POWER CORPORATION AMENDMENT ACT, 1991 / LOI DE 1991 MODIFIANT LA LOI SUR LA SOCIÉTÉ DE L'ÉLECTRICITÉ
COCHRANE PUBLIC UTILITIES COMMISSION
ONTARIO METIS AND ABORIGINAL ASSOCIATION
FALCONBRIDGE LTD, KIDD CREEK DIVISION
MUNICIPAL ELECTRIC ASSOCIATION, DISTRICT 9
RESPONSIBLE ECONOMIC AND ENVIRONMENTAL PROSPERITY ASSOCIATION
CONTENTS
Wednesday 15 January 1992
Power Corporation Amendment Act, 1991, Bill 118 / Loi de 1991 modifiant la Loi sur la Société de l'électricité, projet de loi 118
Inco Ltd
John LeMay
Centra Gas
Jane Peverett, manager of planning and forecasting
Brent Bailey, director of marketing and sales
Cochrane Public Utilities Commission
Peter J. Murray, manager
Ontario Metis and Aboriginal Association
Kathy Brosemer, representative
Falconbridge Ltd, Kidd Creek division
John Owen, manager of maintenance and engineering
Northwatch
Brennain Lloyd, representative
Town of Hearst
Gilles Gagnon, mayor
Municipal Electric Association, District 9
Stan Smith, vice-chair
City of Timmins
Victor Power, mayor
Responsible Economic and Environmental Prosperity Association
Ambrose Raftis, representative
Timiskaming Greens
Doug Fraser, representative
Sudbury Hydro
Doug Scott, general manager
Jan Vandermeer
Organization
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):
Conway, Sean G. (Renfrew North/-Nord L) for Mr Ramsay
Martin, Tony (Sault Ste Marie ND) for Ms S. Murdock
Clerk pro tem / Greffière par intérim: Manikel, Tannis
Staff / Personnel: Yaeger, Lewis, Research Officer, Legislative Research Service
The committee met at 1300 in the Travelway Inn, Timmins.
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 Chair: Good afternoon. We are going to start promptly because there are a number of individuals and groups that want to speak to the committee. First, there is coffee and fruit juices, some of them made in Ontario, some of them as the result of cross-border shopping. Even down in Niagara, where I am from, we do not grow any orange trees yet. They are there for you. Please feel comfortable coming up here and pouring yourself a coffee or having juice.
Second, these devices, packaged earphones, are available on the table right at the entrance for people who want to listen to the proceedings as translated into either of the two languages, English or French. They are useful, of course, for people who may not be able to hear everything being said even if it is the language they speak because it will amplify that.
Third, all three parties in the provincial Legislature are represented here today, of course. Leo Jordan is the Energy critic for the Conservative Party. Dalton McGuinty, who is on his way in, is the Energy critic for the Liberal Party. Bob Huget is the parliamentary assistant to the Minister of Energy.
The first presentation is by the Canadian Oil Heat Association. Would they please come forward and have a seat. The best laid plans. Is Mr LeMay here from the Association of Major Power Consumers in Ontario?
Mr Owen: He stepped outside to hang his coat up.
The Chair: All right, we are looking forward to him coming back in view of the fact that Mr Rice may not be here yet. There was a large number of groups and individuals wanting to make presentations. We are going to be sitting here until around 4:45 this afternoon and then coming back at 7:20 this evening. It has been necessary to restrict participants to 20 minutes, hoping that people will use perhaps no more than 10 minutes, preferably closer to five. In many cases it is written material which can be distributed and will form a part of the record. The most valuable part of these proceedings is the discussion, questions and answers that take place after the presentation.
INCO LTD
The Chair: Mr LeMay, would you please come on up and have a seat. There is water there for you, and clean glasses. The Association of Major Power Consumers in Ontario. Please, sir, tell us what your status is and then proceed to address us. Once again, we have a total of 20 minutes; we would like to save at least 10 for questions and dialogue. Please go ahead.
Mr LeMay: I am here on behalf of Inco Ltd, which is a member of the Association of Major Power Consumers in Ontario, and my remarks today will pertain to Inco. AMPCO will address you in Toronto when you are in Toronto.
I would like to give a little bit of background of why Inco is interested in power and then I will talk about Bill 118. I will not go through the detailed remarks, which your committee can read later. As most of you know, Inco is the non-communist world's largest producer of nickel. In our Sudbury operation, which is the largest part of our operations, we produce some 250 million pounds of nickel and a similar amount of copper annually. In addition, we produce platinum-group metals and a number of other important products. So the Ontario operation is a very large, important part of our operation.
The company operates in a very competitive international market; 95% of our nickel production is exported; 50% of our copper production is exported. We are price takers. We do not set the price, we have to get whatever price we can, so it is very important that we remain competitive and the only way we can do that is to control our costs. Electric power and energy are important cost items. Energy accounts for over 10% of our Ontario division operating costs, and electricity is in the order of 70% of that.
Inco uses power for everything from mine pumping to electrolytic refining, and Inco is the world's most efficient nickel producer when it comes to the use of energy. Right now we are the best in the world when it comes to nickel production and energy use. I do not know if that is a well-known fact or not. Our copper flash-furnace process is also the world's most energy-efficient smelting process. In both our nickel production and copper production, our starting point is that we are the world's most energy-efficient.
There is a graph. If you will turn to the first graph at the back, it shows our energy use in 1981, 1991 and 1995. As you can see, 1981 and 1991 are similar years of production, which is why we picked 1991. You can see our oil use has substantially declined. Natural gas use has stayed about the same, even though we have substituted a large number of oil uses. We have substituted natural gas. Our natural gas usage between now and 1995 will decrease substantially because we are going to go to a new flash-smelting process which is even more energy-efficient.
However, if you look at the bottom of the chart, you will see we used 10,000 BTUs per pound of copper and nickel produced in 1981. This has risen to 10.1 in 1991, and by 1995 that will be 11.9. The reason for that is we have had a whole number of energy-efficiency programs aimed at electricity as well as natural gas, but a lot of the things we are doing to save fossil fuels use more electrical energy. We are using oxygen in our flash-smelting process. One oxygen plant alone uses 15,000 kilowatts of power, so we are using an awful lot of electric power to save other forms of energy. That point is important, from our point of view, and I will come back to it in a minute.
If you turn to the second chart -- and it is a concern of ours -- it shows what has happened to, again, the fossil fuel, natural gas costs and to electric power costs. On the 1991 cost, there is a mistake in the charts. It should read $61.5 million, rather that $63.5 million. But, as you can see, since 1981, our gas and oil costs we have essentially contained. That is both because of the deregulation of gas -- we have been able to address the price -- and because of the energy-efficiency improvements, we have also managed to contain the cost.
Electric power, you can see, almost doubled in cost over that period, and if you look at the projection between now and 1995, we are looking at some $104 million for an electric power cost, which concerns us. One of the things that concerns us about Bill 118 -- we think anything that is done to change the mandate of Hydro is going to increase costs rather than reduce them. We have been involved in a good number of the Hydro conservation programs. They have helped us save money, but I do not think they are necessarily the most cost-effective programs. They tend to become fairly bureaucratic, as any government-type thing does. There are probably better ways of doing it.
I will turn now to Bill 118. Over the years, Ontario has prospered because of power at cost. We built our province really on good, reliable, economical electric power and we think we are losing that advantage. We do not think Bill 118 is going to help it.
The second point is the directors' obligations. If the directors do not have the normal obligations of company directors, why even have them?
The third point I would like to touch on are the fuel-switching and energy-conservation programs. Simply switching from electric power to natural gas does not make it more fuel efficient. In our own case, we have absolutely no alternative to the electric power we use. We cannot use natural gas instead of power. We do not have a choice in the fuel we use. If we switch to some other fuel, it would become much less energy-efficient, rather than more energy-efficient, so we have a real concern with the fuel-switching provisions of the bill as well.
Mr Huget: I would like your opinion on the potential for energy conservation and efficiency initiatives in a heavy industry like yours. Perhaps you could expand that a little bit to a picture you may have of province-wide potential for savings, first of all in consumption of power but second in the bottom line of your operations.
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Mr LeMay: I will start with the bottom line. In the numbers I have provided, we are looking at about 8% to 10% in total conservation between now and 1995. But if you look at the electricity numbers, we are looking at an increase between 15% and 20% in electric power consumption.
The reason for that, as I said earlier, is that we are using the electric power to save overall energy. There is very little scope in total for electric power conservation in an industry like ours. We are involved in a number of large programs. Our lighting program where we are changing some 24,000 lighting fixtures will save us about 4,000 kilowatts of power. In contrast one new oxygen plant takes 15,000 kilowatts, so even though we can save quite a bit, we are not going to end up using less. It will be more.
Mr Huget: That more or less is the nature of your processes. You are having to come up with those types of processes internally that really constantly consume more energy?
Mr LeMay: They do not consume more energy, they consume more electricity. Our energy consumption has gone down 23% since 1981. It will go down another 8% or 10% in the next few years but the electrical portion will go up.
Mr Huget: That increase in the electrical proportion is to increase your processes overall?
Mr LeMay: No. We are staying at about the same level of production.
Mr Huget: But that must be an improvement in your processes if you have --
Mr LeMay: It is both an improvement from an energy point of view and an improvement from an environmental point of view. We are going to be reducing our sulphur dioxide emissions appreciably.
Mr Huget: Could I get your views on the security of supply issue? I think there are some concerns we have heard from several groups about the security of supply, and I think it is a particular concern of a large industry like yours. I would like to get your views on the whole issue of security of supply if we look at the current status of a nuclear moratorium.
Mr LeMay: We have a concern that the security or reliability of the system has deteriorated. The recession has helped that certainly for the short term, but in the long term if we are to have economic growth in the province I think we are going to need more power supply.
Mr McGuinty: Many people are under the mistaken impression that in our energy-intensive industries we have not yet begun to fully tap all that tremendous reserve of energy conservation, but it appears to me that your company has pursued that rather aggressively.
Mr LeMay: Yes, we have. We have pursued energy conservation for a large number of years. I think as I said earlier, we are the most energy-efficient nickel producer in the world. That does not mean we have stood still either. We have about 40 programs right now ongoing with Ontario Hydro and the Ministry of Energy.
Mr McGuinty: How much is your electricity bill going to go up this year with the 12% rate hike?
Mr LeMay: Our bill was $61.5 million in 1991. It will be $73.6 in 1992. Part of the increase is due to the rate increase, about $7 million to $7.5 million. The rest is because we are going to processes that are more electrically intensive.
Mr McGuinty: You are probably aware that the minister intends to introduce formal amendments to Bill 118 which are going to provide, with respect to one item, that Hydro cannot be compelled to do anything that takes it outside of its traditional mandate of supplying us with power at cost. That may be comforting at face value, but on the other hand there remains the issue of Elliot Lake. What Hydro did or was compelled to do with Elliot Lake took place without benefit of any amendments to Bill 118.
So I am still concerned about what government, any government, can compel Hydro to do, and I am particularly concerned about the provision in Bill 118 which is going to exempt directors from liability as long as they do as they are told. I am wondering who is looking out for the interests of the ratepayers.
Mr LeMay, do you have any suggestion as to what we might put into Bill 118 which would ensure that the interests of the ratepayers are maintained first and foremost?
Mr LeMay: I think rather than put something into Bill 118, stop the interference with Hydro. The Elliot Lake thing cost and will cost our company for two more years over $700,000 annually in our power bill. The details of the Kapuskasing one we do not really know, but we expect it will be a similar type of cost.
Mr McGuinty: Have you explored electricity costs in other jurisdictions?
Mr LeMay: I have not got at my fingertips the details on our other operations, which are in Indonesia and Manitoba. In Manitoba we buy from Manitoba Hydro, which is considerably cheaper. In Indonesia we own our own power plant, so that is an awful lot cheaper.
Mr Jordan: Thank you, Mr LeMay, for taking the time to be part of this presentation this afternoon. I have not had an opportunity to read your brief in detail. However, there are two or three items I would like to have clarification on. You mentioned the flash process that you have initiated. Is that energy-efficient?
Mr LeMay: It is energy-efficient. It basically was done initially for environmental reasons. It allows us to capture the sulphur dioxide emissions from our process. By 1995, we will have contained more than 90% of the sulphur in our operations.
Mr Jordan: You also mentioned that the introduction of oxygen consumes 15,000 kilowatts of power. Did I read that right?
Mr LeMay: That is our third oxygen plant, our number three oxygen plant. We already had two that consume some 20,000 to 25,000 kilowatts of power.
Mr Jordan: How many employees do you have?
Mr LeMay: There are 7,300 in Ontario.
Mr Jordan: As the parliamentary assistant to the minister has stated, I think the reliability of supply seems to be coming to the fore at different meetings. Do you see Bill 118 as a detriment to a positive approach to the supply of energy?
Mr LeMay: I think it is part of the overall attitude that has led towards what we feel is the decline in the reliability of the system.
Mr Jordan: Also, I assume you are familiar with Bill 118, as you talked about it.
Mr LeMay: Yes.
Mr Jordan: Perhaps there will be clarification required, but as I read it I understand that the minister is saying he is willing to amend it in that the directives issued to Ontario Hydro will be within the mandate of the act. But it does not go on to say, "the mandate of the act as amended."
Mr LeMay: I was not clear on that when the minister said it either.
Mr Jordan: My understanding, and I stand to be corrected, is that they are willing to have the directives within the act as the act is amended, which to me is very important, in that "as amended" allows us, in section 56a, not to deal with electrical energy but with all energies, and have our hydro bills absorb the cost of doing that.
Mr LeMay: We have a worry with the bill that we will end up paying for other people to switch to natural gas when it might not be economic from an overall point of view. One of the things that has to be considered is the cost of the natural gas system. The Iroquois expansion of TransCanada PipeLines to supply gas to the United States, for instance, costs us $1 million a year as a company.
The Chair: Thank you very much for taking the time to prepare this material and for coming to speak with us. I trust you will be kept advised of the progress of these matters by some if not all of the people present. We appreciate very much your coming.
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CENTRA GAS
The Chair: The next participant is Centra Gas, represented by Jane Peverett and Brent Bailey. If you would please come forward, have a seat and tell us what your positions are. We have your material, which will form part of the record by virtue of becoming an exhibit. People will read that, of course. We would appreciate it if you could keep your comments to less than 10 minutes so that we have sufficient time to engage in dialogue, which is obviously very productive.
Mr Bailey: We do have some handouts attached to the package which I will be referring to.
My name is Brent Bailey. I am director of marketing and sales at Centra Gas. With me here today is Jane Peverett, who is our manager of planning and forecasting.
We would like to thank you for this opportunity to appear before the committee. We would like to provide the committee with some facts about the present energy environment in those parts of Ontario which Centra Gas serves. As well, we will address the impact as we see it of the proposed amendment to the Power Corporation Act on the present and future customers of Centra Gas, and specifically that element of Bill 118 which deals with the substitution of other forms of energy for electrical energy.
To begin with, I would like to give you a sense of the size of Centra Gas and show you the areas across Ontario where we distribute natural gas. If you would please turn to exhibit 1, you will see that Centra Gas serves homes, businesses and industries in Ontario from the Manitoba border across all of northern Ontario and as far south as Orillia. We also serve along the Highway 401 corridor in eastern Ontario from Port Hope across to Cornwall or basically the Quebec border.
In total, we have over 190,000 customers in 164 communities as a result of steady growth since the company's inception in 1968. Those statistics are in the second exhibit.
We operate over 4,200 kilometres of natural gas distribution pipe, employing 745 people full-time. That number swells to approximately 1,000 in the construction season in order to meet the demands of adding between 7,000 and 8,000 new customers a year in these markets. In 1992, our company plans to invest $33 million in capital for natural gas pipeline expansion to service its customer growth additions. This year our new customers will come from oil and electrically heated homes converting to natural gas, new housing and commercial development and one new community which we will pipe in eastern Ontario, that is, Frankford.
Centra Gas is a Canadian-owned company that is regulated by the province through the Ontario Energy Board. All expenditures we make are made with consideration of the public interest and safety and according to extensive feasibility guidelines set forth by the Ontario Energy Board.
Jane Peverett will elaborate on how this process protects the interests of Centra's existing and new customers with regard to the impact of fuel substitution programs within the context of Bill 118.
Ms Peverett: I would like to explain the process Centra uses to determine whether or not it can provide natural gas service to a new customer, and how this process is affected by the fact that the company is a regulated utility.
As a utility, Centra is regulated by the Ontario Energy Board, which I will refer to as the board. The rates we charge for natural gas are approved by the board to recover our costs. In setting rates, the board and other public interest groups scrutinize our operations in a public forum to ensure that our costs are reasonable and prudently incurred, and this includes the costs to attach new customers. Their concern is that extending service to new customers should not result in undue rate increases to our existing customers. To make sure this is the case, we assess the economic feasibility of attaching each new customer using a discounted cash flow test. This test compares the costs of serving the new customer to their gas sales. If the new sales offset the additional costs, there are no increases to our existing customers.
If we wish to serve a new community, the review is even more rigorous. In addition to the economic feasibility test, we have to apply to the board for a certificate of public convenience and necessity and conduct environmental studies to make sure the new facilities are environmentally acceptable. If it happens that Ontario Hydro pursues a fuel-switching program, customers who want natural gas service from Centra will be evaluated using these same economic feasibility tests to ensure that attaching them is feasible.
There are three broad categories of new customers: those who are located on existing pipelines; those who are located on streets which are not yet piped for gas, and those who are located in communities which are not yet served by gas at all. Customers in these categories tend to differ with respect to their economic feasibility. On-main customers tend to be feasible because the cost to attach them is relatively modest. Off-main customers will be feasible if there are enough customers on the street who wish natural gas service. New communities are the least feasible because of the higher cost to build the pipeline to the community itself. Centra maintains a portfolio of feasibility studies on the communities within our franchise boundaries and has already provided gas service to almost every community which is currently feasible.
Unfeasible communities could be served if potential gas sales increase, for example, by the addition of a large commercial or industrial customer, or if the cost of piping the community is reduced. It is our experience that industrial customers are often unwilling to locate in an area where natural gas is not available. However, the idea of funding natural gas projects is not new. In the mid-1980s the federal government provided funds to permit gas expansion into uneconomic communities. As Mr Bailey will indicate, there is significant potential within Centra's areas today to extend gas service under a similar program.
There is a structured regulatory process we follow to evaluate new customers and to receive approval from the Ontario Energy Board to serve them. Depending upon the type of customer, it can take between 6 and 18 months to receive approval to serve.
To summarize, because Centra is a regulated utility, all new customer attachments are subject to economic feasibility tests to make sure existing customers do not face undue rate increases as a result of attaching new customers. Unfeasible customers can be made feasible by reducing the costs to Centra of attaching them. Finally, all proposed attachments must be approved by the Ontario Energy Board, a process which follows a structured timetable which must be recognized when planning service to new customers.
Mr Bailey: In concluding our remarks, I would like to turn now to the technical capabilities of Centra Gas to meet the demands of our marketplace should the bill pass in its present form.
Our market research has shown there are 57,000 single and semi-detached homes located in gas-serviced areas within Centra's franchise limits which are not currently using natural gas. Of those homes, two thirds or 38,000 are electrically heated. We have recently experienced growth in demand from this market to switch from electricity to natural gas heating. However, the cost of conversion still remains a substantial barrier. Centra has worked hard to develop new, less expensive and more energy-efficient systems to respond to this important market segment.
If you look at exhibit 3, I have one example, being the introduction of a system which uses a single natural gas hot water tank to heat both the living space and the domestic hot water requirements of the home. We call this a combo system. In 1991 we installed 675 of these systems in apartments and small housing units. The combo system provides an energy-efficient alternative to the market and could, from a technical point of view, help to meet the electric to gas fuel-switching demand of the marketplace.
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At Centra we have also made a commitment to facilitating a retail distribution network for natural gas appliances such as ranges and dryers. Through a network of 40 independent businesses serving all the communities and markets within our franchise boundaries, we have the combination of product available and the installation expertise in place to serve fuel-switching programs targeted to this market. Market acceptance of natural gas appliances has been rising since Centra Gas began this activity in 1986.
In closing, I would like to share with you some work we did last spring to determine which communities in northern and eastern Ontario still do not have natural gas service and what costs and subsidies would be needed to get them gas. That is exhibit 4. There is a map that shows these communities. There are 47 towns on this map which we are unable to service with natural gas today because they fail the feasibility test which Jane Peverett has just described.
For example, Parry Sound represents a major project which, by our current estimates, requires a $15-million subsidy in order to build a $21-million, 94-kilometre-long pipeline to get there. We have met with people in Parry Sound a number of times, and they feel strongly that the availability of gas in town would support industrial and commercial relocations to their community, bringing them jobs and an economic stimulus.
In addition to these 47 towns, we have another 118 what we call community infill projects which also face the same barriers. Examples of these projects would be something like the Long Lake Road area in Sudbury, if you are familiar with Sudbury, just outside of town, or the Wyborn area north of Hearst.
Our estimate is that a further potential of 21,000 homes, businesses and industries would fuel-switch to natural gas if pipelines were built to service these areas. The capital required to service these areas is in the range of $240 million. The feasibility shortfall for us is $148 million. The difference between those two figures, $240 million and $148 million, is $92 million. If Centra could service these communities for $92 million, we would. If there was a source of funds for the $148-million shortfall, these communities would get gas. As Miss Peverett described, this is not a new concept, because in the early 1980s the federal government did just this through its distribution system expansion program, known as DSEP. Under that program Centra expanded service to more than 35 towns like Elliot Lake, Fauquier and Mattawa.
In conclusion, let me reiterate that with respect to the energy substitution component of Bill 118, our existing gas customers will not be economically harmed by fuel-switching programs. It is a business we undertake now. As I have explained, there are three general areas where fuel substitution has potential in Centra's area, the 38,000 potential where gas mains are already in place, the community infill where new mains must be built and the 47 towns which do not currently have natural gas. In the latter two areas, the potential is 21,000.
If there are any questions, we would be happy to respond to them.
Mr McGuinty: Thank you, Mr Bailey and Ms Peverett. I note with interest your reference to the DSEP program, but I think there is an important distinction to be made between that program and the proposal contained in Bill 118. DSEP was funded by tax money, tax revenue, and not by ratepayers who are using a specific utility. In the case of Bill 118, that is going to be funded specifically by Hydro ratepayers. Am I incorrect in that regard?
Mr Bailey: If that was one of the programs that Bill 118 led to, yes, you would be correct.
Mr McGuinty: You have indicated that Centra Gas's existing customers would not be economically harmed by fuel-switching programs. What about Centra Gas itself, the corporation? Would it stand to benefit from fuel substitution programs?
Mr Bailey: I think we would benefit in terms of growth of our market, but part of what goes along with being in a regulated industry is that your returns are regulated and therefore we need to go to the Ontario Energy Board every year through quite a rigorous process of public hearings where we lay out all our costs of operating our business, the return we would like to make on our investment in the communities, and go through quite a bit of close scrutiny. While there is some benefit, really it only relates to the amount of investment that Centra Gas puts within its communities. It is somewhat limited through the regulatory process.
Mr McGuinty: But you are not telling me, Mr Bailey, that in your business more customers do not mean more net income. You are not telling me that, are you?
Mr Bailey: No, I am not, but net income is not connected to volume. That is part of what being regulated is. If it costs so much to do a business -- I mean, all we are doing is covering our costs.
Mr Jordan: Thank you for your presentation and your detailed explanation on how you propose to meet the increase in demand, should Bill 118 become effective.
One of the stipulations in Bill 118 is that they will add money to my hydro bill to pay for my neighbour to reduce his capital cost so he can go from electrical energy to your energy. I was wondering about your marketing policies. Why would you not pick up these customers because of your reduced costs per BTU relative to electricity? Why would you not assist in the capital costs rather than sitting back and waiting for Ontario Hydro ratepayers?
Mr Bailey: I certainly hope I do not leave you with the impression that we sit back and wait for Ontario Hydro to do our job for us. We quite aggressively market to the fuel-switching market, and this past year in 1991, roughly 60% of our total new customer attachments are a result of conversions from electricity and oil to natural gas. That is a result of the kinds of programs we did.
What I think you are getting at there is, why should Ontario Hydro get involved in the fuel substitution program? We certainly do not support a position which suggests that Ontario Hydro get involved with the fuel substitution program unless that is in Ontario Hydro's best interests. Really, I would like to make it very clear to this committee that our company's position is, where it is in the best interests of Ontario Hydro, then we certainly want to make the committee aware that we can fulfil the market need, and that is really all we are trying to do.
Mr Huget: Bill 118, as you know, looks at alternative sources of energy when it deals with the issue of fuel switching and does not limit itself to natural gas, nor does it mandate natural gas, nor have any programs been developed or put in place that would see one financing the other. It is important that this is clear. It cannot be compared to the distribution system expansion program, which was the old federal program.
My question is on the issue of natural gas. Assuming there were more conversions to natural gas, what is your industry's view of the end result of Ontario's situation, for example, if oil and gas prices skyrocket again? Do you see that happening? What is your prediction for oil and gas prices?
Mr Bailey: I wish we had a crystal ball that we could use to respond to that question. We certainly have seen in the last eight years stable natural gas prices within our industry. I believe our prices today are below what they were in about 1986. I am not exactly sure of the years, but we have certainly seen a reduction in our prices for natural gas. There is an excess supply in the North American market right now. The kinds of initiatives that we are involved with in terms of promoting the efficient use of natural gas -- and we are quite aggressively involved in that activity -- we certainly do not want to turn around. We want to maintain the position we have.
The Chair: I want to thank both of you, Ms Peverett and Mr Bailey, for taking the time to be with us this afternoon and for participating in this process. Of course you are welcome to stay and listen to the rest of the participants. The whole committee is appreciative of your interest and involvement.
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COCHRANE PUBLIC UTILITIES COMMISSION
The Chair: We now have the Cochrane Public Utilities Commission. Speaking on behalf of the commission is Peter J. Murray, the manager of that commission. Would you please come up and have a seat. We have your brief, which is going to become an exhibit and part of the record. Please try to be brief in your comments so that we have time and so that people do not get angry with me about not having enough time to engage in dialogue with you.
Mr Murray: The Cochrane Public Utilities Commission is making a presentation at this forum to express concerns over Bill 118, An Act to amend the Power Corporation Act. The PUC wants to ensure that this legislation does not set dangerous precedents resulting in electricity bills becoming a new funding source available to the provincial government. The Cochrane PUC must confirm for its customers that Ontario's long-standing principle of power at cost remains intact. Any amendments to the Power Corporation Act must not force rate increases resulting in economic hardships for Cochrane and Ontario residents and businesses, ultimately discouraging much-needed economic growth.
Why is the present government proposing changes to the Power Corporation Act? The Cochrane PUC agrees that Ontario Hydro tends to be above reproach on many issues, and making Hydro more answerable to the public makes good sense. But will the changes to the Power Corporation Act have this positive result?
A good example is the existence of the Ontario Energy Board. This board gathers information from a broad base of associations representing an entire cross-section of the province, reviews the needs and proposals from Ontario Hydro and develops a fair and equitable increase for the electricity rates. After all this thorough evaluation, the Ontario Energy Board's proposed rate increase is only a recommendation which Ontario Hydro reviews and then establishes a rate increase to whatever level Ontario Hydro's own requirements are, without restriction. The Ontario Energy Board or another overseeing legislated group should have the authority to restrict Ontario Hydro when acting fiscally irresponsibly.
The greatest area of concern for the Cochrane PUC with Bill 118 is the proposed fuel-switching changes, which will force electricity customers to bear the cost of those switching from electricity to natural gas or other energy forms. The PUC supports the concept of energy management and supports the proposed savings of 700 megawatts by the end of the decade through fuel substitution, as released in a statement by Energy minister Will Ferguson on October 2, 1991. But the Cochrane PUC cannot support Ontario Hydro incentives, funded through changes to the Power Corporation Act, resulting in increases to the electricity rates.
The Cochrane Public Utilities Commission requests that section 5 of Bill 188 be deleted and that the Ministry of Energy redirect its mandate from changing the Power Corporation Act to a policy directive that all fuel-switching incentives be funded by the suppliers of the new energy forms which will prosper by the fuel substitution, for example, the natural gas companies. The present market forces and the economy will encourage fuel substitution, but incentives paid through electricity energy billing will only result in unnecessary and unacceptable rate increases.
How can the Cochrane PUC explain and justify to a customer who had the foresight to spend the extra initial capital costs to heat with another form of energy bill that his or her electricity bill is going to increase to allow his or her neighbour to install a new non-electric heating system? What about the rural customer or others who have no other sources of energy to allow for the conversion of their heating system? Are the rate increases for heating fuel substitution incentives in these situations fair? The Cochrane PUC thinks not.
To change the Power Corporation Act to allow fuel substitution is literally going against the entire premise or essence of an electric utility's existence. Ontario Hydro and the local utilities are a service industry supplying electric energy to customers throughout Ontario. Fuel substitution encourages purchasing another competitor's product or energy source. Ultimately the utilities lose credibility. The purchasers of our service, residential or business, will think twice before establishing or locating in a province that discourages the use of this most essential service.
The Ministry of Energy and Ontario Hydro have stated that any fuel substitution incentives will be developed with active MEA input. The Municipal Electric Association is the responsible voice of Ontario's 312 municipal electric utilities, which represent 75% of the electricity consumers in this province. Ontario Hydro has allowed for MEA input in the past, but only superficially. The MEA is an active member of the demand-supply management planning process. The following is an excerpt from a letter from Ontario Hydro sent December 12, 1991:
"The following provides an update on the recent developments in the area of non-utility generation:
"Ontario Hydro is suspending negotiations on non-utility generation proposals over five megawatts which have not yet received Hydro executive approval. The decision to put current negotiations on hold is the result of a trend of lower economic growth. Hydro's continued commitment is to reduce demand for electricity.
"In a separate matter, Hydro recently announced that it had withdrawn its policy which allowed municipal utilities to purchase electricity directly from NUGs in their service area. As the supplier of power to all the municipal electrical utilities, Hydro believes that it is inappropriate for one utility to have the advantage of lower-cost power from a non-utility generator within its service area when this decreases the rate base and results in higher rates for the other utilities and electrical customers in Ontario.
"This position and associated issues will now undergo a comprehensive review, with MEA input, so that Hydro can arrive at an arrangement which is fair to utilities, suppliers and all electricity customers in Ontario. It is hoped that joint-party recommendations with respect to these issues can be reached by the end of 1992."
It is signed by J. R. Mason, regional manager, customer energy services, northeastern region.
Now, after the decisions are made, Ontario Hydro is seeking MEA input. The Cochrane PUC is afraid this same scenario will happen with fuel switching, where all the decisions will be made before any MEA input is requested.
At the MEA District 9 annual meeting, held in Kapuskasing on Thursday, October 3, 1991, Mr Marc Eliesen, chairman and CEO of Ontario Hydro, spoke on the future of Ontario Hydro. He commented on fuel switching and stated that this would be done. When asked questions about fuel substitution, Mr Eliesen stated that incentives would be offered, there was no need for discussion and fuel substitution was a matter of fact.
On August 20, 1991, at the outset of evidence on demand management, Mr Eliesen announced a $3-billion increase in funding for demand management over the next decade and an increase in demand-side management targets of 1,500 megawatts, most of which would be obtained through fuel switching.
In an article in December 1991's Electricity Today magazine an interview with Mr Eliesen produced the following excerpt. The question was, "What alternatives does Ontario Hydro have in the event that demand management initiatives do not produce the energy savings predicted?" Mr Eliesen replied: "For our size utility, we have the most ambitious demand management program in North America, which now includes new measures on fuel substitution. We are measuring our progress in this area since the program began, and so far we are on track."
If fuel substitution programs are already in place and being undertaken, is Ontario Hydro not in contravention of the existing Power Corporation Act and should Ontario Hydro not be reprimanded accordingly? MEA input has not been received and the amendments to the Power Corporation Act have not been approved, yet Ontario Hydro can supersede the Ministry of Energy, is above reproach and can set its own rules.
Fuel substitution is a matter of fact and the Cochrane PUC does support it, but to change the Power Corporation Act to make electric customers pay for incentives for the benefits of other energy supply companies is unfair. Changes to the Power Corporation Act must be directed at Ontario Hydro's accountability to the public and not fuel substitution or other programs resulting in higher consumer costs, lower revenues and ultimately discouraging economic development.
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Therefore the Cochrane Public Utilities Commission wants to reiterate the request that the Ministry of Energy delete any proposed changes to the Power Corporation Act that would result in electricity customers paying for incentives to change from electricity to another form of energy or that would result in electricity bills being used to supplement government income for non-electric programs.
Mr Jordan: Thank you for your excellent presentation on behalf of the Cochrane Public Utilities Commission. I can see from your presentation you have reviewed Bill 118 and certainly your commission has brought forward the main points that are directly against what we know Ontario Hydro to be. I am not in a position to say whether Ontario Hydro is in a legal position or not to be proceeding with activities as noted in this report today, but certainly I think it is something that should be questioned and looked into, because if it is the case that Bill 118 is now in effect, I wonder why we are here today.
Mr Murray: I have that same question.
Mr Jordan: What action do you think would be coming from the municipal electric utilities relative to this action?
Mr Murray: All along, the Municipal Electric Association has been involved in overseeing this. We have put together a large campaign to try to make sure the mandate of Ontario Hydro is not changed, so that the moneys cannot be taken to fund other programs. As far as the fuel substitution is concerned, we also attacked that at the time and we were told we would have active input. We have been led to believe that would occur, but by the announcements I am reading lately, this is not being done.
Mr Jordan: Are there any members of the Municipal Electric Association on the board?
Mr Murray: I am not sure. The MEA will be making a presentation a couple of people after us.
Mr Jordan: Do you have a democratic system whereby you could have representation on that board?
Mr Murray: Does Cochrane have representation?
Mr Jordan: No, your association. Do you have communication or a relationship with Ontario Hydro at the present time?
Mr Murray: Yes, we do.
Mr Jordan: What forum would you use to have representation on that? We have the Deputy Minister of Energy on the board, without vote. Is there a chance that something like that is available to your association?
Mr Murray: I am not sure. I would have to check with the association.
Mr Jordan: Do you think it would be wise to have representation there?
Mr Murray: Yes, very wise.
The Chair: Mr Wood. If you wish, you may leave time for other members of your caucus.
Mr Wood: I will be brief. Thank you, Mr Murray, for coming forward with an excellent presentation. I just want to refer a little bit to cogenerating. We are both aware that Smooth Rock Falls and Cochrane -- there has been a push on sort of the whole of northeastern Ontario for cogenerating plants and I am just wondering what your feeling would be on that. Should the push continue to have more plants of that kind using natural gas and the waste residue from the north?
Mr Murray: Waste residue is a very good process, but again, we just received a memo from Ontario Hydro that said it was stopping all future development.
Mr Wood: Well, they want to review it. Yes.
Mr Murray: We are in a society right now in which we are in some problems with nuclear and things like that and any non-utility generators that can come on line should be supported very strongly, especially in northern Ontario, where there are some economic problems right now.
Mr Wood: We had presentations made yesterday in Sioux Lookout concerned that Ontario Hydro is a large corporation that nobody has any control over and that somebody is going to have to have some control for direction as far as conservation, reduction in the amount of electricity that is being used and switching of this kind. Some of the concerns were that Bill 118 does not go far enough to bring Ontario Hydro under control of a body that is -- as you are aware, the government has said no to a moratorium on nuclear power because we felt it was the right way to go. They are expensive and they are only good for a short period of time for the amount of billions of dollars it costs to produce them, and what do you do with them when you shut them down?
I am just wondering what reaction you would have on that. They were saying that Bill 118 should be amended and be tougher so that it goes further to bring them under control of an elected body, which is the Ontario government.
Mr Murray: A good example is the Ontario Energy Board, because presently it has a mandate to set rates but it has not been given the mandate to enforce the rate increases. Ontario Hydro does not seem to have anyone in control, any elected body that is in charge. The Ontario Energy Board over the years has recommended rate increases. Ontario Hydro brags quite a bit about the fact that the majority of the time its rate increase is less than the Ontario Energy Board has recommended, yet a year ago we did a study over the last nine years and the actual difference in rate increases -- because when Ontario Hydro has to go above the OEB recommendations, it goes much above -- over those years was 0.1%, so the difference is not great. What happens is, Ontario Hydro lets it build and build until it has to make the big jump and it costs our customers. Again, we have to conserve the consumption, but revenues still have to stay the same because we cannot cut staff, and we have a very small staff now. Ontario Hydro is not cutting staff.
Mr Huget: First, let me thank you for coming today and your presentation. I think you should be aware that we have ongoing discussions with the Municipal Electric Association and in fact amendments that will be introduced to the bill are a direct result of discussion and conversations with the MEA. So we take your positions and concerns very seriously and we will this one as well.
I am concerned about the comment you made in terms of Marc Eliesen and his October 3 statement, that fuel switching would be done, and an extrapolation of that thought to say there is something being done illegally. Are you making that allegation or is it just something you have based on the statement that in Marc Eliesen's view fuel switching would be done?
Mr Murray: This was at our annual District 9 meeting at which I was present and he did state that. I assume it was his view, but I assume he is representing Ontario Hydro when he is speaking as chairman.
Mr McGuinty: Thank you, Mr Murray. I was very interested to hear your comments relating to Mr Eliesen's statements and I guess my colleague Mr Huget was just following up on those. You have raised a matter here which should be of grave concern to your utility commission, to the Municipal Electric Association and to all of us sitting in this committee because it brings into question the very raison d'être of our travelling throughout this province and spending taxpayers' money. Certainly we are not doing this for the good of our health.
What bothers me even more is that just about a half-hour to an hour ago I received a statement put out by Ontario Hydro. In that statement and in an accompanying book entitled Update 1992 Ontario Hydro has made a revision, an amendment to its 25-year demand-supply plan which is presently before the Environmental Assessment Board. I note that on page 11 it states, as one of the reasons behind revising the plan, "In addition, new legislation will provide the opportunity to promote alternative fuels and applications where electricity is not the most appropriate energy and where there are benefits to the customer and to Hydro." It says, and I will repeat, "In addition, new legislation will provide the opportunity." Not might provide, not conditionally provide, it is unconditional.
I am going to leave it to the other members of this committee to consider the appropriate action in these circumstances where we appear to be going around this province and the chair of Ontario Hydro has effectively jumped the gun and indicated that notwithstanding whatever we happen to come up with here and notwithstanding whatever the people of this province tell us, he is going ahead with a fuel substitution program.
Mr Murray: That is what we fear most.
Mr Jordan: That is what you fear most?
Mr Murray: Yes, that fuel substitution will go ahead without public input.
The Chair: Are there any other very brief comments or questions? Sir, on behalf of the committee I want to thank you, along with others, for coming here this afternoon. I think one of the things that is always impressive is the interest that people and organizations across the province have in new legislation, obviously for all different sorts of reasons. But we appreciate the participation and trust that the people on the committee will be keeping you advised of the progress of this bill and any changes that might develop from this committee process.
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ONTARIO METIS AND ABORIGINAL ASSOCIATION
The Chair: I now have participation by the Ontario Metis and Aboriginal Association, Ms Kathy Brosemer. Once again, if you would please try to keep your comments as brief as possible so that we can engage in some questions and answers and conversation, which is always a productive exercise.
Ms Brosemer: All right, I will try. I am here representing the Ontario Metis and Aboriginal Association. OMAA, as we call it, is an umbrella organization that speaks for the interests and aspirations of some 200,000 aboriginal people in Ontario who do not live on reserves.
I want to begin my comments on Bill 118 by stating that it is important that you understand and that all of us understand that the environmental and social costs of generating electricity are not paid by Hydro's ratepayers, nor are they paid by Hydro. They are paid by each of us to a certain extent, but they are disproportionately borne by the aboriginal people of this land.
Uranium mining takes place on and near our land. Uranium milling takes place upwind and upstream of our people. Radiation is released from nuclear plants into the waters where we fish. These things all affect the health and the culture of our people. It has been proposed that radioactive waste from reactors be disposed of in the shield rocks of the north, another great burden for our people, as this waste will be toxic for 500,000 years.
Coal-fired power plants also affect us. Acid gases from the smokestacks, ozone depletion and the threat of global climate change all affect the people who live closest to the land, first and hardest.
Giant hydraulic dams are now planned for the remote areas of our land. These dams poison our fish and game, flood the land and interfere with our transportation. They drown the graves of our ancestors. They disrupt our communities and our families and they destroy our way of life.
Even buying electricity from Manitoba will result in a huge power line being built across the land, across the hunting and trapping areas, and in the clear-cutting and spraying of herbicides over a vast swath of land. There will be enormous disruption of the aboriginal people of Manitoba because the power is to come from huge dams there.
We feel all these things not just because of the impacts on our own people, but because of what they do to the land. I do not know if you understand the way we feel about our land. We believe that the land is our mother, that we are dependent on her just as little children are dependent on their mothers, and that she will provide for our needs. She does provide for all of our legitimate needs, for sustenance, for shelter and for warmth, but she does not provide for greed or for foolishness. We are permitted, for example, to take fish or game where we need to take it because we need to eat, but if we take more than we need, if we go and shoot 30 moose, for example, just to amuse ourselves or to get rich, this is wrong and she will not tolerate it. Our people do not want to stop using electricity any more than you do, but we cannot allow greed or foolishness to determine what we use.
My elders have told me that if Hydro needs to dam the rivers in order to be able to provide power for hospitals or to provide warmth for children, then it may do so. This is a reasonable need that our mother the Earth will provide for. But we should not allow Hydro to dam rivers, build more power lines, construct more nuclear or more fossil-fuel generating stations in order that we can do foolish things with the electricity.
Electric space heating, electric water heating and electric cooking heat are all foolish things to do with electricity. In the past, Hydro has promoted these things even where other options like natural gas were available. It is time they corrected this. Because Bill 118 will allow Hydro to invest money into helping people to switch to less costly, less environmentally damaging and less foolish ways to heat, OMAA supports this bill and urges you to do all you can to implement it. We do not want more damage to our land for foolish reasons.
Mr Martin: It is obvious from your comments that you, representing your people, feel there is in fact a social cost re the carrying out of the business of Ontario Hydro. I sense from your comments that you would probably also agree that, where there are adjustments needed to a program or some curing of a problem that needs to be done in retrospect, the utility which caused it in the first place should be asked to pay for it.
Ms Brosemer: Certainly. I think past grievances need to be redressed. My people's most important concern, though, is that in future things do not go on, that the past practices be stopped where they are and that future damage does not occur for foolish reasons.
Mr Martin: You would also agree then probably that in order to do some of the things you think need to be done to improve the situation, perhaps for example the changing of the type of energy we would use, the utility which has caused the problem in the first place should bear some of the cost of that, if not all of it?
Ms Brosemer: Certainly, for many reasons. One reason is that they have promoted the use of electric space heating over and over again in the past with their Live Better Electrically program and various other things. Because of their active promotion of electric space heating, they have had to go along with the huge growth in demand. They have actively promoted it and that is what caused a lot of the damage to our land.
I think they need to redress that as well, because they need to be helping people, especially our people who have low and fixed incomes. A lot of OMAA members are struggling along. They do not have the wherewithal to install different heating mechanisms in their homes for the most part. We need programs that are funded by utilities to do that. Whether it is by Hydro alone or by Hydro and the gas companies jointly or by municipal utility companies, whatever, I think we do need programs to help people change, because it has been promoted by Hydro in the past.
Mr McGuinty: Thank you for appearing before us, Ms Brosemer. You make a good argument. I do not think anyone could disagree with you in 1992 that certainly we have to make every reasonable effort to conserve energy, however it is reasonable to do so. It is now no longer feasible for us to consider the production of electricity without taking into consideration not only economic, but social and environmental costs.
However, I want to appeal to your sense of fairness and equity. I want you to think of a person living in Sioux Lookout, who does not have access to gas and whose rates are going to go up in order to assist me, living in Ottawa, to switch from electrical heat to gas. I have the supply. In fact, I might very well be able to afford to switch to gas. I have the capital costs, the startup costs to make that switch, but I hear Bill 118 is coming down the pipes and that ratepayers everywhere are going to pay for me to switch. Now, what do I tell that person up in Sioux Lookout?
Ms Brosemer: I think the first thing you explain to the person in Sioux Lookout is that our rates actually will go down with the reduced demand for electricity, not go up.
Mr McGuinty: Who says that?
Ms Brosemer: It is certainly easy to see when you see that Darlington costs $13.5-billion dollars to generate 3,500 megawatts and it is still not generating it. The next station is probably going to cost $20 billion. Any reasonable human being would look at that and say the rates are definitely going to go up if we do not get our demand under control.
Mr McGuinty: I know Hydro is telling us that the rates will go down if we promote fuel substitution, but Hydro told me that Darlington was going to cost around $4 billion.
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Ms Brosemer: Just because Hydro has been wrong on some of its estimates is not a blanket reason to discount everything it says.
Mr McGuinty: You are going to be selective in terms of which advice you will take from Hydro.
Ms Brosemer: Because it is not just Hydro; it is Energy Probe, it is Pollution Probe. It is a number of organizations that do not have a vested interest in this.
Mr McGuinty: I guess my concern is that there was a time when Hydro had a program it called Live Better Electrically. They would have had us embrace without reservation electricity in the home and in the workplace. That was a good thing. Now it would appear that Hydro, or at least the government, is telling us we should embrace fuel substitution without reservation and that too will be a good thing. So I have some concerns.
Ms Brosemer: I do not blame you. I think we should not embrace anything without reservation, but I think when one looks at this with a clear eye, it is very obvious that fuel substitution is a very good thing for rate structures, for the environment, for all kinds of things. I think it is the only reasonable alternative we have.
Mr McGuinty: I hope you are right.
Mr Arnott: I am just wondering if you can tell me if very many of your membership, of the native people of Ontario, would be able to take advantage of fuel-switching programs if Bill 118 passes as it presently is.
Ms Brosemer: First of all, I have to make a distinction between the Ontario Metis and Aboriginal Association membership and its constituency. OMAA has a constituency of the off-reserve aboriginal people in Ontario of 200,000. Its membership is much smaller.
Another thing to keep in mind is that a third of that constituency lives in southern Ontario, in Metro Toronto, so they have some of the same concerns of any low- or fixed-income people in southern Ontario. In many cases they would be able to do so, but in other cases I have no idea. For example, I do not know what impacts of what programs might be suitable for landlord-tenant.
For the people in the north who are not reached by gas, I think we have a problem here when we look at fuel substitution just as natural gas. We can look at fuel substitution in terms of solar, we can look in terms of wood. Some of those options are very readily accessible to the people of the north, with financial help, which is necessary anywhere they are.
Mr Wood: Just very briefly, as you are probably aware, my riding represents native groups along the Hudson Bay and James Bay coast. One of the concerns up there is what are you going to do about the cities, the lights. You walk around those areas at 10 or 11 o'clock at night and there is complete darkness. They are saying, "When is something going to be done about Toronto and Ottawa, which use lighting systems for heating?" They do not have any heating systems whatsoever. I just wonder if you have any comment on that.
Ms Brosemer: I have heard some of the same comments from our people. There are some very strong moral issues involved. I have heard this. I have heard of a woman elder speaking very passionately about, "If they need power for their hospitals, fine, they can come and dam my river, but they do not need it to light up Toronto city hall all night long." Nobody cares if Toronto city hall is lit up at 4 o'clock in the morning. It is time to change those practices. Fuel switching is part of it, but certainly sensible use of electricity, sensible use of all energy forms is what we are really after.
The Chair: Thank you once again for taking the time to prepare the submission and for participating in the dialogue. The committee thanks you very sincerely and hopes you keep in touch with how this bill develops.
I want to tell people, between you and this table are members of the Legislative Assembly representing the three caucuses, the opposition with its critic, the third party with its critic and the government caucus with its parliamentary assistant.
Also here is Louis Yaeger, who is a legislative research person who participates in these hearings by way of recording material that has been submitted and preparing assistance for the committee in arriving at its conclusions.
On your left is Pat Girouard, a Hansard person who has the final responsibility for making sure everything is recorded. It will be recorded and form part of floors and floors of volumes of history at Queen's Park.
On my immediate right is Tannis Manikel from the office of the Clerk. She is the clerk of this committee.
Behind you, tented, are the translation people, Sylvie Soth, Delia Roy Iberra, Daphne Beauroy and Doron Horowitz.
Sitting at the control panels are Tony Abbate and Theresa Jodoin. They work for legislative broadcast and are responsible for recording this.
Those are the people in the room in addition to the politicians. I am not disinclined to suggest that they work as hard if not harder than most politicians and are as dedicated if not more dedicated than most politicians. I thank them for their contribution.
FALCONBRIDGE LTD, KIDD CREEK DIVISION
The Chair: We now have Falconbridge Ltd. Mr Owen is here. Please be seated. If you have written material, it will become an exhibit and part of the record. We can hear your comments. Try to leave us at least 10 minutes for questions.
Mr Owen: A bit of background: Falconbridge Ltd, Kidd Creek division, is located in Timmins and is part of the Falconbridge group whose head office is in Toronto. Kidd division's primary products are copper, at 94,000 metric tonnes a year and 130,000 tonnes of zinc a year. We have other products which include indium, sulphuric acid and cadmium.
The Kidd Creek division employs 2,300 people in the city of Timmins. It is our metallurgical site and both our mine sites are located within the city limits. As far as the competitive position is concerned, the market for our products is worldwide and sensitive to international commodity market and unresponsive to the Canadian domestic scene. Because of this, we are unable to control our prices and must be able to control our cost of production. Energy is one of our most important costs.
Kidd is a significant user of energy with the largest portion of energy in the form of electricity. Other forms of energy utilized are natural gas and secondary fuels. This energy accounts for 20% of our total cost, which is about $350 million a year to run the operation.
Kidd division is Ontario Hydro's second-largest direct customer in the province. We use electricity for everything from mine pumping and ventilation to electrolytic refining. Kidd cannot use an alternative fuel for these applications. Natural gas is used mainly for heating mine air, building and process applications. Secondary fuels are mainly diesel fuel for our mobile production equipment, which is mainly in our mining operation.
From a cost standpoint, in 1991, Kidd spent $63.7 million for energy, $53.7 million of which was for electrical power with the remainder for natural gas and secondary fuels. In 1992, Kidd will spend $68.9 million for energy, with $58.5 million representing electrical power.
Energy consumption: Between our metallurgical site and our mine site, we consume approximately 184 megawatts. Approximately 70 megawatts of that is just to run our zinc plant.
As I have indicated, the largest portion of electrical consumption is our zinc plant which is among the most efficient plants in the world. When you look at the way we measure the efficiency of a plant, we are seventh in the world and we have technology that is years behind some of our competitors.
If you look at the graph, it shows why we are where we are. From 1987 to 1989 we spent lots of time and money increasing the efficiency of our technology to get ourselves into seventh position. The world's best is Cominco. Energy in our zinc plant accounts for 30% of the operating plant cost and increases in the cost of electricity affects its viability.
In efficiency, we are seventh in the world and we applied some costs of 1989-90 vintage that took us from seventh on an efficiency scale down to 12th or 14th on cost with hydro.
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I have attached another graph at the back. As you can see, since 1978, hydro usage at Kidd has increased as the operation grew to its present capacity. If you look at the period 1985 to 1991, the power consumption at our metallurgical site, which is the solid line, increased by approximately 1%. If we had not done the work in our zinc plant, which consumes most of our power, this increase should have been closer to 10% due to the addition of an indium plant and an oxygen plant and an approximate 7% increase in zinc production. Therefore, our concern over energy consumption allowed us to eat up 9% of a possible 10%.
Energy conservation: Total energy conservation is a concern of the Kidd operation, and sometimes this has resulted in an increased electrical consumption to become more efficient. At the mine and in the operating plants, there are energy teams that identify and implement energy-saving projects. As regular practice, all electric motors that are purchased are energy-efficient and we are making use of variable-speed drives for such applications as pump drives and underground ventilation fans.
At our metallurgical site we have a peak power control system that has been installed for a number of years and it is being continually updated. A similar system for natural gas has also been developed by Kidd employees so that we can flatten out our demand for natural gas and make better advantages on the demand side. At our mine site we have a peak power control that has also been implemented to allow better control of electrical power.
We are presently working with Ontario Hydro and the Ministry of Energy on programs to continue reducing Kidd's energy costs. Presently we have about 35 to 40 projects. At the metallurgical site we are looking at in the order of three to four megawatts, based against 150 megawatts, which does not appear to impact that much, and at our mine site, which consumes about 33 megawatts, we have the possibility of three-megawatt savings, which is significant.
Dealing with Bill 118, power at cost is a concern because the principle of power at cost states that the people of Ontario should pay for the costs of generating and delivering electricity and only those costs. We have a problem with the actions taken to do with Elliot Lake and Kapuskasing and the effect it had on the hydro rates.
From what I can understand, the government agreed to limit any policy directives that are issued to matters relating to the corporation's exercise of its power and duties under the act, inferring that Ontario Hydro's mandate will not be changed. However, an interpretation of what this means is open to question, since the government has already compromised power at cost.
Competitive rates based on power at cost must be unencumbered by inappropriate burdens of social policy initiatives. As you can see by our zinc plant, it affects us very directly. As a matter of fact, this 11.8% that went through this year cost us one cent a pound on zinc, which is a major impact on our operation. You can see the price of zinc is fluctuating at low rates.
We are also not too -- I do not know if "happy" is the right word -- comfortable with the director's accountability. The ability of the board of directors to provide second thought in the face of any government directives and to consider its duty to protect the interests of the ratepayers has been removed with the proposed revisions to Bill 118.
Fuel switching: Under Bill 118, the focus seems to be related to substituting electrical energy with an alternative energy source. Previous initiatives championed electrical power as the energy of choice and now the direction is reversed. Kidd is interested in conservation. However, the nature of our operation does not allow fuel switching. Those companies that are concerned with the total energy scene will be penalized with the change in focus of the government, which now includes Ontario Hydro, or appears to include Ontario Hydro, as many will have gone an economic route that conforms with their industry. The initiatives that have been put in place for fuel switching and are supported by Ontario Hydro are reflected in the rates that are charged to companies that may not be in a position to switch and will therefore be placed at a disadvantage.
In summing up, our position basically is we are concerned about any initiative that allows political concerns to affect the cost of electrical power. The independence of the board of directors of Ontario Hydro must remain. A dependable supply of electrical power is of primary concern. Last, the power-at-cost mandate of Ontario Hydro must remain, in order to minimize the negative effect of inflationary cost increases on Ontario industry.
Mr McGuinty: Mr Owen, I am going to ask you a question that I asked of an earlier witness. What took place at Elliot Lake was something that took place at a time when government was acting without benefit of any change to the Power Corporation Act, and we now have -- not formally as of yet, but we will have because the minister has led us to believe we will -- a formal amendment to Bill 118, which is going to put us back in the same position we are in right now.
Are you comfortable with the government's promise not to compel Ontario Hydro to do anything that would take it outside its traditional historical mandate of providing us with power at cost, keeping in mind that the government insists that what it did at Elliot Lake was perfectly in keeping with Ontario Hydro's traditional mandate of providing us with power at cost?
Mr Owen: In 10 words or less, no. I do not know how they can interpret power at cost in doing what was done at Elliot Lake.
Mr McGuinty: I do not want to present this in a partisan way. That would not go over well. There is a concern that we all have about governments doing things for political purposes. Is there anything that you might suggest we can do that would go into this bill to ensure that the interests of ratepayers, the concerns of the people who pay for the hydro are always first and foremost?
Mr Owen: The problem I have with that question is that the bill has not been passed, as far as I know. Otherwise, we would not be having this thing going on right now. And if things are being done before the bill is passed, does that mean nothing is going to happen after the bill is passed? Perhaps we should just leave the bill the way it is and argue it out as situations arise.
Mr Conway: The good thing about this policy is it changes every week, so hope springs eternal.
Mr Owen: Who am I supposed to answer?
The Chair: Please respond, sir.
Mr Owen: Put yourselves in our shoes, where our market is outside of Canada, outside of Ontario. We are affected by what happens within Ontario. If memory serves me correctly, Ontario has presently the second-highest power costs in Canada, and we are dealing with countries that have significantly lower costs. It is reflected when I mention that we are seventh in efficiency for the whole technology of the 1970s, with new technologies of the 1980s and into the 1990s, and when we put our cost per unit on to that, based on our costs from Ontario Hydro, we drop to 12th or 14th. That puts us in a very, very uncomfortable position in the production of zinc. If the targets keep changing, how can we, as a company, know what is going to happen tomorrow, next week, next year or five years from now?
Mr McGuinty: Mr Owen, can you tell me something -- I am not sure whether you are able to answer this or not -- about Faraday's law and its relationship to the amount of electricity that is required to convert raw material into some refined material?
Mr Owen: I do not have it right at my fingertips.
The Chair: Thank you. Perhaps the research people will come up with some easy-to-read analysis of that stuff.
Mr Owen: If you will give me your address, I will forward you the information if you want it.
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Mr McGuinty: I might as well give you a card.
The Chair: You will give it to the committee?
Mr McGuinty: Absolutely.
Mr Arnott: Mr Owen, thank you very much for coming. Following up on Mr McGuinty's question, I would like if you could try to describe for us what your company is going to look like in three years if Bill 118 passes as is, with its inherent, I believe, guarantors of higher rates, and we see a 44% increase in your hydro bill.
Mr Owen: Unless the price of zinc changes to offset the increases, because 11.8% this time costs us a cent a pound zinc, we are looking at the possibility of shutting our zinc plant down.
Mr Arnott: Shutting it down?
Mr Owen: Yes, which will affect approximately 500 employees.
The Chair: Mr Huget, if you leave Mr Martin enough time he will be able to ask a question too.
Mr Huget: Thank you very much for your presentation. I too want to follow along Mr McGuinty's point, particularly with Elliot Lake. In section 7 of your presentation you say quite clearly that people of Ontario should pay for the cost of generating and delivering electricity, and only those costs. I suggest to you, sir, that they have paid those costs and, boy, have they paid them. We have spent for uranium fuel in Ontario $1 billion over the last 10 years, several times the world price for that uranium. I think that has had an impact of about 2.6% or 2.7% increase in the rates, due to what is largely a fuel penalty.
I think you raise the argument that Ontario Hydro, if you look at Elliot Lake, should finance that some other way. How should Ontario Hydro have financed that surcharge in the price we paid for uranium? Should we have done it through the public purse? Should we have notified all the ratepayers in the province, including the industrial ratepayers, that they were paying several times the world price or the necessary price for fuel for the nuclear system in this province?
Mr Owen: I am not too sure how to answer, not being involved in the economics of how you price things. How come all of a sudden we have an 11.8% increase, yet we have been living with the higher uranium costs, as you have just mentioned, over the last few years and we have had smaller increases? My answer to your question is another question.
Mr Huget: You say that Elliot Lake and Kapuskasing results in hydro rate increases in the 5% range. Can you tell me how you arrived at that figure?
Mr Owen: I do not have the numbers right at hand. If I remember correctly, the numbers I got from Cominco are based on projected 1992 income to Ontario Hydro.
Mr Huget: On the issue of energy conservation and energy efficiency -- and I think it is clear from your presentation that your company supports those initiatives -- could you give me your suggestions on how we can ensure that Ontario Hydro proceeds on energy conservation, efficiency initiatives and the whole question of government accountability to make sure that is what Ontario Hydro does? Do you have any suggestions to make that process positive and how we can do that without legislation?
Mr Owen: I think what we have to do is make sure that Ontario Hydro can function as a business. Our operation is a business. We have to try to absorb any increases within our costs. We are not in the position to be able to pass them on automatically and have somebody say, "Sorry, but you are just going to have to pay more." If we did that with our zinc, copper, indium or any of these other products we have, nobody would buy them.
The Chair: Thank you. Mr Martin, very briefly, please.
Mr Martin: You obviously consider yourself a good corporate citizen, do you?
Mr Owen: Yes.
Mr Martin: A good corporate citizen, I guess, can be defined in a number of ways, but mainly it means having some responsibility within the community in which you operate and to the people who live in that community. If you were one of the only major companies in a community and you were about to fold up your tent and go, you would feel you had some responsibility to take care of some things before you left regarding the needs of the community environmentally, socially and even your own employees and their families and the extended community economically.
Mr Owen: I do not quite follow you. Could you give a little bit more detail?
The Chair: Unfortunately, my apologies, but we are going to have to move on to the next participant. I want to thank you along with the others who have come here this afternoon and participated obviously with interest and concern about the legislation. Your views are valuable ones as are the others that we hear.
NORTHWATCH
The Chair: The next participant is a group called Northwatch and the presentation is being made by Brennain Lloyd. Please try to leave us a good 10 minutes and more if you can for some exchanges of views.
Ms Lloyd: Thank you, Mr Chair, for getting my name right. It is Brennain Lloyd from Northwatch. Northwatch is a coalition of environmental groups across northeastern Ontario. Our groups work on a variety of issues including energy issues, safe energy issues, the impacts of the nuclear industries, wilderness, forests, waste management, water quality and also on some broader principles of sustainable development and environmental protection in a legislative all-encompassing sense.
I want to apologize for not having copies of my presentation with me today. I had a six-hour bus ride from North Bay to Timmins and I thought I could write it on the way on my laptop computer, but I fried my batteries last night which is just an example of too much electricity. I thought that was rather a profound error on my part.
In terms of Bill 118, we have two primary interests. Those issues can fall into two categories: issues of accountability, control and relationship of Ontario Hydro to the government and issues of energy savings. Basically, the door that has been opened to energy conservation via fuel switching, we believe has been opened by Bill 118. But the comments I want to make today, I want to make in the context of sustainability, the sustainable development.
Sustainable development has become a flagship phrase in the 1990s from the Brundtland commission's release of its report in 1987. Although it was a term that was common in use from the 1950s in economic and development circles, it has really fallen into popular use in the last few years. The Brundtland commission defines sustainability as development that meets the needs of today without endangering the ability of future generations to meet their needs.
Northwatch has interpreted that in the context of northeastern Ontario to mean the integration of environmental considerations into all economic and social planning and decision-making. I think this applies in energy planning, energy production, energy-related decision-making as it does in all other areas, but it applies absolutely in the area of energy planning and production.
In our region, we think there are a number of indicators of sustainability including community stability, ecological integrity, small scale, local control, decentralization and so on. There are three imperatives: self-sufficiency, ecological security and community stability. I think in the context of today's discussions, those can be boiled down to a practice of maximizing use and minimizing consumption. Basically, maximizing use is making sure that we get the best use out of any resource we use. I think that is very relevant to your consideration of Bill 118 and I think particularly given the opportunities for fuel switching that this bill is going to provide.
Fuel switching is perhaps the most pragmatic example, the most pragmatic way we could put that principle into practice. If we do a very simple comparison of the kind of efficiency we get from nuclear generation or thermal generation where we see an approximate 25% efficiency, compared to the kind of efficiency we can get in direct heat production, say, in a new gas furnace, from a fuel-efficient, new gas furnace, we can get 93% efficiency. Even in a new oil furnace, perhaps not our first choice, but a good choice, we still get 80% efficiency. As compared to 25%, 80% looks pretty good.
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So there are some very practical arguments that need to be made in support of fuel switching, and I think a very practical argument also needs to be made in terms of the consequences of not fuel switching. I find that an easier one to envision. I find it very easy to envision in the context of northeastern Ontario, the region I know, the region where I live, the region I am very committed to and very committed to seeing the best environmental decisions and protections in place.
Let us look at the consequences of not fuel switching, of not making the best use of our energy resources and of not avoiding excess electrical production, unreasonable electrical production, unnecessary electrical production and, when we look, the things we are going to see immediately happening over the next few years or which have already happened. We are going to see 1,700 kilometres of transmission lines, 500-kilovolt transmission lines, with their resultant problems of electromagnetic field radiation, increased access, disruption in the forest area; we are going to see the Little Jackfish project north of Lake Nipigon, and we are going to see possibly 12 developments in the Moose River basin.
I do not know if you have had news today. I have not had news today on what has happened in the demand-supply plan environmental assessment hearing. There was going to be an announcement of revision of Ontario Hydro's 25-year plan, so if we are to be very optimistic we can think that some of these adverse effects are going to be moved off the table because Ontario Hydro is going to withdraw some of those proposals. You might have that information, but I do not. I hope to have it by this evening.
We are going to look at the Little Jackfish project, the Moose River basin developments, nuclear waste already insite -- we have 100 million tonnes of low-level radioactive waste in Elliot Lake. We have had a firm proposal from AECL to give the north a gift of untold quantities of high-level radioactive waste, which will be radioactive for all eternity virtually. We have fossil-fuel burning. We have some estimates of a 66% decline in forest growth rates because of fossil fuels.
Those are the very pragmatic, very practical examples of what we will see if we do not have fuel switching, if we do not avoid excessive electricity production.
I know that not everyone supports fuel switching. I know there are arguments being made against that, and I would welcome an opportunity to meet with those people and to go on a very long walk with them, starting at the Conowapa River development in northern Manitoba. We could spend a little time and walk through a virtually roadless area through eastern Manitoba where bipole 3 is going to be constructed to suck that power down from northern Manitoba. Then we could walk the 1,100 kilometres of that transmission corridor across northwestern and northeastern Ontario, and maybe we could make a stop at Lake Nipigon and visit the site for the proposed Little Jackfish River development. We could talk with the fishing people who have been on that lake for three generations and with the aboriginal people who have lived on that land for uncounted generations. Then we could walk a couple of hundred kilometres farther and paddle up the Moose River basin, paddle up the Mattagami, and we could see some of those developments and we could visit those communities. We could see what the consequences were; we could hear how those lives were going to be affected.
Maybe we could stop at Lake Timiskaming, where we could look at some of the acid lakes that have already been destroyed because of fossil-fuel burning. That might be a good time to stop and consider what the consequences are of not fuel switching, before we travel another 800 kilometres down to the greater Toronto area, where most of the power that is going to be produced in those projects is going to be used.
I think that is where the decisions need to be made, out on the waterways, out on the lakes, out on the land, not in a boardroom, unless you can make the right decision in that boardroom. If you cannot, I would be happy to take that walk with you.
Bill 118 is what opens the door. Bill 118 is what allows us to avoid 6,000 megawatts of electricity production. If we look at that 6,000 megawatts, we see that it is 21 1/2 times the electricity that is going to be produced by the four Mattagami developments, it is 24 Patton Post developments, it is six corridors, it is two Darlingtons. That is the context in which we have to think about it.
The other area of interest and support we have is the area of accountability. Quite simply, Ontario Hydro is a public utility. It is our assessment that a public utility is subject to public ownership, therefore is subject to public direction. This is democracy. It has many problems. The poll is a blunt instrument for making decisions, but it is the only tool we have, aside from legislative processes like this, opportunities for input. But it is a democracy. We have a government. We appreciate the opportunity to speak to our government, to speak to committees, to speak to decision-makers. But ultimately it is a democracy. We have a government. Our public utilities are crown corporations, are accountable to them, and that is how it should be. Bill 118 and the amended provisions for accountability, for reporting, for policy directives -- our assessment is that those are fully in keeping with principles of public accountability and democracy.
The third area, an additional focus -- am I out of time? How am I doing?
The Chair: You just keep on going.
Ms Lloyd: Okay, I will just keep on going.
The Chair: Within limits.
Ms Lloyd: Within limits. You will stop me some time.
The Chair: Far be it from me to stop anybody from making a protracted or lengthy speech.
Ms Lloyd: Okay. Although we have two primary interests, a third area of focus is the customer focus. I think it is a worthwhile place to put our attention as well. Basically this is going to be a better deal for the customer. The bills will be 65% lower. If you switch from electric heating to, say, natural gas or oil heating, your bills will be approximately 65% lower. It is going to be better in the long run, because what we are going to do is avoid new supply. New supply will come in at $3,300 a kilowatt. I do not have a calculator with me and I have not multiplied out those numbers, but to me, $3,300 times 6,000 is a lot of money. That is the public purse, and the customer pays the public purse. I think it is just practical.
Bill 118 is not going to do everything. It is not going to change the rate structures. It is not going to ensure maximum efficiency and conservation, and I think there has to be a commitment from the public, from Ontario Hydro, from this government, from you as decision-makers, to ensure that no kilowatt is left out. But Bill 118 goes some distance, and I think we should applaud and support it for that.
I have to add one note of unhappiness with this bill. We did not do an exhaustive review. We focused mostly on a couple of areas of concern, but in doing a very summary review of all parts of the bill, I was disappointed to see that the amendments had not made the bill gender-neutral. The bill still refers to "him," "he," "his." Women are 52% -- not on this committee, it would seem. But I urge you to review the bill from that perspective as well.
Not to end on that note, I would just like to close by saying that Ontario Hydro is a public utility and it should be structured and run to serve the public good. I think Bill 118 is another couple of steps in that direction. I think Bill 118 makes sense. It makes ecological sense, it is common sense, it is good planning sense and it is also good in terms of dollars and cents. Thank you.
The Chair: Thank you, Ms Lloyd. Mr Arnott. We are going to keep the questions brief.
Mr Arnott: You talked about the fuel switching issue and you mentioned you felt that some people were opposed to it. I just want to make an observation. This is now the third day, and I do not recall hearing anyone explicitly state they are opposed to fuel switching, but many groups have come forward to state they do not believe the customers of Ontario Hydro should be forced to pay for fuel switching. I just wonder if you can explain it to me. I still do not understand why the customers of Ontario Hydro should be expected to pay for fuel switching, some of those customers who will have absolutely no opportunity themselves to switch fuels.
Ms Lloyd: Maybe we could engage in a discussion on this, because I would like to have explained to me why the customers of Ontario are paying for electric heating in some customers' homes. The cost of new supply for one electrically heated home of average size is going to be about $50,000. I would like to know why I am going to pay for that. There is a longer debate that we could have here than we really have time for, but I have those same questions. I would like to know why the customers of Ontario are going to pay for some people being on electric heat. That makes no sense to me.
Mr Arnott: Okay, that is fine. Thank you.
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Mr Martin: I would like to follow up on a question I was asking of the last presenter when I was so rudely interrupted by the Chairman. It is on the question of how we arrive at some of the places you think we should re the development of energy sources and the question of responsibility, and in particular corporate responsibility. Judging by your name, Northwatch, you have been watching over the last few years the record of corporations which do business and their sense of responsibility for the environment and for the people within the communities in which they operate. You might want to comment for a few minutes on their track record without being somehow under some supervision by some government agency.
Ms Lloyd: Sorry, the track record of all sectors or of particular companies?
Mr Martin: Yes, whatever, corporations.
Ms Lloyd: I think the regulation and legislation are essential in terms of getting environmental protection and environmental standards. I have seen no evidence to think market rules or market force brings us environmental safeguards.
There is a dilemma. Industry in the north in particular is having a very difficult time, for some institutional reasons, for some internal structural reasons, for a variety of reasons, and I am sympathetic to some of those difficulties they have. But in a very broad sense I have to say our experience has been that companies become environmentally responsible for two reasons. One is because of legislation, because of the force of the law. Two is because of consumer force, if their practices are very obvious and very measurable by the consumer, by the purchaser of their products. I think that gives them some urging as well. Most industries fall into one or the other of those categories.
Mr McGuinty: Ms Lloyd, just for your information, I have a copy of the Balance of Power update issued by Ontario Hydro.
Ms Lloyd: The revision that was issued today?
Mr McGuinty: Yes.
Ms Lloyd: You have very good courier service.
Mr McGuinty: It is a summary. It has been placed in your hands here through my good efforts.
Ms Lloyd: Thank you.
Mr McGuinty: Just to let you know, I have glanced through it very quickly and I see there are plans to continue with the development of a transmission line to incorporate power already contracted with Manitoba, but I see no other reference to some of the other generation facilities' potential, like Little Jackfish that you referred to.
You made reference to Bill 118 increasing the accountability of Ontario Hydro. I just want you to elaborate a bit on that for me, please.
Ms Lloyd: Elaborate on how that accountability will be increased?
Mr McGuinty: Yes, how is that going to improve?
Ms Lloyd: Let's start with two ways. I think one way is that, by having the deputy minister join the board, although in a non-voting manner, it is going to increase the level of communication and the level of consultation back and forth between the Ministry of Energy and Ontario Hydro. Our hope is that there is going to be a more effective bridge there than has been the case in the past. I think that is one way.
There are three ways actually. A second way is that, by increasing the size of the board, I think it is going to allow the board to be appointed with a broader range of representation -- hopefully a broader range, and this is perhaps a slightly separate issue. Maybe I have gone on a tangent here. I think that is going to allow us a better range of the demographics of the province, which I guess is not a direct answer to your question.
The third manner is that, by clarifying the manner of reporting and policy directives being given -- it is not really something new. I think it is an extension or an elaboration of what has happened in the past. One thing it does is bring it out of the back rooms into the public domain so we do not have $30 million given to AECL during an election year in a government riding. We do not have $1.3 billion signed in overexpenditures in uranium contracts and so on, because that is going to be in the public domain. It increases the publicness of those policy directives.
Mr McGuinty: I just want to stop you there, Ms Lloyd, because I know the Chair will not give me any time to make a little final comment. I think that you, like many others who have appeared before us, are operating under a bit of a misapprehension. There is actually right now, today, a provision in the Power Corporation Act which provides that government can issue so-called policy directives, only we call them by another name, "policy statements," to the board. They have that authority right now.
Ms Lloyd: Right.
Mr McGuinty: Were you aware of that?
Ms Lloyd: Yes, I certainly was. I have read the bill. I have read the act.
The Chair: I suspected you had; I was confident of it. I want to thank you very much. You have put a lot of effort into this obviously. You are well-read on the issues and you have been a most interesting participant.
Ms Lloyd: Thank you.
The Chair: We want to thank you for the long trip you took by bus to get up here.
Ms Lloyd: That is Ontario Northland Transportation Commission, public transit, sort of.
The Chair: We wish you a safe trip back home. I trust that people on the committee will be keeping you updated and advised as to what transpires as this bill progresses through committee and then back into the Legislature. Keep in touch with us. Mr McGuinty would like to hear from you. Mr Jordan would love to hear from you. Mr Huget would love to hear from you.
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TOWN OF HEARST
The Chair: Now I have on behalf of the town of Hearst, his worship Gilles Gagnon. Mayor Gagnon, how are you, sir? Please have a seat. Tell us what you will. We have your brief, which is very well laid out in terms of issues in the left-hand column and comments in the right-hand column. Boy, that is impressive; it really is. It is a very helpful tool for the committee to follow your address laid out in that succinct point form. Please proceed, sir, and try to leave us 10 of your 20 minutes for conversation.
Mr Gagnon: I must say that we had to put this together very quickly the last couple of days because we have quite a few fires to extinguish in Hearst in terms of all kinds of economic problems that we have. I must also say that I was asked by the president of Nord Aski, which is an economic development corporation in our area comprising the municipalities of Mattice, Val Coté, Hearst, Hornepayne and Constance Lake Indian Reserve, to represent them here today with this little brief.
We have split things into issues and suggestions, as you said. Some of them are of a minor nature, including the first four ones, but since we were here we thought we could maybe just touch on them.
The matter of the Ontario Hydro board of directors being increased by four directors, we felt that at this point in time when the economic situation is pretty bad that to add four directors on a board that already has 17 is a bit much. There are a lot of travelling-time costs, increases in remuneration, lost time, and when it gets too big sometimes it is unwieldy and sometimes counterproductive. We just wanted to express our opinion on that.
On the matter of the chairman becoming the CEO, we did not quite understand what was meant by that, but if it means the CEO becoming the chief administrative officer at the same time, we thought we might lose something in terms of separation of policy makers and the administrative staff. That person may become at one point in time kind of mixed in both, and it is hard to wear the two hats. Maybe we would lose the role of the chairman as the protector of the public. Again, it is a minor issue but we thought of mentioning it. If the chairman becomes the CEO, what happens when he is absent or away? Does a vice-chairman then pick up on that administrative responsibility on top and does that add on cost and so on?
The fourth issue we thought of a minor nature is the chairman's remuneration determined by the board. We thought it might be ambiguous. I know I would not like to be a director if all of a sudden I had to determine that. He is maybe not my boss, but he is certainly in a higher position and I would have to do that. We were just wondering, why not have the Lieutenant Governor, just like any other directors, determine that salary?
The following issue, as I said before, is of more importance. It is the cost of complying with policy directives. We thought there might be kind of three levels of absorption of these costs. Some that are directly related to Ontario Hydro, of course, we agree should be absorbed by them.
There may be other costs that are of a general, province-wide nature and should be their responsibility, but sometimes you may have certain commissions or municipalities that might not want to come up and agree. We thought maybe there could be some punitive rate structure in order to ensure that everybody is in line so that maybe those who do not want to participate should absorb that cost, or some of that cost.
Costs for programs and policies of a local or indirect nature, as a result of being imposed by the government, we believe should be borne by the province. Energy conservation programs initiated locally with cost-saving features should be borne by that municipal corporation or commission. We feel there is certainly a fine line in defining what should be the government's or Ontario's, but I think that there is a board to determine that. The key, to us, is to ensure that there are no costs that are all of a sudden kind of buried and hidden away through the agency.
Ontario Hydro's continued high prices and excessive increases for energy have a detrimental impact on the viability of industries, especially in northern Ontario, where there are major hurdles to be faced. We suggest that cost control and operational efficiency programs should be imposed with set targets like zero-based budgeting, restricted increases, prescribed decreases sometimes. I think at this point in time this is being imposed in other jurisdictions, be it hospitals, municipalities and so on. Cost efficiency, I think, is extremely important.
We say Hydro costs in the north should be more affordable and sometimes service-oriented to maintain what is left of the industrial base. Recently, in our own town, we have a lot of trouble making one company, Levesque Plywood, survive. It had to reorganize, lay off and so on. All of a sudden, overnight an increase in cost of $140,000 is imposed, and it is not a very big company. That represents three to four people. We just think it is counterproductive and repressive and we just cannot afford that.
I think it should also provide incentive for industrial and business development in the north and we have recently had examples of that. The key to Spruce Falls' survival, for instance, was involvement. Elliot Lake was another example. We think it should enhance potential for development of small enterprises.
As an example, we put Hornepayne as part of Nord Aski and over there they just cannot add on a five-horsepower motor practically. They are very badly serviced, they have outages that last for days and are very numerous, they are serviced by a bad line and on top of that they do not have any other sources like we may have in our area with natural gas, for instance. We have alternatives that they do not have.
Another point I would like to make at this point in time for Hornepayne is there is a potential for a little hydro project just about 40-some-odd miles away. The thrust now is to bring a line to Hearst to go into the grid. You asked the question of diverting this and diverting it to Hornepayne, which is shorter, maybe a little bit more expensive, because you are on rock versus swamps or soft ground but, in any case, we cannot get anywhere and we just cannot see why not. That would then give them this additional safety net and a potential for growth, of course.
On the issue about strong merits of conservation measures to help achieve cost-efficiency and self-sufficiency in the province, we suggest reduction and eliminating the need to rely on megaprojects which are a hazard to the environment and humans and are excessively costly to operate in the short, medium and long term. Of course, when there are breakdowns it creates a major disaster in terms of supply.
Introduction of a program of conversion to fuel for heating purposes: We think there should be a financial assistance program to home owners in relation to Ontario Hydro savings. We do not say to pay it all, but maybe some savings could be rechannelled towards such a program. It would help a lot in the north here.
Production of energy in an environmentally sound manner using Ontario resources should be maximized before considering external solutions. We think that Ontario Hydro should be conscious of the overall picture, the impact on provincial, regional and local economies, the impact on employment, the impact on the environment, the impact on our cost-efficiency and, of course, should keep an eye on the ups and downs of consumption in times of recession or economic surge.
In our case, right now we are fighting very hard. For instance, we have a major environmental problem. We used to have a firm by the name of BioShell which used to absorb all the residue and convert it into pellets to be transported to Iroquois Falls for fuel there, but since the deregulation on natural gas, this became too expensive, quite a difference. It was a lot easier to open up the tap and let a debt fall.
The companies had relied on a firm like BioShell, for instance, in the last decade to take care of the residue but, all of a sudden, overnight, and even though there are stipulations in the contracts that they would give a two-year notice, just overnight they said, "No, sorry, we can't take it," and that is it, that is all.
Now they are accumulating and there is practically a mountain -- only one of the mills for a half-year operation. There is a mountain there of residue that not only is an environmental problem, but could be a disaster in terms of internal combustion if heat -- and it was seen in another mill not too far from us just last year. We could have a major disaster.
We say also the north should have its share of opportunity in producing energy. Ontario Hydro should value power transmission lines as infrastructures and strategic tools for economic potential. The construction or upgrading of lines to accommodate non-utility generation projects should be a priority. Economic development opportunities are quite restricted in the north and resources for electricity generation capacity are readily available, just like I have said a while ago in terms of residues.
There is surplus natural gas right now. There are water courses that could be promoted under new energy directions. There is the added benefit of many small projects dispersed throughout the province providing economic spinoffs and better assurance of power in case of failures and disasters, since it would be restricted to specific regions. What I mean here also is that the ratio of employment per megawatt is higher with small projects than bigger projects, we believe. To have this shared across the north is a valid suggestion, and of course the economic spinoffs are important for survival. In this vein we think there should be a second look at the Ontario-Manitoba interconnection project and maybe cancelling, delaying, or diverting this money towards such an idea.
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It is noteworthy that, to our knowledge, the Municipal Electric Association and local public utilities, in our own town specifically, have chosen not to consult municipalities which are elected representatives of the public to protect and favour the general interest of the community and hence provide a more comprehensive view. So we were kind of surprised and we made our point to them.
In conclusion, I want to reiterate the fine line between the environmental, social and economic impacts that could be transferred to Ontario Hydro. We disagree that bailouts, for instance, should be added to Ontario Hydro's costs. Not only does it bring unfair competition sometimes between the same types of industry, but it tacks on some additional costs to the competition. We would like to caution Ontario Hydro this way. We also want to reiterate our support of the government's vision for Ontario Hydro to play a more active and responsible role in our economy and society in general.
Mr Wood: Thank you very much, Mr Gagnon, for coming forward with your presentation. I know the number of hours you had to travel by car to get here. I do the same trip myself, and it is a three-hour or three-and-a-half-hour drive to get here.
Second, I would like to personally thank you for bringing forth your representation for Hornepayne and around the Hearst area -- Hornepayne is not necessarily in my riding, but Bud Wildman represents that area -- and the concern that Nord Aski has brought, which has been covered in here.
The question I have concerns the communities in the north wanting to control their own destinies. I am talking about a community like Smooth Rock Falls, which has a cogenerating plant which gets rid of its waste. Cochrane has a cogenerating plant which gets rid of its waste and produces electricity. In Hearst, I believe, the whole population around that area believes in that route as far as Hearst is concerned?
Mr Gagnon: Yes. As a solution to our problem with the closing of BioShell, there was an interministerial committee with the Hearst Lumbermen's Association, including the municipality and Nord Aski, that was set up as late as last spring. Proposals were received for a cogeneration plant that would take care of all that residue in a very efficient manner and with quite a bit of economic spinoff.
There were all kinds of delays. We were told at first it was a problem that the line between Kapuskasing and Hearst could support only 100 megawatts. Then all of a sudden after all this work, late in the fall when everything was ready to go and take care of our problem, at the same time we were told that between Timmins and Sudbury there was a problem. It seems the right hand does not know what the left hand is doing. We were kind of flabbergasted. But I agree with you that the whole town and the population is in total support of this, including the Indian reserve in Calstock who have a mill on their reserve where half the employees at that mill are natives.
Mr Wood: I was going to ask you that question. I am glad you covered it because I believe that at Levesque Plywood, 50% to 60% who work there are native population.
Mr Gagnon: I think it is part of the contract to have that.
Mr Wood: They are in agreement with Nord Aski?
Mr Gagnon: Yes. It is just like the other project I spoke about a while ago, the Nagagami power project. There was a referendum held on the reserve. There were quite a few changes made to that project and now it is pretty near all underground. There was hardly anything done to the environment. They are supporting that project. As a matter of fact, they have shares in it.
Mr Wood: You made the comment that the public utilities commissions in Hearst and in maybe some other municipalities are not necessarily consulting with the mayor and the elected bodies before making presentations. Do you know of any other communities where this might be happening? I am not asking you to name them.
Mr Gagnon: I do not know of any that did. In any case, it seems to me from reading the material that they have taken a very strong position and there were not even copies sent, in our case, between the municipality and the PUC. I do not know, but I have a feeling it was done deliberately in order to avoid the other views that are of benefit to the public in general. This is one of the reasons I am here today.
Mr Huget: I too would like to thank you for a very constructive presentation. It is obvious you put some time into this. I thank you very much for taking the time to come down here today. I have a question as a follow-up to Mr Wood's question regarding the PUCs. You say in your presentation here that one of your minor considerations is the expansion of the board of Ontario Hydro and the related cost factors that go with that. I will certainly take those concerns under advisement.
The purpose of expanding the board was to get more of a cross-section of representation of the people of Ontario. We heard I believe yesterday or the day before from a public utilities commission that suggested the only representatives on the board of Ontario Hydro should be public utility commissions. I wonder what your views would be on that.
Mr Gagnon: I view the board of directors as kind of the people appointed to protect the interests of the public. How many people do you need to do that? It is answerable to the government in power at that point in time. I am sure you have sat on many boards, as I have. I do not know if everyone on there is a full participant and if there is not duplication. If we are serious about being cost-efficient, especially at this point in time, we are saying "I wonder why," because we think even a board of 11 could very well do the job.
Mr McGuinty: I was pleased when the government indicated it was going to promote and encourage production of electricity through non-utility generators. I have a concern that there has been a freeze on that. I understand it is temporary, but I am not sure. In any event, you mention in here that there is room for that kind of development in your area. Can you tell us to what extent?
Mr Gagnon: We have two examples right now that are right before Ontario Hydro. One is that energy complex that would take care of the residue, that would take care of all that environmental problem and that would create about 40 jobs, not counting local transport, one transport that would actually transport 27 miles from the reserve. It would create this. It is there on the table right now.
There is also that other project on the Nagagami River for 15. There are other possibilities, but the restriction was that the line between Kapuskasing and Hearst could only absorb 100 megawatts. That energy complex, to become viable, has to exceed 75 megawatts. They are in the process of getting 85 and maybe 90. The two projects marry very well, because when the production of the Hydro project at Nagagami is down in the wintertime, they can up it, and then it can become quite profitable.
Mr McGuinty: Have you received any indication from Hydro as to whether these proposals are going to meet with success?
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Mr Gagnon: We have confidence, because it follows common sense. It is logical that when they establish priorities, they do not just look at who was first in, the first-in-first-out philosophy, but they look at all the criteria, all the items that are of importance, in order to arrive at a decision and to prioritize.
Mr McGuinty: You mentioned that you felt there was room for other developments of a similar nature.
Mr Gagnon: Yes, there are others along that river. Nagagami Power, for instance, requested 25 megawatts but they have reduced it to 15 megawatts in order to start with phase 1. There are other possibilities that are not on the table right now.
Mr McGuinty: Are you not meeting any environmental concerns or native land concerns?
Mr Gagnon: In the case of?
Mr McGuinty: The non-utility generation.
Mr Gagnon: In our case, we have their total support. I think we are quite environmentally friendly. In the case of the hydroelectric project, you just go about 150 feet down in the rock. The discharge channel is all underground. It is two rivers that are parallel. There is a little dam of about 20 feet and the backup is very minimal. You encroach only four feet on the side. In order to avoid the mercury problem, the one side is rock and on the other side they will take away the surface. All these things were looked at and analysed, and it is ready to go.
Mr Jordan: Thank you for taking the time to be part of our committee. On page 3 of your submission, you say, "The key is to ensure that costs not related to the purposes of producing electricity and delivery are not buried at the expense of the consumer." Would you like to enlarge on that, please?
Mr Gagnon: There could be some costs. It is hard for us to imagine the whole province when you are living in a little town like we are, but we can envisage that at some point in time there could be some cost imposed. We look at Elliot Lake for instance and the fact that they can have the material cheaper than what they have now. Is it reasonable at this time to get that cost diverted to the consumer? We never really sat down and tried to find other cases, but we think potentially there could be some diversion of costs that are not really Ontario Hydro's. We hope everybody will be on their guard not to do that.
Mr Jordan: So if the government wanted to do something like that, it could take it out of the general fund rather than --
Mr Gagnon: That is right. We are saying at that point in time, if Ontario Hydro is a tool for economic development, it is not necessarily required that it absorb the cost, but it could be the infrastructure, the tool, to do it. Especially in the north, Ontario Hydro should be an infrastructure for economic development. We believe in that totally.
Mr Jordan: I understand from the revised demand-supply plan that the development of hydraulic sites in the north has been set aside in favour of the 500-kilovolt tie-line from Manitoba.
Mr Gagnon: To my knowledge, the one I referred to was not. They had status, and I think logically it should go through.
Mr Jordan: I believe the problem was with the environmental effect on the property owners adjacent to the site. Rather than create whatever problem would be created, in order to proceed with the development, they favoured the 500-kilovolt tie-line to Manitoba.
Mr Gagnon: I am not aware. I am just aware of that little project.
Mr Jordan: You do not have a copy yet of the revised update.
Mr Gagnon: I just got it.
Mr Jordan: I have just briefly looked at it also. I guess you end up by saying, "We support the government's vision for Hydro to play a more active and responsible role in our economy and society in general."
Mr Gagnon: We refer here to our specific problems. We have the Nord Aski region, the one of the problem of environment. As a matter of fact, the Ministry of the Environment has been very supportive. They were supposed to get something done last June, delayed it in the fall, and January 14 was supposed to be the deadline. That would have closed all the mills in Hearst, and there is nowhere to go. There is one firm that made an offer recently. I do not know how firm it is, but it would mean transportation of many miles to Iroquois Falls.
Mr Wood: It is an eight-hour round trip.
Mr Gagnon: About. That would cost $2.7 million annually. Does it make sense to spend all that money and bring it there, losing the jobs in Hearst, not having that firm locally, you know, as a corporate citizen, the hazard on the highway in the wintertime, environmental problems in terms of the gasoline? We are saying to establish priority in those criteria. They should look at the total picture.
Mr Jordan: Yes. Just one final, short question on cogeneration. I believe you were referring to energy from waste.
Mr Gagnon: Energy from waste combined with natural gas. In the experience of the lumbermen -- and they have gone through it; some of them had their own project -- the combination is necessary at this point in time with the technology available. For those who have gone only waste, the humidity content and so on entails major problems. So the one that was efficient and the one they want to look at and have agreed to look at --
Mr Jordan: The government has agreed.
Mr Gagnon: The lumbermen's association.
Mr Jordan: Yes, I understand that.
Mr Gagnon: Because they control the residue.
Mr Jordan: But I understand our present government is not in favour of energy from waste.
Mr Gagnon: I think they are.
Mr Jordan: I could be wrong, but --
Mr Gagnon: The combination? That is the only solution. The interministerial committee that represented the ministries of Energy, Northern Development and so on -- there were three or four or five ministries -- has agreed. So this is a surprise to me.
Mr Conway: It is a surprise to me too.
The Chair: Mayor Gagnon, surprises are a daily occurrence, as you well know from being in this business. I want to thank you very much for your community's interest, for your participation this afternoon. You have travelled a significant distance and we are grateful to you. I trust that you will keep in touch with the respective caucuses, keep them advised in an ongoing way of your views and that they will let you know what happens to this legislation as it develops.
Mr Gagnon: I thank you.
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MUNICIPAL ELECTRIC ASSOCIATION, DISTRICT 9
The Chair: We have our next participant, Mr Stan Smith, from the Municipal Electric Association, District 9.
I should explain to people who are observing that each participant was scheduled with 20 minutes of time. When, however, there is a last-minute cancellation, as there was, it permits the committee to spend a little more time with a participant who happens to be sitting with the committee at the time that cancellation occurs. There is a strong effort on the committee's part to be fair and to provide equal time to all participants, but we certainly would not want to waste time with, let's say, a 20-minute adjournment. That would be idle time. It is far better that we spend it discussing the issues.
Sir, please tell us the capacity in which you represent the Municipal Electric Association, and proceed with your comments.
Mr Smith: I am the vice-chair of District 9 of the Municipal Electric Association and also a commissioner with the Sudbury Hydro-Electric Commission. I welcome the opportunity to present a brief to your committee with respect to issues contained in Bill 118. I am here today not as a commissioner of Sudbury Hydro but in my capacity as vice-chairman of District 9.
District 9 of the MEA represents electric utilities in the northeastern section of the province, including large utilities such as North Bay Hydro-Electric Commission, Sudbury Hydro-Electric Commission, Sault Ste Marie Public Utilities Commission and also small utilities such as Chapleau Hydro, Thessalon, Latchford and Larder Lake, a total of 21 utilities serving some 200,000 customers.
As a district, we are vitally concerned about all aspects dealing with electricity, ranging from security and reliability of supply to the cost to the customers we serve. Electricity is absolutely essential to the economic wellbeing not only of northern Ontario but of all the residents of the province. It is for the above reasons that I appear before you to voice concern on specific issues contained in Bill 118.
The first issue is policy directives by government to Ontario Hydro. This particular matter has received considerable attention at the provincial level. It is our understanding that Ontario Energy minister, Will Ferguson, has undertaken the commitment that the government will make sure that any policy directives issued to Ontario Hydro will not change the mandate of Ontario Hydro and, further, that any policy directives issued will be consistent with Ontario Hydro's mandate under the Power Corporation Act.
I bring this forward to ensure that this undertaking by the government is adhered to. We feel that the principle of power at cost must be followed and that the role of Hydro be clearly identified as being the supply of electricity to the province.
A second issue is energy conservation and fuel substitution. While we all support the principle of energy conservation for all forms of energy, be it electricity, gas, oil etc, we wish to convey to you our serious concerns on the issue of fuel substitution, specifically conversion of electric to gas for space heating. The minister has indicated that it is the government's intention to move forward on fuel switching. It has undertaken a commitment to consult with Ontario Hydro and municipal electric utilities. However, we do have three fundamental concerns here.
First, users of electricity should not be expected to bear the financial cost of switching to an alternative fuel where the beneficiary of this switch will be the gas customers and the gas company. This is an unfair charge to impose upon the users of electricity. If this is to be done, the cost should be borne by the gas industry, which will benefit directly by increased sales. With the high percentage of penetration in electric space heating in northern utilities, with 30% of the customers using electricity for heating, fuel substitution would be financially horrendous.
Second, in our opinion there has not been a long-term evaluation of the supply of gas nor its cost to the end user. In fact, the absence of any long-term evaluation of the availability of gas should be a matter of urgent and detailed study by the provincial government before any action is undertaken on fuel substitution. One only has to look at the current problems and demands placed on the primary gas suppliers by what is going on in the United States. We view this as a matter of potential concern which could put the users of gas in the province at risk in future years.
Third, although gas has lower overall emissions to the atmosphere as compared with coal or oil, the fact remains that increased use of gas will add to the emissions problem. This matter must receive further study before proceeding with the fuel substitution initiative.
In our view, the move towards a fuel substitution program in the absence of any long-term energy strategy for the province as a whole is premature. What happens when the price of gas exceeds electricity? What happens when the gas supply runs out? What happens when somebody turns the tap, cuts it off? The only fallback position to make the province less dependent on outside fuel sources is nuclear power. We strongly urge this committee to consider the urgent need to develop a long-term energy policy for Ontario as its first and highest priority.
Electricity and its importance to the economic stability and development of the province: As a District 9 representative and as a commissioner, I know the importance of a secure and competitive supply of electricity to the economic wellbeing of this province. Our concern is that through the actions of government in the moratorium on nuclear power and the application of charges such as the water rental charges, debt guarantee charges, the implementation of the federal goods and services to electricity etc, all have contributed to escalate the cost of electricity and added to the uncertainty of future supply.
The principle of power at cost must be adhered to if we are to retain and attract industrial and commercial growth, and we seek this committee's support in ensuring that this principle is maintained.
It has always been the mandate of Ontario Hydro from its inception to supply power at cost to this great province of ours. I refer you, if you ever have a chance to read it, to this booklet I have a copy of called The People's Power. It was published in 1960. It goes back to the inception of Ontario Hydro up to that point in time and the battles that Ontario Hydro constantly fought with the government to retain that principle. Here we are, 30-odd years later, still fighting for that principle.
The principle of power at cost has been one of the leading factors responsible for the growth in manufacturing, mining and industry in general that this province has enjoyed in the past. We must in all good faith maintain this principle laid down by Ontario Hydro's founder, Sir Adam Beck, the supply of power at cost, so that the prosperity and growth of this great province can once again be triggered.
Respectfully submitted. Thank you very much, members of the committee.
Mr Conway: That book is by Merrill Denison, is it not?
Mr Smith: That is correct.
Mr Conway: It is an interesting book. Mr Beck has enjoyed a very good reputation. I must say that while I accept some of your argument, one of the things I have always admired about Adam Beck was how he was able to construct an apparatus using actually more the tactics of Greenpeace than anybody else to kind of put himself outside anybody's control. Quite an effective fellow was our Adam Beck.
I will not bore you with it, but there is another book by a fellow named Nelles called The Politics of Development, which looks at Hydro in a more detailed way. I recommend you read that. Part of my terror with the new Hydro chairman is I think we have Adam Beck revisited: Adam Beck to Marc Eliesen in two easy steps. But I am not altogether objective on that subject, so I do not expect to be taken as such.
I do want to ask you one specific question, and that has to do with fuel substitution. You seem to be very sceptical. You will want to read the chairman's latest pronouncement from the mountain, because it is very interesting reading. Mr Eliesen has certainly not bothered to tell this committee what he is up to, but he has told the province today that he has some brave new plans. From what I can read, fuel substitution is a very significant part of this, and he has some very ambitious targets. He is succeeding at a rate that is positively breathtaking. By next spring, Bill 118 and a lot of municipal electrical utilities may be entirely redundant, because he is making gains on demand management and fuel substitution at a breathtaking pace. It just awaits, I think, the melting winter snows to see how he is going to amend this even further by about March or April.
Poor Mr Jordan is going to want to read this very carefully, because we are making very great progress, but clearly Mr Eliesen in his revised plans anticipates dramatic gains on demand management as a result of fuel substitution. It would only be a naysayer who would not appreciate that this is a brave new world, and I just do not understand and I need you to help me understand how it is that fuel substitution might not be the best news for Sudbury Hydro.
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Mr Smith: Maybe I did not put that quite clearly.
Mr Conway: I think you put it clearly and I would like you just to explain, because I think you make a very good point and I want to understand. I think you said in your brief that something like 30% of your customers use electricity as space heating.
Mr Smith: That is correct.
Mr Conway: If there is a substitution away from that, the residual cost to the ratepayers in places like Sudbury will be noticeably higher.
Mr Smith: Very much higher.
Mr Conway: Can you just flesh that out a wee bit?
Mr Smith: The consumption of the electrical house user obviously is fairly high. They are among our highest consumers, and that cost of power, the return on that usage, helps to run our utility, and we put in an infrastructure to support and provide that extra cost in transformation, in distribution and what have you. If that consumption then disappears, the capital cost to put in that extra infrastructure is still there. It is amortized over 20 years and we still have to pay for it, but we have to pay for it now on a reduced consumption. Therefore, for the remaining customers, obviously their rates are --
Mr Conway: But your bulk power rate is going to go down significantly apparently, because you are not going to have to build all these --
Mr Smith: From all our information, our power is going to go up significantly.
Mr Conway: But you are not going to have buy all this expensive Darlington power.
Mr Smith: That is hypothetical. We do not know. What I am trying to say is that we have fixed costs in place that have been put in to supply all these subdivisions and what have you so that they are all 200-, 300-, 400-, 500-amp service. There are a lot of them in Sudbury. It has been a favoured fuel, I might say, over the last decade, and we promoted it.
Mr Conway: So you are telling me that over the intermediate term, if the fuel substitution, which quite frankly most people expect to happen and most people I think see as a good thing --
Mr Smith: I would not deny that it is a good thing. We are very concerned that it is not done at the cost of the existing hydro users, if people want to let the market forces take care of it.
Mr Conway: Setting aside the very valid question of who pays, where I do agree with you completely, am I right then in understanding you to say that in at least the intermediate term, if fuel substitution -- let's say away from electricity for space heating to natural gas, which will be the obvious alternative of choice where it is available -- is modestly successful over the intermediate term, and by that I mean, say, the next three to eight years, that could in that intermediate term produce in your view significantly higher electricity bills for those people who are paying them in the Sudbury area?
Mr Smith: As a commission, yes, we feel that.
Mr Jordan: Thank you, sir, for your fine presentation. You noted that the Minister of Energy has stated that he will not issue directives that are outside the Power Corporation Act.
Mr Smith: We understand that.
Mr Jordan: My concern is, which act are we talking about, the act as it is now or the act as amended?
Mr Smith: It is my understanding it is the act as it is now, not the act as amended.
Mr Jordan: I personally have not had that clarified, because the act after Bill 118 is not going to be the same, as you are well aware.
Mr Smith: That is correct.
Mr Jordan: So when you assume that the directives issued will not be outside the Power Corporation Act --
Mr Smith: If I may, Mr Chairman, I will just quote from the October 2, 1991, statement by Will Ferguson, the Ontario Minister of Energy, on Bill 118:
"When I opened debate on Bill 118, I indicated the government would be listening closely to what was said. I also informed the House that the government would be responsive where appropriate. We are responding.
"The changes that will be moved during committee will make it clear that the intent and purpose of the legislation is to provide the framework for a new partnership with Ontario Hydro and remove the barriers to the implementation of our new energy directions. The primary goal of these new energy directions is to protect the environment while ensuring that the province continues to have a reliable supply of energy at reasonable prices.
"We propose to make it perfectly clear that any policy directive that is issued must relate to the corporation's exercise of its powers and duties under the act and not lead to an extension of those powers and duties by means of government directives.
"Mr Speaker, we have heard from the Municipal Electric Association and a number of municipal electric utilities and we are seeking to be responsive to their concerns. We will continue to listen as the legislative process unfolds.
"The government shall also move some minor wording changes dealing with the substitution of other forms of energy for electrical energy. These changes will clarify the government's intentions."
So we are given to understand that there will be consultation with the MEA. I am only speaking on behalf of District 9, not the main body. When we held our annual meeting here in October this is the understanding we received from the government at that time. Does that answer your question?
Mr Jordan: Why I am concerned about it is, the present act relates to the safe use of electrical energy, the improvement of a system for the use of electrical energy in a building and the conversion of a space heating system to one based in whole or in part on the use of electrical energy.
That is going to be revised to read, "The safe use of energy." It will not be "electrical energy." It is, "The safe use of energy." The other will be, "The improvement of an energy system in a building," which means any energy system. The third now reads, "The conversion of a space heating system to a system based on the form of energy that would result in the greatest energy conservation in the circumstances." Ontario Hydro will be absorbing the cost of conservation of all energies relative to the building and relative to the system. That is my interpretation. I was wondering if you had one.
Mr Smith: I am afraid I have not seen that quote. I have not seen that document you are quoting from.
Mr Jordan: It would be my pleasure later to bring it to your attention. Thank you very much.
Mr Martin: I am sorry I was not here for the beginning of your presentation. However, certainly the end of it intrigues me. The place you come from interests me, because initially it was on the sheet here that you were going to be a gentleman from Sault Ste Marie.
Mr Smith: Mr Chairman, if I could clarify, I was called suddenly yesterday. Apparently the gentleman from Sault Ste Marie, Ed Bondar, who used to work for the Hydro, his daughter is one of the astronauts. He has taken the opportunity to go down there, so I was asked to substitute at short notice.
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Mr Martin: I appreciate your coming on such a cold day. I want you to know that the reason I was not in here was that I was talking to the mayor of our community on the phone because we have some mutual concerns about the economy of our community, and certainly the question of energy enters into that discussion.
In our community, there is a proposal on the table with Ontario Hydro and the ministry actually to build a cogeneration plant on the property of Algoma Steel which would in fact provide energy to St Marys Paper to a saving of about $500,000 a year, which is significant as we try to save an industry in the forefront of the recession that is raging at the moment. I ask you to help me struggle with that.
You presented, and rightfully so, the cost of the infrastructure in place in your community and in my community which, no matter how much energy is going through, has to be paid for. The question I ask is: Which becomes more important, providing the industries in our communities with a cheaper source of energy through some other form of generation or continuing the method we are using at the moment? Because there are costs to that. Downsizing to bring it on line might be fairly costly, perhaps to the utility commission and perhaps to the city, I am not sure. Could you talk about that a little bit?
Mr Smith: I cannot speak for Sault Ste Marie because I am not familiar with the problem out there, but as far as Sudbury is concerned, if there was a chance to put a cogeneration plant in Sudbury that could help feed the nickel industry and also feed the utility in a cost-effective way, I think we would look at it very seriously.
We would have to study the impacts, we would have to study the bottom line, as you might say. We certainly would not reject it. We would look at it very seriously even though it may in the short term have some adverse effects, but in the long term have benefits to the community I am elected to serve. I am not elected to serve people outside so much as I am in the community of Sudbury. But we would certainly look at it.
Mr Martin: In that scenario, where it is an obvious benefit to the community from an industrial perspective, do you think it would be appropriate for Ontario Hydro to put some dollars in to see if this was possible or to make is possible?
Mr Smith: If it is an expense, it is a cost that is applicable to the industry, I do not really see any objections to that. But if it is a cost that would promote another form of energy, I think that other form of energy should have an obligation to participate in that cost, if you understand what I mean.
Mr Martin: Yes, I do.
Mr Smith: It should be a shared thing. It should not all fall on the shoulders of our ratepayers. We have no objection to looking at any of these substitutions provided it is a shared cost, provided all the cost does not fall on our ratepayers. The industry, if you want to put it that way, or the utility that is going to benefit should share part of the cost.
Mr Martin: I believe at the moment from everything I have seen so far the intention of Great Lakes Power is to carry all of the costs. But there may be other costs incurred that Ontario Hydro may be asked under this bill to assist with. That was the context within which I presented this. I thank you very much for your comments.
The Chair: Mr Klopp, one quick question.
Mr Klopp: Since you said one quick question and you said I was short, I will do two real quick ones.
The Chair: As a matter of fact, you can ask three quick ones.
Mr Klopp: Two. Back in my riding, I had a Hydro person come up to me and explain to me that the government happened to be giving some money to a contractor to build something; it was government, not a private contractor or a private apartment building. He said: "I don't understand. Governments get really serious with us so that we don't build more plants and keep our electrical costs constant over the years, instead of inflation and all that good stuff. Yet here is a government contract going out and they are going to put in electric baseboard heaters, which are the most inefficient things going. The company is going to make money, but in the long run we're all going to be paying it on our electrical bills. We all are, and I make good money, but it is very inefficient."
He took a strip off my back, and I said, "Well, sir, why didn't you go and tell those people that they shouldn't be using electrical energy?" and he said: "Because the mandate of Ontario Hydro says that I can't. I can only talk about electrical energy. I can't begin to talk about anybody else."
Leo brought it up. Now the act is being changed and Ontario Hydro is to look at wider ranges. Do you think it is a good idea that the act should be changed so that an Ontario Hydro person can talk about other sources of energy?
Mr Smith: I see no objection to it at all. People ask me all day long. I am elected to represent our community on the electrical utility, but many of my constituents talk to me about gas and oil and give me hell about electricity and one thing and another in the context that you say.
Mr Klopp: The act allows that they can look at other things besides electricity.
Mr Smith: I talk about it.
Mr Klopp: You said in your comments that the only fallback position of Ontario is nuclear power. What did you base that on?
Mr Smith: As I understand it, Ontario has no fossil fuels. That was the whole idea of Ontario Hydro: It had no fossil fuels. We have no coal; we have no oil, or very little of it. We had nothing else until uranium was discovered, so we depended on Ontario Hydro and Ontario Hydro triggered and is responsible for where this province is today: cheap power.
Mr Klopp: We have complaints it is going up every --
Mr Smith: I am talking historically; I am not talking about today. If you read any of these things, it is a constant battle to keep this power at cost. It is power at cost, gentlemen. It became power at the lowest possible cost and it became power at the most feasible cost, and now God knows what it is. But it was power at cost, and the fact is, because of that and because the people of this province were able to keep control of their power, that industry came in here. Industry came into this province because we were able to offer it over the years the lowest possible cost in hydro of any other state or province in the country, and gentlemen, we are fast losing that. You can see the result.
Mr Klopp: That is why we have to change the act.
Mr Smith: You can see the result right now: The cost of hydro is going up and up and industry is going out and out. That is the bottom line.
Mr Klopp: Do you not draw the line that we have also increased it in nuclear power? Do you not see that line at all?
Mr Smith: I am sorry. I do not understand you.
Mr Klopp: We have also increased our nuclear dependency by 60%. Sixty per cent of the hydro in Ontario -- it depends if it is running or not -- depends on nuclear power, and that is why the cost has been going up and up. That is power at cost, but what a cost.
Mr Smith: There are an awful lot of other costs that have gone in there that have nothing to do with nuclear: water rental costs, debt guarantee costs, you call them whatever you like. They are nothing to do really with the cost of power.
Mr Klopp: Sixty per cent of it has to do with nuclear.
The Chair: Mr Huget has a brief matter, because we have to wrap this up at 4 pm.
Mr Huget: I would just like to follow up a little bit on Mr Klopp and that continuing discussion about the nuclear role in Ontario.
My view is that, first of all, I do not believe nuclear power is necessarily cheap. There is an environmental issue in terms of dealing with nuclear power facilities, and I think you would agree that the efficiency level of operation of nuclear facilities in recent history is far from being optimum. When I hear your district or you saying that the only fallback position in the province is nuclear power, I am wondering, do you not think it is in the best interests of Ontario, your utility, industry and the general public that we pay some attention to those other possibilities until we deal with some of the issues that are very much a concern of everyone, when you look at the environmental and the efficiency and the cost factor of nuclear power?
Mr Smith: I agree with you 100%, but the point is we do not just stop. As I understand it, anything to do with nuclear at this point in time has just stopped dead. We feel, at any rate, that at least the planning, or whatever has been in place up to this point, should continue, if it is decided to build these plants in whatever shape or form, large or small. They are not built in a year. They are not built in five years. They are not built in six or seven years. We are looking maybe 10 years down the road. If we do not do anything now, 10 years down the road that supply and demand -- which did start to cross over now, as I read in today's Globe and Mail. It has now sort of gone the other way. But it may not, and we hope it does not. Once this province gets moving again, and we hope it will very shortly, the demand for hydro power is going to go up.
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Mr Jordan: If the price is right.
Mr Huget: I understand what you are saying, but I guess my concern is that certainly there is extra supply to be gained from at least getting our current facilities to run efficiently. From a business point of view and an economic point of view, I do not know how we could condone going ahead with this strategy until we have dealt with a couple of issues, and the obvious environmental one, but that efficiency one -- if we were ever to get our plants running the way they should, that in itself would generate a lot of capacity without creating a new facility anywhere.
Mr Smith: Very true. We support energy conservation in every way we can. There is a lot of wastage in the system. We do not deny it. There is wastage in the system, and we need strongly to look at it and we need strongly to flesh it out, as you might say, and correct it. It is there. It is in any system, but it does not mean to say you quit planning for 10 years down the road. Once you have reached the maximum conservation or efficiency possible, then what do you do if your demand is still rising, as we hope it will?
The Chair: I am going to try to balance out the time allotted to each caucus. Mr Conway, briefly.
Mr Conway: I really appreciated your presentation. I think you make quite an interesting argument. Much of this debate is about the role of nuclear power in Ontario's energy future. That much is very clear from these hearings, and there is what I have called in the past a theological difference of opinion on the use of nuclear power in this province. I think it is fair to say that some people have a passionate commitment that it is the worst possible environmental and financial commitment that the province has ever made or could make in the future.
I think there are other people who see it rather differently. I must say we have a new government with a new perspective. I have been around the Legislature longer than I think anybody in this room, and in that the government is consistent, but we will deal with that at another time.
I gather you live in Sudbury.
Mr Smith: Correct.
Mr Conway: My friends tell me that, if I have a free day, I should go to Espanola, because in Espanola I am going to see one of the world's great undertakings, and that is the Ontario Hydro conservation project that is blanketing that community. Since you live a lot closer to Espanola than I do, can you hint at what awaits me when I get there?
Mr Smith: My understanding is -- and, of course, I know quite a few people in Espanola -- they are very happy with the program.
Mr Conway: I gather it is pretty hard to be unhappy with it.
Mr Smith: They are very happy with it and, as far as I could hear, it has had some very positive results.
Mr Conway: I am really looking forward to making a quiet, unannounced visit some day to Espanola, because my friends tell me that it makes previous government projects around urea formaldehyde foam insulation -- well, that is actually not fair -- but the old insulation schemes and some of the other government programs of a decade or so look pretty minuscule by comparison. But you hear good things about it?
Mr Smith: Very good things.
Mr Jordan: I have a couple of quick questions. As we go through this fuel switching which, in accordance with the information I received today, is proceeding regardless of whether we meet here or not -- I understand it is going to proceed. It has been announced as a positive, that it will, not shall, proceed. It is going to go ahead. I do not know if we are gaining anything or not. If I was here as an individual I think I would tell myself to get in the car and get back to my constituency where I have work to do. If my work here is going to be in vain, I should be told that and let me go on with my other work.
Mr Smith: I quite understand.
Mr Jordan: That is what I am feeling. I hope it does not turn out that way but only time will tell. We are talking about heat here basically, shifting the load, 750 megs, over to gas. What is going to happen to your peak in Sudbury? Is it going to become a summer peak?
Mr Smith: Could be.
Mr Jordan: So you still are going to pay the bill but you will not have the kilowatt-hours.
Mr Smith: Then we will try to sell heat pumps or something like that and when we have flooded the market somebody will come along and tell us we did the wrong thing. It is a no-win situation at the moment.
Mr Jordan: Yes, but it is a business.
The Chair: Mr Smith, thank you very much for coming here, especially on short notice. You have provoked and generated a whole lot of interesting discussion. We appreciate it. I trust you will keep in touch with the members of the committee, at least the critics of the respective caucuses and the parliamentary assistant. Take care, have a good trip back home and we look forward to the opportunity of seeing you again.
There are no further presentations this afternoon. Mr Poulin of People Acting for a Clean Environment has elected to fax a submission. It will be distributed to members of the committee. We told Mr Poulin by phone that the committee will be given an opportunity perhaps some time next week to respond, if anybody wishes, to the submission. He will receive a transcript of that and then he could reply further, should he wish to. Otherwise, there is no other matter, subject to anybody wanting to raise a matter for the committee, until 7:20 pm this evening.
The committee recessed at 1607.
EVENING SITTING
The committee resumed at 1935.
CITY OF TIMMINS
The Chair: The first presenter is his worship Victor Power, the mayor of the city of Timmins. Before he begins his remarks, I am going to take the liberty of speaking on behalf of the committee and staff travelling with us to indicate that we have all been impressed, albeit a brief visit, with the hospitality and graciousness of people here and how well we have been received and taken care of since we arrived here early this morning. We are very pleased and happy to have been able to make it to Timmins.
Mr Power: Thank you, Mr Chairman. I will pass those remarks on to those responsible. I would also like to say that we appreciate very much the fact that you selected Timmins as one of the sites for the sittings of this committee. Thank you for this opportunity to comment on Bill 118, An Act to amend the Power Corporation Act.
I am pleased to see that the duties of the chairperson will now include those of chief executive officer. Hopefully this person will become more involved in the operations of Ontario Hydro on a daily basis.
There does not seem to be any reason given to justify why the board must increase from 17 to 22 members. As recently as 1989 the complement had been increased from 13 to 17 members. Some justification should be given to support the need for four additional board members. The public should be made aware of these costs, especially in light of the staggering Ontario Hydro rate increases. Ontario Hydro must look at means of reducing costs. Should the cost for additional members prove to be justifiable, then I trust an appropriate number of northern representatives will be appointed to the board.
Under Bill 118 the Minister of Energy is given the authority to issue policy directives that have been approved by the Lieutenant Governor in Council. This is a positive move if the minister and his government have the courage and conviction to set policy that will be beneficial to the residential, business and industrial users of the province.
This province, as we all know, is still struggling to escape the throes of the current recession. Excessive hydro rate increases will not help improve our economic wellbeing but will do further damage. Increases should be tied into the percentage municipalities receive from the province for unconditional grants or, at the very least, the cost of living for the previous year. We must all live within our means.
The Minister of Energy must look at this authority granted under Bill 118 as an opportunity to implement policy that will put Ontarians back to work.
1. In order to keep industrial operations viable, Ontario Hydro must be able to adjust the rates for industrial users to reflect poor economic conditions. Locally, Falconbridge is one of the top three users of hydro in the province of Ontario. Every time the hydro rate is increased it impacts on the number of people employed, both permanent and contracted, and the goods and services purchased locally.
From North Bay to Hearst 64% of all hydro used is used by six large employers. Four of these are located in the city of Timmins: the Kidd Creek mine, Malette's waferboard division, Placer Dome and Royal Oak. Our citizens are concerned about the huge increases in hydro rates, 44% compounded over the next three years. There is no business in Ontario that would survive in today's economy with a 44% increase in the cost of its product. Why should Ontario Hydro be exempt from market realities? Hydro rates must be competitive to protect the jobs we have and to promote new employment possibilities.
2. Ontario Hydro must be directed to become more cost-efficient in its operations.
3. Ontario Hydro rate increases must be kept to a minimum. The citizens of this province cannot absorb double-digit increases at this time.
4. Energy programs must be developed to encourage the citizens of this province to use the most economical means of energy, whether it be natural gas, hydro or some other form of energy.
5. If we are not able to produce power at a reasonable cost, this province must be able to purchase energy from other sources. There is power to be purchased in the east and west that is produced at a much cheaper rate than this province is selling it to its consumers, but that energy is being exported to the United States for its benefit. Free trade should not only be between countries but also among provinces. This, by the way, is not an endorsement of free trade but a realization of the fact that the omelette cannot be unscrambled.
6. All provincial ministries should be encouraged to work together with Ontario Hydro to assist wherever possible in helping to speed up the delivery of new energy sources and programs.
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In summary, this issue comes down to one four-letter word, and that word is "jobs." Affordable hydro rates will mean the retention of existing jobs, the creation of new jobs and economic opportunities for the city of Timmins, which as you know has long been the mainstay of the province of Ontario.
Mr Chairman, this concludes my remarks on Bill 118, and again I thank you for this opportunity to express for your consideration the views of the corporation of the city of Timmins.
The Chair: Thank you, sir. We have time for questions and conversation. First, Mr Jordan.
Mr Jordan: Your worship, I appreciate your taking the time this evening to come and present a brief to us on Bill 118. I personally apologize for being a little late in getting back to the meeting, but I hope I have not delayed you that much.
I noticed in your brief that you have more or less supported the government in its efforts to implement Bill 118. Are you in favour of the bill generally or are there some aspects of the bill you have questions on?
Mr Power: I would say generally we are in favour, but it is the application we are concerned about. What we hope is that if Ontario Hydro does come under direct control of the cabinet, action will be taken to ensure that the job situation in places such as Timmins -- that is the one I am familiar with -- is rectified.
I will give you an example: Kidd Creek Mines. They have a hydro bill of about $50 million a year. Part of the Kidd Creek operation is a zinc plant -- the biggest zinc mine in the world, right here -- and it uses a terrific amount of electricity. The increase in their bill, I think, in the past year is something like $9 million. They are at the point now where if this should continue for the next three or four years, there just will not be a zinc plant.
That is what we are concerned about. If Hydro is going to come under the direction of the cabinet, or the Minister of Energy specifically, we want to see action taken that would reflect in the rates across the province. If they have to be adjusted to make it possible for people to work, then I say let's do it.
This is the first recession the city of Timmins has ever experienced. We did not experience the Great Depression of the 1930s. We did not experience the recession of 1981-82, but we are certainly hurting right now and we are very concerned about jobs, and hydro rates are tied to them in the biggest way.
Mr Jordan: I understand the 11.8% increase in 1992 would make as much as a cent a pound difference in the price of zinc.
Mr Power: Yes, you are right.
Mr Jordan: And that company is quite concerned. With regard to the fact that we do have an 11.8% increase and we do have a conservation program, if you will, how do you see the government's actions, as laid out in Bill 118, are going to change the cost of power in a positive way if we are going to subsidize fuel switching and other forms of --
Mr Power: I do not quite get the drift of the question, to tell you the truth. Do you want to amplify that?
Mr Jordan: Yes, I would not mind. For instance, the light bulb campaign, $7 million. If it turned out as it was advertised to do, the best you could get back would be $5 million, so how many investments such as that would you want to see?
Mr Power: I do not know. To be honest, I am not terribly excited about these light bulb campaigns. I think that is maybe razzle-dazzle, frizzle-frazzle. It is public relations, as far as I can see, although I could be wrong. I have not done any research on it.
Mr Jordan: But the $7 million is a --
Mr Power: But they are spending money on light bulbs and perhaps that will save some money. What I am saying is that if it comes to the point where rates have to be adjusted in a certain area to keep the industries going, then let's do it.
I know Hydro has a big debt. I know they are paying for nuclear power plants and so on. But the biggest thing we do not want to lose sight of is the fact that we have people working in Ontario and we want more people working in Ontario. If Hydro is the key to that, then we have to keep that in mind.
Mr Wood: Thank you very much, your worship, for coming forward and making an excellent presentation. It has covered a lot of areas.
I want to follow up on what Mr Jordan has said. You emphasize the fact that you realize Ontario Hydro has a huge debt. A lot of it is the result of nuclear plants it had built over the years and probably half of the 11.8% increase is the result of the debt. I do not know if you are aware of that or not. One further comment is that the 11.8% hopefully would not come up to 44% over three years, as you have suggested in here. Do you feel that Bill 118, by allowing power switching to conservation and to gas and to other ways of producing energy, is going to help to reduce the costs of hydro?
Mr Power: Hopefully. Only time will tell, and we are not against that. As I say, there are a lot of things in Bill 118 that are positive. We are not here to oppose Bill 118. What we are here to do is to bring to the attention of the government of Ontario -- and I cannot think of a better committee to address than this one -- that hydro rates are the key to employment in this part of Ontario. That is the long and the short of it, and unless we have competitive hydro rates -- you know yourself, Mr Wood, with respect to the Kapuskasing situation last summer, hydro was the key component in that whole deal, and hydro is your key component here. We have not closed Kidd Creek, and hopefully that will not happen. Nobody is talking about that right now, but we have other industries besides Kidd Creek, and I am certain we could have more industries here in this part of the province related to mining and related to lumbering if we had competitive hydro rates.
Mr Wood: Along that same line, your feeling is that the position the government and Ontario Hydro took concerning Kapuskasing was a good position to take?
Mr Power: Oh, yes. I think they rescued a situation that could have been a lot worse. They did the best they could under the circumstances, no question about that.
The Chair: Mr Wood, we have to allow Mr Huget a question.
Mr Wood: Just one brief one.
The Chair: Okay, but it is between you and him.
Mr Wood: At Sioux Lookout yesterday, we had a presentation saying they felt Bill 118 did not go far enough, that it should go a little further. I am just wondering if you had any suggestions.
Mr Power: How much further would it go? I cannot think of how much further it might go.
Mr Wood: You do not have any other amendments you could suggest?
Mr Power: No, not on that score.
Mr Huget: I will be extremely brief. First of all, let me say I had the privilege of being in Timmins a few months ago with the city's energy forum project that was under way here, and I have to tell you, the enthusiasm displayed by the individuals at that forum was quite refreshing. There was a lot of interest in energy-efficiency issues and conservation issues and I was quite pleased with the turnout here in Timmins. It was a very good event.
I will briefly make comment on the increase of the board members. The intent of increasing the number of board members was indeed to provide for a broader cross-section of representation of the people of the province, but I certainly can understand and appreciate your concerns in terms of the cost issue of increasing the size of the board, and I will take that under advisement.
You mention in your brief that other ministries should be working more closely with Hydro or with the Ministry of Energy in terms of trying to work within a development strategy. Can you elaborate on that a bit?
Mr Power: I think it is fine, I am all for having environmental hearings, but I do not think they should go on for ever. To give you an example, with the projects that are being planned for this area in the next 10 years, it seems that if people keep dragging their feet, they are never going to get off the ground. We are looking forward to these projects, as I know Mr Wood is in the Kapuskasing area, because it is going to generate a tremendous amount of activity in Timmins and Kapuskasing, but will they ever start? Will the hearings ever end once they do start? I think somebody some day has to hit the gavel and say: "That's the end of it. Now we move on to the real world and do what has to be done."
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Mr Conway: Two questions, your worship. The first is that yesterday, as has been mentioned, we were in Sioux Lookout, where we were presented with some testimony from the local public utilities commission, the hydro commission. The city of Timmins has many things, but I gather one of the few things Timmins does not have is a hydro commission.
Mr Power: That is right.
Mr Conway: How would that happen?
Mr Power: We have never had a PUC. When the city consolidated -- that was effective January 1, 1973, so exactly 20 years ago this summer when that was being planned -- Hydro came to us and tried to sell the idea of a PUC. It did not go over very well. Frankly, the council of the day -- I was an alderman at that time -- felt we had enough responsibilities looking after the city of Timmins without acquiring another department with a whole lot of trucks and people with yellow hats and white hats and expensive salaries and benefits.
Frankly, we felt -- I have to say this -- that Hydro in northeastern Ontario does a terrific job. If we get a power outage of maybe seven minutes after an electrical storm in the summer, we think that is a big deal. When they do have the need to change transformers, they give us about a month's notice and everybody knows. It is on a Sunday morning and there are maybe four or five hours that the power is out. I cannot think of anybody doing a better job than Ontario Hydro is doing here right now, so we do not believe in change for the sake of change.
Mr Conway: That is a very helpful answer. A second and final question: One of the great issues that faces the Legislature today, as it has for some time, is what kind of energy sourcing we should have for the future. Much has been said, and I think it is widely agreed that conservation should be applied as rigorously and as reasonably as possible.
I was struck by the fact that on page 3 you make reference to a national energy concept. Point 5 says, "If we are not able to produce power at a reasonable cost, this province must be able to purchase energy from other sources." What advice do you think the average person in Timmins would offer the Legislative Assembly around sourcing future energy requirements, beyond what conservation might recommend?
Mr Power: Are you referring to nuclear power?
Mr Conway: The range of options is out there. Would the average person in Timmins be happier with a purchase, say, from Hydro-Québec, if such was theoretically possible -- from the Abitibi basin, for example? Would that be preferable to people in northeastern Ontario than committing substantial Ontario resources to capital construction for nuclear or some other kind of fossil plant?
Mr Power: Frankly, if it means huge construction projects for this part of Ontario, I guess we would much prefer that Ontario Hydro do it. The person who turns on a light switch does not really care where the hydro comes from.
The Chair: Mr Conway, did you want to let Mr Cleary ask a question?
Mr Conway: Absolutely.
The Chair: If you are brief, go ahead, but leave time for Mr Cleary.
Mr Conway: No, no.
Mr Cleary: Thank you, your worship, for your presentation. On one of the pages you say that 64% of all Ontario hydro used is used by six large employers.
Mr Power: That is right.
Mr Cleary: We have heard and are familiar with some of them who have said that 10%-plus of their operating expenses is used to buy Ontario hydro. Do you agree with that?
Mr Power: I imagine that it is at least that, sure, because I know that in Kidd Creek, as I say, their hydro bill is somewhere in the neighbourhood of $50 million a year.
Mr Cleary: Then you go on to say, as my colleague mentioned, about buying power in the east and west. That is very true, because in our part of Ontario we are supplied by Hydro-Québec at a more reasonable cost. The other thing is that those same people are going to be down in the States this weekend looking to negotiate something there at half the cost of Ontario Hydro. So that fits in well with what you had said.
Mr Power: Right. Thank you, Mr Cleary.
The Chair: Mayor Power, once again we thank you for taking the time to come here and for your thoughtful comments. I am hoping and trusting that the people involved in this will keep you advised of how things are developing as the bill goes through committee and then back to the Legislature.
Mr Power: Thank you very much. We hope when you people return the weather is a trifle warmer. This is the coldest night of the winter.
The Chair: Was this cold tonight? I'll be darned.
RESPONSIBLE ECONOMIC AND ENVIRONMENTAL PROSPERITY ASSOCIATION
The Chair: The next participant is Ambrose Raftis on behalf of the Responsible Economic and Environmental Prosperity Association, acronym REEPA.
Mr Raftis: Thank you for this opportunity. I would like to speak on behalf of a grass-roots community group that was set up to look at a future we could be comfortable with. What has happened in Kirkland Lake is that we have had this garbage issue. That stimulated a lot of interest, with people looking at their own futures and developing a destiny they have in common.
In that vein, I would like to speak in support of the amendment. I think it is a good idea. As to its going far enough, it is hard to go far enough with a bill. There are a lot of directions it could be going in and it may evolve into those directions. I would like to see them go in that direction, but in principle, we support the bill.
Second, I would like to speak in support of the amendment that would allow fuel switching.
Finally, I would like to support a mechanism such as these hearings which allows public accountability. That is probably the fundamental reason that got us into this Ontario Hydro problem in the first place. Decisions were made and the people who paid the bills were not there to cover them.
I am an electrical technologist. My wife's name is Linda Mustard; her father was a research engineer with Ontario Hydro. I have had a history of involvement with Hydro.
I just want to take you back to one example. I was at a course at Trent University and Frank Near was there. At that time, he was the chairman of the hydraulic division at Ontario Hydro. What came out of that meeting was that what Ontario Hydro was telling us at the time about hydro potential as far as nuclear goes was nothing more than a lie. It was telling us there was no feasible hydraulic energy left and that was why it was pushing Darlington at the time.
I discussed this with Frank to find out how Hydro came up with this conflict of potential energy sources. What Frank said was that he went to a meeting. There were 18 people there, two with a hydraulic background and the other 16 with a nuclear background. As a result, when he presented his proposal to produce energy with hydraulic sites -- and some of these sites include the Moose River basin, the upper notch in Latchford, and there is some significant potential left on the Niagara site -- these options were voted down at the meeting. Then Ontario Hydro's public information group got together and remade the plan the way they thought it should be to support this.
Despite the fact that hydroelectric was the most feasible at the time, it got turned down. I think this is a fundamental problem we have with Ontario Hydro and I hope Bill 118 will address this. We cannot have behind-the-scenes decisions being made that affect the public, that are financed by the public and have to be carried by the public for years to come. I think this process of policy directives that has steered Hydro to this point is inadequate. Essentially, it supports corruption and hides it behind the scenes. I think in this day and age, that is not acceptable.
The other area I would like to support is the area of fuel switching, for three separate reasons.
The first is basically for the consumer. The consumers who have electrically heated homes at this point are paying more money than they should for heating their homes. It reduces their standard of living if they have to dump an extra amount of money into an energy source that could be replaced by something substantially cheaper. That is the main reason.
The second reason is the environment. We have increasing energy demand. If we are going to be building more energy sources, the cheapest way to get that is by switching some of our heating load into other types of energy.
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The next reason is the concept of centralized energy. The centralized energy that has occurred in the last 20 years is in part responsible for the decline in the quality of life of rural Ontario and the decline in the numbers of people living in these communities. The centralized electrical energy policy has been very much in the best interests of Ontario Hydro but has not been in the best interests of rural Ontario. As our energy dollars leak off to the urban centres, so do our children and the future of our communities.
Consider for a moment the economic impact if communities were to own their own generating stations. Most of the money presently being sent to Toronto via our hydro bills could be circulated throughout communities, creating a more stable economic base for troubled times. This is not a new or unproved idea. Many of the northern European countries have used this model to overcome the inherent disadvantages of cold climates and to retain a competitive edge.
The third reason, basically, is to strengthen the Canadian economy, specifically the Ontario economy. Ontario Hydro is a powerful tool that could be used to improve the operating efficiencies of both our consumer and industrial energy consumption.
A similar model to this was introduced in the early 1980s in California by energy commissioner Varinenie. We met with him. We had him up here for a conference back in the early 1980s to explain the plan. The plan allowed the use of capital. There would be an energy assessment done on a household or an industry, and these consumers of electricity would come in and assess what specific area of load could be replaced at a reasonable economic cost and where the payoff was, and then the consumer would actually pay for the cost of the change. The money would come back to the utility in the form of a faster payback.
Presently we have capital tied up in power production that does not pay off for 40 years. The problem with this is that it ends up that a large part of our energy dollar is consumed in interest payments. With this other mechanism, we invest in the consumers and allow them to turn the efficiencies they need to do to save money on their own.
Another point is that there will indeed be short-term costs to this energy transition as utilities, which are already geared up to handle these loads, find demands on their systems reduced. I can only ask that they take a long-term perspective on this because we can no longer afford to pay the unrealistic energy costs.
As a society, we must use our energy resources in the most cost-effective manner. We are no longer in a position where we can cover our inefficiencies by selling more resources. Our resources are no longer in demand. We must learn to use our resources wisely if we are to retain a competitive edge. Basically I am asking the political parties to support Bill 118, because I know it will improve the quality of life of the consumers and the competitive edge of our industries.
My final point is the support of the hearing process. I have never spoken before a parliamentary committee, and that is because I have never had the opportunity to do so. As a result of this, I have never felt responsible for actions on my behalf by the government. Much of the alienation felt toward the political process is due to the lack of evolution in the democratic process. People are growing tired of being governed by intermittent dictatorships.
The public review of legislation should empower the government to take strong affirmative action to correct historic problems in our society. The status quo is no longer adequate in these changing times. We must have governments which can make proactive decisions based on a firm understanding of public concern. These hearings are a good start, but it is an evolutionary process and must go on. Our future and yours depends on it.
The Chair: Thank you, sir. If you will stay there, we have questions for you. Would members keep the preamble brief, because Mr Raftis needs time to answer the questions.
Mr Huget: Thank you very much, sir, for coming this evening and taking your time to go through a very well-thought-out presentation.
You mentioned early on in your statement that you thought the bill did not go far enough and there are other things we should be doing. Could you elaborate on some of those other things? You seem to be an individual who would have some interesting ideas.
Mr Raftis: One area is sort of a source of where this community-based group comes from. What we would like to do is develop a community-based society that creates a strong town, and then that town is supported by a strong government.
One of the things we would like to see happen is community-based energy development, because we have a certain consumption of energy in our area and we would like to see the money that is tied up in the machinery and in operating those devices as local as possible.
I am not sure this bill can do that. It may have to go further to allow that sort of ownership of the resource, because the problem with Ontario Hydro having its production facilities in southern Ontario or some remote area is that it does not support the community economics of a town. I think this is critical.
As I said earlier, it is done quite significantly in Europe. As an example, specifically for our area, possibly in the New Liskeard area, we could use a 40-megawatt generating facility that uses biomass, whether it is grains or waste materials. This would supply a significant amount of employment to the area. It would mean we could have our own energy source there and the dollars that travel out in Ontario Hydro bills that go down to Toronto could stay in the community and circulate more effectively. I think this would give the community a sense of control in that it would be able to supply its own needs more effectively.
Mr McGuinty: Thank you for your presentation, Mr Raftis. You made a good argument, I thought, dealing with the advantages of the fuel switching, dealing with the beleaguered consumer who simply cannot afford the upfront costs, and then you advanced the environmental argument. But what about the person who does not have access to natural gas, for instance? What are the people of Sioux Lookout, which we visited yesterday, going to say when they have to assist, through their rates, with the financing of someone who has access to natural gas to switch over to it?
Mr Raftis: Natural gas is not the only solution. I think it is one of the solutions. In rural areas, if natural gas is not the solution, okay, it is a partial solution. It is not as cost-effective.
The other thing I was doing is a quick estimate on power costs, and this gives some numbers for it. Electricity is presently costing us about 2.9 cents per thousand BTUs; the number is 2.9, comparative. Propane costs us about 2.1 cents. We did not have natural gas in the area so we did not use that as a comparison, but the fuel that came in at the cheapest was actually burning grains, which is a biomass, and this came in at .52 cents per kilowatt, one sixth of the cost of electricity. There are options around.
I think the problem we have had with hydro is that we have been focused on hydro as the solution. In fact, there are many other solutions and a number of places in the world are using other solutions, including groundwater heating from local ground heating sources or from mining sources. There are a number of options around.
If the bill were to have a long-term and effective future, I think it should have a fairly significant research component, because the more we find out about energy, the more we can use our dollars effectively.
Mr McGuinty: What do I tell the residents of Sioux Lookout? Do you think it is reasonable for me to tell them that if this bill goes ahead as is, they are going to have to -- they cannot chop wood. When I was asking questions there yesterday, the propane was more expensive. I cannot believe that burning oil is somehow environmentally friendlier than using electricity, so they did not have much choice.
Mr Raftis: I have had a solar heating system for over 10 years. Northern Ontario is probably the best place in North America for solar heating. The reason for that is that we do not have big urban centres up here and we have not smogged in our atmosphere. The other reason is that it is more capital-intensive. We have a longer heating season, which allows the system to pay off more effectively. So I get back to the same point, that there are other solutions for people up here, and at the same time they are not sitting on shelves somewhere. It takes some research, but they are quite available. It takes the initiative of a government and an organization like Ontario Hydro to bring them into place.
Right now, the economics are not in place because we favour hydro. If we did not favour it so heavily, these other options would play their part.
Mr Arnott: Thank you, Mr Raftis, for your presentation. I would like to take you to page 4. I am not familiar with the situation of what is going on in some northern European countries where local communities are involved in small-scale local generation. Can you tell me what countries, what communities, are doing this?
2010
Mr Raftis: I think it was Denmark that I was looking at for the specific example. Basically, they got away from this centralized power, that we should produce the power somewhere, waste half of it and move it somewhere else. They said, "We can save 30% to 40% of the power just by creating it where we need it." I think this bodes well for this bill. That will allow a lot more effective action in the cogeneration scene.
This community decided, "We have a need for 50 megawatts," so they looked around their community and allotted a section of land where they actually grew timber specifically for biomass production for this device, and it became a self-contained, sustainable development. The advantage of that is that the people who worked there, who tended the fields, who did the work to bring in the crops, were all employed there. It became their plant. As a result of that, it supported the economics of the community, it supported the strength, and I think the psychological impact of having your own energy is quite important too.
Mr Arnott: Would that sort of system be practical?
The Chair: You have to be brief, Mr Arnott, because you are using more time than the other caucuses did, and that would not be fair, would it?
Mr Arnott: Would you think that would be practical?
Mr Raftis: I think Timmins has potential for biomass. We have a huge area out in Cochrane that has the large clay belt that is underused, essentially, and has great biomass potential.
The Chair: Do you feel you have been a little unfair? That is okay. We all get a little bit unfair sometimes.
Mr Raftis, everybody on this committee has been impressed with the high level of public interest, and people have been eager to come forward and share their views and your input has been valuable. We appreciate your taking the time to reflect on it, prepare this submission and come here on what the mayor tells us is just about the coldest night of the year. We hope you do not blame that on the fact that this group of legislators is here in Timmins today, although you could if you wanted to and I would not blame you.
Interjection.
The Chair: Politicians have been blamed for a whole lot worse than that, that is right, and are responsible for a whole lot worse than that. Thank you for coming. You are welcome to stay and hear the submissions going on till around 9:20 this evening. We appreciate your comments. I trust you will be kept advised of how this bill progresses.
Mr Raftis: Thank you.
TIMISKAMING GREENS
The Chair: The next participant is Doug Fraser from Timiskaming Greens.
Mr Fraser: Good evening. Thank you for allowing me the opportunity to speak. I should start by making an apology for driving here in a separate car. I am a very good friend of Ambrose's. I did not know he was coming tonight. He started out an hour north of me, but considering that concerns about global warming are part of my interest, I feel like I kind of made an error tonight.
I am a teacher of environmental science and biology in high school and am also an active participant in the environmental community and now sit on the steering board of the Ontario Global Warming Coalition. So I have a presentation that starts out with, I think, a philosophical and ethical context upon which we made our decisions about this bill. We strongly support this bill.
I would like to say that I believe in talking in terms of reality -- my students say you have to talk about reality -- but surprisingly, when you enter into these kinds of discussions, you find that there are a number of different realities. I think there are three critical realities that need to be addressed or have to be recognized as being there.
One is economic reality, which we probably hear about more than any other. It is the one that is flaunted and is based on dollars and cents, the word "cents" starting with the letter "c" and not always with the letter "s," which I think is sometimes lacking. This is the realm, I feel, of most of the powerful vested-interest groups.
Then there is Ontario Hydro's reality, which I think has been somewhat sheltered from much of the world and which is based on some science that clearly has not been very good at being very accurate in its predictions.
Then there is what I would like to refer to as the primary reality. The primary reality is the reality of natural ecosystems on earth. That reality is not really up for debate; it is up for investigation. But that is the true reality within which we live. Natural systems have maxima and minima, they have many parameters and they have upper and lower limits. Whether they be oxygen level, temperature or CO2 concentration, these are unbreachable limits. The only way those limits can be breached by life on earth is through the slow process of adaptation through evolution. Neither Ontario Hydro nor government can contribute to that, although Ontario Hydro has the possibility, I guess, through adding to the mutation rate. They have a slight opportunity to play a role there, but not a very large one.
I think it is well understood that global warming is considered the greatest potential threat, recognizing that it is weather we are talking about, and that our predictive powers are very limited. We have to realize that it is something we do not have a very good handle on and honestly will not know about for sure until it happens. Because of the recognition within the scientific community that global warming is a serious threat, I think it behooves us to address very seriously carbon dioxide levels. I think it is also important to recognize that we are number three in jurisdictions in the world in electricity consumption, after Norway and Quebec, and among the highest and most inefficient energy users on earth, using twice as much electricity per capita as people in New York state.
For Ontario Hydro to advocate on our behalf or to suggest that we need to plan for increased electricity consumption is extremely arrogant. It is not conceivable that we should even think about that. What we have to do, of course, is to start finding ways to reduce our energy consumption.
The nice part about being in this debate is that the economic reality is now very much on side with the primary or ecological reality. I think it has been proven, and I am sure you have the documentation and more expertise in this than I do, but there is a very clear demonstration that megawatts are much cheaper to destroy than to construct.
I think we are seeing this reflected in Ontario Hydro bills. They are telling me that the nuclear plants are not working to capacity and that Darlington has cost a lot more than they thought it was going to.
All these are very expensive, and that is not even including an actual environmental cost. We have not even costed in the price of perhaps destroying the atmosphere and the implications for all of us.
When we look at the two critical areas of the bill, the fuel switching, I cannot imagine how we can allow such a massive institution, that is a public institution, that is involved in energy, not to play a leading role to the greatest degree possible in conservation. It seems absurd to prevent them from being key players, and for them not to become involved in fuel switching, which is in the greatest economic interest of consumers at large, certainly -- there may be exceptions -- and certainly in the best interests of the environment, to me would just be untenable.
In order to allow the government and the public to have more involvement in Ontario Hydro, I think those other amendments to the bill or those other components of the bill are positive; I have no legal experience, and I cannot judge perhaps the true significance of those. But when I get 52-watt light bulbs mailed to me and Ontario Hydro tells me that every little bit helps, I see the situation more as a ship with some rather large leaks in it. If I take a thimbleful of water and throw it overboard, that is a little bit and it helps. But in all seriousness, I do not think it is significant; I do not think it is the right kind of approach. It sends a signal somewhat like the blue box signal, that you participate in this and we are in great shape. But now, actually, as Ambrose mentioned, we are in such great shape that we have mountains of garbage they are trying to give us an economic opportunity to take advantage of.
I think anything that brings Ontario Hydro closer to both economic and ecological reality is very appropriate, and maybe an example of that would be its predictions back in the mid-1970s that it would need close to 300 nuclear reactors by the year 2010. That lack of predictability meant to them, in an honest way, that conservation could not be significant because its predictions were so crazy that changing a few light bulbs would not have made any difference.
2020
I wanted to just address a few of the concerns that I know other people have had who are opposed to the bill. I just cannot imagine how financing conservation programs is going to cost me money. I think that if we were going to be truly honest, then when someone buys an electrically heated house we should tell him that he is also taking out a $20,000 to $50,000 mortgage on hydro facilities.
This, of course, from the numbers, depending on which chairman of Ontario Hydro you listen to, varies somewhat, but if it cost $30,000 to build capacity for one electrically heated home in the province, then that is a cost that is going to be borne by the taxpayers of Ontario. If it is not borne fully by the person who bought that electrically heated home, then I am doing a tremendous amount of subsidizing right now, and I would rather not, and I would rather not from an environmental perspective more than any others.
I would welcome any questions you might have. I apologize for not having a brief prepared for you in advance.
The Chair: It is not necessary.
Mr Martin: I appreciate the content of your presentation. It is really interesting to listen to and it certainly speaks to some things that I suppose we should be focusing on more readily and more often as we imagine how we might deal with the question of energy as we move into the future and, indeed, as we head towards the end of this century and to a new millenium that we hope will be good for us and for our children. I would like to enter into those kinds of discussions about energy.
However, there is a fear out there in the populace that we, as politicians, have to be cognizant of as well, and I would ask you to help me a little. There are those out there who would say that if we make this move from what we have now and the capacity we have now to keep our industry going, particularly in the larger centres, we may, in fact, find that at the end of the century we will not have what it would take to keep the economy going. How do we ease the fear of those people?
Mr Fraser: You are talking about not having electrical capacity? I think if you save a watt or make a watt, you have made no difference, in that sense. Whether you need additional capacity and you get that by saving capacity elsewhere or creating new capacity, the capacity is the same. If I can save a megawatt or make a megawatt, I have a megawatt; but if I save a megawatt, I save the environment and I save money; apparently, I save a lot of money.
If I make a megawatt, it costs me a fortune, unfortunately, and it is environmentally that much more damaging, so I think until we look at the enormous amount that is there to be saved, and after we have saved 50% or more of the electricity that we are wasting now, and doing fuel switching in appropriate sectors, then I guess you can enter into the discussion of where we go from there, but I think by the time that happens we are going to have solar technology from other jurisdictions.
Mr McGuinty: Thanks for coming out this evening, Mr Fraser. I really enjoyed your discussion of economic and environmental reality and how it appears that, fortunately, these two are merging. I have often felt there were many more opportunities to create some kind of merger there so people would understand that you can actually win at both ends.
I want to discuss something; it is not directly related to the bill, but recently I put out a householder in my riding. I had all kinds of calls from constituents and I was surprised at the number who had environmental concerns about the flyer: the weight, the paper, the colour, the print, all those kinds of things. I had actually kind of vetted this through some people who were more knowledgeable in this than I was. I discovered that people by and large are very concerned, as one might expect, about the environment, but they are not particularly well informed. There is a lot of goodwill there to be harnessed. What more can Ontario Hydro and the government do to promote energy conservation that they are not now doing?
Mr Fraser: They have to take the initiative. They have the knowledge to go in and do the energy audits and make the switches and offer the incentives. To expect the public to become enlightened -- I see this as a problem in government, especially in environmental issues which unfortunately have shorter time lines than we might like, the sense that, "We'll let a grass-roots awakening of the public drive policy." But I think it is inappropriate, if government has the knowledge and Ontario Hydro has the knowledge and understands the implications, to not be proactive. There is lots of potential there and it just takes action. I do not think there are any unknowns.
The Chair: Mr Fraser, on behalf of the committee, I thank you, as I have others, for coming this afternoon and this evening. You obviously have a strong interest and a great deal of insight into the issues. We trust you will keep in touch with members of the respective caucuses, be they government or opposition caucuses, and your own MPP, and let people know how you feel and keep up the communication with your representatives. We thank you for coming out this evening. Have a safe trip home. Perhaps you can get yourself caught up in the slipstream from your colleague and reduce some of your fuel costs.
Mr Power: Thank you very much.
2030
SUDBURY HYDRO
The Chair: Doug Scott, who is the general manager of Sudbury Hydro, is here now. Please have a seat, sir. We have your written submission, which is an exhibit now and will form part of the record. Please speak to us. Try to leave a good chunk of time for questions and exchanges, because those are often as valuable as anything that happens here.
Mr Scott: Thank you, Mr Chairman. Good evening, ladies and gentlemen. The following presentation is made to you on behalf of Sudbury Hydro, an electrical utility serving the city of Sudbury, the largest utility in northeastern Ontario. While the Municipal Electric Association will be making a presentation to you on behalf of the 315 municipal utilities in the province, there are three specific areas regarding Bill 118 that are of particular concern to Sudbury Hydro. It is these three items I wish to draw to your attention this evening.
The first one is provincial energy policy. In the speech from the throne in November a promise was made to set a new energy direction for Ontario. This specific promise was referred to by the minister in his remarks to this committee in Thunder Bay on Monday. "A new energy direction" was the term used.
The minister spoke of the need to control the demand for energy, and to reduce our traditional dependence on increasing the supply of energy, and of reducing the environmental impact of energy production and energy consumption. These are all good points. They are motherhood statements and we cannot fault them. Obviously, attempting to make Ontario Hydro more energy efficient is a worthy goal that we should all work towards in concert.
Bill 118, however, is not about energy. Bill 118 is an amendment to the Power Corporation Act. The Power Corporation Act is the legislation that governs Ontario Hydro. It deals specifically with the generation and the distribution of electricity, not energy. These two terms, "energy" and "electricity," are not interchangeable. Ontario Hydro's mandate is, and always has been, restricted to the electrical field. Ontario Hydro has no more voice in the natural gas industry, the coal industry or the oil industry than any other large user of those commodities.
To even suggest, as did the minister in Monday's speech to you, that Ontario Hydro should consult closely with its partners -- the gas utilities, the propane and oil companies and the environnmental groups -- demonstrates a lack of understanding of the long history of the electrical industry in Ontario and Ontario Hydro. Perhaps this partnership between the various fuel utilities and/or companies is a desirable move; I do not know.
Regardless of the direction this government wishes to take, step 1 is the establishment of a provincial energy policy, a policy that addresses and governs the use not just of electrical energy but of natural gas, propane, coal, oil, etc -- all forms of energy. To attempt to address the broad issue of energy efficiency in the province through Ontario Hydro is wrong, in our opinion. To attempt to stimulate other facets of the energy picture via electricity ratepayer funding is also wrong. More about that in a minute.
What we need is a provincial energy policy that will provide direction to the various players in the energy field. Who knows, perhaps what is needed is a provincial energy utility or several localized energy utilities with mandates to handle more than one fuel. Whatever the outcome, this province needs, before anything else is done, a clear energy policy.
That brings me to our second point, fuel substitution. By now you are all sick and tired of hearing about fuel substitution. Simply put, Sudbury Hydro believes that fuel substitution should be market-driven and not artificially stimulated by government-imposed subsidies, either funded from the cost of power via Ontario Hydro rates or from tax dollars.
Once again, in his presentation to you on Monday, the minister referred to natural gas costs for space heating as being only one third the cost of using electricity -- a substantial saving. He said, "With numbers like these, I do not think there is much doubt about where consumers would stand on the question of fuel switching." We believe there is a great deal of doubt, well-founded doubt. We suggest that an equally appropriate statement would be, "With numbers like these, we don't think there's any logical reason to fund, in any form, any type of fuel substitution, as it is obvious that market forces will accomplish the same end without resorting to subsidies."
This brings me to my third point: a review of utility-serviced territories and utility mandates. This point deals with the existing relationship between Ontario Hydro, the major provincial supplier of electricity, and the 315 municipal utilities who distribute electricity within their service territories. We suggest that the time is right to review this relationship, to review the necessity, the practicality, of maintaining over 300 utilities, some of which have fewer than 200 customers, and many of which have fewer than 1,000 customers.
Customers, regardless of who serves them, expect reliable electrical power and reasonable rates. It is difficult to justify the existing system to customers, particularly in locations where adjoining service territories within the same subdivision -- customers on the same street, as a matter of fact -- pay a premium of, in one case, 11%, and in another instance, 5%, for their hydro, just because they were unfortunate enough to be on the expensive side of an imaginary boundary line.
Not only does the existing system cause rate disparity, but in many instances the ability to respond to a service need, to restore power during an outage, varies greatly. It is our opinion that the number of utilities and the service territories should be reviewed on a provincial basis, with the aim of reducing the number of utilities and revising the boundaries of the remaining utilities to better serve the customer.
The second part of the utility review, we suggest, should consider the mandate of utilities. In specific instance, we feel that the distribution of electricity and the distribution of natural gas could be combined, as it is in several utilities in the United States and a few here in Ontario. This would have the advantage of eliminating the present competitive stance of these two fuels and allow the utility or utilities to use each energy source where it is most suited.
We realize that this last proposal is perhaps not one voiced by many presenters. However, we believe it does have merit and, yes, we realize it would certainly alter the status quo. That is precisely the reason we put this suggestion before you.
Time is limited. Members of my commission or myself would be quite willing to discuss any or all of the preceding items with you at your convenience. I thank you for the opportunity to address you tonight. Thank you for your time and attention and I am quite willing to answer any questions I can at this time.
The Chair: Thank you, Mr Scott. We have approximately six minutes per caucus.
Mr Jordan: Thank you, Mr Scott, for your presentation on behalf of Sudbury Hydro. Bill 118 seems to be getting many interpretations as to its purpose. What do you see as the main purpose of Bill 118?
Mr Scott: I think it has been quite a while since the Power Corporation Act was last reviewed in streamline, for lack of a better term. I guess I personally view Bill 118 as a long-overdue change or modernization of the Power Corporation Act.
The frustrating part from Sudbury Hydro's point of view is that everything we have read about Bill 118 so far interchanges the word "electricity" and "energy." They are not interchangeable. You might say I am playing with semantics; I really do not think I am. Electricity is only one facet of the energy picture.
Mr Jordan: Do you have any comments on the fuel switching subsidization?
Mr Scott: I did not put it in my presentation, but fuel switching will hit Sudbury Hydro extremely hard whether it is government subsidized, subsidized through the rates or comes through market forces. Hopefully, if it is left to market forces, it will come in over a longer period of time and we can handle it better.
To put it in perspective, we buy approximately $60 million worth of hydro from Ontario Hydro each year. We have no large industries; we have small industries. Most of our load is residential, so I am guessing -- I do not have the exact figure -- but I would think I am very close when I say 75% of our load is space heating and water heating.
Fuel substitution is basically aimed at taking away 75% of my load. Am I concerned? Yes, I am. The water-heating load, for example: Water heaters make up 25% of our load. Water heaters are the only load for a utility that it can load-control. I do not want to go into great details about load control, but as a utility, like all others, we pay for the number of kilowatt-hours we use each month. We also pay a demand charge to Ontario Hydro, a very steep demand charge, for the largest 15-minute increment of power we buy in any given month. We happened to set our all-time peak last night because it was cold in Sudbury.
If we can keep our peak down, we can save a substantial amount of money. We do that by controlling our water heaters. There are only 18 utilities in the province that do this. We happen to be one of them. We do not control all 13,000 water heaters; we control about 3,000 and we are increasing the number we control each year. To put it in perspective, by shutting a water heater off for that short period of time, once a month, when we hit our peak, we can save on a yearly basis. So far last year, for example, $475,000 was what we saved off our yearly utility peak. That equates to about 1% for our customers. We think the upper limit is probably 2% that we can save. Fuel substitution here is going to take away our ability to control our peak and eat into our basic load. So yes, we are very concerned about that.
2040
Mr Jordan: For the benefit of the committee, could you briefly explain a utility peak?
Mr Scott: If you think of it in terms of a fire department, every city has a fire department and most of the time firemen sit around and do very little of anything. You still pay them for doing that. You pay them to be there when there is a fire. If you look at electricity the same way, some time during the month this city, any city, is going to need quite a lot of electricity. Ontario Hydro has to be prepared to deliver that electricity at that one specific time. You only need it once a month, but it has to be there.
Last night the city of Sudbury had just slightly below 200 megawatts for a very short period of time, probably less than an hour. During the summer our peak drops off to around 120 megawatts, but each month we get billed for that one single 15-minute period where we have used the most that we have used any other time during the month. I think we pay something like $16 a kilowatt at that particular time, $16 and change.
Mr Huget: I want to touch briefly on a couple of points, and one is the fuel substitution issue. I wonder if in fact it is proven that there is a cost-effective reason, an environmental reason, for switching away from electrical power, and we have to deal with your problems in terms of your loads and your fixed costs. What suggestions would you have for dealing with that, assuming that nobody is going to legislate the use of natural gas but market forces may very well accomplish that issue anyway?
Mr Scott: I am glad you asked the question.
Mr Huget: I thought you would be.
Mr Scott: One of the comments made earlier this afternoon when I was sitting here dealt with Ontario Hydro. Its employees, if I read this statement right, were not allowed to talk to anybody and to advise anybody to go to gas or to go to anything else.
I worked for Ontario Hydro for 18 years. I ran a marketing department for a southern utility for four and a half years. I am general manager of a utility now. Never in all my 26 years of working in the electrical industry has anybody ever told me I could not give a customer good advice -- not once. We have mission statements at Sudbury Hydro. One of them is, "Treat a customer the way you would expect to be treated."
One of the first questions our energy management staff asks somebody is: "What are you interested in? Are you interested in air-conditioning?" If they are not interested in air-conditioning, we advise them to go to a high-efficiency gas furnace. If they want air-conditioning, we say, "We suggest you look at the price of air-conditioning and a high-efficiency gas furnace or a heat pump. They both do the same thing."
So I do not see where legislation is needed to tell utilities or Ontario Hydro how to look after their customers. We have been doing it for years. There are a lot of customers out there who come to us, appreciate our service and are quite happy when we point them towards a ground-source heat pump or an air-to-air heat pump, whatever is more practical. Those, by the way, do not use gas, but they do cut down the electrical demand. There are all sorts of ways out there that the electrical load can be lowered without pushing everybody to the gas company.
Mr Huget: I was not suggesting that we were pushing everybody to the gas company. What I was trying to get at is that some of those issues about when we substitute fuels away from electric power -- you and many others who share your occupation have mentioned the load reduction issue and the fixed-costs issue. What I was looking for was some constructive suggestions about how we deal with that.
Mr Scott: One of the reasons we mentioned looking at the boundaries is that we have an infrastructure in place and we have employees in place. I have a different set of objectives than you gentlemen. I have 130 employees whom I want to keep employed somehow. As perhaps one of the easier ways to do it, if fuel substitution is going to cut into the load as we know it now, it would make sense to me to expand our service territory. Our service territory could be expanded in an equitable manner so that we service surrounding areas; we still keep people employed and the utility is still a viable one. Obviously if fuel substitution takes off and our boundaries stay the way they are, we cannot afford to lose 50% of our income and keep people employed. That is just not practical.
Mr Huget: You mentioned on the last page, "the utility or utilities to use each energy source where it was most suited." Could you elaborate on that, that controversial recommendation you said no one else was going to bring up?
Mr Scott: Has anybody else mentioned to this committee that a utility could handle both electricity and gas? I was first presented with this at the public service electric and gas company in Newark, New Jersey, when I was down there looking after them. I said: "Isn't this great? We wouldn't have to keep running ads saying, `Go electric. Don't go gas,'" because they ran both. I asked them how it worked. They said: "In some parts of our service territory we already have gas lines; in other parts we don't. So where we don't have gas lines, people go electric; where we do have gas lines, they go gas." It has the best of both worlds. They are not competing against each other all the time. It is something to think about.
Mr Klopp: Everybody in Sudbury probably has electricity in the house, right?
Mr Scott: Not everybody.
Mr Klopp: Pretty well. We talk about alternative energy sources, and I know we get talking about electric heat versus propane heat. So be it, it is a favourite discussion. It goes back to what happens if tomorrow morning somebody discovers a solar machine that still produces electricity. Your workers would be, in my sense, following that job along. It might be called a different job, but it is still a job. It is just something to point out because it seems we always talk about the furnace versus the space heater. I just wanted to bring that up. We are talking about all kinds of energy sources. We want to have jobs. You talked about the fire department. I think it is cheaper to leave them around. We need them when we need them. I just wanted to bring that out.
Mr Conway: Thank you very much, Mr Scott. I very much enjoyed your presentation. I have a couple of questions. I want to take issue, however, with a statement you make on page 2, I think it is. I would hardly disabuse you of this notion that Bill 118, as you say, is not about energy but about electricity.
From my perspective I would certainly encourage you to rethink this, because it seems to me this bill is very much about energy and a very significant new energy departure for Ontario. I would cite as my support for that the section of the bill which removes the previous impediment whereby Ontario Hydro was not allowed to become involved in fuel substitution other than that which was electrical.
I would also recommend to your attention today's statement by the CEO of Ontario Hydro. We had an opportunity earlier today to chat briefly about this, but if you have not, I would suggest that before the week is over you will want to read this document very significantly, because within weeks the new chairman of Ontario Hydro has discovered thousands of megawatts of demand management that are going to be available to the provincial utility by virtue of that kind of demand management that is going to tend in the direction of fuel substitution -- not tens, not hundreds, but thousands of megawatts.
2050
This committee can hardly wait to get the chief executive officer of Ontario Hydro to come before us to better understand how, within the course of a few weeks or a few months, those targets have risen exponentially. I am sure that is the case, but I want to tell you that you as the general manager of Sudbury Hydro will want to follow this very carefully, because I suspect the chairman's new direction of today, different as it is from the honourable minister's several utterances this past fall and previous summer, is going to make plain that Bill 118 is very much about energy, about that kind of fuel substitution that is going to move the entire energy focus away from electricity and on to some other sources. You may not wish to agree with that, but it is certainly something I would want to leave you with tonight.
Specifically, I was interested in what you said about utility boundaries and mandates. The committee is going to Kingston. I think Kingston is one of the few places where in fact both services are provided by the PUC there. I think that is a very interesting notion and certainly one we would want to look at.
I was struck as well by a comment made at the top of page 6 -- I think I know the answer, but I would like you to confirm it for me -- where you are talking about boundary lines and where, as a matter of boundary, the premium in one case is 11% and in other cases 5%. It is simply a matter of where you stand in relation to the line. Is that simply between an urban and an rural rate?
Mr Scott: The 11% is between an urban and a rural rate. The 5% is between a utility rate and another utility rate. In both instances, unless you knew where the dividing line was, you would assume you were in Sudbury.
Mr Conway: Just as a follow-up to that, I am trying to understand the kind of mandate you have for your expanded boundaries. I am always interested in general managers who want to expand their boundaries and their mandate, because I know the public interest is always foremost in their minds, so tell me again what public good is going to be served by this, because I think our friend the chairman has news for you. If he is successful in this ambitious new plan the minister may or may not know about, you are going to find you will lose some of your traditional load, I would guess. How are you going to replace this by expanding your mandate?
Mr Scott: We will talk about Sudbury in general. Sudbury is a fairly large utility. We have some very small utilities surrounding us, small to the point where -- without naming it -- one has one employee and five commissioners and no outside staff to do any work whatsoever. When the power goes off, the answering service phones us to see if we have a crew available or they phone Ontario Hydro or they phone someone else. So we have a utility with absolutely no staff, but rates that are higher than ours. That does not make a lot of sense to me. We also have a rural area adjoining us.
I understand that Ontario Hydro is always under the gun for having such a large staff. I am sure they would like to get rid of it and I am sure they would like to get rid of a great deal of the rural area. I do not want to just pick the cream and leave the other stuff, but it makes sense to look at an area such as Sudbury that has boundaries that do not really make a great deal of sense, not just for Hydro but for municipal governments too. For example, you cannot tell when you leave Sudbury and enter the town of Garson. There is no field between them. It is a subdivision. That makes no sense.
Mr Conway: One of the most exciting parts of the new government's energy policy has to do with perhaps replacing you very expensive people, whether you are Sudbury Hydro or still that provincial utility. A number of my friends from the grass-roots movement would say that really a key to this is just shucking all this high-cost help that comes in the name of Ontario Hydro. I do not mean to offend the sensibilities of my friend from Lanark-Renfrew, but I was surprised to be told the other day in Thunder Bay that their rates were higher than Ontario Hydro, so why not simply look at scoping down both your mandate and Ontario Hydro's mandate and returning this back to the people so we do not have these $60,000 high-priced help to help us with light bulb replacements?
Mr Scott: Go ahead. That is what I am suggesting, or that is what we are suggesting. Go ahead and look at it. Come out with something that makes sense.
Mr Conway: Do you want to make a comment? I noticed this afternoon you were agitated -- not agitated, but you were anxious to take me up on Espanola.
Mr Scott: No, I was not. We talked to you afterwards.
Mr Conway: Just for the record, do you want to tell me what I should know about the Espanola proposal?
Mr Scott: I suggest you go to Espanola and find out for yourself, but I suggest you talk to both sides of the fence. The people in electrically heated homes are delighted. They have new siding, new insulation, new windows, new everything; you name it. Then talk to the people in the gas-heated houses and see how thrilled they are. That is all.
The Chair: Thank you for taking the time to travel here from Sudbury. Your comments have obviously been provocative and I hope inspiring -- yes, they have been inspiring; I am confident of that. I appreciate your coming here tonight to do this, and I hope that you will keep in touch. Thank you, sir.
JAN VANDERMEER
The Chair: Mr Vandermeer, please have a seat. If there is any explanation about yourself as to where you are from, what your background is, please let us know, and then proceed to tell us what you will and give us some time to ask you some questions.
Mr Vandermeer: It is reasonably brief, and I will launch in. Thank you for the opportunity to address you. I live here in Timmins, and I heat my house, at least to date, exclusively with electric baseboards. We moved up here from southern Ontario about three years ago, and I was quite frankly not fully prepared for the cost of heating electrically. So when I heard there would be an opportunity to present my views on the proposed amendments to the Power Corporation Act, I leaped at the chance.
As an environmentally aware consumer, I have regretted our decision to purchase an electrically heated house. There are economic costs associated with virtually all of man's activities. We have a responsibility to reduce these costs as much as reasonably possible, and if we can achieve a lower environmental cost and at the same time reduce the impact on my pocketbook, I am all for this proposal.
In this short presentation I will not address proposed amendments concerning the additional board members, but would like to comment on regulatory control of Ontario Hydro. I would like to see the Ontario Energy Board assume binding regulatory control over Hydro's rates and rate structure, including the buyback rates. In addition, I would like to see the energy board have binding control over proposals to expand the system and also of the utility's borrowing practices.
By far the most exciting aspect of these proposed amendments to the Power Corporation Act is that enabling fuel switching. By this, I understand switching from electricity for space heating to a source that allows greater energy conservation and that would be more environmentally benign.
Both these points are important. As Canadians, we are especially wasteful of our resources. Conservation methods are needed to marshal what must be accepted as a finite supply. It seems to me that people who pioneered in this province would disapprove of our profligate squandering of resources. For some, the answer seems obvious; they would encourage more nuclear reactors and hydro projects on the scale of James Bay II. I am not in favour of these options because it is a dislocation of responsibility. In the nuclear option, we transfer the environmental problem attendant on this fuel to future generations. In hydroelectric megaprojects, the problem is transferred to areas remote from the user of the energy resource. Those who bear the brunt of the impact typically cannot speak for themselves. Future generations cannot yet speak, and the land, plants and animals in remote locations have, to date, only the voice of the aboriginal peoples.
For me, the key point being proposed in this bill is fuel switching and the important shift in emphasis that actually recognizes energy conservation as a viable alternative to continued consumption and growth. We must reduce our impact on the environment if we are to have a continued chance at survival.
Mr Wood: I would like to thank you very much for coming forward and making your presentation. As you were making your presentation, you seemed shocked at the cost of baseboard heating. I am sure on a night like tonight you can see the little dog running around in the meter.
Mr Vandermeer: I do not even go out and look.
Mr Wood: You are saying that the proposal for switching to other types of energy for heating homes would be ideal?
Mr Vandermeer: I would welcome the chance, yes.
Mr Wood: I would like to say thank you again for coming forward. It takes courage to come forward and get your views out and on record, and I am pleased you did.
Mr Klopp: I can understand very much why you would tend to promote the part of this bill that says it is going to help switch off electric energy. But one of the problems we went into 25 years ago, 10 years ago maybe, is that oil was very expensive. So people said, "Let's switch to electrical because it is cheaper." There are other parts of this bill that say let's look at the total package. Are you in favour of those kinds of things, too, in this bill?
Mr Vandermeer: I am not aware enough or informed enough to make exclusions. I worry about nuclear because of, as I have mentioned, this dislocation of responsibility. I do not think we have fully come to an awareness of what the responsibilities for nuclear wastes are. I think other options would be worth exploring.
Mr Klopp: Okay, fair enough. Thank you.
Mr Martin: I am really pleased you came forward, for the very fact that you are a consumer and obviously not speaking for some other interest and you are not a professional in the field. You speak of the part of the bill that will allow Ontario Hydro to get into the business of converting to other sources of energy. Some of the criticism that has been levelled at that particular initiative is the cost that may be incurred by Ontario Hydro. As a consumer and a taxpayer, how do you feel about that?
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Mr Vandermeer: One of the proposals I have heard is somehow amortizing the cost into some part of the rate structure so that I end up paying for it but I do not notice it quite as badly and I eventually end up paying less; that sort of thing. Most of us do not have all that much money to come and go on these days. If that sort of subsidy were there and then as time went on the switch gradually was paid for and my rates would then be reduced, it would be a possibility I would entertain.
Mr McGuinty: Thank you, Mr Vandermeer, for appearing tonight. I want to add my thanks to those that have been extended already, particularly because you are a member of what I call the silent majority. We often do not hear from people unless they are associated with groups, not that there is anything wrong with that in itself, but it is nice to hear from somebody out there on his or her own.
Something that is at issue here, in my mind, is whether fuel substitution will constitute a cost saving to somebody who cannot switch to natural gas, for instance, or who cannot switch to another fuel. Again, I will use the example of somebody in Sioux Lookout, if they cannot switch to something else. Hydro tells me its rates are going to go down if that couple helps to subsidize you to switch to another form of fuel. I want you to go along with me on this one.
Let's assume that does not prove to be the case -- Hydro has been proven to be wrong in the past -- and the promotion of fuel substitution does result in increased rates for those who remain on electricity for the purpose of space heating. Do you think it would be fair for you to switch because you have the opportunity, only to result in other people's rates going up?
Mr Vandermeer: It is a difficult question to answer. I tried to bring out the point here that I think conservation is an important point. Real costs are real costs. Let's say this house in Sioux Lookout is inefficiently insulated. I think there should be some sort of incentive given to that person perhaps not to switch but to insulate his home more adequately, and if need be, continue using electricity to heat. I do not think we have any blanket solutions to these sorts of problems. I am not aware of the situation in Sioux Lookout by any means; I have never been there. I know that if I had had my eyes opened three years ago when we bought our house, I would have bought a gas house rather than an electrically heated house.
Mr McGuinty: I will give you another example now. What about someone who is financially well off and sees this big freebie coming down the pipe? Bill 118 is going to enable him or her to switch from electricity to gas and receive some kind of subsidy. I am that person; I am going to wait for that bill to become law. What about that case?
Mr Vandermeer: It is kind of similar to old age pensions, is it not, where somebody has socked away money in RRSPs for years and years and has plenty to come and go on but is still getting an old age pension, and there is the clawback amendment, which a lot of these people are fighting. I think there is an analogy there.
I would like to see it perhaps prorated on income, or something like that. You run into a lot of combinations and permutations. I am not competent to say what is the best way of doing it, but obviously I would rather not see someone who is affluent and can pay for a switch himself getting money to do it.
Mr Conway: Do you live in the city of Timmins?
Mr Vandermeer: I do.
Mr Conway: Do you mind my asking where you work?
Mr Vandermeer: I am at home taking care of my daughter.
Mr Conway: The reason I asked is that earlier this evening the chief magistrate, Mayor Power, was here. He told us something that I thought was interesting. I quote from page 2 of his brief: "Sixty-four per cent of all hydro used from North Bay to Hearst is used by six large employers. Four of these are located in the city of Timmins." That is a very healthy electrical appetite by any standard. I know why. Timmins is one of the legendary mining camps in the world. We know mining and metallurgical operations are very energy-intensive.
My question to you is somewhat hypothetical. Having regard to what you said, and I think you made some very good arguments, what would your advice be to me if I were a hydro board member or on the energy board? You have some very ambitious plans for the energy board. I think if your plans were to be fulfilled, my job on the hydro board would be substantially redundant. If I were the provincial Treasurer and Minister of Energy, I would be relieved of a lot of burdens and obligations as well.
Setting that aside and thinking of the Timmins mining camp, what would you recommend? If we were to get another Texas Gulf discovery, as we had here 30 years ago, that produced an enormous degree of economic growth and expansion in the Timmins mining camp and occasioned a very substantial increase in electrical requirement, what would your advice be to me as a member of the hydro board as to how I could responsibly meet that demand locally or regionally, a very significant demand targeted at a very electrically intensive resource industry for which this community is famous and employing thousands of people?
Mr Vandermeer: It is a very difficult question. Places like Timmins which are dependent on the mining industry -- there are constantly rumours floating around that the Kidd Creek development has a lifespan of only 10 to 15 more years and where is Timmins going? We have the past mayor, Dennis Welin, and the present mayor, Vic Power, actively promoting Timmins as a regional centre to anticipate and buffer the impact of, let's say, the possibility of Kidd Creek closing down. It employs, I believe, 1,300 people and is energy-intensive.
Mr Conway: I am very happy to be back in Timmins. As it happens, we are in a community which I suspect has, on a per capita basis, one of the most significant electrical appetites in the country for a lot of very good and obvious reasons. With a view to employment and economic activity, what do responsible people sitting on hydro boards, on local commissions or in the Legislative Assembly of Ontario do to ensure that, particularly in these northern resource communities -- we had the mayor of Hearst in here as well today speaking to some of the pressures from the forest industry up in those communities. How do we responsibly provide for what is a very significant electrical requirement in those communities, which populate northern Ontario to a greater extent than perhaps any other part of the province?
Mr Vandermeer: First of all, there is conservation. It does not remove any energy from the system. In fact, it would leave some for, let's say, Kidd Creek -- I use Kidd Creek as an example -- if we had the development of a sudden discovery of another site the size of Kidd Creek here in Timmins. Obviously 25 years ago, when that site was found, there were no major hydro lines to this area. The electrical industry in Timmins and the Kidd Creek development have grown in tandem. I would guess, depending on demands for those sorts of things, there has been a lot of substitution of other --
Mr Conway: But you have to put juice in the line and my question remains. Where does that juice come from? How do you generate it? Conservation is wonderful. I think we all endorse it, but if one anticipates, particularly in this economy generally and in much of the northern economy -- our friend from Sault Ste Marie was making a very good point earlier this afternoon about the cogeneration plant over at Sault Ste Marie, which I can well understand as being attractive. If these communities are to survive, if they are to grow, to a significant extent they are going to depend upon a reliable supply of electrical energy. Conservation will only take you so far.
I do not want to flog a dead horse, but I will tell you, I think I know why Hydro had to expand in the 1960s. It was because of places like Timmins. Texas Gulf was an enormous boom. If we had not had the juice to supply to Texas Gulf, there would not have been the expansion that took place. That is the concern I think in terms of economic development for these communities.
Mr Vandermeer: I think it is a valid concern and I certainly would not suggest shutting down a lot of things and not trying to meet the growth in demand. But if for the time being, perhaps as a stopgap measure, conservation can marshal some electrical resources for at least a short term in the future, I think that is worthy thing to do.
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Mr Jordan: Thank you for presentation as a citizen and someone interested in the future of not only Hydro but the environment.
A point of clarification for your own benefit: I believe you indicated you had a baseboard heating system, so if Bill 118 is already giving Hydro the authority to finance fuel switches just be warned that you are not in an ideal position to accept it. You need duct work and that.
Mr Vandermeer: Yes, I recognize that. I do have an unfinished basement to date.
The Chair: Mr Vandermeer, you have been taken well beyond the focus of your original presentation. Your responses have been very creative and insightful. It is a valuable bit of input. I often criticize the $1,000-a-day consultants that governments, all of them, are inclined to hire. I insist that people like you and other people this committee meets as it travels about the province are as capable, as often as not more capable, than those same $1,000-a-day people.
I appreciate that type of input. I hope you keep in touch with your local MPP or other members of this committee. I am hoping, your name and address now being recorded, the clerk and the appropriate people will keep you advised of the progress of the bill.
ORGANIZATION
The Chair: There are two other groups and persons scheduled to make comments. They are not here yet. We are not that far beyond their scheduled time that it is impossible for them to appear. There is a matter that Mr McGuinty wanted to deal with. Do you want to deal with it now or do you want to defer that?
Mr McGuinty: No, I might as well take advantage of the opportunity to deal with it now. I want to come back to an issue I raised earlier today. You will recall, as will other members of our committee, that in the course of a presentation made by Mr Murray from the Cochrane Public Utilities Commission, he made reference to certain statements made by Mr Eliesen to the effect that fuel substitution or some type of program was already in place and operative.
We do not have to rely on that, although it is interesting. I guess technically it is hearsay. There are other materials before us which I would like to call to the committee's attention once again, because I think it is very important that we address this and determine what the best course of action is.
I have, first of all, in my hand media background Qs-and-As which were released by the minister's staff a couple of days ago when he appeared before this committee. In answer to one of the questions posed on page 2, it says: "When the government introduced Bill 118, there was commitment made to listen closely to what was said during the legislative process and to be responsive where appropriate. The government did listen and continues to listen." Evidently, the minister was intent on obtaining, to all appearances, the input of people from across the province. Hence the raison d'être of our committee and its tour.
However, today the members of this committee received a statement from the chairman of the board of directors of Ontario Hydro, Mr Eliesen, together with a booklet entitled Update 1992: Ontario Hydro's Plan to Serve Customers' Electricity Needs: Providing the Balance of Power. I note that in Mr Eliesen's statement he indicates in a paragraph about three quarters of the way down on the front page, "However, more opportunities will come from higher efficiency standards from government and changes in law that will allow Hydro to promote alternative forms of energy where the customer can benefit and where electricity is not the most appropriate form of energy."
I also want to indicate, on page 11 of the book that I earlier referred to, it says, "In addition, new legislation will provide the opportunity to promote alternative fuels in applications where electricity is not the most appropriate energy and where there are benefits to the customer and to Hydro."
The Chair: Excuse me. Can you be specific? Where is that on --
Mr McGuinty: Page 11, bottom of the first column.
I can add as well that in a briefing received today by my leader, together with a couple of my Liberal colleagues, in response to a question regarding the amount of projected energy savings that will result from fuel substitution, the response from the representative of Hydro was that we would save 3,600 megawatts. That 3,600 megawatts forms part of the 9,900 megawatts which Hydro is now projecting we will save and which forms the basis for its very substantive revision to its demand-supply plan, which outlines a proposal for meeting demand and supply of electricity for the next 25 years.
My concern is that it may very well be that this committee will conclude at the end of its meetings with members of the public -- and I am certain no one here is prepared to argue that it is not open to this committee to conclude -- that fuel substitution is not a good thing. However, I think it is made perfectly clear, through the statement made by Mr Eliesen and in the wording contained in Update 1992, that Hydro has concluded already -- has jumped the gun, so to speak -- and determined that fuel substitution will go ahead, notwithstanding the findings of this committee. I am very concerned about the inference we have to draw from that, and that is Hydro's disregard for the work of this committee and for the opinions that could be provided to us by members of the public.
I am going to urge this committee -- if you require a motion, Mr Chair, then I can put it in that form -- to request that Mr Eliesen appear before us -- he can do that some time next week in Toronto -- so that he can provide us with some kind of response to the actions taken by him and Hydro indicating that fuel substitution will proceed, apparently notwithstanding the findings of this committee.
The Chair: You have not yet made the motion -- and I am not stating that you are disentitled to do that. Before you reach that stage, because there may be things that people want to say about the appropriateness of a motion right here and now with respect to this matter -- you have raised the issue. Are there other people who want to speak to the matter Mr McGuinty raises?
Mr Huget: Yes.
The Chair: Recognizing that he has not made a motion yet and is entitled to do so whenever he wishes.
Mr Huget: First of all, you raised some interesting scenarios. I think what is said in that booklet is very general in terms of what is expected to be the public mood regarding fuel substitution, that there will be a demand for fuel substitution. I find it difficult to believe that anyone would proceed in a direction without regard to this committee. To me, that is an unfounded allegation. I do not see where it is relevant.
I am not so sure that making that motion here is appropriate either, to tell you the truth. I think it is a just a little presumptuous and is probably at a difficult time to deal with that kind of motion.
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Mr Conway: I am glad my friend from Ottawa South has raised this issue, because I was going to raise the question myself at some point in the next day or so. I had just assumed this committee would, at some point in the deliberation, want to summon the chairman and chief executive officer of Hydro. I had assumed a block of two or three hours would be set aside for that encounter. There is absolutely no question in my mind that Mr Eliesen has had a tremendous amount to do with the drafting and with the moving forward of Bill 118. He is himself materially involved in some sections. I want to talk about some specific sections in the bill that materially relate to him, his employment contract and related matters. We already have an amendment, I gather, which is going to touch upon that, which amendment has been raised by the minister himself.
I have a very high degree of scepticism. I am not as innocent as my friend the member for Ottawa South at all. I suspect that as we speak the executive offices of this government are abuzz with the latest blindsiding of the chairman and chief executive officer. This is a dramatically altered document and I think any committee worth its salt and worth $78 of tax-free money per day would want to ask some questions around the architect of this policy. This policy today relates directly to the bill before us.
As I say, I am not at all sanguine. Poor Willy is someplace between here and Kitchener hearing about it, I am sure, for the first time. As I say, I am sure that people in the executive offices of the government generally are hearing about it for the first time. Unlike my friend the member for Ottawa South I expect that the bill and the policy that informs it are going to contain significant fuel substitution. That could not be more clear to me. I am going to fight and I am going to continue to fight around the question of who pays. That is my primary concern. That we have a very energetic, highly idiosyncratic chairman does not surprise me.
The Chair: At Ontario Hydro.
Mr Conway: At Ontario Hydro. But this incident my friend the member for Ottawa South raises brings me to another point where I would, of course, want the CEO and chairman here, because as my friend the member for Sarnia has said, as the now minister, the member for Kitchener, has said, as his predecessor the member for Peterborough observed, Bill 118 is first and foremost about openness and accountability. I find it remarkable, fetching, heartwarming, that as we travel in the subarctic cold of northern Ontario for the first week of our deliberations, the chairman would grace us by announcing in another place a dramatically altered demand-supply plan that touches upon the very work in which we are now engaged.
So I cannot imagine there is anyone in the government or anywhere else, which is so committed to openness and accountability, who would not want the architects and in some ways the beneficiary of this Bill 118 to come before us and explain not just what my friend the member for Ottawa South is interested in exploring, but that whole host of other policies he has authored and that in some very particular personal ways he benefits from. I am just assuming that at some point soon we will be favoured with a block of at least three hours when the eight or nine of us can cross-examine our friend the chairman and CEO, if for no other reason than in the interests of openness and accountability, because I know who is running Hydro today: Of course it is the people and their members of the Legislature, not some appointed CEO and chairman.
The Chair: Mr Klopp, do you want to talk to this?
Mr Klopp: Yes. The wording in this paper -- I turned to page 12 and it says, "The proposed changes would allow Hydro to promote..." I guess my point is you can take words out of whatever.
I have got a lot out of the week I have been in this so far. Tonight, to hear the idea of amalgamating PUCs, to make them more efficient and to actually tie them into other energy sources I find quite interesting. In the year I have been involved in government and in the standing committee on resources development, we have been accused -- or I used to accuse government -- of moving so slowly on so many issues. I have found that sometimes the legislative process needs to take hearings, and other times other parts of the train are moving. I guess maybe tonight we are almost saying that part of the train is moving a little faster than it should and the standing committee on resources development is up here listening and it should maybe be down with the minister and the CEO.
It is an interesting point, but I think it says in here their idea is based on some assumptions and some proposed ideas. I think we are learning here. I do not think it is time to close up shop and to say your time is wasted or my time is wasted. Heaven knows we have done a lot of sitting for many years and I think we are getting something out of this, so I do not think there is a need to insult my intelligence by saying we are not part of this process or you are not part of this process.
Mr Martin: I just wanted to make a couple of comments in light of what has happened here. Maybe somebody can correct me if I am wrong, but it seems to me that we were elected as a majority government September 6, 1990 and, as such, have a program that we proposed to introduce. We develop legislation and then we take it out on the road.
I have been on the road a couple of times now, and in every instance the bill we took out on the road survived the ordeal. There were many amendments and changes to various sections of the bill so that it might reflect most adequately the concerns and the good suggestions we got from folks, but nevertheless the spirit of the bill went ahead and I would suggest that was probably the case with the previous government when it had a majority. I do not know how many of the bills you took on the road were dropped or did not go through the House.
So you would anticipate that those who work in the very important field of setting the goals of a facility or an operation that is so important to the industrial future of our province would be continually putting out materials to let the province know where we were going. It seems to me in this particular booklet we have early in the new year, as is the wont of many organizations, they are sharing with the province what is happening, what their hopes and dreams are and in fact reflecting to some degree the direction this government wants to proceed in; and to put forth what they see as their new demand-supply plan would be no different from a company perhaps laying out its newly adjusted business plan.
Whereas it would probably be enlightening and interesting to have Mr Eliesen appear before this committee -- I do not think any of us would not have a few questions to ask of him that would create some probably enriching dialogue -- to suggest that the launching of this kind of material today is in any way different from what happens in so many other ways as government proceeds or as businesses proceed, and at the same time as committees are looking at what we might do differently or the same, creates the kind of dilemma that was presented by the member for Ottawa South.
The Chair: We are going to go to Mr McGuinty in just a moment. I am sure the committee will recall having approved the schedule which has us this week travelling, among other places, to Timmins; next week, the week of January 20, in Toronto; the subsequent week, the week of of January 27, in Kingston, Chatham, Guelph, St Catharines. Then a few weeks later, Monday, February 17, we are in Toronto: 2 pm, the Minister of Energy and 2:30 pm, Ontario Hydro. The schedule as it exists now does not specify who from Ontario Hydro. I do not know whether you want to ask the parliamentary assistant whether he anticipates the chair from Hydro coming or how you would prefer to deal with that.
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Mr McGuinty: I would like to make a specific request that Mr Eliesen himself appear. That is one issue. I guess the second one is, how much time do we have allotted for Ontario Hydro?
The Chair: The schedule is Monday, February 17, 2 pm, Minister of Energy, 2:30 pm, Ontario Hydro.
Mr Klopp: Excuse me. Is there not a subcommittee that does all this great, wonderful stuff? Can the subcommittee not take care of this and decide who is coming for Ontario Hydro or whatever? I do not understand why they did not do this or why they do not do it.
The Chair: The subcommittee can, but that revision to the schedule or that sort of amendment or more specific direction would undoubtedly come back to the committee anyway.
Mr Conway: If I might say again, in my own case, even setting aside the particular interest of the member for Ottawa South, I cannot conceive that this committee could proceed to deliberating this bill, given the nature of Bill 118, without having the chairman and CEO, who is materially involved by virtue of the bill and its amendments.
Mr Klopp: I certainly --
The Chair: One moment, Mr Klopp. We are going to get back to Mr McGuinty, but Mr Jordan has something undoubtedly important he wants to add.
Mr Jordan: I think the issue is more important than something that can be left until February 17. My personal view is that in light of the comments from the Cochrane utility -- I quote Mr Eliesen: "For our size utility, we have the most ambitious demand management program in North America, which now includes new measures on fuel substitution. We are now measuring our progress in this area since the program began" -- the gentleman who came down and presented it was quite concerned, because the MEA had been promised to be consulted before anything like this would happen.
My personal view is that when we are in Toronto following this week, if possible we should have the chairman come before us and explain this one item. He does not have to get into the whole bill but explain this one section before we go on the road the following week. That is my personal view.
Mr Klopp: My point is that I do not know whether the subcommittee was asleep at the switch when it was putting all this list of people together and it did not say Ontario Hydro -- of course we assume the chairman would be right in there. I assumed that is what would be there. I have nothing against that; I just wanted to point that out for the record.
The Chair: Mr Wood is going to be entitled to speak, but I suspect, in response to that particular comment --
Mr Conway: Yes. I just want to make the point -- again, I am trying to keep myself focused in on Bill 118. I just assumed all along that we would have the chairman at some point to talk about his involvement. I cannot imagine completing this process without that. My friend from Ottawa and the member for Lanark-Renfrew have raised a very important point, as did the gentleman from Cochrane, that leads me to the following observation: Section 10 of the bill says that this act, save and except subsections 1(2), (3) and (4), comes into force on the day the bill receives royal assent. Interestingly, those parts of the bill that are retroactive are the ones that deal with the role of the CEO himself.
What we have heard today is testimony from the Cochrane PUC, which has excited the interest of my friend from Ottawa and the member for Lanark-Renfrew, which very much leaves the impression that section 4 of the bill, dealing with fuel substitution, has in fact come into effect before the bill has completed this stage of the process. That is an issue, I think, that --
Mr Klopp: You are splitting hairs.
Mr Conway: I am not splitting hairs. This, my friend, would be considered -- I am not saying it is, but if what the member from Ottawa has pointed out and, more important, what the fellow from Cochrane has pointed out is true, there may very well be a contempt of the Legislature here. Knowing the chairman of Ontario Hydro, I would not be surprised to find one, but I am not going to prejudge that. I am simply telling you that the gentleman from Cochrane made the point that as far as he can determine, and as he has been told by the chairman himself in correspondence, some of which is now before us, the fuel substitution program is in place and under way, and according to the bill before us, that is not allowed until this bill is passed and receives royal assent.
The one part of the bill that is retroactive, and it is quite clearly stated, has to do with the function of the chairman and CEO. So, again, I think the member from Ottawa in response to the Cochrane delegation has an extremely valid point, not just in terms of substance but procedurally as well.
The Chair: Mr Arnott, are you responding to Mr Klopp's brief comments, the way Mr Conway did? Okay.
Mr Arnott: As the Conservative member of the subcommittee, I would just like to say -- unfortunately the government member of the subcommittee is not present at the moment, but it was my recollection that the chairman of Hydro was going to be presenting on Tuesday afternoon, and I am certainly looking forward to that. I do think that what has been said this evening is very dramatic, very, very serious, and in the interests of good public policy the chairman has a good deal of explaining to do on Tuesday with respect to what we have heard from Cochrane today.
The Chair: Thank you. Mr Wood.
Mr Wood: In all fairness, I have no problem with the CEO coming forward to the committee at some point in time, but we have to recognize that during 1990 there was a campaign launched and part of the campaign was that nuclear power was not the future for the province of Ontario and that eventually there would be a moratorium put on any future nuclear power. Basically, comments were made, "Okay, the construction that is under way at this point in time will be completed, but there will be a moratorium on it and it is cheaper to conserve kilowatts than it is to produce them," and ways and means were going to be found to conserve energy and other ways and means of producing it.
There have been all kinds of statements, news releases that have come out since September 6, 1990, by the former Energy minister, by the new Energy minister, and Ontario Hydro and the Ministry of Energy are not expected to sit still while we are out debating and getting feedback from the public on any amendments that might be required before Bill 118 becomes law. Nothing is going to sit still as far as I am concerned.
The PUC member from Cochrane who made the presentation today is referring to comments made back on October 3 at a meeting in Kapuskasing, and I think this has been the direction in which the government members in the Legislature have been trying to push Hydro for quite a number of months now, and the process is continuing on that scale. I do not see anything wrong with booklets of this kind that have come out to say this is what the --
Mr Jordan: Just the fact that there is no bill --
Interjections.
Mr Wood: But this has been the direction, since the campaign in 1990 when the government was elected, that the government has taken, and it is proceeding along that line. It is to conserve and find ways of producing energy other than nuclear power --
The Chair: One moment. The most unfair thing in the world, if we are going to talk about fairness, is to the Hansard people who have to decipher two people who talk at the same time; those people are not paid well enough to be required to do that.
Mr Wood, finish up if you will.
Mr Wood: Those were my comments. I wanted to point out here again and for the record that this has been the direction. The government that was elected on September 6 is heading in a different direction from the governments that operated in the province from 1980 to 1990. From September 6, 1990 we have headed in a different direction and we have managed, through news releases and dialogue and through public hearings of this kind, to encourage Ontario Hydro to head in another direction from that which the two previous governments had directed it to head in.
The Chair: Mr Conway wants to respond briefly to Mr Wood, and then Mr Huget wants to raise a matter.
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Mr Conway: I want to again summarize something, I hope quietly and directly. I appreciate what my friend the member for Cochrane North has just said and I listened carefully to what the member for Sault Ste Marie said, but I want to just take you back to what your government has undertaken.
I have no quarrel with the right of the government to do the things you both refer to, but there is something called due process. I mention it because the highlight of the policy -- I well remember the day Ms Carter read the statement on June 5, 1991, that the Hydro policy of this government was going to be highlighted by an attitude of openness and accountability, that the people's interest, through this Legislative Assembly, was going to mean something and it was going to mean more than it had apparently meant in those bad old Grit and Tory days. Well and good, I perfectly understand the government's position.
So a bill was introduced that we have now before us, a very key component having to do with fuel substitution, key in the sense that it changes significantly what is allowed under the Power Corporation Act for Hydro to do in the area of fuel substitution. We have been talking about that here and we will continue to do so over the next couple of weeks.
In this new era of openness and accountability, we have evidence today from two sources, one from the Cochrane PUC and, I think perhaps even more importantly, from an extensive presentation and briefing in Toronto today involving a major amendment to the demand-supply plan of Ontario Hydro, both of which interventions make plain that Hydro is well on its way to implementing today fuel substitution initiatives of a truly significant kind. As the member for Ottawa South has rightly observed, it is on that basis that the demand management numbers have changed so significantly, and here we are with the bill not even through the public consultation stage. My point is that on the face of it that is at the very least a slap in the face to openness and accountability, and perhaps at the most a contempt of the Legislature.
Of course the government is allowed to do things, but it is generally allowed only to do these things once a bill has been passed. The one place where there is an exception has to do with tax bills. I would like, for one moment as a legislator, to pick up any number of bills standing on the order paper and go out and act today as though they were law. With the exception of those tax bills, I cannot think of a place where that is allowed.
I ask my friends opposite just to think for a moment about what they have said -- from their point of view, I think rightly so -- about openness and accountability and what their beloved Hydro chairman did this very day in Toronto and apparently, according to the Cochrane PUC, had been telling these local authorities for some weeks now. If I were into openness and accountability, I think I would be concerned to have my chairman doing this to me. I suspect it is news to the government caucus. As I said earlier, I am almost certain it is news to the minister and I think it is news about which we should be concerned.
The Chair: Mr McGuinty and Mr Martin are seeking the floor, but first Mr Huget has the floor.
Mr Huget: First of all, let me say I do not agree with the assumption that there is any deliberate attempt to usurp the rightful role of the committee or the rightful role of the Legislature. Quite frankly, I find that a little offensive. It is referred to in his statements in the introduction on his demand-supply Update 1992 as proposed legislation, and I think it is counterproductive to assume, and to lead people to assume, as a matter of fact, that there is some hidden motive in that statement.
I want to make a couple of points very clear. I believe the minister is scheduled to appear. I believe Ontario Hydro is scheduled to appear. I do not know who is scheduled to appear from Hydro. What I am prepared to do is to determine who is going to appear for Hydro and certainly pass on your request to see what can be done to alleviate the concerns you have about time to address the chairman of Ontario Hydro.
It is not necessary to paint a very dark, ominous picture in order for there to be cooperation. It is not necessary. What I am prepared to do is find out who is going to appear from Hydro and at the same time check on the availability of the chairman and whether that was planned originally. I do not know, but I can certainly find out.
Mr Conway: For my part, I want Edgar Bergen; I do not want Charlie McCarthy.
Mr Huget: If he is available.
Mr McGuinty: I appreciate Mr Huget's suggestion, but for my part I have not had an opportunity to discuss it with my colleagues. That is not good enough, plainly and simply. I ask that this committee make a specific request that Mr Eliesen appear in person in order to respond to our questions. That is the first point.
The second point is that I have concluded that some of my fellow colleagues simply do not understand the significance of this document, entitled Update 1992, which we received today. It is in booklet form, but it is certainly not a proposal. It is the amendment to the 25-year plan. Perhaps we can gain some understanding of how important it is by looking at some --
The Chair: Are you referring to that glossy, four-colour cover?
Mr McGuinty: Yes. We can gain some understanding of how important this is when we recollect how today a young woman who appeared before us made reference to a revision. I can assure you that she, like thousands, possibly tens of thousands of others throughout this province, will hang on every word contained in this document. It is the revision of a plan to deal with our electricity needs and supply over the next 25 years. This is premised upon Hydro saving 3,600 megawatts through fuel substitution. This document is extremely significant.
The Chair: Please, what are you saying? Your first proposition is, I suspect, the one you want the committee's attention focused on. You are proposing that the committee request that Mr Eliesen appear. It is not by way of a motion. With that not being by way of a motion, is there consensus with regard to the proposition that Mr Eliesen be requested by the committee to appear? Is there consensus? Is there any dissent? I only want to hear if there is dissent. There is no dissent. Then the committee, by consensus, agrees that Mr Eliesen will be requested to appear. I trust that the clerk will do what she has to do and advise him that the committee members have unanimously indicated that they request Mr Eliesen to appear.
Now, the second half of your proposition was a commentary.
Mr McGuinty: Essentially. The only other concern I have, and I am sure this will be much less contentious, relates as well to fuel substitution. I have a real question as to the economics behind fuel substitution and as to how it is going to benefit or harm someone who is not able to switch to an alternative fuel. I would like to see someone give me the economic arguments behind that. I assume there are people from Hydro who are the best experts in that field.
The Chair: You are putting them on notice now that you want that information from them during the course of these hearings.
Mr Conway: I am not as sanguine there as my friend the member for Ottawa South. I think the point is well taken and I would like to pursue it as well. My thought is that we might have an energy consultant. It is hard. It would be hard for me were I at Hydro; I have a conflict of interest in that sense, not anything nefarious, just in the scheme of things.
I think the point is a good one. I am wondering whether, rather than going first to Hydro to get some kind of analysis as to how that works, we might -- the other morning Peter Gzowski had somebody on who was going on at great length about the intricacies of these matters. I thought he sounded interesting. He was not at Hydro. He may be some kind of hired gun for somebody else, but I think the idea is a good one. I am not so sure -- I have not even discussed it with my friend -- whether a person from Hydro is the person you want to give that analysis. I have a feeling that people in Hydro may feel somewhat constrained by developments and we might want to look initially at some kind of energy consultant who could simply give us a more dispassionate, disinterested analysis. Hydro may want to be here to comment and to say what we heard was incomplete or whatever, but --
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Mr Klopp: Leo is kind of good at this.
Mr Conway: I think Leo is not exactly disinterested either.
Mr Wood: A brief comment on that: I know Mr McGuinty is talking about Sioux Lookout. What do the people at Sioux Lookout do if they do not have natural gas? Every community that is not pretty well-populated in the province -- there are all kinds of communities, farming communities, farm houses, throughout the province of Ontario for which we are going to have to take a look at, if natural gas is not available, what other type of switching we do. We are faced with that all over the province. It is something the Minister of Energy and Ontario Hydro, I am sure, are going to have answers for somewhere down the road.
It is just that we are in northern Ontario now. You have pointed out several times today, "What about the people in Sioux Lookout?" In southern Ontario, in small farming communities all throughout the province, there are all kinds of people who do not have natural gas available to them, but I am sure they are going to be interested in some other type of switching if their hydro bills are sky high as a result of electric heating, whether it is in a farm house, whether it is a small village for which gas is not available. I am sure those answers are going to come out eventually.
Mr McGuinty: Our purpose, of course, Mr Chair, is to find those answers before we launch ahead with implementation of the bill and turn it into operative legislation. The minister has said that if we go ahead with fuel substitution it will benefit all ratepayers, and he has been basing that kind of statement, I am certain, on evidence he has obtained. I am just asking to see that kind of evidence.
Mr Conway: I might as well say that I am going to leave here tonight and go to a phone. My friend from Cornwall says his phone lines are lit up; the people of Cornwall Hydro want to talk to him. A couple of mayors in my communities want to talk to me, irrespective of whether it is midnight tonight, because the only thing on their minds is the story running across the CP wire and headlining all the newscasts in Ontario tonight, which is, "Chairman of Ontario Hydro announces an end to nuclear power for the next 20 years." That may bring te deums of praise in NDP heaven; in my part of the world it is causing a great deal of consternation.
A very significant energy policy statement has been made today and there is something almost pathetic about our being here deliberating quietly and productively while this is being done in an allied fashion by an individual who has not bothered to take this committee into his confidence, who sent the poor old minister here just two days ago -- the minister did quite a creditable job of saying nothing about what was to come. As I say, I am going to have to go and tell my people what this means.
Interestingly, one of the towns that is going to be most affected, the community of Deep River, the home of all of those atomic researchers who, I guess, are going to be out of jobs, is one of the first candidate communities for fuel substitution. As the local member, I have probably got a better case study than any of you trying to figure out how this community, which has had its economic future discounted somewhat today, is going to qualify for this kind of fuel substitution that apparently is much more detailed and much further down the line. I suspect what my mayor is going to tell me is that -- in fact, he is probably going to tell me that it is all set and ready to go and it may be the --
Mr Wood: They have been working on it since September 6, Sean.
Mr Conway: Well and good. As I say, the point that has been raised here is that the entitlement to do that is contained within Bill 118, which in my estimation -- well, I want to tell my friend opposite, who is quite a good fellow, that that is absolutely and transparently true. Section 4 of Bill 118 is the enabling section that will allow the Deep River project to go forward, and that legislation is not going to be law, by my calculation, until at least the middle of April.
I am not the one who is talking about a new day of openness and accountability, but if my friends opposite cannot see the difficulty in this, then it is a new day.
The Chair: Mr Martin, it is almost tomorrow.
Mr Martin: Yes. I would suggest that what we have here is a difference of opinion and perception and some great leaps of interpretation, which in themselves are setting parameters around the openness of this particular committee and probably giving people the wrong impression of where we are going. My very scant, quick read of the document put out here was that it was simply a context within which this bill will fit and within which the future of energy in this province will be developed.
Mr Jordan: Mr Chairman, there seems to be a great misunderstanding on what this is. We have been spending millions of dollars in Toronto on the original of this, and this is an amendment to that. The amendment to that includes, now, an amendment to this book, which we are still working on and, as my colleague points out, will not be part of this book until April. I think we have a very legitimate question. It is not just a piece of paper, my friend. You are outside the law, the same as if I went out on the street and drank a bottle of whisky.
Mr Martin: It is a context. It is a business plan that is built on conjecture and presentation --
The Chair: Excuse me. The Hansard people have not done anything to cause us to punish them that way. They have been kind. They have been gracious. They have been good. One at a time.
Mr Jordan: I cannot see that they can slight either one of these booklets. They are more than a piece of paper. I would like clarification from the chairman as to where he has the authority to put this before the people at this time, before this bill has been amended. That is all I am saying.
The Chair: All right. The issue of the chairman has been resolved already; the chairman's appearance before the committee. Now Mr Huget.
Mr Huget: I was going to mention that the issue by consensus requesting the chairman to appear has been dealt with. The issues you raise, I suppose, you should rightly raise with him.
The second request was for the cost-benefit analysis or the cost-effectiveness of the fuel-switching issue. I think we can agree by consensus to have Hydro provide the basis of that information to him. I do not have a problem with that. I think both issues are being dealt with.
Mr Conway: I accept what my friend from Sarnia has said. However, I would like, at some point, to have some independent analysis of the general propositions around fuel substitution brought to the committee by an independent energy analyst, of whom there are several.
The Chair: That is, however, in my view, subject to what people here might say, something far different than the request to have the chairman of Hydro appear and something that would best be first dealt with by the subcommittee, because it is a significant change.
Mr Conway: Yes, the first question is dealt with, as far as I am concerned. It bears no relationship to the first issue, which I think we have settled. It is the second issue, then, around the fuel-substitution question which my friend from Ottawa has raised. My only point there is that I do not have a problem with Hydro coming and making a pitch about what it imagines is possible. It is a highly technical field. I would like to have some opportunity to have somebody briefly and expertly respond to that. I have no competence to make those judgements.
The Chair: You are suggesting that that matter be referred to the subcommittee, because it involves expenditure or the prospect of expenditure, and involves a significant change to the schedule that was agreed upon by the subcommittee and by this committee.
Mr Conway: Yes. I guess I would say further that it may very well be that the time constraint does not provide it. What we could perhaps get is a paper or something from Hydro that we could have, and then have it analysed: ship it out to have somebody look at it and give us a cursory examination of it.
Mr Arnott: Could the committee give consideration to allocating half an hour to our research officer to give us his estimate of that particular issue?
The Chair: There is any number of ways to do it. Let's let the subcommittee deal with that and look at the resources that are available to Mr Yeager before we even call upon him to consider doing that.
Mr Huget: Just a point of clarification: Are you saying you do not want any information that Hydro has on the cost-effective --
The Chair: Is that to Mr McGuinty?
Mr Huget: Yes.
Mr McGuinty: No, I am not saying that. I am saying we would like to have some information from Hydro. It would be of great use to this committee, following up on my friend's suggestion here, that we have a disinterested party as well comment on Hydro's submission. It may very well be that they are going to coincide.
Mr Huget: I am prepared to go along with the request in terms of getting Hydro to provide that information. We can deal with Hydro by consensus. I think the other is a subject for the subcommittee. If you still want the first part of that dealt with --
The Chair: All of those matters having been dealt with, I am waiting --
Mr Conway: Let's go watch the chair of Hydro, who is headlining the television news.
Interjection: Are you adjourning things until 4:30 in the morning?
The Chair: I hear the motion to adjourn. All in favour? Carried.
The committee adjourned at 2201.