POWER CORPORATION AMENDMENT ACT, 1991 / LOI DE 1991 MODIFIANT LA LOI SUR LA SOCIÉTÉ DE L'ÉLECTRICITÉ
BELLEVILLE UTILITIES COMMISSION
KINGSTON PUBLIC UTILITIES COMMISSION
KINGSTON ENVIRONMENTAL ACTION PROJECT
COUNTY OF LANARK ENVIRONMENTAL ACTION NETWORK
ONTARIO PUBLIC INTEREST RESEARCH GROUP
CONTENTS
Monday 27 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
Belleville Utilities Commission
Richard Barrett, chair
Neal Britton, general manager
port Hope Hydro Commission
Frank Hueston, chair
Renewable Energy
Charles Gobeil, proprietor
Action for Social Change
Peter Dundas, member
Kingston Public Utilities Commission
Marion McKenna, vice-chair
Gord Jarvis, general manager
Kingston Environmental Action Project
Stuart Pike, education coordinator
David Hahn
County of Lanark Environmental Action Network
Ken Willis, co-convenor
Rita Burtch
Vince Maloney
Darlington Alert
Paul Gervain, member
Ontario Public Interest Research Group
Toby Mueller, member
Keith Stewart, member
Robin Roots, member
Heather Wornell, member
Stan Segel
Wildside Foundation
Paul McCay, founder
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 Mr Dadamo
Wilson, Gary (Kingston and The Islands/Kingston et Les Îles ND) for Mr Wood
Clerk pro tem / Greffière par intérim: Manikel, Tannis
Staff / Personnel: Yaeger, Lewis, Research Officer, Legislative Research Service
The committee met at 1254 in the Ramada Inn, Kingston.
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.
BELLEVILLE UTILITIES COMMISSION
The Chair: Good afternoon. The first group, the Belleville Utilities Commission, is scheduled for 1pm. Please come forward, have a seat and tell us who you are. There is coffee and, bless them, made-in-Ontario apple juice. There will be no cross-border shopping today.
We have 20 minutes per presentation. As you will discover, inevitably the most interesting part of these presentations is the questions and dialogue that take place after the submissions, so please try to keep your comments to 10 minutes or under so that we have adequate time for questions and comments. Gentlemen, please tell us who you are and carry on. We have your written submission, which will form part of the record as an exhibit to the proceedings.
Mr Barrett: Thank you very much. My name is Richard Barrett. I am the chairman of the public utilities commission in Belleville. With me is the general manager of the commission, Mr Neal Britton.
Mr Chairman and members of the committee, we wish to thank you for the opportunity of presenting the views of the Belleville Utilities Commission respecting this very important Bill 118, An Act to Amend the Power Corporation Act. It is very important because in our opinion it introduces fundamental changes in the relationship between Ontario Hydro, the cabinet and the Legislature as well as the costing of electricity in Ontario. The economy, the environment and the life of every citizen is affected by Ontario Hydro's operation, and therefore the proposed changes deserve the consideration of us all.
Our commission, whose members are elected by the citizens of the city of Belleville, is concerned about three aspects of the bill: the corporation's board; the determination of the purpose and objectives of the corporation by the Legislative Assembly, and the retention of the power-at-cost principle. We would like to address each of these briefly.
First, the board: When Ontario Hydro was a commission, there were three commissioners. This was later increased to five. The corporation started out with 13 members and increased to 17 and now it is proposed to increase it to 22 members. The Deputy Minister of Energy would be non-voting. We cannot see how increasing the size of the board will in any way benefit the electric customers in Ontario who pay all the bills.
The minister, when addressing the Legislature on 23 September 1991, said that it "will ensure a wider representation of public interests," and further, that he believed "the time has come to also appoint some of the employees of Ontario Hydro to the very board in which they are employed."
It is our opinion that 17 members should permit a sufficiently wide representation and that Ontario Hydro employees already have much influence on the board. More members are not needed, but if more representation is needed it should come from the municipal electric utilities, which are the front-line suppliers of 75% of the electric customers in Ontario.
With regard to the salaries of the chairman and other members of the board, we believe they should be established by the respective body that makes the appointment. Thus, the president's salary should be established by the board and all others by the Lieutenant Governor in Council. It is assumed that the Deputy Minister of Energy's liaison duties would be part of his duties as Deputy Minister of Energy, and that no part of his salary would be payable by the electric customers of Ontario.
The second point we would like to address is the determination of the purpose and objectives of the corporation by the Legislative Assembly. A secure, reliable electric supply is vital to the residents of Ontario. Its influence on the economy of the province demands a healthy, vibrant corporation with a confident and clear understanding of its role and purpose. Such an understanding cannot be acquired if it is ever-changing.
If the role of Ontario Hydro is understood by judiciously selected members of the board of directors appointed by the Lieutenant Governor in Council, they should be able to ensure that the corporation fulfils its mandate.
The size of Ontario Hydro as determined by any measure, annual revenue, capital investment, indebtedness, number of employees or number of retail customers, dictates that its influence on the provincial economy is far too great to permit its focus to be changed without a clear understanding of the effects of those changes. This should only be done after consideration and ultimate approval by the Legislative Assembly and not simply by a ministerial directive.
We further believe that the purposes and objectives of Ontario Hydro should be restricted to electrical energy production, supply, delivery and its wise use. It should not be required to enter into programs involving other forms of energy except on a shared-cost basis with the supplier of the other energy sources.
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The third point I would like to touch on is power at cost. Sections 2, 3, 4, 5, 6 and 7 of Bill 118 would allow policy directives to be issued by the Minister of Energy that have no direct relationship to Ontario Hydro's present mandate. This could have an adverse effect on the power-at-cost principle and mean higher costs for our customers.
We recognize that the power-at-cost principle is not limited to the costs of producing and delivering electrical energy. These costs also allow for the effective management of this resource, including aggressive conservation programs targeted at its use. As a public utilities commission we are eager to participate in this process, as every supplier of all forms of energy should be.
This proposed legislation seems to suggest that an energy substitution program will encourage, through financial incentives, electrical customers to switch to another form of energy, most likely natural gas, for their heating needs. Such a plan is completely contrary to our understanding of a founding principle of Ontario Hydro, power at cost.
Load reduction through programs such as fuel substitution may have merit and should be pursued. However, any program that involves more than one form of energy should not be funded by electrical customers alone. Certainly the energy supplier who stands to benefit from fuel substitution should be expected to pay its fair share of any financial incentives.
Our commission believes that by retaining the power-at-cost principle when pricing electricity, the actual cost of providing electrical service will be known. If the Legislative Assembly decides through legislation that costs not directly related to the cost of power, such as conservation initiatives involving multiple energy sources, should be shared by electrical retail customers, then include it as a separate tax on the bill; do not bury it in the cost of electricity.
In summary, it is the opinion of the commission of the city of Belleville, first, that the corporation's board of directors need not be increased in size and that members' salaries should be established by the body responsible for their appointment; second, that the purposes and objectives of Ontario Hydro should be established by the Legislative Assembly as set out in the Power Corporation Act, not by ministerial directive, and third, that the power-at-cost principle should be maintained with no provision to include such extraneous costs as those related to social or energy substitution programs.
Respectfully and sincerely submitted on behalf of the public utilities commission of the city of Belleville.
The Chair: Thank you, sir. We will now have time for questions. I want to explain to people that this is a standing committee of the Legislature, which means that all three caucuses, all three parties, are represented. Among the participants and members of the committee are Dalton McGuinty, who is the Energy critic for the official opposition, the Liberal Party; Leo Jordan, who is the Energy critic for the Progressive Conservative Party, and Bob Huget, NDP for Sarnia, who is also the parliamentary assistant to the Minister of Energy. Today we have Gary Wilson here in Kingston. We are so happy to be here and to have you here.
Mr G. Wilson: This is a lovely city, as you will see from the exhibition in the lobby.
Mr McGuinty: Thank you, gentlemen, for your presentation. I want to pursue this matter of the board. You have indicated that you cannot see how increasing the size of the board will be of any benefit to me as a ratepayer. I guess one of the problems with appointments to the board, if you follow that through a bit more, is that they are pretty well taken to be appointments of people who are going to toe the government line, and sometimes the government line may not be in the interests of ratepayers. Do you have any suggestions for this committee to ensure that we could provide in some way for a board of directors which would always look to the interests of ratepayers first?
Mr Barrett: One way of ensuring that the board of directors acts in the interests of all the people of Ontario is to ensure that it has a clear mandate of what its purpose is and not enable it to sway from that. I think Bill 118 gives too much leeway as far as strolling away from what the mandate of the day is.
Mr McGuinty: Who do you believe should have final say with respect to Hydro's matters of policy? Should it be the government or should it be the board?
Mr Barrett: It should be the board, but it should be within its framework.
Mr Britton: There is no question in my mind that the mandate must be established by the Legislature. The corporation is a creation of the Legislature and therefore the Legislature must assume responsibility for the mandate. The board of course should set policy within that mandate.
If I could, I would like to make one comment on your first question.
Mr McGuinty: Sure, please do.
Mr Britton: It seems to me that the only people in Ontario who are specifically elected by the people in the interests of the electric utility system, albeit their own municipalities, are the municipal electric commissioners. Members of the provincial Parliament, such as yourselves, are elected for the whole breadth of legislative responsibility, including the Power Corporation Act, and therefore you too are directly elected, but for representation on the board it seems to me the one source that should be recognized is the municipal electric commissioners. That is where I think you should be drawing.
You are now drawing someplace in the neighbourhood of 12% of the board members from the electric commissioners. You consider those who have been suggested by the Municipal Electric Association, but those elected commissioners represent and have been elected by or appointed by councils that have appointed them by 75% of the customers. I think that proportion of members on the board, and that is why we mention it in here, could well be increased.
Mr Cleary: Thank you, gentlemen, for your brief. It is always helpful when you have a brief with recommendations. I take it from your brief that you feel strongly that the power-at-cost principle should be carried on instead of straying from that. Would you care to add a bit to what you said in the brief?
Mr Barrett: We just feel that if you maintain the power-at-cost policy, the ratepayers of Ontario will have some sort of protection as to what they are going to be paying in the future. The cost of electricity will go up certainly, but if you go away from the power-at-cost principle, then the price of electricity is up to whoever is in government that particular day. There is absolutely no control over what the funds generated by ratepayers would be used for.
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Mr Arnott: My question is with respect to the determination of the purpose and objectives of the corporation by the Legislative Assembly. In my view, one of the great dangers of this bill is that, because it gives new powers to the minister, in all likelihood we may never see another amendment to the Power Corporation Act and therefore those issues will not again be debated in the Legislature. You have picked up on that point quite well I think. I am wondering if you see this bill as a deliberate attempt by the government of Ontario to usurp power from the Legislative Assembly and put it into the hands of the minister directly.
Mr Barrett: I do not know what the intent is. They might have very good intentions for what they wish to do with this leeway, but the problem is that the government in power right now is not going to be in power -- may be or may not be -- 6 or 10 years from now. What the government will do with this leeway is anybody's guess and I think it is best that it not be there.
Mr Jordan: Thank you, gentlemen, for your excellent presentation. Bill 118, along with other policies, has created an uncertainty of supply and an uncertainty of cost across the province. Would you like to comment on that relative to your city?
Mr Britton: We have never been short of power, being able to receive from Ontario Hydro the power we have needed. I would say, though, that in my contact with customers, industrial customers particularly, their prime concern is security of service and an adequate supply. While this bill does not seem to me to particularly address the demand-supply plan, with it and the provisions being made for fuel substitution and so on as means of ensuring an adequate supply of electricity, I feel we are certainly running on a very thin edge or thin ice in our forecast and for the insurance of that secure, adequate supply that industry in Ontario has needed over the last 70 years and is going to need in the future. I have serious reservations about that.
The Chair: Thank you. Mr Jordan, we have to move on, unless you are going to be very brief.
Mr Jordan: I am just going to ask if the local commission was being consulted at all on the conservation programs, or are they being blanketed across the province from Ontario Hydro. Give this as an example.
Mr Britton: Do not get me into that. My personal feeling is that a lot of that is smoke and mirrors.
The Chair: The transcript will not show what those are. Those are lightbulbs, 52-watt bulbs.
Mr Jordan: There are $7 million worth, Mr Chair.
The Chair: The fact that government members can smile about that now means that perhaps you are getting through. You wonder why the Premier reads the transcripts of these.
Mr Huget: If it is the last thing I do, I am going to get those lightbulbs out of that bag.
I have a question on the fuel substitution issue. I would like some clarification on policy and on the financial incentives for substitution. I think we could probably agree fairly safely that electric heat is more expensive than natural gas, oil, wood or solar heat. Would you agree with that?
Mr Britton: I would, certainly with respect to gas. I have not made comparisons with respect to the others. You are probably correct.
Mr Huget: If we look at that being the case, and fuel substitution being in the best interests of the consumer, how would you see financial incentives, if there were to be any? Who would you see as participating in that and how would you see that working?
Mr Britton: As we have indicated in our submission, we believe strongly in the principle of the power at cost. While one might argue that the same people, whether it be an electric customer or whether it be a provincial taxpayer, are paying the price, I think there is a difference between electric rates and taxes. If the Legislature feels that financial support should be given to encourage fuel substitution, it seems to me that it should be prepared to pay the price and collect it through taxes. That may not be popular within our industry, but I would sooner see it appear as a tax on the electric bill than buried in the cost of the bill. At least we would continue to know what it is costing us to provide electricity and, by and large, electricity has not been tax-supported over the years.
Mr Huget: Do you see a role for example, and there has been none developed, for any kind of financial incentive program for those other sources of energy? Should they be participating in this? The criticism has been, why should the electrical people pay for that? What I want is your views on who should participate in this.
Mr Britton: If we are talking about energy and you feel that the energy users should pay, then make it a tax and apply it to the energy bills of gas, oil, electricity. Ontario Hydro has a history since it introduced electric heating in the late 1950s of being the only energy supplier that really was concerned with insulating homes, the old all-electric homes. You can be critical of it or whatever, but they talked insulation. There has not been any other energy supplier that has done that, and they are not doing it now.
Ontario Hydro, a few years ago, had a residential energy advisory program. It was being paid for by the electric customers and it was applicable to gas customers and everyone else. To my way of thinking, that is not right. If we feel as a Legislature that we should support it publicly, and I am inclined to think we do have some responsibilities, it should be by taxes, and if we want to put that tax on gas, on electricity, on oil, on whatever, let's put it on. Put it up front so that people know. People are concerned that so much is hidden. The cost of electricity is known at the present time. Do not mix in with it other extraneous costs so that they do not know the price.
The Chair: Gentlemen, we thank you and the Belleville Utilities Commission for participating this afternoon. You are welcome to stay. There are a number of other commentaries to be made yet today. We very much appreciate your coming out.
PORT HOPE HYDRO COMMISSION
The Chair: The next participant is the Port Hope Hydro Commission. Please come forward and tell us who you are. I also want to welcome Mr Good from the Kingston Public Utilities Commission who has taken time out to be here today along with another Kingstonite, Vince Maloney, a long-time municipal leader. We welcome them and are grateful for their participation and attendance today.
Tell us who you are. We have your written comments. Please go ahead.
Mr Hueston: My name is Frank Hueston. I am chair of the hydro commission of the town of Port Hope, which is in Northumberland county. I am also the immediate past chair of the Municipal Electric Association. However, it is on behalf of the commission that I speak to you today. I am pleased to have the opportunity to address this august body and I thank you for accepting my petition.
You are undoubtedly aware that many of the electrical utilities of this province have grave concerns over some of the provisions of Bill 118, An Act to amend the Power Corporation Act.
The electrical utilities of Ontario are concerned that this bill is yet another intrusion on the concept of power at cost. This concept was responsible for the early industrial success in this province. In recent years, provincial governments have imposed water rental charges, the debt guarantee, the rural subsidy assistance, and the federal government added the GST. This means that about 15% of an already high utility bill is made up of tax or tax-like charges.
Hydro rates in Ontario are no longer competitive. The Tennessee Valley Authority advertises, "We have power for you at less than five cents US per kilowatt-hour." The large-user rate in Port Hope varies from 6.46 cents Canadian in the summer to 7.43 cents Canadian in the winter per kilowatt-hour. Combine this with right-to-work legislation, and the states in the TVA area have a big business advantage over Ontario.
We are also concerned about the $250-million bailout of Elliot Lake. The costs of this action are not taken into account in the 11.8% hike in the wholesale rates for 1992 and will have to be paid for in future years. I understand that this action was not taken under the proposed revisions of Bill 118, but directives like this are of grave concern to electrical utilities.
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You may also be aware that many utilities communicated with Energy minister Will Ferguson after this bill became available for perusal. As a result he issued a press release on October 2 clarifying the government's intent in some of the aspects of this bill. It is on what I understand to be the government's current position on this bill that I wish to speak to you today.
Specifically, the commission of the town of Port Hope is most concerned over the intent of government in passing this bill. We want to be clear that the intent of the government and the majority of the utilities in this province is the same.
We note that when Mrs Joan Fawcett, Liberal member for Northumberland, addressed the House on Bill 118 last October 17, she made reference to the closing of a government tree nursery in nearby Orono, and I quote:
"The government apparently consulted with the employees and told them that they had nothing to fear, that this was just a revamping to make better use of the resources available. Now their jobs could also be clear-cut. They look at the new organizational sheets and they cannot find themselves, after being told there was no fear, their jobs were secure. And they say: `Trust us. We are from the government. We know what's best for you.' I have a problem with that because I wonder what is coming next."
The utilities of Ontario want to be sure what is coming next is not trouble with the commitments we have on Bill 118.
I would like to review the provisions of Bill 118 with you and offer the sentiments of my commission.
The increase in the number of members of the board of directors is of concern. We are concerned about losing the bank executives, corporate lawyers, business people and engineers of previous boards, people with the business experience, able to offer guidance to the corporate executive. This comment is not intended that the views of ordinary citizens should not be represented, but to ensure that the board can function as it should. We are also concerned with the presence of the Deputy Minister of Energy in a non-voting capacity. It is our concern that he or she may intimidate board members. If he or she is there to communicate government directives, he or she should not be a member of the board. If he or she is there to ensure good communication with the government, then give him or her a vote.
The Municipal Electric Association represents over 70% of Ontario Hydro's customers and its members hold an equity in Hydro, in 1989 figures, of $2,476,893,603. On the basis of the debt-equity ratio of 81.7 to 18.3, this represents about 39% of real equity.
Traditionally, when the Hydro board was composed of 11 members, the MEA had two members on this board. There was a short list recommended by the association and the members were picked from it and approved by the government. With the enlarged number on the board, our commission thinks that number should be increased to four, thus retaining the balance. Furthermore, it should be included as a statutory requirement in subsection 3(1) when revised. Any group that has 39% interest in real equity of a corporation would have this type of representation in the real business world. If this government wants to convey to the business community that business is as usual, here is an opportunity to show that it is so.
With regard to subsection 9a(1), a press release by the minister dated October 2 stated, "Sections of the bill will be clarified to ensure the government's intent that any policy directives that are issued related to the corporation's exercise of its power and duties under the act do not lead to an extension of these powers and duties by means of government directives." We want to be absolutely assured that this means no additional increase in the cost of power to the retail customer. Subsection 9a(4) regarding liability seems to be contrary to the direction of other legislation being contemplated by the provincial government, and I reference the Globe and Mail editorial of May 21, 1991.
The proposed amendments in subsection 56b(3) to permit financial support for fuel substitution projects are flawed. With the direction that electrical costs are headed in this province, economics alone should look after the substitution situation. Why should electrical customers of a utility or the Ontario Hydro rural power district with no practical fuel alternative available be required to support a customer who does? The real problem is that the needs of this vast province are diverse. What is good for the greater Toronto area utilities is not necessarily good for northwestern Ontario utilities.
On January 15 Ontario Hydro announced that it is deleting any additional coal and nuclear plants from its 25-year demand-supply plan. Additional new hydraulic sites appear to be on more or less permanent hold due to environmental reasons. It would appear that any additional supply must come from natural gas. Can we be assured that the price and availability of natural gas will remain stable over this period of time? I have a great concern that the real change in this plan is the focus on future planning. It has moved from the upper probable to the median. This means that, statistically, future needs planning will underestimate the real need by 50% of the time instead of 10% of the time.
Perhaps the time has come for the government to consider the establishment of a provincial natural gas utility. This would provide a more level playing field. After all, there are 312 local electrical utilities already in place to manage local distribution. I point out to you that these hearings are being held today in a city where the local public utilities commission is responsible for natural gas distribution. That proves it can work.
This concludes the formal portion of my presentation. I thank you again for the opportunity to speak to you today on this most important piece of proposed legislation. I shall be pleased to answer any questions the committee may have to the best of my ability.
Mr Jordan: Thank you, sir, for your excellent presentation. It would seem that the main thrust of Bill 118 is to find other ways of supplying the electricity needs in the province -- I mean other ways than nuclear generation, whether it be by natural gas or by conservation. This is creating an industry, a very restless uncertainty of supply and an uncertainty of cost. Do you have a problem, coming from Port Hope, with the ongoing development of the technology of nuclear as a base for generation in Ontario?
Mr Hueston: I think we are in a situation where we have to keep all the options open. Frankly, I am an engineer by background but I have not personally got a good hold on where this atmospheric warming thing is going. How serious is it? If it is very serious then nuclear may be your option by elimination because it is the only massive way of generating electricity without CO2.
I think the options have to become open. With Ontario Hydro's proposed change in focus here, what is going to happen is, anything that is long-term, that has a large front time ahead of it is going to be eliminated, because the need will be there before the facility could be developed or built.
Mr Arnott: Thank you for your presentation. I am holding in my hand the Update 1992 that the chairman of Hydro put forward. You mention it in your presentation. One of the most important points it makes is the new demand management proposals. Instead of 5,570 megawatts, as was in the original demand-supply plan, now the chairman is talking about saving 9,860 megawatts by the year 2014. What would you make of those forecasts?
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Mr Hueston: I had the opportunity to hear the vice-president of environment of Ontario Hydro speak in Toronto last week, and he is the first person to admit that it is a very aggressive program. You tie that with this focus now that they have dropped down to the median. In other words, if you look at the charts in there, you will see that the farther out you get, the wider the uncertainty of the requirements in Ontario.
In the 1989 presentation they followed the upper median. There is not a big spread in this -- it was about 0.3% -- but if you move that thing out about 20 years it becomes a very significant block of power. They have dropped from that down to the median. Frankly, that is the only change that has occurred from 1989 to 1992. They have dropped out the need for that 10% to 50% uncertainty and that says, "If we drop that out we don't need anything new." If you put it back in and you actually look at the numbers, the upper median for 1992 is a little higher than what it was for 1989.
Mr G. Wilson: Welcome to Kingston, Mr Hueston. I am certainly pleased that you made reference to the importance of natural gas in providing energy and singled out Kingston as being the only public utilities commission that has both under its control.
I did want to mention another thing. You talk about how our government is suggesting that it is going to be business as usual. I think that is part of the reason for the thrust behind this, the changes to Bill 118: to suggest that we have to do things in a different way. One of those different ways is a focus on conservation. You have not mentioned a lot about conservation in your brief. I was just wondering what your thoughts are in that regard, what a utility can do to promote conservation specifically, but perhaps more generally, what scope there is for realizing gains in that way.
Mr Hueston: In the lighter vein, not with 52-watt lightbulbs. There is as good a chance that somebody will screw out a 40-watt bulb and put the 52-watt bulb in as that he will screw out a 60-watt bulb and put the 52-watt bulb in. That is not the way to go. I fully believe that conservation is the cheapest way to look after a power system, and I can tell you that in my own house I have 14 compact fluorescent bulbs. I also have a number of quartz halogen bulbs which are not readily available up here. I bought mine in cross-border shops. You can get them through a wholesale house here for $9.50, but I can buy them in the supermarkets in the United States for $2.99. I am talking Canadian money and US money here but there is still a significant difference.
The Chair: You are also talking about the tolls on the bridge and the gas and the lineups and the fact that it is far more effective to buy them in your home town. I knew that is what you meant.
Mr Hueston: Yes, yes. It is better to pick them up when you are coming home with your car after having spent a couple of weeks in Florida. That is an approach for a reading light. The quartz halogen bulb puts out a much purer light and is about 30% more efficient than an ordinary incandescent bulb. Seventy-two watts of a quartz halogen bulb will give the equivalent of 130 watts of incandescent power on a lumen basis.
Mr G. Wilson: At one of the submissions to this committee in Toronto the point was made that as expensive and maybe as ineffective as this program Mr Jordan keeps referring to was, there was still a very good advertising campaign. It drew to a lot of people's attention the fact that conservation is important. Now Mr Jordan himself is trying almost singlehandedly to keep this program going, and we are very grateful for that. But what I want to focus on is just what we can do or what scope is there for promoting conservation.
Mr Hueston: I know in Port Hope we sent out questionnaires to all our customers. We are not a big utility; we have about 4,700 customers, I believe, but the cards are coming back. We put out a whole list of things: What do you want to know about? One of the things was cost of power and conservation, all that sort of thing. We are planning to run a series of four evening seminars for our people to answer their questions. Certainly, as I said before, if we could teach our teenagers that there is an off section to an on switch, I think that would be a good conservation job too.
Mr McGuinty: One of the things Hydro is telling us it is going to be doing through its new update is extending the life of the fossil-fuel-fired plants which, up until 1989 in any event -- well, up until a few weeks ago it was telling us they had only a 40-year lifespan and now we are going to extend that life through some kind of work to be done on the plants, and as a result of course we are going to be prolonging the period of time in which these plants will be producing some of the byproducts resulting from generation which are harmful to the environment.
It is also my understanding that in the past year Hydro has had difficulties meeting its targets with respect to acid gas emissions. As a result it has had to purchase hydro from the United States. I think it is reasonable to expect that in years to come those targets may become more stringent and, furthermore, we may even have carbon dioxide restrictions. There are none at present.
I wonder if you can comment, first, on the advisability of extending the lifetime of these fossil fuel generating plants and, second, on what kind of problems we are going to encounter in terms of meeting those emission controls.
Mr Hueston: It is my understanding that the length of the fossil fuel plants has been extended not on the basis of decrepit plants; it has been extended on the basis that they are going to introduce flue technology and what not that will cut down the emissions. That in itself presents another problem, because if you go back to your grade 12 chemistry you can calculate that if you want to knock one tonne of SOx out of the air, you are going to end up with five tonnes of wet gypsum and you are going to find that a problem to deal with.
Ontario Hydro -- and I question Hydro relentlessly about this -- does not have any answers. They say they are going to store this gypsum onsite, but if you think spent nuclear fuel storage onsite is a problem, this is a massive problem just in square feet or square metres, or whatever you are talking about.
The second thing I would like to say is, buying power in the United States is a copout, because it is probably generated with coal and we are getting the SOx whether they buy it across the border or whether we generate it here.
Mr McGuinty: Absolutely.
Mr Hueston: To be perfectly honest with you, if we are in a situation like that, I would rather see us exceed our own limits than to bureaucratically give it away by paying the US to generate it for us. I do not know; that may be difficult.
The other problem, of course, is that the non-utility generating stations that are going to produce NOx and SOx are not included in Ontario Hydro's allotment, but the stuff is going to be the same whether it comes up a non-utility stack or a utility stack. So that is ludicrous too.
The Chair: Mr Hueston, I feel badly stopping you on that note, but the fact remains that our time is up. I want to thank you on behalf of the whole committee for your interest, your time and your candid responses to the questions that have been put to you. I trust you will keep in touch.
You should know, along with others here, that a transcript of today's proceedings is available to you, as are transcripts of all the hearings and presentations made during the course of this committee. Let your local MPP's office know and she or he will be pleased, I am sure, to get those to you at no charge. I welcome your requests and invite people who are interested to request the sets of transcripts. Thank you, sir.
Mr Hueston: Thank you very much, Mr Kormos and the rest of the committee.
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RENEWABLE ENERGY
The Chair: The next presenter is Renewable Energy. Please seat yourself and tell us who you are.
Mr Gobeil: Good afternoon. My name is Charles Gobeil. I am the operator of a small solar energy business here in eastern Ontario. I feel that the proposed legislation affects the direct operations of the business I am involved in, and I have some comments as to how I see it affecting the solar industry in eastern Ontario. I regret not having copies of my presentation for you; my typing system was slow.
Members of the committee, I have chosen to address you today to voice my support in favour of Bill 118, An Act to amend the Power Corporation Act. I believe these amendments will make it possible for Ontario Hydro to be transformed from an energy-delivery corporation to an energy-service corporation. Furthermore, the proposed changes will finally make the utility accountable to the Minister of Energy and ultimately to the people of Ontario. This is a public utility. As such, the services it offers should be in the best long-term interests of the citizens of the province and the natural environment which sustains all people.
Having said this, I will convey to you my feelings and vision as a small business person involved in marketing solar energy systems in eastern Ontario. Suffice it to say that since the mid-1980s, when the federal government offered home owners substantial financial incentives to install solar water heaters, the demand for systems has been low. Consequently, several manufacturers voluntarily closed their doors or went into receivership as the unsubsidized system prices proved too high when compared to unrealistically low electricity prices.
This experience was, however, critical to the maturing of the solar water-heating industry in Canada. The surviving businesses became more efficient, constantly refining their manufacturing methods while improving performance. The result has been a dramatic reduction in system costs. During this same period of readjustment, electricity prices in Ontario, as elsewhere, have continued to climb, although not enough to reflect the true cost of production. We now face large price hikes to account for these miscalculations.
The questions now are: Should Ontario Hydro be encouraging solar water heating? Would this be of benefit to the utility, the people of Ontario and the environment? I suggest to you the answer to these questions is a resounding yes.
Ontario Hydro, like most other public and private utilities, has recently begun to question the fiscal soundness of capital-intensive megaprojects. Such projects are no longer seen as the panacea to electricity supply, given their inflationary nature and the emerging costs of premature repairs to existing facilities. For these same reasons and a growing concern for the environment, the people of Ontario expect a more cautious and diversified approach from their utility. Ontario Hydro's recent initiatives in the area of conservation are a starting point for what must become a truly exemplary campaign that will facilitate our becoming world-class conservers.
Solar water heating can greatly reduce the electric energy now used for this purpose and reliably reduce peak loads, thereby reducing the need for new generating capacity. A recently released report commissioned by Energy, Mines and Resources Canada entitled The Potential for Peak Load Reduction Through the Use of Solar-Assisted Domestic Hot Water Systems thoroughly examined the opportunities that exist here in Ontario. Given the relevance of the study, I have chosen to explain the work undertaking and findings in some detail, so please bear with me. The objectives were:
1. To design solar-assisted domestic hot water systems, specifically geared to peak reduction.
2. To evaluate the effects of each system on local utility, in this case Ontario Hydro, peak loads, load factors, energy consumption levels and customer satisfaction.
3. To assist each system's potential for a range of geographic locations and penetration levels.
The database: The study utilized climatic data for Toronto in 1988, obtained from the atmospheric environment service of Environment Canada. This was determined to be a typical meteorological year. Hourly utility load data for 1988 were obtained from Ontario Hydro.
A residential hot water usage profile was determined, based on the average of all houses monitored in a study by Ontario Hydro. This profile assigned both hour-by-hour draw volumes and daily totals of hot water use. Given the need to ensure reliability year-round from a customer satisfaction perspective, simulations were conducted, assuming approximately double the average daily use, that is, 450 litres. Most houses were found to use in the neighbourhood of 240 litres of hot water a day.
This additional test was done in accordance with delivery recovery tests specified with the Canadian Electrical Association Inc. Based on the average usage profile, an assumed water delivery temperature of 55 degrees Celsius made it possible to calculate the water heater load for a single family. The single family load was then multiplied by the total number of electric water heaters in Ontario, 1,136,000, to establish the total load in gigawatt-hours per year for electric water heating.
Then a variety of system designs were investigated, based on two commercially available Canadian solar systems. A conventional all-electric water heater with advanced control options utilizing off-peak charging was also compared. The variables examined in these comparisons included increased thermal storage and collector area, off-peak charging, increasing the storage temperatures of the solar water heater and the use of programmable thermostats.
The results for an advanced system design, utilizing two collectors, a programmable thermostat and a single one and a half kilowatt auxiliary element were very impressive. This advanced design showed the potential of energy reductions of 3,536 kilowatt-hours and 4,191 kilowatt-hours, depending on the type of solar collector used. There was a flat plate collector used in one situation and an evacuated tube design in another.
These values represent approximately 60% of the heating load, so this is a very significant reduction in the amount of electrical energy required to heat water. These energy savings per system were then used to predict the annual energy reductions for Ontario, based on a 20% market penetration of the above solar water heater designs. These totals were 803 gigawatt-hours and 952 gigawatt-hours for the two types of collectors. This is 803,000,000 and 952,000,000 kilowatt-hours of electrical energy saved in Ontario a year.
The results for the same advanced solar system demonstrated also the potential for reducing Ontario Hydro's capacity requirements. The peak power displacement potential per system was determined to be 942 watts at the generating station. Again, assuming a 20% market penetration for these solar systems, this translates into peak capacity reductions in excess of 214 megawatts.
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It is important to emphasize that the above energy savings and peak capacity reductions were not found to adversely affect the ability to deliver hot water to the user, even under the heavy-use scenario.
The economic value: It is clear that energy savings for consumers also represent dollar savings. This is also true for Ontario Hydro, given the costs associated with power generation. The term "avoided costs" is defined as the supply costs, which are avoided when any demand-supply option is substituted for an equivalent part of a demand-supply plan. An alternative option is generally seen to be justifiable if it is less expensive than the plan.
There are numerous ways to calculate this avoided cost. The study I am referring to has utilized incremental cost method to assign a value to the solar option described. This avoided cost calculation accounts for both the energy savings component by including factors such as fuelling, operation, maintenance and administration costs for a conventional generating facility, and the cost of emission controls. The power component value assigned reflects the cost of new capacity to meet the increase.
Based on a system life of 15 years for the solar water-heating system, the avoided costs were determined to be, to Ontario Hydro, $2,523 and $2,733 for the two types of solar collectors used.
In conclusion, the opportunity exists here in Ontario for us to implement Canadian solar systems which can save over half the energy we now use for electric water heating. Furthermore, the use of this technology will reliably reduce Ontario Hydro's peak loads without affecting the quality of service for its customers. Is this not in the best interests of Ontario residents? Should pursuing such options not be the new mandate of our utility? I say, yes, let's allow Ontario Hydro to truly serve the people of Ontario.
As a contractor with direct experience with sales and installations of solar water heaters, I will offer you my projections regarding the potential for direct and lasting job creation in this field. In Ontario, as I mentioned, there are currently 1,136,000 electric water heaters in use. The study referred to assumed a 20% market penetration, which I will also assume. This would mean the sale and installation of some 227,200 solar water heaters in Ontario. If we assume this work were done by two-person crews, each crew could install approximately 130 to 135 systems a year. A small contracting business would probably work with three two-person crews installing some 400 systems a year.
This scenario could be repeated a hundred times across the province, creating 700 jobs for six to eight years. This is how many person-years of work are involved in installing 227,000 solar water heaters.
If one adds to this scenario some commercial industrial solar installations, which would surely follow in the wake of such a residential program, an additional crew for these installations would be required in many locations. This would boost, in my estimation, the impact of a concerted solar program to creating close to 1,000 jobs here in Ontario.
I believe in today's economic climate that we would all view this as an important job creation contribution. I am also convinced that such an effort would sensitize Ontario residents to the conservation ethic, thereby facilitating the introduction of other energy conservation technologies waiting to be implemented on a much wider scale: movable window insulation systems, solar pool heaters, solar sun spaces, photovoltaics and many more technologies.
The watershed of economic activity associated with a well-supported energy conservation effort is not to be underestimated. I have not attempted to assess the impact resulting from the primary and secondary manufacturing involved in the solar scenario. It is clear that the need to deliver approximately 250,000 solar water heaters to market would generate additional economic benefits to Ontario and other regions of the country.
Let me stress again that the jobs created by conservation are lasting and decentralized. These are not boom-and-bust jobs, but rather community-based jobs providing products and services to people all over the province, making us all more energy-conscious and environmentally responsible. Is this not a desirable goal for our public utility to support?
In my opinion, Ontario Hydro has an important role to play in the promoting and supporting of the conservation movement. Ontario Hydro has the capability of regularly reaching all of us with the conservation news. Our utility has an advertising budget dedicated to selling us the conservation message. Ontario Hydro has the reputation and credibility to make conservation a reality. It also has the responsibility to do so. It has the technical expertise to assist in the development and testing of technologies.
Ontario Hydro also has the financial incentive and capability of facilitating the purchase of solar water heaters or other energy-conserving technologies by home owners or industry and has in fact begun to do so, although for a limited range of products.
I would like to add a couple of comments on the issue of financing. There are real avoided costs to our utility in pursuing any given conservation measure, as previously shown in the case of solar water heating. Consequently, Ontario Hydro should be free to initiate any number of financial incentive plans which will facilitate this measure, given the costs are comparable. This does not constitute a subsidy but rather a wiser use of funds.
The implementation of a financing program which would allow home owners to repay the cost of installing solar water heaters, for example, from energy credits accumulated is one such type of financing option.
In closing, let me reaffirm my support for Bill 118. I urge you all to embrace the vision of a new Ontario Hydro dedicated to energy conservation and the appropriate use of all forms of energy, responsive to the people of Ontario and sensitive to our environment.
Mr Huget: Thank you for your presentation. Just very briefly, of course the energy and fuel substitution issue is not restricted to gas. There are many other sources we should be looking at, and solar is obviously one of them. What I would like some clarification from you on is how far have we come with that technology. I think there is a perception that solar is a good idea in Phoenix, Arizona, and somewhere in Nevada, but how far have we come with the technology and how practical are its applications?
Mr Gobeil: It is here today, sir. I have sold and installed, although I did not install all of them, in excess of 50 systems in this area, all of which are working, winter and summer, to the full satisfaction of the home owners. The information included in this report is based on actual data collected from system monitoring and extrapolated upon by including some programmable thermostats and various other design modifications.
This is not a pie-in-the-sky technology that has not been proven. There is a company here in Ontario actively fabricating, although not selling as much as it would like to. Another plant in Nova Scotia, currently operating at only 10 per cent capacity, exports technology all over the world and is selling quite actively in the Maritimes. There is another in Montreal. In short, this is proven technology. We have a world-class solar lab here at Queen's University which is constantly monitoring equipment and assisting companies in improving the performance.
Mr McGuinty: Thank you, Mr Gobeil, for your presentation. The natural gas people have been telling us that people who are heating their homes with electricity are switching to natural gas at an ever-increasing rate simply because it is cheaper to heat with natural gas. Can you comment, first of all, on how many people are switching to solar for purposes of heating water? Also, if I were switching from electric space heating to gas, why would I not switch to gas-fired water heating at the same time? For instance, I do not know if you have the same deal around here, but in Ottawa, if I switch to gas to heat my house, not only do they delay payment for my furnace for four months, but they will give me a water heater for 12 months without payment. From a ratepayer's perspective, I am not sure if I can beat that by going the other route of solar power. Can you comment on those things for me, please?
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Mr Gobeil: On the issue of gas, there is no question that home owners will choose, in most cases, the less expensive option unless they are planning to stay in their home for a given period of time. I think if you look at the long-term system cost of a solar system versus a gas water heater over the life of the system, it is still less expensive to install a solar water heater, but people very often do not take the long-term view if they are considering changing location and moving from their homes.
To answer the first part of the question, not very many people are converting to solar water heaters at this time. This merging of the lowering prices of the systems and the increasing costs of electricity rates is just all happening now. The paybacks without incentives are somewhere in the neighbourhood of probably six or seven years.
The only disadvantage is that it requires individuals to go and obtain bank financing or some other form of financing, which they are reluctant to do, and what appears to them to be a longer-term payback. If it were possible for them to pay for the cost of this technology through their energy savings, then this would be obviously much more attractive to them.
As I mentioned, it is in the interest of our utility to view this as an avoided cost to them and in some way facilitate that. It does not have to be in the way of an outright grant but just to facilitate that sort of capital purchase. I am sure that then, with the support of Ontario Hydro, the industry would explode.
Mr McGuinty: What are the capital costs for one household?
Mr Gobeil: There are systems now available where the system itself costs in the neighbourhood of $1,500, and that is probably about a $2,000 installed cost.
Mr Jordan: Thank you, sir, for your presentation. I am especially interested in your wanting to support and promote small business as you attempted to do. Rather than Ontario Hydro, would it not be more in line for the Ministry of Energy, in conjunction with the Ministry of Industry, Trade and Technology, to be supportive of your small business venture? It does not seem to me --
Mr Gobeil: No, I do not think so. We are talking about the solar industry as being a supplier of electricity essentially. We are really identifying this conservation measure as an alternative form of supply. Ontario Hydro is continuously looking at forms of supply and choosing one over the other. When we can conserve or supply energy in that way, then it certainly is within Ontario Hydro's mandate to consider that as a supply option and to determine the value to the utility of that option. It really is not any different from building a generating facility. If you can conserve the energy and thereby supply it to the people of Ontario, it is essentially the same process. I think that is what Ontario Hydro should do.
Mr Jordan: But did I hear you right when you added up the $3,500 for the installation?
Mr Gobeil: No, $1,500 for the system, which is approximately a $2,000 installed cost.
Mr Jordan: I am sorry. It is $2,000 total installed as against $100 for a conventional water heater, whether it is electric or gas. What I am coming at is that surely you have more work to do, more research to do to get this so the initial cost is more competitive. I know there is a return out there, but that return is a difficult thing to sell, because as you mentioned, people are moving, they are not going to be in that house, so why should they add the capital cost to it?
Mr Gobeil: My point is that it is in Ontario Hydro's interest to consider this as a supply option and determine if this is an attractive way for it to be providing us with power, and it is.
Mr Jordan: I think Ontario Hydro has over the past year, through its research division and in conjunction with Queen's University, done a lot of research on the solar.
Mr Gobeil: This particular study I have was presented to them only this August. I am hoping this work, which is geared specifically to utility use of this technology, will surface, possibly with the assistance of some of the people here.
Mr Jordan: I just have trouble with moving on to a cash-incentive type of thing rather than assisting you as they have been in the past, as Queen's has been doing. The National Research Council also has been studying it. The Ministry of Natural Resources has several installations it is measuring. There is a lot of money being spent on it at the present time.
Mr Gobeil: That is right. It is ready to be commercialized. I am not suggesting an outright cash incentive or subsidy. I am suggesting that Ontario Hydro needs to look at this as a means of generating power and that it is economical for it to view it in that light and not necessarily give away large sums of money to make it happen.
The Chair: Sir, we thank you. We appreciate your participation today and trust you will be keeping in touch with us.
Mr Gobeil: Yes, thanks very much.
The Chair: I hope your local member, maybe even Mr Wilson, will ensure you get a transcript.
ACTION FOR SOCIAL CHANGE
The Chair: The next presentation is from Action for Social Change. Sir, tell us who you are and a little about Action for Social Change. Tell us what you will.
Mr Dundas: My name is Peter Dundas. I work with what I guess would be best described as a grass-roots political lobbying organization called Action for Social Change. When I say "lobbying," I mean that in almost a joking sense. With regard to the purposes of this committee, we have attempted over the last 15 years to bring pressure to bear on both the government and the public utility of this province to enlighten themselves as to the options that were open in Ontario for power generation and conservation. It is with that background in mind that I am here.
I do not also have a written presentation. I am just going to make a very few comments. If there are any questions, I would be happy to answer them.
There is a slogan that has been in use for some years among the people I work with and others like us around the province and around the world: "If the people lead, then surely the leaders will follow." That has been one of the bases of the kind of work we have been doing, particularly since 1978, on issues involving Ontario Hydro and the production of electricity in Ontario.
A former Minister of Energy, who was of course a Conservative at that time, in a public meeting in 1978 referred to us and members of our group who were questioning the route that Ontario Hydro was following at that time in terms of its massive megaproject approach to the development of electricity as Jeremiahs. The biblical reference to Jeremiah was that he was a prophet of doom. We, in our opposition to Ontario Hydro, were prophets of doom. In that same year we were referred to by the chief of nuclear engineering of Ontario Hydro as a bunch of Luddites when we opposed the proposition that Ontario Hydro was involved in at that time, trying to bribe the people of Prescott into the acceptance of a new nuclear site in their backyard.
What goes around comes around, in a way. Here we are 15 years later talking to an auspicious group of individuals from the Legislature about the possibility of some fairly significant changes in policy of electrical generation in this province.
After that little introduction, there are a few comments I would like to make about the proposed legislation and questions I have about things that are or are not in it, as I see it in a cursory kind of examination. If some of these things are off the mark, I would be pleased to be advised of that.
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There are a few things that we have been talking about, as I say, for 15 years or so in terms of energy policy and that should be law, and if they are not law, they should be accepted as just the way things are done in the province. One of these is the right to sun and right-to-sun legislation, the idea that when new residential subdivisions are built, houses should be oriented in such a way that they can catch the sun. This is sort of referring back in part to Charles Gobeil's previous presentation.
The ability or the viability of solar technologies is upon us in terms of solar hot water heating and will be upon us in a financially acceptable way in the form of photovoltaic development within a few years. So the idea of continuing to build residential subdivisions in this totally haphazard, stupid way that we continue to do it is no longer acceptable. Building tall buildings that block the sunlight from older residential areas that could in fact retrofit themselves to solar applications is no longer acceptable. Those kinds of things should be written into this legislation.
I have seen no mention at this point of Ontario Hydro's inverse rate structure whereby people who use more electricity get it for less cost than those who conserve. I am not quite sure why that is not included in the legislation. It is something we have been advocating for many years and there does not really seem to be any argument that can be mounted against it except for the possible one that it is a disincentive to big business to consume and as a result, in an economic situation like the one we find ourselves in today, would perhaps be deemed to be a recessionary kind of policy. But everybody seems to be labouring under this idea that we are in fact going to bounce back from the current economic situation, and surely if we are going to talk about significant conservation, the idea of revising Ontario Hydro's rate structure has to be paramount in terms of any realistic approach to this.
We talk about the financial side of a lot of these ideas. I was just talking to one of my colleagues behind us a minute ago about the idea that Ontario Hydro spent so much money and put forward so many arguments for people switching over to electricity and building their houses in this all-electric fashion in the 1970s and early 1980s, that Hydro and the government of this province, because the government of this province has in fact had the capability of guiding Ontario Hydro for some time, have a moral obligation to, I would say without even the delay of the length of time these committee hearings are taking and that the legislation will take to be put through, start working on this right away and to come up with a switchover program.
With regard to that switchover program, I do not think we can look at it as being simply the option between natural gas, high-efficiency oil and electricity. We have to start looking at renewable energy alternatives. As long as we continue to think in outmoded thought processes, we are going to get outmoded technologies. We heard from the Premier of this province last week that we are in this kind of threshold situation, that we are in a significantly troubled situation.
Chuck a moment ago talked about the job creation potential for solar hot water heating programs. But the job-creating potential for all energy conservation -- and I am sure you have heard this and you will be hearing it constantly throughout the process of these hearings -- is astronomical. It could just be the way of moving Ontario out of the economic doldrums that we find ourselves in and moving the province in a direction that would be desirable and in a direction that would get people back to work and working, as we were saying, in community-based, decentralized industries that would provide real long-term environmentally benign employment.
A job creation thing is something that I do not think can be stressed enough. There have been so many studies done, studies that were presented to the Porter commission hearings back in the 1970s. Yes, the Porter commission -- right. It actually happened, and there were some recommendations that came out of those hearings that were right in the 1970s and they are even righter in the 1990s.
Why is it that we have to go through this kind of process to bring Ontario Hydro to heel or to change energy policies in this province? When the government can do things like pass a budget that involves the expenditure of hundreds of billions of dollars for this province, that essentially goes through the House and gets a vote at one point or another either in whole or divided into parts, why do we have to pacify organizations like the Municipal Electric Association and Ontario Hydro by going through this sort of process when many of us see the answers that are required as being so self-evident? The answers are there. They have been there for two decades, and yet we are going through this process that is superfluous. Let's get down to it, folks. The answers, as I said, are there. Let's implement them and get on with the job.
Mr McGuinty: Mr Dundas, I have really enjoyed your presentation. I am not sure I am quite prepared to embrace this Bill 118 to the same degree that you appear to be. One of the concerns I have is to ensure that ratepayers' interests are placed first and foremost. I believe the average ratepayer is concerned about costs and, not unlike everyone else today, is concerned about things that harm the environment. There is a tremendous amount of goodwill there to ensure that we put into place measures that will effectively curtail harm being caused to the environment.
But I am also suspicious of politicians, as a ratepayer. I am suspicious of governments. Yet it may be today, Mr Dundas, that you agree with what this government happens to be doing. We are going to give governments -- not just this government, all governments -- power from here on in apparently to deal with Ontario Hydro. It may be that in years to come another government, with a different policy, does something different which is going to cause harm to me, a ratepayer. I am wondering if we should be embracing this without reservation in the manner you appear to suggest.
Mr Dundas: I probably should clarify that in some respects. First of all, I think there are many shortcomings to this legislation. If we wanted to get into an analysis of the way parliamentary democracy operates and has operated for the last couple of hundred years, and more specifically of the way it operates in Ontario and has operated here for the last four or five decades, I think that would be an interesting discussion and probably a better reason for around-the-province hearings than minor changes to the Energy Act in the province.
I think you are right, of course. My scepticism about the whole accountability aspect of this legislation is based on that. First, I do not think we are talking about enough accountability, and I am not sure it is real accountability in a sense. I maintain that Ontario Hydro has been in a position where it could be influenced or directed by ministers of Energy for some time anyway and that we are not really going that much further with what we are talking about.
Mr McGuinty: That is a good point.
Mr Jordan: Thank you, Mr Dundas. Just to follow up on my colleague's question, I believe you mentioned that we cannot any longer allow subdivisions to be planned and houses set in the manner that has been going on in the past and that this should be written into legislation. Would you like to enlarge on that?
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Mr Dundas: Yes. I am not exactly up to date on my right-to-sun legislation. It was several years ago when I was working more directly in this field. But I know that a number of municipal jurisdictions, particularly in the United States, have right-to-sun legislation where houses that are built have to be oriented in such a way as to obtain maximum what we term "passive solar gain," and that other buildings cannot be built in such a way that they detract from or block sun.
That in fact has been a case in point along this very coastline or waterfront that we are on right now where there have been complaints about the bigger buildings along here and ones that were planned for the piece of land immediately to the east of us here, or west. One of the reasons they were opposed was that they would block off the sun from older houses along the streets just to the north, but there is no legislation to that effect in Kingston, for instance. I think it should be there.
I refer back to Charles's comments on the viability of solar hot water heating technology which is there. That must not be blocked off, so that anybody who wants to install a solar hot water heater 10 years down the road will not be penalized by the fact that they have a 25-storey high-rise apartment building sitting in front of them that was built within the last four or five years. Right-to-sun legislation, as it is written in many American states and many American municipalities, I think is an absolute necessary in Ontario.
Mr Huget: The Ministry of Energy works with municipalities in terms of designing new subdivisions and the placement of houses and the placement of those subdivisions to capitalize on that issue, but I guess what you are saying is conservation is not limited to fuel switching. There are some big picture things we need to look at. I have listened with interest to what you have said here. Do you have any other suggestions in terms of what we can do around the conservation issue?
Mr Dundas: The sort of wholesale energy auditing of housing across the province and retrofitting of the existing housing stock would -- I know you are asking me so this could be on the record, but it almost seems facile in a way, because these are things that seem so blatantly obvious. Why are we even talking about them?
I know Hydro now is giving a rebate program to people to install better quality windows in housing. We did retrofitting of houses in the Brockville-Prescott area in 1977-78 and went around and told people how to insulate their refrigerators so that they would get better power usage, better efficiency out of a household refrigerator by making a styrofoam box for their refrigerator, which may seem silly in one sense, and yet your refrigerator is the one appliance in the house that uses the most electricity on a year-by-year basis.
You can cut that usage down by a very significant amount by some very low cost retrofitting schemes, and those kinds of things built into the existing housing stock would provide countless thousands of jobs and would free up energy, the old conservation freeing up of energy that is clean, that is cheap, and that in some significant way puts the power back into the hands of the home owners, of the consumers.
They can make some of the choices that are there and just feel they have some of the power, which is one of the problems with Ontario Hydro. Its immensity and the way it has dominated the energy picture in Ontario for so many years has completely taken away the idea of energy independence from the individual in this province, and that is a significant kind of psychological barrier we have to overcome and get back into the minds of the people of Ontario.
The Chair: Mr Dundas, thank you for your participation this afternoon. I trust you will be keeping in touch.
KINGSTON PUBLIC UTILITIES COMMISSION
The Chair: The next participant is the Kingston Public Utilities Commission. We welcomed Mr Good. We should also welcome Marion McKenna, who is the vice-chair of the public utilities commission. I do not know if she is going to come up here and sit down with you.
Ms McKenna: I am fine, thank you.
The Chair: Come up here and sit down. We may have questions of you.
Ms McKenna: I may not know the answers.
Mr Good: Thank you, Mr Chairman. We were informed on December 11 that we would make a presentation today and then we found out later that we would not, but now it is back on again. Mr Gord Jarvis is our general manager, and very knowledgeable on the subject.
The Chair: That, sir, will confirm what a whole lot of people have thought about government for a long time, but we are glad that we finally got you here.
Mr Good: Good, and I am glad we are here, and I am glad the general manager is here, because he has a lot of knowledge on the subject we are speaking of today. It will be an oral presentation, but if you wish, for you and yours, I am sure he would see that you get a written presentation at a later date. Without further ado, Mr Gord Jarvis, our manager of the Kingston Public Utilities Commission.
Mr Jarvis: I apologize for my lack of preparedness as a result of having walked in the door. What I would like to do is take a few moments to make the committee aware of an opportunity Kingston provides to the province.
As has already been mentioned, Kingston is the only jurisdiction that has a gas utility and an electric utility under the same roof. As a result, in looking at Bill 118, we see pros and cons. We have similar concerns to our electrical partners with regard to the uncertainty the bill brings forward, and at the same time it appears to offer opportunities on the gas side.
When I listen to the proceedings and as I follow this whole issue or watch this whole issue unravel, I see that the concerns in most cases are associated with a level of uncertainty. We are uncertain as to what these changes will mean, and therefore those who oppose the bill are opposed because we do not know what may happen, and the devil we know is often easier to deal with than the devil we do not.
What Kingston did is that we approached Ontario Hydro with the offer that we would use Kingston as a test, to bring gas, Hydro and government together on neutral ground and try to not only confirm some of the impacts many of us believe will happen, but at the same time identify what other impacts are associated with a major fuel-switching program on a community level. I think we would all agree that it is time integrated resource planning becomes a part of life, and where I believe we can have the greatest impact in integrated resource planning is at the municipal level.
We therefore as Kingston offer ourselves, the two utilities, as an opportunity to test the impact of significant fuel switching. We believe that those who are opposed to the bill and the ramifications of fuel switching would then either have the data they need to support their opinions or vice versa, and at the same time we would have an opportunity, as would the government and the gas users and electricity users, to identify impacts we are not currently aware of when you start looking at significant fuel switching at a municipal level.
That is the basis of my presentation. I would entertain any questions.
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Mr Jordan: Thank you, sir, for your interesting introduction to your understanding of the bill and its effect on your commission. I am particularly interested in that you do have the only utilities in the province, I believe, that manage both gas and electric. How long ago was it that you amalgamated the two?
Mr Jarvis: The two have been together I believe for 77 years.
Mr Jordan: Really. Could you list three major advantages of that?
Mr Jarvis: One of the major advantages I see is that as an organization, like most public utilities, we believe we are there to serve the community. I have worked in the past for solely electric utilities, and the difficulty in working in that environment is that you are charged, for instance, as a general manager, to do the best you can with regard to electricity, the organization you have been charged with serving. The organization I now work for has both the electric and gas, and we are therefore in the enviable position of being able to make a decision with regard to gas or electricity and recommend to our customer either/or, depending on the potential benefit to not only him but the community. Our hands are not tied like a solely electric utility. They see that if they are serving their customers, then potentially allowing gas utilities to come in and erode their revenue base, is that truly what is best for the community and the customer, when they know themselves it certainly is not what is best for the organization, and how do you rationalize those kinds of things as a management group? We do not have to do that.
Mr Jordan: Could you go that other step? How do I rationalize not only managing the electrical utility? How am I not only going to rationalize the shift of my energy to another market, but also going to subsidize that shift?
Mr Jarvis: I think the only correct way to rationalize it is that in that position, you are there to serve the community. I think one of the things we often forget in utilities is that we are not only there to serve the user, we are there to serve the community. Although in electricity it is often the same -- the taxpayer in Ontario and the electric customer are basically the same; the taxpayer and the electrical customer in this city are basically the same -- there are some differences. We are there to serve the public, and therefore we need to know and we need to have the right information to bring ourselves to that rationale.
If I am solely running an electric utility and the only impacts I can see are impacts that are negative for the electric utility, how then can I make a recommendation to my community to do other than what we have done in the past? However, if you can show me the way, show me the light and show me that there are for sure positive impacts on this community, how then can I say it is a bad thing? I cannot.
The Chair: Mr Huget.
Mr Huget: I will defer to Mr Wilson.
Mr G. Wilson: Thanks. Nice to meet you again here, Gord. I am pleased to hear another submission on behalf of the utility to go after this fuel substitution. As you mentioned, Kingston has had both gas and electricity for a number of years now and wants to show leadership again in this issue, perhaps before the amendments are passed.
I was wondering, from what you have heard this afternoon, whether you would think there are other directions this could go, fuel substitution in the broader sense that Bill 118 allows. Even before the amendments were suggested I think you had the idea of substituting gas for electricity, because of course you manage both, but what about some of the things you have heard today with, say, the solar water heaters? Can you see getting involved in a program like that?
Mr Jarvis: I think as our utility evolves we are starting to see ourselves more as suppliers of heat, for instance, which would mean that if we continue to evolve as we are now, if solar energy were a more practical solution, then it would be something our organization would have to become involved in and we would strongly support. At this point the basis of our decision-making is that when we compare what it costs our customer to use electricity in hot water heating, for instance, with what it costs to do it with gas, then we feel we are quite safe in making a recommendation that he switch. If you were to show me figures that the solar heating of water were more cost-effective, then I would have to say that our organization would start to look at that as one of its businesses.
Mr G. Wilson: What about in your budget? Have you got part of that devoted to promotion of conservation?
Mr Jarvis: Our organization is at this point similar to other gas utilities across the province. We are trying to provide incentives for the use of gas over electricity. The one difference between ourselves and other gas utilities is that we are actually trying to convince our customer to do something and it is done for him. We are not looking to take him away or send him someplace else.
When we look at the overall impact on Kingston, I can make no other recommendation to our commission than that as many customers and as much load as we can convert from electricity to gas would be a positive move for this community, for the simple fact that we have both sides of the equation. Any negative impact on the electrical side is going to be replaced with a positive impact on the gas side. Because no funds leave the community with regard to that change, we know it is positive for the community.
Mr G. Wilson: I guess I was just thinking about some part of your program taking an active position with regard to other forms of substitution when you take into account the larger issue of renewable energy, for instance, being so much more beneficial to the environment and to the taxpayer in the long run. Is that kind of educational program something you could see the public utility commission getting into?
Mr Jarvis: At this point, as a utility serving this community, we are there to do whatever we can to improve not only the quality of life in this community but the economics. If you were to tell me tomorrow that I could install a solar water tank for $250 which would give that individual hot water for 20 years at no operating cost, then I think we would be very remiss in our position not to be recommending that to our customers, regardless of the impact it had on my position, knowing I may no longer be in the gas business some time after that.
Mr Klopp: I found your presentation to be very interesting because you have shown that you are in the business of electricity and your business says, "If I go to my bosses and tell them I'm telling people to get off electricity, it's damn scary." Groups have come in who have actually talked against the Municipal Electric Association and it seemed like quite a slap. I appreciate your openness to show the taxpayers the point that ratepayers are also part of the community. Your attitude exemplifies your talent, because as you have pointed out, "I might be out of this job, but if it's good for the system, I'll become a person selling solar heat." I appreciate your comments. It really opens my mind on the whole issue.
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Mr Cleary: Thank you for your presentation. You talk about "our area." Is your area just the city of Kingston or do you go out into the townships too and supply service?
Mr Jarvis: As far as gas goes, we only serve the city of Kingston. As for electricity, we move out a little way. In water, we are out a little way. In transit, we are out a whole lot. But as far as gas goes, we only serve the city of Kingston.
Mr Cleary: The other thing you mentioned, and Mr Jordan has brought it up many times, is that you support conservation. Do you support the conservation program of the two lightbulbs to every household in the province?
Mr Jarvis: In the program we offered Ontario Hydro, we suggested that as a test we would try to switch everybody in Kingston from the electric tank to the gas tank. We felt we could do that at a cost of $700 a kilowatt. When I looked at the lightbulb program, they spent $7.5 million to potentially convert 5.5 megawatts. I felt the offer we made was more attractive.
The one thing I forgot to mention is that some of the information the potential test could offer is the level of uncertainty. We still do not know how many customers out there potentially would switch from electricity to gas or to some other form of fuel. I tell you, we have people in this community who would not switch to gas if we gave it to them. Without tests such as this providing more certainty to the level of uncertainty we have, we may be making decisions for the future that are unattainable.
To answer your question, I felt my deal was better than the lightbulbs.
Mr McGuinty: Tell me a bit more about this arrangement you have whereby you can operate both a gas utility and an electric utility under the same roof. What governs it? Is there some kind of contract or is there some memorandum in place which dictates how you deal with both ends of it?
Mr Jarvis: We operate the gas utility in the same way. In our case, actually, we have gas, hydro, transit and water. We run the gas utility under the same mandate as we would run the electric utility and the water utility. Most utilities across the province have electric and water or some combination of that. We run the gas utility with the same mandate.
Mr McGuinty: Would income from your gas sales benefit me as an electrical ratepayer?
Mr Jarvis: Yes, because the gas sales at this point are being used to subsidize transit. Therefore as a taxpayer in this community, even if you do not use gas, you benefit from the sale of gas.
Mr McGuinty: You do not benefit me directly, though, in my capacity as a ratepayer for using electricity.
Mr Jarvis: At this point they do not directly subsidize the electric side.
Mr McGuinty: Could they?
Mr Jarvis: If it were approved by Ontario Hydro, yes, they could.
Mr McGuinty: Do you see a broader application for this province-wide? Before you answer that, I will tell you what my ratepayers are telling me. They are concerned that Ontario Hydro at the present time, in terms of the number of people working there, the size of the debt and the salaries we are paying the people there, they are all too big. I think if I were to tell them, "Listen, we're going to broaden the mandate to incorporate some kind of a gas utility function," they would get rather excited. Keeping that in mind, what do you think about having a broader application?
Mr Jarvis: Ontario Hydro gas and electricity?
Mr McGuinty: Yes.
Mr Jarvis: I guess my response would have to be at this time that I would want to see more with regard to how you plan to set up that mandate. Electric utilities across the province have always had some difficulty in dealing with the larger utility and with some of their mandates. For you to expand its mandate at this time so that it was clearly a province-wide gas utility, I would have some concerns.
Mr McGuinty: I think you have said this, but I just wanted you to be a bit more clear on it. I think you have indicated already that there are some grave doubts or just a lack of solid information that would convince most public utility commissions that the fuel-switching idea is a good one for ratepayers, particularly for those ratepayers who are not going to switch to gas. If you were advising me as a ratepayer within your jurisdiction and you did not offer a gas alternative in the way that you do here, what would you tell me? Is Bill 118 a good thing for me?
Mr Jarvis: I would have to tell you I do not know, because I do not know what those impacts are. I know there will be impacts on the electric utility. The impact to the whole community at this point I do not know. We are talking about a community that does not have a combined electric and gas utility. We have an electric utility and we have a Consumers' or a Union involved in providing gas. Therefore moving those customers from an electric scenario to a gas scenario may show them short-term gains because it is obvious they can heat their houses for half of what they are heating them with electricity. But the long-term ramifications associated with the impacts on that electric utility and what they may then be paying for electricity in the future are unknown at this time. Therefore without some form of study, as we offer, I put to you that we do not know what those impacts are or how far-reaching the result will be.
The Chair: Thank you for coming here today and for responding as candidly as you have to the questions put to you. We appreciate it and I trust that we will be keeping in touch.
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KINGSTON ENVIRONMENTAL ACTION PROJECT
The Chair: The next presenter is the Kingston Environmental Action Project. I remind people who have just come in that there is coffee, tea and grown-in-Ontario apple juice. Please make yourselves at home. Sir, tell us who you are and go ahead with what you have to tell us.
Mr Pike: Good afternoon, my name is Stuart Pike. I represent the Kingston Environmental Action Project. I would like first of all to thank the members of the committee for allowing me this opportunity to appear before you today. This committee speaks well for the improved openness in government in recent years. The arguments I intend to make today will for the most part be of a non-technical nature. I will however refer to studies and technical data prepared for these hearings. But, by and large, I hope to discuss how this bill will affect the average electrical consumer in the greater Kingston area. I also hope to provide you with some understanding of our desires and commitment to the initiatives presented in this bill.
The Kingston Environmental Action Project acts as a conduit for the environmental concerns and demand for action of people in Kingston and the surrounding areas, a population of approximately 165,000. When people in the greater Kingston area want answers or action regarding environmental reform, more often than not the people they contact are with the Kingston Environmental Action Project.
On behalf of the Kingston Environmental Action Project, I am here today to speak in favour of Bill 118. At KEAP our business is our environment and the challenge of promoting technologies and practices that will help reduce the level of environmental degradation that exists today. We have made great progress, primarily through the public education programs. That is what we believe the success of these new initiatives hinges upon. I will expand upon this later.
Although our focus is our environment, we may define it in broader terms than many people. Although it is true our motivation comes largely from work relating to our biological environment, we understand how the quality of our environment has direct ramifications on all aspects of our society, including the economy, productivity, social and ethical considerations. I will speak briefly on aspects of this bill, but will focus on the many environmental benefits.
The changes in board membership and size will, we believe, make Ontario Hydro more accountable to its customers, in essence, the population of Ontario. The increase in numbers can only broaden the scope of the board and make it more representative of the public it serves. The addition of the Deputy Minister of Energy is a move that will benefit Ontario Hydro with more direct input on government policy. These changes are not a radical departure from past structures under other governments.
From our perspective the opportunities provided in this bill for fuel switching are the most progressive and offer the greatest benefit to society as a whole. I spend a great deal of time speaking to school and community groups. One complaint I hear again and again when talking about environmental reforms is the lack of choice. We are restricted in our choices with regard to the products we buy, our transportation options and our energy options. We must be provided with unbiased information on which service is the least damaging. The options must be competitively priced. First and foremost, we must have choice. This bill provides all of these options and more.
The benefits of fuel switching are readily apparent at first glance and become an even stronger argument in favour of Bill 118 as the different options are explored. The Passmore study shows the great extent of savings, both in terms of air emissions and cost to the consumers. If in 1975 we had passed this bill and the structures for fuel switching were in place, we could have reduced emissions of carbon dioxide by as much as 128 million tonnes, sulphur dioxide by 1,406,000 tonnes and nitrogen oxide by 399,000 tonnes. At the same time, savings to the householders would have been $3.94 billion.
These figures from the report from Passmore Associates, entitled The Economic and Environmental Implications of Fuel Shifting, could be considered the top-end savings of best-case scenario. But the point is clear: We must learn from past mistakes. In the past, we made difficult decisions based on the best available information. It would be foolish to say we are not smarter now. In the future, we may look back on the debate over Bill 118 and say we could have been more aggressive in the programs, but to resist the path that we know is less damaging is to ensure that we repeat our mistakes.
The city of Kingston stands to gain in all aspects of this bill. With a solid infrastructure for natural gas already in place which is controlled by our PUC, the conversion to natural gas for this municipality would ensure economic as well as environmental rewards. I am glad to see that Mr Jarvis had an opportuntiy to appear before this committee today. I believe that Mr Jarvis, the manager of the Kingston PUC, had hoped that Kingston could be used as a test case to determine the number of households that would actually take advantage of the loan incentives to switch fuels.
There may be some reluctance by some people to use natural gas. Again, the possible problems stem from the long history of Ontario Hydro promoting electricity as the clean, safe and efficient fuel. As I mentioned earlier, the need for a comprehensive public education campaign should not be overlooked. With the increased level of sophistication and knowledge of the average consumer about environmental issues, a strong case can be made and met with much more success than a similar campaign from, say, a decade ago.
The Passmore study looks at only two options, considering only natural gas and oil. If we consider the options available to those not in an area serviced by natural gas, it brings in options with even greater emission reductions and fuel savings.
The technology of solar domestic water heaters is one that provides for substantial savings in energy cost and consumption. With water heating accounting for up to 40% of a home's energy requirements, it is one area that we feel those not able to benefit from natural gas should be encouraged to pursue.
There is a domestic solar water heater available right here in Kingston that offers considerable savings and a short payback time. As an Ontario Hydro customer with no access to natural gas, who in the eyes of the Municipal Electric Association would be disadvantaged by this bill, I find the prospect of the rate of payback and substantially reduced electrical consumption very attractive.
The electrical rates may go up in the short term, but I would have the benefit of reduced electrical consumption to offset any increase and I believe I would receive a net reduction in total cost for energy, all this with the added benefit of reducing emissions of carbon dioxide, sulphur dioxide and nitrogen oxide.
Cleaner air, reduced acid rain and lessening the global warming potential are goals that all Canadians would endorse, but with the added benefit of reduced electricity costs it makes a very compelling argument in favour of Bill 118, all this from the perspective of someone who in the eyes of some groups would be the big loser in this initiative.
Perhaps we can look at the experience of others. Hydro-Québec has offered non-taxable subsidies for conversion to dual-energy heating systems for 10 years. With the new dual-energy program, Hydro-Québec intends to make this efficient and cost-effective method of home heating accessible to a greater number of customers.
This program offers subsidies for conversion of single-family and multi-unit dwellings in amounts up to $3,900. Bill 118 is much more conservative than this, offering loans, not subsidies, and with severe restrictions on the types of dwellings that would qualify. To take full advantage of electrical savings to be realized, the definition of homes that qualify should be broadened and the benefit, as stated in the Passmore study, could be double the current estimates.
In June 1988 the World Conference on the Changing Atmosphere was held in Toronto and sponsored by the Canadian government. One of the recommendations from that conference was to reduce global carbon emissions by 20% by the year 2005. It was a substantial step forward, but making that statement in itself does not make it so.
It is initiatives such as Bill 118 that put into action the words and promise of the WCCA, the Clean Air Act in the United States and the recommendations of the Brundtland report. Without action the words are meaningless. We have an opportunity here today, in the province with the highest energy consumption, to make a real and concrete step on the road to reduced consumption, reduced emissions and environmental sustainability.
I am sure the members of the committee are familiar with this report by the House of Commons committee. This is part two of our Changing Atmosphere series, and it is the challenge of global warming. I would just like to point out the recommendations. I believe this is from October 1990. The first recommendation from this committee is:
"Given that human-sourced carbon dioxide emissions are the principal contributors to increasing atmospheric levels of the greenhouse gases and given that society's use of energy is the largest factor in the CO2 generation, the committee concludes that Ontario energy policymaking must have as its most immediate focus the more efficient and conserving use of energy. Coupled with the more efficient use of energy is the need for fuel substitution away from high-carbon fuels, and for the commercial availability of technologies for exploiting carbon-based fuels with less environmental impact."
The Worldwatch Institute in Washington has called this the turnaround decade. When our Prime Minister speaks at the next United Nations Conference on Environment and Development later this year, I hope he can speak with pride about the progressive initiatives taken by Ontario.
I urge you and your colleagues to support Bill 118.
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Mr Johnson: I would like to ask you about something to which you did not refer. I would like to commend you, Mr Pike, on an excellent presentation. One thing you did not mention was the power-at-cost issue. Being an environmentalist I would like to hear your opinion. I know that when we look at nuclear generation, the cost of building that monster is certainly one of the things that is taken into consideration. It is probably the major cost, but there are costs that go beyond that, as I am sure you are aware. There are the costs of mining the uranium, the tailings.
We know that in northern Ontario there are some very tragic circumstances that we as a government are having to look at. I was wondering if you think that under power at cost we should not take into consideration the cost of cleaning up the environment that, as we know, will be costly and certainly is a very serious situation. I was wondering if you could offer an opinion on that.
Mr Pike: Absolutely. This is a fundamental flaw perhaps in our economic structure, that we do not pay the full cost for the products we consume. In all aspects of our society, economists look at costs of disposal, costs of remedial cleanup plans and things like that as externalities. It is not considered in the pricing factor of the products we consume. If we were to factor in those costs, it would simply put the cost of energy, the way we have been producing energy in the past years, out of reach of most consumers. My feeling is that nuclear power has unfortunately ignored the total cost of production.
Mr Johnson: Do you think we have been paying for rates at power at cost, or have we been subsidizing in some way? The other thing we cannot forget of course is the fact that those who pay hydro costs in Ontario are indeed taxpayers. They pay taxes as well as paying for hydro. Ultimately, we all pay in Ontario. Do you think we have been paying the right cost for hydro or do you think it has been subsidized?
Mr Pike: We certainly have been paying the cost one way or the other. The problem I think is that the cost has been hidden in the form of a subsidy, in that it comes through our taxes rather than directly through our cost for energy. If we were required to pay the true cost of our energy, there would be a much greater initiative for people to conserve this very costly form of energy.
Mr McGuinty: Thanks very much for your presentation, Mr Pike. I think that very few people would argue that fuel switching is not a good idea. The concern is, who is going to pay for it? Fuel switching is also something that is happening all the time. We have been told by people in the natural gas utility business that people are switching over to them at an ever-increasing rate. Why do you think the government has to get involved now and to weigh in and to subsidize people switching off electric heating so they can buy natural gas, with the distinct possibility that as a result rates are going to go up for some people who do not have access to natural gas, for instance?
Mr Pike: I think there are options available for everyone. There are options available even though they are not tied into the natural gas network, either through high-efficiency oil, for instance, or also through solar applications. If a person in a rural area, such as I, had the opportunity or the incentive to make use of a domestic solar water heating system, the cost savings that he would find on his electrical bill would offset the increase in rates that would occur. I think Ontario Hydro should be in the business of promoting other fuels simply because the corporation has been promoting electricity, and only electricity, as an economical, safe and efficient fuel for such a number of years. We do need a program to sort of offset that mistaken impression which I believe is in the mind of the average consumer.
Mr McGuinty: Some people would argue that Ontario Hydro has, perhaps unwittingly, been promoting fuel substitution, and it has been doing that very effectively, simply through its rates. Some people argue that if you really want people to conserve, just up the rates. Then you are going to see people conserve. What do you think of that idea?
Mr Pike: That is very difficult, because there are many people who are in no position to pay substantially higher rates. If it were simply a matter of raising the rates and people would be, in that sense, forced to make other choices, they would be faced with higher rates as well as the capital costs of switching to other fuels. With an opportunity from Ontario Hydro for a loan to offset the cost of conversion, some opportunity for people to have a chance, without severe financial hardship, to convert to other fuels, then it would be made available to virtually everyone in the province.
Mr Arnott: Mr Pike, thank you. Just to follow up on Mr McGuinty's question, it is quite evident from your presentation that you support the efforts towards demand management of the present administration at Hydro and that you are very concerned about the high consumption levels of hydro in Ontario. Would you in fact support the government using the price of electricity as a means of governing demand for electricity?
Mr Pike: It would have to be within certain parameters. With our economy in dire straits as it is today, there are certain levels at which people would not be able to take drastic or radical increases in the rate of hydro, but I do think that if we have the cost of energy representing closer to the truer cost, then it would offer people more of an incentive to switch to other fuels.
Mr Arnott: I guess my concern is if the projections of savings included in the update are mistaken and if 10 years or so from now we have a severe shortage of generating capacity, the farmers in my riding of Wellington will be forced to pay incredible rates for hydro and there will be no choice. That is one of the concerns I see happening coming out of this bill. How would you respond to that?
Mr Pike: My hope is that initiatives like Bill 118 will encourage people to move to other forms of energy. It also should be a real boost to the industry which is promoting alternative technologies. In 10 years I would hope that with a bill like this, those other opportunities would be in place.
The Chair: Mr Pike, the committee thanks you for taking the time to be here this afternoon. We have enjoyed your comments and your responses to the questions. Take care, sir.
DAVID HAHN
The Chair: The next participant is David Hahn. Mr Hahn, please seat yourself. You will have to raise your voice a bit. I suppose it is appropriate that we are competing with the forced-air heating system.
Mr Hahn: Good afternoon. I am here today to speak to you as an individual in support of the bill. I have been very concerned about the economic problems Ontario is facing. I have been a teacher of economics and resource geography, and most recently I have been involved in municipal government as a councillor and reeve of Bedford township in Frontenac county.
I guess it is obvious to us all that as a society in Ontario today we face a developing crisis of several dimensions. First it is an economic crisis, a crisis of productivity that is failing to increase as it needs to. Related to this is of course a fiscal crisis that the province of Ontario is now confronting as revenues decline. Second, we are widely perceived to be in an environmental crisis. We are not living off our natural resources in our environment in a fashion that is sustainable into the future. I believe there is also a social crisis developing from these other elements. There is increasing inequality and social tensions coming from the hard times we are experiencing.
I would like to briefly address the questions of inadequate productivity and environmentally sustainable patterns of resource use as they relate to the question of generation and use of electricity in Ontario. Provision of energy services is fundamental to the people of Ontario, both as producers and consumers, and it is imperative that we use energy in the most economical and sustainable fashion possible.
Demand management is the key to providing electricity economically. Measures to increase efficiency of use will reduce overall demand. Measures to promote load management, ie, to shift demand to off-peak times, will permit fuller use of generating facilities. Both these directions should be readily pursuable under the current Ontario Hydro mandate.
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The third leg of demand management strategy, I suggest, must be the allocation of demand to the most appropriate fuel sources. The Ministry of Energy must provide direction here and Ontario Hydro's mandate must be enlarged to encompass encouragement of substitution of other sources of energy for electricity where they are appropriate.
Electricity costs are based on generation and transmission capacity required to supply the peaks of demand, not the volume of demand. There is in effect no practical large storage of electricity possible. Wood and fossil fuels are inherently storable and therefore production facilities need only be sized to produce the total volumes of fuel demanded. Most heat users create demand at times of peak usage of electricity. Home stoves particularly generate demand at peak times of electricity use. Water heating demand is similarly peaked. Space heating or cooling, while not producing daily peaks, produces seasonal peaks, adding to the big peaks in the winter and summer.
The point here is that anything which reduces peak time daily and seasonal demands for electricity reduces the need for construction of new generating and transmission facilities. To a very large extent, heating applications of electricity are responsible for these peaks. Heating applications of electricity are very readily substitutable by other fuels: natural gas, wood, solar, etc.
Since I have not heard everybody else here, I do not know if anybody else has given the example of Amory Lovins's famous quote -- I am sure you must have heard it somewhere along the line -- "Using electricity to heat a house is like using a chainsaw to cut butter." I did not put it in my text, but since I did not hear it today I thought I would throw it in.
If the construction of new facilities can be avoided, electricity rates would not rise as rapidly as they have in the last few years. Newly developed generating capacity has proved to be continuously more expensive than previously built capacity. This is probably also true of transmission capacity. Measures that reduce the need for new capability may therefore reduce the rate of increase in price, depending of course on the costs of the measures. Where capital costs form such a large part of the cost structure, it is not inevitable that rates will rise, even at the rate of general inflation. The large increases have been a result of creating expensive new capacity to generate and transmit to meet a perceived increase in demand.
Many other energy sources are cheaper than electricity for heat applications. A fuel-switching program, through the lowering of costs of energy in general and of electricity, should create a more rationally ordered, more efficient economy. In addition, there is a decentralization effect. The capital spending associated with electricity heating is weighted to large generation stations. Retrofitting of homes and businesses, on the other hand, to systems using other fuels to heat air, water and food will create employment located exactly where people live and work as well as in the manufacturing centres for solar and gas water heaters: gas, oil and wood furnaces and gas stoves.
Thus my belief is that in order to increase the efficiency of use of resources, to increase productivity in general and to promote more long-term sustainable patterns of resource use, Ontario Hydro must be encouraged to switch consumers from electricity for heating applications to more appropriate energy sources.
That was the little thing I wrote out to present. I wonder if I could anticipate some of the questions or respond, from perhaps a different perspective, to some of the questions that were raised previously. I certainly am concerned about environmental impacts, but I have chosen to speak more about economic impacts and economic implications of what we are dealing with here. I think the question of prices and cost is a very serious one.
If I could refer back to your question, Mr Arnott, I am a farmer and the child of a dairy farmer. I live in a rural riding. I have been the reeve of a rural riding. I am very sensitive to that question of appropriate costs of electricity. It strikes me that there are several things that should be brought to bear on this question.
First is the question of externalities of costs. That has been raised before. There are many costs in the generation of electricity as we have done it in the past which are not taken into account in the cost structure. I think people have adequately discussed that already. But there is another aspect of the cost that I do not think people have adequately considered.
In the short time I have been listening here, we have not had people point out or remind us that we have a monopoly corporation that has monopoly powers over the generation, transmission and distribution of electricity in Ontario. One of the implications of its mandate to supply power at cost means that power is supplied at average cost of production. It is not supplied at the cost of new production in the new facilities that are required to meet the increasing demand that is created.
From an economics point of view, if you want, the rational distribution of resources in the society, this provides us with a bit of a dilemma. Either we are forced to argue that electricity should be sold at the actual cost of generation of the most recently built capacity -- which would be the case in the oil industry or the natural gas industry, which are not complete monopolies. Otherwise you would not get any new capacity coming on stream if the price was not such that it would justify bringing new capacity in those fields of energy on stream. That is not the case with hydro. The new plants that we have been building are producing electricity that costs more to produce than the cost of the previous facilities have been producing electricity at, so that gives us the question here of whether we are going to ensure rational decision-making among the customers, among the consumers of electricity. Are we going to argue that it should be priced at the replacement cost price or are we going to promote something else?
I think that because of the inherent public utility character of electricity -- it is so fundamental to so many people, not just as consumers but also as producers; I am thinking of the farmers in many cases as well and, for that matter, the industries too -- I am inclined not to support a proposal to raise the prices to what they should actually be. But if you are not going to do that, then I think you have to argue that Ontario Hydro has to take measures which will give other incentives to people to switch to a pattern of energy use which is more rational.
That is why we need to have what this bill is proposing to do here. It is proposing to allow Ontario Hydro to encourage consumers to use other heat sources where the Ministry of Energy has determined that those other heat sources are more reasonably suited, both from the cost point of view and the environmental point of view. That was a thought I had in response to some of the questions that were raised around price and cost.
Mr McGuinty: One of the implications of switching to natural gas, which presumably would be the end result if this bill were to go through as drafted, would be the natural result of Hydro's new policy, which is going to look to long-term, it seems, natural-gas-fired generation. One of the implications there is that we may be, to a very large extent, giving up some of the independence we have had in the past in terms of generating our power in-house. We have nuclear or fossil-fired plants or hydraulic right here in Ontario. Does that raise any concerns in your mind about supply costs?
Mr Hahn: Not directly, because I think the in-house sources have not proven to be all that cost-reliable. In fact, where 20 or 30 years ago we were promised cheap nuclear energy for the foreseeable future, the nuclear energy option has proven to be increasingly more expensive as the plants do not live up to their potential.
I am very much a Canadian nationalist in the sense that I still think of myself as living in Canada. I think natural resources, such as natural gas and coal, that come from Alberta and the west, from within the country, are still very much in-house resources.
Mr McGuinty: The westerners, though, may not come to think that at some point.
Mr Hahn: Possibly. I think there is a serious concern about the question of the reliability of the other sources. There is lots of gas around, but it is certainly conceivable that prices might escalate. That is one of the things I am concerned about with respect to the new direction for Ontario Hydro, that it does promote renewable sources of energy which will have more predictable cost futures involved with them than something like natural gas would have.
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Mr Cleary: Thank you for your presentation. I was not quite sure when you started whether you were supporting the bill. I think you are leaning towards supporting it.
I myself live on a farm in a rural area. Many of my constituents live there too. One of my farmers brought in his bill the other day. This particular farmer happens to be a dairy farmer and has a cash crop. He probably crops 600 acres. He is selling his corn and barley at prices of 17 years ago. His hydro bill that he showed me was $1,800 for a month. How can I promote this bill to him when he knows his hydro rate is going to go up some 44% over the next three years?
Mr Hahn: I think actually it is very easy to do that, because if we can do things with Ontario Hydro that will reduce the need for the construction of expensive new facilities and continue to use electricity generated at the facilities built 17 years ago, we can come closer to selling hydro at the prices it used to be at. One of the whole points to the argument I am trying to make is that by reducing the need for construction of more expensive new projects, it should be feasible to supply electricity more cheaply than it will be if we do not do something to prevent this extravagant new construction of big facilities.
Mr Arnott: Thank you, Mr Hahn, for addressing my question to one of the last witnesses. I listened very closely to your comments in that respect and I think you were talking about the unit cost of electricity being more expensive using future generating capacity or building new generating capacity as opposed to existing generating capacity. What I was wondering about was whether that particular witness, and I pose the same question to you directly, would favour further deviating from the power-at-cost principle in favour of actively using price of electricity to effectively manipulate demand?
Mr Hahn: I think we have to do something to manipulate demand so that demand will come more into line with the more rational, more sustainable use of energy sources. If we fail to do anything else, for example, if we fail to provide incentives, then I think we would have to use price. I would prefer to use something other than price as an incentive to see people shift from electricity to other energy sources, for heating applications in particular.
Mr Arnott: So would I. Thank you.
Mr Jordan: Thank you for your presentation and representing rural Ontario. I was concerned when you said that we were talking about power at cost, but in fact in your view we are talking about average cost of power. I am sure that, as reeve of your municipality, you certainly did not hit the taxpayer that year for the whole $5 million or whatever it took to build a new firehall or whatever it might be. You amortized it over a number of years. What I am seeing from your comment is a graph like this for power rates.
Mr Hahn: Oh no, I am not quibbling. Contrary to how many of my colleagues complain about the debt structure, I really have no arguments about Ontario Hydro's debt structure. With my municipal background, I understand fully that if you have a major capital structure or capital expenditure, you amortize it over 40 years with a debenture that you put out. I do not have any problem with that. I am not referring to that aspect.
What I am saying is that the newest facilities to generate electricity have turned out to be very expensive. I realize I am sort of speaking ancient history if we are not going to have nuclear power any more, as has been decided, but nuclear power has been the most recent form of new facilities. They were very expensive, specifically compared to the hydraulic sources we had. If we had managed to keep the consumption of electricity down so low that we were able to use hydraulic facilities for the major amount of our electricity, it would be a whole lot cheaper than the way we have switched to nuclear.
Mr Jordan: I hate to think what our unemployment rate would be.
Mr Klopp: Thank you for pointing out the fact that we do talk about average cost. I am not quibbling over it either, that we use average cost. But realize that it is only average cost and not really the cost of power, because we have had a lot of people come in here and say "cost of power" and their definition is bizarre. I do not know if they know about business. I am in business. I am a farmer too. I have a $40,000 combine. I can say to you that this is my power at cost. My neighbour has a $20,000 one; that is his power at cost. Both of us had better realize where we are coming from, though, and I am glad you pointed that out.
Could you expand a little bit? We have had this concern that two years from now, the lights might start going out and we are going to try to manipulate the price. I do not recall in Bill 118 that we are saying we are going to arbitrarily put the prices up. Have you read that in this bill?
Mr Hahn: I certainly have not seen that in the bill. I do not see there is any implication of that.
Mr Klopp: It is more about what you were talking about, that the onus is on advertising to get people to do other things so we can keep the plants we have, period.
Mr Hahn: There are two elements to it. One element is to allow the government through the Ministry of Energy to give a little more direction to Ontario Hydro. Ontario Hydro has operated within that mandate from the government, but this is obviously allowing more of a year-to-year intervention in the direction of Ontario Hydro. I think that is only appropriate, because it is not up to Ontario Hydro under its current mandate to make a judgement about how we are using electricity relative to other sources of energy for heating. It is up to the Ministry of Energy. In my mind, that is who should have the responsibility for making sure that as a society we develop a rational pattern of energy use. That is the first part, that the government should be able to direct. It seems fairly clear from a lot of things I am sure you have heard that it is inappropriate to be using electricity for heat applications.
The Chair: Thank you, Mr Hahn. We appreciate your interest and your willingness to come here this afternoon and be involved as you have been.
COUNTY OF LANARK ENVIRONMENTAL ACTION NETWORK
The Chair: Next we have the County of Lanark Environmental Action Network, which is acronymically known as CLEAN.
Mr Willis: Neat, is it not?
The Chair: I was going to say it was spiffy.
Mr Willis: I wish to thank the committee for this opportunity to make a presentation on behalf of the County of Lanark Environmental Action Network.
Where I come from, in the town of Perth, there meets regularly a group of citizens concerned over the welfare of our planet's environment. The people of this group unselfishly give much time, effort and money to stimulate concern in the minds of others in the area. I am of that group. My contribution includes the occasional article for the local weekly newspaper.
As you might guess from the white colour of my hair and its diminishing quantity, I am not far out on the radical left end of the political or social spectrum. Indeed, the fact that the Rideau Valley Field Naturalists have me as their treasurer, the Horticultural Society has me as its vice-president and the Tay Valley Ski Club has me as its president confirms that I am definitely midstream. However, I am sufficiently stirred up by the protagonists and the antagonists of Bill 118 that I am freely giving more time, effort and money to this, our group's presentation.
Forty-two years ago, I was awarded a doctor of philosophy degree from the University of Toronto. The subject of my dissertation was freedom and authority in the high school. That background makes me very appreciative of these across-the-province hearings into a political and economic issue of considerable magnitude.
The process has the appearance of the very essence of democracy. I am sure you members of the committee, spending your time and effort and the taxpayers' money, feel exhilarated by these contacts with the grass roots of society. I am not so naïve as to think you are not all bound pretty rigidly by party lines, but I hope if you do find interesting and differing views prevailing among your petitioners, elements of your stands on Bill 118 may be modified accordingly.
CLEAN supports Bill 118. Although not fully conversant with the administrative details of Ontario Hydro's mandate, we do feel Hydro's history has included moves that have been less than socially honest, open and honourable. Bill 118 is designed to reduce those kinds of moves and therefore has our support.
The proposal for changes in the wording of section 56 also wins our fervent support. It is my understanding that Ontario Hydro approves of Bill 118. I know the Municipal Electric Association opposes elements of Bill 118. I do wish I had been a mouse in the corner of every room in which separate municipal electrical utilities discussed the implications of Bill 118 for their own purposes. I cannot help but feel that a significant proportion of the individual utilities breathed a sigh of relief over the potential reduction in demand for the extension of their distribution facilities, just as the recent radical change in the direction of Ontario Hydro's expansion plans has enabled it to breathe a huge sigh of relief.
It is easy to understand some reasons why the MEA opposes Bill 118. Those members of the MEA who have recently invested large sums in extended infrastructure, anticipating great increases in Hydro's supply of energy, will suffer a temporary setback over the short-term loss of energy sales due to fuel switching. But careful management will enable them, I am sure, to survive. Moreover, the MEA's policy is not to oppose fuel switching but to support it.
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Let me read from a very recent, end of December, letter to the Perth Courier from Mr Marv LeClair, chairman of the MEA:
"The government has committed Ontario Hydro to full, meaningful consultation with the MEA and its member utilities on fuel switching in order that the MEA can ensure that these programs are designed and implemented with the best interests of the Ontario energy consumers in mind."
I wish to emphasize that last bit, "with the best interests of the Ontario energy consumers in mind." There has been some discussion concerning the utilities and the consumers, and I have seen a conflict of interest or a lack of consistency of concern there.
This letter makes it very clear that the MEA is as ready as Hydro to arrange fuel switching. It sees, as Hydro does, that fuel switching can reduce electricity demand by much more than the equivalent of two maximum-efficiency Darlington nuclear reactor installations. However, MEA's chairman thinks the part of Bill 118 regarding section 56 would be both unnecessary and unfair. Let me quote again from Mr LeClair's letter:
"Bill 118 would allow Ontario Hydro for the first time to provide financial subsidies to people who switch from electric to other fuels. MEA has argued that such subsidies would be both unnecessary and unfair."
One of your committee members has also been quoted on this matter to this effect:
"The minister has very definitely stated that he is not in favour of funding social programs through hydro bills to the people of Ontario, yet there is an amendment to the Power Corporation Act which gives the Minister of Energy the power to issue directives to do just that."
Let me make three small points here:
1. Bill 118 does not propel Hydro into loaning money or providing incentives. It merely removes the restrictions against such actions. If Ontario Hydro, in close consultation with the MEA and the government, deems that moves in such directions would save money, Bill 118 would merely open this route to Hydro.
2. Residential, commercial and industrial customers must be persuaded to switch away from heating by electricity. This is a major element in Hydro's salvation. A penny saved is a penny earned and Hydro stands to save millions through fuel switching. If it can save $10 million by spending $1 million, that is a good deal and hardly constitutes a social program.
3. Some people would say that Ontario Hydro is already into social programs in a small way, even before Bill 118 is passed. In the old-fashioned wisdom that a carrot is often more effective than a stick, Hydro is trying to arouse its domestic consumers to the dire need for conservation by giving free insulation of hot water pipes and tanks, shower heads and lightbulbs. I do not know what kind of carrot it has used with its commercial and industrial clients.
Unnecessary and unfair? Let us return to Mr LeClair's statement that subsidies would be both unnecessary and unfair. Our group, CLEAN, feels there is a middle ground which accepts Bill 118 and also allays the apprehensions of both gentlemen quoted.
In the first place, let us examine Mr LeClair's word "subsidies." Hydro's recent practice of giving things away leads us to think the word "subsidies" means giveaways, but that is not the case. The word "subsidies" includes loans. Would the MEA react strongly against a proposal by Hydro to provide its domestic clients with interest-paying loans on, say, a 50-50 basis to refit houses for fuel switching "to the greatest energy conservation in the circumstances"? That is a quote from Bill 118. Realizing that Hydro needs $50,000 worth of capacity to heat each house electrically and that it must manage or reduce its demand drastically, would the MEA oppose such loans? Mr LeClair says "encourage." He did not use such a word as "precipitate." The switching has to be done soon -- fast.
A young family I know has four boys between the ages of four and 11. The father works in a local plant at below supervisory level. The family lives in a small house, probably one built in quantity for veterans after the last world war. The family and thousands more like it would need more than mere difference in fuel prices to enable them to switch. They would need a loan at Hydro's low rate of interest to meet the large upfront payment needed for a house refit. Why could Hydro not borrow for such a purpose as easily as for the purpose of building a nuclear reactor? Think too of the amount of employment which would result and of how widely that employment would spread.
A landlord in Peterborough rents electrically heated apartments to university students. Two such students in a small apartment pay $150 a month for electricity alone. The landlord's electricity costs are covered by the renters. There is very little market force persuading him to switch.
We are sure there are many kinds of cases where market forces would be less than enough, unless electricity rates rise drastically, to precipitate the degree and rapidity of switching that is necessary. CLEAN therefore believes that loans for switching the maximum possible improvement in energy efficiency are necessary. Moreover, if we are speaking of interest-paying loans and not the broader subsidies, we believe that many, if not most, of the MEA members would agree.
Therefore, members of the committee, CLEAN urges you to support the part of Bill 118 which permits Hydro to make loans because for many customers they are necessary.
Subsidies unfair: The other argument against subsidies which the chairman of the MEA uses is this, and I quote, "They are unfair because these subsidies would be paid by electricity consumers, even if they live in a part of Ontario that does not have access to natural gas."
We would like to raise two questions about this statement. When I was driving to Iroquois Falls last Labour Day a natural gas pipeline was being laid along Highway 11 and at that time was past Kirkland Lake. Sault Ste Marie has or will have natural gas this year. If places as remote in Ontario as those have natural gas, can many others be far behind? I think not, particularly when the push for fuel switching really gets up a head of steam.
Moreover, there must be something to the recent rumour that electricity rates will rise 47% in the next few years. Just think of the fire that rise would set under the gas pipeline companies. Soon the only people who do not have access to natural gas will be so far out in the woods that they will be heating with wood anyway.
Our other question is, what is fair? Young boys when fighting often declare, "That's not fair." Even boxing matches judged by referees leave supporters for one side declaring decisions unfair. People buying poorly insulated, electrically heated houses in low-economic-level developments feel it is unfair to have to pay so much for electricity. The recent 11.8% increase in electricity raised the lowest rate power for large consumers by less than 0.4 cents per kilowatt-hour, but it raised our lowest rate by nearly twice that amount. Is that fair? There is very little in this life that seems fair to all the parties involved: wage settlements, judges' decisions, death to younger people and so on. Even the electricity rate structure seems very unfair to some people.
Mr LeClair felt that subsidies would be unfair to consumers without access to natural gas. I have shown that such consumers are rapidly becoming fewer. Moreover, there are now oil and wood furnaces which are almost as efficient and inexpensive to run as gas furnaces, and Bill 118 does not restrict fuel switching to gas only, but rather to the most efficient fuel under the circumstances. I have also shown that fairness is a point of view. Most decisions seems unfair to one side of the dispute.
Remembering that subsidies may mean nothing worse than interest-paying loans, that it is very urgent that fuel switching spread rapidly, that loans and other incentives will expedite fuel switching and that Ontario Hydro needs fuel switching soon, we hope all parties will see the wisdom of Bill 118 and give it full support.
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Mr Jordan: Thank you very much for your presentation. I was wondering what opposition you would have to these loans and/or subsidies being provided through the general fund of government rather than by Ontario Hydro? We are not fighting fuel subsidization; we are talking about where the subsidization should come from.
Mr Willis: Most people have to buy hydro. The repayment of the loans probably could be done out of their hydro bills or there would be a certain amount of leverage Hydro would have on people to repay, inasmuch as they need to have hydro. That might make it easier to collect loans, recoup the loans, than through the government itself.
Mr Jordan: You made several references to what is fair is fair. Where there are two sides, one side is not going to see the other side as being fair perhaps. Keeping that in mind, if we are going to have subsidization or grants as an incentive to switch, would it not be, if you can make it possible, more fair for it to come from the general fund through one of the other ministries, perhaps the Ministry of Energy or the Ministry of Industry, Trade and Technology, and just leave Ontario Hydro bills alone?
Mr Willis: As I stated earlier, it is my impression that this would be saving on hydro. The purpose of it is to save Hydro the cost of further insulations.
Mr Jordan: But it is also helping out the gas company.
Mr Willis: Yes, I grant that. Those questions are hard to answer, to state that it should be one way or the other.
The Chair: Mr Jordan, did you want to respond to a figure utilized in this presentation? You had it on an earlier occasion from the Franklin speech.
Mr Jordan: Yes, thank you, Mr Chairman, for the opportunity. On page 5 of your presentation, at the bottom of the page, you have a quote, "Realizing that Hydro needs $50,000-worth of capacity to heat each house electrically...."
Mr Willis: Installation.
Mr Jordan: Yes. That has come out several times throughout our hearings and it has recently been brought to our attention that it is in fact an error in print when it first originated and that it is, I believe, either $14,000 or $15,000.
Mr Willis: I see.
Mr Jordan: When we were meeting in Toronto last week one of the Ontario Hydro reps told me that he would be coming forward with not only the exact figure but a breakdown of how they arrived at it.
The Chair: Mr Yeager, the legislative research officer, is going to try to get something definitive on that before we do clause-by-clause. Perhaps the clerk will make a note to let you know what that information is, just so that we can be in common in what we are speaking of.
Mr Willis: Yes, be in agreement.
Mr Waters: I want to refer to a couple of articles. Mr Jordan was talking about switching and what is fair.
There is a big article on Ontario Hydro in the Financial Times today. It basically says that Hydro's debt is growing at an unbelievable rate and that our major power consumers are concerned about it. The main reason for that debt is the Darlington nuclear plant. It says they expect something about $170 million this year and then they will not be able to meet their obligations to retire the debt.
Last week the people from the Metro school boards came to see us. They said if they were allowed to switch in 32 of their 654 buildings in Toronto they would be able to save $1.76 million annually. They said they were looking at switching 32 SEF, or study of educational facilities schools. I assume the Metro school boards are not only ratepayers but also taxpayers, so whether you save it in this pocket or this pocket, or if you could save a bit in both, it sounds interesting to me.
Do you feel that is a fair investment if Hydro were to assist those people to switch? Do you think that is fair not only for the Hydro customers, because they are no longer having to build these inefficient power plants they are complaining about that are creating their debt, making it bigger, but also for consumers in general, because we pay the education fund, with a savings in their tax dollars of over $1.7 million?
Mr Willis: I have not at any time suggested there should be gifts to such organizations. I have suggested loans. Hydro might be in the best position to find out what the cost of retrofit would be and also how much savings there would be and then determine the terms as a consequence of those factors.
Mr Waters: In this particular case, they have done a study. They have it all worked out. In fact, they are awaiting the passage of this bill so that whatever the program is they can access it. They look at it that to the consumer or the taxpayer, there are definite savings. In their case, on both sides. I just wanted your opinion on that.
Mr McGuinty: What about a means test? We are not going to have any grants, as I understand it. You would prefer rather that Ontario Hydro simply extend loans to people who would like to switch. Should there be a means test? What if there is a wealthy person who hears about Bill 118 coming down the pipe who says: "My God, here comes the gravy train. I could easily afford to make the switch now, but if the government is going to help me make that switch, why don't I just wait?"
Mr Willis: I often tell the people to get in there first actually. It is just hard to administer, that is all, but it is possible. I think I would inclined to favour a means test of some sort to be certain, with carefully arranged parameters involved. Yes, I would be inclined to agree.
The Chair: We thank you and CLEAN very much for your comments, your insights and your participation. The clerk will be getting in touch with you with that material we spoke of. Thank you for coming to Kingston to see us. Have a safe trip home.
RITA BURTCH
The Chair: Ms Rita Burtch, please seat yourself.
Ms Burtch: I must apologize. I do not have a copy of my presentation for everyone. I did not get the message.
The Chair: No apologies are necessary. We are going to listen carefully.
Ms Burtch: I was going to suggest that you would look out the window and admire the wonderful view. You make your choice.
My name is Rita Burtch. I live near Smiths Falls in the Rideau Valley. I am a retired Ontario civil servant endeavouring to do what I can, socially and environmentally, to clean up the mess that our generation has created so that my grandchildren and their children will be ensured the right to clean air, clean water, healthy soil and a decent quality of life in a more just society.
Since becoming a full-time activist on my retirement, I have spent a great deal of time protesting government action, mostly federal government I must add. It therefore gives me pleasure to speak out in favour of Bill 118. I am indeed proud to stand with our aboriginal people and environmental groups across the province in support of this bill. Locally, the Rideau Environmental Action League has officially endorsed by presentation.
Through the years I have spoken out against the functioning of Ontario Hydro, its excesses and abuses, always maintaining that we the public should be made aware and have input into the decision-making that profoundly affects our lives and those of future generations.
In January 1986, together with a fellow member of the Ontario Greens, I submitted a petition to cabinet re the eastern Ontario transmission line, pointing out lower-cost, environmentally sound alternatives, and condemning Hydro's nuclear expansion program and its practice of promoting, in fact rewarding, excessive consumption rather than conservation of non-renewable resources. At that time, we felt that with appropriate technology, Ontario could lead the way to a safe, humane, ecologically sustainable and economically feasible energy future and called on cabinet to have the courage of its conviction and the political will to bring Ontario Hydro under control. When the public hearings came to Smiths Falls, I again presented these views.
As we all know, the ugly towers have been constructed across the eastern Ontario landscape and Hydro continued to build Darlington. So my faith in public hearings and select committees was somewhat shattered.
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However, in light of the recent announcement that there will be no new nuclear power plants and thinking we might now have a government that may be listening to what the people have to say, I am pleased to again be part of the process. I can only hope you share my belief that the process is as important as the end result and that consensus can be arrived at through public consultation.
As I see it, the most important aspect of Bill 118 is the move to create accountability by Ontario Hydro to the government, whereby the people of Ontario may regain democratic control of a most important factor in their lives. The fact that for the first time ever Ontario Hydro's 25-year demand-supply plan is being subjected to real regulation under the Environmental Assessment Act and that site-specific assessments will eventually be required is indeed encouraging.
I understand this will not only make Ontario Hydro accountable but it clarifies the responsibility of government, making it also more accountable. It is hoped a mechanism will be provided to ensure that government directives are made public at time of issue. This will confirm that decisions have been taken out of the back room and responsibility placed with the elected officials rather than with the appointed officials of Ontario Hydro.
The other amendment dealing with demand management through fuel switching, whereby the most inefficient and costly use of energy production, electric space and water heating, may be converted to the most efficient, environmentally sound available fuel, affects me directly. For the past 15 years, I have felt guilty about the fact that our retirement home in the country is baseboard electrically heated. However, we are conservers, heating only the space being utilized. We have a wood stove in the basement, thermal windows, and are presently considering a sun room to increase our use of passive solar energy. Unfortunately, natural gas is not available in our area.
It occurs to me that there may be a large section of the population in a similar situation, since baseboard heating is commonly used in apartment buildings and low-rental homes because it is inexpensive to install. The people living in these homes may have other fuels available to them but would not have choice of switching since they are only renting the property. These are mostly people on fixed income, seniors like myself and families of low-income earners, people who must pay the high cost and who would benefit most from a fuel-switching program.
Strong incentives to switching will be necessary in this situation as the landlords are not paying the high costs of the present system and therefore have no interest in fuel switching. Any serious conservation plan involving off-electric fuel switching should include all space- and water-heating systems, residential, commercial and institutional.
My concern is about Ontario Hydro's commitment to such a plan. Can this corporation that so successfully convinced Ontarians to "Live Better Electrically" with its previous expansionary role in the nuclear field and its production to meet any demand planning policy, now become a serious promoter of safe, efficient energy based on less capital-intensive alternatives, many of them small-scale, renewable power sources?
In my view, it is essential that the people of Ontario know where we are, how we got there and where we are going with Ontario Hydro. In order to fix something, you must first understand what is wrong with it. The process of supplying a sustainable source of efficient, economical, environmentally sound power in Ontario should be thoroughly examined and, if necessary, reformed.
That the death knell has sounded on the nuclear industry is indeed cause to celebrate. Purchasing uranium from Saskatchewan, however, where uranium mining is decimating the aboriginal population of northern Saskatchewan, poisoning their land and destroying their way of life, cannot be justified. Nuclear phase-out should begin at once. Instead of spending countless millions on repairs to keep existing plants operational, the decommissioning process, which will cost as much and more, should begin now. This will gradually remove from our lives the threat of a Chernobyl-like catastrophe and the health hazard that exists for all those unfortunate enough to live in the vicinity of nuclear power plants. Though we have been told otherwise by those in charge, Dr Rosalie Bertell, noted nuclear physicist, acknowledges the risks are there and that lives are being adversely affected at all levels of nuclear industry. It is now time to revitalize the soft energy industry, our path to the future, which was mistakenly abandoned in favour of the nuclear option.
Bill 118 is a step in the right direction and must be made effective through (1) a comprehensive fuel-switching program that will eliminate electric space and water heating everywhere in Ontario, (2) an efficiency renovations program, through audits, by Ontario Hydro that would include energy-efficient doors and windows as well as insulation and be extended to include all buildings and homes in the province, (3) solar water heaters for lease from Ontario Hydro and municipal utilities in place of electric water heaters and (4) solar water heating and passive solar design incorporated into the Ontario Building Code.
I also support the proposal by the Independent Power Producers' Society of Ontario for legislation to promote district heating and cooling, DHC, which has proven so successful in Sweden, as a preferred method of heating and to have it included in the Ontario Building Code. This is heat produced as a byproduct of industrial processes, not presently being utilized, that can be used to cogenerate electricity. To a conserver this makes good sense.
I understand there is opposition to this bill from Atomic Energy of Canada Ltd and the Municipal Electric Association. The opposition from Atomic Energy is readily understood since up until now Ontario Hydro has been its biggest customer and promoter of nuclear power. The Municipal Electric Association's opposition, however, is not so clear, except that its primary interests have been those of local utilities, which have expressed concern about reduced revenues due to fuel switching. Both the Municipal Electric Association and the municipal public utilities may simply require restructuring to meet the demands of retail consumers.
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There may also be concerns by employees of Ontario Hydro about job losses. In this regard I would remind government of statements made in its report, Task Force on Hydro, 1984:
"An energy path for the future that emphasizes conservation and the development of renewable alternatives will actually increase total employment in the energy industry. The problems faced in dealing with Ontario Hydro's approach and role in energy policy were not caused by the employees in the energy industry. They were caused by poor planning and mismanagement, problems that are ultimately the responsibility of the government. The employees should not and cannot be forced to bear the brunt of government mistakes."
In accepting responsibility, I trust that this government is prepared to honour its commitment and that transition policies are in place to deal with this situation.
I appreciate the opportunity of presenting my views again. I believe that this time the voices of concerned citizens will be heard above those with vested interests and that Bill 118 will pass into law. My hope is that exercises in participatory democracy such as this will continue to be part of a system that will lead to a brighter future for us all.
The Chair: Thank you, Ms Burtch. Mr Wilson, two minutes.
Mr G. Wilson: Welcome, Ms Burtch. It is nice to see you in person. I have been long aware of your active work in your area through the pages of the Kingston Whig-Standard. I believe you are a fairly frequent correspondent with the editor.
Ms Burtch: Oh, yes. Thank you.
Mr G. Wilson: I guess I can see where some of the members of your family get their activism as well.
Ms Burtch: They do indeed.
Mr G. Wilson: As I say, it is nice to see you here. I would like to follow up on that line of thinking about how we can generate support for the initiatives Bill 118 represents as well as some of the other things it just points towards, like using renewable energy to a greater extent. In other words, how do we acquaint others at the grass-roots level with them. What has worked in your experience?
Ms Burtch: I think there is need for an education program so people realize the necessity of switching fuel. I think there is a real awareness of the environmental conditions. I think people are thinking about conservation and there needs to be encouragement from government and the powers that be in ways of reaching those goals.
Mr G. Wilson: So you think the government should take an active position on making people aware of the issues involved in things like renewable energy?
Ms Burtch: There need to be incentives too. People cannot just change things as much as they would like to without incentives.
Mr G. Wilson: What about incentives? One thing we are hearing here is that with subsidies, for instance, or some kind of payment, that is unfair to those who do not qualify, depending on the area you live in. How do you see that? Do you see that as a problem?
Ms Burtch: Not necessarily. I myself cannot take advantage of switching to gas because we do not have natural gas, but I do not feel badly about subsidizing people who can do it, because I am that concerned about the environment that I think we must all do what we can to change things.
Mr G. Wilson: You mean people who would not qualify for the subsidies can feel some benefit for somebody else, and then there is less need for things like nuclear power plants. Is that what you are saying?
Ms Burtch: No, I do not see any need for nuclear power plants.
Mr McGuinty: Thank you, Ms Burtch, for a very interesting presentation. I just want to pursue this matter of the nuclear generation a bit more with you. Where do you see the connection between this bill and the elimination of nuclear generation in the province? What is the relationship?
Ms Burtch: It was not necessarily to do with the bill. That news came out just as I was studying the background for my presentation, but I do not see that in the bill actually, except that through conservation we will have no need for nuclear.
Mr McGuinty: You know, Ms Burtch, people have a concern about governments and politicians today. I am sure you would agree with that. Some people get to vote for somebody for the public utility commission. A lot of those people have been coming to see us. Commissioners or chairmen of the commissions are coming forward and saying they have some very serious concerns about the fuel-switching provision. I have been asking them if they could assure me, if I were a ratepayer living in their area, whether this would be a good thing. I think it is fair to summarize their response as being either, "We don't know," or "It's going to hurt you."
Who should I look to? Who am I to believe, as a ratepayer? You are telling me it is going to be a good thing and those commissioners are telling me they just do not know, and they are in the business.
Ms Burtch: They are in the business. I am a consumer, and I cannot justify the higher rate of electric heating compared with the other alternatives.
Mr McGuinty: Are you telling me I cannot trust them?
Ms Burtch: Cannot trust whom?
Mr McGuinty: The commissioners. Are they all bad?
Ms Burtch: You can trust them if you want to. Go ahead. I am not saying there is anything wrong with commissioners as such.
Mr McGuinty: Let's just assume that there are a few in there who have my interests as a ratepayer at heart.
Ms Burtch: Really? Where are they?
Mr McGuinty: Okay, thank you very much.
Ms Burtch: Thank you.
The Chair: Oh, Ms Burtch, please.
Ms Burtch: I am not finished?
The Chair: No, you are not finished. We want to hear more from you.
Mr Jordan: Yes, I could not let you go, Ms Burtch, without a special welcome here today. Ms Burtch is a next-door neighbour of mine in the township of Montague, county of Lanark, and I too do not have access to natural gas. Not being perhaps as well read or as committed as you are, I do really resent that on my hydro bill, the people down at the highway from where I live can switch to natural gas, along by Angelo's, and I will be subsidizing it. If that has to be done, I think it should come out of the general fund right across the province and make it fair for everyone. I do not think it should be on my --
Ms Burtch: It should come out of the hydro rate: Is that what you are saying?
Mr Jordan: No, I am saying it should come out of the general fund. Assign it to the Minister of Energy, say, and then it will be in his budget, not in the Ontario Hydro budget. Then my electrical rate will be for the electricity I used. That is about the way I feel about the thing, and you have made your points quite clearly.
The other thing I was concerned about was that somehow you had got the impression that this government has said no more nuclear. I do not think that is really a fact. I think they are saying, "No nuclear, but nuclear if necessary."
Ms Burtch: It is up to us to make it unnecessary.
Mr Jordan: Certainly we are going to support conservation, but on the other hand --
Ms Burtch: If it is done well, it can work.
Mr Jordan: I hope your positive approach is that way, and again, I appreciate your interest in coming over and the time you have spent on environmental issues and on energy in general.
Ms Burtch: Thank you.
The Chair: Mr Johnson, very briefly.
Mr Johnson: I have a very short comment and question. I think a lot of this has to do with attitude. Would you not agree? Mr Jordan's attitude probably is not exactly the same as mine.
Ms Burtch: Changing attitudes --
Mr Johnson: That is right, and then I am a conserver, I am an environmentalist. In fact, previously I heated with electricity, and last year I put up a chimney, put in a woodstove and reduced my costs by 37%, which I had not done previously. I do not regret that at all. In fact, I would not even expect to be paid by the government for having done that, because I saved directly.
My question is simply this: Do you not agree that attitudes generally have to change, and do you think enough emphasis is being placed on that with regard to the conserver society? The fact is that quite frankly we have not been the best society in the past. Do you think the government should be involved in encouraging attitudes to change? We cannot legislate it. Never could we legislate a change in attitude, but certainly to encourage people to change --
Ms Burtch: People should be encouraged certainly. Yes, I believe strongly that they should be encouraged.
The Chair: Ms Burtch, I have to tell you that this committee has been in as many places in Ontario as it has been permitted to go over the last couple of weeks, up north and then in Toronto and now Kingston through to Windsor. This legislation has attracted a whole lot of attention from a whole lot of people. As you can well imagine, the views expressed have covered the whole spectrum, but all the participants, regardless of where they are in the spectrum, have had a strong interest in the issue. You represent those people who are prepared to come forward and expend time and energy and some not-insignificant cost in making sure your views are known. We thank you very much, along with all the other people who have gone out of their way to visit with us. Take care. We trust you will keep in touch. Thanks, Ms Burtch.
1610
VINCE MALONEY
The Chair: One final matter, Vince Maloney. Come forward, please, and tell us who you are.
Mr Maloney: My name is Vince Maloney. I have lived around this area all my life. I am a retired steelworker. I was born and raised on a farm and was involved in municipal politics for nine years. During that term, I was the county of Frontenac's representative on the site selection committee for future generating plants for Ontario Hydro. I am referring now to around 1976. We used to meet down in Brockville, in the area of the Ottawa Valley and the St Lawrence Valley.
At that time, Ontario Hydro had a much different perspective or ideology than I perceive it to have today. For example, they assured us that the demand for hydro was going to increase by 7% each year over the year before, which would result in a doubling of the capacity each 10 years. I guess one way one could describe that is that Ontario Hydro's philosophy at that time was uncontrolled growth, which I understand is the same manifestation as cancer. I am thankful that has been changed.
Incidentally, I support Bill 118, but I wonder if we are all as conserver-minded as we seem to be. We have about 20 windows around here and we have all the lights on, and they have been on all afternoon. I do not think that speaks well for conservation. I know the hotel is going to charge the same amount whether you have the lights on or off, but if we were concerned about conserving, I think we could have seen quite adequately this afternoon with the lights off. This is just a point.
I did not anticipate making a presentation here today, so I did not go to any great pains to prepare anything. I suggested that maybe about five minutes would be adequate and that I might be prepared to attempt to answer a couple of questions.
The Chair: I do not think these people are going to let you go without responding to at least a few. Mr McGuinty?
Mr McGuinty: You had better come back to me, Mr Chair.
The Chair: No problem. Mr Jordan.
Mr Jordan: Thank you, Mr Maloney, for taking time to express your views on what you feel is a positive change in Ontario Hydro. You had the opportunity to sit on the site selection committee as the 500-kilovolt line went across from Kingston to Ottawa. Is that right?
Mr Maloney: No, not at that time. This was prior to that time. This was when they were determining where future generating plants were going to be located and they had concerns about the type of land and other constraints, one of them being, of course, the high prevalence of earthquakes in the St Lawrence Valley. The other constraint was that they did not want them any closer than 15 miles apart, because they wanted the water to be able to cool down a little bit before it got sucked into the next one.
Mr Jordan: You are talking about the plants now?
Mr Maloney: Yes, that is right.
Mr Jordan: When you were on the committee of course, the economy was booming and Ontario was the envy, you might say, of many of the other provinces in Canada. My concern is, should we be fortunate enough, if you will, to return to that state of the economy and the demand that was there, and if we have done our very best with conservation but cannot meet the demand for the new industry moving into Ontario, what would you suggest?
Mr Maloney: It is my understanding that Mohawk Power Corp or some of the private-enterprise generating companies and power corporations in the United States, which cannot put the state or the country up as collateral when they go to borrow money -- after Three Mile Island, they had others on the drawing board, some partially built. They did an about-face and offered to do what has been suggested here today: offer money, interest-free, to their subscribers to retrofit. In so doing, they found out that they could, on paper -- and to the best of my knowledge their calculations have been correct -- meet their obligations to provide power to their customers without having to build other generating plants and without any reduction in the quality of life. They made these loans interest-free to their consumers, be it a factory, a store, a house or whatever.
Mr Jordan: You say we are doing that now?
Mr Maloney: No, no. They are doing it down there and they did it down there. My authority for that was Donald MacDonald, who was quite knowledgeable about Ontario Hydro. He said that here in Kingston one night.
Mr Jordan: I am just saying that today is not for ever, let's face it.
Mr Maloney: But I believe Ontario Hydro was a showcase for flogging the Candu reactor back at that time. They were hooked on that. Hydro, I guess, is derived from the word "hydraulic." Have they exhausted all the hydraulic potential? I do not believe they have.
Mr Jordan: I guess that is one good point about the conservation program. They will be reviewing and studying the remaining hydraulic sites. But again, relative to the environment, you are going to run into an equal amount of opposition, if not stronger, when you go to develop hydraulic sites.
Mr Maloney: I remember reading an article one time about the potential of the tidal bore in the Bay of Fundy. If the Ontario government ever decided to harness the power of James Bay, the transmission from there to here was about what it would be to cross part of the States from the Bay of Fundy. That is a never-ending source of power. The tide goes in and out with that tidal bore twice a day, every day of the year.
Mr Jordan: If I could just read a short bit here on the revised plan, it says that Hydro's planning approach identified hydraulic as a priority option. However, since the 1989 plan -- at that time, they had the hydraulic option as number one. They have never had the nuclear option as number one.
Mr Maloney: We know what Atomic Energy of Canada was trying to do. They wanted to showcase. When Romania and all those other places, South Korea, all these freedom-loving countries, Pakistan and India and so on, came to buy a nuclear reactor, they wanted to see one in operation.
Mr Jordan: What it is saying here is that as the result of the Ontario government and the first nations in Ontario and the relationship between Hydro and the aboriginal peoples, Hydro officially suspended planning for six new stations and two extensions to existing stations on the Moose and Abitibi rivers.
Mr Maloney: Right.
Mr Jordan: So there are environmental problems no matter where we go.
Mr Maloney: That is right. The native people know the situation too, you know. If they could be convinced that the white man no longer speaks with forked tongue, they might be persuaded, for the benefit of all, to enter into some arrangement.
Mr Klopp: You mentioned earlier that you felt Ontario Hydro got kind of hooked on one power source, nuclear. In your mind, is this bill showing that Ontario Hydro should look at many forms of energy sources? Is this bill going to do that?
Mr Maloney: To be quite honest, I have not read this new act, but it would seem to me that Ontario Hydro should be concerned with energy, not just with power, whether you generate electricity from biomass or from wind or from whatever source. I think it should expand its horizons, if it does not already consider those potentials.
Mr Cleary: Just a bit of curiosity. I used to run into you a number of times over a period of years. I think you were a municipal politician. Is that correct?
Mr Maloney: Yes. I was on the AMO board.
Mr Cleary: Are you still on the board?
Mr Maloney: No, the people saw fit to retire me from politics.
Mr Cleary: They retired you?
Mr Maloney: Yes.
Mr Cleary: Okay, thank you.
The Chair: Mr Maloney, thank you. I thank all the people who came this afternoon. We appreciate everybody's cooperation.
We are coming back here at seven o'clock this evening. The first group is Darlington Alert. Of course, members of the public are welcome and entitled to come visit with us more this evening. There will be more coffee; it will be hot. We look forward to seeing you then. Thank you. We are recessed until seven.
The committee recessed at 1622.
EVENING SITTING
The committee resumed at 1856.
DARLINGTON ALERT
The Chair: People are here who believe they are to make their presentations starting at 7 pm. We are going to start. The first participant this evening is Darlington Alert. Will they please come forward, have a seat and tell us who they are. We have 20 minutes. Please try to keep your comments within the first 10 minutes so we have time for questions and answers.
Mr Gervain: There is no way of turning down the temperature in this room, is there?
The Chair: This room is an incredibly ironic place for these hearings to have been held today, for a variety of reasons.
Mr Gervain: It is sort of indicative of the endemic situation we face throughout the province. It is something I hope you people will see we do something about.
I would like to introduce myself. My name is Paul Gervain. I am a member of a local eastern Ontario group called Darlington Alert. I would like to thank the committee for the opportunity to present our views on Bill 118 this evening.
I speak of course, as you might expect, on behalf of and in favour of Bill 118. Darlington Alert is a small group that has been active here locally over the past years. Some forerunners of the group go back to as early as 1978: the Kingston Coalition for Nuclear Responsibility, and in Leeds county where I live, just across the county line in Seeleys Bay, the Leeds County Conservers Society. All these groups and a small group of activists have been working over the years on behalf of a non-nuclear future, and to that end have been actively promoting energy efficiency as an alternative to that nuclear future.
Darlington Alert is a constituent member of the Coalition of Environmental Groups for a Sustainable Energy Future, which is intervening in the environmental assessment hearings of Ontario Hydro's 25-year plan. I am proud to say that as early as 1979 members of our group, myself included, were involved in the first demonstration at the Darlington nuclear station when they were still just digging a big hole, into which they subsequently poured $13.5 billion of our money. Since that time, as I say, we have been actively promoting alternatives to what we see as a very expensive and an environmentally dubious endeavour; that is, nuclear energy.
We have followed with interest the recent announcement of Ontario Hydro with regard to its revised demand for electricity, which would seem to indicate that nuclear energy is a very unlikely alternative in the foreseeable future. We even indulged ourselves recently in a bit of champagne in celebration of the demise of nuclear energy and a non-nuclear future. We celebrated, but we also committed ourselves to continued vigilance, because we know that unless quantum level reductions in consumption of energy continue to happen we could slide back into an expensive nuclear miasma.
As you no doubt know, Ontario is third, I suppose -- only Quebec and Norway consume more electricity per capita than Ontario. We have a very unenviable record in energy consumption and I think it behooves us all to move as quickly as possible to redress that situation. It would also serve our economy and our industry to move towards more efficient use of energy and move away from a very antiquated means of doing business that I think is proving to be very costly and is making us much less competitive in a world environment because of our huge energy appetite.
I would like to quote briefly from Amory Lovins, who some of you may know as an energy guru of the Rocky Mountain Institute. He spoke of the need to move towards energy efficiency. He says:
"The opportunity for selling efficiency is real and pervasive and arrestingly large. Research by Rocky Mountain Institute has shown in detail that by equipping today's factories and buildings with the best equipment now on the market we can save about three quarters of all electricity now used, and save it at a cost far below the cost of just operating a coal or nuclear generating station, even if building it costs nothing.
"Similarly, full use of best technologies already demonstrated but not yet on the market could save nearly four fifths of all the oil consumed, at a cost well below that of finding new domestic oil. A saved watt of power" -- which Lovins refers to as a negawatt as opposed to a megawatt, a unit of production; a negawatt is a unit of conservation -- "a negawatt, is just like a generated watt only cheaper, cleaner, safer and faster to produce.
"Utilities that have helped their customers save electricity or gas through information, design support, low-cost loans and leases, rebates and outright gifts of the more efficient technology are able to sell the saved electricity more cheaply than building facilities to generate more of it, because they are getting it from facilities already operating and often already paid for."
This makes great sense to us. We fully support Bill 118. First, we have long believed that there must be more political control of Ontario Hydro. The need for this is self-evident. Second, we believe it is essential to switch from the inefficient use of electricity -- ie space, hot water and cooking -- to more efficient and environmentally benign energy sources such as natural gas, propane, high efficiency oil and solar alternatives.
Many still believe that electric heat is clean, whereas a switch to natural gas reduces carbon dioxide emissions by threefold and almost completely eliminates sulphur dioxide emissions. Electric heat is not cheap and it is not environmentally benign, and we should do whatever we can in the immediate future to move away from it. This would apply as well to electric hot water heating.
We believe Ontario Hydro must provide incentives to switch from electricity. Some may ask: "Why incentives? Why don't we just let market forces dictate the switch?" The answer is that the market forces are not being allowed to play themselves out. Electricity right now is artificially cheap. It is being held below market value by means of the fact that it is not taxed, by means of the fact that there are cross-subsidies and that electrical prices are blended. Cheaper hydro-electric power is blended with very expensive nuclear and coal power, resulting in an average cost that is less than the cost of the marginal cost of producing an additional bit of electrical energy. As a result of that, people have been given false market signals over the past decade to switch to electric heat and electric hot water heating, which has proven to be a disaster for those people. An electrically heated house similarly insulated to another house heated with natural gas is paying, I think, somewhere about 65% more in electrical bills than the gas utility costs.
We also believe that people will not switch unless it is made easy and economically accessible for them. This applies particularly in the very tough economic environment we are living in, when people have very little disposable income. I cite myself as an example of someone who, despite the fact that I am reasonably well motivated and environmentally motivated -- I look at my own life. I live in the country in an old farmhouse. When I moved into this farmhouse there was no insulation in it whatever and it was heated with an oil furnace. I look back over the 15 to 17 years since I moved there. The first step I made was to insulate the walls and the attic and take advantage of a federal government program to subsidize the insulation. I believe it was $400 that I got. It was some time ago; forgive me if I forget.
Second, there was an off-oil program, you may recall, back in the late 1970s or early 1980s which unfortunately had a lot of people switching from oil to electricity, which is like jumping from the frying pan into the fire. As a result of that off-oil program, I was able to install a high-efficiency wood stove that displaced my use of oil considerably. Actually, I have two wood stoves that almost entirely heat the house now.
A few years later there was a federal government pilot program that unfortunately did not go very far, but it subsidized the installation of solar hot water heaters to displace domestic electrical and gas hot water heaters. I took advantage of that program and installed a solar hot water heater, and therefore I am heating most of my hot water with solar panels on my roof.
Recently Ontario Hydro had a promotion whereby it came around and, for free, installed insulating jackets on hot water heaters, as well as low-flow shower heads. I took advantage of that.
Similarly I have installed about five or six compact fluorescent bulbs in my house, utilizing in part Ontario Hydro's subsidy. All these moves that I have made, these initiatives to conserve electricity in my own home, have been precipitated by incentives from the government. These incentives are absolutely necessary if people are to move away from the inefficient use of electricity and towards more environmentally benign sources of energy such as gas and solar.
I would like to stress that most of the attention with regard to Bill 118 is a switching from electricity to gas. This is, I believe, a very appropriate move for the 70% of households that are serviced by gas, but it should not be exclusively limited to switching from electricity to gas. Rather, all fuels that can compete economically with electricity, which is just about every fuel on the market, should be allowed to compete and should also be the beneficiary of these incentives. Solar hot water heating, for example, is right now economically competitive with electric hot water heating. It should be the subject of the incentive as well. Let's not restrict ourselves strictly to gas.
I know there is some opposition to this bill, as difficult as that may seem to some of us. I think you must acknowledge that the opposition to the bill, which I understand comes from AMPCO, the Association of Major Power Consumers in Ontario, and the Municipal Electrical Association essentially comes from people who are trying either to sell us electricity or sell us electrical products, or from large industries that are huge consumers of electricity and, I would say, wasters of electricity, and therefore in whose interest it is to keep electrical rates artificially low.
You should not listen to them, but to us, the consumers, who are paying 40% of our electrical bill right now into debt repayment for Ontario's nuclear program. Some of us are paying 65% more than we need to for fuel because we were saddled with electrically heated homes that builders found expedient and economically wise to build because of the low capital cost, but are of course very difficult and expensive to heat.
We need incentives to reduce our use of electricity. It is in Ontario Hydro's and the Ontario public's interest to facilitate this switching of fuels. I believe Bill 118 will go a long way to helping that happen. I urge your support for Bill 118.
1910
Mr Jordan: I really do not have the time to enter into a discussion of the pros and cons of Bill 118 in a minute. As you have stated yourself, there is considerable concern about the bill from different aspects, such as the authority being given to the government without it being discussed in the Legislature. We do not see any reason why a directive should not pass through the Legislature and be discussed. The government still has the power to put it through, but at least it has been in the Legislature and it has been heard. The other thing that has been questioned is the subsidization of the switch-over. Is it fair to the people who do not have natural gas available?
Mr Gervain: Why would you ask me that since I do not have natural gas available? I thought this was a question. If so, why do you not ask me whether it is fair to me? I do not have natural gas available to me because I live in the country. Is it fair to me?
Mr Jordan: That is for you --
Mr Gervain: Is that your question?
Mr Jordan: No, that is not my question.
The Chair: Feel free to respond to it, if you want.
Mr Gervain: What is your question?
The Chair: Look, if you want to respond to Mr Jordan's comment, that is entirely appropriate. Go ahead.
Mr Jordan: I do not have a question because I do not expect an answer. Thank you very much.
The Chair: But go ahead and respond, if you want.
Mr Gervain: I would respond because obviously I believe it is fair. As it is now, the rest of us who have been using small amounts of electricity in our everyday lives have been, in effect, subsidizing those who use a lot. We have to look not just at the rates of electricity, what the actual rate per kilowatt is, but what our bill is at the end of the month. If consumers are allowed to make efficiency improvements and therefore reduce the overall demand for electricity, despite the fact that their electrical rates may go up, their overall bill will go down. It is up to us to help them do that.
The Chair: Mr Jordan, do you want to reply briefly to that?
Mr Jordan: No, that is fine.
Mr Arnott: I have a quick question. You seem to be very strident in your -- almost -- hatred of the consumption of electricity. I do not know if that is a fair way to characterize it.
Mr Gervain: Sure.
Mr Arnott: I wonder why you have said you have taken advantage of a lot of government programs. Why do you require an incentive to change your house to restrict the consumption of electricity?
Mr Gervain: That is a good question. If electricity were much more expensive than it is today -- although for some of you it is expensive today, it was much cheaper several years ago over the course of the historical events I have told you about. Essentially electricity has been so cheap that it has competed very well with other fuels. It has therefore been necessary to have economic incentives to move away from its use. It did not make strict economic sense, based on my electrical bill. I could not justify the payback on some of these things. However, if we look, for example, at a 15-kilowatt electrically heated home right now, Mr Franklin, the past chairman of Ontario Hydro, has stated Hydro's own numbers indicate that it costs Ontario Hydro about $50,000 in installed capacity to supply the electricity for that home.
Mr Jordan: Point of order, Mr Chairman.
The Chair: One moment; let this gentleman respond.
Mr Gervain: If we can encourage people to reduce their demand for electricity, it is much cheaper for Ontario Hydro to conserve a megawatt, than to produce a megawatt.
The Chair: Mr Jordan, I think you have a point of some sort. I am not sure whether it is technically a point of order, but go ahead anyway.
Mr Jordan: I am not sure either, but it is a point of information anyway, and it is relevant to your statement. I just received this information from Ontario Hydro on the "cost of installing electric heat in Ontario homes:
"The most up-to-date figures are contained in Ontario Hydro's response to interrogatory 4.7.26. from the Coalition of Environmental Groups at the Environmental Assessment Board's hearing into the demand/supply plan. The response, which is attached, estimates that to supply electric space heating to a 15-kilowatt furnace in an Ontario home would require about $7,000 to $11,200 in net capital cost in the electricity system."
Mr Gervain: I would be happy, Mr Jordan, to --
The Chair: Let me explain.
Mr Gervain: I am quoting Mr Franklin, the past president and chairman of Ontario Hydro, and I have the document. I have the speech by Mr Franklin, who resigned about a year ago, I believe.
The Chair: To be fair to everybody, that figure has been cited many times during the course of the last few weeks. Mr Jordan raised the issue of this corrected or amended figure from Ontario Hydro. Please let Mr Jordan finish reading the letter. It is a copy of correspondence -- January 1992, as I understand it, Mr Jordan -- from Ontario Hydro. Let Mr Jordan finish. This is clearly a matter of some issue and it is only fair that this be clarified.
Mr Jordan: Thank you very much, Mr Chairman. This letter is dated January 27, 1992. The thing I am bringing out here is that we should be working on information that is as correct as we can get.
"Since that response was prepared, Ontario Hydro has updated its overall forecasts. We published these changes in the DSP Update, released on January 15 this year. The Update foresees the possibility of capacity surpluses through much of the next decade. This is a change from the outlook when the original plan was published in December 1989. As a result of this change, the incremental cost for the system to supply space heating load will be different from that previously estimated. In particular, the short-term system incremental capital cost of supplying the space heating load is likely to be lower than previously foreseen.
"Updated estimates of the system incremental cost are scheduled to be completed by the spring of this year. At that time, we may be able to provide a more current estimate of the system incremental cost of supplying residential electric space heat."
At the present time, it is from $7,000 to $11,200, which is considerably different.
Mr Gervain: If I could explain the difference in that, it relates to the fact that Ontario Hydro, as a result of this new demand load projection, is seeing that it can meet a lot of the electrical demand by use of existing capacity that is already installed, which includes hydro electric --
Mr Jordan: No, I am sorry.
Mr Gervain: Allow me to finish, please. What we were talking about was that if a new home is built today and is electrically heated, and if Ontario Hydro has to build new capacity to heat that home, Ontario Hydro's own numbers for cost per installed kilowatt is $3,800. Multiply $3,800 per installed kilowatt as the marginal cost of that electricity times 15 kilowatts and you would get about $50,000 or $60,000.
If you want to blend that in with the lower cost hydro-electric power -- the des Joachims dam in the Ottawa River that was built in the 1940s and 1950s -- and artificially lower that rate, that is fine. But the new house built today that requires that additional margin of capacity in fact will cost Ontario Hydro closer to $50,000 and cost us $50,000.
The Chair: In response to what is obviously a variation in interpretation here, clearly you are referring to the October 22, 1990, speech by Robert Franklin when he was Hydro president and CEO, where he is cited as using the figure $50,000.
Mr Jordan has, and I believe other members of the committee have, received correspondence from Hydro, because they sought clarification as well. I should tell you that the Coalition of Environmental Groups at the demand management hearings sought a clarification of Mr Franklin's figure of $50,000. The matter is still clearly in some issue, and during the week of February 17 representatives of Ontario Hydro, including the chair of Ontario Hydro, will be appearing in front of this committee. I have no doubt that your interpretation of the $50,000 as compared to what Mr Jordan has referred to, and his reliance upon the new figures provided by Hydro, will be put, at the very least, to personnel from Ontario Hydro if not the chair himself. You will undoubtedly be interested in the transcript of those hearings. Get hold of the clerk or your MPP, Mr Wilson, whoever. They will be pleased to keep you advised. It is an interesting issue and it is one about which there is some disagreement. I have no doubt that the purpose of Mr Jordan and others was simply to seek clarification.
1920
Mr G. Wilson: I really appreciate your submission, informed as usual. When you say more political control of Ontario Hydro is self-evident, could you elaborate briefly on what you had in mind?
Mr Gervain: I saw a graph recently on Ontario Hydro's demand projections for total electrical demand for Ontario up to the year 2010, I believe. I do not have that with me. It was a bar chart. It showed the 1976 projection like this and the 1980 projection like this: You could ski down the slope.
Ontario Hydro has been grossly out of whack with reality. They have been blinded by their massive commitment to nuclear energy and to energy supply as opposed to meeting the demand side. For 10 or 15 years, environmentalists and even conservative economists have been lobbying the Ontario government and Ontario Hydro to look at the demand as opposed to keeping on blindly servicing supply. Finally, in 1992, we see Ontario Hydro start to make some moves in that direction. If they had started to make those moves in 1978 or 1980 we would not be in the mess we are in. We would not have spent $13.5 billion on Darlington. we would have spent that money much more efficiently on conservation measures that could have been implemented 10 or 15 years ago.
Ontario Hydro really has very little credibility in its energy projections. I think they have shown themselves very blind and stubborn with regard to alternative futures that other people have seen. I know we do not have a lot of time to go into this, but I think that is one aspect of Ontario Hydro's misguided sense of purpose that has bothered a lot of us. We obviously would like to see some political control brought to Ontario Hydro.
Mr Huget: Just a brief point of clarification: Mr Jordan refers to his figures with regard to capital investment costs. It does not include the cost of operating the facilities or fuel, so the figure goes up somewhat there.
Mr McGuinty: Mr Gervain, I have been listening with interest to your presentation. I am a bit confused when it comes to Hydro. They are the people who told me at one point that I could live better electrically, that we could build Darlington, I think, for around $4 billion.
Mr Gervain: $3.5 billion.
Mr McGuinty: It was $3.5 billion, yes, and now they are telling me I can save 9,900 megawatts by the year 2014. Why should I believe them now?
Mr Gervain: You should not. They can save probably double that.
Mr McGuinty: Why do we not double it?
Mr Gervain: Double it. In 1978 when they were saying Darlington was going to cost $3.5 billion, if you check back in the record, the environmental groups were saying $12 billion or $13 billion and everybody said, "You're crazy." Darlington is now placing their demand reduction figures at -- I do not know what the real numbers are. I do not have the resources to project this data, but intuitively, based on my scepticism of Ontario Hydro's ability to predict the future, I would say they are way low.
Mr McGuinty: One of the things you tell us is a good thing is that Bill 118 would allow government to gain further control over Hydro. What would happen if some government, in reliance on Bill 118, decided it was going to exercise its powers, given to it under Bill 118, to speed up the development of nuclear generation?
Mr Gervain: I have reservations about that as well. My understanding of the legislation is that Ontario Hydro is unlikely to come under direct and total control of any government. I know the history in Ontario has been that the Ministry of Energy and the Ontario Energy Board, who have been the nominal people controlling it, have been like the tail wagging the dog. They are very small. The Ministry of Energy is very small and has proven to be not terribly effective at controlling Ontario Hydro. I would hope that some measure of public accountability would be brought to bear.
In the past, Ontario Hydro has just gone its way with virtually no public accountability. Surely there has to be a middle path somewhere. I share your reservations. I would not want to give over complete control to any government. But none the less, Hydro has to be brought under some degree of public control as opposed to governmental control.
The Chair: I want to thank you on behalf of the committee for coming here this evening. You have obviously been marginally provocative, and that is okay because this type of discussion is inevitably productive. We thank you for your historical interest in the matter, for your ongoing interest, and for taking the time to come here this evening.
ONTARIO PUBLIC INTEREST RESEARCH GROUP
The Chair: The next group is the Ontario Public Interest Research Group. Come on up. While you are seating yourselves, I should explain that this is a three-party committee with representatives of each of the three political parties in the Legislature. In the Liberal caucus is Dalton McGuinty, who is the Energy critic for the official opposition; with the present Conservative caucus here in the committee is Leo Jordan, who is the Energy critic for the Conservative party, and among the government caucus members is the MPP for Sarnia, Bob Huget, who is also the parliamentary assistant for the Minister of Energy.
We are all going to listen with great care. Tell us who you are and proceed with your comments. Try to keep them to 10 minutes or under because we want to save time for exchanges and conversation and questions.
Ms Mueller: My name is Toby Mueller. With me are Keith Stewart, Robin Roots and Heather Wornell. We are here today representing the Peterborough chapter of the Ontario Public Interest Research Group.
OPIRG is a student-funded non-profit organization. We are supporting the proposed amendments to the Power Corporation Act contained in Bill 118. We believe these amendments will increase democratic control over Ontario Hydro and provincial energy policy. The changes will facilitate improvements for the environmental, social and economic wellbeing of Ontario.
Accountability and fuel switching are the main issues we would like to address. By clarifying the relationship between the government and Ontario Hydro, this bill will allow for greater accountability. Although we know that directives by the government of the day to Ontario Hydro are not a new thing, they have not always been open to public scrutiny and comment. This amendment will define the responsibility of the government in the direction of Ontario Hydro and will make both the government and Hydro more accountable to the people of Ontario.
Policy directives should be public in order to avoid the disastrous consequences of backroom deals, such as the contract for Elliot Lake uranium, which has cost Ontario taxpayers and consumers an extra $1.2 billion over the past 10 years.
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As members of a public interest advocacy group, we obviously feel very strongly that the democratic process can only happen when there is an active and informed public participation process. That is why we are here tonight. We recognize that Ontario Hydro is part of a community of industrialists, government officials and scientists who form a genuine electric power establishment. The legitimacy of this community comes from its claim to be working in the public interest. Given the historical facts, I do not believe this to be true. The only people who work in the public interest are the public, and it is essential that all Ontarians, not just technocrats, have access to the decision-making process that determines energy policy.
It is important to have democratic control over Ontario Hydro. It is the single, largest corporation in the country in terms of assets and the largest by debt. It is a crown corporation and should be accountable to the people of Ontario. We own it and it should act in our best interests by supplying power at the lowest social, environmental and economic costs.
The era of "Live Better Electrically" is over. In the last several years, the global environmental crisis has finally hit home. People are becoming increasingly conscious of the fact that we have to consider carefully a broad range of alternatives in order to find answers to our pressing environmental problems. Imagination and ingenuity can only be generated from a truly democratic process. If we leave energy policy up to the technocrats, we run the risk of the same boring, centralized and power-hungry answers.
We do not believe this legislation is an attempt to run Hydro from Queen's Park. Bill 118 proposes that the government set policy, but Ontario Hydro is still responsible for operational decision-making. Energy policy is a political issue and not a technical one. The direction Ontario takes in terms of energy policy must be decided by our elected representatives.
Mr Stewart: The other aspect of Bill 118 we would like to address is fuel switching. Currently the Power Corporation Act expressly forbids the provision of loans or incentives for the conversion from electrical space heating to other more environmentally and economically sound forms of heating. We support the amendment in the bill that will allow for our public utilities to assist with such conversions.
In order to understand why fuel switching is so important, we need to look at Hydro's historical role as a promoter of inappropriate uses of electricity and the economic, social and environmental impacts of this policy.
From its creation in 1906 as the first publicly owned power utility in North America, Ontario Hydro has grown at a fantastic rate. Underlying this relentless expansion has been the ideology that increased sales would result in lower costs per kilowatt-hour. Sadly, this mistaken assumption has resulted in what have been, on occasion, inappropriate or even ludicrous uses of electricity.
It was the arrival of natural gas in Toronto in 1955 touched off a 20-year advertising spree for electricity. Even in 1955 natural gas was a cheaper source of heat, but rather than allow gas to cut into its market share, Ontario Hydro, the Association of Municipal Electrical Utilities and electrical supply firms like Canadian General Electric and Westinghouse launched a major marketing counterattack, the costs of which we are still paying today.
The "Live Better Electrically" campaign was designed to convince people that consuming electricity was the modern thing to do. The campaign included travelling electric circuses, advertisements, gimmicky giveaways and sweetheart deals with developers to make all-electric houses, even though gas or oil space and water heating were and still are cheaper. This campaign was run by public utilities, but was not in the public interest. It used public funds to promote inappropriate uses of electricity.
As Louise Comeau of Friends of the Earth has already told this committee, the overuse of electricity for things like space heating is a waste of resources comparable to cutting butter with a chainsaw, and yet by 1970, electrical heating was being installed in one out of every four new houses being built. According to Statistics Canada, by 1990 there were 731,000 electrically heated homes in Ontario.
The reasons we oppose the use of electricity for space heating include its excessive cost, the brunt of which is borne by the poor of our province, and the unnecessary and unacceptable damage to the environment that it entails.
Ms Roots: Electric heating is extremely expensive for the consumer. Even in the years of high gas prices, it was more expensive than gas or oil. According to the study conducted by Passmore Associates, the deliberate marketing of electricity by Ontario Hydro has encouraged consumers to spend 77.8% more for heating services than if they had used more cost-effective fuels. Between 1975 and 1991, this has cost ratepayers almost $4 billion in extra heating costs. To argue for electrical heating, as does the Municipal Electric Association, is to argue against the best interests of the ratepayers and taxpayers of this province.
Electrical space heating is particularly hard on the economically disadvantaged of our province. Because electric heating is cheap to install, it is commonly found in low-income rental housing. Most of the time these homes are poorly insulated, which only increases the environmental and economic costs. These families can least afford the extra costs associated with electrical heat.
For families on low or fixed incomes, large lump-sum expenditures such as those associated with fuel switching or insulating may be impossible, even when this expenditure would save money in the long run. The Ontario government has taken a step forward in banning electrical heat in non-profit housing, but more can be done.
Ontario Hydro and local utility commissions should assist with the financing of fuel switching and conservation programs. The potential impact of such a program is enormous. An aggressive fuel-switching program combined with government legislation could result in up to 6,000 megawatts of energy savings by the year 2000. When compared to the $13.5 billion spent so far on the 3,500-megawatt Darlington nuclear generating station, the cost of such a program would be minimal. If there are concerns regarding cross-subsidization, this investment in Ontario's future could be considered a loan to be repaid out of savings on electrical bills.
Electric space heating is not only hard on the pocketbook, but it is also hard on the environment. Almost all the power used for electrical space heating comes from coal-fired generating stations. Coal is one of the dirtiest fossil fuels available. It contributes significantly to particulate and nitrous oxide emissions, sulphur dioxide emissions which cause acid precipitation and to atmospheric carbon dioxide, which is the leading greenhouse gas.
Electric space heating is very inefficient. Less than one third of the energy from coal actually becomes electricity and a further 8% is lost in transmission, meaning only one out of every four units of energy produced actually makes it into your home. High-efficiency gas and oil furnaces, by way of contrast, transform 90% to 95% of the energy into heat without transmission loss. As a result, large quantities of coal are being imported from the United States to do something that would be far more effectively done by alternative fuels.
These alternatives do exist and are feasible. Seventy per cent of Ontario residents have access to natural gas. Where natural gas is not available, other fuels such as wood and oil are. Renewable and environmentally friendly technologies, such as solar-powered water heaters, are becoming increasingly effective and competitive.
Ontario Hydro and local public utility commissions would best serve the interests of their customers and protect the environment if they were to provide loans or incentives for the conversion from electrical heat to cheaper and more environmentally benign forms of heating. Hydro's inappropriate promotion of electrical heat in the past has resulted in the current predicament. Hydro has a responsibility to help its customers get out of the hole that it has dug for them.
Ms Wornell: I would like to bring to your attention this example from Peterborough. OPIRG is currently entering into a home-warming partnership with the Peterborough Utilities Commission and Peterborough Green-up. The utilities commission will provide the materials, while OPIRG and Peterborough Green-up will provide the volunteer training, labour and coordination in order to better insulate low-income housing through caulking windows and sealing doors.
It seems that everyone will gain. Low-income families, for whom the relatively large initial investment in materials and the lack of technical skills makes such a stop-draught program otherwise unlikely, will have lower heating bills. The reduction in peak demand for the Peterborough Utilities Commission puts off, perhaps permanently, the need to invest in costly new supply. Producing less power is good for the environment, as fewer resources are consumed and fewer pollutants and greenhouse gases are produced. The catch is that this program will only be implemented in houses that are electrically heated, as Hydro and the Peterborough Utilities Commission currently cannot encourage customers to conserve on anything but electrical heat.
Conservation programs are part of a win-win scenario and should be pursued much more aggressively. They lower costs for consumers. They are relatively labour-intensive, as opposed to building new power supply, which demands large inputs of capital. They create jobs through the province and they preserve and protect the environment.
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Ultimately, the consumer would be best served through a combination of fuel switching away from electrical space heating and a comprehensive conservation program aimed at reducing energy waste. The cost of these programs would easily be justified by the elimination of the need to build expensive new power stations.
In conclusion, we would like to emphasize that Ontario Hydro and its municipal partners are not and should not believe themselves to be in the business of selling electricity. Instead, our public utilities should be attempting to serve their customers in the most efficient way possible, taking into account all financial as well as environmental costs.
Energy policy, as mentioned before, is a political not a technical issue. As such it must be determined in an open manner that allows for public participation and for voters of this province to hold their elected representatives accountable. This legislation is a forceful step in the right direction.
We thank you for your attention and for this opportunity to convey our concerns to you.
Mr Huget: Thank you very much for taking the time to come down and give your presentation before the committee. Briefly, I think probably we can agree that Ontario Hydro, in your view, needs to be more accountable to the people of Ontario. My question is around that process. Do you feel elected officials are in the best position to uphold that accountability to the taxpayers when we deal with Hydro? I would like your views.
Mr Stewart: If I could respond to that, I think what we need to do is make the whole process more transparent. If we have politicians setting energy policy with advisers -- we are not expecting everyone in Queen's Park to be energy wizards.
The Chair: That is a given.
Mr Huget: Or even wizards, for that matter.
Mr Stewart: Right now it is unclear who is responsible for energy policy. Is it the technocrats in Ontario Hydro? Is it the Minister of Energy? If we can clarify who is accountable, then Ontario Hydro would be accountable to the government. The government will be accountable for giving clear direction to Ontario Hydro.
Mr Huget: The utility commissions have appeared before the committee on a number of occasions and will continue to until the conclusion of the hearings. They are opposed to this bill. They say they are opposed because they are acting in the best interests of their customers. Do you believe they are? You are their customers.
Ms Mueller: I do not know why they think they are. I have not seen transcripts of what they have said in these hearings, so I do not know what kind of evidence they are putting forward to say they are working in the best interests of their public. In the example of this project we are engaging in in Peterborough, we have had to do an incredible amount of wrangling to get this done, and it is a very simple matter.
Mr Huget: With whom?
Ms Mueller: With the general manager, Bob Lake, of the Peterborough Utilities Commission.
Mr Huget: So you do not see eye to eye on that?
Ms Mueller: No. I am not convinced he is actually committed to having a really comprehensive conservation program happen in Peterborough.
Mr Huget: Did anybody from a municipal utilities commission ever ask you what your best interests are?
Ms Mueller: No, I do not think so.
Mr Klopp: Just to add to that, you blame the general manager a little bit. Obviously you have talked to the general manager, so it is like you are talking to your sister every day; you think it is her making the decision. What about the elected officials? Did you talk to them? They are ultimately going to say to him, "If you're not doing your job, we'll fire you," that type of thing. Did you talk to the elected officials on your PUC to promote your idea?
Ms Mueller: Yes, we did.
Mr Stewart: This program was actually suggested by one of the new commissioners.
Mr Klopp: So the commission then an elected official got the bureaucracy working?
Mr Stewart: Right.
Mr McGuinty: If I went into a crowded room and said to people, "Look, we've got an organization here, some 36,000 people, highly paid and involved in some very technical operations and we're having difficulty with them, so we're going to put politicians in charge," I am not sure what kind of response I would get to that.
Just to give you an idea of what can happen, the Ontario Energy Board, which is Hydro's so-called watchdog -- some people refer to it as more of a chihuahua than a pit bull -- reviews, of course, the rate proposals put forward by Ontario Hydro on an annual basis. One of the things they looked at last time was how certain money was being spent with a view to producing energy conservation. The OEB, a body that I like to think is impartial, said that money was not being well invested. It was pretty clear it was only being spent as a result of a political directive. My concern remains. We have a problem with Ontario Hydro. I do not think there is any doubt about that. Does the solution lie in bringing government to bear? Does it lie in beefing up the OEB? More recently some people are telling us we should bring in another force that has never had the opportunity to be brought to bear and that is privatization, that we should let the market force at it and see what that does to it. Do you have any comments?
Mr Stewart: On the issue of bringing the politicians to bear, I think they already have been. I do not think there is any question but that there have been policy directives to Ontario Hydro, whether it is the uranium deal or the increased funding to Atomic Energy of Canada Ltd. Those were political decisions and I do not think it is an entirely new thing to bring policy directives to bear. I think we have to make the process more transparent so everyone knows what those policy directives are and so we can hold our elected officials accountable for them.
Mr McGuinty: Were you pleased with those two decisions you refer to? were you pleased with those?
Mr Stewart: No.
Mr McGuinty: You might end up with more like those in the future, though, as a result of Bill 118.
Ms Mueller: I think the point is that those decisions were made beyond the scrutiny of the public eye. If they had been visible to groups like ourselves, they might not have happened.
Mr Arnott: Thank you very much for coming in this evening to present to us. The existing Power Corporation Act as presently administered by the Ministry of Energy uses the terminology, with respect to the minister's power and the government's power, "The minister may from time to time issue policy statements that have been approved by the Lieutenant Governor in Council." This bill changes that terminology to "policy directives" which, I believe it says, must be implemented efficiently and essentially immediately. I am not sure why the government requires that new wording. I assume there is a reason. I assume the government thinks the minister should have more powers with respect to forcing Hydro to do its bidding.
My concern is that some day perhaps we might have a Minister of Energy who has this new power that is very strong who might be unsophisticated, unlettered and perhaps not particularly knowledgeable or with no background on energy issues and electricity issues. We might have some problems if that were to occur. Would you respond to that possibility?
Ms Mueller: I do not know, I think there are quite a lot of groups that are quite on the ball, that are watching politicians very closely. I do not think anything major could happen in that scenario because there would be a lot of people down that person's throat very quickly.
The Chair: I want to thank you for taking the time to come here this evening. As you can well imagine, there has been a wide range of views presented in response to this legislation, covering the complete spectrum. Everybody here has been very impressed with the interest there is by the public across the province. The committee has been in northern Ontario, Toronto, now here in Kingston, and tomorrow we are going to Chatham. We appreciate the interest you have and the energy you have generated to develop and articulate the approaches you have to the issues. We trust you will keep in touch. You and others can get transcripts not only of today's proceedings but of the complete set of hearings by calling your MPP or the clerk of the committee. Those are available to you or anybody free of charge. I trust you will keep in touch.
STAN SEGEL
Mr Segel: Good evening. My name is Stan Segel. I am presenting a brief as an individual. I am a recently retired physics professor from Queen's University. I will speak to you tonight in support of Bill 118.
The background of my support is as follows. When I and a group of friends became interested in energy matters at the time of the oil crisis of the 1970s and the expansion of the electrical generating system as represented by the Darlington plant, we found at that time that it was practically impossible to get Ontario Hydro to listen to the concerns and comments of non-Hydro personnel such as ourselves. Our concern is how to deal with lack of economies of scale, the finiteness of the province and the limits to exponential growth, as well as other environmental issues.
At that time, the lack of attention paid by Hydro to those of us outside the electrical generating system was such that we considered the possibility of political action designed to bring Hydro entirely within a provincial Ministry of Energy, much like the comments you were referring to a few minutes ago, so that the energy problems of the province, not just its electrical problems, might be dealt with in a rational way, which heretofore had not occurred. The downside, which of course is what you have already discussed as well, is that such a proposition has the appropriate scepticism that people have about the ability of any government ministry, provincial or national, to run anything in a satisfactory way.
The present bill seems to me to be a reasonable first-step compromise. It allows in its limited way for public input via the political representation in Hydro decision-making processes without dominating the independence of the corporation any further.
It also expands the notion of the corporation from one that simply supplies electricity to one that is capable of managing energy and electricity, including the non-use of electrical energy. This is important for several reasons. When faced with a shortfall of energy -- the example I am choosing, of course, is electrical -- there are several ways you might remedy the process. One is to simply expand the supply in the form of a large generating station such as Darlington. But to be able to pay for Darlington, there has to be the demand to consume Darlington once Darlington is finished, so you advertise up to demand. When Darlington is finished you find that demand indeed has overtaken what you have suggested and then at the conclusion of the process you still have the same shortfall. This is known to some people as the upward-outward spiral and to others as the downward-inward spiral.
Another way would be to control or manipulate the demand, as opposed to controlling or manipulating the supply. Paul Gervain has already mentioned to you the off-oil program and the Canadian home insulation program so I will not bother detailing those things any further. What I would like to mention to you is a little known consequence of that combination of two programs. Do you remember what the off-oil program did? It got you off oil but that was really neither here nor there. What the off-oil program enabled people to do was switch over to energy-efficient furnaces. It really would not have made any difference whether they had switched from oil to oil or oil to gas, as long as they went to a more energy-efficient furnace. Of course, the other thing it did was enable people to insulate their houses so they did not really need so much energy.
What was the consequence of that program? The consequence was that between 1980 and 1990 the absolute energy consumed in home space heating in Ontario declined in absolute terms. Despite the population growth between 1980 and 1990 and despite the larger, increased number of houses and apartment buildings and so on, the absolute amount of energy of all kinds decreased between 1980 and 1990. That is the consequence of what can happen if you go out and say, "What is it we want to achieve and how do we go about doing it?"
When those programs were terminated, I guess in 1983-84, I would estimate that fewer then 20% of the appropriate homes in the province had been so treated. As I say, there is probably a very large market out there for reducing energy demand in absolute terms in the province, if that is what we decide would be a good thing to do.
Hopefully one of the functions of the reconstituted Hydro would be the realization that it is not just electricity that needs to be conserved simply because it is the most expensive, but that all energies need to be conserved. Gas-heated homes need to be better insulated because even gas supplies will not last for ever. Even gas pollutes to some extent, so what we need is a broader perspective on the ways in which energy is utilized.
I hope Bill 118 succeeds and that the public political input into a revamped Ontario Hydro will better serve the energy needs of the province.
Mr McGuinty: One of the things that concerns me about Bill 118 is that it contains a provision which, simplistically, provides that directors are going to stay out of hot water as long as they do as they are told; that is, there is a provision in the bill which exempts directors from liability.
We have already had an instance of the government using this. When the government directed Ontario Hydro to do what it did at Elliot Lake, it inserted a provision in the order in council which said, "...officers and directors of the Corporation" -- referring to Ontario Hydro -- "who exercise their decisional discretion in compliance with the policy set out herein will be saved harmless and indemnified, jointly and severally, from and against any and all liability incurred arising from such exercise."
The logical interpretation is that the directors felt what they were doing was against the interests of the ratepayers, the people to whom they are, in law, accountable and to whom they owe a very special duty, so the government said: "We want you to go ahead. We are going to exempt you from liability." In fact, the directors said, "If you exempt us from liability, we will go ahead." Are those directors not there to protect us?
Mr Segel: First, I think you are gilding the lily just a little bit by implying that the directors of Ontario Hydro have been concerned directly about the rates the ratepayers pay. If that concern had really been there, the system would have developed in a different way. Somehow the common sense that exponential growth is not going to work and that therefore you have to think of some other way -- you cannot simply imagine the future the way the past was -- would have got hold of them and they would have constituted the system in a different way so that the economies of scale would indeed have resulted and ratepayers would have paid less. When you say these big guys up there who are concerned about our rates are now being told to do something else, I do not really believe they have ever had our interests fundamentally at heart.
Second, I cannot comment specifically on that particular situation. I am aware of the fact that this -- I do not know whether it is a buyout or a copout -- occurs continuously, unfortunately, in the political process. Even presidents of the United States have been known to be exempt from liability as long as they promise to resign. That is really a political science question that I am not in a position to answer.
You have raised several questions this evening directed towards, "How do you think the political process really works?" I was sitting back here thinking: "That's one of the chances you take with the democratic process. Sometimes you get turkeys and sometimes you don't. You can always hope for the best."
Mr Klopp: That was based on past experience in government, I think.
Mr Segel: I have already expressed my reservations about letting any provincial ministry take over anything completely, so you understand my conservative concerns in this matter.
Mr McGuinty: Why should we have a board of directors then?
Mr Segel: You mean any board of directors?
Mr McGuinty: No, just the board for Hydro.
Mr Segel: Actually, I am not sure. I know why it is important, at this particular juncture, to have some representation via a diffuse political process on the board, or maybe not so much into the board but rather into the decision-making process. As the Ontario Public Interest Research Group has said, somehow the processes need to be made a little bit more transparent. That is a really nice term. We have to be able to see it. We have not been able to see it. I do not think the board of directors has really done very much except rubber-stamp everything Ontario Hydro more or less decided it wanted to do, whoever those top dogs were.
2000
Mr Arnott: I have a couple of questions. I am interested in the concept -- the historical concept, I guess we should start calling it -- of power at cost. Historically Ontario has had a great competitive economic advantage in that its electricity supply has been looked after through something called "power at cost." Presently this Bill 118 further deviates from that concept. I am just wondering if you think power at cost was ever a worthwhile objective for Ontario Hydro.
Mr Segel: My feeling is that as OPIRG has suggested, we have never really taken into account all the costs. It is not just the cost of the cheap coal from Pennsylvania that is important any more. It may have been important 20 or 30 years ago, but we no longer say that is the only cost. We have to consider the cost of what happens to the SO2 if we decide not to take it out of the stacks, which is an initial one, and the particulate matter and so on and so forth. I would like to think that we now think there is more than just the direct money involved, but rather all the other higher second- and third-order costs that are really important both for the province and for the globe to take into account. Therefore, it is the wider and larger picture that we need.
Mr Arnott: We have heard from many witnesses, though, that our relatively inexpensive source of reliable electricity through the power at cost principle was one of the economic advantages that gave Ontario a great deal of help as it industrialized in this century. Do you dispute that?
Mr Segel: It is possible that statement is true, but there is still a very large disparity between power at cost in the United States and power at cost in Ontario, so if a company were deciding on power costs alone, Ontario would still have an advantage to offer.
Mr Arnott: My second question deals with the nuclear moratorium that was announced in the speech from the throne in 1990. I wonder what your position is on that particular aspect of the government's energy policy.
Mr Segel: I have been opposed to the nuclear power program for some time.
Mr Arnott: Could you explain on what basis?
Mr Segel: What did you mumble?
The Chair: I think it was a mere mumble. He did not intend anybody to hear it.
Mr Segel: It was a polite mumble. The origins of my opposition to nuclear power probably came around 1975-76 when I simply decided that the health risks involved in nuclear power did not warrant the benefits and that the consequences of a possible accident, some of which we have managed to realize in the last 16 years, fortunately not so far in Ontario, simply verify it is a risk that is not well taken.
Mr Waters: There has been much said here, throughout the hearings actually, about switching. It seems to me that my friends from the far side of the room have a real problem with the switching. Earlier on this evening it the "Live Better Electrically" campaign was talked about where Hydro subsidized, bribed, did whatever it could to get people to live better electrically and implied that there were great savings and it was going to be a wonderful life, which turned out not to be. Do you not feel it is just as fair now that Hydro help people get into something that is more energy-efficient, or do you have a problem with that?
Mr Segel: I personally do not have a problem with that. I see it as being to Ontario Hydro's benefit specifically, but I also see it being to the benefit of the province as a whole, in much the same way the Canadian home insulation program and the off-oil program were beneficial. It is a very narrow definition of the word "beneficial." It is beneficial in the sense that it is important we all start to consume less energy.
If this is a program that not only does that but saves everybody money at the same time, I do not really see how you can have an argument with it. I think what you are suggesting is, why should it be on Ontario Hydro's shoulders to carry this burden? In the back of my mind what I say is that people have objected to the present budget deficit by the current provincial government, but that deficit really looks kind of paltry compared to the $30 billion deficit Ontario Hydro has incurred. I am not complaining about that deficit. I understand there is a capital structure that stands behind the deficit, and it is a deficit we all bear -- somewhat less proportionately than we would like, but it is a burden we all bear -- much in the same way we bear the deficit for the province.
It really will not make any difference whether the province says, "This is what we're going to do," or whether Hydro says, "This is what we're going to do," as long as the goals and the economies are there.
Mr Klopp: You talked about nuclear, and one of the things is the definition of "power at cost." Some groups have said here that the nuclear part of the structure of Ontario Hydro does not take into account the winding down of a nuclear plant and what it is going to do to with the spent bundles. Are you aware, from your background, that this cost is not figured into our figures?
Mr Segel: My information says yes, it is not figured in.
Mr Klopp: Would you have an idea what that cost might be?
Mr Segel: The numbers I have been able to read about say the wind-down costs of the generating station will probably be something between 10% and 30% of the construction costs. As to the long-term care costs for the spent fuel, I do not think anybody knows what that number is, because at the moment an appropriately safe technique that will carry us roughly, say, 10,000 years into the future to protect whomever happens to be living here simply has not been formulated. It may be that we simply have to cast them into concrete every 10 or 50 years and continue to do that in perpetuity, much like we get somebody in the cemetery to take care of the grass for ever.
Mr Klopp: But to the best of your knowledge, that is not figured into my electrical bill right now.
Mr Segel: That is right; it is not.
Mr Klopp: You think that should be figured in somewhat?
Mr Segel: I think somebody ought to arrive at a not unreasonable number and say, "If this is the kind of electricity you want, this is what you're going to have to pay to get it."
The Chair: Does anybody else have any questions or any other matters?
Mr Segel: I have one more comment that was not directly in my talk. Earlier on with Paul Gervain there was an altercation about what the marginal costs of electricity are. I do not really understand why there is any doubt about what those marginal costs are. The Darlington nuclear station is an incremental, marginal cost. They said, "We're short of electricity, therefore we're going to build Darlington." Therefore, it is a piece you add to the system to satisfy demand which is at the margin. Darlington cost roughly $15 billion. It supplies roughly 3,000 megawatts. You divide one by the other and you get something like $5,000 per installed kilowatt of capacity.
If you think a home has 15 kilowatts for supply on the coldest day of the year, then Ontario Hydro has supplied you with that 15 kilowatts at the cost of $5,000 per kilowatt, which gives you something like $75,000. As far as I am concerned, that is the end of the story, and that does not take into account the operating costs and so on and so forth. That is just the capital cost of the station, $15 billion divided by 3,000 megawatts.
The Chair: Does anybody want to respond to that?
Mr McGuinty: I will speak for myself personally. I am rather confused by the numbers and I keep going back to what Mark Twain said about lies. There are three kinds: lies, damned lies and statistics. I hope that by the end of our tour here we will have had the opportunity to consolidate some of these numbers and come to understand them. Anyway, I appreciate your information.
Mr Huget: We have all heard this evening and every other evening that we have been sitting -- it is very easy to blame Hydro as being the culprit here, but I think the issue is bigger than that. I think what is missing in this province is an energy policy that takes into account the wise use of all forms of energy, including electricity that is delivered by Hydro. I really believe that without a comprehensive sort of integrated resource policy that makes sense for conservation and efficiency, we are going to be a worse place if we do not implement those kinds of policies. I would just like your views on that.
2010
Mr Segel: I would support what you are saying, in the sense that you can talk about electricity now and the switch to gas and so on and so forth, but remember that when we talk about all those other things, and you can throw uranium in as well -- the last testament I heard before they started the wind-down in the nuclear industry was that the kind of cheap uranium we are thinking about for the nuclear industry will power something in the order of 1,000 nuclear reactors around the globe. After that you get into really expensive uranium, which is prohibitively expensive, or you get into ultradangerous types of generation, fusion reactors or the breeder reactors and so on. We will not even bother talking about those. Those are clearly out of sight.
Mr Huget: Sounds like scary stuff.
Mr Segel: Right. I am not trying to frighten you; I am just trying to say they cost too much and are too dangerous. But the point is that when we talk about all the alternative fuels, we are talking about resources that have a finite limit. Therefore, it behooves us to think about conserving every last bit at the appropriate time to do it, which is starting right now. Yes, I think we should switch to gas, but then I think we should find better ways of making sure people use as little gas as possible. That is really what I am saying: a wider and longer perspective.
The Chair: Sir, the committee thanks you very much for your time and interest and expertise. You and others who have appeared here today illustrate why so many people are so concerned about the government relying on $1,000-a-day consultants when there is a wealth of skills and talent in the community who are prepared to help and give advice and provide input. We are grateful to you and the others who have been here today.
WILDSIDE FOUNDATION
Mr McKay: Good evening. Peter Ornstein was to follow me tonight, but he got called to a council meeting near Brockville. He asked me to make a few remarks on his behalf at the end, if that is acceptable.
My name is Paul McKay. I am the founder of a not-for-profit organization called the Wildside Foundation, which has been established to develop renewable energy resources in Ontario and promote energy conservation technologies and programs among remote and aboriginal communities. I currently also work for the northern Ontario environmental group Northwatch and the aboriginal Moose River/James Bay Coalition. I am on the board of the Independent Power Producers' Society of Ontario. This is the voice of Ontario's non-utility generation industry. I am also the author of the only modern history of Ontario Hydro, Electric Empire, published in 1983, the author of a biography of the late uranium mining magnate Stephen Roman, and a former senior policy adviser to the Ontario Ministry of Energy.
I give this introduction to underscore that I have had a long, keen interest in the issues raised by the Power Corporation Act amendments and that I have viewed this from every vantage point: environmental, non-profit, business, government and aboriginal.
The amendments address accountability and energy efficiency, two elements that have been glaringly absent from Ontario Hydro's corporate persona during the past quarter century. Hydro has become a construction juggernaut with a $30-billion debt and a stable of platinum-priced nuclear workhorses that just do not work, while simultaneously leaving Ontarians with one of the most scandalous electricity consumption records in the industrialized world.
You have heard it before, but the numbers are worth repeating. Ontario residents use twice as much electricity per capita as those in New York state. Our ratio of electricity use per unit of industrial product is far below that of countries such as Finland, Germany, France and Japan. Virtually everything using electricity that has been bought or built in Ontario in the past 25 years -- office towers, pulp mills, refrigerators, homes, lightbulbs, public buildings such as seniors' apartments and day care centres -- wastes electricity on an appalling scale.
Let me give one example. In 1965, Ontario Hydro's monthly magazine proudly proclaimed that the first of the Toronto-Dominion Centre office towers in downtown Toronto was consuming, each eight-hour day, as much electricity as the residents of a city of 32,000 people. The reason? The building was built solely of glass and steel, which have no insulation value. In the summer the sun would pour in and bake employees, so the electric air-conditioners had to work overtime. In the winter the heat would simply fly out the windows. The office space was not only overlit to headache levels, with lights lined up within inches of the windows, but the electricians had not even bothered to wire in switches on each floor to turn them off, so they burned 24 hours a day.
The TD Centre is still standing and still wasting scandalous amounts of power. More important, the glass and steel format remains the standard commercial office tower design in Ontario. More of these towers are under construction now, partly because they are cheaper to build and the owners pass on the energy cost to the tenants and partly because energy conservation, sadly, for most office tower architects, ranks below what kind of shrubbery should be planted in the concourse.
There are two points here. The first is that Ontario Hydro has built and operated very expensive, dirty and dangerous power plants to supply that badly designed building, and will for as long as the TD Centre stands as a monument to waste. The second point is that until very recently Ontario Hydro and it allies encouraged and even applauded this kind of insanity.
Ontario's grossly inefficient energy infrastructure is a testament to the lack of public accountability of Ontario Hydro. After all, accountability for a public agency essentially means doing the right job well. For a utility, that means helping its customers learn how to use the least amount of power necessary to do a given task and to provide that power reliably at a frugal but honest cost.
Given this standard, Ontario Hydro has done the wrong job with a vengeance and with an Imelda Marcos touch that has left a $30-billion debt and interest payments of $370,000 per hour. On top of that, the "Live Better Electrically" ethic has accelerated Ontario's pollution problems. It has led to more coal emissions, more uranium tailings, more high-level nuclear garbage which will remain lethal for centuries, more dams and flooded lands in aboriginal territories, and these external costs have not shown up on our Hydro bills, so we do not have even have honest power prices.
Clearly there is a yawning chasm between what the public needs and deserves from its utility and what has been delivered. There are some who would say Hydro is a prima facie case for privatization, including the Globe and Mail's new ghost editorial writer, Energy Probe, but I strongly disagree. One must consider the past and present notorious record of private utilities for predatory practices and consumer, or customer, gouging. For instance, the number of New Yorkers who love Consolidated Edison can be counted by adding Con Ed staff and shareholders, and they all live in New Rochelle.
I am also very concerned about the prospect of private coal, hydro and nuclear corporate lobbies using their economic and political muscle to fight or ignore environmental legislation, as they do with telling effect in the United States.
But the more direct reason is this: I cannot accept the premise that a public agency is beyond public accountability, because that calls into question whether democracy itself is irrelevant or expendable. It comes down to this: If we believe that we and the people we elect cannot compel a public agency such as Ontario Hydro to do the right job well, then we may as well not elect anybody. That is precisely what they are there for.
Interestingly, the very people who argue for the instant privatization of Ontario Hydro have leapt to that conclusion by assuming Hydro cannot be made publicly accountable, knowing that this has not been genuinely tried. I am convinced it is worth a shot. Hydro has become the juggernaut it has because the public and its MPPs were not paying enough attention to it and there were few avenues for either to compel it to change course. The way to reverse this is for the public and its MPPs to begin paying attention.
I am very pleased to see this committee here in Kingston doing just that in a modest way. To my knowledge, this is the first time a legislative committee has ever come to Kingston to ask the public here what it thinks about Ontario Hydro. Does that not speak volumes?
The bottom line is that our MPPs have to take an accurate sounding of what the public wants Hydro to do and then have the Legislature issue public marching orders to Hydro. For this reason, I support the Bill 118 amendments because they enshrine the right and the obligation of our elected government to direct Hydro policy. It is important to remember that while Hydro has 30,000 employees, which just about equals the entire population of the Yukon, none of them are elected. Under our system of government, the policy directives must and should come from the Legislature. They should be public, and the public can then judge their merit at the following election.
2020
This is precisely not what has happened in the past. No one except Hydro and its electrical industry allies and suppliers, for example, decided that the "Live Better Electrically" campaigns over the past 25 years were a good idea. No one ever voted on it. Yet it was effectively the very heart of Hydro's policy and the foundation for a $25-billion capital expansion program.
This unilateralism thrived in a climate where there was little vigilance or countervailing direction from the Legislature. When directives did come, they came in a secrecy which masked highly partisan politics. One now notorious example: In 1978, Premier Bill Davis, despite the objections of an all-party legislative committee and Ontario Hydro, ordered Hydro to sign a uranium contract with Denison Mines, which was then controlled by Davis's personal friend and Conservative Party patron, Stephen Roman. That contract, and a companion uranium contract with Rio Algom, was the most scandalous sweetheart contract ever signed between the Ontario government and a private company. One clause in the Denison contract stipulated that if any other uranium mine within 50 miles of the Elliot Lake post office ever made a higher profit than Denison, Hydro would make up the difference.
For the privilege of signing those contracts and purchasing made-in-Ontario uranium, Hydro ratepayers paid an extra $1 billion during the last decade. They would have paid another $1.2 billion in the next decade if they had not been cancelled by the current government. This is the price of secret policy directives.
The danger and the temptation for governments to use Hydro in this way will always remain, regardless of political stripe, as long as the secrecy does. I am pleased to see that the proposed amendments will compel Hydro to follow the policy direction set out by the Legislature and I believe the changes to the Hydro board structure will help to bring a broader public voice to the boardroom.
However, I see no explicit requirement for the cabinet or the Minister of Energy to publish the policy directives to Hydro. Accordingly I would like to see subsection 9a(1) amended to read, "The minister may issue policy directives that have been approved by the Lieutenant Governor in Council, and such directives shall be made public within 15 days of issuance."
Fuel substitution: I am convinced, as I hope this committee is, that most Ontarians want to shed their reputation as the electricity addicts of the western world. They now know that making electricity on a mega scale is an expensive and dirty business. It means mega rate hikes and mega damage to the environment.
The fact that we are a province of 9.7 million power junkies is ironically both a curse and a potential blessing. It means we have created unnecessary environmental and financial problems where they need not have occurred, but it also means that by admitting we are substance abusers and by "just saying no," we can solve many of Ontario's energy problems by a full-bore commitment to "Live Better Efficiently" by kicking our habit.
The issue is not how many new mega power plants does Hydro have to build and how much will they cost, and the issue is not whether we should trade our dependence on one dangerous drug, nuclear or coal, for mega dams, out-of-province power or even natural gas plants. The problem is the addiction. So the real issue is, how many of the existing nuclear and coal plants can we retire, and how soon, by compelling Ontario Hydro to invest the same kind of money, technical muscle and professional pride it has devoted to its nuclear construction program?
All the evidence at every level confirms that Hydro's smartest, cheapest, cleanest and most reliable power should come from building negawatts instead of megawatts for the next two decades; that is, helping Ontarians turn this province upside down to find and fix every power-wasting home, office tower, public building, factory, farm, appliance, motor and lightbulb.
I am convinced that the combined gains from efficiency, industrial cogeneration and fuel substitution will allow Ontario to reduce its per capita electricity consumption by nearly half. This may sound like a return to shivering in caves and wearing fig leaves, but it means, in the residential sector, for example, that we will be at the same rate as New York state today. Put another way, it means Ontarians will have the same per capita consumption rate they had in 1965, the year that TD Centre tower turned on its switch.
This brings me to the fuel substitution amendments. Repealing subsection 56b(3), which legally blocks Hydro from reversing the "Live Better Electrically" era by helping customers convert to cleaner, cheaper fuels for space and water heating, is a fundamental requirement for maximizing efficiency and minimizing electricity waste.
As your committee has heard in previous meetings, electric space and water heating is just plain dumb. On the consumer cost side, a typical mid-age, single-storey, electrically heated home in Ontario had a 1991 fuel bill of near $3,000. The fuel bill for a comparable natural gas heated home with a high-efficiency furnace was $1,000.
Even more alarming is the environmental cost of that electric space heating load. To supply that customer, Hydro operates coal and nuclear plants which convert their potential energy into electricity at 34% and 29% efficiency respectively. There are further losses during transmission. The result is that at one end of the wire the customer pays a fortune for what is not getting delivered. At the other end, the greenhouse gases and sulphuric acid belch into the sky while nuclear poisons are created in each reactor core.
Why would any sane person advocate this? They would not unless they had a commercial interest in building those plants, such as the nuclear lobby, in supplying the electrical equipment at the plant and in the home and office towers, such as the Electric and Electronic Manufacturing Association of Canada, or in building thousands of chintzily insulated homes with cheap-to-install electric baseboards and air-conditioners. Sadly, like the junkie's dealer, there are some powerful lobbies that do profit from our addiction to electricity. The existing Power Corporation Act prohibition on fuel substitution is a testament to their considerable political influence.
I firmly support the repeal of subsection 56b(3) and its replacement with language that will allow Hydro to use all its resources to help its customers maximize efficiency, no matter what fuel is involved. In most urban areas, the conversions will be to natural gas, but all other fuels, including renewable fuels such as wood and solar hot water systems, will qualify under the proposed amendments and the proposed wording.
I would like to see an additional amendment under section 56b which states:
"The corporation may offer financial incentives for the conversion of electric heating systems to alternative fuels only where:
"(a) its customers agree to install the most efficient technology available within the limits of practicality and availability.
"(b) its customers agree to insulate the building structure where the conversion is to take place to the maximum practical level, prior to funds being approved for conversion to alternative fuels."
These clauses would reinforce the intent of the amendments, which is to maximize efficiency both in the amount and the type of fuel used by Hydro's customers. In effect, they would help transform Hydro from an electricity production and promotion company into an energy services company.
There are some compelling reasons why an ordinary citizen may conclude that Ontario Hydro is another public institution failure on a megascale, one which should be auctioned off to the higher private bidder as soon as yesterday. It is undeniable: Hydro has not been publicly accountable for decades and it has done the wrong job, in spades, for its customers.
But it is not all Hydro's fault. As long as Hydro's customers got cheap power and the lights never flickered, they were content to be asleep at the switch: If it ain't broke, don't fix it. So were the politicians who, hearing no noise from their voters, never ventured into the basement to discover that Hydro had become a 500-kilovolt Frankenstein.
The lesson here is that, as Ralph Nader says, "Democracy without vigilance is abdication." Given that Ontario Hydro has accounted for about three quarters of all capital spending by all levels of government in Ontario during the past three decades and that it was supervised by itself, should we be surprised that it has become an institutional renegade?
I believe we can reclaim Ontario Hydro. It has some very good things going for it: talented and highly professional staff and a deserved world-class record for reliability and access to every home, farm, factory and office tower in Ontario. These are indispensable assets for a province which wants to "Live Better Efficiently." All Ontarians are going to need plenty of help in kicking their addiction to electricity: what fuel to use, what furnace to purchase, what refrigerator to buy, what motor to install in a pulp and paper mill, how a city can cut down on its street lighting costs etc. This is not to say at all that Hydro should be doing all this for us. It should not. We do not need a conservation Big Brother any more than we need a nuclear Big Brother. We do not need platinum-plated compact fluorescents that save only meagre amounts of power, and a megabureaucracy to mail them out.
What we do need is for Hydro to make it easy for us all to do the right thing by providing conservation financing at cost in the same way that it now nominally provides power at cost. Instead of using our money, public money, to build itself new plants and then recovering the money through rates, Hydro should be loaning us our money to prevent them from being built.
But in order to achieve this, Hydro needs some things from us. It needs the right marching orders. It needs advice from all its customers on what their genuine energy needs are so that Hydro can then help design the best way to match them. In the past, Hydro was content to make no distinctions between energy whims and energy needs. It is up to us, not Hydro, to make that distinction in the future.
Finally, to do the right job well, Hydro needs vigilance from an informed, involved public. In a democracy, we know best, by definition. What is ultimately at stake here is the trust Ontarians have in their government. Citizens need to roll up their sleeves, take charge and insist that we know best what we need. The alternative is abdication and a future that leads only to more addiction.
2030
Mr Jordan: Bill 118 is really what is under discussion and I would be interested to know which sections of Bill 118, relative to the present act, you are most interested in.
Mr McKay: The policy directive and the fuel substitution amendments.
Mr Jordan: You feel the policy directive should come through the Legislature and be approved by it. Did I understand you correctly?
Mr McKay: Yes, absolutely. I think that as someone said earlier, or Winston Churchill said, democracy is a lousy form of government but it is better than every other one. Given the fact that there is no one elected in Ontario Hydro, it is ultimately the responsibility of the people we elect to set out the right policy directives. That is not to say the government should be involved in the day-to-day operations of Ontario Hydro or in the inside elements of how we deliver on those policy directives. But the direction, the thrust, should be decided by our elected officials.
Mr Jordan: What advantage would you assume the government sees in Bill 118 to have the right to have the policy directive go directly to the Hydro board and then have the directors on that board not be responsible for their actions? It seems there is a duplication of authority here somewhere. If the decision is made in the Ministry of Energy, it bypasses the Legislature to the chairman and his board, and then they have to rubber-stamp it and are not accountable for their actions. Do you see some confusion there?
Mr McKay: I do not think that is an accurate way of describing, in my estimation, how it would work if the amendments are passed. I think that with my friendly amendment in terms of ensuring that the directive is made public, it will be heard and debated in the Legislature, will be debated in the press, will be debated in public.
Mr Jordan: I agree. But according to the way the bill is presently written, it would not be debated anywhere.
Mr McKay: That is true, and that is why I am asking for that friendly amendment. It would not necessarily be debated in the beginning. Under the current legislation and current practice it is the cabinet that makes decisions on policy directives to Ontario Hydro and they are issued through the Minister of Energy.
Mr Jordan: My interpretation of the way it is now is that the only person who is going to have to accept responsibility is the Minister of Energy.
Mr McKay: I fundamentally disagree with that. I think that even without my friendly amendment, the public is going to judge this government or any government of the day come next election time. If the issue of Ontario Hydro's accountability or its conservation or its nuclear program is near and dear to their hearts, they are going to vote based on what they think the government did in the previous four and a half or five years. If the public in general is satisfied with the directives that have been given, maybe they will be re-elected. If they are not happy, they will turf them out and that is how it should be.
Mr Jordan: But you are going to have to go through the Legislature; you would like to see them pass the test of the Legislature.
Mr McKay: As the person from the Ontario Public Interest Research Group said, I think the transparency here is the real issue. I think they should be aboveboard with their policy directives and I think the amendment here moves along that road.
Mr Arnott: Are you from the Kingston area or did you drive a distance to get here today?
Mr McKay: I live in Lansdowne, which is about 30 miles from here.
Mr Arnott: I appreciate your coming in. My question is with respect to the chairman's update of the demand-supply plan. When it was announced on January 15, the chairman indicated that $6 billion would be used for demand management plans over the next 10 years. There has been a lot of concern expressed about the great Hydro debt, and $6 billion represents a full 20% of that debt. Were that $6 billion used to retire the debt, we would make a great dent in it. What I am just wondering and trying to understand is how the board and the chairman of Hydro plan to spend the $6 billion. If you had $6 billion to spend on a demand management program, where would you start?
Mr McKay: I heard two kinds of questions there. First of all, I have some grave concerns about $6 billion being spent by Hydro on conservation by the year 2000, in that time frame. It is a lot of money and I do not think they are ready to spend that kind of money intelligently or efficiently, so I do have concerns about that.
However, as I said in my presentation, I think with some educational help from Ontario Hydro, Hydro's customers can get up to speed very quickly. If you have a program where Hydro takes that $6 billion and loans it to its customers and then only begins to recover the loan once the customer is saving more energy, or it has a positive cash flow from their energy savings, then in fact you are not doing any harm to the debt situation. You are helping the customer individually and protecting him against future rate increases.
Mr Arnott: So you would favour subsidized loans ahead of grants or free refrigerators or something like that.
Mr McKay: I do not like this word "subsidy" at all, because if it is a loan program and Hydro loans money out to its customers and recovers all the principal back plus all the interest plus the assigned value of money, then it is not a subsidy at all. It is public money being cycled to its customers and then back into the pot, if you want.
Mr Arnott: Presumably the interest rate on such loans would be less than the market interest rate.
Mr McKay: Hydro's borrowing rate is very good. It is better than prime.
Mr Arnott: At the present time.
Mr McKay: At the present time, yes.
Mr G. Wilson: I hope you brought some copies of Electric Empire. I am sure you sparked some interest.
Mr McKay: It is out of print.
Mr G. Wilson: Anyway, you gave a very good summary there. I really appreciate it and I think the rest of the committee did too.
I am thinking of the gap that appears to have arisen between Hydro's goals and what the people of the province really needed. What in your view led to that gap and how can it be overcome? I am thinking that, as you said, the people of the province ultimately had control over what Hydro did. They could have demanded that kind of accountability. How do we get beyond this, working through what people perceive as their needs?
Mr McKay: I think there are hundred of details on that, but the essence of it is for Hydro to accept the idea that the customer knows best, with some background and some educational material, and that it is the public's money.
Therefore, I would combine this loan program, because every person's house is different, every industrial facility is different, every municipality is different. Each has different energy needs. In some cases, it makes sense, in fuel substitution, to move from electricity to natural gas. In the rural area where I live, it makes sense to move from electric baseboards to wood or a wood-oil combination furnace. It always makes sense, in the application, to insulate the structure first and do the proper job on that.
But if Hydro makes it easy for customers to do the right thing by providing these loans where they only have to pay back out of their positive cash flow, as far as the customers are concerned, nothing has come out of their pockets. They did not have to put up a nickel in terms of their own capital because it is sitting in a big pool at Ontario Hydro right now anyway. That makes is easy for them. It gets them across what they call the capital hurdle or the financial problems, especially in these recessionary times.
Then, if the cost of Hydro and the municipal electrical utilities -- and this is very key; I think they are an indispensable element in delivering conservation properly. If they come and pay attention to their customers' needs without preconceived ideas of what kind of centralized program they are going to impose, then they will get the best of both worlds and maximum efficiency. You will get the big bang for the buck.
2040
Mr Klopp: I agree with your statements about the people who say, "Quick, let's privatize it." It almost says, as we have advocated, that we have never had it under control, which I think is a true statement and a sad one indeed. I believe you used New York state as an example of privatization and later I think I heard you say that if we do some good things, we will get our energy use down as much as New York state. Did I miss something?
Mr McKay: No, that is a good question. For 1,000 kilowatt-hours in New York City you pay $118 a month. You pay roughly $70 a month for the same 1,000 kilowatt-hours in Ontario. The single biggest reason why the residential per capita rate in New York state is half of what it is in Ontario is because no one in his right mind heats with electricity. When you take those 720,000 homes in Ontario and spread them over the entire residential sector, it doubles the per capita electricity consumption rate. It is a fairly blunt instrument, but in New York state the price of power has told the average consumer, "The last thing you're going to do is heat with electricity."
Mr Klopp: Basically you are saying that it maybe is not running power at cost in a lot of ways. It is $118, but the people there are very energy-efficient. We could maybe have the best of both worlds here.
Mr McKay: I think this is a whole level of complication. The price of electricity in New York state itself is underpriced because there are a lot of external costs generating electricity, pollution costs that are not factored into the price of electricity.
Mr Klopp: It sure is the same as here then.
Mr McKay: It is blasphemy to say it, but prices in New York state should be even higher then they are. If we are going to be fiscally conservative, which I am, and believe there is no free lunch in environmental terms as well as economic terms, if the pollution goes out there, we are going to pay for it in our health bills, cleaning up acid-damaged lakes, whatever. There is no free lunch. We should be paying the shot honestly. If we were doing that, the price of electricity would be even higher in New York state and they would be even further down the road to conservation than they are now, and they are way ahead of Ontario. As the price rises in Ontario, the same thing is going to happen.
Mr Waters: Going back to your comments, I just want to get something clear. Did you say that people should be able to access the loan or whatever only if they went to the most economical or energy-efficient alternative fuel?
Mr McKay: Yes. I should clarify that. We do not want to see people moving from inefficient electric baseboard systems over to a low-efficiency oil or natural gas furnace. We can talk about the politics that underlie this if we want to let our hair down a little bit later, but there is no doubt about it that the gas companies have a commercial advantage in the fuel substitution.
I think that as a quid pro quo for their getting benefits from this fuel substitution, they should be prepared to accept the proposition that Hydro will only help customers switch to natural gas or another alternative fuel if the alternative fuel you use is in the most efficient furnace and technology available, water heater or whatever, because we want to maximize efficiency. The gas companies and Hydro should both be playing by those ground rules. The gas companies do not particularly like the idea because they make their profits on volume.
Mr Waters: I represent an area called Muskoka, where we have an abundance of wood. You are saying that a rural person would not necessarily have to go to wood; he would have to go to the most efficient alternative form of fuel.
Mr McKay: Where available. In my rural area or in Muskoka, if the person chooses to go to wood, he has to get a maximum-efficiency wood stove.
Mr Waters: Could they choose to go to oil instead of wood?
Mr McKay: If they went to oil, then they would have to go to the maximum-efficiency.
Mr Waters: That is what I wanted to get clear.
Mr McKay: Yes, they have the whole range of fuels to use, but whatever their choice is, they have to pick the most efficient technology within that fuel category.
Mr Huget: Very briefly, I have asked a couple of the municipal electrical commissions that have appeared before the committee if encouraging their customers to heat with electricity was in their customers' best interest. They told me that yes, it was. You are saying that anyone who heats with electricity is out of his mind. Maybe you can explain that to me. This was supposed to be, the commissions are telling me, in their customers' best interests. Mind you, their customers are not quite saying that. I would like your views.
Mr McKay: I hesitate to attack municipal utilities or the Municipal Electric Association because, as I said, I think it is indispensable in delivering conservation in Ontario. They are the front-line deliverers, or should be in the future. I do not want to impair that by attacking them for past policies.
Maybe it is unavoidable, but the Municipal Electric Association -- I have seen some of their presentations to this committee and I heard earlier this afternoon the presentations from Belleville and Port Hope -- is not really being straight with the committee. The problem for the municipal utilities, if you look at their internal newsletters and listen to or read debates they have at their conventions, conferences and seminars, the real issue is that conservation makes rates go up. In the short term revenue goes down. They have fixed costs, rates are going to go up and they are going to get flak for it. That is a very real problem. They should be straight about it and then people can start talking about what is the best way to get around this, what is the best way to cushion the blow for utilities and deliver conservation at the same time. It is really an impediment now to moving forward on this whole thing and delivering conservation across the province.
Sorry, I am wandering here from your question. From their perspective, from the perspective of most of the municipal utilities, they identify the public interest with rates and they say to themselves -- this is not dishonest. If they have one bottom-line job, it is reliability and it is keeping the rates as low as possible. When they see fuel substitution and conservation proposals, they get very concerned because they know that is going to make revenues go down in the short term and rates go up.
I think the answer is that we have to keep the customer in mind, not the rate, not the PUC officials or the managers but the customer. If the customer saves a lot of money by moving to an alternative fuel -- natural gas in urban areas, for instance -- if the rate goes up 15% because of that and their fuel consumption gets cut from $3,000 a year to $1,000 a year, they are going to love it and the rate increase is not going to be the thorny political issue it presents to the Municipal Electric Association right now. It is a real issue, though. It is a psychological issue, a political issue, a financial issue. It has to be looked at squarely. I am very disappointed that it has not been brought before this committee to date in that way, because that is really what is behind this whole thing.
Mr Conway: Thank you, Mr McKay, for a very stimulating presentation. As it happened, I spent some of the weekend rereading Electric Empire. Your presentation is as stimulating as your book. I would certainly recommend it to others on the committee. Can you just help me with a couple of basic questions? You were doing what occupationally between, say, 1 November 1990 and 5 June 1991?
Mr McKay: Why do you not tell the committee that? You know. I said it at the beginning of my presentation that I was the policy adviser to the Minister of Energy.
Mr Conway: I knew that and I wanted to just confirm it. I do not think you should be embarrassed about that at all, but I just make the point, quite fairly, that this is your bill. I do not think you should be embarrassed about that. I just think the committee should know that. From your point of view you have not done a bad job, but I think we should all know that and I have two questions for you following out of that.
Mr McKay: Hang on a second, now. I will ask the Chairman. If you are going to make a point, we will go through these one by one.
Mr Conway: No, I have 90 seconds and I just --
The Chair: No. This time, Mr Conway, I am giving you as much time as everybody else got. You might even get a little more.
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Mr McKay: As a matter of fact, I am the last presenter for the evening and I am prepared to sit here until 11 o'clock if Mr Conway would like to do that.
The Chair: So am I. Go ahead. If you want to respond, respond, and then we will have this exchange.
Mr McKay: I have two points. First, Mr Conway has apparently read my book. He would know that in 1983 I was proposing and promoting the idea of fuel substitution and increased public accountability. Second, you may have implied or you may think, Mr Conway, that I am a member of the NDP.
Mr Conway: No, believe me.
Mr McKay: I am not. I never have been.
Mr Conway: No, I know that, and that is immaterial.
The questions I wanted to ask actually had to do with two elements in the bill that really puzzled me. You may not be able to help, but I was struck. I was a very harsh critic of the bill as originally presented because I could not understand two things. I could not understand that unqualified directive power. The new minister has moved to put a fence around that in a way I think is sensible, but I was really puzzled, given what the government had said. I heard Ms Carter and I think she clearly meant what she said, that she wanted this bill to exact a greater degree of accountability out of Hydro than had been the case, and wanted more openness. I thought, that is really peculiar. How did that initial section get written as it did?
The other one is at a much lower level. Quite frankly, I do not know how it happened. I was stunned that the original section was written as it was and not at all surprised that it was changed. My own personal belief is that the cabinet never really intended some of the sweeping possibilities that were immediately attached to the original section as written. But my question still remains: How the hell did that ever get written as it was originally written and presented? It may be a breach of your previous responsibility, and I would understand that.
Mr McKay: It is.
The Chair: Wait. Are you asking --
Mr Conway: No, that is in a sense a rhetorical question. I was really struck by that. I thought, why did that happen? I respect your oath of confidentiality.
The Chair: You do not want him to comment on that in general, in terms of what perhaps in his mind the legislation is intended to achieve?
Mr Conway: My question is more specific than that.
The Chair: I know that.
Mr Conway: I have to take the minister at her word on what she intended, and I accept that, but I then read in one of the critical sections of the bill something that is just a gaping hole, not nearly as bad as many of the naysayers would have imagined but none the less there.
Mr McKay: It is as gaping as you want it to be if you are trying to make partisan hay out of it. The idea that Ontario Hydro would be used in some way to bail out the SkyDome, for instance, is utterly preposterous. You can read that piece of legislation. It does not forbid Ontario Hydro from getting involved in the SkyDome, but to read that in as a virtual certainty, as was proclaimed in some of the MEA ads, or even a possibility, as was suggested in the Legislature, is really stretching a point.
Mr Conway: I have just finished Jack Saywell's wonderful book on Mitch Hepburn, the best sections of which I think deal with Hydro. Arthur Roebuck's behaviour as Hydro minister and Attorney General for this province were absolutely incredible. One of the things that reading has me thinking about is that when someone who is perfectly fanatic about Hydro, as Arthur Roebuck was -- he was unbalanced. He was prepared to do and advise things that were irresponsible in the extreme. He happened to have been a minister of the crown, the minister of justice and minister responsible for Hydro. So there is some very recent evidence to make me not so willing to accept what you have just said.
The other thing I would observe, and you rightly make the point about those Denison contracts, and they were --
Mr McKay: Which you objected to at the time.
Mr Conway: I was not on the committee but certainly I sat in. I am probably the only member here who was there at the time and I had some critical things to say at the time. I remember saying them, and I said them quite frequently outside the Legislature.
But one of the things I would take issue with in that whole controversy is that those contracts, to a substantial extent, were written in the broad light of day. It was no secret what was going on. They were widely canvassed in that select committee and they were the subject of months and months of public attention, and I well remember, a very substantial part of the 1981 provincial general election result.
I suppose I was on the losing end of that argument, but it was certainly not, in the main, a particularly great secret. I suppose the public was not involved in the discussions between Denison and the Ontario government. I would dispute somewhat your presentation that it was all done behind closed doors. There was an awful lot of that done openly, and our system, imperfect as it is -- it appears to me that the government of the day, certainly both in that legislative committee, in the Legislature itself and later in the general election, won more than it lost, or won enough to carry the day whether I liked it or not.
Mr McKay: I will address your second point first. It is true there was considerable public debate about the Denison contracts, but the committee members never saw the contracts. During their examination of it between January 1 and February 28, 1978, they never saw the contracts. What they had was a number of consultants hired who did reviews of the contracts and gave their analyses to the committee members and to the select committee staff, but the actual members of the Legislature who sat on that select committee did not see the contracts.
Mr Conway: There was a great deal of stinging criticism around those contracts. It was not the case that the government was unscathed. In fact, I remember a great deal of abuse being directed at the government with a fair degree of specific data about just how outrageous these contracts were.
Mr McKay: If I can say so, the Liberals, in their dissenting opinion in that select committee report, were bang on, but let me also say that what the public did not know, and what was never disclosed in the Legislature, was that Ontario Hydro was opposed to those contracts. I collected the evidence in my biography on Stephen Roman. Ontario Hydro's lawyers read those contracts and they were opposed to the contracts because of those scandalous clauses, and they were vetoed by the Premier.
While there was a public debate, it was not a terribly informed public debate. It did not focus on what have proved to be some of the fatal issues in that contract, and the secret is the public was not served by that position.
Mr Conway: My final point would be simply that I think you make a very strong argument. When I raised the question about your participation in the bill I am sure it sounded a bit mischievous; it was not intended to be such. I must say that you did have an involvement in this, and I think it is fair for everyone to know that. You should not be embarrassed about that. But I look at this paradigm and I say to myself, "How is this a situation that is fundamentally different than the example you have just spoken to or the example Jack Saywell has brilliantly depicted, where another Hydro minister systematically ignored the advice he was getting from the dispassionate professional staff who kept saying: `Mr Roebuck, you are wrong. This is not going to work. You are advising a course of action here that is completely at odds with our best professional advice, and you are putting the government, the Legislature and the province in a very difficult position.' "
Mr McKay: I agree with you, Mr Conway.
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Mr Conway: I look at the new paradigm and I say, "Now I know the hope is there," but I am not at all convinced we have dealt as completely as many feel with some of the potential abuses that exist.
Mr McKay: I agree with that and I did not say in my presentation that this is a sufficient condition for accountability, but it is a necessary condition for accountability. There are many more steps that have to be taken to make Ontario Hydro truly accountable. As there was before these amendments came forward, there is the potential problem of a megalomaniac as the Ontario Hydro chair. There is the potential problem of a megalomaniac as the minister, such as the case you are citing, and these amendments will not foreclose those possibilities. I agree with that.
There needs to be much more done. There needs to be a permanent committee, a standing committee of the Legislature on Ontario Hydro so that opposition members can hone proposed legislation and policy directives by adding their input. There should be a mechanism for publicly choosing Ontario Hydro board directors. It could be through a legislative committee. It could be a search process that is agreed to by all the parties of the Legislature.
The operations of the board itself, except for obviously professional employee situations and certain business contracts, should be much more public. The Ontario Hydro chairman's salary should be a matter of public record. Citizens should be able to go in and find out what the directors are being paid and how often they are at meetings. There should be public minutes, except for the in-camera sessions, made available. The press should be there, which is not the case now. There has to be a lot more done, but that is not to say these amendments are flawed.
Mr Conway: A final observation, Mr Chairman: Perhaps the witness would care to speak to it. There are many things we could talk about, but one of the observations I would make is that any Legislature and any cabinet in which I have sat -- I think they would, to a certain extent, be representative, some perhaps more than others -- would find it very difficult to provide the level of detailed accountability around many of the complex issues the energy debate necessarily involves. Some people who are much more knowledgeable than I nod very vigorously in the negative, but that is simply my sense of things given how busy cabinet ministers become, how necessarily generalist are most members of the Legislature.
Some of the testimony we have heard has suggested that the Ontario Energy Board should be given a strengthened mandate to at least assist the government and/or the Legislature in sorting out a variety of the competing analyses.
I do not know about other members. I have sat here and listened fairly carefully over the course of many days. I bring no special knowledge to this debate, and I must say, at the end of three weeks of testimony, I am not sure who to believe. It reminds me of one of those great theological debates in the Reformation. I clearly understand the fervour with which the three sides have advanced their case, but it is not clear to me how I might decide many of the second- and third-tier questions.
How would you feel about a significant increase in the mandate, the scope of the energy board in some of these matters?
Mr McKay: I am happy to address that, but before I do I want to say that you seem to be assuming Ontario Hydro is going to be the kind of institution in the future that it is today, and I hope it is not. I believe if we can get on to an ethic of living better efficiently and introducing renewable fuels and advanced technology such as hydrogen batteries and that kind of thing, the monolith of today will be a much shrunken entity 20 years from now.
For that reason, the pressing issues of accountability with Ontario Hydro and the questions you are raising about the relationships between the Minister of Energy and the chair and that kind of thing will be much less pressing because it will be a smaller entity, but in the meantime it is important to have regulatory oversight of Ontario Hydro. As I said, a standing committee on Hydro affairs would be ideal. An Ontario Energy Board combined with cross-appointments from the Environmental Assessment Board would be a good idea so that one body could evaluate the details of implementation and demand site management, non-utility generation, fuel substitution, that kind of thing, but also could look at the planning horizon and make assessments.
This 25-year hearing is a megahearing and it has a lot of deficiencies simply because of its structure. Something with a shorter time line and a fixed frame or a fixed radar screen would be much more effective. If it had the legal mandate of the Environmental Assessment Board in terms of screening projects and the technical expertise of the Ontario Energy Board on Hydro affairs that has been built to date, that would be a good option.
Mr Conway: One last point --
The Chair: Mr Conway, I do not want to interrupt, but I am telling you Mr McGuinty wants to ask a question.
Mr Conway: Just one last point then: I will ask my friend, because he has very detailed experience, a lot has been said -- I have almost felt sympathetic to a lot of the witnesses who rightly look at the structure of the Ontario government and imagine the Ministry of Energy as being a significant player. I am going to say something provocative perhaps, but probably in the last 30 years it would be my guess that with the exception of Bob Macaulay and Darcy McKeough --
Mr McKay: Hugh Macaulay?
Mr Conway: Bob Macaulay, who served as a very influential political figure. He was vice-chairman of the Hydro board and effectively the Minister of Energy in the Robarts government until he left politics in 1964. He went on later to serve as the chairman of the Ontario Energy Board. With the exception of Macaulay -- and McKeough spent a relatively short period of time at the Ministry of Energy -- it would be my submission that the real ministers of energy, or to put it another way the effective Hydro ministers in the Ontario government, have been the Premier and the Treasurer, both of whom in my experience and my understanding of those governments of which I was not a part played an enormously influential role, if not in the day-to-day affairs of Hydro, I would say in the week-to-week affairs of Hydro.
I do not think that is very well understood. I do not think people understand the extent to which a Premier's office is deeply involved in the affairs of Hydro, and the Treasurer of course by virtue of the provincial credit that is involved. Would you care to comment on that? Would you also care to comment that perhaps that paradigm continues, not necessarily in a bad way?
Mr McKay: Speaking in general, I think I disagree with you. When Darcy McKeough was the Minister of Energy, he was also the Treasurer.
Mr Conway: No, he was not. He resigned the Treasury because of his conflict of interest, and he came back. That is part of my argument.
Mr McKay: I would argue that he was the effective Treasurer then, because he stepped into Hydro and then moved back to his Treasury position. You are correct on that. He was a very smart, astute guy. I would argue that he was probably the savviest Minister of Energy in the 1970s and 1980s. He was one person who was not afraid of taking on the Hydro technocrats.
I cannot speak for the Liberal government. Obviously I was not there and you were. If they did have week-to-week involvement in Hydro affairs, they did not do a very good job. The debt between 1983 and 1990 went from $13 billion to $26 billion -- double.
Mr Conway: I believe, rightly or wrongly --
The Chair: Mr Conway, you cannot say this is your last question and then keep on going. That is an interesting way of doing business.
Mr Conway: A fair point.
The Chair: Mr McKay, have you completed your remarks? If you have, Mr McGuinty has --
Mr Conway: But I believe, if I might add, that Marc Eliesen and Bob Rae are very much in John Robarts's debt.
The Chair: Mr McGuinty does not have a question any more because Mr Conway just asked it.
Mr McKay, we thank you very much for your attendance here this evening. Once again, people across the province have been generous with their time and expertise. There has been a lot of constructive debate and discussion going on here.
I should tell people that it is not just the members of the Legislative Assembly here, but staff like Lewis Yeager from the legislative research services, Tannis Manikel from the Clerk's office, Pat Girouard from Hansard and Clayton Hatfield and Jim Petselis who work hard at making this committee work as it travels about. Also, we all want to thank Kingston for its hospitality and graciousness in having received us and taken care of us today.
We are adjourned until Chatham, tomorrow, at 1 pm.
The committee adjourned at 2111.