in the outcome. Under Bill 35, let me tell you, the Ministry of Finance, on behalf of the government of Ontario, has a huge interest. You might say, "How?" Let me give a few examples. The Minister of Finance gets to make all the calls about when the stranded debt is paid off. When it's paid off you know, for example, that there's going to be $1 billion - according to the estimates the other day - of new taxes.
Where do they go? They go to the Ontario treasury. Who among us, as Treasurer, wouldn't want to get at that as soon as possible? If you're a ratepayer in Lambton county, if you're the former mayor of Petrolia, you might say, "I want that stranded debt paid down over a longer rather than a shorter period of time because that's going to ameliorate the rate." The shorter the period, probably the greater the upward pressure on rates. If you're Marcel Beaubien, citizen, or if you're Sean Conway, Treasurer, you've got a very different perspective. How the minister relates to this financial company, the possibilities there are phantasmagorical. I suspect that we will be reading a lot of front-page stories in the National Post and the last post and the about-to-be-acquired Toronto Sun empire in the years to come.
There is a true moral hazard in this policy with our friend Farlinger now being presumably in charge of the very valuable generating assets and sitting on the board of Newcourt Credit. I don't know how he can manage the responsibilities for Newcourt and the Ontario Hydro ratepayer at one and the same time but he's going to - another conflict of interest. The conflicts of interest are everywhere. I don't feel very comfortable that this is going to work out to the advantage of the broad base of residential and farm customers.
For those and other reasons, I say with some regret, I strongly recommend to my colleagues that we not support this bill on third reading. What I really would like to do is send this back to the drawing board and say: "Listen, there is a problem, we all agree, and there is a consensus around some of the fix. Let's just do what we say we want to do. If you want competition, let's do the competitive thing." Let's tell Ontario Hydro that their imperial ambition to remain big and powerful and head to the green grass of Kentucky is for another day, if ever. That's not what we're about, though they may want it.
With that, I'm happy to yield the floor to my esteemed colleague from Scarborough-Agincourt.
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Mr Phillips: I appreciate the chance to join the debate on Bill 35. My biggest interest in this is on the financial side of it, and my colleague Mr Conway, who I might say has spent an enormous amount of time on this issue, spelled out for us the basic concern, that there was an expectation that there was going to be some fundamental change here and that the end result could have led to a far more efficient generation of power in Ontario, to the benefits that would accrue through the normal competition in the marketplace, and that we would take advantage of this once-in-a-generation opportunity really to restructure Hydro.
When I attended the briefing two days ago with the very high-priced help that had been hired by the taxpayers to give us advice on the finances, what we got was something that I don't think any business person ever would have accepted. We were told, "Listen, the most recent annual report of Ontario Hydro shows that Ontario Hydro essentially broke even in 1997." They paid down no debt, they essentially broke even, although they had to record, or they did record, a net loss for the year of $6.3 billion.
Here's the situation. In the year that the most recent financial statement is available for, the year ending December 31, 1997, Ontario Hydro paid down no debt, they made about $250 million before corporate write-off, they wrote off $6.5 billion of expenses and showed a net loss of $6.3 billion. That has been the case for the last two years. They paid down no debt and have recorded substantial losses. The combined loss they had to record over the last two years is about $8 billion.
But now we were told in this briefing that magically this happened: Genco, as my colleague Mr Conway said, essentially is the new company that will take all of the existing generating plants, all of them. They'll go into one company. Servco will take all of the distribution company, the lines that we see Ontario Hydro stringing, and for many people in Ontario - I'm one of them; I am an Ontario Hydro Retail customer; with the line coming into my house, I pay Ontario Hydro for electricity on that - that will be split into a separate company, and there is in total a debt of $39 billion. We were told this: that magically, just by breaking the two companies up and with no change in the rates, this company could begin to not only turn a profit but indeed pay down that almost $40-billion debt over a relatively short period of time.
We said: "Can we see the numbers? Will you give us a profit-and-loss statement, how you arrived at that?"
Mrs Johns: And they did.
Mr Phillips: They didn't do that. They refused to do that, as a matter of fact. They did not supply that. They still have not supplied that.
Mrs Johns: Yes, they did.
Mr Phillips: Here's what they gave us.
Hon Jim Flaherty (Minister of Labour): Come on, they were all there.
Mr Phillips: I was there, and they said, "We can't do that because it is competitively sensitive."
Interjections.
Mr Phillips: If the member for Huron thinks we are going to accept five numbers, well, I'll tell you, I don't accept it. No business person would accept it. Nobody would want to run a business that way. But you have the government saying that just by breaking these two things in half suddenly you're going to turn a magical profit. We said: "How did you get earnings of $760 million? How did you suddenly arrive that you could pay almost $1 billion in taxes that weren't paid before?" And they refused. I'll tell you why I'm so suspicious. I think it is wrong -
Interjection.
Mr Phillips: Mr Flaherty, they didn't provide it. If you provided it, table it today. You didn't. Table it. Bring it over right now. You didn't provide it.
Interjections.
Mr Phillips: You see, that's the problem: You didn't provide it.
Interjections.
The Deputy Speaker (Mr Bert Johnson): Order, order. If you persist in wanting to get into the debate and you're not willing to take your turn, then I'll ask you to leave. I want to hear the person who has the floor and I don't want to hear others. I recognize the member for Scarborough North.
Mr Phillips: There is the P and L statement. It's just five numbers. If you went to your local bank and said, "I'd like to get a loan on this," they would laugh you out of the office.
I'm just saying to members that my first suspicion was, and my colleague mentioned it: Mr Farlinger is the chair of Hydro, a well-regarded person, a close personal friend of the Premier, one of the people I gather who got the Premier to run for the leadership and that sort of thing. The day I saw his picture in the paper on the board of Newcourt finance - and that's a well-regarded company as well. Newcourt is a company that will without doubt down the road - their business is funding companies that will compete with Hydro. I thought, here is somebody the taxpayers are paying, I think, $400,000 a year or thereabouts to look after the interests of the shareholders of Ontario Hydro.
Hon Mr Flaherty: That's low-life stuff. You wouldn't say that out there.
Mr Phillips: Mr Flaherty says, "Low." I don't think he should be on the board.
Hon Mr Flaherty: I don't think you would say it outside. That is low-life stuff.
Mr Phillips: I will say it inside and I'll say it outside, as I have. I think it is incorrect for someone like that, for the chairman of Hydro, to be on the board. I just think it is wrong. Mr Flaherty says, "Say it outside." I've said it many times. I said it publicly. I said Mr Farlinger is a well-regarded person, Newcourt is a well-regarded company, but I don't think the chairman of Hydro, who is looking after the shareholders' interests, should at the same time be on that board. I just don't believe that. It's something, as I say, that I will say anywhere.
I frankly found unacceptable the way Ontario Hydro keeps its books. I was very interested in reading in Ontario Hydro's report that they did not follow generally accepted accounting principles. They decided to write off that $6 billion and, as it says here, that didn't follow generally accepted accounting principles. I think that was wrong. I don't think they should have done that. As a matter of fact, the province itself, in its own books, its Ontario budget books, tried to do the same thing and the auditor said, "I won't sign the books if you do that," and forced the Ontario government to change the way it reports its finances. I think Ontario Hydro has done the same thing and I'm looking forward to the auditor's report. I hope the auditor has looked at this and I hope he will point out that writing off the things Ontario Hydro wrote off, using what is called its unique rate-setting authority, was inappropriate.
Why do we on this side look at these numbers with suspicion? It is for those reasons. I go back over what happened to us two days ago. Here we are being asked to approve a bill that, as my colleague Mr Conway said, is certainly the most significant financial bill that this House will deal with in 10 years. This will probably be the biggest financial endeavour in North America, certainly in this year and probably for the next five years.
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We were told that we wouldn't get the background on how they arrived at $776 million of profit and, as my colleague Mr Conway points out, how they arrived at a total of $1 billion in new provincial and federal taxes, about $400 million in new property taxes and some estimate on net income, a substantial amount of net income. Yet tonight we're being asked to approve a bill that will essentially give the government carte blanche to do that. As my colleague Mr Conway said, where are the savings in this? Where are the things that are going to result in Hydro - which has paid down no debt for two years and as a matter of fact has recorded roughly an $8-billion loss in two years - suddenly, magically being able to pay down $39 billion of debt over a 10-year period just because you set up Genco and Servco?
My colleague Mr Conway pointed out another reason we get concerned about the finances of Hydro. The benefit package given to new employees who joined Ontario Hydro to deal with nuclear was by any standard exceptional. To be guaranteed, after four years in an organization, a $200,000-a-year pension for life is exceptional. The amount of money it has cost Ontario Hydro to provide that benefit is incredible. If it is the mindset at Ontario Hydro that this is acceptable, that this kind of deal is quite all right, that there is nothing wrong with it, if the Ontario Hydro board said when they looked at it, "This is something we're quite prepared to offer," I say they are operating on a different wavelength than I am and a different wavelength than I think Ontario is operating on.
So you go through all those things: Hydro deciding, and the term in here is, "to not follow generally accepted accounting principles," to use their unique rate-setting authority to write down $6.5 billion, many of the costs for things that are going to be incurred in 1998-2000, that should have been in the books for those years. If that is acceptable, then I repeat, and I will say inside the House and outside the House, that I think the chair of Hydro has a responsibility to the shareholders of Hydro, namely the public, to be single-mindedly focused on that for us. A Hydro board that believes it is acceptable to offer those kinds of benefits is on a different wavelength than we are.
I return to the fundamental point that Mr Conway makes, as we embark down this road of fundamental change to Hydro. It is fair to say that in the hearings travelling across the province I don't think there was a single person who didn't believe there had to be fundamental change in Hydro. Certainly Mr Conway spelled out our belief in the need for fundamental change. But in the end what are we left with? Essentially Hydro retains all its generating capacity. It sets up a distribution service that I think, as Mr Conway points out, will have a lot of clout to actually get bigger, not smaller. It will go from municipality to municipality - I think it's doing that already. Municipal electrical organizations are extremely worried about the predatory approach of Ontario Hydro.
It does allow for some new generation, and I don't think there's any doubt there will be some new generation plants coming on to cream off the best possible users for Ontario Hydro. We found that in Sarnia, where there will be a new generation plant set up. It will take away from Ontario Hydro some of its perhaps most profitable customers.
You take all of those things and add them all up and we are left with approving a bill without the proper financial information, in my opinion, where the fundamental objective of the bill, to encourage substantial competition in the generation area, has not been met. You wonder why there's disappointment after all this effort when we thought there was going to be a significant benefit, particularly to the residential users, and I don't think it's there.
The Deputy Speaker: Comments and questions?
Mr Lessard: I want to thank the member for Renfrew North for his comments, which I know are going to be discounted by the members of the government because they don't respect the fact that for 23 years the member for Renfrew North has lived and breathed Hydro issues and the knowledge and experience -
Mr Ernie Hardeman (Oxford): That's not true. That's not factual.
The Deputy Speaker: The member for Oxford, would you please withdraw that remark.
Mr John Gerretsen (Kingston and The Islands): Come on, withdraw the remark, Ernie.
The Deputy Speaker: Have I got the wrong member?
Mr Gerretsen: No, you've got the right member. That was a nasty thing to say there, Ernie.
Mr Hardeman: I withdraw, but I don't know what I said.
The Deputy Speaker: Thank you. The Chair recognizes the member for Windsor-Riverside.
Mr Lessard: How many people in this Legislature can say they've read articles in the New York Times recently that talk about what Ontario Hydro has done? Obviously he has some real fascination and interest in this issue and his experience and knowledge is something we should take seriously. He talked about 70% of the market for Hydro in Ontario is represented by small residential and farm consumers. They are the people who are going to end up paying the bills for the mismanagement of Ontario Hydro over all of these years; it's the large, corporate consumers that are going to be able to end up with favourable rates. Why are they paying? They're paying for the mismanagement of Hydro that has occurred over a number of years, but that large debt has built up primarily as a result of the construction of the Darlington power plant that was started by the Progressive Conservative government.
This legislation is not going to result in more competition. It's not going to result in the reduction of Ontario Hydro Retail. It's going to result in Ontario Hydro getting bigger, moving into the United States market and, when they're making those decisions, completely unaccountable to the government of Ontario. They're only going to be accountable to their board of directors. When they have to make a decision whether they're going to serve the market here in Ontario or their big corporate customers in the United States, I'm afraid that rates are going to go up for consumers here and we're going to have blackouts like they do in Alberta, as the member said.
The Deputy Speaker: I want to address a remark, if I could, to the member for Oxford. I have no mistake about what I heard. I do have a question about where I heard it from, and if I've made a mistake, my apology. The Chair recognizes the member for Huron.
Mrs Johns: After hearing the last 60 minutes, I feel like starting off by saying the sky is falling, the sky is falling, my God, the sky is falling. What I heard over here was: "The system isn't working. I don't have any solutions for you. I don't like what's happening now. I don't like what you're doing and I'm not offering any other solutions." From that I've got to say that we've asked all the way along in committee: What did they think was the stranded debt number? How did they think we should proceed? What did they think of the Market Design Committee? But the sky is falling.
I'd like to say that the Market Design Committee suggested very strongly in its third report that you can obtain competition when you have a generator with 85% capacity. They have said that you can do that by bilateral contract, by leasing, by any number of methods, and in our amendments we made sure that those opportunities were available so that we could ensure there was competition in the generation sector. The member opposite fails to tell the public we did that.
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They talk about Genco and its stranded debt. The members opposite fail to say that if we're wrong on the numbers and all of a sudden Hydro or Genco or Servco gets a AAA credit rating, they'll have fewer expenses and more earnings. Where do the earnings go? The earnings go to the taxpayers of Ontario and that gets put against the debt.
Once again, the sky is falling. God help that the taxpayers of this province get this monkey off their backs. I have to say that things have been a little one-sided tonight, but we have to recognize that this company is not working the way it is right now, and they need management and a good system.
Mr Bruce Crozier (Essex South): I'm pleased to comment on the speeches of my colleagues from Renfrew and Scarborough. What we should understand in these debates is that it's an opportunity for each of us to put our view forward. As the member for Huron just said, if the sky is falling in - I think in fact she said the sky is falling in - that may be the case, but if you listened to what was said tonight and if you have any doubt whatsoever - and that's all we really want to do in these debates: determine whether there's any doubt.
All that was suggested was that if we haven't met in this legislation the objective we set out for, then it's time, and we still have time, to take a step back and look at it again. If you don't do that - I understand the vote will be taken on this tomorrow - then it's too late. If there is any benefit at all to be derived from debates in this Legislature, it's the opportunity to think about it, because the mistake, once made, if the sky does fall in, it's going to be too late. We have to absorb what was spoken about earlier this evening, and there will be more said about it tonight. But before that vote is taken tomorrow, I suggest that you have a look at Hansard in those areas that you can't quite recall what was said, listen to what the member from Renfrew said, listen to what the member from Scarborough said and think about it.
Mr Jordan: We're listening to what you're saying.
Mr Crozier: I'm glad you are listening to what I say.
The Deputy Speaker: Time has expired. Comments and questions?
Mr Tony Martin (Sault Ste Marie): I want to thank the members for Renfrew North and Scarborough-Agincourt for enlightening us tonight as to the real issues in front of us as we debate this privatizing of Ontario Hydro. It's passing strange in this place these last three years that no matter what the problem or the issue, the answer is always, "Let's privatize it." That's the simple response to all that ails us, "If we privatize Ontario, then all will be better."
The member for Scarborough-Agincourt referred to the appointment of Mr Farlinger by the Premier, not long into the tenure of this government, to fix up Ontario Hydro. We should have known from that that something extraordinary was about to happen. Mr Farlinger turns around, and as this government is wont to do, finds the highest-priced American consultant he can find, who have nothing usually in their portfolio but American experience, to come in here and tell us in Ontario how to run our business, how to do it properly, how to make sure that the private sector makes loads of money and that the ordinary citizen, the consumer, gets soaked.
I want to raise the red flag, as the member for Renfrew North did, on this question of privatizing resources such as hydro or water or health care in this province. If you're not careful, you will end up at the end of the day with problems on your hands that will make the problems we're dealing with now under the aegis of Ontario Hydro seem like just so much child's play.
The Deputy Speaker: The Chair recognizes the member for Renfrew North.
Mr Conway: I appreciate the comments. The debate's nearly over; it'll be over in half an hour. I'm reminded that last week the 105th Congress left Washington after passing a $500-billion federal budget. At the end of it, Senator Moynihan said that nobody there knew what was in it. He hoped that there were some good things in it, but it was so big, so complicated, that no one, he said, knew what was in it.
Quite frankly, the problem with this is it is a matter of how you read the situation. I understand the differences of opinion. At the end of the day, this will be judged by its performance in the marketplace. This bill, because it is so wide-sweeping, so regulatory, can mean any number of things. There's no one in here, particularly the government, who can tell me what it may mean because by the very nature of the legislation it can mean a variety of things depending on the application as decided in the regulations.
Ms Johns said it herself - or somebody, Gilchrist - "Well, of course, this is all preliminary." It's going to be preliminary from now till doomsday. I hope I'm wrong. I submit the evidence from jurisdictions like California and Alberta where they're now months or a couple of years ahead of us. I submit again, that we said we were about competition. The government has clearly and manifestly and premeditatively done that which precludes competition. That, more than any other reason, is why I oppose this bill as written, in addition to which it is very clear that the average residential and farm consumer has no guarantee that they are going to share in equal measure and at the same time as big business in the so-called advantages of this policy. If this policy works for Bay Street and not for Main Street, I for one, am happy and proud to reject it.
The Deputy Speaker: Further debate?
Mr Lessard: I have to disagree with the member for Renfrew North. The debate isn't over. We still have a few more minutes left to try and bring some sense of reason to this government.
This is one of the most important financial undertakings that this Legislature is probably going to be involved in for the foreseeable future. The fact that on third reading debate we are going to dedicate a mere three hours to discussion of this legislation I think is to do a disservice to the taxpayers and hydro consumers in Ontario, especially in light of what the member for Huron reminded us; that is, that the sky is falling. She stole my line. That was how I was going to start out tonight.
Most people who don't know this bill got introduced during the summertime and don't know about the hearings that were undertaken by the committee, have no idea of how this legislation is going to impact them as far as rates go. They have no idea of the importance of this legislation. The fact that we only have three hours of debate this evening is not going to do anything to bring to the attention of Hydro consumers in Ontario the impact of what it is we're doing.
I really do think it's going to have a negative impact on rates. I just cannot foresee this government's prediction that rates are going to go down because: "Hey, we've looked in other places and they've gone down, so they're going to go down in Ontario. It doesn't matter how unique the conditions are here in the Ontario market. Trust us, rates are going to go down."
I sat with the committee as we did the hearings during the summertime, a mere eight days of hearings, but we did have an opportunity to hear from a great number of people who had a whole lot to say about what was taking place here. It's interesting to have been witness to that exercise and to have been part of it and to have seen how much the agenda changed from when the government first got elected to when this legislation finally got introduced and what direction we're taking by passing it in third reading.
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Everybody will remember this. This is the Common Sense Revolution. This was waved around in this Legislature quite a bit before the last election. This is what it says with respect to Ontario Hydro. There will be a rate freeze. That's good for consumers. But it says, "This may mean more changes at Hydro, including some moves towards privatization of non-nuclear assets." That's it. That's all it says about Ontario Hydro. But we know that what's being undertaken in Bill 35 means a whole heck of a lot more than what was set out in the Common Sense Revolution.
When we started down this road, it was all about competition through the breakup of Ontario Hydro, and when this legislation was introduced I indicated, on behalf of our caucus, that we supported competition in electrical energy marketing. However, that isn't what's happening here. Time after time this government says that competition is going to lead to lower rates. But what they fail to say is that what they're introducing here has nothing whatsoever to do with the introduction of competition into the Ontario marketplace. That's not what's happening here.
What is happening, and the evidence is very clear and we heard it time and again from all the presenters, is that Ontario Hydro is going to get bigger, they're going to move into the United States to compete and we in Ontario are going to be subject to the decisions that are going to be made by a board of directors who no longer are accountable to this Legislature for the decisions they make.
There are a lot of people who are concerned about the impact that these decisions are going to have on their rates, and justifiably so. We heard that time and again from people who came to present to our committee and we reminded the government during clause-by-clause hearings that what the minister said upon introduction of the bill was that competition was going to mean lower rates. This bill was all about providing benefits to consumers in the form of lower rates, and in fact the bill's title says "An Act to create jobs and protect consumers by promoting low-cost energy."
We thought it would be a good idea to have that in the objectives of the bill and we put forward an amendment to ensure that the promotion of low-cost energy was going to be part of the purposes of the bill, but the government rejected that amendment out of hand. They didn't want to have any part of the promotion of low-cost energy, and I can only ask, why is that so? What does the government know that we don't know, that consumers in Ontario don't know and that they don't want to tell them? What they don't want to tell them is that there is a very distinct possibility that rates are going to go up for the 70% of consumers in this province who are small residential consumers and rural and farm consumers.
We thought there should be a guarantee that there would be lower rates for consumers in Ontario, but the government didn't want to have anything to do with guarantees. They say guarantees of low rates are wrong. But this is a government that continued the cap on hydro rates that was put in place by the NDP many years ago to ensure that there was some rate stability. They continued that in the Common Sense Revolution as well, a continuation of the five-year freeze of hydro rates. But somehow now they don't want to have that guarantee for consumers and I want to know why.
Why don't they want to put that protection for consumers in the bill? I suspect it's because they know that for the majority of small residential consumers there is the very distinct possibility that rates are going to go up. There is going to be a lot of opportunity for large commercial and industrial consumers to try and ensure that they're not going to end up stuck with those bills. They're going to find a way to make a good deal for themselves and they're going to leave the rest of us stuck with the bill.
Something else that I am concerned about is the impact this is going to have on the environment. The government holds this bill up as some kind of incredible breakthrough in environmental protection. But the only thing that protects the environment is the fact that they may pass regulations to cap emissions. That's all that it says. However, what they're going to be doing is inviting generators from the United States to sell power into Ontario.
A lot of those generators are going to be coal-fired power plants in Ohio. We know that when those coal generators fire up, the emissions that come out of those large smokestacks just blow right into Ontario. Most of them are coming right over Windsor and Essex county.
We're having to deal with that bad air and we're having to deal with the prospect of up to 1,600 premature deaths in Ontario as a result of emissions, mostly from coal-fired plants in the United States. Just a couple of weeks ago we had representatives from the David Suzuki Foundation come to tell us that even those estimates about the number of premature deaths were probably conservative in nature.
We need to take some immediate action to try to improve air quality in Ontario. We had that opportunity in Bill 35 and, quite frankly, we blew it. It's unfortunate that although groups like the Ontario Medical Association, the David Suzuki Foundation and the Ontario Clean Air Alliance all came before the committee to make suggestions about how, through Bill 35, we could improve air quality in Ontario at the same time as making changes to Ontario Hydro, but this government rejected all of those suggestions.
One of the things we heard over and over again was how we can promote renewable energy. One of the things we need to do is to encourage the development of renewable energy resources, enable people who produce power through renewable energy to have a market for that power. This was an opportunity to be able to do that. One of the suggestions was to have what's known as a renewable portfolio standard. It would be a requirement that anyone who is marketing power to consumers in Ontario would have to have renewable energy as a certain percentage of the portfolio of power products that they sell. That would be energy that was produced through solar power, through small hydroelectric installations, through bio-thermal and power such as that.
The government says they don't want to have any part of that sort of requirement for renewable portfolio standards, that the marketplace is the way that is going to be accommodated for, that somehow permitting producers of green power access to the market is going to provide opportunities for generators to produce green power and consumers to buy green power. That may very well be the case to a very small extent.
However, in order for consumers to take advantage of being able to purchase green power, they're only going to do it if it makes economic sense; if it doesn't, they're just not going to buy it. Until such time as generators, corporations, put the cost of environmental consequences on to their balance sheet, the marketplace is never going to accommodate for environmental consequences in making their decisions, because it just doesn't make sense to their bottom line.
If you are a coal generator in Ohio and you're selling your power into Ontario, it doesn't make any economic sense for you to put scrubbers, for example, in your smokestack, because there is going to be a huge cost associated with that. Why would you do it if you can sell a lot of your power here in Ontario and you're not forced to do it?
That's the reason we have environmental regulations in Ontario. If the marketplace was going to ensure that our environmental interests were going to be looked after, we wouldn't need regulations. Why is it that we need regulations? Because we know that industry, corporations, hydro generators, aren't going to spend the money for equipment that will ensure that we have enhanced environmental protection. There's no incentive for them to do that.
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It's incumbent upon governments to ensure that they have that incentive, and part of the way they can do that is through regulation, through legislation. It says if you don't comply with these requirements, you're going to have to pay a fine, you're going to be subject to the enforcement actions of environmental agencies of the government. Unfortunately, because of the tremendous cuts that this government has made to the Ministry of Environment, there are so few people there now to enforce those environmental regulations that people can get away with a whole lot more. That's unfortunate. That's one way that you can do it, through legislation.
The other way you can do it is through economic incentive, providing some advantage to people who are going to provide an environmental advantage when they are conducting their business. One of the ways they can provide that incentive, that advantage, is through a renewable portfolio standard so that there is a requirement that those who market electricity in Ontario have to, as part of their portfolio, have some sort of green energy component in their sort of bundle of products that they sell. When we introduced this amendment to the legislation, once again the government said no.
We heard from a great number of people who appeared before our committee. We weren't the only ones who thought about having the provision about low-cost energy in the purposes clause of the bill - it wasn't an NDP idea; the Liberals introduced a similar amendment - it was a suggestion by the Municipal Electric Association as well, an organization that I'm sure has a great deal of credibility in Ontario, an organization whose opinions I know are respected by the government. But the government didn't feel it was important enough to listen to the Municipal Electric Association.
We heard from a number of people who thought there should be some guarantee that Bill 35 would benefit residential hydro consumers. I have to say that I agree, because the government should live up to its word; it should put its money where its mouth is. If it says that Bill 35 is all about the promotion of low-cost energy, then they should put that commitment in the legislation; they should put that commitment in the purposes clause of the legislation. They should tell consumers of Ontario that there is some assurance other than just unfettered market forces that are somehow going to result in lower prices. "Just trust us." This is a government that most people in Ontario I suggest aren't going to trust to that extent.
Lindsay Hydro and Kanata Hydro also said that the government's intention to reduce electricity costs should be entrenched in the legislative language. Once again, the government didn't want to listen to them.
The Green Energy Coalition: Their suggestion was that the Ministry of Finance, when exempting or reducing the competition transition charge to service the residual stranded debt, should favour green power producers and consumers. That's another way to try and promote green energy in Ontario and provide some incentive for those who are interested in developing solar power or wind power, for example, to be able to do that. The government keeps on saying, "We're providing access so that if anybody wants to generate that sort of power, they'll have the ability to put it on the grid." That may be true, but if there's a limit as to what consumers are going to pay for green power, if the price is going to be 50% more than you can buy cheap Ohio coal-fired power for, then I think there are very few people who are going to want to pay that higher price to do something that is more environmentally friendly.
Another suggestion was made with respect to the Ontario Energy Board. This is in conjunction with environmental improvements that could have been made in Bill 35 as well. It was suggested the Ontario Energy Board should impose a small charge called a system benefits charge on the transmission of electricity to help promote and finance energy efficiency programs and research and development into experimental clean energy sources.
That's a suggestion that makes a lot of sense to me, and I think it makes a lot of sense to people who are concerned about environmental quality, environmental improvement, and once again this was an amendment that we put forward that was rejected. It was a suggestion that came from a number of people, not just from the NDP. It came from Greenpeace, Nuclear Awareness Project, Green Energy Coalition, Pollution Probe, Greenest City, the Canadian Association of Energy Service Companies, Citizens for Renewable Energy, the Ontario Medical Association and Great Lakes United. That represents a pretty large cross-section of environmental groups in Ontario, and this government rejected that suggestion completely out of hand. Why is that? Why is it that this government doesn't want to pay any attention to those who are interested in improving the environment in Ontario?
Other ways that Bill 35 could have improved the environment would be by putting a mandatory cap on emissions of sulphur dioxide, nitrogen oxide and carbon dioxide emissions, and also emissions of other toxic chemicals like mercury, for example. We didn't see any movement by the government to put caps on those sorts of emissions.
There was a suggestion that there should be mandatory caps on radioactive pollutant emissions from nuclear facilities. Once again, we don't see that in the bill.
There should be wording to facilitate the forming of green power co-operatives. That was a suggestion that came from the Toronto Renewable Energy Co-op, another good suggestion that was rejected by this government.
There should be regular public disclosure emission data for air pollution from power generation. That was suggested by the Ontario Medical Association, another suggestion that was rejected by this government.
Over and over again we heard from people who said that you have an opportunity to enhance environmental protection through the changes that are being introduced in Bill 35, and every one of those suggestions was rejected by this government.
We are very concerned that the benefits of Bill 35 are not going to be seen by residential and farm consumers in Ontario. We don't think that prices are going to go down either in the short term or in the long term. What this bill is doing is an attempt to try and fix the mistakes of Ontario Hydro that have been undertaken in the last number of years. We know there are mistakes that have been made and we certainly aren't without responsibility in that regard.
A lot of that stranded debt, a lot of the debt that Ontario Hydro is saddled with now is a result of the construction of the Darlington nuclear power plant. We know that. We know that many of the construction projects of nuclear power plants shouldn't have been undertaken. We know that now. That was the religion back in the 1960s and the 1970s, that nuclear power was going to be the antidote for everything that ails us. It was going to give us cheap, clean power from now into the next century.
We found out that was just plain wrong. It ended up costing us a whole heck of a lot more than we expected and, because of that, as the member for Huron said, we have this huge debt monkey on our back. How are we going to get that debt monkey off our back? It isn't going to be by closing down those facilities. It's only going to come through it being paid off, and how it's going to be paid off is through special charges like the competition transition charge to cover the residual stranded debt that we now know is about $7.8 billion.
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The competition transition charge is going to show up on people's hydro bills and it's going to be another tax from a government that considers itself to be the taxfighter. I ask, how is it that this government can justify putting another tax on people's hydro bills, and who is going to end up paying those special charges? Is everybody going to end up paying them equally or are some people going to get away with not paying their fair share? Somehow I suspect, on behalf of the many small residential consumers out there in Ontario, they're the ones who are going to end up paying the bill.
When people finally realize what has happened through Bill 35 - it may not be next year, it may not be for a couple of years down the road, it may not be for five years - and how much their hydro rates have gone up and the fact that they're experiencing blackouts like they are in Alberta right now, they're going to say: "How could this possibly have happened? Who let this happen?" They're going to discover that it was the Progressive Conservative Mike Harris government that was the architect of these changes. They're going to be long gone. They're not going to be held accountable for this great experiment that they're taking us down. Really, what this government is doing is taking us into uncharted, shark-infested waters without so much as a compass to guide us. That's what this is all about: We're going into the great unknown.
We've been saying right from the outset that the government's plan is to privatize Ontario Hydro. That's why they brought in Sir Graham Day, the great serial privatizer from Great Britain, to serve on the board of Ontario Hydro. That's why they brought in Mr Farlinger to be the CEO of Ontario Hydro and put into his contract the requirement that he be prepared to take Ontario Hydro into the private sector.
We realized that even more as a result of what we heard about the stranded debt and the residual stranded debt at the briefing on Monday afternoon. Ministry of Finance officials indicated to us that the nuclear power plants weren't worth a plug nickel.
Carl Andognini, who is making $1 million a year, plus an annual pension of thousands and thousands of dollars if he stays on for four years, has been failing in his attempts to revive those nuclear power plants. Not only are we paying this huge salary, we're going to be paying him a pension in perpetuity, forever. He's going to be retired, probably someplace in South America, collecting his big, fat pension, and we'll discover that all of the work he was doing here in Ontario is all for naught, that the value of those nuclear power plants hasn't been enhanced one bit, they're still worth zero, and he's going to be long gone.
We believe that Ontario Hydro has been given relatively little debt and the reason they're doing that is because they feel that if they leave Ontario Hydro with too much debt it's going to fail. They don't want Ontario Hydro to fail. Ontario Hydro has somehow convinced this government that the only solution to the problems of Ontario Hydro is to make them bigger, give them the ability to compete in the United States and to do so without being accountable to this Legislature. That's how they're going to succeed.
How that deals with the problems we've used to justify bringing forward these changes in Bill 35, I have absolutely no idea. If the government says the reason they're doing this is because Hydro is broken and needs to be fixed, let's fix Ontario Hydro; let's not completely cut them off. Part of the reason they got us into this mess was because we didn't hold them accountable enough. This bill isn't going to hold Ontario Hydro any more accountable. They're not going to be accountable to the government at all. They're only going to be accountable to the marketplace. That's it. It's the marketplace that's going to determine how financially viable Ontario Hydro is, and that marketplace is a ruthless, shark-infested place.
Once it's determined that Ontario Hydro can be purchased at a reasonable price, there are going to be millions and millions of dollars that are going to be made by the people who are the richest and most well-off, who have the money to invest in Ontario Hydro. What's going to happen is that this important public investment that we have built up over 100 years in Ontario is going to end up being sold at fire sale prices. I don't want to see -
The Deputy Speaker: Order.
Pursuant to the order of the House dated June 24, 1998, I'm now required to put the question.
Mr Wilson has moved third reading of Bill 35. Is it the pleasure of the House the motion carry?
All those in favour, say "aye."
All those opposed, say "nay."
In my opinion, the ayes have it.
Call in the members; it will be up to a five-minute bell.
There has been a request that the vote on Bill 35, the Energy Competition Act, be deferred until Thursday, October 29, 1998.
It being almost 9:30 of the clock, this House stands adjourned until 10 am tomorrow.
The house adjourned at 2128.