POWER CORPORATION AMENDMENT ACT, 1991 / LOI DE 1991 MODIFIANT LA LOI SUR LA SOCIÉTÉ DE L'ÉLECTRICITÉ
CONTENTS
Wednesday 19 February 1992
Power Corporation Amendment Act, 1991, Bill 118 / Loi de 1991 modifiant la Loi sur la Société de l'électricité, projet de loi 118
Adjournment
STANDING COMMITTEE ON RESOURCES DEVELOPMENT
Chair / Président: Kormos, Peter (Welland-Thorold ND)
Vice-Chair / Vice-Président: Waters, Daniel (Muskoka-Georgian Bay/Muskoka-Baie-Georgianne ND)
Arnott, Ted (Wellington PC)
Cleary, John C. (Cornwall L)
Dadamo, George (Windsor-Sandwich ND)
Huget, Bob (Sarnia ND)
Jordan, Leo (Lanark-Renfrew PC)
Klopp, Paul (Huron ND)
McGuinty, Dalton (Ottawa South/-Sud L)
Murdock, Sharon (Sudbury ND)
Ramsay, David (Timiskaming L)
Wood, Len (Cochrane North/-Nord ND)
Substitution(s) / Membre(s) remplaçant(s):
Brown, Michael A. (Algoma-Manitoulin L) for Mr Conway
Brown, Michael A. (Algoma-Manitoulin L) for Mr Ramsay
Carr, Gary (Oakville South/-Sud PC) for Mr Arnott
Farnan, Mike (Cambridge ND) for Mr Wood
Fletcher, Derek (Guelph ND) for Mr Kormos
Frankford, Robert (Scarborough East/-Est ND) for Mr Dadamo
Jamison, Norm (Norfolk ND) for Mr Klopp
Ward, Brad (Brantford ND) for Mr Kormos
Also taking part / Autres participants et participantes:
Ciemiega, Ed, Ministry of Energy
Jennings, Rick, Ministry of Energy
Clerk pro tem / Greffière par intérim: Manikel, Tannis
Staff / Personnel: Cutbert, Graham, Legislative Counsel
The committee met at 1017 in committee room 2.
POWER CORPORATION AMENDMENT ACT, 1991 / LOI DE 1991 MODIFIANT LA LOI SUR LA SOCIÉTÉ DE L'ÉLECTRICITÉ
Resuming consideration of Bill 118, An Act to amend the Power Corporation Act / Projet de loi 118, Loi modifiant la Loi sur la Société de l'électricité.
The Vice-Chair: We will call the meeting to order. We are resuming clause-by-clause.
Mr Huget: Mr Arnott requested some information on the remuneration of board members as well as the oath of allegiance which board members took. I have information on the remuneration issue and I will likely have information later on today about the oath issue. There is no oath. There is, however, a code of ethics, and we will provide that and table it. In the meantime, I am informed that each member of the board of directors of Ontario Hydro is entitled to an annual honorarium of $5,000. If they serve as vice-chairman or chairman of any subcommittee, they receive an additional $3,000 annual honorarium. For each day of attendance, they receive $185. I am also informed that the annual total cost for four members would not be in excess of $30,000.
Mr Brown: Including expenses?
The Vice-Chair: Is there any further discussion on this? Okay, thank you.
Section 2:
The Vice-Chair: Yesterday we left off at section 2 of the bill. We will be resuming with some new amendments brought forward by Mr Jordan. What we will be looking at, Mr Jordan, is your amendment to subsection 10(1) of the act, as set out in section 2 of the bill.
Mr Jordan moves that subsection 10(1) of the act, as set out in section 2 of the bill, be struck out and the following substituted:
"Policy directives
"(1) The minister may issue policy directives consistent with the mandate of the corporation that have been approved by the Lieutenant Governor in Council on matters relating to the corporation's exercise of its powers and duties under this act."
Mr Jordan: The important issue that is being brought out here by the motion is relative to the minister issuing policy directives that are consistent with the mandate of the corporation and have been approved by the Lieutenant Governor in Council.
Mr Huget: The issue of mandate is not specifically defined in the Power Corporation Act. We believe that the issue of policy directives, being related to the corporation's business and purposes, will be adequately dealt with by a government motion, so we are not in favour of Mr Jordan's motion.
Mr McGuinty: One of the concerns my party has and one of the primary concerns related to us by so many of the people who appeared before the committee when we toured the province was that the government might be able to compel Hydro to do things that were not in the interests of the corporation, and more especially of the ratepayers. I think we witnessed that the day before yesterday when I was asking questions of Mr Eliesen. He indicated he honestly believed that when Hydro was compelled by the government to pay I think some $35 million to a job creation fund in northern Ontario and to pay off a couple of municipal debts, that actually was quite rightfully in keeping with Hydro's mandate to supply power at cost.
I think the crux of the matter here is this definition of power at cost. I guess there are two problems: first, it is not specifically defined sufficiently to my liking within the act as it exists; second, it is very subjective. What someone says falls within that definition may be very different from what someone else says falls within that definition. There is no objective test here we can apply and say, yes, you can tell Hydro to do this and no, you cannot tell it to do that because that falls outside its mandate.
I am going to support this motion because it attempts to narrow the scope of those directives so that they have to fall within the mandate, and I am assuming that implicitly the mandate is to supply power at cost.
The Vice-Chair: Further discussion? Seeing none, we will put the question. All those in favour of Mr Jordan's amendment, please signify. Opposed?
Motion negatived.
The Vice-Chair: We will move on. Mr Jordan, you have another amendment?
Mr Jordan: I do, relative to section 2 of the bill, subsection 10(2) of the act.
The Vice-Chair: Mr Jordan moves that subsection 10(2) of the act, as set out in section 2 of the bill, be struck out and the following substituted:
"Consultation
"(2) Before issuing a policy directive, the minister shall consult the board with respect to the content of the directive and its effect on the corporation and to determine whether the directive is consistent with sound business practices and the mandate of the corporation.
"Report by minister
"(2.1) The minister shall table in the assembly a written report concerning the consultation.
"Review
"(2.2) If the board concludes that a policy directive is inconsistent with sound business practices or the mandate of the corporation, the board shall request a review of the directive by the minister.
"Idem
"(2.3) A review requested under subsection (2.2) shall be completed within ninety days of the date on which the minister receives the request from the board and during that time the board shall not act to implement the directive in whole or in part.
"Reasons
"(2.4) If the minister decides to proceed with a policy directive that the board finds to be inconsistent with sound business practices or the mandate of the corporation, the minister shall provide to the board and the assembly the reasons for the decision."
Mr Jordan: What we are attempting to do here is allow the minister to have the power he wishes in issuing directives to Ontario Hydro. But we in the Legislature, representing all ridings -- when we refer to the government, I think we have not only to think of the people who have been elected and have formed the government; we have to think of the Legislative Assembly as all the members who represent the people of Ontario. This amendment our party is proposing would be a type of assurance to those of us who are not part of the government that in fact directives issued by the government and carried out by the board will receive proper public debate and assessment before action is taken on them. That is the basis of it.
Mr Carr: This was an attempt at a bit of a compromise. If the government is saying it wants to have this power, then let's make it so that the minister will be accountable in an open process. That is what subsection (2.1) does, makes it accountable. He has to justify it, so that when it becomes open and public, there will be public input and debate around it. That is essentially what subsection (2.4) does as well, makes it accountable to the public, to justify the reasons a minister may act.
It was done as a way of saying okay, if you are going to proceed in this way, then here is an amendment which may help make it more accountable, as a bit of a compromise. You are going to go ahead with it. Let's just make it so that the public will be aware of it. They will have to justify it and we will not end up with having a situation two years down the road when costs go up dramatically and people ask, "Why in the heck did this happen and where did we go wrong?" It will give, along the way, the public a chance to understand what is happening and what the government is doing. The bottom line is that all it does is make the government accountable, which I think is a good thing.
Mr Huget: With the government motion, policy directives can only relate to Hydro's powers and duties under the act. The government's intention is that policy directives will be consistent with Hydro's mandate. Therefore, there is no need for the forms of review mechanisms included in the PC motion. The bill already requires the minister to consult with Hydro about the content and effect of implementing policy directives. It also already requires Hydro to report to the minister on the implementation. The minister already reports to the Legislature about Hydro activity. Further, policy directives will become public after being approved by the Lieutenant Governor in Council under the normal process of gazetting of orders in council and regulations. We cannot support the motion.
Mr McGuinty: What we are getting at here again is the issue as to whether we are looking for control of Hydro or domination. As I read it, and I was just handed this a few moments ago, what this motion is attempting to do is establish some kind of test that the minister and the board have to apply in considering the effect of a policy directive, and that is, whether it is consistent with sound business practices. Maybe the preferred wording would have been, "Is it cost-effective?" This motion does not go far enough, to my mind, in that, even if it is not cost-effective, it still gives discretion to the minister to proceed with it notwithstanding, as long as the minister provides the board and the assembly with the reasons for that decision.
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I think many of us would agree that we have a problem with Hydro, with some things in the past that have not been beneficial, that in fact have been harmful to the ratepayers. They have done all kinds of good things as well, but they have done a few things that have been harmful. The objective here is to ensure that we do not do things that are harmful again. The reason I cannot support the motion is because it goes so far as to say that even if it is harmful you can still go ahead.
It also brings into question the role that the board of directors is to play. The bill is going to provide that they have to carry out these directives. I will take a look at the wording. "The directors shall ensure that policy directives are implemented promptly and efficiently." They are not accountable as long as they have acted honestly and in good faith. What about the old traditional common law duty to take care? Apparently they do not have to take care, as long as they act honestly and in good faith. Those are two very different legal tests.
The motion is good, but it is not good enough in the sense that it does not go far enough to ensure that whatever we do with Hydro is going to be beneficial. It is a good thing, but it ain't good enough, so I cannot support it.
Mr Farnan: I am appreciative of the very constructive approach taken by Mr Jordan and his concern for accountability, because that echoes the government's intent to have real accountability in the process. When we look at Ontario Hydro, talking to subsection (2.4) of Mr Jordan's suggestion -- "the board finds to be inconsistent with sound business practices" -- Mr Eliesen was questioned on this issue while before the committee. I think his position marked out a very strong leadership. He simply said that if there were going to be a directive that would be inconsistent, the board certainly could make an issue of that. When you look at his presentation Monday, he said:
"Public scrutiny of the provincial monopoly utility is a long-embedded and justifiable tradition in Ontario. In more recent times, we have been the object of study by the Porter commission and various select committee hearings in the 1970s."
"In the 1980s, our demand-supply plan underwent public and government review." There was the Hare report on nuclear safety, the Environmental Assessment Board and of course, for the past two decades, annual review by the Ontario Energy Board.
If members have problems, there are certainly checks and balances within the system. Again, while supporting the intent, in my view checks and balances exist. The recommendations that have been put forward reinforce the intent of Mr Jordan that accountability be built in. I will not be able to support his amendment on that ground, although I sympathize with the intent.
Mr McGuinty: Just in response to something Mr Farnan raised, he believes that there is a system of balances and checks here, that some kind of safety mechanism is available so that if a government gets carried away there are some means by which we can ensure that the ratepayers' interests would not be hurt. Again, I come back to Elliot Lake. In that instance the board of directors felt in its heart of hearts it was not a good thing to do, and what we ended up doing was getting an order in council which said: "Look, you'll go along with this and we're going to relieve you from legal responsibility." That is how the government dealt with it. I do not think that mechanism is in place.
The process which was used to create that order in council is essentially one that is embodied in Bill 118 now. It says: "You're going to have to go along with this expeditiously. Anything we do in terms of policy directive is deemed to be in the interests of the corporation, so don't worry about that. We know what's best. You just rubber-stamp it. Furthermore, as long as you act honestly" -- what kind of test is that, to act honestly? Surely to God we can count on them to act honestly and in good faith. As long as they do those two things then they are off the hook. They just have to go along with what the government says. I do not think that lends much comfort to the ratepayers of the province. There is just not enough protection available to them.
Mr Farnan: I find Mr McGuinty's arguments very seductive, but fundamentally wrong. I suppose the bottom line is that as a result of the September 6 election New Democrats got the right to govern in Ontario. It is not an unrealistic thing for a party that elects 74 of 130 members to consider that it had a mandate from the people to govern. It is not an unreasonable thing when you are talking about crown corporations that the crown corporations would be sensitive to the broad policy directions and principles of the governing party.
If you take northern Ontario transportation, for example, if a crown corporation or a board under crown authority said, "We won't service any bus routes into the small villages. We'll only take the profitable routes," would that be a policy initiative that was in contradiction to the broad principles for which this was in place? I believe -- there is no doubt in my mind -- that there is a philosophical view and broad principles, principles that we are very proud of.
What we are doing here is bringing forward legislation that is very sensitive to Ontario Hydro, giving it it's arm's-length independence, but at the same time reaffirming the sense that there are principles the government is committed to. You do not infringe on an individual's rights, but certainly one would anticipate that there would be sensitivity. Mr Eliesen was very clear. If there were a direction that infringed upon the operational decision-making, that was contrary to what the board felt were the best interests, it had a choice. They could say, "No, we're not going to." There could be a showdown.
Indeed, that is fair. If the government crosses the line, there should be a showdown, but because the government is sensitive and wants to work in harmony with Hydro, it will have that distance and opportunity to be accountable within its own right. But certainly the taxpayers of Ontario must feel that this government wants to have some checks and balances on a corporation such as Ontario Hydro. To have anything less would be unacceptable, I believe, to the taxpayers of Ontario.
Mr Carr: I just want to comment a little on the checks and balances. Mr Farnan talked about the mandate to govern. I do not think there are very many people who voted for the NDP based on its platform with regard to Ontario Hydro. As a matter of fact I, who obviously was very involved in it, was not even aware that the government was going to be more involved in Ontario Hydro. I do not remember seeing anything on it, although I guess we should not be surprised when governments take everything they plan to do and say it is a result of why they were elected. I guess we should not be surprised, when a socialist government is elected, to see that there is more government involvement, because that is what this really boils down to: more government involvement in Ontario Hydro.
I honestly, truly do not believe that people believe government involvement is the best thing. I think in a broad sense this would include NDP supporters and Liberals and Conservatives, saying that if a corporation is allowed to proceed, it will probably proceed in a manner much better than politicians, who have been accused -- again, I say this in a non-political manner, because all political stripes have been doing things in order to make themselves look good rather than in the interests of the corporation.
To say that this was part of the reason the NDP was elected -- I can tell you that is not true. That is totally false. Most people did not even have any ideas, and I suspect even the members elected here did not know what their policy was or that they were planning to basically socialize Ontario Hydro.
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Ms S. Murdock: What about checks and balances?
Mr Carr: Getting back to the checks and balances of subsection (2.2), the reason I brought this up -- I did not jump in with the mandate; it was Mr Farnan who brought it up. To say you had other areas on which you may have been elected, three or four other areas, would be true, but to come in and say, "We got elected because of this policy," I think is definitely not true. Maybe that is not what Mike meant to say, but I do believe that people should not be surprised, when they elect a socialist government, that they are going to see more government involvement. I mean, that is what socialism is all about. So in that regard people had better be very careful, because when you vote on these three or four other things, as a tail-on you might get more government involvement in things than you necessarily want.
Subsection (2.2) basically says we need to have public input. All I am saying is that if the government has a directive and the board of directors agrees with it, I have no problem. That should be the checks and balances. If the board of directors disagrees with the government policy -- and that is what subsection (2.2) does -- all we are saying is let's bring it out in the open so people will be aware of it.
What I fear will happen as a result of this bill is that people will not be aware of it. Programs will come in -- we have heard some of the examples here -- where costs go up dramatically, and at the end of the day people will see their bills go up and not understand why. I think it is typical of politicians to try to keep that away from them, why costs are going up. All I am saying is to be honest with the people. If it is socialist policy that you are going to do whatever it is, whether it be Elliot Lake or whatever, at least be honest with the people.
If the board of directors says, "There are no financial considerations in this and we agree with it," I have no problem; we should not even be talking about those things. But if in fact the board of directors disagrees, I think at that time the alarm bells should go off and we should let the public know. That is why we are saying do it through the assembly.
Our system of checks and balances is such that the assembly is where, because we will have -- I hate to use this word, and it is not necessarily this -- an adversarial approach, there are checks and balances with the opposition. If the board of directors disagrees, bring it back and at least be honest with the people so they know what is happening, rather than the way it will be now, which is that when costs go up, two years later people say, "Why in heck did my costs go up?" They do not know. All I am saying is let's be honest with the people. If we work on that principle, the government of the day has a mandate to manage and govern for four years. Go ahead and proceed with it, justify it all you want, but at least let's have the people know why their costs will be going up.
The Vice-Chair: Thank you, Mr Carr. I know you wish to thank the members of the government caucus for their assistance in helping you make your arguments during that.
Ms S. Murdock: You woke everybody up.
Mr Carr: I was not going to speak.
Mr McGuinty: Mr Farnan raised a good point, which is that certainly when a government is elected, it does not matter what kind of numbers or what kind of percentage of the vote they got, those are the rules we play by. The NDP is now in power and it has certain policies it would like to put in place. That is fair game.
At the same time, you should keep in mind that any legislation you put in place will of course enable ensuing governments to profit from it in order to put their policy in place. Again, there is nothing wrong with that except that there has to be some concern shown for putting in place as well some kind of system that is going to ensure that there is somebody out there all the time who has the ratepayers' interests first and foremost.
If, heaven forbid, the Conservatives won the next election and if our good friend here Mr Jordan was made Minister of Energy, we would have a slowpoke reactor in all our backyards. He could do that with these policy directives, just to give you an example. I say that, of course, Mr Jordan, in good jest. But it gives you an understanding, an inkling, of the kind of abuse that this system is prone to, because there is no real check and balance in here.
Furthermore, we have a CEO and chair who is hired by the government of the day, which makes it even more difficult for that one person to say: "Hang on a second here. You know, notwithstanding the fact that you have hired me, I don't want to go along with that because I feel it is not in the interests of the corporation." Again, for the reasons I referred to, the other provisions contained within Bill 118, the board of directors really is not going to be able to have much power, much ability to say, "No, I don't think that is in the interests of ratepayers."
The Vice-Chair: Thank you, Mr McGuinty. Mr Jordan, I believe, has a couple of quick words that he was just interjecting.
Mr Jordan: I would just like to comment on my colleague's reference to nuclear energy as a source. He may not be that far wrong, in that if you believe in progress and future accomplishments in this province, there could in fact be a power cell in each house that would provide the energy for residential use. That is one reason I am concerned that we are turning our back on the research department of Ontario Hydro and putting the policies or ideology of government ahead of all of that section of Ontario Hydro, because we spend a lot of money on it. Candu 3 is just coming in, which is only a 450-megawatt plant, as compared to the Darlington one. So the progress is ongoing.
I thank Mr McGuinty for bringing that to my attention, and you, Mr Chair, for allowing me to remind myself and the government that research is going to go on whether it is done by Ontario Hydro or not. There are going to be new energy sources, and I certainly support that. At the present time, in studying the 25-year demand-supply plan that went across the province to every municipality, I support that also because of the amount of study and research that went into it. The base supply source most benign to the environment was established without doubt in that document as using uranium to heat the water to make the steam to turn the generator.
Mr Brown: I find this discussion rather interesting if not wide-ranging, but Mr Farnan brought up something that I thought was quite interesting. He compared Ontario Hydro with the Ontario Northland Transportation Commission, which some of us heard about last week. One of the interesting comparisons there is that government does give Ontario Northland directives. It does say to them, "Look, you've got to provide ferry service from Tobermory to South Baymouth on a reliable basis," and it tells Ontario Northland how to do that. It does not make money, but it provides a valuable service that needs to happen.
The interesting part about that is that when government forces this corporation to do something, it pays it. It says: "You can't do this economically. This doesn't make good business sense. No business would do this, but it is a service that has to be provided." We would all agree with that. So government then says, "Here is the money to pay for it." That does not happen here with Ontario Hydro; that does not happen with this legislation.
If the government, for whatever good reason -- I can conceive of some good reasons to do some things using Ontario Hydro. But it seems to me that if you are going to say this is outside of, in Mr Jordan's words, sound business practice, or what we believe to be cost-effective approaches, why should the government of Ontario not foot the bill?
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I think the comparison Mr Farnan made to Ontario Northland is a good one, and I think it brings forth what Mr Jordan is trying to get at here. I do not suspect Mr Jordan would have great difficulty if the corporation was to follow a government directive that was not cost-effective or sound business practice and the government of the day was willing to pay the freight, but it is not. The government of the day is saying, "Ontario Hydro, you do it, and your ratepayers will pay for it."
I cannot support this because I do not think it goes far enough either, but I think Mr Jordan is just trying to make sure these things are in the public domain, that everyone knows what has happened and that the people who are going to have to pay the freight know they are going to have to pay the freight. I do not think that is unreasonable.
Mr Farnan: I have just a very brief comment to suggest that Mr Brown's comments from the hearings we went through last week have been extremely selective.
Mr McGuinty: I know Ms Murdock was interested in hearing some more, so in an effort to appease that appetite, I will speak further. Just one comment, if that is possible. If we each went back home to our riding, in a crowded room, and we got up on some kind of podium and said, "Listen, we've got a problem with a very large organization, some 30,000 or 35,000 people and $7 billion in annual revenues. It's got a lot of people and a lot of them are, we feel, overpaid. They've made some decisions in the past which have cost us a great deal, so what we're going to do to attack this problem is to put the politicians in charge," I think that you would have some difficulty gaining support for that kind of an approach.
We have an opportunity to do something here, which is to look beyond the present and, with some vision, attempt to put in place some kind of system which is going to prevent us, the politicians, from abusing the relationship that we have been able to abuse over the years with Ontario Hydro. Unless we accord some kind of decent authority to the board of directors, we are not going to achieve that objective. We are going to lose this opportunity here to reach beyond the present and show that we have vision.
Mr Brown: I really think Mr Farnan maybe misunderstood me when I was talking about Ontario Northland, because it certainly was not highly selective. All their operations work exactly the same, and he knows that.
Having said that, I will point to another arm's-length body, the Ontario Energy Board, which, when it reviewed Hydro's conservation efficiency plans, was not very impressed with its actual performance during the last year. I cannot recall the exact wording, but the gist was that these are not cost-effective policies and you should do something about that; you should make sure the ratepayers get their money's worth.
I really cannot understand why the government is having so much trouble with giving the board some real responsibility, and why the government is so adamant that it keep this a closed shop and that it just be run out of the corner office.
The Vice-Chair: Any further discussion? Seeing no further discussion, I will put the question on Mr Jordan's amendment. All those in favour of Mr Jordan's amendment, please signify. Opposed?
Motion negatived.
The Vice-Chair: I believe, Mr Jordan, you have a further amendment.
Mr Jordan: Yes. I am going to ask Mr Carr to present it, please.
Mr Carr: Since we lost two with him, I am going to try.
The Vice-Chair: Mr Carr moves that subsection 10(5) of the act, as set out in section 2 of the bill, be struck out and the following substituted:
"Report by board
"(5) The board shall report to the minister and the assembly whenever it exercises a power or performs a duty to which a policy directive relates and shall indicate the effect of the implementation of the directive on the corporation's operations and financial position and on power rates and rate increases."
Do you have further explanation of the amendment you wish to put forward at this time?
Mr Carr: Yes. The reason again is a lot of what we have been talking about and I suspect is the crux of this bill. We are elected to represent the public. I think everyone would agree the biggest concern for the public is the cost of hydro. As well, most of us know that one of the greatest reasons for any company that uses a tremendous amount of power to come to Ontario has been that the cost of our energy has been very competitive vis-à-vis the rest of the world. In fact, it is probably one of the biggest factors why people in the past have come to this province when they are big users of power. The public is concerned about cost.
I believe one of the Hydro board's duties is to control the expenditures and costs. What we are saying again is that if there is something that comes up that they disagree with, the government does have the mandate to proceed with it, because ultimately the government of the day does have control over it. But what we should do is to be able to assess the financial cost from what the board of directors says so the public is aware so they can either agree or disagree with the government, to agree in order to say it is worth it and Ontario Hydro should be proceeding in this direction, or to disagree. All we are saying is that we need to know, and I am talking about the general public now, what the cost will be and how it will affect us.
In these checks and balances we are talking about, I have complete confidence that the corporation will be able to assess the situation, whether it is purchase of a company it is being asked to do for a government or whatever, and say: "Okay, this is what it's going to cost as a result of the government's initiatives. This is what it will cost you, Mr Public, in terms of increased costs."
The government is going to proceed and we will be able to do it regardless, but I do believe we should lay everything out on the table so the public is aware of it, because it gets back to what I said before. If not, what we will have is that when we have dramatic increases in the cost of power in this province, people will be sitting back and saying, "How did this happen?" All we are saying is, open it up. At the end of the day, this government will be judged on its record. By trying to hide some of the financial statistics and not reporting them to the assembly, then I believe we do not do justice to the public.
There will be those who would say the board can talk about it anyway. By coming to the assembly, and whether we like it or not, this is the forum where it is done -- sometimes, as we all know, if you hold a press conference, you probably get more public knowledge than something coming into the assembly and being debated upstairs -- but the fact of the matter is that our system is that the elected officials debate public policy like this in the assembly. That is our system, unless we plan on changing it.
We are saying that if something is going to affect us fundamentally, as Hydro power rates will, then we need to have the public input through the elected officials so we will all be accountable. At the end of the day, the people may agree with the approach and say what somebody like Mr Farnan is doing is correct and elect him back in. They may say, "We disagree, because Gary, you disagreed with what Hydro was doing, so we're going to throw you out." All I am saying is that the public needs to have everything on the table, and then I have complete and absolute faith the public will make the right decisions.
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The perception we give by not introducing or passing amendments like this -- and we have tried to do it in a constructive manner, knowing that you are going to want to have more government involvement in Ontario Hydro. We are saying, if you are going to proceed that way, as a bit of a compromise to the opposition parties, which have spoken at length about their concerns with that, okay, if you are going to do it, let's have a process so the cards will all be on the table and the government will be accountable for its action and the board of directors, if it disagrees, will be able to say, with hard facts, "This is how much it is going to cost."
If we have the board report to the ministry and the assembly, the minister may say: "No, it isn't going to be that amount. It may be half that." Legitimate debate over costs will be there. What we are saying is that we need to have that debate, and then at the end of the day the public can say, "Yes, the minister is making the right decisions, we believe him or her," or, "No, we do not and we disagree."
It will not change things. The government has a mandate to proceed with this. What we have attempted to do is be constructive and say, "Hey, let's put a couple of checks and balances in here so the public will know exactly what we are doing." I think as a fundamental principle, all parties should be able to support -- and I think we do. At the end of the day, whatever we do we should be judged on, but we need to give a forum so the public knows what is going on. That is what this amendment attempts to do, so obviously I will be supporting it.
The Vice-Chair: Debate on the proposed amendment, Mr Huget?
Mr Huget: The minister already reports to the Legislature about Hydro activity, and policy directives will become public after being approved by the Lieutenant Governor in Council under the normal process of gazetting and OIC regulations. Our government motion deals with the board reporting to the minister. The minister in turn would report to the Legislature. Further, the Ontario Energy Board already reviews Hydro's costs annually in a public process where intervenors are funded and Hydro costs are scrutinized there, so we cannot support the motion.
Mr McGuinty: I have a question for the parliamentary assistant. He made reference to the normal process for disclosure of OICs. Is that what it is?
Mr Huget: Orders in council.
Mr McGuinty: How does that work? What is that normal process?
Mr Ciemiega: It is my understanding that the normal process would be a posting outside the cabinet office, and anyone can walk up there and take a look at the orders in council.
Mr McGuinty: And that is it? It is not published in the Ontario Gazette or --
Mr Ciemiega: Oh, yes, they can be. All regulations have to be, and I would assume --
Mr McGuinty: Orders in council are published there?
Mr Ciemiega: Not all orders in council, no. These would be in the nature of a regulation, I believe. Therefore I would think they would be published as a matter of course.
Mr McGuinty: Thank you. It is a publication really of the policy directive, not formally of the implications arising from the implementation of the directive. That kind of publication is grossly inadequate in terms of making the public aware of the existence of the policy directive and of its implications.
When Mr Ferguson was minister, he spoke of how this was going to improve the openness and he talked about transparency. Here is an amendment which would simply require that this kind of information be formally disclosed in a specific manner so both the elected representatives and through them the public at large would be made aware specifically of the effects of implementing a directive, in particular on the financial position and on the rates. If there is anything ratepayers are sensitive to, it is rates. They are concerned with reliability, but particularly rates at this time.
I think this kind of amendment is eminently reasonable. It is in keeping with the government's stated intention to provide for greater openness and transparency. To have an order in council posted or published in some abstract Gazette, which I would think 95% of the people of this province have never heard of, really is not dealing with this properly and it is not accomplishing the aims of openness and transparency.
Mr Carr: The point I just want to make as well is that we sometimes get caught up in saying, "There are the procedures to be aware of it." I venture to say that the vast majority of the people of this province are not even aware of this bill being before a committee. Those in the know are, but all the average person wants to know is, "How will it affect me?" As a matter of fact, I was reading last night something very ironic about the United States. It said there are more people down there who know their cholesterol level than who their representative is in the Congress or the Senate, which was kind of an interesting standpoint.
When we are talking as intricately as we are about this bill, people sometimes assume that the checks and balances and some posting is going to be available to the people to be able to take it out. What I am saying is to give the board of directors the mandate that if there is something it disagrees with, it will have the responsibility to make the views known to the assembly. The assembly will then act in accordance and make the decisions of how it would like to proceed. All we are saying is that we need to have a forum so the board of directors can come out with the financial position. If they disagree with a directive from the government of the day, they have the process to come out and make it known to the assembly in a formal manner that will allow the elected members to then make the decisions.
Again, we hide these little things in Gazettes I suspect none of the members even read and we assume that somehow is reporting. I guess we justify to the people who are out there that this is how it is done. I agree that the public does not need to know all the details of the things that are reported in the Gazette. The reason we do not read it is because a lot of it does not affect us. We are talking about the broader issue, but when we are talking about something as fundamental as the energy and power future in this province, then I do believe the board of directors has a responsibility to make the elected officials aware of the differences from a financial standpoint so the elected officials of the day can debate it and the opposition parties, under our system, can make their views known. If the opposition parties believe it is worthwhile proceeding with, then they can use the many avenues that are open to them, and if in fact the change in the financial position is not that great, I suspect most of them would not. All we are saying is that as a bit of a compromise we are attempting to put this in. When you say the checks and balances are there now, I do not believe they are sufficient.
Mr Jordan: I would just like to follow up on Mr Carr's presentation a bit, relative to the effect of the directives on power rates and rate increases. These are the things the people out in the riding, as he points out, are not so concerned about. It is available in a certain office; you can go in and read it. They want to know, "Why are we facing an 11.8% increase in our Hydro bill?" When they come into the constituency office, do not start telling them that it was explained in some Gazette and they should know all about it. That is not acceptable.
What we are trying to do here with this is have it -- it has been discussed in the Legislature. It will probably hit the press with the purpose of the directive, its reason for being implemented, and it could be that the net result would be a decrease in rates, we do not know, depending on what the directive would be.
The worst thing I find to do is to keep information from a customer, especially in a public utility. If you keep them informed, especially on the bottom line, how their bill is going to be affected and why -- for instance, at the present time Ontario Hydro is still building up to a kilometre of line, I believe, in a subdivision, which to me is very questionable. That was an old policy that was there when they were trying to develop rural Ontario, and here a developer comes in and buys a parcel of land and ends up with free distribution line built by Ontario Hydro into that subdivision. That is a policy that is there, but the intent of the policy, looking back, was to extend electricity into the rural areas, not to assist somebody to develop a subdivision.
1110
As industry has said, anything that makes uncertainty of supply and uncertainty of cost or that under these present conditions is going to affect the cost upward regardless, you must really explain with great care the reasoning behind it. We cannot just say, "It's the cost of bringing Darlington on." That does not wash any more.
You have to really show: "Okay, I have a cost of bringing Darlington on, but I'm going to cut costs here and I'm going to cut costs over there. I don't have a marketing program any more. My engineering is going to be cut back." There are many areas of the operation I am sure you would be looking at with private industry if you could not just reach out and get more income by raising the rates.
Rather than the government looking at this as us nitpicking to have something brought into the Legislature that is not necessary I would prefer that it looked at it as a source of information to the people, and especially to the customer who is going to pay the bill.
Mr Brown: I think Mr Jordan's amendment is imminently reasonable. I think the way the accountability can really be seen to be happening is for announcements of this type to be made in the Legislature. I think back to the last year or so. Day upon day would go by in the Legislature without any ministerial announcements. I do not think this would really crowd the schedule too much. I do not suspect there will be that many.
I really cannot understand why any Minister of Energy and any cabinet that was so proud of its energy initiatives and its directives to Ontario Hydro would not want to come to the House and tell the people of Ontario what they are about, what they will cost and how they will affect the ratepayer.
I can think of no reason to do that, to say that it is considered a yea. Quite frankly not a lot of people are aware of that, as other members have told us, and it does not provide some of the other things this amendment does. The effect on the power rates and the rate increases and the financial position would not be included in the Gazette. I see no reason for a government not to want to bring this forward if it is open and accountable, and that is what it is trying to make us believe. I am looking for a reason why a government that purports to be open and accountable does not want to do this.
I think Mr Jordan is providing us with a very reasonable amendment that would not inhibit the Minister of Energy, that would not inhibit the cabinet and that would not inhibit Hydro. All the information that would be made public here we are told is readily available.
To not come to the House and to tell the people of Ontario how proud they are to issue this policy directive just seems to me to be totally inconsistent with the government's stated goals. I would ask the parliamentary assistant to consider this amendment and urge his members to vote for it.
The Vice-Chair: Thank you, Mr Brown. I believe he has been considering and wishes to respond at this moment.
Mr Huget: I will just remind the members of the committee of what I said earlier. The posting process and gazetting process is available to the press gallery for one thing, and I think there is sort of an understanding that the press will write about items it considers to be news. If indeed the interest level is as high as Mr Carr, for example, would suggest it is in the Ontario, it would most certainly be news. It is not something that will be buried in a drawer somewhere.
The Ontario Energy Board is the public forum that reviews all rate issues and all cost issues. It is not only a public forum, but intervenor funding is provided in that public forum. There certainly is already a very open process in terms of dealing with these issues. We just cannot support the motion.
Mr Brown: I am quite disturbed to hear that. I really believe that what Mr Huget says is totally true, but why would the government not be willing to take that one more step? Why would the government not want the Minister of Energy, on one of the many days that no minister is standing up, telling the people of Ontario what he or she is very proud to be doing? This is a government that appears to be afraid to meet the House these days. They have postponed the opening of the House. We are not seeing this openness and this accountability that we are hearing so much rhetoric about.
If the government were to meet the House and the government were to have ministers who wanted to tell the people of Ontario what was going on, I think it would adopt this amendment.
Mr Jamison: I think the parliamentary assistant answered the question. There is a body set up to review all the decisions that are made by Ontario Hydro in a very in-depth way to make recommendations. Certainly that has happened in the past and there is no reason why that would not happen in the future.
I get an overriding sense from both the official opposition and the third party that there is something tremendous here to fear. Again and again this position keeps coming back -- and I think the parliamentary assistant has made it very clear -- that the mechanisms are there to scrutinize the spending of Hydro and the directions at Hydro and the rate increases. All those things are there in a fashion that is more than fair as far as being able to assess candidly the point of view of Hydro when the decisions are made. Having said that, I certainly cannot support this motion.
The Vice-Chair: Further debate? Seeing none, all those in favour on Mr Carr's proposed amendment? Opposed?
Motion negatived.
Mr Farnan: I wonder if it would be reasonable at this stage to take short break for the convenience of the committee. Certainly there are members who have indicated that they would appreciate having a five-minute break.
The Vice-Chair: Can we get a general consensus from the committee? There is also one member who has asked that we recess 10 or 15 minutes early because of an appointment the member has.
Mr Farnan: I think we can do both.
The Vice-Chair: You think we can do both. Mr Huget.
Mr Huget: If we could read my motion into the record and then adjourn for five minutes, that would be fine. That will be part of the process done. It is up to you.
The Vice-Chair: It is your motion.
Mr Huget: It is your call, sir.
The Vice-Chair: I believe there is a Liberal motion prior to yours, Mr Huget.
I have no problem with a five-minute recess so that people can stretch their legs, but I wish you to be back promptly in five minutes. We will stand recessed for five minutes.
The committee recessed at 1120.
1127
The Vice-Chair: Shall we, by mutual consent, wait until the other two come back before we have this vote? But we will start the debate. We will come back to order then, please.
Mr McGuinty moves that section 10 of the act, as set out in section 2 of the bill, be amended by adding the following subsection:
"Public notice
"(6) The minister shall within seven days of issuing a policy directive make the directive public."
Mr McGuinty: This is a very simple amendment. I think it is important to know what it is that I am not asking for here: I am not even asking for debate, I am not asking for consultation and I am not asking for the effects of proposed or actual implementation of a policy directive. I am simply asking that the directive itself be made public.
One of the most thoughtful presenters I thought we heard from during our tour was a person who appeared before us in Kingston, I believe. This gentleman is the author of Electric Empire: The Inside Story of Ontario Hydro. He was the policy adviser to the former minister Jenny Carter and he was one of the architects of Bill 118. This man had obviously spent a great deal of time thinking about the problems relating to Ontario Hydro and he raised some potential solutions.
I thought he outlined the problems very effectively. I do not agree with all the solutions, but I want to quote from some of his presentation. I am not quoting from the actual text but from its reprinting in the Kingston Whig-Standard. It appeared in the February 3, 1992, edition: "When directives did come, they came in a secrecy which masked highly partisan pork-barrel politics." Here he is making reference to directives in the past. He then goes on to describe a particularly notorious example involving Premier Bill Davis and a uranium contract with Rio Algom. I think he referred to it as a sweetheart contract. He then goes on to say:
"This is the price of secret policy directives. The danger and the temptation for governments to use Hydro in this way will always remain, regardless of political stripe, as long as secrecy does. I am pleased to see that the proposed amendments will compel Hydro to follow the policy directions set up by Legislature, and I believe the changes to the Hydro board structure will help bring a broader public voice to the boardroom. However, I see no explicit requirement for cabinet or the Minister of Energy to publish the policy directives to Hydro."
Then this gentleman -- I am trying to remember his name now, it escapes me -- goes on to say: "Accordingly, I would like to see subsection 9a(1) amended to read: `The minister may issue policy directives that have been approved by the Lieutenant Governor in Council, and such directives must be made public within 15 days of issuance.'"
I am going to use the example of the advice given by Paul McKay -- that is the gentleman's name -- policy adviser to Jenny Carter. He is one of the architects of Bill 118 and, I think, one of the most thoughtful thinkers on Ontario Hydro today. He indicated quite clearly the reasons why we should have a disclosure made. Again, it is important to keep in mind what I am not asking for: I am not asking for debate, although I think we should have it. I am not asking for consultation with the public, although I think we should have it. I am simply asking that the directive itself be made public; not the actual, proposed or potential impact of carrying out such a directive, simply that the directive itself be made public.
Paul McKay said we should make such disclosure within 15 days. I have reduced that period to seven days. Again, in keeping with the former minister's stated intention to bring about openness and transparency, I cannot for the life of me see why the government members would not go along with this amendment. I am anxious to hear -- not assuming, of course, that they are going to oppose it -- from them and to witness the mental gymnastics that would have to go into opposing a simple amendment which makes the directive itself public. I thank you for your patience, Mr Chair.
The Vice-Chair: Discussion on Mr McGuinty's proposed amendment?
Mr Huget: I have to say again that a policy directive does not exist unless it is by order in council. I understand Mr McGuinty's concerns. Given the interest, I think we can make an undertaking to make them public within 15 days, but seven days is too short. We are willing to take the amendment with 15 days rather than the seven days.
The Vice-Chair: There are other people who wish to speak on it, so I will say Mr Jordan.
Mr Carr: That will give him time to think. Go ahead, sorry.
Mr Jordan: I would like to say that the position the government has just taken here seems reasonable in that, as presently worded, I take this to say that the directive would be made public before the board had even reviewed it or dealt with it. I take it now that the motion, as the government is willing to amend it, is that the order in council or the directive would have been presented to the board in 15 days. Following that, it would be made public. Is that correct?
The Vice-Chair: I would ask for some clarification.
Mr Jennings: Our understanding of it is that section 2 of the bill states: "The minister may issue policy directives that have been approved by the Lieutenant Governor in Council." The directives would not be issued until after they had received full cabinet approval, so the 15 days would be after cabinet approval plus the time taken to convey to Ontario Hydro.
The process of consultation with Ontario Hydro takes place before there is cabinet approval. Subsection 9a(2) says: "Before issuing a policy directive, the minister shall consult the board with respect to the content and effect of the directive on the corporation." The issuing would be after there has been consultation with the board of Hydro and after there has been formal approval by cabinet. Then the issuing would be conveying that to Ontario Hydro. We are saying that within 15 days of that it would be made public.
Mr Jordan: Actually the directive has been approved for action prior to the order in council. Is that what you are telling us?
Mr Jennings: It is not really a policy directive until it has been approved by the Lieutenant Governor in Council. Prior to that it is a proposed policy directive.
Mr Jordan: That has been dealt with by the board, sent back for approval by the --
Mr Jennings: The consultation process would take place before you actually have an LGIC-approved one. Once you have that approved, the issuing would be conveying that final directive to the board, and then we would be undertaking to make that public within 15 days.
Mr Jordan: I do not have a problem with that.
Mr Carr: I thought Dalton maybe wanted to comment on the change. I will wait, in light of the PA's announcement, to see if there is anybody else before I speak.
Mr Farnan: I have some questions. First of all, I would like to know what is meant by issuing a policy directive. "The minister shall within seven days of issuing a policy directive make the directive public." What is meant by "make the directive public"? How do you define that? What kind of communications? Is 15 days a shorter period of time than the appearance in the Gazette? Is this a precedent for the government for every conceivable piece of legislation, directives or regulations? That would be putting an unnecessary burden, in my view, upon all of the ministries.
Basically, the whole purpose of appearing in the Gazette is making it available to the public. Who decides what should be made public and how widely it should be made public? I think we have a system in place that actually addresses the needs of the province in terms of information. Unless I can be convinced that 15 days is a longer period of time than it would normally appear in the Gazette, I will not support this motion. If it is a shorter period, then it is adding an unnecessary and unrealistic expectation. There is no definition here of what "public" is, how far or how broadly that is communicated. I am looking for some answers before I make a decision on this.
The Vice-Chair: I ask the parliamentary assistant or someone for some clarification for Mr Farnan.
Mr Jennings: We would assume making it public is posting, similar to what is done for regulations and orders in council. My understanding is that for things to be gazetted the time period is something like 45 days, so this would be a shorter time period.
Mr Farnan: If I may respond to that, the whole system is designed in order that gazetting provides a purpose for all of these matters to come into the public domain. There are exceptional areas where it can be brought into the House in a direct statement in the Legislative Assembly and, if something is significantly important, it will indeed be brought directly into the House. I am sure the media, as the faithful watchdogs for the public of Ontario, would be very diligent in recognizing the fact that if there was a major issue that was not being brought into the House but simply being gazetted, it would be highlighted. I suggest to this committee -- and I am going to vote against this amendment -- the intent is good. We want to get information out but we must not put on unrealistic expectations. We want the information out. The process is already in place and I will be voting against the amendment.
Mr Carr: I would speak very briefly as well. I agree with Mike with regard to not wanting to impose new burdens. One of the criticisms I have is that sometimes as politicians we sit around dreaming up ways of protecting ourselves. We have wound things up so that a lot of our programs do not work. I guess what we are getting at is what Mike was pointing out too: Anything that would be major with regard to the financial position I hope would be made public.
The only comment I will make is that how we do that is very important. To be helpful, I suggest that anything the government deems to be a policy that will affect the financial situation of the corporation should be highlighted somehow. I will support Mike in saying that I do not want to institute new procedures. I can just see the people in the government offices sitting there and thinking, "We've got the Gazette but, if it's a policy directive to Ontario Hydro, we're going to have to have this separate way of doing it."
All I am saying is that a major policy decision that will affect the financial situation should be brought to the attention of the public. Furthermore, my basic belief is that any policy directive the board of Hydro agrees with I do not want to hear about. I think that is a case of having the checks and balances. That is making a big assumption that the board is always going to be representative of the people and have quality people on there, and that is assuming we are going to have a broad base. That is not the case, because when the government gets to appoint the people it can then turn around and appoint the people. That is assuming we have the checks and balances in place. If we have a board there that is truly representative of the people, then I think that would be the checks and balances, and where the public should be involved is when there is debate.
The problem is that the government of the day gets to choose the people and -- again it could be any political party -- could elect people who could be puppets. There would be no debate because they would rubber-stamp everything that comes through. All I am getting at is that major decisions somehow need to be brought to the attention of the people. I think the parliamentary assistant is attempting to be cooperative in terms of the time frame. I agree with what Mike says. How we highlight it I do not know, but I believe something that will affect the corporation needs to be brought to the attention of the people.
Mr McGuinty: I am very pleased with the words I have heard from the parliamentary assistant. In view of the fact that it is quarter to and there has been a request that we adjourn at this point, perhaps we should adjourn. The government members would profit from the time over lunch to thoroughly consider the amendment and what I take to be the friendly amendment proposed by the parliamentary assistant.
The Vice-Chair: With that, I will call a recess until 2 o'clock. We will reconvene promptly at 2 o'clock for the afternoon clause-by-clause.
The committee recessed at 1145.
AFTERNOON SITTING
The committee resumed at 1425.
The Vice-Chair: I believe we have a Liberal amendment that we were debating. All those in favour of the amendment proposed by Mr McGuinty?
Mr McGuinty: Could I ask for a recorded vote, please?
The committee divided on Mr McGuinty's motion, which was negatived on the following vote:
Ayes -- 3
Brown, Cleary, McGuinty.
Nays -- 7
Farnan, Frankford, Huget, Jameson, Jordan, Murdock, S., Ward, B.
The Vice-Chair: The next amendment is a government motion.
Mr Huget moves that section 10 of the act, as set out in section 2 of the bill, be struck out and the following substituted:
"Policy directives
"10(1) The minister may issue policy directives that have been approved by the Lieutenant Governor in Counsel on matters relating to the corporation's exercise of its powers and duties under this act.
"Consultation
"(2) Before issuing a policy directive, the minister shall consult the board with respect to the content and effect of the directive on the corporation.
"Best interests
"(3) Compliance with a policy directive shall be considered to be in the best interests of the corporation.
"Power
"(4) The corporation may do such things as in its opinion are necessary, usual or incidental to the furtherance of the objectives set out in a policy directive.
"Directors
"(5) The directors shall ensure that policy directives are implemented promptly and efficiently.
"Liability
"(6) A director is not accountable for any consequences arising from the implementation of a policy directive if he or she acted honestly and in good faith in relation to its implementation.
"Reports
"(7) The board shall report to the minister whenever it exercises a power or performs a duty to which a policy directive relates.
"Notice
"(8) Where a policy directive is issued under subsection (1), the minister shall cause it to be published in the Ontario Gazette and shall give or cause to be given notice of the directive to all members of the assembly."
Mr Huget: The purpose of the motion is to ensure that policy directives can be issued only on matters relating to the corporation's exercise of its powers and duties under the Power Corporation Act. Subsections (3) and (4) appearing in the proposed new section 10 are being transposed from section 6 of the bill, which is to be struck out. Section 6 would have amended the act to include in the purpose and business of the corporation the objectives set out in any policy directive.
Mr McGuinty: Unless I am mistaken, these are essentially the same provisions found within Bill 118, sections 2 and 6. Subsection (8), I guess, is new, the one we have just had notice of. There is now a restriction being applied to the directors "on matters relating to the corporation's exercise of its powers and duties under this act." I believe I am correct in those comments.
On that basis, I am very concerned about the effect of these provisions and I remain so because of all the objections that were raised to them during the course of our work as a committee on the road. It brings me back to something I mentioned earlier today; that is, this business of a policy directive having to be connected with or somehow falling within the mandate of Hydro. The question is, who is going to make that decision, and where is it stated in objective terms so that a third party acting objectively could determine whether a policy directive actually dealt with a matter relating to the corporation's exercise of its powers and duties under this act?
Now there are ways we could have restricted that, but in fact what we have done here through these other provisions contained within this amendment is to ensure that whatever the government has to say in these matters is going to go ahead, notwithstanding. The first matter is subsection 10(3), that provision entitled "Best interests." It says, "Compliance with a policy directive shall be considered to be in the best interests of the corporation." That is a deeming provision, a very powerful provision. It says: "When you do as you're told, it doesn't really matter what it is, in fact or in law. We're just going to deem it to be in the best interests of the corporation. Forget the facts, forget the opinions. It's just going to be that way. It's as simple as that." That is a very dangerous provision. Deeming provisions are used only rarely, and with good reason. I think ratepayers have much to fear as a result of this.
That ties in with subsection 10(6), the one relating to liability. This provides directions, with a general absolution for any consequences arising from going along with a policy directive as long as they acted honestly and in good faith. As I said earlier today, I hope our directors are always acting honestly. Surely we can count on our directors to act honestly and we can also count on them to act in good faith.
I had an earlier amendment which would have imposed a positive duty, which exists in common law anyway, requiring that the directors exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances. Now they are relieved of that obligation. All they have to do is act honestly and in good faith, and if they do those two things -- they do not have to do the third -- then they are off the hook; they are not accountable for consequences.
Why would you put that kind of provision in the bill? "Don't worry about the consequences just as long as you do these two things." Then again, we are deeming it to be in the interests of the corporation anyway. It is a rather elaborate bit of architecture in that it gets around, usurps the proper role of the board of directors.
The way I look at it, as a ratepayer, the only people who are accountable to me in law are my directors. They are the people who through a 100-year-old tradition in common law owe me a fiduciary duty. They are the people who are to look out for my interests, not my political representative. He does not owe me a fiduciary duty. Governments, you know, are prone to do things for political reasons; that is the nature of the beast. But I want somebody who is there at all times looking out for my interests above any others, and that is the board of directors. This provision effectively emasculates the board of directors. They are no longer able to act in any real way to protect my interests, and that is very regrettable.
I should comment as well on subsection 10(8), just recently added to the amendment. I think that strikes out in a very positive direction and I commend the parliamentary assistant for taking that step. However, to say that we are going to give notice gets us halfway there. If we want to go the rest of the way, we have to establish a time frame. Is that notice to be within 30 days, 60 days, one year, two years? There is no limitation whatsoever stipulated here, and I do not think it is unreasonable to provide some kind of restriction in terms of a time frame, at least in so far as giving notice to the offices of the members of the assembly is concerned.
Mr Jordan: I too would like to express my recognition of the government's move towards attempting to make the members of the Legislative Assembly aware of the directives. My colleague has certainly pointed out what could be a shortcoming in it, no question, that of, which year would I be notified, or should I depend on the Gazette to know about the directive? I assume the intent is that at the same time as the directive was put in, or prior to that, the members of the assembly would be notified. However, it does not say that, as he has pointed out.
As we have travelled across the province, I have done a summary of all the ones who came before us, and there is not one here of any business interest, if you will, in the utility that is in favour of the government exercising the power of a policy directive. A policy statement and some confidence in the board and the chairman and chief executive officer are there now, in our opinion, and that is all that is required, even to the point where you want to have a moratorium on one form of energy, the use of uranium, as a means of heating water to create steam.
I still cannot see, even after listening to the chairman the other day, that you need the power you are vesting in the Minister of Energy over the chairman and chief executive officer at the board of Ontario Hydro. All these people, generally speaking, said, "Please withdraw the bill; it's not good legislation." It seems to me it has all been in vain as we listened to all those submissions. A lot of time was spent on them. A lot of the important customers across the province took time and came.
This government still insists on giving the Minister of Energy that power to issue policy directives which shall be carried out immediately. Imagine. How are you going to define "immediately"? You are sitting on the board, you are a member of the board, and it is right in the act that as soon as you get this directive, you must carry it out immediately. Some of the board members have already indicated things have been put before them and they have been told, "We're going to vote on this in 15 minutes," when they need a week to study it.
1440
It would seem to me this is more serious than the government intended it to be. I think the government overreacted here in an attempt to take control of Ontario Hydro from the board and move it over to the Ministry of Energy. I do not know what staff they have added to the Ministry of Energy that is going to give it the wisdom and the research and everything that is required to operate a corporation of that size. I admit it allows for the directives to be discussed with the board prior to their being approved by cabinet, but I am sure the members of the Municipal Electric Association and the industrial customers and rural customers who came before the committee all across the province would all say, as I say: "We do not want that power in the hands of the government. Policy statements, yes; policy directives, no."
It is honourable to move to the extent that you are going to attempt to keep the assembly informed of the directives, but the fact that the government has taken that power, or deemed it necessary, really bothers me. The money we are paying the chairman and chief executive officer and the board of directors and the confidence that people have had in that group in the past have been completely removed, in my mind.
We were told yesterday, I believe, and throughout the hearings, "You can have freedom for day-to-day operations, but we are going to make the policy and we are going to give it to you through policy directives." That is how the corporation is going to be run, "Go ahead and do the day-to-day operations." If it was my company, I sure would not be paying that kind of money just for day-to-day operations, after I have set the framework and the whole bit. On behalf of the people who came before us and spoke so strongly against these directives, I just find it impossible to sit here and see this go ahead and become part of the Power Corporation Act.
Mr Huget: For the record, Mr Jordan has raised the issue of policy directives and he stated that policy directives will be implemented immediately. In fact, the section says that directors shall ensure that policy directives are implemented promptly and efficiently, not immediately.
This motion responds to public concerns about the scope of policy directives. Directives can only be given on matters relating to the corporation's exercise of its powers and duties under the act, and many environmental groups and individuals supported the directive power. The changes are being made to clarify the scope of policy directive issues that will address most of the concerns raised by industry and the public utility commissions concerning the directive power. I think basically that is why we feel this is a good motion.
Mr McGuinty: I just think it would be useful to read into the record a small part of the brief we got from the Consumers' Association of Canada (Ontario). I thought this was a very thoughtful brief, and I think this group has a great deal of credibility in terms of looking out for the interests of consumers generally. In this capacity, of course, they were concerned with the interests of consumers of electricity who are ratepayers.
Section 7 on page 4 is entitled, "Language Which Anticipates Opposition by the Board to Policy Directives." It says, "The language in subsections 9a(3) and (4) and subsection 56ba(2) seems to anticipate opposition by the board to these policy directives. This leads one to suspect that policy directives are to be introduced which would force board members to act against their better judgement.
"Subsection 9a(3) requires that directors implement policy directives promptly. If directors choose not to implement a policy, they should resign. If they are seen to be merely dilatory, the Lieutenant Governor should ask for their resignations.
"Subsection 9a(4) seems to anticipate situations where members of the board are telling the minister that they are not prepared to be held responsible for the consequences of a directive. This situation should never arise. If the directors are that concerned about the consequences of a directive, then the minister should withdraw it or the director should resign."
"Section 56ba states that compliance with a policy directive shall be considered in the best interests of the corporation. Why does this have to be said? Would the minister be issuing policy directives which were not in the best interest of either the corporation or the electrical consumer?
"CAC recommends that these sections be clarified or, better still, withdrawn."
Mr Farnan: I would just like to ask the parliamentary assistant, is this necessary? Is what is on the table redundant? Is it not already process, that it is published in the Gazette?
Mr Huget: Are you referring to subsection (8)?
Mr Farnan: Yes.
Mr Huget: It is and it is not. It is not necessarily redundant in that I do not think this type of clear direction exists anywhere else, but I will have Mr Ciemiega respond to you.
Mr Ciemiega: It is not clear that a policy directive would be a regulation, and if it is not a regulation, then under the Regulations Act it would not require publishing in the Ontario Gazette. The section makes it specific that, yes, you have to put it in the Ontario Gazette regardless of whether or not it is a regulation. So you have notice that way. On the other one, giving notice of the directive to all members of the assembly, we have a precedent for that; we have that in the Planning Act.
Mr Farnan: That was my second question. I was going to ask if there was a precedent.
Mr Ciemiega: Yes, there is.
Mr Farnan: I was wondering if indeed this was establishing a precedent.
Mr Ciemiega: No.
Mr Farnan: I think you have answered my question.
Mr Ciemiega: We have, in fact, a precedent.
Mr Farnan: I can support that.
The Vice-Chair: Thank you, Mr Farnan. Any further debate? Seeing no further debate, all those in favour of the amendment proposed by Mr Huget?
Mr McGuinty: Recorded vote.
The committee divided on Mr Huget's motion, which was agreed to on the following vote:
Ayes -- 6
Farnan, Frankford, Huget, Jamison, Murdock, S., Ward, B.
Nays -- 4
Brown, Cleary, Jordan, McGuinty.
Section 2, as amended, agreed to.
Section 3:
The Vice-Chair: Moving on to section 3 of the bill, I am impressed that we are actually off that page. I ask Mr Huget for his explanation of section 3.
Mr Huget: The purpose of this amendment is to make it clear that the corporation may apply its income to purposes that are authorized or required not only by the act but also by the regulations made under the act.
The Vice-Chair: Any discussion? I see a puzzled look, Mr McGuinty.
Mr McGuinty: You caught me off guard here. I assume that there is a very good reason for that. There is always a good reason for these things, right? I have no comments.
The Vice-Chair: You do not wish to speak. Anyone else wish to speak? Seeing no discussion, all those in favour of section 3? All those opposed?
Section 3 agreed to.
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The Vice-Chair: Mr McGuinty moves that the bill be amended by adding the following section:
3.1 Subsection 63(1) of the act is repealed and the following substituted:
"Business of the corporation
"(1) Except as otherwise provided by this act, the purposes and business of the corporation are the generation, transmission, distribution, supply, sale and use of power.
"Incidental powers
"(1.1) The corporation has power and authority to do all such things as in its opinion are necessary, usual or incidental to the furtherance of the purposes described in subsection (1) and to the carrying on of its business.
"Supply at cost
"(1.2) Except as otherwise authorized by this act, the corporation shall supply power to users in Ontario at the cost to the corporation of supplying the power.
"Idem
"(1.3) For the purposes of subsection (1.2), the cost to the corporation of supplying power does not include any charge for profit but does include charges authorized by sections 18, 19 and 20."
Mr McGuinty: This is an attempt to set out very clearly what the business of Hydro is; that is, the generation, transmission, distribution, supply, sale and use of power. It does not prevent Hydro from undertaking cost-effective energy conservation programs. It does prevent the government from compelling Hydro to do something that is not part of its business as set out in the act. The existing subsection 63(1) of the Power Corporation Act does not offer this protection. The existing section could mean that Hydro can also do anything the Lieutenant Governor in Council says it must do.
The section that deals with supply at cost makes it perfectly clear that Hydro's duty is to provide power at cost to users in Ontario. The Ontario Energy Board has for some years now indicated that Hydro should have some kind of return on equity. That would mean escalating rates. Whether Hydro has any equity, as it is defined accountingwise, is a very real issue. There is no legislative authorization for the creation of equity, and this is essentially what the section is saying, "This is what Hydro is in the business of doing; secondly, when it supplies power, it has to be power at cost." There you have it.
Mr Huget: It is not clear what this motion is intended to achieve. The purposes and business, incidental powers and matters that can be included in the cost of power are already dealt with in the act. What can be included in the cost of power is already dealt with and defined extensively in section 92 of the Power Corporation Act. The purposes and business of Hydro are already set out in detail in section 65 of the Power Corporation Act and other sections. So we cannot support this amendment.
Mr Jordan: I would like to speak in support of this amendment because it is important. The interpretation at the present time of supplying power at reasonable cost and the interpretation of what is -- it reads, "Except as otherwise provided by this act, the purposes and business of the corporation are the generation, transmission, distribution, supply, sale and use of power." What they told us as we went across the province was that they wanted Ontario Hydro to stick to its mandate of supplying power at cost.
It would appear from what we have heard from the government members and from the minister that the government at the present time can interpret certain responsibilities to be part of the corporation's duties and still be relative to providing power at cost. This, in our opinion, is far too broad an interpretation and therefore I think it would be to the ratepayers' advantage that they would clearly understand when they got their Hydro bill that this was the cost of carrying out the mandate of Ontario Hydro and that these broader interpretations of corporate duties and corporate responsibilities and other social responsibilities in the community would be isolated from that. They would be looked after, but they would come under the Ministry of Energy's budget or under some other budget, not on my Hydro bill, please; it is high enough now, and I want to keep it relative to the cost of generating and transmitting power. So I speak very much in favour of this motion.
The Vice-Chair: Further discussion? Seeing none, all those in favour of the amendment? All those opposed?
Motion negatived.
Section 4:
The Vice-Chair: Mr McGuinty moves that section 4 of the bill be amended by adding the following subsection:
"(0.1) Subsection 64(2) of the act is repealed and the following substituted:
"Purpose of program
"(2) The purpose of an energy conservation program is to encourage the safe and efficient use of electrical energy."
Mr McGuinty: What I am doing here is attempting to restrict Hydro's conservation business to the conservation of electrical energy, not the conservation of other forms of energy. I think the conservation of other forms of energy should be looked after by the utility that happens to be supplying it, in conjunction with the Ministry of Energy. I think it is a mistake for the government to attempt to use Hydro to put in place some kind of all-encompassing energy policy. If you have a policy relating to Hydro, that is fine, but make sure it relates to the use of electricity and the conservation of electricity. If you have a concern with natural gas or oil or whatever else, put in place some other kind of mechanism to deal with it.
I have a copy here of the NDP Environmental Policy in the Turnaround Decade: A Review of Ontario NDP Environmental Policy, November 1990, put out by the environment committee. The suggestion there in section 3.6.2 is, "The responsibility for achieving greater energy efficiency would be separated from Ontario Hydro and delivered by a crown agency responsible directly to the Minister of Energy."
I think on the face of it that has quite a bit of appeal, and it certainly runs counter to what the government intends to do with Hydro. Again, I do not think Hydro should properly be available to implement policies of energy conservation that have to do with conserving anything other than electricity. It is the Minister of Energy's job to promote energy conservation in its broader form, and the ministry can do that through cooperation with all energy suppliers. If the minister deems it is necessary that there be other kinds of legislation brought forward to accomplish that objective, then that is his business, but I do not think he should be doing it through Ontario Hydro.
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Mr Huget: This motion would narrow the scope of conservation programs to matters relating to the safe and efficient use of electrical energy. The motion would severely restrict Ontario Hydro's ability to implement its demand management programs and would probably prevent fuel-switching initiatives. The Power Corporation Act, as amended in 1981, subsection 64(2), already states that, "The purpose of an energy conservation program is to encourage the safe and efficient use and the conservation of all forms of energy." Consequently we cannot support this amendment.
Mr Jordan: From the standpoint that we are attempting to use Hydro as a sort of motherhood type of corporation for all energies, we have had the gas companies come before us and make presentations, and we have had the oil companies, the retailers' association, come before us and make presentations relative to their now sudden interest in energy conservation and efficiency.
I cannot help but recall when oil was 17 cents a gallon and electricity was 25% to 30% more per BTU than the other fuels, and in order to make it a feasible fuel for consideration by the customer, the energy audits had to be done, and they were done by Ontario Hydro. Ontario Hydro continued to do energy audits on any building regardless of the fuel that was being used.
I have had discussion with executive people of the other fossil fuels and they say they have nothing against sharing the cost of energy conservation, energy audits and so on, but for some reason this government is zeroing in that it is Ontario Hydro's responsibility to do the energy audits on all buildings, to carry the ball for energy efficiency across the province. The gas company at this particular time happens to be the one that is walking in to not only reap the benefits of free energy audits for all buildings but of providing the major source of fuel relative to fuel switching.
We feel that fuel switching is a term that should not be required in the Power Corporation Act, because any switching that is required can be handled by the marketplace and is being done right now very well by the marketplace. As Mr MacCarthy indicated the other day, he could not see any reason for Ontario Hydro to be supplementing fuel switching at the present time because the marketplace was looking after it.
The policy of this government to continue to whip Hydro into carrying the responsibility for all energies is not acceptable, and I do not believe that in all cases it has the backing of the municipal electrical utilities. I believe it was indicated by Mr MacCarthy that before they would implement such a policy in a municipality where there were elected utility representatives, that utility would be consulted. I think that is what the people were telling us as we went across the province: Let's keep Hydro Hydro and let's keep the cost of Hydro as stable as we can and not let other costs get involved in the cost of generating and transmitting electricity.
I really believe, as was stated two or three times on our presenting of this bill, we need to actually table this bill and back up for a minute and form a a task force to look into all energies in Ontario. I plan later to present a motion to that effect as we progress. I will be voting in favour of the amendment.
The Vice-Chair: Further discussion? All those in favour of the amendment? Opposed?
Motion negatived.
The Vice-Chair: The next amendment is a government motion.
Mr Huget moves that section 4 of the bill be struck out and the following substituted:
"4(1) Subsection 64(3) of the act is repealed and the following substituted:
"Content of program
"(3) An energy conservation program may include, but is not limited to, the following:
"1. The safe use of energy.
"2. The improvement of an energy system in a building.
"3. The substitution of other forms of energy for electrical energy.
"4. The improvement of the capacity of a building to retain heat.
"5. The reduction of electrical energy use through more efficient use of energy.
"6. The shifting of electrical loads from times of high demand to times of lower demand.
"(2) Subsection 64(4) of the act is amended by striking out `other' in the second line."
Mr Huget: Ontario Hydro officials are concerned that the changes reflected in the bill are not wide enough. The new amendment to subsection 64(4) is simply consequential to the revised amendment to subsection 64(3). It is appropriate to delete the word "other" from the phrase "any other service" in subsection 64(4) because the word "service" will not appear in the opening words of the new subsection 64(3).
Mr McGuinty: Mr Chair, I am going to seek your guidance on this. I have the subsequent motion which I have been advised is properly presented as an amendment to the government's motion. I am wondering if this is the right time to do it. Do I move that amendment to this amendment now?
The Vice-Chair: In other words, what you are saying is you wish to debate both at the same time?
Mr McGuinty: I am not sure what the procedure is.
The Vice-Chair: Or do you wish to debate the amendment and then subsequently the other amendment? If you wish to introduce the other right now, it is my understanding, and I could be corrected by counsel, you would end up debating both at the same time.
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Mr McGuinty: All right, we will deal with this one first.
Interjections.
Mr McGuinty: My concern is that if I do not deal with my amendment first, then it will be lost.
The Vice-Chair: The clerk is advising that the proper way is that we deal with your amendment to the proposed amendment first.
Mr McGuinty: All right. I will move my amendment then.
Mr Huget: Just a point of clarification: We are dealing with the Liberal motion first and then the government motion?
The Vice-Chair: I will get the clerk to clarify this.
Clerk of the Committee: You have moved your motion and that is on the floor now. It is my understanding that Mr McGuinty is about to move an amendment to your amendment. That will be dealt with and then we will go back to your amendment and then we go to voting on the section.
Mr Farnan: I am not sure if you can word your amendment as such, as opposed to a separate motion here, because I think you have to read into the record where you will amend.
Mr McGuinty: I have some wording here, Mr Farnan. I will try it on you.
The Vice-Chair: Shall we proceed then?
Mr McGuinty: Yes. We see this wording as a result of the good efforts of our committee counsel here.
The Vice-Chair: Mr McGuinty moves that the government motion be amended by striking out subsection 64(3) of the act, as set out in the government motion, and substituting the following:
"Content of program:
"(3) An energy conservation program may provide information, advice and inspection services in respect of the use of electrical energy if in the opinion of the corporation these will result in cost savings to the corporation or to users of electrical energy.
"Idem
"(3.1) An energy conservation program may include, but is not limited to, the following:
"1. The safe use of electrical energy.
"2. The improvement of a system for the use of electrical energy in a building.
"3. The improvement of the capacity of a building to retain heat.
"4. The shifting of electrical loads from times of high demand to times of lower demand.
"Substitution of other forms of energy
"(3.2) An energy conservation program may include the substitution of other forms of energy for electrical energy if the substitution will result in cost savings to users of electrical energy.
"Priority to renewable energy sources
"(3.3) In any efforts made by the corporation to encourage users of electrical energy to switch to other forms of energy, the corporation shall give priority to renewable energy sources as a preferred substitute for electrical energy."
Mr McGuinty: The reason I am offering this amendment to the government motion is the concern we have and have registered earlier to ensure that Hydro's business is the business of electricity, the supply, generation and sale of electricity at cost, and the same has application in its energy conservation programs.
The first proviso contained within subsection (3), and it is an important proviso, says, "You can get into the energy conservation program business, but it has to result at all times in cost savings to the corporation or to users of electrical energy, not to users of other forms of energy and not to engage in activities for some esoteric reasons, but rather they have to result in black and white savings, savings that are going to register on the books at the end of the year."
I think subsection (3.1) is pretty well the same as the act today. Again, the references are to electrical energy and not allowing Hydro to participate in conservation programs that have the effect of conserving other forms of energy.
You will notice that in subsection (3.2) I say it is perfectly acceptable for Hydro to get into this business of fuel switching, but again there is a proviso, and it is very important: as long as it results in cost savings to users of electrical energy. I do not mind if we pay people to switch off electricity on to natural gas or oil as long as Hydro can show me, again in black and white, with numbers, that it is going to result in cost savings to me as a ratepayer.
Subsection (3.3) is something we should not be overlooking in all this discussion of fuel switching and environmental impact of use of energy. When we are trying to switch people off our non-renewables, surely we have an obligation to lend priority to renewable forms of energy, and that is what this does. It just says that if you are going to switch people off Hydro, that if you are going to switch people off electricity, let's give a priority to our renewable energy sources as a preferred substitute.
Mr Huget: This motion would restrict conservation programs to information, advice and inspection services. Ontario Hydro has asked to be provided with more flexibility in the type of program that can be offered. I am glad to see the motion recognizes that in certain circumstances fuel switching is okay. The restriction on fuel switching in this motion is too restrictive.
Conservation programs will mean immediate cost savings for participants but in the short term increased costs for other electricity users. In the long term, all electricity users will benefit. References to cost qualifications are difficult to include in legislation from a drafting point of view and the corporation is required in any case to act in the best interests of its customers.
The support for renewables in the motion is consistent with government policy. However, it is clearly a policy matter and to enshrine it in legislation would limit the government's flexibility in modifying its policy. The matter is best dealt with in the memorandum of understanding between Hydro and the Minister of Energy, and we cannot support the motion.
Mr Jordan: I would like clarification from Mr McGuinty on subsection (3.2), "Substitution of other forms of energy." Are you stating there that you are willing to have Ontario Hydro supply funds for me to switch from an electric furnace to, say, a gas furnace?
Mr McGuinty: What I am saying as a general rule is that I do not mind what Hydro does in connection with fuel substitution as long as it results in net savings for me.
Mr Jordan: I have difficulty with the thinking that goes with that, in that as we discussed this bill across the province, that was one of the very strong points that was being made by the municipal utilities, that they were not in favour of using grants, if you will, to individual customers to allow them to provide them with a new gas furnace. Just the other day Mr MacCarthy mentioned here -- they gave me the impression that they were not particularly in favour of that either at Hydro, that they were more interested in letting the marketplace handle it for the present time and then, as it tended to slow down, they would look at providing perhaps loans to those who needed it, not as a blanket policy across the province. They did not get into the detail of how they were going to do it, but it is something they have not studied yet. I could not, in all fairness, support fuel switching other than it being controlled by the marketplace.
Mr McGuinty: Just to be clear on that, what I am saying as a ratepayer is that if Hydro can do anything that will save me money, that is a good thing.
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Mr Brown: I am pleased with Mr McGuinty's amendment. I think what it does is refocus the debate, as far as Ontario Hydro is concerned, on electrical energy. I think that is important. Many of us are uneasy with the concept that Ontario Hydro should be pursuing a policy that advocates conservation and energy efficiency in only one sector of the energy field. We are not asking the oil companies and the natural gas companies to do the same thing. We are not asking Shell Oil to subsidize the Ford Motor Co to come up with more efficient cars. Within this conservation and efficiency question, we are just dealing strictly with the electrical utility. I think Ontarians have reason to be very concerned about that. What Mr McGuinty is doing here is very clearly laying out what we all believe to be the role of the crown corporation that is charged with providing electricity at cost to the people of Ontario.
I have a question for the parliamentary assistant in this regard. It may apply more to his amendment than to this one, but as they deal with the same subject, I guess I could ask it now. You have talked about the $6 billion that is to be spent on energy conservation and efficiency in Ontario and the $8 billion that you project to supply the same amount if you were building new stations of one sort or another. That sounds really good. It sounds like a $2-billion bargain for the consumers of the province.
What I am concerned about, however, is that obviously, if you have $8-billion worth of new generating out there, somebody is paying for that. The load is increased, there are more units being purchased by the people of Ontario, and therefore Hydro is getting some return on that. Could somebody give me the numbers of what the net $8 billion would be, if you follow my question? What I am really trying to get at is, at today's prices -- I am not talking about changing the price for providing the load -- what kind of revenue does that $8-billion investment give us?
Mr Huget: I will defer to Mr Jennings.
Mr Jennings: Various comparisons can be used, depending on what type of generation would be used to supply the plants. If we were talking about a $6-billion expenditure over the 1990s, the total that Ontario Hydro is expecting to reduce the load would be 5,200 megawatts by the year 2000. As a comparison, Darlington, which is a total of 3,600 megawatts, is projected to be $13.5 billion in the final cost. We would expect that the costs would be somewhat higher than that for the next nuclear station.
Mr Brown: I am coming at your number, though. Your number was $8 billion.
Mr Jennings: There was an $8-billion to $10-billion number. Again, it would depend on what generation was used.
Mr Brown: You must have known when you came up with that number.
Mr Jennings: If it was supplied by gas-fired combustion turbine units, it would be somewhere around $8 billion, because it would be a bit more than $1,000 a kilowatt, but then you would, of course, have the running costs of those. Those are the capital costs.
Mr Brown: Yes. What kind of revenue would they generate?
Mr Jennings: The operating revenue would depend on what the rates are at the time, but if you had to supply 5,000 megawatts, you would be talking about, say, 70% capacity. I would have to work out the number. It would not be that difficult. The point of the comparison is that people have to buy the power, but if you look at the total energy bill of the province, if you defer the need for building that station, the economic impact on the province is reduced if you do not have to incur that $13.5 billion or that $8 billion.
Mr Brown: We were talking about $8 billion.
Mr Jennings: Okay, but the $8 billion was the capital cost of that generating station. You still have to buy gas to run the generating station, so it is going to be more than $8 billion that you defer with the $6 billion.
Mr Brown: You must have some idea how much net revenue is available there at today's prices. There are people who are going to buy this product.
Mr Jennings: It is easy to work it out; I just multiply a couple of numbers together. But the basic point we are looking at is that those are dollars people do not have to spend. It is a reduced electricity bill for the province. If you look at the provincial economy as a whole, that is several billion dollars that is going to be available to be spent on something else.
Mr Brown: I am not following this. The $8-billion worth of generation obviously is going to generate some revenue every year. If you use the kind of revenue we produce now, how much is that?
Mr Jennings: I can work out the number and give you the number, but the basic point is that there is not a benefit to having that additional revenue. You are saving people from spending that much money.
Mr Brown: No.
Mr Jennings: I understand your point, but I do not think you understand my point.
Mr Brown: My point is that if the $8 billion is out there, fine. You just told me that and Mr Huget told me that in his opening statement. But there is a revenue offset to spending that $8 billion. I want to know what the revenue offset is, because I do not have any idea what it is. That is why I am asking you. I might be able to decide whether $6 billion is a good investment or whether maybe $7 billion would be a better investment or whether it should be $5 billion or $4 billion, depending on what the net is. Because if I am the Hydro consumer, the price per unit will be lower depending on what kind of numbers you can give me.
Mr Jennings: The rates, yes, but the $8 billion would be recovered from rates, if it was a nuclear plant, over 40 years, or a combustion turbine unit might be 25 years. That would be recovered from rates on an annual basis at either a fortieth or 25%, plus the interest on that based on Hydro's debt, so it would be something like 10% on top of that.
Mr Brown: That is what I am asking. I have no way of figuring this out and I was hoping you did so you could tell me what this amount is.
Mr Jennings: If it was over 40 years, it would be $200 million a year plus 10% on the declining balance. That is how it is recovered from rates.
Mr Brown: I understand how that works, but what is the net revenue after you work all those nice numbers out? I agree that they have to be worked out, but there is still a net revenue there.
Mr Jennings: I am saying what the net revenue is. You would have to recover that $8 billion from rates.
Mr Brown: You have to recover the $6 billion from rates too.
Mr Jennings: Some of that would be capitalized and some of that would be expense. Yes, it would be recovered from rates.
Mr Brown: Yes, they both have to be recovered. We have to get the $6 billion or the $8 billion from somewhere.
Mr Jennings: Yes.
Mr Brown: But with a conservation program of a $6-billion investment, there is no offsetting revenue, zip. With the generation, there is at least some offsetting revenue. I want to know what that is so I will know whether $6 billion is a good number or whether you should be at $12 billion or $4 billion. That is what I want to know.
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Mr Jennings: You are going to sell a certain amount of electricity in different cases. You are still going to have to recover the $6 billion from rates and you are going to have to recover the $8 billion plus the cost of running the plant from rates.
Mr Brown: I am talking about net revenue.
Mr Jennings: I know, but you are going to have lower revenue because you are selling less. That is a saving to the consumer in a total bill.
Mr Brown: Am I the only one having trouble with this?
Mr Jordan: You have spent $6 billion. There is no revenue from that.
Mr Brown: There is no revenue from the $6 billion. It is the $8 billion that there will be some revenue from?
Mr Jordan: What is the net revenue per kilowatt-hour from a gas-fired --
Mr Jennings: It does not matter what the generation is; you are going to be selling the electricity. Currently the end block rate might be seven cents per kilowatt-hour. It does not matter where you have generated that. You look at the total average system cost, and you come up with the cost.
Mr Brown: Maybe we are talking about two different things.
Mr Jordan: There is no revenue from the investment.
Mr Brown: No, the $6 billion gets you no revenue, zip.
Interjections.
The Vice-Chair: Mr Jamison and Ms Murdock both wish to speak on this too.
Mr Jamison: I do not know how many times it has been said here that it costs less money to save a kilowatt of energy than it does to build a facility to produce one. On top of that, we just heard that there are input costs to that facility, the labour force, the cost of upkeep and so forth. All those things are there and ongoing. The point is -- and the bottom line has been stated time and time again -- that it costs less to save a kilowatt at this point than to produce one.
Mr Brown: That is what we are trying to determine.
Mr Jordan: How much less? We have to take the revenue into consideration.
Mr Jamison: Most industries are headed in the same direction: downsizing, better control of the assets they have, inventory stock and all those kinds of things. On one side, the argument has been here for days and days about building excess capacity. The report just came down on that, and this is where the argument is. We have to understand that it costs less money to preserve a kilowatt -- okay, to save one -- than to build one into the system.
Mr Brown: No, that is not right. There is a mathematical relationship here, and at some point it costs more to save it than to build it. That is obvious. I am trying to figure out where that point is, and that is the question I am asking.
Ms S. Murdock: I do not know exactly. I thought I understood this, and now I am really confused. If I am wrong, I want to be corrected early so I do not get more confused. I am hearing Mr Brown ask what the net revenues would be on the $8 billion that would be used to build a unit and what the net revenues would be on the $6 billion it is going to cost for energy saving. I am hearing you say, Mr Jennings, that the saving that would be made on energy would result in less revenue.
Mr Jennings: Yes, but I am arguing that it is a benefit.
Ms S. Murdock: I understand that. It is sort of like a positive negative, and it is looking at it from a different perspective.
Mr Jennings: It is a lower bill for the province, a lower cost for the province as a whole.
Mr Jamison: Which is a positive.
Mr Jennings: Yes.
Ms S. Murdock: Yes. It is really irrelevant what the $8 billion and the $6 billion -- I know money is not irrelevant in this day and age, but what I am saying is that for the purposes of explanation, whether it is $8 billion or $6 billion or $4 billion does not really matter.
Mr Jennings: Maybe I will try to explain it on a different basis. When Ontario Hydro examines the types of expenditures it will have to make on programs for energy efficiency, it is looking at the costs of those programs per kilowatt-hour saved. For the types of programs they have developed and are working on now, the cost of getting those savings would be about two to three cents per kilowatt-hour.
The avoided cost that Ontario Hydro is using on its system base is the type of cost it was negotiating with non-utility generators, which reflected that Ontario Hydro's avoided cost of new supply is around four and a half to five cents a kilowatt-hour. So on that economic analysis basis, the cost of a kilowatt-hour from a demand management program is more economic than a supply kilowatt-hour.
Your question deals with the revenue impact of a given kilowatt or megawatt of power. Roughly, if you looked at 1,000 megawatts and if it was base load generation -- we are talking about high utilization rate, so for most cases it would probably be lower than this number -- you could talk about something like $500 million in revenue from 1,000 megawatts of base load capacity. Peaking load would be far lower than this because it would only be maybe 10% of the time.
What I was trying to get at with the size of the bill is that currently Ontario Hydro's annual revenues are about $7 billion. That is money that customers across the province -- consumers, industry, everybody -- pay for power from Ontario Hydro.
The $6 billion that is to be spent on conservation programs would mean that in the year 2000 you would have 5,000 megawatts less of demand than you would have without that being spent. As a consequence, the overall bill to the province will be considerably lower. It will be less than the $500 million, but if we use that as a round number, you could be talking about $2.5 billion lower as a bill to the province than you would be otherwise looking at.
You can look at it as lost revenue to the corporation, and any fixed costs would have to be spread around more customers, so there may be some rate implication because of that. But if you look at the province as a whole, it means $2.5 billion people do not have to spend on electricity for the same level of service, because we are talking about efficiency, and we are talking about people still having the same level of heating in their homes, still having the same level of lighting. They may have more efficient lightbulbs, but they are going to be getting the same amount of light. So people are going to have the same services or quality of life, but at a lower bill.
Mr Frankford: I am far from being an accountant, but I think I can see some confusion there. Revenue is -- perhaps the term should be cash flow. You talk about revenue, which is there, but there is no guarantee that it does anything apart from flow through. What you are talking about might be profit, but does that not depend on the rates? You cannot predict at this point in time that the rates --
Mr Brown: That is what the issue really is all about: rates. That is what I am trying to determine. I do not think we are disagreeing here; I think we are just having some difficulty in coming to an understanding of what is being said. What I am really trying to determine is whether in the year 2000, after we have spent $6 billion on energy conservation instead of spending $8 billion on generation, my bill will be lower or higher.
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Mr Jennings: The overall bill to the province will be lower.
Mr Brown: My bill.
Mr Jennings: It will depend on whether you have participated in a conservation program or not.
Mr Brown: I am one of these happy guys who just put a state-of-the art heat pump system in my house. It is providing good energy efficiency; it is doing a lot of good. But I have $20,000 or more invested in this system and I saved $400 over the last three months, so it is going to be a long time until I see a payback on that. I am not complaining about that, because I think it is just a matter of time until I get my payback on that system, but there are a lot of constituents who are not in a position to do that. All of these programs require some capital expenditure on the part of the person who wants to participate. Particularly among seniors and among people with low incomes generally, they are going to have great difficulty doing this. So I might be in a position to save on my Hydro bill, because fortunately I am in a situation where I can make the investment. What I am concerned about are my constituents who do not have that ability to take part in an equitable manner in those conservation projects.
Mr Jennings: In the short term, the person participating in the program will receive an immediate benefit. In the longer term, the benefit to all the ratepayers would be that we do not have to put in the high-capital-cost facilities such as a $13.5-billion nuclear plant.
Mr Brown: To get this straight, if we do the $8 billion in capital expenditures, my bill will be lower, but the province's bill will be higher. I think that is what you just told me.
Mr Jennings: You are talking about the new supply? Yes, because you will have more revenue for Ontario Hydro, but what that means -- the equivalent of saying that is to say the electricity bill for the province will be higher.
Mr Brown: Yes, exactly. I think that is what I said, that for the province as a whole the bill will be higher.
Mr Jennings: Yes.
Mr Brown: But for Mike Brown or Gary Carr the bill will be lower.
Mr Jennings: No, the bill will be higher. Your rate may be lower, but you do not pay just the rate; you have to pay the bill.
Mr Brown: Provided I can take advantage of the conservation program.
Mr Jennings: You may have a bill that may be higher, but you will say, "That's great, because my rate, my cents per kilowatt-hour, is lower."
Interjection: I think you have answered the question.
Mr Frankford: I think you have proved --
Mr Brown: I have one more question. As long as we are on this whole thing, we have Darlington coming on stream, partially on stream. We have that investment. What is Hydro's projected cost per kilowatt from that station over the next 40 years?
Mr Jennings: You would have to ask Hydro for the exact, up-to-date number. I would hesitate to give the actual number. In terms of the long-run avoided costs, it might be in the neighbourhood of four cents in real terms. But in an accounting sense, coming into the rate base is more like six to seven cents a kilowatt-hour.
The Vice-Chair: Is there any further debate on this?
Mr McGuinty: Mr Chair, are we still on my amendment?
The Vice-Chair: This is on the amendment to the proposed amendment. I believe we are ready to vote. No more debate? Now we will vote on Mr McGuinty's proposed amendment to the amendment. All those in favour of Mr McGuinty's amendment? All those opposed?
Motion negatived.
The Vice-Chair: Now we are open for discussion on the government motion as put forward by Mr Huget. We have had Mr Huget's supporting comments, so we are open for debate.
Mr McGuinty: When I presented my amendment to this motion, I dealt with my views as to why Hydro, if it is going to get into the conservation business in any way, should do so with respect to electricity only. I do not want to make those same comments again. This time I want to restrict my comments to the business of fuel substitution.
I think we have clarified now that rates will go up, apparently at least initially, as a result of the fuel substitution program. That is obviously a concern. Even if this were the right thing to do -- and I am not saying it is; that is, if rates are going to go up, if that is somehow the right thing to do -- this is not the time to do that thing. Of course, that is because we are now living in the context of a recession, when consumers, householders, small business, large business, industry and the commercial sector are extremely sensitive to any increases in their costs of living, overhead costs over which they have no control. There is some kind of an equity issue, a fairness issue here.
What about those people who will not switch? There is a certain group of people who will not switch to natural gas, for instance, because they do not feel comfortable with it. What about those people who are living in areas of the province where they cannot switch to natural gas, who do not have access to it? Their rates are going to go up as a result of funding other people who do have such access to make the switch.
What about those people who have switched? Socially they felt it was the responsible thing to do. Economically they felt it was the right thing to do. What about those people who can afford to switch quite easily, but who see this freebie coming down the government pipes and say: "Look, we could make the switch now to natural gas, but you know what? The government's going to have Hydro pay for us to make that switch, so why don't we wait and jump on that bandwagon when it gets here?"
Those are the issues here that remain unaddressed by the fuel substitution provision as it is contained here. The concern I have, and the one I raised in connection with my amendment, is that if we are going to get into fuel substitution and fuel switching, let's make darned sure it is going to be of benefit to Hydro's ratepayers. I think it should be of benefit in the short term as well as the long term, and there is no such guarantee that is offered here. For those reasons, I cannot support this motion.
Mr Huget: Our intention, as stated when Bill 118 was introduced, was that Hydro should be able to promote fuel substitution where it is cost-effective and where the market will not make it happen otherwise. In some cases, education and information may be all that is needed to encourage fuel switching. On occasion, some form of incentive may be required. Where this is necessary, Hydro's programs will be designed in a way that ensures they are cost-effective and benefit consumers.
Mr Jordan: I would like some explanation. "An energy conservation program may include, but is not limited to, the following." Could you enlarge on that, please?
Mr Huget: Beyond what is written here, Mr Jordan?
Mr Jordan: Yes. You indicate that an energy conservation program may include the six items you have listed, but is not limited to those.
Mr Huget: I think, as far as "may include" is concerned, it is fairly straightforward.
Mr Jordan: Can you give us some idea of the scope that you --
Mr Huget: I do not see that any explanation is necessary.
Mr Ciemiega: That is the language in the current act; it has not changed.
Mr Jordan: I am asking for interpretation, if you do not mind. What scope do you see it going to outside of what is listed?
Mr Ciemiega: That would depend on the corporation itself. It is within its discretion. It would look at this list. The language means that it is not limited to this list, but that these are the kinds of things it can do. We are not changing the language. That is the way it is in the current act, subsection 64(3); the wording is identical, "may include, but is not limited to, the following."
Mr Jordan: Do you not feel that is sort of open?
Mr Ciemiega: In a sense it is, but that is the way it probably should be. That is the way the corporation wants it.
Mr Huget: Mr Jordan, I think it is clear we want to ensure that Hydro has the flexibility to enable it to be able to achieve energy efficiency.
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Mr Jordan: Paragraph 2 is, "The improvement of an energy system in a building." You want the right to go in and spend money on my gas-fired unit to make it more efficient? Am I interpreting this wrong? I am just trying to find out how my hydro money is going to be spent here on conservation.
Mr Jennings: In general, where Ontario Hydro was giving programs to improve energy systems in buildings, that would be a building that had electric heating, although in the case of some buildings, regardless of the form of heating, the heating, ventilating and cooling system would be electric motors, that type of thing. Ontario Hydro could have a program to improve the heating of a building where it was assisting people in putting in high-efficiency motors for the ventilating system, the fans, the pumps, that type of thing.
Mr Jordan: We had an industry come before us in Ottawa, I believe it was. In making other forms of energy efficient at their plant, they increased their electrical load by 15,000 kilowatts, using the equipment to make more efficient use of the other energy. They took great efforts to point that out to us. Or was it at Thorold? It was one of the plants.
The Vice-Chair: If I could clarify that, I believe it was Ottawa and it was a steel manufacturer that makes high-grade steel in its electric blast furnace, if my memory serves me correctly.
Mr Jordan: Subsection (3.2) says "the substitution of other forms of energy for electrical energy." At what cost, might I say, would we do that, or is the substitution of other forms of energy for electrical energy just a blanket right to the corporation?
Mr Jennings: This provision would add that as one of the definitions of an energy conservation program. Energy conservation programs have already been spelled out in the act, in previous amendments going back to 1981, saying that is part of the business and purposes of the corporation. Those do not have explicit financial or investment criteria to them outside of the general fiduciary responsibility the corporation has.
Mr Jordan: I guess the concern is the control of how the $6 billion is going to be spent on conservation. For instance, I believe in Wellington county a company went ahead and built a windmill. Of course, it needed three-phase power which was not available. I understand now it has received a grant of $200 million to relocate the windmill. Do you know if that came from Hydro or from the government?
Mr Jennings: I do not think it could have been $200 million.
Mr Jordan: It was $1.5 million to build a three-phase line to it. I could be wrong. I understand they just recently received $200 million and they are relocating the windmill to Bruce. Do you have any information on that?
Mr Jennings: I am not familiar with it. No, I am sorry.
Mr Jordan: It was in Wellington county, I believe. They went ahead and erected the towers. Someone did not realize there was not three-phase power available for the project and they have just received this money. I wonder if it was from your energy conservation or from the Ministry of Industry, Trade and Technology, or just where this money comes from.
Mr Jennings: I am not familiar with that. I would be surprised if someone got $200 million from either the government or Ontario Hydro for such a project.
Mr Jordan: Maybe I am getting millions and thousands --
Mr Jennings: If it was $200 million, I think I would have heard of it.
Mr Jordan: You are not familiar with the project.
Mr Jennings: No.
Mr Jordan: I may stand corrected on the dollars, but it is that type of thing I am wondering about. Are you foreseeing this energy conservation thing as being loose enough, if you will, that you can enter into any of these types of projects?
Mr Jennings: That would be covered under parallel generation, which is not part of anything that is being amended here, but that is already part of the business and purpose of the corporation under the act.
Mr Jordan: You want to continue to do improvements to buildings regardless of the fuel being used?
Mr Jennings: If it is improvements to the motors of a heating, ventilating and air-conditioning system, then it is a reduction in electricity.
Mr Jordan: That would be the improvement of a building to retain heat.
Mr Jennings: In general, Ontario Hydro's programs would apply to electrically heated buildings.
Mr Jordan: If I am heating my building with gas, are you still going to improve the capacity of the building to retain heat?
Mr Jennings: These are enabling provisions. I would not expect Ontario Hydro to offer insulation programs to someone with gas heating. They certainly do not currently.
Mr Jordan: They do not currently?
Mr Jennings: They do not have insulation programs for someone who has gas space heating and I would not anticipate that would change. There is nothing in here that would direct them to do that.
Mr Jordan: It is left very general, you will have to agree: "The improvement of the capacity of a building to retain heat." Again I come back to these people who are concerned about anything that will affect the cost of hydro to them, to be competitive in business.
Mr Jennings: The current act, as it is written, under that same section says, "The improvement of the capacity of a building to retain heat." It is an existing provision in the act.
Mr Jordan: It says, "to retain electrical heat," does it not?
Mr Jennings: No. It says, "The improvement of the capacity of a building to retain heat." But as I said, there is no reason why Ontario Hydro would be involved in a program to improve the capacity of a building to retain heat unless it was using electric space heating. That happens to be the wording of the existing legislation. We are not changing anything with that.
Mr Farnan: This is a situation in which we are looking for flexibility, and indeed Hydro itself has requested that flexibility. I have been very touched by the opposition members on this committee who have been requesting that we listen to the requests that are emanating from Hydro itself. Here we have very clearly a request for flexibility and of course I think the government would want to be sensitive to this kind of request. It is not a simple matter, the matter of energy.
What we have is a rapidly changing world, and I suspect Hydro would share with the government the desire for longer-range and long-range planning and the adaptability and flexibility to make those changes that this rapid transition in our society demands. This calls for innovation, courage, brave decision-making, and that is what this is all about. This is the kind of legislation that can allow for that kind of brave, courageous and innovative decision-making.
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Mr Carr: I just want to point out that everyone agrees what we need is long-term planning. Ontario Hydro in its history has done more long-term planning than politicians of all political stripes and all parties that sometimes -- I say this in a non-partisan way -- do it short-term and may be thinking of the next election, not about energy supplies 10 years down the road. I have more confidence if Ontario Hydro is making decisions on our energy, based on its expertise, than in the policy decisions of any government. I say this to be non-political, because I would not trust it if it happened to be a government of any political stripe. That is where we differ on this. I just want to point that out because I agree long-term strategy is what we need. What I am saying is that when politicians get involved, their long-term sometimes only goes to the next election.
Mr Brown: I am somewhat concerned that in the list here there is no mention of the environment anywhere. We are not looking at a conservation program that might benefit the environment. It could be argued, and I suspect you will, that all these things will benefit the environment. But it seems to me that it may be in the people's interests, Ontarians' interests, to make sure that when we are looking for efficiency in conservation we do it in an environmentally correct manner; in other words, we do not encourage the use of a fuel just because it happens to be cheaper and happens not to be electricity and would do more harm to the environment than continuing to use electricity. I ask the parliamentary assistant why this has not been included as part of the list, not that I am really ecstatic about the list.
Mr Huget: Mr Brown, I am somewhat at a loss. I do not know if you have followed any of the debate on this bill or have read any of the documentation on this bill or have bothered to get your hands on any of the copies of any of the presentations from the environmental groups in this province on this bill, or have listened to any government statements involving the very serious nature of making environmental gains and the effects of energy and energy conservation on the environment, which we understand quite well. I think, had you bothered to get your hands on some of that, you would have understood clearly that when we save energy in Ontario we do good things for the environment. That has been stated by the government. It has been stated by the minister. It has been stated by almost every environmental organization that appeared before the committee in support of the gains we were making with this bill.
Frankly, I am a little distressed that perhaps you may be the only person I have run across in this committee who is not aware of those environmental benefits. Certainly it is patently obvious from anybody's commonsense point of view that we would not do things that were not environmentally sound with the reduction of electrical use.
Mr Brown: Mr Huget, in the preface to my question, I acknowledged the fact that conservation is in and of itself good for the environment. Notwithstanding your comments, I think that stands.
What I am more interested in is the substitution or whatever that will occur because of your list. There is no consideration being given to the environmental impact of that consideration. Just because you use less electricity does not mean you are not going to use more of something else. Notwithstanding your comments on my "lack of reading" or whatever, I think I am quite familiar with these issues, and I am surprised that consideration does not enter in here.
There is something that has been referred to in previous committees on energy as the best use of energy. For example, it can be argued and is argued by many people that natural gas should be used as a primary source in heating your home or heating water right in your home, and that it is not necessarily the best use of natural gas to use it to generate electricity. That is an argument in which I am not coming down on one side or other. I am just pointing that out and wondering why that is not included as something Hydro is considering. I grant you that conservation is a good thing for the environment. I am just wondering, when you make these choices, are you going to consider the impact of the other fuels you are going to use, rather than just considering the electrical supply in isolation?
Mr Huget: My only comment would be that we take it as a given that the environmental concerns are of the utmost importance to the people of the province. When we substitute fuel, it must be environmentally and economically sound. I think that is a principle we have communicated to everyone as often as we can; however, we will communicate it again to you today.
Mr Brown: Thank you very much for that. I then presume the Ministry of Energy is committed to reducing the greenhouse gases emissions by 2005, a commitment many of the industrial countries in Europe have already made.
You see, the difficulty with this is not just to look at Hydro. If you look just at Hydro, you can say, "Yes, I did it." But if the rest of the economy is now using more natural gas, more oil products etc because of that, it may not mean you have accomplished anything. That is why I am wondering why you have not included that. At least you could give me the assurance -- and I know your sincerity on this issue -- that the government will be, by the year 2005, reducing the fossil fuel emissions in Ontario.
There was a select committee that was looking into this issue, I am sure you are aware, in I think the winter of 1990, but I could be wrong on the date. The Minister of Energy at that time had issued a policy statement. I would appreciate confirmation that this is still your priority, that you have not moved away from that, that the environment is still a top concern of the ministry and that its omission here is just because you do not think it is necessary rather than the fact you are changing policy.
Mr Huget: We certainly have not embarked on a policy to destroy or harm the environment of Ontario. Fuel-switching initiatives will primarily replace coal-fired generation of electricity with direct use of natural gas, although oil and other fuels may also be cost-effective substitutes for electricity and are options for fuel substitution where gas is not available. Coal-fired electricity generation is less than 40% efficient compared to natural gas efficiencies for space heating of 78% to 96% with new furnaces. Replacing electric space heating with natural gas could reduce CO2 emissions produced to heat that house by 75% to 80%. Clearly we understand the implications for the environment.
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Mr McGuinty: I want to touch on something we have raised before, but it is worth noting once again. This business of a government weighing in and deciding to subsidize people through one means or another to switch off one form of fuel to another is not without precedent. We had it on the federal scene when they had the off-oil programs, but it is noteworthy that when they had those programs, those subsidies were funded out of the federal general revenue fund, a very broad base derived from revenues from across the country. This fuel substitution program would be subsidized by a very select group, not the taxpayers of the province but Hydro's ratepayers. That is very different.
We pay such taxes as are a function of our income, but we pay our Hydro rates regardless of our income. When those rates go up, they do not reflect any increase in our income. They are going to go up notwithstanding or down notwithstanding. You flick on the switch, as we all do regularly. We cannot live without it now. We are bound and we are held hostage by electricity. We have become addicted to it. That is why, when we get into a fuel substitution program, it is very important to thoroughly consider the ramifications of having a select group, Hydro's ratepayers, pay to switch people off one fuel, electricity, to another.
There is no provision in here that would have the natural gas people, who stand to benefit directly from this kind of initiative -- we have to ask ourselves why they are not participating. Why is there not some kind of requirement that they participate, and the same with the oil industry? I see those as serious shortcomings.
Mr Huget: I would only add that in some cases education and information may be all that is needed to encourage fuel-switching. On occasion, some form of incentive may be required. Where this is necessary, Hydro's programs will be designed in a way that ensures they are cost-effective and benefit consumers.
The Vice-Chair: Seeing no further debate on the motion by Mr Huget, would all those in favour please signify. All those opposed?
Motion agreed to.
The Vice-Chair: Mr McGuinty moves that section 4 of the bill be amended by adding the following subsection:
"(2) Section 64 of the act is amended by adding the following subsection:
"Report
"(5) The corporation shall, on or before the first day of March in each year, submit a report to the minister and to the assembly specifying the cost of each energy conservation program undertaken by the corporation and the benefits achieved, including the quantity, if any, of additional electrical generation avoided or planned to be avoided by the program and the costs avoided."
Mr McGuinty: What I am attempting to do here is to put in place another provision that would guarantee some of this openness and some of this transparency we have heard so much about. It would require that Hydro, when it undertakes any kind of energy conservation program, file a report with the minister and with the assembly. It would be fairly detailed. It would have to specify the costs of those programs and specifically the kinds of benefits that were achieved. It goes on to specify "including the quantity, if any, of additional electrical generation avoided or planned to be avoided by the program and the costs avoided." It is fairly onerous, but I think it is still the responsible thing to do to ensure that we get a full briefing from Hydro as to what the real results of energy programs are.
We have already had some criticism levelled by a very credible party in this, the Ontario Energy Board, which has said that some of the conservation programs being undertaken by Hydro are simply not cost-effective. This amendment, if adopted, would allow the government and the opposition to scrutinize the effectiveness of those energy conservation programs.
The government has indicated that Hydro is going to be spending some $6 billion in energy conservation programs from here until the year 2000. That is an astonishingly large sum of money. I am very concerned about the manner in which that is to be spent. I think it would take a lot of work to determine how you are going to spend it, let alone actually spend it at the end. I am concerned about what kinds of internal machinations are going on to provide for the expenditure of that kind of money. This is the kind of difficulty I am attempting to address with this amendment.
It is also noteworthy that we have very capable people with Hydro who have been employed in the business of meeting demand. They have been working on the supply side of Hydro for quite some time. Apparently Mr Eliesen has guaranteed that there are going to be no jobs lost at Hydro, and all those people who were involved in the development of generation and transmission of electricity, are now suddenly to become expert in the art of conservation.
I am concerned with those kinds of expenses and the conservation programs at Hydro generally. This will ensure we are given a full report on it.
Mr Huget: The Ontario Energy Board has in fact asked Hydro to emphasize more cost-effective activities such as fuel switching. Ontario Hydro is required to report on its conservation programs and their cost-effectiveness to the Ontario Energy Board in its public review of Hydro's annual rates application. The memorandum of understanding between Hydro and the Minister of Energy also requires Hydro to report on its conservation activities. The ministry is now reviewing the memorandum of understanding with a view to strengthening the reporting requirement. We will not support the motion.
Mr Jordan: I would think the parliamentary assistant might reconsider. During the estimates hearings a year ago, when Hydro came before the committee, it was hoping at that time to report every three months on the kilowatts saved and the cost per kilowatt for having attained those goals. I would feel that if anything, this motion should go along with that, with a quarterly report. You can spend a lot of money and if you do not have a handle on the actual kilowatts saved, this can easily be forgotten.
The method of measuring here is that in industry they go and measure the megawatts or kilowatts they have saved on peak. They can do that because of their billing system. But to go into residential and try to measure the savings is not very easy. If you look in the report we were given -- I believe it was the interim minister who was present at the time -- I know you will find that Hydro is going to be requested to report the savings on a quarterly basis. I would think the company would be doing this regardless of the government's wishes.
Mr Huget: Ontario Hydro is providing quarterly reports on its demand management savings to the minister.
The Vice-Chair: Anything further, Mr Jordan?
Mr Jordan: Only to stress the importance of a reliable measuring system relative to the kilowatts saved and the cost of those savings, because the Ontario Energy Board has stated that the moneys being spent on the conservation programs, to date, as I understand the report, were not well thought out. Surely then it should be assessed on a quarterly basis.
I am willing to accept the motion on an annual basis, but hopefully, in actual practice and in operation, it would be done on a quarterly basis so that the Minister of Energy and the members of the Legislature would have a better handle on how the $6 billion was being spent and on the success of the program relative to the revised demand-supply plan, which has made considerable changes in the savings relative to this.
Mr Huget: I would just remind Mr Jordan that the Ontario Energy Board has asked Hydro to emphasize more cost-effective activities such as fuel switching.
The Vice-Chair: Hearing no further debate, shall the amendment proposed by Mr McGuinty carry? All those in favour?
Mr McGuinty: Recorded vote.
The committee divided on Mr McGuinty's motion, which was negatived on the following vote:
Ayes -- 5
Brown, Carr, Cleary, Jordan, McGuinty.
Nays -- 6
Huget, Farnan, Frankford, Jamison, Murdock, S., Ward, B.
The Vice-Chair: I believe that brings us to the end of section 4.
Mr Huget: On a point of relief, Mr Chair: Can we take a five-minute recess?
The Vice-Chair: Can we carry this first?
Section 4, as amended, agreed to.
The Vice-Chair: Please come back on time if you wish to leave at 5 o'clock. We will recess for five minutes.
The committee recessed at 1624.
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Section 5:
The Vice-Chair: I will call the committee back to order. We are now dealing with a government motion.
Mr Huget moves that section 5 of the bill be struck out and the following substituted:
"5(1) Section 65 of the act is amended by adding the following subsection:
"Idem
"(1.1) As part of an energy conservation program, the corporation may, in addition to its powers under subsection (1), loan such money and provide such incentives and other assistance as the corporation determines in order to assist in the carrying out of the program.
"(2) Subsection 65(3) of the act is repealed."
Mr Huget: Ontario Hydro officials are concerned that the changes reflected in the bill are not wide enough, and this amendment is being made at the request of Ontario Hydro officials. This new amendment, subsection 65(1.1), is consistent with the policy behind the amendment that repeals subsection 65(3). Both amendments broaden the scope of the things Ontario Hydro may do in conjunction with an energy conservation program.
Mr McGuinty: I am not sure whether the wording Mr Huget read was the same as was contained within here. Perhaps I might ask him to repeat it.
Ms S. Murdock: That was the new one.
Mr McGuinty: Okay. I have been working with the old copy here.
The Vice-Chair: They were distributed at lunchtime. I have a spare copy here.
Mr McGuinty: From my quick reading of it, the original subsection 65(1) restricted the corporation's ability to extend loans and incentives, "in order to assist in the doing of work or the acquisition and installation of equipment and material in accordance with the energy conservation program." It would appear that the government's amendment removes that restriction and provides Hydro with a wider ambit to make those loans as long as it is "in order to assist in the carrying out of the program."
One of the concerns I have with this is that there is no restriction, no proviso regulating the interest rates or ensuring in any way that the net result of lending those loans is there is some cost-effective benefit to Hydro's ratepayers. For that reason, I cannot support it.
Mr Jordan: I have my reservations on this. I may need some clarification on this from the parliamentary assistant. How is it you feel the present act does not cover a situation like "A loan or incentive or assistance under this section may be made" and so on? and so on? Does that not cover what you want to do relative to it?
Mr Huget: I will defer to Mr Jennings.
Mr Jennings: There are two parts to this section. One is repealing subsection 65(3), which is the current restriction on incentives or loans for conversion of a space heating system. For subsection 65(1.1), the change there is to broaden the definition of what types of things Ontario Hydro can be involved in. The definition under the current act says that "the corporation may loan such money and provide such incentives and technical assistance as the corporation determines in order to assist in the doing of work or the acquisition and installation of equipment and material in accordance with the energy conservation program." The motion we are putting forward here would broaden that and really give Ontario Hydro the flexibility to pursue whatever type of energy conservation program it felt was in the best interests of the corporation and its customers.
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Mr Jordan: And that would include the freedom of the government also by directive to direct the Hydro board to do such and such.
Interjection: If it is within the act.
Mr Jordan: Within the act. I guess what I want to clarify first of all is that we are saying the directives issued by the government to the board will be within the Power Corporation Act. Are we making it clear that it is within the Power Corporation Act as amended, not as it is at the present time, and that is what we are talking about?
Mr Jennings: The act as amended will be the new act.
Mr Jordan: Yes. Even with your change, I do not see that it says you can give grants of money, like give a customer $2,000 to switch.
Mr Jennings: "Provide such incentives and other assistance as the corporation determines."
Mr Jordan: So the loan would be one thing, and you would consider a grant as an incentive. Is that what you mean?
Mr Jennings: It says may "loan such money and provide such incentives and other assistance as the corporation determines." Again, that is enabling and was really requested by Ontario Hydro to give it the full flexibility it thought it needed.
The Vice-Chair: Further debate? All those in favour of the motion put forward by Mr Huget? Opposed?
Motion agreed to.
The Vice-Chair: Mr McGuinty moves that section 5 of the bill be amended by adding the following subsection:
(2) Section 65 of the act is amended by adding the following subsection:
"Report
"(3) The corporation shall, on or before the first day of March in each year, submit a report to the minister specifying the amount of loans made under this section and giving a summary of the terms and conditions governing the loans."
Mr McGuinty: What we are doing here is that given we now have a continuation of Hydro's ability to extend loans in an effort to promote its conservation programs, and given we have also even gone further and broadened that framework within which you can extend those loans, all I am requiring in this amendment is that we have an accounting of the amount of those loans made and a summary of the terms and conditions. This is in keeping with the openness and transparency that has been talked about so much in relation to Bill 118. I think it is only right that when Hydro goes ahead and extends these kinds of loans, we know what it is we are talking about and we look at the picture at least once a year.
Mr Huget: Details such as referred to in the motion will be provided to the Ontario Energy Board when it reviews Hydro's annual rate application. We think it is more appropriately dealt with in the report section through a memorandum of understanding, and as we have already said, we are looking at strengthening the reporting aspect of the memorandum of understanding, so we cannot support the motion.
Mr Jordan: I have a question to Mr McGuinty. In, "The corporation shall, on or before the first day of March in each year, submit a report to the minister specifying the amount of loans," did you also intend to include the amount of money in incentives?
Mr McGuinty: This was just with respect to loans, because this -- that is actually a good point, Mr Jordan. I was at the time thinking section 65 dealt with loans, but in fact it would more properly be broadened by including incentives. I will take that as a friendly amendment, though.
The Vice-Chair: Do you wish to formalize that suggestion, Mr Jordan?
Mr Jordan: I move that the report include such incentives and other assistance as the corporation determines in order to assist in carrying out the energy efficiency program.
The Vice-Chair: We will now commence discussion on Mr Jordan's amendment to the proposed amendment.
Mr Farnan: Let's move to the vote.
The Vice-Chair: Any discussion on the amendment to the amendment? Hearing no discussion, all those in favour of Mr Jordan's amendment to the amendment please signify. All those opposed? The amendment to the amendment is carried. It is a tie. Sharon voted with them.
Clerk of the Committee: No, she did not.
The Vice-Chair: Yes, she did.
Clerk of the Committee: Oh. It is up to you to decide.
Mr Jamison: Could we have a recorded vote on that?
Mr Brown: It is six to five.
Mr McGuinty: You are off the hook, Mr Chair.
The Vice-Chair: Okay, I am off the hook. The amendment did pass then.
Mr Cleary: How are you off the hook?
The Vice-Chair: I am off the hook on the first one. Now we will go back to discussion on --
Clerk of the Committee: Mr Jordan, can you write out your amendment for me?
The Vice-Chair: Mr Jordan's amendment passed. Now we are back on to Mr McGuinty's original motion, as amended. Any further discussion on Mr McGuinty's motion? Seeing no further discussion, all those in favour of Mr McGuinty's motion, as amended? Opposed?
Motion negatived.
Interjections.
The Vice-Chair: I know the day is coming to an end. Mr Jordan?
Clerk of the Committee: He is writing out his first motion.
Mr Carr: I will just do it for Mr Jordan.
The Vice-Chair: Mr Carr moves that section 5 of the bill be amended by adding the following subsection:
(2) Section 65 of the act is amended by adding the following subsections:
"Local option -- conversion of heating system
"(3) The corporation shall comply with a written request from a municipal corporation that the corporation not loan money or provide incentives or assistance under this section to assist energy users located in the municipality in the conversion of a space heating system to a system other than one based in whole or in part on the use of electrical energy.
"Reimbursement
"(4) The Ministry of Energy shall reimburse the corporation for the cost to the corporation of loans, incentives and assistance provided under this section."
Mr Carr: Just very quickly, I think obviously the amendment is self-explanatory. Mr Jordan will add a few points to that, I am sure, when he gets a chance.
The Vice-Chair: Mr Jordan, do you wish to speak?
Mr Jordan: I think the importance of this motion is that the indication we got from the vice-president was that he would in fact consult with municipal electrical utilities before implementing a conservation program and that they would discuss the effects that particular program might have on that utility. In that light the corporation would comply with a written request from a municipal corporation that the corporation not loan money or provide incentives or assistance under this section to assist energy users located in the municipality; that is, they would come under that municipal electrical utility. That utility would have the option on loaning that money and providing the incentives.
I do not feel that is going against the projected policy of Ontario Hydro as I interpreted it the other day when the chairman and vice-president were here. I was wondering if the parliamentary assistant understood that as I did.
Mr Huget: The government has already made it clear that fuel-switching programs will be cost-effective and will be designed in consultation with the stakeholders including the municipal electrical utilities. The government is not prepared to limit Hydro's ability to act in the best interests of the electricity customer and the people of Ontario. Therefore, we will not be supporting the motion.
The Vice-Chair: Further discussion on the amendment? All those in favour of Mr Carr's motion? Opposed?
Motion negatived.
Section 5, as amended, agreed to.
The Vice-Chair: Seeing it is 4:55, I will adjourn for today. We have had a very productive day. We will resume tomorrow morning at 10 o'clock promptly. Thank you very much for a most productive day.
The committee adjourned at 1653.