POWER CORPORATION AMENDMENT ACT, 1991 / LOI DE 1991 MODIFIANT LA LOI SUR LA SOCIÉTÉ DE L'ÉLECTRICITÉ
ASSOCIATION OF MAJOR
POWER CONSUMERS IN ONTARIO
ICI CANADA
ELORA ENVIRONMENTAL ACTION GROUP
ARTHUR PUBLIC UTILITIES COMMISSION
BRUCE PENINSULA ENVIRONMENT GROUP
MOUNT FOREST PUBLIC UTILITIES COMMISSION
HYDRO-ELECTRIC COMMISSION OF CAMBRIDGE AND NORTH DUMFRIES
NEW TECUMSETH HYDRO-ELECTRIC COMMISSION
WATERLOO PUBLIC INTEREST RESEARCH GROUP
CONTENTS
Wednesday 29 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; ICI Canada
Peter Staadecker, director, AMPCO
Tri-City Air Systems Ltd
Russ Hollamby, president
Randy R. Revie
Elora Environmental Action Group
Deryk Smith, member
Arthur Public Utilities Commission
Ross Densmore, chair
Bruce Peninsula Environment Group
Siegfried Kleinau, secretary
Mount Forest Public Utilities Commission
Alex Watson, manager
Hydro-Electric Commission of Cambridge and North Dumfries
Andrea Mitchell, chair
Bill Boyle, general manager
New Tecumseth Hydro-Electric Commission
Jim Richardson, general manager
Geoffrey Mallard, commissioner
W. C. Wood Co Ltd
Steve Griffin, manager, product engineering
Bruce Nuclear Awareness
Chris Peabody, chair
Guelph Hydro
Joyce Robinson, chair
Jim MacKenzie, general manager
Waterloo North Hydro
Al Clark, general manager
Union Gas
John van der Woerd, manager, marketing
Frank Varga, manager, sales, northern region
Waterloo Public Interest Research Group
Daryl Novak, member
Cameron Douglas, member
North Shore Tribal Council
Keith Lewis, director, environmental program
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):
Fletcher, Derek (Guelph ND) for Ms Murdock
Conway, Sean G. (Renfrew North/-Nord L) for Mr Ramsay
Clerk pro tem / Greffière par intérim: Manikel, Tannis
Staff / Personnel: Yeager, Lewis, Research Officer, Legislative Research Service
The committee met at 1301 in the Carden Place Hotel, Guelph.
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.
ASSOCIATION OF MAJOR POWER CONSUMERS IN ONTARIO
ICI CANADA
The Chair: Good afternoon. It is 1 o'clock. We are scheduled to begin at 1, so we will.
The first group making a presentation is the Association of Major Power Consumers in Ontario, if its spokespeople could please come forward. We have 20 minutes. We have your written material, which is going to become a part of the record by virtue of being made an exhibit today. It is a really important thing to allow time for questions and dialogue, so please try to highlight the submission so that we have the last 10 minutes at least for questions and exchanges.
Mr Staadecker: Thank you for having me here. We will certainly have time for questions; I appreciate your looking out for the time.
I am here on behalf of AMPCO, the Association of Major Power Consumers in Ontario. I am also here on behalf of my employer, ICI Canada. To some of you, ICI Canada will be better known under its previous name of C-I-L Inc. As such, you may know that we both manufacture and resell fertilizers, which is the particular business I am associated with in Sarnia. We also produce paints, pharmaceuticals, mining explosives, and chemicals for the pulp and paper industry, for Canada's forestry industry. By way of wrapping up the background, ICI employs somewhat in excess of 3,000 people across Canada.
Let's home in now on Ontario and energy usage. Within our various sites in Ontario we have two sites that are major consumers of power. Those are in Cornwall and in Sarnia, which is Bob Huget's backyard. Those two sites in total use $20 million of Ontario Hydro electricity between them. They employ about 550 people. Electricity makes up about 20% of our manufacturing costs at those sites. So I think you can see that electricity is important to us and close to our hearts, as it is to all the other AMPCO members.
I need to say a little bit about energy efficiency because I think it is relevant. By way of illustration, the plant I work for and am most familiar with, the ammonia plant at Courtright near Sarnia, has reduced its energy usage per tonne of ammonia, which is the primary product, by over 30% in the last decade. The way we have done that is by replacing an old-technology plant by a modern new-technology plant. That new plant is listed in a recent study commissioned by Energy, Mines and Resources Canada as the number one most efficient ammonia producer in Canada -- efficient in terms of energy and natural gas conversion. In fact, it is the number one most efficient ammonia plant in all of North America.
So where does that stack us up against our marketplace, which is North America? I have to tell you that, in spite of being number one most efficient, we are still at a cost disadvantage in all our energy forms against a lot of our major competitors.
What we need as ICI, what AMPCO would like, and what I believe, in fact, would be good for all of Ontario industry, is to have Ontario Hydro strive to become just as competitive and efficient as we have striven to become opposite our North American competition. We would like to see Ontario Hydro strive to be equally competitive opposite our competitors' utilities, be they in the US or the other Canadian provinces. I think Hydro has a long way to go.
My colleagues from ICI's Cornwall site recently, that is in late 1991, wrote a letter to Marc Eliesen and copied AMPCO. I have included a brief excerpt in the document I have filed with you. The excerpt says:
"A recent Chem Systems report studying power costs for a number of chloralkali plants in North America showed...Cornwall's power costs were above 10% higher than the highest-cost chloralkali production plant in the study....In 1994 Cornwall's power cost...will probably be double the highest-cost chloralkali production plant in the study."
Let's get to Bill 118. Anything that Bill 118 does to make our utilities more competitive so that we in turn can be more competitive, I will welcome and AMPCO will welcome. However, I have some severe concerns about Bill 118 and the direction it is heading in. I have summarized my key concerns in the written document in front of you.
Will adding four people to Hydro's board make Hydro and ICI and AMPCO and Ontario industry more competitive? Will diluting the board's accountability and liability make Hydro more competitive opposite my competitors' utilities? Will putting Hydro under government control make Hydro any more competitive? Will those conservation programs, whose effectiveness has been harshly criticized by the Ontario Energy Board, make Hydro and Ontario industry more competitive? Will subsidization for fuel switching have that effect? And, will continued payments for overpriced uranium and contributions to the northern heritage fund have that desired effect?
I have severe doubts on all of those points. Having raised those doubts, I would like to at least leave you with some alternative suggestions. I hope they will be seen in a constructive light. My suggestions are:
Instead of growing the Ontario board, I would suggest you shrink the board, shrink Ontario Hydro, make the board more accountable. If you are asking, "Accountable to whom?" I would suggest the Ontario Energy Board is the right body to make it accountable to. Above all, prohibit Hydro from making any further payments to causes like northern heritage funds, premium-priced uranium and such; please remember that my competitors have utilities whose rate base and whose rates do not include charges for contributions to a northern heritage fund and so on.
In summary, Ontario does not operate in a vacuum. My employers do not operate in a vacuum. AMPCO does not. We operate in a North-American-wide market. Any burden you place on Ontario's utilities, please remember and think: Do our competitors' utilities carry these burdens, and if not, if this an appropriate direction to take the utilities in? This is the 1990s, the era of free trade. Think about the continental market, please.
That ends my submission to you. I am open to questions.
Mr McGuinty: Thank you for your presentation. I found it very interesting. I am particularly appreciative of your emphasis on the fact that we do not operate in this province in a vacuum and we have not for quite some time. Our power rates are an important component of business overhead, especially so when that business has to compete with foreign competitors.
You made a reference to a recent Chem Systems report in a letter that was directed to Mr Eliesen. It says that Cornwall's power costs were above 10% higher than the highest-cost chloralkali production plant in the study. Where were those other plants located?
Mr Staadecker: Those other plants would have been principally in the United States. Typically, the areas with the cheapest power costs tend to be in the southern states as well. When you get into Louisiana, Texas, power costs really drop in those areas. That sounds like a long way away, but the reality of the marketplace that we operate in is that we do compete against a large number of plants that are placed precisely in those jurisdictions.
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Mr McGuinty: It would seem that today -- and you can confirm this because you are in the business world and I am not; I am just a generalist -- if you want to set up some kind of business operation, you look at a particular jurisdiction to determine whether it has the workforce you need, whether the economic climate is satisfactory or would permit you to earn a sufficient return, and of course one of the components is the cost of power. Now, where are we? I would like to get your opinion on this. Where are we now in terms of providing that climate, particularly in relation to our power costs? In other words, if your company had to set up again today --
Mr Staadecker: I understand. Unfortunately -- and I say unfortunately because I am an Ontario resident and I too would like the best things for Ontario's future -- the situation in that regard is grim.
ICI is a multinational company run out of a head office in London, England. Future investment in Ontario has been put on hold with the exception of what is needed to meet statutory requirements as far as environmental and safety requirements go. Aside from that, and keeping equipment in order, there is no major expansion planned, nor will there be, under the current economic environment. In terms of North America, the North American market is attractive to our parent company, ICI. They have expanded, and they are continuing to expand, but any further expansions will take place at this stage not in Ontario but in the southern states that I have mentioned and in Mexico.
Mr Cleary: You have talked about the Cornwall plant, which is very close to my home there, and I know some of the very ambitious projects that you have undertaken already.
We hear presenters who say, "Oh, there's lots of room in industry to conserve more electricity." I would just like your comments on that. As well, we have had some presenters from our part of eastern Ontario who said just what you said a few moments ago, that it is not in their plans to leave Ontario but their future business decisions could depend a lot on the cost of electricity.
The Chair: Wait, Mr Cleary. To be fair, this participant was very specific about talking about the broad economic implications when he answered Mr McGuinty's second question. Perhaps he wants to clarify that in response to yours.
Mr Staadecker: Mr Chairman, I am not sure what it is you would like me to clarify there. Let me try to answer Mr Cleary's question and steer me on track if I have missed your point.
The Chair: It is always unfair to put a premise to a witness like yourself that was not necessarily established by that witness. It is called putting words in somebody's mouth.
Mr Staadecker: Well, I may have missed that one. Stop me if I have --
The Chair: Oh no, you go ahead. I am not worried about what you have to say.
Mr Staadecker: Okay. Let me tackle the first question I heard, which was, is there room for more conservation? Yes, there is always more room for conservation. Is it substantial? The answer is no. I was alluding to that when I said that in the case of our plant in Cornwall we have already made a 30% gain. We have already been ranked as the number one most efficient ammonia production plant in all of North America. In fact, I do not think I mentioned it, but the same study for the Department of Energy, Mines and Resources actually refers to the fact that the chemical process we use is close to the theoretical maximum efficiency; those are the words of the Energy, Mines and Resources study.
So, yes, there is always room to do things better, but because the dollar figures are so important to us, we have already had a lot of incentive to get smart about energy conservation. The dollars matter to us much more than they do perhaps to a home owner.
Mr Arnott: Thank you, Mr Staadecker, for coming in this afternoon to inform us of your views of Bill 118. I would like to follow up on the line of questioning Mr Cleary and Mr McGuinty initiated. With respect to the Courtright plant where you have been able to cut your energy costs 30% by replacing the existing technology with newer technology, when did you finish the transition, how much did it cost and what is the payback time?
Mr Staadecker: The new plant was brought on stream in 1985. It cost about $200 million to put into the ground. At the same time, the price in the ammonia market we serve deteriorated rapidly, so in terms of payback we are not going to see that for a long, long time. This is not a plant you would go out and build with any expectation of payback if you knew the prices were where they are today; so by hindsight, not our wisest decision. None the less, now that the plant is operating, it is at least making cash-flow, so we will cope.
Mr Arnott: Would you say your company is less economically competitive because of this decision?
Mr Staadecker: No.
Mr Arnott: It was an improvement.
Mr Staadecker: It was an improvement. We have had certain pains from it as well. For a while, we had hoped to run both the new and the old plant. In fact, we found that the market conditions, the price deterioration I had alluded to, were such that we just could not find a home for volumes from both plants at a worthwhile rate. So in 1989 we had to shut down the older plant, which was a fairly major and traumatic experience for us.
Mr Dadamo: On page 3 you talk about adding people to the board as not being such a good idea, and you gave a real terse "I doubt it." I am not convinced, either, that larger is always better, but could we possibly get a broader mosaic of the province in the makeup, add some members to it and maybe make it a little bit better?
Mr Staadecker: I am a member of two boards myself, and my belief is that large boards slow down things and add to the bureaucracy to a huge extent. Adding four more, unless there is a particular driving need that those four will fill and a valid need, is a bad move in general. I think it also sends the wrong signal to what should be happening in Hydro; that is, in general, in the rest of the organization, you do not want to be seen to be adding people at this stage. I think you would want to control and make good use of what you have already.
Mr Huget: Thank you for your presentation. I want to go back to the Chem Systems report in terms of your cost. You mention Gulf coast states of Texas and Louisiana as being much more competitive and I am interested in a couple of things. First of all, are there any differences in processes in the plants in Texas and Louisiana compared to Canadian plants and, second, is it a fair assumption to project that you would use less energy in Texas and Louisiana of all kinds, given that you are far south of the 49th parallel, compared to Canada which is above the 49th parallel, and we need a lot more energy of all sorts to generate the types of heat required in chemical processes?
Mr Staadecker: In terms of your first question, Bob, whether there are different processes, for the Cornwall-type plant, which is a chloralkali plant, I believe there are three basic types of processes. Not being from the Cornwall plant, I cannot tell you the makeup of the Chem Systems study. I can get back to you on that if you wish as to what proportion of each basic process was covered in the study. I suspect they are all in there. In terms of whether one uses more electricity, more energy, in a cold climate, I am sure that is true. None the less, what troubles us is the cost of that electricity.
The Chair: Thank you very much for your time in coming here this afternoon to participate in the process. You have made interesting and insightful comments and a valuable contribution.
Mr Staadecker: Many thanks for having me and listening.
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TRI-CITY AIR SYSTEMS LTD
The Chair: The next group is Tri-City Air, if they would please come forward and seat themselves. There are refreshments: coffee, soft drinks and juice, some of it made in Ontario, some the result of cross-border shopping. Perhaps those politicians who did go to Florida at Christmastime brought it back with them. In any event, it is there.
Please make yourselves comfortable. Sir, tell us who you are. We have your written submission. Please try to give us at least 10 minutes for exchanges and dialogue.
Mr Hollamby: My name is Russ Hollamby and I am president of Tri-City Air Systems, a Waterloo-based heating and air-conditioning contractor serving residential, commercial and industrial markets in this region. I am also the president of the local chapter of the Heating, Refrigerating and Air Conditioning Institute of Canada. HRAI is a national trade association serving the heating, ventilating, air-conditioning and refrigeration industry with membership comprising contractors, manufacturers, wholesalers and utilities.
I have made the brief rather short, allowing time for questions. Let me just go through it. I would like to state my general support of the bill and agree that there are significant benefits to Ontario, should Ontario Hydro be permitted to promote fuel substitution where it makes economic sense. Benefits include use of lower-cost energy by consumers, reduced demand for high-cost generating capacity and reduced emissions at the generation stage.
My specific support concerns the space heating market and in particular the residential sector. It is not uncommon today for a residential customer with electric resistance heating to be facing annual heating costs of $2,000 or more. We see this first hand; we deal with these people.
Given the cost of most alternative fuels and the high-efficiency technology available in today's gas and oil heating equipment, these customers can realize savings of 50% and 60% in heating costs. This is in addition to the benefits of reducing peak demand of high-cost electric generation capacity. To realize the benefits which would accrue from this type of conversion, Ontario Hydro must be able to promote fuel substitution where it makes economic sense. Promotion activity will be in the following areas:
Naturally, advertising: Present electric energy users for space heating have to be made aware of the savings possible using alternative fuels. I would like to point out that many of these same users made their original investment in electric energy use based on claims and advertising Hydro did several years ago, so it is coming full circle. To gain some credibility Hydro has to tell these people that the rules of the game have changed and in fact there are better sources available to them.
The other one, which is very topical, is the financial incentive issue. I would like to point out that many customers have no trouble justifying the cost of converting to other fuel sources. They will be able to make the decision and take action based on their own economic position, but there are many other customers who may be aware of the economic advantages of other fuels and be very willing to make the conversion, but are not in the financial position to do so.
Typically, we see these customers presently using electric baseboard heating and facing the additional cost of installing forced-air duct systems. Where a typical forced-air electric system can be converted for, in general terms, $3,000 to a high-efficiency gas system, and upwards of $3,800 for an oil system, retrofitting a new duct system to make the forced air possible can add another $1,500 to $2,500 to the conversion cost.
These customers would be able to make the conversion if some form of financial incentive program was available to them, be it grants, low-cost financing or some combination. That, I would like to point out, is the real market sector beneficiary of any incentive promotion. These people, typically, are at the lower end of the economic layer of things and they can benefit the most by it.
Last, I wanted to point out that my support for promoting the substitution of electric space heating concerns jobs. This activity will create work while producing the overall benefits to Ontario Hydro mentioned previously at a time of severe economic depression. Many thousands of jobs have been lost in the energy sector we serve due to the current recession. Many of these jobs will return under a conversion program, taking workers off unemployment insurance and, in some cases, welfare. This not only reduces our provincial benefit cost but produces taxable revenues.
In regard to job creation, I recommend that in any promotional scheme that might be embarked on, preference be given to Canadian-made products. I do not mean Canadian companies; I mean products made in Canadian factories. If we are going to create jobs, let's make sure they are made here in Canadian factories and not in some factory in Tennessee, because most of the manufacturers serving our industry make products in the United States and not in Canada.
Are there any questions?
Mr Arnott: Thank you very much for coming in this afternoon. I appreciate your views on Bill 118. I would just like to know exactly what your business sells. Do you sell forced-air oil as well as natural gas?
Mr Hollamby: We sell all forms of energy equipment for heating, air-conditioning and ventilation. By dint of the market share, we tend to sell more gas than electric these days and there are great herds of people trying to convert at this time. As I say, the people most difficult to convert are those on baseboard heating right now. It is a very large bill for them to swallow.
Mr Arnott: Would you guess, if Bill 118 passes as it is and the fuel-switching subsidies are available, that your business will expand and you will be able to employ more people and so forth?
Mr Hollamby: Very much so, yes.
Mr Arnott: The government -- and I say "the government" now too, because if Bill 118 passes as it presently sits, Ontario Hydro will become a government agency and for all intents and purposes no longer a corporation. The government is going to be sending out $6 billion worth of demand management incentives. What, ideally, would you suggest is the best way to do it?
Mr Hollamby: As I say, it has to make it easy for the average home owner to make the conversion: restrict the amount of money spent on gloss and fancy brochures and make it easy for them to get on the program and to get on with converting off electric.
Mr Arnott: Grants, loans -- which sort of incentives?
Mr Hollamby: It depends. The bottom line is that it has to be easy for the individual to convert. Whether it is a grant or a low-cost incentive I do not think really matters; it is just being able to get on that train and start moving with it. Whatever would be the easiest to administer from Hydro's point of view is what I would say.
Mr Arnott: Six billion dollars is a lot of money and there has been some suggestion that it should be a combination of grants and loans. There has been concern that a number of wealthy people may be able to take advantage of this whereas low-income people may not. Do you have a feeling about that?
Mr Hollamby: Not really, other than from the point of view that typically in our business people who have a forced-air system in place can afford to make the conversion. The stumbling block seems to be where a forced-air system is lacking, ie, a baseboard user. If anything, I suggest you skew your incentive to that group of people.
The Chair: Here at the Carden Place Hotel the meeting room is immediately adjacent to the dining room, and if your meeting starts at 1, as ours did, we have to compete with the not unusual din of diners, so please speak up until the din of the diners has diminished.
Mr Huget: Thank you for your presentation. First of all, I want to let you know that Bill 118 does not make Ontario Hydro an agency of government, nor does it allow government to meddle in the day-to-day operations of Hydro. It simply allows for policy directions like energy conservation, energy efficiency and fuel switching where it makes economic and environmental sense, to be set, There certainly is no intent in the bill to meddle in the day-to-day operations.
You mentioned the issue of conversion and that some of your customers would convert but cannot, for economic reasons. Could you expand on that and give me some of those circumstances you have run across?
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Mr Hollamby: I guess the most obvious these days is that people are out of work or on welfare or some type of assistance and are facing a conversion cost of $5,000 or more. The choice between putting food on their table and lowering their energy costs is an easy one: They are going to put food on their table. That is the most dramatic. It graduates up from there. Hard cash is just not available these days for people at a time when they are spending considerable amounts of money heating their house, quite frankly. I cannot be more specific than that.
Mr Huget: You mentioned that there is a potential for job creation and investment in the province. One of the things that has troubled me for many years is that natural gas, for example, is a made-in-Canada resource yet the technology that is developing has been stolen from Canada or willingly given away to be developed in other countries, most notably California, which prides itself on being the leader in natural gas technology. It is strange, because they do not have any natural gas; it comes from us. I would like your views on the potential, how serious an issue that is and whether we should be encouraging Canadian manufacture of energy-efficient products as well as products to do with alternative fuels.
Mr Hollamby: I am not sure how to answer you on that one. We have a pretty outstanding natural gas industry here. I do not propose to speak as a spokesman for the natural gas industry, but at the utility end, the utility serving this area, Union Gas, is probably the most aggressive and innovative serving the market these days in terms of bringing new products on stream, encouraging manufacturers to develop and what not. Right here down the road in Cambridge, there is a manufacturer, Clare Brothers. They were literally the first people in the world, ahead of any of our American cousins, to develop a high-efficiency gas furnace.
Given the opportunity, I think the technology and the will to do it are here. That is why I made a strong plea that if there is any program available, I think it should be skewed with a preference, if not entirely, to Canadian-made products and Canadian jobs.
Mr Huget: That is one of the problems in this province. We have not encouraged over the years that made-in-Ontario business and made-in-Ontario investment. I think it is showing up now to cause us some problems.
Mr Waters: I was just curious. Is the bulk of your business residential or do you do commercial work?
Mr Hollamby: We do about 60% residential and the balance is commercial.
Mr Waters: We all know there have been things going on for years in the residential market for better insulation, but I do not recall seeing a lot of that in the commercial. Are the large factories still running with two or three inches of insulation in the walls and then block and nothing else?
Mr Hollamby: Yes.
Mr Waters: There is no move to insulate for heating?
Mr Hollamby: Typically, if a manufacturer, let's say, needing a building builds his own, he will specify better grades of insulation. If it is a tenancy situation in a building, leasing from a landlord, that landlord will put up the bare minimum.
Mr Waters: So there is a start at least with our manufacturing sector.
Mr Hollamby: There is. We have seen it in the last five years. It has become more and more prevalent, but it tends to be skewed to the business building its own facility.
Mr Waters: Do you ever put in any form of electric heat in large buildings?
Mr Hollamby: Very rarely.
Mr McGuinty: I want to ask you a bit about the available equipment produced in Canada right now. If I wanted to convert from electric heat to gas, how many Canadian manufacturers are producing the high-efficiency gas furnace now? Do you know?
Mr Hollamby: There are three Canadian-owned companies that market high-efficiency gas equipment. Two of them are actually made here. The third one is produced in Tennessee. I do not want to exclude anybody, but I think that is the extent of it. These two factories -- one is in Cambridge and one in Tilbury -- have the capacity between the two of them of handling the market if the market were there. They have fairly significant manufacturing facilities.
Mr McGuinty: I appreciate your comments about the employment opportunities that Bill 118 would create -- I have no doubt about that -- if we were to give some kind of subsidy -- I am not sure yet what form it would take -- to induce people to switch from electric to gas heating. I think the people in your industry and the spinoff industries would profit from it. My concern remains, though, that if we go ahead with Bill 118 rates will go up, and if rates go up, people will lose jobs in other industries, in keeping with the evidence given by the previous witness.
Mr Hollamby: Which rates going up?
Mr McGuinty: Hydro rates. That is a public utility.
Mr Hollamby: Do you mean more than 50% over three years?
Mr McGuinty: I am not sure. One of the difficulties we have here is getting hold of numbers that are credible and stand up to scrutiny.
I wish it were as simple as saying that we are just going to go ahead and create more jobs, but I have a concern that we are going to lose some at the same time. There are other factors involved, but just looking at it in terms of jobs, we are wondering whether we are going to gain more than we lose or lose more than we gain.
Mr Hollamby: I gather you are alluding to the fuel substitution aspect of it. Am I correct?
Mr McGuinty: Right.
Mr Hollamby: I really cannot visualize where jobs can be lost. If you can give me an example, I can comment on it.
Mr McGuinty: The public utilities commission people have been telling us that if people are using less electricity, the rate per unit is going to go up. If we take a look at major consumers, what they have been doing in order to become more efficient is use more electricity. They are using considerably more now than they have in the past in order to become more efficient, so their rates are going to go up. Again, if we are competing on a global basis, if I have capital and am based in London, England, and decide the rates there are too high, I can say, "Let's move it over to our Scandinavian operation." That is my concern with the rates. It may have a direct impact on the jobs we have here, an adverse effect.
Mr Hollamby: My view is that if there is a finite amount of electric capacity available and that has to be allocated and is allocated based on rates, if you can ease that allocation process, you are going to come out ahead. That is the benefit I see with being able to substitute selectively where it is economically available.
The Chair: We appreciate your, along with the others', spending time with us and taking time out of your own schedule today.
Mr Hollamby: I appreciate the opportunity.
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RANDY R. REVIE
The Chair: The next participant is Mr Revie. You have distributed your letter. Everybody has that. It is part of the record, part of an exhibit. Please tell us what you will.
Mr Revie: There really is not too much to say that has not already been said.
The Chair: Point 2 is one that might call for a little further -- nobody ever told us about a water softener facilitating speedier heating.
Mr Revie: Are you familiar with your kettle? You do not use a kettle?
The Chair: No.
Mr Revie: Ask your wife.
The Chair: That is the problem.
Mr Revie: Okay. First of all, inside it has an element. If you have hard water, this element becomes corroded and has a lot of garbage that is created. Then when you try to heat something it has to heat the garbage, then heat the water, thus using more electricity. Soft water completely eliminates it. The faster the water gets heated, the less electricity is used.
The next thing is that I am from Rockwood, about seven miles due east. We are a small community and there is a monopoly there. It is called Ontario Hydro. It completely controls us. It is not a case of having a hookup to natural gas. We cannot do that. We do not have that. It is true we can put in oil, I agree, but the government has tried to stay away from that for the past years. It does not want us to use oil. It is hard on the environment. We are running out of oil. "Try to stay away from it."
What are we the strongest in? Natural gas, a homegrown Canadian product. Why are we not using it? I am not going to sit here and say these are the facts and figures. I want you to tell me why we cannot. You cannot come back with one reason. One fellow over there was worrying about jobs that are lost. Jobs will not be lost, because if we can save money here, we can develop. If you develop, you get yourself out of a recession. If we get out of a recession, we end a lot of problems, do we not?
There is too much offshoot of you guys dumping the $6 billion that you are playing with. It is going to cost $6.1 million to come from here to Rockwood, to bring us natural gas. That is pocket change, it is coffee money, when you are talking $6 billion. But what would you do for Rockwood? You would definitely open it up. You would take the weight off Hydro there, which is having trouble just supplying what we have. It is having trouble handling what we have. They have just bought themselves a new substation for $150,000. Who is going to pay for that? I pay three grand a year.
Just like Russ said before, I am one of those flunkies who has to sit there and eat this. You have no choice. I can convert. If natural gas comes knocking at my door, I am one of the lucky ones, I have forced-air electric, but I can understand his reasoning for saying that the baseboard people have problems.
There are ways around it, but that is not to be discussed now. Let's just worry about a small community that is feeding a major community. A lot of people in Rockwood work in Toronto. We have to pay big dollars for our hydro bills. That limits me in what else I can buy. Indirectly I am saying: "I am going to shoot to the States. If I can go down there and spend $100 and get $150 worth of goods, I am not going to spend it here." Common sense prevails. What are you going to do about it? It is me sitting here having to say: "Here's my tax dollar. I've given it to you. Now I've got to beg you to give it to help myself."
The Chair: You are most generous to suggest you have given it to us. Others will suggest we have taken it.
Mr Revie: You tell me when it comes to a paycheque. Do I say, "Okay, I'll cut this much off for the taxes"? I do not even see it. I get to say where it is sent and a little thank you note behind it, but that is all you give us. I have no control. This monopoly is killing us. If you want to keep eating us like this, eventually you end up with the attitude: "The government that's in power now doesn't seem to be solving the problem. We'll have to bide our time. Next election, you're not here." That is the only way we can strike back.
I do not think a lot of you people here -- maybe one or two -- have lived under an NDP government. I believe Bob has. I have lived under one too, so I know it can work. But I bet the majority of you have not, so you really do not know how good it can be. Again, the frustration is just phenomenal.
I have worked with Union Gas a fair bit. I have had meetings with the Ministry of Energy and with representatives of Union Gas. That was just like a coffee break. I spent a fair bit of time and money going down there. "Yeah, we'll see if we can help you next week." I hate that attitude, and that just builds the frustration and anger.
The Chair: Let's develop some dialogue here, because I know some people want to talk to you, including Derek Fletcher, who is the MPP for this riding.
Mr Fletcher: Not for Rockwood, just for Guelph.
The Chair: We are pleased to be in this riding, because we are neighbouring Ted Arnott's riding, and I suspect he is going to want to talk to you.
Mr Fletcher: Let me first say welcome to Guelph. Some of the things you have done are phenomenal. I think they are excellent ideas which you have done in your own home. It would be nice to see some of the industries around this area do the same things to try to conserve.
My point is on natural gas. You say you have spoken with Union Gas. Did you quote a figure on how much it would cost to get natural gas?
Mr Revie: It was $6.1 million. You will be talking to Don Mills tonight. I have given him nine questions that you would probably want answered -- he will give you that tonight; I have a copy, but I only have one, I do not have 25 -- dealing with the environment, offshoot jobs, spinoffs, what could be lost, what could not be lost and so on; what I could think of. There is not one negative thing there.
Mr Fletcher: That $6.1 million does come from Union Gas. When you were talking with them, one of the problems they must have told you about was the bedrock in the area.
Mr Revie: Yes. That is why they figured $6.1 million. They have to come from Guelph. Actually, it is not too far, but there is only a small feeder out there. They have to come back, step it up and bring a main out. That is why it is $6.1 million. It is my belief they are talking about right to your door, right to your house. If Hydro dug in -- I know Union Gas will throw money into it. Instead of fighting among each other, you join forces and you get yourselves out of this recession, because if you do this, Rockwood will go.
Mr Fletcher: I think you have just hit on one of the key messages the Premier has been trying to promote: The utilities and everyone have to start working together to dig themselves out.
The Chair: This man is here in front of an all-party committee. You should know, Mr Revie, and everybody else, that we have the Liberal Party, the official opposition, and its critic for Energy, Dalton McGuinty; the Conservative Party and its Energy critic, Leo Jordan; an area member, Ted Arnott; the NDP government caucus and the MPP for Sarnia, who is also the parliamentary assistant to the Minister of Energy. You are asking this committee as a microcosm, representative of the whole of Queen's Park, what it is going to do for you.
Mr Revie: Not just me. You have other persons.
The Chair: You mean all those folks in Rockwood and other communities?
Mr Revie: Yes, every small community.
Mr Fletcher: When Union Gas told you about the bedrock, did they tell you that, other than the $6.1 million, they would have any other problems in getting it out?
Mr Revie: No. That is why I said $6.1 million. It will be a difficult construction, I understand that. But there automatically is your offshoot. You do not think Union Gas is going to put it in; it will be clay pipelining or gas pipelining, so it will be somebody else and now we are spreading out offshoots. That is money; that is work. It is not for the gas company; it is going to be labourers and machine operators who are going to put this in. That is construction. Now you are starting development.
Mr Fletcher: Is it your proposition that the government should force Union Gas to do this or help it?
Mr Revie: It does not have to force them. I think Union Gas is biting at the bit, saying, "We'll do it." It should help them, assist them.
Mr Cleary: I understand from what you are saying that you feel natural gas should be available in most communities in Ontario. Is that what you are trying to tell us?
Mr Revie: It could be, but you must look at the geography here. You have Guelph, a major centre; you have Acton, a major centre. They both have gas. You have Rockwood in the middle. What are we? We are the desert. We do not have it. We are also feeders to major areas like Toronto. I worked there. If you want to develop, you have to start spreading yourselves out. You are not spreading.
Mr Cleary: Who should pay for all this?
Mr Revie: Right now you can look at Union Gas. I think they are willing to throw a lot of money behind it, but they need that little extra push. They need assistance, because it is a major thing. There was a guy, I think two guys ahead of me, who said, "We've dumped out a lot of money and there's going to be no return for years." You ask Union Gas tonight. They will not get money right away, they realize that -- maybe 10 years down the road. They understand that, but the problem exists now, and if you want to get money 10 years down the road, you solve it now.
Mr Cleary: You are telling me, then, that the money for the conservation programs proposed in Bill 118 should come from Ontario Hydro in the way of a grant or a loan for part of that money.
Mr Revie: Whatever, yes. That is what they are looking for. It may be a low-interest loan. That is what I am leaning towards. Right now you are not going to lose money on gas. You will not lose money if you dump money into gas. You cannot. No matter where you put it, there is no loss. As for electricity, look what happened in Pickering. Was it rods that went in one of their reactor stations? You could end up with another Chernobyl. You could end up with a meltdown. We do not know enough about it yet, so you better go with what we do know. We do know about natural gas.
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Mr Cleary: I know you feel very strongly about what you are saying in your presentation, but are you sure there is going to be an indefinite supply of gas for many, many years and that the price will not increase, the same as it increased for other heating fuels?
Mr Revie: If you know anything about gas, you know we can make our own. One, we can do it through barley, grain and oats. Two, you go to any dump and in the methane that is created there -- have you ever worked in a dump? I am sorry, but I have. They took the gas that was at the dump and they heated the plant: self-contained, self-efficient, no cost. Look at the dump in Mississauga. If they ran lines in there, and that is relatively new, they could be drawing methane off that. They could heat all the public buildings, or a lot of them: self-contained, no cost. Where are you? We need help. Are you going to give it to us or are you going to sit in the weeds? I do not like it. If you are going to sit in the weeds, we need a change.
Mr Arnott: Thank you, Mr Revie, for coming in to tell your story today. The committee should know that the hamlet of Rockwood, while not an incorporated municipality, is a sizeable little hamlet of 2,000 people. For some time Mr Revie has been promoting the idea that natural gas should be extended to Rockwood. It is only five or six miles from the city of Guelph. I can confirm the figure he indicated, that it is approximately $6 million for Union Gas, because I met with Union Gas officials in Kitchener in response to Mr Revie's concerns, as well as others from the Rockwood area.
Mr Revie, you probably investigated the possibility of getting an oil furnace instead of --
Mr Revie: Yes.
Mr Arnott: But for some reason you do not feel that that is your preferred alternative?
Mr Revie: Unless you are going to do something with the tar sands out west or in Newfoundland with the offshore oil there, you are going to end up with Saudi Arabia. Then you are in somebody else's hands. I do not like that at all. Let's have homegrown products. I do not know what they are going to do with the tar sands. It is very hard because there is sand and tar there and it takes a lot of steam to turn that into oil and then you have to refine that. That is a big cost; we are not smart enough yet. Out in Newfoundland, we are just tinkering with that; we are not into that yet. So you have only one other choice: You go to gas.
Mr Arnott: Let's assume that in the short term, in the next four or five years, first of all Bill 118 passes as is and fuel-switching incentives are allowed. But let's say, for example, that this $6 million is not forthcoming from anyone and that natural gas is not extended to Rockwood in the short term. Your Hydro rates are going to go even higher than they are presently.
Mr Revie: We know.
Mr Arnott: The incremental rate increase in your Hydro rate is going to be paying for other people to have the benefit of natural gas conversion. How do you feel about that?
Mr Revie: What can you do? Again, you have to sit here, and you say, "Election time's coming up."
Mr Arnott: It does not seem fair.
Mr Revie: Yes, but election time is coming up. You say, "That is all we can do." This is the democratic system. If you do not want to do anything about it, we will bide our time. Then in a few years you boys will be looking for a job. That is the only way you can do it. How else can we do it? You have our hands tied. You can keep the little guy down, to a point, and then at some point he becomes your worst enemy.
The Chair: Mr Revie, do you feel any better now than when you started?
Mr Revie: No, not really, because I cannot see them starting construction.
The Chair: I know the feeling. We appreciate your coming here today. Quite frankly, I like your style.
Mr Revie: Brute force and raw ignorance win every time.
The Chair: I appreciate very much the enthusiasm in your coming here and appearing before our committee and speaking not only on your behalf, but on behalf of your whole community, or a big chunk of your community at the very least.
Mr Revie: I would add one thing. Union Gas will be here tonight at 8 o'clock. They have a number of representatives. The information they have, I would relate to you, but why not let professionals, people who do it for a living, get all these figures together and lay it out for you in their spreadsheets, rather than me just scribbling something down on a piece of paper? That will be a little more professional and you guys seem to look at that a little better.
The Chair: We hear you. People have listened to you. I want you to know this: The transcript of your participation is available to you through your MPP's office at no charge. Give him a call or drop by. As well, keep in touch with your MPP and let him or her, as the case may be, or his or her staff, know what you are thinking.
Mr Revie: I will.
ELORA ENVIRONMENTAL ACTION GROUP
The Chair: The next participant is the Elora Environmental Action Group. Mr Smith, we have your written submission by way of a letter. It is an exhibit, part of the record. Tell us what you will. We have 20 minutes. Please save the last 10 minutes for exchanges and dialogue.
Mr Smith: My name is Deryk Smith. I am presenting on behalf of the Elora Environmental Action Group. For the information of those who do not know about Elora, it is a village about 15 kilometres northwest of the city of Guelph. I might say that this presentation will be a little milquetoast, perhaps, compared to the previous presenters.
By way of background, it seems to me that the relationship of Ontario Hydro to the provincial government, the mandate of Ontario Hydro and the polices by which Ontario Hydro was to have been guided in its day-to-day work have all previously been examined in the 1970s and 1980s by various commissions and studies. Some of them I have noted in my appendix with footnotes, items 1 to 6, which is the last page of my submission. It would be therefore presumptuous for me to suggest that I am going to be presenting you with brand-new material or insights or earthshaking revelations never before presented.
However, there are some common threads, it seems to me, running through the various reports and commission studies that have been previously conducted. One of them is for the greater accountability of Ontario Hydro to the government of Ontario and the people of Ontario. Two methods, among others, by which accountability can be promoted are by regulatory control and government control.
Regulatory control: Ontario Hydro is presently being subjected to real regulation by the provincial Environmental Protection Act and the review of its 25-year demand-supply plan. This is a difficult process, however, because the time frame is so long and the plan is relatively inflexible.
The Coalition of Environmental Groups for a Sustainable Energy Future has recommended in a letter addressed to Premier Bob Rae, dated September 18, 1991, that the government should: "Establish an energy services commission with regulatory authority and a significant planning capability to replace the Ontario Energy Board. This commission would have a mandate to review and regulate public utilities on an ongoing basis with the costs of the commission to be borne by the utilities. A least cost test (ie, one counting all financial, social and environmental costs) should be applied to the utilities' capital spending plans on a regular basis in a public forum....At the present time there is no adequate regulatory framework governing Hydro."
We would support any proposal to strengthen and make more workable the regulatory process in order to make Ontario Hydro more accountable to government.
As for government control, all political parties at various times have called for greater control of Ontario Hydro. It is perhaps less well known that government has issued policy directives to Ontario Hydro with unfortunate results, making examples of the Elliot Lake policy directives in the 1970s to 1991 and the Atomic Energy of Canada Ltd policy directive in 1990.
Notwithstanding the foregoing, we support the concept, and particularly the amendments in proposed Bill 118 which appear to clarify the responsibility of the government in the direction of Ontario Hydro, making not only Hydro but the government itself more accountable. We would submit, however, that a mechanism be put in place to ensure that policy directives be made public at such times as they are issued.
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While the Municipal Electric Association has expressed concern as to the scope of authority which government would have under section 2 of Bill 118, amending section 9a of the act, I understand that the wording may be changed to clarify that policy directives issued will in fact relate to Hydro matters and not social policy, the construction of an amusement park, or funding of cancer research or any other such unrelated items.
Now for the fuel-switching amendments. From an environment perspective, the most important proposed amendments relate to fuel switching, which is to say switching from electric applications such as space and water heating, to other cheaper and environmentally sound and direct fuels such as natural gas, oil, propane, wood or solar.
There are extremely strong economic and environmental reasons for Ontario Hydro to encourage fuel switching, and perhaps to support it financially to some extent at least.
It is significant that at subsections 56a(1) and 56a(2) of the existing legislation, there is provision for energy conservation programs and enunciation of the purpose of such programs.
The effect of the changes at subsection 56a(3) is to clarify the intention of the utility to concern itself with overall energy efficiency, rather than just electrical efficiency. We understand that at paragraph 56a(3)3, there is to be a word change made in the bill as it presently is drafted, to broaden its scope to allow for the conversion of an electrical heating system as opposed to the conversion of a space-heating system.
The repeal of subsection 56b(3) removes a barrier to the provision of financial incentives in converting from an electrical heating system to one based on alternative fuel, and these changes we support.
The potential for fuel switching: Ontario Hydro itself in August 1991 announced an increase of 1,500 megawatts in its demand management target for the year 2000, largely due to fuel switching. This is considered a conservative estimate, because the study assumed only natural gas was available as an alternative, and further, only homes with central ducting or of one storey were included in the study. In the commercial sector, only buildings with central electric heating were considered eligible and the industrial sector was not included at all.
Ontario Hydro itself estimates that the total fuel-switching potential for all sectors is 3,210 megawatts by the year 2000 if only natural gas is considered, and 4,676 megawatts if oil and propane are also considered. Even the latter figure is an underestimate of the available potential, which is probably over 6,000 megawatts.
At issue is how much Hydro and its municipal utility allies will allow to be implemented. Furthermore, what significant fuel switching will be achieved by means of information programs alone, without a combination of financial incentives to encourage switching and legislation by government to force switching, along with changes to rate structures and different hookup fees? The banning of electric heating in non-profit housing is a significant first step already taken by government, in our opinion.
The relative efficiences of switching: Thermal electricity production, whether by means of fossil or nuclear generation, is extremely inefficient, overall about 25% efficient. Direct heating fuels, such as oil, gas and wood, are more than twice as efficient. New high-efficiency gas furnaces are rated at 93% AFUE, or annual fuel utilization efficiency, and new oil furnaces are at 80% AFUE.
Environmental impacts on fuel switching: The major problem with electric heating is that it creates an enormous peak of demand in winter. In Ontario, most of this peak electricity is generated by coal stations, which account for 25% to 30% of Hydro's generating mix. Roughly 12% of the residential sector's heating loads are electric. The Ministry of the Environment predicts that without a policy change this will rise 18% by the year 2005, amounting to a load of 61 petajoules. Because coal generation is so dirty, dramatic reductions of acid gases and carbon dioxide can be achieved by substituting natural gas, oil, propane, wood and solar for electricity.
The economic impact of fuel switching: A report prepared by Passmore Associates in December 1991 entitled The Economical and Environmental Implications of Fuel Shifting examines the costs and emissions implications of consumers using fuels other than electricity to provide residential heating in Ontario. Other substitution opportunities, namely, heating in the industrial and commercial sectors, water heating and appliance conversions, are not examined in the study. If these additional sectors and services were included, the conclusions of this analysis would be dramatically increased.
The report indicates that between 1975 and 1991, electrically heated households were billed a total of $8.94 billion in 1991 dollars for basic heating services. If these households had used natural gas where available and oil in those areas without natural gas service, they would have saved $3.91 billion in 1991 dollars over the same period. The deliberate marketing of electricity encouraged consumers to spend 77.8% more for heating services than had they used more cost-effective fuels.
The report makes the statement:
"Supported by past provincial governments, Ontario Hydro has supported a massive overexpansion of supply facilities, and has then promoted wasteful consumption in order to create a market for the excess capacity. The system perpetuated itself in a vicious circle as prices were kept artificially low because of oversupply. Eventually, overconsumption begins to catch up with supply and provides the justification for further expansion. The financial costs of these ill-conceived policies are very real. Long-term debt is now $30 billion, and interest alone amounts to $375,000 per minute."
"An important cost consideration in fuel switching is the extent to which Ontario Hydro will be able to forgo extensive capital investment in generating and transmission facilities. Ontario Hydro has calculated that the capital cost of supplying a kilowatt of power is over $3,300; thus a home requiring 15 kilowatts of power for electric heating requires Ontario Hydro to invest $50,000." That statement was made by the former president and CEO of Ontario Hydro, Robert C. Franklin.
With the potential of 6,000 megawatts, fuel switching has the ability to eliminate the need for any major supply expansion in Ontario for the foreseeable future.
Now for the arguments against fuel switching. The Municipal Electric Association has argued against the repeal of subsection 56b(3), which forbids incentives for off-electric conversions. They say market forces alone are sufficient to encourage fuel switching. This is simply not true. At the Ontario Energy Board hearing in 1991, Ontario Hydro stated: "Approximately 25% of new homes built in Ontario are electrically heated....Approximately 69% of these new electrically heated homes are built in areas where natural gas is available."
In other words, despite the fact that natural gas is on average 65% cheaper than electric heating and oil is about 40% cheaper, one quarter of all new homes are being built with electric heating, and a majority of these are being built where natural gas is available.
MEA has also argued that there is a cross-subsidy involved with fuel switching. This point was made by one of the questions to the last presenter. A response paper presented by MEA in 1991 says: "Current electricity customers should not be forced to finance through their electricity bills other customers' conversion to other fuels, and many customers, who have no access to natural gas, should not be forced subsidize other customers' conversion to it" -- the point made by the speaker from Rockwood.
We submit that all electricity ratepayers will benefit from fuel switching. Hydro has historically subsidized those using electric heat. Subsidization of fuel switching would redress this existing cross-subsidy.
The municipal utilities have also argued that fuel switching will decrease their revenues. I also heard about this. While the impact will vary on utilities, those experiencing load growth and whose distribution systems are already strained will in fact experience an immediate financial benefit from fuel switching, as with efficiency programs. It seems to me that is the case Rockwood is putting forward.
Those utilities not experiencing load growth will have reduced revenues to cover fixed costs. However, the fixed-costs portion is usually quite low, so that a modest rate increase might be required to offset the loss. The point is that it will cost every electricity ratepayer less to switch fuels than to build new power plants and transmission facilities.
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As for implementation, I appreciate that the bill does not speak to implementation, but I expect you would want to have some input on the subject. I think we need more input from all sectors on precisely how fuel switching can and should be accomplished. We may not have sufficient consensus at the moment to support, for example, 100% subsidization of fuel switching and/or retrofitting, as has been proposed I suspect by many of the interest groups presenting to you in these public hearings.
Conceptually at least, are there not problems with the fact that natural gas, propane and oil are all non-renewable resources and they all create emissions to some degree? If it is viewed as an interim measure only, then ought we to be funding this switch 100%, or at all?
We should suggest a broad-spectrum approach which would include consideration of the following, among other considerations:
1. Dissemination of information relating to conservation of these resources.
2. A revision of rate structures which would not reward those who consume the most energy.
3. The potential for non-utility generation.
4. The real costs, including social and environmental, of proceeding with rehabilitation of existing facilities.
5. The potential benefits in selling some of Hydro's older hydraulic plants to the private sector. This is happening right now in Nova Scotia, as you probably well know.
As a general proposition, I think we need to credit home owners and business persons with the intelligence they possess to make appropriate choices for themselves without a subsidy. To some degree this was the point made by the presenter from Tri-City.
The fundamental issue underpinning so many assumptions is Ontario Hydro's 25-year proposed plan to serve its customers' energy needs with a proposed expenditure of $200 billion, ie, over $100,000 for every single family in the province. Its review, and either approval, modification or rejection, constitutes the biggest economic decision ever to be faced by Ontario. It is a decision with far-reaching and complex environmental and social implications, and one which, perhaps more important, will affect the next generations in a most profound way.
We must understand in this whole process therefore that we are trustees for our children and we ought as well to be regarding ourselves as stewards of all our resources, for not only our children but all subsequent generations.
I would be pleased to respond to questions.
The Vice-Chair: We have a very limited amount of time, so I will allow one question from each caucus.
Mr McGuinty: Mr Smith, thank you for your presentation. Obviously you have given a great deal of thought to this and considerable research has gone into it. I remain uninformed as to your opinion precisely with respect to who should be paying for the switching. Could I have your recommendations as to whether it should be a loan or a grant, and whether it should be being paid by the ratepayer, by the natural gas utility or by the oil company? With the latter two, of course, I am referring to parties that stand to benefit as a result of the fuel switching.
Mr Smith: With respect, I do not have the answer to that question. I think it would be presumptuous if I did propose to have the answer. I have suggested on page 6 that we all have to have a multifaceted approach to the issue. I do not like the knee-jerk reaction of 100% subsidy. I find that offensive largely because I think Ontario Hydro clearly has made a mistake in subsidizing to the extent it already has the conversion to electrically sourced heat. That is a big credibility problem, I think, for Ontario Hydro right off the bat. How can we, in this day and age, with the deficits that are climbing in everyone's bailiwick, be blithely suggesting 100% subsidy? I have a problem with that. I think the people of Ontario want the government to realize we surely cannot be subsidizing everything 100%.
I do not like the idea of subsidy as the sole approach; subsidization for those who need it perhaps, which was a suggestion made by the Tri-City presenter. I do not know how you determine who is in need and who is not.
By way of comparison, the Ontario government, to encourage first-time purchasers of homes, made available a refund of the land transfer tax on the purchase of the home. That was a very simple application. First of all they had to pay out the money themselves before they got back a refund. The refund related to the value of the home and their ability to pay. It was all on the back of the application, which was very easy to fill out. I think it worked very well in encouraging certain persons to get into the home market for the first time. I think some incentives are probably appropriate; I just do not know how they would be organized.
Mr Arnott: Thank you, Mr Smith, for coming forward to outline the view of the Elora Environmental Action Group. I want to compliment you on your brief. I certainly agree with a great many points. The benefits of fuel switching I think are apparent to everybody. One of the downsides that has not been discussed very much -- in Wellington county it is particularly pertinent -- is that if a massive fuel-switching campaign is under way with $6 billion worth of subsidy programs, perfectly good electric baseboards and electric furnaces are going to end up in our garbage dumps. That is a downside of fuel switching that I see and it is something we are going to have to deal with.
I particularly agree with one of the last points you made, that as a general proposition we need to credit home owners and business persons with the intelligence they possess to make appropriate choices for themselves without a subsidy.
Mr Smith: I think the word "switching" is a little bit misleading, because there are new homes, new businesses, new commercial enterprises and new industrial plants being created. In those situations, by the building code and regulations, for example, I think we can very easily force them and preclude the ability to heat electrically, period. Where we are in a position to influence people who can make the choices, we are going to do that, but we are going to make that mandatory by statute.
Mr Arnott: Six billion dollars has been discussed as the demand management proposal. There has been discussion that there are going to be small-scale loans perhaps. One of the reasons banks do not like to deal with small-scale loans, less than $5,000, is that they are very expensive to administer. Do you care to comment on that?
Mr Smith: I have no doubt that it is. I am horrified that it is $6 billion. That figure blows me over.
Mr Huget: You mention in recommendation 4 that the real costs of power, including the social and environmental costs, be factored into the equation here. In your view, are the social and environmental costs of generating power factored in now? If they are not, then we are not paying the true cost of power currently.
Mr Smith: That is obvious. The figure that has been put on it is roughly 65% subsidy of the Hydro rates -- that is the figure I have heard -- when we are talking about that kind of generation. There is no charge for the water. Special borrowing rates on capital loans are needed. There is no pricetag on what is emitted into the atmosphere, the acid, the CO2, with the ozone layer diminishing and acid rain resulting; the hydro dams that displace people; the costs of the examination from an environmental assessment point of view. Are those things factored into hydraulic dams? I do not think so. So there is a subsidy for roughly 60% already.
The Vice-Chair: I would like to give you one bit of information. On page 4 you mention $50,000 per hookup. We have since had documentation from Hydro, depending on which set of figures you read, that it is $7,000 to $11,000; another set of figures goes as high as $20,000. That figure of $50,000 has been somewhat downgraded.
Mr Smith: I thought I had pretty good authority on that one.
The Vice-Chair: Hydro has come back with somthing of a rebuttal on that and it just depends -- just to let you know.
Thank you very much for your presentation. It was very insightful. Be sure to get any information you want from your local MPP as to the results of these hearings.
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ARTHUR PUBLIC UTILITIES COMMISSION
The Vice-Chair: I ask the Arthur Public Utilities Commission to come forward for its presentation. Please introduce yourself for the sake of Hansard and the members. You can start your presentation then, sir.
Mr Densmore: To the members of the standing committee on resources development, the clerk and others present I would like to express my appreciation for the opportunity to present our brief to the hearing pertaining to Bill 118.
I am Ross Densmore from the Arthur area and I am presenting this brief on behalf of the Arthur public utilities. One of the members of your committee is Mr Ted Arnott, who lives in Arthur, which is located in the riding of Wellington, from which he was elected to represent the people of the riding at the Ontario Legislature. I have known Ted all my life and his mother and my myself are first cousins. I was first elected to the Arthur public utilities in 1968 and have served on the commission since then, being chairman for a good many years.
Arthur being a small utility with approximately 900 customers, we have always appreciated the advice pertaining to the operation of our utility provided to us by the Ontario Hydro people in the regional office in Barrie.
Also, having operated a family electrical contracting business since 1948, we have been involved with the Hydro people a great deal over the years and hold a great deal of respect for all area managers, office personnel and line crews and so on.
We have always found that if you treat these people the way they should be treated, they will go out of their way to help you. I, as well as the Arthur members of my commission, would like to express my concern, if this Bill 118 is passed in its present form, about what implications it could have in the future role of Ontario Hydro and the adequate supply of electrical energy for the people of Ontario.
The country runs on hydro, and I think it is too vital a commodity to the wellbeing of Ontario to have decisions made by politicians about the complex operation of Ontario Hydro. Some of these decisions are of a long-range nature. The people who make these decisions could be long gone if we experience a shortfall of electrical supply in the future.
As an example of what can happen, back in the 1930s Ontario Hydro had a long-range contract with Hydro-Québec for the supply of electrical energy to Ontario at a very reasonable price. During the 1930s Ontario was involved in an election and the Liberal Party at that time campaigned on the issue that power from Quebec was not required by Ontario Hydro. When the Liberal Party came into power under Premier Mitchell Hepburn, a directive by the Legislature was issued to Ontario Hydro to have this contract cancelled, which did take place. Shortly after this happened, the Ontario Hydro load started to increase and they had to go back to Hydro-Québec and renegotiate this contract at a considerably higher price than the original contract.
I keep hearing that one of the reasons the NDP government brought forth Bill 118 was to have Ontario Hydro more accountable to the people of Ontario and the directives of the present government. To us, they do not seem to recognize the role the municipal utilities of Ontario have in the operation of Ontario Hydro. The municipal utilities distribute and retail energy to 75% of the electrical customers of Ontario and also own about 80% of Ontario Hydro equity, as they have always paid their portion of the Hydro bonds as they come due according to the demand on the system.
I and the other members of the electrical utilities of Ontario are elected or appointed by our respective municipalities to look after the operations of our electric utilities. Each utility is a member of the Municipal Electric Association. District meetings are held once a year, where resolutions are put together which are presented at the annual meeting in March on issues we feel should be acted on in the best interests of the electrical customers of Ontario. These resolutions are debated and voted on by the membership, and if approved are dealt with by the MEA executive.
What has been in place here for the past 80 years is a democratic system which is very accountable to the public. I think the present government has a tendency to listen to some of the many special-interest groups now operating in Ontario that are self-appointed people who think they represent the best interests of the electrical customers of Ontario. Because Ontario Hydro is a public utility owned by the people of Ontario, they find it an ideal setup where they can carry on their activities criticizing Ontario Hydro, making statements to the press and making a living out of it by appearing as intervenors at various hearings and soliciting donations from the public.
A few years ago I witnessed a group of people who were enacting a mock spill of the transportation of tritium through the town of Arthur. It was quite a performance to watch, and while this was being done some of the groups were handing out forms to people on the streets soliciting donations to their group.
As far as we are concerned, the section of Bill 118 where the electrical customers of Ontario are going to be asked to subsidize the conversion of electric heat to gas in homes should be deleted. We have customers who have electrically heated homes who are saying they would possibly convert to gas if it was available to them, but when it is not available to them they do not feel like subsidizing other people to convert to gas where it is available.
We also have customers who have electrically heated homes with baseboards where gas is available, and even if hydro is more expensive they say they are not going to convert. They like the individual room controls, a maintenance-free system and most of all, as it was mentioned before, they have basements that are finished into recreation rooms, offices and so on, and they do not feel like having their basements ripped apart to put in ducts and so on. I do see some gas fireplaces being installed, which I think are a good idea. My own home was built with baseboard heating in 1980 and maintenance on the system has been nil in that period of time. Other people who built homes at the same time are on their second or third furnace.
The present NDP government is determined to get people who have electrically heated homes to switch to an alternative fuel mainly to reduce the load on the system, yet the peak load of Ontario Hydro is now occurring in the summer because of the air-conditioning load coming on to the system, therefore the generating capacity has to be in place to meet this load anyway. Just off the record, I do not hear anything much about trying to control the air-conditioning load.
I do not think Ontario Hydro would have embarked on the marketing program we have seen in the past if it had not been for the aggressive marketing program of the gas companies, where they went into municipalities where the electrical utilities had customers with rental water heaters in place. They talked these people into having their electric water heaters removed and having them replaced by rental gas water heaters.
I have heard Bob Rae remark the odd time that they have people coming to them saying the government should be implementing certain policy. One of these that comes to mind is Energy Probe saying that Ontario Hydro should be broken up and privatized. I recently read an article in a magazine -- Electricity Today was the name of the magazine -- written by a person from England who had been involved in the supply of electrical energy in that country. The heading of this article was "Privatization of Electrical Supply Not for Ontario." One of the main problems with several companies in England being involved with the supply of electrical energy is having these companies assume responsibility for supplying adequate generating capacity, the responsibility of having adequate distribution systems in place, etc. By reading this article, it appears that the supplying of electrical energy in England could end up in chaos in the future.
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I would like to refer back to 1906 when the generating of electrical power was falling into the hands of private power interests who were charging whatever the market would bear. About 1,500 mayors and reeves of the cities and towns right across Ontario assembled at Toronto city hall and drew up a resolution asking the Ontario government to create a public utility to generate and supply power to the people of Ontario at cost. They marched up University Avenue and this resolution was presented to the Legislature and this resolution was passed immediately.
Now there seem to be forces at work to wreck this legislation that was put in place and worked very well through those years. The present NDP government is banking heavily on non-utility generation to meet some of the electrical demand of the future, which I am sure some of these large installations will make a significant contribution to. However, I feel the potential capacity of these smaller installations that are being funded, such as small generators in dams, windmills and so on, to supply electrical energy for the people of Ontario is being overestimated by a lot of people.
As an example, Atacon Energy Systems has been involved in the building of two vertical-axle windmills on property it purchased in the north end of West Garafraxa township approximately four miles from Arthur. The one windmill is 100 feet high and drives a 150-kW motor-generator unit and the other one is 200 feet high and was to be equipped with a 300-kW motor generator.
The purpose of building these units was to sell power to Ontario Hydro. The only problem is that they require three-phase power to get these units rolling and also to feed power into the Ontario Hydro system. They bought this property and paid $117,000 for it assuming that three-phase power went past the property but later were made aware that only single-phase power was available and the closest three-phase line was at Highway 9. Ontario Hydro was asked to come up with the cost of building this line down to them, which came out to a figure of approximately $200,000. They continued working on these windmills for the past two years hoping this three-phase line would eventually be built but I understand now that this line is not going to be built and the two units are going to be dismantled and reassembled at the Bruce energy centre.
The point I am making here is that you have people developing these energy-producing installations who do not have enough electrical knowledge to distinguish the difference between a single-phase line and a three-phase line. I understand these people have been building windmills for the last nine years at various locations and have not produced any electrical energy from any of their installations, while at the same time soliciting government funding or whatever. I thank you again for the opportunity of making this presentation.
Mr Arnott: Thank you for coming forward today to enlighten us, cousin Ross, with your vast expertise and the history of Ontario Hydro and so on.
I understand Garafraxa is one of the windiest areas in the province. If that $200,000 line were to be built, what would your assessment be of the feasibility and long-term practicality of that development as a generator of hydro?
Mr Densmore: I do not know. Ontario Hydro did stake the line all out and get the cost on it. I understand that the non-utility generating part of Ontario Hydro in the Orangeville area refused to start building the line until there was some money up front. As I hear now, the non-utility generating division of Ontario Hydro refused to fund this, so I understand now the whole setup is going to be torn down and relocated to Bruce.
Mr Arnott: If we go back to May 1985 when the tornado ripped through our area, could you describe your experience at that time?
Mr Densmore: I must say, Ted, it was quite an experience for the people up in that area. The tornado hit on a Friday afternoon about 4:30. Arthur was completely out of power till Sunday evening. As chairman of our public utility, it was quite a thing -- the dire straits people were in with their freezers and so on.
By Sunday at noon there was really big concern, and this 44-kV line that comes into Grand Valley and through the municipality and fed up on to Arthur was distributed all over the field. People were saying, "It'll be two weeks before we get that built." But anyway, Ontario Hydro put all its resources together and the crews came in from other towns and they had them bedded down for the night. There were truckloads of poles coming in and equipment coming in through the night. It was amazing the effort that was put forward there to get the power back on. Many people remarked what a wonderful job Ontario Hydro had done and the resources they brought to bear. I have a film of this tornado back at that time. It is at some of the information centres. If you get a chance to see it, it is well worth seeing what was accomplished there in a very short time.
Mr Jordan: I want to thank you sincerely for your presentation and to show my appreciation for the history you have given of utility relative to Ontario Hydro and how you see it as you, the utilities, owning in fact 80% of the utility known as Ontario Hydro.
You have taken us back to the last depression when a change of government saw that power from Quebec was not a requirement so they cancelled the contracts. Of course, as nature has been, there was a recovery and the need was there and we had to go back and start over again. Do you see us getting into a similar situation?
Mr Densmore: Using it as an example, one of the reasons demand started to increase again was that war broke out. There was the war effort, you see. It was Dr Hay from Kingston that related this story to me. He was well respected in the utilities. He was a member of the Kingston public utilities. I remember him relating that story and that is where I got it.
Mr Fletcher: Thank you for presenting today. Do you believe we have to start conserving energy?
Mr Densmore: I certainly do.
Mr Fletcher: Have you ever heard the Premier of the province or the Minister of Energy say that we are going to privatize Ontario Hydro?
Mr Densmore: I think Energy Probe is recommending --
Mr Fletcher: I know. Have you heard the Premier or Mr Ferguson say --
Mr Densmore: No, nobody there. I am just saying I have heard Bob Rae's statement that we have people coming to us saying we should do this and do that.
Mr Fletcher: That is part of the public consultation, is it not?
Mr Densmore: But Energy Probe are the people that are promoting privatization --
Mr Fletcher: They are not the government, though.
Mr Densmore: No, they are not the government.
Mr Fletcher: I was just wondering about the idea of people who criticize Ontario Hydro. Are you saying that people should not be allowed to criticize Ontario Hydro?
Mr Densmore: No, they should be allowed, the same as my presentation here.
Mr Fletcher: I know. Just one quick thing about windmills. As far as windmills are concerned -- not only the windmills, but Ontario Hydro -- if you produce more electricity, Ontario Hydro does not allow you to sell back right now because of the setup.
Mr Densmore: Oh, I think there are arrangements made to resell back to Hydro.
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Mr Fletcher: I know. That can be converted; it can all be converted.
Mr Densmore: There are arrangements made, but there is some of that being done. You have the Elora mill in Elora. There are all kinds of installations now; there is a small dam down at Velvet Lake and there is a 640 kilowatt unit in there. I had a tour of that one day and one of the Grand River conservation employees made the remark that he was told that unit was to supply the town of Fergus. The town of Fergus has a 20,000 kilowatt load and you only have a 640 kilowatt unit there, so somebody is passing out information that is entirely untrue. That is the thing I am getting at.
Mr McGuinty: Mr Densmore, Hydro has a wonderful history and it has played a vital part in the development of our province. I do not think there is any question of that. However, it would be difficult to deny that Hydro has evolved in such a way that it has not kept up with the expectations of ratepayers generally, so it presents us with a problem. I am not sure this bill is the solution to that problem, but as I see it, the option -- one of the options, in any event -- is that maybe we give the Ontario Energy Board more teeth.
This bill will, as far as I am concerned, attempt to put government in control of Hydro. I do not know about you, but if I were to stand in a room and tell people that we have an operation that is very technically oriented, some 36,000 employees, a huge debt, many people on salaries that are very high, I think if I did not tell them what I was talking about, they would first assume I was talking about government. Then if I told them, "No, I'm talking about Ontario Hydro; What we're going to do to resolve this is we're going to put the politicians in charge," I think I would be laughed out of the room. That is one option.
But I am intrigued, more specifically, about the role the municipal utilities are playing and the role they might play. Can you tell me a bit more about that so we can help shape Hydro into something more modern, more efficient, more acceptable?
Mr Densmore: Ontario Hydro and the utilities are coming around more and more all the time to the view that we have to conserve energy. There has been a great deal of talk here about electric heating, but as a contractor I can remember back in the 1970s when the OPEC countries were in charge of the oil, the price of oil was going up to astronomical prices. It was increasing astronomically fast and gas was following the price of oil at 85% of that rate. A lot of the homes that were built back in that time -- they were scared of oil and they were convinced in their own mind that electric heating was the way to go. Those people were well satisfied and they had a maintenance-free system and most of the work we did was in baseboard units and individual control. But as I say, the price of hydro has gone way out of whack now and I know there is going to be a lot of conversion. There is no question about it.
Mr McGuinty: Just to be a bit more specific, please, Mr Densmore, what role could the PUCs play in helping us turn Hydro around?
Mr Densmore: We have representatives from our regional office and the area office coming to us. We are just a small utility, but larger utilities are having the odd conservation program set up and I think they are getting involved in conservation.
Another thing is revenue. I used to hear people say Hydro was no different from any other business. If you had a grocery store, the more product you put out through the cash register -- if you had your capital in place, the more business you did helped out your cost. Then somebody said that if you get too much business, the first thing you know you have to put in another cash register; then you are starting to spend capital. We are losing a lot of water heater revenue load, and that is one of our main loads as far as the utilities are concerned.
Mr Cleary: Thank you very much for your presentation. I would like you to comment on the present structure of the board and the proposed structure of the board.
Mr Densmore: Of the Hydro board?
Mr Cleary: Right.
Mr Densmore: I feel they should have representation from the municipal utilities. It is a cooperative and I do not like to see this Hydro board slanted one way or the other. It should have equal representation. That is my opinion.
The Chair: Mr Densmore, thank you very much for coming here today. You, along with so many others, are making a valuable contribution to this protest -- yes, it has been a protest by more than a few -- to this process. We trust you will keep in touch with your local member as well as with the critics from the respective caucuses or the parliamentary assistant.
Mr Densmore: Thanks ever so much.
The Chair: Take care. Our pleasure.
BRUCE PENINSULA ENVIRONMENT GROUP
The Chair: The next participant is the Bruce Peninsula Environment Group. Sir, please seat yourself. Tell us who you are. We have your written materials.
Mr Kleinau: I put a couple of inserts in there. They refer to some old wisdoms which apparently have been forgotten but which are just as valuable and good today as they were about 10, 20 or 30 years ago, I guess, when Hydro went on its spending spree.
My name is Siegfried Kleinau, better known as Ziggy. I am the secretary of the Bruce Peninsula Environment Group. We are based in Lion's Head. Sometimes we are referred to as the "Roar from Lion's Head." Our group was formed in 1989 in response to the ever-increasing problems facing our natural environment. We applaud the effort of the government to amend the Power Corporation Act and to make changes in its impact on environmental degradation.
We feel that the addition of the Deputy Minister of Energy to the board of directors will be beneficial by providing greater contact with the government. A higher degree of interaction between the elected body of our province and the crown corporation affected by this act is definitely important and desirable. To this end, policy directives issued by the Minister of Energy should have a binding effect on the corporation.
We are especially gratified by the proposed changes in paragraphs 56a(3)1, 2 and 3 of the act, the repeal of subsection 56b(3) and the amendments proposed under subsection 56ba.
Paragraph 56a(3)3 gives the indication that a conversion to a form of energy resulting in the greatest conservation is being recommended. This so-called fuel switching entails conversion to other fuels with, so far as we can determine, an emphasis on natural gas and oil. In our opinion, to switch to non-renewable energy sources would be a definite step backward. We realize that these fuels are readily available and their producers are eager to supply, but we have to consider why these new measures are being taken in the first place: to lower the impact of energy generation on the environment. This is definitely not effectively done by switching to gas and oil.
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The technology of solar and wind energy generation is well enough advanced that it can be put on the same level as gas and oil, with a significantly smaller impact environmentally. Even though there is a larger pricetag on these conversions to the renewable energy sources, the price difference would be greatly diminished if demand for these installations were stimulated. While at present the solar-wind option supplying an average house with all normal power needed is in the range of $20,000 to $25,000 -- the price of a good solid new car -- to build the capacity to supply costs Ontario Hydro at least $50,000 just to to supply 15 kilowatts of electric heat for a house, according to the estimate of Robert Franklin, previous president of Ontario Hydro, in a speech. Just the conversion of electric water heaters to solar would cut electric energy consumption of a normal household by one third. About 10 years ago the corporation had an ambitious plan to convert up to 30% of all electric water heaters to solar after running a series of test installations, but then mysteriously abandoned the idea.
We can see a tremendous saving of future supply requirement by having Ontario Hydro install solar-wind combination generator units in every new dwelling on a loan basis with a buyback option. In a different scenario Hydro could supply these units and amortize their cost under a mortgage arrangement over 10 or 15 years. The savings would be manifold and extremely attractive to new home-buyers. At the same time the owner would be encouraged to maintain the unit in good repair at the danger of a self-inflicted power outage.
For Ontario Hydro there are savings in the cards not only in the cost of electricity generating and transmission but also in the cost of maintenance of lines and transformers. The biggest winning combination would be the removal of a need for new generating facilities. To see hydro poles replaced by wind turbines and transformers by photovoltaic panels would, in our mind, be rewarding progress.
Existing buildings with an electric heat source should only be converted to natural gas where supply provisions already exist and then only as a stopgap measure. In non-supply regions conversion should be to renewable fuel sources, as mentioned above, with wood or propane, but not oil, as alternatives.
The costs involved in the fuel-switching mandate should be divided between Ontario Hydro and the beneficiary of the action. A substantial portion of their profit should be requisitioned for recovery of costs involved. After all, Ontario Hydro, being a crown corporation working with taxpayers' money, already is saddled with a stupendous debt of over $30 billion, thereby endangering the stability of the whole province's financial system. There is little room to increase this debt by subsidizing fuel switching.
Home buyers originally profited from lower housing prices when choosing electrically heated homes, so they should carry part of these costs, especially since they will benefit over the long term.
In conclusion, we would like to encourage the government and Ontario Hydro to see their way to a decentralizing of power generation. Bigger is not better. That is what we are all starting to see in the generating option. It is a fallacy, with all the inefficiencies becoming painfully obvious.
The trend of the population spreading from the cities into rural regions is putting a strain on the transmission system too. Here is a chance to give people a powerful feeling by letting them generate their own requirements with Ontario Hydro acting in a regulatory function only. Instead of "Bigger is better," let us realize that small is practical, small is economical and small is even beautiful.
Thank you very much for giving me the chance.
Mr Fletcher: Ziggy, thanks a lot for the bumper stickers. I will use them. I have just one thing about the technology in terms of conversion to solar energy. I know that in the past people moved into solar energy and the active solar equipment they had was failing and the technology was not there. Has it come up to date?
Mr Kleinau: I have this edition of Earthkeeper magazine, which is actually printed here in Guelph, and I have the permission of the publisher for anybody who would be interested to take photocopies of it. There are some very enlightening stories about people who have converted their houses to solar electricity. There is one story especially. I talked to the gentleman not long ago. He has converted an old farmhouse completely to solar. It says, "The panels convert the sun's rays into electricity and it's stored in six large batteries as a backup for days when there is no sun and of course for night-time use." He runs an office from his place and has all the amenities. He runs a computer, fax machine and a VCR.
It certainly is very obvious to me that it can be done. There are all kinds of solar equipment on the market. Unfortunately, so far the only catalogue I was able to obtain is called Remote Power Systems, from a company in the United States. It is from Atlantic Solar Products Inc in Baltimore, Maryland. The price list refers to a 1991 catalogue. It gives you the highest-priced PV general set hybrid system, which supplies all the power -- it is a pre-packed power system -- for US$10,475.
Mr McGuinty: I am a bit confused. The government and Hydro, as the government's mouthpiece, have been telling us that Bill 118 is good for the environment because it is going to enable Hydro to have people switch from electric heating to gas or oil, and there has been some talk of biomass -- burning wood -- but to my knowledge there has been no mention of solar or wind power. But you are sitting here, as an environmentalist and as a man who have given this a great deal of thought, telling me that unless we switch to solar or wind power Bill 118 is not environmentally friendly, so to speak.
Mr Kleinau: We feel that this getting away from electricity does not have to be as painful as it has been made out by previous speakers. People who definitely and desperately want to switch to natural gas have to put in the duct system and everything. It will cost them a lot of money. But in this case, with solar heat, you use all the electric wiring you have in the house.
Yesterday, I visited a good member of our group. He has solar panels. He had the wind turbines just recently installed and he has his heaters on electric. He said: "I'm pumping green. I'm all excited. It's just off these turbines." Of course, it has been such dreary weather lately that everybody would say, "What power do you get from photovoltaic panels?" Even these panels give you some electricity on a cloudy day. There does not need to be a bright sun.
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At the same time, I installed a solar water heater in my previous house in the early 1980s, when the Department of Energy, Mines and Resources, the federal ministry, was giving a kind of subsidy to it, and I was perfectly happy with it. I know that Jenny Carter, the previous Minister of Energy, owns a solar water heating system and is very happy with it. This is the way to go to get away from any environmental damage. Natural gas still has impact on the environment. We can look a little further afield. Sour gas wells and these sour gas fires going in Saskatchewan and Alberta on a regular basis are putting the environment at risk. At the same time we have to build the transmission facilities to accommodate the higher demand, if that is the case.
Mr Arnott: Thank you, Mr Kleinau, for coming in today. I just want you to know that I parked my car about two spaces from Derek's at Queen's Park and if he forgets to put his stickers on I will be sure to remind him.
Mr Fletcher: Thank you.
Mr Arnott: The $30-billion debt figure has been an important side of this issue that has been brought forward. Many witnesses have expressed concern about it and have used that as justification for the fact that Ontario Hydro is out of control or is not spending its money wisely. Six billion dollars is the figure being used right now by the chairman for the demand management programs, which is a full 20% of that debt figure. That is money that could be used to pay down the debt everyone is concerned about. How do you feel about that?
Mr Kleinau: In our opinion, we are certainly not impressed by the way Ontario Hydro goes along with its conservation program, especially when they are passing out these EEL. You know what that is: energy-efficient lightbulbs. That is what we call them: EELs. At the same time, there is a lot of waste going on that does not need to be done.
Mr Jordan: You mean these?
Mr Kleinau: Yes.
The Chair: Did Mr Jordan have a brief question, or did you have one subsequent brief question in reference to those?
Mr Arnott: No, I am fine, thank you very much.
The Chair: You know the question.
Mr Jordan: Thank you, Mr Chairman, but I thought I would help our fine gentleman who has made an excellent presentation here. I and the people I represent have always been sincerely interested in alternative sources of energy. Our concern was that we maintain a strong base supply of energy so that the uncertainty to industry of supply and cost could be dealt with. That is our only concern. I do not care really how they do it, but we have to do it, and that $7 million on this, if it had been spent in Lanark-Renfrew would get every sawmill back on the road and take a lot of pressure off.
Mr Kleinau: At the same time, to take some of the load off Ontario Hydro and to get away from this building new generating facilities is the way to go, in our opinion. It would be very easy on their conversion money if you subsidize something and you want to get good value for your money. Hydro would still be involved in the system because it would give out these systems and let people pay it back for the loan or for the mortgage, instead of a Hydro bill. We have all these renewable energy sources which can be tapped and we do not need to go back to oil and gas, as far as I am concerned.
The Chair: Sir, all of us thank you for taking the time to come here today and obviously for your ongoing work and interest in the area of environmental concerns. We appreciate your time today. Are you going to leave that with us?
Mr Kleinau: Could I leave that with you? I would be very honoured if you would take a close look.
The Chair: Give it to one of the members here and we will file it with the clerk. Thank you. We appreciate your time and attendance.
MOUNT FOREST PUBLIC UTILITIES COMMISSION
The Chair: The next participant is the Mount Forest Public Utilities Commission. Please tell us who you are and proceed to make your submission.
Mr Watson: I have prepared remarks to make the presentation this afternoon, but I could not help but take a moment, for fear I do not have time when I finish, to commend Mr Densmore on his fine presentation.
As I sat there listening to Ross Densmore speaking to you, I suddenly started to add up the number of years both he and I have given to electricity and to our customers in Ontario. I think our combined years -- and probably that is the reason I have so much grey hair -- would easily total in excess of 80 years with our interest in Ontario Hydro, what Ontario Hydro does for the rural area and for Ontario in general.
As an introduction, I am here today on behalf of the Mount Forest Public Utilities Commission. Mount Forest is an average-sized utility in the centre of a rural area of Ontario. We have 1,804 residential, 12 industrial, and 297 small commercial and institutional accounts, which accounts for the 2,113 customers currently being supplied.
The commission wishes to indicate its strong support for the two basic important principles: public power and power at cost.
Our Municipal Electric Association has already presented many of our views to the standing committee pertaining to Bill 118. This commission wholeheartedly endorses the changes they recommend. I specifically refer to the paper they presented to you on January 23, 1992, where they referred to three specific recommendations, on pages 5 and 6 of the submission.
Fuel substitution: Our utility is very concerned as to who will fund those programs and what devastating impact it will have on utilities. The funding should certainly not be part of the cost of power. Therefore, neither Ontario Hydro nor public utilities should become a party to such programs. Why?
With the help of the government's municipal directory -- and I have it with me -- I have attempted to assess what could conceivably be the outcome if, for example, natural gas were to be considered as the alternative substitute. Of all households in the area reviewed -- I reviewed Wellington county, Bruce county and Grey county, which all surround our small community -- 64% would not nor could not receive that advantage. Sparsely settled villages, hamlets, strip developments, rural farms, etc, are but a few of the losers. Why should they, through their Hydro rates, have to contribute to subsidization of 36% of the 91,478 households in the area which is but a small corner of Ontario. Is this then not discrimination?
Ramification to the utility: In our situation, approximately 25% of all residential units are dependent on electrical energy for heat, water heater and lights. Should these units opt for other forms of energy -- certainly some of them have and some of them will, given the present market -- then the downside of the outcome can only translate into drastic increases to all minimum hydro bills -- and I specify minimum hydro bills -- to compensate for the loss of revenue needed to maintain the present infrastructure of the system.
Electric baseboard heating which, by the way, is 100% efficient, and electric water heaters certainly contribute a great deal to the off-peak demand load thereby assisting to reduce the generation cost created by other peak-load demands on the system.
For the record, our energy consumption already declined in 1991 by more than 3%. However, our peak demand has only declined by 1.5%, which for our utility translates into a loss of revenue of $80,000, quite substantial when total revenue had been approximately $2.75 million. Much of this loss can be directly traced to the change of residential heating.
Peak demand, as we all are aware, is what Hydro must provide for so blackouts do not occur; in other words, to deliver a reliable, dependable and safe supply of energy. As we turn off the switch to save energy, generation cannot throttle down that quickly. Therefore, some other source of use needs to be out there to utilize those valleys.
It seems to me that off-peak load uses, such as referred to here, help reduce our overall cost of electrical power. As a matter of fact, for many years Ontario Hydro promoted the concept to help reduce the overall cost of power. It made common sense then and it still does in the real world today.
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It also seems to me that there are those who wish to live in Utopia without light or with lights at a cost some of us may not be able to afford. The moral is lost revenue, which removes the ability to maintain the system unless rates increase dramatically or unless government wishes to subsidize the electrical infrastructure similar to the conditional grant program for highway maintenance. Otherwise, reliable, safe, dependable energy will not be there perhaps even to operate those 52-watt lamps.
Bill 118: I have read in articles that Bill 118, as proposed, allows for too much interference by the provincial government in the activities of Ontario Hydro. It cannot, nor should it be permitted to do so. Surely the board of directors, properly appointed, can manage Hydro. An appropriate change could be to include municipal representatives on the board, inasmuch as they report directly, by election, to 75% of the consumers who use electrical energy. I would be naïve not to recognize that the overview of Ontario Hydro might appear different in the larger arena, but let us not forget that not all of us live in the metropolis of the big city.
Before closing, one more item that really hurts the citizens and customers I speak with and for in Mount Forest is the Elliot Lake handout or social gift, along with many other dollars Ontario Hydro has apparently spent on an antique situation in the north. It hurts that our citizens and my neighbours, as well as all good citizens of Ontario, will bear these extraordinary costs in their energy bills, which naturally includes our electrically heated homes.
I have a copy here of an article appeared in the November 25, 1987, Kitchener-Waterloo Record -- I believe the Honourable Mr Ferguson comes from that community -- that referred to a uranium find at Cigar Lake, Saskatchewan, so pure that 60 tonnes of ore would produce as much uranium as 10,000 tonnes of ore from Elliot Lake. Also, there appeared to be no noticeable radiation, as it was contained within the lake. The article further stated that it was felt spent uranium could be safely stored in the same manner. Has this government ever been in touch with AECL to find out if this venture of theirs, being atomic energy, is fact or fiction?
In conclusion, power at cost must be reinstated as a priority, for as far as anyone can tell it is the cleanest, most efficient, safest energy to be used in the home. No fuel subsidization program should be a part of energy costs by Ontario Hydro or the local utility. We continue to support the MEA in its efforts to guard the portals.
I hope and trust the Honourable Will Ferguson will be a man of his word as contained in the letter of October 2, 1991, to Mr Marv LeClair of the MEA and not lower himself to read between the lines. I quote from that letter, "The government has made it clear that it will listen to what is said about the proposed amendments to the Power Corporation Act and that we will be responsive where we feel that such action is in the interests of the people of Ontario." I trust Mr Ferguson is including us in that sentence.
This concludes my prepared text on behalf of the Mount Forest Public Utilities Commission. I have appreciated the committee's time for this presentation. Should you have any questions, I am willing to respond.
Mr Conway: Thank you, Mr Watson. You give the appearance of being a man with a point of view, and that is the kind of people I enjoy.
I have two quick questions, one having to do with the local municipal electrical association, in your case, Mount Forest. I will perhaps pick on you here -- and I do not mean to -- but I have been sitting for days listening to testimony. Let me play devil's advocate for a moment and ask you to respond to a point of view that I think is gaining support in significant measure across the province. That criticism would go something like this:
Those people at these local utilities, largely middle-aged men, are good people. They basically are in the business of distributing electricity, but inevitably they have been caught up in a conflict of interest in all this because they are necessarily today, as they have always been, very closely associated with the Hydro-Electric Power Commission of Ontario. It is kind of an old boys' network and they do not understand, good people though they may be, the fundamental issues that relate to choices around the sourcing of our electricity. They do not understand that there is a choice to be made with very significant environmental and social aspects having to do with the choice of nuclear power or the choice of -- well, let's use nuclear; I think it would probably be the most oft-cited one. These people mean well, but they are just sort of out of touch with the contemporary reality and, you know, they are not very accountable either. Yes, they get elected, but who really understands who they are? It is worse than the school boards. I mean, 15% or 20% of the voters go out and cast ballots where that is the case and, gee whiz, we are going to have to really discount a lot of what they say because they are not really in touch with contemporary reality. How would you respond to that?
Mr Watson: I guess I would say this in response to your comment: I can tell that you have never attended a meeting where Ontario Hydro and local utility commissioners attended and heard the discussions that went forth indicating the concern small utilities and all utilities have for the way Hydro operates its affairs from time to time.
I would like to carry that statement one step further and say to you that we are as much concerned -- I have sat as a mayor and a commissioner and an electrical contractor. I have been an electrical contractor for 25 years, I have been on a commission for 20 years and I am now directly involved in the utility, so I think I talk for a lot of people whom I have dealt with out and across this province. I have worked all the way from Brighton to Sarnia to Espanola doing electrical work, so I hear a lot of discussion about what goes on around the province.
To get back to the point that you are asking --
Mr Conway: I want you to understand, sir, that it is not my criticism. I am summarizing.
The Chair: Let the man finish. We are running out of time.
Mr Conway: It is a fair point, but I want the witness to understand this.
Mr Watson: I understand. I understand where you are coming from and I appreciate your question. It raises a very valid point in a meeting such as this. I think that is the feeling our present government has, that somehow the commissioners and small utilities are in bed, if you will, with Ontario Hydro. We realize Ontario Hydro is out of control in some ways that we feel it should address, and I think they can address it, given a little bit of guidance. They do not need to be told how; they need some guidance. Sometimes all of us, if we have not done anything, have not made a mistake.
Hydro has done things to try to supply power so that people are not without power when the chips are down and the demand is high. I think over the years they have proved they can do that. Out of control, maybe, in the fact that they are overburdened with top-end staff and high-paid help. Some of their problems are not generated within the scope of Ontario Hydro. Some of the problem comes from the fact of things they must live with, and labour happens to be one of them. It is no simple problem, and we know they create the highest wage structure in the province mainly because of other factors that have controlled that part of their operation.
Mr Arnott: Thank you very much for your fine presentation, Mr Watson. I just want to let you know that I was talking to a farmer in Arthur township on Sunday afternoon. He told me his hydro bill on a monthly basis on average is about $1,100 to $1,400. Of course he buys directly from Hydro because he is in the township. He uses hydro for a number of things: ventilation, his milking operation and his feed mill. Incentives to switch will not help him in those respects.
Where is the fairness for him if his neighbours in the town of Mount Forest are able to take advantage of the provisions in Bill 118, where they get a big benefit for fuel switching and part of that cost is reflected in his hydro bill?
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Mr Watson: I think we are quite aware, Ted, that for the rural area there is subsidization now. You are aware of it. The rate there is 20-some cents and a 6.5-cent credit coming back to them in the first rate. However, I agree in the sense that I think there has to be a block of power returned. We used to have a block of power years ago. If you had a water heater you got a special rate.
For those people who are not in a position to switch to other types of energy I think we have to reincorporate a block of energy by doing a study of those locations, in particular the residents and their operations, whether it be a farm or residents in a rural area, and determine if they insulate properly and do all the proper things. Then they measure up the house and we do an evaluation of the energy they are going to be required to use for that particular size of home. Then we create a special block of energy for those people so that they are not penalized by what may come down the pipe. Then we can revert back to having a charge that realistically encourages people to get off electric for uses that do not necessarily need to be there. I think that is something that needs to be fully discussed with Hydro to see what direction -- off-power is not necessarily the answer either, off-peak load.
We could go on all day here, but this is not the discussion we are here about. These are things I see where we could really sit down and solve a big problem. I am sure Ross and I are both on the same wavelength and I know most people are. We want to conserve energy, but we still have to realize that people maybe need a refrigerator and that maybe we cannot get it off these sorts of things. People cannot get off electricity if they are in a rural area.
I have a son living on a farm with electric heat in his house and I recognize the problem there. I have a couple of homes with electric heat in Mount Forest. I wanted to have some gas installed to get a comparison and I have found it is not that great a saving. I actually had a costing for two homes identically built. I knew our hydro bills were running neck and neck month after month when both homes were all-electric. Then I converted one home to gas, a unit fireplace and a water heater. I now see the bill and it has not dropped enough to compensate for the extra capital cost that was required to do just that.
I do not really know where the cost saving is coming from in some instances. We have condominiums that are electric heat and I just do not know how we are going to put gas into those. The thing is too broad, really, and we cannot take the time here. I am sure the Chairman would be upset at me if we did.
The Chair: I would never get upset at you, sir. There are others here to whom I can vent my anger on occasion.
Mr Huget: Thank you for your presentation. I think one of the things you should know is that all during these committee hearings there has been a variety of opinion on the power issue but that there certainly has never been any variety of opinion on the respect this committee holds for the people who work for Ontario Hydro and who indeed work in the industry. We have been criticizing a lot of things, but one of them is not the people.
I want to address specifically one of the comments in your presentation. It refers to your disappointment with what you would view, I suppose, as a misdirected use of Hydro funds in the Elliot Lake situation. Is that correct?
Mr Watson: Correct.
Mr Huget: Do you view it as misdirected?
Mr Watson: I am not in Elliot Lake, but in articles I have read in the newspaper and by way of association, yes.
Mr Huget: I just have a final question.
The Chair: Mr Huget, you have one question like Mr Arnott had one question.
Sir, I have to tell you that we appreciate you very much for the time you have taken to be here and the interest you have shown in the issue. I suspect that you have generated, in your own right, some new areas of thought on this issue. You may well see them by way of amendments that are proposed by one or the other of the caucuses during clause-by-clause consideration. Thank you, sir, we appreciate your time. Take care.
HYDRO-ELECTRIC COMMISSION OF CAMBRIDGE AND NORTH DUMFRIES
The Chair: The next participant is the Cambridge and North Dumfries Hydro.
Ms Mitchell: I will have to sit here where the light is better.
Mr Boyle: Part of the old boys' club.
Ms Mitchell: Yes, I am part of the old boys' club. Our general manager, Bill Boyle, will join me here.
I was first elected to the Cambridge and North Dumfries Hydro commission in 1988 and I ran again in 1991 and was re-elected again. I have enjoyed my work with Hydro and I do have some opinions that I would like to share with you at this time.
I am Andrea Mitchell, chairperson of Cambridge and North Dumfries Hydro. I wish to pass on the serious concerns of the commission with the proposed amendments to the Power Corporation Act. Cambridge and North Dumfries Hydro has over 35,000 customers and has experienced considerable growth over the past five years in spite of zero growth in the last two years due to the poor economy. Our number of customers has risen by 23% and our load has risen by 36%. The bulk of our supply is used by commercial and industrial customers. It is very important to maintain the advantage of less expensive electrical energy to help these customers compete in the free trade market.
The concept of power at cost has served Ontario very well over the past 80 years. This principle should be reinforced by the Ontario government. The cost of electricity should not include costs of the Ontario government's social programs that are not related to the electrical consumers' best interests. The Elliot Lake bailout is an example of this.
The government of the day clearly has the authority to direct Ontario Hydro to undertake program initiatives within the context of the Power Corporation Act. However, we strongly object to expanding this authority to allow the current government to direct Ontario Hydro to undertake actions which are not in keeping with its original mandate: the provision of power at cost. If the Ontario government wishes to undertake investments in social programs or economic development, it should do so explicitly through direct government action, not by hiding the costs of such programs in electricity rates.
Cambridge and North Dumfries Hydro has a customer service policy which states that we should assist our customers to use energy as efficiently and effectively as possible. We do not object to fuel substitution where it is in the customers' best interests and where it can help to lower their overall energy costs. Given the current differential that exists between natural gas and electricity prices, we routinely advise customers who have a choice between electric and natural gas space heating that natural gas is their least expensive alternative.
We also do not object to the concept of encouraging fuel substitution for space heating. Although the short-term impact of such fuel substitution will reduce our net revenues and result in higher overall rates, we believe that in the longer term, if properly managed such load reductions will result in reduced need for new generation and lower overall electricity rates. Conceptually, such a reduction will provide virtually the same effects as other forms of reduction due to demand management.
Our concern, however, is that the inclusion of fuel substitution in Bill 118 will lead to a dangerous misdirection of energy policy in Ontario. In 1982, the federal government's Canadian oil substitution program encouraged customers to convert away from oil to natural gas, electricity and other forms of energy. Now, 10 years later, we are going to mount a campaign to convince electric-heating customers to convert to natural gas, oil and possibly wood.
Apart from confusing the poor home owner caught in these conflicting policy currents and providing a lot of business for heating contractors, this type of shell game does nothing to solve the underlying problem of increasing the efficiency of our housing stock, but merely shifts the problem from one fuel source to another. Focusing on improving the efficiency of the home, on the other hand, reduces the demand for all forms of energy, has greater environmental benefits and provides real, long-term savings.
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Our second concern with a policy focused on fuel substitution is that we believe that the anticipated potential is much smaller than forecast and that the focus on substitution will result in deferral or cancellation of other programs aimed at demand reduction. There is currently a 45% cost differential between heating with a standard natural gas furnace and electricity in our area. The natural gas utility has certainly not been reticent in making customers aware of the potential savings opportunity. Surely those customers who have the opportunity to convert to natural gas and wish to do so already have sufficient motivation. Despite this, approximately 12% of the homes in our service area use electric heating. Why is this the case? At least 15% of our electric heating customers live in areas where natural gas is not available to them. For these customers the savings from fuel substitution would be minor at best and only worth considering if their existing heating systems needed to be replaced.
Approximately 78% of the homes using electric heating in our service territory use baseboard heating. To add a distribution system and furnace to these homes with baseboard heating is not only prohibitively expensive but would require substantial disruption to the household. Even if an attractive incentive were offered, how many Ontario home owners will decide to undergo the inconvenience of having a heating contractor come into their homes, tear open walls and ceilings and floors to install duct work and then undergo the expense of redecorating and painting to cover up the results? The average cost of converting a baseboard heating system to forced-air natural gas heating is estimated to be between $8,000 and $10,000. It is our belief that an equivalent expenditure on energy management improvements would often provide an equal or greater benefit to the customer, which will only be enhanced by future cost increases in all energy forms.
Ontario Hydro and Census Canada statistics indicate that between 74% and 78% of electrically heated homes across Ontario use either baseboard or radiant ceiling heating. We do not feel that any realistic incentive level, estimated at $2,000 to $3,000 per home, will succeed in convincing most home owners with baseboard heating to convert to another fuel. As a result, we question whether the projected demand savings will be achieved. The projection of 3,800 megawatts of savings due to fuel substitution in Ontario Hydro's latest demand-supply plan seems to indicate that more than 400,000 of the existing 600,000 all-electric homes in the province would have to convert.
However, we have already seen indications that the concern over fuel substitution has resulted in energy management programs being deferred or cancelled. Ontario Hydro's water heater tune-up program, which was widely accepted and supported by municipal utilities, was cancelled at the end of 1991 due to just such a concern.
In summary, while we encourage customers who can do so cost-effectively to convert their heating systems to a less expensive energy form, such as natural gas, we believe the economic incentives already provided by the market are sufficient. We strongly urge that fuel substitution not become the dominant policy focus for energy policy in the province and that programs to assist electric heating customers in improving the efficiency of their homes not be cancelled or delayed as a result.
As one final comment concerning fuel substitution, if the government elects to proceed with the proposed changes to the act, we urge that the following conditions be included in any fuel substitution program:
1. That in order to qualify for the grant the home must be upgraded to current insulation and air sealing standards.
2. That minimum efficiency standards be established for eligible equipment, ie, limited to high-efficiency gas furnaces.
3. That participating contractors must be fully trained and qualified and be registered with the program.
4. That an inspection be required for all installations and that an audit program be established to ensure the quality of installations meet all relevant safety and efficiency standards.
5. That the Minister of Energy commit to producing and distributing a publication to provide customers with actual energy cost comparisons, realistic conversion costs and anticipated paybacks available from conversion to different fuel sources. One of the most common problems during the previous off-oil program was that consumers were faced with conflicting information on relative energy prices and often had unrealistic expectations of the benefits of conversion. This document should also provide comparisons with alternative expenditures on efficiency improvements.
6. That a more realistic assessment of the potential for fuel substitution, given various incentive levels, be conducted in order to ensure that targets included in Ontario Hydro's future plans be achievable.
Thank you, gentlemen and ladies.
The Vice-Chair: Thank you very much. We will start this round of interaction with Mr Arnott.
Mr Arnott: Thank you very much for your presentation. I very much appreciate the information you provided, particularly towards the end when you talked about the fact that there are approximately 600,000 all-electric homes right now in Ontario and 400,000 of them would have to convert to meet the projected numbers included in this latest demand-supply plan. I have grave reservations about the numbers in here. The information you have provided certainly gives us cause to be concerned about those numbers as well.
Mr Jordan: Thank you for your excellent presentation. I welcome you, I believe, as the first lady to come. You are chairman of the board?
Ms Mitchell: Yes, the second year as chairperson.
Mr Jordan: How long have you served on the commission?
Ms Mitchell: This is my fourth year.
Mr Jordan: I am happy to see that. I am sure you are enjoying the challenge of meeting the requirements of the customers in Cambridge.
Ms Mitchell: I certainly am.
Mr Jordan: I can see you have put considerable work into this presentation. In the summary at the back you have Ontario statistics from 1986.
How would you feel about a previous suggestion, that a block of power be made available at a special rate to those people with baseboard heat who do not want to tear their homes apart to put in duct work and so on? Would you see that as a solution if the government should insist on going ahead with the residential substitution program?
Ms Mitchell: I do not think that would be viable. Bill, you speak to that.
Mr Boyle: There are various ways of rebating customers money if it is decided to do so for certain reasons. Tinkering with the rate structure is probably not the way to do it. Rate structures generally still decline the more you use. There are suggestions that it should not decline, that it should be inverted the other way. Rate structures are changing, and I think the less tampering with allowances inside the rate structure, the better. The simpler they are, the better. Certainly customers can get a monthly rebate if it is deemed proper for certain purposes.
Mr Jordan: So something to make it fair for those who do not have gas as an alternative fuel or have a system that it is not practical to convert.
Mr Boyle: Basically I do not agree that subsidization should be given to anyone.
Mr Jordan: It should be left to the marketplace?
Mr Boyle: Yes.
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Mr Fletcher: Welcome. I have a quick question. You were saying that Elliot Lake was a misdirected use of Hydro revenue. If that were the case, would paying several times the world price for your uranium from Elliot Lake also be a misdirection of funds?
Ms Mitchell: You speak to that, Bill.
Mr Boyle: Paying too much for uranium?
Mr Fletcher: Previous governments had contracts with Elliot Lake paying several times the world price.
Mr Boyle: I agree.
Mr Klopp: Thank you for your comments. I think some of them are echoed in what Bill 118 talks about, that they do all kinds of energy. You mentioned the off-oil programs of long ago. I was one who took advantage of it because I had to change my hydro system over anyway, so I took advantage. But it reminds me of other government programs. They paid me to take fence rows down and then 10 years later another government paid me to put trees up. It seems people do jump around a lot.
Do you think maybe one of the problems of past governments, federal and provincial, with the off-oil programs, was that they did not use a mechanism like Ontario Hydro, with all its expertise, to be part of that mix, so that we do get a totally energy-efficient package out there?
Ms Mitchell: Probably that is true. I think Ontario Hydro is spending a great deal of time and money to make this as equitable as possible. Is that what you mean? Do you mean people were not well enough informed about the off-oil programs?
Mr Klopp: It seemed to me that on the off-oil programs one ministry was telling us one thing but never asked anybody like Ontario Hydro, "Why don't we use your expertise?"
The Vice-Chair: Quickly, Mr Klopp.
Mr Klopp: I bet you 10 to 1 we can find articles that Ontario Hydro staff were laughing, because even I was. The only reason I went to electrical was because I was going with wood full time. As my electrician and I talked it over, my real savings were every time I had the wood on. Oil was high at that time, but he said, "Electrical and oil really aren't much different, but you're using wood, so that's only your backup." I said, "How come they're not talking about this?" He said, "I guess one hand isn't leading." Is that not a positive step then in Bill 118, that we are tying Ontario Hydro in to be part of this process, to use its expertise to make sure it is an efficient use of whatever alternatives we go to?
Ms Mitchell: I suppose you are right, but I do not think it should be subsidized through electricity rates. Is that what you mean?
Mr Klopp: I was wondering about their expertise being part of the process.
Ms Mitchell: I missed your point.
Mr McGuinty: Ms Mitchell, I thoroughly enjoyed your presentation. In particular, what you have brought to our attention here is that we are talking about people. We have to contend with the human factor. As you highlight in here, we are wont to look for solutions to complex problems that are neat and simple and completely wrong. That is one of our hangups. As people, we are stuck with that. That is evidenced to some extent in taxpayers federally paying for us to switch off oil. Now Bill 118 would have ratepayers pay perhaps the same individuals to switch back to oil.
I was upstairs after I booked myself into a room in this hotel. It was recently renovated and there is a window heating-cooling unit. It is just plugged into the wall. I assume that on the efficiency scale it is probably very inefficient. I was wondering, if there were a subsidization program of some kind, how much money would I need to put the necessary duct work into a hotel I had recently renovated? What loss of business would that mean while that work was being carried out? Would I feasibly want to make that kind of undertaking? As I say, you have brought in the human factor. I do not know what Hydro's assumed penetration rate was, but it would appear it is too high.
Ms Mitchell: Yes, I agree with you. So does the commission. I think the projection is too high. I think they should reconsider that.
The Vice-Chair: Thank you both for coming and making the presentation. It was most insightful. You can contact any of the local members and get all of the particulars and the outcome of all of this. It should be quite interesting, the week in Toronto.
NEW TECUMSETH HYDRO-ELECTRIC COMMISSION
The Vice-Chair: The next will be the amalgamated towns of Alliston, Beeton, Tecumseth and Tottenham. If that is not a mouthful --
Mr Mallard: We call it New Tecumseth, Mr Chair.
The Vice-Chair: It was not the way it was when I was growing up.
Mr Richardson: My name is Jim Richardson. I am the general manager of the New Tecumseth Hydro-Electric Commission. As noted in your dialogue with one of our commissioners, our name has just changed. Our letterhead shows the old name, but as of January 1 it has changed. Try not to be confused by that.
The town of New Tecumseth is a rural-urban area of about 20,000 people and we have three urban centres of about 6,000, 4,000 and 2,000 people. So we have quite a mixture there. As to what our town is like, we are a community in central Ontario, a little southwest of Barrie, so we are general, simple, central Ontario people.
We would like to thank you for the opportunity to come and speak to you today and to present our views. The way we want to make our presentation today is to report what the people of our community see and feel about this proposed Bill 118.
We have a presentation that our commissioner, Mr Mallard, who is the elected representative, will bring to you. We did a poll of some of the people and that is basically what we want to bring to you today, not only our views as a commission, but the views of the people in our community. So I would turn it over now to our commissioner, Mr Mallard.
Mr Mallard: It was an informal poll; there is no scientific basis at all. You have to remember that we are a grass-roots community. We represent rural and urban people. We are the type of people who stand on the street corner and talk to each other. We talk to each other about the NDP government and what it is going to do to us and what Brian Mulroney does on the other side of the street. We are kind of horrified in actual fact, because you can think of so many things to alter, but you do not want to alter the economy. But, of course, that is another story.
Lots of people had no idea at all about Bill 118. They did not know a thing about it when we talked to them, so we had to try to explain it. In a word, it seems that our government has decided to alter something that is working. Now, I wonder why it would alter something that was working. Normally, you would alter something that was not working. It has been working for many, many years.
We have had a superb hydro system. Our government advertised it as the best hydro system in the whole of North America. I would support that view, but I also support the view that this is a public corporation that should not be in the business of government. We should not at any time be talking about assisting anyone to do anything other than make the market forces known so that people can purchase hydro at a particular rate and gas at another rate, and if you choose one or the other you are going to benefit. If you are not sharp enough to do it, that is your fault.
We feel the government should have provided more public information on what the bill is about and its ramifications. What is it going to do to the ratepayer? Will it increase our rates or will it decrease our rates? In actual fact, there is concern. During this last municipal election campaign, knocking on doors, people were very concerned with what is going to happen to hydro rates. We have had 10% and 12% increases over these last couple of years, plus the GST, and I know that this is not your fault.
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Mr Klopp: Neither is the Hydro rates going up.
Mr Mallard: Well, they have gone up. Everything has gone up. We are in real bad times, Mr Chairman, and what the hell are we going to do? It is going to be tough. When you say, "Well, look, the NDP government has" -- and I am going to say NDP government because that is what you are; I know you are not all NDP here, thank God, although I voted for the buggers -- you will have to cross that out.
More public information: You are doing it for us today, but why did you not tell the general public what you were going to do, a general public very satisfied with the hydro system.
You are going to put on more directors. Why the hell are you going to put on more directors? We are paying enough already. If you put on more directors, you will add cost to our system, but also what you are going to do is allow the NDP government to put political influence into the corporation that we do not really need.
The consumer does not need politics in Hydro; we need cheap power. Are we getting it? It is reasonable at the present time, but if you add 2% and 3% because the NDP government wants to add to multiculturalism and to some unwanted programs or something like that, we are going to get very angry with you guys, and in two and a half years there is going to be an election. You have added it up, have you? Looking forward to it?
If you were going to add to the directors, it is suggested on the street corner that maybe you should not take those technocrats or the people that you politicians tend to appoint, you know, the old piggy barrel. Maybe you can look for blue collar workers, for ordinary people, and get ordinary people's input into the system, instead of a guy that wears a tie.
Then, of course, you are going to issue policy directives. But let's go with government involvement with a crown corporation: Maybe it should be at arm's length, but you are taking the arm's length away from it. I hope you are reading these notes. Are you reading these notes? If government gets into everything, government can control nothing. If you appoint a commission to do something, then let it do it, let Hydro be Hydro and government be government.
I would not want to see a minister of the crown sitting on Hydro, because he is going to tell his newly elected directors what the hell to do. And it might not be in the interest of the ratepayers, it might just be for the interest of the NDP government or --
Interjection: No.
Mr Mallard: Is that not terrible? But that is the perception. You see, we not only deal with the reality, we deal with the perceptions of the reality.
I am going to start reading now because I am spouting too much. They want less government involved in everything. The policy directive issue will increase government, therefore increase costs. As one person said, what makes the government think it knows best? Of course, what the hell does government know about hydro. Hydro knows about hydro. Maybe we report to you. Maybe we have to have the analytical experts. But a guy who is elected because he pays dues to a particular political party, it does not make him an expert in hydro. He sits on the back benches, he votes as the Premier tells him to vote.
More government involvement through policy directives: This is really a crock, because your minister said, "Well, if we do this, this is going to open the process up." What the hell does he mean by opening the process up? Policy directives are going to come from cabinet. Now he has said that it will come through the Lieutenant Governor in Council. That makes it open? Bullshit. It makes it closed, because it comes from cabinet. The Legislature did not discuss it. The people of this province were never ever consulted.
Let's talk about the directors. If a policy comes in, the directors are only empowered to implement it. You mean they cannot object? So you can say, "Okay, we'll buy cloth diapers for everybody in the province," and the directors cannot say, "You're bullshitting." Excuse me. But it is true: That is what it is. It is a directive and they have to enact it. Where are you guys coming from?
Hidden taxes we strongly dislike of course, we are so overtaxed. Do you know why we are overtaxed? We have too many damn politicians. We are overtaxed, overtaxed and overtaxed. You want to pick up every little pebble. There are no pebbles on the beach now, are there? We are kind of broke, all of us. You have to be careful.
If you want a tax, show the tax. Do not hide it in some hideaway, because hydro users want to switch a light on and know that they are going to pay so much for that light. They do not want 20% of it going to some other facility that someone has dreamt up in an office when they are sitting down smoking a cigar and drinking old port.
As for the fuel-switching system, if it is economic, of course, the home owner will do it himself. I will read the line: "The fuel-switching issue had mixed responses." Terribly mixed responses. It basically comes down to who had electric heat and who did not. If you had electric heat, they liked the idea that somebody else was going to pay for the switchover. Why not? Shit, you can build a whole house. This is the greatest thing in the world.
You are going to get the electric consumer, the guy who is paying the rates, me, to pay for the jerk up the road who has just bought a new house to change over to gas heating. Did you ever think of the cost to install gas heating systems into two-storey houses that were made for electrical heat? The ducting systems alone, because you have to open walls, you have to open ceilings, it is horrendous.
I suggest to you, if you are going to put some type of regulation like this, what you have got to do is say: "Okay. All those houses are built. If it's going to be an economic advantage for you to change over, do it by yourselves. Don't come into my pocket." But then you alter the building codes and you say, "No more houses to be built with hydro heat." You have it.
If it is going to be economically feasible to change from hydro to gas, which the bungalows will do, then let the gas people subsidize it, not us. When I switch a kettle on to heat the water, I do not want to be paying something to heat that guy's gas house. The savings were so strong -- although there is nothing to say what the savings are, of course -- when we moved over in our house from oil to gas, we paid for the whole system in three years. We did not ask anybody to do it and we were so happy as hell. Why should not other people be? Why do we want the NDP government to tell Ontario Hydro to pay all the other bugger's bills?
Oh, I am a limey. Sorry, Mr.Chair. It comes out, you know.
The Vice-Chair: I have to tell you that you are down to about six minutes left of your time allotment.
Mr Mallard: I am going to pass it over. You can read this. I will pass it over to Jim.
Mr Richardson: Our commission feels that Ontario Hydro is really in the business to look after the generation, transmission, distribution and sale of hydro. We do not think they are in any other business, and we do not feel we are in any other business as a local commission either, except to look after the electricity needs of our constituents.
Supplying power at cost is really where we think Ontario Hydro should be, and that is really where we feel that we as a commission should be. Not at reasonable cost, but at the lowest possible cost. That is where we think Ontario Hydro should be and where we should be. Ontario Hydro's business should be ensuring that the province has a sufficient supply of hydro to meet the short-term and the long-term needs.
Recently, we had a big snow storm out where we lived and the power was off for quite a while. When we get pressed into those emergency situations, I sometimes man the phones as well. The phones were going from about 8:30 in the morning until about 9 at night. They did not stop ringing. The people wanted to know: "When is my power going to get back on? I want it on immediately. I've got a baby. I can't warm the bottle." You know the story. All they care about is, "I want to have hydro."
We feel very concerned that this government might be jeopardizing the long-term supply of hydro for the province. We do not want to gamble with that and I think that is what you are doing. You are gambling with the long-term supply of hydro for this province and we do not want to see that happen.
I was surprised to see in the Toronto Star on Sunday an article that echoed exactly what I had said here. They talk about an energy cushion. I do not know if you have read it, but the basic thing they say is that you have to make allowances for some forecasting error and you have to ensure that the hydro is there. When it comes to power and the Ontario economy's future, it is clearly better to be safe than sorry, and that is what we are saying: Please do not gamble with the long-term supply of hydro for the province.
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Another thing we heard from the people on the phone was "lower rates." I get calls on a regular basis from people who want the rates low. They are complaining that their rates are too high. You cannot put anything in the hydro rates except what it costs to produce that electricity, and only that cost. Please keep that in mind. Hydro rates are only for Hydro purposes. I think that is important.
The fuel switching will obviously put hydro rates to a level that is not just for the cost of hydro. If there is some long-term benefit there, we would like to see it. I do not believe there is a full economic analysis of what will happen with the fuel switching. Maybe it will prove itself out, but do the numbers first. Show how much it is going to cost to fuel-switch. Show how much you are going to save. Show in the long run, 10 years down the road, that the rates will be lower. Prove it to me and then I am on side. At the moment, we have not had any proof. Prove to me that fuel switching is going to reduce my rates in the long run and I think I will be on side, and I think the people will be as well. Some of the people have said, "I don't mind some short-term pain with hydro rates if you are going to prove to me I will get long-term gains." At the moment it has not been proven that we are going to see those long-term gains, so we are asking for a full financial analysis on that.
I believe what we have presented to you today is not the New Tecumseth Hydro-Electric Commission's viewpoint; it is that of the people we serve. It is their comments that we are passing on to you today, and we respectfully request that you fully take into account what the people of this province are saying.
The Vice-Chair: Thank you very much. We have about two or three minutes per caucus. We will start this one with Mr Wood.
Mr Wood: Thank you for coming forward with your presentation. Some of the news articles have compared Ontario Hydro and what has been developed over a number of years with the two previous governments in power, to the point where they build up a $30-billion deficit; the interest on that is enormous. There have been comparisons all the way from Sioux Lookout, from Ottawa, all over the province, that Ontario Hydro has been not only a nightmare under the previous governments but has been considered to be something like a monster where nobody had any control over it. One made a comparison to giving a blood transfusion to a dinosaur and it flopping around, and nobody had any control over it.
I am just wondering if in your opinion the debt that was built up with the Elliot Lake situation, where contracts were signed that cost an extra $1.4 billion more than what they should have -- if the right routes were taken over the last 10 or 15 years, prior to the new government being elected?
Mr Mallard: That kind of broad statement is not a question, is it, Mr Wood? I feel that a new government coming in has the ability to appoint directors to the board of Hydro. They have the choice. Over the years the Conservative, Liberal and NDP governments have had choices of the directors. They have had choices of caucusing with those directors and have been doing that, and there are guidelines. That should be sufficient. If you are not doing your job, do not blame us, and do not put any more on us.
The second part of it is that you have said -- and it has been said before -- that a $1.4-billion debt was saved by going to Elliot Lake. We had the northern heritage program that the Hydro system will have to subsidize. I have never seen the figures. I looked and I asked the MEA to show me the $1.4 billion that you guys saved by forcing us to buy higher-priced uranium. Where are the figures? You have not published them. I have not seen them. It would have been nice for you to have told the MEA that, that because you are going to buy higher-priced uranium, you make us save $1.4 billion. I have been searching for it for a week and I cannot find it.
Mr Wood: Just briefly, I understand that information is available. It was read out in the Legislature and it is not secret, but they were secret contracts that were signed. Thank you very much, Mr Chairman.
The Vice-Chair: Mr Fletcher, you have about 30 seconds.
Mr Fletcher: I have just one question. As commissioner, are you appointed or elected?
Mr Mallard: Elected.
Mr Fletcher: So we should keep politicians out of this. I agree. Thank you very much.
Mr Mallard: You must be Liberal.
Mr Fletcher: Only in thinking, sometimes.
Mr Cleary: Thank you, gentlemen, for your presentation. I wish you would tell us how you really feel about this bill.
Mr Mallard: We think it is a crock. Why change something that is not broken?
Mr Cleary: Many of the presenters tell us, when they come, about their years of experience they have been involved in. I wonder if you gentlemen would share your background with us too. It has already been started.
Mr Mallard: I am an industrial chemist. I have been in this country since 1964 and have been Hydro commissioner for the past four years. And yes, I did vote NDP in the last election, and I shall not ever do it again. I will chop me damn hands off before I do that.
Mr Richardson: I have been with the Hydro commission since 1986, in the general manager's capacity, so I have been at it for six years. Before that I was with Canada Wire and Cable, a manufacturing company which supplies to the Hydro commission. I was with them for 13 years.
Mr Cleary: I would like your comments on the present board of Ontario Hydro and the proposed board. Also, to add a little bit to that, what do you think of the conservation projects that Ontario Hydro and your utility have come out with; namely, Mr Jordan's lightbulb campaign?
Mr Jordan: Please do not attach me to it.
Mr Richardson: If you are asking what we think of the energy conservation programs that have taken place so far, I think with some of the lightbulb campaigns there are energy savings to be made, and that is good. I think a lot of it has to do with making people aware that there are ways they should conserve and that they should start thinking of it. Certainly Ontario has been a very greedy province as far as consumption. I think the campaigns that have gone out have been not only saving some kilowatt-hours but have been increasing awareness too. I think that is important, that we have to get on side that energy conservation is a way to go. It not the only way; it is a way. I think there are a couple of steps we have to go through.
Mr Arnott: I want to get off topic a wee bit. You represent an area that was amalgamated; several municipalities were amalgamated. I just want to know what your experience was with respect to the change that you had undergo as a result of municipal amalgamation.
Mr Richardson: You mean regarding whether the amalgamation worked or did not work, or how the commission reacted to it?
Mr Arnott: How the commission responded to challenges that came forward.
Mr Richardson: The commission from the three urban centres was a joint commission for when we were trying to implement it. Then last year, the first year of working as the town, there were certainly different viewpoints as to how hydro systems should be run. I think the commission had a lot of good discussions and a lot of involvement in what should happen. In my view, the commission is stronger now than the three separate commissions of the past. You certainly lose a little bit of that close touch with the people, because now we are in a central area and we are not on the street all the time in the other urban areas we serve. So there is some concern with that.
Mr Mallard: That is the manager talking; let the commissioner talk. Really and truly, the Hydro commission -- we set up the system as an amalgamated committee and it is working exceptionally well. Our problems with amalgamation are not with hydro because we are taking on an extra area that we are going to buy out. In actual fact, the problems are with the works department and things like that. Our act is there; we are doing a fantastic job. These guys are doing a good job.
It worked well, but the people are still very sad about it. If you have lost identity -- I mean, we had eight guys working in our village cleaning streets and doing all sorts of things. Today we have two guys every other day. It is not working for us, but the hydro works.
The Vice-Chair: Thank you, Mr Arnott. Mr Jordan, very quickly.
Mr Jordan: Just a quick question. I was interested in the fact that Bill 118 was so poorly publicized at your local utility. Would that not be a responsibility of your utility, as soon as this bill comes up, to get it out to your ratepayers so that they understand it? We are looking at Ontario Hydro as a monster. I think the utilities have a certain amount of responsibility to get the message out, and I would like to compliment you on the fact that you have done it. Perhaps more should be doing it so that the people are aware when they turn on the light switch that it may not be just for electricity; there could be other charges.
Mr Mallard: We did try, but we try within the normal political process as well; you know, the people going around canvassing as all these things come up. But you have to remember that Bill 118 is an act of the Parliament of Ontario. It is your job to advertise it, to make it public. It is no good putting it on the back page of the Globe and Mail, because 90% of the province do not read the Globe and Mail. You have got to get out there and do it. It is not for me to tell you what to do, but it is up to you to get some of those minions who work for you in Queen's Park to do that.
The Vice-Chair: Thank you, Mr Jordan. I am going to make a couple of comments here. One is that there has been some discussion about the way we advertise this. We went out of our way as a committee, actually; we spent $32,000. We advertised in every weekly and every daily paper in this province so that everyone would know. That is a lot of money, and if we are not getting the message out we would like some input into how we can better do that. We are always willing to do that, but we actually hit every paper in the province.
Mr Mallard: Could I answer that briefly, Mr Chairman?
The Vice-Chair: Yes.
Mr Mallard: When you see the crown and an edge around a publication from government, because you are considered lower than a -- whatever you can get down to -- people will not read it; they generally will not read it. You have to get it out under that splashy photograph of the guy sitting over there. That is the way you get publicity, not the way you are doing it.
The Vice-Chair: Okay, thank you very much for your opinions. It has been very interesting.
The Chair: You know that if the Premier reads that transcript, you are going to open old wounds. You know that, do you not, Mr Mallard?
Mr Mallard: Yes, I think I do. But I shall support you but not vote for you. Thank you, Mr Chairman.
The Vice-Chair: Thank you very much.
The Chair: Thank you, Mr Waters, for your excellent chairing during a most interesting submission.
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W. C. WOOD CO LTD
The Chair: The next participant is W. C. Wood Co Ltd, Steve Griffin, manager, product engineering. Please come forward and be seated. We have your written material. It is going to become part of the record by virtue of being made an exhibit. Tell us what you will, when you speak, of the appliances you manufacture. Please explain those a little bit just so we can put your submission in context.
Mr Griffin: My name is Steve Griffin and, as already mentioned, I am the manager of product engineering for W. C. Wood Co located here in Guelph. W.C. Wood Co and an affiliated company operating in Ohio are owned by the Wood family, who again are out of Guelph, Ontario.
We manufacture a variety of major appliances for the North American market, primarily freezers -- chest freezers and upright freezers -- and home comfort products, which are dehumidifiers, humidifiers and range hoods. We currently employ up to 800 people in the Guelph area, with an annual payroll in excess of $20 million. Our products are widely recognized for leadership in reliability and energy efficiency. As such, we as a company are well aware of the importance of energy conservation initiatives and really do strongly support well-considered measures. We also have concerns regarding the future employment of our dedicated workforce, as the regulatory environment in Canada, and in particular the province of Ontario, makes it increasingly difficult for our industry to survive.
The committee should be aware of two things. First are the Ontario factory closures in our industry within the last two years. These include General Freezer at Woodbridge, Inglis's refrigerator facility in Toronto and WCI Canada's freezer manufacturing facility in Cambridge. The second thing the committee should be aware of is the vulnerability of the remaining producers.
I will talk a little bit about our views on energy efficiency and regulated industrial standards. The major appliance industry is truly global in scope, we feel, with barriers to trade being continually reduced. As a result, we do not believe any political jurisdiction can effectively implement standards in isolation without substantial cost to its consumers and risk of employment loss.
We believe the record of the federal government in the United States should be carefully reviewed when considering standards. Federal officials eventually pre-empted the ability of any of the individual states to set independent energyefficiency standards. This followed a long and exhaustive public debate involving competing interest groups, each of whom eventually had many, if not most, of their goals met. Action by the province of Ontario to implement standards in a narrow jurisdiction, in isolation -- I emphasize "in isolation" -- could have dire economic consequences.
With regard to the effectiveness of regulations, we believe regulations are difficult and costly to enforce. Canada currently has legislated requirements for energy labelling on appliances. The province of Ontario, among others, has regulations regarding a separate labelling program. Currently we do not believe either of these programs is effectively policed. We have seen instances where imported product is being sold in Canada and Ontario without the application of all these labels. Canadian and Ontario producers are incurring cost penalties in conforming to the regulations while we believe importers are getting a free ride. We are aware the federal government has energy-labelling legislation under review. We are hopeful that any new regulations will be subject to serious public debate, including detailed analyses of the policing costs before implementation.
With regard to Bill 118, as we understand it the Ontario government seeks to have a more forceful intervention into Ontario Hydro's operating programs. Our views are as follows.
With regard to board membership, we recommend the board be cut from 17 to 12 through attrition, rather than that the board be increased from 17 to 22. In our view, it is inconceivable that an additional five board members could have a substantial impact on the operation of such a large corporation; the sole net result leading to higher costs.
Capitalizing soft costs: Costs associated with physical assets of a business are appropriate for capitalization. On the other hand, we do not believe soft costs such as energy conservation manuals, training programs and engineering studies should be subject to capitalization, as their expected life is indeterminate with today's rapid pace. To capitalize these costs, we believe, is misleading to the taxpayers of the province.
With regard to policy costs, we are of the view that any costs associated with the implementation of policy directives from any political structure should be borne by, and be clearly traceable to, that political structure. Any policy initiatives imposed by the government of the province must be funded by the government and traceable and accountable to the taxpayers. With the exception of capital investment, we believe all government initiatives should be funded from current revenues. Failure to do so in the past has contributed substantially to the difficult situation faced by Canadian taxpayers and future generations. Please do not borrow from the future.
In conclusion, we believe the tasks faced by the government of Ontario are formidable. We believe any action taken by that jurisdiction in isolation from the economic realities occurring elsewhere in the global economy will have a negative impact for employment in Ontario and for the taxpayers of the province. Please work in support of national and international standards regarding energy efficiency. Please ensure that the electric generating facilities of this province are responsive to the needs of their consumers, as a first priority. Please ensure that any regulatory initiatives by our government are only considered after opportunity for public hearings from all interest groups. Thank you.
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The Chair: Thank you, sir. There are going to be questions. You speak of yourself as an appliance manufacturer. Who are the other Canadian or Ontario appliance manufacturers, not necessarily by name, but what type of products are they manufacturing, to flesh out this appliance market?
Mr Griffin: The only other Canadian major appliance manufacturer I am aware of is Camco. Camco is located in Hamilton; it is a subsidiary of General Electric.
The Chair: What do they manufacture?
Mr Griffin: In Hamilton they manufacture refrigerators and, I believe, dishwashers. They have a plant in Montreal which manufactures, I think, refrigerators. I stand corrected on one issue: There is another appliance manufacturer in Canada and it is located in L'Assomption, Quebec. They are the remaining branch plant of WCI in Canada. The other facility, which was located in Cambridge, closed in November of last year.
The Chair: If I want to buy a gas stove, a kitchen range, in Canada, I cannot buy a Canadian-made gas stove. Is that accurate?
Mr Griffin: I may not be the best person to ask, but I cannot think of anybody who is manufacturing gas stoves in Canada, not as home appliances. There are people manufacturing wood stoves, gas fireplaces and those types of things who may be located in Canada, but as for major white-good appliances, I am not aware of anybody who is doing that.
The Chair: Was there a manufacturing industry that was broader than what exists now? You referred to recent shutdowns.
Mr Griffin: I have not been with the industry since its inception in Canada, but the way I hear the story is there were 37 different manufacturers of appliances in Canada. Some of them were subsidiaries of multinational companies, but many were privately held, owner-operated Canadian companies. Except for W. C. Wood Company, all are gone.
Mr McGuinty: Those 37 companies you just referred to, why did they go?
Mr Griffin: I guess the best answer is to compare our industry to the automotive industry. If you had bought a refrigerator in 1960, you would have likely paid $300 to $400. If you had bought a car in 1960, you might have paid $2,000 or $3,000; I do not know. These days when you buy a car for $28,000, you still can buy your refrigerator for $500 or $600. The industry has gone through a strongly competitive downsizing that is cost- and quality-driven. The companies which could not maintain the pace either were absorbed into other organizations or fell by the wayside.
Within our own company we have three or four major areas that we focus on. These are productivity, cost improvement and quality improvement. We also were lucky enough to develop a strategy of bringing to market energy-efficient appliances. We developed a strategy about 1975 and have been moving with that strategy since then. That strategy has allowed us to become the second-largest manufacturer of freezers in Norther America.
The committee may be aware of the regulatory environment in the United States where energy consumption maxima have been mandated by the federal government. The process was initiated in 1987. The standards were written effective 1990, and the standards have been updated for implementation in 1993. Canada, through CSA and the C-300 standards, which have been adopted, is moving into lockstep with these standards.
Many of the companies now are moving to improve their products to be what I call Department of Energy 1993 compliant. We are already there with many of our products and it is because of our commitment to energy efficiency. So, to answer your question, I am not sure our strategy in 1975 was to recognize that energy efficiency would some day become the crunch, but it certainly has been the strategy that has allowed us to grow.
Mr McGuinty: What percentage of your overhead is constituted by your hydro rates?
Mr Griffin: I do not believe I could give you an accurate answer.
Mr McGuinty: Can you tell us how those rates might compare with your Ohio-based operation?
Mr Griffin: Again, I could only give you my impressions. I do not think they would be accurate. If I had to guess, I would guess they would be roughly equivalent. That may be totally misleading.
Mr McGuinty: You now have an American- and a Canadian-based operation.
Mr Griffin: Yes, we do.
Mr McGuinty: What factors would lead you to pull out of either to go to the other? Do hydro rates factor into that?
Mr Griffin: In effect, hydro rates have not been put forth as a rationale for moving to one locale or the other. The problems associated with rezoning, those types of things, the length of time it takes to do some of those things, have been put forth as good rationales for moving from one jurisdiction to another. The flexibility of doing business in the United States has been one of the issues.
There are aspects of our costs that would be lower than what we have here. I will give you a good example. We use CFCs in manufacturing our products. These, you may have heard about, are suggested as ozone depleters. We spent quite a bit of time last year working with the Ministry of the Environment to have some regulations that were in effect going to put us out of business revised so that they were more rational and more in keeping with what we believed the province originally wanted to do when the regulations were written. This allowed us to continue operation here in Guelph.
I do not know if I am answering your question, but right now what I do know is that the commitment of the company to this location is very strong. If we made our decision solely on economics, you could make a good case for the fact that an organization like ours or some other manufacturing company should move. We have not done that because it is not only an economic situation: There is a big commitment to our workforce; there is a big commitment to the community. I think that is something you see in a privately owned company that you do not see in a multinational subsidiary. I do not believe the multinational subsidiaries necessarily have any commitment to the community within which they are operating in a Canadian branch plant.
Mr McGuinty: I wonder if you might consider this for me. What if this were the case? You owned this company outright and lived in London, England. You had no commitment either to the States or to Canada. You were running both operations. You had no connection with the workforce. What I am trying to understand is what would govern your decision as to whether you would stay. In other words, if it is reduced to purely economics, it would seem to me that if I were elsewhere and had no attachment, if I am after dollars, then I will be motivated solely by dollars. Could you comment on that?
Mr Griffin: Yes. You have structured the question such that there is only one answer. If it were based solely on economics and maximizing return on investment and return on capital employed -- recognizing that I am the manager of engineering and do not get a big peek at the balance sheet -- my view is that we would move.
Mr McGuinty: To where?
Mr Griffin: Likely to our United States site.
Mr McGuinty: Thank you.
The Chair: I was sure you were going to say, "But what if Mexico were in the calculation or perhaps South Korea?"
Mr McGuinty: No, I was not thinking of that, Mr Chair.
The Chair: Oh, I am sorry. I was off on another train of thought, I guess.
Mr Griffin: The other thing you have got to recognize with appliances is that, because we have kept the cost down, it is high cube for shipping and low value. A car may be as big as this table or a little bit bigger than this table, but it costs $20,000. The shipping costs from Japan are low in proportion to the retail costs, whereas with a freezer that arrives at retail at maybe $200, the shipping costs from overseas would be a big component of that cost.
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Mr Cleary: Thank you for your presentation. This is something that has been on my mind ever since these hearings started and I think you are the right gentleman to answer it. You had talked about your cost-efficient units? Let's say I had a freezer that was 20 or 25 years old. How much of a cost saving would there be to me if I were to buy one of your new units?
Mr Griffin: The cost saving depends on the cost of energy. With a low cost of energy there is a low return on replacing your appliance with something that is more energy-efficient. With a high cost of energy there is a higher return or a higher driving force behind changing.
Mr Cleary: Maybe percentage, then.
Mr Griffin: An appliance that is 25 years old probably has no effective insulation in it at all and probably the gasket is not maintaining any insulating value or seal. As a result, something that maybe would have measured at 200 kilowatt-hours per month when it was first manufactured might now be measuring at 300 kilowatt-hours per month. Some companies make a replacement product that would be a two-door, top-mount, frost-free refrigerator similar to what most people have in their homes. At 18 cubic feet you would probably be looking these days at 90 kilowatt-hours per month or something in that neighbourhood. We manufacture a product that is almost an 18 cubic foot; it is a single-door, all refrigerator that we label at 36 kilowatt-hours per month, and it measures out usually anywhere between zero and 10% below that. So if you want to take those, it could be a 10-fold order of magnitude reduction in energy consumption.
Mr Arnott: Thank you, Mr Griffin, for coming in. I notice you have expanded your remarks beyond just Bill 118 to a discussion about a concern your company has about industry standards and regulations. I am just wondering if you are concerned about what the government may be doing in that respect. Is that why you have expanded to include that?
Mr Griffin: Yes. We are concerned about what the government may be doing in that regard because the experience of the appliance industry -- I can point to the United States experience; it is kind of interesting. About 1985, the United States government decided it wanted to implement some energy-efficiency standards. The Association of Home Appliance Manufacturers of America, of which we are a member, got the membership together and, as an industry association, made representation to the United States government to not have any standards. After some long discussions, and I guess President Reagan was involved in this somehow, the federal government decided not to have standards. The California government decided it would implement standards and adopted some fairly severe standards and challenged the industry for 1987. At the same time, Massachussetts implemented different standards and Rhode Island was headed towards some other standards and so on and so forth. The industry quickly saw that the best thing to do was to develop a federal standard.
I guess what we have learned out of all of this is that, as an industry, we have to be, we should be, part of the formulation process of these standards and regulations and not arriving after they are set and arguing pro or con. It is much better to be involved in the process than to be presented with a fait accompli and have to argue pro or con. Another example of that was the CFC regulations that we were recently dealing with here in Ontario. We had input, yet when the regulations came forward they were couched in terms that made it impossible for us to comply.
Mr Arnott: I understand that and I commend you for coming forward in that respect. Are you a manager of product engineering?
Mr Griffin: Yes.
Mr Arnott: I assume that enhancing the energy efficiency of your product on an ongoing basis is one of your highest priorities as a company.
Mr Griffin: Yes. Right now we do all our own research and development. We are, as I said, a family-held, private business. I have a department of approximately 60 people and a good portion of that group is devoted to energy-efficiency improvements and maintaining or doing the quality assurance associated with making sure the products we produce meet what we say they meet. Depending on the production line and depending on the rate, we may test as many as 2% to 3% of our products to make sure they meet their labels. We take this extremely seriously.
Mr Jordan: I thank you also for your presentation and your interest in Bill 118. On the second-last page you state, "Any policy initiatives imposed by the government of the province of Ontario must be funded by the province of Ontario and accountable to the taxpayers." Relative to the policy directives, would you enlarge on that?
Mr Griffin: When we looked at the legislation, what we read or thought we read was a channel for the government to make policy directives to Ontario Hydro's board which were not optional and which could result in higher costs. While we would not dispute, necessarily, the government's right to set policy initiatives and to give directives to crown corporations and so on and so forth, we believe it is in everybody's best interest to make sure the taxpayers understand where the directives and where the initiatives are coming from. An Ontario Hydro initiative, or what would be perceived as an Ontario Hydro initiative, that turns out to increase costs markedly, that came from the government, should be traceable, in our view, to the government, and that is all we are saying.
Mr Jordan: What I am to understand, then, is that these policy directives that are not directly related to the cost of power, being the generation, transmission and distribution of the product, even though the government feels it is a good policy to have in effect, should be taken out of the general fund through one of the other ministries: Ministry of Energy or the Ministry of Industry, Trade and Technology, but not let it affect the energy product you are going to use to stay in business.
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Mr Griffin: I am not sure how to answer your question. What we are trying to say is that the funds --
Mr Jordan: You said it should be traceable.
Mr Griffin: It should be traceable. Let us say there is a policy initiative and the ratepayers, or Ontario Hydro's customers, see an increase of so on and so forth on their bills. We believe the people who pay those bills should be able to trace those cost increases back to the individuals who put forth the policy initiatives. It is just straight accountability.
We are not exactly sure where the funds should come from. I have a really good concept of where the money we have to operate our business comes from. I am not sure I have as good a concept of where the money government has to run its operations comes from, so I do not want to comment on that. All I am saying is I believe it should be traceable for those people who are eventually footing the bills.
Mr Jordan: Thank you very much.
Mr Fletcher: Thanks for coming in. I am going to get to the cost. I know W. C. Woods is on the leading edge as far as technology and energy conservation is concerned. I have been in the plant a number of times. You say, "Let's trace the cost." If there are increases in hydro, we can trace them to what has been going on in the past and that comes up to things such as Darlington. Let me just quote a few figures.
Delays in Darlington totalled 19 unit-months and the cost of one month's delay is $25 million for each monthly unit. Also, the total cost of Darlington is going to be $13.5 billion. These are some of the things that are driving the costs and we can trace them back to the follies of previous governments.
Also, as far as the CFC problem is concerned, I know you had a fight with the Ministry of the Environment. These CFC regulations came in under the previous government and they were carried on, and we were put in the position of trying to rationalize what was going on. I think we did a pretty good job; it took a little twisting of arms here and there, but it worked out.
You say our regulations should be made on a more competitive basis or equal to what is going on in the global situation. Is that referring more to what is going on in the North American market or are we saying global? Because I know what is going on in Germany right now. You look at some of their environmental laws and you would not even sit still for some of them.
Mr Griffin: What we would support first and foremost is a non-checkerboard approach in North America, where British Columbia has one standard that we have to meet and New York state has another standard.
With the energy-labelling program, when we manufacture products we have to know whether this product is destined for Canada or the United States as it comes off the production line because the labels are different. That is why we think some of the other companies which are operating in the United States do not recognize this, so products are being sold in Canada with the United States energy guide label on them rather than the Canadian EnerGuide label.
We go to great lengths to make sure we understand where this product is going, what label should be on it and so on and so forth. The labelling is a big enough nightmare without having different standards for different jurisdictions, which would have a refrigerator of this size have an energy consumption maximum of 100 kilowatt-hours and in another jurisdiction 80 kilowatt-hours per month, because that would prompt a different compressor selection, another model skew. Those things become nightmares to track.
Mr Fletcher: So as far as Canada is concerned, we should try at least to be uniform across the country. It acts as a trade barrier, is that it?
Mr Griffin: We believe that to have different standards in effect constitutes a non-tariff trade barrier, even across the United States-Canadian border.
Mr Fletcher: I agree with you as far as Canada is concerned. I think that is why the message comes in that the levels of government have to get together and work things out. I agree with that fully.
Mr Waters: I have a question. I will try to get through it as fast as possible. I am going to read you a bit of information I have received from the Financial Times, dated January 27. I take it to be true; after all, I would imagine it is quite a reputable paper. It says:
"Energy Probe predicts that by the year 2000, Ontario rates will be 27% higher than the US, on average, for hydro....While Hydro accepts Energy Probe's comparison with the current power cost, it maintains that the organization's forecast figures are wrong, and insists that the provincial rates will always remain competitive with those in the US. That seems to be more a hope than a likelihood, especially since the given projection of Ontario Hydro's power rates may double by the end of this decade. The major reasons for this," it goes on to say, "is poorly conceived, poorly engineered, and poorly constructed new plants, combined with erratic demand forecasts, bad planning, and decrepit older plants that have become increasingly more expensive to keep alive."
As a businessman, if you were running a business in that kind of condition, would you not think this would be a good time to step back, have a look at your business, look at the efficiency and make sure this thing is running cost-efficiently, iron the bugs out -- you know you have a definite problem with the nuke. Would you not step back and go into energy conservation and that type of thing while you work this through and maybe even look at alternative supplies?
Mr Griffin: There is no doubt, given that scenario, that energy conservation has to be a critical aspect of the strategy, not only in Ontario and Canada, but in North America.
With regard to the engineering of the various power plants and so on, it is difficult to say. In a previous career I was in the power industry. I have a slightly different view with regard to cost overruns. I suspect that some of the cost overruns on some of these projects are associated with the length of time it takes to get them approved and the ongoing reopening of closed and approved studies.
With regard to the efficiency of an operation, I agree with you wholeheartedly. Every organization, whether a service organization, manufacturing company or government, should be working to reduce and eliminate waste and unnecessary activities. If you do not have to consume a kilowatt you do not have to build the capability to generate that kilowatt.
In the same vein and using the same logic, that is where our comment with regard to the board of directors comes from. We believe that excess people -- additional personnel, going from 17 to 22 -- is not in keeping with improving productivity. Maybe that is a simplistic view, but if you take output and divide it by a head count, going from 17 to 22 seems counterproductive.
Mr Waters: Given the fact that Hydro's original 25-year forecast was more and more megaprojects, nuke projects; no time given to step back and repair the problems, just build, build, build; no time given to look at efficiency, conservation or anything, I see this whole process, if nothing else, has at least Hydro's attention to the point where it is looking at alternatives to spending more and more money and basically the hell with the costs. I would like your opinion on that statement.
Mr Griffin: Again, in a previous career, I was in the power industry. I was with a company that manufactured power stations and manufactured some nuclear equipment. I was involved in the nuclear side and the fossil-fired side. I have dealt with a lot of utilities. In my view, Ontario Hydro is a pretty good utility. When I look at what I know of its record and compare it with what I am aware is happening in other jurisdictions, I believe it has a good record with regard to safety and operation of the plants. It is not without problems, but comparatively speaking I believe they operate fairly safe plants. With regard to their lack of planning or poor planning in the past, hindsight is 20-20. It is really difficult to comment on whether they could have been better planners. I suppose they could have been, but then again, so could we all. Thank you.
The Chair: With that, sir, thank you very much for a most interesting commentary on this whole exercise. We appreciate your coming very much and look forward to your ongoing contact with critics for the opposition parties, your own MPP, any one of us or any members of the Legislative Assembly.
Mr Griffin: Thank you very much.
The Chair: That completes the presentations for this afternoon. We will be coming back at 7 o'clock this evening. Of course, all of you are welcome to return. There will be fresh coffee and perhaps some renewed supplies of apple juice. In the meantime, we recess until 7 pm.
The committee recessed at 1652.
EVENING SITTING
The committee resumed at 1900.
BRUCE NUCLEAR AWARENESS
The Chair: The first presentation is by Bruce Nuclear Awareness. Tell us who you are. We have 20 minutes. We have the written submission from you. We want to save at least 10 minutes for questions and exchanges.
Mr Peabody: My name is Chris Peabody. I am the chair of Bruce Nuclear Awareness, a group based in Walkerton, Ontario, in the Bruce riding. Bruce Nuclear Awareness is affiliated with Nuclear Awareness Project, based in Durham region, and we are part of the Coalition of Environmental Groups for a Sustainable Energy Future, which is intervening in the Ontario Hydro demand-supply plan.
Bruce Nuclear Awareness is participating in these hearings tonight because the members of Bruce Nuclear Awareness feel that the amendments contained in Bill 118 are essential to the future of Ontario Hydro. Cost overruns, mammoth debt, accountability and a mangled demand-supply plan point to the need for legislation that will reform Ontario Hydro.
These issues are addressed by the two major themes of Bill 118. One theme is the accountability of Ontario Hydro to the government and the other deals with demand management through fuel switching. One group of amendments proposes to bring democratic control to an institution that has been called a monster and the other seeks to redress the promotion of electric heating for the last 30 years.
Cost overruns in the order of billions of dollars at Darlington make it essential that the accountability changes to the Power Corporation Act be implemented. The $13.5-billion pricetag for Darlington is unacceptable. Through a myopic megaproject mentality, Hydro planners have amassed a debt of over $30 billion. This must never happen again. Hydro's huge debt acts as a yoke and an albatross around the neck of the province, dragging money away from hospitals and schools.
Accountability: The amendments in Bill 118 regarding the status of the chairperson, board membership and policy directives increase Ontario Hydro's accountability. These changes are long overdue. They are positive steps towards putting controls on a monolith.
Fuel switching: Members of Bruce Nuclear Awareness feel that the fuel-switching provisions found in Bill 118 are also very important. Fuel switching will provide a wide range of benefits. These include reduced carbon dioxide and sulphur dioxide emissions, less demand for new fossil and nuclear generating stations and cheaper heating costs.
On January 15, 1992, Ontario Hydro announced major revisions to its demand-supply plan. The revisions dropped plans to build new nuclear reactors in the near future. In light of this announcement, it is essential that the fuel-switching amendments found in Bill 118 be approved.
The Coalition of Environmental Groups for a Sustainable Energy Future estimates that 4,676 megawatts of electricity can be saved by switching households from electric heating to natural gas or oil where available. By contrast, the Darlington nuclear generating station will generate 3,524 megawatts if completed.
The Passmore report on fuel switching brings into stark clarity the potential for cost savings. Since 1975 electrically heated households were billed a total of $8.94 billion. If these households had used natural gas, $3.9 billion would have been saved. In the past 16 years consumers have spent 77% more for heating services than necessary. It is ironic that many of these home owners live in rental properties where landlords install the cheapest form of heating to install, baseboard electric. These are the very people who can least afford to pay 77% more for heating costs.
New home buyers are given a false impression of the costs of the installation of heating. The installation costs of baseboard electric heating appear to be $3,000 cheaper than natural gas. This cost is borne by the consumer. Closer inspection reveals that electric heating actually costs much more to install, as much of the cost is assumed by Ontario Hydro. In 1990 former Hydro president Robert Franklin announced that the average electrically heated home required $50,000 in new generating capacity. We can no longer afford electric heating.
Electric heating also takes its toll on the environment. Passmore Associates reports that large reductions in carbon dioxide, sulphur dioxide and nitrogen oxide will occur if Ontarians switch from electric heat to natural gas where available or oil in areas without it.
Public utilities: A number of utilities have expressed concern about fuel switching raising their rates. A reduction in electricity used due to a fuel-switching program will have a limited impact on retail electricity rates. For example, in the municipality where I come from, Walkerton, our utility purchased $3.3 million worth of electricity from Ontario Hydro in 1989. All the billing expenses totalled $350,000. Only 11% of the total expenses of the Walkerton Public Utilities Commission are local. Because the fixed costs are small, reduced sales will not have a large impact. In Walkerton, electricity use would have to decline by about 50% just to equal the impact of Hydro's rate increase of 11.8% in 1982.
Recommendations: The members of Bruce Nuclear Awareness recommend that to facilitate fuel switching it is essential that Ontario Hydro pay for the program. In light of the fact that electric heating for new homes costs $50,000 per household in new generating costs, the members of Bruce Nuclear Awareness recommend to the standing committee on resources development that Ontario Hydro pay 100% of the costs of fuel switching. This is necessary as low installation costs of electric heat deter alternatives such as natural gas.
In summary, the amendments proposed in Bill 118 affecting accountability and fuel switching will provide for substantial changes at Ontario Hydro. These changes are necessary to set the stage for an institution that is both accessible and democratic. The fuel-switching amendments set the stage for a cleaner environment and reduced dependency on both fossil and nuclear fuels.
The Chair: I should mention to you, Mr Peabody, that the $50,000 figure that was cited in the October 1990 speech by Mr Franklin, CEO of Hydro, has been challenged by Mr Jordan, among others. He has a letter from Ontario Hydro, which has been filed as an exhibit, that speaks to the cost being $7,000 to $11,200, as compared to $50,000. A further explanatory notes goes on to indicate -- this is what it appears to indicate -- that the $50,000 figure is arrived at based on the cost of nuclear generation solely. Failing to recognize that those 15-kilowatt furnaces -- the servicing of that would be based on a mixture of sources.
What we are doing is trying to get clarification on that, because it has been an interesting but rather serious difference in numbers. I am going to ask the clerk to record your organization and your address so that you can be sent whatever information we get, just so everybody is playing fairly, with the same numbers and figures. I say that just as a point of information and out of fairness to everybody involved.
Thank you for a succinct presentation that leaves us a healthy amount of time for comments and questions.
Mr Arnott: Mr Peabody, you seem to be quite convinced of your case.
Mr Peabody: Yes, I am.
Mr Arnott: One of the presenters who came forward this afternoon, Andrea Mitchell, chairman of Cambridge and North Dumfries Hydro, indicated that there are approximately 600,000 all-electric homes in the province and that for Hydro to meet its objectives for demand management and the demand-supply plan, it would have to convert 400,000 of those 600,000 homes away from electricity. That would save 3,800 megawatts. You say that the affiliated organization you are with, the coalition of environmental groups, has suggested that 4,676 megawatts could be saved if fuel switching was, I guess, in every single electric house in the province. Would that be the case? Where was that number from?
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Mr Peabody: I think some figures Ontario Hydro has presented of houses it plans to fuel-switch are restricted to bungalows as opposed to two-storey houses. I think the figure the Nuclear Awareness Project came up with was if the two-storey houses that were electrically heated were included also.
Mr Arnott: Okay. How far would you go or urge the government to go to encourage fuel switching? Beyond 100%? I am asking that question because we have heard from a number of presenters that there are people who may not want to fuel-switch. Would you make it mandatory, for example, that new homes not have electric heat, that they have some other source, or make it mandatory that all households switch whether they want to or not, in order to meet the objectives of Ontario Hydro's demand-supply plan?
Mr Peabody: I think the building code should be changed so that all new houses do not have electric heat.
Mr Arnott: Entirely prohibit it as an option?
The Chair: That is what he is suggesting.
Mr Peabody: Yes, I said that. I feel that existing home owners should have the option of whether or not to switch over, but based on the fact that natural gas is much cheaper than electricity, if there was a 100% subsidy there probably would not be many holding back.
Mr Arnott: Do you not think it is a little authoritarian of a government to take that approach, to say: "You don't have that option. You can't heat with electricity even if you want to"?
Mr Peabody: No. I think that in Ontario we have established a precedent that government will intervene in many areas. We intervene in the areas of education and health care. We already set that standard with Ontario Hydro in the 1920s with energy. Ontario Hydro should continue to set that precedent with new initiatives, such as fuel switching.
Mr Jordan: Mr Peabody, you have based a lot of your fuel switching on this $50,000 per electrically heated home, so I would like you to get the new information that was given to the committee and rework your calculations.
I would also like to ask you, in light of the statistics provided to us on the number of all-electric homes, to give some serious consideration to the kilowatts and megawatts that you are going to depend on. I am a new industry coming in and you are telling me that you are going to give me power. I ask you where you are going to get it and you tell me it is going to be based on these different modes of conservation. I have to have some certainty of supply and some certainty of cost. Otherwise I will go someplace else. So when you are putting these out, I just ask you when you go to this much work and you are that committed to the cause, that we be careful that we are in fact getting our figures, because it is serious.
Mr Peabody: There are still 20 nuclear reactors that supply the base load in Ontario. This report by Passmore Associates does say that perhaps Mr Franklin overstated the case. However, they did some number crunching and found that perhaps $2,800 per kilowatt was a more accurate figure. So 15 times $2,800 is still $35,000, which still leaves a lot of leeway for 100% incentives for fuel switching.
Mr Waters: Thank you for coming in, Mr Peabody. You brought up an interesting thing on page 2, under "Public Utilities." I have heard from PUCs that the sky is falling and that if they do not grow bigger and bigger and keep Hydro growing, the cost to the individual in our communities will be enormous and that the only way they can keep the cost down is by spending more money. Yet you turn around and say that there would have to be a decline of 50% or something like this. Could you elaborate on how you came up with that? The other perception or the other side of the argument is interesting. I figure that a saving is a saving. The consumer really does not care.
Mr Peabody: That information was supplied to me by a researcher for Nuclear Awareness Project. If the committee would like a detailed answer on that question from me, I can provide it in writing at a later time.
I spoke with the mayor, who is on the utilities commission, and sent him a letter, and he said he was not opposed to Bill 118. I think perhaps the utilities should get away from the growth mindset and start considering themselves to be managers of electricity rather than simply suppliers.
Mr Waters: I will turn it over to one of my cohorts.
Mr Klopp: You talk here in your recommendations about 100% of the costs of fuel switching. I can see your point, but there are others who have said, "Well, somebody has already changed," in the light of trying to be fair with this bill. We have not really said any numbers, what we would try to recommend. One of them is that we help, and it will probably help all of us out because somebody has to pay for it one way or another, with loans to people, recognizing that those on low incomes know it is a cost saving. But to go and get a loan to put in that new furnace or whatever is just not within their reach. Would you be opposed to that kind of idea?
Mr Peabody: Loans as opposed to --
Mr Klopp: Outright grants.
Mr Peabody: I know Mr Jordan is opposed to this idea, but I think the Passmore report establishes what new generating costs do cost. Ontario Hydro and consumers who have already switched to natural gas are still saving money by reducing the demand for new nuclear power plants and new fossil fuel plants. With Darlington it is $13.5 billion and it is still is not finished. Unit 2 is not working and they do not know why. I do not think we can afford to build another new nuclear power plant. The amount of engineering that goes into a nuclear power plant I think is far too complex. The problems they have had at Pickering and Bruce A -- units 1 and 2 have been shut down for the last year -- simply point to the fact that nuclear power is not dependable as an option either.
Mr McGuinty: Mr Peabody, you have raised something that which has been raised by a number of people in support of Bill 118, that this bill is somehow going to increase Hydro's accountability to the government. I wonder if you might expand on that a bit for me. I do not really see how it does that.
Mr Peabody: The number of members on the board being increased to 22 from 17 I think is significant, because it will allow for broader ranges of interest to be represented on the board. With regard to the changes in the chair, I think that was important since the board of directors appointed Alan Holt as president without consulting the government.
Mr McGuinty: How does that help the government, though, to lend direction to Hydro apart from this business of policy directives? I do not see that. The board does not report to members of the government.
From my point of view, what we are seeing here is that this government is going to be able to issue policy directives. In the old days we called them policy statements. I guess "directive" connotes something slightly different from "statement." One of the things that concerns me is that when the government does that, the Hydro directors, those 22 you were telling me was a good idea, will be absolved from liability as long as they go along with what the government tells them. When the government tells them to do something, that will not be subject to debate in the House. It will just be a directive.
I want you to imagine this possibility. The government changes at some time in the future and the directive that is issued says, "You are going to build more nuclear generating stations." The directors in their heart of hearts may feel this is not the right thing to do, but they are going to have to go along with it because there is this thing in the bill that says, "as long as you do as we in the government say, you are going to stay out of hot water." I cannot see how that is going to be a good thing for you and your cause. I cannot see how it is going to be a good thing for ratepayers generally.
Mr Peabody: I do not agree with that statement at all, Mr McGuinty. I think the amendments to the bill put the policy directives on the table and out in the open. It will not go back to the system where we had Bill Davis making secret deals with Stephen Roman over how much uranium Ontario Hydro is going to buy.
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Mr McGuinty: You understand, though, that they are not subject to debate, or maybe you do not understand that. The government will issue a directive. It will go through an order in council. It may be made public. We are not sure yet. That is certainly not an element of the bill. It will not be subject to debate.
Mr Peabody: As I said, I am not familiar with that. It will be out in the open. It will not be a return to the system with the Conservatives, where there were secret deals made.
The Chair: Thank you very much for your participation here, for your interest and for your group's eagerness to share its opinion and expertise in these proceedings. You are welcome to stay, of course. Transcripts of your participation here are available to you or anybody else who is here this evening, as well as transcripts of the whole course of presentations and interrogatories by the committee. Let your MPP know. They are available to you free of charge. It is probably going to be one of the few things you can get without charge from this government this year.
GUELPH HYDRO
The Chair: The next group is Guelph Hydro. Good evening. Please be seated and let us know who you are. We have your written presentation, which will become part of the record by virtue of being an exhibit. Everybody is going to listen carefully to what you have to say.
Mrs Robinson: Mr Chairman, members of the committee, I am pleased to welcome you to Guelph. My name is Joyce Robinson. I am chairperson of Guelph Hydro and I wish to speak to you tonight on the amendments proposed to the Power Corporation Act under Bill 118. I am accompanied by Guelph Hydro's general manager, Mr Jim MacKenzie.
I am sure the committee will have heard and received presentations from a number of municipal electric utilities concerned with various aspects of Bill 118. The bill, as originally introduced to the Legislature on June 5, 1991, would significantly alter the relationship between Ontario Hydro and the government and have major impacts on electricity users in the province.
Policy directives: There are a number of areas of the bill that are of interest to municipal utilities, such as increasing the size of the board and the unusual retroactivity provisions. However, the matters that concern us the most relate to the provisions on policy directives and fuel substitution.
Section 2 of Bill 118 repeals section 9a of the current act and would permit the government, through the Minister of Energy, to issue binding policy directives to Ontario Hydro. Further, section 6 of the bill would add a new section to the act that changes Ontario Hydro's mandate to include anything the government sets out in a policy directive.
This suggests to us that the government could change Ontario Hydro's mandate by policy directive. In our view, Ontario Hydro should only be able to exercise powers and undertake duties that are authorized by legislation. However, the cumulative impact of sections 2 and 6 of this bill would enable a government to change Ontario Hydro's mandate by decree.
In a letter on November 14, 1991, the Minister of Energy indicated to me that the government will introduce amendments to the bill that will limit the directive powers to matters related to the powers and duties of Ontario Hydro as set out in the current act. While we accept that the minister indicates he will address our concerns, we have not yet seen the amendments he proposes. I am bringing our concerns to your attention so that you, the committee studying the bill, will ensure that our concerns in this area are addressed.
Section 7 of Bill 118 amends section 75 of the current act, which deals with what Ontario Hydro can include in the cost of power to municipal electric utilities. The amendment adds "the cost of complying with a policy directive issued under subsection 9a(1)." This means simply that the cost of a government policy directive will be borne in the cost of power paid by all municipal electric consumers across the province.
The cumulative impact of sections 2, 6 and 7 of Bill 118 significantly impact on the long-standing power-at-cost principle. Bill 118, in its original form, could result in the government using electricity rates paid by municipal consumers as a vehicle for regional development assistance or other activity possibly unrelated to electricity.
We recognize the importance and the need for government to act in promoting the economic development and wellbeing of regions throughout this province. However, we suggest this is best accomplished through government revenues, not electricity rates. Electricity consumers should not be subject to taxes hidden within their rates.
A recent illustration of this is the contribution of $65 million to the northern heritage fund. This fund and this contribution are not in any way related to the supply of electricity, yet our customers are paying for this through their rates. The balance of the $250-million assistance package is directed at the Elliot Lake and North Shore communities and is also paid for by electricity users across the province.
Our commission understands the need to assist communities such as Elliot Lake. Assistance during difficult times is an appropriate action for the government to take. However, we feel it should be emphasized that government is the appropriate authority to manage the assistance, and government revenues, not electricity rates, are the appropriate vehicle. We considered Bill 118 with the Elliot Lake assistance in mind and it demonstrated to us that the policy directive power proposed is inappropriate and needs to be restricted.
Fuel substitution: The municipal electric utilities in Ontario are strong supporters of energy conservation and are very active in energy management programs. Many utilities, including Guelph Hydro, are working cooperatively with Ontario Hydro in a range of energy management projects.
Guelph Hydro understands that electricity demand reduction, including activities such as fuel substitution, is a key to ensuring a long-term, reliable electricity supply. However, we are concerned that subsidizing fuel switching ignores market realities and imposes an unnecessary burden on electricity customers who may not have access to alternative fuels. Customers who do not have the option to switch will be subsidizing, through their electricity rates, those consumers who are able to switch. This is unfair. Currently other fuels, such as natural gas, are cheaper than electricity and the cost differential alone can make it a viable option for consumers to switch from electric heat.
The government has clearly indicated that it wishes to proceed with the section of the bill providing subsidies for fuel switching. In fact, in Update 1992, the update to the demand-supply plan, issued by Ontario Hydro two weeks ago, it would appear that fuel switching is an accepted fact. The minister, however, has also indicated that he expects Ontario Hydro to consult closely with municipal electric utilities, among others, to develop appropriate guidelines. We appreciate that commitment to meaningful consultation.
Our provincial association, the Municipal Electric Association, has established a task force to study fuel switching. We suggest that legislation not be passed until this task force has completed its study and has had an opportunity to discuss the results with Ontario Hydro and other interested groups.
The minister has committed to a process of full consultation. We would suggest this commitment be reflected in the legislation.
We are also concerned that the promotion of fuel switching to natural gas is only a short-term reaction to the electric capacity crunch that we have to address. In our view, it would be more appropriate to consider the long term. Ontario Hydro's demand-supply plan places an increased emphasis on natural gas as a source fuel for generation by combustion turbine units operated by Ontario Hydro or generators.
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At the same time, the government is promoting increased use of natural gas for space heating, but are we guaranteed a supply of natural gas to meet our future needs? Natural gas is a non-renewable resource. Our free trade agreement with the United States commits Canada to US access to gas reserves. Has the government considered the long-term viability of gas supply?
We recommend that the government develop a long-term view of this issue through the Ontario Energy Board hearings on integrated resource planning for Ontario natural gas utilities. The IRP hearings are expected to get under way in the spring of this year. You will recall that not many years ago the government was promoting off-oil programs. We suggest the government develop an overall energy strategy or policy that would address issues such as long-term supply and fuel switching. A strategy should be developed that would address all forms of energy and not simply focus on one area, which Bill 118 does.
This concludes Guelph Hydro's comments to the committee on Bill 118. We appreciate the committee's consideration of this presentation and are prepared to respond to any questions.
The Chair: Thank you, Mrs Robinson. I should explain to you and other people here that this is a three-party committee which is representative of the Legislative Assembly. With us is Dalton McGuinty, the Energy critic for the Liberal Party, the official opposition; Leo Jordan, Energy critic for the Conservative Party, and Bob Huget, MPP for Sarnia and parliamentary assistant to the Minister of Energy, accompanied, of course, by their colleagues from the three caucuses.
Mr Klopp: On the last page, I think it is a very good point that you suggest government develop an energy strategy for all forms of energy, but where in Bill 118 has it said we are not looking at all forms of energy in the changes we are promoting?
Mrs Robinson: Mr MacKenzie is going to answer this one.
Mr MacKenzie: The bill only addresses fuel switching from electricity, It does not provide a long-term view of the total energy resources this province needs. It focuses simply on removing or reducing electricity use, but does not focus on what you substitute it with, except perhaps for natural gas, which is a non-renewable resource. We feel it would be more appropriate to develop an overall strategy that includes all forms of energy in this province. The province does not have an abundant supply of its own natural gas. We are dependent totally on outside resources.
Mr Waters: A couple of quick questions: If you were in business and your supplier was charging you 7 to 10 times the world price for a commodity and you could get out of that deal and save money, would you not take that?
Mr MacKenzie: I presume you are referring to the Rio Algom arrangement in Elliot Lake.
Mr Waters: I am referring to the Elliot Lake thing. We have been paying for a number of years. We were going to continue paying 7 to 10 times the world price and we bought our way out of the contract as cheaply as we could. Would that not make good business sense, or do you go on paying the price?
Mr MacKenzie: It is our understanding from what we have read that Ontario Hydro had an opportunity to remove itself from that contract in 1993 and that there was in fact no real saving of $1.4 billion. It is money they have not spent; it is not really a saving. With respect to the $250 million that we referenced, Ontario Hydro could have saved $250 million for the electricity consumers of this province if it had not been required to provide that to those communities.
Mr Cleary: We have heard similar briefs many times in the past two weeks. I just want to ask what part of this bill are you in favour of, if any?
Mr MacKenzie: As indicated in Mrs Robinson's presentation, we had an interest in a number of parts of the bill that concern us. I am not in favour of increasing the board of directors, for example, of Ontario Hydro from 17 to 22. I do not think that is necessary. However, if the government feels that is appropriate we will not argue the point. It is not a real issue for municipal utilities. As for the rest, the bill in total is perhaps unnecessary.
Mr Cleary: You have already answered my second question. You are satisfied with the makeup of the present board, then.
Mr MacKenzie: We think the way the present board, constituted with 17 members, is not inappropriate; that is correct.
Mr Cleary: As you know, the government has the right to pass this bill and if it does -- I think Mrs Robinson already mentioned they were not in favour of the grants or loans coming out of the Hydro budget. Is that correct?
Mrs Robinson: Yes.
Mr Cleary: If this bill is passed, would you have any objection to that coming from another ministry, the Ministry of Energy, or do you still think it is unnecessary?
Mr MacKenzie: Do you mean grants for fuel switching?
Mr Cleary: Yes.
Mr MacKenzie: Currently pricing is such that people are able to switch based on market conditions and I know of people who have switched from electric heating to high-efficiency gas furnaces at their own cost. They do not need any other incentives to do that.
Mr Arnott: Thank you for your fine presentation. I really enjoyed it. I want to refer to the concerns you express with respect to the part of the bill that refers to policy directives. As I think everyone knows, the present Power Corporation Act has a provision that the government can present policy statements to Ontario Hydro that I assume Hydro has the option to implement if it can, or whatever. Obviously, with this bill the government feels policy statements are not enough and there has to be a provision for policy directives, as you say, by decree, ordering certain action to be taken.
If I assume this bill is going to be passed as is, and if I look down the road a bit, there is a possibility that some day there would be a cynical and manipulative government that has been in power for a while and sees difficulty going into the next election. It decides a year before the election to do something to get a lot of attention. Perhaps it would give a free refrigerator to everyone in the province. Would there be anything in this new bill that would preclude that from happening if the Minister of Energy decided it was the appropriate policy of the province?
Mrs Robinson: No, and it makes me think of what happened years ago when they switched from 25 to 60 cycles. That was all done, and actually it would look like something cynical. On the other hand, I understand refrigerators are one of the worst consumers of energy. As a matter of fact, I gave up my 25-year-old refrigerator about a year ago and I notice quite a difference in my bill. By the way, I have an electrically heated house that was built about 25 years ago and we are thinking about switching to gas. It would be quite a considerable cost to us, but we are certainly planning to look at it seriously because it would save us quite a bit of money.
Mrs Robinson: Yes, and I also bought a microwave. I do not use the oven and stove as much. I wrapped the water heater too, and my kids left home.
Interjection: That was a substantial saving.
The Chair: You have been somewhat provocative, but that is a good thing. You have left the whole committee with something to think about. We appreciate very much your coming.
Mrs Robinson: It was very interesting.
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WATERLOO NORTH HYDRO
The Chair: The next participant is Waterloo North Hydro. Please tell us who you are. We have your submission, which is going to become part of the record by virtue of being an exhibit. We would like to hear what you have to say.
Mr Clark: I am Al Clark, general manager and secretary of Waterloo North Hydro and I will be speaking on behalf of our commission this evening. I would like to thank you for this opportunity to express our thoughts on Bill 118. By holding such hearings, it shows that you appreciate there are divergent views on this subject and that you are trying to assess the implications these changes would initiate.
We are of the opinion that Bill 118 would significantly alter the relationship that exists between Ontario Hydro and the government and that it would be detrimental to the electric customers and the people of this province. The parts of the bill of particular concern to our utility are those that would specifically allow the Minister of Energy to issue binding policy directions to Ontario Hydro and to have the costs of such directions included in the cost of power, and also those sections dealing with fuel substitution.
The part of Bill 118 dealing with policy directives is of particular concern, since there is no limit on the scope or direction of such directives. There is serious potential that the government could move away from the principle of power at cost. This was recently demonstrated by the contribution of $65 million to the northern Ontario heritage fund. A number of utilities have already voiced their objection to this payment and we strongly support those utilities in this matter.
We have no problem with the government granting concessions or giving incentives for the purpose of promoting economic development. However, that should come from tax revenues and not be included as a hidden tax in the price of electricity. We know the Minister of Energy has indicated that changes will be forthcoming that will limit the scope of such policy directives to the current mandate of Ontario Hydro. However, we have not seen these changes. It is our opinion that the sections dealing with this particular matter in Bill 118 should be completely withdrawn since they are not desirable, nor are they necessary.
The board of directors and the chairman of Ontario Hydro are currently appointed by the government. With the government making these appointments to the board, it already has significant influence and control over the direction Ontario Hydro will take. We appreciate the need for Ontario Hydro to be accountable to government. However, we feel the existing system is adequate.
Bill 118 could result in very serious consequences in that such policy directives could and would likely be subject to the whims of the current government. Every time the government changed, the new Minister of Energy would likely make a series of pronouncements, forcing Hydro to go in this or that direction solely to meet and fulfil an election promise that may not have been fully explored or thought out. It is far more desirable that policy changes be fully explored and considered before they are implemented.
The current system has a certain amount of stability and consistency built into it but also ultimately allows the government to have the final say. Changing this to allow for short-term agendas and swings in government thinking would seriously impact on Ontario Hydro, which must operate with a long-range vision. We believe Ontario Hydro and the people of this province are best served by the implementation of good, well thought out and consistent approaches to supplying power and energy to customers.
It should be noted that allowing the issuing of policy directives is a double-edged sword. A government that is in power today could have its direction seriously altered by the government of tomorrow. The very prospect of this would make it very difficult for the Ontario Hydro board to make good, long-range decisions.
The second major issue in Bill 118 that concerns us is fuel substitution. Including the cost of incentives in the cost of power for fuel substitution is an issue that needs to be very seriously considered before we proceed. While Waterloo North Hydro has always supported Ontario Hydro and the government in its demand-management and energy conservation programs, we are not convinced our electric customers should be assessed for the costs involved.
As you are no doubt aware, the price of electricity is increasing significantly. Including the cost of large-scale incentive programs for fuel substitution will only place additional pressure on retail rates. This is of particular concern to our customers who are not pleased with the prospects of further increases, particularly for those who have no access to alternative energy sources.
Waterloo North Hydro is geographically the largest utility in the province and as such we have a number of rural-type customers where no gas is available and there is no prospect that it will be in the foreseeable future. It would seem only fair to us that if one form of energy, ie electricity, is expensive, the cost of conversion from that source to another should be borne by those who are going to benefit, ie the customer who actually converts and the other energy company.
It is a long-standing principle in our society that market forces are the best mechanisms to determine the availability, price and allocation of products. Tampering with this in a material way distorts their efficient and effective allocation. To do so otherwise would ultimately prove to be detrimental to our customers and the province.
Before we proceed further with fuel substitution, I feel two things need to happen: first, that the government develop a comprehensive energy policy for this province; second, that the matter of fuel substitution be examined in light of this policy and in conjunction with all interested and affected parties.
That concludes my comments on Bill 118. I would be pleased to answer questions.
Mr Huget: I want to go to page 2 where you mention the northern heritage fund. The utility that appeared before you also mentioned Elliot Lake and that scenario. I feel the opinion put forward by municipal electric commissions is that the money that was passed on to Elliot Lake was a misuse of revenues, yet I do not get the same feedback when we look at the several times the world price we paid for uranium. I believe that is a misuse of revenues as well in terms of Ontario Hydro.
In your presentation you say you do not have a problem with the government granting concessions or giving incentives for the purpose of economic development. How does Elliot Lake fit into that picture, in that Elliot Lake was a creature of Ontario Hydro and has existed largely because of the inflated rates we paid for uranium from Elliot Lake? Is that not some kind of incentive, an economic development program, that took place some time ago? Where should that money have come from? Did it not indeed come from Ontario Hydro through rates?
Mr Clark: Certainly the money that was paid to the mines in Elliot Lake came from Ontario Hydro. There was probably a mistake made way back when Ontario Hydro got locked into signing those long-term contracts. It was probably shortly after Hydro signed those that the price of uranium started to dip. My personal view is that it should not have happened in the first place. Elliot Lake should probably not have been allowed to have so much of the contract to supply Ontario Hydro.
1950
Mr Huget: In that economic sweetheart deal, if you will, between Rio Algom, Denison Mines and Ontario Hydro, as far as I know the extra costs for that uranium must have been paid for through hydro rates. I do not recall any special section on the Hydro bill saying there was a tax for the extra price we paid for uranium. I believe it was paid through the cost of electricity. Is that not right?
Mr Clark: Certainly it would be paid through the cost of electricity. But I also feel that government probably had a significant influence on where Ontario Hydro was to buy uranium. It is my feeling the provincial government said, "If Ontario Hydro is going to build nuclear plants, it is going to buy uranium in Ontario and pay whatever that price happens to be."
Mr Huget: I want to briefly touch on the fuel-switching issue and the effects on your utility of fuel switching and the fixed costs of your utility. Could you tell me what percentage of your electric rates to your customers are fixed costs, your transmission and distribution costs?
Mr Clark: Approximately 82% of our costs are for power we buy from Ontario Hydro. The rest are our local costs. How we split that between fixed costs -- labour, I would guess, is a small part of that because a fair bit of that labour gets capitalized in terms of the distribution system and then charged out to the customers over a period of time. Probably the actual operating costs for issuing the bills, meter reading, maintaining the system, are in the range of 7% or 8% of the cost of power to our customers. The difference between that and the 18% that is our costs is probably the cost of the fixed assets we have to provide.
Mr Fletcher: Imasco makes money off its cigarettes and it moves it into another part of its operation. That is not wrong in private industry. What I am getting at is that business in government, whatever business -- whether it be Ontario Hydro -- makes money from its product. Why can it not shift some of that money into another section of the government? Is that wrong compared to private industry doing that? I am wondering why there is such a problem with moving some of the revenues we get from Hydro into other areas.
Mr Clark: Yes, I guess if the government chooses to tax Ontario Hydro, that is its choice and it can do it. I believe it does that now through water rental rates and the debt guarantee. I believe that is their money and they can pass that money out in any way they choose. That is the government's right. That is the business they are in. But I do not think the government should try to unload its responsibility and hide it on somebody else.
Mr McGuinty: I want to take the opportunity to have you confirm something for me if you can. It is in relation to the facts connected with Elliot Lake. There has been all kinds of discussion and I think I am pretty clear on the facts. If not, maybe you would let me know.
It is my understanding that what happened is that Ontario Hydro had entered into a contract to purchase uranium from Rio Algom. There was a provision in the contract that said, "If you give notice in 1991, you can pull out in 1993." However, it was a prerequisite that they get consent of government to do that. The government said: "No. You're not going to pull out in 1993. You're going to extend to 1996. We're going to cut back the price you would have had to pay for the uranium, and you're only going to pay $185 million more than you would have paid on the open market. Furthermore, you're going to kick in $65 million to the northern Ontario heritage fund." So the net result at the end of the day when all this is added up is that this deal is costing Hydro $250 million more than it otherwise would have cost had it simply bailed out in 1993 as it was permitted to do under the legal terms of the contract. Is that your understanding?
Mr Clark: Generally speaking, yes.
Mr McGuinty: Of course, the issue remains as to whether there was an obligation owed to the people of Elliot Lake. If there was such an obligation, by whom? I maintain it was the government's obligation, not Hydro's obligation.
I want to ask you something, though, in relation to subsidies -- that is the word that has been kicked around here lately -- to assist people to switch from electricity for purposes of heating to natural gas or an alternative fuel. If Bill 118 was ultimately to provide that there be no grants, only loans extended to people interested in making the switch, would that have any adverse effect on ratepayers?
Mr Clark: It depends on who guarantees the loan, I guess, and whether there are defaults on it.
Mr McGuinty: Okay, maybe it is difficult --
Mr Clark: Certainly it would have less impact than an outright grant; there is no doubt about that. It may be a better way to promote the switching because it provides for cheaper financing for the individual customers to convert.
Mr McGuinty: I am assuming Hydro would extend a loan at a reduced rate as a result of its borrowing power. It has the guarantee of the province, of course. I guess it is difficult for you to answer that question, but my assumption was that it would not be as detrimental as an outright grant.
Mr Clark: Oh, absolutely not. However, if it is an interest-free loan, then it becomes much more of an incentive. If it becomes a forgivable loan, it is just an outright grant. I guess it depends on how your loans are set up.
Mr Arnott: You have stated right near the end of your presentation: "It is a long-standing principle in our society that market forces are the best mechanisms to determine the availability, price and allocation of products. Tampering with this in a material way distorts their efficient and effective allocation." The present government we have in Ontario is known for many things, but promotion of the value of the free market is probably not one of them. Would you care to expand on what you have said and why that is so essential, especially in a finite resource such as energy?
Mr Clark: I have the basic feeling that products should be priced at whatever their costs are. If you distort that, you end up either overproducing or underproducing. Probably the best example in the world today is eastern Europe where the communist countries have subsidized certain products to the point where they simply cannot produce them. Nobody will produce them. I do not really think in our society we have gross misuse of that. If products become too expensive and there are other alternatives, the customers will switch to those other alternatives and I honestly think they should. It is in their best interests. That is why we are here: to serve the customers of the province. If we have a product that is too expensive and there is another way of doing it cheaper, that is the way our society should go. I do not think we should try to maintain a system in place through incentives. If it is not needed, we should get out of it, and the price is the right way to do it.
Mr Arnott: Do you think that if $6 billion of demand-management or fuel-switching incentives are put forward we may wildly distort our energy market in Ontario?
Mr Clark: There is a concern that it will be distorted. This is one of the things the government, Ontario Hydro, the MEA, the large players in this should sit down and really sort out. Is that a distortion or is it not? Six billion dollars sounds like an awful lot of money to me.
Mr Jordan: You, along with other utilities across the province, state that many areas of Bill 118 cause you concern. I wonder how you feel about putting Bill 118 on the table for the present time and have further study and establish a task force to develop a comprehensive energy policy for this province, as you have indicated here in your brief.
Let's just put this thing on hold because of the many areas of misunderstanding and dissatisfaction. Would your utility or you as an individual think that establishing a task force to establish a comprehensive energy policy for this province would be a start in the right direction?
Mr Clark: Yes, I do.
The Chair: We all thank you for taking the time to be here and participating, as so many others have. This legislation has attracted an incredible amount of interest. As you can well imagine, the views that have been expressed have covered the complete spectrum, but they have all been a valuable part of the process, so we thank you. We are grateful to you and we trust you will keep in touch.
2000
UNION GAS
The Chair: The next participant is Union Gas. Come up and have a seat. I have to tell you people that we spoke with Union Gas last night. You know that. I checked the submission made by Union Gas in Chatham last night and the one that you are about to make today and they are not the same, not that they contradict each other, but you raise some issues and you talk about some figures that are new. Far be it from me to tell you how to make your presentation, but time is scarce.
You may want to highlight your submission, getting down to the nitty-gritty, because as you can see --
Mr Dadamo: Same map.
The Chair: It is Ontario; it should be the same map. I hope things have not changed in the last 24 hours.
The most valuable part of these exchanges almost inevitably is the questions and answers, so let's try to get to the heart of the matter. Tell us who you are.
Mr van der Woerd: We will make our submission brief so that there will be time for questions. I would just like to make a few introductory comments. I am John van der Woerd. My function is manager of marketing at Union Gas. I have with me colleagues from this particular area called the northern region of Union Gas. Rob Fennell is our manager of operations and Frank Varga is our manager of sales for this area. I will make a few introductory comments and then Frank is going to give you some perspectives that apply particularly to this area in terms of fuel switching.
First, as you remember, we believe that conservation through fuel switching benefits all participants in the transaction, including electric customers who are going to realize reduced increases in electricity rates as Ontario Hydro chooses fuel switching rather than other more costly capacity options, including Hydro demand management.
Second, new gas customers will receive lower energy bills. We showed you some of that evidence.
Third, society sees reduced energy consumption generally as well as reduced environmental emissions. Ontario Hydro will experience reduced demand as a result of fuel switching and thereby limit further capacity investment requirements. The local electric utilities will pay less for electric supply because they have the opportunity to choose a less expensive option, or Hydro does. To the extent that the local electric utilities have some concerns, Ontario Hydro may wish to develop mechanisms to resolve such concerns in a mutually beneficial way.
I would like to summarize for you some of the reasons we think it would be useful for the committee to consider natural gas as one of the fuel-switching alternatives.
Customer savings are in the range of 50% as compared to electricity. In addition to that, source efficiency is 50% greater with gas than with electric, and carbon emissions are reduced in excess of 65% when going from electricity to gas.
As we discussed earlier, we showed you a perspective regarding our system expansion project, which is a project to displace 100 megawatts by expanding our distribution system. We are proposing that costs be shared among the participants in ways that benefit them so that our project, which would be a $62-million project to displace 100 megawatts of electricity, would include contributions by customers for their equipment, Union Gas for its distribution system, and if Hydro saw fit we would see the possibility to have incentives for the transmission lines that need to be built to transmit gas, as well as some incentives for the customers to switch.
As I mentioned, it is our view that fuel switching is an option that is missing in Ontario Hydro's power portfolio that could be put in place with this bill. We would only be proponents of this particular option being added to the extent that it was economical for Ontario Hydro as well as Union Gas.
With those introductory comments, I would like to turn the floor over to Mr Varga so that he can take a few minutes as well.
Mr Varga: I would like to take the opportunity to put some of the comments heard from John last night and now into a local perspective, what it means to the local area, and I have brought this map along to refer to.
The Chair: Mr Revie wants to hear you talk about Rockwood.
Mr Varga: Yes, and I shall. I will cut down the text and you can fill in the rest later. I will try to hit the salient points.
As you will note on the map, the northern region is coloured in purple and yellow. We have eight divisions in the company. Two of those divisions become the northern region. This region covers a large geographic area in southwestern Ontario, from Georgian Bay to Lake Erie, including all the major communities of Owen Sound, Kitchener-Waterloo, Guelph, Cambridge, Brantford, Simcoe and dozens of smaller communities. We have 125,000 residential and 16,000 commercial-industrial customers in this area and we employ about 370 individuals who provide services ranging from pipeline installation to technical sales advice, billing services and so on. We pay municipal taxes in excess of $4.3 million. Our average annual capital budget is about $17 million, so we create a lot of employment in the area.
If you would just look at our Waterloo division -- my secretary calls it lavender; I call it purple -- we have installed approximately 94 kilometres of new gas main and about 4,000 new gas services annually over recent years. We have been very busy in the marketplace. Last fiscal year alone, over 1,800 customers in this region switched from other fuels to natural gas for heating. About 58% of those were oil and 42% were electric. We expect similar numbers this year. In fact, we will probably hit 2,000.
In our 1991 fiscal year, over 3,500 customers in the region switched from electric to gas water heaters and our forecasts are similar for this year. Natural gas has become the fuel of choice based on economy, efficiency and environmental advantages.
Working with Ontario Housing Corp and local housing authorities, we are currently in the process of converting 52 buildings from electric to gas water heating in Waterloo division. Almost 1,000 new social housing units will use gas for heating and water heating this year. This represents over 90% utilization, up substantially from 1988 where almost everything was baseboard.
In our efforts to bring higher efficiency equipment to the market and support the province's energy production and efficiency objectives, our division pioneered the first installation of microcogeneration in the province at Lutherwood school for the developmentally handicapped in Waterloo. This was a joint project co-sponsored by the Ministry of Energy and Ontario Hydro. Additionally some of the first installations of direct-fired water heating equipment occurred in Waterloo. This equipment is almost 100% efficient.
We have also introduced through-the-wall cooling units requiring no duct work. Space-heating natural gas fireplaces have also provided another option to offset electric baseboard heating.
However, there are limitations to our ability to provide our fuel and services to many consumers in an economical manner. Conversion costs can be onerous, and it is not economically possible for us to supply natural gas to all communities.
2010
In Waterloo division there are dozens of communities without access to natural gas. The costs of the transmission systems to bring natural gas to these communities make most of these projects economically unviable. We have reviewed our ability to provide gas service to a sizeable community like Rockwood, for example, just outside Guelph. The community has approximately 600 homes, of which 364 are heated with electricity. Presumably all the houses use electric water heaters. Forecasts from builders and developers project that Rockwood will grow to a community of over 2,600 homes over the next 20 years. New installations are going electric due to the unavailability of natural gas, and we continue to receive numerous inquiries from Rockwood residents and businesses.
In order to provide natural gas to Rockwood, the project costs would be $6.5 million. Of this total, using our economic tests, we can only support $3.6 million economically. The difference would be required as an aid to construction to bring natural gas to the community of Rockwood. Rockwood is just one of many examples we have throughout the company territory. The interest in natural gas is high and the reasons are straightforward. John has outlined those.
Current estimates by Hydro show that it will cost approximately $800 to generate a new kilowatt of electricity, and Ontario Hydro is spending in the order of $600 per kilowatt to reduce consumption and demand. We estimate that sufficient incentives can be generated at approximately $300 per kilowatt for substitution of natural gas to be successful.
The point I want to stress next is that our option is certainly cost-effective compared to the other two alternatives, but furthermore, when a furnace or a water heater is converted to natural gas, the electric load is definitely reduced. It is gone and you can verify it. This contrasts sharply with advertising and promotional activities, which are hard to measure.
In Rockwood, converting existing electrically heated homes would reduce demand by 3.64 megawatts. This is equivalent to saving $2,912,000 in generating capacity. If we look out over 20 years, the total savings could be as much as 24 megawatts. Expressed in financial terms, it will cost Ontario Hydro $19,320,000 to supply Rockwood over the next 20 years. The natural gas option, using the $300-per-kilowatt equation, would only cost $7,245,000, a saving of some $12 million. It is clearly more economical to support substitution in this example.
We provide many examples of these opportunities in the northern region and we have undertaken expansion on our own where it is economical. The natural gas penetration rate in the northern region is among the lowest in the company due to past aggressive marketing by Ontario Hydro. There are many all-electric subdivisions that provide immediate opportunities to reduce load.
Recently we began piping the Parkwood Gardens area here in Guelph. There are over 500 electric homes in this survey representing five megawatts of load reduction potential. We took on this project on our own within our own economic abilities and we figure that we will convert about half of all those homes. With further incentives from Hydro, perhaps the other half or a good portion of those would convert.
We also recently finished piping the community of Mannheim for some $800,000 in capital investment. We have already converted 50 electric homes there out of a total of 200. In Simcoe we have converted over 120 homes from electric this fiscal year and have spent over $300,000 in capital.
Overall, in Waterloo division the heating market share for natural gas is only 56%. Water heating is only 42%. This means there are potentially over 56,000 heating customers and 99,000 water-heating customers. Assuming only half the heating customers are electric, the potential load reduction could range as high as 493 megawatts. This is in Waterloo division alone, in that purple section. Further, only 6% of customers in the division cook with natural gas and 5% use it for clothes-drying, significant other opportunities for load reduction.
I would like you to note on the map the very large areas referenced in white, particularly to the west of the purple. These areas have no natural gas available whatsoever. Many more areas even within the coloured sections, which are our franchise areas, have no gas due to the capital costs that make the projects uneconomical. This year -- we track these -- we have had over 140 individual inquiries from these communities, and we have surveyed and unfortunately have been unable to provide gas to over 660 households or businesses that directly inquired of us, due to capital costs considerations.
We are obviously interested in economic expansion of our system and the economic provision of services in the province. We know that the province and Hydro have the same interests. We respectfully suggest that supporting substitution complements the province's and Hydro's objectives.
We will be most pleased to answer questions.
Mr McGuinty: Think of me as a very cynical consumer. At one point in time the feds told me I should get off oil. They used my taxes to help me get off oil and to help others get off oil because they could not supply me with a guarantee regarding supply, essentially, and price. Hydro, like that fellow on The Price is Right, tells me to "Come on down" and to "Live better electrically." So I have done that, but now I have learned that electricity is very expensive and is not good for the environment. Now Hydro is maybe going to pay me to go back to oil, so I am concerned about that. Now the gas people are saying "Come on down," so I am concerned about supply and want to know what guarantees you could offer me as a consumer if I switched to gas, about supply, about your pipeline capacity and about price.
Mr van der Woerd: Regarding the issue of supply, I think in the first instance it is certainly something to raise as a point. As we have mentioned, we think the supply of natural gas is such that there is a glut on the North American market. There is a glut that is reflected in the fact that the price of gas at the retail level is now 7% lower than it was eight years ago in Ontario. That has all happened since the time of deregulation, when the market price tried to reflect a balance between supply and demand. That is indicative of the fact that there is a significant supply of gas on the North American scene, but that does not change the fact that conservation is as much a part of the way gas utilities do business as it is a part of the way electrics do business. So conservation is important to ensure our integrity in the future. If we look at substitution and at the impact it would have in southwestern Ontario, let's take Union Gas as an example --
Mr McGuinty: Sorry; I think you are straying a little bit. It is supply, pipeline capacity and price. What guarantees can you offer me?
Mr van der Woerd: Let me take you through the analysis of Union Gas's situation. We sell 250 billion cubic feet of gas today. If we connect all the cogeneration that we think is available to be connected and all the substitution that is theoretically possible, we will increase our sales by about 50%. This is what is going to happen in Ontario. In the situation where we have the kind of surplus that we do and we add that level of sales, I think the concern about supply -- I respect the fact you have that concern, but I submit to you that this kind of evidence supports forecasters who are saying the price of gas is going to be stable for a very long time because of the surplus of supply.
The Chair: Thank you. I am not sure whether Mr McGuinty is going to be happy with that, but we have to move on to Mr Arnott.
Mr Arnott: I would like to put a proposition to you and ask whether or not you agree. I believe history has taught us that if we tamper with and distort the free market system in a significant way, we have long-run problems in that market. I think what the government wants to do is have everyone -- it has said many different times that space heating should not be done by electricity. If the government brings forward incentives that totally eliminate that form of heating, I have real concerns about the security of supply and the price of natural gas.
2020
Mr van der Woerd: Mr Arnott, I would too. I would share that concern. We agree with you that the free market needs to work and that impediments need to be removed rather than added.
What Bill 118 does is give Ontario Hydro the ability to make capacity choices. One of the choices they cannot make because of the existing Power Corporation Act is fuel switching. We would only suggest that they do that to the extent that it makes financial sense for them and their customers. They cannot do that today. This bill is going to give them the ability to choose an inexpensive option that is in their best interests and the best interests of customers. If it is not in their best interests or the best interests of electric ratepayers, then they ought not to be doing it.
Mr Arnott: If it is in the best interests of the customer, why do they need the incentive?
Mr van der Woerd: It is in the best interests of customers because the next available option to fuel switching is twice as expensive, and the next available option thereafter is ten times as expensive.
Mr Arnott: Why do they require incentives?
The Chair: Mr Dadamo, you may want to ask the question Mr Arnott wants real bad to ask now.
Mr Dadamo: It is good to have you as good corporate citizens in the city of Windsor, by the way.
Mr Varga, it says here that in fiscal year 1991, over 3,500 customers in the region switched from electric gas to water heaters. It says equally that in 1992 you will have probably around the same. Do you perform any studies that make a distinction on the use of electricity to gas being more economical? In other words, do you go out and make the sales pitch or do people come to you saying they would like to make the switch?
Mr Varga: We do both. We clearly provide promotional material in the marketplace that shows the actual costs. Those costs typically are not disputed by the electrical utilities or other people in the marketplace. We do mailers and therefore we promote them in a true marketing way. The newspapers and the media also support that. People do call us. In fact, we get dozens of calls every day. We have over 40 or 50 water heaters go out every day, and that is not just because we called people or called on people.
Mr Dadamo: Okay, one other quick one.
The Chair: No.
Mr Dadamo: No? Okay.
The Chair: Union Gas, thank you very much for visiting us yet one more time. We appreciate your coming here, especially in the evening.
WATERLOO PUBLIC INTEREST RESEARCH GROUP
The Chair: The next participant is the Waterloo Public Interest Research Group. Gentlemen, please tell us who you are and tell us what you will. We have 20 minutes. Please try to save at least the last 10 for questions.
Mr Novak: My name is Daryl Novak and I am a staff person with the Waterloo Public Interest Research Group.
Mr Douglas: My name is Cameron Douglas and I am a master's student in the faculty of environmental studies at the University of Waterloo. I promise tonight's presentation will not take more than about six or seven minutes, so we will have lots of time for questions.
In my studies, I am specializing in land use planning and energy issues. I am also a member of the James Bay work group, which is part of the Waterloo Public Interest Research Group, and it is on their behalf that I would like to speak to you tonight.
In terms of my familiarity with electricity planning issues, I have just completed a comprehensive course entitled "sustainable energy futures," which addressed, among other things, the potential for energy conservation and efficiency in Canada, and specifically in Ontario. As a requirement for that course and as a result of my interest in Hydro-Québec's James Bay development, I prepared a study of Hydro-Québec's electricity planning procedure in which I examined, for example, its conservation and efficiency strategy.
The James Bay work group that I represent tonight has over the past nine months been involved with promoting awareness of and citizen involvement with issues concerning Hydro-Québec's James Bay development. Our group has, however, slowly shifted its focus to our own backyard of Ontario, and as such has looked for ways to avoid the need for construction of new hydraulic, nuclear and coal-based electrical generating facilities in Ontario. We believe that in terms of meeting growing energy service demands in Ontario, conservation and efficiency measures are much more desirable than new conventional supply options in terms of economic and environmental impacts. I am sure your committee is more than familiar with the impacts I am referring to. Specifically, our group has begun to actively promote electricity conservation in the city of Waterloo, and we have the official endorsement in principle of Waterloo city council for our efforts.
I would like to speak tonight in favour of Bill 118 because I believe its passage would remove several barriers that stand in the way of the implementation of conservation measures our group is attempting to promote. I am referring specifically to two sections of Bill 118.
The first is the section that changes Ontario Hydro's mandate to allow for the active promotion by Ontario Hydro of space-heat fuel switching, ie, off electricity. I am aware your committee has received extensive support for this proposal from other consumer and environmental groups, so I will not focus on this issue other than to confirm our support for this change in mandate for economic and environmental reasons that we are told have been brought forward in previous submissions.
We realize there is some opposition to fuel switching, but we believe this change would very much be in the public interest and we fail to recognize how reduction in the wholesale cost of electricity to municipal utilities would make their mandate any more difficult to carry out.
The second issue of Bill 118 that I speak in support of is section 8, concerning section 95a of the old act. This amendment would allow municipal utilities to amortize, over several or many years, the cost of conservation initiatives. This applies to cases where it is cheaper for the utility to reduce demand using conservation than it is to purchase electricity from Ontario Hydro. Under existing legislation, all conservation programs must be budgeted and paid for as operating expenses, which means effectively that only those initiatives that pay for themselves in one year or less will be implemented. Clearly this limits the potential for conservation.
For example, approximately 15% of the population of of Waterloo are students attending the city's two universities. Typically students will not live in one place for more than about eight months. The conservation measures of compact fluorescent lightbulbs and set-back thermostats for electric space heating, for example, both have payback periods longer than one year but generally less than five. As it is not economically rational for students to invest in these measures, market forces alone cannot be expected to deliver them. However, if the local municipality were allowed to amortize the purchase of these devices over the lifetime of the device, it could become economical for the municipality to subsidize in part or in total the purchase of these devices.
Clearly, however, the savings Ontario Hydro would derive as a result of reduced demand must be passed on to the municipality for compensation of the cost of the devices and of lost operating revenues. Ontario Hydro could pay the municipality for the lost sales as well as passing on a portion of the savings it has realized. This is in effect a win-win-win situation. Ontario Hydro's costs are lower, the municipality's costs are lower and the consumer's costs are lower, not to mention of course the environmental benefits.
An arrangement similar to this has already been implemented by the Pacific Gas and Electric Co in California and by New York's Niagara Mohawk Power Corp. I will very briefly read a description of this program that I find particularly convincing:
"Niagara's residential low-cost measures program provides each participating household with a low-flow shower head, a compact fluorescent lightbulb and insulation to wrap their electric water heaters and pipes. The equipment should save 960kWh per participating household per year. For each household, the utility loses about $72 in annual energy sales but saves about $40 on fuel and capacity costs. The difference ($32 a year) is charged to the residential customers each year for eight years and includes a $5 profit for the utility. For the equipment, each participating household pays $6 a year for eight years. Therefore, each household will save $272 over eight years."
The source I quote here is the special publication of Scientific American called Energy for Planet Earth, from the chapter "The Efficient Use of Electricity."
I obviously do not have the specifics as to how such a program would work in Ontario and in Waterloo. However, the proposed changes to section 95a of the old Power Corporation Act would open up a great number of exciting possibilities for the implementation of energy conservation in Ontario. Our group would be more than willing to assist our local utility, Waterloo North Hydro, in the planning and implementation of such possibilities in Waterloo.
In conclusion, I would like to commend Ontario Hydro for its recent and dramatic increase in commitment to conservation and efficiency. Many of its initiatives will represent significant changes to past ways of doing things. As a result, a certain amount of inertia that will make these changes more difficult can be expected. That is why I have spoken tonight in favour of two of the proposed changes to the Power Corporation Act.
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Mr Arnott: Thank you very much, gentlemen, for coming forward. I appreciate your opinion, your strongly held view on this matter. I do not have any questions but I want to thank you for coming forward.
Mr Jordan: Thank you for your interest, first of all, in Bill 118. It is good to see that type of interest and the time you have spent in preparing your presentation.
I was wondering, taking into consideration previous submissions, if you think we have done enough study on an energy policy for the province, whether perhaps we are rushing into something. It would appear there is no shortage of generation at the present time, in that Ontario Hydro has just advised Windsor, I believe, that it is not in need of supporting gas generation there to feed the Windsor public utilities and the system. So I do not see that we have to deal with in an irrational manner by rushing into it, that we could give it some more thought. I was wondering, with your age group and your interest, if you think a task force to study a provincial energy policy that was long-term would be time well spent.
Mr Douglas: To answer that, I guess partly out of ignorance, I do not know how many of the policy issues have been brought up through the environmental assessment process currently under way with Ontario Hydro. I would imagine that in the context of those hearings, a certain amount of policy discussion must go on, because you cannot talk of electricity without talking about gas, oil and other energy.
My own feeling is, no, I do not think we are rushing into things. I think these ideas are not new, and I think the recent hearings at Ontario Hydro have shown that conservation and efficiency are no longer something that only environmental radicals believe in. In light of your question about a task force, our interest is a community-based, small-scale effort, and in that sense maybe our interest is not in looking at the whole province. We would like to focus and direct our small amounts of person power.
Mr Waters: You said you had just finished or were taking a course at the university level on energy. I understand there is a way that the PUCs can offload their peaks without going to the house. In other words, they can basically, from wherever, shut down your hot-water tank at a peak time, or your drier will not work at the peak time, or whatever. I was wondering if you found any of that going on or any indication of it.
Mr Douglas: No, I have not. I do not believe, certainly in Waterloo, that the potential is there. They need individual control to do such a thing. As far as the electrical hot-water heater is concerned, are you referring to the scenario where they just cut off power for, let's say, one second, but over the space of a whole consumer base --
Mr Waters: You could cut off the hot-water heater, let's say, from 5 o'clock to 7 o'clock. You are not going to hurt the hot water. It is still hot. I would say that is your peak time.
Mr Douglas: I am not aware of anything going on in Waterloo.
Mr Waters: Is there anything in your studies or in your work that this is going on anywhere, that type of thing.
Mr Douglas: Not as you discuss it. What I have heard is something that does not affect service whatsoever. It is a one-second shutdown at various times across the customer base, which actually can have significant impact, but I have not heard of a more extensive shutdown.
Mr Huget: You were mentioning that you are involved in an energy conservation project here in this area. I would like to know, first of all, are you working with Waterloo North Hydro when you are doing that? I would like to know a bit more about what initiatives, about what you are doing for the conservation and efficiency issue here?
Mr Douglas: First, I should tell you what we have done. We started with what we called our "symbolic action." What that refers to is that we made public through the use of the two Waterloo newspapers an offer to the citizens to change one high-use lightbulb anywhere in their apartment or house for a compact fluorescent as a symbol of their commitment to efficiency. That was the launch to our program. It was done on our own without discussion with Ontario Hydro, but we have since been speaking with them. We have some of our own ideas and at our next meeting they will be there with us and we hope to sort of co-plan where we are going.
Mr Huget: Is the local hydro, Waterloo, involved in that?
Mr Douglas: The local office of Ontario Hydro is involved, but Waterloo North Hydro will be contacted as well. We have not established, up to now, contact with Waterloo in that sense.
Mr Huget: What is the reception to the compact fluorescents you are providing as sort of your program launch?
Mr Douglas: It is really difficult to say. This was launched in late November. We have no way of actually assessing the market and what the effect has been. With our new effort, with our ideas, we will have a much better opportunity to assess how effective it has been. We are focusing initially on apartment buildings where there is some sort of homogeneity to the areas we are trying to affect.
Mr Huget: What has the public reaction been? Are people interested in conservation initiatives?
Mr Douglas: We are waiting until Ontario Hydro meets with us before we actually approach the customers, so we are in the infancy of what we hope to do.
Mr McGuinty: I should say at the outset that we have heard from a number of groups with environmental roots, if you can put it that way. It is heartening to know there are people like yourselves out there working, whose sincerity in bringing about a solution to some of the problems that have been created over a few lifetimes is beyond doubt.
We had a witness here before us earlier today, Mr Kleinau -- in fact, I think he is still here -- and he raised something I thought was very interesting. He is with the Bruce Peninsula Environment Group, and he felt that if Bill 118 was to go ahead, it should be used by the government and Hydro to switch people off electricity, not to our non-renewables, gas and oil, but rather to solar and wind-powered sources. His point was that if we were to show real foresight, if we were to reach as far as we possibly could into the future in terms of showing our ability to plan, we would go with those two sources rather than oil and gas. Can you comment on that?
Mr Douglas: I can comment. I feel that somewhere in the middle is where we should be going. My own feeling is there is not overwhelming evidence that we could make the switches we are talking about, which are possible with, let's say, electricity to gas, in the non-renewable to renewable framework.
With the section I was talking about, allowing the municipalities to treat conservation as an investment, this bill might enable, for example, such things as solar water heaters to be used. That would be a mechanism where that could be done because clearly they need a substantial investment period. As to the overall energy policy, I guess in my mind I see it as a direction, something we have to be working towards, but my own feeling is we are not at the point yet where we can do that. I would imagine the previous submission did more looking into this than I have.
Mr McGuinty: The government is going to get into this and begin to promote alternative fuels. In terms of promoting it, do you think we should perhaps enlarge the number of grants available for renewables and recognize that as being better than the size of grants, and not give as large a grant if it would get into grants to people switching to the non-renewables?
Mr Douglas: I could not agree with you more. It has been a frustration for myself to listen to discussions about conservation compared to, let's say, non-renewables that say: "Why should we meddle in the market? Let the market handle it. If it's not economical, then don't do it." My answer to that is the non-renewables have been subsidized for countless numbers of years, with huge subsidies in terms of exploration, development, transportation, whereas the conservation initiatives and research and development, have been receiving a paltry amount.
I would see any sort of intervention in conservation not as intervention but more as bringing it up to par with the others. A direct answer to your question is, yes, I think that is where Canada could create a niche for itself in terms of environmental energy technology. I think it is a great possibility.
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The Chair: Gentlemen, we all thank you. In the early part of your comments you were talking about people -- students among others -- who move about, and the difficulty there is for them to utilize energy-saving bulbs and so on in the premises you were referring to. I know a man who, I presume because he is so enthusiastic about the whole prospect, carries his energy-saving bulb with him wherever he goes. I presume it is so that when he is in a hotel, for instance, he takes out the 60-watter and puts in the 50. I know he has carried them with him for the last three weeks. If only other people could acquire that same enthusiasm.
Mr Douglas: If we had had an opportunity to be here earlier, we would have outfitted this room, but we were late arrivals.
Mr Jordan: I can help you out here.
The Chair: We are grateful for your participation, and as Mr McGuinty pointed out, we are grateful for your enthusiasm. You know that you do not have unanimity in this group before you and that not everybody agrees entirely with you, some more than others, but I think all of us are unanimous in encouraging you to keep on doing what you are doing. You are making a significant contribution to your community and to the province. Thank you for coming here tonight. Take care and keep in touch.
NORTH SHORE TRIBAL COUNCIL
The Chair: The next participant is North Shore Tribal Council. Please tell us who you are.
Mr Lewis: Thank you for the opportunity to speak to the group. My name is Keith Lewis and I am the environment director of the North Shore Tribal Council.
The Chair: Tell us what you will. We have your written material, which will become part of the record by virtue of being an exhibit. You have 20 minutes plus. Try to give us some time for conversation.
Mr Lewis: The North Shore Tribal Council comprises seven first nations communities along Trans-Canada Highway 17 between the cities of Sudbury and Sault Ste Marie. Those communities are called Batchewana, Garden River, Thessalon, Mississauga First Nation, Serpent River First Nation, Sagamok Anishinabek First Nation and Whitefish River First Nation. My home community is the village of Cutler, known by our people as Kenabutching, situated on a tract of federal Indian reserve, which is also known as Serpent River.
The geographic area mentioned, being that of the north shore of Lake Huron, is unlike many somewhat pristine areas to the north of us, though even those are fast disappearing, because the north shore sadly has become known as an environmental sacrifice area for a host of destructive enterprises, most of which are energy-related. Public and private industry developments, and proposed developments, are either in the forest or mining sectors and the requisite infrastructure, energywise, must be developed to meet the demand for power.
Sault Ste Marie is host to St Marys Paper and the near-defunct Algoma Steel, being threats from a perspective of pollution to all downstream users on the St Marys River. Blind River, the home of the Cameco uranium hexafluoride refinery, formerly owned by Eldorado Nuclear, seems to be consistently plagued by accidental emissions of uranium dust, traces of which have turned up in the blood and tissue samples of members of the Mississauga First Nation who happen to live downwind and adjacent to the refinery.
The Mississagi River itself has been all but destroyed by a string of hydro-electric dams that have been built along its course and which during summer months reduce the river to a trickle. People of the Mississauga First Nation make comments that seagulls and people can walk across the mighty Mississagi during the summer without getting their feet wet.
The Mississauga First Nation has also felt the impact of the loss of a major part of its traditional sturgeon fishery, something it has done for hundreds of years, this in part due to siltation problems caused by fluctuations in water levels caused by Hydro's activities on the river. To add insult to injury, when the Aubrey Falls reservoir was being flooded to create what is now Rocky Island Lake, it was amid the protests of some aboriginal people at the time whose trapping territory was located there, who lived there for the better part of the year and who also had burial grounds there. No consideration was made whatsoever for this and the burial grounds are now part of the lake bottom. The Blind River and Mississauga First Nation area is also home to a number of small Hydro projects which infringe on an area currently undergoing land claims negotiations.
The Mississagi River itself is the object of yet another hydraulic proposal by Ontario Hydro being pushed by the provincial government to offset the impact of mine closures in Elliot Lake. In this case aboriginal people on the north shore have been given a carrot whose premise is that a comanagement regime may be implemented to empower Indian people relative to natural resources development. It is also rumoured that the idea of a joint venture may be entertained by the province. This is the Patten Post proposal, which calls for generation of 250 megawatts of electricity through hydraulic generation. It would flood 4,000 hectares of land and inject $300 million into the local economy. I will talk a little more about that later.
Some other horror stories include the community of the Sagamok Anishinabek, which has had its traditional fishery severely impacted upon by the activities of E. B. Eddy Forest Products Ltd, which operates a pulp and paper mill upstream of its community on the Spanish River. Also a part of that plant or facility is a cogeneration plant. A few years back the company had a major spill into the river that killed thousands of fish the people had used for consumption and economic development initiatives in the form of commercial fishing.
There are long lists of grievances that have been endured by not only the aboriginal people but also the general public. There has been test drilling in the Sagamok Anishinabek traditional areas by Atomic Energy of Canada Ltd as an investigative process into the disposal of high-level radioactive waste, a worrisome process for all of the people there who opposed the testing vehemently.
The most worrisome and destructive industry -- this is my opinion -- has been associated with the mining activities in Elliot Lake. Since the early 1960s the mining operations of Rio Algom and Denison Mines have polluted the land, air and water of the Serpent River basin and have negatively affected the people of the Serpent River First Nation, physically, socially, culturally and environmentally. Now that there is a downturn in the economy and the mines are scheduled to slowly die, the people of the region are saddled with the possibility of another environmental nightmare in the thousands of acres of mine tailings that are going to be left behind.
Last week on January 23, I had the opportunity to say a few words to this committee on the subject of Elliot Lake and those special considerations that were being made for the community. What I mentioned at the time was that if activities like Patten Post were to be used as economic initiatives to assist Elliot Lake, then any such development should be done in an environmentally sustainable manner with complete environmental assessments. Patten Post -- that is, Ontario Hydro in particular -- should make consideration for aboriginal people one of its top priorities, especially in light of the recent provincial recognition of the inherent right to self-government, that any talks with aboriginal people will be on a government-to-government basis and so there will be statements by the Minister of Natural Resources that aboriginal people will be given the opportunity to participate in these types of developments in significant ways. For aboriginal people to be recognized in such a way is contrary to what the history has been between Ontario Hydro and aboriginal people. This gives rise to the question of whether first nations should be negotiating with Hydro when the corporation is not a government.
There is a somewhat new and emerging concept, I have been told, which has arisen. It is called life-cycle cost. The way I understand it is that corporations like Ontario Hydro and, for instance, the mining industries in Elliot Lake have a responsibility to the people of the communities they have affected in social, economic and environmental terms from the cradle to the grave. The concept is not unique and it sounds really good. It provides some rationale for the bailout of Elliot Lake, especially in regard to the province's involvement in requiring Hydro to purchase its uranium from Elliot Lake at high cost over uranium from Saskatchewan at a lower cost and higher grade.
The question that arises here is whether Hydro should be utilized as an economic tool. This gives rise to a dilemma, especially for Indian people, who from a traditional perspective do not wish to negatively impact on the land, but at the same time enjoy the conveniences electrical power affords us.
In the case of the North Shore Tribal Council, which has been offered the carrot I spoke of earlier, and which according to some might have to seriously consider the possibility of joint venture, the dilemma becomes one of a choice between large-scale destruction of the land and opposing the project on environmental and cultural grounds to the detriment of all local people, or of participating in the development of the project and receiving many of the opportunities we have been lacking over the decades, such as education, health and cultural awareness education, those kinds of things.
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The most likely scenario with respect to Patten Post would be that the tribal council would opt to develop the site, were it to go ahead, but on a much smaller scale than originally proposed and utilizing a run-of-the-river concept.
There are many stories and dilemmas I would like to express at this forum, but I would like to get into some specific points and then any questions you might have.
I think aboriginal people should be given special consideration in terms of the shared development of Ontario Hydro projects, especially if those projects potentially impact on aboriginal interests, rights or treaties. This would be consistent with the statement of political relationship and the concept of inherent rights. History has shown that aboriginal people have received few benefits and shouldered much of the costs and inconvenience of Hydro initiatives.
The board of directors of Ontario Hydro is currently comprised of people who seem to reflect a professional bias towards development, such as engineers and the like, and should be comprised of more of a cross-section of disciplines, including the social and environmental disciplines, and should also reflect the makeup of the community it serves. More aboriginal people should be appointed to the board to reflect the fact that many of the projects being initiated across the province directly or indirectly affect aboriginal interests, their lands and their rights.
There is some discussion and disagreement in the aboriginal community over how their representatives are to be appointed; that is, the aboriginal people appointed to the board of directors of Ontario Hydro. If Hydro must become more accountable to the people, then maybe a process should be set up in which first nations select their own board members.
Meetings of the board should be made public and at specific times should be held in northern communities. This would give the public an opportunity for input into the decision-making of a public corporation and allow the board members to see and experience first hand the impacts of their decisions.
Ontario Hydro should formulate a declaration that acknowledges there are past grievances that need to be addressed with respect to first nations peoples. The past and the present have shown us that there has been a relationship between Hydro and aboriginal people that has been based on inherent distrust. Any time energy policy has been discussed with aboriginal people included, if there has been any consideration for consultation whatsoever, it has been to look for the approval of some sort of development where there has been no benefit to aboriginal people.
Ontario Hydro upper management is in the practice of making grand statements that never filter down to the level of the field workers who essentially are the face and negative attitude of Ontario Hydro. In relation to Indian people, there should be a massive cross-cultural education campaign to educate Hydro employees concerning their role in relation to the community. If the purpose is to change Ontario Hydro and education is not addressed, you will only serve to change the board and not the attitude towards first nations and the general public.
The costing of electricity, said to be calculated at cost, should also include social and environmental costs.
The idea of fuel switching, in my mind, somehow seems fundamentally faulty, given that one form of environmentally unsound way of heating is being trashed to exploit another that may be just as damaging.
These are my submissions and I will take any questions if you have any.
Mr McGuinty: Thank you for your presentation. You are probably aware that Ontario Hydro, through its amendment to its demand-supply plan, plans to double the number of megawatts we are going to get from non-utility generators. It is my understanding that 70% of those generating stations will be located in the north. I wonder what concerns you have, if any, regarding that. I wonder if you could also speak to -- I guess there is a NUG going through at Chiblow Lake.
Mr Lewis: Yes.
Mr McGuinty: I understand that was exempted from an environmental assessment.
Mr Lewis: With respect to the implementation of NUGs in the north -- 70% of the sites are located there -- I think there should be some sort of policy or implementation process that takes into account that in some places in the north, especially in isolated areas in the far north, the majority of the population are aboriginal people. Of the opportunities available, in terms of the sites available, there should be a percentage set aside for aboriginal people to develop themselves if they wish to.
Chiblow Lake is a really touchy subject for the Mississauga First Nation. Because it is within the land claim area, the Mississauga First Nation has asked for a legal caution to be placed on developments of any sort. The development of Chiblow Lake runs contrary to the understanding that caution would sort of postpone the development.
In terms of its being exempt from the Environmental Assessment Act, we at the North Shore Tribal Council would like to see some process whereby private enterprise is no longer exempt from the Environmental Assessment Act, either the Environmental Assessment Act itself being amended or some sort of local arrangement, some sort of agreement between aboriginal communities in the North Shore Tribal Council area and the provincial government where those private enterprises must go through environmental assessment.
Mr Arnott: Thank you, Mr Lewis, for coming forward to our committee once again. I spent some time this past summer driving up through Elliot Lake and that area. I am concerned about point 12 that you made. You stated that now that Rio Algom and Denison Mines are going to be closing, there are going to be thousands of acres of mine tailings left behind. Are there any steps that can be taken to minimize the negative environmental impact and do you think the government has an obligation to take whatever steps available?
Mr Lewis: I agree fully that the provincial government and federal government both have an obligation to take steps to prevent leakages or whatever types of pollution run rampant as a result of the Elliot Lake mine tailings. I also think the companies themselves should be held responsible for those tailings and that long-term monitoring processes should be put in place, and maybe local people employed to do that monitoring, as unemployment is one of the big issues in the Elliot Lake area.
Mr Arnott: What sort of pollution risk is there?
Mr Lewis: To my understanding, there is some risk in terms of low-level radiation. It comes in the form of the dust being blown into water and going downstream, being blown by the wind on to plants and and eaten by animals, and then the animals in turn being consumed by people and therefore bioaccumulating. There is risk in terms of ingestion of this for people and especially for animals that live in the area.
Mr Arnott: The greatest risk is through ingestion of this toxin?
Mr Lewis: That is what I understand.
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Mr Jordan: Thank you, sir, for coming again to the committee with your thoughts and suggestions regarding Bill 118. Looking to the past and to the future regarding hydraulic development in the north, do you think it is that in the past we lacked communication and did not establish and recognize the rights of the people that is causing the concern about future development? I am wondering about if it was gone about in the proper way, if there was proper communication established. You have stated that the higher-ups of Ontario Hydro have spoken with forked tongue, if you will. The actual field people do not seem to have paid attention. The result is that you as a people are very displeased with Ontario Hydro as a corporation. Can that be turned around through communication and recognition of the social impact?
Mr Lewis: There is a possibility, but I think it must be looked at in the very long term. That is why I mentioned in this presentation that cross-cultural education should be the basis for changing some of the attitudes of Ontario Hydro, for implementing processes whereby Indian people have more access to decisions made by Ontario Hydro, as well as employment and development opportunities that could be shared with Ontario Hydro.
In terms of being displeased generally, I would say that Ontario Hydro is a contributing factor to a lot of the social malaise that seems to be rampant in Indian communities in Ontario -- just a contributing factor. Indian people from the time of European contact have been conditioned for centuries into accepting negative approaches and into believing that they have no power over their own lives and situations. Therefore, I would say in that context that they are the most vulnerable and put up the least fight when it comes to megaprojects and developments in the north, especially in the isolated communities.
Mr Wood: It is nice to see you have come forward with a brief, as well as the presentation you made to us on January 23. On pages 4 and 5 of your presentation you have raised some concerns I am well aware of as a representative of nine communities made up of aboriginal people from one end of my riding all the way up the James Bay coast: Onakawana, Moosonee, Moose Factory.
I take it from what you are saying that the aboriginal people would like to choose their own people, have more people on the board, have more people as far as decision-making is concerned, have more dialogue with the government as government to government. I have a question that goes back probably over the last 35 or 40 years. When the development was taking place, were very many of your people involved in the construction and the development, driving trucks or one thing or another during the Mattagami construction when they put on Harmon, Little Long Rapids and Kipling or some of the other places, or were they left off to the side?
Mr Lewis: I am really not familiar with the area that far north of us. As a general comment, I am of the impression, and I have been told by other aboriginal leaders in the province and read in some literature that it is more the exception than the rule that aboriginal people participate in construction and employment opportunities when it comes to developments like that in their communities and adjacent to areas they live in.
Mr Wood: We were talking to Randy Kapashesit last week. In your dialogue, have your people seen a change in discussions in the last 12 or 15 months? Have they found a different relationship with the aboriginal people as far as the dealings are concerned? Has there been more dialogue?
Mr Lewis: You are talking about Ontario Hydro.
Mr Wood: The government as well as Ontario Hydro.
Mr Lewis: I would say there has been a definite increase in -- how do you say that -- acceptable relations with the government over the past few months and especially since the last election.
Mr Huget: I want to briefly touch on one of your recommendations on the last page of your presentation, that says, "The costing of electricity, said to be calculated at cost, should also include environmental and social costs." As you know, if you have been following the hearings, there is a raging debate about power at cost. You are saying we are not considering environmental and social costs in the current practices, if I understand it right, which means we have power below cost. I would like you to expand on this environmental and social cost issue.
Mr Lewis: I was hoping I would not be asked that question. In the demand-supply plan hearings one of the issues being talked about is in the area of costing. They call it, I think, the evaluation of externalities. I have a vague understanding of it. I think you are saying that right now the cost of electricity is below what it actually costs. In the case of hydraulic development, for instance, intuitive factors like aesthetics are not taken into account and valuated, and they should be. The effect of disrupting fish habitat is not taken into account. The effect of disrupting feed for deer and that sort of thing is not taken into account and a commensurate value is not placed on it.
There is no comparison. In the demand-supply plan hearings I see in this valuation of externalities that you are trying to place monetary values on intuitive values and things like animals' feed and habitat. Basically it boils down to subjective assessment. Depending on who it is and what value they place on these factors it could be high or low. It seems to me there is no standard approach.
The Chair: Mr Lewis, thank you for joining us again.
Mr Lewis: Thank you again for allowing me to be here.
The Chair: I trust you will keep in touch and we look forward to the next time we have an occasion to exchange views. Those are all the participants we have today. A couple of things remain to be said: We thank Guelph for its hospitality today and the people in Guelph and area for coming out with enthusiasm and interest. I thank Derek Fletcher for joining us, the MPP for Guelph in whose riding we are. It is nice to make sure that Ted Arnott is here as we are in the riding neighbouring his riding.
Barring any other matters, I thank the people on the committee for their cooperation. We are adjourned until tomorrow at 12 noon in St Catharines in the Niagara Peninsula, close to the riding of Welland-Thorold.
The committee adjourned at 2110.