POWER CORPORATION AMENDMENT ACT, 1991 / LOI DE 1991 MODIFIANT LA LOI SUR LA SOCIÉTÉ DE L'ÉLECTRICITÉ
MUNICIPAL ELECTRIC ASSOCIATION
HYDRO-ELECTRIC COMMISSION OF THE CITY OF YORK
CANADIAN INSTITUTE OF PLUMBING AND HEATING
CONSUMERS' ASSOCIATION OF CANADA (ONTARIO)
TORONTO ENVIRONMENTAL ALLIANCE
MOOSE RIVER/JAMES BAY COALITION
CANADIAN UNION OF PUBLIC EMPLOYEES, LOCAL 1000
CANADIAN UNION OF PUBLIC EMPLOYEES -- ONTARIO DIVISION
PUBLIC SCHOOL BOARDS OF METROPOLITAN TORONTO
CONTENTS
Thursday 23 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
Municipal Electric Association
Marvin LeClair, chair
John Wiersma, past president
Tony Jennings, chief executive officer
Hydro-Electric Commission of the city of York
Mark Anshan, chair
Rudy Roth, vice-chair
Frances Nunziata, commissioner
Bill Scott, general manager
Canadian Institute of Plumbing and Heating
Ed Hardison, president and general manager
Consumers' Association of Canada (Ontario)
Joan Huzar, president
Peter Dyne, chairman, energy committee
Toronto Environmental Alliance
Gerard Coffey, coordinator
Moose River/James Bay Coalition
Randy Kapashesit, chair
Canadian Oil Heat Association
John Butt, executive director
Sid Finklestein, consultant mechanical engineer
Canadian Union of Public Employees, Local 1000.
Jack MacDonald, president
Bob Menard, education and publicity officer
Canadian Union of Public Employees_Ontario Division
Michael Stokes, president
Brian Blakeley, legislative assistant
Public School Boards of Metropolitan Toronto
Dr Jack Murray, superintendent, capital program and planning
Geoffrey Brown, plant controller, York Board of Education
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
Johnson, Paul R. (Prince Edward-Lennox-South Hastings/Prince Edward-Lennox-Hastings-Sud ND) for Ms S. Murdock
Ward, Brad (Brantford ND) for Ms S. Murdock
Clerk pro tem / Greffier ou Greffière par intérim:
Manikel, Tannis
Decker, Todd
Staff / Personnel: Yaeger, Lewis, Research Officer, Legislative Research Service
The committee met at 1000 in committee room 2.
POWER CORPORATION AMENDMENT ACT, 1991 / LOI DE 1991 MODIFIANT LA LOI SUR LA SOCIÉTÉ DE L'ÉLECTRICITÉ
Resuming consideration of Bill 118, An Act to amend the Power Corporation Act. / Projet de loi 118, Loi modifiant la Loi sur la Société de l'électricité.
The Chair: It is 10 am. We are scheduled to begin. People came here expecting to make their presentations at the times allotted.
MUNICIPAL ELECTRIC ASSOCIATION
The Chair: The first presentation is the Municipal Electric Association. People, please come forward and have a seat. I should note that Mr Huget is here and Mr Cleary is here. We are ready, notwithstanding that there is only Mr Huget and Mr Cleary, to move on because that is what we are scheduled to do.
Please tell us who you are, say your names and your status with the Municipal Electric Association. You have 20 minutes. We have your written material which of course becomes part of the record by virtue of being filed as an exhibit. Please keep your presentation to 10 minutes or under because one of the most valuable parts of this process is the questions and dialogue that takes place after that. Go ahead, gentlemen.
Mr LeClair: Thank you. Good morning. I am Marvin LeClair, chairman of the Municipal Electric Association and a commissioner on the Essex Public Utilities Commission. With me this morning are our past president John Wiersma and our CEO Tony Jennings. We appreciate the opportunity to address the committee today. We have distributed copies, as the chairman has mentioned, of our brief to the committee. I am not going to read the entire document but I hope you have an opportunity to review it in detail.
We would like this morning to present to you some highlights of our position and then take any questions you might have.
The Municipal Electric Association, MEA, was formed in 1986 from two predecessor organizations, one that represented the commissioners and one that represented utility management. These two predecessor groups traced their roots back to the 14 municipalities that set up the original power commission known as Ontario Hydro.
Today MEA represents about 315 municipal electric utilities which serve 75% of the province's electricity consumers. MEA members believe strongly in two important principles: public power and power at cost. It is important to keep this in mind during discussions of the concerns we have about Bill 118 and the actions the association has taken.
Bill 118 was introduced without any prior consultation with this association, and as we examined the bill after its tabling, our concerns quickly focused on two critical areas of the bill: policy directives and fuel substitution. The MEA's position was very clear. With regard to policy directives, the MEA stated that the province's provisions that would allow the government to issue binding policy directives that could change Hydro's mandate and which would be paid for out of the cost of power were absolutely unacceptable. Why? Because they violate the principle of power at cost. In its original form, Bill 118 could allow the government to force Hydro to undertake any kind of activity unrelated to the provision of electricity and then make hydro ratepayers foot the bill. It was very clear to MEA members that they must vigorously oppose any measure that could turn Ontario electricity bills into tax bills.
MEA concerns in this regard were heightened by another situation which has been raised by this committee's members on several occasions during the hearings and which appear to be an indication of the government's intentions regarding Ontario Hydro. The situation is the community assistance package for Elliot Lake. I know you are all familiar with the terms of this assistance package, which MEA believes is inappropriate as it again violates the principle of power at cost and indicates a tendency to use Ontario Hydro as an instrument for government social policy.
Some members of the committee in this room have been led to believe the Elliot Lake assistance package represents a saving of $1.4 billion for Ontario Hydro. This is not the case. Ontario Hydro is not saving $1.4 billion, because the corporation was not under any obligation to extend the contract with Rio Algom beyond 1993. If the government had not stepped in, Hydro presumably would not have extended the contract. It would have terminated the contract in 1993. The fact is that now the government has ordered Hydro to extend the contract from 1993 to 1996 at prices $160 million higher than the market price for uranium. The $1.4 billion is based on the contract being extended for 10 years, which surely Hydro would not have done. Therefore, to describe this amount as a saving is totally inaccurate.
But back to the bill at hand. On policy directives, MEA has determined that the breadth of the policy directive power was inappropriate and should be restricted. That is what was recommended in our position paper released in August.
The second area MEA focused on in Bill 118 was fuel substitution. Despite what has been written and said about MEA's position on this matter, the association is not opposed to energy conservation and it is not opposed to fuel substitution, although MEA does argue that it appears to be unnecessary to subsidize fuel substitution and unfair to force Hydro customers to pay for it. The MEA is very active in energy conservation programs and is working cooperatively with Ontario Hydro on several energy management projects. We understand that energy conservation activities such as fuel substitution are key elements in ensuring future reliability of supply of electricity.
However, Bill 118 would permit Ontario Hydro for the first time to provide financial incentives to people to encourage them to switch from electricity to other fuels for space heating. Why does MEA oppose this? Quite simply, it is unnecessary and it is unfair. It is unnecessary because other fuels such as natural gas are currently cheaper than electricity. In MEA's view, it appears market forces alone are sufficient to encourage fuel substitution. It is unfair because in many parts of Ontario electricity consumers do not have access to other fuels. This means they will end up subsidizing, through their electricity rates, the conversion of other customers who do have the option. Therefore, MEA believes the section of Bill 118 permitting Ontario Hydro subsidies for fuel substitution should be withdrawn.
As you are aware, MEA made its concerns about policy directives and fuel substitution well known to the government and the opposition members through an intensive campaign by our members that included many letters, petitions, resolutions and meetings. As you are also aware, our campaign succeeded in having the new Minister of Energy consider our concerns and promise to introduce amendments to the bill. The minister has promised to appropriately reduce the breadth of the policy directives as we recommended. On the fuel substitution, the government has said it intends to proceed with subsidies. However, we have been promised a full and meaningful consultation process on the development of these programs, and the minister has said he expects these programs to stand up to economic scrutiny.
We are pleased with the commitments made to date. Since October, MEA has continued to monitor the progress of the bill through second reading and the referral to the committee. MEA has also been considering what further constructive comments and suggested revisions might be made to Bill 118.
In the area of policy directives, MEA and its member utilities expect any directives issued will relate to matters under Hydro's mandate: the safe, reliable supply of electricity. MEA intends to be vigilant in this regard, to ensure that the principle of power at cost is preserved, that policy directive powers are not abused and that Ontario Hydro is not used as an instrument for government social policy.
1010
To that end, MEA believes there must be a mechanism to ensure that policy directives issued by the government receive some legislative scrutiny and are open and accessible to the public.
When the former Minister of Energy introduced Bill 118, she indicated that the policy-directive provisions were similar to those in the federal Financial Administration Act. There are some similarities, it is true, but the federal act contains many safeguards to ensure that policy directives are scrutinized and do not change the mandate of a crown corporation. One of these safeguards is subsection 89(3), formerly 89(4) of the federal act, which states:
"The appropriate minister shall cause a copy of any directive given to a parent crown corporation to be laid before each House of Parliament on any of the first 15 days on which that House is sitting after the directive is given."
The MEA believes that a similar provision must be added to Bill 118 to ensure that the Legislature and the public have the opportunity to see all policy directives that have been issued. Therefore, we recommend that section 9a of the act, under section 2 of Bill 118, be amended by adding the following clause:
"The Minister of Energy shall cause a copy of any directive issued under subsection (1) to be laid before the Legislature within 15 days of it being issued."
The MEA further believes that details surrounding the implementation and costs of policy directives should be available to the Legislature and to the public. Therefore, we recommend the following:
That section 9a of the act, under section 2 of Bill 118, be amended by adding the following clause:
"The board shall report to the minister all details concerning the implementation and costs of any directive issued under subsection (1), and the minister shall cause these details to be laid before the Legislature within 15 days of their receipt."
For the reasons stated earlier, the MEA still believes that the section of Bill 118 permitting Ontario Hydro to subsidize fuel substitution is unnecessary and should be withdrawn. However, the government has made it very clear that it is determined to proceed with this section.
MEA appreciates the minister's written commitment -- he wrote to me personally -- to full and meaningful consultation with municipal electric utilities and other parties in the development of fuel substitution programs. The MEA is already making plans to participate in this consultation to make an effective contribution to the consultation process.
We also appreciate the minister's written statement that he expects fuel substitution programs to stand up to economic scrutiny and to be in the best interests of the electrical system.
That being said, MEA is concerned about increasing pressures from other parties to maximize fuel switching, regardless of the implications. Therefore, MEA would like to see the minister's commitments on fuel substitution become part of the legislation itself so that it takes on the appropriate prominence. Therefore, we recommend the following:
That section 5 of Bill 118 be withdrawn. If it is not withdrawn, it should be replaced with wording that enshrines the minister's commitment, as per his letter of October 2, which you have attached to your documents.
This concludes the MEA's comments to the committee on the background of the association, its positions on Bill 118 and the minister's proposed changes, and its additional comments on and recommendations for amendments to the legislation. We appreciate the committee's consideration of the presentation, and we are prepared to respond to any questions you have, Mr Chairman.
The Chair: Mr LeClair, thank you. I should tell you and the other people who are going to be participating that each of the caucuses is represented. Among the members of the official opposition Liberal Party is Mr McGuinty, Energy critic for the official opposition. Among the members representing the Conservative Party is Mr Jordan, Energy critic for that caucus. Among the government caucus is Bob Huget, MPP for Sarnia, who is also the parliamentary assistant to the Minister of Energy. Two minutes per caucus.
Mr Cleary: I would like to thank you gentlemen for your brief. I think it is very easy to understand. Also, your recommendations are very helpful to the committee. I just wondered about one thing. I did not see it in the brief; I hope I did not miss it. Are you satisfied with the present makeup of the board of directors of Ontario Hydro, and what is your opinion of the proposed changes?
Mr LeClair: I am going to ask Mr Jennings, our CEO, to respond to that.
Mr Jennings: The MEA has not taken a firm position on the number. The number on the board was already fairly significant. We have asked over the years for an increased representation from among the people with experience in the local utilities, since most of them are elected. The commissioners represent some 75% of the customers, so if there was an issue, I think it would be a question of where the members of the board are drawn from.
Mr Cleary: The other thing I would like to mention here is that you, sir, said that you were not opposed to a conservation program through Ontario Hydro.
Mr LeClair: That is correct.
Mr Cleary: My colleague Mr Jordan had a couple of lightbulbs that were mailed out to every householder in the province of Ontario. I was just wondering, were you in favour of that?
Mr LeClair: They were distributed by Ontario Hydro without consultation. We were informed that they were being sent out.
Mr Cleary: That is not what it says on the package.
The Chair: There is not going to be time for any more questions from that caucus. Mr Jordan.
Mr Jordan: Thank you, Mr Chairman. I thank my colleague for picking up the light on those bulbs. It was important, though, that the package did say, "From your local utility." My understanding was that the utilities had not been consulted on this $7-million program.
First of all I want to say what an excellent brief this is, and I mean that from the point of view of being knowledgeable about the bill and the present act, which is shown throughout this presentation.
"The MEA executive met and passed a motion indicating that, if the minister did in fact proceed with such amendments to the policy directive power, and did promise consultation on fuel switching, the MEA would discontinue its publicity campaign." What is your position relative to that at the present time?
Mr Wiersma: It was the position of the MEA to discontinue the campaign. We still have a lot of questions. I happen to be on a committee of the MEA that is now trying to get the information from Ontario Hydro on the economics of fuel switching. Just on January 15 I received a thick document on the economics. They are not clear to us. It obviously needs a lot more consultation. We believe that process has to be ongoing before we can be definitive about whether fuel switching is a good thing or not.
Mr Jordan: What was your reaction to the five-year demand-supply plan, one that was studied for five years prior to presentation? Now one that has perhaps been looked at over a period of five months is replacing it. Do you have any comment on that?
Mr Wiersma: Fuel switching is considered to be a large part of that plan, and it is not clear to us, given the new avoided-cost scenarios with generation not being part of this plan, what the economics of fuel switching really are, or indeed of some of the demand management programs. I believe this whole issue needs review so that they are economically viable and we do not embark upon a program that is being subsidized out of the electricity consumers.
Mr Huget: Thank you for your presentation. I will just briefly touch on a couple of points. You mention of course the fuel substitution issue and your desire to be part of that process and for some direction from the minister saying that indeed you would be part of a group to be consulted. Could you tell me how you see that consultation process unfolding, and where and what kind of role you can play in that?
Mr LeClair: Personally, I wish I knew, but Mr Jennings or Mr Wiersma might be able to respond, especially John, since he is general manager of Pickering.
1020
Mr Huget: We are asking for your enlightened opinion.
Mr Jennings: Perhaps I could start. I think we need to have all the parties involved. We have made preliminary contact with the Ontario Natural Gas Association. We have already been in touch with Ontario Hydro, as Mr Wiersma said. The question at this point is how much more study is necessary to sort out the background. As was done with a lot of demand management programs more directly aimed at efficient use of electricity, there is very often a considerable amount of study necessary to see whether incentives are necessary or whether pure information programs can work the trick.
I think it is important that the basic position of the MEA is that the electricity consumer should not be asked to pay for it, but if in fact that strategy is being adopted by the government and applied by Ontario Hydro, being allowed by the change in the legislation applying to Ontario Hydro, then our party wants to be at the table considering the impacts on the local consumer, because the impacts will be different in different municipal utilities. Some have access to gas, some do not. The amount of electric heat, space heat, now being used in some utilities is a lot higher than others, so if you lose a large percentage of your customers and still have to keep all the wires and distribution system in place, it is going to affect the rates differentially. Part of the minister's commitment was that the issue of impact on affected people would be looked at as well. Those are the kinds of issues.
As was mentioned, Mr Wiersma is already involved in some preliminary looks, so maybe he would like to expand.
The Chair: Thank you, gentlemen. On behalf of the committee, I want to thank you very much for your participation this morning. We appreciate the time you have taken out of your schedules to come here. Your contribution has been a valuable one. We trust that you will keep in touch. Please take care.
HYDRO-ELECTRIC COMMISSION OF THE CITY OF YORK
The Chair: The next participant is the Hydro-Electric Commission of the City of York. Will people participating in that presentation please tell us who you are and commence with your presentation. Please try to save 10 minutes of the 20-minute portion of time for questions and dialogue.
Mr Anshan: Good morning, Mr Chairman and members of the committee. We appreciate the opportunity of appearing before you to present the views of York Hydro on Bill 118, An Act to amend the Power Corporation Act. I am Mark Anshan, chairman of York Hydro. I am pleased to introduce Rudy Roth, vice-chairman of our commission; Frances Nunziata, our commissioner, and Bill Scott, our general manager.
York Hydro serves the city of York, one of the six municipalities comprising the municipality of Metropolitan Toronto. We supply electricity to over 35,000 customers, making the utility the 23rd largest of Ontario's 312 electric utilities.
York Hydro was the first large utility in the province to convert its entire distribution system from 4,160 volts to 27,600 volts. This has resulted in considerable savings in energy purchased and provided the city of York with a much more efficient distribution system. We are also an active member of the Municipal Electric Association, the organization which preceded us here today. Many of our senior staff, as well as Vice-Chairman Roth and myself, serve on various committees of the MEA.
We are here today on behalf of our commission and our customers in York. Our concerns are to ensure that Ontario Hydro will be able to continue to provide us with a secure and reliable supply of electricity in an efficient and cost-effective manner. We participate in all activities designed to achieve that end. That is the reason for our appearance here this morning.
Our commission, on behalf of the customers and residents of York, supports the underlying principles governing the production and distribution of electricity in the province of Ontario and the importance of our public power system to the economic wellbeing of our province.
As a public utility, we strongly support the principle of supplying power at cost to our customers. It is for this reason that we support the position adopted by our association, the MEA, on Bill 118 and would like to emphasize some of the critical points raised by Bill 118.
First, permit me to make a few remarks regarding the policymaking process adopted by the government in regard to this bill. We believe it would have been prudent for the government to have entered into consultations with stakeholders and interested parties prior to the introduction of Bill 118 last June. In our view, such a dialogue might very well have made the public campaign undertaken by the Municipal Electric Association unnecessary.
The government apparently had serious concerns with the manner in which Ontario Hydro functions and the degree of accountability it has to the government. That is certainly a legitimate concern for a government to hold; indeed, as taxpayers and leaders in the electric industry in Ontario we expect our government to adopt such views and take appropriate action. But we hope our government will do so after public consultation and careful analysis of the problem, so that the proposed solution makes sense and is consistent with existing public policy.
As indicated by Mr LeClair, the policy directive provisions of Bill 118 as originally proposed violated, in our view, the basic principle underlying our electric system, power at cost. Fortunately, the minister has undertaken to amend that provision so that the principle will be maintained.
The rates charged for the provision of electricity in Ontario should be used for that purpose alone. A corporation such as Ontario Hydro should not be expected or required to use its revenues for the advancement of other government objectives, such as the contributions to the northern Ontario heritage fund for the benefit of Elliot Lake and other funds which have been advanced. Other examples, such as Ontario Hydro's debt guarantee charge by the government and the charge for water rental paid for the water flowing through the hydraulic generating stations are basically hidden forms of taxation to the electrical customers. The use of tax revenues for such objectives should be rationalized by the public policy underlying the objective itself.
We appreciate that the government is concerned about the accountability of Ontario Hydro. However, we believe that ongoing review of Ontario Hydro's operations and policies might be better served by evaluating the current process of annual review by the Ontario Energy Board and determining if greater regulatory powers should be adopted for the OEB. The means by which a large, complex organization such as Ontario Hydro can be made more accountable requires a process which is objective, open and fair and has the required expertise and resources to undertake the necessary reviews. The use of policy directives as a means of making Ontario Hydro more accountable should be seriously reconsidered.
As well, we believe that there still must exist flexibility and an ability to respond to changing circumstances in order that Ontario Hydro can make adjustments both in its policy and operations as the need arises. Last week's publication by Ontario Hydro of Update 1992 to its demand-supply plan is a good example of why Ontario Hydro will continue to require the ability to make changes in its short- and long-term plans. Ontario Hydro has the expertise and resources to make such determinations, subject of course to the accountability review being suggested by the Ontario Energy Board.
We support the proposed amendments suggested by Mr LeClair.
Section 9 of Bill 118 states, "Any action taken on or after the 5th day of June, 1991" -- the date of first reading -- "and before the coming into force of this act by any person purporting to act as the corporation's chief executive officer who was not the corporation's chairperson when the action was taken shall not bind the corporation." Although this transitional provision may not be very relevant by the time Bill 118 actually becomes law, its rationale needs to be seriously questioned. It certainly cannot be considered good public policy. Theoretically, what is supposed to be happening at Ontario Hydro during the interim period between the introduction of Bill 118 and its receiving royal assent? How is one of the largest corporations in Canada being managed on a daily basis with this kind of provision hanging in the air, waiting to become law? Who is the CEO at this moment? Legally, and as a matter of public policy, it makes no sense whatsoever.
York Hydro is actively engaged in energy efficiency measures. We are participating in the programs being introduced by Ontario Hydro to encourage our customers to save electricity and reduce their hydro bills. In that regard we are not opposed to fuel substitution and support the remarks made previously by the MEA.
Fuel substitution should be recognized as a demand management tool provided that it is economically viable and does not require customers in some parts of the province to be subsidizing customers in other areas to switch fuels. These types of initiatives must be fair and equitable across the province. Any type of subsidy which is not equitable cannot be considered as sound public policy.
Furthermore, any program of fuel substitution which increases the overall cost of electric power will seriously erode one of the economic advantages historically used by this province in attracting industry to locate and remain here.
Finally, such programs will further undermine the basic principle of power at cost. Generally, the customer alone should decide if fuel substitution is economically viable, and incentives from electricity revenues should not be used to increase gas company profits.
York Hydro supports demand management activities. We recognize the importance of this policy in order to ensure we will have an adequate supply of electricity in this province in the foreseeable future. We note Bill 118 will permit us to capitalize the cost of energy conservation programs. As long as this provision remains permissive, we have no objections, although at the present time it is unlikely that York Hydro would wish to take advantage of this provision. Our preference is to pay for such measures out of the current operating budget. We do not believe that future generations of customers should necessarily have to pay for present energy management programs. They will be required to pay for their own measures when the time comes.
1030
Finally, we wish to point out that we believe the cost of demand management activities should be borne by the entire system in the province and not passed on to the local customers through increased rates.
In conclusion, we wish to thank you once again for the opportunity to convey our views on some of the essential features of Bill 118. We hope our presentation will assist the commitee in its deliberations. We look forward to working with you in the future, through our association, and trust that together we can ensure that our province will continue to be well served by its electric industry. We welcome your questions.
The Chair: Thank you, sir. Three minutes per caucus. Mr Jordan, please.
Mr Jordan: Thank you, gentlemen, for your presentation this morning. I would like to go to page 4, the retroactivity provision of the bill. I think you bring out some important points there. First of all, who legally has the authority, while the act is sort of in limbo, to make decisions and sign contracts or deals at Ontario Hydro?
Mr Anshan: Are you asking me?
Mr Jordan: Yes.
Mr Anshan: I am a lawyer by profession, Mr Jordan, but I would not venture to give you a legal opinion at this point. I suggest that it is a serious question which the government ought to be concerned about at the present time, although I understand that informally certain arrangements have been made in the upper levels of management at Ontario Hydro. So it may not be, as a practical matter, a problem. But certainly, theoretically and legally, it is in our view a problem.
Mr Jordan: In line with that, then, Bill 118 is in committee stage and it has received only first reading. We are proposing and certainly are going to be suggesting, as you people are, major amendments to the bill, if indeed it is not withdrawn completely. In light of that, somebody had the authority to go ahead and change an official document, the demand-supply plan in front of the Environmental Assessment Board. That is a major decision that someone has made, and not only made it but made it on the basis of this act being amended under Bill 118.
Mr Anshan: Yes, although in fairness to Ontario Hydro, I think the 1992 update was approved by the board of directors of Ontario Hydro. I am not certain about that.
Mr Jordan: But it does include part of --
Mr Anshan: Yes. Your point is well taken, sure.
Mr Arnott: How much time, Mr Chair?
The Chair: You have 45 seconds.
Mr Conway: I thought it was 39 seconds.
The Chair: No, you are wrong; it is 45.
Mr Arnott: Thank you for coming in, first of all. On page 3 there is a suggestion with respect to the issue of policy directives. You are saying that the Ontario Energy Board could perhaps be given greater regulatory powers. Do you have any specific suggestions as to how that might be accomplished?
Mr Anshan: At the present time, the annual review of Ontario Hydro's proposed rate increase goes to the energy board for review and recommendation by the board, but it is not binding. It seems to us that the government may want to look at the possibility of giving the energy board greater regulatory powers in that regard, in the same way they regulate the gas industry.
Mr Huget: Thank you for your presentation. I want to just touch on the fuel substitution issue and ask you your opinion. In the past there has been a practice of promoting electricity for space and water heating use. In your view, was that in the best interests of your customers?
Mr Anshan: Well, I was not around at the time that was going on.
Mr Huget: Mr Jordan was.
Mr Jordan: Thank you.
Mr Anshan: Maybe Mr Jordan should answer the question.
Mr Jordan: Be glad to.
Mr Scott: At the time electric heating was being promoted, it was thought to be in the best interests of our customers.
Mr Huget: You have no opinion of whether it is or not?
Interjection.
Mr Huget: Mr Chairman, are we into a round table?
The Chair: If you want to generate that type of dialogue, go ahead, Mr Huget. Otherwise, ask these people a question.
Mr Huget: Thank you very much. Would you agree, then, that your customers will no doubt have lower energy bills as a result of fuel substitution, and is that in the best interests of your customers as consumers?
Mr Scott: Well, we are finding right now that our customers are switching to other fuels without any subsidies.
Mr Huget: Yes. I did not ask for subsidy. Is fuel substitution, comparing the cost of electric heating to natural gas, oil, solar, wood or any other form of energy, going to be in the best interests of your customers in terms of energy bills? Yes or no.
Mr Anshan: We answered that, Mr Huget, by saying that we are not opposed to fuel substitution provided that it is economically viable and makes sense.
Mr Huget: Thank you very much.
Mr McGuinty: Just to pursue that a bit further, gentlemen, do you have any inkling or any indication with respect to your own commission as to whether fuel substitution would be good for me as a ratepayer?
Mr Anshan: Again, if it is economically viable, if it makes sense; as long as the rates do not increase as a result of subsidies being imposed.
Mr McGuinty: But do you have any feeling on that, based on your experience? Do you have any feeling, any numbers? What would you recommend to me if I were a ratepayer and I said: "Should I support Bill 118 or not? What is it going to mean to me? I don't want to switch off electricity. I don't like gas in my home." What would you tell me?
Mr Anshan: I can only tell you what is happening in our own community right now. For instance, in the water heater business we are losing a lot of water heaters to gas, and I think that is because market forces are dictating the decisions that customers are making. Again, I can only tell you what our position is, and that is that we support the idea of fuel substitution, provided it makes sense economically to the customer.
We have an ancillary issue, too, in terms of the effect it will have on our own local loads and our purchase of power from Ontario Hydro. But provided that other demand management activities can be put in place and we can manage our load and we do not increase our peak at certain times, I think we would be supportive of that as well.
Mr McGuinty: But again, from the perspective of a ratepayer, what am I to make of these swings? I can recall that at one time people were telling me I should at all costs get off oil, that there could be an oil shortage, there could be crises in parts unknown to me in the world, and as a result my oil costs would go up dramatically. Then there was a time Hydro was telling me that the best thing I could possibly do with respect to electricity was to use more of it. Now they are telling me that I have to use as little as possible, that I should switch to gas. What confidence should I have that gas rates will not go up in the future?
Mr Anshan: We cannot answer that any better than you can. Certainly nobody can predict what is going to happen internationally or in terms of world events, and that has had a great effect.
Mr Roth: The answer is very simple. We are doing this any time, switching VCRs, videos, CD players and whatever. Every three years we are switching all these things. So according to the technology advancing, we switch anyway.
The Chair: Mr Klopp, a brief question.
Mr Klopp: We talk about subsidies, etc. People from the nuclear industry were here the other day, and they were pushing that if Ontario Hydro quits buying nuclear, it will hurt their industry around the world. I asked them how it would do that. Do you know if Ontario Hydro helps the nuclear industry in Ontario, subsidizes it, other than just worrying about the electrical part of nuclear energy?
Mr Anshan: I am not aware of the detail of that. Do you know?
Mr Scott: No, I do not.
Mr Klopp: Would you be in favour of Hydro helping the nuclear industry in other parts of nuclear advancement? Would you consider that a subsidy?
Mr Anshan: We would have to consider that. We have not considered that issue.
The Chair: I want to thank the Hydro-Electric Commission of the City of York for taking the time to come here this morning. I should mention that we have been impressed -- certainly not surprised, but impressed -- with the interest this bill has generated across the province, and a wide range of views, as you can well imagine. Your contribution has been a significant one and we appreciate it very much, all of you. I trust you will keep in touch.
Transcripts are available not only of people's participation today, but of the whole series of meetings and presentations and deliberations. They are available free of charge through either the clerk's office or any MPP's office. I trust that some of you may be interested in that. Simply ask and you will get. Thank you.
1040
CANADIAN INSTITUTE OF PLUMBING AND HEATING
The Chair: The next participant is the Canadian Institute of Plumbing and Heating. Sir, please be seated. Tell us who you are and tell us what you will. We have 20 minutes. Try to save at least 10 for the type of exchange you have witnessed already.
Mr Hardison: Good morning, Mr Chairman and members of this committee. I am delighted to be here. I did not expect to be here this morning, but I had a call from a government office asking me if I would like to come and speak to you. I thought it was my obligation to do that, and that is why I am here this morning.
My name is Ed Hardison. I am president and general manager, the chief paid officer, of the Canadian Institute of Plumbing and Heating. CIPH is a not-for-profit trade association established in 1933. We represent the interests of the manufacturers, wholesale distributors and manufacturers' agents who produce and sell plumbing and hydronic heating products in Canada. We have about 200 operations in Ontario with total sales exceeding $1 billion. Total employment is estimated at over 6,000 residents of the province. We are consumers of electrical power and we manufacture and sell products that consume electrical power.
Our membership includes over 90% of the key companies in the plumbing and hydronic heating industry. Hydronic heating is hot water heating, so when I speak of heating, I mean hot water heating.
CIPH supports the amendments to the Power Corporation Act, providing the new act will:
1. Encourage conservation of electrical energy by companies, institutions and home owners. Every citizen should have access to economical electrical power, but those who waste it must pay the price.
2. Provide clear educational guidelines to all electrical energy users. Ontario Hydro has begun an impressive program of education, and it must be expanded.
3. Reduce the dependence on electrical heating where practical. Electrical heating has proven to be expensive and a drain on the Ontario energy pool.
4. Maintain the high standards of Ontario Hydro while curtailing or eliminating its marketing programs and staff. Ontario Hydro seems to have lost its vision as a public utility.
5. Ensure that economical electrical power is available in the future to new and/or expanding businesses. CIPH's vote for conservation is not a vote against nuclear-power generation of electricity.
6. Maintain Ontario Hydro as a government-owned corporation with a minimum of political interference. Ontario Hydro should be a provider of quality service with a goal to be the best in the world.
CIPH companies depend upon economical electrical power to maintain and expand their own businesses in Ontario. CIPH members believe that other sources of heating of buildings must be developed and exploited. This is the commercial. Hydronic heating systems have proven to be superior to electric baseboard radiant or electric forced air systems. Hydronic heating is also more economical. Hydronic heating boilers can be fueled by gas, oil, wood and, of course, electricity, and they can also be hooked into ground-looped water systems. Hydronic heating can be installed and economically used in every area of the province. So yes, we do have a commercial reason for supporting a reduction in electric heating. Our hydronic industries have not been able to compete with the marketing programs of Ontario Hydro in the past, and that has led many Canadian home builders, for instance, to install electric heat.
On a personal note, in the past 26 years I have owned or at least been the holder of the mortgage on four houses. Three of the four had used electric heat, but not by my choice. I bought the home, not the heating source. In each case I would have preferred another source of energy and another system. In each case the builder chose to install electric heating and electric hot water heaters. Even in my first home, which was heated by natural gas, the water heater was electric.
Yes, hydronic heating can provide a wonderful answer to the proposal to retrofit electrically heated homes and buildings in Ontario. In many instances it may be more satisfying for the owner. Why? Because it is space efficient and provides clean, quiet, easily controlled warmth. I told you this was a commercial. It may require a minimum of construction changes as well, and it can be used as a heating source for hot water.
Finally, hydronic heating can be backed up by solar heating. In our estimation, solar heating panels are a "possible" for future Ontario buildings.
This leads me to the other large consumer of electrical energy that is provided by the plumbing industry: the hot water heater. CIPH manufacturers are now providing high-efficiency hot water heaters that can utilize natural gas, propane, electricity and oil. Ontario Hydro should encourage all households either to upgrade to the new superefficient hot water heaters, or better, get off electricity altogether. Heating domestic hot water with electricity is not a wise use of the energy source. Ontario citizens have paid and are paying a premium for this service. In many countries of the world hot water is provided by solar heaters. At one time, solar hot water heaters were quite common in North America.
I would like to add at this point that you might think I am advertising solar. We have nothing to do with solar. This is a general overview we are trying to give you. However, cheap electrical power and a high-powered advertising program wiped out the manufacturers of solar hot water heaters. Although expensive, they are efficient and over time will pay back the initial cost. There may be a time in the future at which a return to individual solar hot water heaters will make sense.
Hydroelectric power is the old paradigm for cheap and plentiful energy in Ontario. The new paradigm was supposed to be nuclear-generated power, but in fact the paradigm shift we need is to conservation, not only of electrical energy but of all our alternative sources of energy. That is why I raise the question about solar. It is a resource that is never-ending.
Ontario is blessed with an abundance of electrical power and Canada is blessed with an abundant source of natural gas. Canadians, and particularly citizens of Ontario, have shown a wonderful willingness to conserve, to be part of the solution rather than part of the problem. Bill 118 to our members appears to be an excellent start to our blue box response to the conservation of electrical energy.
I thank you for this opportunity to present our views, many of them personal. In closing, I want to quote Sir Clifford Sifton, who said in 1910, "The best and most highly economic development and exploitation in the interest of the people can only take place by having regard to the principles of conservation."
Mr Klopp: Thank you. I think that is a very good brief. You bring some technical standards with the water system and whatever.
I am intrigued by this solar heating. What year did that happen and when did it die out and all that good stuff?
Mr Hardison: If you go to a country like Israel, you will find that all their domestic hot water is provided by solar power. If you had been in Florida back in the 1930s and early 1940s, you would have found that the hot water heating in most of the homes in Florida was supplied by solar energy.
It is a market that is not necessarily going to work all over Ontario, but it is an area we need to look at. Again, we have taken a long-range look. We are not looking at it for the next three or four years. We think that has been a problem with Ontario Hydro. They have working in five- and 10-year plans and maybe should have been looking a little further. On one hand they produced power, on the other hand they were out attempting to sell more than they produced. This was wrong; that is my impression.
Mr Klopp: Thank you very much. That is my impression too.
Mr B. Ward: I appreciate your brief today. Just a quick question: There are a number of energy-efficient programs available through energy. I was just wondering, are they pertinent to your membership, and if so, are there ways that perhaps communications could be improved so that more members are aware of what is available?
Mr Hardison: We are working with the government in bringing briefs before it about hydronic heating. Many of you may wonder what I am talking about when I am talking about hydronic heating. Any of you who are older than 50 can recall growing up in a house that had big cast-iron boilers around its perimeter. That is hot water heating. It was tremendously efficient and it did a good job. The problem was that it was expensive and when other heating forms came along that could undersell it, immediately the home builders, not the consumers, switched over to other sources of energy, other sources of heating systems, that were not necessarily the best. That is why you hear the advertising all the time now on radio and television to have your ducts cleaned. We did not have ducts when I was a kid.
We are concerned that there may be something like the off-oil program, which we think was a good program but not well-thought-out. Not enough industries, not enough associations like the Canadian Institute of Plumbing and Heating, were brought in by government and the committees involved and told: "Okay boys, give us your best shot. Tell us what we should be doing." We think this is important.
1050
You have all seen the article about $2 billion from Ontario Hydro to convert to furnaces. I am not here to sell you furnaces. I am here to sell you heating systems that work for consumers. Too often we tell consumers what they should have and once it is installed, as in my own case, it is not what they want. I think we need more consultation.
Mr McGuinty: As a result of the conservation campaign being carried out by Hydro now and as a result of some of the publicity coming out of this committee, I think what is permeating the consciousness of most Ontarians is that the best thing we can do is to get off of electricity. You are telling us something here that is perhaps a bit different, that there are ways in which we can use electricity to heat that are extremely efficient. Can you tell me a bit more about that?
Mr Hardison: I think your first perception is wrong. I am a typical Ontario citizen. If you think the typical Ontario citizen knows what is going on in this room or understands what we are talking about, I think you are wrong. Most of them moved into houses where they did not control the selection of the heating and most of them are going to move into houses where they will not control the source of energy or the style of heating. I believe Ontario Hydro has done an excellent job talking about illumination and how you can save energy in illumination. I think they have yet to really start when we are talking about the major sources of energy: water heaters and electric heating.
There are possibilities, for instance, with hydronic heating, that is, hot water heating. You can heat the boiler with electricity. It reduces the cost or the amount of electricity used dramatically. There is conservation there. I am not positive -- in fact, I would be reluctant to state, so I am not going to -- that electricity should be used in any form to heat houses where it is practical to use another energy source. "Practical" is the key word here.
What we all need, you gentlemen in this room and the industry, is wisdom. We need to go forward together as a team and not do screwy things because of political influence or because of industry influence. I am trying to influence you from my industry's point of view, but I am also trying to influence you from the point of view of what I believe is best for this province. My members do subscribe to that.
Mr McGuinty: I wonder if you can answer this question for me, Mr Hardison, and if you cannot, just say so: Is it more efficient, in terms of using energy, for me to heat my house with a heat pump or through natural gas?
Mr Hardison: I am telling you now as a consumer, not as an expert, that I have a heat pump and I prefer natural gas. If I were looking at it solely from the total cost of heating my house, natural gas would be cheaper at this point in time. There are other sources of fuelling a heat pump and of fuelling an energy system that do not use natural gas and will not use electricity. They are starting to be explored in this province.
Heat pumps, once you get north of Barrie, I would not like to heat my house with. I can tell you that two weeks ago during our cold weather I had to shut down the heat pump and turn on my auxiliary heating, which is electrical -- not a very happy situation because my fuel bill went out of sight. Heat pumps are not the answer. Again, I do not pretend to be an expert on this, Mr Chairman. If you are going to explore alternative types of heating, you need to put all the associations who represent the interests of the manufacturers and the wholesaler distributors in a room together to discuss it and come out with some findings that take the marketing out and keep the scientific fact in.
The Chair: Research has asked me to ask you, what about what you have said in the context of cooling rather than merely heating?
Mr Hardison: My last house does have central air. Mr Kormos, I choose not to use it. I am now talking about residences. I do not represent the air-conditioning industry so I can say this. I think air-conditioning may have been overdone in this province. It is a convenience we may have to do without in the future. The Premier said we have to pay a price. I think that may be one of the prices we are going to have to pay. That does not mean we should not be air-conditioning offices and buildings where you have a lot of people. You can air-condition a hydronically heated house. You can air-condition any house you want to.
Maybe the best way of air-conditioning, in my non-professional estimation -- it does not look pretty but it works -- is to stick an air conditioner in the window of the room you want to cool. Why cool the whole house? If you have a kitchen that is at 65 degrees and a bedroom that is at 65 degrees, that makes no sense to me at all. I think we need more common sense in this whole area. Ontario Hydro can be the driving force behind it, or the cost of energy is going to be the force behind it.
The Chair: Ontario Hydro is not the only institution that needs more common sense.
Mr Jordan: Thank you, sir, for your presentation. I understand you had to do it on short notice; you just got a call yesterday.
Mr Hardison: No, do not let me give you that impression. I was asked if I would be interested in appearing before you some time in mid-December, I believe. It has just been a busy four weeks since that phone call.
Mr Jordan: I thought you said, "I didn't realize until yesterday I was going to be here."
Mr Hardison: No, sorry, I did not mean to say that.
Mr Jordan: Anyhow, that is beside the point. To have to prepare a presentation on that short notice is --
Mr Klopp: Pretty damned good.
Mr Jordan: I agree. A large sector of the public, of the customers, want a controlled environment. We are progressing and we are not hard up in Ontario for a source of energy, whether it be solar, nuclear, oil or coal.
Mr Hardison: Agreed.
Mr Jordan: Surely you are not recommending that we go back to a piecemeal home where I am going to stay in the kitchen because it is cooler in there. I am not going to go and sit in the living room when you come to visit me and say: "No, don't sit in there. My air conditioner is over in this corner." Are you trying to promote that, after these years in which we have progressed?
Mr Hardison: Quite the opposite, sir. What I am trying to promote is that we need to control the temperature, be it in the summertime when it is cool or in the wintertime when we want heat. We need to control it so that each room is the temperature we want it at. Currently, when we air-condition a house the whole house is cool. We may not want the whole house cool; we may not want the nursery cool.
Mr Jordan: You mean we cannot zone air-conditioning? Come on.
Mr Hardison: No, I am not suggesting that we cannot zone air-conditioning. But if you are going to hook it into a central air system where you have no control -- the only control you have is to shut off a vent, go over and pull it out of the floor, put the flaps closed and put it back in. This is supposed to be the 1990s, moving on to the 20th century. I do not believe that is an effective way of controlling temperature in any room.
Mr Jordan: There is technology available, though, to zone-control the home for heating and cooling.
Mr Hardison: Yes, there is.
Mr Jordan: Thank you. The other point is, when you talk about solar heating you are referring to Florida and Israel. Let's get back to reality: We are in the province of Ontario.
Mr Hardison: No doubt about that. Again, I am not here to represent the interests of solar heating. I am simply saying let's not shut down our minds about anything.
Mr Jordan: I agree. If you are familiar with the research department of Ontario Hydro, my criticism of that department is that it does not get out more white papers showing what it has studied to date. We do not know what they have studied to date.
Mr Hardison: Not only that; neither do we.
Mr Jordan: But we should know.
Mr Hardison: Yes. If they were getting that information out to associations that had a vested interest in what they were doing, we might be able to assist them as well. I agree.
Mr Jordan: Regardless of how you want to run the motor or the circulator of the water or whatever you are going to use in the lines, the heat pump has certainly been given a lot of research, not only by Ontario Hydro but by the industry as well. I could give you facts, and I am sure you are aware that they are available, that there is a big saving in heating and cooling for a controlled-environment home using the heat pump.
Mr Hardison: I do not disagree with that. Again, I have a heat pump in my own house and I do heat and cool my house using the heat pump. It certainly is less expensive than other systems I can have.
Mr Waters: I represent Muskoka. I know that right now Hydro and those people are encouraging groundwater heat pumps and throwing whatever it is that they use for collection in the bottom of the Muskoka River or whatever. Does this make sense?
Mr Hardison: It may very well, but so few people know about it. I do not pretend to be an expert, but the situation is that the consumer could be held hostage by somebody who takes his money and runs. The general sense of the scientific background as I understand it is that a very solid and good system can be created, but I do not know about the manufacturer of the system.
The Chair: On behalf on the committee, I want to tell you that we appreciate your interest and your readiness to come here and talk to us and answer questions as candidly as you have. It has been again, like so many others, a valuable contribution and we sincerely thank you, sir.
1100
CONSUMERS' ASSOCIATION OF CANADA (ONTARIO)
The Chair: The next participant is the Consumers' Association of Canada. Please seat yourselves, tell us who you are and commence your presentation. You have 20 minutes, but please leave at least 10 for questions and dialogue if you can.
Ms Huzar: I am Joan Huzar, president of the Ontario branch of the consumers' association. With me is Peter Dyne, the chair of our energy committee. I will just start off by giving you a brief overview of the CAC, the consumers' association.
We are a national organization and I represent the Ontario branch of that national organization. We are the largest organized consumer group in Canada. In Ontario we have over 40,000 members. Consumer advocacy, consumer representation, consumer education are what we are really all about.
We have had a long-standing interest in energy issues. The impact of energy policy on the wellbeing of the residential consumer is our concern. Back in September of 1989, we made a submission to the select committee on energy that was looking at Bill 204, An Act to amend the Power Corporation Act. In that submission we expressed serious concerns about the level of independence of Ontario Hydro. We identified at that time that there was a need for both increased government scrutiny and regulatory oversight of Ontario Hydro's activities. Now we are back again and are pleased to be able to comment on this most recent act to amend the Power Corporation Act.
Peter, do you want to speak?
Dr Dyne: Thank you. I will be speaking to the brief, which I understand you have.
First of all, the clear definition of accountability: Ontario Hydro has a very significant role in Ontario's economy, and it is entirely appropriate that there is a clear definition of accountability, essentially that Ontario Hydro and the government work together in harmony so that we support the overall objective of the bill. The appointment of the deputy minister to the board is an extremely good step, which should aid communication between the minister and the minister's office and the Ontario Hydro board. But the one thing in the act which will help cooperation between government and Ontario Hydro is that one measure.
We are somewhat concerned as to the language which is in the legislation, of whether it is a matter of control of Ontario Hydro or accountability. Some of the supporting material leaves us to have the impression that the object is to give the minister more control; there is a distinction. It would apparently give the government power to intervene in technical and engineering matters. We feel that Ontario Hydro's technical record in safety and reliability is good and we would not want anything to be done that would mitigate against that. We are concerned that the power of the government of the day to issue policy directives should not become a vehicle for ad hoc intervention in the affairs of the corporation.
En passant, we note that there is a larger board. In our experience a larger board does not necessarily mean that other views are listened to. They may be heard, but a larger board dilutes the input and in fact it is much easier, from personal experience, for a strong chairman to dominate a larger board than a small one, but that is a minor matter.
Terms of reference for policy directives: Section 2, the amendment to section 9a of the act, when it is properly used, allows a minister to make changes in policies and programs which are appropriate but are not necessarily things which the Ontario Hydro board of directors would regard as their first priority. This measure permits that and we certainly think that is appropriate. However, the wording in the legislation is much too broad and we would not want to endorse the wording as it now stands. We would recommend that the wording and language be changed so that the policy directives must be of benefit to electricity consumers and to energy users in the province. We note that in the supporting material the minister said he is going to do that. Fine, but we want to underline that point.
In addition, policy directives which are relevant to larger areas, things like CO2 and global warming, should be a part of larger legislation and not used in a sort of ad hoc manner in these policy directives to what Ontario Hydro is involved in.
Consultations and hearings: Section 9a says the minister will be consulting with members of the board, but in view of the scope which is apparently envisaged for some of these policy directives, we feel there should be an opportunity for public consultation and, in particular, consultation with the Ontario Energy Board, specifically in the matter of energy fuel switching, which we are talking about. The question somebody has to answer is, "What is the future price and availability of natural gas?" The Ontario Energy Board should be consulted on that. A mechanism to deal with that type of concern should be built into this legislation.
We are concerned about language which anticipates opposition by the board to these policy directives; it just raised our curiosity. For instance, section 9a seems to anticipate a case where the board is telling the minister that it is not prepared to be responsible for these policy directives. How on earth could a situation like that arise? If they are that concerned, either the board members should resign or the minister should reconsider his directives. We are puzzled as to why that has to be put in.
It also states, "Compliance with a policy directive shall be considered to be in the best interests of the corporation." Why does that have to be said? Would the ministry issue policy directives which were not in the best interests of the corporation? Either please clarify what is behind these clauses or eliminate them. In fact, we feel that the wording we are looking for which gives the frame of reference to the policy directives will in fact deal with that.
The changes on conservation strike out of Ontario Hydro's mandate anything to do with electrical energy and electrical heating. That is necessary, of course, so that you can have this fuel-switching operation. We understand that. But this legislation, as read, means that Ontario Hydro could be the government's agent to, for instance, support programs to increase efficiency of gas furnaces. Is that the government's intention or is it not? That certainly needs clarification, because it is quite a change.
As an observation, the consumers' association feels, yes, Ontario Hydro should be responsible for efficiency and conservation in electrical energy. But efficiency in the use of gas is the responsibility of the gas utilities, somehow or other, and it is separate legislation.
Then there is the matter of the cost of implementing the policy directives. The proposed legislation is quite clear that Ontario Hydro -- which means the electrical consumer himself or herself -- will pay for these directives. In so far as the consumer benefits, that is fine. However, in the case of the fuel-switching operation, the immediate beneficiary is the person who switches to natural gas. The numbers given us by the Ontario Ministry of Energy talk about a saving of $1,000 or $2,000 a year; that is real money over three years. The other consumers' benefit is sort of hypothetical in that their rates will not have gone up as much as they might have. It is a hypothetical proposition over 20 years.
We feel the legislation should be amended so that this particular problem is identified. It can be fixed. Things can be done. But it is of serious concern for us as a consumer. We feel that legislation should clarify the way in which that problem is going to be addressed.
1110
The last item is capitalization of the costs of conservation measures. Since the main argument, for instance, in fuel switching is that it is going to reduce capital costs for generating equipment, it is entirely reasonable that the conservation costs should be capitalized.
In summary, yes, the overall objective of this legislation, as we read it, is laudable. However, the power given the minister to issue policy directives needs precise definition. We note that we have material which says that is going to be done. Public consultations, particularly with the Ontario Energy Board, are certainly desirable in the frame of reference we are talking about. The allocation of costs, which we also see the minister said he is going to do something about, requires further consideration.
Mr McGuinty: Ms Huzar and Dr Dyne, I will categorize this as pure gold, very impressive. You showed much perception and insight and I am not sure where to take this. I am particularly pleased that you have indicated that the intent here is one of increasing and improving accountability. The question remains, however, as to whether that objective is really being obtained.
You raise the question as to whether the government's intent is in fact to increase accountability or rather to establish control. Through your association, you must receive communication from members. Just being a resident of Ontario and living in Canada today you would understand that people do not take great comfort today in knowing that somehow government is going to step in and look after some particular area.
You are the first people, I believe, who have commented that there may be problems in implementing a larger board. I wonder if you can elaborate your comments there a bit further, please?
Dr Dyne: This relates to my personal experience before I retired. To be brutally cynical, if I were a minister and I wanted to really get an operation like Ontario Hydro under my thumb, I would make the chief executive officer my appointee, which is also in the legislation, and I would give him a large board, because a large board cannot really discuss things and come to grips with things. The dynamics of those situations is that there is always an executive committee, and then there is a finance committee which make the real decisions. That is a cynical observation. The essence is that the intent is good, that more people are heard, but -- I am repeating myself -- it is not clear to me that this mechanism will mean more people are listened to.
I am not privy to the dynamics of the Ontario Hydro board, so I do not know exactly how it works, but from other experience, my reaction is ho-hum on that. But it is in the legislation. It will go through. There is no point in making an issue of it.
Mr Jordan: I have just a couple of quick questions. First, rather than getting completely involved in the mechanics of this bill and what it can do and what it could do, what Ontario is looking for right now is some certainty of supply and some guarantee of what the cost will be. What, in your opinion, should we as a government be doing to try to give that certainty of supply to the province, to the people, and some guarantee of what the cost may be, rather than just throwing out a 44% increase?
Dr Dyne: You have to do your homework and your staff work correctly. The question about security of supply in gas is very relevant. I raised this thing in my answer to you. We have also now got a letter from the gas utilities to us saying they are concerned about this business of people entering into contracts because they cannot guarantee security of supply over a five-year period.
Mr Conway: No kidding.
Mr Jordan: That is right.
Dr Dyne: That is what they say. I am not telling you whether I believe that or not; that is what they are saying. Let me make that perfectly clear. The other thing is that the Ontario Ministry of Energy had consultations with groups like us, and one of the questions was, "What should be done if the price of gas should go up or its security of supply were reduced"? My reply -- it was rather tart -- was that somebody should have thought of that question before they proposed the legislation. I think it is reasonable, but there has to be some good staff work.
Mr Jordan: The MEA this morning stated that any of these directives should be laid before the Legislature within 15 days of their receipt by the board. You point out different areas where the directive might not be in the best interests of the corporation, therefore the board member may not want to have a positive view on them, but even though he votes, he is not accountable for his actions. Would it not be a fair thing to put that directive before the Legislative Assembly so that it can be discussed and the people can be aware of the contents and its effect on Ontario Hydro?
Dr Dyne: The problem with that question is, I do not really know the sort of things being envisaged in these policy directives. The particular thing we are talking about is fuel switching, and I do not really think that has to come before the Legislature. It comes before other organizations. But you are echoing the sort of concern I had. There is a sense that these policy directives may have all sorts of others things, and I do not know what is really in the mind of the government. Some preamble, terms of reference, to these policy directives would clear that up, and when we see the wording of those terms of reference, then you could decide whether it is worthwhile bringing it before the Legislature or not.
Mr Arnott: Thank you, Dr Dyne, for your presentation. I was pleased to hear about your concern for the security-of-supply issue, and I guess if we go back a number of years to the time when Ontario Hydro initiated its policy, Live Better Electrically, that was the prime motivation behind it, a domestic, local security of supply. Hindsight is very wonderful, but do you not think at that time, when that program was initiated, there were some fundamental reasons for putting it forward?
Dr Dyne: Were there sound reasons for security of supply in 1974? Yes.
Mr Waters: During the hearings, as we have travelled, we have heard from different municipal electrical utilities that they feel they should make up the biggest part of the Ontario Hydro board or a substantial amount of the board. Looking at the best bang for the buck for the consumer in energy costs, my question would be, do you feel they should actually take that position on the board? Would that be a recommendation coming from you, or do you feel they would have a vested interest in more hydro, more power plants?
Dr Dyne: Municipal electrical utilities have to be well represented on the board; that is a given. To give them more power -- the problem with your question is, more than what?
Mr Waters: If their numbers were greater on the board, so that they --
Dr Dyne: Greater than what?
Mr Waters: Let's say they made up the majority on the board.
Dr Dyne: I do not think that would be a good balance.
Mr Klopp: You said a little earlier you have a letter from the gas company which says they cannot guarantee supply in this country over five years?
Dr Dyne: We have a letter from the gas company which had also been sent to the minister, and this deals with this practice that you pay the gas companies to deliver the gas, but you can simply go to a separate producer and have a bargain with it and you get a lower price for your gas. There are house-to-house salesmen going about doing this. The gas utilities are saying that under those circumstances, when you are dealing with -- pejorative phrase; these are my words, not theirs -- fly-by-night operators, they cannot guarantee security of supply and they are concerned. My recollection is that they are concerned that five years hence the current surplus of gas will turn around, and those people who are operating on this ad hoc basis will raise their price because they can get a better price selling to California, and the consumer could be shortchanged. So that is their concern.
The Chair: Thank you, sir. Thank you to the Consumers' Association of Canada for participating.
1120
TORONTO ENVIRONMENTAL ALLIANCE
The Chair: The next group is the Toronto Environmental Alliance. Please come up and introduce yourself. You have 20 minutes. Please reserve the latter 10 at least for participation in dialogue and questioning. Go ahead, sir.
Mr Coffey: Thank you very much. My name is Gerard Coffey and I represent the Toronto Environmental Alliance.
The Chair: I know people are listening carefully to you, sir.
Mr Coffey: Yes, I understand that. The Toronto Environmental Alliance is a group that was formed in 1987 to deal with environmental issues in the greater Toronto area. As for my own background, I was a former director of Ecology House, which was a resource and energy conservation demonstration in the city of Toronto, so I have some background in this area.
What I would like to say is that the Toronto Environmental Alliance believes the provisions in Bill 118 which would allow Ontario Hydro to finance fuel switching by its customers are in the best financial and environmental interests of the citizens of Ontario. Financing of fuel switching will maximize environmental gains from use of alternative fuels, reduce energy costs to a major portion of Ontarians and reduce rate increases for everyone.
The purpose of energy: The Toronto Environmental Alliance is aware of the need to provide electricity generating capacity for future generations of Ontarians. Population is growing and there will always be a need to supply electricity for the things that electricity allows us to do well.
On the other hand, we are also aware of the great social and environmental costs -- such as global warming and acid rain, to name but two -- that the production and consumption of energy, including electricity, imposes on society as a whole. These costs, I might add, are also borne by those in other parts of the globe whose energy consumption is but a small fraction of our own and who therefore contribute little to the global problems which will affect them.
The Toronto Environmental Alliance believes the answer to this conundrum lies in our view of why we produce energy such as electricity. We obviously do not produce energy or electricity for its own sake, nor even as a job creation strategy, although this is a useful side-effect. We produce it for the things it can do for us that enable us to live better lives; in other words, for its end uses.
The purpose of end use satisfaction means that wherever possible, providing the same services to the public -- that is, to ourselves -- by more efficient methods or by use of more environmentally and financially cost-effective fuels is the only real way to delink population and economic growth from higher energy use and from higher environmental and social costs. The value of this particular approach to electricity generation is underlined by the fact that energy efficiency, including fuel switching, is in fact cheaper to buy than new capacity. Efficiency thus reduces costs to consumers, to the public, which pays for Ontario Hydro programs, and to society as a whole, which bears the costs of environmental degradation.
Provision of new generating capacity for new uses and for larger populations has in fact already become a major financial problem for the citizens of Ontario. New generating capacity, especially nuclear, is extremely expensive to build and has major financial after-effects.
Because of previous reliance on new capacity rather than end use efficiency, and because of the cost overruns and poor performance of that installed capacity, Ontario Hydro, and therefore the taxpayers of the province, have amassed a debt of $30 billion in return for such assets as its nuclear generating stations, which in our opinion are of dubious value. Nuclear stations also have major environmental costs. Highly toxic spent fuel must be stored and monitored, and the plants themselves are subject to expensive decommissioning and subsequent monitoring procedures.
It is our view that the value of Ontario Hydro and in fact all other energy utilities to the citizens of Ontario lies not in their pure ability to provide energy, but in their ability to satisfy our end use requirements at the lowest social and environmental cost possible. In terms of electricity generation, energy efficiency programs, which include fuel switching, presently provide the most environmentally sound vehicle to meet those goals. They also happen to have the lowest cost.
Fuel switching for residential and commercial customers is one of the most useful efficiency options open to the utility at this time. With regard to the residential sector, Hydro estimates that approximately 500,000 homes in the province are electrically heated and 1.26 million homes have electric water heating. Even though these estimates do not include multistorey residences or some specific forms of single-family homes, the potential is obvious.
In environmental terms, the value of switching these homes from electric space and water heating cannot be underestimated. Greatest heating demand is experienced during the major peaks of the winter season. This demand is mostly met by electricity generated by coal-fired stations, which are responsible for large releases of CO2 and acid rain.
A switch to fuel such as natural gas will have a major beneficial effect, as it produces only half as much CO2 as coal. Studies such as the Passmore study recently presented to this committee have suggested that substitution of a mix of 50-50 gas and oil heating for electric residential heating between 1975 and 1991 would in fact have resulted in a reduction of between 53 million and 128 million tonnes of CO2, 840,000 to 1.4 million tonnes of SO2 and between 218,000 and 399,000 tonnes of nitrogen oxides.
We do not, however, concur with the view of the Municipal Electric Association that market forces alone are sufficient to move consumers to switch from electricity to an alternative less costly and more environmentally beneficial fuel. In a perfect economic world, those rational choices might indeed take place; however, our world is far from being perfect in any sense and a number of factors are present which we believe impede this valuable move to alternatives.
Not all consumers, especially lower-income families and individuals, are in possession of the information needed to convince them to make the move. Even if such information were more widely distributed, access to credit needed to capitalize conversion is not always available. Again, this is of particular importance in the case of lower-income groups. Also, many tenants have no control over the type of heating installed or operated in multistorey residential buildings, yet must pay the costs. We therefore believe that in order to maximize environmental and economic benefits, Ontario Hydro must have the capacity to make funds available for fuel switching.
In relation to the point regarding control of heating systems by tenants, we believe this government should go further than the provisions in this bill to discourage the use of electric space heating. Even when this bill is passed, builders of residential and commercial units will still have an incentive to use electric space heating, even though it may be the least desirable form of space heating on the market.
Ontario Hydro itself recognizes that despite the availability of natural gas, some 25% of new homes are still being built with electric space heating. The reason for this is not hard to find. Baseboard heaters are simple and cheap to install, thus bringing down the purchase price to the buyer and making it more attractive, no matter what the financial or environmental consequences to the occupants or the public at large. It is therefore our recommendation that the government investigate methods to discourage the use of electric baseboard heaters in new single-family and multiresidential units across Ontario.
To conclude, the Ontario Round Table on Environment and Economy has recommended that in order to reach a sustainable economy and a sustainable society, what we need to do is include all external costs in the price of our resources. In other words, we have to include the social and environmental costs as part of the equation. It is our view that this is the only rational option open to us if we are to reduce the impact of the environmental degradation presently under way.
Meeting our needs for warm houses, cooked foods and reliable transportation must therefore be done with methods and with fuels which will minimize the social, environmental and economic impacts of energy use on the citizens of the province and, indirectly, the citizens of the planet. We must also meet these needs in a proactive way and not rely on the imperfect functioning of market systems to achieve the results required by society. We must therefore strongly recommend to this committee that the recommendations of Bill 118 which would allow Ontario Hydro to finance fuel switching by its customers be passed.
The Chair: Thank you, sir.
Mr Coffey: How am I doing?
The Chair: You are doing fine. You are doing a lot better than a whole lot of other people who are here daily.
Mr Coffey: I am running on adrenalin this morning.
The Chair: You are a conservationist. You conserved time very effectively today. Mr Arnott, three minutes, please.
1130
Mr Arnott: Sir, I am just wondering, if Bill 118 is passed and many people in Toronto are encouraged to get rid of their electric heating and replace it with something different, I assume there are going to be a lot of extra electric furnaces, baseboard heaters and so forth that are going to end up in the garbage dump. Do you support that aspect of it?
Mr Coffey: I do not support waste of any kind.
Mr Arnott: Do you not see that as being a direct result of encouraging people to switch from one source of heat to another?
Mr Coffey: Of course it is a direct result, but there is no need to imagine that these electric baseboard heaters, which are made of metal, cannot be recycled in some way, or that furnaces cannot be reused in some other fashion. I do not support waste in any shape or form. However, when we look at our options for heating, and for any other kinds of policies that have an environmental impact, what we have to do is take the whole picture into consideration. I believe the major implications of energy use -- and they are indeed major -- far outweigh the impacts of getting rid of some baseboard heaters and recycling them.
Mr Arnott: Do you really believe that those will be recycled?
Mr Coffey: Absolutely. If I have anything to do with it, yes, they will. I believe that people in this municipality of Metropolitan Toronto in fact are well on the way to achieving high rates of recycling for metals and various other things.
Mr Arnott: I represent a rural riding in Wellington county. Do you think it is going to a province-wide situation that all those superfluous pieces of equipment will be recycled?
Mr Coffey: I would hope so. I cannot guarantee it. I am relying on the Ministry of the Environment, which I believe is quite progressive in this regard, to do those kinds of things.
Mr Arnott: Okay, thank you.
Mr Jordan: Thank you, sir, for your presentation this morning. The previous brief drew our attention to the fact that instead of air-conditioning the whole house, we could put an air-conditioner in the room that we wanted to cool. I just want to get your opinion on this: Instead of leaving the customer with the idea that he was given wrong information to have installed the baseboard heat, the company at that time had to come up with large amounts of generation to reach the peak load to keep Ontario humming industry-wise, and the valleys of power were there.
Talking about control, just one of the good points of your baseboard heat, if you can imagine one, was that you had individual control for each room. So in fact you did not heat your whole house to 72 degrees; you could have any section of it at whatever temperature you wished to have it, even in hospitals and nursing homes. I know in my riding when I go into a nursing home that is centrally heated, God bless us, some of those areas are like ovens.
Mr Coffey: Yes, I agree.
Mr Jordan: Those people who are there would give anything to be able to go over to the wall and set that thermostat at the temperature they would like. There is no other energy on the market that can have the on-location control like electric can. I submit to you that in public buildings, with this program of the government going to natural gas in its non-profit housing because the fuel -- one part of it is cheaper. But I know, from having gone around campaigning, what I found in the non-profit housing is that there is no control of the heat because they are not responsible for the cost of the heating.
Mr Coffey: If I can just respond to three of those points, working backwards, yes, I believe it is a real problem that tenants in fact are not responsible for their own heating costs, because as I pointed out, what that does is allow builders and owners of multiunit residential buildings to install heating systems which have no regard for their ultimate costs to the consumer and to the public. We would like to see some more control in the hands of the tenants, and we believe that would move people away from electricity because it is so expensive.
Coming back to your second point, I believe there are heating controls for fuels other than electricity to allow us to control temperature in individual rooms. In fact, the house I live in has an old gas-fired hot water system. It has a tap on the rad. If I turn it off, the heat goes down. I do not think it is an insoluble technical problem.
To go back to the first point you made, we did not build up a huge generating capacity to allow Ontario's industries to keep humming. That is base load electricty. The problem is that the large peaks are in fact heating and other non-constant uses.
Mr Jordan: No, but the large ones took over the base --
The Chair: Mr Jordan, we have to move on to Mr Huget.
Mr Huget: Thank you for your presentation. I want to touch particularly on the accountability issue and the policy direction issue. Some of the things we are talking about throughout these hearings are fuel substitution and the obvious economic and environmental benefits to substituting fuel. I would like your views as to whether or not initiatives like energy efficiency, conservation and indeed fuel substitution would take place without some government policy direction to Ontario Hydro.
Mr Coffey: I have no doubt that some would take place. The market will drive some of it, but the point I tried to make is that it certainly will not drive the optimum amounts or even the maximum amount that we would prefer to see happen from an environmental and from a cost point of view.
Credit is not always available, especially to low-income people. I think these are the people who are impacted most by high electricity costs and also the people who are more likely to have had electricity installed in their multiunit and subsidized housing units. They are the very people to whom credit will not be available to make the switch. If we do not allow Ontario Hydro to subsidize this kind of thing, they will not be able to, whether they like it or not. It also assumes, of course, that they do have the information available to them to inform them that this is a useful thing to do.
Mr Huget: The point was raised yesterday that in new home construction under the building code it is mandated that homes be wired for electrical stoves and electrical clothes dryers. There was a view by the presenter that that was kind of an unfair situation too. What I am trying to lead to is, are there other things we can be doing in terms of dealing with the building code and the Energy Efficiency Act to make sure we are doing all the things we need to do to efficiently use and conserve energy?
Mr Coffey: I am not expert enough in those areas to tell you exactly what can and cannot be done, or what has not been done. However, I think the point you made about wiring for -- electric towel racks, was it?
Mr Huget: Clothes dryers and stoves. If you want to do anything other than that, you have to pay a premium.
Mr Coffey: I do not personally think it makes a lot of sense to require that to happen. I think there should be some options available for people to use natural gas cooking facilities. I think the basis of this whole thing is that we should be able to use the kind of fuels in our homes and new construction of any kind which minimizes social-environmental impacts. We should not be mandating the use of a fuel which we believe is detrimental to our environment and also to the welfare of people in general. That would be my basic answer.
Mr Huget: There are many other forms of energy; I guess the debate is really focused around gas here. I would like your views as to what else we can be doing to address the other issues, the other forms of energy. Are there opportunities there? I believe there are, and I would like your views.
Mr Coffey: Do you mean with regard to residential construction or just with regard to energy conservation in general?
Mr Huget: Energy in general.
Mr Coffey: Yes, I think there are. I deal, to a great degree, with waste management issues. One of the concerns I have with waste management and with disposal of materials is the amount of energy it takes to remanufacture those materials once they are disposed of. It costs us a great deal, both in terms of the energy production and consumption itself, but also in terms of the resource consumption. They have large environmental costs. Recycling, re-use and reduction of waste therefore have major environmental implications, major energy conservation implications. The more we promote these kinds of things, the less energy we will use.
I think there are major steps to be made within construction too. I recently stayed at a hotel which still in the middle of winter had single-glazed windows. It boggles the mind that large commercial buildings are still equipped with those kinds of things. If I ruled the world, it would not be allowed. I think it is a flagrant waste of resources. It is impossible to keep the heat up in rooms with large expanses of single-glazed windows. I think we have to put a lot of effort into doing those kinds of things.
The Chair: This committee room is as good an illustration of large expanses of single-glazed windows as any.
1140
Mr McGuinty: Tell me a bit more about the economics of fuel switching. What I would like from you is an assurance, an unequivocal assurance, if you can provide that, that rates are not going to go up as a result of fuel switching.
Mr Coffey: I cannot provide that assurance. What I can say to you is that as a result of fuel switching and energy conservation measures, they will not go up as much as they would if we had to build new capacity to provide extra energy. It is cheaper. It may not keep rates below what they are. It may not even keep them level with where they are at the moment, but rates --
Mr McGuinty: Are you telling me that notwithstanding the interests of the market -- we have heard from many people from public utility commissions who are telling us that people are switching at a growing rate from electricity to gas only because it makes sense, and notwithstanding that I think the public consciousness is now being permeated with the concept of conservation as a good thing, that without the fuel substitution program we are still going to have to build those large facilities?
Mr Coffey: I am sorry. My mind slipped.
Mr McGuinty: Maybe I am being a bit obtuse. The point I am trying to make is that I think there are a number of factors at play here which are going to take us in that direction, notwithstanding fuel substitution.
Mr Coffey: That we will have to build new capacity.
Mr McGuinty: That we are going to conserve because we cannot afford not to, because we now recognize that conservation is a good thing. One of the things I am realizing in my own constituency is that people are extremely conscious of the environment. I sent out my last householder; I had calls left, right and centre about the quality of the paper. People were smelling the ink and telling me it was not vegetable dye and all these kinds of things. There is a lot of concern and energy to be harnessed out there. You made the statement that we are going to save, that it will be cheaper than if we had gone ahead and built those other plants. The point I am trying to make is that we may very well not have needed to build those other plants.
Mr Coffey: We may not need to build those plants anyway. Is that your question?
Mr McGuinty: Because of the way things are going.
Mr Coffey: No, it is not conceivable. At some point in the future, my guess is that we will have to provide new capacity of some sort. There is only a certain depth in conservation, I believe. It obviously depends on what the cost of new capacity is. However, what I believe is that in the intervening period where it is still cheaper -- and it still is cheaper to buy conservation than it is to buy new generating capacity -- we should be putting a lot of resources into the development of alternative fuels, as opposed to research into nuclear power. Even though the market is driving the system at the moment and people are switching, I still believe, as was my experience a few days ago, there is a lot of conservation which will not happen unless there is some sort of financial incentive to make it happen.
It is unfortunate, but people in the hotel industry want to keep their costs down as low as they can. I, for one, am not in favour of subsidizing people in the hotel industry for any particular reason, other than that I believe if we do not encourage them to switch over we will have to find new power for growing populations or for growing industrial capacity and it is going to be more expensive to do it that way.
The Chair: On behalf of the committee, thank you for being here today, for taking the time out of your day to come and talk to us. I trust that you will keep in touch with your own MPP and other members of the committee.
Mr Coffey: Thank you for the opportunity.
MOOSE RIVER/JAMES BAY COALITION
The Chair: The next participant is the spokesperson for the Moose River/James Bay Coalition. Sir, please come forward; have a seat. Tell us who you are. You have 20 minutes. Tell us what you will.
Mr Kapashesit: My name is Randy Kapashesit. I am the chairperson of the Moose River/James Bay Coalition. I trust that everybody has a copy of this presentation. I will go through and hopefully answer any questions you might have.
As the chair of the Moose River/James Bay Coalition, I am also holding another hat, which is the chief of the Mocreebec first nation.
The Moose River/James Bay Coalition is made up of seven first nations in the Moose Factory/Moosonee area of northern Ontario. I will run briefly over those other groups that are involved with our work as a coalition: Moose Factory first nation; New Post first nation; Mushkegowuk tribal council, which includes northern communities as far north as Hudson Bay, Peawanuck, for example, Attawapiskat, Kashechewan, Fort Albany. We also have the Moosonee Metis Association, the Omushkegowuk Harvesters Association, which is a body that represents the harvesters on the west coast of James and Hudson Bay up from Peawanuck down to Cochrane, basically, and the Moose Factory Island local services board.
From the coalition's perspective, it has become very clear that here in Ontario we have become junkies; we have become addicts of electricity. The campaign that Ontario Hydro has been embarking on for the last few years of living better electrically has been really successful in encouraging people to consume -- too successful, in our view.
As an example, after Norway and Quebec, we use more electricity per capita than anywhere else in the industrialized world. In the residential sector, we use twice as much electricity per capita as residents of New York state. Ontario's industrial sector uses more electricity per unit of product than its counterparts in Japan, Scandinavia, Germany and the US. Ontario's commercial sector buildings are designed with typically short-term thinking. Developers insist on low costs of construction to produce what some consider to be aesthetically pleasing towers of glass and steel with no insulation value whatsoever. Energy conservation measures are usually considered, if at all, after the fact.
I use the term "electricity addicts" and I think it is appropriate, because the costs for our consumption are great. We have examples of capital-intensive developments that have been pursued by Ontario Hydro, such as nuclear, coal and hydraulic megaprojects. Ontario Hydro's customers in all sectors are now just beginning to feel the costs of their addiction in their pocketbooks. I am sure all of you are aware of that.
The environmental costs of our addiction are even greater. Making electricity is a very dirty business. Ontario Hydro's past record and future plans for making more of it borders on the criminal. Burning coal acidifies our lakes, destroying the fish, pokes more holes in the ozone layer and adds to the real threat of massive climatic change. The lakes affected are, of course, not limited to those next to the fossil plants, but the effects extend far and wide to affect the lakes and streams used by people in the Moose River basin, for example, and elsewhere. Nuclear energy has left millions of tons of toxic nuclear waste leaching into the Serpent River near Elliot Lake, from which the Serpent River first nation gets its drinking water.
As Canada looks for a place to dump its nuclear wastes, it looks at the north. In particular, from my perspective, the greatest concerns we have are those impacts that will, in effect, hit aboriginal communities, aboriginal lands and aboriginal people.
I want to just stop there for a second to expand on that, because I think this point is something that is very real. In the history of this country, when it comes to developing Indian policy, it is no secret that the governments of this country have looked south of the border to see how the United States has dealt with Indian people. Very clearly, Indian communities in the States, primarily because of the legal nature of their reserve lands, have been targeted for energy waste, nuclear waste sites and toxic sites, because nobody else wants them in their backyard. That is a very real reality that seems to be emerging, and we would not want to see that happening in Canada.
Ontario Hydro, however, does not figure the real costs of nuclear waste disposal into its calculations. The short-term thinking is quite evident in that process. In particular, of great concern to the Moose River/James Bay Coalition is Ontario Hydro's continued fascination with what it tells us is clean energy: energy produced from mega-dams like those we already have in the Moose River basin with the Mattagami dams and the Abitibi and the Otter Rapids dams. Ontario Hydro has told us it does not know what the real impacts of those dams are, but the many stories of the people in our communities who have experienced these impacts will be told, and will convince the naïve and the purposely blind that saying hydraulic is clean energy is a blatant lie.
1150
Entire family hunting, trapping and fishing territories have been lost. Burial grounds have been washed away. The shores of what was once a narrow creek have become the steep walls of a canyon that, for reasons that children cannot understand, continues to be called Adams Creek. The rivers that have been used for travel by our ancestors can no longer be used by us, as the daily fluctuations from operation of these dams leave the river beds dry.
Ontario Hydro still wants to build more, telling us the Moose River system is no longer a pristine river. They want us to agree to studies to look at this possibility. Shall we agree to sacrifice what we have left because of a sick addiction? Shall aboriginal people using microscopic amounts of Ontario's power be told, once again, that for the sake of meeting what are called the electricity needs of the people of Ontario, and in exchange for a scattering of jobs to cement our destruction in the walls of these dams, we should cater to this addiction?
Ontario's electricity addiction is not just an energy or economic issue; it is an issue of social justice, and an immensely important environmental issue. Wasting power on a mega-scale means our environment gets damaged on a mega-scale, and the aboriginal people who depend on the natural environment for their cultural and economic livelihood suffer the most damage.
Breaking the addiction, fortunately for all of us, need not be difficult. Hundreds of already proven, cost-effective technologies are available to cut power consumption significantly in the home, farm, office and manufacturing plants. Compact fluorescents, Sunfrost refrigerators, super-efficient windows, insulation, power-saving office equipment, electronic timers, etc, can all add up to big power savings. On a larger scale, industrial cogeneration can decrease Ontario's power consumption levels by thousands of megawatts, and fuel substitution can bring an equivalent saving.
This brings me to Bill 118. Ontario Hydro must reverse its Live Better Electrically ethic by turning its money, technical muscle and access to all Ontarians to full use in a conservation crusade. Ontarians must learn to live better efficiently. Ontario Hydro is legally prohibited from doing so at this time because of section 56(b)(3), which prevents Hydro from encouraging its customers to get off electric space heating and on to cleaner, cheaper fuels.
This legal prohibition, together with the cheap installation costs for electric heating relative to natural gas, has led to a phenomenal increase in the number of electrically heated homes in Ontario during the last decade, despite the fact that natural gas is environmentally cleaner and much cheaper. Other fuels, such as propane and oil, are also cheaper and cleaner, but the priority should be given to renewable fuels such as solar and wood, combined with state-of-the-art insulation.
The coalition supports the broadest definition of conservation and the repeal of the legal block against fuel substitution, because Hydro can then use every available means to not only stop new inefficient load from being added to the grid, but also to replace inefficient electric space and water heating added to the system in the last 25 years. By investing in conservation and fuel substitution, Hydro will not need new Darlingtons or the dozen more dams it is proposing for the Moose River basin.
I would also suggest the act be amended so as to provide that Ontario Hydro be able to take several steps in its efforts to promote conservation.
First, Ontario Hydro should be enabled to charge hookup fees for every home which installs electric heat after January 1, 1993, to recover in advance the capital costs Hydro must incur to supply that load. The British Columbia Hydro and Power Authority has done so, charging $1,150 per kilowatt; an average house in Ontario would be charged about $15,000 to install electric space heat. Clearly, this would discourage electric heating installation, which is precisely the goal to be achieved.
Second, Ontario Hydro should be enabled to provide all its conservation and fuel substitution services on a loan basis. That is, Hydro should loan to all customers -- residential, commercial and industrial -- the full amount needed to do state-of-the-art insulation and conversion to power-efficient appliances, industrial processes, lights, office equipment, motors, building retrofits, etc. Hydro should then recover all the money loaned, with interest, from the money its customers save by becoming more efficient. In other words, customers only begin to repay the loan when they begin saving more money than the cost of the loan. Hydro would, in effect, become a conservation bank rather than a construction company.
In conclusion, I want to reiterate that aboriginal people view Ontario's electricity addiction as a pathological sickness for which we bear, as aboriginal people, much of the environmental and social costs. Inefficiency and electric space heating are enemies of aboriginal people, destroying our environment and our culture. To prevent this destruction, we would encourage that this bill be passed and the conservation crusade begin. Thank you.
The Chair: Thank you, sir. Mr Wood?
Mr Wood: Thank you very much, Randy, for coming forward. I know you were on the list in Timmins at the end of the day and I am pleased to see that you have been able to travel down to Toronto to bring us a very interesting presentation and a number of proposals and suggestions to make Hydro more accountable to the government.
I am aware of the area you live in, the coastal region, Hudson Bay and James Bay. What type of heating do most of the homes have along the coast, Randy?
Mr Kapashesit: As far as the grid goes, the only communities hooked up to it are Moosonee and Moose Factory. Everybody else north of us, Attawapiskat, Kashechewan, Fort Albany, Peawanuck and more than that -- I am just talking about the ones involved with the coalition -- the majority of northern native communities north of the highway line, basically, are not on the grid. They are on diesel generation and usually limited to the amount of power they have. Their alternative for heat is usually wood. We are the only communities on the grid.
Mr Huget: Thank you for your presentation. I want to touch briefly on Elliot Lake. Opponents of this bill, and indeed critics from a variety of sources, have been very critical on the Elliot Lake issue and what we view as the corporate responsibility of Ontario Hydro when we deal with Elliot Lake. I would like your views on that. There are some who would say Hydro has no business at all being corporately responsible to Elliot Lake and consider it nothing more than a social bailout. I would like your views on Elliot Lake.
Mr Kapashesit: I do not know what your process is here, and I do not even know if he feels comfortable, but we happen to have Mr Keith Lewis here from the Serpent River first nation near Elliot Lake, and it might be more appropriate to ask him that question.
The Chair: Let him speak.
Mr Lewis: Thank you. We have problems with the idea that there is an attempt by Ontario Hydro and the province to bail out Elliot Lake because of the enormous environmental and social costs it is going to place on aboriginal people in the area.
I should mention that my job is director of environmental programs at the North Shore tribal council, and I am also from the Serpent River first nation.
What we see is that the area of the north shore has become a sacrifice zone for pollutants and environmental destruction of every kind, and in our case of the aboriginal people, social destruction. In the planning that goes into attempting to save Elliot Lake and the people there and their jobs, we would like to participate as much as we could to have our interests accommodated as much as possible.
In the past, the practice has been to exclude us almost entirely from any processes that have taken place, and we feel a situation like that must be rectified. It is not a situation common only to the Elliot Lake area in terms of incorporating in consultation with native people; it is Canada-wide, I would say. We agree the people in Elliot Lake must be helped, but it should be sensible help. We do not believe in aid and assistance to these people at the cost of the environment, at a social cost for aboriginal people. We have said it looks like progress at any cost or a bailout at any cost, and we do not agree with that concept at all.
1200
Mr McGuinty: Your description of the environmental degradation that followed effects from hydraulic plants was very graphic and compelling. I want to see if I can get you to take that a step further. Hydro still has long-term plans, of course, for meeting future demand. If you had your druthers, would you prefer nuclear over hydraulic? I am assuming, of course, that we have made every reasonable effort to conserve every megawatt we can.
Mr Kapashesit: Personally speaking, and from the perspective of the coalition, because of where we live and our particular lifestyle, we have been and continue to be very much aware of the impacts on our environment. For far too long we have been hearing that hydraulic energy and the building of dams is in fact a clean source of energy. I want to answer your question but I want to inform you of some of the realities that either are not acknowledged or are only just becoming accepted as reality in terms of hydraulic.
We can look on the west coast of James Bay and Hudson Bay and into northern Manitoba and see examples of the results of hydraulic developments there. We can see on the east coast of James Bay in northern Quebec examples of hydraulic developments there. Also, we do not need to limit our look to just within Canada; we can look elsewhere and see what the results have been of hydro projects.
Aside from the things I have mentioned, some of the more important factors I did not mention which I think are emerging more and more as time goes on are the level of mercury and the acceleration of mercury in the ecosystem as a result of building a dam and reservoir and storing water behind it. Mercury is naturally in the environment. Then, for some reason, once it is captured within a reservoir, it seems to accelerate its presence and proceeds to flow through our river system to the point where you have my own relatives on the east coast of James Bay, members of my own extended family, getting tested three or four times a year for mercury because they eat the fish. They have always eaten the fish. They have been told that perhaps they should not eat any more fish because they have passed the acceptable levels of consumption. In the Moose River basin alone, for example, with the projects that have been built, the documentation Ontario Hydro produces internally acknowledges that the amount of mercury in certain species of fish exceeds the acceptable limits, and these fish are consumed by our own people.
It comes down to the lifestyle for us; it is not a question of choosing energy sources. That may be, in fact, a question we will have to answer at some point, but in terms of being a society or a culture of people, we would like to continue. We would like to be able to continue that way of life and we see all of these options -- I mean, you narrow it down to the choice of either nuclear or hydraulic. Where we live, hydraulic seems to be what people would prefer and they see the north as providing that kind of alternative. As Cree people we disagree with hydraulic, and that is the extent of our concern because that is what seems to be valued in our area. We feel it is our role to speak out against hydraulic because for far too long there has been the myth that hydraulic is clean.
Mr McGuinty: I appreciate your comments. I think it is important for people to recognize that there is no easy solution to meeting future demand and that every supply option has inherent difficulties.
Mr Kapashesit: I would agree with you that conservation measures have to be pursued vigorously and to the fullest extent possible. Then perhaps we could have this kind of serious debate as to what the choices really are, but I do not think we are there as a society and I would not want to be dealing with that question without knowing what has been done to achieve that maximum conservation priority.
Mr Jordan: Thank you both for your interest in coming here and making your presentation. Yesterday, I believe it was, we had a presentation that referred to a river-run project versus the four-bay storage. If Hydro were to go that route, would you consider it?
Mr Kapashesit: We have stated officially as our position that the least impacting technologies, the least damaging to the environment, and processes and projects that can come up with those kinds of options and alternatives are what we would favour. Certainly run-of-the-river is one of the more important ones.
Mr Jordan: What has the reply been back to you on that type of project?
Mr Kapashesit: That is usually left up to the non-utility generators, that particular option, from what we have seen, at least. You should know that 70% of the non-utility generation that is being identified as being attainable in the province lies within the Moose River basin.
Mr Jordan: Did you say 70%?
Mr Kapashesit: at we have seen so far, it is going to be that sector that pursues those kinds of projects, as opposed to Ontario Hydro. Ontario Hydro seems to be cemented into thinking it has to build dams with reservoirs, unless it comes up with another proposal that I have not seen. I have not seen it yet.
Mr Jordan: Would you care to comment on the James Bay project as an engineering design, as developed by Hydro-Québec, the way that was done in bringing the three rivers into a basin?
Mr Kapashesit: I am not an engineer, and I can only speak from my own perspective and from my own experiences. Many people probably do not even know that the reservoirs and the dams they built have moved 18 inches from the day they opened up.
Mr Jordan: The dam?
Mr Kapashesit: Yes, at the base. It has already been moving. I do not know if any of you have ever seen those particular reservoirs and the size of them; they are immense. I mean, you cannot even see the other end. It is just like being out on the ocean.
I do not personally take any gratification in an engineering achievement. In fact, I see it as a reflection of the imbalance in this world, and the sacrifice Cree people have to endure in this case because Hydro-Québec would like to sell this power to the United States. I do not have very much to say that would be considered positive about Hydro-Québec and its projects. We have intervened in their processes as well.
Mr Jordan: Not even the accommodation they tried to provide for the people?
Mr Kapashesit: I would fundamentally disagree that they tried to accommodate anybody. The fact of the matter is that the court, the law of the land, initially ruled that there was an interest in that land. The decision that is referred to as the Malouf decision confirmed that the Cree in the area and the Inuit in the area had aboriginal rights unextinguished and that their interests had to be protected and the project should stop. So Hydro-Québec and the government of Quebec intervened and appealed to a higher court and got it overturned within 10 days, something called a balance of convenience. If that reality was around today, that would not be the case, because we have a totally different legal and political reality to be operating in. But to me, the James Bay northern Quebec agreement, which I presume you are referring to, while it had positive features, did not necessarily deal on an even playing field. People had a gun held to their head, if you ask the people who were negotiating. Developments were going on anyway, and Hydro and the Quebec government could do whatever the heck they wanted.
Mr Jordan: I am glad to hear you are positive to the river-run type of project anyway.
1210
Mr Kapashesit: We have made it clear in the work we are trying to address that it is a mindset that seems to be out there that apparently because there are dams already in the Moose River we should consider sacrificing it, when that river is struggling for survival and is still very much alive and is being used by the people in the area. We feel there is a question that needs to be asked there as to whether in fact river systems should be enduring such development. Maybe there are maximum amounts of energy and destruction that can be brought on to a river system, as opposed to thinking, "It's already got dams on it; let's just waste the whole thing and do whatever the hell we want with it, without concern for the environment or the people who live there." We live there. A lot of our economy is based on that river. Our slogan as the Moose River/James Bay Coalition is The River is Our Life, and there could be nothing more apt than that.
Mr Arnott: Thank you very much for coming down to present to us today. I am just wondering, will there be opportunities for your people to economically benefit from non-utility generation? Who is going to come in and build the run-of-the-river programs?
Mr Kapashesit: Obviously the private sector is anticipating that this whole area will open up, and it already has to a certain extent. In terms of who will benefit, the proponent obviously will be the first to benefit, but there is, to my understanding, no policy that would encourage each individual proponent to consider getting native communities involved or that says how they could in fact benefit or what types of technologies to bring so there is no lasting impact on the lifestyle or support that lifestyle in some way. Those kinds of questions I think have to be entertained.
It should not be left just to the non-utility generating sector; it should also be a question Ontario Hydro considers. How do their projects and how do their planning processes impact on aboriginal people? I think that question has been ignored for far too long. In the Moose River basin alone, Ontario Hydro has no documentation whatsoever as to the impact of those projects, and they have been in place from the early 1900s, with Spruce Falls at least. There is just no accounting from Ontario Hydro with regard to its projects and how they impact at this point in the Moose River basin.
Mr Arnott: I would just like to say it was a very compelling and informative presentation for me.
The Chair: Gentlemen, on behalf of the committee I say a sincere thank you. You have provided us with a somewhat unique insight and we appreciate it.
Mr Kapashesit: I just wanted to --
The Chair: Just give me 30 seconds. I do not get to talk a whole lot around here, and I miss it. We really appreciate your participation. We trust you will keep in touch and we look forward to that. Go ahead.
Mr Kapashesit: I overheard a question Mr Huget asked the presenter before me regarding housing, and I do not know exactly what your question was, but something with regard to the building code and things like that.
Mr Huget: Yes.
Mr Kapashesit: I want to inform the members here that in the community of Peawanuck, for example, and also in the housing we do in Moose Factory with the Mocreebec first nation, in the houses we have built we have tried to be as energy-efficient as possible, notwithstanding the restrictions that are in place once you are involved in a government program, in a social housing program. I think it is important to know that in a place like Peawanuck, on the shores of Hudson Bay, they have housing they have designed and built on their own. They have nine-inch walls, they have airtight housing. You can walk around in that house in the middle of winter and you will not feel cold.
My point is that native communities, if given the opportunity to empower themselves in providing the resources as opposed to restrictions of budget and costs for building housing, could in fact demonstrate to others how to live in northern climates. It is happening and it can happen on an even greater scale. There has to be some sense of trust in partnership, because most of these communities, you should know, are fly-in communities, and the costs for building a house in these communities are great because most of the material has been imported. The annual allocation per unit is not great and you have to build your transportation costs into that. If people can do it in Peawanuck on the shores of Hudson Bay, I do not see why they cannot do it anywhere else. I just thought I would make a comment about that.
The Chair: Does anybody want to respond to that particular issue briefly?
Mr Jordan: I just have a brief comment for Mr Kapashesit, and it is relative to the fourth paragraph on the last page where it says Ontario Hydro should be enabled to charge hookup fees for every home. There has been evidence given before the committee that Ontario Hydro's cost is $50,000 for I think it was a 15-kilowatt bulb. I have information that was an error in print and it should have been $40,000, not $50,000. I think for the benefit of the committee and the information available, that should be documented.
The Chair: That is in response to the oft-quoted comments by Franklin, the chair as he was then.
Mr Jordan: Yes. It was just a misprint in that correspondence.
The Chair: That may still be a matter of contention. Obviously I am taking your word for it because I trust you and I respect you and I like you.
Mr Jordan: Thank you very much.
The Chair: But there may well be somebody coming up along the line to contradict you. Mr Huget.
Mr Huget: I would like to comment on the housing issue you raised. You raise some compelling arguments in your brief to the committee about what we may not have been doing in terms of wisely using a very important resource and the whole issue of efficiency and conservation, and it is my profound hope that we as a society get much more aware of what will happen without a very sincere conservation effort. It is also my profound hope that through education and efficiency in conservation we can avoid building large projects of any kind, not necessarily just nuclear but every other kind. I just hope we are able to accomplish that. Certainly that is my view, and I think we are attempting to start that process with this bill.
The Chair: Chief?
Mr Kapashesit: Thank you all for the opportunity. I am sorry I could not make it to Timmins, but I was chasing you all over the province and chasing everybody else.
The Chair: Once again, thank you. Have a safe trip back home.
The committee recessed at 1217.
AFTERNOON SITTING
The committee resumed at 1331.
CANADIAN OIL HEAT ASSOCIATION
The Chair: People are here expecting to be able to make their submission at the time scheduled for them. The first participant is the Canadian Oil Heat Association. I am pleased that Mr Johnson and Mr Huget are here. We are going to begin because it is 1:31 pm and these people were scheduled to begin at 1:30. Go ahead, gentlemen. You have 20 minutes. Please save at least the last 10 minutes for questions and dialogue.
Mr Butt: My name is John Butt and I am the executive director of the Canadian Oil Heat Association. I have with me today Sid Finklestein, who is a consultant and a mechanical engineer. He has about six years experience in the oil business and is also very familiar with the manufacturing sector of the oil heat business in Ontario. I am going to turn things over to Sid to make the formal presentation on behalf of the association.
Mr Finklestein: Thank you to the committee. Just so you know why I am speaking, John is certainly perfectly capable of giving it, but because he is a Newfoundlander, we thought there might be some problems understanding his English, so he has asked me to speak.
You probably already know from previous meetings that the Canadian Oil Heat Association is an eight-year-old association of oil dealers, technicians, suppliers, equipment manufacturers and related government agencies. As of December 1991, there were in excess of 135 members across Canada, and more than 104 members in Ontario and growing very rapidly thanks to John. The majority of Ontario members are small independent operators with 18 employees, primarily selling oil. The manufacturing side consists of members, with a few exceptions, that are small Ontario-based companies.
It is evident that COHA represents a significant and vital part of the Ontario economy at a time the individual members, because of their size and scope, are most vulnerable to today's economic situation and government policies. That is why we feel it is important that we address the ramifications of Bill 118. Specifically we intend to address a very limited aspect of Bill 118. Although as a group we discussed other aspects of it, we have only made decisions or suggested proposals pertinent to the area of incentives.
The Canadian Oil Heat Association fully appreciates and supports Ontario's energy conservation initiatives and the Ministry of Energy's new energy directions. This includes support for a moratorium on new nuclear power facilities and the direction to Ontario Hydro to increase its conservation efforts, to be funded in part, as we understand, by diverting the $240 million it had planned to spend on future nuclear studies.
COHA is very specifically in favour of and strongly supports aspects of Bill 118, An Act to amend the Power Corporation Act, that deal with fuel substitution. As I say, that is what we will talk about. Specifically, the association is in support of section 5, which eliminates subsection 56b(3) of the Power Corporation Act. This allows Hydro to provide incentives or assistance in conversion of space-heating systems to a system other than one based in whole or in part on the use of electrical energy. COHA feels it is in the best interests of all Ontario residents that conservation and conversion be made accessible to all, and specifically to homes currently heated by electricity.
The Canadian Oil Heat Association does not see any conflict if incentives are available and are subsidized by electricity users. First, the biggest residential electricity users are the ones most likely to benefit directly, and second, all of Ontario and all electricity users are the ones who will gain indirectly through environmental benefits and ultimately tax benefits. I will go into some of that more specifically in a moment.
We feel very strongly that market forces alone are insufficient to encourage fuel substitution in today's economic realities. The Canadian Oil Heat Association definitely believes in energy efficiency and conservation as the first priority and supports the Ontario government's desire to be the leading jurisdiction in North America in conservation and energy efficiency. We also believe in the fact that barriers to an efficiently functioning market exist. Where intense interests of consumers or society as a whole are not best served by the market, we feel the government should use other tools at its disposal, including regulations and incentives. We feel mobilizing public action and influencing public attitudes, such as preferences and purchase decisions for appliances, are a vital part of that requirement.
There is some very pertinent information in support of our beliefs. I will run through a few of them right now. There was a report recently by the National Energy Board entitled Canadian Energy Supply and Demand 1990-2010, which predicted that from 2000 to 2010 natural gas demand would moderate because gas prices would exceed oil prices. This would lead to the substitution of oil for gas. This prediction is based on energy-demand growth of 1.2% annually on average, with oil supply exceeding demand, keeping oil prices at US$27 a barrel. In fact, as of December the price was US$19 a barrel and right now is closer to US$18 a barrel. The board also predicted that by 2010, 37% of Canada's energy would be supplied by oil, 25% by gas and 22% by electricity. This is a very significant shift from what existed in 1990, where the numbers were 14% oil, 46% gas and 40% electricity.
Further support was given by Marion Stewart, a vice-president of National Economic Research Associates in the United States, who predicted that oil prices would drop to $16 a barrel by June of this year. In fact we are, as I say, very close to that. This was a prediction based on the fact that the influx of Kuwaiti and Iraqi crude would start. The NERA study says that the outlook for natural gas is good until supply gets tight in 1993 and then, NERA says, wellhead prices in the United States would go from $1.35 per 1,000 cubic feet currently to about $2.25 per 1,000 cubic feet by 1995. This will have a very significant impact, we feel, on Ontario residents and our choice of fuels.
We feel there is a lot for Ontario to gain by a program of incentives. Currently there are over 800,000 homes in Ontario heated by electricity and 1.5 million have electric hot water tanks. Over 160,000 of these electrically heated homes are ducted, which makes them very easily converted to other fuels.
Ontario is currently building approximately 54,000 -- at least that is what it did last year -- new homes a year, although it forecasts a few more next year. About 12,000 are in places not serviced by gas. In addition, 100,000 of the 564,000 existing homes serviced by oil could be equipped with higher-efficiency oil furnaces to meet the government's new energy directions. Approximately 380,000 electric hot water tanks are in homes already serviced by oil.
This represents a significant potential saving of electricity and fuel to Ontario. Why incentives? Why not market research? We looked at this very closely. There was a study done in October 1991 by Goldfarb Consultants. This report, entitled Natural Gas Perspectives Tracking Study -- Wave VI, was prepared for the Canadian Gas Association. The overall objective was to examine current attitudes towards natural gas as a source of heating energy in Canada and to investigate attitudes towards the environment.
1340
What they discovered through approximately 1,000 phone calls to residents across the country was that 96% of the respondents were very or somewhat concerned about the environment. That was a very crucial issue, which I think this government is well aware of. Of the three major sources of heating energy, 15% believed electricity was best. Eight per cent said oil and 17% said electricity was likely to be the least expensive in 10 years. Three per cent picked oil and 34% picked electricity as being the one most available in supply in the next 10 years. Oil heating was chosen by only 1% as using the most modern equipment and only 2% saw oil as the least damaging to the environment. Finally, 74% believed that greater use of natural gas would alleviate the greenhouse effect. In fact, these perceptions are in many cases very far from reality.
This is why we feel incentives are crucial to get people to use oil and the products that will best serve Ontario. Without the incentives, the truth will not come out and the actual benefit to Ontario will not happen. The real truth is that oil-fired space-heating and water-heating equipment have led the way in technology advances and increased efficiencies for over 20 years. The flame-retention oil burner was introduced to the market in 1970. It increased burner combustion efficiency from 60% to 98% on conventional furnaces, taking steady-state operating efficiency to 85% and 88%. Condensing flue-gas oil furnaces are available today with seasonal efficiencies in excess of 95%. Actually, oil led the way in technology advances. The majority of gas furnaces installed in Ontario are operating at less than 70% seasonal efficiency.
Oil is less expensive than any of the other fuels. This was proven by the Ministry of Energy in documentation and deep research they did recently for a consumer guide. They found that electric furnaces or baseboard electric cost between $1,000 and $1,500 at installation. New oil furnaces are $1,200 to $1,800 and old oil furnaces can be upgraded with a burner of 80% AFUE, or annual fuel utilization efficiency, for only $400 to $800, a very significant difference.
A typical economy of installation and operation presented by one of our members suggested an installed cost for an oil furnace, picking not the midpoint but quite high, close to the top of the range, of $1,797, and for a midefficiency gas of $2,150 and a high-efficiency gas furnace of $3,800. Using the financing arrangements that are typically available in the marketplace, the capital outlay and the life expectancy of the products -- we have some documentation to leave with you -- an oil furnace will last 30 years. A gas furnace, we feel from our research, will last about 20 years. The installed cost would be $60 per year with oil, $178 per year with the midefficiency gas furnace and $315 per year with the high-efficiency product. The midefficiency gas furnace, by the way, includes the cost of a chimney liner.
An actual study done by one of our members on a home that he sells oil to -- this is Grant Chisholm from Chisholm Fuels, who happens to be our chairman -- over the 1990-91 heating season demonstrated the advantage of oil over electricity. On an R-2000 equivalent home of approximately 1,800 square feet, heated by baseboard electric, Grant installed an oil furnace rated at 87.1% efficiency using a side-wall venter. He measured exact quantities of oil and hydro used over specific degree-day periods and from that was able to determine the K factor for each fuel.
The results were as follows: They both, of course, had the same degree-days, which was 7,463 for oil, as it was for electricity. The K factor for oil was 8.78 and for electricity 0.696. What that really turns out to mean is that the quantity of fuel used in oil was 854 litres and for electricity 10,722 watts. Based on a cost of oil of 35.2 cents per litre, which has since come down, and based on a cost of electricity at seven cents per kilowatt-hour, which fluctuates and varies from location to location, oil was $300.60 and electricity was $750.54. So there was a savings of just about $450 using oil.
A 30-gallon oil-fired hot water tank delivers about 100 gallons of hot water per hour. It is equivalent to a continuous hot water supply. A 30-gallon gas-fired hot water tank can only deliver 30 gallons of hot water per hour, and it takes a 66-gallon electric hot water tank to supply 45 gallons of hot water per hour.
There are currently about 1.5 million electric hot water heaters in Ontario. Replacing these with oil hot water heaters will eliminate the need for, and the expense of, special gas or propane meters. You will obviously also save significantly in the amount of electricity in the province.
Oil-fired hot water tanks make economic sense. A typical family of four in Ontario requires about 65 gallons of hot water per day or 2,015 gallons per month. A gallon of heating oil will produce about 120 gallons of hot water, based on an efficiency of 75%. Therefore, it takes 16.8 gallons of oil costing $22 per month, or $264 per year, to feed that family hot water. The equivalent for electricity is $666 per year. There is a considerable savings to the consumer, and obviously from the point of view of energy.
Another misconception that makes incentive so important is the idea of environmental aspects. In fact, the truth is that both oil and gas will have the same amount of impact airwise on the environment for the same amount of efficiency, because the carbon dioxide would be the same no matter what the fuel, depending on the efficiency of the furnace. The more efficient the furnace is, the less CO2 would get into the environment.
The bad name that oil has, comes, it seems, from the liquid aspects of it. People have the impression that oil is an environmental polluter and this is based a lot on crude oil spills and so on that get a lot of publicity and attention. The truth is very different. Extensive studies done by Hart and Environ show that in reality the effects of fuel oil contamination are negligible and not at all harmful. These studies have shown that the greatest number of fuel oil tanks in service are less than 600 gallons in capacity, and most are above ground so any spill would be very quickly noticed.
The fuel oil tanks underground use suction fuel delivery systems that present significantly lower risk to the environment than do pressurized fuel oil systems, such as those used at gasoline service stations. If a leak occurs in a suction fuel delivery system, the pump will lose suction and stop operating, thus acting as a leak detection system.
The frequency of release from all underground storage tanks containing heating oil is well below 1%. That is a very significantly low number.
Certain chemicals present in gasoline that are of significant public health concern, like benzene and n-hexane, are not found in fuel oil.
Fuel oil, as a free product, will permeate downward to the water table through the unsaturated zone at a rate four to five times slower than gasoline. Fuel oil will migrate along the water table, once reached, at a rate four to five times slower than gasoline, and fuel oil, as a bulk material, dissolves into groundwater at a rate approximately 10 times slower than gasoline. Because of its ability to be seen and felt, and its low migration rate, it is very significantly safe to the environment, compared to other products such as gasoline.
Fuel oil has none of the carcinogens found in gasoline. Therefore, as a liquid pollutant, fuel oil has unjustifiably received a bad name. Because the public does not know this, unless we offer incentives, it will not have the opportunity to try fuel oil.
The amount of carbon dioxide produced in fossil fuels, as I said, is dependent on the amount of fuel efficiency of the product. Other aspects of fuel oil that people are not aware of is the security of supply and the safety of the product.
The most important thing we think the incentive program will do is from a social aspect. The members of COHA, as well as non-member fuel oil supply companies, are for the most part small independent businesses. Even the major oil companies, which may be national in scope, utilize independent agents and operate in a localized manner. We feel these are vital businesses to Ontario's growth. An incentive program is crucial to their growth and to their actual existence, and that is vital to growth of the economy.
We also feel that the use of oil in place of other fuels will allow electricity to keep its base load, because the oil companies do not supply fridges and stoves, so it is strictly the heat appliance for the hot water and the furnace to maintain that.
1350
We make a number of recommendations and feel that both regulations and incentives will produce the effect we want:
1. Incentives directed towards the marketing, advertising, training and implementation of off-electricity fuel conversion.
2. An incentive for Ontario-based research and development to produce state-of-the-art equipment to continue our growth in spite of the free trade penalties that many have taken.
3. An incentive of $2,000 to be paid directly to the consumer to cover the cost of ductwork to convert from baseboard electric heating.
4. An incentive of $500 to be paid directly to the installer of ductwork.
5. An incentive of $500 to be directed to the consumer for off-electricity heating conversion.
6. An incentive of $1,500 to be paid directly to the consumer for installation of an oil-fired hot water tank in place of an electric one in a home serviced by oil.
The Chair: Gentlemen, thank you. You should know that we have had previous discussions with people from your industry, including your Ottawa colleagues, representing the Canadian Oil Heat Association. We appreciate the interest you have shown and your contribution today to this process. I trust you will keep in touch.
Mr Conway: Is there no time for questions?
The Chair: There is no time for any questions. Talk to your House leader.
CANADIAN UNION OF PUBLIC EMPLOYEES, LOCAL 1000
The Chair: The next participant is the Ontario Hydro employees' union, Local 1000. Please tell us who you are. We have 20 minutes. If you want to leave time for questions, please try to restrict your initial comments to the first 10 minutes.
Mr MacDonald: My name is Jack MacDonald. I am the president of Local 1000, Canadian Union of Public Employees, which represents the 20,000 Hydro workers in Ontario. With me is Bob Menard, our education and publicity officer.
CUPE 1000 welcomes the opportunity to comment on Bill 118, particularly during a time when considerable attention is being directed at Ontario Hydro and its future. As well as being employees of the corporation, the 20,000 members we represent are ratepayers who are extremely concerned that the right choices are made for the future of electrical generation in this province.
Consultation: Unfortunately, this process does little to assure our members that proper consideration has been given to the impact of critical issues addressed in the legislative amendments before this committee. Although CUPE 1000 notified government representatives shortly after the 1990 election that we had an interest and an expertise in all issues pertaining to Hydro's operations, CUPE 1000, along with other labour groups, were simply notified of the proposed amendments after all the decisions were made.
Consultation means involvement in decision-making before the agenda is set. It is clear that, by definition, consultation did not take place with Local 1000 concerning the amendments to the Power Corporation Act. For the record, it makes no difference if other parties are equally ignored. Different behaviour was expected from this government and in this instance it was not forthcoming. CUPE 1000 believes that full and meaningful consultation should take place prior to introduction of legislation and those parties directly affected should be given ample opportunity to participate.
Board of Directors: In 1989 CUPE 1000 submitted a brief to the standing committee addressing amendments contained in Bill 204. Several issues raised then still have not been adequately addressed. Of particular interest then was the composition of the Hydro board of directors. CUPE 1000 still wants a representative on Hydro's board to ensure that the important concerns of the 20,000 members we represent are heard.
As we said before, unions regularly take positions on energy and environment issues. There is still reason to believe that these and other important initiatives do not get full consideration.
We also raised the issue of the Hydro board's conflict of interest over our pension plan. We still contend that an important trust has been violated when, acting as pension plan trustees, the board allowed contribution holidays. As you know, this case has been finalized in the courts as far as the money value of Hydro's contribution holidays is concerned, which amounts to $609 million. We have now been reimbursed for that. But the remaining issue of the board of directors and its action is still in the courts. These concerns remain in 1992 and will continue to remain until CUPE 1000 has a representative of our choice on the Hydro board.
Government Control: The recent amendments raise concerns about the relationship between the Hydro board and the government. From our perspective, increasing government involvement in Hydro's operations is questionable in terms of the impacts this relationship can have on Hydro's operations, and by association, the members we represent.
A case in point is the amendments that direct Hydro to actively pursue fuel substitution as an alternative to electrical use. Increasing the province's dependence on an out-of-province energy source makes little sense, particularly when the energy source is controlled by the private sector.
It is important to note that the very controls being used to direct Hydro's future do not exist, and will likely never exist, to control the action of private industry when the real or contrived demand for the commodity exceeds supply.
The amendments as proposed will direct Hydro to promote an alternative energy source with no immediate financial gain to the corporation. Successful implementation of the government directive means that the energy dollars spent will go to someone else. This means that Hydro is now mandated to compound existing financial hardship by doing the competition's job for them. While the construction of additional generation capabilities may be avoided, the benefits of constructing and operating new generation are also lost. These includes jobs for construction workers, suppliers and operating staff and the knowledge that the public still has ownership over a significant energy source for the future.
Implementing these amendments will ensure two things: Hydro's performance will suffer and even more energy will be privatized and moved out of the control of the electorate.
CUPE 1000 has other concerns about government policy that can now be dictated to the corporation. Hydro's recent revision of the demand-supply plan indicates strong political support for non-utility generation to the extent that a significant amount of power is expected to be delivered by this form of privatization over the next 25 years.
CUPE 1000 totally opposes this decision and we oppose any government that uses its legislative ability to direct the corporation to give the production of electricity to private industry. To make a comparison, there is strong support for the continuation of public health care in this province, with good reason, as it is a vital service that ensures a level of health that Ontarians expect and deserve. The public control and continued availability of electrical generation in Ontario is arguably as vital to the province's financial and economic health.
Making the right choices: While critical of several policies currently being promoted by the government, CUPE 1000 understands that Hydro's status as a crown corporation necessitates government involvement. The right kind of political direction can make Ontario Hydro an important tool in the economic resurgence required to get this province's economy back on its feet.
From our perspective, that means maintaining public control over the entire system. It also means redirecting the corporation's activities to ensure that any new generation is "made in Ontario." Arrangements like purchasing power from Manitoba must be seen as counterproductive to the long-term goal of creating employment, stimulating the economy and ensuring energy independence.
Conclusion: The proposed amendments to the Power Corporation Act indicate that the government wants to use Ontario Hydro to carry out its agenda for energy in Ontario. However, actions such as the lack of consultation with major stakeholders, the reluctance to give CUPE 1000 direct representation on Hydro's board, and the commitment to privatize both energy source and electrical generation raises serious concerns about the appropriateness of that agenda for CUPE 1000 members and the ratepayers of Ontario.
There are alternatives and CUPE 1000 wants to reaffirm our desire to be actively involved through meaningful consultation and active participation on Hydro's board of directors. Due to our unique perspective and relationship with Hydro, we feel we have much to offer in maximizing the corporation's potential as a critical part of Ontario's economic restructuring.
1400
Mr Jordan: Thank you, gentlemen, for your presentation on behalf of the 20,000 employees you represent. Just a quick question: Why do you think we need Bill 118?
Mr MacDonald: With the present contents of the bill going forward unchanged, I do not think we need it at all.
Mr Jordan: As a representative of a good majority of the employees, you feel there is sufficient room in the present Power Corporation Act for government direction.
Mr MacDonald: I think there are some important key issues addressed in the proposed legislation. I just do not believe in its present form it will do us any good.
Mr Jordan: You came through strongly in support of having Ontario independent as an energy source for electricity and in developing what we have in the province. Would you like to enlarge on that?
Mr MacDonald: I think Ontario Hydro has always acted perhaps with somewhat too much independence, but I now see in the legislation that they are calling for fuel switching and so on and I do not believe that is the job or the role of Ontario Hydro.
Mr Jordan: If there is going to be any subsidization, you are saying it should come out of the general fund is what you are saying.
Mr MacDonald: As an example, there are changes in the bill to allow Hydro to charge back to the ratepayers of Ontario the cost of the energy conservation program, the fuel switching and so on. They are going to have the gas industry, as an example, benefit from this position taken by Hydro when for a number of years it has been in direct competition with the gas company. It seems to me the gas company is being subsidized now by this change.
Mr Jordan: It seems what has happened as a result of the introduction of this bill is that we have created a very definite uncertainty of supply and cost to the industrial sector of the province. We see that as very negative. Industries are closing; they certainly are not expanding.
Mr MacDonald: I believe there should be a solid supply of electrical energy available in the future to enhance our opportunities for bringing in new industry to this province. I believe the direction should go to Ontario Hydro to build further generation.
Mr Huget: I want to touch on the issue of the employees' representation on Hydro's board of directors. First, I would like you to give me a little bit of history on that if you could, in terms of what the response has been traditionally to that suggestion. Second, I would like to hear from you the type of unique perspective you could bring to the board.
Mr MacDonald: First, in the area of pensions, the Ontario Hydro pension plan covers everybody who works for Ontario Hydro. We have the right in our collective agreement to negotiate any changes to the pension plan, so when we change the pension plan, when we negotiate at the table, it changes for everybody: the management, the society of professional engineers and all the 10,000 people with Hydro who are outside our membership.
As you know, we took the on case in 1986 because we felt Ontario Hydro was not complying with the Power Corporation Act and submitting its proper monthly contribution. We took that to court and after about a year and a half the court ruled against Ontario Hydro. We finally took that through to the Supreme Court of Canada and the decision has stood. As a result of that, we were able to have Hydro contribute all the moneys it had avoided, going back as far as 1962. We have all that money back within the pension plan. We have negotiated a very good pension plan.
We also have another case in the courts where we are charging the board of directors of Ontario Hydro with violating its fiduciary responsibility in not complying. Once that first court case came out and said they had to contribute. We took it took to the courts in the year 1986. They still failed, until we went to court again, to pay for all the other years when they had not contributed. We believe they acted irresponsibly once they got that court direction. What we were asking for was to have the board of directors removed from the trustees of the pension plan.
As far as our sitting on the board of directors is concerned, we have had much discussion with Ontario Hydro and I think we pretty well have come to an agreement that it is a matter of timing: When would it be seen to be appropriate for us to sit on the board of directors of Ontario Hydro?
I think we have a lot to offer. I have been with Ontario Hydro for 34 years. They are expanding the board of directors. We have internal knowledge as far as the operation of the company is concerned, and knowledge of some of the other activities board members have been doing, such as the pension plan and so on. I believe it is vital to our own self-interest to be participants in those areas.
Mr Cleary: You were talking about being consulted. Does your union still have the same position and thoughts about the makeup of the board as those in the document I have here?
Mr MacDonald: I suppose that document is one we submitted a few years back.
Mr Cleary: Yes; it was just handed to me.
Mr MacDonald: Things have changed generally in the industry. Since that time, of course, the Hydro board of directors has been found to be acting irresponsibly -- I should not say "irresponsibly" -- to be acting in contravention of the Power Corporation Act in not contributing to the plan. That has made us focus a little more on that issue.
Mr Cleary: When? I am sorry.
Mr MacDonald: Since the court action has come out making Hydro squarely responsible for the pension contribution holidays it had taken since 1962.
Mr Cleary: Have you also consulted your union on any programs Hydro might have, for instance, the lightbulbs that were delivered to every household in Ontario? Does your organization get involved in any of that?
Mr MacDonald: Our role primarily is to represent the members of our union and not to get into that. I also see a change to the Power Corporation Act that allows Hydro to charge off such ventures to the ratepayers of Ontario. It is questionable whether or not that is good value. When I get three lightbulbs delivered to my mailbox and then pay for that in subsequent months, I question the value. I understand what they are trying to do, but I question the value of that type of approach.
Mr Cleary: I think most of us got only two lightbulbs. Am I correct?
The Chair: I did not get any. Join CUPE, Mr Cleary.
Are there any other very brief comments or questions from any of the members of the committee? Brother MacDonald and brother Menard, I want to thank you very much for taking the time to come here this afternoon, not only in your own right but on behalf of the membership of CUPE 1000. You have added yet another perspective to what, as you can well imagine, has been a very diverse range of views and opinions about this whole issue. Yours is a valuable contribution. We thank you. Please convey that thanks to your membership.
1410
CANADIAN UNION OF PUBLIC EMPLOYEES -- ONTARIO DIVISION
The Chair: The next participant is the Canadian Union of Public Employees -- Ontario Division. Gentlemen, please come forward, be seated and tell us who you are. We remind you of our welcome to stay for the balance of the afternoon. Of course transcripts, not only of your own participation but of the whole series of proceedings, are available to you through the clerk's office or through your own MPP's office free of charge. Gentlemen, tell us who you are and start telling us what you will. We have 20 minutes. Please try to save at least 10 minutes for questions and conversation.
Mr Stokes: My name is Michael Stokes. I am president of the Canadian Union of Public Employees in Ontario. With me today is Brian Blakeley. He is our legislative assistant.
The Canadian Union of Public Employees -- Ontario Division is pleased to have this opportunity to present our comments on Bill 118, An Act to amend the Power Corporation Act.
CUPE Ontario represents over 165,000 members in Ontario. Among our membership we are quite proud to have the members of CUPE Local 1000, which represents 20,000 members and from whom you have just heard. CUPE Ontario also represents a number of locals and electrical utilities throughout the province.
CUPE Ontario wishes to refer the members of the standing committee on resources development to the submission of CUPE Local 1000. CUPE Local 1000 has a long and established history of being a strong advocate of the need for a publicly owned and operated corporation for the production and distribution of electrical power in Ontario. As employees and critics of Ontario Hydro, Local 1000 is in a unique position to offer valuable commentary and direction to this committee on Bill 118.
In our estimation, Bill 118 alters the fundamental purpose and operations of Ontario Hydro in a number of ways that cause concern to CUPE Ontario.
On the question of the board of directors, CUPE Ontario calls for the amendment of Bill 118 to require that CUPE Local 1000 have a seat on the Ontario Hydro board of directors. No further justification for this position is required, other than to mention the legal battles that CUPE Local 1000 has just explained to you, battles it has been forced to undertake as a result of the illegal use of pension funds by the Ontario Hydro board of directors.
On energy efficiency, while we strongly favour energy efficiency and informing the general public about the most efficient sources of energy for their homes, we are also concerned about the quality and security of employment for our membership. Bill 118, in our opinion, threatens CUPE members at Ontario Hydro by forcing employees to recommend to the public that they convert from electricity to alternative power sources.
Effectively the amendments contained in Bill 118 in some circumstances will require employees to recommend that Ontario Hydro consumers switch to alternative sources of energy. These alternative sources of energy, under current economic conditions, may appear to be more energy efficient, but this advantage is largely a result of market pricing. One does not have to think too far back to remember a period of time when conversion to electrical power was energy efficient due to the OPEC-produced oil shortages in North America.
In Ontario, electricity is largely produced by Ontario Hydro and distributed to end users by local utility boards and commissions. Thus electricity is a publicly owned and operated source of energy, thereby ensuring a constant supply of essential electrical power is available to both residential and commercial power users in Ontario.
The same cannot be said about the alternative sources of energy widely available in the province. Natural gas is transported by private industries that are not publicly owned or operated. In the fall of 1991 the control of southern Ontario's principal gas company was purchased by a British company.
The amendments, as proposed, will direct Ontario Hydro to promote alternative energy sources with no immediate financial gain to itself. Successful implementation of the government directive will mean that energy dollars spent will go to other non-publicly owned energy suppliers. Effectively these amendments will mean that Ontario Hydro will be forced to spend its financial resources to promote the businesses of its competitors. Ratepayers will be required to fatten the pockets of out-of-province and offshore energy corporations.
CUPE Ontario is opposed to any measure that will weaken the public presence in the production and distribution of energy in Ontario. In our opinion Bill 118, as it currently exists, will have this result.
In conclusion, we would like this committee to adopt the changes we have proposed to Bill 118, and we look forward to further opportunities to address this issue on behalf of our membership.
Mr Dadamo: Thank you very much for your presentation this afternoon. Ontario Hydro is thinking of adding to the board of directors, I believe, five or six people. You mention on one of your pages that you would like to have a seat on the board. How would you propose to do this?
Mr Stokes: I assume it would be through the normal appointment process. We would submit the names of nominees.
Mr Dadamo: You were talking about pension funds. Are you in a position to expound on that if it is in the hands of lawyers or courts?
Mr Stokes: When I was sitting here I heard Jack explain the troubles Ontario Hydro caused for Local 1000 on the pension issue. Brian actually came from Local 1000 and might be able to expand on that issue in a better way than I can.
Mr Blakeley: I guess the linkage we are trying to make is that the board of directors approves the business plans of Ontario Hydro. In the past, those business plans included using pension funds to offset operating money requirements. They decided that instead of contributing to the pension plan, they would take a contribution holiday and sell it to the energy board and sell it to themselves as a saving for the ratepayers. We feel strongly that if Local 1000 had had a representative on the board of directors, that would not have happened and they would not have had to spend all the money and the province would not have been saddled with the financial burdens of this seriously misguided decision by a board of directors.
Mr Dadamo: Does the executive of CUPE 1000 have any idea how much money we are talking about?
Mr Blakeley: I believe the court cases have covered that. Perhaps Jack could be called upon to give that answer.
Mr Dadamo: Just out of curiosity.
The Chair: Does somebody want to tell us what the number is?
Mr MacDonald: The settlement was $609 million.
The Chair: Tell you what, sir, come on up here to a microphone. In that way you are on record, for better or worse.
Mr MacDonald: The settlement to the court case was that we were able to establish a 75% indexed pension scheme at a cost of $1.2 billion and we were able to make several improvements that cost $383 million. As well, we put the remaining $223 million into a fund to supplement the 75% guaranteed indexing to 100% as long as that money lasted.
Mr Waters: When we talk about government or somebody keeping control of Hydro, historically people have accused Hydro of being inefficient. Hydro being basically a service industry, I would like your comments on inefficiencies at Hydro, if you feel you are able to comment.
Mr Stokes: Local 1000 could probably give you a very in-depth and detailed response to that question. I suggest that perhaps if the union were involved in some of the management decisions that take place at Ontario Hydro, much of what is seen to be wasteful spending could be eradicated.
Mr Waters: Do you feel there is also education needed with the public? I know working that in the wire industry, working around high voltage, you do not do those things by yourself. The public sees a line truck go out there and there are two or three people. Do you think Hydro should educate the public on why there is more than one person on a job site at any given time?
Mr Stokes: That should probably be part of a general educational package for the people in Ontario so that they understand everything to do with Hydro, including the environmental impact of the different generating sources, the health and safety risks faced by workers and the real costs of generating hydro power.
Mr Blakeley: The education element, as far as the need for rules to prevent people from having to work alone is concerned, is a very strong and important point to make. Unfortunately, having two people on a truck does not guarantee you that there will not be contact accidents.
One of the popular misconceptions about that -- and it is not limited to Hydro; I think it is related to all public services -- is that people drive by and see a crew of half a dozen people staring at a pole. The problem is the public does not drive by in March during an ice storm when the crew has been out for 24 hours and is putting power back on. The member of the public merely gets on the phone and calls in and says, "Why is my power off today?" He will be on the phone as quickly in the morning to call for a rate decrease. I am not sure I have heard a lot of stories about thank you letters on situations. You only need to spend some time among people who work with Local 1000 to hear horror stories about ice storms or traffic accidents. I think there was one in Owen Sound a few years back that involved the police, a stolen vehicle and several transformers. That is the sort of situation a single person on call-out would have absolutely no ability to deal with. Local 1000 has advocated changes to outlaw single-person crews in electrical situations.
1420
Mr Waters: I am only allowed a short one, so I would like to switch over to the future. The way Hydro seems to have been going, the future was a single thought and that was nuclear. I was wondering how you, as representatives of the employees, felt about alternatives, whether they be with hydro, alternative types of generation or whatever. I would not mind your opinion on alternatives to the nuclear option.
Mr Stokes: That is something you would have to discuss with Local 1000 members to get a detailed response. We would argue that any source of hydro generation should be kept in public control, public ownership, public operation, taking into consideration all the environmental impacts and other related issues. Local 1000 would be the specific group to talk to on that issue.
Mr Cleary: I would like to know your opinion of this document I have, which I mentioned a bit earlier. It says, "The CANDU reactor is a safe, reliable design which poses no undue hazard to the public when operated by trained unionized staff." It goes on to say, "The government of Ontario should approve the construction of new reactors." I would like your comments on those statements, please.
Mr Blakeley: I think the document you are referring to is something we can still endorse. With the design and construction of CANDUs, using qualified union personnel, it has proven to be a successful reactor from a safety point of view in Ontario. I do not think we have had any major serious incidents that have threatened the public health and welfare of this province. The design and construction are one issue. The way governments in the past have managed the financing and development of those resources is another issue. I am not sure we would argue the Darlington project has been a model of management efficiency, but I have no qualms with those statements concerning safety in design.
Mr Cleary: The other thing I would like to mention is that I take from you gentlemen that you are not in favour of the setup of the proposed new board of directors for Ontario Hydro.
Mr Blakeley: I think our concerns primarily are focused around the need for the inclusion of an employee representative from Local 1000 on the board. I know our brief does not address any of the other issues vis-à-vis the inclusion of the deputy minister or anything like that. Our concern is for the need for an employee representative from Local 1000 on that board.
Mr McGuinty: Gentlemen, I just want to get your views with respect to the present moratorium we have on the development of further nuclear capacity in the province. How do you feel about that? Is it a good thing, a bad thing?
Mr Blakeley: The decision of the board reflects, I guess, the decision of Hydro in that area and the decision of the government reflects a number of concerns for the population of Ontario.
Mr McGuinty: What about your concerns, though?
Mr Blakeley: My personal concerns do not factor into this at all.
Mr McGuinty: I beg to differ, because you are here and I value your concerns; not your personal concerns, but the concerns of your membership.
Mr Blakeley: The concern of our membership is that Local 1000 members be involved on the board of directors. We feel that is an efficient way for them to represent their membership's concerns within the organization.
Mr McGuinty: With respect to the moratorium, though, has your membership taken a position on that?
Mr Stokes: Actually our position is the one that was adopted by the New Democratic Party at its last convention, one that received not only the support of our organization but that of the environmental movement.
Mr McGuinty: I have some difficulty reconciling that with -- I am not sure whether I read it in here -- this statement here.
The Chair: Believe it or not, Mr McGuinty, there are not a whole lot of NDP policy books floating around. Somehow they have managed to disappear over the last 12 months. I have one in my office that I will send down to you.
Mr McGuinty: I am wondering how I reconcile that, unless you are telling me you have changed your position. On the one hand you say you are adopting the NDP position, and on the other hand this statement says the government of Ontario should approve the construction of new reactors.
Mr Blakeley: That is from the document we presented today?
Mr McGuinty: I am not sure where this is from.
Mr Stokes: I would be prepared to comment on the document we presented today. I did not have any participation in the development of that one. Our position would be that the development of further nuclear power be done in line with the policy that was adopted at the NDP convention which, as I say again, was done with the support of the environmental movement and is dependent upon energy needs and the impact on the environment.
Mr Arnott: One of my principal concerns about Bill 118 is that it changes the ultimate decision-making power at Hydro. It takes it away, as we know, from technical, sophisticated experts and puts it into the hands of a politician. In theory, if not in practice, some day we could perhaps have a Minister of Energy who has no background, no training and no qualifications with respect to energy. I am very concerned about that possibility, that eventuality and how Hydro might be run under those circumstances. How would you respond to that?
Mr Stokes: My understanding is that they are talking about expanding the board of directors to include politicians but that the technical expertise would still be there. We are asking that the other major component be there as well, and that is worker input. We see the development of the board of directors probably filling out in a much better way the decisions that come from the board.
Mr Arnott: If the minister is given the power by which he or she can issue policy directives that are binding and must be implemented efficiently and immediately, then your participation and input on the board is a little less, is it not?
Mr Blakeley: I was reading something yesterday discussing some amendments to clarify the position that policy directives from cabinet to the board of Hydro will be consistent with the Power Corporation Act. The other factor is that if we run a system that is publicly owned and operated and we elect people to manage that system, being the government, they have the duty to manage but also a duty to manage responsibly. I do not think the board of directors at Hydro currently, in the past or in the future is the source of detailed technical information about the power system. I believe that is the job of the engineers and staff of Ontario Hydro
I believe the responsibility of the board in making decisions is like that of the Legislature in making decisions: to get the best information possible prior to making a decision. I am not sure any of the changes will affect that process.
Mr Stokes: I would also add that I do not envision any circumstance arising that would require an immediate response from the minister that would be of that magnitude. Hydro works, I believe, on a 25-year plan, so I do not think anything is going to sneak up on it, so to speak.
Mr Jordan: We have received several complaints regarding the operation, maintenance and administration budget of Ontario Hydro. Perhaps this should have been a question for Local 1000. Generally speaking, with Bill 118 should we really be looking at the downsizing of Ontario Hydro? Personally I see it going from a strong electrical industry to an essential electrical service, and in so doing, it is not going to be that vibrant Ontario industry we have known in the past. Would you like to comment on that?
Mr Stokes: I cannot comment on the first part but I can comment on the downsizing. I see that as being something very negative. You run the risk of losing control of our natural resources if it gets beyond public control and ownership.
1430
Mr Jordan: Do you see considerable layoffs coming at the utility?
Mr Stokes: I cannot speak to that directly. That is probably a better question for Local 1000. Do you guys want to comment on that?
The Chair: What is your next question, Mr Jordan?
Mr Jordan: Bill 118 is virtually going to give the government control to halt nuclear development, and it is going to be done under the blanket, if you will, of conservation, which everybody agrees with. I do not think there is anyone I have talked to who is not in favour of conservation or alternative fuels where they can do a more efficient job, but to be promoting them and subsidizing them at the utility's expense and at the employees' expense we find difficult. I really think there is enough power in this Power Corporation Act at the present time for input to Hydro, provided the board has the proper representation and the Ontario Energy Board has a little more teeth in it.
Mr Stokes: That would probably result in support of the amendments we are urging. If you are in agreement with us, thank you very much.
Mr Blakeley: I am not sure we can agree with your premise, but your conclusion is one that is addressed in our brief. We are concerned that the direction to the employees of the utility to advocate switching away from electrical power puts those employees in an uncomfortable position of effectively recommending that people stop utilizing the services of that employment. This is something we have concerns with. I am not sure we can agree with your premise that led to that, because I am not sure the bill specifically targets nuclear energy; I think the bill targets any form of generation that is within Ontario Hydro.
Mr Jordan: I understood that. I took the weight of your membership at the convention was to keep nuclear as part of the development of energy.
Mr Blakeley: I am not sure either of us was at the convention you are referring to, so I do not think we can comment.
Mr Stokes: I was at the convention. I can comment on that. That was a consensus that was reached that we both share in. I do not think it was anybody throwing his weight around; I think it was people getting together, having an intelligent conversation and reaching an intelligent decision.
Mr Klopp: You are basing it on your convention.
Mr Stokes: On the NDP convention, the one I am talking about, anyway.
The Chair: Brother Stokes and Brother Blakeley, the whole committee thanks you, once again, as with your colleagues' presentation from Local 1000. It is yet another perspective, one that is important, well put forth and that obviously generated some interest and dialogue among the members of the committee. We look forward to hearing from you again on this and other issues. Thank you with sincerity. Have a safe trip back to your respective homes. Take care.
PUBLIC SCHOOL BOARDS OF METROPOLITAN TORONTO
The Chair: We now have the Public School Boards of Metropolitan Toronto. Come forward, please, and be seated. Tell us who you are. You have 20 minutes and try to leave some time for dialogue.
Dr Murray: The chair of my board, Mrs Mae Waese, regrets that she was unable to attend today. She sends her regards to you and the committee. In her place, my colleague Mr Brown and I will make a brief presentation on behalf of all the public school boards in Metropolitan Toronto and in fact throughout the province. You will note that the last letter of our written submission is a letter to Mrs Waese from Mrs Paula Dunning, the president of the Ontario Public School Boards' Association, endorsing the position we are about to put forward. I will outline briefly the background or the context from which we are speaking and my colleague Mr Brown will explain the reasons why we are here and the nature of our proposal, which is currently before Hydro, with respect to energy savings.
You will note that we represent eight public school boards that own and operate approximately 45 million square feet of space in some 650 buildings. Replacement value of this physical plant is approximately $4.5 billion. The budget for utilities in these facilities was $47 million last year, which included roughly $27 million for electricity. The school boards have been very conscious of the need for energy conservation and have developed good working relations with Hydro and the local hydro commissions. In the city of Toronto, that board alone has achieved savings from energy conservation that currently run at $3.5 million a year.
The committee knows, of course, from its hearings in other places and from other presentations, that the success attained by the city of Toronto is not restricted to school boards or indeed in any way to the city. Certainly we have recently sent technical staff to Waterloo county to learn from its experience. The efforts of the area boards in energy conservation have been stimulated and sustained by the various Hydro programs, and we believe these programs have helped both Hydro and the boards.
Our concern is one particular proposal we have before Hydro that relates to fuel substitution, which we are unable to proceed with without one of the amendments included in the bill that is under consideration by your committee.
Now I will turn the matter over to Mr Brown, who chaired the technical committee that worked for over a year to develop this particular proposal.
Mr Brown: I would like to take you through the current situation. In 1991 the boards represented here today undertook to coordinate their energy conservation efforts on a Metro-wide basis. A first step was the development of a proposal to replace the electric heating, ventilating and air-conditioning systems in 32 of what we call SEF schools, or study of educational facilities schools. The significance of the SEF schools is that they are a prefabricated type of school built around 1970 and are all-electric.
This project would involve the replacement of the existing electrical heating, ventilating and air-conditioning systems with modern systems using high-efficiency gas heating and high-efficiency electric air-conditioning. The school board was prepared to contribute $15.6 million to this $37.7-million project. The balance was to be provided by grants from Ontario Hydro plus the reinvestment of the first five years of energy savings. I would just like to make the point that the project will not go ahead without the Ontario Hydro incentive grants.
A thorough feasibility study involving a leading energy service company was completed last October. It was planned to order the new equipment by December and to begin the first phase of the work this summer. Unfortunately the project is stalled at the moment because of Ontario Hydro's legislative mandate, which does not allow it to make grants to projects that are primarily fuel substitution.
This feasibility study indicated that the following savings would be available:
"The project is expected to reduce the overall energy use in the SEF buildings" -- that is, 32 schools -- "from their current average 31 kWh/sq ft to the target of 26 ekWh/sq ft. The energy use of the buildings is estimated to drop by some 16% and realize approximately 10.5 megawatts of electrical winter peak demand reduction."
In overall terms, the program's annual savings, based on 1991 energy rates, would be as follows: The electrical demand would be reduced, as I mentioned, by 10.5 megawatts, which would equate to $472,986. The electrical consumption would be reduced by 32.6 million kilowatt-hours, which would equate to $1,698,689. Of course we would be using natural gas to take the place of electricity to some extent, and the gas we would use would amount to something like 89,240 MCF, which equates to $411,600. If you add that lot up, the net savings come to $1,760,075.
1440
This is the type of project the school board wishes to undertake. It would save not only energy but operating tax dollars on an ongoing basis. For a project of this scale, that is over $37 million, which would be particularly useful in these hard economic times.
The school boards urge the committee to endorse the amendment to the Power Corporation Act which will enable Ontario Hydro to support projects that permanently reduce electrical demand and increase energy efficiency. Furthermore, the boards urge the committee, and indeed the Legislature, to pass the necessary amendments as soon as possible, because every month of delay costs the boards approximately $150,000 in unrealized savings. Furthermore, every month of delay also means that people who could be working remain unemployed.
A project of this nature and magnitude would provide an excellent example of how to reduce electrical demand and increase energy efficiency while at the same time making available an extra 10.5 megawatts of electrical energy with no adverse effects on the environment.
I thank you for your attention. My colleague and I will be pleased to address any questions the committee may have.
The Vice-Chair: We have about three or four minutes per caucus. I will start with Mr McGuinty.
Mr McGuinty: For the program you have described here in some detail, capital costs are $37 million. Am I correct? I want to be clear in my understanding of what it is you would like Hydro to be able to do. Would that be to give you the full $37 million, to loan some of it, or how would it work?
Dr Murray: It is my understanding that the way the $37 million would be paid for would be roughly $15 million to $16 million in direct cash payments by the school boards, with the remainder coming from direct grants and from savings in the first five years. This is the way the project is structured.
Mr McGuinty: Would it make any difference to you whether some of that came from a gas utility?
Dr Murray: I am not clear.
Mr McGuinty: One of the issues here is who is going to pay for this. Ratepayers? I understand you have a concern for your taxpayers, but I am more concerned about the subject matter of this bill and about Hydro's ratepayers. I am wondering who should be paying to subsidize people to go from electric heat to gas. Should it be Hydro solely, or a natural gas utility, or who?
Dr Murray: We regard ourselves as a major ratepayer. We pay $27 million a year for electricity, and we believe this is a very reasonable expenditure of whatever contribution we would be making to the grants to make the whole operation more efficient.
Mr McGuinty: I do not really have another question, but perhaps a comment or a concern that I could register with you is that I have yet to be comforted or convinced that if we proceed with this kind of program, there would be a net savings to ratepayers generally, including the people in Sioux Lookout who do not have access to natural gas, for instance. That remains something I hope to get more information on as time progresses. Certainly you illustrate here very effectively the potential savings.
Dr Murray: Mr Brown will speak to the latter point, because we have spent considerable hours looking at the relative costs of these area options.
Mr Brown: This project would displace, provide or make available about 10.5 megawatts of energy. This will help to avoid a need for Ontario Hydro to build future generating plants. My understanding is that the incentive Ontario Hydro would be offering us on a per kilowatt basis or megawatt basis is significantly less than it would have to pay to build new plants. In those terms it is a benefit to all the residents of this province.
Mr McGuinty: That is what we have been told, but I have not seen the numbers yet. I am looking forward to receiving them.
Mr Arnott: Mr McGuinty took part of my question. I was wondering if you particularly cared where the subsidy money was coming from with respect to this project that you are hoping to pursue.
Dr Murray: We have not considered that. If this were the federal Department of Energy, Mines and Resources -- we in fact have been dealing with and talking to the Ontario Ministry of Energy throughout the preparation of our submission and the proposal. As a school board, we believe we need the kind of grants or stimulation that Ontario Hydro is offering in order to proceed with the project. It is fairly obvious that these are going to be public funds.
Mr Arnott: Are you familiar with the concept of power at cost? Many of our witnesses have brought forward the concern that power should be sold at cost and that one of the original operating concepts of Ontario Hydro, dating back to the start of the century, was the mandate to sell power at cost. Are you familiar with that concept?
Dr Murray: I read it in the paper yesterday, but no, I cannot participate in that discussion.
Mr Arnott: Many witnesses have seen this bill as a rather severe deviation from that principle. Would you have any comments on that at all?
Dr Murray: No.
Mr Brown: I cannot comment on that particular question, but I think we have to understand the benefits behind this type of program. As we know, over the years, Ontario's demand for electricity increases. We have reached a point where to build a new generating plant obviously is inconsistent with protecting the environment, whichever way you go. If you go for fossil fuels, you produce pollutants. If you go nuclear, then of course you run into strong public opposition on two fronts.
What Ontario Hydro is seeking to do is to provide extra capacity through conservation. This is exactly what this project is doing. It is doing it in two ways. It is using a more efficient fuel for heating and using it more efficiently through modern plant, and it is using what electricity it does use more efficiently because it is modern, high-efficiency equipment. This would make a very significant contribution to making available extra electrical power without any increase in generating capacity. To give you some idea, 10.5 megawatts, in very rough terms, equates to something like fuelling over 1,000 homes. That is without building any extra plant.
I put it to you that this has to be beneficial to this province and that this particular project is totally consistent with the government's own policy. Indeed, it is my understanding that only last year the government prohibited the use of electrical heating in any further socially assisted housing because of its concerns about electrical demand. This project is totally consistent with that.
Dr Murray: If I may add something, I was part of the team that built the schools. We spent considerable time looking at the fuel option. At that time, in terms of our understanding of rates and probabilities and the probable cost of nuclear, which was there and going to become very large, we made the bet, with the encouragement of Hydro, to go electric. Many people did that with many buildings at that particular time. It is ironic to come back now to support Hydro to go in the other direction that we seriously considered some 25 years ago when these were in the design stage.
Mr Arnott: Would you then agree that perhaps government creates problems for itself when it interferes in the energy market, and that if it goes too far in encouraging one particular form of energy, it may create problems for itself down the road? Would that not be a lesson?
Dr Murray: My personal opinion is that it is the responsibility of government to manage the supply of energy for industry and private and public consumers.
Mr Arnott: Including interfering in the normal market distribution of that energy?
Dr Murray: The alternative to interference is laissez-faire, which is no guarantee.
Mr Wood: It is quite obvious that there is an enormous waste out there in the type of fuel being used for electric heating, heating water and this kind of thing, just in the fact that you are saying $150,000 each and every month would be saved. I wonder if in your opinion there is any concern about fuel switching. Is there a concern or any fear of supplies of oil or gas or other types of fuels? I know that in Sioux Lookout there is no gas, but there are other types of fuels, and there are other types of fuels throughout the province. Is there any fear in the minds of the people with whom you have been dealing?
Dr Murray: We are also a major gas consumer. We buy our gas directly and pay to have it transported and pay to have it distributed locally by Consumers' Gas. There was a break in Calgary two weeks ago. Our gas did not come from that particular field, but in our contracts -- we are in the second or third of these contracts -- we certainly look at that, and in that instance the suppliers and the users get together and share the difficulties as they arise.
We looked at the security of supply 20 or 25 years ago and deemed it safe then, and certainly the distribution methods and the collective sharing are much more secure today than at that time. Yes, we are major users of gas and we are prepared to take that risk. The same risk exists with some of the electrical sources.
Mr Wood: Once again, I would just like to say that it is quite impressive. The conservation and switching are an example of the amount of extra capacity that does not have to be generated through coal or nuclear or other types of plants that have to be built. It is really impressive. Thank you for making a presentation.
Mr Klopp: Mr Arnott brought up a point. About 25 years ago, it looked like electrical was the way to go. Was it the government that prompted you to go that way, or was it Ontario Hydro?
Dr Murray: It was Hydro.
Mr Klopp: We are being told it is going to be government now. It is going to be telling people what to do, telling Ontario Hydro what to do. I just wanted to make that point clear, that it was Ontario Hydro that promoted it.
Dr Murray: Yes, there is no question that we dealt with Hydro. I do not believe we dealt with any government agencies at that time.
The Vice-Chair: I thank you, gentlemen. You have brought an interesting perspective. I personally never thought of schools, but reading this and hearing your figures, I am really amazed. It opens up a whole new field.
Dr Murray: It certainly is not just Metro; it is right across the province. There are many opportunities in schools.
The Vice-Chair: I do not think a lot of us were aware of that, so I thank you very much for that.
I will conclude the hearings for today. I remind the members that we will be in Kingston on Monday, so please take everything with you when you leave today and be prepared for another week of travel.
Mr McGuinty: I refuse to get up at four o'clock in the morning, Mr Chair.
Interjection: You do not have to.
The Vice-Chair: We have allowed you till at least 4:15 now.
With that, we stand adjourned until Monday in Kingston.
The committee adjourned at 1454 pm.