POWER CORPORATION AMENDMENT ACT, 1991 / LOI DE 1991 MODIFIANT LA LOI SUR LA SOCIÉTÉ DE L'ÉLECTRICITÉ
ASSOCIATION OF MAJOR POWER CONSUMERS IN ONTARIO
ONTARIO NATURAL GAS ASSOCIATION
PORT GRANBY/NEWCASTLE ENVIRONMENT COMMITTEE
ORGANIZATION OF CANDU INDUSTRIES
DURHAM REGION COALITION FOR NUCLEAR RESPONSIBILITY
INDEPENDENT POWER PRODUCERS' SOCIETY OF ONTARIO
CONTENTS
Tuesday 21 January 1992
Power Corporation Amendment Act, 1991, Bill 118 / Loi de 1991 modifiant la Loi sur la Société de l'électricité, projet de loi 118
Association of Major Power Consumers in Ontario
Arthur Dickinson, executive director
Syd Olvet, member, board of directors
Joint Industry Task Force
Russell Baranowski, chair
Peter McBride, member
Lloyd Greenspoon
Ontario Natural Gas Association
Paul Pinnington, president
Norm Loberg, vice-president of marketing, Consumers' Gas
Brent Bailey, director of marketing and sales, Centra Gas
John Van Der Woerd, manager of marketing, Union Gas
Port Granby/Newcastle Environment Committee
Janet Mayer, acting chair
Organization of Candu Industries
Wayne Broughton, vice-chair
Martyn Wash, director
Voice of Women
Ursula Franklin, representative
Betsy Carr, representative
Anna Lou Paul, representative
Atomic Energy of Canada Ltd
Don Lawson, president
Doug Christensen, representative
Durham Region Coalition for Nuclear Responsibility
Bob Rutherford, chair
Jack W. L. Goering
Independent Power Producers' Society of Ontario
Jake Brooks, executive director
Nuclear Awareness Project
David Martin, member, steering committee
Durham Nuclear Awareness
Irene Kock, representative
Adjournment
STANDING COMMITTEE ON RESOURCES DEVELOPMENT
Chair / Président: Kormos Peter (Welland-Thorold ND)
Vice-Chair/ Vice-Président: Waters, Daniel (Muskoka-Georgian Bay/Muskoka-Baie-Georgianne ND)
Arnott, Ted (Wellington PC)
Cleary, John C. (Cornwall L)
Dadamo, George (Windsor-Sandwich ND)
Huget, Bob (Sarnia ND)
Jordan, Leo (Lanark-Renfrew PC)
Klopp, Paul (Huron ND)
McGuinty, Dalton (Ottawa South/-Sud L)
Murdock, Sharon (Sudbury ND)
Ramsay, David (Timiskaming L)
Wood, Len (Cochrane North/-Nord ND)
Substitution(s) / Membre(s) remplaçant(s):
Conway, Sean G. (Renfrew North/-Nord L) for Mr Ramsay
Johnson, Paul R. (Prince Edward-Lennox-South Hastings/Prince Edward-Lennox-Hastings-Sud ND) for Ms S. Murdock
Clerk pro tem / Greffière par intérim: Manikel, Tannis
Staff / Personnel: Yaeger, Lewis, Research Officer, Legislative Research Service
The committee met at 1005 in committee room 2.
POWER CORPORATION AMENDMENT ACT, 1991 / LOI DE 1991 MODIFIANT LA LOI SUR LA SOCIÉTÉ DE L'ÉLECTRICITÉ
Resuming consideration of Bill 118, An Act to amend the Power Corporation Act / Projet de loi 118, Loi modifiant la Loi sur la Société de l'électricité.
The Chair: Good morning. It is 10:05 and we have managed to garner at least one at least one person from each caucus and, in the case of one of the caucuses, two people. So notwithstanding that the majority of people are not present, it is not necessary to have a quorum to conduct these hearings. We will commence because people have been waiting; people expected these hearings to commence at 10 am.
ASSOCIATION OF MAJOR POWER CONSUMERS IN ONTARIO
The Chair: The first participant is the Association of Major Power Consumers in Ontario. Speaking on their behalf, I understand, are Arthur Dickinson, executive director, and Syd Olvet, a member of the board of directors. Gentlemen, if you would please come forward and seat yourselves, tell us which of you is whom. You have 20 minutes. If you could, try to keep your initial comments to under 10 minutes, because inevitably the most productive part of these session is the dialogue and the interrogation that takes place after the submission.
Mr Dickinson: We will certainly try to keep our presentation short. It is written and I will be reading it. I may have to speed up towards the end.
The Chair: Feel free to summarize some of the paragraphs, to précis them, in view of the fact that dialogue is inevitably more important or more productive, because this brief is part of the record now.
Mr Dickinson: May I start by wishing members of the committee a good morning. My name is Arthur Dickinson and I am executive director of the Association of Major Power Consumers in Ontario, normally known as AMPCO. My colleague is Syd Olvet, and he is a member of the board of directors of AMPCO.
AMPCO is an Ontario-wide association that represents cost and reliability concerns of companies that are electricity-intensive and use large amounts of power in manufacturing and processing activities. AMPCO represents some 60 member companies operating in more than 190 locations in Ontario. These companies are involved in mining, pulp and paper, vehicle manufacturing, oil, chemicals and petrochemicals, cement, steel, abrasives and consumer products.
In 1990, our members provided direct and indirect employment estimated in excess of 680,000. They also consumed over 16% of Ontario Hydro's primary energy sales, at a cost of more than $900 million. Their impact on the Ontario economy is huge.
I would like to establish how important electricity is to these companies. The cost of electricity typically represents between 10% and 25% of their final manufactured product costs, rising as high as 70% for the industrial gas sector. In other sectors it may be below 10%, but it represents an enormous dollar figure, typically in excess of $30 million. It can be as high as $60 million, as I believe Inco has already stated.
AMPCO's concern is that Ontario Hydro will be opened up to manipulation by Bill 118 and there will be a move away from power at cost. Our message is that large power users in the industrial sector cannot support any initiatives which undermine the principle of power at cost. Bill 118 threatens to damage this principle significantly and will change the way Ontario Hydro does business, to the detriment of the province.
Basically, we have three concerns: the principle of power at cost which I have just mentioned, director's accountability and, last but not least, the issue of fuel switching.
The principle of power at cost has served this province well for decades, attracting industries to a region with highly competitive rates and a very stable supply of power. It has significantly contributed to economic growth and provided Ontarians with an enviable quality of life.
Economic development will be at risk if projected double-digit rate increases over the next two years occur, in addition to the 11.8% already imposed in 1992 and with the introduction of unnecessary amendments to the Power Corporation Act which would substantially change the way Hydro meets its obligations to the ratepayers.
Although the government has agreed to limit any policy directives to issues relating to the corporation's exercise of its power and duties under the act -- that is, it will not change Ontario Hydro's mandate -- interpretation of what that means is open to question.
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AMPCO firmly believes that the mandate issue has already been compromised by the government directing Hydro to commit a total of close to $500 million in support of the Elliot Lake and Kapuskasing communities. AMPCO companies understand that the government feels a responsibility or an obligation to assist communities in economic stress, but we do not support supporting them through Ontario Hydro's rate base. That appears to us to be totally inappropriate. That support should come from general revenues.
From a practical point of view, it is very important that the major power consumers are reassured that the sector's needs for power at cost will not be compromised -- which, unfortunately, we believe Bill 118 will do. The current perception -- and I think it is important for members to understand this -- is that this is not the case, and that future rates will have activities like support for Elliot Lake factored in which are extraneous to Ontario Hydro's established responsibilities. The result will be damage to the investment climate and, more important, the risk of losing jobs in this province. That situation is already threatened.
You should also be aware that there are jurisdictions in the US where rates are below Ontario Hydro's. Even more important is the fact that the industrial rates established in Ontario in 1991 were the second most costly in this country. I do not think that is well understood, but it should be understood.
You have already heard from a number of member companies, and I will not repeat what they have said. You will be hearing from others in the next week. I want to stress again that we cannot afford to see the power-at-cost principle undermined or modified in any way. It has served this province well and we believe it should continue to be left untainted or unaffected by any legislation.
In terms of the director's accountability, our concern is that providing the minister with the authority to direct Ontario Hydro to perform or pursue particular policy initiatives will undermine the power-at-cost principle again. It is unclear to us that this power is needed. There is no evidence that Hydro has not recognized policy initiatives already delivered to it by governments in the past. In fact, the 1989 amendments to the Power Corporation Act require Ontario Hydro's board to respect government policy. We have seen no evidence whatsoever that this requirement is not functioning well. If it is functioning well, the act should be left alone.
Last, we want to touch on the issue of fuel switching. We do not have a problem with the concept of fuel switching itself. In fact, many of our member companies have switched fuels, typically from fossil fuel to electricity, and with an increase in electricity use. That is an issue that should be well understood; that is not unusual in the industrial sector.
The problem we have with the fuel-switching initiative embodied in the proposed amendments is that the cost of it will be loaded on to Ontario Hydro's ratepayers. This is totally inappropriate. For the major power-consuming industries which have committed to reducing their use of fossil fuels, recognizing the impact of those fuels on the environment, what it will mean is that their cost of doing business will increase. That is not in this province's interest; in fact, it will have the reverse effect.
Finally, I would like to point out that there is a unifying point in the issues we are raising. All three of the issues we are concerned about have a direct or an indirect impact on the principle of power at cost. We do not believe that is in this province's interest. It certainly is not in the industrial sector's interest.
The Association of Major Power Consumers in Ontario firmly believes that Bill 118 is ill-conceived and should be scrapped in its entirety. It will not serve this province well. I think that will end my remarks, and we are available for questions.
Mr Conway: Thank you, Mr Dickinson and Mr Olvet. I have just one question, and it has to do with power at cost. It is that oldtime religion, apparently. A number of people, and it seems to be a growing number of people, are telling this committee -- not just telling the committee, but if one reads, God forbid, the morning papers these days, it is hard to ignore the attacks on that oldtime religion of power at cost as well.
What do you say to critics who would argue that AMPCO has a vested interest in maintaining the status quo because the status quo has in fact been subsidizing a lot of your constituent groups in ways that fairness and good marketplace rigour would not sustain in other circumstances -- that power at cost is a shibboleth that we should look right through?
Mr Dickinson: To this point in time, as I said, power at cost has served this province well. It has attracted a lot of industry here. Anything that pushes up the cost of power will threaten the industrial base. We are finding that member companies are very concerned about how Ontario Hydro conducts its business. It needs to be thoroughly reviewed, and in detail. We believe there are excessive costs that are loaded into the rates, and Ontario Hydro needs to make a very careful examination of its own operation.
Mr Conway: How radical is AMPCO prepared to be to deal with the point just identified, that over the decades, for whatever good and bad reasons, the power-at-cost formula may have attracted to it all kinds of costs that are overblown and excessive and should be shaken away? Are you prepared to recommend to this committee that the Hydro we have known -- that big, technocratic organization that is a public monopoly -- should be recast in fundamental terms?
Mr Dickinson: "Recast in fundamental terms" is a serious change. As I mentioned, we certainly think Ontario Hydro needs to take a very careful look at how it conducts its business.
In the business sector in the last few years, companies have been put under enormous economic pressure, and they have reduced their costs by skimming away unnecessary fat. Our concern is that under the power-at-cost principle, Hydro does not have enough pressure on it to reduce its costs; it is very easy to pass those costs on. So while in the past it worked well, unless there is a real effort to examine the power-at-cost principle as it is now vested, we would have to look more carefully at what the alternatives might be. But to this point in time we do not believe that we have to compromise that principle. We believe there needs to be more careful examination of how Hydro conducts its business, however.
Mr Jordan: I am going to pass to Mr Arnott here for the moment.
Mr Arnott: One question, gentlemen. First, thank you very much for coming in. I am pleased you made reference to the 1992 update to the Ontario Hydro demand-supply plan. There are a number of projections and so forth that I find highly questionable and I wonder where the numbers are coming from, but one specifically I would like to isolate and ask you about: the section about non-utility generation. Obviously the present chairman feels this will yield great quantities of electricity, and they are talking about providing 4,200 megawatts by the year 2014 through non-utility generation. Would you care to comment on that specific aspect?
Mr Olvet: I will take a crack at that. I am presently representing AMPCO on something called the Non-Utility Generation Advisory Committee, which hopes to provide advice to the chairman of Hydro and the minister, neither of whom needs or wants any more advice about how to conduct the business of non-utility generation. AMPCO is on that council at the request of the various council members, including the government, which chairs the council, and Ontario Hydro, with the agreement of the other parties. There is a variety of opinions about it.
The unifying principle which enables us to work together among these competing interests is the fact that we all need megawatts, and the question is how to provide them in a balanced way. In the original balance-of-power document, going back to -- what? -- 1989, it was visualized that some 1,600 megawatts, I think, later upgraded to 2,100, would be required by the turn of the century. Now it is up to, I believe, 3,100 or some such, and then the over-4,000 number that you mention is in the year 2014, I think.
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There are a couple of key words, I believe, in exhibit -- whatever the number is. I have not looked at the glossier brochure. Let's say something like "if necessary." What I believe is going on right now is that there is a desire by Hydro to meter out cogeneration projects and other non-utility projects at a pace that matches the supply and demand equation, whatever it may be. After Darlington, I guess, we are going to begin eating into our current position of being well supplied. There was a big rush to provide a lot of cogeneration in particular, and now I guess the time of saying, "When do we really need it?" is upon us.
AMPCO supports the activity as part of the balance of power. It is late. We are disturbed by the apparent lack of balance that is being introduced now, and that is part of our concern. We are shifting away from the balance that was created over five years of work by Lorne McConnell and his helpers, and well-thought-out, over 40 cases examined in the lowest-acid-emission lowest-cost case put forward, which is this plan 15 that is in front of this humongous process right now, the environmental assessment. Clearly, the update deviates from that balance, and we were concerned it is going to drive us into the ditch on supply perhaps, and certainly we are very concerned about cost, as Mr Dickinson has pointed out. So our overall concern is more with the total plan as opposed to single elements of it, and the unifying principle here this morning is really cost comparativeness.
Mr Jordan: Thank you, gentlemen, for your presentation. I am sorry I was not here for the complete presentation.
My question is related to this fuel-switching policy that is being planned for implementation; in fact, if this revised demand-supply plan is presented as it has been revised, then fuel switching is going to be implemented. Hopefully as a result of these committee hearings the government will be listening and perhaps act accordingly. But an industry is billed on kWh and kVA, and you watch that very carefully relative to your power factor to determine the best level for the cost of power, is that correct?
Mr Olvet: Yes, our membership varies quite a lot, but in general I guess they are issues of efficiency and energy use, including the technical factors you mentioned. So on average I guess that applies.
Mr Dadamo: Thank you, gentlemen, for the message this morning. I think at one point during your brief you mentioned that hydro rates appear to be lower in some states. Could you hone in on one particular state and maybe make some sort of parallel for us and tell us how its rates could be lower than what we are giving out here?
Mr Dickinson: Washington state, North Dakota, Georgia. The Tennessee Valley Authority offers incredibly competitive rates and with lower incremental changes over five-year periods -- guaranteed, that is. Even in New York, not Niagara-Mohawk, but the New York Power Authority, I believe it is, is offering very attractive rates.
Mr Dadamo: Is there some sort of formula they have that we do not have, the reason they could offer --
Mr Dickinson: No. Some are more successful than others, I guess. It may also be a function of what access they have to hydraulic power.
Mr Dadamo: I would like to add a comment on that particular issue. There was a time when Ontario had a fairly big lead in cost competitiveness vis-à-vis the jurisdictions Mr Dickinson mentioned. I think all of them, with minor exceptions, were behind us, so to speak. What has happened is, there has been a shift over time. I suspect that part of the reason there is a shift is that the Americans now very strongly understand, under competitive pressures, the importance of keeping and attracting industry. They have probably understood it a little more quickly than we have. We have had a very good period the last 10 years here.
The Chair: Mr Huget, a question. No lengthy preamble.
Mr Huget: The policy directives section, I think we have heard from many groups, gives people some anxiety. If an amendment is introduced to clarify that policy directive -- in other words, we are not going to go out and buy an amusement park using Ontario Hydro. Would that satisfy you, or what?
Mr Dickinson: I think I would repeat the statement I made earlier that support for communities in economic distress, such as Elliot Lake, is inappropriate if it is funded through Ontario Hydro's rate base. I cannot understand how anyone can conceive that paying down a municipal debt has anything to do with supplying power at cost. The membership of AMPCO simply does not accept that that is reasonable. The definition of power at cost, or the interpretation of the mandate, is already in question, and we certainly do need reassurance that we will not see similar things happening, because that could become an open-ended means for government to fund activity that rightly should come out of general revenues.
The Chair: Thank you, gentlemen. I tell you on behalf of the whole committee that we appreciate your interest and participation today. This bill has attracted attention and generated, as you can well imagine, a very diverse set of views and opinions. This process is a particularly valuable one, and your input is important, so we thank you for taking the time to be here.
We trust that you will keep in touch with either your own MPP or the critic for the Liberal Party, Mr McGuinty, who is here, Mr Jordan for the Conservative Party, or the parliamentary assistant to the Minister of Energy, Mr Huget, who is here with the government caucus. Thank you. Take care.
Mr Dickinson: Thank you.
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JOINT INDUSTRY TASK FORCE
The Chair: The next participant is the Joint Industry Task Force on electricity supply in Ontario. Two persons are making the submission: Russell Baranowski, who is the chair, and Peter McBride, a member. Gentlemen, please seat yourselves, and tell us which of you is Mr Baranowski and which is Mr McBride. You have 20 minutes. Please try to give us 10 minutes at the end for the dialogue and conversation that will undoubtedly ensue from your submission.
Mr Baranowski: I am Russ Baranowski, and that is Peter McBride.
The Chair: We have your written submission.
Mr Baranowski: As I mentioned, I am the chairman of the Joint Industry Task Force. I am also the president and chief executive officer of Federal Pioneer Ltd and president of Schneider Canada. Peter McBride is a member of the Joint Industry Task Force through his association, the Mining Association of Canada.
As chairman of the Joint Industry Task Force on electricity supply in Ontario, I appreciate the opportunity to speak to the members of the Legislature's standing committee on resources development about certain aspects of Bill 118, An Act to amend the Power Corporation Act.
By way of introduction, the JITF is a coalition of companies, industry associations and unions which was formed in 1980. Members of the JITF are involved in various aspects of electricity, from its production and transmission to the consumption of electricity to produce goods and services demanded by modern society. The factor unifying these diverse groups is a recognition of the need for Ontario to have a reliable and reasonably priced supply of electricity. Electricity has been a cornerstone in the development of Ontario's prosperity historically and it is necessary for the province's economic future. The JITF is supportive of demand management and energy conservation as methods of saving electricity. Many of the group's members are leaders in these areas.
I know, as you mentioned, that this committee is operating on a tight schedule and is busy assessing the overall intent and possible impact of the legislation which is under review. With that in mind, I do not wish to belabour these issues and I will try to be straightforward and brief in keeping my remarks to three specific aspects of the legislation to fit into the format of these hearings.
The first concern involves the core issue, which is the mandate of Ontario Hydro to provide power at cost to customers across the province. Although there has been some modification demonstrated by the Minister of Energy, the proposed legislation still states that Ontario Hydro shall implement policy directives of the government. This is troubling, because it leaves the province's electrical utility open to the changing political whims of the day, which could impair Ontario Hydro's ability to operate in a businesslike fashion.
A press release from the Ministry of Energy concerning Bill 118, which was distributed on October 2, 1991 states, "The minister said the government is determined to make Hydro truly accountable to the government for the first time in Ontario history." From the JITF perspective, through its mandate of providing power at cost Ontario Hydro has been and is largely accountable to its customers.
People on this committee have no doubt been reminded by many groups which have appeared before it about the financial assistance Ontario Hydro offered to Elliot Lake and Kapuskasing last year. While appreciating the circumstances of these communities, Ontario Hydro revenues from ratepayers should not be used to sponsor government initiatives of this nature. Hydro bills should pay for electricity; they should not be a form of hidden taxation to support other government programs.
Making Ontario Hydro operate through political directives would make it more difficult for the utility to carry out meaningful long-term planning. The job of providing electricity to power the economy of this province is an enormous task. Long lead times are required to develop new sources of supply and to have demand management programs show results. In dealing with the province's electricity grid, short-term solutions to problems are generally more expensive.
The second aspect of the bill I wish to speak about is the suggestion to exempt Ontario Hydro directors from responsibility for executing government directives. Who would be responsible to the ratepayers? This suggestion runs counter to a prudent rule of business practice that boards of directors of companies, crown corporations, charities or any other organizations are responsible for their decisions and actions and accountable to shareholders, ratepayers, clients, customers, suppliers and others. If Ontario Hydro directors are not going to be responsible for their decisions, they are not functioning as directors. At a time when legislation is strengthening the bonds of responsibility -- and liability -- of directors, a proposal of this nature appears totally inappropriate.
The third issue involves the desire to have Ontario Hydro pay for the cost of having its customers switch from electricity to another source of energy. If this or any government believes with scientific certainty that switching from electricity is beneficial, why tax electricity ratepayers to pay for this?
The Joint Industry Task Force does not believe the case has been proven that switching from electricity will result in improved energy efficiency. In fact, many of our members are real-life examples of organizations which have significantly decreased their overall energy consumption through an increase in the utilization of electricity.
Administration difficulties aside, the fuel-switching proposal would result in the inequitable situation of having some Ontario Hydro customers subsidize others. It is somewhat irresponsible to encourage the large scale switching to another fuel such as natural gas without detailed examinations of the supply and distribution system of that fuel and its overall economics.
Without a reliable supply of electricity, Ontario's economy cannot expand. There will be no attraction for new investment. There will be a decreased likelihood of new jobs and less security of existing jobs. This province needs electricity to grow and meet the demands of its citizens. Bill 118, whether through proposed changes in Ontario Hydro's mandate to provide power at cost, through removing the responsibility of its directors, or through having the utility finance the switch to other fuels, does not improve the reliability of the future supply of electricity in this province.
The JITF appreciates the opportunity to present its concerns over Bill 118 to this committee. Thank you for your time and your attention.
The Chair: Thank you, gentlemen. Four minutes per caucus. Mr Jordan.
Mr Jordan: Thank you, gentlemen, for your excellent presentation. You certainly have pointed out very clearly that Bill 118 will remove the certainty of supply for the province of Ontario, and cast a big shadow over what we have known as power at cost. My question is, relative to the updated demand-supply plan as presented recently, after five years of study to produce the original plan, we are now working on a plan which incorporates Bill 118, even though we are still studying the bill. I would like to know how you feel about your concerns being taken seriously when the government is proceeding in this manner?
Mr Baranowski: With respect to Bill 118?
Mr Jordan: Yes.
Mr Baranowski: It is a tough question to answer, Mr Jordan. We are attempting, through being here today and through other ongoing initiatives of the JITF, to bring to the attention of the current government, the opposition in the Legislature, and through speaking with Ontario Hydro and other groups, to point out the fact that with respect to the recently revised plan last week, and even prior, our opinion was that the load-growth forecast was very conservative, and that Ontario Hydro will run out of power long before the turn of this century.
The conclusions that have been put forward by Ontario Hydro last week with regard to a date -- I believe around 2009 -- as to when new power supply would be required are totally inaccurate, and we are going to do everything possible to point out the facts as we know them in order to influence the government, Ontario Hydro and other people who are involved in this process. I hope we are successful. It is up to the government whether it will respond and listen to what we have to say.
Mr Jordan: Thank you very much. You pointed out also that these decisions are being made without what you -- and I might say myself -- consider adequate study. For instance, twinning the present Trans-Canada pipeline: Do you know what stage that is at? Do the people know? Does the government realize what could happen here? That pipeline is relative to our 500 kV line coming across the country for electricity, and I can imagine the length of time it would take us to twin it. Are you people up to date on how they plan to do that?
Mr Baranowski: We are not up to date and we are not aware that that kind of detailed examination has been done and put forward in terms of cost in relationship to the alternative, which we believe is the development of additional generating capacity in Ontario.
The Chair: Mr Huget, and if you wish you can leave some time for Mr Waters.
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Mr Huget: Thank you, gentlemen, for your presentation. First of all, I have a comment on Mr Jordan's comment, in terms of the government listening. There will be amendments introduced that are clearly the result of dialogue and discussion with important groups in the power industry, not the least of which is the Municipal Electric Association. Those amendments I think will clear up some of the problems around the policy directive issue.
You mentioned a concern, that you have trouble with the sort of political aspect of Ontario Hydro, and you say this bill is going to make Hydro respond to the political whims of the government of the day. Are you suggesting that there has never been any political influence on Ontario Hydro in the past?
Mr Baranowski: Not at all. I think we are speaking about the process, and the recent decision to spend in excess of a half-billion dollars of funds by Ontario Hydro is a direct tax on users of electric power, and it is the process by which this happened that we are arguing with.
This was an initiative that did not come from the Ontario Hydro board and presented to the government for consideration. In fact, it happened just the other way. So it is the process that we are concerned about, and certainly, Ontario Hydro being a corporation of the Ontario government, has to be responsive to that government and the people in general. But the process is through a board that is independent and has a true role to play in examining the affairs of Ontario Hydro, and thereby making recommendations through the board for action.
Mr Huget: On the fuel-switching issue, you mentioned that you do not think that electric ratepayers should be involved in that. We have had groups come before the committee that have pointed to the potential of at least $4 billion being spent needlessly for heat, whether it is space heating or hot water heating, that could have been saved by consumers if they had used an alternative fuel. What is your view on that? It is a $4-billion extra charge people have paid by heating water and their accommodations with electricity.
Mr Baranowski: I think our point was that fuel switching, the alternative fuel sources, is always something that should be considered. The concept of rewarding people for switching away from the use of electric power to some other fuel source causes a cost to be borne by electricity users, some of whom prefer electricity as a clean, reliable source of power.
In fact, in recent years some major industrial users, while decreasing their overall use of power, have increased their use of electricity, just because electricity as a fuel source is very attractive. Why these people should then be subjected to paying a tariff to induce others to switch to other fuel sources is the issue we are raising.
Mr Waters: I would like to go very quickly into the switching. I spent the last 16 years working in the wire and cable industry, and my employer has finished reheating the entire plant. For efficiency and cost, they put in gas once again.
To me, if we want to have Ontario Hydro working efficiently, would we not be encouraging people to switch, when people within the electrical industry are moving more and more to gas? All our annealing ovens and everything were very much moved to gas. So if the people within the industry that create the power lines are saying, "Switch to gas" by their very actions, do you not think that is the way the government and Hydro should be going for space heating?
Mr Baranowski: Yes, what I would say to that, Mr Waters, is that there are certain businesses and certain industries where the use of an alternative fuel such as gas makes sense on its own merit. But I submit there are other industries and companies in the province, such as Inco and Falconbridge, where that is not an alternative and electricity is the best form of energy for them to use. They will make that decision based on the fuel source and the economics and cost that go along with it, as other people will make the decision to use gas because it is economical and appropriate for them, so I think you have to differentiate within the sorts of application.
All we are saying is that you should not confuse this for industrial users by imposing tariffs or extra costs to induce other people to switch in an artificial manner, especially as has been mentioned by Mr Jordan. The full cost of putting a program together to switch on something like gas is known and I certainly do not know what it is except I have been led to believe that the cost of bringing more gas supply on is going to be substantial.
Mr McGuinty: Thank you, gentlemen. I think perhaps more than anything, what the discussions here around Bill 118 are doing for me is pointing out the importance of the challenge before us, and that is to ensure that the interests of ratepayers are properly protected.
On the one hand we have Hydro, and I will have no hesitation in saying that I do not believe Hydro has been properly looking out for those interests. I think that objectively speaking you could make a sound argument today to the effect that there are too many people on staff, too many of those people are overpaid and that its debt is too large. On the other hand, we now have this government weighing in and holding itself out as the protector of ratepayers. But we have a difficulty associated with any government which is made up of politicians doing things for reasons that are sometimes political, and when a government attempts to look out for the interests of ratepayers it is sometimes putting itself in a position of conflict because those interests conflict with the interests of Ontarians at large.
So my question for you is, what do you think we can do in order to ensure that somehow the interests of ratepayers are going to be protected? It seems to me that to date Hydro has not done that and government has not done it.
Mr Baranowski: My response to that question, Mr McGuinty, would run along the lines that Ontario Hydro should have a strong, independent board. The government, in conjunction with the board or whatever the process is, should charge Ontario Hydro with very substantial cost reduction and productivity improvement programs.
Industry in Ontario these days and in recent years has been routinely looking for 20% and 30% cost reductions to remain competitive. Electric energy is a cost of doing business and to the extent that Ontario Hydro is an inefficient corporation, efforts should be directed towards making it efficient. I happen to agree. I think the JITF agrees that Hydro can be made more efficient, and I am not talking about demand management and conservation programs, I am talking about the operation of Ontario Hydro. So we would strongly encourage that Ontario Hydro be charged with very tough productivity objectives and cost reduction programs in the future.
The Chair: I should mention, Mr McGuinty, if you want to give Mr Conway time for a question, keep that in mind.
Mr McGuinty: There is much talk of late of privatization of the public utilities and there seems to be some kind of a trend in that direction. Certainly that has taken place in England of late and I understand in Nova Scotia now. I guess the advocates on behalf of privatization tell us that the strongest force we could possibly bring to bear is the force of the marketplace and that when we unleash that force on Ontario Hydro it will be the only force that will require that Ontario Hydro streamline its operations and act with the utmost efficiency, under whatever new form it might happen to take or exist.
Has your association considered this or what concerns would you have? I assume that the Globe and Mail is going to come out advocating that tomorrow too, but what concerns would that cause you?
Mr Baranowski: JITF has not focused greatly on freeing Ontario Hydro from government control. However, in a recent meeting we had with the present Minister of Energy, this subject surfaced, and our reaction in that meeting was that this is one viable alternative for the operation of Ontario Hydro. We have not really discussed it beyond a reaction in general to the fact that it would be a viable option for running Ontario Hydro.
The Chair: Mr Conway -- short.
Mr Conway: Mr McGuinty anticipated my question. I think one of the most exciting and dramatic elements of this debate in which we are now engaged is that the privatization of Ontario Hydro has begun. When one looks at the chairman's presentation to the demand-supply update last week, when one thinks about the increasing reliance on non-utility generation, thousands of megawatts that were not part of the calculation five years ago, it is a very dramatic and for many an exciting new departure.
My question is perhaps a little more specific. As we move along the road to privatizing all or a substantial part of what Ontario Hydro once did in this province, where initially would you see the best opportunities for productivity gains and efficiency gains within the multifaceted mandate of the Hydro we once knew?
Mr Baranowski: The initiative on non-utility generation I believe is a good one. The initiative for conservation and demand management is a good one. You referred to the presentation last week as being important, and it needs to be responsible as well. One aspect of what was presented was almost doubling reliance on demand management programs from demand management levels that were already extraordinarily high. Our reaction to that is that those numbers are incredible.
With regard to where we would direct the attention, I think it is a matter for Ontario Hydro to look within Ontario Hydro to carefully examine every aspect of its operation to cut costs. Speaking as an industrialist, my company and many others are now routinely seeking 30% cost reductions, and I think if this committee or other people in government are in contact with other important Ontario businesses, you will find large efforts and successful efforts to cut costs and increase productivity. It is unique to each business. Ontario Hydro is one of the biggest businesses of all and I believe the opportunities are very substantial.
The Chair: Gentlemen, the committee thanks you for your participation this morning. We trust you will keep in touch with members of the committee or other members of the Legislative Assembly. You, as well as others, are entitled to copies of not only today's transcript but the transcript of all the submissions and deliberations of the committee; get hold of your MPP or any MPP's office. Those are available to you and to anybody else who is interested, of course free of charge. We appreciate your coming; take care.
Mr Baranowski: Thank you.
The Chair: We are adjourned until 11:15, and there is a subcommittee meeting in room 230.
The committee recessed at 1054.
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LLOYD GREENSPOON
The Chair: It is 11:20. We are scheduled to resume. We have Mr Greenspoon here, who is the next participant, if you would please come have a seat. You have 20 minutes, sir. Please try to save at least the second 10 minutes for questions and dialogue.
Mr Greenspoon: My name is Lloyd Greenspoon. I am from Manitoulin Island and I practise law there. Actually I practise law now more in Toronto. I am counsel at the demand/supply plan hearings for a coalition called Northwatch. I am here in my own capacity, though, not representing Northwatch.
I have been very interested in electricity supply in Ontario for about 20 years. We live in Algoma-Manitoulin. We consider that we are kind of a nuclear sacrifice area of at least Ontario, if not the world. I flew down yesterday, norOntair, and the first leg of the flight goes from Gore Bay to Elliot Lake. I think when you fly over Elliot Lake, the first thing you see are all the tailings piles. There are about 200 million tons of tailings in Elliot Lake, and I think a lot of that, the uranium tailings, is as a result of electric heat. Electric heat was a big sell in northern Ontario in the 1950s. I can remember when I was growing up in Sudbury, that was the time of the Medallion home in the 1950s, when electric heat was going to be the thing of the future.
I heat my house with wood totally, and I am very concerned about the fuel switching and the applicability of fuel switching to wood. I believe northern Ontario is a society that learned a lot of its lifestyle from the native people, and of course native people heated with wood. I think wood is too valuable a resource to be wasted on paper, and that is basically what we do in northern Ontario now. We get very little money for wood in northern Ontario, and certainly with energy, especially electrical energy, being such a premium commodity, I think it is an obscenity to use electricity for heating.
I know there are a lot of people in northern Ontario who are using electric heat, but there are also a lot of people in northern Ontario who are not on the gas pipeline and they do not have the opportunity to fuel-switch to natural gas. For those who are on the pipeline, that is fine; I think the amendment is clear that they can take advantage of it.
I was looking at the Ontario Hydro Update 1992, and I am very concerned. I suppose everybody here can get a copy of this. It is the demand-supply plan update that was filed last Wednesday by Ontario Hydro. In the executive summary it says on point 4:
"As reflected in the primary load forecast, the expectations for demand management were increased by about 4,300 megawatts by the year 2014, reflecting expected Ontario government initiatives to mandate higher efficiency standards" -- and then it goes on to say, and this is the important point -- "and to allow Ontario Hydro to offer incentives for customers to switch from electricity to natural gas."
I am very concerned that Ontario Hydro is interpreting the amendments to this bill as meaning fuel switching from hydro to gas, and I do not think that is what the drafters intended. It worries me that Ontario Hydro is putting out a document that seems to assume that all fuel switching will be to natural gas.
I guess that is all I want to say. I sort of hesitate to say -- well, it is not a big deal, but I think it is really important -- that there are a lot of people who are very upset with this new direction for Ontario Hydro, and it would be my urging to this committee that this is only the beginning. Fuel switching is a good direction to go in, but I do not think you should consider that this should be the end of the amendments to the Power Corporation Act. It is a new era and the time of the megacorporation like Ontario Hydro having the power it presently has is over and it is not appropriate any more. I think this is the first dent in the armour, as it were, of Ontario Hydro, and I think it is long overdue. I support the amendments and urge you to pass them.
Mr Waters: Partially as a point of clarification, I would like to talk about the fuel switching again. You were talking about wood and I want to get it straight. You referred to making paper out of wood and that was not efficient use of the wood product, but should we be using it for fuel? Should we be coming up with a good fuel out of the sawdust, out of the scrap from the wood industry? I would like to know your feelings about that.
Mr Greenspoon: I think there are two issues. I think the sawdust, dealing with that issue, is more valuable to generate electricity as a biomass. There is a lot of future in Ontario for biomass.
Any harvesting of wood, in my opinion, has to be a sustainable harvest. The attractiveness of burning wood for heat is that it is usually done by the owner, or even if a person is selling his wood, it is his bush he is cutting, and he is going to take care of that bush. He is not going to go in and clear-cut it like a pulp operation. That is the difference.
I know I have a 50-acre hardwood bush on my farm, and for every tree I take out, I have the Ministry of Natural Resources come in and mark the bush. Every time I take out a tree it opens up the canopy, and in five years I have more wood than I had before I took the wood out. The woodlot is a sustainable entity if it is done properly. The problem with a pulp and paper operation is that it is a cut and slash and burn operation. It is not sustainable.
Mr Waters: To have efficient wood heat, at least the way I grew up, you always used hardwood anyway, and in pulp they use a lot of the softwoods and that.
Mr Greenspoon: Fine paper is made with hardwood; you know, a good letterhead. Now, with recycled paper, that may be changing, but there are certain kinds of paper that need hardwood. E. B. Eddy in Espanola, for example, pays premiums for hardwood.
Mr Waters: You also said that this did not go far enough, or implied that it did not go far enough, that there should be future changes. In what direction would you say we should go from here? What should happen in the future? What should Hydro be looking at after it looks at the switching or while it is looking at switching?
Mr Greenspoon: This is very current, and with this update I do not know the answer. I think the next step is that we have to figure out how we are going to regulate Hydro. I know Hydro wants this. We cannot have these mega-environmental-assessment hearings any more. We have to have a more regular means of regulating Ontario Hydro with some give and take from the environmental community, the business community and Ontario Hydro; maybe sort of a joint Ontario Energy Board/Environmental Assessment Board.
Mr McGuinty: Thanks, Mr Greenspoon, for coming down and appearing. You made reference to the amendment to the demand-supply plan here. Is that correct?
Mr Greenspoon: I think it is an amendment. Ontario Hydro calls it an update.
Mr McGuinty: Yes, I have the same difficulty, but one of the things that concerned me was the fact that the chairman has made a very significant amendment to the original plan introduced in 1989, and some of that is premised -- I think to the tune of 3,600 megawatts -- on the assumption that this committee is going to approve the fuel substitution component of Bill 118. I was very disturbed to hear that, because as far as I am concerned it is not a fait accompli but still at issue and it is still something we are much concerned about.
One of the things I have yet to obtain is solid evidence to the effect that, economically, fuel substitution is a good thing, and I am wondering now -- go along with me a little bit on this. Let us assume that at the end of the day when we have heard from everybody we are going to hear from, including Ontario Hydro and hopefully a third party who is impartial, we hear that it is not economical. That is, if we have someone living up north, for instance, who does not have access to natural gas and for whatever reason does not have access to an alternative fuel which is cheaper than electricity, yet those people are going to have -- again I am going to make this assumption -- their rates increase in order to subsidize people who have access to natural gas, what about the equity argument there, the issue of fairness? Should we go ahead notwithstanding and say, "Listen, for the good of the whole, so to speak, your rates are going to have to go up." What are your comments on that?
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Mr Greenspoon: I go back to what I said before about electricity used for heating being an obscenity. Those are issues that can be addressed in other ways. You raise a good point. Maybe there is an exception for that person. The whole rate structure has to be looked at again, and it is very easy to address the rate problem of a person who cannot fuel switch. You give him a subsidy if he cannot fuel switch. You are right. Why should he subsidize those who can?
But that does not take away from the basic issue. We cannot heat with electricity. It is too valuable a fuel. It should be used to run high-efficiency lighting, high-efficiency motors to fuel our economy. Heating with it is not appropriate any more. Eventually we have to stop having toasters that are so inefficient as well. Resistance heating, resistance use of electricity is not appropriate.
Mr McGuinty: If we go ahead with a subsidy program, shall we subsidize everyone to the same extent? Should the millionaire and the pauper get the same subsidies?
Mr Greenspoon: That is a taxation question. I do not know. You are the politician, I defer to you. You are going to have to figure that out. I think taxation is the way to address that. Subsidize them all equally, because it is easier to do that structurally. Subsidize the electricity system, fuel switching. Address your issue through taxation of that person.
Mr Arnott: Mr Greenspoon, thank you for coming in. I would just like to ask you two questions. The first one is, do you totally reject or oppose the concept of power at cost, which has been one of the key principles?
Mr Greenspoon: I do not know. I am not sure I believe the concept is very admirable. I am not sure I believe that is really what Ontario Hydro is doing.
Mr Arnott: It is not what they are doing with Bill 118, that is for sure.
Mr Greenspoon: I do not know about that. I am not sure I understand the connection of the issues.
Mr Arnott: In an effort to better regulate them and/or make sure demand does not get any higher than we have the capacity to produce, would you regulate artificially, raising the hydro rates to ensure we do not run out of electricity?
Mr Greenspoon: I do not know if it is the Power Corporation Act in British Columbia, but I think we have the wrong rate structure. The last block of electricity should be the most expensive block, which is exactly the opposite of what we have now. The last block of electricity should be the cost of new supply; about $3,500 a kilowatt is what Darlington is going to cost.
Mr Arnott: You think rates should be raised to regulate demand?
Mr Greenspoon: In a very complicated way, yes, I do.
Mr Arnott: Thank you.
Mr Jordan: You mentioned, Mr Greenspoon, that you see this as a dent in the armour to control Ontario Hydro. What is it that makes you feel that the utility is not responding to the customer? I am not talking about the governments; I am talking about the user, the customer.
Mr Greenspoon: I just think they are too big. What is their debt now, $30 billion? Their debt is often higher than the provincial debt. It is difficult to regulate such a large body. The changes in the board, the new chairman, the new directions from the Ministry of Energy -- I am certainly not a promoter or a loud advocate of this present government, but I do see a new direction. I do not think it is enough, but I think this is a beginning.
Mr Jordan: Do you think we can acquire the necessary expertise in the Ministry of Energy to really and truly direct a corporation of that size and complexity?
Mr Greenspoon: No. I see a lot of merit in the people who say Ontario Hydro should be privatized. I do not know how you are going to do it, but I do not --
Mr Jordan: Your main fear is that the corporation is too big?
Mr Greenspoon: Yes, too big.
The Chair: Thank you, sir.
Mr Greenspoon: My pleasure.
The Chair: We appreciate your taking the time to come here from Manitoulin. The transcript of this present proceeding, the transcript of all the proceedings are available to you. Get hold of your MPP. She or he will send them to you, no charge. We thank you for your interest and we trust you will keep in touch with members of the committee and your own member.
Mr Greenspoon: Thanks for your time.
ONTARIO NATURAL GAS ASSOCIATION
The Chair: The final participant for the morning is the Ontario Natural Gas Association. Gentlemen, will you please come forward with enough chairs to accommodate all of you. Let us know who you are. We have your written submission, and I say that hoping people will presume it is not necessary to read all of it but rather to highlight it so that there is enough time for questions and dialogue. Please go ahead.
Mr Pinnington: Thank you, Mr Chairman. Good morning, gentlemen. My name is Paul Pinnington. I am the president of the Ontario Natural Gas Association. I want to thank you on behalf of the members of the association for the opportunity to appear before this committee as it considers the possible amendments to the Power Corporation Act. Joining me this morning are Norm Loberg, who is the vice-president of marketing of Consumers' Gas; Brent Bailey, the director of marketing and sales for Centra Gas, and Mr John Van Der Woerd, who is the manager of marketing for Union Gas.
In this presentation we will confine our remarks specifically to the issue of fuel substitution and the benefits that can be derived by electricity customers, Ontario Hydro and society as a whole.
The Ontario Natural Gas Association, or ONGA as it is commonly known, is an industry association comprising over 300 company and individual members. These members represent transmission and distribution companies, natural gas producers and marketers, equipment manufacturers and suppliers, professional organizations, contractors and individuals, all of whom serve Ontario's natural gas industry. ONGA is the voice of the gas industry in Ontario and represents the industry's collective views.
The natural gas industry plays an important role in Ontario's energy sector and in the provincial economy. ONGA's four major natural gas distribution and transmission members alone employ more than 7,000 people, make more than $2.2 billion in purchases and pay corporate and municipal taxes totalling close to $200 million annually.
In addition, the industry helps Canada and Ontario compete on a global scale by providing a secure supply of low-cost energy to this province's businesses and industries. Ontario depends on these corporate entities to maintain its high standard of living; industries such as pulp and paper, mining, petroleum refining and the manufacture of steel, cement, fertilizers and chemicals. In recent years, many of these industries have been able to lower their energy costs by using natural gas in combination with more efficient technologies.
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Natural gas also represents one of the most environmentally friendly means of meeting energy needs. It is the cleanest-burning fossil fuel, and when used in place of other more polluting energy sources serves to minimize some of the most serious environmental problems such as photochemical smog, acid rain and global warming; burning natural gas produces less carbon dioxide, sulphur oxides, nitrogen oxides and particulate matter. Because of these economic and environmental benefits, the natural gas industry firmly believes that this abundant and versatile fuel can play an even more significant role in meeting Ontario's future energy needs.
In particular we will address the following areas: first, the concept of fuel substitution, its economic and environmental benefits and how it is consistent with the broader provincial energy goals of increased energy conservation and efficiency; second, the many initiatives being taken by the natural gas industry to encourage greater energy conservation and efficiency in Ontario, and third, the fact that the natural gas industry is well positioned to meet the increased demand for natural gas resulting from fuel substitution, and Bill 118 in particular.
In the 1970s the significance of the energy sector was underscored for the world as never before. Conflicts in the Middle East, followed by oil supply shortages and spiralling prices, caused many people to rethink their energy strategies. Most of us recognized that we had to take some of our eggs out of the oil basket, begin investigating different energy alternatives and get serious about energy conservation and efficiency.
During this period the federal government, with financial assistance from the natural-gas-producing provinces, initiated programs that stimulated the substitution of natural gas for oil in both existing and new markets. This early example of fuel substitution had important economic benefits for many of Ontario's businesses and private citizens.
Over the course of the 1980s, environmentalists began to demonstrate that our increasing demand for energy of all forms was taking its toll on the environment, as well as our pocketbooks. Once again, energy conservation and efficiency were cited as key means of reducing the negative environmental impact associated with production, transmission and the use of energy.
Today, many energy industries and governments have taken these lessons of recent history to heart and begun to entrench conservation and efficiency in both corporate and public policy.
The natural gas industry has long accepted the role in helping to achieve Ontario's energy goals. In fact, the association's charter includes the directive to "initiate and encourage the efficient use of natural gas, conservation, standardization, safety, protection of the environment and public awareness."
Certainly these objectives are also shared by the government of Ontario, which has recognized that balancing the demand and supply of various energy forms is central to achieving gains in conservation, efficiency and the environment. We believe one of the ways this government is trying to foster the wise use of energy is by pursuing a policy of fuel substitution. Fuel substitution is defined as supplying consumers' energy needs with alternative fuels where it is economic to convert.
In recent years governments, environmentalists and the energy industries have recognized that society would benefit if particular sources of energy were used to their best advantage. Let me give you a simple example to illustrate this thought.
A number of methods can be used to prepare a cup of coffee: an electric kettle, a kettle on an electric stove or a kettle on a gas stove. The most efficient of these is the kettle on the gas stove, because to use natural gas is more than twice as efficient as electricity when production, transmission, distribution and end-use losses are all considered. The very nature of gas and the fact that energy is released from natural gas at the point of use, in this case the burner, makes it efficient.
Work done by the association in preparation for its forthcoming submission to the Environmental Assessment Board hearing on Ontario Hydro's demand-supply plan confirms that switching from electricity to natural gas for specific applications in the residential and commercial sectors could save Ontario Hydro approximately 3,500 megawatts of electricity annually by the end of this decade.
ONGA has developed this projection on what we call marketable potential for fuel substitution, which is the total amount of electricity used in applications where natural gas is both economic and practical to use. It is based on applications where natural gas is available and where the infrastructure exists to sell, deliver, install and service the necessary appliances at competitive market prices. The applications include space heating, water heating, cooking and clothes drying in the residential sector, and space and water heating, cooking, clothes drying and make-up air applications in the commercial sector. Some specifically identified uses in the industrial sector are also included.
Savings through fuel substitution are already being realized in public housing facilities across the province. Many public housing units subsidized by the government of Ontario use electric resistance heating. The natural gas utilities are working closely with the ministries of Housing and Energy to convert existing electric heaters in social housing facilities and to ensure that all new facilities use natural gas. The program offered by the natural gas utilities finances capital costs for conversion to gas using the energy cost savings resulting from these conversions.
Much of the recent work in the area of social housing stems from the Ontario government's 1990 ban on electric baseboard heating in all new units funded by the government. ONGA believes that the government, having recognized the economic and environmental benefits of this program, should consider extending it to apply to all publicly funded buildings, such as schools, colleges, hospitals and government facilities. Any policy statement should go beyond space heating to include other cost-effective applications, such as water heating, cooking, clothes drying, make-up air and cooling.
Ontario Hydro has already introduced a policy which specifies that electric heating should not be installed in any new homes where natural gas is available. This is an example of where Ontario Hydro is in effect already promoting fuel substitution as one means of supporting its wider efforts to achieve greater conservation and efficiency. When Ontario Hydro encourages the use of natural gas over the use of electricity for specific applications, it will save megawatts and at the same time decrease its overall load. By decreasing its electric load and lowering demand for electricity, Hydro can successfully defer the need for new, large and costly electric generating stations.
Such actions serve the best economic interests of both Ontario Hydro and electricity consumers, who are facing large rate hikes over the next few years to pay for existing facilities. It will also improve natural gas utility efficiency by increasing the utilization of existing and planned facilities. These facilities will benefit society in general through overall lower energy costs. In addition, fuel substitution will have the positive effect of providing much of the needed economic activity for Ontario manufacturers and the construction sector.
Producing and using natural gas is not without environmental impact. However, given the present situation and the unique qualities of natural gas that were mentioned earlier, it is widely recognized that natural gas can make a significant contribution to combating some of the most serious environmental problems.
Over the last two decades, the natural gas industry has played a leading role in promoting conservation and energy efficiency. High-efficiency gas furnaces were developed by the Canadian gas industry right here in Ontario. Efficiencies are in the mid-90% range and this product is now marketed throughout North America. To complement the high-efficiency furnace, the industry has also developed new and more efficient wall-vented water heaters.
Energy management in the food service industry and commercial kitchens is also a priority area for new equipment and technologies that increase productivity, quality and energy efficiency. ONGA and the Ministry of Energy have a long history of jointly sponsored technology transfer seminars designed in particular for large energy consumers in the industrial and commercial sectors.
Research, development and demonstration of energy-efficient gas technologies is another way in which the natural gas industry helps society meet its energy and environmental goals.
The industry is also involved in setting new efficiency standards for appliances, promoting natural gas vehicle transportation technology, providing capital assistance for electric-to-gas conversions and educating residential consumers on the importance of conservation and efficiency techniques.
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ONGA's members clearly support fuel substitution and an expanded role for natural gas in Ontario. We look forward to working with all interested parties in charting the best course for Ontario's energy future. Economics rather than legislation should drive the decision-making process, with government providing leadership in the form of policies that promote and facilitate the wise use of energy.
In concluding, we want to assure members of this committee that the association's members are well prepared to accommodate an increased role for natural gas in the Ontario economy. There is an abundant and secure supply of natural gas in Canada, it is competitively priced and there is an excellent delivery system in place to provide increased volumes of gas to Ontario markets. We are committed to working together with governments, with Ontario Hydro, with our customers, with environmentalists and with all other interested parties to achieve the desired objectives.
We are prepared to respond to any questions you may have.
The Chair: Thank you, sir. We have two minutes per caucus. You may either make a comment or ask a question, but it will be done within two minutes.
Mr Conway: A friend likes to say that it is a remarkable thing to see grown men drool. Not that you are drooling, but if I were the natural gas association, this bill and the policy that informs it would have me drooling 24 hours a day. I could not anticipate such opportunity as this policy presents, and I think your brief makes a variety of very significant and telling points. One of your colleagues presented before us last week in Timmins and I thought made some of the same points with equal compulsion.
I want to turn to page 10, where you say, "Economics rather than legislation should drive the decision-making process." I cannot disagree with that. It seems to me that if we have a policy now to drive Hydro rates up, apparently by as much as 40% or 45% over three years, that alone, without any other encouragement, in the marketplace you do business in should have all or most of the apples fall in your basket.
Over the last 10 or 15 years, I think retrospectively we have been quite wrong in predicting the pricing regimes for electricity. We have been spectacularly wrong in predicting the pricing regimes for petroleum. I laugh and think about what we did 10 and 12 years ago. It is a belly laugh because we were so bad.
If we are successful, as this government's policy seems to suggest, in a massive move away from electricity to natural gas, which is what I think it is going to be, what guarantee can you people give me that marketplace forces are not going to take over and that in fact the price of natural gas, in light of these spectacular new opportunities in Ontario and I suspect across much of continental North America, will not drive the price of natural gas to a level, when we look back to 1991 and remember the good old days when natural gas, for all of these good and wonderful purposes, was so cheaply priced and so readily available?
Mr Pinnington: Two words I would rise to are "spectacular" and "massive" that you choose to describe the future for the Ontario natural gas industry and the growth of the market. Certainly it is substantial, but I think gas will serve a balanced portion of the marketplace.
In terms of price projections, we are in the process of providing that information to the Environmental Assessment Board hearing on Ontario Hydro. We do not anticipate spiralling prices for natural gas. Natural gas is in abundant supply in North America and it is readily available to the marketplace. It is true that right now our customers enjoy a quite significant benefit in terms of natural gas pricing in the market today.
Mr Conway: So the producers --
The Chair: Mr Arnott, please.
Mr Arnott: Mr Pinnington, I will give you a brief question and ask you to be brief as well in response. One of my colleagues, Mr Jordan, has a question. In your view as a businessman, what is your assessment of the government's involvement with Elliot Lake?
Mr Pinnington: I am sorry --
Mr Arnott: If Ontario Hydro --
Mr Pinnington: Yes, I understand the question, but we are not prepared to respond to that particular item. I do not have the detail of that particular item.
Mr Arnott: You just want to confine your remarks to the fuel-switching principle.
Mr Pinnington: Yes. We have addressed ourselves to the issue of substitution. I think the Elliot Lake question is really quite outside the realm of that area of activity. I am sorry.
Mr Arnott: Thank you.
Mr Jordan: You mentioned that 3,500 megawatts would be saved. That is 3,500 megawatts not sold. People are talking about the megawatts saved, but no one is mentioning the kilowatt-hours that will not be sold; therefore the revenue will not be coming into the utility. Many utilities have made presentations to us telling us they have the infrastructure in place, based on the present mandate of Ontario Hydro. Now it is there to pay for and at the same time, with the stroke of a pen, we are going to take away the opportunity to have them get the revenue to pay for it. How would you feel about that if we were doing it to your company?
Mr Pinnington: I think you have to look at the overall matrix of all the information that is provided.
Mr Jordan: I am speaking of revenue coming in.
Mr Pinnington: But you are talking about production capacity. The question you put to me was, if that production capacity is in place and you take 3,500 megawatts off, who is going to pay for the capacity? But the whole logic, the whole process Hydro is putting forward is a decline in its ability to meet demand with existing plant and its need for additional capacity.
I do not see it as redundant. I do not believe there is redundant capacity. In their latest projections they are suggesting there could be some redundant capacity by the year 2000, depending on the economic growth characteristics in Ontario between now and then. I do not see it as redundant capacity.
Mr Waters: Mr Conway asked part of it and I am glad to hear the answer that gas is not going to cost us all four or five times what it does today and we are not going to run out the day after we all switch. But seeing as how he has asked that, between pages 9 and 10 you say you are involved with providing capital assistance for electric-to-gas conversions. Could you elaborate on that?
Mr Loberg: Yes. I can speak for Consumers' Gas; Mr van der Woerd may wish to remark with respect to Union. We provide financial assistance in the form of a rental-leasing program for furnaces and water heaters. If someone wants to switch off electricity, we will provide that particular piece of hardware on a rental or a lease program so there is no first cost to the customer; he would be paying for the use of that appliance on a monthly basis over the life of the product.
Mr Waters: Do you see that it is, I guess, unheard of for Hydro to offer people assistance to go either on to gas or away from hydro? Should they or should they not be in that part of the industry?
Mr Loberg: I think what we look at is that Ontario Hydro is dealing with a mammoth problem and it needs every option available to manage its way out of that problem. Fuel substitution is one of the elements that will allow them to do this. There is conservation, there is load shedding, there are other, what we would call in our energy nomenclature, demand-side management techniques. There are some very sophisticated economic analytical techniques available that will allow you to determine whether these options are in the economic best interests of not only the corporation, or in this case Ontario Hydro, but also the ratepayers, both electric and gas in this case, and society at large.
It is clear in our view that we are saying: "Okay, if Ontario Hydro has the option for fuel switching, then it can make decisions based on the real, universal economics. That way they will be able to build a plan accordingly." I do not think we are suggesting for a moment we are the universal panacea, but we can provide a very significant impact and assist Ontario Hydro in meeting its long-term supply-demand requirements.
The Chair: Thank you, sir. I want to thank on behalf of the whole committee the Ontario Natural Gas Association and each of you for taking time to come here and speak with us. Your submission is a part of the record; it has been made an exhibit. The exchanges that took place after your submission, I am confident, will be valuable to the committee members.
We are recessed until 1:50 pm, and subject to anybody raising an objection now, I anticipate commencing with the presentations whether or not caucuses are represented.
The committee recessed at 1201.
AFTERNOON SITTING
The committee resumed at 1350.
The Chair: It is now 1:50 pm. Mr Huget and Mr Wood are here, Mr Arnott is here, Mr Cleary is here. We indicated that we were going to commence at 1:50 and we will, because people are waiting to make their submissions at the scheduled times.
PORT GRANBY/NEWCASTLE ENVIRONMENT COMMITTEE
The Chair: The first participant this afternoon is the Port Granby/Newcastle Environment Committee. Janet Mayer is here to speak on their behalf. Ms Mayer, please come up and have a seat. We have 20 minutes. One of the problems is that we really have to try to stay on schedule or else all those people who want to participate will not be able to. Your written material has been distributed. It is part of the record as an exhibit. Please try to highlight the material here, because the most valuable part of these proceedings is inevitably the dialogue that takes place between committee members and yourself or other presenters.
Ms Mayer: Thank you. Again, I am Janet Mayer. I am filling in for John Veldhuis, who is the chairperson and spokesperson for our committee. He is a teacher and unfortunately this week there are examinations at all the schools, so he is unable to be here.
I have included a pamphlet for you with our presentation. It will give you an idea of how and why the Port Granby group formed, but just to give you a quick brief, we initially formed to address a low-level radioactive waste problem in the town of Newcastle. Business is a bit slow right now, even though John Veldhuis went on a hunger strike this summer, so we are kind of branching out a bit.
First of all, as we understand it, Bill 118, An Act to amend the Power Corporation Act, will essentially do two things: First, it will authorize the Minister of Energy to issue policy directives to Ontario Hydro; second, it will make it clear that Ontario Hydro's use of corporate funds and its energy conservation programs will not be restricted to means of conservation involving the use of electricity.
This is important to the Port Granby/Newcastle Environment Committee, as we are very concerned about the environmental destruction caused by the need to fulfil Ontario's electrical power requirements. We want to stress to you the importance of demand management and the need to pass the amendments to the Power Corporation Act.
In the town of Newcastle, which is an area dealing with ongoing socioeconomic problems regarding nuclear power and nuclear waste, we are acutely aware of the power we use because we know what it means to be a community hosting a megaproject such as the Darlington Nuclear Generating Station and its tritium removal facility. While it is true that these projects have provided jobs for the community, the bulk of these jobs are not long-term.
There are a number of sociological impacts related to megaprojects that affect our community and that need to be considered; for instance, cost versus risk factors. In Newcastle we take the risk in the case of accidents or accidental releases, while others share in the power. There is a psychological stress regarding whether living in the shadow of a nuclear reactor is hazardous to health, and the Atomic Energy Control Board of Canada continues to study the impact of radioactive pollution on workers' health and community health.
There is a serious concern regarding the Port Granby low-level radioactive wastes in Lake Ontario, which is a source of drinking water for millions of people. Municipal tax dollars were needed to address the nuclear waste issue in the town of Newcastle, and there has been an emotional and financial impact. At present, low-level radioactive wastes are a federal issue. I wanted to mention the waste issue to point out that we feel some issues relating to the production of power do and should overlap different levels of government.
I wanted to point out that producing power is more than just turning on a light switch. For 40 years we have been gambling on a solution to radioactive waste. We do not have it yet, and the costs are escalating. We are beginning to study and realize the health implications. While I do not mind gambling for myself a certain amount, I will not gamble with my children. We have no right to.
We need diversity in providing electrical power. We need less expensive alternatives. Fuel switching will give us this. We should not have all our eggs in one basket. A certain amount of competition is healthy. It keeps costs to ratepayers down, it provides stimulation for improvements in technology and efficiency, and it provides jobs. All of this, of course, requires a transition, but as you have seen from the number of environment groups which have listed to make presentations to your committee, you have a lot of willing participants for this transition. This is a good window of opportunity to meet the challenge of this transition.
Bill 118: How can we achieve this transition? We agree that the content of energy conservation programs must be broadened and not restricted to means of conservation involving the use of electrical energy. From an environmental standpoint, the most important change to the act is to subsection 56a(3), which will allow Ontario Hydro to encourage consumers to switch from electrical heating to other alternatives. This was received as good news by the Port Granby/Newcastle Environment Committee.
There are two main reasons to support fuel switching: environment and economics. In Ontario, one fifth of the homes are electrically heated. I have attached a graph at the end to show you that approximately one half is space heating and water heating. As you can see, space and water heating take up more than one half of the electrical use in homes. Electric heat uses enormous amounts of power. Ontario Hydro uses nuclear stations for base load power and fossil-fuelled stations for daily and seasonal peaking requirements. Electric heating is environmentally destructive. Almost all the electricity used for space and water heating originates with inefficient and polluting coal-fired generating stations which kick in to cover the peak load time.
A look at appendices 2 and 3 will give you comparisons of the polluting emissions for fossil-fuel-produced electric heat, natural gas and light oil. I think they are fairly self-explanatory, so I will not take the time to go into them. Some 20% of Ontario's electrical generation is produced by fossil fuel, which is shown in appendix 4. The results are rising rates and the extra emissions that cause acid rain and global warming. By comparison, switching from electricity to natural gas would reduce carbon dioxide emissions threefold and largely eliminate sulphur dioxide. Other options that are just as feasible are wood, propane and oil, which can be used effectively where natural gas is not available.
Costwise, electric heating is more expensive than any other form of heating. Statistics show, for example -- and I have another appendix, 5 -- that natural gas is 60% to 65% cheaper and oil is about 40% cheaper. Fuel switching also means that Ontario Hydro would not have to build another nuclear station -- quite a savings considering that a station could cost as much as $20 billion. Poor performance of nuclear power stations like Darlington in the town of Newcastle has been a major factor in rate increases, and we are just beginning to realize the real cost in attempting to dispose of nuclear waste.
If properly implemented, fuel switching has the potential to completely eliminate the need for new nuclear stations and other mega-electricity supply options in Ontario. One cannot help but recognize that fuel switching would effectively manage the demand.
While working on this report, one of the difficulties encountered was understanding how we could present a case to justify asking the taxpayer -- I guess I should say the ratepayer -- to pay for fuel switching. We found the answer in Hydro's DSP documents and in a remark made by former Ontario Hydro president and CEO Robert Franklin, who said: "If a builder installs 15 kilowatts of electric heat in a house in Ontario, Hydro has to spend over $50,000 to build the capacity to keep that house warm. This is not a cheap heating system."
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To date, it has been profitable for developers and contractors to build homes with electric baseboard heating, since no furnace or ductwork is required. We need clear legislation as well as education and incentives to reverse this trend. Essentially, all ratepayers pick up the tab for this inappropriate use of electricity by part of the population, and sooner or later we will have to deal with the environmental impact of our behaviour. In the town of Newcastle, we are dealing with that impact. No one can predict the impact of global warming on our society and the planet as a whole.
Dollars saved on electricity would be used elsewhere and thus stimulate the economy. Improving the efficient use of energy represents an economic opportunity. Much of the effort to increase energy efficiency is labour-intensive and so will create new jobs. Fuel switching therefore makes sound economic sense. The answer is clear. How can we afford not to support fuel switching when Ontario Hydro can actually save dollars by retrofitting homes?
We submit that fuel-saving amendments would also provide benefits to rural customers who do not have access to natural gas. Fuel switching and energy conservation programs can lower the rates of all customers if Ontario Hydro has the freedom to choose the most cost-effective options.
A number of our Port Granby members are rural residents, and a fair portion of the town of Newcastle are rural residents as well. They probably will not have access to other options such as natural gas. For any of you who are really interested in seeing alternatives in action, I invite you to accompany me on a tour. Just give me a call and I will arrange it. We can show you R-2000 homes in Newcastle that are functioning really well, solar-and-propane combination homes, and houses that are heated strictly with wood. While environmentally conscious, most of the people living in these homes were also largely motivated by the sheer economics of heating their homes.
Rural homes pay higher rates for electricity and are subsidized. Statistical information would suggest that fuel switching will affect the Newcastle municipal electrical utilities minimally from a financial standpoint. It is understandable that the municipal electrical utilities would be concerned that their income would decrease; however, it is our view that the effect would be minimal.
I have attached appendix 6, which compares the impact of declining electrical use on municipal rates to the effect of Ontario Hydro's recent 11.8% rate increases. Note that for this analysis it was assumed that all the municipal utility costs were fixed and that there would not be any savings gained in local distribution costs.
For the town of Newcastle, the local sales would need to decline by 44.7% before the impact on the average cost per kilowatt would equal the impact of this year's increase in the wholesale cost of power from Ontario Hydro. In the worst-case scenario, the average resident may end up paying more per kilowatt, but this would even out because we would be buying less if Hydro retrofitted homes. We would need fewer kilowatts to obtain the same heat, so it would even out.
The primary goal of the municipal electrical utilities should be to meet our energy needs at the least social and environmental cost. Perhaps they could enter into provision of fuel-switching services and generate dollars in doing so.
Passing this bill would allow drastic reduction in the socioeconomic and environmental cost of electrical space and water heating. Policy direction should include fuel switching and cogeneration for the industrial and commercial sectors and also include water heating and appliance conversions. This would increase the benefits even more dramatically. We need to consider also combining fuel switching with home insulation programs. The two combined could feasibly produce a more than 90% reduction in kilowatt-hours per year. I have attached another appendix which shows some of the thermal envelope improvements that would make that so.
The efficiency factors of different types of furnaces or heating units is also an important factor to consider. The amendments contained in Bill 118 regarding policy are in the interests of public accountability. A certain amount of competition is healthy. Without it, costs are passed to the ratepayers, who have little say, and in the case of nuclear power and other megaprojects, on to future generations, who have absolutely no say.
The amendments contained would serve to clarify the lines of communication between government and Ontario Hydro. They serve to strengthen the government's and therefore the people's right to guide Ontario Hydro through a more democratic process. Of behalf of the Port Granby/Newcastle Environment Committee, I ask you to recommend the passage of Bill 118 and I thank you for the opportunity of presenting our views.
The Chair: Thank you, Ms Mayer. We have 90 seconds for each caucus. Mr Arnott.
Mr Arnott: I understand from your presentation that you live in the town of Newcastle.
Ms Mayer: Yes, I do.
Mr Arnott: That is closest to the Darlington facility?
Ms Mayer: Yes, it is.
Mr Arnott: I wonder if you have ever taken a guided tour through the facility.
Ms Mayer: Yes, I have, and Pickering as well.
Mr Arnott: Okay. Second, the security of supply of electricity is an issue that has been raised by a number of witnesses. We are hearing that Ontario's industry absolutely requires a secure supply of electricity; many thousands of jobs depend on it. In new investment decisions that are being considered at any given time, one of the considerations is security of supply of energy, and electricity specifically. Do you have any comments with respect to that?
Ms Mayer: I acknowledge that, but I also think that where we can save, we must save. I think fuel switching would accomplish that. I do not think there is one answer that is going to solve the problem across the board. We have to diversify and combine the benefits of whatever is available.
Mr Arnott: Okay, thank you.
Mr Huget: Thank you for your presentation. The demand management initiatives and indeed the fuel switching I think are there to address a way of coming to grips with building these megaprojects. Some of them are controversial, in the case of nuclear generating stations.
You mentioned in your presentation that municipal tax dollars had to be spent to address the nuclear waste issue. You go on to say there is an emotional and financial impact. Could you elaborate on that?
Ms Mayer: I live in a community called Haydon. There are about 35 houses there and we are about nine miles north of Bowmanville. It is very close to a small village called Tyrone. When it was announced that the low-level nuclear waste from Port Granby needed to be moved back from the lake for health reasons because it was gradually going into the lake and would affect the drinking water of millions of people, they announced that it was going to be moving to Tyrone, which is less than a mile from my home. We formed a community group to address it, to get more information and to try to stop it, because we were all worried. At the time, we did not understand much about it. It was hard slogging to understand the issues involved, but essentially there were a number of small villages around that formed the Port Granby group, and we did address the situation.
The waste will not be moved to Tyrone. It was agreed that they should not use prime agricultural land and that it should be moved back farther from the lake and that the technologies to make it safe needed to be reviewed in depth. At this stage the siting task force on low-level radioactive waste has been set up by the federal government to review and find a solution to the problem.
I realize that although I did not want it in my backyard, we do have to find a solution to the problem. There is not going to be an answer to satisfy everybody, but the best has to be done.
When this came up we obtained support from the town of Newcastle. Our council and in fact the region also gave support, and tax dollars were used in order to make presentations and to address the problem and find solutions.
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Mr Cleary: I know you spoke about many types of heating. You saw in today's Toronto Sun that the minister said he generally supports a proposal for Ontario Hydro to pay an estimated $2 billion to put gas or oil furnaces in electrically heated homes. I would just like your comments on that.
Ms Mayer: I have not read the article, so I do not like to comment until I --
Mr Cleary: But you had said earlier that you would like to see that expanded to other types of energy too.
Ms Mayer: Yes. For example, natural gas water heaters, a combination of solar and natural gas, would increase the savings. I think there is a great opportunity for solar to play a part where it is possible to do so. There are areas where natural gas is not available. For example, where I live, I do not have access to it, so we have to diversify and include whatever other alternatives we can. I am not answering your question.
Mr Cleary: In a roundabout way.
The Chair: Ms Mayer, with that, it is my job, and I do it with pleasure, to thank you and the Port Granby/Newcastle Environment Committee for taking time to come here to Toronto, for putting your views together as articulately as the committee has in its submission and for your candid responses to the questions put to you.
A transcript of today's proceedings and of course of all the proceedings of this committee are available to you through your MPP's office, as they are to anybody else who is interested in obtaining them. Please keep in touch with your own MPP and with members of this committee, be it opposition or government members, and take care.
Ms Mayer: Thank you. If anyone has any further questions, I would be glad to answer them on the phone or in writing.
ORGANIZATION OF CANDU INDUSTRIES
The Chair: Thank you. The next participant is the Organization of Candu Industries. Could the persons please seat themselves, tell us who they are and then proceed with their submission. We have their written material, which will become an exhibit and part of the record, and if they would please ensure that there is time left for the dialogue which would follow this submission, which is obviously of great interest to the committee, we would appreciate it.
Mr Broughton: No problem. Thank you very much for giving us time this afternoon.
My name is Wayne Broughton, vice-chairman of the Organization of Candu Industries. With me is Martyn Wash, one of the directors at the Organization of Candu Industries.
The OCI was formed in 1979, and we now comprise 40-some manufacturing operations in Canada, to a large extent in Ontario, companies which provide equipment and services of a very high-technology nature, as opposed to goods and raw materials.
We were formed primarily to go after export markets. In very recent years we have decided that in order to protect our export markets we have to get involved in the domestic electricity supply scene, and that is really why we are here today.
I made the presentation, as you have noticed, double-columned so you can write notes in it and ask questions later.
I want to start with, first, just a brief overview of electricity and the economy to try to set the stage for why we feel Ontario Hydro is so important to the economy of this province and our own personal wellbeing, and I mean that personally, not from a company point of view.
Secure, reliable and economic supply of electricity has always been a cornerstone in the development of Ontario, and as we all know, Ontario is the industrial engine which drives the Canadian economy. Continued availability is particularly important to the large export segment of our economy. An interesting statistic is that Ontario exports more goods and services per capita than any country in the world, and this provides employment for many Ontarians and income for the province.
The standard of living and the social programs we all demand require a strong economy.
Electricity is an essential component in industrial growth and job creation, forming as much as 80% of the total cost of production in some industries, such as steel. In other industries, particularly automotive, electricity forms a smaller portion of the total cost, but reliability of supply is crucial to maintain efficient manufacturing operations.
The competitiveness of our economy here in Ontario is directly related to the cost of electricity. Reliable, low-cost electricity creates employment in both domestic and export industries. Conversely, expensive electricity results in lost job opportunities.
We share the opinion of about 83% of the population of Ontario, as reported in the 1989 Goldfarb report which Energy Probe released to the public, that continued availability of electrical energy is very important for economic growth. As many have recognized in recent years, a coherent, long-term energy policy is essential to confidence in the continued prosperity of Ontario.
I want to look at some of the characteristics of a good utility. What makes a good utility? Obviously, a good utility will focus on what it does best, generation and distribution of electricity at the lowest possible cost to its shareholders, and this has been the mandate of Ontario Hydro since its beginning. I personally think it did a marvellous job until probably 20 years ago.
Because of the complex and long-term nature of its business, a utility must be operated by professionals if it hopes to be classed as good, and a stable management process is essential to attracting and maintaining the best personnel.
In the eyes of a utility, its five-year plan is the short-term one. Any major disruptions in the short-term plans result in unnecessary costs to the consumers. A classic example of this is the tremendous excess cost of the Darlington station attributable solely to governmental interference -- about 30% of the total cost of Darlington.
A good utility will be responsive to the needs of its customers, and the board of directors will be legally responsible for acting in the best interests of its shareholders, just as other boards of directors are required to be.
Next is a little bit about the Power Corporation Act itself. In their zeal to ensure Ontario Hydro is truly accountable to the legislature and the people of Ontario, previous governments have enacted the Power Corporation Act in such a manner that political interference in the affairs of Ontario Hydro has been far too easy. Examples of this interference, to the detriment of the consumers, which are all of us, include one we talked about already, the scheduling and rescheduling of the Darlington station. That was directed from Queen's Park -- a massive, unnecessary cost to the ratepayers in Ontario.
Previous governments did not allow adequate funding for maintenance at Ontario Hydro's operating nuclear power plants. We are now paying a terrible price for this in terms of lower availability than those units are capable of and would have met had they been properly maintained.
The recent $65-million donation to the northern Ontario heritage fund by Ontario Hydro bears no relationship to the mandate of providing electricity at the lowest cost.
The current moratorium on new nuclear power effectively prevents Ontario Hydro from considering its lowest-cost supply option for major base load. This was a completely political move and is not in the best interests of the consumer.
On instructions from the government, Ontario Hydro recently distributed two energy-efficient lightbulbs to each household in the province. If the full potential savings actually accrue, that is, every 52-watt bulb replaced a 60-watt bulb, the cost per kilowatt-hour -- the savings -- is about three times that of the cost of electricity produced at Darlington. This type of approach is really not appropriate for a utility.
The subsidy to be paid by Ontario Hydro to Deep River so it can convert to natural gas increases the cost of electricity to the remaining consumers.
Participation by Ontario Hydro in the Elliot Lake economic development program raises the cost of electricity to all of us.
There was a directive from Queen's Park to Ontario Hydro which demanded that $240 million be redirected from preparatory work on a nuclear plant to energy management. The Ontario Energy Board report HR 20 of August 26 last year states in reference to this redirection: "The board finds that the additional expenditures will not likely result in cost-effective energy management savings but only in additional costs and and lost revenue in the short term. In the board's view, this is not short-term pain for long-term gain; rather, this is short-term pain for little or no gain." This is a classic example of a policy directive for political advantage, increasing the cost of electricity with no benefit to the consumers.
Addressing Bill 118 directly, we feel very strongly that it contains several provisions that, if they were implemented, would make Ontario Hydro ineffective in comparison to many other major utilities, and we do have some fairly good ones south of the border that we can compare ourselves to.
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With reference to section 1, under the existing act, the Ontario Hydro board of directors appoints the CEO of the corporation from among the board members. In this manner the board selects a chief executive officer in whom it has confidence. The bill proposes that the CEO be the chairperson, a political appointee, and not necessarily fit to be CEO of such a large corporation.
I want to go on record as saying it is not anything aimed directly at Mr Eliesen. That is just a generic comment.
At its best, this creates a confrontational situation between the Ontario Hydro board and Queen's Park.
Section 2 of the bill allows the government of the day to take control of the day-to-day operations of Ontario Hydro. The bill contains no provisions to ensure that policy directives are in accordance with the mandate of Ontario Hydro, thus allowing the government to completely change the mandate without the need for parliamentary debate. This is very dangerous as it allows easy manipulation of Ontario Hydro by the government in power, and there are no checks to ensure that directives are not merely for political gain. The result would be a utility which cannot plan ahead, and this would result in poor service to electricity consumers. This would also make it very difficult to attract qualified people to serve at the upper levels of Ontario Hydro.
Directors of any corporation in Canada are held legally responsible to the shareholders to act in the best interests of the shareholders. This bill proposes to eliminate that responsibility. The effect would be to facilitate the implementation of policy directives which are solely for the political benefit of the party forming the government.
In section 4, the bill proposes to eliminate the requirement for Ontario Hydro to only undertake energy conservation activities which are economically viable. This would facilitate abuse of the act for political gain, again certainly not in the best interests of the consumers.
Section 6 of the bill specifies that all policy directives shall become the "purposes and business" of Ontario Hydro. This provides the political party in power the ability to completely change the direction and focus of Ontario Hydro without consultation or debate, and would facilitate the use of Ontario Hydro for political gain, again to the detriment of the shareholders.
The provisions of section 7 would allow the government in power to instruct Ontario Hydro to carry out social programs or other activities not related to the generation and distribution of electricity, with the costs to be borne by electricity consumers. The negative effects of higher electricity rates we talked about earlier in relation to employment and jobs, and are certainly not in the best interests of the shareholders of Ontario Hydro.
Because Bill 118 is so fatally flawed, we recommend strongly that it just be completely discarded. Start over again. We endorse the idea of an amendment to the Power Corporation Act. However, it should result in a more stable environment for Ontario Hydro, not the reverse. There is an irreconcilable dichotomy between the short-term viewpoint of politicians -- and that is a fault in our system; it is not the politicians' fault -- and the long-term planning required for successful operation of a utility. The act should bridge this dichotomy with minimal disruption for both sides and also ensure accountability of Ontario Hydro to the people of Ontario.
How did I do?
The Chair: You did real good. We have two minutes per caucus.
Mr Huget: Thank you for your presentation. I will just address two quick points.
In your presentation, you say the moratorium on nuclear power was not in the best interests of the consumer. Could you explain to me why, then, people who have come before this committee as consumers have thought it is in their best interests in terms of a number of issues, not the least of which is cost, but around the environmental issues as well?
Mr Broughton: The cost issue I will leave as total misinformation. I believe Darlington is the most expensive nuclear station for Ontario Hydro in terms of the cost of the electricity, yet it is still far less costly than any other major supply option available to us. Even with the cost overruns, the meddling from Queen's Park, it is still far more economical.
The environmental is a different kettle of fish. We have a lot of misinformation. We have most people, probably including a lot of professionals, who really do not appreciate how much work has been done in the disposal of spent fuel. In fact, other countries are now implementing the deep burial of this waste, very similar to what we have, which I think either has begun or is about to begin the Federal Environmental Assessment Review Office hearings in Ottawa. I think ignorance of the facts is the biggest part of it.
Mr Huget: You mentioned as well in your presentation that the $240 million that was redirected to demand management is not a sound investment. I guess my question is, would it not be prudent for anybody to look at demand management? When we look at the total overall costs of facilities like Darlington and Bruce, the related problems we have at Bruce in terms of the amount of money we are going to have to spend in retrofits and upgrades, does it not make sense, as a responsible citizen, to look at alternatives before we commit ourselves to these kinds of projects?
Mr Broughton: Oh, absolutely. We are fully in agreement with demand management. In fact, from our point of view efficient conservation and demand management are the first priorities, but we also recognize that conservation and demand management cannot handle our needs. We need the entire broad range of options available to Ontario Hydro.
The reason we say that was a mistake is that we had no qualms with government money being spent -- or perhaps even Ontario Hydro -- but specifically government money being spent to investigate efficiencies in conservation. What we are saying was wrong was removing from Ontario Hydro the option of going nuclear, as it has lost its cheapest source.
Mr Jordan: Thank you, gentlemen, for your excellent presentation. I would like to ask you quickly if you could give us some direction. You just asked, "Why are some consumers so concerned about nuclear energy being a part of our power base?" You said it was based on ignorance of the facts. Could you give some direction to this committee not only on that point, but how we might correct that situation?
Mr Broughton: Indeed, it is a very broad subject. We broached that in May of last year when we issued a position statement on electricity in Ontario. We have included a copy in the back of the Organization of CANDU Industries brochure.
One of the recommendations we made was that a special advisory committee should be formed bringing together knowledgeable members of industry, government, academia and labour as a forum in which to advise the government on how to address many, many issues, not the least of which is misinformation on the question surrounding the nuclear industry.
Mr Jordan: Thank you very much.
The Chair: Gentlemen, I want to thank you on behalf of the committee for your participation, for your comments prepared in the written brief as well as for your responses to the questions put to you. We appreciate the time you have taken to be here and trust that you will keep in touch and follow the progress of this bill.
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VOICE OF WOMEN
The Chair: The next participant is the Voice of Women. Would you please come forward and have a seat. We have with us three participants representing the Voice of Women, Ursula Franklin, Betsy Carr and Anna Lou Paul. You have a written submission, which is filed now and is an exhibit and forms part of the record. You have outlined the background, and of course all of us are aware that Voice of Women is not only well established but well known as a Canadian women's peace organization. You have been active for over 30 years and you have outlined some of your background.
The interesting facets of your presentation are the rationale for your comments on the bill and your specific comments on Bill 118. Please proceed with those and try to leave us time to ask you questions. That is undoubtedly a valuable part of this process.
Ms Franklin: Thank you. I speak on behalf of my colleagues. Just to put at rest worries about misinformation, non-information, it is not germane to us but it may be germane to you that I have a PhD in experimental physics and have just retired after more than 20 years as a professor of engineering from the department of metallurgy and material science. I have worked at the Ontario Research Foundation and have been a member of bodies such as the National Research Council and the Engineering Research Council.
Please, just as my friends and colleagues had the benefit of professional advice, do assure your constituencies that the subject of ignorance of citizens is not as widespread as the flu. We have been around and have developed a certain amount of immunity to the, let's say, male conceit of those who think that nobody except those who wear an iron ring can possibly be informed on matters of energy.
I must say that I would like to express my sympathy with you. You have travelled on these matters throughout the province and have heard, I am sure, a large number of views on matters where there really are only a few questions. You very much have my sympathy. I take you to a world where things look very different from what you heard. We have been in the fortunate position of being intervenors at the current Hydro hearing so that for those questions of cost-effectiveness, of nuclear, etc, we have had the details of Hydro's own information.
I do not want to address that, however, but the matters of the bill very specifically. We want to address these from essentially five perspectives which form our view.
The first one is that energy policy, of which the Power Corporation Act is a part, is essentially social policy and economic policy and consequently a matter in which citizens have a very profound interest. It is crucial for us that this process is open and transparent and that there is accountability through elected representatives.
We see energy as a currency of an industrial society, and we see the absolute need that this currency be spent responsibly, not wasted, no bad debts and clearly accountable. However, we would also like to stress that we see energy in context. Energy is not an issue; energy is a tool to do something. The context however is also that of the environmental intersocial implication. Seeing energy in context, we see and are very clear that electrical power generation is only one of a spectrum of energy services that must be available to the citizens of Ontario under a set of criteria that are not set by the supplier but by the country and its elected representatives.
We have seen among our colleagues and their friends a great deal of willingness to be receptive to the needs of the country, to the savings in energy that can come from changes in lifestyle. In many ways, around the province there is a great deal of willingness to have responsible and conserving lifestyles, provided these practical alternatives are available.
It is from those perspectives, energy in context, the spectrum of energy policy as industrial as well as social policy, the democratic transparency and the need and willingness to be very conscious of environmental impact that our direct comments to the bill are made.
We want to talk about the reorganization of the board of directors. The adding of extra numbers is indeed to us only justifiable if those new directors represent constituencies that otherwise were not on the board. Merely stuffing the board is of no use. We would like therefore to see that the new board positions be specified either in the act or in the administrative provisions to the act as to be used to enlarge the constituencies, be they technical or non-technical, in particular the constituency of consumers and women as consumers.
We see nothing wrong in the presence of the Deputy Minister of Energy as a nonvoting member. We indeed welcome the fact that the historical intimacy between Hydro and the government is legalized in that sense. If there are policy directives, we much prefer that the government direct Hydro and not, as has been so frequent in the past, that Hydro direct the government.
However, in terms of context, we think that the Minister of Energy and his deputy cannot solely represent all spectra and all facets. We would prefer to see, in addition to the Deputy Minister of Energy, the Deputy Minister of the Environment, even if that would mean one less position on the board.
With that same question of energy in context, we look to the subsection regarding the conservation programs. I heard the previous presentation on meddling by the government. With Ontario Hydro, I think the crown corporation, if that is a public institution, does require directives. When I say to my son, "Pick up your socks," it is mother meddling, but from my point of view, it is a good ordering of a functioning family. I hope you will see that the function of policy directives that do not come out of ignorance but out of need is a rightful place of government intervention.
It is that energy in context that brings us to a critique of the legislation with respect to the conservation programs. We see and take some objection to the narrow definition of conservation as reduction of energy consumption or, as some say, that is economically advantageous at the moment over the consideration of impacts on the environment. We would suggest to you that subsection 56a(2) and and the three paragraphs of 56a(3) each contain at the end of the text the phrase "with due regard to environmental impacts," because only then can the viability of a conservation program be judged.
We feel rather ambivalent about Hydro's role as directing conservation efforts. While conservation efforts are needed, we are not sure whether Hydro will not act as a gatekeeper in terms of screening out, in particular, new conservation technologies under the guise of economic efficiency.
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I want to illustrate that by the example of heating. The legislation permits Hydro now to help in the substitution of natural gas for electricity. Assume, however, that the case be heating with natural gas versus heating with solar. Assume a municipality switches from electrical to gas space heating. It can put these costs as capital costs, as the amendments on Bill 118 permit. That is a great advantage, that it is not current expenditure but capital cost. We feel that same advantage ought to accrue to somebody who may wish to switch from gas to solar heating.
We urge you, because we do not have the means in this particular bill, to assure that the advantages given to Ontario Hydro as a vehicle for conservation not be out of step with the advantages that may be given to other utilities, let's say gas, let's say oil, as proponents of conservation technologies. Otherwise Hydro will remain a gatekeeper favouring certain things, well beyond its mandate of the supply.
Finally, we would like to draw your attention to what we consider an omission in the bill. You will see that in the section that describes the purpose of Ontario Hydro, section 95, it says Hydro's business is a long list that includes the generation, transmission, distribution, supply, sale and use of power. We have watched with some care and we have seen at the hearing the problems arising with non-utility generation and the distribution function of Ontario Hydro. Historically, Hydro has both been the supplier and the distributer. Now that other suppliers can provide the province with electrical energy, the distribution system of Ontario Hydro takes on another dimension.
You can imagine that with people who build cars and roads, you first had a monopoly of people who built cars and maintained roads. When a new carmaker comes up, the situation cannot arise that they are excluded from the road. Historically, Hydro has been the road and the car. We now have new cars on the road, so I would urge the committee, in the amendments you may bring to the third reading of this bill, to consider a clear decoupling between the supply functions of Ontario Hydro and the mandate to maintain the distribution system for electrical power, regardless of who generates it. These are our remarks and we are awaiting your questions.
The Chair: Thank you, ma'am. Mr Conway, two minutes.
Mr Conway: Dr Franklin, as I would expect, a very stimulating and most illuminating presentation. I think your last point is a particularly telling one. I do not think there are very many people who have begun to realize what the growth of non-utility generation means for the transmission function of Hydro and I think some very heated political battles, locally and centrally, await us, and not too far in the distance.
In the limited time that is available, the question I would simply like to raise with you is that I think you are one of the few, perhaps the only presenter I have heard over the course of many days now, who has in dealing with the energy question raised the whole issue of lifestyle and the extent to which we are going to have to rethink some of the lifestyle to which we have all grown accustomed, certainly those of us who are of a younger generation. I suppose I would like you to sort of flesh that out to some extent. I have heard you on this subject in other fora, where you have had some very interesting things to say. As a practical matter for practising politicians, the concern for me is that, to the extent there may be lifestyle changes not too far in the distance to prepare for a new energy policy, what advice would you have for politicians who may find there is something of a gap between what will have to be and where the bulk of the population now is?
Ms Franklin: Three things: One, do not underestimate the bulk of the population. People are pretty thoughtful, and the notion that this has to be done like cod liver oil stands a little bit in the way of saying it is really not all that horrible.
I think one of the things the politician has to see is that the alternatives are possible without people making fools of themselves. If you look at the transportation system, it is not a hard thing to leave the car, but you have to get somewhere. If I want to see our children come to Bracebridge, they do not have a car, but the scheduling of buses, the availability of trains are the things that will bring people to do it, not grudgingly but happily. Who wants to sit on the 401 or 400?
I think the politician's imagination is primarily engaged in finding novel, useful ways of stimulating others. What is wrong with a car pool? What is wrong with a minibus? What is wrong with investing a little bit into an 800 number on car pooling, on having vans on demand? The entrepreneurial spirit should come out of every buttonhole when you lay down the possibility of an 800 number, possibly the guarantee of a safe driver. Find yourself a voluntary police person who will go into that.
There are ways, but not without engaging the people who are involved in designing and helping them to design the alternative. I think, or my friends will confirm, there is a much greater willingness, there is a much greater imagination. It may need a clause in the Insurance Act for these minivans, it may need an 800 line, it may need some enabling help, but it is far less of an expenditure and effort than having to deal with acid rain from too many cars.
I would think, call in people, let them come in, let them be specific and let it be theirs, not, "Somebody ought to." Does that answer you?
Mr Conway: Thank you.
Mr Jordan: Thank you for your excellent presentation. You state clearly here that your committee has long favoured public investment in energy conservation rather than in energy generation.
Ms Franklin: Yes.
Mr Jordan: Taking it as a known fact that we require both, do you as a group have any objection to nuclear being part of the base generation?
Ms Franklin: Yes.
Mr Jordan: Could you --
The Chair: Thank you, Mr Jordan. Mr Dadamo.
Mr Dadamo: How much time do I have?
The Chair: Very little.
Mr Dadamo: Oh, boy. On the top of page 2 you say that VOW --
Mr Arnott: On a point of order, Mr Chair: Our caucus had very little time for a response from the witness and we would like to have some more time.
The Chair: I understand that. You asked a question; you got the answer.
Mr Jordan: No, we did not. We got half of the answer, Mr Chair.
Mr Dadamo: On the top of page 2 it says, "VOW sees value in increasing the number of board members only if the additional members will increase the presence of previously unrepresented constituencies, be they civic or regional." Many of the groups we have talked to across the province and also here in the last couple of days have showed much dismay at the increasing of board members. How do you see the importance of new or additional board members to the success of Ontario Hydro in the future?
Ms Franklin: I think it is the receiver community that must have an input. If I may link that to the half-answered question, when Ontario Hydro, for instance, decided on whether nuclear is a viable economic option, how many people on the board were those who said, "No, we are stuck (a) with too much cost, (b) with too much pollution and (c) the deep-drilling stuff is undoubtedly going to be somewhere where I live"? It is a representation of the receiver communities, those who have to deal with the consequences of Hydro's plans, that ought to be on the board when that is dealt with, and if they had been, I do not think Hydro would ever have gone into nuclear.
The Chair: Thank you. On behalf of the committee I want to thank the Voice of Women and the three of you very much for your time, your interest and your insights. I hope you keep in touch. Take care.
Ms Franklin: We wish you well. I know it is not easy.
The Chair: It certainly is not.
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ATOMIC ENERGY OF CANADA LTD
The Chair: Atomic Energy of Canada Ltd is the next participant. Please tell us who you are. We have 20 minutes. Please spend no more than the first 10 minutes so as to leave sufficient time for questions and dialogue.
Mr Lawson: Thank you, Mr Chairman. My name is Don Lawson and I am joined by Doug Christensen, both of AECL.
Mr Chairman, honourable members, ladies and gentlemen, thank you for the opportunity to speak today to Bill 118 as it relates to Ontario's energy future. AECL greatly appreciates the government's consultative approach on this important topic. It is an important subject because when you look at society's needs, I guess the first priority is food and the second is energy -- energy for transport, for the factory, for the home, the school, the hospital. Electricity has an enormous role in providing this vital energy. Let me stress that all of us in Ontario, companies and citizens alike, have benefited from the principle of power at cost. It is clearly desirable to see that these benefits will continue.
I would like to concentrate my remarks today on the broad energy directions for Ontario which Bill 118 is designed to facilitate. Let me introduce AECL, Atomic Energy of Canada Ltd. We employ 3,400 highly trained and skilled people in Ontario. We have two parts: a research part and the Candu part. The research part runs the national laboratories, which covers a wide range of nuclear engineering and science work. It is located at Chalk River in Ontario and Whiteshell in Manitoba. Chalk River is of course Canada's largest R and D scientific laboratory. AECL Candu for its part is responsible for the design, marketing, project management and quality assurance of Candu stations. We also supply a wide variety of high-tech nuclear engineering services to clients around the globe. We are the commercial arm of AECL and we do not receive any government-vote funds or grants.
Our head office is at Sheridan Park, Mississauga, where we have over 900 people and a testing laboratory. We have an office in Montreal with 135 staff and smaller offices in Fredericton and Saskatoon. Outside Canada we have offices in Washington, Seoul, Buenos Aires, Bucharest, The Hague and Tokyo. As president of AECL Candu I am proud of its people and its products and in particular I am proud to say that the Candu work of AECL is and has always been profitable.
Last year we brought $1 billion worth of orders into Canadian industry. I should point out that while we do the engineering work ourselves, we buy many services from other engineering companies. AECL does not manufacture anything, so when we get an order we buy the parts, equipment and components mainly from Canadian manufacturers. For example, the $650-million order from Korea last year has roughly a $450-million Canadian content, of which we purchased $250 million worth from precision manufacturers and engineering companies, and the lion's share of that work goes to Ontario. This provides thousands of jobs in our crucial manufacturing sector. To put the work AECL does for Ontario Hydro in perspective, it contributed about $40 million worth of our last year's $1 billion worth of orders.
AECL and Ontario Hydro go back a long way together, over 40 years. When the idea of Candu emerged from the laboratories, Hydro and other Canadian utilities and the private sector joined forces to study the new concept. AECL, Ontario Hydro and the private sector jointly built NPD, the 22-megawatt prototype reactor at Rolphton, Ontario. The larger demonstration unit built at Douglas Point was again a joint exercise.
Once we came to the booming 1960s, Ontario had to make a decision on new power sources. Demand for power had outgrown the capacity of the hydroelectric plants at Niagara. The choice then was to buy into new home-grown nuclear technology or to import more and more US coal. Hydro cautiously started by constructing two units at Pickering. We, together with the government of Ontario, profitably invested in the first two units at Pickering. Ontario Hydro subsequently went on to build more units at Pickering, then eight units at Bruce and now four units at Darlington. AECL's scope of work in the Ontario program has been reduced as Hydro has undertaken more work itself and AECL has concentrated on work in other provinces and overseas.
What have been some of the major impacts of Ontario's Candu program? Clearly, Hydro's nuclear power plants have generated major benefits. The cost of nuclear has been less than coal. This is shown not only in the audited annual reports of Ontario Hydro, but also in the independent cost studies. Even in 1990, when total system performance was down, the cost of electricity for nuclear was 4.2 cents per kilowatt-hour and the cost for coal was about 10% higher.
Since the early 1970s Ontario has saved over $17 billion in foreign exchange. This is because Ontario used Canadian uranium instead of buying mainly US coal. The accumulated benefits of the Candu program over the equivalent coal program amount to about $6 billion. So the program has been a large financial success. The Candu program has helped Ontario maintain competitive power rates, rates which are 25% to 30% cheaper today than the majority of North American jurisdictions. In terms of reactor reliability, four of the top 10 lifetime performers in the world are Candus, three of those being Ontario Hydro's, and the competition is stiff because that includes 300 large reactors.
Perhaps the most significant benefit is the huge clean-air dividend paid to Ontario's environment through the Candu program. Using Candu rather than coal has spared the atmosphere 10 million tonnes of acid gas, 23 million tonnes of coal ash have been avoided and millions of tonnes of carbon dioxide were not emitted into the atmosphere to warm our planet.
On the other side, on the human level, about 25,000 direct jobs have been created in Ontario's nuclear industry. These are good jobs, many of them high-tech. Candu is largely a made-in-Ontario energy system. Nearly all the work and jobs are located here. In a coal-fired station, on the other hand, the coal is imported and hence we have to pay for the jobs in the coal mines of the USA.
It is true that the performance of a few of the older Ontario stations have slipped over the past two years. As you know, the nature of the nuclear units is that they require a lot of capital to build, but they are cheaper to run over their lifetimes. Hence you have to get as much power out and not leave the station idle. I am sure Ontario Hydro would tell you that it cut back on some of the maintenance a few years ago. Now that maintenance work has to be done. It is just like cutting back on the maintenance of your house. You can get by for a year or two and then it eventually catches up with you.
Last year Ontario Hydro had some success and improved the overall annual performance of its stations to 73%. In fact, when you look at the newer B stations, they averaged 80% of the time on line. We at AECL Candu have been providing our key engineers during the last couple of years to assist Hydro to get these plants back up to the customary high-capacity factors that Candu is known for.
What about Darlington? It is a lightning rod for debate in the House on Bill 118. Darlington unit 1 is now at full power. It produces fully one half of all the power from Niagara Falls with just one reactor. Darlington unit 2 is on the way to having its technical problems resolved and despite the construction delays, electricity from Darlington over its lifetime will cost about 4 cents per kilowatt-hour, cheaper than the equivalent coal. I should point out that $5.5 billion of the cost of Darlington has been interest payments during construction and almost $4 billion of that is attributable to the cost of various provincial governments starting, stopping or slowing the project.
The Canadian nuclear program diverged along two complementary paths. Ontario Hydro went on to build large, integrated multi-unit stations. In other provinces and countries we did not have customers for such large projects, so we developed a single standalone Candu. It is known as the Candu 6. It is based on the Pickering A design. There are now four Candu 6s in operation: one in Quebec, one in New Brunswick, one in Argentina and one in Korea. There are six more under construction in Romania and Korea and we are currently bidding on two more in Korea.
The Candu 6 at Point Lepreau, New Brunswick, is the world's top-performing reactor, with a capacity factor of 91% since it started generating electricity in 1982. New Brunswick has sold about a third of its power to the US. This has earned $1 billion for the New Brunswick economy, which adds up to jobs and cheaper power rates. That makes their goods and services more competitive.
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As you know, Hydro's new demand and supply document was released last week. The document states that smaller nuclear units than the Darlington concept would be considered, a reactor which is cheaper, more flexible and faster to build. We at the AECL have seen this need for some years and we built the Wolsong 1, Korea's first Candu plant as a turnkey plant in five years. We had the order for the second one last year and that will be completed in June 1997.
AECL values Hydro as a key customer and not only as a customer. We provided some export orders to Ontario Hydro to provide work for our foreign customers and we particularly value the close association that allows Candu utilities to hear at first hand from a leading utility like Ontario Hydro. As an energy system supplier, we need utility customers who can work with us and tell us their requirements: how much power they need, what size, the technical details and when they need it. We have to plan our R and D and design development years ahead in order to match those utility needs. Clearly, in today's uncertainty, we the supplier have to try and provide flexibility. Above all, products with short construction time are needed. It would be a pity to lose the option of competitive, clean nuclear power because key decisions were not taken in time.
I think it is instructive to see in the demand update that nuclear power will still be the dominant source of electricity in the province for the next 25 years even without building new power plants.
In conclusion, the government and Hydro's common determination to make Ontario the most energy-efficient jurisdiction bar none is ambitious and necessary. We fully support demand management, conservation and efficiency measures. As for supply-side planning, which requires that new energy sources be ready to go as the economy recovers, we recognize that plans can change and they can change rapidly. Utilities have the almost impossible mission to accurately predict the future economy. Undoubtedly Hydro's last demand-supply will change again once the economy and other factors predicted may change in an unpredictable manner. We aim to be there to be able to provide components and equipment when Ontario is ready for that.
Thank you, ladies and gentlemen. I would be pleased to take any questions.
The Chair: Thank you, sir. Mr Jordan, two minutes please.
Mr Jordan: Thank you, gentlemen, for your presentation. It was certainly very informative and well appreciated. In a few words could you explain the Candu system so that our committee is knowledgeable, and so that we are not comparing it to Chernobyl and other places where there have been serious accidents.
Mr Lawson: I will attempt the very quick answer in relation to Chernobyl. Candu is a very neutron-efficient reactor, which means it is only just about the size big enough to work, so any shutdown rod you put in there closes it down quickly. The Chernobyl reactor was the equivalent of 26 times that. It is kind of like having a dog sled team, where if you have one dog you can go where you want to and if you have 26 going in all directions, you do not know where on earth you are. That was a difficult reactor to control and certainly one where the design and operation was very bad. It is completely different. There is no real comparison except that they both use nuclear fission.
Mr Huget: Thank you for a very informative presentation. In the presentation, you refer to electrical rates in Ontario being 25% to 30% lower than most jurisdictions in North America. We have heard many presentations, particularly from major power users, who are telling this committee that we have the highest rates in North America. Which one of you is right?
Mr Lawson: I think it is maybe selected figures. There are some utilities in the United States that do have low costs. Traditionally Canadian utilities have benefited from much lower costs, but on average I believe the figures that we are quoting are correct. You can find jurisdictions, and if you are a manufacturer and someone is tempting you down there by lower power rates, that is very instructive. I was talking about total power rates. They may well have been talking about power rates for manufacturers, which are sometimes different from power rates for private, public consumers.
Mr Huget: Given the cost in huge megaprojects, and I refer to Darlington and projects like Darlington that are usually a top-driven, heavy-debt type of project, does it not make sense for us to examine all the alternatives in generating electricity and using energy and not just the nuclear option?
Mr Lawson: Certainly, because in our international competitive work the utilities we are trying to sign to will do just that, so our challenge is to be able to beat any of that competition. When you are talking about the larger projects like Darlington, one of the directions we are going and have gone in our overseas work, if you look at the Wolsong site in Korea, the units are being built one at a time so there is no big piece of financing that is needed all in one go. You can build them when you want them and you still get some of the economies of having them on the same site. The same applies in Romania.
We have been looking to see how we can get nuclear units so they are not such a big piece of investment all in one go. It is also instructive to look at what the total investment bill of Ontario Hydro looks like. It looks enormous when you see it in one figure, but if you spread it as a percentage of every householder in the province it is really quite small with the comparison of the cost of houses these days; it is a couple per cent. Is it worth a couple per cent to get an adequate electricity supply?
Mr Conway: Mr Lawson, a very interesting presentation. Kurt Browning should take note: You have skated with dexterity and a diplomatic aplomb through this minefield quite well. There is a subtext here that long-time observers might read and lead to a conclusion other than the one that is evidently stated, but as I say, diplomacy is not one of my strengths; I admire it in other people.
One of the interesting aspects of this whole debate is the chairman's demand-supply update of last week, to which you have made very diplomatic reference. But clearly it is the intention of the new order that there will be no need, on the basis of very creative demand management, for any new significant supply to be committed now for almost 20 years. When married to a nuclear moratorium for Ontario, that might lead some sceptics to believe there will not be much left for AECL to do other than presumably to assist Hydro to maintain its existing nuclear plant equipment and obviously to engage in whatever non-Ontario and international business it might effect, whether in Korea or wherever.
Would you care to comment on a negative scenario where in fact something like that did happen, there turned out to be little or no growth for your activities in Ontario over the course of, say, 10 to 15 years? What would be left to anybody by the year 2005 who might want to rethink the nuclear option? Would there be enough basic research and development infrastructure left at that time?
Mr Lawson: Certainly that is a question we look at ourselves. If we are in a situation where we, in our domestic market, have very little opportunity, it is not going to be very easy to run a business. One of the points I wanted to make is that the Candu business is a successful business in the country and particularly in the province. There are not many engineering businesses that have been able to bring in $1 billion worth of orders in the last year, and we are intending to bring in more in this year.
If the view of the province is seen as a continuous moratorium with no opportunity for Candu in the future, then that is going to be very damaging for us and for our business and it is going to be very damaging for those employed in the nuclear business in the province. It would be very difficult to get that work and those jobs coming. We hope that is not the case and that what we are seeing here is an attempt to have more conservation, and the effect of the recession, so it is a case of putting the time back a bit.
I mentioned how long it takes to get a nuclear program going, and one of the things we have to do is to see that while this extra time is being taken, if the need is still out there we can build a station quicker and still get the power from an effective nuclear station when it is needed in the province. We certainly do not see the decisions that are being taken at present as an abandonment of nuclear in the province, and I sincerely hope that is not the case, because that would be extremely damaging to the economy not only of Canada, but particularly this province.
The Chair: Gentlemen, thank you on behalf of the committee for your participation, for your contribution. We appreciate very much that you took time out to come here this afternoon. Thank you.
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DURHAM REGION COALITION FOR NUCLEAR RESPONSIBILITY
The Chair: The next participant is the Durham Region Coalition for Nuclear Responsibility. Please come forward and let us know who you are. You have 20 minutes. There is a written submission that has been filed. It is an exhibit; it is now part of the record. All the members of the committee are reading it.
Mr Rutherford: I have a video to show you if I can figure out how to work it.
The Chair: This is a good opportunity for committee members to read the submission so that Mr Rutherford will not have to read it and then we will be able to get right into questions after the video.
I do not think we can blame this on the government. I think that equipment has been around for a couple of regimes.
Mr Rutherford: Hello. My name is Bob Rutherford. I have been a member of the New Democratic Party for over 25 years. When I was 15 years old I made Ed Broadbent's first election lawn sign. I also designed the peace tower logo which the federal NDP used for years. I have been chairperson of the Durham Region Coalition for Nuclear Responsibility since 1982. I am also CEO of Robert John Rutherford Electric Co, a research and development corporation which does research and development on alternative energy sources such as energy-efficient houses, solar domestic hot water collector systems, high-efficiency wood heat exchangers, such as this unit here, controls that plug into existing computer systems to control windmills and other alternative energy products. This is a 20-kilowatt wind generator. This air foil gives you 20 kilowatts of electricity in a 30-mile-an-hour wind. This is primarily designed for the farmers of Ontario and for the Third World.
Funding for the past 10 years of our research and development projects has been done by Bob's Electric. Bob's Electric is a division of Robert John Rutherford Electric Co and is a maintenance and construction company. Doing electrical construction and maintenance for the past 10 years has given us a good working knowledge of Ontario Hydro and the Power Corporation Act.
On Thursday, May 22, 1986 at 8:30 in the morning I witnessed an Ontario Hydro truck drive into a neighbour's backyard and unload some lumber. I was fortunate enough to have a camera and take pictures of the incident. After the employees unloaded the truck they went into the house for about 10 minutes carrying some boxes, then they returned to the truck and drove by. I had the film developed and turned it over to Durham Regional Police and told them that I considered it a possible theft. Durham Regional Police contacted Ontario Hydro and Ontario Hydro instructed them that it is in the public's best interest to forget the whole thing and cover it up, and that is exactly what happened. So I turned around and wrote a letter to Tom Campbell, chairman of Ontario Hydro, with copies to all three political leaders in the provincial Legislature and also to the media. None of them would do anything about it because there were never any charges laid. Tom Campbell did credit [inaudible] for telling him about it, and that was all that was done about it and the whole thing was forgotten.
On August 6, 1986 the Durham Region Coalition for Nuclear Responsibility was promoting the Darlington peace festival. The city of Oshawa would not allow us to paint chalk shadows on the sidewalk as they did in Toronto for the anniversary of Hiroshima. The local media, CHEX from Peterborough, wanted to do a story on it. When we were talking about doing a story on not being allowed to paint the chalk shadows on sidewalks because our council could not comprehend how they would be removed, I mentioned about the Darlington theft scandal. They turned around and did a story on the Darlington theft scandal. This is their news story.
[Video presentation]
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Mr Rutherford: Any questions?
The Chair: Mr Rutherford, I am sorry to tell you we have gone over the time.
Mr Rutherford: Can I make one more statement? What we have here is a crown corporation which is totally out of control and what we have to do is make it accountable. We have to break up its monopoly of the grid to allow people like farmers who have windmills and stuff, the independent power producers of Ontario, to sell electricity. When all this electricity is sold to the grid, we will market it and sell it to the United States. The money we make off it, the profits, will come back to the government to pay for Hydro's debt, pay for the provincial budget that we are running into for $9 billion, which is necessary. Also, after that is all paid for it will be another source of revenue for the government.
We have to free enterprise and let Hydro compete against private industry. The way it is now, if you take the Windsor program -- do you all know about that? Hydro said no to Windsor. Windsor could build it cheaper and do it better and still make a profit.
It is time we had some free enterprise here and started a brand-new industry. If the grid were opened up and they guaranteed the market 3.6 cents a kilowatt for electricity, you would find tomorrow that a million jobs would be created and a $10-billion industry would open up in this province. Because of Ontario Hydro's monopoly and gross mismanagement, we will never see that industry develop here. Those are jobs and technology we can export globally as well as use in this province.
The other thing is that I do not think Ontario Hydro, being a monopoly, should have a $10-million-a-year propaganda budget. I also feel too, dealing with the Ministry of Energy, to me and to anybody I know who has dealt with it, the Ministry of Energy has basically just been an extension of Hydro's propaganda machine. It should be dismantled. We should start the ministry of conservation and promote conservation, be champions. We should not allow the monopoly with that.
The nuclear industry, if it had to compete privately, on its own two feet, would fall down. What killed me was listening to these guys talk. When they built it, the best Douglas Point would ever run was 42% of its design capacity. It took them two years to get the bugs out. When they did get the bugs out and it did run, the electricity it sold did not even cover the interest on its construction. They lost over $10 million annually. After 13 years they scrapped that nuclear plant because the cooling system was not sufficient enough to stop the core meltdown.
I spent half my life up in Port Elgin, at the labour camp there. We used to go down there and play all the time. I thought nuclear power was wonderful till, later on in life, I actually researched it.
The Chair: With that, Mr Rutherford, I have to thank you on behalf of the committee. If you wish, you can leave your tape or send a duplicate.
Mr Rutherford: I have a copy for you.
The Chair: It will become a part of the record.
Mr Rutherford: You guys are in the driver's seat. You have an opportunity to make some great changes here. If you do it, you will be in power for the next 25 years, just like the Tories were. That is what we need.
The Chair: You have just scared the daylights out of a few people in the room. Thank you, sir.
JACK W. L. GOERING
The Chair: The next participant is Mr Jack Goering. We have your written submission. We are ready to hear what you have to say, sir. Please leave us time to engage in some dialogue with you.
Mr Goering: Thanks very much, Mr Chairman and ladies and gentlemen of the standing committee on resources development. I do not know whether you want me to read through this, since you have a copy.
The Chair: Please highlight it for us so we can get down to the nitty-gritty.
Mr Goering: Perhaps I will just do the highlights. You should have two packets. The second packet is as a result of having written this. Things came up since it was written on January 9. I will refer to those in a moment.
This is addressed to the fuel-switching part of Bill 118. In the first part, under the heading of "Efficiency," it mentions that the efficiency of using electricity from oil is very low. This appears on the first page of your addendum, a table of comparisons of home heating efficiencies. The third from the bottom, nuclear to electric, is 15%. That is the overall efficiency from digging up the uranium to the actual heating of the house. The next one up is the same system using coal, 21%. If you go up two higher, to natural gas using a natural gas furnace which is about 90% efficient, you get 60% efficiency. This is, again, right from the resource to final heating of the house. On this basis, electricity is not a very good item to use for heating a house.
As far as the cost to consumers is concerned -- this is the third paragraph on the first page of the brief -- consumers are obviously interested in saving money. If you look at the five sets of figures about three paragraphs down, if you use 100% electric heating, it costs $835 a year. These figures are for 1987. Oil heating costs $800. If you go to high-efficiency gas heating, it costs $473, but to sort of split it down the middle here, taking not-so-efficient gas heating, it would only cost you $660, close to a difference of $150 a year. If you are trying to save money and put it into the economy, why spend it on fuel which is not doing a very good job?
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As far as the next section, "Pollution and Global Warming," is concerned, every time you cut down on using coal, you are cutting down on using or producing carbon dioxide, sulphur dioxide and the nitrous oxides. On the next page, these figures are obtained from a report by Passmore Associates, which if you have not already got it you probably will. I saw a reference to it this morning in today's Globe and Mail.
The Chair: I should tell you that Mr Argue from Passmore was here speaking to us yesterday.
Mr Goering: That is what I was referring to. In today's Globe and Mail, it was mentioned.
The Chair: He filed his report with us.
Mr Goering: I am just referring to that. I am not going to go over that again, but in the last paragraph it says that promoting a switch from electric heat to an alternative fuel, preferably renewable, would help to produce the production of greenhouse gases.
On the next section, "Solutions: Saving Energy, Saving Money and Reducing Pollution," not much has been said. I have not been here to all of these meetings so I do not know whether, apart from the last one, solar panels have been mentioned. I have been using them since 1977 in my house in Port Hope which is 60 miles or 100 kilometres along the shore east of here on Lake Ontario, in conjunction with, in one house, electric hot-water heating and, in the next house, gas hot-water heating. In the summertime, it reduces the bills by close to 75%. In the wintertime, with weather like this, it does not help a great deal. However, if a lot of people used them, it would again take most of the basic load off by helping to put in the first amount of heat -- solar -- which of course is free, and then the rest would have to be peaking power which would again be coal in most cases.
The next section, regarding the negawatts, you have probably heard discussed. I do not want to go into that in great detail, except to say that the report I referred to -- I did not make copies of it because it is several pages. I have a few if you are interested in them.
In the most recent issue of National Wildlife, it mentions the town of Osage, Iowa, a town of about 4,000 people, which saves about $1 million a year because its utilities department went in and finally convinced people that they could save a lot of money. Instead of spending it on energy, electricity and gas and so on, they would keep the energy in the economy in their town. They spend the money there. It is a very nice-looking town, and it attracts industry.
A kick-start for the economy, which so many people like to talk about these days, would be to make work for myriads of people in changing to gas where possible and oil where necessary to replace the electrical energy presently being wasted by the megawatt-hour. This is a good time to do it because if you get the economy going and it is going in the wrong direction, you are back in trouble again. The time to make the switch is now, while there is sort of a doldrums situation. If people can be working in the right direction to improve efficiency, to switch from the electrical energy heating system to gas, oil or an alternative, it would be the time to do it. It may seem expensive, but in most cases people have found out that the money you save in the long run is a heck of a lot more than you spend to start off with, so you really gain.
The next paragraph points out that in this article the US wastes some $300 billion a year due to lack of insulation in efficient refrigerators, draughty doors and so on.
One complaint that I understand has been put forward is the fact that the municipal electrical utilities would be upset to see their profits go down. At the end of that paragraph, I say this should be investigated: an incentive to let the electrical utilities make some money.
Since I wrote that, I found a separate report, which is on your addendum, item D. It is called The Negawatt Revolution, by our friend Amory Lovins. What he does is explain that.
This is attached to your addendum: The Green Energy Conference. On page 10, which should be the last page of your addendum, under "The Role of Regulation" it says:
"In the US, our national association of regulatory utility commissioners (which has Canadian observers as well) has unanimously approved in committee, has also approved at the executive level and is now sending to the floor for very likely passage in November" -- this was written in 1989 -- "a completely new principle of utility regulation: namely, decouple utilities' profits from their sales."
In this way they do not get taken advantage of if they do not sell their product. I am no economist, I am a retired engineer and high school teacher, but it seems to me from the information available -- a number of states, eight of them at least, are working on this sort of thing and I believe Maine and California are making this work.
Towards the bottom of that paragraph it says:
"If they do something smart" -- this is the utility -- "to cut your bill, let them keep part of the saving as extra profit, or in some other way give them an exemplary reward for efficient behaviour."
Nobody is going to be completely altruistic these days. You have to have some kind of reward. If they can make money in a way that is acceptable, this would be a way of avoiding that problem of theirs.
I do not really need to refer to Mr Franklin's speech of October 22, 1990. I expect you have copies of that. The key item in that is the fact that if a builder installs 15 kilowatts of electric heat in a house in Ontario, Hydro has to spend over $50,000 to build the power plant to keep that house warm. This is not a cheap heating system.
In the conclusion, I have written down six advantages that switching from electric to alternative forms of heating would give you. They are in no particular order.
I think that is about all I need to tell you; if you would like to ask any questions.
The Chair: Thank you for leaving time, because that is an important part of the process.
Mr Waters: We have had the Municipal Electric Association here representing the local PUCs. They have indicated they should run the board of Ontario Hydro for the public, that they would be the logical people. Do you think they would go into energy conservation in switching or do you think they would be going into selling wattage?
Mr Goering: As I just pointed out in this last little bit, I am not an economist and I really do not understand how they do this, but if you decouple profits from sales -- I would like a concrete example of how that is done. Evidently it is being done in the United States and it appears to work, because you bring in competition. If they do bring in smart ideas about how to reduce use, they get something for it.
There are a number of water utilities working with electric utilities that are giving out, or selling at a very small fee, conservation kits of shower heads, toilet dams and so on. That is costing them something. Who is paying for it? In other words, at least they are getting a green pattern to their behaviour. That does not really answer your question except that if we change the rules, I think the electric associations or utilities would be a little happier.
Mr Cleary: I take it you support any type of conversion from electricity?
Mr Goering: Yes. Do not put me in a trap here now.
Mr Cleary: You have mentioned some of them. One thing I do not think you mentioned is wood.
Mr Goering: We use a wood stove in our house, a cook stove which heats the whole house. Therefore you do not use electricity or gas when you are using it. It is a tradeoff. Again, it is not always easy to give all the benefits.
Mr Cleary: You do not have a blower on your wood stove?
Mr Goering: No.
Mr Cleary: So you are losing a bit of circulation there.
Mr Goering: What I have is a little fan up in the ceiling. It is a bungalow and so it is hard to heat. A little fan circulates it when it is cold at the other end of the house.
Mr Cleary: That is electricity, though.
Mr Goering: That is right, but you can also run that by solar. I have a trailer outside with a solar panel on it which keeps the battery charged all year. It would run a fan like that.
Mr Arnott: Do you believe it is in the interest of the people of Ontario to artificially raise the price of electricity so as to depress the demand for that commodity?
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Mr Goering: It depends what you mean by "artificially," because I do not know whether it is at true cost at the moment.
Mr Arnott: Strictly to depress demand, to make demand a function of the --
Mr Goering: It may be, but I would not go that way for a long time, because what you are doing is subsidizing it, in effect, in a reverse direction. I do not think subsidies are a very good idea.
Mr Arnott: Fuel-switching subsidies.
Mr Goering: Okay, a fuel-switching subsidy, but in a lot of these cases I have read about, it pays off to do that; therefore, it is not really a subsidy. It may look like it. In fact, California Edison, I think, has given away umpteen low-watt lightbulbs, which it finds is cheaper than building new power plants. Therefore, it is not really doing that. The other way, of course, is to put the price of the kilowatt-hours up.
Mr Arnott: Do you not support the program we experienced just a couple of months ago whereby Ontario Hydro gave out free lightbulbs to every household in Ontario?
The Chair: You can hold them up, if you wish.
Mr Goering: I know about them. The trouble with that is it was misleading in a way, because people are not educated to know how to use them. What I have heard they were doing is using a 52-watt bulb instead of a 40-watt bulb because they figured it was more efficient.
I would just like to point out that when I wrote this report, I wrote it as an individual. I am actually an individual member of the Conservation Council of Ontario. In checking with my standing committee on energy, I found I could not get them all together at a meeting, so by phone, by five to two, they supported this brief I have put forward.
The Chair: As you can well imagine, there has been a wide range of views expressed over the course of the last couple of weeks during these hearings. It remains to be said, however, that you and so many others like you demonstrate that there are people with a whole lot of expertise and talent, regardless of where they are on the spectrum, who are prepared to make themselves available to politicians if only politicians would listen.
I thank you very much for coming today, and for the energy you have devoted to this exercise. We all appreciate it, and we appreciate it not only from you, but from the others who have participated.
Transcripts of today and the rest of the hearings are available to you. Call your MPP. He or she will make sure you get them at no charge.
Mr Goering: Thank you for your time, and your comments and questions.
INDEPENDENT POWER PRODUCERS' SOCIETY OF ONTARIO
The Chair: The next participant is the Independent Power Producers' Society of Ontario. You are Mr Brooks, the executive director? Please be seated. We have 20 minutes. Try to keep your comments brief so that we have time for questions and commentary.
Mr Brooks: I am going to go through the two-page brief you see in front of you.
IPPSO, the Independent Power Producers' Society of Ontario, is a non-profit association of power producers, small and large, using cogeneration, small hydro, biomass and other technologies. Maybe just as an aside here, I will say that we are a lot larger and growing a lot faster than most people realize.
IPPSO represents companies that are, according to Hydro's plans, going to install 3,100 megawatts of power generation capacity by the year 2000. That is more power generation capacity than even Ontario Hydro plans to install in the same period. In other words, we are looking at a $4-billion to $5-billion investment being made by this industry in this province in the next few years, just to give you an idea of the size of the industry I represent.
We have about 400 members at the moment, both companies and individuals. We publish a magazine -- copies are available at the back -- an industry directory and other materials. We run an annual conference and trade show, and intervene in public hearings. We have been here several times -- the select committee on energy, the Ontario Energy Board -- and we are major intervenors in the current Environmental Assessment Board hearings into Hydro's demand-supply plan.
Independent power now produces about 5% of Ontario's electricity, and if Hydro's current plans are met, that 3,100 megawatts plus what is in place now will be about 14% of Ontario's electricity.
IPPSO has a dual role. Simultaneously we represent the private interests of our members, power producers and also some broader public interests like environmental interests, at least in respect to electric power planning issues. To date, IPPSO has not suffered from internal conflict resulting from the difference between the public interest and private interest roles. I think that may say something about the nature of our business: It tends to be conveniently aligned with the public interest in many respects. We represent an environmentally preferable line of power production technology, generally speaking.
Like other independent power organizations around the world, IPPSO stands for the principle of an open and competitive marketplace for electricity and open competition between energy services. IPPSO is not ideological: It recognizes that a mixed economy with roles for public, private and "third sector" enterprise will continue to characterize Ontario and Canada.
Other principles which are embodied in IPPSO's work of the last five years include diversity, self-reliance and recognition of social and environmental costs. Diversification of energy sources and maximization of regional and local self-reliance are benefits to the society that independent power does and will continue to promote.
One of the most important principles, which you may hear echoed over and over again, is that we stress the importance of recognizing that environmental and social costs of power production are real costs of power production. We may not pay them in our bills, but we pay them through our taxes, because it costs money to clean up after power is produced, and we should be recognizing this as the cost of power. IPPSO takes no position as to exactly how those costs should be charged or to whom, if anybody, but they should certainly be recognized when we are making planning choices, when we are trying to make comparisons among alternatives.
It may be interesting to note here that if you took a poll of IPPSO members, you would not find many supporters of the NDP, but you would certainly find many supporters of Bill 118.
On fuel substitution: IPPSO believes that enabling Ontario Hydro to engage in arrangements that promote the use of economically and environmentally preferable technologies and fuels is in the public interest. In fact, failing to do so would be failing the public interest.
IPPSO disagrees with the view that Ontario Hydro investments in efficiency or fuel substitution necessarily constitute subsidies. Bill 118 only empowers Hydro to offer incentives. IPPSO does not support the use of subsidies to encourage specific technologies or fuels, but stresses that social and environmental costs are, in effect, subsidies. If you ignore social and environmental costs, we are, in effect, subsidizing the most polluting technologies. If we want to get rid of subsidies, we should start recognizing social and environmental costs. Those are much more significant. Of course, this is directly connected with the interest of the industry I represent. Such subsidies should be eliminated or at least neutralized for purposes of making comparisons among alternatives.
IPPSO does acknowledge, however, the reasonable concerns of local utilities that are forced to accept reduced sales volumes as a result of fuel substitution. It is reasonable to argue that the system should not unduly penalize the local utility for fuel substitution. Probably the best way to accomplish this is for the local utility to take the initiative to pursue efficiency and fuel substitution opportunities and be rewarded for doing so -- in other words, similar to what previous speaker said, making revenues correspond to capital efficiency more than to raw sales.
On the accountability of Ontario Hydro, the other major aspect of the bill, IPPSO does not see the power to issue policy directives proposed in Bill 118 as particularly threatening to Ontario's business climate. The government owns Ontario Hydro and it has to redefine its objectives from time to time. There already exist powers known as memoranda of understanding which accomplish the exact same thing through a more roundabout way. It is more appropriate that this regulatory power be openly identified and legislatively empowered for what it is, rather than being lumped into halfway measures which we now have called memoranda of understanding. Governments have shown that they are reluctant to intervene directly in Hydro affairs, except where there is an important matter of public policy at stake. These fears serve as a check on the misuse of the power to issue policy directives.
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Hydro, on the other hand, must follow the broad policy directives of the government, and Bill 118 does away with ambiguities in that process. However, this power can be misused and that is why we need to look beyond perhaps this bill to a more comprehensive and in fact fairer method of regulating Ontario Hydro. This would make the use of policy directives unnecessary or almost unnecessary. IPPSO does not object to the enlargement of Hydro's board of directors. The number of directors proposed in Bill 118 is still rather small, considering the size of Ontario Hydro. The designation of the chairman as the chief executive officer is probably a means of ensuring accountability to the government and is not seen as detrimental to the functioning of the organization as long as government continues to appoint competent and well-trusted individuals.
As a result of the situation that has developed in Windsor, it has become apparent that further legislative or policy action is needed to ensure that local utilities retain their independence. Ontario Hydro should not be permitted to block a local utility from buying power independently unless it is going to cause severe damage to the environment or the social equity framework that Hydro tries to support between utilities. Legislation should be developed, in consultation with the Municipal Electric Association, that preserves the independence of local utilities and provides them with a mandate and incentives to pursue efficiency and sustainability.
In summary, our recommendations are, first, that we support Bill 118, and that you should waste little time in getting the fuel substitution programs in place.
There needs to be a mechanism to compensate local utilities for certain negative effects of fuel substitution programs. Further discussion is necessary in this area.
We would recommend that the Power Corporation Act amendments specifically require Ontario Hydro to calculate and factor social and environmental costs into avoided-cost-of-power calculations. This is actually a very large area, and I do not want to underemphasize this. It takes a lot of work to arrive at reasonable figures on social and environmental costs. We should not leave it to the last minute.
IPPSO feels it is important to emphasize that Ontario Hydro remains essentially unregulated in contrast to almost every other utility in North America. Consequently, changes to improve regulatory powers may also be required in the Ontario Energy Board Act or possibly some other legislation. A comprehensive regulatory system that examines and revises utility rates and plans, in addition to arbitrating between NUGs -- our industry -- and utilities, is very much needed.
In consultation with the MEA, further legislation should be developed that preserves the independence of local utilities and gives them the mandate and incentives to pursue efficiency and sustainability.
Mr Cleary: Thank you, sir, for your presentation. In this pamphlet, you refer to cogeneration. I also see, in another pamphlet you have here, that you challenge Ontario Hydro's alleged transmission constraints. Would you like to expand a bit on that?
Mr Brooks: Transmission constraints are a very complex technical area. The article where we challenge Hydro's transmission constraints is produced by an expert in the area who was hired to deal with just this. As you may be aware, this industry is much bigger on the other side of the US border and transmission constraint issues are a major area of study for them.
The basic contention of our study is that most of the transmission constraints in the Ontario electric system result from the fundamental problem of having very large load centres like Toronto and very large centralized generating stations like Darlington. You have more transmission problems when you have centralized generation and large load centres. You end up with bottlenecks. In fact, independent power, because it is in smaller increments and more distributed geographically, reduces transmission problems.
Mr Cleary: You say you have 400 members. What about eastern Ontario? You talked about Toronto and Windsor. Is that problem as bad in eastern Ontario?
Mr Brooks: Oh, yes. There is quite a bit of independent power already in eastern Ontario and quite a bit more going in. In fact, Ontario Hydro first hired its regional NUG coordinator in eastern Ontario a couple of years ago, before it hired NUG coordinators for other regions.
Mr Jordan: Thank you for your presentation on the independent power producers. My question is to the transmission aspect of the product and the guarantee of availability. Let's suppose that Ontario Hydro was to enter into a network of independent generating stations. What type of agreement can you see for the use of their transmission facilities, and what type of agreement do you have in mind as a guarantee of availability of generation? If we are depending on you for the peak tomorrow morning at 6:30 and you phone in at 4 o'clock in the morning and say, "I am sorry, but my units are down," where would the ability be with that?
Mr Brooks: This is one area where we agree with Ontario Hydro and almost all economists. The way to manage that problem is with pricing. If we fail to supply -- in other words, we are unreliable for some reason or other -- just like any other power producer, our power sales contract provides for penalties which would cover the utility's cost of finding replacement power on the short-term spot market, if you can call it that.
The same goes for transmission, really. Although it is a tougher area to analyse -- the costs and value of transmission services -- we basically think any user of a public asset like the transmission system should be paying the allocated share of costs that can be attributed to their activity.
Mr Jordan: Surely we cannot say Ontario Hydro is responsible for the load growth in the greater Toronto area.
Mr Brooks: Oh, no. Conservation programs could have been started a few years earlier, but --
Mr Jordan: For people and the industry that is here, I think they have provided the generation that is as close to the demand as possible.
Mr Brooks: Generally speaking, but the bottlenecks are generally problems of getting power into Toronto.
Mr Jordan: We have bottlenecks with waste management and the whole bit because everybody is in the one spot.
Mr Brooks: Yes, Metro Toronto is Ontario's biggest problem, no question.
Mr Jordan: Thank you very much.
The Chair: Mr Huget, then perhaps Mr Johnson.
Mr Huget: Thank you very much, Mr Brooks, for your presentation. We have had presenters come before the committee who have been relatively adamant that we cannot meet the needs for power, particularly the industrial needs, without these large megaprojects. I would like to know your views on that. I would like to know how you would see us being able to meet the demand.
Mr Brooks: Pricing is a really powerful tool. If there is anything like a shortage of power in this province, prices should be allowed to rise. Then an awful lot more power becomes available from an awful lot more sources, and more conservation becomes available too. We have seen that happen last year. Ontario Hydro raised the rates that it paid our sector by a significant chunk last January, and the amount of power available from our sector went up geometrically.
Our people have submitted proposals for over 8,000 megawatts of power to Ontario Hydro. They are not all going to get built and they are not all economic at today's prices, but there is no shortage of potential resources for generating power, should they be necessary. Prices would undoubtedly move that process along, as they already have. The real forces at work here have to do, really, with Ontario Hydro finding its own costs are higher than anticipated, prices going up a little bit, and all of a sudden a whole bunch more conservation and independent power become available.
Mr Huget: Thank you, Mr Brooks. I will turn it over to Mr Johnson.
Mr Johnson: Did I have a question? Thank you, Mr Chair; indeed I do have a question.
You said recently that the cost paid to the independent power producers has been increased. I find this interesting and probably very important, because I know that down in my constituency of Prince Edward-Lennox-South Hastings there are some independent power producers. One of the problems that has existed is that they previously did not feel they were being paid enough to make it worth their while. I think it is an important statement that you have made. Do you think a moderate increase would bring -- although it has already been said that the new supply-demand indicates that a lot of power is going to come from NUGs. I guess the price must be sufficient to encourage people to do that now, but do you see any problems with that in the future?
Mr Brooks: Prices are complicated because we usually end up talking about an average price when really we should be paying a little bit more for preferable technology. Solar technology, for example, should probably get paid a little more because it does not put as much junk in the atmosphere, etc. Hydro has a rate structure which attempts to recognize that but probably does not go far enough. It is my job to say that we should be paid more; that goes without saying. But let's just leave it that last January, when rates were raised about 15% to 20% depending on the category, an awful lot of power became available, and relatively environmentally preferable power became available at below Ontario Hydro's own estimates of its avoided cost. We are not asking for subsidies; we are asking to be paid Ontario Hydro's avoided cost, which is what it thinks it should be paying us.
The Chair: Mr Brooks, thank you very much for coming here this afternoon, for your comments and for yet another perspective on the issue before the committee in the Legislature. We appreciate it.
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NUCLEAR AWARENESS PROJECT
The Chair: The next participant is David Martin, speaking on behalf of the Nuclear Awareness Project. Mr Martin has filed, and it is now an exhibit and part of the record, a very comprehensive and lengthy submission. It is completed by an appendix, a summary of recommendations and comments which is particularly useful. Mr Martin, as you have noted because you have been monitoring these hearings for a couple of days now, among the more valuable parts of the submission is the question and answer, the dialogue. Make sure we have time for that, please.
Mr Martin: So that means I cannot read this?
The Chair: You can do anything you want in the 20 minutes we have.
Mr Martin: No, I have no intention of reading, but good afternoon. My name is Dave Martin. I am on the steering committee of Nuclear Awareness Project. Nuclear Awareness Project is a member of the Coalition of Environmental Groups for a Sustainable Energy Future, which is a major intervenor in the current environmental assessment on Ontario Hydro's supply-demand plan. We have two affiliated groups: Durham Nuclear Awareness, from whom you are going to be hearing next, and Bruce Nuclear Awareness, from whom you will be hearing next week.
I would like to talk first about the question of accountability in Bill 118. We have seen the increase of the board size and the inclusion of the deputy minister in the bill. Nuclear Awareness Project sees these as positive steps. We also support the policy directive amendments. We see the changes as a modest strengthening of the act. For example, the directors will now be acting "promptly and efficiently" instead of using their "best efforts," as it was phrased in the previous version -- the existing act, I should say.
We believe the reaction to the policy directive amendments has been out of proportion to their real impact on the act. Past governments have given policy direction to Ontario Hydro, and my paper cites two prominent examples that have been of particular concern to those of us dealing with nuclear issues. The first was the long-term uranium contracts that were signed in 1978 at the direction of the government of former Premier Bill Davis. Over the last decade, those contracts have cost Ontario electrical ratepayers in excess of $1.2 billion because Saskatchewan uranium would have been much cheaper. If those contracts had been renewed last year, excess costs over the next decade would have been another $1 billion.
The second example cited in our brief was a decision in 1990 by the Liberal government of David Peterson to increase the Ontario Hydro subsidy of Atomic Energy of Canada Ltd, whom you heard from earlier, by $39 million. This brought the subsidy from Hydro up from $48 million to $87 million, and that is per year. This does not even include the engineering business that Ontario Hydro gives to AECL. That is up around $40 million per year.
In the lead-up to the September election in 1990, Mr Conway boasted -- I am sorry he is not here now -- that he had "worked hard to convince Ontario Hydro to spend more than $30 million in support of Atomic Energy of Canada at Chalk River." And, of course, Chalk River is in Mr Conway's riding.
My point here is that governments have in the past and will in the future continue to give direction to Ontario Hydro. But I think what has happened with Bill 118 is that we have seen a definition of the right of the government to give direction. For the first time, we will have clearly defined responsibility. This is something that is going to work two ways. Not only will the accountability of Ontario Hydro be enhanced, but the government itself will therefore become more accountable.
These changes have the effect of taking policy directives out of the back rooms where they have resided with past governments. The one change we would like to see in the bill is to include public disclosure of policy directives as part of the whole package. The government has noted that it does not intend to extend the powers and duties of Ontario Hydro beyond the act by means of policy directives and that Bill 118 will be changed to clarify this. Nuclear Awareness Project supports such a change to the bill.
I should note that we see all of these accountability measures as positive steps, but we do not believe they go far enough. We believe that Hydro should be subject to ongoing regulation under the auspices of either the Ontario Energy Board or some new agency, not just on rates but on system expansion and on borrowing as well. We would like to know when we can expect to see a bill to amend the Ontario Energy Board Act. I would note that in the last two days, I have heard groups as diverse not only as ourselves, but as Pickering Hydro and the Independent Power Producers' Society of Ontario suggest just such a bill.
Next, on fuel-switching amendments, even those of you who still blindly support nuclear expansion in this province should be getting the message by now that electric heating is a major disaster for all those concerned. Nuclear Awareness Project strongly supports the proposed fuel-switching amendments. You have heard from Passmore Associates in its brief on behalf of the Coalition of Environmental Groups that if half of the electrically heated homes in Ontario had instead used natural gas and half had used oil, we would have saved almost $4 billion in 1991 dollars since 1975.
The environmental benefits, you have heard, are just as dramatic. I will not go into the figures. You have received them before. Suffice it to say, we are talking major reductions of carbon dioxide, we are talking major reductions of sulphur dioxide, and we are talking major reductions of nitrogen oxides.
Something a little more specific: Paragraph 3 in the amended section of 56a(3) of the act -- and that is section 5 of Bill 118 -- should be changed so that switching is clearly not limited just to space heating. Switching of water heating and other applications such as cooking and clothes drying should be examined.
Just a word on implementation of fuel switching. I realize this is not part of the bill, but I think it is important to further this debate. The existence of electric heating is itself the result of self-interested promotion by Ontario Hydro and represents a failure of the market system. Electric heating has to be eliminated therefore by an aggressive program of fuel switching, possibly combined with further legislation by the government.
Nuclear Awareness Project recommends that Ontario Hydro institute a program that will cover 100% of the cost of fuel switching, and we favour a direct-grant program, since it is likely to have greater market penetration and be implemented faster and at less cost to all ratepayers.
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Ontario Hydro and the government will also have to look at innovative reforms to such things as rate structures. We will have to look at differential hookup fees. A stiff hookup fee for homes with electric space and/or water heating would send the proper market signal to developers, builders and prospective home owners.
We believe that Ontario Hydro must achieve the maximum possible conversion from electric heating to alternative fuels. This means switching not just to natural gas, as we have heard Ontario Hydro talking about, but also to oil, propane, wood and solar. However, fossil fuels should be seen as transitional fuels.
There are several important considerations here. First, Ontario Hydro and the gas utilities should be taking advantage of the opportunity in switching to audit and if necessary improve the thermal envelopes of the residences being switched. Second, renewable energy systems based on wood and solar power should be given special encouragement. Third, residences should be switched only to the most efficient state-of-the-art heating systems. Thank you for your consideration, and I look forward to your questions.
Mr Jordan: I find your presentation interesting and certainly detailed. The Ontario Energy Board: Do you care to comment on its power, what its function is and what you think it should be?
Mr Martin: Very briefly, because I do not think it is relevant particularly to the bill that is in front of us, but there are a number of ways of achieving accountability. We support the bill as one method of increasing Hydro's accountability, but regulation by the board or a similar agency is also necessary. I am disappointed that you did not ask me about the lightbulbs.
The Chair: I think he will, Mr Martin.
Mr Jordan: I will certainly accommodate you. Do you feel that the utilities should have been consulted, when it said on the package that they had been?
Mr Martin: The municipal utilities?
Mr Jordan: It said so on the package received by the customer.
Mr Martin: I think, given the fact that the program resulted in substantial electricity savings at a good price for consumers, that it was to the advantage of the municipal utilities.
Mr Jordan: I understood the projection was $7 million against $5 million.
Mr Martin: In fact, the program was projected to save six megawatts of power. That amounts to about $1,160 per kilowatt as compared to about $3,500 per kilowatt for Darlington, so it is very cost-effective program. The reason many environmental groups, including ourselves, objected to it was because it could have been done better. There could have been even more savings if Ontario Hydro had, for instance, used compact fluorescent lamps.
Mr Huget: Thank you very much for a very interesting presentation and a great deal of detail. With reference to Mr Jordan's lightbulbs, I guess what I am interested in is, how do we get them out of the bag? We cannot seem to get Mr Jordan's lightbulbs out of the bag so that we can use them. But there is a certain amount of funds, I think some $600 million, that Ontario Hydro has set aside for energy conservation.
The Chair: One moment, Mr Huget. Mr Jordan has assured me that he takes these home at night. They are only here for demonstration purposes. That is why they have filed them as an exhibit.
Mr Jordan: Perhaps the bulbs are not only bringing the project in front of this committee as a conservation program, but also the fact that in my riding, I know, that is exactly where a lot of them still are, unfortunately or fortunately.
Mr Huget: My question is trying to address that point. Should there be, first of all, some of that funding used for public education, energy efficiency and conservation? Do you think it will be effective and what types of educational things should we be doing?
Mr Martin: I have no objection to educational programs but I think we have to move beyond just information. We have to move beyond just education. To a certain extent that has happened in the past. What we need is an abundance of proactive programs to go out there and achieve conservation. That means investing money and there should be no hesitancy about investing that money.
We have heard talk of subsidies for fuel switching. Well, it is not a subsidy if it is going to save us money compared to the alternative, which is building more supply. What we are talking about is cost-effective investment here, and that it needs to happen in a big way, bigger even than Hydro has recently proposed in its amendment to the demand-supply plan.
Mr Wood: Just briefly, on page 8 and again on page 32, I notice you have referred to Elliot Lake policy directives and the fact that the policy directives given in 1977 were a $1-billion ripoff for Elliot Lake. We have had presentations made that some of that money directed that way was in some way an obligation of the ratepayers of the province compared with social development. I wonder if you would comment on that. I see there is quite a writeup on those two pages.
Mr Martin: As I said in the brief, it is entirely reasonable to think that Ontario Hydro has corporate responsibility to look after the mess that was left in Elliot Lake. I have no problem with that. However, I think a number of concerns were expressed about how that money was spent and that perhaps it could have been invested more wisely in projects that would have resulted in sustainable development.
The point generally of my raising the whole settlement in Elliot Lake was to indicate that in fact there have been policy directives in the past and that there is no need to shy away from taking that kind of political position, if you will, of direction from the government.
Mr Conway: One of the issues that has been presented to the committee in recent days, and it is certainly one that has been increasingly debated around the province, is how to control this giant technological corporation that is Hydro. I am just wondering, and I am sorry I missed the bulk of your presentation, but do you have a view as to whether it is possible to exact reasonable accountability given the nature of the beast, or whether the time perhaps has come to fundamentally restructure Hydro and privatize significant aspects of its traditional mandate.
I raise that question particularly because of the non-utility generation issues that are developing: more reliance on the NUG, transmission problems that have been mentioned by some of the witnesses earlier this afternoon. Do you have a view on that?
Mr Martin: We do, certainly. On the question of privatization, the Nuclear Awareness Project does not support the privatization of Ontario Hydro. On the other hand, we do support increased utilization of independent power, of non-utility generation.
It has been pointed out, I think by several people, that you could not give away Ontario Hydro's nuclear power plants, let alone sell them. But on the more broad question of accountability, I think the most immediate need is for ongoing regulation of Hydro, not just a review of rates as presently happens at the Ontario Energy Board but real regulation, real regulatory power on rates and on expansion plans. I for one certainly hope the opposition will take up that challenge and make sure that happens.
Mr Johnson: This past summer I was in Winnipeg with the standing committee on public accounts and was talking to some economists. I suggested that often on the balance sheet -- you alluded to this already; that is why I am posing this question -- Ontario Hydro states that its nuclear generating plants are assets. I would contend they are liabilities. Would you agree?
Mr Martin: The reality and the technical truth may be two different things. They are certainly counted as assets, and that is the reason Ontario Hydro can claim to be the largest corporation in the country, bar none, by assets. But yes, I agree with the spirit of your question in the sense that these are assets that are truly worthless and becoming increasingly worthless, as we have seen with the decline in performance capacity from 80% at their design level to a present average of roughly 60%. That is a big decline, and it is not clear to us that it is going to improve with rehabilitation and retubing. In fact, looking at the retubing of Pickering A which has taken place, the evidence seems now to be that the performance is not improving despite the money invested there. Therefore, we suspect that the major dollars Ontario Hydro is still proposing to invest in rehabilitation and retubing is money very poorly spent and that it would be much wiser to invest that money in conservation programs and non-utility generation.
The Chair: Mr Martin, thank you very much for coming here this afternoon and for your obvious interest, demonstrated by your attendance here on a number of occasions. We appreciate your involvement and we appreciate the work you and your organization put into the submission and the candid responses to the questions put to you.
1630
DURHAM NUCLEAR AWARENESS
The Chair: The final participant is Durham Nuclear Awareness, Ms Irene Kock. Please tell us what you will. You have 20 minutes. Try to keep your initial comments to less than 10 minutes so we can handle the type of exchanges we have been listening to a bit earlier.
Ms Kock: Thank you for the opportunity to speak today. My name is Irene Kock and I work with Durham Nuclear Awareness. We are based in Oshawa and we are a citizens' group founded in 1986. We are concerned about nuclear issues in Durham region, and that is primarily why I have come today, to express why we support Bill 118. Our office is actually 10 kilometres from Darlington and 20 kilometres from Pickering. We are right between the two. I will end my presentation with more details about our particular concerns with Ontario Hydro's activities in Durham region.
We support the bill because we feel it is about time Ontario Hydro joined the trend among utilities where a priority is given to providing customers with energy services, not just electricity, but by recommending and promoting the best-suited fuels and the best available technology for the task.
In fact this bill could go further, and we hope it will. Electric heat is an environmental and economic loser. Our electricity applications in the residential sector, such as hot water heating and appliances, should be switched as well. We also feel that commercial and industrial applications should be addressed, but we do feel that looking at electric space heating is a good start.
Getting Ontario off electric heat will reduce acid gas and greenhouse gas emissions, as you have heard from many presenters, I am sure, since most of the demand is met by coal generating stations. Switching to direct heating with fossil fuels, even including oil where natural gas is unavailable, is less environmentally damaging than our current practices. Ideally, options like solar and wood heating should be included in these programs as well, with an added incentive, since these are renewable.
Because Ontario Hydro and local utilities across the province have been promoting electric heating, the overall demand for electricity increased more than it might have otherwise. This has been used to justify expansion of nuclear generating capability, and in particular as justification for the completion of Darlington A.
Durham Nuclear Awareness does not favour any further expansion of nuclear power in Ontario. The problems involved with nuclear power are too great to justify relying on the nuclear option any more than we already have to. The passage of this bill will greatly reduce electricity demand and help make sure that electricity megaprojects like the proposed Darlington B will be completely unnecessary.
It has been suggested by others appearing before this committee that fuel switching will dramatically increase electricity rates. The Municipal Electric Association has noted that a reduction in electricity sales will force rates up because of the fixed costs that must be paid regardless of the amount of electricity sold. In fact in the Oshawa area where our office is located, the fixed costs are only about 10% of the local rate. This means that electricity used would have to be reduced by more than 50% before electricity rates went up substantially, for example by the amount of the current rate increase, which is 11.8%. So we do not concur that local rates will be substantially affected by this. The flip side of this, of course, is that in the long run the overall electricity bills will be reduced, so ratepayers would end up paying less anyway, and particularly if our current rate structure were changed as well.
Durham Nuclear Awareness would like to see a comprehensive building retrofit program carried out in conjunction with fuel switching to ensure that heat loss is minimized. Some conservation and fuel switching has occurred without incentives where people are keen to make wise economic and environmental decisions, but we feel very strongly that incentives are required to achieve the full potential in savings because not everybody is so keen or understands the parameters around these decisions as well.
Ontario Hydro should cover up front all costs that are associated with getting rid of electric heat. It is far cheaper than adding new generating capacity. We only have to look at Darlington, which is now probably above $13 billion in costs, to know it is smarter to be doing it this way. The potential for new employment is enormous, and a dedicated program should include assistance in training people to carry out the retrofitting, which would help to boost local economies across Ontario.
Durham Nuclear Awareness supports the bill's initiatives to increase accountability at Ontario Hydro. However, the Ontario Energy Board or a similar agency should be given the mandate to review and provide approval for Hydro's expansion plans and rates. This would provide a genuine opportunity for public involvement and control of Hydro's activities.
Ontario Hydro has a huge impact on communities which house its facilities, and there are currently few effective means of having input into Hydro's plans and decisions. Durham Nuclear Awareness has many concerns about the impact of Hydro's nuclear stations in Durham region. There is evidence, for example, that the routine emissions from the nuclear stations are having a direct impact on the rate of birth defects and childhood cancer in our communities. The Atomic Energy Control Board is still investigating this situation. Durham Nuclear Awareness has been involved with the committee of Durham region, set up by the health and social services committee to investigate ways of improving health monitoring in our communities in relation to the radioactive pollution we are exposed to daily.
Durham Nuclear Awareness is also very involved in ongoing efforts to have our emergency plans improved. The current nuclear emergency plans are not adequate, but there is a great deal of resistance in our communities to making the necessary improvements because of a fear the public will become alarmed and local property values will drop. There is a great deal of education that needs to be done continuously in our community. Some of the main issues we work on in this area are trying to get the size of the emergency evacuation zones expanded, trying to get alarm systems put in so that people are alerted immediately, and also the distribution of iodine tablets so that people will be somewhat protected if they do have to be exposed to radiation. We meet a great deal of resistance to these changes in our community.
Serious accidents are a regular occurrence at Pickering and Darlington. Over the past few years, there have been hundreds of accidents. Routine maintenance at the facilities is substandard, and we know from the Atomic Energy Control Board reports that this is contributing quite a bit to risks of accidents. Some of the accidents we have had in recent years include serious loss of coolant and a fuel failure at Pickering in 1988, which very few people heard about. It was never really made public.
These are just a few of the reasons why Durham Nuclear Awareness wants nuclear power phased out and environmentally responsible alternatives phased in. Bill 118 will reduce electricity demand and help make nuclear stations unnecessary, while at the same time reducing our short-term reliance on coal-fired generating stations. Thanks very much for your attention.
1640
Mr Huget: Thank you very much for taking the time and providing a very good presentation. I am interested in two things, really. First, you said very early on in your presentation that Bill 118 does not go far enough and you hoped some day it will. I would be interested in what suggestions you would have around that issue.
Second, if you could, I would like you to elaborate a little bit about the concerns of the community you live in that hosts one of these megaprojects.
Ms Kock: In a specific way in terms of expanding the bill, we do feel the Ontario Energy Board or a kind of parallel organization should be mandated to have more control over Hydro's decisions and provide a forum for public review of those decisions.
I will give you one example of where we faced an inability to have any impact, and that was in the decision to transport tritiated heavy water between Pickering and Darlington, where it is purified. We tried in a number of ways to express a concern about the hazard with this process and how it may not be necessary if a separate processing facility where built at Pickering, that we could actually avoid the entire risk of transporting this radioactive water. We came up against stone walls every which way we turned. We really could have no impact, and we feel that if decisions like this that are in effect a planning part of Hydro's operations were put before a forum where we could have advance notice and be part of the discussion and the decision-making, the best possible decision could have come about, rather than just have Hydro off in a back room, decide what it is going to do and do it behind our backs without even telling us what it is up to. We have Highway 401 running directly through Durham region from one end to the other. Pickering is at one side; Darlington is at the other. These trucks now run once a day, every day of the year, with a huge load of radioactive water. That is just one example.
Just to follow through with the second part of your question, I think the health concerns are really the biggest thing right now in Durham region. Even though the risk of a very serious accident worries many people, I think the day-to-day radioactive pollution is a real concern.
One of the areas the provincial government actually might have some impact in this is through extending the municipal-industrial strategy for abatement program, for example, which only looks at non-radioactive pollutants. If radiation were included within the MISA parameters, we might hope that tritium emissions might be lowered, for example. Right now, all radioactive effluents are exempt from the MISA program. They are controlled through limits set by the Atomic Energy Control Board, but we feel that those limits are way too high and that provincial standards would likely be much tighter. We feel that radioactive pollution should be dealt with just the same way other toxic pollutants are dealt with, and they are not being dealt with very well right now.
Mr Conway: Thank you for your presentation. We once had a Minister of Energy here about 14 years ago who said the principal problem with Ontario Hydro was its size and its scope. He used the example, from his high perch as minister of the crown responsible to some extent for Hydro, "The difficulty with Hydro is that you if you called Hydro and asked them to change a lightbulb in your house, their response would be" -- to quote the minister of the day -- "to build you a new house." That may have been overblown, but I listened to you, and you, like a lot of people I know, have had a very unhappy relationship with this gargantuan corporation.
My question continues to be, and I would like your response to this: How do we sensitize this beast? It is so big and so technological. I am very sympathetic to the citizens, such as yourself, trying to plug in and exact some meaningful dialogue and some accountability. How do we do that? My friend from Sarnia was asking you to sort of extrapolate Bill 118 into a more ideal future, because you said it is only a first step. What would harness this tiger? What would make ordinary people living in Tyrone think that perhaps they could beat this city hall?
Ms Kock: I can give you one example where I have actually had some very effective dialogue with people in Ontario Hydro, and that has been through our work with the committee investigating health monitoring in Durham region. Part of that committee consisted of membership from the health physics department at Ontario Hydro.
During the one year we did meet as a group, we proceeded to learn a lot about each others' positions and worked to a consensus report that had 11 recommendations in it on how to improve health monitoring in Durham region. One of the recommendations that is coming forward now, I think the first one to be implemented, is the publishing of a radiation index in the local papers that expresses how much radioactive pollution has been emitted over a previous recent time period.
The membership of this committee, as I said, included people from Ontario Hydro. It included two delegates from our organization and the medical officer of health, so I think breaking things down into smaller community-based decentralized working groups may help where there are specific problems that can be dealt with that way.
I also think, relating it back to the effort to get people off electric heat, that if working groups were set up regionally to do that and allowed people to work on implementing this within their communities in what they feel their own best method available would be, it would help bring Hydro down to earth in a sense. The personal contact helps a lot.
Mr Conway: We had a general manager of a utility in northern Ontario last week suggest that perhaps it would be a good thing for local electrical utilities to broaden their mandate and take over, for example, natural gas outlets. Would that be a good thing?
Ms Kock: I am afraid I cannot comment because I do not know enough about the local utilities' current mandates and their mechanisms to know whether it would make sense or not.
Mr Jordan: Thank you very much for your presentation. Are you an Ontario Hydro customer or do you have a local utility?
Ms Kock: We have a local utility.
Mr Jordan: Do you know the people there? Have you been to the office?
Ms Kock: I have dropped in a few times but I do not know the people very well, no. I have not had much contact.
Mr Jordan: My friend from Renfrew North was indicating that Hydro is some type of monster. To me it is just a figment of his imagination really, because right in your own home town you have an office with someone who is, in my experience, very well informed and usually well trained for customer service, to give information and so on. Do you not think it would be a good idea to make use of that office and go there and express your concerns and perhaps even request more in the form of education to you as a customer on the merits of nuclear energy and so on? That person there has nothing to gain financially by not giving you the information, if you know what I mean. He or she is there to provide a service, and my experience has been very good in that the people in these field offices or utility offices, if they do not have it there, certainly have access to any information you might request.
I just feel even this committee is very uninformed on the product, on the nature of the product, because we just call it electricity, but it is a very unique form of energy. It is here, but because we do not see it, it is difficult to understand.
Do you think that creating a better communication with your local utility would sort of dispel this fear of some monster that is out of control?
Ms Kock: There is only a limited role for what education the local utility offices can do. They simply do not have, considering their other concerns in terms of local distribution in supplying their local customers, the time or budget to deal with the more substantial issues like nuclear safety.
On the other hand, we already know where to get the information about our concerns and how to best inform ourselves. We make very good use of the Ontario Hydro public reference centre, and there are within Durham region two public information centres at the nuclear stations themselves that put forward the position of nuclear expansion in our community, so I would tend to disagree that there is much of a role for the local utility in public education, other than in efficiency measures, perhaps. But on the more substantial issues, I think that is a little out of their league.
The Chair: Thank you, Ms Kock. We appreciate you and so many others taking time to come from your homes and communities to Queen's Park and address this issue with your concerns and insights. Those are valuable insights and it has been a very productive conversation. We appreciate it. We thank you. Have a safe trip back home.
Ms Kock: Thanks very much. I appreciate it.
The Chair: We will resume tomorrow at 10 am whether or not all caucuses are represented, because there are participants scheduled to begin their presentations at 10 am. Not hearing any opposition to that, there is consensus and consent to that. We are adjourned, then, until 10 am tomorrow.
The committee adjourned at 1651.