Legislative Assembly of Ontario

APPOINTMENTS REVIEW

MAURICE STRONG

CONTENTS

Wednesday 9 December 1992

Appointments review

Maurice Strong

STANDING COMMITTEE ON GOVERNMENT AGENCIES

*Chair / Président: Runciman, Robert W. (Leeds-Grenville PC)

*Vice-Chair / Vice-Président: McLean, Allan K. (Simcoe East/-Est PC)

Bradley, James J. (St Catharines L)

*Carter, Jenny (Peterborough ND)

Cleary, John C. (Cornwall L)

Ferguson, Will, (Kitchener ND)

*Frankford, Robert (Scarborough East/-Est ND)

*Grandmaître, Bernard (Ottawa East/-Est L)

Marchese, Rosario (Fort York ND)

Stockwell, Chris (Etobicoke West/-Ouest PC)

*Waters, Daniel (Muskoka-Georgian Bay ND)

Wiseman, Jim (Durham West/-Ouest ND)

*In attendance / présents

Substitutions present / Membres remplaçants présents:

Conway, Sean G. (Renfrew North/-Nord L) for Mr Bradley

Cooper, Mike (Kitchener-Wilmot ND) for Mr Ferguson

Huget, Bob (Sarnia ND) for Mr Wiseman

Jordan, Leo (Lanark-Renfrew PC) for Mr Stockwell

McGuinty, Dalton (Ottawa South/-Sud L) for Mr Cleary

Sutherland, Kimble (Oxford ND) for Mr Marchese

Also taking part / Autres participants et participantes:

Elston, Murray J. (Bruce L)

Stockwell, Chris (Etobicoke West/-Ouest PC)

Clerk / Greffière: Mellor, Lynn

Staff / Personnel: Pond, David, research officer, Legislative Research Service

The committee met at 1007 in room 228.

APPOINTMENTS REVIEW

Consideration of intended appointments.

MAURICE STRONG

The Chair (Mr Robert W. Runciman): We'll come to order, please. Our first and only witness this morning is Maurice Strong, who is an intended appointee as the full-time chair and chief executive officer of the Ontario Hydro board of directors. Mr Strong, would you like to come forward and take a seat? Welcome to the committee, sir.

This is a two-hour review. The way the process works, we rotate and try to divide the time evenly between the three caucus groups. Since this is a two-hour review, I want to indicate to you that if at some point you'd like a brief break from the proceedings, just indicate to me and we'll be glad to do that.

You have a brief opening statement, I understand.

Mr Maurice Strong: Thank you very much for this opportunity of meeting with the committee. I want to thank the committee for providing me with this opportunity to express some of the thoughts that I have about Ontario Hydro at this point and about the challenges and opportunities of the Ontario Hydro position for which I have been nominated.

When Premier Rae proposed that I become chairman and chief executive officer of Ontario Hydro, he certainly offered me one of the most challenging corporate posts in Canada today. From a personal point of view, I regard it as among the most demanding and exciting prospects of my own career. Some of my friends have asked me if I really have holes in my head to take on a role like this at this stage of my life. I think not. The challenge is indeed one I relish.

Ontario Hydro is one of the great institutions of this great province, indeed of Canada. It has been an indispensable part of Ontario's economic and social development for virtually all of this century. It has a proud history of reliable public service and a solid reputation for professional excellence and leadership in the electric utility industry.

It has not only an enviable record of achievement, but also the exciting potential to establish even more national and international benchmarks, to become the very model of a modern major energy utility, to enable the province of Ontario to set the standard for energy-efficient and competitive economies: a working prototype of the successful and productive union of industrial development and environmental responsibility.

Mr Chairman and members of the committee, you will notice that I am not wearing rose-coloured glasses. I have faced challenges before and I do see the positive as well as the difficult side of this challenge. In fact what I seem to see, as I look upon Ontario Hydro today as an outsider, is a kaleidoscope of trouble. I see a company with high debt, high costs, depressed revenues and oppressive price increases. In short, I see a public corporation in crisis, certainly a crisis of public confidence.

I have no illusions about the extent and the complexity of the problems that Ontario Hydro faces, nor do I come here with a prescription for instant relief. Indeed, it would be reckless of me to pretend to understand fully all aspects of the predicament in which this vital organization now finds itself. But please allow me to make some general observations based partly on the information I have been absorbing on Hydro recently and partly on my own past experience and biases.

Ontario Hydro, as you well know, is caught in a serious financial bind, and it is Hydro's customers who are feeling the cruel pinch today. The economic recession has saddled Hydro with the most prolonged period of reduced revenues in its history. At the same time, a very high proportion of its costs are fixed, based on decisions taken in the past, notably those related to servicing a $36-billion debt.

As if this dilemma were not bad enough in itself, Hydro over the past two years has had to bring on stream, and so into the customer rate base, the biggest block of assets in its history, mainly made up of the Darlington nuclear generating station. This fateful and debilitating combination of circumstances has resulted in rate increases over the past two years which Hydro's customers clearly find unacceptable.

So the first and highest priority, as I see it, is to rein in those costs that can be controlled. Getting Hydro's fiscal house in order is absolutely crucial, a prerequisite to moving ahead with other initiatives. We cannot achieve our economic, environmental or social goals without financial integrity. Our objective must be to enhance Ontario's ability to compete in an increasingly competitive world economy. This will require competitive electricity rates and a strong Ontario Hydro financially and professionally.

I know that Ontario Hydro has already begun some intensive efforts in this direction. Cost-cutting measures already in effect, plus deferrals of a number of capital projects, give some promise of rate relief in the years ahead. There is much more to be done and, as I said, this will be very high on my action agenda.

As big as the challenge is, I approach it with a great deal of confidence because of what I am learning about Ontario Hydro's most important resource, its people. As I begin the process of getting to know them, I am deeply impressed with their professional quality and their commitment to Hydro and its goals.

The experience they have gained over the years, in which they have made Ontario Hydro one of the finest and most respected organizations of its kind in the world, will be an invaluable asset in reshaping the Hydro of the future. The process of change the corporation is now experiencing will affect them most of all and will require their full cooperation. I look forward to working with them and with their union representatives in effecting the changes which circumstances now dictate. Of course, we must do this in ways that respond to their needs and interests and which will ensure that Ontario Hydro will continue to provide challenging and satisfying career opportunities to Ontario's finest and most able people.

I would also like to recognize another important positive that Ontario Hydro has going for it, and that is its historical alliance with the more than 300 municipal utilities that directly service over two thirds of Ontario's electricity customers. These local utilities are a fundamental part of the province's unique public power alliance, and I look forward to working with them individually and through their collective entity, the Municipal Electric Association.

There are, as you know, some very large questions surrounding the subject of nuclear power in Ontario. Nuclear power is an important fact of life for Ontario Hydro and for the province, and we must make the best decisions we can about the system we have inherited. I support the government's moratorium on new station development because I think some of the large questions concerning the corporation's future directions in respect of nuclear, particularly on its economics, have yet to be answered.

I think it's obvious -- in fact senior Hydro officials keep telling us -- that Hydro's nuclear program has a great deal to do with the company's current financial difficulties. Megaprojects, which once held out so much promise of economies of scale, have shown that they also carry risks and costs commensurate with those vast scales.

There have been problems on the operating side too. Over the past few years, Ontario Hydro's nuclear performance has not met expectations, and this in turn has required enormously costly upgrading and rehabilitation programs.

When the fourth unit at Darlington starts up next year, Ontario will be dependent on nuclear power for more than 60% of its requirements. The people of Ontario have every right to question whether this is a prudent level of reliance on a technology which still is capable of surprising its designers. Aside from anything else, the sheer scope and scale of Ontario's nuclear power program and the huge demands it makes on resources may well have deprived Hydro of some of its flexibility to adapt to dramatically and rapidly changing circumstances such as those that have occurred over the past few years.

A moment ago I mentioned biases. My strongest bias at this point is the need to maintain the professional and financial integrity of Ontario Hydro to ensure that it can continue to meet Ontario's energy needs at competitive prices and on the most economically, environmentally and socially responsible basis possible.

It will not surprise you, then, that I strongly agree with the stated position of both the province and Ontario Hydro that energy conservation and demand management are the front-line options for meeting Ontario's electricity needs. I believe Hydro should continue to pursue its energy management objectives and activities, which are among the most innovative and ambitious anywhere.

Some people argue that because of the current surplus generation capacity and because demand is dampened anyway by the recession, Hydro should cancel or severely cut back its conservation programs. I could not disagree more.

Certainly there are sectors where current market forces will do the job for the time being. Fuel substitution for residential customers is an example. But Hydro should make every effort to capture opportunities that may be lost if not exploited now; for example, retrofits or new construction. Energy conservation efforts have to be concerted and consistent if they are going to have any real effect. Efficient use of electricity not only reduces polluting emissions but will improve this province's industrial competitiveness by reducing energy bills.

One initiative that I am particularly interested in is Hydro's identification and promotion of energy-efficient technologies and products and its intention to foster development of these products in Ontario. This is the kind of activity that will not only bring environmental dividends, but will also yield long-term economic benefits to the provice.

On the issue of privatizing Ontario Hydro that has been the subject of public discussion, I would say only that the public power pool concept has served the people of Ontario very well over the past 86 years. There is undoubtedly at this point significant room for improvements in the effectiveness and efficiency of the system. But anyone who proposes breaking it up surely must first demonstrate that there would be compelling economic advantages, that a continued high level of reliable service and competitive rates can be assured and that all Ontarians may continue to count on equal access and equal costs.

In the meantime, I believe that Hydro should pursue vigorously the expanding opportunities I see for cooperation and for partnership for the private sector. Non-utility generation is a case in point. As you know, the corporation has already entered into arrangements in respect of a number of NUG projects. Over time, a growing proportion of its supply can no doubt be provided by such projects, which often produce additional benefits for the communities in which they are located.

At the same time, Mr Chairman, I have a strong conviction that new supply commitment, including new non-utility generation projects, should not be undertaken at the expense of the financial integrity of Ontario Hydro. This is particularly important at the present time of oversupply and financial constraint.

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Mr Chairman, Hydro's customers and the community at large rightly expect that Hydro will be operated in a businesslike way. They want Hydro to be market sensitive and customer oriented and they want Hydro to be accountable, which means doing what is best for the customers and for the province as a whole, not just what is best or most convenient for the organization.

Mr Chairman and distinguished members of the committee, I am on record -- I guess many records in fact -- as saying the only way a modern industrial society is going to maintain economic viability is through a marriage of environment and economic development.

Because of Ontario Hydro's size and its pervasive influence on every citizen and virtually every activity in this province, I believe it has the potential to become a model to the world -- a model of efficiency and a model of environmental responsibility. In my view, the two are not merely compatible; they are mutually reinforcing.

Mr Chairman, I look very much forward to the opportunity of helping to make that potential a reality and I welcome the opportunity to receive the guidance and the questions and hear the concerns of this committee. Thank you.

The Chair: Thank you, Mr Strong. I'm going to suggest that, as this is a two-hour review, we use 20-minute rotations per caucus so that each caucus will get two 20-minute opportunities. Just for those members who are new to this committee or substituting this committee, we do operate under some tough time constraints. Unlike other committees where you may have free rein, I'm going to -- I have to, I'm obligated to -- try to keep you within those 20-minute opportunities.

The review was the selection of the official opposition, so I go to Mr McGuinty to begin the questioning.

Mr Dalton McGuinty (Ottawa South): Thank you, Mr Chair. Let me begin by just indicating, Mr Strong, you're probably very much aware of this, but I think it's important to confirm it for others present that your appointment is in no real jeopardy here today. This is not the equivalent -- I've sometimes referred to this as a confirmation hearing -- by any means of an American Senate confirmation. The government members have never, in the history of this committee, in terms of our dealings with these kinds of matters, voted against an appointment that had been made by the Premier. Given that, I hope that we'll be able to engage in a full and frank discussion here today.

First of all, let me put it this way: Mr Eliesen, your predecessor, found at times that he himself became an issue rather than a part of the solution to addressing some of Hydro's issues, and at the outset, one of the issues he had to contend with was that of his salary. I understand, Mr Strong, you'll be earning $425,000 a year. Is that correct?

Mr Strong: That's what I understand.

Mr McGuinty: All right. And you have a five-year contract?

Mr Strong: That's correct.

Mr McGuinty: I want to know how you can justify that, and a good number of people across the province are asking the same question. In fact, we have a letter which was submitted together with our committee materials today from a Ms Jeanette deLevie, who raises the same kind of concerns. It's a copy of a letter to the Premier, and before you answer that question, I want to set the context here.

First of all, Hydro is in desperate financial straits. Mr Eliesen, your predecessor, took a pay cut from $400,000 to $260,000. Your counterpart with Hydro Quebec is earning $220,000. Hydro rates are going up 30% over three years. Hydro has a debt of some $36 billion. How can you justify a salary of $425,000 a year?

Mr Strong: Mr McGuinty, I did not set the salary; I accepted it. In doing so, I accepted a salary which was considerably less than I had every expectation of meeting in the private sector. If this were a charity or if there were some strong case for salaries that did not meet normal business standards, I would certainly have considered that. My understanding is that the rate was set after consideration of a review of comparable salaries by the Ontario Energy Board, which indicated that under normal business standards, the salary range of this job would have been some $800,000 to $1,200,000 a year.

I understand also that before Mr Eliesen, when perhaps the affairs of the corporation were a little simpler, not quite so troubled, that the salary was at least $100,000 in excess of what has been set for my salary. I did not set the salary; however, I did not feel that, if I was expected to run a businesslike operation, I should subject myself to a means test on the salary. If there was a good case for doing that, then I would.

I've served pro bono in many other situations, but in this situation it seems we need to send strong signals to the business and financial community that this organization is going to be run in a businesslike way. I believe that means establishing salary levels that meet businesslike standards.

Mr McGuinty: Right. Now you raised the issue of the equivalence in the private sector. Let me tell you about some of the things that are happening in the private sector.

First of all, executives are now regularly declining bonuses. Some are taking cuts in pay. I even heard of a Japanese executive who has declined to take any pay, in light of the fact that the corporation had lost money that year.

So I again raise the issue -- and I'm not sure if it's going to go away, because the people on the street who are feeling the very real pain of this recession have a great deal of difficulty understanding how -- and this is not a private sector job; you're almost a civil servant.

Let me just quote to you from Ms Jeanette deLevie here, who says,

"Dear Mr Premier:

"This letter is to express my concern regarding the appointment of Mr Maurice Strong as Ontario Hydro's new chairman and the accompanying salary of $425,000 annually plus benefits.

"Mr Eliesen was initially awarded a similar salary when he was appointed chairman of Ontario Hydro. However, after much criticism, he took a pay cut to $260,000.... Mr Eliesen then left Ontario for a job with BC Hydro at $195,000 per year. If Mr Eliesen could settle for $195,000 then perhaps the salary for the chairman of Ontario Hydro should be viewed as perhaps not worth more than what BC Hydro needs to pay. The cost of living in BC is at least equal to the cost of living in Ontario."

How do you respond with respect to that?

Mr Strong: I understand that when you're talking about levels of salary like this, it is difficult for people. I came up the hard way myself, and I understand those reactions. I think it's a matter of principle. I could afford to take a lower salary but I do not believe, and I've had some experience now with public corporations, that if you are seeking to establish a businesslike model of management, the salary of the chair should be subject to a means test.

I am already taking a very considerable reduction -- now that's voluntary; I'm very happy to do it -- from what I would otherwise have been making. But the numbers seem high. They are much less than those of baseball players and others. This company is a corporation and is in a state of crisis and difficulty. The job has perhaps never been more challenging than it is now. I understand that previous governments rated the chairman's job, or at least acquiesced in the rating of the chairman's job, at considerably higher figures than are now applied to it.

Mr McGuinty: Have you negotiated at all the terms of your contract now?

Mr Strong: Yes.

Mr McGuinty: Has your pension entitlement become part of that contract as well?

Mr Strong: Yes.

Mr McGuinty: All right. What is it you're getting in terms of pension?

Mr Strong: I am entitled to the normal pension benefits that any employee at my level of Ontario Hydro receives. There's no special pension package.

Mr McGuinty: All right.

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Mr Strong: There is one. I qualify only in the sense that I am entitled to have credit for the two and a half years of service I've recently had in the UN. That is a normal arrangement.

Mr McGuinty: All right. What does that mean, then, in terms of dollars on an annual basis at the end of your five-year term?

Mr Strong: I actually haven't figured that out, but I believe it's 2% per year of service.

Mr McGuinty: So you serve five years and get 10% of your original --

Mr Strong: That's my understanding, yes.

Mr McGuinty: All right. There was a rumour floating around that you were going to get 70% after five years. That's untrue. Is that correct?

Mr Strong: Not true.

Mr McGuinty: Okay. There's also another rumour saying that you were only prepared to work three weeks out of four. Any truth to that?

Mr Strong: None whatsoever.

Mr McGuinty: All right. I want to ask you about your sense of commitment. I do that in light of the recent history of Ontario Hydro. You see, I got this job two years ago, and since then we've had three ministers. You will be the third chairman of Ontario Hydro. We're looking for our third president. The last chairman said that he'd sign on for five years and he left after 16 months. You know the expression, "Once bitten, twice shy"? We've been bitten several times, so we're very, very shy. We're sceptical, maybe even suspicious.

Now your people have met Hydro's people, and they've worked out something in writing, and everybody signed things in the appropriate places in terms of the contract. Are you prepared to publicly commit that come hell or high water, you're on for the five years?

Mr Strong: I made that commitment; I'm happy to confirm it. I have to add the qualification that the Arabs always add to any statement, inshallah -- God willing.

Mr McGuinty: God willing. Now something somewhat related to that: You're going to have to engage in some trench warfare here now. You've just been a real high flyer. You have, as a result of your recent summit and prior experiences, mixed it up with statesmen from around the globe and the business élite. You have travelled about, and now this job, to my way of thinking, is going to require that you spend all of your time dealing with the pressing problems which are threatening our very economic life in this province. How do we reconcile that? What can you tell us that will make us believe that this transition, a very distinct and marked transition, is something that is natural and that you intend to follow through on?

Mr Strong: Mr McGuinty, I of course can't speak to what has happened in respect of previous chairpersons and presidents. I do understand very much, however, that that would give you a proper concern in this respect. I would, however, remind you that my career has included significant domestic as well as international commitments. When my commitments were international, my life was international. That was part of my job. Incidentally, I'm sure you won't be surprised to know there's lots of trench warfare in the kind of work I've been doing internationally too, so I'm not unaccustomed to that.

I took this job in large part because it is domestic. I made a conscious decision at this state in my life to return to my own country. I could have had a very nice life outside of Canada. I chose to come back here because I am a Canadian, my family's here, my roots are here, and I believe that what remains of my working life should be committed to my own country.

I don't believe my international associations are likely to be a disadvantage to this province in that respect; I hope they will be turned to an advantage. But my job is here, my commitment will be here, and I hope I will demonstrate that to your satisfaction as we move along.

Mr McGuinty: Why is it you turned the job down three times?

Mr Strong: I didn't exactly turn it down. It was a surprise to me. I had already made my arrangements for my return to private life. Initially, I just didn't see how I could extricate myself from those arrangements. So I indicated that while it was a challenge that I certainly took seriously, they shouldn't consider that I could necessarily be available for it; they should go on with their search.

Over the several weeks that followed, I gave similar signals saying that the more I think of it, the more I am interested. If I'm coming back to Canada, why not take on a challenge that is one of the most important facing our economy? I was able to make arrangements with those to whom I had made commitments to extricate myself from those commitments over time and finally was in a position to accept the post.

Mr McGuinty: Let me talk to you now about the rates. They are close to the highest in the country, and they've gone up 30% over three years. Our large power users are becoming uncompetitive as a result. Falconbridge, for instance, has a hydro bill annually of $90 million. It simply cannot pass along those costs in an international market.

The other day in this House I filed a petition signed by 10,000 home owners. These were people who were not motivated because a transmission line was going to be located in their backyard or a nuclear generating station was going to be located nearby; they were motivated simply by rates. What are you going to do to bring the rates down?

Mr Strong: As I'm sure the honourable member knows well, rates are largely a product of past decisions. The major element in the recent increases in rates has been the bringing on stream into the rate base of the very substantial capital expenditures that have been made recently, principally Darlington; not only Darlington, but principally Darlington. They are also, to the extent of about 25%, the product of management and maintenance costs of operating.

The controllable element at this stage is the reduction of costs. The corporation has made some very important initial efforts in this direction. I expect to re-examine the situation to determine where further cost reductions can be made, but I don't want to suggest that I can perform any miracles in respect to rates.

I do share your concern. I would be personally outraged and very unhappy if I were on the other side of this rate structure and were experiencing, at this time of economic difficulty and austerity, this kind of increase in rates. But unfortunately it's built into the system; decisions have to be made well in advance on the basis of projected need for supply. They were made in good faith by Hydro and by governments that previously made those decisions, and the net result is that the cost related to these decisions has accrued at a very untimely moment for Ontario residents and consumers. I share that concern.

As I see the task of Ontario Hydro, it is to ensure that this province becomes the most energy-competitive place in the world. That may sound like a lofty aspiration, but we live in a world economy, and I think we have to do that. So I can assure you that we will make a commitment to doing everything possible to levelling those rates out and trying to ensure that we do not move into an uncompetitive situation. I've given you a rather long answer to that, which is no answer at all except that I share your concern and I regard this as one of my primary tasks and commitments.

Mr McGuinty: There are a couple of things arising out of that, but let me focus on the reference you made earlier, I guess as a kind of adjunct, to your support for Ontario Hydro's conservation programs. In its last two rate hearings, the Ontario Energy Board has severely criticized Hydro for proceeding with expenditures which have not been cost-effective. At the last rate hearing, evidence was filed which showed that over the next four years the net cost of proceeding with the conservation programs that are presently in place will be $1.9 billion. After taking into consideration the savings, there's still going to be a cost of $1.9 billion.

We had a lightbulb giveaway program in this province which achieved a great deal of notoriety. That cost us $7 million. We saved $4 million in electricity: net cost, $3 million. That $3 million and the additional $1.9 billion all have to be absorbed in our rates. I understand your support for conservation programs, but at what cost?

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Mr Strong: Mr McGuinty, I do believe that conservation programs, like other aspects of the corporation's activities, need to be subject to close cost-effective tests. I am committed to energy conservation, I am committed to energy management; I'm not necessarily committed to all the methods by which these programs have been carried out. I want to review the ways in which we are carrying them out in relation to our current circumstances.

I also believe that the current conditions should not be the reason for making very major changes in programs that essentially have to be carried out on a long-term basis, but I do believe they must be subjected to tests of cost-effectiveness and I will be examining them from that point of view.

Mr McGuinty: Speaking of costs, another issue that arises is that the OEB has criticized Hydro for overpaying its employees.

The Chair: Make this a quick question.

Mr McGuinty: Yes. There are some 29,000-plus employees earning on average, benefits included, close to $68,000. I have two questions for you. First, what do you intend to do about that in order to bring it in line with the equivalent in the private sector? Second, in the design and construction section of Ontario Hydro there are 4,700 plus people working there. We're not constructing anything. What are those people doing?

Mr Strong: On the first question, I am aware that the general level of salaries and total remuneration for a large percentage of Ontario Hydro's employees is a little higher than the average in the province. I would point out, however, that the level of professional qualifications required for most is higher than the average in most industries because of the nature of our business. It is also true that these rates are largely the subject of negotiation with the employee unions representing a large percentage of Ontario Hydro's employees. So there are limits to what can be done in this respect.

The Chair: Mr Strong, I'm afraid I'm going to have to jump in here. Perhaps you'll have an opportunity to elaborate on that later.

Mr Leo Jordan (Lanark-Renfrew): Thank you, Mr Strong, for taking time to come before this committee and giving us an opportunity to hear your outstanding qualifications but, more importantly, to find the qualifications that are most relative to the job you're taking on here.

On October 29, when the Premier announced your appointment, at that time you indicated you were on the outer ring of a learning curve, I believe, or something to that effect. That created some concern across the province in that we're going to pay $425,000 in salary for somebody coming in on the outer ring of a learning curve. How would you like to respond to the reaction of the people on that?

Mr Strong: Mr Jordan, there are two kinds of learning curves. There's a kind of fundamental learning curve in which you learn about business and about the energy business. I've been on that learning curve for many years.

I started out my life as an energy analyst, then went to an oil and gas company and then I was chief executive of the Power Corp of Canada at a time when it was the largest public utility holding company in the country, owning what is now Hydro-Québec, the main elements of Shawinigan Water and Power, British Columbia Power. That was at an early stage of my career.

I have since been active in many other utilities, natural gas utilities, water utilities, and I've been very active in the energy business throughout my life. In fact even in my UN responsibilities energy has been one of the primary factors and I was on an energy strategy group with people like the chairman of Shell and the heads of some of the major energy organizations in the world. So I have been on a long learning curve in terms of utilities and energy.

But when you come to a specific organization, obviously you need to know the specifics of that organization, and Ontario Hydro is a large and complex organization. When I mentioned the learning curve, I didn't mean I was learning the business, although of course I've still got lots to learn about the business; I meant I was learning about Ontario Hydro and its specifics.

Mr Jordan: Thank you. Having done that now and had an opportunity to have an overview of the problems at Ontario Hydro, and taking into consideration your experience with these other major corporations, do you have a plan you can relate to where you've solved similar types of corporate problems in the past and would like to have the opportunity to implement that plan at Ontario Hydro?

Mr Strong: I don't think, Mr Jordan, that any plan I have implemented in the past could be applied in a cookie-cutter fashion to an organization like Ontario Hydro. Obviously, I would think some of the things we've learned from the past -- I have had experience in both sides of privatization. I was, as I mentioned, the head of Power Corp at the time when power corporations were taken over by provincial governments. That was a kind of deprivatization, and I have been involved on the other side.

I think my experience in many respects is relevant, but no situations are identical with each other and I do not come into Hydro with some preconceived plan. I have some general principles that motivate me; some of them I have mentioned in my introductory remarks. Particularly, I am concerned with the need to restore confidence in the financial integrity of the corporation. This, in my view, is an a priori requirement.

Mr Jordan: What about your board of directors? I'm sure all chairmen and chief executive officers want to surround themselves with the best they can get in qualified board of directors. Have you had a look at the board at all and the vacancies there? Do you have any opinion to give us on that?

Mr Strong: I obviously have looked at the board. I have only met very superficially on a social occasion with the board at a luncheon following the board meeting, so I know them more by reputation and I think there are some very fine people on the board.

There are, as you say, some vacancies and I hope that in filling those vacancies the government would want to have a substantially greater representation on the board of business experience and perhaps of some of the other elements, the local utility area, the municipal utilities. There is experience in a number of areas that perhaps could be better represented on the board, but the decisions on board representation are, of course, made by the government.

Mr Jordan: That's correct. So it's sort of out of your control then.

Mr Strong: Yes. I very much hope we would have an opportunity to make suggestions from time to time, but the decisions are made by the government. My impression in my discussions is that there is a recognition on the part of government of the need, in enlarging the board, to have greater representation of the business community and some of the other elements that are important to the life of Hydro.

Mr Jordan: In your past experience in the corporate field, have you ever been part of a corporation that had such a direct arm to the government as we now have under Bill 118? You'll actually get directives sent to you, asking you to carry them out in a limited amount of time. How are you going to run a corporation under that pressure?

Mr Strong: Well, Mr Chairman, I have run two major corporations that were subject to similar directive powers at the federal level. The first was Petro-Canada. I was the first chairman, president, chief executive officer of Petro-Canada. I put it together, recruited the staff etc. We operated under directive powers. Then, when I was given the similar task to establish Canada Development Investment Corp as the federal holding company for most of the major crown corporations of the federal government, a very large corporation in itself, we were also subject to directive powers.

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However, my practice in those cases was to consult closely with the government. Statutes, of course, gave us a mandate that required that we operate independently, in a day-by-day operating sense, from the government, but in my understanding we did not receive a directive in either of those cases from our government but it was always there to be used.

I would hope that in the case of Ontario Hydro it would not be necessary to use the directive power too much. It's there and it's up to the government, of course, to decide when and how it will be used, but I would hope that we would conduct the affairs of the corporation in such a way that that directive power would not have to be used too frequently.

Mr Jordan: I'm concerned, Mr Strong, about a strong corporate leader such as yourself getting in sort of a conflict with directive power of the government. Are you then going to just say, "Well, I'm sorry, this position is not suitable to my mode of operation and I too will have to -- "? Do you see that possibility if a directive is against your principles and against your majority of your board?

Mr Strong: Mr Jordan, I don't want to foresee that kind of a problem. I guess in theory it could occur. I have to say that I've never yet been in an open conflict position with any government I have served. I've had very tough, difficult issues to deal with and I've always been able to deal with them inside the government. I guess I've made my political masters nervous on occasion but I don't think I've ever embarrassed them and I certainly don't go into this job with any intention of doing so.

My normal mode is to try and work things out, but there are certain basic principles for which the corporation must stand, and at this stage I put the financial and professional integrity of the corporation at the very top of the list. If there are serious offences against those, of course the government, as the shareholder, is entitled to take positions that I might see might offend against that. But I think we would have a corporate obligation to take a strong position on any such issues. I would hope they would not arise.

Mr Jordan: Do you realize the members of the board are not responsible for their actions as per Bill 118?

Mr Strong: I do understand that. I'm not sure I understand the full legal implications of that.

Mr Jordan: It does relieve them of their responsibility, so they can become a direct arm of the government and just carry out the function.

Mr Strong: I do see that. There are real dangers in a directive power if it is used too frequently or in a way which compromises the ability of the corporation to manage itself. It would simply transfer the management over to the government offices, which I don't think anybody wants, including the government, as I understand it. However, the government is the custodian of the public interests in the province and not Ontario Hydro, and therefore when there is an important matter of public interest, I think at least in principle I believe that the directive power is something it should have.

Mr Jordan: But, you see, previous governments recognized that, as Ontario Hydro grew in size and became a more complicated corporation due to the different types of development relative to the supply of energy, they saw it was time that this must be run as a corporation, as a business at arm's length, not as a commission of the government. With this directive power, in all fairness, Mr Strong, we are back now, you might say, as a commission of the government, not as a corporation per se operated by the chairman and the board of directors.

Mr Strong: Well, Mr Jordan, I can understand that concern. I have, as I've said, served in crown corporations subject to directive power, and in principle I am not against directive power as a matter of principle. After all, the owners should have the ultimate say.

But I think it's the manner in which that directive power is used that might create the conditions that you're concerned with rather than the existence of that directive power. I think we'll just have to see. As I say, I've worked under those conditions before and have always been able to work out my problems and I very much hope I do that here. I don't have any sense in my discussions with representatives of the government that they intend to use the directive power to actually manage Ontario Hydro. I don't see any sense of that and I hope that is not the case.

Mr Jordan: It's our opinion that it has been in the past, even to the extent of removing a president. On that point, I would like to ask you, do you have anything to offer on who you would like to see fill that position?

Mr Strong: Obviously, that is one of the most important decisions that must soon be made. It'll be made by the board and I of course would expect to have a significant input into that decision.

Mr Jordan: Would you wait until the board has its full complement?

Mr Strong: No, I don't think so. I have informally, obviously, been giving a lot of thought to that issue now and, if I do go into this role, certainly that'll be a high priority.

We have a very good acting president, Mr Kupcis, for whom I am developing a very high regard, but I think that both he and I, and the other board members I've talked to informally, realize that we should go through an objective search process and that we've got a good basis for that in the search process that the government undertook for the job that I'm now being nominated for.

Mr Jordan: There's no consideration of your attempting to do both jobs?

Mr Strong: No. I have done that on occasion. I don't believe in it in principle. It may be sometimes done as a very temporary transitional thing, but in principle I do not believe both those jobs should be held by the same person.

Mr Jordan: Are you familiar with the Tennessee Valley Authority?

Mr Strong: Somewhat, yes. I have known some of their key people.

Mr Jordan: Are you aware of the problems that they had faced and Mr Runyon's solution to them?

Mr Strong: I'm not sure I know the particulars of the solution. It's a little bit in the past for me, but I do recall the kind of problems they had.

Mr Jordan: Do you know Mr Marvin Runyon?

Mr Strong: I've just met him. I don't really know him, no.

Mr Jordan: It is a known fact that he did reduce staff there from 37,000 to approximately 20,000.

Mr Strong: That's right.

Mr Jordan: And he did freeze the rates.

Mr Strong: Yes. They do operate under somewhat different legislative conditions than Ontario Hydro does, and I certainly don't pose as an expert on the act at this stage. But there is a best principle of providing service at cost and that does rule out government subsidies, at least under current conditions, whereas the Tennessee hydro budget was done in a somewhat different way in which there were inherent government subsidies incorporated in the budget. If I understand it correctly, they could make decisions as long as the government agreed to the budgets which represented a subsidy into the system. That possibility isn't available to Ontario Hydro, to my knowledge.

Mr Jordan: I think the important thing with that downsizing was that he was able to do it without causing hardship, if you will, to employees. At Ontario Hydro, I'm sure the morale must be very low at this time due to the uncertainties there.

Mr Strong: Yes.

Mr Jordan: We can't just keep pointing at Darlington as the cause. The people aren't buying that any more because half of that cause was a political decision anyhow to delay the project, as you're well aware. Then when they had to retender and start up again, of course there were penalties and there were new prices and everything added up to approximately, I understand, between $4 billion and $6 billion extra cost, just because of the delay. So to keep pointing at Darlington and the nuclear projects as the problem with the utility kind of scares me a bit, because if that's the only thing that you're seeing there to solve, what about the OM&A budget?

Mr Strong: Mr Jordan, as I tried to bring out in my remarks, previous capital expenditures, including Darlington, and it's just a matter of fact, have created the high debt load which is a primary basis for -- not the only basis -- the rate increases we've experienced. About 25%, however, as you said and as I indicated in my remarks, is attributable to management and administration and operating expenses, and it is in that area where I will certainly be examining every possibility for reduction. But we cannot, at least the corporation cannot, do anything about the existing debt load it carries, whatever were the reasons why that occurred. I'm not going into those reasons; I have to deal with the current situation, which is that the debt is there and has to be serviced.

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Mr Jordan: That brings us to the reducing of the OM&A budget. The association of major power users has suggested not $115 million but $692 million. Do you see that as a reasonable assessment by the association?

Mr Strong: I have to say honestly, Mr Jordan, I don't know at this point. This is something I have started to look at very carefully, but I cannot say that I've absorbed all the information one would need to take a position on that. But it is one of the primaries to which I would have to address myself.

Mr Jordan: You had spoken earlier about the training and the technical abilities required by the employees -- a lot of professional employees, engineers and so on, and technical people -- and in that way you could substantiate the average salary quoted of $68,000. Would you consider having Ontario Hydro made an essential service so that they're not facing strikes and labour disruption?

Mr Strong: I see that there is a case for that. I do not know where I would come down on that case. I will need to become much more familiar with the dynamics of that situation before I take a position on it, but it's a key issue.

Though I am impressed with the quality of our employees, you mentioned yourself, and I'm concerned with this, that morale is a problem, and I think we need to make sure that whatever difficulties we're experiencing now -- and as I mentioned in my remarks, these difficulties impact most on those who have committed their careers to and depend for their livelihoods on this corporation. So we're going through tough times and many of the impacts are going to fall on them.

In the course of this we have to make very sure that we preserve Ontario Hydro as one of the finest places to work for career people, because we're not only managing through today's problems, we're establishing the basis for the future Ontario Hydro, and this place has got to continue to be able to attract and to hold and to energize and include some of the finest people in the province.

We need them, and we cannot, in dealing with our current problems, it seems to me -- I feel strongly about this -- we must not undermine the attractiveness of Hydro as a long-term place for people making their careers in the energy business.

The Chair: We'll have to move on now. We have Mrs Carter and then Mr Huget.

Ms Jenny Carter (Peterborough): Would you want to go first?

Mr Bob Huget (Sarnia): The other way around, I think, if that's acceptable.

The Chair: You want to go first? Go ahead.

Mr Huget: First of all, welcome to the committee, Mr Strong. I hope you won't find us to be too unpleasant a chore to be up to this morning. I'm looking at your résumé that's here with the committee in some detail, and I have to say that I'm very much impressed with the list of lifetime accomplishments, really, in a number of major areas that involve power, among other things. It's a very impressive list.

Mr McGuinty and, I believe, Mr Jordan referred to the executive salary issue and I think it's important for you to understand just exactly what is taking place here. We have the official opposition party and the third party, both of whom in this province have had a kick at the can in terms of trying to manage Hydro, and I think the issue of salary and the question of executive salary and the chair's salary is being more directed at the government of the day, Mr Strong. In other words, we are the ones who are paying the salary.

I can't recall hearing the same sort of criticisms from either the opposition or the third party when they had their kick at the can paying the executive salaries. In fact, if memory serves me right, they were higher. As well, I think it's important to note that our government has initiated a review of executive salaries to make sure the compensation packages make sense.

Recognizing that this is a very large corporation -- and you would know better than I in terms of comparative size, both private corporations and public corporations -- it's probably safe to say that it's an organization whose direction probably can't be set by volunteers. I would suggest it likely needs a very competent, strong management team and a very strong chairman and chief executive officer.

I guess what I'm interested in is this. For the $425,000, what has Mr Strong got to offer in terms of qualifications for the direction and operation of this very big corporation? What qualifications do you bring in order to justify that kind of compensation package, first of all, and secondly, how do you see those qualifications leading the organization?

Mr Strong: I don't really want to recite my qualifications. I think only time will tell whether the government was correct or not correct in deciding that my qualifications might be applicable to this job. As this curriculum vitae, which I think has been circulated, indicates, the largest portion of my working career has been in the energy or energy-related fields. Even my environmental activities in the United Nations have been directly energy-related.

But I am not the one to judge whether those qualifications are ideal for the post for which I've been nominated. The government obviously made that judgement. In responding, I had to decide myself that I was up to it. I believe I will be, but only time will tell. I'm certainly fully committed to it. I've had a lot of roles in my life. I don't believe I have disappointed any of those that I've served in the past, and I certainly will work hard to ensure that I do not disappoint those I work for now.

On the level of my salary, I repeat: I responded to a level that was set, which I feel is an appropriate level. It does represent a significant reduction from what a private sector corporation would be paying, and therefore there is an element of public service in it. It also represents a significant reduction over something that I would have been receiving in the private sector. That's not a complaint. I took the job willingly and happily.

I did consider whether I should do it pro bono and decided that this would not send the right signal at a time when we do have to attract people and we do have to demonstrate that this corporation is going to be run on a businesslike basis.

Mr Huget: In your past experiences, can you highlight some of the qualifications that you would bring now in facing problems of the magnitude that we're looking at in terms of Ontario Hydro? Have you had other encounters in terms of trying to deal with very problematic situations that would be of the magnitude of Hydro's?

Mr Strong: I guess I've been dealing with problems all my life. The last major corporation that I headed was in my chairmanship of the Canada Development Investment Corp, which was about seven years ago.

Since then, in my international life, I think probably one of the greatest management challenges I ever faced was that I spent two years organizing the relief efforts in Africa. That may not sound like a management job, but that involved mobilizing $4 billion worth of funding, mobilizing port facilities and transport facilities, logistics for bringing in a variety of supplies into a small number of port areas and airports, and refurbishing, on short notice, road systems and railway systems. Thirty million people were at risk in that operation. Most of them survived. That was like running a war, in effect. I was the person responsible for organizing that operation.

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I don't think Ontario Hydro's problems could be any more complex, could be any more demanding of leadership and management skills, than that job was.

The job I have just left was of course of a different nature in a sense, but it's still a public service job, managing the largest summit conference in history. I don't want to pronounce judgement on whether I did it well or not, but the job itself was one of the most important, I think, management challenges anyone could face. Indeed, I hate to be self-serving, but just in response to your question, I was recently elected businessman of the year in the United States because of this. At least some people thought it was a fairly businesslike operation.

Mr Huget: There's certainly no need for you to apologize for anything in terms of what you've done over your lifetime, recent and not so recent, because I don't think that's at issue here at all.

Mr Jordan refers to Bill 118, which is the Power Corporation Act, and also implies that -- I guess Mr Jordan's view of the bill would be that there is a direct hand from the Premier's office that extends with an elbow joint across University Avenue and into the chair. No one else sees it that way. It's probably just Mr Jordan's imagination, but he has an active imagination.

You alluded to Petrocan. I think that's an important comparison because it's probably similar in terms of having policy directives from, in this case, the federal government.

I would like to find out from you your comfort level working under that kind of arrangement, first of all. Secondly, is there anything inherently wrong with a corporation owned by the province of Ontario suggesting it may have some policy directives like energy management or conservation, and then leaving that task to the hands-on management of yourself, the board of directors and the corporation? Is there anything wrong with that arrangement?

Mr Strong: Mr Huget, as I say, I have lived with this arrangement. Of course, there are often difficulties between a corporation and its shareholder, especially if the shareholder is the government, but I am not unaccustomed to dealing with them. Sometimes they're very, very tough, but the principle of directive power I have no problem with.

I would have problems, I have to say, if that directive power were used to provide a kind of surrogate management for the corporation and, therefore, relieve the corporation of a kind of proper system of accountability for its actions. There will be occasions in the broad policy sense that it would be perfectly appropriate to use that directive power. It isn't the principle of it that bothers me at all; indeed, even the practice of it doesn't necessarily bother me. But it is in the practice of it, rather than the principle of it, that I would think any difficulties might arise.

Mr Huget: If I were to ask you -- and there's a very important issue that I think everybody in this room is concerned about, partisanship aside: the cost situation, the rate situation in the province, whether that's an industrial consumer, just a general public consumer or anybody. Everybody's concerned about rates. Everybody's concerned about the cost part of the equation of Hydro's rates.

Recognizing that you're not there and you're not in charge of the operations yet, what I'd like from you is some kind of sense about how you would go about bringing some of those costs under control. There is a general consensus out there, rightly or wrongly, that Hydro's costs are out of control. I'd just like some sense from you what you think you can do to bring those costs in line.

Mr Strong: Mr Huget, clearly the area in which costs would be subject to control is that 25% that represents the operations and management costs. Within that, there also will be some limitations as to what you can do. You can't really take a meat axe to an organization like this; we're not a simple grocery or industrial business. We are managing for today. We are also trying to ensure the integrity of the organization to serve the needs of the province in the future.

But I would take it as one of my most important priorities and one of my most important tests to try to reduce those expenditures to the point where they can have some further impact on rates. I do not know at this stage the potential for doing that, but I'm sure, from what I've seen, there is some further potential.

Mr Huget: How important a mission do you think that is in terms of trying to rebuild or regain the industrial confidence in terms of hydro in this province? Where is it on the priority list? If you were to have one, where would it be?

Mr Strong: Well, there's no question that the need to reassure those industries that are suffering particularly from the current rate increases, coming as they do at a particularly bad time for most industrial customers, is a concern. I've started the process of informal consultations with some of the larger customers and will continue this. I want to hear their point of view.

It's very important in a new role like this to be a listener for a while. I haven't a long time to listen, but I've started that process of listening, and I've been getting some very important inputs. There's no question that some of our larger industrial customers are very acutely worried and suffering under this, as some residential customers are. I'm not sure what the answer is, but I certainly intend to give a lot of attention to that issue, and I hope there will be some answers.

Mr Huget: Thank you. I was going to ask you about your pension, but probably Mr Jordan could tell you more about your pension than you could tell me. He's the pension expert when it comes to Ontario Hydro. I think he's receiving one, so you might want to ask him some questions. I'll defer to Mrs Carter.

Mr Jordan: All I can say on it is that you have to earn it.

Ms Carter: First of all, Mr Strong, I'd like to congratulate you on getting the job, or consenting to take it, on your thoughtful and well-balanced presentation and on being as well qualified as anybody could be for this impossible job. I'd also like to commiserate with you for coming in on it at a very challenging time.

Yesterday morning I went to a breakfast that was put on by an industry. They were complaining about rising power rates, which are going to make competition more difficult and so on. They also wanted to bring in cogeneration and do something very energy-efficient, which I think most of us would agree was a good thing. But they were blaming the government for the rising rates, and yet those people belong to a group, the Association of Major Power Consumers in Ontario, which in fact has pushed for more generating capacity over the years and in particular for Darlington.

I think we really have to face up to the part that Darlington has played. I know it's a done deal now, but we can't just turn around and say, "Well, it's bad, so we won't take the messages from this." I believe Darlington is 78% of the reason for rate increases and I think about 39% of Hydro's revenue goes to interest payment on debts. Darlington costs more than it earns. I believe even if it was bringing in $1 million a day, the interest on the debt for it would still be considerably greater than that.

I guess my question really is, how are we going to pay for Darlington? We're now at a kind of juncture where money is short, obviously. We can't do everything. We need to look at going in for different kinds of energy, conservation, renewable energy, because after all, even if we do spend billions of dollars on keeping it up, nuclear is not going to last for ever. In fact, it's not going to really last for very long. So if we spend our money on refurbishing Bruce and that kind of thing, and we let some of these other opportunities go, we're not preparing ourselves for the future, and that money's not going to be well spent. So how are we going to pay for Darlington? How are we going to pay for transition to a non-nuclear future?

Mr Strong: Well, Mrs Carter, I appreciate your remarks. I don't have any miracle answers for that. I can only say that we have to pay through our rate structure for servicing all of the debt that has been incurred in the past, not only for Darlington but for the whole panoply of capital investments that the corporation has made over the years which have resulted in an accumulated debt of some $36 billion.

I don't see the holders of that debt likely to want to give us any breaks on it, and the moment we were to suggest that, our costs of money and our credit would go out the window. So there's no question of that. We have to service the debts we've incurred, whatever we may think of the decisions that created those debts.

Ms Carter: Absolutely.

Mr Strong: That's part of it.

Now in terms of the future we have more options. I would regard it as another very important priority to ensure that we select a range of options for future supply that will give our customers, those who are here and those who may be considering locating in Ontario, the ironclad assurance that we're going to continue to have the reliable sources of supply and the high standards of service that we've had in the past and at competitive rates. That's not easy, but although we call Hydro "Hydro" after its original source of supply, obviously we have a broad mix of sources of supply, and that mix is changing and will change over time.

I am one who believes that we're entering a period in which we need a more versatile and flexible range of sources. The corporation has already moved into that area. I think there are some sources that need examination that may not be economic now, may not be economic for a while but nevertheless do have a real potential.

People used to laugh at windmills, for example. There are now commercial wind farms in some areas.

Ms Carter: Certainly, yes.

Mr Strong: Well, we've got a lot of wind in Ontario and we've got a lot of places for windmill farms. I don't see that as an immediate answer, but I do see that that technology is something we've got to be close to.

We've also have among the largest peat reserves in the world in Ontario. In fact I understand, if I read the figures correctly, that Ontario's peat reserves are more than equivalent in energy content to all of Alberta's oil reserves. Now there are problems in developing peat or it would have been developed to date. But a number of countries are making electricity out of peat in a very commercial way, Finland for example.

I'm not tied to any of these, but I am saying that we must have, in my view, a broader range of supply options, options also that can be moved up and down in the movement of supply and demand more readily. One of the problems with the very large megaprojects is that when they're there, the costs are fixed, and they face you day by day, whereas a more flexible mix does give you better opportunities to respond to changes in your supply and demand pattern. Some of them can be brought on stream faster.

The Chair: Thank you, Mr Strong. I'm going to have to stop at that point. I'm going to declare a five-minute recess, and then we'll start the second rotation.

The committee recessed at 1123 and resumed at 1132.

The Chair: I wonder if we could get back to business again. If everyone could resume their seats, please. If there are any absolutely necessary conversations that must continue, could you do it out in the hall, please. We'll start the final rotation, again 20 minutes. We begin with Mr McGuinty.

Mr McGuinty: Mr Strong, I wanted to get your views on privatization and have you expand a bit more. I read some press clippings recently that said that you certainly considered it an option. It was something that you were not prepared to rule out. In reply to that, the minister has indicated that it is not a viable option. That's understandable because it's a matter of ideology, something which I don't think we have the luxury to afford at this particular stage.

As a matter of ideology, privatization is seen as something by this government that is inherently bad. The minister says it's not an option; you're saying it is an option. Are you going to consider it?

Mr Strong: I should make clear the context in which, Mr McGuinty, I suggested that all options for the corporate future of Ontario Hydro should be examined.

My understanding, in reviewing the public discussion on Hydro, is that the issue of privatization has arisen in the public dialogue on Hydro and I was responding to that situation. In doing so, I have no ideological position on the matter. I have served personally both public and private corporations. But I did and would now make clear on general principle, my approach is not one of favouring privatization in any ideological policy sense, but rather in suggesting that in looking at the options, and I think we must look at the options for the future of Ontario Hydro, that privatization is already one issue under consideration. That issue will not be decided by Ontario Hydro or by me. It will be properly decided by the government and there will be an accompanying public and political dialogue on that.

However, I believe that one of the things that we should do and that I would wish to do is to provide the kind of analytical background that would help evaluate those. The principle question on privatization, I would suggest, is to what degree and under what circumstances would privatization result in a most cost-effective and reliable electricity energy service to the people of Ontario.

I think that's the ultimate test. It's not an ideological test and, my understanding, when I discussed this with the Premier, was that he has taken no position on this issue and I have not understood that the minister's comments foreclosed any analysis of this. It was a statement of his view of privatization at this time. I would repeat and I believe that to the degree there is a public dialogue on privatization, our job is not to take a position on that dialogue but to help furnish some of the analysis that would ensure that this dialogue can focus on the kinds of issues I should think Ontarians would expect.

Mr McGuinty: The government has also taken a position on nuclear that is based on ideology. You are suggesting that we apply a more objective test, that of economics, and that's commendable and supportable. However, this kind of brings to mind the issue as to whether you are accountable in the first instance to the ratepayers or to the government.

I'd like to get your views on that, because from time to time you may find that you're placed in a position where the government is directing that you do something which you do not feel is in the best interests of ratepayers. They may say, "Mr Strong, we're not going to consider nuclear because ideologically we think that is something that is bad," or, "Mr Strong, we're not going to consider privatization because ideologically that is something that is bad," and as a ratepayer I want the best possible price. Whose side are you going to be on?

Mr Strong: I'm not on any side with the side of the public in Ontario. The process of accountability is well established, as you know, Mr McGuinty. Of course we're accountable to our customers, but the formal system of accountability is quite clearly established. We are accountable to the government and there's a series -- I don't need to tell you; you know all about this. There's the Ontario Energy Board and there's a very significant system through which we are accountable for our actions.

So we are not accountable directly to the people or to the customers; we are accountable through a system of accountability. I of course don't understand all the intricacies of it yet; I probably soon will. It's through that system that I see we have to be accountable.

I have to say that in my discussions with the Premier I have had no suggestion that we are subject to any ideological biases. Certainly, no such ideological biases have been made known to me. The nuclear moratorium is something I agree with.

Mr McGuinty: Mr Strong, it's very important for me to learn today whether you will be speaking out for the interests of ratepayers. Under the recent amendments to the Power Corporation Act, your board of directors will be issued directives and they will be absolved from any liability as long as they do as they're told, and any directive will deem to be in the best interests of the corporation. If you, in your heart of hearts, feel that what this government is saying is not in the best interests of ratepayers, will you speak up for us?

Mr Strong: I certainly will speak up in the councils of the corporation and in my relationship with the government. I have never yet in my public life -- and I've had lots of difficult issues -- had to take issue publicly with the government I serve. If I have to, I'm prepared to, but that is not the way I approach my job. My job is going to be that of serving the public, and it's particularly our clients. Under the act we have to do that, and I will feel a responsibility to act in accordance with the statutory mandate that we have.

Mr McGuinty: Thank you. My colleagues will have some questions.

Mr Sean G. Conway (Renfrew North): Mr Strong, on a more current issue, the morning press here in Toronto is reporting that the Ontario government has backed off its market value assessment legislation, in a word, because it now understands the impact of that on Ontario Hydro. Can you indicate to this committee this morning whether, in the course of the last few weeks since you've come on board, you have had any dealings with the government on the question of the market value impacts of proposed government policy?

Mr Strong: No, Mr Conway. I've had no dealings on this issue.

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Mr Conway: I was interested to hear you talk earlier, in responding to earlier questions, about some of the structure that you imagine at Ontario Hydro. Let me just, in the brief time I have, ask you this: When one looks at Ontario Hydro today -- and it is still, I think, the largest and one of the most complex corporations, if not the most complex, in the nation -- there are some people who are increasingly alarmed that there is no one now at the very senior levels who has any operational experience. There are a lot of very good people, but almost no one now at the apex of this gargantuan public corporation with any operational experience. Do you see that as a legitimate criticism, and if so, what kind of steps would you imagine taking to address it?

Mr Strong: One of the impressions I've formed in my contact with the organization and its people is indeed that one of its primary strengths is the operating experience and capacities of its senior executives. The vice-presidents represent many, many years of operating experience and operating excellence. I don't want to be premature in making judgements, but my impression is that what the corporation needs now is a strong sense of strategic direction and the kind of confidence rebuilding that will enable the operating people in the organization to function properly.

Mr Conway: I guess specifically the concern has been focused at the chair, the CEO, the president and the chief operating officer. Those four positions are the positions that I think people are concerned about. There's no question that elsewhere in the corporation there are a lot of people with a lot of operational experience, but there is some very real concern that at the apex, in those top three or four positions, we now have no one with any significant operational experience within that corporation.

Mr Strong: When you add the last qualifier, that would exempt me, because of course I haven't been within the corporation. Of course, my experience in recent years has been very much at the policy level, but I have had very significant operating experience. I started out as an analyst and worked my way up: accountant, controller, treasurer, vice-president of finance. So over many years I've had significant operating responsibilities, but not within the corporation.

Al Kupcis, who is the acting president, has come up through the corporation and has very significant knowledge of it, and the other vice-presidents represent, in my view, a very rich array of operating experience. Of course, we must fill the presidency, and I would hope the presidency would be filled with someone who does have that kind of operating experience.

Mr Conway: Those of us who have been involved in the public debate in this province over the past number of years -- in my case it's nearly 20 years now -- have been struck by the number of people from, quite frankly, all political persuasions who have observed that Ontario Hydro represents one of the most elaborate and complex and immovable bureaucracies in God's creation.

Quite frankly, we've had ministers of the crown responsible for Hydro tell us that in this room. My friend the member for Ottawa South has observed that this corporation has some nearly 30,000 people. The historical literature is replete with chapter and verse on this subject. It's not a partisan issue. It has troubled every government, whether NDP, Liberal, Tory or United Farmers. There isn't a Premier who has gone to his grave without complaining, often very publicly, about the impossibility of trying to manage the Hydro bureaucracy. My question is what, if any, plans you have for dealing with this.

Let me just preface this. I read myself to sleep last night with a New Yorker article from 1972, an unbelievably wonderful profile. Bob Rae and Pierre Trudeau should have died for this kind of coverage. It was a profile on yourself. It's from June 1972 and I'm just going to cite one paragraph:

"Every so often, Maurice Strong remembers that not all people are blessed with his tirelessness, and at the end of an especially gruelling day he invites his staff to join him at an impromptu champagne party in his office. Even on non-champagne days, Strong's subordinates are likely to excuse his demands on them because they realize he is a rare international civil servant. He loathes red tape. He is happy to make decisions. He is bored with bureaucracy.

"He even gave a speech last November" -- probably November 1971 -- "in which he cheerfully proposed" -- and this, for me, is the operative part of this -- "that it might be advantageous for the United Nations if some of its proliferating departments were reduced in size by 50%, and instead of quoting some conventional authority on the human experience, such as Plato, Strong quoted Pogo, `We have met the enemy and he is us.'"

That, quite frankly, sounds like former ministers of Energy who've come to this committee to complain about their difficulties with Ontario Hydro.

I'm wondering if you would care to comment on any views you have about measures you might take to reduce the bureaucratic tangle and to perhaps significantly reduce the layers of operation at this mother of all public monopolies.

Mr Strong: I had forgotten that quotation, but your suggestion that there is something in common with the United Nations and with Ontario Hydro has actually struck me. I have been Undersecretary General of the United Nations six times in my career, coming in to take on particular tasks. I have never confronted an organization anywhere as complex, as difficult to manage, as difficult to get things done in, as the United Nations, but in my first encounters with Ontario Hydro, I do think I now have a prospect of serving in an organization which has some of the same complexities.

However, my initial reaction is that there's one fundamental difference: The UN bureaucracy doesn't work very well. The Ontario Hydro bureaucracy, in my experience, does work extremely well. I've never seen an organization in which it worked better. That's an initial impression.

That doesn't mean improvements can't be made. In a big organization there are areas -- human resources functions exist in the regions and exist at the centre; a number of planning functions exist in the regions and exist in the centre. I don't know what my position would be after I look at those, but those are areas where you have duplicated functions that need examination. I would be surprised if they didn't yield some significant opportunities for improvement.

Mr Conway: Mr Chairman, I yield to the member for Bruce.

Mr Murray J. Elston (Bruce): Thank you very much, Mr Strong. As you know, my area has in it the Bruce nuclear power development and at this stage, of course, there's continual concern about the prosperity and prospects for prosperity, not only of Hydro but also of the communities at large. I think it's fair to say that our people are not asking for any special consideration, because they understand the pressures, but how can you demonstrate that there will be a fair assessment of all the studies and reports which have been done on the economics and the prospects for an economic production out of A, if that's to happen? How can you demonstrate to the community and the people who are working there that they're going to get that fair assessment?

Mr Strong: I fully agree with the need to do this. I think when decisions are made that affect important communities, the interests of those communities, human factors involved in those decisions, have to be given a tremendous amount of weight.

I am pleased to say that a committee of the board of Ontario Hydro is examining the potentials and the options for the future of Bruce A. That committee is under the vice-chairman of the board and will be going to Bruce within the next few days. They're there simply to look at the situation from the local perspective, and during that they will have many opportunities for discussions with local people. That is one of the important measures already undertaken to make sure the interests, the concerns and the views of the people who depend on that facility are taken into account. I certainly would very much follow in that mode.

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Mr Elston: Apart from the interviews, how can the people from that area sort of become involved in the discussions? I think we've seen so many times where the interviews or the touching of people is a demonstration of interest in quelling, sort of, weary nerves but there is no indication that the message is clearly heard or in fact has even been presented during the discussions.

Is there a possibility, for instance, that people from the community can actually become involved actively in the discussions, so that there is some sense or some connection in the community that fairness has prevailed at a time which is most critical economically not only to Hydro, which it is and to all of Ontario, but certainly to the constituents in my area? I repeat, we're not asking for special consideration or any of that, but we certainly are looking forward to a sense of fairness.

Mr Strong: I think that is very important. I do not know all of the measures the corporation is planning to give effect to this, but I assure you that I will examine them very closely, if I do find myself occupying the chair, and will do my best to ensure that this concern is met.

The Chair: We'll move on to Mr McLean and then Mr Stockwell.

Mr Allan K. McLean (Simcoe East): Good morning, Mr Strong. Welcome to the committee.

I have a question for you that relates to the debt and the assets. The debt is almost as large as what the assets are. There are more people changing to gas than ever before. There are fewer people paying hydro. What are you going to do to get rid of the debt or to keep it in line because of the fact that there are fewer people paying hydro and the cost is going up?

Mr Strong: We obviously can't wish the debt away. I wish we could, but it's only going to be reduced over time. I think initially the important task is to try to keep the growth of the debt in line and also to conduct the corporation's affairs in such a way that we'll inspire the confidence of the financial markets and therefore be able to borrow money on the most favourable terms. But I think it would be unrealistic, unfortunately, to suggest that we can do anything to actually get rid of that debt at an early stage. I think slowing its growth has to be our primary objective.

Mr McLean: Some employees have indicated to me that there could be as many as 10,000 more employees at Ontario Hydro than what's needed. What is your view with regard to getting rid of some of those employees?

Mr Strong: I don't know the answer to that, but that is certainly something that I'm going to pay a tremendous amount of attention to. But I do want to make the point that we must not forget that the prime asset of this corporation is not just the physical assets on which we're paying debt, but the people in it.

We do have to cut costs, and I think our employees recognize this. We do have to trim our personnel. Someone mentioned earlier, and I don't think I responded to this, the construction area. I think it is quite clear that if you're doing less construction, you need fewer people, just to give one example.

But by the same token, we must do this in a way which does not erode or impair the morale and the basic conditions of service for our people, because this is our key asset for the future. The management of this corporation is going to be much more difficult in the future than it has been in the past, much more demanding, both of our professional and our managerial capacities and our operating people, and we must provide a solid base to ensure that people are going to continue to find it attractive to come here and commit their careers to Ontario Hydro.

Mr McLean: Could I get your views with regard to contracting out?

Mr Strong: In principle, I like it. In principle, I believe that if we were looking back, and I'm not criticizing anyone, I would think that perhaps the costs on some of our major construction projects might have looked differently. If we were dealing with private contractors, we might have had recourse which we can't have with our own employees.

As I say, I'm not looking back on that, but in principle I believe that contracting out can be a very useful way of having services performed competitively and, in the course of it, helping to support the creation of a viable services structure.

Mr McLean: I understand you're going to Bruce; you indicated tomorrow. Could I have your observation with regard to the updating of that facility? I know that you don't want to build more, but will you upgrade that facility so that it'll continue to be in use for many years to come? Is that your observation now? Are you thinking of that, or are you thinking of closing it?

Mr Strong: Continuing it is certainly one of the options. I have no position on it. I am doing my best to get up to speed on this issue. Of course, I'll be very influenced by the findings of the special committee that is reviewing the matter that I referred to earlier, but I have no position on it at the moment.

Mr McLean: We met yesterday with the Ontario forest industry and we were informed that Detroit Edison, across the border from many Ontario operations, is cutting rates by 3% in 1993 and 16% in 1994 for its major power customers. What are we going to do for those forest industry people?

Mr Strong: Unfortunately, Mr McLean, I cannot give you a specific answer to that, but I do recognize it is a very prime challenge to us. Detroit is our neighbour. It's the closest place to which industry could move if it moved from Ontario, so that is a very real concern. What we can do about it within the limitations of our situation, the act under which we operate, I'm not sure, but I would like to think there are some things that we can do about it, and if there's anything we can, I will be proposing such measures to the board.

Mr McLean: There has been a lot of industry that has moved to the United States. Would you believe that part of that reason is because of hydro rates?

Mr Strong: I don't know. I've discussed with a number of industrial leaders here who are concerned about rates and no one has yet suggested that they have actually moved. There's been the odd suggestion that this is a factor in a move. I had a call this morning before I came to this committee from a leading industrialist in Europe who was actually looking in the other direction, looking at locating here.

I think we have to reach out as well as just protect the industry that is here. I think we also have to create an energy rate structure that is going to be attractive to new people as well, but we can't do that if it's not competitive with our neighbours.

Mr McLean: Right. Energy Probe and think tanks such as the C.D. Howe Institute, for example, have criticized Hydro severely. What are your views with regard to the criticism? Do you think its appropriate?

Mr Strong: I couldn't give you a broad answer to that. I've been reading and trying to absorb a vast array of material on Hydro, including critical reports from Energy Probe etc. I think they have some very good points. Some things I would agree with at this preliminary stage; some things I would question; some things I would disagree with. I couldn't give you a total answer, but these are all very helpful in terms of the process of making some of the tough decisions we're all going to have to make.

Mr McLean: My final question is, would you, in the overall looking at Ontario Hydro, be looking at selling off some of the assets in order to reduce some of the debt?

Mr Strong: I think we should be looking at every option. Now, the extent to which these options provide real answers to our problems, I don't know, but we're a vast corporation. In any vast corporation, and one as old as this, of course, various assets accrue which maybe are no longer quite as relevant. That's certainly something we should look at.

Mr McLean: Have you considered the amount of layoffs? I know I started out with this question, but in your mind presently, from what you have observed, what do you anticipate will be the layoffs in Ontario Hydro?

Mr Strong: I can't give you any answer to that. As Mr Conway quoted, I made a statement in the UN that 50% of the staff could be cut. That was a considered statement. I'd been with the UN, I knew it, and I still feel very much the same, incidentally, but I don't have that same knowledge of the internal situation in Ontario Hydro. So I could not give you a knowledgeable answer to that at this stage.

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Mr Chris Stockwell (Etobicoke West): I want to address the issue of cost to the consumer very specifically. Probably outside this room and this building, when you go out into the regions of this province, that appears to be the number one issue and the number one question that's asked about the costs of hydro.

I note in the Toronto Star, I believe it was last week, that you said you will keep future rate increases below the rate of inflation. You have also said today that basically when you're talking about keeping the costs in line you really only have about 25% of the budget to play with. Obviously you're an accountant or you've been in the accounting process, but we all understand that six and six are 12. The capital costs and the debt servicing are fixed costs. There's nothing you can do about them.

I can't understand -- and I guess you're singing from both sides of this hymn book, as far as I'm concerned. How can you tell me that the number one commodity that you have at Ontario Hydro is the people, tell me on the other hand that there's only 25% availability as far as controlling costs are concerned, then say you're going to keep your rate increases below the rate of inflation and then say you haven't looked at layoffs? The bottom line here is that if only 25% of your ability to control costs is available to you, what else are you going to do but have layoffs? What's the option?

Mr Strong: First of all, let me say that I did not, as that article implied, make a commitment to keeping the rates below inflation. I said that has to be our objective over time. It's quite clear you're not going to do that in the next two or three years, but over time we have to have that as an objective.

It's not easy to accomplish, as you rightly say. It will require reductions in future capital expenditures. You can't do anything about capital expenditures that have already been made, but over time you can take a much tougher look at the mix of new capital expenditures, at the mix of supplies you provide internally with your own capital expenditures and those which you contract for. That's one of the supply options.

Of course, as you say, there are limitations in the degree to which you can slash staff costs, but we are not going to be competitive. However difficult it may be, we are going to have to keep our rates below inflation, but that can't be done instantly. That's got to be our objective over time.

Mr Stockwell: What time period are we looking at? I mean, these people --

Mr Strong: Ten years.

Mr Stockwell: Yes. That's the difficulty I'm faced with in speaking to constituents in this province. No offence; it's your first time in here and I can appreciate that. I think you're probably going to have very few impromptu champagne parties over the next few years because of the difficulties you're faced with at Ontario Hydro.

But the question stands: Ten years doesn't seem to be good enough for my constituents, it's not good enough for the businesses in my municipality, and I would suggest, sir, it's not even close to good enough for those particular industries that are very dependent on hydro and are spending millions and millions of dollars to try to stay competitive.

I'll put it to you in that fashion. They don't buy into this 10-year plan; in 10 years they're out of business. What do I go back and say to these people about your game plan of, "Ten years and we'll get down to the rate of inflation"?

Mr Strong: I didn't say it would take 10 years to do it; I said you have to be able to do that within a 10-year context. That doesn't mean we can't move there in the next three or four years. I simply don't know how long it would take. I do know you can't do it in the next two or three years.

Mr Stockwell: Okay. The next question: I think you've got to do it tomorrow, quite frankly. I don't think you have any options here. We're losing business like it's just going out of style in this province. We're losing 500 jobs a day, businesses closing down, hydro rates going through the roof, double-digit increases. The only way I can see you can do this and maintain what you suggest is a reasonable position with respect to your employees is massive layoffs, in the range of the thousands of people.

If you get to the situation where it's quite obvious that there's no other alternative, are you prepared to pink-slip thousands of employees so we can have competitive, economic hydro rates?

Mr Strong: I am prepared to do what has to be done to make this corporation viable and competitive. Whatever we do has to be done, however, in a way that does not destroy its capacity to remain a viable and competitive organization over time. We are not just meeting the current crisis. We are doing that, as you well know, but we have to do that in a way that doesn't destroy the organization. It's one of the prime assets to this province, and we've got to make very sure that we do not seriously compromise that capacity to continue to serve in the future. Otherwise, we're not only going to lose present industry; we're not going to attract future industry.

So it's a balancing act, and it's not an easy one. Frankly, if this job had been easy, I wouldn't have been interested. But I'd be very happy to have any specific proposals that you or anyone else has that will help me to do this more effectively.

Mr Jordan: Mr Strong, Ontario Hydro has been referred to as the largest construction company in Ontario and maybe in Canada. Would that not be a number one move? You refer to contracting out and reduction of staff and so on. We've got design, we've got planning, we've got all the construction staff, we've got the engineering division, but we've got nothing for them to do. The people are telling us that. We don't have to go inside the corporation to see that. That's dealing with the 25% my colleague has referred to, that one aspect of it.

On the other side, here we are negative marketing when we have to build generation to meet a 20-minute peak, and here we have valley power and we're saying, "Don't use it." There is not another energy that is as controllable, Mr Strong, as electricity. With the technology we have today, we can control it so it's not on at peak time; we can have that cash flow from valley power. People in business do not understand that we're saying to them: "Don't use our product. Go down the street. We'll let the generators spin. We'll let the water over the dam." How do you feel about that approach to marketing?

Mr Strong: Basically, I think it's sound to be reducing demand over time --

Mr Jordan: That part we agree with. I'm talking about the valley power.

Mr Strong: But when you get into a tough situation, as we are now, when our market is less than projected and we've made expenditures, including capital expenditures, on the basis of higher projections, obviously you have to cut the cloth to fit the situation. So I think all of our programs need to be re-examined in terms of adjustments in the short term which will not fundamentally change our long-term commitment but will accommodate to the very unusually tough and austere situation we now face.

Mr Jordan: I really believe we're looking at something here that the rest of the North American continent and in fact the world is envious of. We have the knowhow, the expertise, and we have the electrical industry, and we're killing it, we're killing it with a plan -- not by accident, but with a plan. This is going to be very sad for the future of this province if we continue down that avenue of negative marketing: "Don't use it." It just does not make sense.

I say demand management: Cut the peaks as much as you can. It's good for business; it's good for everybody. But you have the equipment there, you have those kilowatt-hours that are off-peak, and people today are accustomed to living in a totally controlled environment, Mr Strong. We have a way of life here, and to keep threatening us with, "If you keep using it, we'll raise the cost" -- that's one way to control it. I think the old "Live better electrically" has done a lot for this province, and we have lived better electrically, not only in our homes but through industry.

Industry has made great strides. I have a letter from Falconbridge. They had implemented all the very best technology to cut their demand so on, and what happened? The increase absorbed everything they had saved.

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Mr Strong: What you're saying is very important, Mr Jordan. I certainly hear you very well.

We have short-term objectives and longer-term objectives. One of the longer-term objectives -- in fact, I think the primary longer-term objective of Ontario Hydro -- should be to take the lead in trying to ensure that Ontario will be the most energy-efficient and competitive economy in the world.

Energy efficiency means eventually reducing demand, and of course you've got to manage that reduction in a way that doesn't create undue problems for you when you're experiencing short-term problems like we are now. But if we don't become more energy-efficient, we're going to have a sinking economy as a whole.

Japan now takes 50% of the energy that we do to produce a unit of GDP. That's something that's bad for our competitiveness. So an energy-efficient economy is the key to the economic future of this province. Managing it in a way that achieves it without exacerbating short-term problems is a challenge. I don't say I have any secret means of keeping that balance right, but I do see it as a very primary challenge.

Mr Jordan: Do you see the cash flow in that valley power?

Mr Strong: Yes, I do see it. I see that there's cash flow available in that, of course.

The Chair: We have to move on.

Mr Kimble Sutherland (Oxford): Mr Strong, I don't have the knowledge of some of my colleagues here about Ontario Hydro, but our historian of the Legislature, Mr Conway, has talked many times about the mandate of Ontario Hydro from day one being power at cost. I've been spending the last two years trying to figure out what the definition is of "power at cost." Have you had an opportunity to develop your definition of what power at cost is? Do you think Hydro has been able to provide power at cost?

My second question to you has to do with the greening of Ontario Hydro, not only in terms of energy conservation and reducing those costs, also some comments on non-utility generation, but do you see a role -- maybe Ontario Hydro is already doing this -- in helping to develop new industries, new technologies that can be turned into new jobs for the province of Ontario? How do you see Ontario Hydro's role in that? What vision do you have for making Ontario Hydro supportive of these new technologies and new jobs?

Mr Strong: Like you, I have been trying to understand what is meant by "cost" in the particular context of our legislation and our experience. I obviously need to form a view of that, but I have to start by understanding what the prevailing view is, what the governing view is.

Cost, like a lot of other things, is subject to a wide variety of interpretations, but I believe the principle is quite clear, that obviously we are not called upon to receive subsidies from the government in the setting of our rates, nor do I believe we are expected to provide subsidies. The full implications of the definitions that have been applied by Hydro are not known to me yet; I don't fully understand them yet, and I'm seeking to do that.

What was the second question again?

Mr Sutherland: It was regarding technologies, helping to support new industries and new jobs.

Mr Strong: In fact, this is one of my prime interests. I have had a significant interest in technology for some years. I have chaired a group for several years now of the heads of some of the major technological and intellectual institutions in the world, including the heads of Tokyo University, Caltech, MIT, Kyoto University, the Institute of Advanced Studies in Princeton, the Max Planck Institute, the Royal Swedish Academy; heads of 25 of the leading organizations of the world. I've been chairman of that for several years, and their principal purpose is to examine major new scientific and technological breakthroughs that may have industrial implications, so I'm deeply interested in this.

I believe there is a tremendous potential for Hydro, as one of the largest organizations in the country, certainly in Ontario, in an industry -- energy -- which is particularly susceptible to the use of technologies, to play a role in this, and I'd like to feel we can play a role. I think Ontario Hydro has been playing a role, but this is an area where I believe we can make a significant contribution to the province.

Mr Daniel Waters (Muskoka-Georgian Bay): I know we've kept you well past the time, and I also happen to know you have another appointment we're making you late for.

Mr Strong: No problem.

Mr Waters: I'll keep it brief and then we'll let you go. I thank you very much for your patience with us.

I would like a quick comment on what your views are on municipalities wanting to leave the grid and produce their own power.

The second thing I'd like a quick comment on is that Hydro -- at least where I live in central Ontario -- is known for listening but not hearing. I would like to know what you could do or bring to the board about the general public out there, ultimately the people who buy the power, about bringing to Hydro a means and an understanding that Hydro indeed is hearing, not just listening, that it's hearing and is willing to act upon some of the concerns.

Mr Strong: On the second question first, if I may, I can only assure you that the Hydro I'm associated with will not only listen but hear, and we'll try to make sure that isn't just a rhetorical statement. We'll try to make sure we actually establish processes or use existing processes to make that happen.

On the issue of individual municipalities opting for their own supply, this is a fundamental issue, as well as a very important issue in terms of the current situation.

In terms of the current situation, as I mentioned, I see that my highest priority is trying to ensure the financial integrity of our system as a whole. We need to be flexible. We need to be cooperative and helpful with communities that have particular needs and particular solutions to their problems that might meet those needs. But the reason the people of Ontario opted long ago for a province-wide system was to ensure that the whole province was going to be supplied with reliable, competitive service. As in many other aspects of a province like Ontario, there'll be many, many policies where one community could pursue that policy to the detriment of the rest of the province. When that happens, that opens very fundamental issues.

From the Hydro point of view, we don't take decisions on the whole range of issues, but we do have to take a position in terms of any such arrangements that would at this point, however desirable they might be for that community and as a general matter of cooperating with communities. We might well have to take a position that we simply have to resist anything that's going to significantly compromise the integrity of this corporation at this important time.

Mr Waters: Once again, I thank you for your time, and we will allow you to get on and try to get caught up with your schedule.

Mr Strong: Thank you.

The Chair: Mr Strong, that completes the interview process. We appreciate your appearance here today and wish you well.

Mr Strong: I'm very, very grateful, Mr Chairman, to you and the other members. The fact that you gave me two hours of your precious time and asked questions that indicate the degree of knowledge and commitment to the affairs of this corporation is an encouragement to me. I look forward to hearing your criticisms, your guidance, your comments in the future, and I'll try to live up to your expectations.

The Chair: Thank you very much.

Mr Conway: The courtship is over. Let the marriage begin.

The Chair: Can I ask members of the audience who wish to leave to do so as quickly and quietly as possible? The committee still has some business to conduct here.

I'm looking for a motion from a member of the committee in respect to Mr Strong's appointment. Do we have a motion to concur with the intended appointment of Mr Strong?

Mr Waters: So moved.

The Chair: Moved by Mr Waters. Any discussion on the motion? All in favour? The motion carries.

One other item of business: As this is probably going to be the last meeting of the committee, I'd like to have a motion from someone giving the subcommittee authorization to make final decisions on all matters to be dealt with during the recess. It's a normal --

Mr Waters: I can move it.

The Chair: Moved by Mr Waters. Any discussion or question on that? Okay, that's carried.

Anything further we should be discussing? We do have a subcommittee meeting next door. Meeting adjourned.

The committee adjourned at 1220.